exv4w8



 









Exhibit 99.1




Rogers Communications Reports Strong Third Quarter 2004 Results



Quarterly Revenue Grows 18%, Operating Profit Rises 14% and Capital Expenditures

Decline 10% as Cable, Wireless and Media Divisions Each Deliver Solid Financial and Operating Results





TORONTO (October 26, 2004) — Rogers Communications Inc. today announced its consolidated
financial and operating results for the third quarter and nine months ended September 30, 2004.



Financial highlights (in thousands of dollars, except per share amounts) are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Three Months Ended September 30,
	 	2004
	 	2003
	 	% Change

	Operating revenue(1)
	 	 	1,433,688	 	 	 	1,211,623	 	 	 	18.3	 
	Operating profit(2)
	 	 	455,975	 	 	 	400,106	 	 	 	14.0	 
	Net income (loss)
	 	 	61,584	 	 	 	(17,442	)	 	 	—	 
	Earnings (loss) per share — basic(3)
	 	 	0.20	 	 	 	(0.13	)	 	 	—	 
	Additions to property, plant and equipment
	 	 	221,147	 	 	 	244,722	 	 	 	(9.6	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 







	 	 	 	 	 	 	 	 	 	 	 	 	 
	Nine Months Ended September 30,
	 	2004
	 	2003
	 	% Change

	Operating revenue(1)
	 	 	4,041,932	 	 	 	3,500,216	 	 	 	15.5	 
	Operating profit(2)
	 	 	1,283,621	 	 	 	1,079,586	 	 	 	18.9	 
	Net income
	 	 	2,289	 	 	 	60,354	 	 	 	—	 
	Earnings (loss) per share — basic(3)
	 	 	(0.16	)	 	 	0.11	 	 	 	—	 
	Additions to property, plant and equipment
	 	 	668,080	 	 	 	655,984	 	 	 	1.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 













	1.	 	Effective January 1, 2004, we adopted new
accounting standards regarding the timing of revenue
recognition and the classification of certain items as
revenue or expense. See the “New Accounting Standards -
Revenue Recognition” section for further details with
respect to the impact of this reclassification. All
periods presented above are prepared on a consistent
basis.
	 
	2.	 	Operating profit should not be considered as a
substitute or alternative for operating income or net
income, in each case determined in accordance with
generally accepted accounting principles (“GAAP”). See
the “Reconciliation to Net Income (Loss)” section for a
reconciliation of operating profit to operating income
and net income (loss) under GAAP and the “Key
Performance Indicators and Non-GAAP Measures — Operating
Profit” section.
	 
	3.	 	Reflects both the distribution on and dividend
accreted on Convertible Preferred Securities. See Note
8, “Calculation of Earnings (Loss) Per Share” to the
Unaudited Consolidated Financial Statements for the
interim period ended September 30, 2004.





Highlights of the third quarter of 2004 included the following:





	•	 	Operating revenue increased 18.3% for the quarter, with all
three operating companies contributing to the year-over-year
growth, including 22.5% growth at Wireless, 9.8% growth at Cable
and 6.2% growth at Media.
	 
	•	 	Consolidated quarterly operating profit grew 14.0%
year-over-year, with 21.3% growth at Wireless, 3.3% growth at Cable
and 14.3% growth at Media.




1









 






	•	 	Cable had quarterly growth in revenue generating units of
77,100, driven by growth of 43,300 Internet subscribers and of
37,300 digital cable households, modestly offset by a net loss of
3,500 basic subscribers.
	 
	•	 	Cable announced that it began offering customers in certain
areas an all-digital channel line-up with all analog channels now
fully digitized to offer picture and sound in digital format to
customers who have a Rogers Digital Cable terminal or Personal
Video Recorder. With the all digital line-up, these customers are
able to experience Cable’s extensive programming offering in 100%
digital format, while at the same time retaining the ability to watch the analog channels on any cable outlet in the house without
the need for extra digital boxes.
	 
	•	 	Cable launched its powerful new broadband Internet offering
that is co-branded with Yahoo! Inc. and completed the transition of
its Ontario and New Brunswick high-speed Internet customer bases to
the new platform. This integrated broadband experience seamlessly
combines broadband speed with a compelling suite of powerful
services, including safety and security features with award-winning
parental controls; a powerful email system with industry-leading
e-mail anti-virus, SpamGuard Plus and two gigabytes of storage; Rogers Yahoo! Photos with unlimited storage; Rogers Yahoo!
Messenger; Internet music and radio; and Rogers Yahoo! Games.
	 
	•	 	Wireless had net additions of 88,800 postpaid voice and data
subscribers, compared to the 97,100 net additions in the third
quarter of 2003, reflecting stable churn rates impacting a larger
cumulative base of postpaid subscribers. Average monthly postpaid
churn for the quarter was unchanged year-over-year at 1.85%, while
average monthly revenue per postpaid voice and data subscriber was
$62.18, an increase from the third quarter of 2003 ARPU of $60.56,
or 2.7%, reflecting the continued growth of wireless data and
roaming revenues and an increase in the penetration of optional
services.
	 
	•	 	At Media, strong performances at the Radio division and The
Shopping Channel more than offset continued softness in certain
publications of the Publishing division and in over-the-air
television advertising at the Television division to produce 14.3%
year-over-year growth in Media’s operating profit.
	 
	•	 	Media’s Publishing division launched the inaugural edition of
LouLou, its new and well-received national fashion, lifestyle and
beauty shopping magazine. The only magazine of its kind in Canada,
LouLou follows an already popular concept in the U.S., U.K., Japan
and Australia. Also during the quarter, Media’s OMNI multicultural
television stations began broadcasting in high-definition (HDTV)
format, while its Sportsnet television network more than tripled
the amount of HDTV sports content it broadcasts.
	 
	•	 	On July 30, our wholly-owned subsidiary, Blue Jays Holdco
Inc., redeemed and cancelled all of its outstanding Class A
Preferred Voting shares that were issued in April 2001 to Rogers
Telecommunications Ltd. (“RTL”), a company controlled by our
controlling shareholder. At that time, RTL acquired the voting
rights to control the Toronto Blue Jays. As a result of the
cancellation, voting control of the Toronto Blue Jays transferred
to RCI and, accordingly, we began to consolidate the results of the
Blue Jays effective July 31, 2004.
	 
	•	 	We generated net income of $61.6 million in the third quarter
of 2004 compared to a loss of $17.4 million in the third quarter of
2003, with the increase primarily attributable to the



2









 





	 	 	year-over-year growth in operating profit, as well as foreign
exchange gains of $35.8 million on U.S. dollar-denominated debt.
	•	 	To further enhance our position in the Canadian wireless
market, we announced two significant initiatives during September
2004; an agreement to acquire from AT&T Wireless Inc. (“AWE”) their
34% stake in Rogers Wireless for approximately $1.767 billion in
cash while leaving seamless wireless voice and data roaming between
Canada and the U.S. on North America’s largest combined GSM/GPRS
network intact, and a consensual all cash offer to acquire, through
Rogers Wireless Inc., 100% of the outstanding equity securities of
Microcell Telecommunications Inc. (“Microcell”), Canada’s fourth
largest wireless communications provider, for $35.00 per share, or
approximately $1.4 billion.
	 
	•	 	Subsequent to the end of the quarter, on October 13, 2004, we
completed the acquisition from AWE of its 34% stake in Rogers
Wireless, increasing our ownership of Rogers Wireless from 55.3% at
September 30, 2004 to 89.3%. Financing for the approximately $1.767
billion cash purchase price was provided by a bridge financing
facility of up to two years with a group of Canadian financial
institutions.





“In addition to delivering solid operating and financial results across the Rogers group, two
significant structural and strategic developments unfolded during the third quarter,” said Ted
Rogers, President and CEO of Rogers Communications. “Our agreement with AT&T Wireless to purchase
its 34% equity interest in Rogers Wireless, combined with Rogers Wireless’ offer to acquire 100%
control of Microcell, will significantly increase our scale position in the rapidly growing
wireless communications sector while solidifying Rogers Wireless’ position as Canada’s leading
wireless communications company. These strategic initiatives in the wireless space, combined with
our ongoing focus across the Rogers group on stable operating performance and profitable growth,
are positioning us increasingly for continued success well into the future.”



ROGERS COMMUNICATIONS INC.



MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2004





In this Management’s Discussion and Analysis (MD&A) of operating results and financial
position, the terms “we”, “us”, “our”, “the Company” and “RCI” refer to Rogers Communications Inc.
and our subsidiaries, which are reported in the following five segments:




	•	 	“Cable” or “Rogers Cable”, which refers to Rogers’ wholly-owned subsidiary Rogers Cable Inc.;
	 
	•	 	“Wireless”, “Rogers Wireless”, “RWCI”, or “RWI”, which refers to Rogers’ majority-owned
subsidiary Rogers Wireless Communications Inc.; and
	 
	•	 	“Media” or “Rogers Media”, which refers to Rogers’ wholly-owned subsidiary Rogers Media
Inc.; and
	 
	•	 	“Blue Jays”, which refers to Rogers’ wholly-owned subsidiary Blue Jays Holdco Inc., which
owns the Toronto Blue Jays Baseball Club; and




3









 






	•	 	“RCI Corp”, which refers to Rogers’ wholly-owned subsidiary
Rogers Communications Inc. Non-Consolidated.





This discussion should be read in conjunction with our 2003 Annual MD&A and 2003 Annual
Audited Consolidated Financial Statements and Notes thereto. The financial information presented
herein has been prepared on the basis of Canadian generally accepted accounting principles (“GAAP”)
for interim financial statements. Please refer to Note 22 to our 2003 Annual Audited Consolidated
Financial Statements for a summary of the differences between Canadian GAAP and United States
(“U.S.”) GAAP.




Throughout this MD&A, percentage changes are calculated using numbers rounded to the decimal
to which they appear. All dollar amounts are in Canadian dollars unless otherwise indicated.



COMPANY OVERVIEW




We are a diversified Canadian communications and media company engaged in cable television,
high-speed Internet access and video retailing through our wholly-owned subsidiary Rogers Cable; in
wireless voice, data and messaging services through our subsidiary Rogers Wireless, the equity of
which we owned 55.3% at September 30, 2004 and which we increased our ownership of to 89.3%
effective October 13, 2004; in radio and television broadcasting, televised shopping, consumer
magazines, and trade and professional publications through our wholly-owned subsidiary Rogers
Media; and in sports entertainment through our wholly-owned subsidiary the Blue Jays.




We also hold other interests including a pay-per-view movie service and investments in several
specialty television channels, all of which are accounted for by the equity method. In addition, we
hold interests in other companies for investment purposes.



COMPANY STRATEGY





Our business strategy is to maximize revenue, operating income and return on invested capital
by enhancing our position as one of Canada’s leading national diversified communications and media
companies. We remain committed to our strategy and believe the financial and operating results for
the three months and nine months ended September 30, 2004 reflect continued progress against our
stated strategies.




In addition, on February 12, 2004, we announced an initiative to deploy an advanced broadband
Internet Protocol (IP) multimedia network to support primary line voice-over-cable telephony and
other new services across our cable service areas with the rollout of the network to begin in
2005.




To further our exposure to and scale position in the Canadian wireless market, we announced
two significant structural and strategic initiatives during the third quarter of 2004 which are
further described below; an agreement to acquire from AWE their 34% stake in Rogers Wireless and
an offer by Rogers Wireless to acquire 100% ownership of Microcell.



PURCHASE OF ROGERS WIRELESS SHARES FROM AT&T WIRELESS




On September 13, 2004, we announced an agreement with JVII General Partnership (“JVII”), a
partnership owned by AWE, whereby RCI agreed to purchase all of JVII’s 27,647,888 Class A Multiple
Voting shares (“Class A shares”) and 20,946,284 Class B Restricted Voting shares



4









 






(“Class B shares”) of Rogers Wireless for a cash purchase price of $36.37 per share. We
closed this transaction on October 13, 2004 through our wholly-owned subsidiary, Rogers
Acquisition Inc. Immediately prior to closing, JVII converted the Class A shares into Class B
shares of Rogers Wireless. As a result of the transaction, the shareholders’ agreement among RCI,
Rogers Wireless and JVII dated August 16, 1999, as amended, was terminated; the registration
rights agreements between Rogers Wireless and JVII, also dated August 16, 1999, was terminated;
and JVII’s four nominees to the Rogers Wireless Board of Directors resigned. The sale by AWE of
its shares of Rogers Wireless does not impact or change the extensive North American wireless
voice and data roaming capabilities between the companies. Customers of both Rogers Wireless and
AWE continue to enjoy the benefits of seamless wireless roaming between Canada and the U.S. on
North America’s largest combined GSM/GPRS network. Upon closing of this transaction on October 13,
2004, our equity ownership of Wireless increased from 55.3% to approximately 89.3%. We funded the
approximate $1,767.4 million cash purchase price for the 48.6 million Rogers Wireless shares with
a bridge financing facility with a term of up to two years provided by a group of Canadian
financial institutions and cash on hand.



OFFER TO ACQUIRE MICROCELL TELECOMMUNICATIONS INC.




On September 20, 2004, together with Wireless, we announced an all cash offer of $35 per
share, totalling approximately $1.4 billion, to acquire (through Rogers Wireless Inc.) all of the
issued and outstanding equity securities of Microcell, Canada’s fourth largest wireless
communications provider. Microcell’s Board of Directors has recommended that its shareholders
tender to Wireless’ offer, and the offering documents were mailed by Wireless to Microcell security
holders on September 30, 2004. The initial offer period currently expires on November 5, 2004. The
acquisition would make Wireless the largest wireless operator in Canada with over 5.1 million voice
and data customers across the country, operating Canada’s only nationwide GSM/GPRS/EDGE wireless
network. This combination, amongst other things, would lead to measurably increased scale providing
opportunities for operating and capital spending efficiencies. Completion of the transaction is
subject to receipt of certain regulatory approvals and other conditions. Wireless intends to
finance the purchase through cash on hand, drawdowns under its $700 million bank credit facility
and a bridge loan of up to $900 million from us.




We intend that Wireless will refinance its bridge loan from us, as well as our $1.75 billion
bridge credit facility, with longer-term debt financing which Wireless will most likely issue in
the U.S. and/or Canadian public debt markets. Wireless is beginning a review of the various methods
of transferring funds to shareholders, including us, so that we will have adequate funds to repay
our $1.75 billion bridge credit facility. No decision has been made on any of these matters, and
each is subject to Wireless Board approval.



SUMMARY CONSOLIDATED FINANCIAL RESULTS





For the three months ended September 30, 2004, Cable, Wireless, Media and the Blue Jays
represented 34.1%, 50.3%, 14.4% and 2.9% of our consolidated revenue, respectively, offset by
negative 1.8%, representing corporate items and eliminations. For the same period, Cable, Wireless
and Media represented 36.8%, 57.2% and 5.1% of our consolidated operating profit, respectively,
offset by negative 2.0% and 0.4%, representing the Blue Jays operating profit and corporate
expenses, respectively. See the “Key Performance Indicators — Operating Profit and Operating Profit
Margin” section.



5









 






The Blue Jays were consolidated effective July 31, 2004, and prior periods have not been
restated, as required under Generally Accepted Accounting Principles (“GAAP”). Our net income was
unaffected by this change as we had been recording 100% of the losses of the Blue Jays under the
equity method of accounting.





For more detailed discussions of the Cable, Wireless, Media and Blue Jays segments and their
respective results, please refer to the individual segment discussions below.




Summarized Consolidated Financial Results



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(In millions of dollars, except per share	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	amounts and margin)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Operating revenue (1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	$	489.4	 	 	$	445.6	 	 	 	9.8	 	 	$	1,437.3	 	 	$	1,313.0	 	 	 	9.5	 
	Wireless
	 	 	721.1	 	 	 	588.6	 	 	 	22.5	 	 	 	1,969.9	 	 	 	1,618.2	 	 	 	21.7	 
	Media
	 	 	206.8	 	 	 	194.7	 	 	 	6.2	 	 	 	653.4	 	 	 	611.1	 	 	 	6.9	 
	Blue Jays
	 	 	42.1	 	 	 	—	 	 	 	—	 	 	 	42.1	 	 	 	—	 	 	 	—	 
	Corporate
items and
eliminations
	 	 	(25.6	)	 	 	(17.3	)	 	 	—	 	 	 	(60.7	)	 	 	(42.1	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total
	 	$	1,433.8	 	 	$	1,211.6	 	 	 	18.3	 	 	$	4,042.0	 	 	$	3,500.2	 	 	 	15.5	 
	Operating expenses(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	$	316.3	 	 	$	278.0	 	 	 	13.8	 	 	$	919.7	 	 	$	826.2	 	 	 	11.3	 
	Wireless
	 	 	451.5	 	 	 	366.3	 	 	 	23.3	 	 	 	1,233.6	 	 	 	1,057.5	 	 	 	16.7	 
	Media
	 	 	182.8	 	 	 	173.7	 	 	 	5.2	 	 	 	584.1	 	 	 	547.0	 	 	 	6.8	 
	Blue Jays
	 	 	51.2	 	 	 	—	 	 	 	—	 	 	 	51.2	 	 	 	—	 	 	 	—	 
	Corporate
items and
eliminations
	 	 	(23.9	)	 	 	(6.5	)	 	 	—	 	 	 	(30.1	)	 	 	(10.2	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total
	 	$	977.9	 	 	$	811.5	 	 	 	20.5	 	 	$	2,758.5	 	 	$	2,420.5	 	 	 	14.0	 
	Operating profit(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	$	173.1	 	 	$	167.6	 	 	 	3.3	 	 	$	517.6	 	 	$	486.8	 	 	 	6.3	 
	Wireless
	 	 	269.6	 	 	 	222.3	 	 	 	21.3	 	 	 	736.3	 	 	 	560.7	 	 	 	31.3	 
	Media
	 	 	24.0	 	 	 	21.0	 	 	 	14.3	 	 	 	69.3	 	 	 	64.1	 	 	 	8.1	 
	Blue Jays
	 	 	(9.1	)	 	 	—	 	 	 	—	 	 	 	(9.1	)	 	 	—	 	 	 	—	 
	Corporate
items and
eliminations
	 	 	(1.7	)	 	 	(10.8	)	 	 	—	 	 	 	(30.6	)	 	 	(31.9	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total
	 	$	455.9	 	 	$	400.1	 	 	 	13.9	 	 	$	1,283.5	 	 	$	1,079.7	 	 	 	18.9	 
	Other income and expense, net(3)
	 	 	394.4	 	 	 	417.5	 	 	 	(5.5	)	 	 	1,281.2	 	 	 	1,019.3	 	 	 	25.7	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss)
	 	$	61.5	 	 	$	(17.4	)	 	 	—	 	 	$	2.3	 	 	$	60.4	 	 	 	(96.2	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Earnings (loss) per share
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	$	0.20	 	 	$	(0.13	)	 	 	—	 	 	$	(0.16	)	 	$	0.11	 	 	 	—	 
	Diluted
	 	$	0.19	 	 	$	(0.13	)	 	 	—	 	 	$	(0.16	)	 	$	0.10	 	 	 	—	 
	Property, plant and equipment (“PP&E”) expenditures
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	$	126.5	 	 	$	122.1	 	 	 	3.6	 	 	$	344.6	 	 	$	335.1	 	 	 	2.8	 
	Wireless
	 	 	89.9	 	 	 	116.4	 	 	 	(22.8	)	 	 	305.8	 	 	 	292.9	 	 	 	4.4	 
	Media
	 	 	4.0	 	 	 	6.1	 	 	 	(34.4	)	 	 	15.9	 	 	 	27.6	 	 	 	(42.4	)
	Blue Jays
	 	 	0.2	 	 	 	—	 	 	 	—	 	 	 	0.2	 	 	 	—	 	 	 	—	 
	Corporate
items and
eliminations
	 	 	0.6	 	 	 	0.2	 	 	 	—	 	 	 	1.6	 	 	 	0.4	 	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total
	 	$	221.2	 	 	$	244.8	 	 	 	(9.6	)	 	$	668.1	 	 	$	656.0	 	 	 	1.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating profit margin(4)
	 	 	31.8	%	 	 	33.0	%	 	 	 	 	 	 	31.8	%	 	 	30.8	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition” section.
	 
	(2)	 	As defined — see the “Key Performance Indicators Non-GAAP Measures — Operating Profit” section.
	 
	(3)	 	See the “Reconciliation of Operating Profit to Net Income (Loss)” section for specific details of these amounts.
	 
	(4)	 	As defined — see the “Key Performance Indicators Non-GAAP Measures — Operating Profit Margin” section.






Consolidated revenue for the three months ended September 30, 2004 was $1,433.8 million, an
increase of $222.2 million, or 18.3%, from $1,211.6 million in the corresponding period of 2003.



6









 






Of the increase, Wireless contributed $132.5 million, Cable $43.8 million, Media $12.1 million
and Blue Jays $42.1 million.




Consolidated operating profit for the three months ended September 30, 2004 was $455.9
million, an increase of $55.8 million, or 13.9%, from $400.1 million in the corresponding period in
2003. Of this increase, Wireless contributed $47.3 million, Cable $5.5 million and Media $3.0
million, offset by the Blue Jays loss of $9.1 million. Consolidated quarterly operating profit as a
percentage of revenue decreased to 31.8% in 2004 from 33.0% in 2003 as margin contraction at Cable
and the loss at the Blue Jays more than offset margin expansions at Wireless and Media.



Reconciliation of Operating Profit to Net Income (Loss)





The items listed below represent the consolidated income and expense amounts that are required
to reconcile operating profit to net income as defined under Canadian GAAP. For details of these
amounts on a segment-by-segment basis and for an understanding of intersegment eliminations on
consolidation, the following section should be read in conjunction with the Unaudited Interim
Consolidated Financial Statements and Notes for the quarter ended September 30, 2004 (included
herein)



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	Chg
	 	% Chg
	 	2004
	 	2003
	 	Chg
	 	% Chg

	Operating profit(1)
	 	 	456.0	 	 	 	400.1	 	 	 	55.9	 	 	 	14.0	 	 	 	1,283.6	 	 	 	1,079.6	 	 	 	204.0	 	 	 	18.9	 
	Depreciation and amortization
	 	 	(255.9	)	 	 	(261.7	)	 	 	5.8	 	 	 	(2.2	)	 	 	(752.5	)	 	 	(766.4	)	 	 	13.9	 	 	 	(1.8	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income
	 	 	200.1	 	 	 	138.4	 	 	 	61.7	 	 	 	44.6	 	 	 	531.1	 	 	 	313.2	 	 	 	217.9	 	 	 	69.6	 
	Interest on long-term debt
	 	 	(116.4	)	 	 	(121.9	)	 	 	5.5	 	 	 	(4.5	)	 	 	(359.3	)	 	 	(373.5	)	 	 	14.2	 	 	 	(3.8	)
	Gain on sale of other investments
	 	 	1.5	 	 	 	12.9	 	 	 	(11.4	)	 	 	(88.4	)	 	 	5.5	 	 	 	12.9	 	 	 	(7.4	)	 	 	(57.4	)
	Writedown of investments
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(4.1	)	 	 	—	 	 	 	(4.1	)	 	 	—	 
	Loss from investments accounted
for by the equity method
	 	 	(3.4	)	 	 	(11.5	)	 	 	8.1	 	 	 	(70.4	)	 	 	(19.6	)	 	 	(37.1	)	 	 	17.5	 	 	 	(47.2	)
	Foreign exchange gain (loss)
	 	 	35.8	 	 	 	5.4	 	 	 	30.4	 	 	 	—	 	 	 	(88.6	)	 	 	242.1	 	 	 	(330.7	)	 	 	(136.6	)
	Change in the fair value of derivative
instruments
	 	 	(7.9	)	 	 	—	 	 	 	(7.9	)	 	 	—	 	 	 	28.1	 	 	 	—	 	 	 	28.1	 	 	 	—	 
	Loss on repayment of long-term debt
	 	 	—	 	 	 	(17.2	)	 	 	17.2	 	 	 	(100.0	)	 	 	(20.3	)	 	 	(24.8	)	 	 	4.5	 	 	 	(18.1	)
	Investment and other income
	 	 	3.8	 	 	 	(1.6	)	 	 	5.4	 	 	 	—	 	 	 	11.6	 	 	 	1.4	 	 	 	10.2	 	 	 	—	 
	Income tax expense
	 	 	(3.4	)	 	 	(3.0	)	 	 	(0.4	)	 	 	13.3	 	 	 	(8.4	)	 	 	(13.5	)	 	 	5.1	 	 	 	(37.8	)
	Non-controlling interest
	 	 	(48.5	)	 	 	(18.9	)	 	 	(29.6	)	 	 	—	 	 	 	(73.7	)	 	 	(60.2	)	 	 	(13.5	)	 	 	22.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss) for the period
	 	 	61.6	 	 	 	(17.4	)	 	 	79.0	 	 	 	—	 	 	 	2.3	 	 	 	60.5	 	 	 	(58.2	)	 	 	(96.2	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As defined — see “Key Performance Indicators — Operating Profit” section.





Depreciation and Amortization Expense





Depreciation and amortization expense for the three months ended September 30, 2004 was $255.9
million, a decrease of $5.8 million, or 2.2%, from $261.7 million in the corresponding period of
2003. This decrease is due to lower property, plant and equipment (“PP&E”) expenditure levels over
the last several periods.



Operating Income





Operating income increased to $200.1 million for the three months ended September 30, 2004; an
increase of $61.7 million, or 44.6%, from the $138.4 million earned in the corresponding period of
2003.



Interest on Long-term Debt





Interest expense for the three months ended September 30, 2004 was $116.4 million, a reduction
of $5.5 million from $121.9 million in the corresponding period in 2003. This was primarily due to
the impact of lower interest rates on the fixed rate portion of debt (due to refinancings earlier
in 2004) as well as to the fact that there was less lower cost floating rate debt outstanding in
the current period, largely as a result of the unwinding earlier in 2004 of certain cross-currency
interest rate exchange agreements which were swapped into Canadian floating rate debt.



7









 





Losses from Investments Accounted for by the Equity Method




We use the equity method to record losses and income from investments that we do not control,
but over which we are able to exercise significant influence. The equity loss for the three months
ended September 30, 2004 was $3.4 million, compared to $11.5 million in 2003. Effective July 31,
2004, as a result of the redemption and cancellation of the preferred voting shares more fully
described below, we began to consolidate the Blue Jays. As a result, only one month of the Blue
Jays’ loss is included in losses from investments accounted for by the equity method, with the
remaining two months of the Blue Jays’ results consolidated with our operations. The equity loss
for the quarter consists of the Blue Jays’ losses for the month of July 2004 of $3.8 million
compared to $11.9 million for the comparative quarter of 2003, offset by other equity investments
with equity income of $0.4 million in the third quarter of 2004 and $0.4 million in the
corresponding period of 2003.



Foreign Exchange Gain (Loss)





The foreign exchange gain of $35.8 million in the third quarter of 2004 arose primarily from
the translation of the unhedged U.S. dollar-denominated debt and reflects a strengthening of the
Canadian dollar relative to that of the U.S. dollar from an exchange rate of $1.3338 as at June 30,
2004 to a rate of $1.2639 at September 30, 2004. In the corresponding period of 2003, the Canadian
dollar also strengthened against the U.S. dollar, although to a lesser degree, resulting in a more
modest foreign exchange gain of $5.4 million. Refer also to Note 1(b) of the Unaudited Interim
Consolidated Financial Statements.



Change in Fair Value of Derivative Instruments





Effective January 1, 2004, in accordance with the Canadian Institute of Chartered Accountants
(“CICA”) Accounting Guideline 13 (AcG-13), we determined that we would not record our derivative
instruments, including cross-currency interest rate exchange agreements, as effective hedges for
accounting purposes. Consequently, we began to account for such derivatives on a mark-to-market
basis with resulting gains or losses recorded in or charged against income. Accordingly, up to June
30, 2004, we recorded the change in the fair value of our derivative instruments as either income
or expense, depending on the change in the fair value of our cross-currency interest rate exchange
agreements.




Effective July 1, 2004, we met the requirements of AcG-13 to treat certain of our
cross-currency interest rate exchange agreements and forward exchange agreements as effective
hedges for accounting purposes. Hedge accounting was applied prospectively beginning July 1, 2004.
The exchange agreements not accounted for as hedges are marked-to-market with their change in fair
value for each period either recorded in or charged against income as appropriate.




For the three months ended September 30, 2004, the change in fair value of our cross-currency
interest rate exchange agreements not accounted for as hedges resulted in a loss of $7.9 million.




This change in accounting has been adopted on a prospective basis, as described in Note 1(b)
to the Unaudited Interim Consolidated Financial Statements.



Income Tax Expense





Income taxes for the three months ended September 30, 2004 and for the corresponding period in
2003 consisted primarily of current income tax expense related to the Federal Large Corporations
Tax.



8









 





Non-Controlling Interest




Non-controlling interest, representing a 44.7% interest in Wireless’ income, resulted in a
charge of $48.5 million in the three months ended September 30, 2004, as compared to a 44.2%
interest in Wireless’ net income in the corresponding period in 2003, which resulted in a charge of
$18.9 million. On October 13, 2004, following the end of the quarter, the non-controlling interest
in Wireless of 44.7% was reduced to approximately 10.7% upon the completion of our purchase of the
34% ownership interest in Wireless previously held by AWE. As such, the amount in future periods of
the non-controlling interest in Wireless’ income will reflect this significantly decreased level of
minority ownership.



Net Income (Loss) and Earnings (Loss) per Share





We recorded net income of $61.6 million in the three months ended September 30, 2004, or
earnings of $0.20 per share, compared to a loss of $17.4 million or a loss of $0.13 per share in
2003.




Distributions and accretions on Convertible Preferred Securities, totalling $13.5 million in
the third quarter of 2004 and $13.3 million in the third quarter of 2003, had the impact of
decreasing basic earnings per share by $0.05 and $0.05, respectively. See Note 8 to the Unaudited
Interim Consolidated Financial Statements.



EMPLOYEES




At September 30, 2004, we had approximately 15,600 full-time equivalent (“FTE”) employees
across all of our operating groups, including our shared services organization and corporate
office, representing an increase of approximately 600 FTEs from the levels of December 31, 2003.
This increase primarily reflects increased sales, customer service, credit and collections staff
and resources dedicated to the cable telephony project, partially offset by staff reductions in
other areas.




Refer to the respective segment discussions below for details of Cable, Wireless and Media
employee levels.



NINE MONTHS ENDED SEPTEMBER 30, 2004




Consolidated revenue for the nine months ended September 30, 2004 was $4,042.0 million, an
increase of $541.8 million, or 15.5%, from $3,500.2 million in the corresponding period of 2003. Of
the increase, Wireless contributed $351.7 million, Cable $124.3 million, Media $42.3 million and
Blue Jays $42.1 million.




Operating expenses for the nine months ended September 30, 2004 were $2,758.5 million, an
increase of $338.0 million, or 14.0%, from $2,420.5 million in the corresponding period of 2003. Of
the increase, Wireless contributed $176.1 million, Cable $93.5 million, Media $37.1 million and
Blue Jays $51.2 million.




Operating profit grew $203.8 million or 18.9% to $1,283.5 million for the nine months ended
September 30, 2004, with Wireless contributing $175.6 million, Cable $30.8 million and Media $5.2
million, offset by a loss of $9.1 million at the Blue Jays.




For details of these changes by segment, refer to the respective segment discussions below.



9









 






In the nine months ended September 30, 2004, we recognized net income of $2.3 million,
compared to net income of $60.4 million in the corresponding period of 2003. This decrease of
approximately $58.1 million was primarily attributable to foreign exchange fluctuations, resulting
in a foreign exchange gain of $242.1 million in 2003 compared to a loss of $88.6 million in 2004.
As previously discussed, hedge accounting was not applied for the first six months of the 2004 for
our derivative instruments, resulting in this charge against income due to the recognition of
unrealized foreign exchange loss on the debt previously hedged. This foreign exchange loss was
partially offset by a $217.9 million increase in operating income.



CABLE OVERVIEW




Cable is Canada’s largest cable television company, serving approximately 2.25 million basic
subscribers representing approximately 29% of the basic cable subscribers in Canada. Cable
provides digital cable services to approximately 627,000 households and Internet service to
approximately 879,500 subscribers at September 30, 2004.




Cable has highly-clustered and technologically advanced broadband cable networks in Ontario,
New Brunswick and Newfoundland. Its Ontario cable systems, which comprise approximately 90% of its
approximately 2.25 million basic cable subscribers, are concentrated in and around three principal
clusters: (i) the Greater Toronto Area, Canada’s largest metropolitan centre; (ii) Ottawa, the
capital city of Canada; and (iii) the Guelph to London corridor in southern Ontario. Cable’s New
Brunswick and Newfoundland cable systems in Atlantic Canada comprise the balance of its
subscribers.




Through its technologically advanced broadband networks, Cable offers a diverse range of
services, including analog and digital cable television services and residential and commercial
Internet services. At September 30, 2004, 99% of the homes passed in its service areas had digital
cable available and 96% of the homes passed were two-way addressable.




Cable also offers digital video disc (“DVD”), videocassette and video game sales and rentals
through Rogers Video, Canada’s second largest chain of video rental stores. There were 288 Rogers
Video stores at September 30, 2004, many of which provide customers with the additional ability to
purchase cable and wireless products and services, to pay their cable television, Internet or
Rogers Wireless Communications Inc. (“Rogers Wireless”, “Wireless”, or “RWCI”) bills and to pick
up or return Rogers digital cable and Internet equipment.




In addition, on February 12, 2004, Cable, together with ourselves, announced an initiative to
deploy an advanced broadband Internet Protocol multimedia network to support primary line
voice-over-cable telephony and other new telephony services across its cable service areas, with
the roll-out of that network expected to begin in mid-2005.



CABLE STRATEGY




Cable’s business strategy is to maximize its revenue, operating income and return on invested
capital by leveraging its technologically advanced cable network to meet the information,
entertainment and communications needs of its subscribers. Cable remains committed to its strategy
and believes that the financial and operating results of the three months and nine months ended
September 30, 2004 reflect continued progress against its stated strategy.



10









 





CABLE OPERATING AND FINANCIAL RESULTS




For purposes of this discussion, Cable’s revenue has been classified according to the
following categories:




	•	 	Core cable, which includes revenue derived from: (a) analog
cable service, consisting of basic cable service fees plus extended
basic (or tier) service fees, and access fees for use of channel
capacity by third and related parties, and (b) digital cable
service, consisting of digital channel service fees, including
premium and specialty service subscription fees, pay-per-view
(“PPV”) service fees, video-on-demand (“VOD”) and revenue earned on
the sale and rental of digital set-top terminals;
	 
	•	 	Internet, which includes service revenues from residential and
commercial Internet access service and modem sale and rental fees;
and
	 
	•	 	Rogers Video, which includes the sale and rental of DVDs,
videocassettes, video games and confectionary, as well as
commissions that Rogers Video earns while acting as an agent to
sell other Rogers’ services, such as wireless, Internet and digital
cable.





Cable’s operating expenses are segregated into three categories for assessing business
performance:




	•	 	Cost of Video store sales, which comprises Rogers Video store
merchandise and depreciation related to the acquisition of DVD,
videocassettes and game rental assets;
	 
	•	 	Sales and marketing expenses, which include sales and
retention-related advertising and customer communications, as well
as other customer acquisition costs such as sales support and
commissions and costs of operating, advertising and promoting the
Rogers Video store chain;
	 
	•	 	Operating, general and administrative expenses, which include
all other expenses incurred to operate the business on a day-to-day
basis and to service subscriber relationships, including: (a) the
monthly contracted payments for the acquisition of programming paid
directly to programming suppliers, as well as to copyright
collectives and the Canadian Programming Production funds; (b)
Internet interconnectivity and usage charges and the cost of
operating its Internet service; (c) technical service expenses,
which includes the costs of operating and maintaining its cable
networks as well as certain customer service activities such as
installations and repair; (d) customer care expenses, which include
the costs associated with customer order-taking and billing
inquiries; (e) community television expenses, consisting of the
costs to operate a series of local community-based television
stations in the communities served by its cable services, which
have traditionally filled a unique and localized customer-oriented
niche; (f) other general and administrative expenses; and (g)
expenses related to the national management of the Rogers Video
stores.




11









 





Summarized Consolidated Financial Results



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars, except margin)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Operating revenue(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Core cable
	 	$	316.4	 	 	$	298.6	 	 	 	6.0	 	 	$	933.2	 	 	$	878.5	 	 	 	6.2	 
	Internet
	 	 	96.5	 	 	 	81.7	 	 	 	18.1	 	 	 	278.2	 	 	 	236.2	 	 	 	17.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total cable revenue
	 	 	412.9	 	 	 	380.3	 	 	 	8.6	 	 	 	1,211.4	 	 	 	1,114.7	 	 	 	8.7	 
	Video Stores
	 	 	77.4	 	 	 	66.1	 	 	 	17.1	 	 	 	228.3	 	 	 	200.8	 	 	 	13.7	 
	Intercompany
eliminations
	 	 	(0.9	)	 	 	(0.8	)	 	 	—	 	 	 	(2.4	)	 	 	(2.5	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating revenue
	 	 	489.4	 	 	 	445.6	 	 	 	9.8	 	 	 	1,437.3	 	 	 	1,313.0	 	 	 	9.5	 
	Operating expenses(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of Video
Stores sales
	 	 	36.0	 	 	 	29.0	 	 	 	24.1	 	 	 	105.9	 	 	 	91.7	 	 	 	15.5	 
	Sales and
marketing expenses
	 	 	68.3	 	 	 	49.3	 	 	 	38.5	 	 	 	186.0	 	 	 	146.8	 	 	 	26.7	 
	Operating,
general and
administrative
expenses
	 	 	212.8	 	 	 	200.5	 	 	 	6.1	 	 	 	630.2	 	 	 	590.2	 	 	 	6.8	 
	Intercompany
eliminations
	 	 	(0.9	)	 	 	(0.8	)	 	 	—	 	 	 	(2.4	)	 	 	(2.5	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating expense
	 	 	316.2	 	 	 	278.0	 	 	 	13.7	 	 	 	919.7	 	 	 	826.2	 	 	 	11.3	 
	Operating profit(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	 	166.4	 	 	 	162.0	 	 	 	2.7	 	 	 	499.9	 	 	 	473.1	 	 	 	5.7	 
	Video Stores
	 	 	6.8	 	 	 	5.6	 	 	 	21.4	 	 	 	17.7	 	 	 	13.7	 	 	 	29.2	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating profit
	 	 	173.2	 	 	 	167.6	 	 	 	3.3	 	 	 	517.6	 	 	 	486.8	 	 	 	6.3	 
	Cable operating profit margin(3)
	 	 	40.3	%	 	 	42.6	%	 	 	 	 	 	 	41.3	%	 	 	42.4	%	 	 	 	 
	Video Stores operating profit margin (3)
	 	 	8.8	%	 	 	8.5	%	 	 	 	 	 	 	7.8	%	 	 	6.8	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total (3)
	 	 	35.4	%	 	 	37.6	%	 	 	 	 	 	 	36.0	%	 	 	37.1	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	PP&E expenditures
	 	$	126.5	 	 	$	122.1	 	 	 	3.6	 	 	$	344.6	 	 	$	335.1	 	 	 	2.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition” section.
	 
	(2)	 	As defined — see the “Key Performance Indicators and Non-GAAP Measures- Operating Profit” section.
	 
	(3)	 	As defined — see the “Key Performance Indicators and Non-GAAP Measures- Operating Profit Margin” section.





Cable Revenue and Subscribers




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(Subscriber statistics in thousands, except ARPU)
	 	2004
	 	2003
	 	Chg
	 	% Chg
	 	2004
	 	2003
	 	Chg
	 	% Chg

	Homes passed
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,270.1	 	 	 	3,195.1	 	 	 	75.0	 	 	 	2.3	 
	Basic cable subscribers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,248.8	 	 	 	2,260.9	 	 	 	(12.1	)	 	 	(0.5	)
	Basic cable, net additions (losses)
	 	 	(3.5	)	 	 	5.9	 	 	 	(9.4	)	 	 	—	 	 	 	(20.7	)	 	 	(9.5	)	 	 	(11.2	)	 	 	—	 
	Core cable ARPU
	 	$	46.95	 	 	 	44.17	 	 	 	2.78	 	 	 	6.3	 	 	 	45.95	 	 	 	43.16	 	 	 	2.79	 	 	 	6.5	 
	Internet subscribers (1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	879.5	 	 	 	736.5	 	 	 	143.0	 	 	 	19.4	 
	Internet, net additions (1)
	 	 	43.3	 	 	 	36.1	 	 	 	7.2	 	 	 	19.9	 	 	 	101.7	 	 	 	108.0	 	 	 	(6.3	)	 	 	(5.8	)
	Internet (Residential) ARPU
	 	$	36.92	 	 	 	37.60	 	 	 	(0.68	)	 	 	(1.8	)	 	 	36.67	 	 	 	37.74	 	 	 	(1.07	)	 	 	(2.8	)
	Digital terminals in service
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	729.3	 	 	 	562.7	 	 	 	166.6	 	 	 	29.6	 
	Digital terminals, net additions
	 	 	48.0	 	 	 	43.9	 	 	 	4.1	 	 	 	9.3	 	 	 	115.6	 	 	 	106.6	 	 	 	9.0	 	 	 	8.4	 
	Digital households
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	627.0	 	 	 	492.1	 	 	 	134.9	 	 	 	27.4	 
	Digital households, net additions
	 	 	37.3	 	 	 	35.2	 	 	 	2.1	 	 	 	6.0	 	 	 	91.8	 	 	 	90.6	 	 	 	1.2	 	 	 	1.3	 
	VIP customers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	698.9	 	 	 	637.7	 	 	 	61.2	 	 	 	9.6	 
	VIP customers, net additions
	 	 	16.5	 	 	 	13.4	 	 	 	3.1	 	 	 	23.1	 	 	 	37.3	 	 	 	44.7	 	 	 	(7.4	)	 	 	(16.6	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	Effective in the third quarter of 2004, Cable
modified the reporting of Internet subscribers to
include only those subscribers with service installed,
operating and on billing and to exclude those
subscribers who have subscribed to the service but
installation of the service was still pending.
Historically Cable had included both those subscribers
that had the service installed and those with
installations pending. The impact of this change in the
presentation of Internet subscriber net additions for
the three months ended September 30, 2004 and 2003 was
to reduce net additions by 1,575 and 2,933,
respectively. Prior period results for Internet
subscribers and net additions have been conformed to
this current presentation. Schedule 1 to this MD&A
presents historical quarterly subscriber results under
both its current and previous reporting.





12









 





Core Cable Revenue




Core cable revenue, which accounted for 64.7% of total revenues in the three-month period
ended September 30, 2004, totalled $316.4 million, an increase of $17.8 million, or 6.0%, increase
over 2003. Analog cable service increased year-over-year by $8.8 million due to price increases in
August 2003 and July 2004, with the remaining $9.0 million increase primarily attributable to
increased penetration of its digital cable services.




The increase in Core cable average monthly revenue per subscriber (“ARPU”) to $46.95 from
$44.17 reflects the growing penetration of its digital products, its continued up-selling of
customers into more expensive programming packages, and pricing changes. Price increases on basic
service in July 2004 and August 2003 contributed to an overall lift in ARPU despite the net
reduction of 3,500 basic subscribers in the current quarter, which was associated with competitive
activity and the impact of price increases. The popularity of its bundled offerings and its VIP
customer loyalty program has continued, with an additional 37,300 VIP members added so far during
2004, the majority of whom upgraded to more expensive tiers of service, bringing the VIP program
penetration of its basic cable subscriber base to 31.1%. Cable estimates that approximately 1
million customers now subscribe to two or more of Rogers’ cable, Internet and wireless services,
and expects this trend to continue as we continue to develop and advertise unique product bundles
and provide for billing of multiple services on a single bill.



Internet Revenue





The growth of $14.8 million, or 18.1%, in Internet revenue primarily reflects the 19.4%
increase in the number of Internet subscribers. Average revenue per residential Internet
subscriber per month for the three-month period ended September 30, 2004 was $36.92, a modest
decrease from $37.60 for the corresponding 2003 period, due to increased discounts as well as to
an increase in the proportion of subscribers to its lower priced entry-level Internet offerings.
Year-over-year, the Internet subscriber base has grown by 143,000, resulting in 39.1% Internet
penetration in its service areas of basic cable households, and 26.9% Internet penetration as a
percentage of homes passed.



Video Stores Revenue





The increase of $11.3 million, or 17.1%, in Rogers Video stores revenue reflects the
combination of an 11.3% increase in same-store revenues, as well as to an increase in the number
of stores at September 30, 2004, to 288 compared to 276 at September 30, 2003. (“Same stores” are
stores that were open for a full year in both 2004 and 2003.) The strong Video store sales results
as compared to 2003 are attributable to an increase in the number of popular titles that were
available in the quarter and to higher average revenue per customer visit. At the end of September
2004, many of the Rogers Video stores were integrated stores that offered access to a wide variety
of cable, Internet and Rogers Wireless products and services, in addition to the core DVD and
video rental and sales offerings.



13









 






Cable and Video Stores Operating Expenses



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Cable operating expenses:(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sales and marketing expenses
	 	$	38.4	 	 	$	21.1	 	 	 	82.0	 	 	$	94.5	 	 	$	61.6	 	 	 	53.4	 
	Operating,
general and
administrative
expenses
	 	 	208.1	 	 	 	197.2	 	 	 	5.5	 	 	 	617.1	 	 	 	580.0	 	 	 	6.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Cable operating expenses
	 	 	246.5	 	 	 	218.3	 	 	 	12.9	 	 	 	711.6	 	 	 	641.6	 	 	 	10.9	 
	Video stores operating expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	36.0	 	 	 	29.0	 	 	 	24.1	 	 	 	105.9	 	 	 	91.7	 	 	 	15.5	 
	Sales and
marketing expenses
	 	 	29.9	 	 	 	28.2	 	 	 	6.0	 	 	 	91.5	 	 	 	85.2	 	 	 	7.4	 
	Operating,
general and
administrative
expenses
	 	 	4.7	 	 	 	3.3	 	 	 	42.4	 	 	 	13.1	 	 	 	10.2	 	 	 	28.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Video stores operating expenses
	 	 	70.6	 	 	 	60.5	 	 	 	16.7	 	 	 	210.5	 	 	 	187.1	 	 	 	12.5	 
	Intercompany eliminations
	 	 	(0.9	)	 	 	(0.8	)	 	 	—	 	 	 	(2.4	)	 	 	(2.5	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating expenses
	 	$	316.2	 	 	$	278.0	 	 	 	13.7	 	 	$	919.7	 	 	$	826.2	 	 	 	11.3	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition and Classification” section.






Cable sales and marketing expenses increased by $17.3 million, or 82.0%, in the three month
period ended September 30, 2004 compared to the same period in 2003. The launch of Cable’s new
Rogers Yahoo! Hi-Speed Internet offering was supported with a significant marketing campaign. In
addition, Cable is continuing to invest in awareness of its unique digital cable offerings,
focusing on sports, movies and VOD advantages versus satellite, as well as an increased sales and
distribution presence in retail locations.




The increase of $10.9 million, or 5.5%, in Cable operating, general and administrative
expenses in the three months ended September 30, 2004 compared to the same period in 2003 relates
to: increased costs of programming associated with the growth in digital cable subscribers and the
cost related to the deployment of digital set-top terminals, which total approximately $5.0
million; increased pension expense of $4.1 million; the impact of expensing stock options
beginning in 2004 of $0.9 million; certain costs totalling $0.7 million which were expensed
relating to the development of its cable telephony offering; and increased costs directly related
to servicing a growing base of Internet subscribers.




The $7.0 million increase in cost of sales at the Video stores reflects the higher sales
volumes as well as the increased number of store locations. The growth in store locations, from
276 stores at September 30, 2003 to 288 stores at September 30, 2004, was the primary driver of
the increase in Video store sales and marketing expenses, which includes the cost of operating the
stores. The modest $1.4 million increase in operating, general and administrative expenses for
Video stores reflects increases in costs related to functions such as human resources and
administration.



Operating Profit





The modest 2.7% growth in total Cable operating profit reflects the 8.6% revenue growth
partially offset by the 12.9% increase in total Cable operating expenses. The 21.4% increase in
operating profit at the Video stores was due to increased same store revenues, operating
efficiencies and improved margins on the rental and sale of products.




The revenue and expense changes described above resulted in Cable’s operating margin
declining year-over-year to 40.3% in the three months ended September 30, 2004, compared to 42.6%
in the corresponding period of 2003. The compression of the Core Cable operating margin resulted
from Cable’s increase in sales and marketing expense as Cable supported the launch of a large
array of new Internet and digital services, the expensing of stock options, increased pension
expense, start-up costs associated with cable telephony and accounting changes related to revenue




14









 







recognition. Video operating margins increased slightly, to 8.8% in the three-month period
ended September 30, 2004 from 8.5% in the corresponding period of the prior year, as described
above.



CABLE PROPERTY, PLANT AND EQUIPMENT EXPENDITURES





The nature of the cable television business is such that the construction, rebuild and
expansion of a cable system is highly capital-intensive. Cable categorizes its PP&E expenditures
according to a standardized set of reporting categories that were developed and agreed to by the
U.S. cable television industry and which facilitate comparisons of PP&E expenditures between
different cable companies. Under these industry definitions, Core Cable PP&E expenditures are
classified into the following five categories:




	•	 	Customer premises equipment (“CPE”), which includes the equipment and
the associated installation costs;
	 
	•	 	Scaleable infrastructure, which includes non-CPE costs to meet business
growth and to provide service enhancements, including many of the costs to
date of our cable telephony initiative;
	 
	•	 	Line extensions, which includes network costs to enter new service areas;
	 
	•	 	Upgrade and rebuild, which includes the costs to modify or replace
existing coaxial cable and fibre optic network electronics; and
	 
	•	 	Support capital, which includes the costs associated with the purchase,
replacement or enhancement of non-network assets.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Customer premises equipment
	 	$	50.1	 	 	$	50.0	 	 	 	0.2	 	 	$	143.8	 	 	$	128.5	 	 	 	11.9	 
	Scaleable infrastructure
	 	 	32.0	 	 	 	19.7	 	 	 	62.4	 	 	 	76.5	 	 	 	44.8	 	 	 	70.8	 
	Line extensions
	 	 	13.5	 	 	 	13.3	 	 	 	1.5	 	 	 	36.6	 	 	 	33.9	 	 	 	8.0	 
	Upgrade and rebuild
	 	 	8.3	 	 	 	29.0	 	 	 	(71.4	)	 	 	33.4	 	 	 	84.3	 	 	 	(60.4	)
	Support capital
	 	 	19.2	 	 	 	8.7	 	 	 	120.7	 	 	 	45.6	 	 	 	37.8	 	 	 	20.6	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Core Cable PP&E expenditures
	 	 	123.1	 	 	 	120.7	 	 	 	2.0	 	 	 	335.9	 	 	 	329.3	 	 	 	2.0	 
	Video Stores PP&E expenditures
	 	 	3.4	 	 	 	1.4	 	 	 	142.9	 	 	 	8.7	 	 	 	5.8	 	 	 	50.0	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Rogers Cable PP&E expenditures
	 	$	126.5	 	 	$	122.1	 	 	 	3.6	 	 	$	344.6	 	 	$	335.1	 	 	 	2.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 








The significant factors driving the 3.6% year-over-year increase in Cable’s PP&E expenditures
were spending on scaleable infrastructure, which increased by $12.3 million, of which $15.5
million was related to spending on its cable telephony initiative; and an increase in support
capital of $10.5 million. These increases were offset by reduced spending on upgrades and rebuild
of $20.7 million. As at September 30, 2004, approximately 93.1% of the cable network was upgraded
to 750 MHz or greater, and 85% of the cable network was upgraded to 860 MHz, as compared to
approximately 36% at 860 MHz at September 30, 2003.



CABLE EMPLOYEES




Cable had approximately 5,690 full-time-equivalent employees (“FTE”) at September 30, 2004,
an increase of 220 from 5,470 at December 31, 2003. The increase in the FTE levels was spread
across a number of operating areas, including resources dedicated to the cable telephony project.
Cable also relies on employees of RCI in the area of, amongst other things, customer service call



15









 






centres, for a material amount of services. These employees are not included in the FTE
levels that Cable reports.



CABLE NINE MONTHS ENDED SEPTEMBER 30, 2004




Operating revenue grew to $1,437.3 million for the nine months ended September 30, 2004, an
increase of 9.5% compared to 2003, as a result of consistent quarterly revenue growth. The level
of revenue growth at Cable increased in the third quarter due to rate increases and to the
continued growth in Internet and digital cable subscribers. Video store revenue in the first nine
months of 2004 increased by 13.7% over 2003 due to a combination of the increase in same-store
revenues and the increase in the number of store locations.




Operating expense levels increased by 11.3% in the nine months ended September 30, 2004 as
compared to the corresponding period in 2003, largely attributable to increased levels of sales
and marketing spending in Cable supporting the launch of new product and service offerings and to
the growth in Internet and digital cable subscribers.




The combination of growth in revenue and operating expenses resulted in an increase in
operating profit of 6.1% to $488.9 million for the nine months ended September 30, 2004 as
compared to the corresponding period in 2003.



WIRELESS OVERVIEW





Wireless is a leading Canadian wireless communications service provider, serving more than 4.2
million customers at September 30, 2004, including over 4.0 million wireless voice and data
subscribers and approximately 211,000 one-way messaging (paging) subscribers. Wireless operates
both a Global System for Mobile Communications/General Packet Radio Service (“GSM/GPRS”) network,
with Enhanced Data for GSM Evolution (“EDGE”) technology, and a seamless integrated Time Division
Multiple Access (TDMA) and analog cellular network. The GSM/GPRS/EDGE network provides coverage to
approximately 93% of Canada’s population. Wireless’ seamless TDMA and analog network provides
coverage to approximately 85% of the Canadian population in digital mode and approximately 93% of
the population in analog mode. Wireless estimates that its more than 4.0 million wireless voice and
data subscribers represent approximately 13% of the Canadian population residing in its coverage
area and approximately 28% of the wireless voice and data subscribers in Canada.




Subscribers to its wireless services have access to these services in the U.S. through its
roaming agreements with various U.S. wireless operators. Wireless’ subscribers also have wireless
access internationally in over 140 countries, including throughout Europe, Asia and Latin America,
through roaming agreements with other wireless providers.



WIRELESS STRATEGY





Wireless’ business strategy is to achieve profitable growth within the Canadian wireless
communications industry. The elements of this strategy are designed to maximize its cash flow and
return on investment. Wireless remains committed to this strategy, and it believes that the
financial and operating results for the three months and nine months ended September 30, 2004,
reflect continued progress in line with its stated strategies.



16









 






To further its investment and scale position in the Canadian wireless communications market,
Wireless and RCI announced two significant structural and strategic developments during the third
quarter of 2004: an agreement for RCI to acquire from AWE its 34% interest in Rogers Wireless and a
bid to acquire 100% ownership of Microcell.



SUMMARY WIRELESS FINANCIAL RESULTS



For the Third Quarter Ended September 30, 2004





For purposes of this discussion, revenue has been classified according to the following
categories:




	 	•	 	Postpaid voice and data revenues generated principally from:





	 	 	 	— Monthly fees;
	 
	 	 	 	— Airtime and long-distance charges;
	 
	 	 	 	— Optional service charges;
	 
	 	 	 	— System access fees; and
	 
	 	 	 	— Roaming charges.





	 	•	 	Prepaid revenues generated principally from charges for
airtime, long-distance and text messaging;
	 	 	 	 
	 	•	 	One-way messaging (paging) revenues generated from monthly fees and usage charges; and
	 	 	 	 
	 	• 	 	Equipment revenues generated from the sale of hardware and accessories to independent
dealers, agents and retailers, and directly to new and existing subscribers through direct
fulfillment by its customer service groups, Rogers.com e-business Web site, and telesales.
Equipment revenue includes activation fees. Equipment subsidies and other incentives related to
the activation of new subscribers or the retention of existing subscribers are recorded as a
reduction to equipment revenue.





     Operating expenses are segregated into three categories for assessing business performance:





	 	•	 	Cost of equipment sales;
	 
	 	•	 	Sales and marketing expenses, which represent
costs to acquire new subscribers (other than those
related to equipment), such as advertising, commissions
paid to third parties for new activations, and
remuneration and benefits to sales and marketing
employees, as well as direct overheads related to these
activities;
	 
	 	•	 	Operating, general and administrative expenses,
which include all other expenses incurred to operate
the business on a day-to-day basis, including
inter-carrier payments to roaming partners and
long-distance carriers, and the Canadian
Radio-television and Telecommunications Commission
(“CRTC”) contribution levy. As well, it includes costs
to service existing subscriber relationships, including
retention costs (other than those related to
equipment).




17









 





Summarized Consolidated Financial Results



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Operating revenue(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Postpaid (voice and data)
	 	$	604.6	 	 	$	510.8	 	 	 	18.4	 	 	$	1,678.5	 	 	$	1,408.3	 	 	 	19.2	 
	Prepaid
	 	 	25.0	 	 	 	21.2	 	 	 	17.9	 	 	 	75.2	 	 	 	64.0	 	 	 	17.5	 
	One-way messaging
	 	 	6.0	 	 	 	6.8	 	 	 	(11.8	)	 	 	18.7	 	 	 	21.1	 	 	 	(11.4	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Network revenue
	 	 	635.6	 	 	 	538.8	 	 	 	18.0	 	 	 	1,772.4	 	 	 	1,493.4	 	 	 	18.7	 
	Equipment revenue
	 	 	85.5	 	 	 	49.8	 	 	 	71.7	 	 	 	197.5	 	 	 	124.8	 	 	 	58.3	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating revenue
	 	 	721.1	 	 	 	588.6	 	 	 	22.5	 	 	 	1,969.9	 	 	 	1,618.2	 	 	 	21.7	 
	Operating expenses(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of equipment sales
	 	 	151.6	 	 	 	94.6	 	 	 	60.3	 	 	 	357.5	 	 	 	252.0	 	 	 	41.9	 
	Sales and marketing expenses
	 	 	89.6	 	 	 	85.2	 	 	 	5.2	 	 	 	266.4	 	 	 	250.1	 	 	 	6.5	 
	Operating, general and administrative
expenses
	 	 	210.4	 	 	 	186.5	 	 	 	12.8	 	 	 	609.7	 	 	 	555.4	 	 	 	9.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating expenses
	 	 	451.6	 	 	 	366.3	 	 	 	23.3	 	 	 	1,233.6	 	 	 	1,057.5	 	 	 	16.7	 
	Operating profit(2)
	 	 	269.5	 	 	 	222.3	 	 	 	21.2	 	 	 	736.3	 	 	 	560.7	 	 	 	31.3	 
	PP&E Expenditures(3)
	 	$	89.9	 	 	$	116.4	 	 	 	(22.8	)	 	$	305.8	 	 	$	292.9	 	 	 	4.4	 
	Operating profit margin as % of
network revenue(4)
	 	 	42.4	%	 	 	41.3	%	 	 	 	 	 	 	41.5	%	 	 	37.5	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition” section.
	 
	(2)	 	As defined — see the “Key Performance Indicators and Non-GAAP Measures — Operating Profit” section.
	 
	(3)	 	As defined — see the “Key Performance Indicators and Non-GAAP Measures — Operating Profit” section.
	 
	(4)	 	Calculated by dividing operating profit by network revenue as detailed below:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Operating profit
	 	$	269.5	 	 	$	222.3	 	 	$	736.3	 	 	$	560.7	 
	Divided by network revenue
	 	$	635.6	 	 	$	538.8	 	 	$	1,772.4	 	 	$	1,493.4	 
	Operating profit margin
	 	 	42.4	%	 	 	41.3	%	 	 	41.5	%	 	 	37.5	%
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







18









 





Wireless Network Revenue and Subscribers



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30, 2004
	 	Nine Months Ended September 30, 2004

	(Subscriber statistics in thousands,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	except ARPU, churn and usage)
	 	2004
	 	2003
	 	Chg
	 	% Chg
	 	2004
	 	2003
	 	Chg
	 	% Chg

	Postpaid (Voice and Data)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross additions
	 	 	268.2	 	 	 	252.3	 	 	 	15.9	 	 	 	6.3	 	 	 	764.1	 	 	 	683.1	 	 	 	81.0	 	 	 	11.9	 
	Net additions
	 	 	88.8	 	 	 	97.1	 	 	 	(8.3	)	 	 	(8.5	)	 	 	260.3	 	 	 	234.0	 	 	 	26.3	 	 	 	11.2	 
	Total
subscribers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,289.9	 	 	 	2,863.4	 	 	 	426.5	 	 	 	14.9	 
	ARPU ($)
(1)
	 	 	62.18	 	 	 	60.56	 	 	 	1.62	 	 	 	2.7	 	 	 	59.10	 	 	 	57.27	 	 	 	1.83	 	 	 	3.2	 
	Average
monthly usage
(minutes)
	 	 	397	 	 	 	374	 	 	 	23	 	 	 	6.1	 	 	 	388	 	 	 	360	 	 	 	28	 	 	 	7.8	 
	Churn (%)
	 	 	1.85	 	 	 	1.85	 	 	 	—	 	 	 	—	 	 	 	1.78	 	 	 	1.84	 	 	 	(0.06	)	 	 	(3.3	)
	Prepaid
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross additions
	 	 	73.1	 	 	 	73.4	 	 	 	(0.3	)	 	 	(0.4	)	 	 	192.3	 	 	 	190.0	 	 	 	2.3	 	 	 	1.2	 
	Net additions
(losses)
	 	 	8.7	 	 	 	18.1	 	 	 	(9.4	)	 	 	(51.9	)	 	 	(26.4	)	 	 	(4.4	)	 	 	(22.0	)	 	 	—	 
	Adjustment to
subscriber base
(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	(20.9	)	 	 	20.9	 	 	 	—	 
	Total
subscribers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	733.4	 	 	 	753.4	 	 	 	(20.0	)	 	 	(2.7	)
	ARPU ($)
	 	 	11.45	 	 	 	9.46	 	 	 	1.99	 	 	 	21.0	 	 	 	11.37	 	 	 	9.40	 	 	 	1.97	 	 	 	21.0	 
	Churn (%)
	 	 	2.96	 	 	 	2.48	 	 	 	0.48	 	 	 	19.4	 	 	 	3.31	 	 	 	2.85	 	 	 	0.46	 	 	 	16.1	 
	Total — Postpaid and Prepaid
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross additions
	 	 	341.3	 	 	 	325.7	 	 	 	15.6	 	 	 	4.8	 	 	 	956.4	 	 	 	873.1	 	 	 	83.3	 	 	 	9.5	 
	Net additions
	 	 	97.5	 	 	 	115.2	 	 	 	(17.7	)	 	 	(15.4	)	 	 	233.9	 	 	 	229.6	 	 	 	4.3	 	 	 	1.9	 
	Adjustment to subscriber base(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	(20.9	)	 	 	20.9	 	 	 	—	 
	Total
subscribers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	4,023.3	 	 	 	3,616.8	 	 	 	406.5	 	 	 	11.2	 
	ARPU (blended)
($) (1)
	 	 	52.88	 	 	 	49.85	 	 	 	3.03	 	 	 	6.1	 	 	 	50.09	 	 	 	46.89	 	 	 	3.20	 	 	 	6.8	 
	One-Way Messaging
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gross additions
	 	 	7.6	 	 	 	8.3	 	 	 	(0.7	)	 	 	(8.4	)	 	 	23.4	 	 	 	33.5	 	 	 	(10.1	)	 	 	(30.1	)
	Net losses
	 	 	(10.7	)	 	 	(14.8	)	 	 	4.1	 	 	 	—	 	 	 	(30.7	)	 	 	(43.9	)	 	 	13.2	 	 	 	—	 
	Total subscribers
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	210.6	 	 	 	258.4	 	 	 	(47.8	)	 	 	(18.5	)
	ARPU ($)
	 	 	9.19	 	 	 	8.58	 	 	 	0.61	 	 	 	7.1	 	 	 	9.15	 	 	 	8.36	 	 	 	0.79	 	 	 	9.4	 
	Churn (%)
	 	 	2.77	 	 	 	2.89	 	 	 	(0.12	)	 	 	(4.2	)	 	 	2.63	 	 	 	3.04	 	 	 	(0.41	)	 	 	(13.5	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition” section.
	 
	(2)	 	Wireless’ policy is to treat prepaid subscribers with no usage for a six month period as
a reduction of the prepaid subscriber base. In 2003, as part of a review of prepaid
subscriber usage, it determined that a number of subscribers who only had non-revenue usage
(e.g. calls to customer service) were being included in the prepaid subscriber base. Wireless
determined that these subscribers should not have been included in the prepaid subscriber
base and, as such, made an adjustment to the second quarter of 2003 opening prepaid
subscriber base.





Wireless Network Revenue





Network revenue of $635.6 million accounted for 88.1% of Wireless’ total revenues in the three
months ended September 30, 2004, an increase of 18.0% from the corresponding period in 2003. This
growth reflects the 11.2% increase in the number of wireless voice and data subscribers from
September 30, 2003 combined with a 6.1% year-over-year increase in blended postpaid and prepaid
ARPU.




Postpaid voice and data gross subscriber additions in the three months ended September 30,
2004 represented 78.6% of total gross activations and 91.1% of its total net additions. Wireless
has continued our strategy of targeting higher-value postpaid subscribers and selling prepaid
handsets at higher price points, which has contributed to the significantly heavier mix of postpaid
versus prepaid subscribers.




The 2.7% year-over-year increase in average monthly revenue per postpaid voice and data
subscriber in the quarter ended September 30, 2004 reflects the continued growth of wireless data
and roaming revenues and an increase in the penetration of optional services. With the continued
increase in the portion of its customer base using GSM handsets, it has experienced significant
increases in roaming revenues from our subscribers travelling outside of Canada, as



19









 






well as strong growth in roaming revenues from visitors to Canada utilizing our network. The
90.1% growth in data revenues, from $19.1 million for the three months ended September 30, 2003 to
$36.3 million for the three months ended September 30, 2004, represented approximately 90.7% of the
$1.62 increase in postpaid ARPU.




Prepaid ARPU increased to $11.45 in the third quarter of 2004, compared to $9.46 in 2003, as a
result of changes to prices introduced in 2003 together with higher usage per subscriber. The
higher prepaid ARPU also reflects increased use of text messaging by prepaid subscribers.




Wireless’ postpaid voice and data subscriber churn rate of 1.85% in the three months ended
September 30, 2004 was unchanged from the third quarter of 2003 and reflects its continued
utilization of longer term customer contracts and focused subscriber retention efforts. During the
third quarter, it continued to experience increased levels of customers being deactivated for
non-payment. As a result, Wireless has implemented more restrictive credit requirements early in
the fourth quarter. The increase in prepaid churn to 2.96% from 2.48% in the prior year period
reflects the minimal sales and marketing resources applied to its prepaid offerings given its
postpaid focus, combined with highly competitive prepaid offerings in the market.




One-way messaging (paging) subscriber churn has declined year-over-year to 2.77%, while
one-way messaging ARPU has increased by 7.1%, reflecting pricing changes implemented in earlier
periods. With 210,600 paging subscribers, Wireless continues to view paging as a profitable but
mature business segment, and recognizes that churn will likely continue at relatively high rates as
one-way messaging subscribers increasingly migrate to two-way messaging and converged voice and
data services.



Wireless Equipment Revenue





In the three months ended September 30, 2004, revenue from wireless voice, data and messaging
equipment sales, including activation fees and net of equipment subsidies, was $85.5 million, up
$35.7 million, or 71.7%, from the corresponding period in 2003. This significant increase in
equipment revenue reflects the higher volume of handset upgrades associated with its retention
programs, combined with the generally higher price points of more sophisticated handsets and
devices and the higher volume of postpaid voice and data subscriber gross additions.



Wireless Operating Expenses




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars, except	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	per subscriber statistics)
	 	2004
	 	2003
	 	Chg
	 	% Chg
	 	2004
	 	2003
	 	Chg
	 	% Chg

	Operating expenses(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of equipment
sales
	 	$	151.6	 	 	$	94.6	 	 	$	57.0	 	 	 	60.3	 	 	$	357.5	 	 	$	252.0	 	 	$	105.5	 	 	 	41.9	 
	Sales and marketing
expenses
	 	 	89.6	 	 	 	85.2	 	 	 	4.4	 	 	 	5.2	 	 	 	266.4	 	 	 	250.1	 	 	 	16.3	 	 	 	6.5	 
	Operating, general
and administrative
expenses
	 	 	210.3	 	 	 	186.5	 	 	 	23.8	 	 	 	12.8	 	 	 	609.7	 	 	 	555.4	 	 	 	54.3	 	 	 	9.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating expenses
	 	$	451.5	 	 	$	366.3	 	 	$	85.2	 	 	 	23.3	 	 	$	1,233.6	 	 	$	1,057.5	 	 	$	176.1	 	 	 	16.7	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Average monthly operating
expense per subscriber before sales
and marketing expenses (1)
	 	$	19.59	 	 	$	17.69	 	 	$	1.90	 	 	 	10.7	 	 	$	18.47	 	 	$	17.68	 	 	$	0.79	 	 	 	4.5	 
	Sales and marketing costs per gross
subscriber addition (1)
	 	$	344	 	 	$	340	 	 	$	4	 	 	 	1.2	 	 	$	359	 	 	$	367	 	 	$	(8	)	 	 	(2.2	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As reclassified — see the “New Accounting Standards — Revenue Recognition” section.





20









 






The $57.0 million increase in the cost of equipment sales reflects the significantly increased
handset upgrade activity associated with our retention programs and increased activations of new
subscribers. Both the new subscriber acquisition and subscriber retention programs were influenced
by the trend to higher-priced feature-rich colour phones and data devices.




The 5.2% year-over-year increase in total sales and marketing expenses in the three months
ended September 30, 2004, as compared to the corresponding period in 2003, primarily reflects the
higher variable acquisition costs associated with the 6.3% year-over-year increase in the number of
postpaid voice and data gross additions. Variable sales and marketing expenses increased in line
with our strategy of offering customers incentives to enter into multi-year service contracts. In
the third quarter of 2004, Wireless introduced three year contracts for its postpaid customers and
it was able to drive 67.0% of its postpaid gross additions in the current quarter to this new
contract term. Fixed sales and marketing costs, such as advertising and overhead costs, increased
modestly in the three months ended September 30, 2004, as compared to the prior year quarter,
largely due to increased advertising costs. These factors resulted in the 1.2% increase in our
sales and marketing costs per gross addition to $344.




The year-over-year increase in operating, general and administrative expenses of $23.8
million, or 12.8%, as compared to the corresponding period in 2003, is primarily attributable to
higher credit and collection costs, increases in retention spending and growth in network operating
expenses reflective of the growth in our customer base, offset by savings related to more
favourable roaming arrangements and operating efficiencies across various functions. Retention
spending includes the cost of customer loyalty and renewal programs, as well as residual payments
to agents and distributors for ongoing service for certain existing customers.




The year-over-year increase in average monthly operating expense per subscriber, excluding
sales and marketing expenses, to $19.59 in the third quarter of 2004 reflects Wireless’ increased
spending on handset upgrades associated with targeted retention programs and the impact of
increases in operating, general and administrative expenses. Total retention spending (including
subsidies on handset upgrades) increased to $58.9 million in the third quarter of 2004 as compared
to $36.7 million in the corresponding period in 2003. Retention spending, both on an absolute and
per subscriber basis, is expected to continue to grow as wireless market penetration in Canada
deepens.



Wireless Operating Profit





Operating profit grew by $46.2 million, or 21.2%, to $269.5 million in the three months ended
September 30, 2004, from $222.3 million in the third quarter of 2003. Quarterly operating profit as
a percentage of network revenue, or operating profit margin, increased to 42.4% from 41.3% in the
third quarter of 2003 due to the strength of network revenue growth.



WIRELESS PROPERTY, PLANT AND EQUIPMENT EXPENDITURES





PP&E expenditures totalled $89.9 million for the three months ended September 30, 2004, a
decrease of $26.5 million, or 22.8%, from $116.4 million in the corresponding period in 2003.
Network-related PP&E expenditures were $70.0 million compared to $94.9 million in the prior year,
and included $27.5 million for capacity expansion of the GSM/GPRS network and transmission,
compared to $39.6 million in the third quarter of 2003. The remaining balance of $42.5 million in
network-related PP&E expenditures related primarily to technical upgrade projects, including new
cell sites, operational support systems and the addition of new services.



21









 






Other PP&E expenditures consisted of $16.0 million for information technology initiatives, and
$3.9 million for call centres and other facilities and equipment.



WIRELESS EMPLOYEES





Wireless had approximately 2,567 full-time-equivalent employees (“FTE”) at September 30, 2004,
an increase of 203 from 2,364 at December 31, 2003. The increase in the FTE levels was primarily in
the areas of credit and collections, network operations and information technology. Wireless also
relies on employees of RCI in the area of, amongst other things, customer service call centres, for
a material amount of services. These employees are not included in FTE levels that Wireless
reports.



WIRELESS NINE MONTHS ENDED SEPTEMBER 30, 2004





The year-over-year revenue trends experienced in the first half of the year continued, with
network revenue increasing by 18.7% to $1,772.4 million for the nine months ended September 30,
2004. The revenue growth was driven by the increase in the postpaid subscriber base and by the
year-over-year increase in postpaid (voice and data) ARPU, which was up 3.2% to $59.10.




Operating expenses for the nine months ended September 30, 2004 increased by 16.5% to $1,242.4
million as compared to $1,066.0 million in the corresponding period of 2003. Operating expenses
were modestly higher in the third quarter of 2004 as compared to the first and second quarters, due
to higher costs of equipment sales attributable to volume increases in sales and retention,
increased sales and marketing costs as a result of increased levels of gross additions, and higher
operating, general and administrative expenses related to increased levels of retention and
collection costs.



MEDIA OVERVIEW




Rogers Media holds Rogers radio and television broadcasting operations, its consumer and trade
publishing operations, and its televised home shopping service. Within Media, the Broadcasting
group (“Broadcasting”) includes our 43 radio stations (“Radio”) across Canada (33 FM and 10 AM
radio stations), two multicultural television stations in Ontario (OMNI.1 and OMNI.2), an 80%
interest in a sports specialty service licenced to provide regional sports programming across
Canada (“Rogers Sportsnet”), and Canada’s only nationally televised shopping service (“The Shopping
Channel”). Broadcasting holds minority interests in several Canadian specialty television services,
including Viewers Choice Canada, Outdoor Life Network (OLN), Tech TV Canada, The Biography Channel
Canada, and certain other minority interest investments. In addition, effective January 2, 2004,
Broadcasting entered into a partnership with CTV Specialty Television Inc. (“CTV”) in which 50% of
CTV’s mobile production and distribution business was acquired for $21.3 million, including working
capital adjustments and net of cash acquired. Our interest in this partnership, “Dome Productions”,
is proportionately consolidated with the results of the Television group (“Television”). The
Publishing group (“Publishing”) publishes approximately 70 consumer, trade, and professional
publications. In addition to its traditional broadcast and print media platforms, the Media group
also delivers content over the Internet relating to many of the individual broadcasting and



22









 






publishing properties, and has a Web-commerce distribution channel associated with The
Shopping Channel.



MEDIA STRATEGY




Media seeks to maximize revenues, operating income and return on invested capital across each
of its businesses through leveraging our brands, exploiting our ability to sell targeted media and
cross-promoting our properties. Media remains committed to this strategy and believes that the
financial and operating results for the third quarter of 2004 reflect continued progress.



Summarized Media Financial Results




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Operating revenue
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Publishing
	 	$	65.0	 	 	$	62.8	 	 	 	3.5	 	 	$	205.3	 	 	$	208.1	 	 	 	(1.3	)
	Radio
	 	 	46.8	 	 	 	41.8	 	 	 	12.0	 	 	 	144.7	 	 	 	124.5	 	 	 	16.2	 
	Television
	 	 	44.0	 	 	 	42.0	 	 	 	4.8	 	 	 	146.0	 	 	 	128.2	 	 	 	13.9	 
	The Shopping
Channel
	 	 	53.7	 	 	 	48.6	 	 	 	10.5	 	 	 	165.9	 	 	 	151.1	 	 	 	9.8	 
	Corporate
items, eliminations
and other
	 	 	(2.7	)	 	 	(0.5	)	 	 	—	 	 	 	(8.5	)	 	 	(0.8	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating revenue
	 	 	206.8	 	 	 	194.7	 	 	 	6.2	 	 	 	653.4	 	 	 	611.1	 	 	 	6.9	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating expenses
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	33.0	 	 	 	30.4	 	 	 	8.6	 	 	 	102.7	 	 	 	95.0	 	 	 	8.1	 
	Sales and
marketing
	 	 	43.3	 	 	 	41.0	 	 	 	5.6	 	 	 	135.8	 	 	 	125.5	 	 	 	8.2	 
	Operating,
general and
administrative
	 	 	106.5	 	 	 	102.3	 	 	 	4.1	 	 	 	345.6	 	 	 	326.5	 	 	 	5.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating expenses
	 	 	182.8	 	 	 	173.7	 	 	 	5.2	 	 	 	584.1	 	 	 	547.0	 	 	 	6.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating profit(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Publishing
	 	 	2.6	 	 	 	2.6	 	 	 	—	 	 	 	12.8	 	 	 	16.2	 	 	 	(21.0	)
	Radio
	 	 	12.8	 	 	 	8.5	 	 	 	50.6	 	 	 	35.1	 	 	 	24.7	 	 	 	42.1	 
	Television
	 	 	7.9	 	 	 	8.0	 	 	 	(1.3	)	 	 	19.7	 	 	 	18.7	 	 	 	5.3	 
	The Shopping
Channel
	 	 	4.7	 	 	 	3.6	 	 	 	30.6	 	 	 	14.6	 	 	 	11.0	 	 	 	32.7	 
	Corporate
items, eliminations
and other
	 	 	(4.0	)	 	 	(1.7	)	 	 	—	 	 	 	(12.9	)	 	 	(6.5	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating profit(1)
	 	$	24.0	 	 	$	21.0	 	 	 	14.3	 	 	$	69.3	 	 	$	64.1	 	 	 	8.1	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating profit margin(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Publishing
	 	 	4.0	%	 	 	4.1	%	 	 	 	 	 	 	6.2	%	 	 	7.8	%	 	 	 	 
	Radio
	 	 	27.4	%	 	 	20.3	%	 	 	 	 	 	 	24.3	%	 	 	19.8	%	 	 	 	 
	Television
	 	 	18.0	%	 	 	19.0	%	 	 	 	 	 	 	13.5	%	 	 	14.6	%	 	 	 	 
	The Shopping
Channel
	 	 	8.8	%	 	 	7.4	%	 	 	 	 	 	 	8.8	%	 	 	7.3	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	11.6	%	 	 	10.8	%	 	 	 	 	 	 	10.6	%	 	 	10.5	%	 	 	 	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Additions to property, plant and equipment
	 	 	4.0	 	 	 	6.1	 	 	 	(34.4	)	 	 	15.9	 	 	 	27.6	 	 	 	(42.4	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 













	(1)	 	As defined — see the “Key Performance Indicators Non-GAAP Measures — Operating Profit” section.
	 
	(2)	 	As defined — see the “Key Performance Indicators Non-GAAP Measures — Operating Profit Margin” section. Refer to table below for details of calculation.





23









 





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Publishing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating profit
	 	$	2.6	 	 	$	2.6	 	 	$	12.8	 	 	$	16.2	 
	Divided by revenue
	 	$	65.0	 	 	$	62.8	 	 	$	205.3	 	 	$	208.1	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Publishing operating profit margin
	 	 	4.0	%	 	 	4.1	%	 	 	6.2	%	 	 	7.8	%
	Radio
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating profit
	 	$	12.8	 	 	$	8.5	 	 	$	35.1	 	 	$	24.7	 
	Divided by revenue
	 	$	46.8	 	 	$	41.8	 	 	$	144.7	 	 	$	124.5	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Radio operating profit margin
	 	 	27.4	%	 	 	20.3	%	 	 	24.3	%	 	 	19.8	%
	Television
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating profit
	 	$	7.9	 	 	$	8.0	 	 	$	19.7	 	 	$	18.7	 
	Divided by revenue
	 	$	44.0	 	 	$	42.0	 	 	$	146.0	 	 	$	128.2	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Television operating profit margin
	 	 	18.0	%	 	 	19.0	%	 	 	13.5	%	 	 	14.6	%
	The Shopping Channel
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating profit
	 	$	4.7	 	 	$	3.6	 	 	$	14.6	 	 	$	11.0	 
	Divided by revenue
	 	$	53.7	 	 	$	48.6	 	 	$	165.9	 	 	$	151.1	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Shopping Channel operating profit margin
	 	 	8.8	%	 	 	7.4	%	 	 	8.8	%	 	 	7.3	%
	Total Media
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating profit
	 	$	24.0	 	 	$	21.0	 	 	$	69.3	 	 	$	64.1	 
	Divided by revenue
	 	$	206.8	 	 	$	194.7	 	 	$	653.4	 	 	$	611.1	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Media operating profit margin
	 	 	11.6	%	 	 	10.8	%	 	 	10.6	%	 	 	10.5	%
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







Media Revenue Overview




Media’s revenue of $206.8 million in the three months ended September 30, 2004 represented an
increase of $12.1 million, or 6.2%, from $194.7 million in the corresponding period of 2003. The
Media revenue growth was led by Radio, which increased 12.0%, and The Shopping Channel, which grew
10.5%, as well as modest growth at Publishing and the contribution from the acquisition of our 50%
interest in Dome Productions. This growth was partially offset by declines at our Sportsnet and
OMNI television properties. Further details with respect to each group are provided below.



Media Operating Expenses




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	% Chg
	 	2004
	 	2003
	 	% Chg

	Publishing
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sales and marketing
	 	$	17.7	 	 	$	17.1	 	 	 	3.5	 	 	$	54.0	 	 	$	53.8	 	 	 	0.4	 
	Operating, general
and administrative
	 	 	44.7	 	 	 	43.1	 	 	 	3.7	 	 	 	138.4	 	 	 	138.1	 	 	 	0.2	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Publishing
	 	 	62.4	 	 	 	60.2	 	 	 	3.7	 	 	 	192.4	 	 	 	191.9	 	 	 	0.3	 
	Radio
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sales and marketing
	 	 	13.3	 	 	 	12.9	 	 	 	3.1	 	 	 	44.1	 	 	 	37.9	 	 	 	16.4	 
	Operating, general
and administrative
	 	 	20.7	 	 	 	20.4	 	 	 	1.5	 	 	 	65.5	 	 	 	61.9	 	 	 	5.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Radio
	 	 	34.0	 	 	 	33.3	 	 	 	2.1	 	 	 	109.6	 	 	 	99.8	 	 	 	9.8	 
	Television
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sales and marketing
	 	 	3.0	 	 	 	3.0	 	 	 	0.0	 	 	 	10.2	 	 	 	9.4	 	 	 	8.5	 
	Operating, general
and administrative
	 	 	33.1	 	 	 	31.0	 	 	 	6.8	 	 	 	116.3	 	 	 	100.1	 	 	 	16.2	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Television
	 	 	36.1	 	 	 	34.0	 	 	 	6.2	 	 	 	126.5	 	 	 	109.5	 	 	 	15.5	 
	The Shopping Channel
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of sales
	 	 	33.0	 	 	 	30.4	 	 	 	8.6	 	 	 	102.7	 	 	 	95.0	 	 	 	8.1	 
	Sales and marketing
	 	 	9.3	 	 	 	8.0	 	 	 	16.3	 	 	 	27.5	 	 	 	24.4	 	 	 	12.7	 
	Operating, general
and administrative
	 	 	6.7	 	 	 	6.6	 	 	 	1.5	 	 	 	21.1	 	 	 	20.8	 	 	 	1.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total Shopping Channel
	 	 	49.0	 	 	 	45.0	 	 	 	8.9	 	 	 	151.3	 	 	 	140.2	 	 	 	7.9	 
	Corporate items, eliminations and other
	 	 	1.3	 	 	 	1.2	 	 	 	—	 	 	 	4.3	 	 	 	5.6	 	 	 	(23.2	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Total operating expenses
	 	$	182.8	 	 	$	173.7	 	 	 	5.2	 	 	$	584.1	 	 	$	547.0	 	 	 	6.8	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







24









 






Total Media operating expenses for the three months ended September 30, 2004 were $182.8
million, up $9.1 million, or 5.2%, over the corresponding period in 2003, as discussed in detail
below.




Total operating profit in the three months ended September 30, 2004 was $24.0 million, a
year-over-year increase of $3.0 million, or 14.3%, compared to the corresponding period in 2003.
Further details with respect to each group are provided below.



Publishing





Publishing experienced revenue growth of $2.2 million in the three months ended September 30,
2004 as compared to the corresponding period in 2003. The increase in revenue was due largely to
the launch of LouLou Magazine in August 2004 combined with continued strength in the Womens’
Publications group. These increases in revenue were offset by a $2.2 million increase in operating
expenses, primarily reflecting start-up costs associated with the launch of LouLou resulting in
flat year-over-year operating profit for the quarter ended September 30, 2004. Also in the quarter,
Publishing closed its Physicians’ Financial News publication.



Radio





The $5.0 million year-over-year increase in Radio’s quarterly revenues reflects the success of
the Jack-FM format in several of our markets as well as strong results at 680 News in Toronto.
Operating expenses at Radio increased $0.7 million, or 2.1%, due to additional variable costs
associated with the growth in Radio’s revenue. The growth in revenues, offset slightly by the
increase in operating expenses, led to $4.3 million, or 50.6%, quarterly operating profit growth at
Radio to $12.8 million.



Television





Television operations include the results of OMNI.1, OMNI.2, Rogers Sportsnet and our 50%
interest in Dome Productions. The $2.0 million increase in Television’s revenues in the three
months ended September 30, 2004 arose from the 50% interest in Dome Productions acquired during
2004, as Television, in general, experienced softness with respect to national advertising sales at
both our Sportsnet and OMNI properties. Television’s operating expenses increased by $2.1 million
as the result of the acquisition of Dome Productions as well as increased programming costs at
OMNI. As a result of the modest growth in revenues and the increase in operating costs,
Television’s operating profit decreased by $0.1 million in the current quarter compared to the
corresponding period in 2003. With the current NHL player lockout, Sportsnet is facing the
likelihood of reduced advertising revenue due to NHL hockey games that will not be played. However,
this revenue loss will be offset by a reduction in programming and production costs from not
producing the games. If there is a relatively timely resolution of the NHL labour dispute,
advertising revenue for the games will likely be slow to return, but programming and production
costs would begin to be incurred immediately.



The Shopping Channel





The Shopping Channel’s revenue growth of 10.5% reflects a generally improved retail climate in
the current quarter relative to the prior year quarter, which reflected the negative impact of the
SARS outbreak and the black-out. During the quarter, the Shopping Channel’s off-air sales, which
includes catalogue, Internet, and physical store sales, increased to 27.5% of revenue compared to
26.0% in the third quarter of 2003. Strong sales of selected product categories (including fashion
jewellery and health and beauty products), reduced product return



25









 






rates, operating efficiencies at our national distribution centre and favourable exchange
rates, combined to drive a 140 basis point increase in operating profit margins and a 30.6%
increase in operating profit to $4.7 million.



MEDIA PP&E EXPENDITURES





Total Media PP&E expenditures for the three months ended September 30, 2004 were $4.0 million,
compared to $6.1 million for the corresponding quarter in 2003. The decline in the current quarter
expenditures primarily reflects expenditures associated with the construction of a new national
distribution centre for The Shopping Channel in 2003.



MEDIA EMPLOYEES





At September 30, 2004, Media had 3,080 FTEs, an increase of 60 from 3,020 FTEs at December 31,
2003. The increase primarily relates to the launch of LouLou and increases in sales and marketing
staff.



MEDIA NINE MONTHS ENDED SEPTEMBER 30, 2004





Operating revenue increased by $42.3 million, or 6.9%, for the nine months ended September 30,
2004 as compared to the corresponding period in 2003. The growth was driven primarily by increases
at Radio of $20.2 million, The Shopping Channel of $14.8 million, and Dome Productions of $18.5
million, of which we acquired a 50% interest during 2004. These were partially offset by declines
at our Publishing and OMNI television properties.




Operating expenses increased by $37.1 million for the nine months ended September 30, 2004 as
compared to the corresponding period in 2003, due to increased programming costs at Radio and
Television as well as higher sales and marketing costs. As a result, total operating profit was
$69.3 million in the nine months ended September 30, 2004, a year-over-year increase of $5.2
million, or 8.1%, compared to the corresponding period in 2003.



BLUE JAYS OPERATING AND FINANCIAL RESULTS




Effective July 31, 2004, due to the redemption of the Class A preferred voting shares as more
fully described below, we began to consolidate the Blue Jays. As a result, only one month of the
Blue Jays’ equity loss is included in losses from investments accounted for by the equity method,
and the remaining two months are consolidated with our operations.




The requirement to consolidate the Blue Jays resulted from the redemption and cancellation by
Blue Jays Holdco Inc. (“Blue Jays Holdco”) of all of the outstanding preferred voting securities
held by RTL. Refer to the New Accounting Standards for significant accounting policies related to
the Blue Jays.




During the two months ended September 30, 2004, the Blue Jays generated revenue of $42.1
million primarily related to baseball revenue, which comprises home game and concession revenue,
and revenue generated from Major League Baseball’s revenue sharing agreement whereby funds are
distributed to and from clubs based on the clubs’ respective revenues.




Operating expenses for the two months ended September 30, 2004 were $51.2 million, which
consist primarily of player salaries, team costs, scouting and stadium operations. During the
quarter, the Blue Jays took a non-cash write off of $15.2 million relating to deferred receivables



26









 






which were considered uncollectible. As such, an operating loss of $9.1 million was recognized
for the two months ended September 30, 2004.




On a cash basis, for the quarter ended September 30, 2004, we advanced the Blue Jays $7.8
million compared to $22.2 million in the third quarter of 2003.



CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES



Operations





Cash flows from operating activities before changes in non-cash working capital items for the
three months ended September 30, 2004 increased by $67.6 million to $345.2 million, up from $277.6
million in the third quarter of 2003, reflecting the increase in operating profit of $55.8 million.




Taking into account the changes in non-cash working capital items for the three months ended
September 30, 2004, cash generated from operations decreased by $4.5 million to $356.7 million,
compared to $361.2 million in the corresponding quarter of 2003.




Cash flow from operations of $356.7 million, together with the following items, resulted in
total net funds of $361.5 million raised in the three months ended September 30, 2004:




	•	 	$3.3 million from the issuance of Class B Non-Voting shares
under employee share purchase plans and the exercise of employee
stock options; and
	 
	•	 	proceeds on the sale of investments of $1.5 million.





Net funds used during the three months ended September 30, 2004 totalled approximately $348.3
million, the details of which include:




	•	 	net PP&E expenditures of $186.7 million;
	 
	•	 	net repayments of bank credit facilities of $105.5 million;
	 
	•	 	redemption of Blue Jays Holdco Class A Preferred Shares held by RTL for $30.0 million;
	 
	•	 	payment of dividends of $11.7 million on Class B Non-Voting shares and Class A Voting shares;
	 
	•	 	distributions on Convertible Preferred Securities of $8.3 million;
	 
	•	 	other investments aggregating $5.1 million, including $2.0 million for advances in July to
the Blue Jays; and
	 
	•	 	net reduction of $1.0 million of capital leases and mortgages and other debt.





As a result of the above, our cash and cash equivalents increased in the third quarter by
$13.2 million which, together with the opening cash balance of $203.7 million, resulted in a
closing cash balance of $217.0 million.



Financing





Our long-term financial instruments as at December 31, 2003 are described in Note 10 to the
2003 Annual Consolidated Financial Statements.



27









 






During the nine-month period ending September 30, 2004, the following financings and
redemptions were completed:




In January, 2004, Cable established a dividend/distribution policy to distribute $6.0 million
per month to RCI on a recurring basis, starting in January 2004. During the three months and nine
months ended September 30, 2004, Cable distributed $18.0 and $54.0 million, respectively, to RCI.




On February 20, 2004, Wireless completed the private placement of US$750.0 million 6.375%
Senior Secured Notes due 2014, and on March 26, 2004 used approximately US$734.7 million of the
proceeds to redeem US$196.1 million 8.30% Senior Secured Notes due 2007, US$179.1 million 8.80%
Senior Subordinated Notes due 2007, and US$333.2 million 9.375% Senior Secured Debentures due 2008.
Also on February 20, 2004, Wireless unwound an aggregate of US$333.2 million notional amount of
cross-currency interest rate exchange agreements for net cash proceeds of $58.4 million. In
February, Wireless also entered into US$750 million notional amount of new cross-currency interest
rate exchange agreements.




As a result of these transactions, Wireless recorded a loss on repayment of $2.3 million,
which included redemption premiums of $34.7 million and the write-off of deferred financing costs
of $7.8 million, offset by a $40.2 million gain on the release of the deferred transitional gain
related to the cross-currency interest rate exchange agreements that were unwound during the first
quarter. The cross-currency interest exchange agreement were previously treated as effective hedges
for accounting purposes prior to the adoption of the new rules with respect to accounting for
hedges, as discussed in Note 1(b) to the Unaudited Interim Consolidated Financial Statements.




On February 23, 2004, Cable redeemed $300.0 million aggregate principal amount of its 9.65%
Senior Secured Second Priority Debentures due 2014 at a redemption price of 104.825% of the
aggregate principal amount which, together with the write-off of deferred financing costs, resulted
in a loss on the repayment of debt of $18.0 million.




On March 11, 2004, Cable completed a private placement in an aggregate principal amount of
US$350.0 million 5.50% Senior Secured Second Priority Notes due 2014. During the first quarter of
2004, Cable entered into an aggregate US$525.0 million notional amount of new cross-currency
interest rate exchange agreements.




On September 30, 2004, Wireless mailed a cash offer to acquire all of the outstanding equity
securities of Microcell. The estimated cash cost is approximately $1.4 billion. We expect the
aggregate net cost to increase to approximately $1.6 billion, including the repayment of
Microcell’s bank debt net of Microcell’s cash on hand. The funding for this acquisition, if
completed, will comprise of: utilization of Wireless’ cash on hand; drawdowns under Wireless’
committed $700 million bank credit facility; and proceeds from a bridge loan from RCI of up to $900
million. The bridge loan will have a term of up to two years from the date of drawdown and will be
made on an unsecured subordinated basis. The loan will bear interest at 6% per annum and will be
prepayable in whole or in part without penalty. RCI in turn intends to fund the bridge loan of up
to $900 million using cash on hand, cash to be received from Cable in the form of a return of
capital and cash to be received from Media in the form of a partial repayment of an intercompany
advance made by us to Media. Each of Cable and Media will make drawdowns under its committed bank
credit facilities to fund the cash transfers to RCI. RCI expects that Cable will distribute up to
$660 million, of which up to



28









 






$600 million will be used by RCI to partially fund the $900 million bridge loan to Rogers
Wireless.




On October 13, 2004, we purchased 48,594,172 Class B Restricted Voting shares of RWCI owned by
JVII, an entity wholly-owned by AWE. The cash price of $36.37 per share totalled approximately
$1.767 billion. This acquisition was funded by RCI, with a $1.75 billion secured bridge credit
facility with a term of up to two years to October 12, 2006. The facility was provided by a group
of Canadian financial institutions and is secured by a pledge of all of the shares of Cable and
Wireless that are owned by RCI or any of its subsidiaries. The company may borrow at various rates,
including the bank prime rate plus 0.50% to 2.25% per annum, the bankers’ acceptance rate plus
1.50% to 3.25% per annum and the London Inter-Bank Offered Rate (“LIBOR”) plus 1.50% to 3.25% per
annum. The bridge credit facility contains mandatory repayments, subject to certain exceptions,
from the incurrence of debt and/or equity at RCI or Wireless. The bridge credit facility also
requires the maintenance of certain financial ratios on a quarterly basis.




RCI intends that Wireless will refinance its bridge loan from RCI of up to $900 million as
well as RCI’s $1.75 billion bridge credit facility with longer-term debt financing, which Wireless
will most likely issue in the U.S. and/or Canadian public debt markets. Wireless is beginning a
review of the various methods of transferring funds to shareholders, including RCI, so that RCI
will have adequate funds to repay its $1.75 billion bridge credit facility. No decision has been
made on any of these matters, and each is subject to Wireless Board approval.




There can be no assurance that Wireless will be successful in raising the intended amount of
longer-term debt financing on terms acceptable to Wireless, or if successful, how such financing
will impact the future ability of Wireless and/or RCI to issue additional debt.




We structure our borrowings generally on a stand-alone basis. Therefore, borrowings by each of
our three principal operating groups are generally secured only by the assets of the respective
entities within each operating group, and such instruments generally do not provide for guarantees
or cross-collateralization or cross-defaults between groups. Currently, no such guarantees or
cross-collateralizations or cross-defaults between the groups exist.




At September 30, 2004, our long-term committed bank credit facilities provided for aggregate
credit of $2.28 billion, of which nil was drawn down. Generally, access to these credit facilities
is subject to compliance within certain debt-to-operating profit ratios; and at September 30, 2004,
based upon the most restrictive covenants under our bank credit facilities and public debt
instruments, we could have borrowed additional long-term debt under existing credit facilities of
approximately $2.18 billion, including $400.0 million available for the repayment of debt maturing
in Cable in 2005. In addition, $217.0 million was available as cash on hand at September 30, 2004.




Of all our debt instruments, the provisions of our bank loan agreements generally impose the
most restrictive limitations on the operations and activities of the companies governed by these
agreements. The most significant of these restrictions are debt incurrence and maintenance tests
(based upon certain ratios of debt to operating profit), restrictions upon additional investments,
sales of assets, and distributions to shareholders. We and our subsidiaries are currently in
compliance with all of the covenants under the respective debt instruments, and we expect to remain
in compliance with all covenants. (See Note 10 to the 2003 Annual



29









 






Consolidated Financial Statements for details of the specific debt instruments outstanding as
of December 31, 2003.)




Cable’s amended and restated $1.075 billion bank credit facility, which was established on
January 2, 2002, comprises of two tranches: (a) the $600.0 million Tranche A which matures on
January 2, 2009, and (b) the $475.0 million Tranche B, which reduces by 25% annually on each of
January 2, 2006, 2007, 2008 and 2009. In September, 2003 Cable amended its bank credit facility to
eliminate the possibility of earlier-than-scheduled maturity of Tranche B. Availability of a $400.0
million portion of Tranche B has been reserved to repay Cable’s Senior Secured Notes due 2005. The
$400.0 million reserved amount will be reduced by an amount equal to any repayment of the Notes due
2005 made from time to time from any source including Tranche B and, as a result, an amount equal
to such repayments becomes available to Cable under Tranche B.




On October 8, 2004, Wireless and its bank lenders entered into an amending agreement to
Wireless’ $700 million bank credit facility, which provided, among other things, for a two-year
extension to the maturity date and the reduction schedule so that the bank credit facility now
reduces by $140 million on each of April 30, 2008 and April 30, 2009, with the maturity date on
April 30, 2010. The proviso for early maturity in the event that Wireless’ 10 1/2% senior secured
notes due 2006 are not repaid (by refinancing or otherwise) on or prior to December 31, 2005 has
been eliminated. In addition, certain financial ratios to be maintained on a quarterly basis have
been made less restrictive; the restriction on the annual amount of PP&E expenditures has been
eliminated; and the restriction on the payment of dividends and other shareholder distributions has
been eliminated other than in the case of a default or event of default under the terms of the bank
credit facility.




Media’s revolving $500.0 million bank credit facility is due on September 30, 2006.




We believe that if the proposed maximum $660 million distribution by Cable to RCI is not at
least partially reinvested in Cable by RCI on or before March 15, 2005, then Cable will require
additional cash funding sources in order to satisfy its 2005 funding requirements. Additional debt
would be the most likely source of funding.




On April 28, 2004, following AWE’s decision to explore the sale of its 34% stake in Rogers
Wireless, Standard & Poor’s (S&P) placed the credit ratings on all of the Rogers companies on
“Credit Watch with negative implications”. S&P has historically rated Wireless on a stand-alone
basis, but indicated that it would revert to a consolidated basis when AWE sold its 34% stake to
RCI following our announcement that we had reached an agreement to purchase AWE’s 34% stake in
Wireless. On September 14, 2004, S&P said that it had consolidated and equalized the long-term
corporate credit ratings for RCI and Wireless. The ratings remain on “credit watch with negative
implications” due to the uncertainty with regard to Wireless’ bid for Microcell. The previous debt
ratings were: for RCI senior unsecured debt, BB- with a negative outlook; for Cable’s senior
secured and subordinated debt, BBB- with a negative outlook and BB- with a negative outlook,
respectively; and for Wireless’ senior secured debt, BB+ with a positive outlook.




On September 13, 2004, the ratings of RCI, Wireless and Cable were put under review for
possible downgrade by Moody’s following our announcement that we would acquire AWE’s 34% stake in
Wireless and they remain under review following Wireless’ offer to acquire Microcell. The previous
ratings were: for RCI senior unsecured debt, B2; for Cable’s senior



30









 






secured and subordinated debt, Ba2 and Ba3, respectively; and for Wireless’ senior secured
debt, Ba3.




On September 14, 2004, Fitch Ratings placed its BBB- rating for Wireless’ senior secured debt
on “rating watch negative” following our announcement that we would acquire AWE’s 34% stake in
Wireless. Following the announcement of Wireless’ offer to acquire Microcell, Fitch announced that
it would maintain the “ratings watch negative” status.




We do not have any off-balance sheet arrangements other than the cross-currency interest rate
exchange agreements described below.



Interest Rate and Foreign Exchange Management




Consolidated Economic Hedge Analysis





As a result of the financing activity described above, our consolidated economic hedged
position changed at September 30, 2004 compared to December 31, 2003 as noted below.



	 	 	 	 	 	 	 	 	 
	(in millions of dollars)	 	September 30	 	December 31,
	Foreign Exchange
	 	2004
	 	2003

	U.S. dollar-denominated long-term debt
	 	US$	3,265.7	 	 	US$	2,868.3	 
	Hedged with cross-currency interest rate exchange agreements
	 	US$	2,885.3	 	 	US$	1,943.4	 
	Hedged Exchange Rate
	 	 	1.4217	 	 	 	1.4647	 
	Percent Hedged
	 	 	88.4	%	 	 	67.8	%
	 
	 	 	
 	 	 	 	
 	 
	Effect of cross-currency interest rate exchange agreements:
	 	 	 	 	 	 	 	 
	Converted US $ principal of
	 	US$	2,833.4	 	 	US$	1,558.4	 
	at US $ fixed rate of
	 	 	7.60	%	 	 	8.82	%
	to Cdn $ fixed rate of
	 	 	8.50	%	 	 	9.70	%
	on Cdn $ principal of
	 	Cdn$4,034.7	 	Cdn$2,346.0
	Converted US $ principal of
	 	US$	51.8	 	 	US$	385.0	 
	at US $ fixed rate of
	 	 	9.38	%	 	 	9.38	%
	to Cdn $ floating at bankers acceptance plus
	 	 	2.67	%	 	 	2.35	%
	for all-in rate of
	 	 	4.98	%	 	 	5.11	%
	on Cdn $ principal of
	 	Cdn$67.4	 	Cdn$500.5
	 
	 	 	
 	 	 	 	
 	 
	Amount of long-term debt at fixed rates:
	 	 	 	 	 	 	 	 
	Total long-term debt
	 	Cdn$5,300.1	 	Cdn$5,305.0
	Total long-term debt at fixed rates
	 	Cdn$5,229.7	 	Cdn$4,560.6
	Percent of long-term debt fixed
	 	 	98.7	%	 	 	86.0	%
	 
	 	 	
 	 	 	 	
 	 
	Weighted average interest rate on long-term debt
	 	 	8.44	%	 	 	8.48	%
	 
	 	 	
 	 	 	 	
 	 








As discussed below in “New Accounting Standards — Accounting for Derivative Instruments”, effective
July 1, 2004, we began accounting for 96.1% of our cross-currency interest rate exchange agreements
as hedges against designated U.S. dollar-denominated debt. As a result,



31









 






84.9% of consolidated U.S. dollar-denominated debt or US$ 2,773.4 million will be hedged for
accounting purposes versus 88.4% on an economic basis.




The weighted average interest rate of consolidated long-term debt remained relatively
unchanged against December 31, 2003. The amount of long-term debt at fixed interest rates
increased during the nine-month period by almost $670.0 million, from 86.0% to 98.7% of
consolidated debt, with a significant portion of long-term debt refinanced at lower fixed rates,
the effect of which was virtually offset by the $674.0 million decrease of lower interest rate
floating rate debt outstanding at September 30, 2004 compared to December 31, 2003.



OUTSTANDING SHARE DATA





Set out below is our outstanding share data as at September 30, 2004. For additional detail,
see Note 7 to the Unaudited Interim Consolidated Financial Statements included herein.



	 	 	 	 	 
	Common shares:
	 	 	 	 
	Class A Voting
	 	 	56,235,394	 
	Class B Non-Voting
	 	 	188,856,821	 
	Options to Purchase Class B Non-Voting shares:
	 	 	 	 
	Issued and Outstanding
	 	 	16,314,032	 
	Exercisable
	 	 	10,912,912	 







	 
	Securities Convertible into Class B Non-Voting Shares:








	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Number of
	 	 	Number or Amount	 	Shares Issuable
	Class
	 	Outstanding
	 	on Conversion

	Convertible Preferred Securities
	 	$	600,000,000	 	 	 	17,142,857	 
	 
	 	 	
 	 	 	 	
 	 
	Convertible Senior Debentures
	 	$	284,137,000	 	 	 	7,726,270	 
	 
	 	 	
 	 	 	 	
 	 







COMMITMENTS AND CONTRACTUAL OBLIGATIONS




Our material obligations under firm contractual arrangements, including commitments for future
payments under long-term debt arrangements, capital lease obligations and operating lease
arrangements, are summarized in our 2003 Annual MD&A and are further discussed in the Notes to our
2003 Annual Consolidated Financial Statements. Refer to Consolidated Liquidity and Capital
Resources for significant changes to our contractual obligations since December 31, 2003.



GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS



Wireless Spectrum Licence Issues





On August 27, 2004, Industry Canada rescinded the cap on ownership of mobile spectrum. Up to
that time, Canadian carriers were limited to a maximum of 55 MegaHertz (“MHz”) of mobile spectrum
(PCS and cellular). After a public consultation earlier in 2004 as to whether the cap should be
maintained, removed or increased, Industry Canada advised that it would be removed, effective
immediately. Industry Canada concluded that the wireless industry will require access to more
spectrum through a future third generation (“3G”) wireless services



32









 






auction and further stated that it will continue to monitor the wireless industry for spectrum
concentration, and to manage the licensing of spectrum resources through other mechanisms at its
disposal. We expect that Industry Canada will follow future spectrum allocation decisions made by
the Federal Communications Commission in the U.S., and will likely not proceed with a 3G spectrum
auction before such decisions regarding 3G spectrum allocations are made, likely not before the
2007 timeframe.



Fixed Wireless Spectrum Auction





Industry Canada announced its intention to auction one block of 30 MHz of spectrum in the
2,300 MHz band, as well as three blocks of 50 MHz of spectrum and one block of 25 MHz of spectrum
in the 3,500 MHz band. The auction was completed on February 16, 2004. There were approximately 172
geographic licence areas in Canada for each available block. Successful bidders for the spectrum
had flexibility in determining the services to be offered and the technologies to be deployed in
the spectrum. Industry Canada expects that the spectrum will be used for point-to-point or
point-to-multi-point broadband services. Wireless participated in this spectrum auction in 2003 and
acquired 33 blocks of spectrum in various areas for a total cost of $5.9 million.




Industry Canada has initiated another auction process to make available the blocks of spectrum
that did not sell in the February 2004 process. In a multiphase process that has recently
commenced, parties were able to identify those blocks in which they were interested, and if there
were no other parties expressing interest in those blocks, then they were the successful party. In
this process, Wireless obtained an additional nine licences for a cost of $0.1 million. The
remaining licenses are expected to be auctioned commencing January 10, 2005.



UPDATES TO RISKS AND UNCERTAINTIES



Wireless Local Number Portability





Over the past several years, certain countries in Europe and Asia have mandated wireless local
number portability (“WLNP”). WLNP involves porting wireless phone numbers to other wireless
companies, but can also involve porting phone numbers between wireline and wireless companies. The
implementation of WLNP systems and capabilities represents significant costs for the carriers in a
country. In November 2003, as mandated by the U.S. federal government, the U.S. wireless industry
began the implementation of WLNP. There has been no regulatory mandate for the implementation of
WLNP in Canada to date. The Canadian Radio-television and Telecommunications Commission (CRTC)
recently stated that it intends to review the matter in its 2005/2006 planning period. If WLNP were
to be mandated, this would require carriers, including Wireless, to incur implementation costs that
could be significant and could cause an increase in churn among Canadian wireless carriers.



Potential Indebtedness





We have financed the purchase of the 48.6 million Wireless shares from AWE and we intend to
finance the acquisition of Microcell, should such an acquisition be completed, through the
incurrence of additional debt. The purchase of the Wireless shares alone had the effect of
materially increasing our debt, and should the Microcell acquisition be completed, our financial
leverage would increase significantly. Such increased debt could increase our vulnerability to
general adverse economic and industry conditions, limit our flexibility in



33









 






planning or reacting to changes in our businesses and industries and limit our ability to
obtain additional financing.



Cable Funding Risk





In connection with the possibility of Cable distributing up to $660 million to RCI if Wireless
is successful in acquiring all of the outstanding equity interests of Microcell (see “Consolidated
Liquidity and Capital Resources — Financing”), we anticipate that Cable will require additional
funding sources if all or a portion of this distribution is not reinvested in Cable by RCI on or
before March 15, 2005 in order to fund Cable’s cash requirements in 2005. Additional debt would be
the most likely source of funding. There can be no assurance that Cable could raise the required
debt.



Potential Claim against the Company





On August 9, 2004, a proceeding under the Class Actions Act (Saskatchewan) was brought against
Wireless and other providers of wireless communications services in Canada. The proceeding involves
allegations by wireless customers of breach of contract, misrepresentation and false advertising.
The plaintiffs seek unquantified damages from the defendant wireless communications service
providers. Wireless believes it has good defences to the allegations. The proceeding has not been
certified as a class action and it is too early to determine whether it will qualify for
certification as a class action.



GUIDANCE




We are revising one element of our 2004 annual guidance for Cable which was originally
provided during the first quarter of 2004. PP&E expenditures associated with our anticipated
mid-2005 deployment of local telephony at Cable are revised downward from the range of $140 million
to $170 million to a new range of $100 million to $120 million for the full year 2004. This change
reflects our current expectation that portions of the local telephony initiative spending initially
anticipated to occur during the second half of 2004 will instead occur during the first half of
2005.




Other previously issued 2004 financial and operating metric guidance ranges for Cable,
Wireless and Media remain unchanged.



KEY PERFORMANCE INDICATORS AND NON-GAAP MEASURES





We measure the success of our strategies using a number of key performance indicators that
are defined and described in our 2003 Annual MD&A. These key performance indicators are not
measurements under Canadian or U.S. GAAP, but we believe they allow us to appropriately measure
our performance against our operating strategy as well as against the results of our peers and
competitors. They include:




	•	 	Revenue and average revenue per subscriber (ARPU);
	 
	•	 	Subscriber counts and subscriber churn;
	 
	•	 	Operating expenses and average monthly operating expense per Wireless subscriber; and
	 
	•	 	Sales and marketing costs per gross Wireless subscriber addition.




34









 






We also refer to the following two other non-GAAP measures that are used in various financial
tables and discussions throughout this MD&A. The related definitions and reconciliations to GAAP
measures of these items are as follows:



Operating Profit





Operating profit is defined as net income before depreciation and amortization, interest
expense, income taxes and non-operating items, which include losses from investments accounted for
by the equity method, foreign exchange gains (losses), loss on repayment of long-term debt, change
in the fair value of derivative instruments, gain (loss) on the sale of other investments,
write-down of investments, investment and other income (expense) and non-controlling interest.
Operating profit is a standard measure used in the communications industry to assist us in
understanding and comparing operating results, and is often referred to in the industry either as
earnings before interest taxes, depreciation and amortization (EBITDA) or as operating income
before depreciation and amortization (OIBDA). We believe this is an important measure as it allows
us to assess our ongoing businesses without the impact of depreciation or amortization expenses as
well as other non-operating factors. Operating profit is intended to measure our ability to incur
or service debt, to invest in property, plant and equipment (“PP&E”), and to pay dividends, and it
allows us to compare ourselves to peers and competitors that have different capital or
organizational structures. This measure is not a defined term under GAAP.



Operating Profit Margin





For Cable and Media, we calculate operating profit margin by dividing operating profit by
total revenue; and for Wireless, we calculate it by dividing operating profit by network revenue.
Network revenue rather than total revenue is used in the calculation because it excludes equipment
sales revenue and thus better reflects Wireless’ core business activity of providing wireless
services. This measure is not a defined term under GAAP.



INTERCOMPANY AND RELATED PARTY ARRANGEMENTS





From time to time, we enter into agreements with our subsidiaries and other related parties
which we believe are mutually advantageous to us and our affiliates. Our subsidiaries also enter
into agreements with related parties. For example, Wireless has entered into a reciprocal roaming
arrangement and into other agreements related to the marketing and delivery of wireless services
with AWE, a significant shareholder of Wireless at September 30, 2004.




Wireless, Cable and Media have each entered into a management services agreement under which
we provide a range of services, including strategic planning, financial and information technology
services. We also maintain contractual relationships with Wireless and Cable involving other cost
sharing and services agreements.




Our management is presently discussing with Wireless and Cable the terms upon which these two
subsidiaries may outsource, to a shared operation managed by us, their information technology
operations. We are also discussing with Wireless and Cable the terms upon which we may establish a
business unit that would be responsible for marketing Wireless and Cable products and services to
business customers.



35









 






We monitor our intercompany and related party agreements to ensure that the agreements remain
beneficial to us. We are continually evaluating the expansion of existing arrangements and the
entry into new agreements. See the “Intercompany and Related Party Transactions” section in the
2003 Annual MD&A for further details with respect to these arrangements.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES





Within this MD&A, reference is made to our 2003 Annual Consolidated Financial Statements and
Notes thereto, which have been prepared in accordance with Canadian GAAP. The preparation of these
financial statements requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amount of revenues and expenses during the period. These
estimates are based on our historical experience and various other assumptions that we believed to
be reasonable under the circumstances, the results of which form the basis for making judgments
about the reported amounts of revenues, expenses, and carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from these estimates.




We have identified the accounting policies and estimates outlined below as being critical to
our business operations and to an understanding of the results of operations. The impact and any
associated risks related to these policies on our business operations are discussed throughout this
MD&A, and a detailed discussion of these critical accounting policies can be found in our 2003
Annual MD&A.




Our Audit Committee reviews our accounting policies and periodic financial filings, and
recommends adoption of our annual financial statements to our Board of Directors. For a detailed
discussion on the application of these and other accounting policies and estimates, see our 2003
Annual MD&A and Note 2 to our 2003 Annual Audited Consolidated Financial Statements. In addition, a
discussion of new accounting standards adopted by us in the nine months ended September 30, 2004
follows in the New Accounting Standards section below.




Our critical accounting policies and estimates are as follows:




	•	 	Revenue Recognition;
	 
	•	 	Allowance for Doubtful Accounts;
	 
	•	 	Subscriber Acquisition Costs;
	 
	•	 	Costs of Subscriber Retention;
	 
	•	 	Capitalization of Direct Labour and Overhead;
	 
	•	 	Depreciation and Amortization Policies and Useful Lives;
	 
	•	 	Asset Impairment;
	 
	•	 	Accounting for Derivative Instruments;
	 
	•	 	Pension Assumptions;
	 
	•	 	Contingencies; and
	 
	•	 	Related Party Transactions.





Significant changes to accounting policies and estimates since December 31, 2003 are discussed
below.



36









 





NEW ACCOUNTING STANDARDS




In the nine months ended September 30, 2004, we have adopted the following new accounting
standards:



GAAP Hierarchy





In June 2003, the Canadian Institute of Chartered Accountants (“CICA”) released Handbook
Section 1100, “Generally Accepted Accounting Principles”. Previously, there had been no clear
definition of the order of authority for sources of GAAP. This standard established standards for
financial reporting in accordance with Canadian GAAP, and applies to our 2004 fiscal year. This
section also provides guidance on sources to consult when selecting accounting policies and on
appropriate disclosures when a matter is not dealt with explicitly in the primary sources of GAAP.




We have reviewed this new standard, and as a result have adopted a classified balance sheet
presentation because we believe that the historical industry practice of a declassified balance
sheet presentation is no longer appropriate.




In addition, within our Consolidated Statement of Cash Flows, we have reclassified the change
in non-cash working capital items related to PP&E to cash used in investing activities. This change
had the impact of decreasing our cash used in investing activities on the Statements of Cash Flows,
compared to our previous method, by $34.5 million and by $6.6 million in the three months ended
September 30, 2004 and 2003, respectively. For the nine months ended September 30, 2004, our cash
used in investing activities on the Statements of Cash Flows decreased by $16.1 million and for the
nine months ended September 30, 2003, this change had the impact of increasing our cash used in
investing activities on the Statements of Cash Flows by $96.3 million. In all periods, the
corresponding change was to non-cash working capital items within operating activities.




With the adoption of these two changes, which are further described in the Notes to the
Unaudited Interim Consolidated Financial Statements included herein, we believe that our accounting
policies and financial statements comply with this new standard.



Accounting for Derivative Instruments





Our cross-currency interest rate exchange agreements (“swaps”) are used to manage the cash
flow risks associated with the fluctuations in foreign exchange rates relating to our U.S.
dollar-denominated debt. We do not enter into such swaps for speculative purposes.




Prior to January 1, 2004, we accounted for these swaps as hedges of the fluctuations in
foreign exchange rates relating to approximately 67.8 % of our U.S. dollar-denominated debt. Under
hedge accounting, the foreign exchange gains and losses arising on the translation of the U.S.
dollar-denominated debt at the end of each accounting period were hedged by the equal and
offsetting foreign exchange gains and losses relating to the swaps that were designated as hedges.




In November 2001, the CICA issued Accounting Guideline 13, “Hedging Relationships” (“AcG-13”),
and in November 2002, the CICA amended the effective date of the guideline. AcG-13 established new
criteria for hedge accounting with application to all hedging relationships in effect on or after
January 1, 2004. Effective January 1, 2004, we determined that we would not account for our swaps
as hedges for accounting purposes and consequently



37









 






began to account for such swaps on a mark-to-market basis, with resulting gains or losses
recorded in or charged against income.




We adjusted the carrying value of these swaps from $334.8 million at December 31, 2003 to the
fair value of $388.2 million on January 1, 2004. The corresponding transitional loss of $53.4
million was deferred and amortized to income over the remaining life of the underlying debt
instruments. Amortization for the six months ended June 30, 2004 totalled $3.3 million.




This resulted in the recognition in the Consolidated Statement of Income of an unrealized gain
related to the change in fair value of the swaps of $36.0 million for the six months ended June 30,
2004. A loss of $87.2 million was also recognized for the six months ended June 30, 2004 related to
the unrealized foreign exchange on the debt previously hedged.





Effective July 1, 2004, we met the requirements for hedge accounting under AcG-13 for certain
of our instruments, and consequently, on a prospective basis, began to treat approximately
US$2,773.4 million notional amount of the aggregate US $2885.2 million (or 96.1% of our swaps) as
hedges for accounting purposes against foreign fluctuations on US$2,773.4 million of
US-dollar-denominated debt.




Under hedge accounting, the foreign exchange gains and losses arising on the translation of
the U.S. dollar-denominated debt at the end of each accounting period are hedged by the equal and
offsetting foreign exchange gains and losses relating to the swaps that are designated as hedges.




A new transition adjustment arising on the change from mark-to-market accounting to hedge
accounting was therefore calculated as at July 1, 2004, resulting in a deferred transitional gain
of $74.8 million, which will be amortized to income over the shorter of the remaining life of the
debt and the term of the swaps. Amortization of this transitional gain from July 1, 2004 to
September 30, 2004 totaled $3.1 million.




Certain other swaps will continue not to be hedges for accounting purposes, as they do not
meet the requirements for hedge accounting under AcG-13. Approximately US$111.83 million notional
amount of swaps will continue to be accounted for on a mark-to-market basis. The fair value of
these swaps of $9.4 million at September 30, 2004 was recorded in other long-term liabilities.



Stock-Based Compensation





Effective January 1, 2004, Canadian GAAP requires us to estimate the fair value of stock-based
compensation granted to employees and to expense the fair value over the vesting period of the
stock options. In accordance with the transition rules, we determined the fair value of stock
options granted to employees since January 1, 2002 using the Black-Scholes Option Pricing Model,
and recorded an adjustment to opening retained earnings in the amount of $7.0 million, representing
the expense for the 2002 and 2003 fiscal years. The offset to retained earnings is an increase in
our contributed surplus. Stock-based compensation expense was $3.4 million and $11.5 million for
the three months and nine months ended September 30, 2004, respectively.



Revenue Recognition





Effective January 1, 2004, we adopted new Canadian accounting standards, including the CICA
Emerging Issues Committee Abstract 142 issued in December 2003, regarding the timing of revenue
recognition and the classification of certain items as revenue or expense.





38










 





As a result of the adoption of these new accounting standards, the following changes to the
recognition and classification of revenue and expenses have been made:





	•	 	Cable installation fee revenue from both new connects and
re-connects is deferred and amortized over the estimated life of
the subscriber, which we have determined based on churn, transfers
of service and moves to be approximately four years. Re-connect
installation costs up to the amount of installation revenue earned
from re-connects are also deferred and amortized over the estimated
life of the subscriber. At September 30, 2004, the revenue deferred
with respect to installations was $6.3 million and the re-connect
costs deferred were $4.1 million.
	 
	•	 	Wireless activation fees are now classified as equipment
revenue. Previously, these amounts were classified as network
revenue.
	 
	•	 	Recoveries from new and existing subscribers from the sale of
Wireless and Cable equipment are recognized immediately upon sale
and are now classified as equipment revenue. Previously, these
amounts were recorded as a reduction to expense.
	 
	•	 	Certain other recoveries from Wireless and Cable subscribers
related to collections activities are now recorded in revenue
rather than as a recovery of operating, general and administrative
expenses.
	 
	•	 	Wireless equipment subsidies provided to new and existing
subscribers are now classified as a reduction to equipment revenue.
Previously, these amounts were recorded as sales expense in the
case of a new subscriber, and as operating, general and
administrative expense in the case of an existing subscriber.
	 
	•	 	Wireless equipment costs for equipment provided under
retention programs to existing subscribers are now recorded as cost
of equipment sales. Previously, these amounts were recorded as
operating, general and administrative expense.




The effect of this adoption on the financial results and on our key performance indicators at
Wireless is as follows:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of	 	 	 	 	 	 	 	 
	dollars, except per	 	 	 	 	 	 	 	 
	subscriber statistics)
	 	2004
	 	2003
	 	2004
	 	2003

	 	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to
	 	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption
	Network revenue
	 	$	635.6	 	 	$	636.7	 	 	$	538.8	 	 	$	540.7	 	 	$	1,772.4	 	 	$	1,777.2	 	 	$	1,493.4	 	 	$	1,499.1	 
	Equipment sales
	 	 	85.5	 	 	 	92.5	 	 	 	49.8	 	 	 	59.0	 	 	 	197.5	 	 	 	214.3	 	 	 	124.8	 	 	 	158.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	$	721.1	 	 	$	729.2	 	 	$	588.6	 	 	$	599.7	 	 	$	1,969.9	 	 	$	1,991.5	 	 	$	1,618.2	 	 	$	1,657.5	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Cost of equipment sales
	 	$	151.6	 	 	$	87.2	 	 	$	94.6	 	 	$	58.5	 	 	$	357.5	 	 	$	207.5	 	 	$	252.0	 	 	$	160.9	 
	Sales and marketing expenses
	 	 	89.6	 	 	 	132.2	 	 	 	85.2	 	 	 	120.8	 	 	 	266.4	 	 	 	378.8	 	 	 	250.1	 	 	 	349.6	 
	Operating, general and
administrative expenses
	 	 	210.3	 	 	 	240.3	 	 	 	186.5	 	 	 	198.0	 	 	 	609.7	 	 	 	668.9	 	 	 	555.4	 	 	 	586.2	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating profit
	 	$	269.6	 	 	$	269.6	 	 	$	222.3	 	 	$	222.3	 	 	$	736.3	 	 	$	736.3	 	 	$	560.7	 	 	$	560.7	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Postpaid ARPU
	 	$	62.18	 	 	$	62.30	 	 	$	60.56	 	 	$	60.78	 	 	$	59.10	 	 	$	59.28	 	 	$	57.27	 	 	$	57.50	 
	Average monthly operating
expense per subscriber
before sales and marketing
costs
	 	$	19.59	 	 	$	19.14	 	 	$	17.69	 	 	$	17.26	 	 	$	18.47	 	 	$	18.05	 	 	$	17.68	 	 	$	17.28	 
	Sales and marketing costs
per gross addition
	 	$	344	 	 	$	378	 	 	$	340	 	 	$	361	 	 	$	359	 	 	$	385	 	 	$	367	 	 	$	389	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







39









 





The effect of this adoption on the financial results and on our key performance indicators at
Cable is as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(in millions of dollars, except operating profit margin and core cable ARPU)
	 	Three months ended September 30,
	 	Nine months ended September 30,

	 	 	2004
	 	2003
	 	2004
	 	2003

	 	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to
	 	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption
	Operating revenue
	 	$	489.4	 	 	$	483.3	 	 	$	445.6	 	 	$	441.1	 	 	$	1,437.3	 	 	$	1,425.3	 	 	$	1,313.0	 	 	$	1,298.5	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Sales and
marketing expenses
	 	$	68.3	 	 	$	69.1	 	 	$	49.3	 	 	$	49.8	 	 	$	186.0	 	 	$	188.4	 	 	$	146.8	 	 	$	147.8	 
	Operating, general
and administrative
expenses
	 	 	211.9	 	 	 	204.3	 	 	 	199.7	 	 	 	195.5	 	 	 	627.8	 	 	 	611.2	 	 	 	587.7	 	 	 	573.0	 
	Operating profit
	 	$	173.2	 	 	$	173.9	 	 	$	167.6	 	 	$	167.6	 	 	$	517.6	 	 	$	519.7	 	 	$	486.8	 	 	$	486.8	 
	Core cable ARPU
	 	$	46.95	 	 	$	46.05	 	 	$	44.17	 	 	$	43.50	 	 	$	45.95	 	 	$	45.35	 	 	$	43.16	 	 	$	42.45	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Cable operating
profit margin
	 	 	40.3	%	 	 	41.1	%	 	 	42.6	%	 	 	43.1	%	 	 	41.3	%	 	 	41.9	%	 	 	42.4	%	 	 	42.9	%
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







Significant Accounting Policies- Blue Jays



The following represents the significant accounting policy of the Blue Jays:




Revenue Recognition: The Blue Jays revenue, which is composed primarily of home game admission
and concession revenue, is recognized as the related games are played during the baseball season.
Revenue from radio and television agreements is recorded at the time the related games are aired.
The Blue Jays receive revenue from the Major League Baseball (MLB) Revenue Sharing Agreement which
distributes funds to and from member clubs, based on the clubs’ revenues, in an effort to subsidize
lower-revenue generating clubs. This revenue is recognized in the season in which it is earned,
when the amount is estimable and collectibility is reasonably assured.



FUTURE ACCOUNTING STANDARDS



Effective January 1, 2005, we will be required to adopt retroactively the amended provisions
of CICA Handbook Section 3860, “Financial Instruments — Disclosure and Presentation”, requiring
that financial instruments embodying obligations that may be settled by the issuance of a variable
number of shares be classified as debt. While we are currently evaluating the implications of this
requirement, it is expected that a portion of the carrying value of the Convertible Preferred
Securities will be reclassified from shareholders’ equity to liabilities effective January 1, 2005,
while a portion representing the value of the securities’ conversion feature will remain in
shareholders’ equity. With the adoption of these amended provisions of CICA 3860 on January 1,
2005, certain amounts that previously had been recorded as dividends on these Convertible Preferred
Securities will instead be recorded as interest expense and reflected as such in our net income and
earnings per share.



CAUTION REGARDING FORWARD-LOOKING STATEMENTS



This document includes forward-looking statements concerning the future performance of our
business, its operations and its financial performance and condition. These forward-looking
statements include, among others, statements with respect to our objectives, and strategies to
achieve those objectives, as well as statements with respect to our beliefs, plans, expectations,
anticipations, estimates or intentions. When used in this document, the words “believe”,



40









 





“anticipate”, “intend”, “estimate”, “expect”, “project” and similar expressions are intended
to identify forward-looking statements, although not all forward-looking statements contain such
words. These forward-looking statements are based on current expectations. We caution that all
forward-looking information is inherently uncertain and actual results may differ materially from
the assumptions, estimates or expectations reflected or contained in the forward-looking
information, and that actual future performance will be affected by a number of factors, including
economic conditions, technological change, regulatory change and competitive factors, many of which
are beyond our control. Therefore, future events and results may vary significantly from what we
currently foresee. We are under no obligation (and we expressly disclaim any such obligation) to
update or alter the forward-looking statements whether as a result of new information, future
events or otherwise. For a more detailed discussion of factors that may affect actual results, see
the Risks and Uncertainties discussions in our 2003 Annual MD&A.



ADDITIONAL INFORMATION



Additional information in respect of the Company, including the Annual Information Form, is on
our website at www.rogers.com or on SEDAR at www.sedar.com.



Schedule 1



Supplemental Information:



The following table outlines the reclassification of our Internet subscriber activity to conform to
current presentation.



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002
	 	2003
	 	2004

	 	 	Q1
	 	Q2
	 	Q3
	 	Q4
	 	Q1
	 	Q2
	 	Q3
	 	Q4
	 	Q1
	 	Q2
	 	Q3

	Internet,
net additions including pending
	 	 	21,194	 	 	 	40,958	 	 	 	53,315	 	 	 	45,164	 	 	 	50,306	 	 	 	26,361	 	 	 	39,057	 	 	 	35,388	 	 	 	37,958	 	 	 	22,872	 	 	 	44,840	 
	as reclassed (excluding pending)
	 	 	27,059	 	 	 	34,925	 	 	 	53,826	 	 	 	48,004	 	 	 	48,962	 	 	 	22,948	 	 	 	36,124	 	 	 	41,277	 	 	 	37,896	 	 	 	20,572	 	 	 	43,265	 
	Internet
subscribers including pending
	 	 	499,971	 	 	 	540,929	 	 	 	594,244	 	 	 	639,408	 	 	 	689,714	 	 	 	716,075	 	 	 	755,132	 	 	 	790,520	 	 	 	828,478	 	 	 	851,350	 	 	 	896,190	 
	as reclassed
(excluding pending)
	 	 	491,745	 	 	 	526,670	 	 	 	580,496	 	 	 	628,500	 	 	 	677,462	 	 	 	700,410	 	 	 	736,534	 	 	 	777,811	 	 	 	815,707	 	 	 	836,279	 	 	 	879,544	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







41









 





Historical Quarterly Summary



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(thousands of dollars,	 	2004
	 	2003
	 	2002

	except per	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	share amounts)
	 	Q1
	 	Q2
	 	Q3
	 	Q1
	 	Q2
	 	Q3
	 	Q4
	 	Q1
	 	Q2
	 	Q3
	 	Q4

	Income Statement
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Revenue (1)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	$	473,074	 	 	$	474,846	 	 	$	489,371	 	 	$	432,998	 	 	$	434,386	 	 	$	445,646	 	 	$	475,092	 	 	$	384,586	 	 	$	394,218	 	 	$	409,235	 	 	$	426,515	 
	Wireless
	 	 	592,841	 	 	 	655,920	 	 	 	721,136	 	 	 	497,118	 	 	 	532,462	 	 	 	588,615	 	 	 	589,599	 	 	 	414,624	 	 	 	461,018	 	 	 	512,871	 	 	 	503,001	 
	Media
	 	 	215,741	 	 	 	230,881	 	 	 	206,757	 	 	 	196,726	 	 	 	219,706	 	 	 	194,691	 	 	 	243,869	 	 	 	176,817	 	 	 	213,570	 	 	 	187,395	 	 	 	233,023	 
	Blue Jays
	 	 	—	 	 	 	—	 	 	 	42,062	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Corporate and eliminations
	 	 	(16,907	)	 	 	(18,152	)	 	 	(25,637	)	 	 	(11,462	)	 	 	(13,341	)	 	 	(17,329	)	 	 	(16,920	)	 	 	(10,984	)	 	 	(12,035	)	 	 	(12,945	)	 	 	(14,124	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	1,264,749	 	 	 	1,343,495	 	 	 	1,433,689	 	 	 	1,115,380	 	 	 	1,173,213	 	 	 	1,211,623	 	 	 	1,291,640	 	 	 	965,043	 	 	 	1,056,771	 	 	 	1,096,556	 	 	 	1,148,415	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating
profit (2)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cable
	 	 	171,186	 	 	 	173,294	 	 	 	173,144	 	 	 	157,288	 	 	 	161,878	 	 	 	167,587	 	 	 	176,721	 	 	 	131,314	 	 	 	136,067	 	 	 	139,770	 	 	 	156,329	 
	Wireless
	 	 	219,644	 	 	 	247,083	 	 	 	269,564	 	 	 	155,810	 	 	 	182,546	 	 	 	222,295	 	 	 	166,921	 	 	 	110,851	 	 	 	132,782	 	 	 	160,906	 	 	 	123,148	 
	Media
	 	 	6,470	 	 	 	38,819	 	 	 	24,046	 	 	 	6,020	 	 	 	37,106	 	 	 	20,988	 	 	 	42,610	 	 	 	4,234	 	 	 	30,129	 	 	 	18,804	 	 	 	34,468	 
	Blue Jays
	 	 	—	 	 	 	—	 	 	 	(9,065	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Corporate
	 	 	(15,443	)	 	 	(13,407	)	 	 	(1,714	)	 	 	(9,846	)	 	 	(11,324	)	 	 	(10,762	)	 	 	(16,942	)	 	 	(7,358	)	 	 	(10,630	)	 	 	(8,717	)	 	 	(10,483	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	381,857	 	 	 	445,789	 	 	 	455,975	 	 	 	309,272	 	 	 	370,206	 	 	 	400,108	 	 	 	369,310	 	 	 	239,041	 	 	 	288,348	 	 	 	310,763	 	 	 	303,462	 
	Other expense
(recovery)
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(12,331	)	 	 	—	 	 	 	—	 	 	 	5,850	 
	Depreciation &
Amortization
	 	 	246,090	 	 	 	250,528	 	 	 	255,857	 	 	 	248,319	 	 	 	256,427	 	 	 	261,666	 	 	 	273,851	 	 	 	235,861	 	 	 	247,227	 	 	 	246,534	 	 	 	251,836	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income
	 	 	135,767	 	 	 	195,261	 	 	 	200,118	 	 	 	60,953	 	 	 	113,779	 	 	 	138,442	 	 	 	95,459	 	 	 	15,511	 	 	 	41,121	 	 	 	64,229	 	 	 	45,776	 
	Interest on
long-term debt
	 	 	(124,144	)	 	 	(118,840	)	 	 	(116,359	)	 	 	(123,547	)	 	 	(128,010	)	 	 	(121,944	)	 	 	(115,364	)	 	 	(108,635	)	 	 	(118,035	)	 	 	(133,107	)	 	 	(131,502	)
	Other income
(expense)
	 	 	(75,383	)	 	 	(41,775	)	 	 	29,676	 	 	 	109,620	 	 	 	96,860	 	 	 	(12,045	)	 	 	50,558	 	 	 	(12,241	)	 	 	(216,923	)	 	 	(48,692	)	 	 	798,569	 
	Income tax
recovery (expense)
	 	 	(1,453	)	 	 	(3,555	)	 	 	(3,371	)	 	 	(7,132	)	 	 	(3,372	)	 	 	(3,039	)	 	 	36,400	 	 	 	(10,367	)	 	 	105,365	 	 	 	11,564	 	 	 	(31,832	)
	Non-controlling
interest
	 	 	423	 	 	 	(25,596	)	 	 	(48,480	)	 	 	(16,158	)	 	 	(25,197	)	 	 	(18,854	)	 	 	1,784	 	 	 	18,169	 	 	 	(324	)	 	 	6,241	 	 	 	17,145	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income
(loss) for the
period
	 	 	(64,790	)	 	 	5,495	 	 	 	61,584	 	 	 	23,736	 	 	 	54,060	 	 	 	(17,440	)	 	 	68,837	 	 	 	(97,563	)	 	 	(188,796	)	 	 	(99,765	)	 	 	698,156	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income
(loss) per share
-basic
	 	$	(0.33	)	 	$	(0.03	)	 	$	0.20	 	 	$	0.06	 	 	$	0.18	 	 	$	(0.13	)	 	$	0.24	 	 	$	(0.53	)	 	$	(0.96	)	 	$	(0.68	)	 	$	3.22	 
	Operating
profit margin %
(3)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated
	 	 	30.2	 	 	 	33.2	 	 	 	31.8	 	 	 	27.7	 	 	 	31.6	 	 	 	33.0	 	 	 	28.6	 	 	 	24.8	 	 	 	27.3	 	 	 	28.3	 	 	 	26.4	 
	Other Statistics
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Property,
plant and equipment expenditures
	 	$	228,666	 	 	$	218,267	 	 	$	221,147	 	 	$	188,950	 	 	$	222,312	 	 	$	244,722	 	 	$	307,758	 	 	$	242,043	 	 	$	324,656	 	 	$	305,359	 	 	$	389,925	 
	Property, plant
and equipment
	 	 	5,037,873	 	 	 	5,016,443	 	 	 	5,007,141	 	 	 	5,004,390	 	 	 	4,981,017	 	 	 	4,975,265	 	 	 	5,039,304	 	 	 	4,739,519	 	 	 	4,839,198	 	 	 	4,904,965	 	 	 	5,051,998	 
	Total Assets
	 	 	8,606,593	 	 	 	8,761,089	 	 	 	8,794,097	 	 	 	8,446,249	 	 	 	8,791,553	 	 	 	8,481,103	 	 	 	8,465,495	 	 	 	9,460,899	 	 	 	9,469,818	 	 	 	9,477,272	 	 	 	8,524,503	 
	Total long-term
debt, including
current portion
(4)
	 	 	5,674,517	 	 	 	5,587,164	 	 	 	5,287,830	 	 	 	5,727,561	 	 	 	5,777,974	 	 	 	5,356,314	 	 	 	5,305,016	 	 	 	5,766,770	 	 	 	6,048,900	 	 	 	6,053,303	 	 	 	5,687,471	 
	Shareholders’ equity
	 	 	1,708,771	 	 	 	1,946,787	 	 	 	2,006,238	 	 	 	1,459,611	 	 	 	1,736,140	 	 	 	1,714,462	 	 	 	1,767,380	 	 	 	2,312,778	 	 	 	2,122,742	 	 	 	711,376	 	 	 	1,404,035	 













	1.	 	Effective January 1, 2004, we adopted new accounting standards regarding the timing of revenue recognition and the classification of certain items as revenue or
expense; see the “New Accounting Standards — Revenue Recognition” section for further details with respect to the impact of this reclassification. All periods presented
above are prepared on a consistent basis.
	 
	2.	 	Operating profit should not be considered as a substitute or alternative for operating income or net income, in each case determined in accordance with generally
accepted accounting principles (“GAAP”). See the “Reconciliation to Net Income (Loss)” section for a reconciliation of operating profit to operating income and net
income (loss) under GAAP; and the “Key Performance Indicators and Non-GAAP Measures — Operating Profit” section.
	 
	3.	 	As defined — see the “Key Performance Indicators Non-GAAP Measures — Operating Profit Margin” section and as calculated below.
	 
	4.	 	Total long-term debt, including current portion, has been presented to include the effect of cross-currency interest rate exchange agreements for all periods.




42









 









Rogers Communications Inc.

Unaudited Consolidated Statements of Income



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars, except	 	 	 	 	 	 	 	 
	per share amounts)
	 	2004
	 	2003
	 	2004
	 	2003

	Operating revenue (Note 1 (d))
	 	$	1,433,688	 	 	$	1,211,623	 	 	$	4,041,932	 	 	$	3,500,216	 
	Cost of sales (Note 1 (d))
	 	 	220,730	 	 	 	154,075	 	 	 	566,193	 	 	 	438,746	 
	Sales and marketing costs
(Note 1 (d))
	 	 	203,640	 	 	 	175,488	 	 	 	591,717	 	 	 	522,375	 
	Operating, general and
administrative expenses (Note 1
(d))
	 	 	553,343	 	 	 	481,954	 	 	 	1,600,401	 	 	 	1,459,509	 
	Depreciation and amortization
	 	 	255,857	 	 	 	261,666	 	 	 	752,475	 	 	 	766,413	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income
	 	 	200,118	 	 	 	138,440	 	 	 	531,146	 	 	 	313,173	 
	Interest on long-term debt
	 	 	(116,359	)	 	 	(121,944	)	 	 	(359,343	)	 	 	(373,501	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	83,759	 	 	 	16,496	 	 	 	171,803	 	 	 	(60,328	)
	Gain on sale of other investments
	 	 	1,513	 	 	 	12,892	 	 	 	5,479	 	 	 	12,892	 
	Writedown of investments
	 	 	—	 	 	 	—	 	 	 	(4,080	)	 	 	—	 
	Losses from investments
accounted for by the equity method
	 	 	(3,433	)	 	 	(11,490	)	 	 	(19,633	)	 	 	(37,051	)
	Foreign exchange gain (loss)
	 	 	35,804	 	 	 	5,378	 	 	 	(88,566	)	 	 	242,064	 
	Change in the fair value of
derivative instruments
	 	 	(7,919	)	 	 	—	 	 	 	28,073	 	 	 	—	 
	Loss on repayment of
long-term debt
	 	 	—	 	 	 	(17,242	)	 	 	(20,327	)	 	 	(24,839	)
	Investment and other income
	 	 	3,711	 	 	 	(1,583	)	 	 	11,572	 	 	 	1,370	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Income before income taxes
and non-controlling interest
	 	 	113,435	 	 	 	4,451	 	 	 	84,321	 	 	 	134,108	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Income tax expense
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current
	 	 	3,371	 	 	 	3,039	 	 	 	8,379	 	 	 	10,359	 
	Future
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,185	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	3,371	 	 	 	3,039	 	 	 	8,379	 	 	 	13,544	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Income before non-controlling
interest
	 	 	110,064	 	 	 	1,412	 	 	 	75,942	 	 	 	120,564	 
	Non-controlling interest
	 	 	(48,480	)	 	 	(18,854	)	 	 	(73,653	)	 	 	(60,210	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss) for the
period
	 	$	61,584	 	 	$	(17,442	)	 	$	2,289	 	 	$	60,354	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Earnings (loss) per share
(Note 8)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	$	0.20	 	 	$	(0.13	)	 	$	(0.16	)	 	$	0.11	 
	Diluted
	 	 	0.19	 	 	 	(0.13	)	 	 	(0.16	)	 	 	0.10	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







See accompanying Notes to Unaudited Interim Consolidated Financial Statements.





43









 





Rogers Communications Inc.

Unaudited Consolidated Statements of Cash Flows



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Cash provided by (used in):
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating activities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income (loss) for the
period
	 	$	61,584	 	 	$	(17,442	)	 	$	2,289	 	 	$	60,354	 
	Adjustments to reconcile net
income (loss) to cash flows from
operating activities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation
and amortization
	 	 	255,857	 	 	 	261,666	 	 	 	752,475	 	 	 	766,413	 
	Gain on sale
of other
investments
	 	 	(1,513	)	 	 	(12,892	)	 	 	(5,479	)	 	 	(12,892	)
	Writedown of
investments
	 	 	—	 	 	 	—	 	 	 	4,080	 	 	 	—	 
	Losses from
investments
accounted for by
the equity method
	 	 	3,433	 	 	 	11,490	 	 	 	19,633	 	 	 	37,051	 
	Unrealized
foreign exchange
(gain) loss
	 	 	(34,197	)	 	 	(4,094	)	 	 	87,718	 	 	 	(237,259	)
	Change in fair
value of derivative
instruments
	 	 	7,919	 	 	 	—	 	 	 	(28,073	)	 	 	—	 
	Loss on
repayment of
long-term debt
	 	 	—	 	 	 	17,242	 	 	 	20,327	 	 	 	24,839	 
	Accreted
interest due on
repayment of
certain notes
payable
	 	 	2,546	 	 	 	2,529	 	 	 	7,589	 	 	 	7,728	 
	Dividends from
associated
companies
	 	 	1,124	 	 	 	249	 	 	 	1,498	 	 	 	624	 
	Future income
taxes
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,185	 
	Non-controlling
interest
	 	 	48,480	 	 	 	18,854	 	 	 	73,653	 	 	 	60,210	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	345,233	 	 	 	277,602	 	 	 	935,710	 	 	 	710,253	 
	Change in
non-cash working
capital items (Note 13)
	 	 	11,495	 	 	 	83,643	 	 	 	(120,335	)	 	 	(9,428	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	356,728	 	 	 	361,245	 	 	 	815,375	 	 	 	700,825	 
	Financing activities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issue of long-term debt
	 	 	28,000	 	 	 	236,500	 	 	 	2,407,550	 	 	 	1,334,900	 
	Repayment of long-term debt
	 	 	(134,539	)	 	 	(654,908	)	 	 	(2,429,712	)	 	 	(1,436,527	)
	Proceeds on termination of
cross-currency interest rate
exchange agreements
	 	 	—	 	 	 	—	 	 	 	58,416	 	 	 	—	 
	Premium on repayment of
long-term debt
	 	 	—	 	 	 	(13,032	)	 	 	(49,188	)	 	 	(19,348	)
	Financing costs incurred
	 	 	—	 	 	 	—	 	 	 	(18,671	)	 	 	(6,220	)
	Issue of capital stock
	 	 	3,322	 	 	 	4,009	 	 	 	263,914	 	 	 	248,046	 
	Dividends on Preferred shares
and distributions on
Convertible Preferred Securities
	 	 	(8,250	)	 	 	(8,250	)	 	 	(24,750	)	 	 	(24,750	)
	Dividends on Class B
Non-Voting, Class A Voting and
Series E Preferred shares
	 	 	(11,745	)	 	 	(11,607	)	 	 	(23,422	)	 	 	(11,607	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	(123,212	)	 	 	(447,288	)	 	 	184,137	 	 	 	84,494	 
	Investing activities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Property, plant and equipment
(“PP&E”) expenditures
	 	 	(221,147	)	 	 	(244,722	)	 	 	(668,080	)	 	 	(655,984	)
	Change in non-cash working
capital items related to PP&E
(Note 1(a))
	 	 	34,493	 	 	 	6,631	 	 	 	16,095	 	 	 	(96,337	)
	Proceeds on sale of other
investments
	 	 	1,496	 	 	 	15,696	 	 	 	7,768	 	 	 	15,696	 
	Acquisition of Toronto Blue
Jays
	 	 	(30,000	)	 	 	—	 	 	 	(69,111	)	 	 	—	 
	Acquisitions of subsidiary
companies, net of cash acquired
	 	 	(1,483	)	 	 	—	 	 	 	(21,260	)	 	 	—	 
	Acquisition of spectrum
licences
	 	 	—	 	 	 	—	 	 	 	(5,913	)	 	 	—	 
	Other
	 	 	(3,645	)	 	 	(20,700	)	 	 	(31,755	)	 	 	(54,305	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	(220,286	)	 	 	(243,095	)	 	 	(772,256	)	 	 	(790,930	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Increase in cash
	 	 	13,230	 	 	 	(329,138	)	 	 	227,256	 	 	 	(5,611	)
	Cash (deficiency), beginning of period
	 	 	203,738	 	 	 	350,411	 	 	 	(10,288	)	 	 	26,884	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Cash, end of period
	 	$	216,968	 	 	$	21,273	 	 	$	216,968	 	 	$	21,273	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







Cash and cash equivalents are defined as cash and short-term deposits which have an original
maturity of less than 90 days, less bank advances




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Supplemental cash flow
information:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Interest paid
	 	$	100,888	 	 	$	80,863	 	 	$	329,054	 	 	$	316,660	 
	Income taxes
paid
	 	 	2,818	 	 	 	19,921	 	 	 	9,490	 	 	 	27,692	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Supplemental disclosure of
non-cash financing and investing
activities:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Class B
Non-Voting shares
issued on
conversion of
Series B and E
Convertible
Preferred shares
	 	$	—	 	 	$	—	 	 	$	851	 	 	$	12	 
	Class B
Non-Voting shares
issued in
consideration for
acquisition of
shares of Cogeco
Cable Inc.
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	35,181	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







See accompanying Notes to Unaudited Interim Consolidated Financial Statements.



44









 





Rogers Communications Inc.

Unaudited Consolidated Balance Sheets



	 	 	 	 	 	 	 	 	 
	 	 	September 30,	 	December 31,
	(In thousands of dollars)
	 	2004
	 	2003

	Assets
	 	 	 	 	 	 	 	 
	Current assets
	 	 	 	 	 	 	 	 
	Accounts receivable
	 	$	599,677	 	 	$	550,830	 
	Cash and cash equivalents
	 	 	216,968	 	 	 	—	 
	Other current assets
	 	 	231,164	 	 	 	178,993	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	 	1,047,809	 	 	 	729,823	 
	Property, plant and equipment
	 	 	5,007,141	 	 	 	5,039,304	 
	Goodwill
	 	 	1,985,572	 	 	 	1,891,636	 
	Other intangible assets
	 	 	431,638	 	 	 	400,219	 
	Investments (Note 2)
	 	 	128,060	 	 	 	229,221	 
	Deferred charges
	 	 	119,780	 	 	 	142,480	 
	Other long term assets
	 	 	59,097	 	 	 	32,812	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	$	8,779,097	 	 	$	8,465,495	 
	 
	 	 	
 	 	 	 	
 	 
	Liabilities and Shareholders’ Equity
	 	 	 	 	 	 	 	 
	Liabilities
	 	 	 	 	 	 	 	 
	Current liabilities
	 	 	 	 	 	 	 	 
	Bank advances, arising from outstanding cheques
	 	$	—	 	 	$	10,288	 
	Accounts payable and accrued liabilities
	 	 	937,119	 	 	 	1,021,559	 
	Current portion of long-term debt (Note 4)
	 	 	371,668	 	 	 	11,498	 
	Current portion of derivative instruments (Note 5)
	 	 	41,764	 	 	 	—	 
	Unearned revenue
	 	 	106,616	 	 	 	97,577	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	 	1,457,167	 	 	 	1,140,922	 
	Long-term debt (Note 4)
	 	 	4,472,974	 	 	 	4,958,734	 
	Derivative instruments (Note 5)
	 	 	401,424	 	 	 	334,784	 
	Deferred transitional gain (Note 6)
	 	 	76,224	 	 	 	19,225	 
	Other long term liabilities
	 	 	82,958	 	 	 	51,108	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	 	6,490,747	 	 	 	6,504,773	 
	Non-controlling interest
	 	 	282,112	 	 	 	193,342	 
	Shareholders’ equity (Note 7)
	 	 	2,006,238	 	 	 	1,767,380	 
	 
	 	 	
 	 	 	 	
 	 
	 
	 	$	8,779,097	 	 	$	8,465,495	 
	 
	 	 	
 	 	 	 	
 	 







Canadian and United States accounting policy differences (Note 15)

Subsequent events (Note 16)

Contingent liabilities (Note 17)



See accompanying Notes to Unaudited Interim Consolidated Financial Statements.




45









 








Rogers Communications Inc.

Unaudited Consolidated Statements of Deficit



	 	 	 	 	 	 	 	 	 
	 	 	Nine Months Ended	 	Nine Months Ended
	 	 	September 30,	 	September 30,
	(In thousands of dollars)
	 	2004
	 	2003

	Deficit, beginning of period
	 	$	(339,436	)	 	$	(415,589	)
	Adjustment for stock-based compensation (Note 1(c))
	 	 	(7,025	)	 	 	—	 
	 
	 	 	
 	 	 	 	
 	 
	As restated
	 	 	(346,461	)	 	 	(415,589	)
	Net income for the period
	 	 	2,289	 	 	 	60,354	 
	Dividends on Class A Voting shares and Class B Non-Voting shares
	 	 	(11,745	)	 	 	(11,602	)
	Dividends on Series E Preferred shares
	 	 	—	 	 	 	(6	)
	Distribution on Convertible Preferred Securities
	 	 	(24,750	)	 	 	(21,546	)
	 
	 	 	
 	 	 	 	
 	 
	Deficit, end of period
	 	$	(380,667	)	 	$	(388,389	)
	 
	 	 	
 	 	 	 	
 	 







See accompanying notes to Unaudited Interim Consolidated Financial Statements.



46









 





Rogers Communications Inc.

Notes to Unaudited Consolidated Financial Statements

Three Months and Nine Months Ended September 30, 2004 and 2003



These interim unaudited Consolidated Financial Statements do not include all of the
disclosures required by Canadian generally accepted accounting principles (GAAP). They should be
read in conjunction with the audited Consolidated Financial Statements, including the Notes
thereto, for the year ended December 31, 2003.




	1.	 	Basis of Presentation and Accounting Policies:





	 	 	The interim Consolidated Financial Statements include the accounts of Rogers Communications
Inc. and its subsidiaries (collectively “Rogers” or “the Company”). The Notes presented in these
interim Consolidated Financial Statements include only significant changes and transactions
occurring since the Company’s last year-end, and are not fully inclusive of all matters normally
disclosed in the Company’s annual audited Consolidated Financial Statements.
	 
	 	 	These interim Consolidated Financial Statements follow the same accounting policies and
methods of application as the most recent annual financial statements, except that certain
comparative figures have been reclassified and the following policies have been adopted in the nine
months ended September 30, 2004:





	(a)	 	GAAP Hierarchy
	 
	 	 	In June 2003, the Canadian Institute of Chartered
Accountants (CICA) released Handbook Section 1100, “Generally
Accepted Accounting Principles”. Previously, there had been no
clear definition of the order of authority for sources of GAAP.
This standard established standards for financial reporting in
accordance with Canadian GAAP and applies to the Company’s 2004
fiscal year. This section also provides guidance on sources to
consult when selecting accounting policies and on appropriate
disclosures when a matter is not dealt with explicitly in the
primary sources of GAAP.
	 
	 	 	The Company has reviewed this new standard, and as a result
has adopted a classified balance sheet presentation since it
believes the historical industry practice of a declassified
balance sheet presentation is no longer appropriate.
	 
	 	 	In addition, within the Company’s Consolidated Statements of
Cash Flows, it has reclassified the change in non-cash working
capital items related to PP&E to investing activities. This
change had the impact of decreasing cash used in investing
activities on the Statements of Cash Flows, compared to the
previous method, by $34.5 million and by $6.6 million in the
three months ended September 30, 2004 and 2003, respectively. For
the nine months ended September 30, 2004 cash used in investing
activities on the Statements of Cash Flows decreased by $16.1
million and for the nine months ended September 30, 2003 this
change had the impact of increasing cash used in investing
activities on the Statements of Cash Flows by $96.3 million. In
all periods, the corresponding change was to non-cash working
capital items within operating activities.



47









 










	(b)	 	Hedging Relationships
	 
	 	 	In November 2001, the CICA issued Accounting Guideline 13,
“Hedging Relationships” (“AcG-13”), and in November 2002, it
amended the effective date of the guideline. AcG-13 established
new criteria for hedge accounting with application to all hedging
relationships in effect on or after January 1, 2004. Effective
January 1, 2004, the Company determined that it would not account
for its derivative instruments, including cross-currency interest
rate exchange agreements and forward exchange agreements, as
hedges for accounting purposes and consequently began to account
for such derivatives on a mark-to-market basis with resulting
gains or losses recorded in or charged against income.
	 
	 	 	This resulted in the recognition in the Consolidated
Statement of Income of an unrealized gain related to the change
in fair value of the exchange agreements of $36.0 million for the
six months ended June 30, 2004. A loss of $87.2 million was also
recognized for the six months ended June 30, 2004, related to the
unrealized foreign exchange on the debt previously hedged.
	 
	 	 	The Company also adjusted the carrying value of these
instruments from $334.8 million at December 31, 2003 to the fair
value of $388.2 million on January 1, 2004. The corresponding
transitional loss of $53.4 million was deferred and amortized to
income over the remaining life of the underlying debt
instruments. Amortization for the six months ended June 30, 2004
totalled $3.3 million.
	 
	 	 	Effective July 1, 2004, the Company met the requirements for
hedge accounting under AcG-13 for certain of our instruments, and
consequently, on a prospective basis, began to treat
approximately US$2,773.4 million notional amount of the aggregate
US$2,885.3 million, or 96.1% of these exchange agreements as
hedges, for accounting purposes, against foreign exchange
fluctuations on US$2,773.4 million of US dollar-denominated debt.
	 
	 	 	Under hedge accounting, the foreign exchange gains and
losses arising on the translation of the U.S. dollar-denominated
debt at the end of each accounting period are hedged by the equal
and offsetting foreign exchange gains and losses relating to the
swaps that are designated as hedges.
	 
	 	 	A new transitional adjustment arising on the change from
mark-to-market accounting to hedge accounting was therefore
calculated as at July 1, 2004, resulting in a deferred
transitional gain of $74.8, million which will be amortized to
income over the shorter of the remaining life of the debt and the
term of the exchange agreements. Amortization of this
transitional gain from July 1, 2004 to September 30, 2004
totalled $3.1 million.
	 
	 	 	Certain other cross-currency interest rate exchange
agreements will continue not to be accounted for as hedges as
they do not meet the requirements for hedge accounting under
AcG-13. Approximately US$111.83 million notional amount of
exchange agreements will continue to be accounted for on a
mark-to-market basis. The fair value of these exchange agreements
of $9.4 million at September 30, 2004 was recorded in other
long-term liabilities.




48









 






	(c)	 	Stock-Based Compensation
	 
	 	 	Effective January 1, 2004, Canadian GAAP requires the
Company to calculate the fair value of stock-based compensation
awarded to employees and to expense the fair value over the
vesting period of the stock options. In accordance with the
transition rules, the Company determined the fair value of stock
options granted to employees since January 1, 2002, using the
Black-Scholes Option Pricing Model, and recorded an adjustment to
opening retained earnings in the amount of $7.0 million,
representing the expense for the 2002 and 2003 fiscal years. The
offset to retained earnings is an increase in contributed
surplus. Stock-based compensation expense of $3.3 million and
$11.5 million have been recorded for the three months ended
September 30, 2004 and the nine months ended September 30, 2004,
respectively.
	 
	(d)	 	Revenue Recognition
	 
	 	 	Effective January 1, 2004, the Company adopted new Canadian
accounting standards including CICA Emerging Issues Committee
Abstract 142 issued in December 2003, regarding the timing of
revenue recognition and the classification of certain items as
revenue or expense.
	 
	 	 	As a result of the adoption of these new accounting
standards, the following changes to the recognition and
classification of revenue and expenses have been made for all
periods presented:
	 
	•	 	Cable installation fee revenue from both new connects and
re-connects is deferred and amortized over the estimated life of
the subscriber, which the Company has determined based on churn,
transfers of service and moves to be approximately four years.
Re-connect installation costs up to the amount of installation
revenue earned from re-connects are also deferred and amortized
over the estimated life of the subscriber. At September 30, 2004,
the revenue deferred with respect to installations was $6.3
million and re-connect costs deferred were $4.1 million.
	 
	•	 	Wireless activation fees are now classified as equipment
revenue. Previously, these amounts were classified as network
revenue.
	 
	•	 	Recoveries from new and existing subscribers from the sale
of wireless and cable equipment are now classified as equipment
revenue. Previously, these amounts were recorded as a reduction
to expense.
	 
	•	 	Certain other recoveries from Wireless and Cable subscribers
related to collections activities are recognized immediately upon
sale and are now recorded in revenue. Previously, these amounts
were recorded as a recovery of operating, general and
administrative expenses.
	 
	•	 	Wireless equipment subsidies provided to new and existing
subscribers are now classified as a reduction to equipment
revenue. Previously, these amounts were recorded as sales expense
in the case of a new subscriber, and as operating, general and
administrative expense in the case of an existing subscriber.
	 
	•	 	Wireless equipment costs for equipment provided under
retention programs to existing subscribers are now recorded as
cost of equipment sales. Previously, these amounts were recorded
as operating, general and administrative expense.



49









 









The effect of the adoption on the financial results of Wireless is as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In millions of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	 	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to
	 	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption
	Network revenue
	 	$	635.6	 	 	$	636.7	 	 	$	538.8	 	 	$	540.7	 	 	$	1,772.4	 	 	$	1,777.2	 	 	$	1,493.4	 	 	$	1,499.1	 
	Equipment sales
	 	 	85.5	 	 	 	92.5	 	 	 	49.8	 	 	 	59.0	 	 	 	197.5	 	 	 	214.3	 	 	 	124.8	 	 	 	158.4	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	$	721.1	 	 	$	729.2	 	 	$	588.6	 	 	$	599.7	 	 	$	1,969.9	 	 	$	1,991.5	 	 	$	1,618.2	 	 	$	1,657.5	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Cost of equipment sales
	 	$	151.6	 	 	$	87.2	 	 	$	94.6	 	 	$	58.5	 	 	$	357.5	 	 	$	207.5	 	 	$	252.0	 	 	$	160.9	 
	Sales and marketing
expenses
	 	 	89.6	 	 	 	132.2	 	 	 	85.2	 	 	 	120.8	 	 	 	266.4	 	 	 	378.8	 	 	 	250.1	 	 	 	349.6	 
	Operating, general and
administrative expenses
	 	 	210.3	 	 	 	240.3	 	 	 	186.5	 	 	 	198.0	 	 	 	609.7	 	 	 	668.9	 	 	 	555.4	 	 	 	586.2	 







The effect of the adoption on the financial results of Cable is as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three months ended September 30,
	 	Nine months ended September 30,

	(in millions of dollars)	 	2004
	 	2003
	 	2004
	 	2003

	 	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to	 	After	 	Prior to
	 	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption	 	Adoption
	Operating revenue
	 	$	489.4	 	 	$	483.3	 	 	$	445.6	 	 	$	441.1	 	 	$	1,437.3	 	 	$	1,425.3	 	 	$	1,313.0	 	 	$	1,298.5	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Sales and marketing
expenses
	 	$	68.3	 	 	$	69.1	 	 	$	49.3	 	 	$	49.8	 	 	$	186.0	 	 	$	188.4	 	 	$	146.8	 	 	$	147.8	 
	Operating, general and
administrative expenses
	 	 	211.9	 	 	 	204.3	 	 	 	199.7	 	 	 	195.5	 	 	 	627.8	 	 	 	612.7	 	 	 	587.7	 	 	 	574.7	 








	(e)	 	Significant Accounting Policies — Blue Jays
	 
	 	 	The following reflects the significant accounting policy of
the Toronto Blue Jays Baseball Club (the “Blue Jays”), which is
consolidated as of July 31, 2004:





	 	(i)	 	Revenue Recognition: The Blue Jays’
revenue, which is composed primarily
of home game admission and concession
revenue, is recognized as the related
games are played during the baseball
season. Revenue from radio and
television agreements is recorded at
the time the related games are aired.
The Blue Jays receive revenue from
the Major League Baseball (MLB)
Revenue Sharing Agreement that which
distributes funds to and from member
clubs, based on the clubs’ revenues,
in an effort to subsidize
lower-revenue-generating clubs. This
revenue is recognized in the season
in which it is earned, when the
amount is estimable and
collectibility is reasonably assured.



50









 










	2.	 	Investments:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	September 30,	 	December 31,
	(In thousands of dollars)	 	 	 	 	 	 	 	 	 	2004
	 	2003

	 	 	 	 	 	 	Quoted	 	 	 	 
	 	 	 	 	 	 	Market	 	Book	 	Book
	Description
	 	Value
	 	Value
	 	Value

	Investments accounted for by the equity method	 	 	 	 	 	 	 	 	 	 	 	 
	Blue Jays Holdco
	 	 	 	 	 	 	 	 	 	$	—	 	 	$	95,720	 
	Other
	 	 	 	 	 	 	 	 	 	 	5,594	 	 	 	5,055	 
	 
	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	 	 	 	 	 	 	 	 	5,594	 	 	 	100,775	 
	Investments accounted for by the
cost method, net of writedowns	 	 	 	 	 	 	 	 	 	 	 	 
	Publicly traded companies:	 	 	 	 	 	 	 	 	 	 	 	 
	Cogeco Cable Inc.     7,253,800     Subordinate Voting Common Shares
	 	 	 	$	157,770	 	 	 	75,758	 	 	 	75,758	 
	Cogeco Inc.                2,724,800     Subordinate Voting Common Shares
	 	 	 	 	52,452	 	 	 	28,610	 	 	 	28,610	 
	Other publicly traded companies
	 	 	 	 	 	 	19,904	 	 	 	3,550	 	 	 	7,508	 
	 
	 	 	 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	 	 	 	$	230,126	 	 	 	107,918	 	 	 	111,876	 
	Private companies
	 	 	 	 	 	 	 	 	 	 	14,548	 	 	 	16,570	 
	 
	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	 	 	 	 	 	 	 	$	128,060	 	 	$	229,221	 
	 
	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	
 	 







Blue Jays Holdco



On January 5, 2004, the Company paid the remaining amount due related to the purchase of the
20% minority interest in the Blue Jays for approximately $39.1 million. This payment had no impact
on the carrying value of the investment, as this liability was recorded at the date of acquisition.




Effective April 1, 2001, Rogers Telecommunications Ltd. (“RTL”), a company controlled by the
controlling shareholder of the Company, acquired the Class A Preferred Shares of a subsidiary of
RCI that owns the Blue Jays (“Blue Jays Holdco”) for $30.0 million. On July 31, 2004, Blue Jays
Holdco redeemed and cancelled the 30,000 Class A Preferred shares for $30.0 million, resulting in
Blue Jays Holdco becoming a wholly-owned subsidiary of the Company. This redemption had no impact
on net income, as the Company had previously recorded 100% of the losses of Blue Jays Holdco.






51









 






As a result of the consolidation of the Blue Jays, the net assets included on consolidation
effective July 31, 2004 are as follows:




	 	 	 	 	 
	 	 	As at
	(In thousands of dollars)
	 	July 31, 2004

	Assets:
	 	 	 	 
	Accounts receivable
	 	$	32,169	 
	Cash and cash equivalents
	 	 	70	 
	Other current assets
	 	 	3,334	 
	Property, plant and equipment
	 	 	7,166	 
	Goodwill
	 	 	95,509	 
	Intangible assets
	 	 	27,524	 
	Other long-term assets
	 	 	36,913	 
	 
	 	 	
 	 
	 
	 	 	202,685	 
	 
	 	 	
 	 
	Liabilities:
	 	 	 	 
	Accounts payable and accrued liabilities
	 	 	27,822	 
	Unearned revenue
	 	 	10,869	 
	Other long-term liabilities
	 	 	31,151	 
	 
	 	 	
 	 
	 
	 	$	69,842	 
	 
	 	 	
 	 
	Net reduction in investment
	 	$	(132,843	)
	 
	 	 	
 	 








	3.	 	Acquisitions:




On January 2, 2004, the Company entered into a partnership with CTV Specialty Television Inc.
(“CTV”) in which it acquired 50% of CTV’s mobile production and distribution business. The interest
in the partnership, “Dome Productions”, was acquired for cash of $21.3 million, net of cash
acquired. The final purchase price is subject to adjustments for working capital items and the
allocation of the purchase price to the net assets acquired is not yet finalized.



52









 






	4.	 	Long-Term Debt:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Interest	 	September 30,	 	December 31,
	(in thousands of dollars)	 	 	 	Rate
	 	2004
	 	2003

	(A)	 	Corporate:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	(i)	 	Convertible Debentures, due 2005
	 	 	5.75	%	 	$	272,436	 	 	 	271,197	 
	 	 	(ii)	 	Senior Notes, due 2006
	 	 	10.50	%	 	 	75,000	 	 	 	75,000	 
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	
	 
	 	 	 	 	 
	 	 	 	 	 	 	347,436	 	 	 	346,197	 
	(B)	 	Cable:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	(i)	 	Bank credit facilities
	 	Floating	 	 	—	 	 	 	36,000	 
	 	 	(ii)	 	Senior Secured Second Priority Notes, due 2005
	 	 	10.00	%	 	 	368,469	 	 	 	376,777	 
	 	 	(iii)	 	Senior Secured Second Priority Notes, due 2007
	 	 	7.60	%	 	 	450,000	 	 	 	450,000	 
	 	 	(iv)	 	Senior Secured Second Priority Notes, due 2012
	 	 	7.875	%	 	 	442,365	 	 	 	452,340	 
	 	 	(v)	 	Senior Secured Second Priority Notes, due 2013
	 	 	6.25	%	 	 	442,365	 	 	 	452,340	 
	 	 	(vi)	 	Senior
Secured Second Priority Debentures, due 2014
	 	 	5.50	%	 	 	442,365	 	 	 	—	 
	 	 	(vii)	 	Senior
Secured Second Priority Debentures, due 2014
	 	 	9.65	%	 	 	—	 	 	 	300,000	 
	 	 	(viii)	 	Senior Second Priority Debentures, due 2032
	 	 	8.75	%	 	 	252,780	 	 	 	258,480	 
	 	 	(ix)	 	Senior Subordinated Debentures, due 2015
	 	 	11.00	%	 	 	143,674	 	 	 	146,914	 
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	
	 
	 	 	 	 	 
	 	 	 	 	 	 	2,542,018	 	 	 	2,472,851	 
	(C)	 	Wireless:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	(i)	 	Bank credit facilities
	 	Floating	 	 	—	 	 	 	138,000	 
	 	 	(ii)	 	Senior Secured Notes, due 2006
	 	 	10.50	%	 	 	160,000	 	 	 	160,000	 
	 	 	(iii)	 	Senior Secured Notes, due 2007
	 	 	8.30	%	 	 	—	 	 	 	253,453	 
	 	 	(iv)	 	Senior Secured Debentures, due 2008
	 	 	9.375	%	 	 	—	 	 	 	430,589	 
	 	 	(v)	 	Senior Secured Notes, due 2011
	 	 	9.625	%	 	 	619,311	 	 	 	633,276	 
	 	 	(vi)	 	Senior Secured Notes, due 2014
	 	 	6.375	%	 	 	947,925	 	 	 	—	 
	 	 	(vii)	 	Senior Secured Debentures, due 2016
	 	 	9.75	%	 	 	195,778	 	 	 	200,193	 
	 	 	(viii)	 	Senior Subordinated Notes, due 2007
	 	 	8.80	%	 	 	—	 	 	 	231,443	 
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	
	 
	 	 	 	 	 
	 	 	 	 	 	 	1,923,014	 	 	 	2,046,954	 
	(D)	 	Media:	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Bank credit facility — Media
	 	Floating	 	 	—	 	 	 	63,500	 
	Obligations under mortgages and capital leases and other	 	Various	 	 	32,174	 	 	 	40,730	 
	 	 	 	 	 	 	 	 	 	 	 	
	 	 	 	
	 
	 	 	 	 	 
	 	 	 	 	 	 	4,844,642	 	 	 	4,970,232	 
	Less current portion (Note 5)	 	 	 	 	 	 	(371,668	)	 	 	(11,498	)
	 	 	 	 	 
	 	 	 	 	 	 	
 	 	 	 	
 	 
	 	 	 	 	 
	 	 	 	 	 	$	4,472,974	 	 	$	4,958,734	 
	 	 	 	 	 
	 	 	 	 	 	 	
 	 	 	 	
 	 







Issued:



On February 20, 2004, Wireless issued US$750.0 million 6.375% Senior Secured Notes due 2014.




On March 26, 2004, Wireless entered into US$750.0 million notional amount of cross-currency
interest rate exchange agreements to reduce Wireless’ exposure to changes in the exchange rate of
the U.S. dollar as compared to the Canadian dollar.




On March 8, 2004, Cable issued US$350.0 million 5.50% Senior Secured Second Priority Notes,
due 2014.



53









 





Redeemed:



On February 20, 2004, Wireless unwound US$333.2 million cross-currency interest rate exchange
agreements for cash proceeds of $58.4 million. On March 26, 2004, Wireless redeemed its US$196.1
million Senior Secured Notes, US$179.1 million Senior Subordinated Notes and US$333.2 million
Senior Secured Debentures for an aggregate US$734.7 million, including payment of redemption
premiums. These transactions resulted in a loss on the repayment of long-term debt of $2.3 million,
which consisted of redemption premiums of $34.7 million and $7.8 million related to the write-off
of deferred financing costs, offset by a $40.2 million gain on the release of the deferred
transition gain related to the cross-currency interest rate exchange agreements that were unwound
during the quarter.




On February 23, 2004, Cable redeemed $300.0 million of its Senior Secured Second Priority
Debentures for $314.5 million including redemption premiums, resulting in a loss on the repayment
of debt of $18.0 million.




See also Note 15 for subsequent events related to long-term debt.




	5.	 	Derivative Instruments:




The carrying value of the derivative instruments represents the impact of the differences in
foreign exchange rates under the cross-currency interest rate exchange agreements used to hedge,
for accounting purposes, long-term debt denominated in U.S. dollars and the spot foreign exchange
rate at the balance sheet date. In the prior year, this amount was recorded as part of long-term
debt on the consolidated balance sheet. The comparative amount as at December 31, 2003 has been
reclassified to reflect the current year’s financial statement presentation.




	6.	 	Deferred Transitional Gain:




The deferred transitional gain arose from changes between mark-to-market accounting and hedge
accounting related to cross-currency interest rate exchange agreements. The transitional gain is
being amortized to income over the shorter of the remaining life of the debt and the term of the
exchange agreements. Amortization for the three months ended September 30, 2004 totalled $3.8
million.



54









 






	7.	 	Shareholders’ Equity:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	September 30,	 	December 31,
	(In thousands of dollars)	 	 	 	 	 	2004
	 	2003

	Capital stock issued, at stated value:	 	 	 	 	 	 	 	 
	Preferred shares:	 	 	 	 	 	 	 	 
	Held by subsidiary companies:	 	 	 	 	 	 	 	 
	 
	 	60,000	 	Series XXVII (2003 — 60,000)	 	$	60,000	 	 	$	60,000	 
	 
	 	818,300	 	Series XXX (2003 — 818,300)	 	 	10,000	 	 	 	10,000	 
	 
	 	300,000	 	Series XXXI (2003 — 300,000)	 	 	300,000	 	 	 	300,000	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	370,000	 	 	 	370,000	 
	Held by members of the Company’s share purchase plans:	 	 	 	 	 	 	 	 
	 
	 	Nil	 	Series E Convertible shares (2003
— 104,488)	 	 	—	 	 	 	1,787	 
	Common shares:	 	 	 	 	 	 	 	 
	 
	 	56,235,394	 	Class A Voting shares (2003 — 56,235,394)	 	 	72,313	 	 	 	72,313	 
	 
	 	188,856,821	 	Class B Non-Voting shares (2003 — 177,241,646)	 	 	306,851	 	 	 	287,978	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	749,164	 	 	 	732,078	 
	Deduct:	 	 	 	 	 	 	 	 
	Amounts receivable from employees
under certain share purchase plans	 	 	—	 	 	 	(1,186	)
	Preferred shares of the Company held by subsidiary companies	 	 	(370,000	)	 	 	(370,000	)
	 	 	 	
	 	 	 	
	 
	Total capital stock	 	 	379,164	 	 	 	360,892	 
	Convertible Preferred Securities	 	 	576,000	 	 	 	576,000	 
	Contributed surplus	 	 	1,431,741	 	 	 	1,169,924	 
	Deficit	 	 	(380,667	)	 	 	(339,436	)
	 	 	 	
	 	 	 	
	 
	Shareholders’ Equity	 	$	2,006,238	 	 	$	1,767,380	 
	 	 	 	
	 	 	 	
	 








	(i)	 	During the nine months ended September 30, 2004, the Company
completed the following capital stock transactions:
	 
	 	 	a)	 	On April 15, 2004, the Company filed a final shelf
prospectus in all of the provinces in Canada and in the U.S.
under which it will be able to offer up to aggregate of US$750
million of Class B Non-Voting shares, preferred shares, debt
securities, warrants, share purchase contracts or units, or any
combination thereof, for a period of 25 months;
	 
	 	 	b)	 	On June 16, 2004, 9,541,985 Class B Non-Voting shares
were issued under the shelf prospectus for net cash proceeds of
$238.9 million;
	 
	 	 	c)	 	1,970,088 Class B Non-Voting shares were issued to
employees upon the exercise of stock options for cash of $24.1
million;
	 
	 	 	d)	 	103,102 Series E Convertible Preferred shares with a
value of $1.8 million were converted to 103,102 Class B
Non-Voting shares, and 1,386 Series E Convertible Preferred
 shares were cancelled upon their expiry in April 2004.
	 
	 	 	 	 	As a result of the above transactions, $245.8 million of the
issued amounts related to Class B Non-Voting shares was recorded
in contributed surplus.
	 
	(ii)	 	Convertible Preferred Securities:
	 
	 	 	In August 2004, the Company and Microsoft Corporation, the
holder of the Convertible Preferred Securities, agreed to amend
the terms of such securities whereby certain transfer
restrictions will terminate on March 28, 2006 unless a
qualifying offer to purchase these securities is made by the
Company. In the event such transfer restrictions terminate,
during a three month period subsequent to March 28, 2006 the
Company has the option



55









 










	 	 	to extend the maturity of these securities for up to three
years from the original August 11, 2009 maturity date.
	 
	(iii)	 	Stock-based compensation:
	 
	a)	 	On January 1, 2004, the Company adopted CICA
Handbook Section 3870 and recorded a charge to opening retained
earnings of $7.0 million for stock options granted to employees
on or after January 1, 2002 (Note 1(c)).
	 
	 	 	During the three months and nine months ended September
30, 2004, the Company recorded compensation expense of
approximately $3.3 million and $11.5 million, respectively,
related to stock options granted to employees.
	 
	 	 	As a result of the above transactions, $18.5 million was
recorded in contributed surplus. This was offset by the change
related to the non-controlling interest share of stock
compensation expense of $2.5 million, which together with the
change in contributed surplus related to shares issued,
increased the contributed surplus by $261.8 million.
	 
	b)	 	Based on stock options issued subsequent to January
1, 2002, the stock-based compensation expense for the three
months and nine months ended September 30, 2003 would have been
increased by $1.9 million and $4.1 million, respectively, and
pro forma net income (loss) for the three months and nine
months ended September 30, 2003 would have been a loss of $19.3
million and net income of $56.3 million, respectively, or a
loss of $0.14 per share and earnings of $0.09 per share (basic
and diluted), respectively.
	 
	 	 	The weighted average estimated fair value at the date of
the grant for RCI options granted for the nine months ended
September 30, 2004 was $11.90 per share (2003 — $10.64). There
were no RCI options granted for the three months ended
September 30, 2004 and 2003. There were no Wireless options
granted for the three months and nine months ended September
30, 2004. The weighted average estimated fair value at the date
of the grant for Wireless options granted for the nine months
ended September 30, 2003 was $10.59 per share. The “fair value”
of each option granted was estimated on the date of the grant
using the Black-Scholes Option Pricing Model with the following
assumptions:




	 	 	 	 	 	 	 	 	 
	 	 	Nine Months Ended Sept 30,

	 	 	2004
	 	2003

	Risk-free interest rate — RCI’s options
	 	 	4.38	%	 	 	4.41	%
	Risk-free interest rate — Wireless options
	 	 	—	 	 	 	4.66	%
	Dividend yield — RCI’s options
	 	 	0.40	%	 	 	—	 
	Volatility factor of the future expected
market price of Wireless Class B Restricted Voting
shares
	 	 	—	 	 	 	56.14	%
	Volatility factor of the future expected market
price of RCI’s Class B Non-Voting shares
	 	 	45.24	%	 	 	49.88	%
	Weighted average expected life Wireless options
	 	 	—	 	 	5 years
	Weighted average expected life of RCI’s options
	 	6.1 years	 	6.6 years







56









 






	8.	 	Calculation of Earnings (Loss) Per Share:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands, except per share amounts)
	 	2004
	 	2003
	 	2004
	 	2003

	Numerator:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income (loss) for the period
	 	$	61,584	 	 	$	(17,442	)	 	$	2,289	 	 	$	60,354	 
	Distribution on Convertible Preferred
Securities
	 	 	(8,250	)	 	 	(8,250	)	 	 	(24,750	)	 	 	(21,546	)
	Dividends accreted on Convertible
Preferred Securities
	 	 	(5,259	)	 	 	(5,035	)	 	 	(15,607	)	 	 	(14,943	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss) — basic and diluted
	 	$	48,075	 	 	$	(30,727	)	 	$	(38,068	)	 	$	23,865	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Denominator:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of Class A and
Class B shares outstanding:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	 	244,951	 	 	 	232,221	 	 	 	238,502	 	 	 	223,608	 
	Diluted
	 	 	248,984	 	 	 	232,221	 	 	 	238,502	 	 	 	227,615	 
	Earnings (loss) per share
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
	 	$	0.20	 	 	 	($0.13	)	 	 	($0.16	)	 	$	0.11	 
	Diluted
	 	$	0.19	 	 	 	($0.13	)	 	 	($0.16	)	 	$	0.10	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







For the three months ended September 30, 2004, the effect of potentially dilutive securities,
including the Convertible Debentures and the Convertible Preferred Securities, were excluded from
the computation of diluted earnings per share as their effect is anti-dilutive. In addition, stock
options totalling approximately 4.1 million that are anti-dilutive were excluded from the
calculation.




	9.	 	Pensions:




For the three months and nine months ended September 30, 2004, the Company has recorded
pension expense in the amount of $1.5 million and $4.9 million, respectively (2003 — $2.5 million
and $8.5 million, respectively). In addition, expense for the three months and nine months ended
September 30, 2004 related to supplemental executive retirement plans that are unfunded were $0.9
million and $3.0 million, respectively.





	10.	 	Employee Share Accumulation Plan:




Effective in the first quarter of 2004, the Company launched an employee share accumulation
program that allows employees to voluntarily participate in a share purchase program. Under the
terms of the program, employees of the Company can contribute a specified percentage of their
regular earnings through payroll deductions. The designated administrator of the plan then
purchases Class B Non-Voting shares of the Company or, in the case of Wireless employees, Class B
Restricted Voting shares of that company, on the open market, on behalf of the employee.




At the end of each quarter, the Company makes a contribution of 25% of the employee’s
contribution in the quarter. The administrator then uses this amount to purchase additional shares
of the Company or of Wireless on behalf of the employee, as outlined above.




The Company records its contribution as compensation expense, which amounted to $0.3 million
and $0.8 million for the three months and nine months ended September 30, 2004, respectively.





	11.	 	Restricted Share Units:




Effective March 10, 2004, the Company created the 2004 Restricted Share Unit Plan which
enables employees, officers and directors of the Company and participating companies to participate
in the growth and development of the Company by providing such persons with the opportunity,
through Restricted Share Units, to acquire a proprietary interest in the Company.



57









 





Under the terms of the plan, Restricted Share Units are issued to the participant, and the
units issued vest over a period not to exceed three years from the grant date.



On the vesting date, the Company shall redeem all of the participants’ Restricted Share Units in
cash or by issuing one Class B Share for each Restricted Share Unit. The Company has reserved
2,344,591 Class B Shares for issuance under this plan.



As at September 30, 2004, 50,916 Restricted Units were outstanding related to Units issued on April
20, 2004. These Restricted Units vest at the end of three years from the grant date. The Company
records compensation expense equally over the vesting period, taking into account fluctuations in
the market price of the Class B Shares. Compensation expense for the three months and nine months
ended September 30, 2004 related to these Restricted Units were $0.1 million and $0.2 million,
respectively.





58









 







	12.	 	Segmented Information:




As discussed in Note 2, effective July 31, 2004, the Company obtained control of the Blue Jays
and accordingly began to consolidate their results of operations. The Blue Jays are a separate
operating segment and accordingly, the results for the three months and nine months ended September
30, 2004 presented below include the Blue Jays as a separate segment since July 31, 2004.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	For the Three Months Ended	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	September 30, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Corporate items	 	Consolidated
	(in thousands of dollars)
	 	Cable
	 	Wireless
	 	Media
	 	Blue Jays
	 	and eliminations
	 	Totals

	Operating revenue
	 	$	489,371	 	 	$	721,136	 	 	$	206,757	 	 	$	42,062	 	 	$	(25,638	)	 	$	1,433,688	 
	Cost of sales
	 	 	36,048	 	 	 	151,675	 	 	 	33,007	 	 	 	—	 	 	 	—	 	 	 	220,730	 
	Sales and marketing
	 	 	68,300	 	 	 	89,605	 	 	 	43,408	 	 	 	2,327	 	 	 	—	 	 	 	203,640	 
	Operating, general and
administrative expenses
	 	 	211,880	 	 	 	210,291	 	 	 	106,296	 	 	 	48,800	 	 	 	(23,924	)	 	 	553,343	 
	Management fees
	 	 	9,787	 	 	 	2,919	 	 	 	3,223	 	 	 	—	 	 	 	(15,929	)	 	 	—	 
	Depreciation and amortization
	 	 	112,199	 	 	 	118,944	 	 	 	22,446	 	 	 	1,591	 	 	 	677	 	 	 	255,857	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income (loss)
	 	 	51,157	 	 	 	147,702	 	 	 	(1,623	)	 	 	(10,656	)	 	 	13,538	 	 	 	200,118	 
	Interest:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term debt
	 	 	(60,909	)	 	 	(47,630	)	 	 	(1,518	)	 	 	(414	)	 	 	(5,888	)	 	 	(116,359	)
	Intercompany
	 	 	(7	)	 	 	—	 	 	 	(11,508	)	 	 	—	 	 	 	11,515	 	 	 	—	 
	Intercompany dividends
	 	 	—	 	 	 	—	 	 	 	10,788	 	 	 	—	 	 	 	(10,788	)	 	 	—	 
	Gain on sale of investments
	 	 	—	 	 	 	1,445	 	 	 	—	 	 	 	—	 	 	 	68	 	 	 	1,513	 
	Writedown of investments
	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 
	Loss from investments
accounted for by the equity method
	 	 	—	 	 	 	—	 	 	 	341	 	 	 	—	 	 	 	(3,774	)	 	 	(3,433	)
	Loss on repayment of long-term debt
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Change in fair value of
derivative instruments
	 	 	(2,713	)	 	 	(5,206	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7,919	)
	Foreign exchange (loss)
	 	 	9,512	 	 	 	10,783	 	 	 	190	 	 	 	166	 	 	 	15,153	 	 	 	35,804	 
	Investment and other income
(loss)
	 	 	73	 	 	 	2,591	 	 	 	(137	)	 	 	(19	)	 	 	1,203	 	 	 	3,711	 
	Income tax reduction (expense)
	 	 	(1,472	)	 	 	(1,301	)	 	 	399	 	 	 	(1,039	)	 	 	42	 	 	 	(3,371	)
	Non-controlling interest
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(48,480	)	 	 	(48,480	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss) for the period
	 	$	(4,359	)	 	$	108,384	 	 	$	(3,068	)	 	$	(11,962	)	 	$	(27,411	)	 	$	61,584	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Plant, property and equipment
expenditures
	 	$	126,523	 	 	$	89,911	 	 	$	3,951	 	 	$	179	 	 	$	584	 	 	$	221,147	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	For the Three Months Ended
September 30, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Corporate items	 	Consolidated
	(In thousands of dollars)
	 	Cable
	 	Wireless
	 	Media
	 	and eliminations
	 	Totals

	Operating revenue
	 	$	445,646	 	 	$	588,615	 	 	$	194,691	 	 	$	(17,329	)	 	$	1,211,623	 
	Cost of sales
	 	 	29,040	 	 	 	94,610	 	 	 	30,425	 	 	 	—	 	 	 	154,075	 
	Sales and marketing costs
	 	 	49,293	 	 	 	85,233	 	 	 	40,963	 	 	 	(1	)	 	 	175,488	 
	Operating, general and administrative
expenses
	 	 	199,728	 	 	 	186,477	 	 	 	102,315	 	 	 	(6,566	)	 	 	481,954	 
	Management fees
	 	 	8,823	 	 	 	2,834	 	 	 	2,459	 	 	 	(14,116	)	 	 	—	 
	Depreciation and amortization
	 	 	122,938	 	 	 	129,069	 	 	 	8,924	 	 	 	735	 	 	 	261,666	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income (loss)
	 	 	35,824	 	 	 	90,392	 	 	 	9,605	 	 	 	2,619	 	 	 	138,440	 
	Interest:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term debt
	 	 	(61,823	)	 	 	(49,339	)	 	 	(2,036	)	 	 	(8,746	)	 	 	(121,944	)
	Intercompany
	 	 	(7	)	 	 	—	 	 	 	(11,224	)	 	 	11,231	 	 	 	—	 
	Intercompany dividends
	 	 	1,504	 	 	 	—	 	 	 	10,925	 	 	 	(12,429	)	 	 	—	 
	Gain on sale of other investments
	 	 	—	 	 	 	305	 	 	 	1,107	 	 	 	11,480	 	 	 	12,892	 
	Loss on repayment of long-term debt
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17,242	)	 	 	(17,242	)
	Loss from investments accounted for by the
equity method
	 	 	—	 	 	 	—	 	 	 	459	 	 	 	(11,949	)	 	 	(11,490	)
	Foreign exchange gain (loss)
	 	 	1,507	 	 	 	2,008	 	 	 	85	 	 	 	1,778	 	 	 	5,378	 
	Investment and other income (loss)
	 	 	(270	)	 	 	546	 	 	 	(625	)	 	 	(1,234	)	 	 	(1,583	)
	Income tax expense
	 	 	(1,735	)	 	 	(1,171	)	 	 	(119	)	 	 	(14	)	 	 	(3,039	)
	Non-controlling interest
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(18,854	)	 	 	(18,854	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net Income (loss) for the period
	 	$	(25,000	)	 	$	42,741	 	 	$	8,177	 	 	$	(43,360	)	 	$	(17,442	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Plant, property and equipment expenditures
	 	$	122,081	 	 	$	116,379	 	 	$	6,068	 	 	$	194	 	 	$	244,722	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







59









 






	12.	 	Segmented Information (continued):




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	For the Nine Months Ended	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	September 30, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Corporate items	 	Consolidated
	(In thousands of dollars)
	 	Cable
	 	Wireless
	 	Media
	 	Blue Jays
	 	and eliminations
	 	total

	Operating revenue
	 	$	1,437,291	 	 	$	1,969,896	 	 	$	653,379	 	 	$	42,062	 	 	$	(60,696	)	 	$	4,041,932	 
	Cost of sales
	 	 	105,926	 	 	 	357,527	 	 	 	102,740	 	 	 	—	 	 	 	—	 	 	 	566,193	 
	Sales and marketing
	 	 	185,920	 	 	 	266,447	 	 	 	137,023	 	 	 	2,327	 	 	 	—	 	 	 	591,717	 
	Operating, general and
administrative expenses
	 	 	627,822	 	 	 	609,630	 	 	 	344,280	 	 	 	48,800	 	 	 	(30,131	)	 	 	1,600,401	 
	Management fees
	 	 	28,746	 	 	 	8,756	 	 	 	9,739	 	 	 	—	 	 	 	(47,241	)	 	 	—	 
	Depreciation and amortization
	 	 	348,366	 	 	 	357,327	 	 	 	43,342	 	 	 	1,591	 	 	 	1,849	 	 	 	752,475	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income
	 	 	140,511	 	 	 	370,209	 	 	 	16,255	 	 	 	(10,656	)	 	 	14,827	 	 	 	531,146	 
	Interest:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term debt
	 	 	(181,842	)	 	 	(152,422	)	 	 	(6,980	)	 	 	(414	)	 	 	(17,685	)	 	 	(359,343	)
	Intercompany
	 	 	(21	)	 	 	—	 	 	 	(32,253	)	 	 	—	 	 	 	32,274	 	 	 	—	 
	Intercompany dividends
	 	 	—	 	 	 	—	 	 	 	32,188	 	 	 	—	 	 	 	(32,188	)	 	 	—	 
	Gain on sale of investments
	 	 	—	 	 	 	1,445	 	 	 	—	 	 	 	—	 	 	 	4,034	 	 	 	5,479	 
	Loss on repayment of
long-term debt
	 	 	(18,013	)	 	 	(2,314	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(20,327	)
	Writedown of investments
	 	 	(494	)	 	 	—	 	 	 	 	 	 	 	 	 	 	 	(3,586	)	 	 	(4,080	)
	Gain (loss) from investments
accounted for by the equity method
	 	 	—	 	 	 	—	 	 	 	936	 	 	 	—	 	 	 	(20,569	)	 	 	(19,633	)
	Change in fair value of derivative
instruments
	 	 	37,119	 	 	 	(9,046	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	28,073	 
	Foreign exchange gain (loss)
	 	 	(49,719	)	 	 	(46,369	)	 	 	(50	)	 	 	166	 	 	 	7,406	 	 	 	(88,566	)
	Investment and other income (loss)
	 	 	(309	)	 	 	3,646	 	 	 	(681	)	 	 	(19	)	 	 	8,935	 	 	 	11,572	 
	Income tax reduction (expense)
	 	 	(4,288	)	 	 	(3,947	)	 	 	(219	)	 	 	(1,039	)	 	 	1,114	 	 	 	(8,379	)
	Non-controlling interest
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(73,653	)	 	 	(73,653	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net income (loss) for the period
	 	$	(77,056	)	 	$	161,202	 	 	$	9,196	 	 	$	(11,962	)	 	$	(79,091	)	 	$	2,289	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Plant, property and equipment
expenditures
	 	$	344,609	 	 	$	305,790	 	 	$	15,941	 	 	$	179	 	 	$	1,561	 	 	$	668,080	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	For the Nine Months Ended
September 30, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Corporate items	 	Consolidated
	(In thousands of dollars)
	 	Cable
	 	Wireless
	 	Media
	 	and eliminations
	 	total

	Operating revenue
	 	$	1,313,030	 	 	$	1,618,195	 	 	$	611,123	 	 	$	(42,132	)	 	$	3,500,216	 
	Cost of sales
	 	 	91,711	 	 	 	252,009	 	 	 	95,026	 	 	 	—	 	 	 	438,746	 
	Sales and marketing costs
	 	 	146,793	 	 	 	250,086	 	 	 	125,876	 	 	 	(380	)	 	 	522,375	 
	Operating, general and administrative
expenses
	 	 	587,775	 	 	 	555,449	 	 	 	326,115	 	 	 	(9,830	)	 	 	1,459,509	 
	Management fees
	 	 	25,971	 	 	 	8,502	 	 	 	8,173	 	 	 	(42,646	)	 	 	—	 
	Depreciation and amortization
	 	 	363,448	 	 	 	373,425	 	 	 	26,846	 	 	 	2,694	 	 	 	766,413	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Operating income
	 	 	97,332	 	 	 	178,724	 	 	 	29,087	 	 	 	8,030	 	 	 	313,173	 
	Interest:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Long-term debt
	 	 	(177,754	)	 	 	(146,948	)	 	 	(5,453	)	 	 	(43,346	)	 	 	(373,501	)
	Intercompany
	 	 	(2,858	)	 	 	—	 	 	 	(35,729	)	 	 	38,587	 	 	 	—	 
	Intercompany dividends
	 	 	4,488	 	 	 	—	 	 	 	32,433	 	 	 	(36,921	)	 	 	—	 
	Gain on sale of investments
	 	 	—	 	 	 	305	 	 	 	1,107	 	 	 	11,480	 	 	 	12,892	 
	Loss on repayment of long-term debt
	 	 	(5,945	)	 	 	—	 	 	 	—	 	 	 	(18,894	)	 	 	(24,839	)
	Loss from investments accounted for by the
equity method
	 	 	—	 	 	 	—	 	 	 	1,059	 	 	 	(38,110	)	 	 	(37,051	)
	Foreign exchange gain (loss)
	 	 	34,842	 	 	 	107,780	 	 	 	(323	)	 	 	99,765	 	 	 	242,064	 
	Investment and other income
	 	 	97	 	 	 	556	 	 	 	(297	)	 	 	1,014	 	 	 	1,370	 
	Income tax expense
	 	 	(5,820	)	 	 	(3,927	)	 	 	(549	)	 	 	(3,248	)	 	 	(13,544	)
	Non-controlling interest
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(60,210	)	 	 	(60,210	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Net Income (loss) for the period
	 	$	(55,618	)	 	$	136,490	 	 	$	21,335	 	 	$	(41,853	)	 	$	60,354	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	Plant, property and equipment expenditures
	 	$	335,125	 	 	$	292,865	 	 	$	27,583	 	 	$	411	 	 	$	655,984	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







60









 






	13.	 	Consolidated Statement of Cash Flows — Supplemental Information:




The changes in non-cash working capital items are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Decrease
(increase) in
accounts receivable
	 	$	(26,165	)	 	$	(46,740	)	 	$	(35,183	)	 	$	(16,817	)
	Increase (decrease)
in accounts payable
and accrued
liabilities
	 	 	55,279	 	 	 	121,605	 	 	 	(58,062	)	 	 	15,270	 
	Increase
(decrease) in
unearned revenue
	 	 	(1,962	)	 	 	(3,950	)	 	 	8,253	 	 	 	(1,995	)
	Increase (decrease)
in deferred charges
and other assets
	 	 	(15,657	)	 	 	12,728	 	 	 	(35,343	)	 	 	(5,886	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	$	11,495	 	 	$	83,643	 	 	$	(120,335	)	 	$	(9,428	)
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 








	14.	 	Related Party Transactions:




The Company has entered into certain transactions in the normal course of business with AT&T
Wireless Services, Inc. (“AWE”), a 34% shareholder of Wireless, and with certain broadcasters in
which the Company has an equity interest as follows:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Roaming revenue billed to AWE
	 	$	(5,872	)	 	$	(4,409	)	 	$	(12,146	)	 	$	(10,098	)
	Roaming expense paid to AWE
	 	 	2,547	 	 	 	3,081	 	 	 	8,977	 	 	 	10,868	 
	Fees paid to AWE for
over-air activation
	 	 	—	 	 	 	61	 	 	 	31	 	 	 	234	 
	Access fees paid to
broadcasters accounted for by the
equity method
	 	$	5,287	 	 	 	3,893	 	 	 	14,420	 	 	 	12,057	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	$	1,962	 	 	$	2,626	 	 	$	11,282	 	 	$	13,061	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 







The Company has entered into certain transactions with companies, the partners or senior
officers of which are directors of the Company and/or its subsidiary companies. During the three
months and nine months ended September 30, 2004, total amounts paid by the Company to these related
parties are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended September 30,
	 	Nine Months Ended September 30,

	(In thousands of dollars)
	 	2004
	 	2003
	 	2004
	 	2003

	Supplemental:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Legal services
and commissions
paid on premiums
for insurance
coverage
	 	 	1,425	 	 	 	1,143	 	 	 	3,279	 	 	 	4,043	 
	Telecommunicati
on and programming
services
	 	 	1,519	 	 	 	12,738	 	 	 	4,698	 	 	 	43,469	 
	Interest
charges and other
financing fees
	 	 	1,166	 	 	 	7,821	 	 	 	5,926	 	 	 	15,121	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 
	 
	 	 	4,110	 	 	 	21,702	 	 	 	13,903	 	 	 	62,633	 
	 
	 	 	
 	 	 	 	
 	 	 	 	
 	 	 	 	
 	 








	15.	 	Canadian and United States accounting policy differences:




The consolidated interim financial statements of the Company have been prepared in accordance
with GAAP as applied in Canada. In the following respects, GAAP as applied in the United States
differs from that applied in Canada.



If United States GAAP were employed, the net income in each period would be adjusted as follows:



	 	 	 	 	 	 	 	 	 
	 	 	Nine months	 	Nine months
	 	 	ended	 	ended
	 	 	September 30,	 	September 30,
	 	 	2004
	 	2003

	Net income for the period based on Canadian GAAP
	 	$	2,289	 	 	$	60,354	 
	Gain on sale of cable systems (b)
	 	 	(3,021	)	 	 	(3,021	)
	Pre-operating costs (c)
	 	 	5,374	 	 	 	8,362	 
	Interest on equity instruments (d)
	 	 	(26,548	)	 	 	(26,540	)
	Capitalized interest (e)
	 	 	6,034	 	 	 	6,624	 
	Financial instruments (h)
	 	 	26,485	 	 	 	(170,356	)
	Stock-based compensation (i)
	 	 	11,459	 	 	 	(863	)
	Income taxes (k)
	 	 	(517	)	 	 	20,606	 
	Installation revenues (l)
	 	 	6,211	 	 	 	—	 
	Installation costs (l)
	 	 	(4,118	)	 	 	—	 
	Loss on repayment of long term debt (m)
	 	 	(28,759	)	 	 	—	 
	Other
	 	 	(2,636	)	 	 	(1,846	)
	Non-controlling interest
	 	 	8,195	 	 	 	32,940	 
	 
	 	 	
 	 	 	 	
 	 
	Net income (loss) based on United States GAAP
	 	$	448	 	 	$	(73,740	)
	 
	 	 	
 	 	 	 	
 	 
	Basic earnings (loss) per share based on United States GAAP
	 	$	0.01	 	 	$	(0.33	)
	Diluted earnings (loss) per share based on United States GAAP
	 	$	0.01	 	 	$	(0.33	)
	 
	 	 	
 	 	 	 	
 	 







61









 





The cumulative effect of these adjustments on the consolidated
shareholders’ equity of the Company is as follows:



	 	 	 	 	 	 	 	 	 
	 	 	September 30,	 	December 31,
	 	 	2004
	 	2003

	Shareholders’ equity based on Canadian GAAP
	 	$	2,006,238	 	 	$	1,767,380	 
	Gain on sale and issuance of subsidiary shares
to non-controlling interest (a)
	 	 	46,245	 	 	 	46,245	 
	Gain on sale of cable systems (b)
	 	 	121,944	 	 	 	124,965	 
	Pre-operating costs (c)
	 	 	(3,480	)	 	 	(8,854	)
	Equity instruments (d)
	 	 	(588,208	)	 	 	(586,410	)
	Capitalized interest (e)
	 	 	44,020	 	 	 	37,986	 
	Unrealized holding gain on investments (f)
	 	 	118,617	 	 	 	78,596	 
	Acquisition of Cable Atlantic (g)
	 	 	34,673	 	 	 	34,673	 
	Financial instruments (h)
	 	 	(33,108	)	 	 	(59,593	)
	Stock-based compensation (i)
	 	 	—	 	 	 	661	 
	Minimum pension liability (j)
	 	 	(29,058	)	 	 	(7,858	)
	Income taxes (k)
	 	 	(253,567	)	 	 	(253,567	)
	Installation revenues (l)
	 	 	6,211	 	 	 	—	 
	Installation costs (l)
	 	 	(4,118	)	 	 	—	 
	Loss on repayment of long term debt (m)
	 	 	(28,759	)	 	 	—	 
	Other
	 	 	(19,676	)	 	 	(17,701	)
	Non-controlling interest effect of adjustments
	 	 	(50,206	)	 	 	(58,401	)
	 
	 	 	
 	 	 	 	
 	 
	Shareholders’ equity based on United States GAAP
	 	$	1,367,768	 	 	$	1,098,122	 
	 
	 	 	
 	 	 	 	
 	 







The areas of material difference between Canadian and United States GAAP
and their impact on the consolidated financial statements of the Company are
described below:





	(a)	 	Gain on sale and issuance of subsidiary shares to non-controlling interest:
	 
	 	 	Under United States GAAP, the carrying value of the Company’s
investment in Wireless would be lower than the carrying value under
Canadian GAAP as a result of certain differences between Canadian and
United States GAAP, as described herein. This results in an increase to
the gain on sale and dilution under United States GAAP.
	 
	(b)	 	Gain on sale of cable systems:
	 
	 	 	Under Canadian GAAP, the cash proceeds on the non-monetary exchange
of the cable assets in 2000 were recorded as a reduction in the carrying
value of PP&E. Under United States GAAP, a portion of the cash proceeds
received must be recognized as a gain in the consolidated statements of
income on an after-tax basis. The gain amounted to $40.3 million before
income taxes.
	 
	 	 	Under Canadian GAAP, the after-tax gain arising on the sale of
certain of the Company’s cable television systems in prior years was
recorded as a reduction of the carrying value of goodwill acquired in a
contemporaneous acquisition of certain cable television systems. Under
United States GAAP, the Company included the gain on sale of the cable
television systems in income, net of related future income taxes.
	 
	 	 	As a result of these transactions, amortization expense under United
States GAAP was increased in subsequent years.
	 
	(c)	 	Pre-operating costs:
	 
	 	 	Under Canadian GAAP, the Company defers the incremental costs
relating to the development and pre-operating phases of new businesses and
amortizes these costs on a straight-line basis over periods up to five
years. Under United States GAAP, these costs are expensed as incurred.
	 
	(d)	 	Equity instruments:
	 
	 	 	Under Canadian GAAP, the Convertible Preferred Securities are
classified as shareholders’ equity and the related interest expense is
recorded as a distribution from retained earnings. Under United States
GAAP, these securities are classified as long-term debt and the related
interest expense is recorded in the consolidated statements of income.
	 
	 	 	Under Canadian GAAP, the Preferred Securities were classified as
shareholders’ equity and until September 2002, the related interest
expense was recorded as a distribution from retained earnings. Under U.S.
GAAP, the Preferred Securities were classified as long-term debt and the
related interest expense was recorded in the consolidated statements of
income.
	 
	 	 	Under Canadian GAAP, the proceeds from the Collateralized Equity
Securities were classified as shareholders’ equity. Under United States
GAAP, these securities were recorded as long-term debt and recorded at
their fair value at December 31, 2001. Adjustments to the fair value at
each reporting date are recorded in the consolidated statements of income.
	 
	(e)	 	Interest capitalization:
	 
	 	 	United States GAAP requires capitalization of interest costs as part
of the historical cost of acquiring certain qualifying assets that require
a period of time to prepare for their intended use. This is not required
under Canadian GAAP.
	 
	(f)	 	Unrealized holding gains and losses on investments:



62









 










	 	 	United States GAAP requires that certain investments in
equity securities that have readily determinable fair values be
stated in the consolidated balance sheets at their fair values.
The unrealized holding gains and losses from these investments,
which are considered to be “available-for-sale securities” under
United States GAAP, are included as a separate component of
shareholders’ equity and comprehensive income, net of related
future income taxes.
	 
	 	 	As at September 30, 2004 and December 31, 2003, this amount
represents a component of the Company’s accumulated other
comprehensive income.
	 
	(g)	 	Acquisition of Cable Atlantic:
	 
	 	 	United States GAAP requires that shares issued in connection
with a purchase business combination be valued based on the
market price at the announcement date of the acquisition, whereas
Canadian GAAP had required such shares be valued based on the
market price at the consummation date of the acquisition.
Accordingly, the Class B Non-Voting shares issued in respect of
the acquisition of Cable Atlantic in 2001 were recorded at $35.4
million more under United States GAAP than under Canadian GAAP.
This resulted in an increase to goodwill in this amount, with a
corresponding increase to contributed surplus in the amount of
$35.4 million.
	 
	(h)	 	Financial instruments:
	 
	 	 	Under Canadian GAAP, the Company accounts for certain of its
cross-currency interest rate exchange agreements and interest
exchange agreements as hedges of specific debt instruments. Under
United States GAAP, these instruments are not accounted for as
hedges as a result of adopting the new pronouncement entitled
“Accounting for Derivative Instruments and Hedging Activities
(“SFAS 133”), effective January 1, 2001. As a result, the Company
has recorded the net excess of the fair values of the
cross-currency interest rate exchange agreements and interest
rate exchange agreements over the carrying values of these
instruments as at December 31, 2000, being $18.4 million, as a
cumulative transition adjustment to net income under United
States GAAP. The Company has also recorded a cumulative
transition adjustment to write off the net balance of the
deferred foreign exchange as at December 31, 2000, being $20.7
million, that arose upon redesignation of certain of the
Company’s cross-currency interest rate exchange agreements.
Further, the Company has recorded $29.7 million as a cumulative
transition adjustment to net income, which represents the excess
of the fair value of the long-term debt to which the derivative
instruments relate (the “hedged debt”) over its carrying value.
Therefore, the net cumulative transition adjustment under SFAS
133 to the loss for the year ended December 31, 2001 under United
States GAAP was a charge to the net loss of $32.1 million. The
adjustment to long-term debt is being amortized to net income
under United States GAAP over the remaining effective life of the
related long-term debt.
	 
	 	 	Therefore, for the nine months ended September 30, 2004 and
2003, under United States GAAP, the Company has recorded the
change in the fair values of the cross-currency interest rate
exchange agreements and the amortization of the adjustment to its
long-term debt, as discussed above.
	 
	(i)	 	Stock-based compensation:
	 
	 	 	Under Canadian GAAP, effective January 1, 2004, the Company
adopted the fair value method of recognizing stock-based
compensation expense. For United States GAAP purposes, the
intrinsic value method is used to account for stock-based
compensation of employees. Compensation expense of $11.5 million
recognized under Canadian GAAP would not be recognized under
United States GAAP for the nine months ended September 30, 2004.
The exercise price of stock options is equal to the market value
of the underlying shares at the date of grant, therefore there is
no expense under the intrinsic value method for United States
GAAP purposes for the nine months ended September 30, 2004 and
2003.



63









 










	 	 	Effective January 1, 2004, the Blue Jays were
determined to be a variable interest entity for United
States GAAP purposes and, as a result, their results
were consolidated. As such, the employees of the Blue
Jays were considered employees of the Company effective
January 1, 2004 for United States GAAP purposes. For
United States GAAP, the intrinsic value method of
accounting for the Blue Jays is therefore used. The
intrinsic value of the options of Blue Jays’ employees
was calculated as at January 1, 2004 resulting in no
compensation cost as at that date. Prior to 2004, the
Blue Jays’ employees were not considered employees of
the Company. Therefore, compensation expense of $0.9
million for the nine months ended September 30, 2003
under United States GAAP was determined using the fair
value method.
	 
	(j)	 	Minimum pension liability:
	 
	 	 	Under United States GAAP, the Company is required
to record an additional minimum pension liability for
one of its plans to reflect the excess of the
accumulated benefit obligation over the fair value of
the plan assets. Other comprehensive income has been
charged with $13.5 million, net of income taxes of $7.7
million for the nine months ended September 30, 2004.
For the nine months ended September 30, 2003, other
comprehensive income has been charged with $5.0 million,
net of income taxes of $2.9 million. No such adjustments
are required under Canadian GAAP.
	 
	(k)	 	Income taxes:
	 
	 	 	Included in the caption “Income taxes” is the tax
effect of various adjustments where appropriate and the
impact of substantively enacted rate changes that would
not have been recorded under United States GAAP until
enacted. Under Canadian GAAP, future income tax assets
and liabilities are remeasured for substantively enacted
rate changes, whereas under United States GAAP, future
income tax assets and liabilities are only remeasured
for enacted tax rates.
	 
	(l)	 	Installation revenues and costs:
	 
	 	 	Effective January 1, 2004, for Canadian GAAP
purposes, installation revenues for both new connects
and reconnects are deferred and amortized over the
customer relationship period. New connect installation
costs are capitalized to property, plant and equipment
and depreciated over the related useful lives consistent
with historical practice. Reconnect installation costs
are deferred only to the extent of reconnect
installation revenues with any excess charged to
expense. For United States GAAP purposes, installation
fees are immediately recognized in income only to the
extent of direct selling costs with any excess deferred
and amortized over the customer relationship period.
Installation costs for reconnects are expensed as
incurred while installation costs related to new
connects are capitalized to property, plant and
equipment and depreciated over the related useful lives
consistent with our historical practice.
	 
	(m)	 	Loss on repayment of long term debt:
	 
	 	 	On March 26, 2004, the Company repaid long term
debt resulting in a loss on early repayment of long-term
debt of $2.3 million. This loss included, among other
items, a $40.2 million gain on the realization of the
deferred transitional gain related to cross-currency
interest rate exchange agreements which were unwound in
connection with the repayment of long term debt. Under
United States GAAP, the Company records cross-currency
interest rate exchange agreements at fair value.
Therefore, under United States GAAP, the deferred
transition gain realized under Canadian GAAP would be
reduced by $28.8 million, representing the $40.2 million
gain net of realization of a gain of $11.4 million,
related to the deferred transition adjustment that arose
on the



64









 










	 	 	adoption of Statement of Financial Accounting Standard No.
133, “Accounting for Derivative Instruments and Hedging
Activities”.
	 
	(n)	 	Blue Jays
	 
	 	 	Under United States GAAP, Financial Accounting Standards
Board Interpretation No. 46, “Consolidation of Variable Interest
Entities”, requires the Company to consolidate the results of the
Blue Jays effective January 1, 2004. Under Canadian GAAP, the
Company consolidated the Blue Jays effective July 31, 2004. Prior
to this, in 2004, the Company accounted for 100% of the
operations of the Blue Jays using the equity method. Therefore,
the United States GAAP consolidated balance sheet as at September
30, 2004 and net income of the Company for the nine months then
ended would be unchanged from that of Canadian GAAP specific to
the consolidation of the Blue Jays. However, Under States GAAP,
revenues would increase by $75.0 million, cost of sales would
increase by $70.1 million, sales and marketing costs would
increase by $3.8 million, operating general and administrative
expenses would increase by $17.8 million, depreciation and
amortization would increase by $5.8 million, operating income
would be reduced by $22.6 million and losses from equity method
investments would decrease by $22.7 million.
	 
	(o)	 	Statements of cash flows:





	 	(i)	 	Canadian GAAP permits the disclosure of a subtotal
of the amount of funds provided by operations before
change in non-cash operating items in the
consolidated statements of cash flows. United States
GAAP does not permit this subtotal to be included.
	 
	 	(ii)	 	Canadian GAAP permits bank advances to be included
in the determination of cash and cash equivalents in
the consolidated statements of cash flows. United
States GAAP requires that bank advances be reported
as financing cash flows. As a result, for the nine
months ended September 30, 2004 under United States
GAAP, the increase in cash and cash equivalents of
$227.3 million would decrease by $10.3 million and
the cash flows received from financing activities
would decrease by $10.3 million. For the nine months
ended September 30, 2003, the increase in cash and
cash equivalents and cash flows from financing
activities would remain unchanged.





	(p)	 	Statement of comprehensive income:
	 
	 	 	United States GAAP requires the disclosure of a statement of
comprehensive income. Comprehensive income generally encompasses
all changes in shareholders’ equity, except those arising from
transactions with shareholders.




	 	 	 	 	 	 	 	 	 
	 	 	Nine months	 	Nine months
	 	 	ended	 	ended
	 	 	September 30,	 	September 30,
	 	 	2004
	 	2003

	Net income (loss) based on United States GAAP
	 	$	448	 	 	$	(73,740	)
	Other comprehensive income, net of income taxes:
	 	 	 	 	 	 	 	 
	Unrealized holding gains arising during the year, net of
income taxes
	 	 	32,881	 	 	 	86,707	 
	Minimum pension liability, net of income taxes
	 	 	(13,543	)	 	 	(4,982	)
	 
	 	 	
 	 	 	 	
 	 
	Comprehensive income based on United States GAAP
	 	$	19,786	 	 	$	7,985	 
	 
	 	 	
 	 	 	 	
 	 








	16.	 	Subsequent Events:





	 	(a)	 	On September 30, 2004, Wireless, a subsidiary of RCI, mailed a cash offer to acquire all of the outstanding equity
interests of Microcell Telecommunications Inc., a Canadian telecommunications company. The estimated cash cost is approximately
$1.4 billion. Completion of the transaction is subject to the receipt of certain regulatory approvals and other conditions. The
funding for this acquisition, if it is completed, will be comprised of the utilization of Wireless’ cash on hand, drawdowns
under Wireless’ committed $700 million bank credit facility and proceeds from a bridge loan from RCI of up to $900 million. The
bridge loan will have a term of up to two years from the date of drawdown and will be made on an unsecured subordinated basis.
The loan will bear interest at 6% per annum and will be prepayable in whole or in part without penalty. RCI intends to fund the
bridge loan of up to $900 million using cash on hand; cash to be received from Cable in the form of a return of capital and cash
to be received from Media in the form of a partial repayment of an




65









 







	 	 	 	intercompany advance made to Media by RCI. Each
of Cable and Media will make drawdowns under its
committed bank credit facilities to fund the cash
transfers to RCI.
	 
	 	(b)	 	On October 8, 2004 Wireless and its bank lenders
entered into an amending agreement to Wireless’ $700
million bank credit facility that provided, among
other things, for a two-year extension to the
maturity date and the reduction schedule so that the
bank credit facility now reduces by $140 million on
each of April 30, 2008 and April 30, 2009 with the
maturity date on April 30, 2010. The proviso for
early maturity in the event that Rogers Wireless’ 10
1/2% senior secured notes due 2006 are not repaid (by
refinancing or otherwise) on or prior to December 31,
2005 has been eliminated. In addition, certain
financial ratios to be maintained on a quarterly
basis have been made less restrictive; the
restriction on the annual amount of PP&E expenditures
has been eliminated; and the restriction on the
payment of dividends and other shareholder
distributions has been eliminated other than in the
case of a default or event of default under the terms
of the bank credit facility.
	 
	 	(c)	 	On October 13, 2004, the Company announced the
completion of its purchase of the 48,594,172 Class B
Restricted Voting shares of Wireless owned by JVII
General Partnership, a partnership owned by AWE, for
a cash price of $36.37 per share for a total of
approximately $1,767 million. The number of Class B
Restricted Voting shares purchased reflects the
requisite conversion of the Class A Multiple Voting
Shares owned by JVII to such Class B shares.
	 
	 	 	 	With the completion of the purchase, the Company beneficially
owns 64,911,816 Class B Restricted Voting shares, representing
approximately 80.9% of the issued and outstanding Class B
Restricted Voting shares; and 62,820,371 Class A Multiple Voting
 shares, representing 100% of the issued and outstanding Class A
Multiple Voting shares; combined representing a total ownership
position of approximately 89.3% of the total issued and outstanding
 shares of both classes of such shares of Rogers Wireless.
	 
	 	 	 	The Company funded the approximate $1,767 million cash
purchase price of the 48.6 million Rogers Wireless shares through a
$1.75 billion secured bridge credit facility with a term of up to
two years to October 12, 2006. The facility was provided by a group
of Canadian financial institutions and is secured by a pledge of
all of the shares of Rogers Cable and Rogers Wireless that are
owned by RCI or any of its subsidiaries. The Company may borrow at
various rates, including the bank prime rate plus 0.50% to 2.25%
per annum, the bankers’ acceptance rate plus 1.50% to 3.25% per
annum and the London Inter-Bank Offered Rate (“LIBOR”) plus 1.50%
to 3.25% per annum. The bridge credit facility contains mandatory
repayments, subject to certain exceptions, from the incurrence of
debt and/or equity at RCI or Rogers Wireless. The bridge credit
facility also requires the maintenance of certain financial ratios
on a quarterly basis.
	 
	 	 	 	For accounting purposes, this will be treated as the
acquisition of approximately 34% of Rogers Wireless. Accordingly,
on a consolidated basis, the Company will record the fair value
increments of the assets and liabilities of Rogers Wireless as at
October 13, 2004, including intangible assets, and will reduce its
non-controlling interest. The excess purchase price over the fair
value of the net assets will be recorded as goodwill.



66









 










	 	 	 	The Company is currently determining the fair values of the
acquired net assets. Using the September 30, 2004 accounts of
Wireless, the excess of the purchase price of $1,767 million over
the book value of the net assets acquired is approximately $1,553
million.





	17.	 	Contingent Liabilities:




On August 9, 2004, a proceeding under the Class Actions Act (Saskatchewan) has been brought
against Wireless and other providers of wireless communications services in Canada. The proceeding
involves allegations of breach of contract by wireless customers, misrepresentation and false
advertising. The plaintiffs seek unquantified damages from the defendant wireless communications
service providers. Wireless believes it has good defences to the allegations. The proceeding has
not been certified as a class action and it is too early to determine whether it will qualify for
certification as a class action.



About the Company:



Rogers Communications Inc. (TSX: RCI.A and RCI.B; NYSE: RG) is a diversified Canadian
communications and media company. It is engaged in cable television, high-speed Internet access and
video retailing through Canada’s largest cable television provider, Rogers Cable Inc.; in wireless
voice and data communications services through Canada’s leading national GSM/GPRS cellular
provider, Rogers Wireless Communications Inc.; and in radio, television broadcasting, televised
shopping and publishing businesses through Rogers Media Inc.



For Further Information (Investment Community):



Bruce M. Mann, 416.935.3532, bruce.mann@rci.rogers.com

Eric A. Wright, 416.935.3550, eric.wright@rci.rogers.com



For Further Information (Media):



Jan L. Innes, 416.935.3525, jan.innes@rci.rogers.com




Quarterly Investment Community Conference Call:




As previously announced, a live Webcast of the quarterly results conference call with the
investment community will be broadcast via the Internet at www.rogers.com/webcast beginning at
10:00 a.m. ET on October 26, 2004. A re-broadcast of this call will be available on the Webcast
Archive page of the Investor Relations section of www.rogers.com for a period of at least two weeks
following the call.



# # #




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