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Rogers Wireless Communications Inc.





2003 MANAGEMENT’S DISCUSSION AND ANALYSIS



     This discussion should be read in conjunction with the audited
Consolidated Financial Statements and Notes thereto for 2003. The financial
information presented herein has been prepared on the basis of Canadian
generally accepted accounting principles (“GAAP”). Please refer to Note 18 to
the Consolidated Financial Statements for a summary of differences between
Canadian and United States (“U.S.”) GAAP.



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




CAUTION REGARDING FORWARD-LOOKING STATEMENTS



     This Management’s Discussion and Analysis includes forward-looking
statements concerning the future performance of the business of Rogers Wireless
Communications Inc. (“Rogers Wireless” or the “Company”), its operations and
its financial performance and condition. When used in this Management’s
Discussion and Analysis, the words “believe”, “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. The Company cautions 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 its
control. Therefore, future events and results may vary significantly from what
the Company currently foresees. The Company is under no obligation (and
expressly disclaims 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
“Operating Risks and Uncertainties” below.





OVERVIEW



Company



     Rogers Wireless is a leading Canadian wireless communications service
provider serving over 4.0 million customers at December 31, 2003, including
approximately 3.8 million wireless voice and data subscribers and approximately
241,000 one-way messaging subscribers. The Company operates both a Global
System for Mobile Communications/General Packet Radio Service (“GSM/GPRS”)
network and a seamless integrated Time Division Multiple Access (“TDMA”) and
analog network. The GSM/GPRS network provides coverage to approximately 93% of
Canada’s population. The seamless TDMA and analog network provides coverage to
approximately 85% of Canada’s population in digital mode, and approximately 93%
of Canada’s population in analog mode. Rogers Wireless estimates that its 3.8
million wireless voice and data subscribers represent approximately 12.9% of
the Canadian population residing in its coverage area.



     Subscribers
to the Company's wireless services have access to these services
throughout the United States through our agreements with AT&T Wireless
Services, Inc. (AT&T Wireless or AWE) and other U.S. operators. The Company's subscribers also have access to
international service in over 110 countries, including throughout Europe and
Asia, through roaming agreements with other wireless communication providers.



     At
December 31, 2003, Rogers Communications Inc. (“RCI”
or “Rogers”), directly and
indirectly, beneficially owned or controlled 62,820,371 Class A Multiple Voting
Shares of the Company, representing 69.4% of the issued and outstanding Class A
Multiple Voting Shares, and 16,317,644 Class B Restricted Voting Shares of the
Company, representing 31.7% of the issued and outstanding Class B Restricted
Voting Shares, which together represented 67.4% of the total votes attached to
all voting shares of the Company currently issued and outstanding. At December
31, 2003, AWE indirectly beneficially owned or controlled 27,647,888 Class A
Multiple Voting Shares, representing 30.6% of the issued and outstanding Class
A Multiple Voting Shares, and 20,946,284 Class B Restricted Voting Shares,
representing 40.7% of the issued and outstanding Class B Restricted Voting
Shares, which together represented 31.1% of the total votes attached to all
voting shares of the Company currently issued and








 



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outstanding. The remaining 14,166,250 Class B Restricted Voting Shares,
representing 27.5% of the issued and outstanding Class B Restricted Voting
Shares and 1.5% of the total votes on selected matters, are publicly held. The
Class B Restricted Voting Shares are entitled to vote on all matters other than
the appointment of the auditors and generally on the election of directors.
The Class B Restricted Shares are entitled to elect three directors, voting
separately as a class. As a percentage of the total number of shares of the
Company currently issued and outstanding, at December 31, 2003, the Company was
55.8% owned by RCI and 34.2% owned
by AWE, with the balance publicly held.



Products and Services



     The Company offers wireless voice, data and messaging services across
Canada. Wireless voice services are available in either postpaid or prepaid
payment options. In addition, the Company’s GSM/GPRS network provides customers
with advanced high-speed wireless data services, including mobile access to the
Internet, e-mail, digital picture transmission and two-way short messaging
service (“SMS”).



Distribution Network



     The Company markets its services through an extensive national network of
over 7,000 dealer and retail locations across Canada, which include
approximately 2,500
locations selling handsets and prepaid cards and an
additional approximate 4,500
locations selling the prepaid cards. The Company’s nationwide distribution
network includes an independent dealer network, Rogers AT&T Wireless stores and
kiosks, major retail chains, such as RadioShack Canada Inc., Future Shop Ltd.
and Best Buy Canada, and convenience stores. The Company also offers many of
its products and services through a retail agreement with Rogers Video, which
is a division of Rogers Cable Inc. (“Rogers Cable”), a subsidiary of RCI, that
had 279 locations across Canada at December 31, 2003. The Company also offers
products and services and customer service on its e-business Web site,
www.rogers.com.



Wireless Networks



     The Company is a facilities-based carrier operating its wireless networks
over a broad, national coverage area with an owned and leased fibre-optic and
microwave transmission infrastructure. The seamless, integrated nature of
Rogers Wireless’ networks enables subscribers to make and receive calls and to
activate network features anywhere in the Company’s coverage area and in the
coverage area of its roaming partners as easily as if they were in their home
area.



     In June 2002, the Company completed the deployment of its digital wireless
GSM/GPRS network overlay in the 1900 megahertz (“MHz”) frequency bands. This
coverage reaches 93% of the Canadian population. During 2003, the Company also completed the deployment of GSM/GPRS technology
operating in the 850 MHz spectrum across its national footprint, which expanded
the network capacity, enhanced the quality of the GSM/GPRS network and enabled
the Company to operate seamlessly between the two frequencies. The Company’s
GSM/GPRS network provides high-speed integrated voice and “always on” packet
data transmission service capabilities.



     In late 2003, the Company began trials of Enhanced Data Rates for GSM
Evolution (“EDGE”) technology in the Vancouver, British Columbia market.
Accomplished by the installation of a network software upgrade, EDGE more than
triples the wireless data transmission speeds available on the Rogers Wireless
network. The Company intends to begin deploying EDGE across its national
GSM/GPRS network during 2004.



     The Company’s integrated TDMA and analog network is operationally seamless
in GSM/GPRS and TDMA digital functionality between the 850 MHz and
1900 MHz
frequency bands, and between TDMA digital and analog modes at 850 MHz.








 



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COMPANY STRATEGY



     The Company seeks to achieve profitable growth within the Canadian
wireless communications industry. The Company’s strategy is designed to
maximize its cash flow, as defined below, and return on investment. The key elements of the
Company’s strategy are as follows:





	 	•	 	focusing on data services that are attractive to youth and small and
medium size businesses to optimize its customer mix;
	 
	 	•	 	delivering on customer expectations by improving handset reliability,
network quality and customer service while reducing subscriber
deactivations, or churn;
	 
	 	•	 	increasing revenue from existing customers by utilizing analytical
tools to target customers likely to purchase optional services such as
voicemail, calling line ID, text messaging and wireless internet;
	 
	 	•	 	enhancing its sales distribution
channels to increase its focus on youth and
business customers;
	 
	 	•	 	maintaining a technologically advanced, high quality and pervasive
network by improving the quality of its GSM/GPRS network and increasing
capacity; and
	 
	 	•	 	leveraging its relationships with the Rogers group of companies to
provide bundled product and service offerings at attractive prices,
in addition to cross-selling, joint sales distribution and cost reduction initiatives through infrastructure sharing.







KEY PERFORMANCE INDICATORS



     The Company measures the success of its strategies using a number of key
performance indicators, which are outlined below. The following key
performance indicators are not measurements in accordance with Canadian or U.S.
GAAP and should not be considered as an alternative to net income or any other
measure of performance under Canadian or U.S. GAAP.



Subscriber Counts



     The Company determines the number of subscribers of its services based on
active subscribers. When subscribers are deactivated either voluntarily or
involuntarily for non-payment, they are considered to be deactivations in the
period the services are discontinued. Generally, each telephone number
represents one subscriber. Prepaid subscribers are considered active for a
period of six months from the date of their last revenue-generating usage.



     In the first quarter of 2003, the Company introduced enhanced reporting
classification for stratifying subscriber and revenue categories, which more
clearly reflects the emergence of data products and integrated voice and data
devices. Concurrently, the Company changed its classification of subscribers
of certain resale two-way messaging arrangements for reporting purposes. The
previous period’s subscriber and revenue categories have been reclassified to
conform to this current presentation. The Company now reports subscribers and
revenues in three categories: postpaid, prepaid and one-way messaging.
Postpaid includes voice-only and data-only subscribers, as well as subscribers
with service plans integrating both voice and data. In addition, the Company
previously reported resale two-way messaging subscribers as individual
subscribers. However, with roaming capabilities on data networks, it is
increasingly difficult to determine if these resale two-way messaging customers
are permanently resident on the Company’s data network or are transient roamers
temporarily utilizing the Company’s network. Accordingly, only those data
subscribers that are known to be permanently resident on the Company’s network
will be treated as subscribers. These enhancements to the classification of
subscriber and revenue categories had no impact on the reporting total
revenues, expenses or operating profit in the current or previous periods.








 



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Subscriber Churn



     Subscriber churn is calculated on a monthly basis. For any particular
month, subscriber churn represents the number of subscribers deactivating in
the month divided by the aggregate number of subscribers at the beginning of

the month. When used or reported for a period greater than one month,
subscriber churn represents the monthly average of the subscriber churn for the
period.



Network Revenue



     Network revenue is total revenue less revenue received from the sale of
equipment. The sale of such equipment does not materially affect the Company’s
operating income as the Company generally sells equipment to its distributors
at a price approximating cost to facilitate competitive pricing at the retail
level. Accordingly, the Company believes that network revenue is a more
relevant measure of its ability to increase its operating profit as
defined below.



Average Revenue per User (“ARPU”)



     The average revenue per user is calculated on a monthly basis. For any
particular month, ARPU represents monthly network revenue divided by the
average number of subscribers during the month. ARPU, when used in connection
with a particular type of subscriber, represents monthly network revenue
generated from these customers divided by the average number of these
subscribers during the month. When used or reported for a period greater than
one month, ARPU represents the monthly average of the ARPU calculations for each of the
months in the period. The Company believes ARPU helps indicate whether the
Company has been successful in attracting and retaining higher usage
subscribers.



Operating Expenses



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





	 	•	 	cost of equipment sales;
	 
	 	•	 	sales and marketing expenses, which represent
the costs to acquire new subscribers in a subscription-based business and
include items such as commissions paid to third parties for new activations, 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, service existing subscription relationships, including
retention costs and inter-carrier
payments to roaming partners and long-distance carriers and the Canadian
Radio-television and Telecommunications Commission (“CRTC”) contribution
levy; and
	 
	 	•	 	management fees paid to RCI.



     In the wireless communications industry in Canada, the demand for services
continues to grow and the variable costs, such as
commissions for subscriber activations, as well as the fixed costs of acquiring
new subscribers are significant. Fluctuations in the number of activations of
new subscribers from period to period and the seasonal nature of the Company’s
subscriber additions result in fluctuations in sales and marketing expenses.



Cost of Acquisition per Subscriber



     Cost of acquisition per subscriber (“COA”), which is also often referred
to in the wireless communications industry as “subscriber acquisition cost” or
“cost per gross addition”, is calculated by dividing total sales and marketing
expenses plus costs related to equipment provided to existing
subscribers for the period by the total number of
gross subscriber activations. Subscriber activations include postpaid and prepaid
voice and data activations and one-way messaging activations. COA, as it
relates to a particular activation, generally is in direct proportion to the
level of ARPU and term of a subscriber’s contract.








 



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Operating Expense per Subscriber



     Operating expense per subscriber, expressed as a monthly average, is
calculated by dividing total operating, general and administrative
expenses, plus costs related to equipment provided to existing
subscribers and management fees paid to RCI by the average number of subscribers during
the period. Operating expense per subscriber is tracked as a measure of the
Company’s ability to leverage its operating cost structure across a growing
subscriber base, and the Company believes that it is an important measure of
its ability to achieve the benefits of scale as it increases its business.



Operating Profit and Operating Profit Margin



     The
Company defines operating profit as net income before
depreciation and amortization, interest expense, income taxes and
non-operating items which include foreign exchange gain (loss) and
investment and other income and the 2002 net recovery related to the
change in estimates of sales tax and CRTC contribution liabilities. Operating profit is a standard
measure used in the communications industry to assist in understanding and
comparing operating results and is often referred to by the Company’s
competitors as EBITDA (earnings before interest, taxes, depreciation and
amortization) or OIBDA (operating income before depreciation and
amortization). The Company believes this is an important measure as it allows
the Company to assess its ongoing businesses without the impact of depreciation
or amortization expenses as well as non-operating factors. It is intended to
indicate the Company’s ability to incur or service debt, invest in property,
plant and equipment (“PP&E”) and allow the Company to compare itself to its
competitors who have different capital or organizational structures. This
measure is not a defined term under GAAP.



     The Company calculates operating profit margin by dividing operating
profit by network revenue. Network revenue is used in the calculation, instead
of total revenue, because network revenue excludes the impact of the sale of
equipment, which is generally sold at a price that approximates cost to
facilitate competitive pricing at the retail level.



Additions to PP&E



     PP&E expenditures include those costs associated with acquiring and
placing into service the Company’s PP&E. Because the wireless communications
business requires extensive and continual investment in equipment, including
investment in new technologies and expansion of geographical reach and
capacity, additions to PP&E are significant and management focuses continually
on the planning, funding and management of these expenditures. The Company
focuses more on managing additions to PP&E than it does on managing
depreciation and amortization expense because additions to PP&E
have a more direct impact on the
Company’s cash flow whereas depreciation and amortization are non-cash
accounting measures required under GAAP.

 
     Additions to PP&E included in the Consolidated Statement of Cash Flows comprise additions to PP&E on a cash basis.
The additions to PP&E based on the accrual basis represent
PP&E that we actually took title to in the period. Accordingly, for
purposes of comparing our PP&E outlays, we believe that additions to PP&E on the accrual basis best reflect our cost of PP&E in a period,
and provides a more accurate determination for period-to-period comparisons. Our discussions of additions to PP&E as found in the
sections titled “Additions to PP&E” are based on the
accrual basis.



SEASONALITY



     The Company’s operating results are subject to seasonal fluctuations that
materially impact quarter-to-quarter operating results. Accordingly, one
quarter’s operating results are not necessarily indicative of what a subsequent
quarter’s operating results will be. In particular, this seasonality generally
results in relatively lower fourth quarter operating profits due primarily to
increased marketing and promotional expenditures and relatively higher levels
of subscriber additions, resulting in higher subscriber acquisition and
activation-related expenses. Seasonal fluctuation also typically occurs in the
third quarter of each year because higher usage and roaming result in higher
network revenue and operating profit.








 



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RECENT WIRELESS INDUSTRY TRENDS



Focus on Customer Retention



     The wireless communications industry’s current market penetration in
Canada is approximately 42% of the population, compared to
approximately 54% in the U.S.
and approximately 87% in the United Kingdom, and the Company expects
the Canadian Wireless industry to grow by 3 to 4
percentage points each year.
While this will produce growth, the growth is slowing compared to
historical levels. Such slowing growth has been, and will continue, driving
the increased focus on customer satisfaction, the sale to customers of new
data and voice service features and, primarily, customer retention. Due to
legislation in the U.S. and other countries regarding local number portability
and the speculation that this approach will be adopted by Canadian regulators,
customer satisfaction and retention will become even more critical in the
future.



Demand for Sophisticated Data Applications and Migration to Next
Generation Wireless Technology



     The ongoing development of wireless data transmission technologies has led
manufacturers to create wireless devices with increasingly advanced
capabilities, including access to e-mail and other corporate information
technology platforms, news, sports, financial information and services,
shopping services, and other functions. Increased demand for sophisticated
wireless services, especially data communications services, has led wireless
providers to migrate towards the next generation of digital voice and data
networks. These networks are intended to provide wireless communications with
wireline quality sound, far higher data transmission speeds and streaming video
capability. These networks are expected to support a variety of data
applications, including high-speed Internet access, multimedia services and
seamless access to corporate information systems, such as e-mail and purchasing
systems. As discussed above, the Company began trials of EDGE technology in the Vancouver market late in 2003 and intends to
begin deploying EDGE across the remainder of its national GSM/GPRS network
during 2004.



Development of Additional Technologies



     The development of additional technologies and their use by consumers may
accelerate the widespread adoption of 3G digital voice and data networks. One
such example is WiFi, which allows suitably equipped devices, such as laptop
computers and personal digital assistants, to connect to a wireless access
point. The wireless connection is only effective within a range of
approximately 100 meters and at theoretical speeds of up to 54 megabits per
second. To address these limitations, WiFi access points must be placed
selectively in high-traffic locations where potential customers frequent and
have sufficient time to use the service. Technology companies are currently
developing additional technologies designed to improve WiFi and otherwise
utilize the higher data transmission speeds found in a third generation
(“3G”) network. Future
enhancements to the range of WiFi service, and the networking of WiFi access
points may provide additional opportunities for mobile wireless operators to
deploy hybrid high-mobility 3G and limited-mobility WiFi networks, each
providing capacity and coverage under the appropriate circumstances.







OVERVIEW OF GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS



Canadian Radio-television and Telecommunications Commission



     Canadian wireless service providers, including the Company, are regulated
by the CRTC pursuant to and in accordance with requirements of the
Telecommunications Act (Canada) (the “Act”). Under the Act, the CRTC regulates
all telecommunications common carriers in Canada that provide or participate in
a communications system, including mobile voice and data and paging service
providers.



Industry Canada



     The awarding of spectrum and licences for mobile voice and data services
in Canada is under the jurisdiction of Industry Canada, a department of the
Government of Canada. Industry Canada is responsible for telecommunications
policy in Canada and has specific jurisdiction under the Radiocommunication Act
(Canada) to establish radio licencing policy and award radio licences for radio
frequencies, which are required to operate wireless communications systems.








 



7


Restrictions on Non-Canadian Ownership and Control



     Pursuant to the Act and associated regulations, up to 20% of the voting
shares of a Canadian carrier, such as the Company’s operating subsidiary,
Rogers Wireless Inc. (“RWI”), and up to 33 1/3% of the voting shares of a
parent company, such as the Company or RCI, may be held by non-Canadians,
provided that neither the Canadian carrier nor its parent is otherwise
controlled by non-Canadians. Similar restrictions are contained under the
Radiocommunication Act. In April 2003, the House of Commons Industry Committee
released a report calling for the removal of foreign ownership restrictions for
telecommunications carriers and broadcasting distribution undertakings. In
June 2003, the House of Commons Heritage Committee released a report opposing
the Industry Committee’s recommendation. The Cabinet responded to the Industry
Committee report in September 2003 and to the Heritage Committee report in
November 2003. Officials from the Heritage and Industry departments will
convene to reconcile the two positions. By the spring of 2004, the Government
of Canada intends to be in a position to examine possible solutions. Rogers
Wireless supports the recommendation calling for the removal of foreign
ownership restrictions but cannot predict the nature or timing of changes that
might result.



Contribution Funding Mechanism



     In November 2000, the CRTC released a decision that fundamentally altered
the mechanism used by the CRTC to collect “contributions” to subsidize the
provision of basic local wireline telephone service. Previously, the
contribution was levied on a per minute basis on long-distance services. Under
the new contribution regime, which became effective January 1, 2001, all
telecommunications service providers, including wireless service providers such
as the Company, are required to contribute a percentage of their adjusted
Canadian telecommunications service revenues to a fund established to subsidize
the provision of basic local service. The percentage contribution levy was
4.5% in 2001 and 1.3% for 2002. In 2003, an interim rate of 1.3% was set and
in December 2003 the final rate was reduced to 1.1%, retroactive to January 1,
2003. The interim rate for 2004 has been set at 1.1% and the final rate for
2004 will not likely be set until December 2004. The final rate for 2004 would
likely be retroactive to January 1, 2004. Refer to the “Operating Risks and
Uncertainties–CRTC Revenue-Based Contribution Scheme” section for further
information on the CRTC contribution levy.



Spectrum Fee Assessment Revision



     Late in 2002, Industry Canada released a consultation paper proposing a
new methodology for calculating spectrum fee assessments (excluding auction
spectrum). Spectrum fees are currently assessed on a per radio channel basis in
the case of 850 MHz spectrum, and a per site basis for 1.9 GHz spectrum. The
new regime proposes an annual cost per MHz per population for both frequency
ranges, and, as a result, fees will be based on the amount of spectrum held by
the carrier, regardless of the degree of deployment or the number of sites. The
final rate established by Industry Canada in December 2003 is considerably
lower than the rate initially proposed. The new rates come into effect on April
1, 2004. As a result of the new methodology, there is a nominal increase in
annual spectrum fees for Rogers Wireless that will be phased in over a
seven-year period to 2011.



Spectrum Licence Issues



     Late in 2003, Industry Canada released a policy document regarding a
number of spectrum issues, including a discussion on the existing spectrum cap,
spectrum allocations for 3G networks and possible timing of a 3G spectrum
auction. Industry Canada has proposed a possible spectrum auction date of 2005
to 2006 for this spectrum. The FCC is expected to auction similar spectrum in
the 2004 to 2005 period. The Company expects that Industry Canada will follow
the spectrum allocation of the FCC and will likely proceed with the auction in
the 2005 to 2006 timeframe. A final determination on these matters is not
expected until late 2004.



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 over 172 geographic licence areas in Canada for
each available block. Successful bidders for the spectrum had








 



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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. Rogers
Wireless participated in this spectrum auction and as a
result, have committed to acquire 33 blocks of Spectrum in
various license areas for an aggregate bid price of $5.9 million.





COMPETITION



     At the end of 2003, the highly competitive Canadian wireless industry had
approximately 13.4 million wireless subscribers. Competition for wireless
subscribers is based on price, scope of services, service coverage, quality of
service, sophistication of wireless technology, breadth of distribution,
selection of equipment, brand and marketing.



     In the wireless voice and data market, the Company competes primarily with
three other wireless service providers, and the Company may in the future
compete with other companies including resellers using existing or emerging wireless technologies
such as WiFi or “hotspots”. Wireless messaging (or one-way paging) also
competes with a number of local and national paging providers.



     In 2003, one of the Company’s competitors, Microcell Telecommunications
Inc. (“Microcell”), which operates under the “Fido” brand, restructured its
business and financing pursuant to the Companies’ Creditors Arrangement Act
(Canada) and has emerged from court protection with a significantly reduced
debt load. This recapitalization may permit Microcell to compete in the market
more vigorously than it had prior to its restructuring.





INTERCOMPANY AND RELATED PARTY TRANSACTIONS



     From time to time, the Company enters into agreements with RCI, RCI’s
subsidiaries and other related parties that the Company believes are mutually
advantageous to the Company and its affiliates. In addition, the Company has
entered into a reciprocal roaming arrangement and other agreements related to
the marketing and delivery of wireless services with AWE, one of the Company’s
significant shareholders.



     The Company’s arrangements with RCI include a management services
agreement under which the Company receives a range of management services,
including strategic planning, financial and information technology services.
The Company also maintains contractual relationships with RCI involving other
cost sharing and services agreements. In late 2001, RCI began providing
customer service call centre services thereby expanding the contractual
relationships between the companies. In January 2003, RCI began managing the
collection of accounts receivable of the Company.



     The Company is also a party to agreements with Rogers Cable and Rogers
Media. With Rogers Cable, the Company has agreed to provide sales and
distribution services for certain of the products and services of Rogers Cable.
Rogers Cable also distributes the Company’s products and services through
Rogers Video. With Rogers Media, the Company purchases advertising at
discounted rates.



     The Company monitors its intercompany and related party agreements to
ensure that the agreements remain beneficial to the Company. The Company is
continually evaluating the expansion of existing arrangements and entry into
new contracts.



     See “Intercompany and Related Party Transactions” below.





CRITICAL ACCOUNTING POLICIES



     Management’s Discussion and Analysis of Operating Results and Financial
Position is made with reference to the Company’s Consolidated Financial
Statements and Notes thereto, which have been prepared in accordance with
Canadian GAAP. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Company’s financial statements and the reported
amount of revenues and expenses during the period. These estimates are based
on management’s historical experience and various other assumptions that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the reported amounts of
revenues, expenses, assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates.








 



9

     The Company has identified the accounting policies outlined below as
critical to its business operations and an understanding of its results of
operations. The impact and any associated risks related to these policies on
its business operations are discussed throughout this Management’s Discussion
and Analysis.



     The Audit Committee reviews the Company’s accounting policies. The Audit
Committee also reviews all quarterly and annual filings and recommends adoption
of the Company’s annual financial statements to the Company’s Board of
Directors. For a detailed discussion on the application of these and other
accounting policies, which are reviewed by the Company’s Audit Committee, see

Note 2 to the Consolidated Financial Statements



Revenue Recognition



     The Company considers revenues to be earned as services are performed,
provided that ultimate collection is reasonably assured at the time of
performance. The Company’s revenues are categorized into the following types:





	 	•	 	monthly recurring subscriber fees in connection with wireless
services and equipment are recorded as revenue on a pro-rata basis over
the month;
	 
	 	•	 	revenue from the sale of wireless airtime, wireless long-distance and
other services are recorded as the services are provided; and
	 
	 	•	 	revenue from the sale of equipment is recorded when the equipment is
delivered and accepted by the independent dealer or customer.
Equipment subsidies provided to new and existing subscribers are
recorded as a reduction of revenues.



     Unearned revenue represents amounts received from subscribers related to
services to be provided in future periods.


     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 “- Recent Accounting Developments -
Revenue Recognition”.


Allowance for Doubtful Accounts



     A significant portion of the Company’s revenues are earned from selling on
credit to business and consumer subscribers. The allowance for doubtful
accounts, as disclosed on the Balance Sheet of the Consolidated Financial
Statements, is calculated by taking into account factors such as the Company’s
historical collection and write-off experience, the number of days the
subscriber is past due and the status of a subscriber’s account with respect to
whether or not the subscriber is continuing to receive service. As a result,
fluctuations in the aging of subscriber accounts will directly impact the
reported amount of bad debt expense. For example, events or circumstances that
result in a deterioration in the aging of subscriber accounts will in turn
increase the amount of bad debt expense. Conversely, as circumstances improve
and subscriber accounts are brought current, the reported amount of bad debt
expense will decline.



Subscriber Acquisition Costs



     The Company operates within a highly competitive industry and generally
incurs significant costs to attract new subscribers. All sales and marketing

expenditures related to subscriber acquisitions, such as commissions and
equipment subsidies, are expensed at the time of activation of the subscriber.
A large percentage of the subscriber acquisition costs, such as equipment
subsidies and commissions, are variable in nature and directly related to the
acquisition of a subscriber. In addition, subscriber acquisition costs on a
per subscriber acquired basis fluctuate based on the success of promotional
activity and seasonality of the business. Accordingly, if the Company
experiences significant growth in subscriber activations during a period,
expenses for that period will increase.



Costs of Subscriber Retention



     In keeping with the practice of expensing costs related to the acquisition
of new subscribers at the time of activation, costs related to subscriber
retention and contract renewals are expensed in the period incurred. In addition, the Company pays certain distributors a monthly percentage of
subscriber revenues for customer service and retention activities. Increased
retention activities in a given period will, in turn, increase expense in the
same period.








 



10


Capitalization of Direct Labour and Overhead



     As outlined in the recommendations of the Canadian Institute of Chartered
Accountants (“CICA”) with respect to PP&E, capitalization of costs includes the
consideration expended to acquire, construct, develop or better an item of PP&E
and includes all costs directly attributable to the acquisition, construction,
development or betterment of the assets. The cost of an item of PP&E includes
direct construction or software development costs, such as materials and
labour, and overhead costs directly attributable to the construction or
software development activity. The cost to enhance the service potential of an
item of PP&E is considered a betterment. Service potential may be enhanced
when there is an increase in the previously assessed physical output or service
capacity, associated operation costs are lowered, the life or useful life is
extended, or the quality of service is improved. Costs incurred in the
maintenance of the service potential of an item of PP&E are charged to
operating expenses as incurred.



     The Company capitalizes direct labour and direct overhead incurred to
construct new assets and better existing assets. These costs are capitalized
as they include the construction costs directly attributable to the
acquisition, construction, development or betterment of its networks through
either increased service capacity or lowered associated operating costs.
Although interest costs are permitted to be capitalized during construction,
the Company’s policy is not to capitalize such interest costs.



     Amounts of direct labour and direct overhead that are capitalized
fluctuate from year-to-year depending on the level of customer growth, new
services and network expansion. In addition, the level of capitalization
of direct labour and overhead fluctuates depending on the proportion of internal labour versus external
contractors used in construction projects.



     The percentage of direct labour capitalized is determined, in many cases,
by the nature of activities in a specific department. For example, all labour
and direct overhead of construction departments are capitalized as a result of
the capital nature of the activity performed by those departments. In some
cases, the amount of capitalization depends on the level of maintenance versus
capital activity that a department performs. In these cases, an analysis of
work activity is applied to determine this percentage allocation.



Depreciation Policies and Useful Lives



     The Company depreciates the cost of PP&E over the estimated useful
service lives of the items. These estimates of useful lives involve
considerable judgment. In determining these estimates, the Company takes into
account wireless industry trends and company-specific factors, including
changing technologies, subscriber migration between its GSM/GPRS and TDMA and
analog networks and expectations for the in-service period of these assets. On
an annual basis, the Company reassesses its existing estimates of useful lives
to ensure they match the anticipated life of the technology from a revenue
producing perspective. If technological change happens more quickly
or in a different way then the Company has
anticipated, the Company might have to shorten the estimated life of certain
PP&E, which could result in higher depreciation expense in future periods or an
impairment charge to write down the value of PP&E.



Asset Impairment



     The valuations of all long-lived assets, along with spectrum licences and
goodwill, are subject to annual reviews for impairment.



     A two-step process determines impairment of long-lived assets. The first
step determines when impairment must be measured and compares the carrying
value to the sum of the undiscounted cash flows expected to result from their
use and eventual disposition. If the carrying value exceeds this sum, a second
step is performed, which measures the amount of the impairment as the
difference between the carrying value of the long-lived asset and its fair
value, calculated using quoted market price or discounted cash flows. An
impaired asset is written down to its estimated fair market value based on the
information available at that time. Considerable management judgment is
necessary to estimate cash flows. Assumptions used in estimating these cash
flows are consistent with those used in internal forecasting and are compared
for reasonability to forecasts prepared by external analysts. Significant
changes in assumptions with respect to the competitive environment could result
in impairment of these assets.



     In testing for impairment of goodwill, the Company conducts a two-step
process. In the first step, the fair value of the Company is compared with its
carrying value. If the fair value exceeds the carrying value, no impairment is
considered to have occurred. The second step is performed when the carrying








 



11


value of the Company exceeds its fair value, in which case the implied
fair value of the Company’s goodwill is determined in the same manner as it
would be determined in a business combination.



     Spectrum licences are tested for impairment by comparing their fair values
with their carrying values, when fair values exceed carrying values no
impairment is considered to have occurred.



     The Company cannot predict whether an event that triggers an impairment
will occur, when it will occur or how it will affect the asset values reported.



     The AT&T brand licence, acquired in 1996 at an aggregate cost of $37.8
million, which provided the Company with, among other things, the right to use
the AT&T brand name, was determined to have no remaining useful life as of
December 31, 2003 because the Company had announced its intention to terminate
this brand licence agreement in early 2004. The remaining book value of $20.0
million was therefore fully amortized. See “Intercompany and Related Party
Transactions — Brand Licence Agreement” for further discussion and Note 4 to
the Consolidated Financial Statements.



Contingencies



     The Company is subject to various claims and contingencies related to
lawsuits, taxes and commitments under contractual and other commercial
obligations. The Company recognizes liabilities for contingencies when a loss
is probable and capable of being reasonably estimated. Significant changes in
assumptions as to the likelihood and estimates of the amount of a loss could
result in the recognition of an additional liability.



Related Party Transactions



     All material related party transactions are reviewed by the Audit
Committee of the Company’s Board of Directors.



     Refer to the “Intercompany and Related Party Transactions” section below
and to Note 14 to the Consolidated Financial Statements for additional
information on related party transactions.



NEW ACCOUNTING STANDARDS



     In 2003, the Company adopted the following new accounting standards as a
result of changes to Canadian and U.S. GAAP:



Asset Retirement Obligations



     Under new Canadian and U.S. accounting standards, the Company is now
required to record the fair value of the liability for an asset retirement
obligation in the year in which it is incurred and when a reasonable estimate
can be made. Fair value is defined as the amount at which that liability could
be settled in a current transaction between willing parties.



     The Company reviewed its existing contracts and commitments to determine
where such obligations exist and determined many of its contracts do
not have any such asset retirement obligations. The Company then assessed what the estimated
fair value of those obligations that exist would be and the probability that these would
be incurred. The Company determined that the fair value of the
obligations was not significant. The Company will monitor contracts on an ongoing
basis and when the Company determines that an obligation exists, the Company
will record these obligations at their fair value.



Impairment of Long-Lived Assets



     On January 1, 2003, the Company prospectively adopted the new accounting
pronouncement, “Impairment of Long-Lived Assets” which establishes standards
for the recognition, measurement and disclosure of the impairment of long-lived
assets held for use. This standard harmonizes Canadian requirements with U.S.
GAAP impairment provisions. Previously, the impairment of long-lived assets
was measured as the difference between the carrying value of the asset and the
future undiscounted net cash flows expected to be generated by the asset.
Under the new pronouncement, as discussed above, this measurement is used to
determine if impairment has occurred, and the amount of impairment is measured
as the difference between the carrying value of the asset and its fair value,
calculated using quoted market price or discounted cash flows. The adoption
had no impact on the Company, as no impairment of long-lived assets had
occurred at December 31, 2003.








 



12




RECENT ACCOUNTING DEVELOPMENTS




GAAP Hierarchy




     In
June 2003, the 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 since we believe that the historical industry practice of a declassified balance sheet presentation is no longer appropriate.



     In addition, within the Consolidated Statements of Cash Flows, we have 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 our previous method, by $98.6 million
for the year ended December 31, 2002 and increasing cash used in
investing activities by $87.7 million for the year ended December 31,
2003. In all periods, the corresponding change was to non-cash
working capital items within operating activities.



     With
the adoption of these two changes, we believe that our accounting
policies and financial statements comply with this new standard.


Hedging Relationships



     The Company uses derivative instruments, including cross-currency interest
rate exchange agreements, interest rate exchange agreements, and foreign
exchange forward contracts, to manage risks from fluctuations in exchange rates
and interest rates. As more fully described in Note 2(s)(ii) to the
Consolidated Financial Statements, effective January 1, 2004, Canadian GAAP
will require the Company to maintain detailed documentation regarding these
derivative financial instruments in order to continue accounting for these
derivative instruments as hedges. Further, the Company will be required to
assess whether each hedging relationship is effective, both at inception and on
an on-going basis.



     If the Company determines that these derivative instruments will not
continue to be accounted for as hedges, the Company will adjust the recorded
amount of the liabilities related to these derivative instruments from their
carrying value of $136.5 million at December 31, 2003, to their fair value of
$120.4 million. The adjustment of $16.1 million will be recorded as a deferred
gain and amortized into income over the remaining life of the derivative
instruments. Going forward, this liability will be marked to market on a
quarterly basis and any changes in value will be recorded in the statement of
income. This is consistent with the Company’s treatment of these instruments
under U.S. GAAP.



Stock-Based Compensation



     Effective January 1, 2004, Canadian GAAP will require companies to
estimate the fair value of stock-based compensation to employees and to expense
the fair value over the vesting period of the options. As a result, in 2004,
the Company will begin expensing the fair value of options granted to employees
since January 1, 2002, and will record an adjustment to opening retained
earnings in the amount of $2.3 million, representing the expense for the 2002
and 2003 fiscal years. The estimated impact of adopting this accounting
standard in 2004, if the Company were to continue using the Black-Scholes
Option Pricing model, would be an increase in compensation expense of
approximately $5.0 million.



Revenue Recognition





     Effective January 1, 2004, we 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:






	 	•	 	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 equipment are now classified as
equipment revenue. Previously, these amounts were recorded as a reduction to sales expense in the
case of a new subscriber, and as a reduction to operating, general and administrative expense in the
case of an existing subscriber;
	 
	 	•	 	Equipment subsidies provided to new and existing subscribers are now classified as a reduction to
equipment revenue. Previously, these amounts were recorded as a sales
expense in the case of a new
subscriber and as an operating, general and administrative expense in the case of an existing subscriber.
Costs for equipment provided under retention programs to existing subscribers are now recorded as a cost of equipment sales.
Previously, these amounts were recorded as an operating, general and
administrative expense; and
	 
	 	•	 	Certain other recoveries from subscribers related to collections activities are now classified as
network revenue. Previously, these amounts were recorded as a
recovery of operating, general and administrative expenses.



     



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


 


 


 

	 	 	 	 	 	 	 	 	 
	  
	 	Year Ended December 31,

	  
	 	2003
	 	2002

	  
	 	(In millions of dollars, except
per subscriber data)
	Postpaid (voice
and data) revenue:
	 	 	 	 	 	 	 	 	 	 	 	 
	Prior to adoption
	 	$	1,921.0	 	 	$	1,632.9	 
	After adoption
	 	 	1,911.1	 	 	 	1,628.1	 
	Network revenue:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	2,039.8	 	 	 	1,759.3	 
	After adoption
	 	 	2,029.9	 	 	 	1,754.5	 
	Equipment sales:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	242.4	 	 	 	206.7	 
	After adoption
	 	 	177.9	 	 	 	137.0	 
	Total Operating
revenue:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	2,282.2	 	 	 	1,966.0	 
	After adoption
	 	 	2,207.8	 	 	 	1,891.5	 
	Cost of
equipment sales:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	244.5	 	 	 	209.9	 
	After adoption
	 	 	380.8	 	 	 	296.8	 
	Sales and
marketing expenses:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	522.7	 	 	 	462.8	 
	After adoption
	 	 	362.0	 	 	 	328.9	 
	Operating,
general and administrative expenses:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	787.5	 	 	 	765.5	 
	After adoption
	 	 	737.4	 	 	 	738.1	 
	Postpaid (voice
and data) ARPU:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	57.55	 	 	 	55.95	 
	After adoption
	 	 	57.25	 	 	 	55.78	 
	Blended ARPU:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	47.42	 	 	 	45.20	 
	After adoption
	 	 	47.19	 	 	 	45.07	 
	Sales and
marketing expenses per wireless gross subscriber addition:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	397	 	 	 	384	 
	After adoption
	 	 	376	 	 	 	366	 
	Average monthly
operating expense per wireless subscriber:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	17.47	 	 	 	18.42	 
	After adoption
	 	 	17.87	 	 	 	18.81	 




     These
changes in accounting classification had no effect on the amounts of reported operating profit, net income or earnings per share.
All prior period amounts, including key performance indicators, have been conformed to reflect these changes in classification.


 






 



13




ALTERNATIVE ACCEPTABLE ACCOUNTING POLICIES



     GAAP permits, in certain circumstances, alternative acceptable accounting
policies. The three primary areas where the Company has made a choice are (1)
the accounting for subscriber acquisition costs, (2) the accounting for
stock-based compensation and (3) capitalized interest.



Accounting for Subscriber Acquisition Costs



     Subscriber acquisition costs are expensed in the period incurred by the
Company. The alternative method is to defer and amortize these costs over the
life of the contract or the expected life of the relationship with the
customer. The Company has elected to expense these costs as incurred because
it believes these costs reflect period costs that may or may not be recoverable
depending on the length of the relationship with the customer, whether it be
contractual or otherwise. In addition, subscriber acquisition costs on a per
subscriber basis fluctuate based on the success of promotional activity and
seasonality of the business, and, as such, the Company believes these costs
should be reflected as costs at the point in time that they are incurred.



Accounting for Stock-Based Compensation Costs



     The Company does not record any expense for employee stock options;
however, it provides note disclosure of the pro forma expense using the
fair-value-based method of accounting calculated using the Black-Scholes Option
Pricing model. While the Company acknowledges that stock options represent a
form of compensation, it elected to disclose the pro forma expense in Note 9(d)
to the Consolidated Financial Statements, rather than expense such
compensation, to maintain comparability with other peer companies. In response
to activities and decisions by accounting standard setters in Canada in respect
to the adoption of mandatory expensing of stock options, as described above,
effective January 1, 2004, the Company will adopt the policy of expensing the
fair value of stock options granted to employees.



Capitalized Interest



     Canadian GAAP permits, but does not require, the capitalization of
interest expense as part of the cost of acquiring certain assets that require a
period of time to prepare for their intended use. The Company does not
capitalize interest as part of its PP&E expenditures.





U.S. GAAP DIFFERENCES



     The Company prepares its financial statements in accordance with Canadian
GAAP. U.S. GAAP differs from Canadian GAAP in certain respects. The areas of
principal differences and their impact on the Company’s Consolidated Financial
Statements are described in Note 18 to the Consolidated Financial Statements.
The significant differences include:





	 	•	 	goodwill arising on purchase transactions;
	 
	 	•	 	accounting for interest capitalization and the related depreciation impact;
	 
	 	•	 	accounting for development and pre-operating costs; and
	 
	 	•	 	accounting for changes in the fair value of financial instruments.



Goodwill Arising on Purchase Transactions



     Under U.S. GAAP, purchase transactions that result in an entity becoming a
wholly-owned subsidiary establish a new basis of accounting for the entity
purchased and its assets and liabilities. As a result of RCI’s acquisition of
100% of the Company in 1989, for U.S. GAAP purposes, the Company must record as
an asset in its Consolidated Financial Statements the amount of goodwill that
was recorded on the consolidated financial statements of RCI. As this
acquisition was financed principally by the parent company with proceeds from
other asset sales, the corresponding adjustment for the assets recorded was an
increase in shareholders’ equity.








 



14


     At the time of the acquisition by RCI, Canadian GAAP did not permit a
subsidiary company to alter the historical costs of its assets or liabilities
upon it being acquired. This difference increases goodwill and shareholders’
equity by $521.9 million.



Accounting for Interest Capitalization and the Related Depreciation Impact



     U.S. 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. The impact of capitalizing interest under U.S. GAAP is to increase net
income by $5.7 million in 2003 and $6.5 million in 2002. The corresponding
depreciation expense impact related to interest capitalized in previous years
is to increase depreciation expense for the years ended December 31, 2003 and
2002 by $3.0 million and $2.2 million, respectively.



Accounting for Development and 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 U.S. GAAP,
these costs are expensed as incurred. As a result, under U.S. GAAP the
consolidated net income for each of the years ended December 31, 2003 and 2002
was increased by $3.0 million, representing the amortization of pre-operating
costs under Canadian GAAP.



Accounting for Changes in the Fair Value of Financial Instruments



     Under U.S. GAAP, the changes in fair value of cross-currency interest rate
exchange agreements and interest rate exchange agreements are recorded as an
adjustment to net income. Accordingly, the Company’s net income under U.S.
GAAP has been decreased by $102.8 million in 2003 and increased by $88.1
million in 2002.



OPERATING AND FINANCIAL RESULTS



     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 of airtime, for long-distance charges and
text messaging;
	 
	 	•	 	one-way messaging revenues generated from monthly fees and usage
charges; and
	 
	 	•	 	equipment sales revenues generated from the sale of hardware and
accessories to independent dealers, agents and retailers, and directly
to subscribers through direct fulfillment by the Company’s customer
service groups, its website and telesales.




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




	 	•	 	cost of equipment sales;
	 
	 	•	 	sales and marketing expenses, which represent
all costs to acquire new subscribers (other than those related to
equipment), such as advertising, commissions
paid to third parties for new activations,
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,
as well, it includes costs to service existing subscriber
relationships including costs (other than those related to equipment); and inter-carrier payments to roaming partners and long-distance
carriers and the CRTC contribution levy;









 



15


	 	•	 	management fees paid to RCI.




     The
wireless communications industry in Canada continues to grow and the
costs of acquiring new subscribers are significant. Because a
substantial portion of subscriber activation costs are variable in
nature, such as commissions and equipment subsidies paid for each new
activation, and due to fluctuations in the number of activations of new
subscribers from period to period and the seasonal nature of these subscriber
additions, the Company experiences material fluctuations in sales and marketing
expenses and, accordingly, in the overall level of operating expenses.









 



16


Year Ended December 31, 2003 Compared to Year Ended December 31, 2002



Summarized Consolidated Financial Results




	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Years ended December 31,	 	 	 	 
	 	 	 	
	 	 	 	 
	(In
millions of dollars, except per share data)	 	2003	 	2002	 	% Chg
	 	 	 	
	 	
	 	

	Operating revenue
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Postpaid
(voice and data)(1)(2)
	 	$	1,911.1	 	 	$	1,628.1	 	 	 	17.4	 
	 	Prepaid
	 	 	91.2	 	 	 	91.2	 	 	 	—	 
	 	One-way messaging
	 	 	27.6	 	 	 	35.2	 	 	 	(21.6	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 
	 	Network
revenue (1)
	 	2,029.9	 	 	 	1,754.5	 	 	 	15.7	 
	 	Equipment
revenue (1)
	 	177.9	 	 	 	137.0	 	 	 	29.9	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating revenue
	 	 	2,207.8	 	 	 	1,891.5	 	 	 	16.7	 
	Operating expenses (1)
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Cost of equipment sales
	 	 	380.8	 	 	 	296.8	 	 	 	28.3	 
	 	Sales
and marketing expenses
	 	 	362.0	 	 	 	328.9	 	 	 	10.1	 
	 	Operating, general and administrative expenses
	 	 	737.5	 	 	 	738.1	 	 	 	—	 
	 	Management fees
	 	 	11.3	 	 	 	11.0	 	 	 	2.7	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating expenses
	 	 	1,491.6	 	 	 	1,374.8	 	 	 	8.5	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Operating profit (3)
	 	 	716.2	 	 	 	516.7	 	 	 	38.6	 
	 	Change in estimate of sales tax and
CRTC contribution liabilities
	 	 	—	 	 	 	(12.3	)	 	 	—	 
	 	Depreciation and amortization
	 	 	518.6	 	 	 	457.1	 	 	 	13.5	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Operating income
	 	 	197.6	 	 	 	71.9	 	 	 	174.8	 
	Interest expense
	 	 	(193.5	)	 	 	(195.2	)	 	 	(0.9	)
	Gain on repayment of long-term debt
	 	 	—	 	 	 	31.0	 	 	 	—	 
	Foreign exchange gain
	 	 	135.2	 	 	 	6.4	 	 	 	—	 
	Investment and other income
	 	 	0.9	 	 	 	0.5	 	 	 	80.0	 
	Income taxes
	 	 	(2.4	)	 	 	(5.3	)	 	 	(54.7	)
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Net income (loss)
	 	$	137.8	 	 	$	(90.7	)	 	 	—	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 
	Earnings (loss) per share -
basic and diluted
	 	$	0.97	 	 	$	(0.64	)	 	 	—	 
	Total assets
	 	$	3,107.3	 	 	$	3,185.0	 	 	 	(2.4	)
	Total liabilities
	 	$	2,664.3	 	 	$	2,885.5	 	 	 	(7.7	)
	Addition
to property, plant
	 	 	 	 	 	 	 	 	 	 	 	 
	 	and equipment
	 	$	411.9	 	 	$	564.6	 	 	 	(27.0	)
	Operating
profit margin as % of network(3)(4)
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Revenue
	 	 	35.3	%	 	 	29.4	%	 	 	 	 





	(1)	 	As reclassified. See the
“Recent Accounting Developments – Revenue Recognition”
section.
	 
	(2)	 	The 2002 period presentation of subscriber and revenue categories has
been reclassified to conform to the current presentation. See the “Key
Performance Indicators — Subscriber Counts” section.
	 
	(3)	 	As previously defined. See
the “Key Performance Indicators — Operating
Profit” section.
	 
	(4)	 	Operating profit margin as a percentage of network revenue is a key performance
indicator for the reasons indicated in the “Key Performance
Indicators — Operating Profit Margin” section and is calculated as follows:






	 	 	 	 	 	 	 	 	 
	($millions)	 	2003	 	2002
	Network revenue
	 	$	2,029.9	 	 	$	1,754.5	 
	 
	 	 	
	 	 	 	
	 
	Operating profit
	 	$	716.2	 	 	$	516.7	 
	 
	 	 	
	 	 	 	
	 
	Operating
profit margin — 2003
	 	$	716.2 divided by
$2,029.9 = 35.3%
	Operating
profit margin — 2002
	 	$	516.7 divided by
$1,754.5 = 29.4%









 


17




Wireless Operating Highlights and Significant Developments of 2003





	 	•	 	Network revenue increased 15.7% and operating profit increased 38.6%
compared to 2002. Operating profit margin based on network revenue rose
by 590 basis points year-over-year to 35.3%.






	 	•	 	2003 PP&E expenditures decreased by $152.7 million, or 27.0%, over
2002 due to the substantial completion of the initial roll-out of the
nationwide GSM/GPRS network in 2002.
	 
	 	•	 	Growth in operating profit, combined with reduced spending on PP&E
and lower interest costs, resulted in a $353.9 million year-over-year
improvement in operating profit cash flow.
	 
	 	•	 	Postpaid voice and data ARPU
increased year-over-year by $1.47, or
2.6%, to $57.25, reflecting the continued activation and retention of
higher valued customers, increased penetration of enhanced services and

the continued growth of wireless data and roaming revenues.
	 
	 	•	 	Postpaid voice and data subscriber net additions of 400,200 were
higher by 19.3% versus the 335,400 net additions in 2002, reflecting
both higher levels of gross activations and reduced churn levels.
Average monthly postpaid churn for the year declined to 1.88% from 1.98%
in the previous year.
	 
	 	•	 	Revenues from wireless data
services, which grew 124.8%
year-over-year to $67.9 million from $30.2 million in the prior year,
represented approximately 3.3% of network revenue compared to 1.7% in
2002.
	 
	 	•	 	The Company completed its deployment of GSM/GPRS technology operating
in the 850 MHz spectrum range across its national footprint, expanding
the capacity and also enhancing the quality of the GSM/GPRS network.
Rogers Wireless also began trials of EDGE technology in the Vancouver
market at the end of 2003 which, accomplished by the installation of a
network software upgrade, more than triples the wireless data
transmission speeds available on its network.
	 
	 	•	 	On March 8, 2004, the Company will begin transitioning its branding
to Rogers Wireless from Rogers AT&T Wireless, bringing greater clarity
to the Rogers brand in Canada. As a result, the Company recorded a
non-cash charge in 2003 of approximately $20.0 million to reflect the
accelerated amortization of the associated brand licence costs.
	 
	 	•	 	The Company recorded net income of $137.8 million in 2003 compared to
a loss of $90.7 million in 2002. The primary reasons for the
improvement were a $125.7 million increase in operating income combined
with the recognition of $128.8 million of additional foreign exchange
gains primarily resulting from the translation of the unhedged portion
of U.S. dollar-denominated long-term debt as the Canadian dollar
strengthened against the U.S. dollar.









 



18


Wireless Network Revenue and Subscribers




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Years Ended December 31,	 	 	 	 	 	 	 	 
	 	 	 	
	 	 	 	 	 	 	 	 
	(Subscriber statistics in thousands, except ARPU, churn and usage)	 	2003	 	2002	 	Chg	 	% Chg
	 	 	 	
	 	
	 	
	 	

	Postpaid (Voice and Data)(1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Gross additions
	 	 	1,021.5	 	 	 	910.7	 	 	 	110.8	 	 	 	12.2	 
	 	Net additions
	 	 	400.2	 	 	 	335.4	 	 	 	64.8	 	 	 	19.3	 
	 	Total subscribers
	 	 	3,029.6	 	 	 	2,629.3	 	 	 	400.3	 	 	 	15.2	 
	 	ARPU ($)(3)(4)
	 	 	57.25	 	 	 	55.78	 	 	 	1.47	 	 	 	2.6	 
	 	Average monthly usage (minutes)
	 	 	361	 	 	 	324	 	 	 	37	 	 	 	11.4	 
	 	Churn (%)
	 	 	1.88	 	 	 	1.98	 	 	 	(0.10	)	 	 	(5.1	)
	Prepaid
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Gross additions
	 	 	257.4	 	 	 	243.3	 	 	 	14.1	 	 	 	5.8	 
	 	Net additions (losses)
	 	 	2.0	 	 	 	44.2	 	 	 	(42.2	)	 	 	(95.5	)
	 	Adjustment to subscriber base(2)
	 	 	(20.9	)	 	 	—	 	 	 	(20.9	)	 	 	—	 
	 	Total subscribers(2)
	 	 	759.8	 	 	 	778.7	 	 	 	(18.9	)	 	 	(2.4	)
	 	ARPU ($)(3)
	 	 	10.08	 	 	 	10.17	 	 	 	(0.09	)	 	 	(0.9	)
	 	Churn (%)
	 	 	2.82	 	 	 	2.23	 	 	 	0.59	 	 	 	26.5	 
	Total – Postpaid and Prepaid
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Gross additions
	 	 	1,278.9	 	 	 	1,154.0	 	 	 	124.9	 	 	 	10.8	 
	 	Net additions
	 	 	402.2	 	 	 	379.6	 	 	 	22.6	 	 	 	6.0	 
	 	Adjustment to subscriber base(2)
	 	 	(20.9	)	 	 	—	 	 	 	(20.9	)	 	 	—	 
	 	Total subscribers(2)
	 	 	3,789.4	 	 	 	3,408.0	 	 	 	381.4	 	 	 	11.2	 
	 	ARPU (blended) ($)(3)(4)
	 	 	47.19	 	 	 	45.07	 	 	 	2.12	 	 	 	4.7	 
	One-Way Messaging
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Gross additions
	 	 	42.5	 	 	 	61.0	 	 	 	(18.5	)	 	 	(30.3	)
	 	Net additions
	 	 	(61.1	)	 	 	(68.3	)	 	 	7.2	 	 	 	(10.5	)
	 	Total subscribers
	 	 	241.3	 	 	 	302.3	 	 	 	(61.0	)	 	 	(20.2	)
	 	ARPU ($)(3)
	 	 	8.40	 	 	 	8.79	 	 	 	(0.39	)	 	 	(4.4	)
	 	Churn (%)
	 	 	3.13	 	 	 	3.20	 	 	 	(0.07	)	 	 	(2.2	)





	(1)	 	The 2002 period’s presentation of subscribers and revenue has been
reclassified to conform to the current presentation as discussed in the
“Key Performance Indicators — Subscriber Counts” section above.
	 
	(2)	 	The Company’s policy is to treat prepaid subscribers with no usage for a
six month period as a reduction of the prepaid subscriber base. As part
of a review of prepaid subscriber usage in the second quarter of 2003, the
Company determined that a number of subscribers, totaling 20,900, which
only had non-revenue usage (i.e. calls to customer service) over the past
several quarters, were being included in the prepaid subscriber base. The
Company determined that these subscribers should not have been included in
the prepaid subscriber base and, as such, made an adjustment to the
opening prepaid subscriber base. The Company has amended its policy to
reflect all prepaid subscribers with no revenue-generating usage in a six
month period as deactivations.
	 
	(3)	 	See “Key Performance
Indicators — Average Revenue per Subscriber”
section.
	 
	(4)	 	As reclassified. See the “
Recent  Accounting Developments - Revenue Recognition” section. 




Wireless Network Revenue



     Wireless
network revenue in 2003, which accounted for 91.9% of the
Company’s total revenue, was $2,029.9 million, an increase
of 15.7% from 2002.
This revenue growth reflects the 11.2% increase in the number of wireless voice
and data subscribers over fiscal 2002 and a 4.7% year-over-year increase in
blended postpaid and prepaid ARPU.



     Postpaid voice and data subscriber additions in 2003 represented 79.9% of
total gross activations and close to 100% of total net additions. The Company
continued its strategy of targeting higher value postpaid subscribers and
selling its prepaid handsets at higher price points which contributed
significantly to the mix of postpaid versus prepaid subscribers.



     The 2.6% increase in average monthly revenue per postpaid voice and data
subscriber compared to the previous year reflected the continued activation and
retention of higher value customers, increased penetration of enhanced
services, and the continued growth of wireless data and roaming revenues. The
growth in data revenues from $30.2 million to $67.9 million represented
approximately 68.5% of the 2.6% ARPU increase. Prepaid ARPU remained
relatively flat on a year-over-year basis.



     The continuing trend to lower postpaid voice and data subscriber churn, as
reflected in the 1.88% rate in 2003 versus 1.98% in 2002, is directly related
to both the Company’s strategy of acquiring higher value, more stable customers
on longer term contracts and an enhanced focus on customer retention. The
Company’s focus on customer retention aims to ensure that customers receive








 




19


responsive, quality service at every point of contact with the Company.
The Company attributes the increase in prepaid churn to 2.82% in the current
year to the impact of competitive prepaid offers.



     One-way messaging (or “paging”) subscriber churn has remained relatively
stable on a year over year basis declining to 3.13% in 2003 from 3.20% in the
previous year. With 241,300 paging subscribers, the Company 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 Sales Revenue



     In 2003, revenue from wireless voice, data and messaging equipment sales
was $177.9 million, up $40.9 million, or 29.9%, from the prior year. The
increase in equipment revenues reflects both the higher cost of more
sophisticated handsets and devices and the significantly higher volume of
postpaid voice and data customer gross additions. However, this increase in
sales does not materially affect the Company’s operating profit as the Company
generally sells equipment to distribution at a price approximating cost to
facilitate competitive pricing at the retail level.



Wireless Operating Expenses




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Years ended December	 	 	 	 	 	 	 	 
	 	 	 	31,	 	 	 	 	 	 	 	 
	 	 	 	
	 	 	 	 	 	 	 	 
	(In millions of dollars, except per subscriber statistics)	 	2003	 	2002	 	Chg	 	% Chg
	 	 	 	
	 	
	 	
	 	

	Operating
expenses(1)(2)(3)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Cost of equipment sales
	 	$	380.8	 	 	$	296.8	 	 	$	84.0	 	 	 	28.3	 
	 	Sales
and marketing expenses(4)
	 	 	362.0	 	 	 	328.9	 	 	 	33.1	 	 	 	10.1	 
	 	Operating, general and administrative expenses
	 	 	737.5	 	 	 	738.1	 	 	 	(0.6	)	 	 	—	 
	 	Management fees
	 	 	11.3	 	 	 	11.0	 	 	 	0.3	 	 	 	2.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating expenses
	 	$	1,491.6	 	 	$	1,374.8	 	 	$	116.8	 	 	 	8.5	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Average monthly operating expense per
subscriber before sales, marketing
and equipment margin(1)(3)(4)
	 	$	17.87	 	 	$	18.81	 	 	$	(0.94	)	 	 	(5.0	)
	Sales and marketing expenses per gross
subscriber addition (including equipment margin)
	 	$	376	 	 	$	366	 	 	$	10	 	 	 	2.7	 





	(1)	 	As reclassified. See the “-
Recent Accounting Developments - Revenue Recognition” section.

	 
	(2)	 	The 2002 period presentation has been reclassified to conform to the
current presentation. Customer retention costs are included in
operating, general and administrative costs.
	 
	(3)	 	Operating expenses for the year ended December 2002 exclude the benefit
of the change in the estimate of sales tax and CRTC contribution
liabilities of $12.3 million.
	 
	(4)	 	Sales and marketing expenses exclude margin on equipment sales.




     Total
operating expenses were $1,491.6 million, up 8.5% from $1,374.8
million in 2002. Cost of equipment sales increased by approximately
$84.0
million as a result of increased equipment revenues. These costs do not
materially affect the Company’s operating profit as the Company generally sells
equipment to distributors at a price approximating cost to facilitate
competitive pricing at the retail level.



     Operating,
general and administrative expenses decreased by $0.6 million
in 2003 over 2002. The slight decrease is attributable to
savings related to more favourable roaming arrangements and
operating efficiencies across various functions offset by increased
customer care and retention spending. Retention spending includes
spending on retention programs, excluding equipment upgrades, costs
associated with the Company’s customer loyalty and renewal programs and
payments to the Company’s distributors for ongoing service of the Company’s
existing customers. The Company is continually focused on operating
efficiencies and cost reduction programs which in turn have served to offset
the impact of the growth in the subscriber base, allowing operating profit
margins to expand.








 



20

     Average monthly operating expense per subscriber, excluding sales and
marketing expenses and equipment cost of sales, decreased $0.94, or
5.0%, to
$17.87 in 2003, compared to $18.81 in 2002. This year-over-year reduction
reflects scale economies from the larger subscriber base, roaming cost
reductions, and improved efficiencies in call centre and network maintenance
operations offset by increased costs related to customer retention.



     At December 31, 2003, the Company, as a result of its sales and retention
strategies, had approximately 67% of its postpaid wireless voice and data
subscriber base under contracts with an initial term of greater than 12 months,
up from 61% at December 31, 2002.



Wireless Sales and Marketing Expenses



     The 10.1% year-over-year increase in total sales and marketing expenses
was due to higher variable acquisition costs associated with the 12.2%
year-over-year increase in the number of postpaid voice and data gross
additions. In addition, variable sales and marketing expenses increased in line
with the Company’s strategy to attract higher value business customers and
customers on longer term contracts. The Company also invested more in
advertising and promotion on a year-over-year basis as it emphasized the value
proposition related to data and other product offerings. Sales and marketing
expenses per wireless subscriber gross addition were $376, an
increase of $10,
or $2.7%, from $366 in 2002, attributable to increases in equipment
subsidies required to match competitive offers.



Wireless Operating Profit



     Revenue increased at a faster rate than expenses, resulting in operating
profit growth of $199.5 million, or 38.6%, to $716.2 million in 2003 from
$516.7 million in 2002. Operating profit as a percentage of network revenue, or
operating profit margin, improved in 2003 to 35.3% from 29.4% in 2002.



Reconciliation of Operating Profit to Net Income (Loss)



     Taking into account the other income and expense items below operating
profit, the Company recorded net income of $137.8 million in 2003, compared to
a loss of $90.7 million in 2002. The improvement in net income of $228.5
million was primarily a result of: (1) a year-over-year increase in operating
profit of $199.5 million, and (2) a stronger Canadian dollar resulting in an
increase in foreign exchange gain of $128.8 million, which was partially offset
by an increase of $61.5 million in depreciation and amortization expense due to
the increased fixed asset base and the accelerated amortization of the brand
licence, and a reduction in 2003 of the gain on repurchase of long-term debt of
$31.0 million. Other income and expense items required to reconcile operating
profit to operating income and net income (loss) as defined under Canadian GAAP
are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Years ended December 31,	 	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 	 	 	 
	(In millions of dollars)	 	2003	 	2002	 	Chg	 	% Chg
	 	 	
	 	
	 	
	 	

	Operating profit(1)
	 	$	716.2	 	 	$	516.7	 	 	$	199.5	 	 	 	38.6	 
	Change in estimate of sales tax and
CRTC contribution liabilities
	 	 	—	 	 	 	12.3	 	 	 	(12.3	)	 	 	—	 
	Depreciation and amortization
	 	 	(518.6	)	 	 	(457.1	)	 	 	(61.5	)	 	 	13.5	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating income
	 	 	197.6	 	 	 	71.9	 	 	 	125.7	 	 	 	174.8	 
	Interest expense on long-term debt
	 	 	(193.5	)	 	 	(195.2	)	 	 	1.7	 	 	 	(0.9	)
	Foreign exchange gain
	 	 	135.2	 	 	 	6.4	 	 	 	128.8	 	 	 	—	 
	Gain on repurchase of long-term debt
	 	 	—	 	 	 	31.0	 	 	 	(31.0	)	 	 	—	 
	Investment and other income
	 	 	0.9	 	 	 	0.5	 	 	 	0.4	 	 	 	80.0	 
	Income taxes
	 	 	(2.4	)	 	 	(5.3	)	 	 	2.9	 	 	 	54.7	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net income (loss)
	 	$	137.8	 	 	$	(90.7	)	 	$	228.5	 	 	 	—	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 





	(1)	 	As previously defined. See the
“Key Performance Indicators — Operating Profit”
section.









 



21



Depreciation and Amortization



     The year-over-year increase in depreciation and amortization expense was
primarily due to PP&E expenditure levels in prior years and the resulting
higher fixed asset levels and depreciation relating to the GSM/GPRS network
overlay.



     The cost of the AT&T brand licence was deferred and amortized to expense
on a straight-line basis over the 15-year term of the brand licence agreement.
During 2003, the Company announced that it would terminate its brand licence
agreement in early 2004 and change its brand name to exclude the AT&T brand.
Consequently, the Company accelerated the amortization of the brand licence to
reduce the carrying value to nil.



Interest on Long-Term Debt



     The $1.7 million reduction in interest expense in 2003, compared to 2002,
reflects the reduced debt levels in 2003. Long-term debt has declined to
$2.210 billion at December 31, 2003, from $2.360 billion at December 31, 2002.
The reduction in debt levels are directly related to the impact of the change
in foreign exchange related to the improvement in the Canadian dollar versus
the U.S. dollar.



Foreign Exchange



     The Canadian dollar continued to strengthen in relation to the U.S.
dollar, continuing the trend experienced in 2002, and accordingly, the Company
recorded a foreign exchange gain of $135.2 million, compared to $6.4 million in
2002, related to both realized and unrealized foreign exchange gains, primarily
as a result of the translation of the unhedged portion of U.S.
dollar-denominated long-term debt.



Income Taxes



     Income taxes for 2003 consisted primarily of current income tax expense
related to the Federal Large Corporations Tax, offset by tax recoveries of
prior years.



Additions to PP&E



     Additions to
 PP&E totaled $411.9 million in 2003, a decrease of $152.7
million, or 27.0%, from $564.6 million in 2002. Network-related additions to
 PP&E of $338.2 million included $251.3 million for capacity expansion
of the GSM/GPRS network and transmission infrastructure and $66.1 million for
expanded coverage as well as construction of new sites for improved coverage in
existing service areas and for expanded coverage. The Company has continued to
construct the infrastructure necessary for enhanced digital coverage and
lower-cost incremental capacity by adding channels on existing sites. The cost
to complete the deployment of GSM/GPRS equipment in the 850 MHz frequency band
that was initiated during the fourth quarter of 2002 and completed in late 2003
is included in the network capacity expansion costs above. The remaining
balance of $20.8 million in network-related additions to
 PP&E related primarily
to technical upgrade projects, the operational support systems, and the
addition of new services. Other Additions to PP&E consisted of $51.1 million
for information technology initiatives, $8.7 million for the completion of the
expansion of the Company’s headquarters facilities, and $13.9 million for call
centres and other facilities and equipment.





EMPLOYEES



     Remuneration represents a material portion of the expenses of the Company.
The Company ended the year with approximately 2,360 full-time-equivalent
employees, an increase of 40 from 2,320 at December 31, 2002. The increase in
staff was primarily concentrated in the areas of sales and marketing as the
Company focused its subscriber acquisition programs and service and retention
efforts on customer segments that would yield greater value to the Company.



     Total remuneration paid to employees (both full and part-time) in 2003 was
approximately $164.2 million, an increase of $5.3 million
or 3.3% from $158.9
million in the prior year.








 



22




LIQUIDITY AND CAPITAL RESOURCES



Operations



     Cash
generated from operations before changes in non-cash operating items, which is
calculated by adding all non-cash items including depreciation and
amortization, back to net income, increased to $522.0 million in 2003 from
$310.6 million in 2002. The $211.4 million increase is mainly the result of the
increase in operating profit as discussed above.



     Taking into account the changes in non-cash operating items for the 2003 fiscal
year, cash generated from operations increased by $132.2 million
to $496.5
million compared to $364.3 million in the previous year. The
change in working capital is mostly attributable to increased income
levels offset by increased levels of accounts receivable primarily
related to growth in network revenue.



     Cash
flow from operations of $496.5 million, together with $4.8 million
received from the issuance of Class B Restricted Voting Shares under employee
share purchase plans and the exercise of employee options, resulted in total
funds raised in 2003 of approximately $501.3 million.



     These
funds were used (1) to fund PP&E expenditures (net of change
in non-cash working capital), of $499.6 million, (2)
for net repayments under the Company’s bank credit facility of $11.0 million
and (3) for a $5.0 million net repayment of capital leases and mortgages. In
total, $515.6 million of funds were used in 2003, resulting in a cash deficit
of $14.3 million for the year. Taking into account the $10.1 million cash
balance at the beginning of the year, the cash deficit at the end of 2003 was
$4.2 million.



     The Company expects to continue to incur significant PP&E expenditures.
In 2004, Rogers Wireless expects to incur PP&E expenditures of between $400.0
million and $425.0, million primarily associated with the addition of network
capacity to accommodate subscriber additions, increases in usage, expansion of
geographical coverage and quality enhancements in certain areas of its network.
PP&E expenditures also include amounts for information technology and general
PP&E. The Company expects operating profit to increase in 2004 and the Company
anticipates generating a net cash surplus in 2004. Rogers Wireless believes
that it will have sufficient capital resources to satisfy its cash funding
requirements in 2004, taking into account cash from operations.



Financing



     The Company’s long-term financial instruments are described in Note 8 to
the Consolidated Financial Statements. Financing activity is outlined below.




     The Company’s required repayments on all long-term debt in the next five
years totals $1.24 billion, excluding an aggregate $2.5 million effect of
cross-currency interest rate exchange agreements. In 2004 and 2005, required
repayments total $3.3 million. In 2006, required repayments total $182.7
million, mainly comprised of $160.0 million for the repayment of the 10 1/2%
Senior Secured Notes due 2006 and $22.2 million for the repayment of a mortgage
due 2006. In 2007, required repayments total $485.1 million, mainly comprised
of $253.5 million for the repayment of the 8.30% Senior Secured Notes due 2007
and $231.4 million for the repayment of the 8.80% Senior Subordinated Notes due
2007. In 2008, required repayments total $568.6 million, comprised of $430.6
million for the repayment of the 9 3/8% Senior Secured Debentures due 2008 and
$138.0 million outstanding under the bank credit facility at December 31, 2003.
The three debt issues that mature in 2007 and 2008 are currently redeemable.
The Company is considering whether or not to redeem one or more of these debt
issues, which may involve the incurrence of debt.



     The Company’s bank credit facility, amended in April 2001, provides a
revolving facility of up to $700.0 million, and the Company also has an
operating line of credit that provides for up to $10.0 million. The terms of
the bank credit facility generally impose the most restrictive limitations on
the Company’s operations and activities, as compared to the Company’s other
debt instruments. The most significant of these restrictions are debt
incurrence and maintenance tests based upon certain ratios of debt to adjusted
operating profit. The Company is currently in compliance with all of the
covenants under its respective debt instruments, and it expects to remain in
compliance with all of these








 



23

covenants. Based on the Company’s most restrictive covenants at December
31, 2003, the Company could have borrowed over $1.8 billion of additional
long-term debt, of which $562.0 million could have been borrowed under its bank
credit facility.



     Rogers Wireless’ $700.0 million amended bank credit facility reduces by
20% on April 30, 2006 and again on April 30, 2007, with the final 60% reduction
on April 30, 2008. However, the bank credit facility will mature on May 31,
2006 if the Company’s Senior Secured Notes due 2006 are not repaid (by
refinancing or otherwise) on or prior to December 31, 2005. If these Notes are
repaid, but the Company’s Senior Secured Notes due 2007 are not repaid (by
refinancing or otherwise) on or prior to April 30, 2007, then the bank credit
facility will mature on September 30, 2007.



     On October 24, 2003, Moody’s Investor Services changed the ratings outlook
on the Company’s Senior Secured and Senior Subordinated public debt, which are
rated Ba3 and B2 respectively, to positive from stable. In addition, on
October 30, 2003, Standard & Poor’s revised its ratings outlook on the
Company’s Senior Secured and Senior Subordinated public debt, which are rated
BB+ and BB- respectively, to positive from stable. On
April 11, 2003 Fitch Ratings changed the ratings outlook on the
Company’s Senior Secured and Senior Subordinated public debt,
which are rated BBB- and BB respectively, to stable from
negative.



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



Interest Rate and Foreign Exchange Management



     The Company uses derivative financial instruments to manage its risks from
fluctuations in foreign exchange and interest rates. These instruments include
interest rate and cross-currency interest rate exchange agreements, foreign
exchange forward contracts and, from time-to-time, foreign exchange option
agreements. All such agreements are used for risk management purposes only and
are designated as a hedge of specific debt instruments. In order to minimize
the risk of counterparty default under these agreements, Rogers Wireless
assesses the creditworthiness of these counterparties. At December 31, 2003,
all of the Company’s counterparties to these agreements were financial
institutions with a Standard & Poor’s rating (or other equivalent) ranging from
A+ to AA.



     Because the Company’s operating profit is almost exclusively denominated
in Canadian dollars, the incurrence of U.S. dollar-denominated debt has caused
significant foreign exchange exposure. The Company has established a target of
hedging at least 50% of its foreign exchange exposure through the use of
instruments outlined above. At December 31, 2003 and 2002, the Company had
U.S. dollar-denominated long-term debt of U.S.$1,353.3 million. At December
31, 2003 and 2002, U.S.$885.0 million or 65.4% was hedged with cross-currency
interest rate exchange agreements at an average exchange rate of $1.4466 to
U.S.$1.00.



     The cross-currency interest rate exchange agreements have the effect of
converting the interest rate on U.S.$500.0 million of long-term debt from an
average U.S. dollar fixed interest rate of 9.63% per annum to a weighted
average Canadian dollar fixed interest rate of 10.29% per annum on $779.7
million. The interest rate on an additional U.S.$385.0 million has been
converted from a U.S. dollar fixed interest rate of 9.38% per annum to $500.5
million at a weighted average floating interest rate equal to the Canadian
bankers’ acceptance rate plus 2.35% per annum, which totaled 5.11% at December
31, 2003, compared to 5.22% at December 31, 2002.



     Total long-term debt at fixed interest rates at December 31, 2002 and 2003
was $1,170.6 million and $1,571.1 million, or 72.5% and 71.1%, respectively, of
total long-term debt. The Company’s effective weighted average interest rate
on all long-term debt as at December 31, 2003, including the effect of the
interest rate and cross-currency exchange agreements, was 8.32% per annum,
compared to 8.42% at December 31, 2002.



     The Company will continue to monitor its hedged position with respect to
interest rate and foreign exchange fluctuations and, depending upon market
conditions and other factors, may adjust its hedged position with respect to
foreign exchange fluctuations or interest rates in the future by unwinding
certain existing hedges and/or by entering into new cross-currency interest
rate exchange agreements or by using other hedging instruments.



     The following table summarizes the effect of changes in the foreign
exchange rate on the unhedged portion of the Company’s U.S. dollar-denominated
debt and the resulting change in the principal carrying amount of debt,
interest expense and earnings per share based on a full year impact.








 



24


	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Change in	 	Change in	 	 	 	 
	 	 	 	 	debt principal	 	interest	 	Earnings
	 	 	 	 	amount	 	expense	 	per
	Change in Cdn$ vs. US$(1)	 	($ millions)	 	($ millions)	 	share(2)
	
	 	
	 	
	 	

	$	0.01	 	 	$	4.7	 	 	$	0.4	 	 	$	0.036	 
	 	0.03	 	 	 	14.0	 	 	 	1.2	 	 	 	0.108	 
	 	0.05	 	 	 	23.4	 	 	 	2.1	 	 	 	0.179	 
	$	0.10	 	 	$	46.8	 	 	$	4.1	 	 	$	0.359	 





	(1)	 	Canadian equivalent of unhedged U.S. dollar-denominated debt if U.S.
dollar costs an additional Canadian cent.
	 
	(2)	 	Assumes no income tax effect. Based on the number of basic shares
outstanding as at December 31, 2003.



     At December 31, 2003, interest expense would have increase by $6.4 million
per year if there was a 1% increase in the interest rates on the portion of the
Company’s long-term debt that is not at fixed interest rates.





INTERCOMPANY AND RELATED PARTY TRANSACTIONS


The Company has entered into a number of intercompany agreements with RCI, the
Company’s parent, and its other subsidiaries. These agreements govern the
management, commercial and cost-sharing arrangements that the Company has with
RCI and its other subsidiaries, including Rogers Cable. The Company also has
entered into a number of agreements with AT&T Wireless, which holds a
significant equity interest in the Company and other companies previously
affiliated with AT&T Wireless. The AT&T Wireless agreements principally relate
to commercial matters and the Company’s corporate governance. The RCI and AT&T
Wireless agreements and arrangements are summarized below.



The Company monitors intercompany and related party agreements to ensure the
agreements remain beneficial to the Company. The Company continually
evaluates the expansion of existing arrangements and the entry into new
agreements. The Company’s agreements with the Rogers group of companies have
historically focused on areas of operations in which joint or combined services
provide efficiencies of scale or other synergies. For example, beginning in
late 2001, RCI began managing the customer call center operations of both the
Company and Rogers Cable, with a goal of improving productivity, increasing
service levels and reducing cost.



Most recently, the Company’s arrangements with RCI and its other subsidiaries
are increasingly focusing on sales and marketing activities. In February 2004,
the Company’s board of directors approved two additional arrangements between
Rogers Cable and the Company:




	 	•	 	Distribution. The Company will provide management services to
Rogers Cable in connection with the distribution of Rogers Cable
products and services through retail outlets and dealer channels and
will also manage Rogers Cable’s e-commerce relationships. The Company
also may manage other distribution relationships for Rogers Cable if
mutually agreed by Rogers Cable and the Company.






	 	•	 	Rogers Business Services. The Company will establish a division,
Rogers Business Solutions, that will provide a single point of contact
to offer the full range of the Company’s products and services and
Cable’s products and services to small and medium businesses and, in
the case of telecommunication virtual private network services, to
corporate business accounts and employees.





The definitive terms and conditions of the agreements between Rogers Cable and
the Company relating to these arrangements will be subject to the approval of
the audit committee of the Company’s board of directors.



In addition, the Company continues to look for other operations and activities
that it can share or jointly operate with other companies within the Rogers
group. Specifically, the Company is considering the expansion of intercompany
arrangements relating to sales and marketing activities as well as other
arrangements that may result in greater integration with other companies within
the Rogers group. The Company may also provide billing and other services to
Rogers Cable in connection with its launch of local telephony services. In the future, market conditions may require the Company
to further strengthen its arrangements to better coordinate and integrate its
sales and marketing and operational activities with its affiliated companies.
Any new arrangements, including the proposed new arrangements described above,
will be entered into only if the Company believes such arrangements are in the
Company’s best interest.



AT&T Arrangements



     In November 1996, the Company entered into a long-term strategic alliance
with AT&T Corp. (“AT&T”), AT&T’s affiliate, AT&T Canada Enterprises Inc. (“AT&T
Canada Enterprises”) and its then affiliates, AWE and AT&T Canada Inc. (“AT&T
Canada”). AT&T Canada, now renamed Allstream Inc., offers local and
long-distance telephone and data transmission services to business customers in
Canada. This strategic alliance included, among other things, a brand licence
agreement under which the Company was granted a licence to use, on a co-branded
basis, the AT&T brand in connection with the marketing of wireless
communications services.



     In 1999, the Company entered into a renewed long-term strategic alliance
with AWE, AT&T Canada Enterprises and AT&T Canada involving a number of
agreements. In January 2003, the Company’s supply and marketing agreement and
non-competition agreement with AT&T Canada were terminated. The relevant
agreements between the Company and AWE, AT&T Canada Enterprises or AT&T Canada,
as applicable, are described below.



Brand Licence Agreement



     The Company entered into an amended brand licence agreement with AT&T
Canada Enterprises under which it was granted a licence to use the AT&T brand
on a co-branded basis in connection with the marketing of the Company’s
wireless services. In December 2003, the Company and AT&T Canada Enterprises
amended the brand licence agreement to permit the Company to terminate the
agreement at any time, but not later than March 31, 2004. The Company has
given notice of termination that will become effective March 8, 2004.
Following a windup period of nine months, the Company will cease to use the
AT&T brand and will thereafter carry on business as Rogers Wireless. The
Company is required to pay a royalty of approximately $2.5 million per month to
AT&T Canada Enterprises during the windup period until the Company ceases to
advertise using the AT&T brand.



AWE Investment in the Company



     In 1999, as part of the renewed strategic alliance, AT&T and British
Telecommunications plc (“BT”) created JVII, a partnership that was 50%
indirectly owned by each of AT&T Corp. and BT Corp. Through JVII, AT&T and BT acquired an
equity interest of approximately 33 1/3% in the Company for a purchase price of
approximately $1.4 billion in 1999. In preparation for its spin-off of AWE,
AT&T Corp. transferred its interest in JVII to AWE. In June 2001, AWE acquired BT’s
interest in JVII. Also in 2001, through JVII, AWE participated in an equity
rights offering to finance the Company’s acquisition of additional spectrum
licences. AWE’s equity interest in the Company is currently approximately
34.2%. As described below, there are certain rights and restrictions
associated with any future sale of this interest in Rogers Wireless that JVII
might contemplate.








 



25

Mobile Wireless Marketing, Technology and Services Agreement



     The Company entered into an amended and restated mobile wireless
marketing, technology and services agreement with AWE that enables them to
share marketing and technology information and requires the parties to work
together to develop networks with common features for their respective
subscribers. This agreement may be terminated at any time by either party.
No amounts are payable under the agreement.



Roaming Agreements



     The Company maintains a reciprocal roaming agreement with AWE whereby AWE
provides wireless communications services to the Company’s subscribers when
they travel to the U.S. and the Company provides the same services to AWE
subscribers when they travel to Canada. This agreement may be terminated upon
short notice by either party.




Over-the-Air Activation Agreement



     The Company currently utilizes the services of AWE for automated
“over-the-air” (“OTA”) programming of subscriber handsets. The current
agreement with AWE expires March 31, 2004, at which time the Company will
assume responsibility for OTA programming.



Shareholders Agreement



     In connection with the JVII investment described above, the Company, RCI,
and JVII entered into a shareholders agreement. Pursuant to the shareholders
agreement, RCI has agreed as a shareholder of the Company to cause JVII to have
the following rights:





	 	•	 	various governance rights with respect to the Company and its
wholly-owned subsidiary, RWI, including the ability to nominate four
directors to each Board of Directors and representation on each
committee of such Boards of Directors;
	 
	 	•	 	the ability to nominate any Chief Technology Officer for the Company or RWI;
	 
	 	•	 	the requirement for JVII’s consent to certain transactions involving the Company or RWI including:





	 	–	 	a sale of all or substantially all of its assets, including a sale of control of RWI;
	 
	 	–	 	a decision by the Company or any
of its subsidiaries including RWI to carry on a business other than specified wireless businesses;
	 
	 	–	 	certain issuances of equity securities by the Company;
	 
	 	–	 	the entering into by the Company with certain competitors of
AWE of any material contract which is outside the ordinary course of
business of the Company.
	 
	 	–	 	certain amalgamations, mergers or business combinations; and
	 
	 	–	 	the entering into of certain related party transactions;
	 
	 	–	 	the issuance of indebtedness by the Company that would result
in total indebtedness for borrowed money outstanding in excess of
five times earnings before interest, taxes, depreciation and
amortization (“EBITDA”) based on 12-month trailing EBITDA calculated
on a consolidated basis;
	 
	 	–	 	the grant by RCI to JVII of
a right to make a first offer and a right of first negotiation in
respect of that offer if RCI wishes to transfer its shares of the
Company (other than to members of the Rogers group of companies or
pursuant to other exceptions).



     The shareholders agreement also provides for, among other things:





	 	•	 	JVII’s agreement to support any going-private transaction relating to
the Company which is initiated by RCI and which does not dilute JVII’s
equity and voting interest in the Company, subject to certain liquidity
rights in favour of AWE;
	 
	 	•	 	a requirement that JVII convert all of the Class A Multiple Voting
Shares owned by it into Class B Restricted Voting Shares if any person
other than AWE and permitted transferees become the beneficial owners
of, directly or indirectly, more than a majority of the equity shares of
JVII, or have the power, in law or in fact, to direct the management and
policies of JVII;









 



26






	 	•	 	the grant by RCI to JVII of the right to make a first offer, and a
right of first negotiation in respect to that offer, if RCI wishes to
sell any shares of the Company (other than to members of the Rogers
group of companies, the Rogers Family or pursuant to other exceptions);
	 
	 	•	 	the grant by JVII to RCI of the right to make a first offer, and a
right of first negotiation in respect to that offer, if JVII decides to
sell any of its shares of the Company;
	 
	 	•	 	certain shotgun rights of first refusal in the event that a material
competitor of AWE acquires control of RCI at a time when, among other
requirements, the Brand Licence Agreement is in effect (the Company on
March 8, 2004 will begin transitioning its branding to Rogers Wireless
from Rogers AT&T Wireless); and
	 
	 	•	 	the Company has agreed that if the Company proposes to issue treasury
shares, each of RCI and JVII has a pre-emptive right to purchase
additional shares of the Company in order to maintain their respective
voting and equity interests in the Company (subject to exceptions).



     If JVII notifies RCI that it wishes to sell all or any portion of its
shares of the Company and if RCI does not purchase those shares under its right
of first offer and right of first negotiation, JVII may sell the shares to
third parties provided, amongst other things, that (i) any Class A Multiple
Voting Shares of the Company to be sold are first converted into Class B
Restricted Voting Shares, (ii) such shares are sold to any third party at a
price greater than the highest price offered to RCI under its right of first
offer and first negotiation and (iii) JVII may not sell to any one third party,
shares representing more than 5% of the equity of the Company (or 10% in the
case of certain service providers to the Company) to any one party.



     The shareholders agreement terminates in certain circumstances, including
(subject to exceptions) in the event that JVII ceases to own at least 20% of
the equity shares of the Company.



     Concurrently with entering into of the shareholders agreement, the Company
entered into a registration rights agreement with JVII. Under that agreement,
in connection with a sale by JVII of shares of the Company to a third party or
parties, JVII is entitled, subject to certain limitations, to require the
Company to qualify the sale of such shares pursuant to a prospectus or
registration statement filed with Canadian or U.S. securities regulators.



RCI Arrangements



Management Services Agreement



     The Company has entered into a management services agreement with RCI
under which RCI provides executive, administrative, financial, strategic
planning, information technology and various additional services to the
Company. Those services relate to, among other things, assistance with tax
advice, Canadian regulatory matters, financial advice (including the
preparation of business plans and financial projections and the evaluation of
PP&E expenditure proposals), treasury services, service to the Company’s Boards
of Directors and committees of the Boards of Directors, and advice and
assistance on relationships with employee groups, internal audits, investor
relations, purchasing and legal services. In return for these services, the
Company has agreed to pay RCI fees equal to the greater of $8 million per year
(adjusted for changes in the Canadian Consumer Price Index from January 1,
1991) and an amount determined by both RCI and the independent directors
serving on the Company’s Audit Committee. The Company also has agreed to
reimburse RCI for all out-of-pocket expenses incurred with respect to services
provided to it by RCI under the management services agreement.








 



27

Call Centres



     The Company is a party to an agreement with RCI pursuant to which RCI
provides customer service functions through its call centres. The Company pays
RCI commissions for new subscriptions, products and service options purchased
by subscribers through the call centres. The Company reimburses RCI for the
cost of providing these services based on the actual costs incurred. The
Company is not obligated to pay additional amounts and may receive a refund if
costs, based on actual call volume multiplied by an agreed upon cost per call
rate, are higher than actual costs. In addition, the Company owns the assets
used in the provision of services. This agreement is for an indefinite term
and is terminable upon ninety days notice.



Invoicing of Common Customers



     Pursuant to an agreement with Rogers Cable, the Company purchases the
accounts receivable of Rogers Cable for common subscribers who elect to receive
a consolidated invoice. The Company is compensated for costs of bad debts,
billing costs and services and other determinable costs by purchasing these
receivables at a discount. The discount is based on actual costs incurred for
the services provided and is reviewed periodically. This agreement is for a
term of one year.



Accounts Receivable



     RCI manages the subscriber account collection activities of the Company.
The Company is responsible, however, for the costs incurred in the collection
and handling of the Company’s accounts.



Real Estate



     The Company leases, at market rates, office space to RCI and RCI’s
subsidiaries. RCI also manages the real estate leased or owned by the Company.
The Company reimburses RCI for the costs it incurs based on various factors,
including the number of sites managed and employees utilized.



Wireless Services



     The Company provides wireless services to RCI and its subsidiaries. The
fees received by the Company are based on actual usage at market rates.



Distribution of Company’s Products and Services



     Rogers Cable and the Company have entered into an agreement for the sale
of the Company’s products and services through the Rogers Video retail outlets
owned by Rogers Cable. The Company pays Rogers Cable commissions for new
subscriptions equivalent to amounts paid to third-party distributors.



Distribution of Rogers Cable’s Products and Services



     The Company has agreed to provide retail field support to Rogers Cable and
to represent Rogers Cable in the promotion and sales of its business products
and services. Under the retail field support agreement, the Company’s retail
sales representatives receive sales commissions for achieving sales targets
with respect to Rogers Cable’s products and services, the cost of which to the
Company is reimbursed by Rogers Cable.



Transmission Facilities



     The Company has entered into agreements with Rogers Cable to share the
construction and operating costs of certain co-located fibre-optic transmission
and microwave facilities. The costs of these facilities are allocated based on
usage or ownership, as applicable. Since there are significant fixed costs
associated with these transmission links, the Company has achieved economies of
scale by sharing these facilities with Rogers Cable, resulting in reduced
capital costs.



     In addition, the Company receives payments from Rogers Cable for the use
of its data, circuits, data transmission and links. The price of these
services is based on usage.








 



28

Advertising



     The Company advertises its products and services through radio stations
and other media outlets owned by Rogers Media. The Company receives a discount
from the customary rates of Rogers Media.



Other Cost Sharing and Services Agreements



     The Company has entered into other cost sharing and services agreements
with RCI and its subsidiaries in the areas of accounting, purchasing, human
resources, accounts payable processing, remittance
processing, payroll processing, e-commerce, the RCI data centre and other
common services and activities. Generally, these services are provided to the
Company and other RCI subsidiaries by RCI and have renewable terms of one year
and may be terminated by either party on 30 to 90 days notice. To the extent
that RCI incurs expenses and makes PP&E expenditures, these costs are typically
reimbursed by the Company, on a cost recovery basis, in accordance with the
services provided on behalf of the Company by RCI.



Corporate Opportunity



     The Company has agreed with RCI under a business areas and transfer
agreement that RCI will, subject to any required regulatory, lender or other
approvals, continue to conduct all of its cellular telephone operations and
related mobile communications businesses through the Company.



     In July 1999, the business areas and transfer agreement was amended to
permit RCI and its subsidiaries, other than the Company and its subsidiaries,
to resell the wireless communications services and products that the Company
may agree to supply to RCI and its subsidiaries.



     RCI has also agreed with the Company that if RCI acquires, through one or
more transactions, a controlling interest in assets or operations that are
within Rogers Wireless’ permitted businesses, as described below, RCI will,
subject to any required regulatory, lender or other approvals, promptly offer
to transfer RCI’s interest in those assets and operations to Rogers Wireless
for a purchase price equal to RCI’s cost, if readily determinable, or otherwise
RCI’s determination of fair value of the assets, plus, in either case, costs
and expenses incurred by RCI in transferring the assets and operations to
Rogers Wireless. If RCI’s determination of fair value with respect to any such
offer is in excess of $10.0 million and if the Company’s independent directors
disagree with such determination, then the fair value shall be determined by an
independent appraiser chosen by the independent directors of the Company.



     In order to reduce difficulties that may arise in allocating business
opportunities, the Company’s Articles of Incorporation, as amended, provide
that, unless the holders of a majority of its Class A Multiple Voting Shares
otherwise consent, it is prohibited from engaging, directly or indirectly
through its subsidiaries, in businesses other than (i) the business that it
engaged in on June 17, 1991 and (ii) mobile communications services. At
present, RCI holds the majority of the Company’s Class A Multiple Voting
Shares.



     Mobile communications services are defined as communications services
where either the terminal from which the communications originated or on which
the communications are alternately received or both, are mobile radio
communications devices (including, in each case, mobile communications devices
that are being used in a fixed mode). These include, but are not limited to,
cellular telephone equipment sales and related services, paging and mobile
voice/data equipment sales and related services, local area personal
communications networks and all activities reasonably necessary or incidental
thereto.



     In August 1999, as part of the shareholders agreement with JVII, RCI
irrevocably consented to the Company and its subsidiaries carrying on wireline
telecommunications businesses outside of the cable territories operated by
affiliates of RCI, subject to the Company complying with its contractual and
other legal obligations to JVII. The foregoing limitations automatically
terminate and the Company may thereafter engage in any lawful business at such
time as RCI no longer holds, directly or indirectly, capital stock of the
Company representing 20% or more of the combined voting power of all of its
outstanding capital stock.



     The Company’s Articles of Incorporation provide that neither it nor any
shareholder of Rogers Wireless will have a claim against RCI or any director or
officer thereof, or of an affiliate, for a breach of a fiduciary duty on
account of a diversion of a corporate opportunity unless:








 



29



	 	•	 	the opportunity related solely to a business in which the Company is
authorized to engage, and
	 
	 	•	 	the Company’s directors who are not affiliated with RCI have not
disclaimed the opportunity by majority vote thereof.



     For purposes of the Company’s Articles of Incorporation, “solely” means,
with respect to any entity, that 80% or more of its revenues or assets is
derived from or dedicated to businesses in which the Company is permitted to
engage. Notwithstanding such limitations on liability in the Company’s Articles
of Incorporation, the Company’s directors and officers are subject to a
statutory duty of good faith under the Canada Business Corporations Act and
this duty is not waived by the provisions of the Company’s Articles of
Incorporation.



Minority Shareholders Protection Agreement



     The Company has entered into a shareholder protection agreement with RCI
that extends certain protections to holders of the Company’s Class B Restricted
Voting Shares (“RWCI’s Restricted Voting Shares”). The Company has agreed with
RCI that:





	 	•	 	in respect to a “going-private” transaction involving the Company
proposed by RCI or insiders, associates or affiliates thereof:





	 	–	 	a formal valuation of RWCI’s Restricted Voting Shares will be
prepared by an independent valuer,
	 
	 	–	 	the consideration offered per share will not be less than the
value or will be within or exceed the range of values per share
arrived at in the formal valuation, and
	 
	 	–	 	such transaction will be subject to approval by the majority of
the minority of RWCI’s Restricted Voting Shares (minority
shareholders will exclude the Company’s affiliates); and





	 	•	 	in respect to an issuer bid or insider bid made by RCI or any of its subsidiaries relating to the Company:





	 	–	 	a formal valuation will be prepared by an independent valuer, and
	 
	 	–	 	the consideration offered per share to holders of RWCI’s
Restricted Voting Shares will not be less than 66 2/3% of the value
(or of the midpoint of the range of values) arrived at in the formal
valuation.



     The Company and RCI have also agreed under the terms of the shareholder
protection agreement that a committee of independent directors of the Company
will be responsible for the selection of the independent valuer and will review
and report to the Board of Directors on any transaction. The Board of Directors
will be required to disclose its reasonable belief as to the desirability or
fairness of the transaction to holders of RWCI’s Restricted Voting Shares.



     The shareholder protection agreement provides certain instances in which a
transaction is not subject to the valuation and minority approval requirements,
including if the price to be offered to all shareholders is arrived at through
arm’s length negotiations with a selling holder of a sizeable block of RWCI’s
Restricted Voting Shares, provided such holder had full knowledge and access to
information concerning the Company. Further, a going-private transaction will
not be subject to minority shareholder approval where 90% or more of the
outstanding RWCI’s Restricted Voting Shares are held by RCI or its affiliates.
RCI has agreed that, so long as RCI owns or controls shares representing 50% or
more of the voting interest of the shares of the Company, RCI will not vote any
of RWCI’s Restricted Voting Shares which it may own or control with respect to
the election of the three directors to be elected by the holders of RWCI’s
Restricted Voting Shares as a class.



     The provisions of the shareholder protection agreement may not be waived
or amended by the Company or RCI without the approval of the majority of
holders of RWCI’s Restricted Voting Shares, excluding any holder who was an
affiliate of the Company. The rights and obligations under the shareholder
protection agreement are in addition to any applicable requirements of law and
regulatory authorities.








 



30


Summary of Charges From (To) Related Parties



     The
following table provides a summary of all significant charges from
(to) related parties, which have been accounted for at exchange amounts:




	 	 	 	 	 	 	 	 	 	 
	(in thousands of dollars)	 	2003	 	2002
	 	 	 	
	 	

	RCI:
	 	 	 	 	 	 	 	 
	 	Management fees
	 	$	11,336	 	 	$	11,006	 
	 	Rent income
	 	 	(7,980	)	 	 	(8,144	)
	 	Wireless
products and services
	 	 	(978	)	 	 	(79	)
	 	Cost of shared operating expenses
	 	 	192,292	 	 	 	208,257	 
	 	Cost of PP&E(1)
	 	 	24,656	 	 	 	37,418	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	219,326	 	 	 	248,458	 
	Cable:
	 	 	 	 	 	 	 	 
	 	Wireless products and services for
resale
	 	 	(14,926	)	 	 	(10,116	)
	 	Subscriber activation commissions
and customer service
	 	 	9,511	 	 	 	8,817	 
	 	Rent income
	 	 	(3,516	)	 	 	(3,587	)
	 	Wireless
products and services
	 	 	(2,355	)	 	 	(2,214	)
	 	Consolidated
billing services
	 	 	(1,499	)	 	 	(655	)
	 	Transmission facilities usage
	 	 	440	 	 	 	440	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	(12,345	)	 	 	(7,315	)
	Media:
	 	 	 	 	 	 	 	 
	 	Advertising
	 	 	3,000	 	 	 	2,940	 
	 	Rent income
	 	 	(8,493	)	 	 	(1,881	)
	 	Wireless services
	 	 	(516	)	 	 	(181	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	(6,009	)	 	 	878	 
	AWE:
	 	 	 	 	 	 	 	 
	 	Roaming revenue
	 	 	(13,030	)	 	 	(13,910	)
	 	Roaming expense
	 	 	13,628	 	 	 	18,028	 
	 	Over-the-air activation
	 	 	292	 	 	 	680	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	890	 	 	 	4,798	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	$	201,862	 	 	$	246,819	 
	 	 
	 	 	
	 	 	 	
	 





	(1)	 	Cost of PP&E relates primarily to expenditures on information technology
infrastructure and call centre technologies.




     The Company has entered into certain transactions with companies, the
partners or senior officers of which are directors of the Company and RCI.
During 2003 and 2002, total amounts paid by the Company to these related
parties for legal services and commissions paid on premiums for insurance
coverage aggregated $1.5 million and $1.7 million, respectively, and for
interest charges aggregated $12.0 million and $8.3 million, respectively.



OUTSTANDING SHARE DATA



     Set out below is the outstanding share data for the Company as at December
31, 2003. For additional detail, please see Note 9 to the Consolidated
Financial Statements.




	 	 	 	 	 
	Common
Shares
	 	 	 	 
	Class A Multiple Voting
	 	 	90,468,259	 
	Class B Restricted Voting
	 	 	51,430,178	 
	Options
to Purchase Class B Restricted Voting Shares
	 	 	 	 
	Outstanding Options
	 	 	4,227,097	 
	Exercisable Options
	 	 	2,291,372	 





DIVIDENDS



     The Company did not pay dividends in 2003 or 2002.



COMMITMENTS AND CONTRACTUAL OBLIGATIONS



Contractual Obligations



     The Company’s material obligations under firm contractual arrangements are
summarized below as at December 31, 2003. See also Notes 8(j) and 16(b) of the
Consolidated Financial Statements.








 



31



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Contractual Obligations	 	Payments due by period
	
	 	

	 	 	Less than	 	 	 	 	 	 	 	 	 	More than	 	 	 	 
	(in thousands of dollars)	 	1 year	 	1-3 years	 	3-5 years	 	5 years	 	Total
	 	 	
	 	
	 	
	 	
	 	

	Long-term debt(1)
	 	$	—	 	 	$	160,000	 	 	$	1,053,485	 	 	$	833,469	 	 	$	2,046,954	 
	Mortgages and capital leases
	 	 	2,378	 	 	 	23,579	 	 	 	228	 	 	 	—	 	 	 	26,185	 
	Operating leases
	 	 	34,394	 	 	 	54,526	 	 	 	26,330	 	 	 	19,342	 	 	 	134,592	 
	Purchase obligations(2)
	 	 	75,354	 	 	 	19,362	 	 	 	22,948	 	 	 	5,811	 	 	 	123,475	 
	Other long-term liabilities
reflected on the Balance
Sheet under GAAP
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	 	 	

	Total
	 	$	112,126	 	 	$	257,467	 	 	$	1,102,991	 	 	$	858,622	 	 	$	2,331,206	 
	 	 	







	(1)	 	The bank credit facility will mature on May 31, 2006, if the Company’s
Senior Secured Notes due 2006 are not repaid (by financing or otherwise)
on or prior to December 31, 2005. If these notes are repaid, then the
bank credit facility will mature on September 30, 2007 if the Company’s
Senior Secured Notes due 2007 are not repaid (by financing or otherwise)
on or prior to April 30, 2007.




	(2)	 	Purchase obligations consist of agreements to purchase goods and services
that are enforceable and legally binding and that specify all significant
terms including fixed or minimum quantities to be purchased, price
provisions and timing of the transaction. In addition, the Company incurs
expenditures for other items that are volume-dependant. An estimate of
what the Company will spend in 2004 on these items is as follows:





	(i)	 	The Company is required to pay an annual spectrum licensing and CRTC
contribution fees to Industry Canada. The Company estimates its total
payment obligations to Industry Canada will be approximately $60.0 million
in 2004.





	(ii)	 	Payments to acquire
customers in the form of commissions and payments
to retain customers in the form of residuals are made pursuant to
contracts with these distributors. The Company estimates that payments to distributors and other retailers
will be approximately $340.0 million in 2004.





	(iii)	 	The Company is required to make payments to other communications
providers for interconnection, roaming and other services. The Company
estimates the total payment obligation to be approximately $145.0 million
in 2004.





	(iv)	 	The Company estimates its total payments to a major network
infrastructure supplier to be approximately $165.0 million in 2004.





OPERATING RISKS AND UNCERTAINTIES



     The Company’s business is subject to several operating risks and
uncertainties that could result in a material adverse effect on its business
and financial results as outlined below.



Risk of Insufficient Future Demand for Advanced Services



     It is expected that a substantial portion of future revenue growth will be
achieved from new and advanced wireless voice and data transmission services.
Accordingly and as discussed above, the Company has invested and continues to
invest significant capital resources in the development of its GSM/GPRS network
in order to offer these services, and also intends to invest capital resources
in the deployment of EDGE technology across its GSM/GPRS network. However,
consumers may not provide sufficient demand for these advanced wireless
services. Alternatively, Rogers Wireless may fail to anticipate demand for
certain products and services, or may not be able to offer or market these new
products and services successfully to subscribers. Rogers Wireless’ failure to
attract subscribers to new products and services, or failure to keep pace with
changing consumer preferences for wireless services, would slow revenue growth
and have a material adverse effect on the Company’s business and financial
condition.



Potential Competitiveness or Compatibility of EDGE technology



     The deployment by Rogers Wireless of EDGE technology may not be
competitive or compatible with other technologies. While Rogers Wireless and
AWE have selected this technology as an evolutionary step from their current to
future networks, there are other competing technologies that are being
developed and implemented by the wireless industry. None of the competing
technologies are directly compatible with each other. If the next generation
technology that gains the most widespread acceptance is not compatible with
Rogers Wireless’ networks, competing services based on such alternative
technology may be preferable to subscribers.



Potential Impact of Change in Foreign Ownership Legislation



     The Company could face increased competition if, as discussed in the
“Overview of Government Regulation and Regulatory Developments” section above,
there is a removal or relaxation of the limits on foreign ownership and control
of wireless licences. Legislative action to remove or relax these limits








 



32

could
result in foreign telecommunication companies entering the Canadian wireless
communications market, through the acquisition of either wireless licences or
of a holder of wireless licences. Such companies could have significantly
greater capital resources than the Company. The Company supports removal of
the limits on foreign ownership and control and believes that removal would
give the Company greater access to lower cost capital.



Potential Effect of Wireless Industry Pricing



     Aggressive pricing by industry participants in previous years caused
significant reductions in Canadian wireless communications pricing. Rogers
Wireless believes that competitive pricing is a factor in causing churn. It
cannot predict the extent of further price competition and customer churn into
the future, but it anticipates some ongoing re-pricing of its existing
subscriber base, as lower pricing offered to attract new customers is extended
to or requested by existing customers. In addition, as wireless penetration of
the population deepens, new wireless customers may generate lower average
monthly revenues than Rogers Wireless’ existing customers, which could slow
revenue growth.



     The Company cannot anticipate what, if any, impact new wireless
communications services or lower prices could have on overall market growth. It
intends to compete vigorously for all customer segments, focusing on the
business, consumer and youth segments, and in all Canadian geographic markets
based on the strengths of its extensive networks and broad digital services
coverage, strong brands and wide distribution presence.



CRTC Revenue-Based Contribution Scheme



     Commencing January 1, 2001, Rogers Wireless was required to make payments
equal to an annual percentage of adjusted revenues in accordance with the new
revenue-based contribution scheme. The percentage of adjusted revenues payable
is revised annually by the CRTC. The CRTC has announced a contribution levy of
1.1% as both the final rate for 2003 and the interim rate for 2004. While the
rate has been reduced modestly over each of the last two years, the Company
cannot anticipate the final rate for 2004 or the rates for future years. An
increase in the rate would have a negative impact on operating profits.



3G Spectrum Allocation



     As discussed in the “Overview of Government Regulation and Regulatory
Developments” section above, Industry Canada has released a proposed policy
regarding 3G spectrum allocation and a proposed timeframe for a 3G spectrum
auction in the 2005 to 2006 timeframe. The spectrum frequency range for 3G has
not been fully resolved but will likely bear a close resemblance to the U.S.
allocation. Should the cost of acquiring such spectrum in the proposed auction
be greater than currently anticipated by the Company, this could create a
significant capital funding requirement for the Company.



Capital Resource Requirement



     The operation of the Company’s wireless communications network, the
marketing and distribution of its products and services, and the continued
evolution of network technology will continue to require significant capital
resources. The Company may not generate or have access to sufficient capital to
fund these expected future requirements.



Alleged Links Between Radio Frequency Emissions and Health Concerns



     Occasional media and other reports have highlighted alleged links between
radio frequency emissions from wireless handsets and various health concerns,
including cancer, and interference with various medical devices, including
hearing aids and pacemakers. While there are no definitive reports or studies
stating that radio frequency emissions are directly attributable to such health
issues, concerns over radio frequency emissions may discourage the use of
wireless handsets or expose the Company to potential litigation. It is also
possible that future regulatory actions may result in the
imposition of more restrictive standards on radio frequency emissions from
low powered devices such as wireless handsets. The Company is unable to predict
the nature or extent of any such potential restrictions.








 



33

Legislation on Wireless Handset Usage While Driving



     Certain provincial government bodies are considering legislation to
restrict or prohibit wireless handset usage while driving. Legislation banning
the use of hand-held phones, but permitting the use of hands-free devices, was
passed in Newfoundland and Labrador in late 2002, with implementation in April
2003. Legislation has been proposed in other jurisdictions to restrict or
prohibit the use of wireless handsets while driving motor vehicles. Some
studies have indicated that certain aspects of using wireless handsets while
driving may impair the attention of drivers in various circumstances, making
accidents more likely. If laws are passed prohibiting or restricting the use of
wireless handsets while driving, it could have the effect of reducing
subscriber usage. Additionally, concerns over the use of wireless handsets
while driving could potentially lead to litigation relating to accidents,
deaths or bodily injuries.



Dependence on Infrastructure and Handset Vendors



     The Company has relationships with a small number of key network
infrastructure and handset vendors. The Company does not have operational or
financial control over its key suppliers and has limited influence over how
they conduct their businesses. Failure of one of the Company’s network
infrastructure suppliers could delay programs to provide additional network
capacity or new capabilities and services across the business. Although the
Company has not been materially affected by supply problems in the past,
handsets and network infrastructure suppliers may, among other things, extend
delivery times, raise prices and limit supply due to their own shortages and
business requirements. If these suppliers fail to deliver products and
services on a timely basis, or fail to develop and deliver handsets that
satisfy the Company’s customers’ demands, this may have a negative impact on
the Company’s business, financial condition and results of operations.
Similarly, interruptions in the supply of equipment for the Company’s networks
could impact the quality of its service or impede network development and
expansion.



Disaster Recovery



     Rogers Wireless uses industry standard network and information technology
security, survivability and disaster recovery practices. Security breaches and
disasters may occur that are beyond the scope of Rogers Wireless’ ability to
recover without significant service interruption and commensurate revenue and
customer loss.



Wireless Local Number Portability in Canada



     Over the past several years, certain countries in Europe and Asia have
implemented wireless local number portability (“LNP”). In November 2003, as
mandated by the Federal government, the U.S. wireless industry began the
implementation of wireless LNP. Wireless LNP involves porting wireless phone
numbers to other wireless companies, but can also involve porting phone numbers
between wireline and wireless companies. The implementation of wireless LNP
systems and capabilities represents significant costs for the carriers in a
country to deploy. There has been no regulatory mandate for the implementation
of wireless LNP in Canada. However, if wireless LNP were to be required, this
would require carriers, including the Company, to incur implementation costs
which could be significant and once implemented could cause an increase in
churn among Canadian wireless carriers, including Rogers Wireless.



AWE Investment in the Company



     At December 31, 2003, the Company was 34.2% owned by AWE. AWE has
recently reported that it is exploring its strategic alternatives, including a
possible sale of its interest in the Company. Any decision by AWE or a
successor company to sell all or a portion of its shares in the Company is
subject to the terms of a shareholders agreement, as described above in the
“Intercompany and Related Party Transactions – Shareholders Agreement” section.



     The Company does not know AWE’s intentions with respect to its investment
in Rogers Wireless. Any change in the AWE relationship could result in changes
to, including termination of, the mobile wireless marketing, technology and
services agreement or roaming agreement, as described in the “Intercompany and
Related Party Transactions – AT&T Arrangements” section above.










 



34

Regulatory Risks



     As discussed in the “Overview of Government Regulation and Regulatory
Developments” section above, the Company’s operations are subject to government
regulation that could have adverse effects on its business.



Information Technology Systems



     The day-to-day operation of the Company’s business is highly dependent on
information technology systems. An inability to enhance its information
technology systems to accommodate additional customer growth and support new
products and services could have an adverse impact on its ability to acquire
new subscribers, manage subscriber churn, produce accurate and timely
subscriber bills, generate revenue growth and manage operating expenses, all of
which could adversely impact the Company’s financial results and financial
position.



     In
addition, the Company uses standard network and information
technology security, survivability and disaster recovery practices.
Approximately 1,400 of its employees and critical elements of the
Company’s network infrastructure and information technology
systems are located at its corporate office in Toronto. In the event
that the Company cannot access theses facilities, as a result of a
natural or manmade disaster or otherwise, its operations and
financial results could be adversely impacted.









 



35



RWCI

Five-Year Financial Summary




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Years ended December 31	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(thousands of dollars, except per share amounts)	 	2003	 	2002	 	2001	 	2000	 	1999
	 	 	 	
	 	
	 	
	 	
	 	

	Income Statement
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Postpaid
(voice and data) (1)
	 	$	1,911,073	 	 	$	1,628,095	 	 	$	1,464,423	 	 	$	1,350,587	 	 	$	1,171,471	 
	 	Prepaid
	 	 	91,255	 	 	 	91,151	 	 	 	71,068	 	 	 	42,530	 	 	 	23,849	 
	 	One-way messaging
	 	 	27,565	 	 	 	35,238	 	 	 	43,632	 	 	 	55,992	 	 	 	51,793	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 	Network
revenue (1)
	 	 	2,029,893	 	 	 	1,754,484	 	 	 	1,579,123	 	 	 	1,449,109	 	 	 	1,247,113	 
	 	Equipment
revenue (1)
	 	 	177,901	 	 	 	137,030	 	 	 	61,766	 	 	 	95,774	 	 	 	107,252	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 	Total
operating revenue  (2)
	 	 	2,207,794	 	 	 	1,891,514	 	 	 	1,640,889	 	 	 	1,544,883	 	 	 	1,354,365	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 	Operating
profit (3)
	 	 	716,236	 	 	 	516,681	 	 	 	401,261	 	 	 	400,550	 	 	 	412,477	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 	Net income (loss)
	 	$	137,841	 	 	$	(90,705	)	 	$	(224,692	)	 	$	(90,667	)	 	$	8,582	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Cash Flow
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Operating
cash flow from operations (4)
	 	$	521,957	 	 	$	310,641	 	 	$	211,773	 	 	$	262,870	 	 	$	318,960	 
	 	Additions
to PP&E (excluding
spectrum licence costs) (5)
	 	$	411,933	 	 	$	564,552	 	 	$	654,457	 	 	$	525,993	 	 	$	400,959	 
	Per Share
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Weighted average outstanding
Number of shares (000s)
	 	 	141,773	 	 	 	141,608	 	 	 	135,652	 	 	 	122,366	 	 	 	103,902	 
	 	Net income (loss) per share
	 	$	0.97	 	 	$	(0.64	)	 	$	(1.66	)	 	$	(0.74	)	 	$	0.08	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	As at December 31	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(thousands of dollars)	 	2003	 	2002	 	2001	 	2000	 	1999
	 	 	 	
	 	
	 	
	 	
	 	

	Balance Sheet
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Total assets
	 	$	3,107,343	 	 	$	3,185,004	 	 	$	3,055,895	 	 	$	2,310,168	 	 	$	2,081,230	 
	 	Property, plant and equipment (net)
	 	 	2,299,919	 	 	 	2,371,133	 	 	 	2,252,328	 	 	 	1,972,110	 	 	 	1,778,545	 
	 	Long-term debt
	 	 	2,209,603	 	 	 	2,360,075	 	 	 	2,305,683	 	 	 	1,443,756	 	 	 	1,413,792	 
	 	Total Liabilities
	 	 	2,664,263	 	 	 	2,884,548	 	 	 	2,667,554	 	 	 	2,120,220	 	 	 	1,809,236	 
	 	Shareholders’ equity (deficiency)
	 	 	443,080	 	 	 	300,456	 	 	 	388,341	 	 	 	189,948	 	 	 	271,994	 





	(1)	 	As reclassified. See the “Recent
Accounting Developments — Revenue Recognition” section.

	 
	(2)	 	Previous years have been
reclassified to conform to the current presentation.
	 
	(3)	 	As previously defined. See
“Key Performance Indicators — Operating Profit
and Operating Profit Margin” section.
	 
	(4)	 	Operating cash flow from
operations before changes in non-cash operating items.
	 
	(5)	 	Spectrum licences for the deployment of next generation wireless services across Canada were acquired in February 2001 at a total cost of $396.8 million.









 



36




QUARTERLY SUMMARY 2003




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(in thousands of dollars, except per share amounts and subscriber information)	 	Dec. 31	 	Sep. 30	 	Jun. 30	 	Mar. 31
	 	 	 	
	 	
	 	
	 	

	Income Statement
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating revenue (1)(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Postpaid
(voice and data) (1)
	 	$	502,749	 	 	$	510,908	 	 	$	464,582	 	 	$	432,834	 
	 	Prepaid
	 	 	27,242	 	 	 	21,172	 	 	 	21,720	 	 	 	21,121	 
	 	One-way messaging
	 	 	6,442	 	 	 	6,815	 	 	 	6,876	 	 	 	7,432	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 	Network
revenue (1)
	 	 	536,433	 	 	 	538,895	 	 	 	493,178	 	 	 	461,387	 
	 	Equipment
revenue (1)
	 	 	53,166	 	 	 	49,720	 	 	 	39,284	 	 	 	35,731	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
operating revenue (1)
	 	 	589,599	 	 	 	588,615	 	 	 	532,462	 	 	 	497,118	 
	Operating
expenses 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Cost of equipment sales (1)
	 	 	128,762	 	 	 	94,610	 	 	 	83,761	 	 	 	73,638	 
	 	Sales
and marketing costs (1)
	 	 	111,912	 	 	 	85,233	 	 	 	82,007	 	 	 	82,846	 
	 	Operating,
general and administrative costs (1)
	 	 	182,004	 	 	 	186,477	 	 	 	184,148	 	 	 	184,824	 
	 	Management fees
	 	 	2,834	 	 	 	2,834	 	 	 	2,834	 	 	 	2,834	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating expenses
	 	 	425,512	 	 	 	369,154	 	 	 	352,750	 	 	 	344,142	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating
profit (3)
	 	 	164,087	 	 	 	219,461	 	 	 	179,712	 	 	 	152,976	 
	Depreciation and amortization
	 	 	145,174	 	 	 	129,069	 	 	 	125,232	 	 	 	119,124	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating
income
	 	 	18,913	 	 	 	90,392	 	 	 	54,480	 	 	 	33,852	 
	Interest expense
	 	 	46,558	 	 	 	49,339	 	 	 	49,601	 	 	 	48,008	 
	Foreign
exchange (gain) loss
	 	 	(27,462	)	 	 	(2,008	)	 	 	(53,483	)	 	 	(52,289	)
	Other income (expense)
	 	 	—	 	 	 	851	 	 	 	134	 	 	 	(124	)
	Income taxes
	 	 	(1,534	)	 	 	1,171	 	 	 	1,378	 	 	 	1,378	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net income
	 	$	1,351	 	 	$	42,741	 	 	$	57,118	 	 	$	36,631	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net income per share – basic and diluted
	 	$	0.01	 	 	$	0.30	 	 	$	0.40	 	 	$	0.26	 
	Operating
profit margin (3)
	 	 	30.6	%	 	 	40.7	%	 	 	36.4	%	 	 	33.2	%
	Operating
cash flow from operations (4)
	 	$	119,366	 	 	$	169,516	 	 	$	128,969	 	 	$	104,106	 
	Additions
to PP&E
	 	 	119,068	 	 	 	116,379	 	 	 	98,793	 	 	 	77,693	 
	Property, plant and equipment
	 	 	2,299,919	 	 	 	2,302,200	 	 	 	2,311,014	 	 	 	2,333,578	 
	Total assets
	 	 	3,107,343	 	 	 	3,140,001	 	 	 	3,109,691	 	 	 	3,117,942	 
	Long-term debt
	 	 	2,209,603	 	 	 	2,199,321	 	 	 	2,309,708	 	 	 	2,362,282	 
	Shareholders’ equity
	 	$	443,080	 	 	$	439,013	 	 	$	395,421	 	 	$	337,596	 
	Wireless
subscribers (5)
	 	$	3,789,400	 	 	$	3,616,700	 	 	$	3,501,600	 	 	$	3,458,300	 
	One-way subscribers
	 	 	241,300	 	 	 	258,400	 	 	 	273,200	 	 	 	289,100	 





	(1)	 	As reclassified. See “Recent
Accounting Developments — Revenue Recognition” section.
	 
	(2)	 	Previous year quarterly comparison have been reclassified to conform to current presentation.
	 
	(3)	 	As previously defined. “See Key
Performance Indicators — Operating Profit and Operating Profit
Margin” section.
	 
	(4)	 	Operating cash flow from
operations before changes in non-cash operating items.
	 
	(5)	 	Wireless subscribers consist of Postpaid (voice and data) and prepaid. Previous year quarterly comparison have been reclassified to conform to current presentation.









 



37




QUARTERLY SUMMARY 2002




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(in thousands of dollars, except per share amounts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	and subscriber information)	 	Dec. 31	 	Sep. 30	 	Jun. 30	 	Mar. 31
	 	 	
	 	
	 	
	 	

	Income Statement
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating
revenue (1)(2)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Postpaid
(voice and data)(1)
	 	$	429,373	 	 	$	425,193	 	 	$	401,116	 	 	$	372,413	 
	Prepaid
	 	 	21,238	 	 	 	26,869	 	 	 	22,419	 	 	 	20,625	 
	One-way messaging
	 	 	8,304	 	 	 	8,851	 	 	 	9,016	 	 	 	9,067	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Network
revenue (1)
	 	 	458,915	 	 	 	460,913	 	 	 	432,551	 	 	 	402,105	 
	Equipment revenue (1)
	 	 	44,086	 	 	 	51,958	 	 	 	28,467	 	 	 	12,519	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating revenue (1)
	 	 	503,001	 	 	 	512,871	 	 	 	461,018	 	 	 	414,624	 
	Operating expenses (1)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cost of equipment sales (1)
	 	 	95,833	 	 	 	82,266	 	 	 	68,298	 	 	 	50,397	 
	Sales and marketing costs (1)
	 	 	103,354	 	 	 	85,712	 	 	 	72,994	 	 	 	66,824	 
	Operating, general and administrative costs (1)
	 	 	180,665	 	 	 	183,987	 	 	 	186,945	 	 	 	186,552	 
	Management fees
	 	 	2,751	 	 	 	2,752	 	 	 	2,751	 	 	 	2,752	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total operating expenses
	 	 	382,603	 	 	 	354,717	 	 	 	330,988	 	 	 	306,525	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating
profit (3)
	 	$	120,398	 	 	$	158,154	 	 	$	130,030	 	 	$	108,099	 
	Change in estimate of sales tax and CRTC
contribution liabilities
	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(12,331	)
	Depreciation and amortization
	 	 	120,157	 	 	 	116,646	 	 	 	110,802	 	 	 	109,528	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Operating
income
	 	 	241	 	 	 	41,508	 	 	 	19,228	 	 	 	10,902	 
	Interest expense
	 	 	49,647	 	 	 	50,105	 	 	 	48,008	 	 	 	47,390	 
	Foreign
exchange (gain) loss
	 	 	(3,095	)	 	 	27,182	 	 	 	(30,938	)	 	 	441	 
	Gain on repayment of long-term debt
	 	 	(8,238	)	 	 	(22,759	)	 	 	—	 	 	 	—	 
	Other income
	 	 	(335	)	 	 	(4	)	 	 	(1	)	 	 	(77	)
	Income taxes
	 	 	1,129	 	 	 	1,127	 	 	 	1,426	 	 	 	1,576	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net income (loss) for the quarter
	 	$	(38,867	)	 	$	(14,143	)	 	$	733	 	 	$	(38,428	)
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Net income (loss) per share - basic and
diluted
	 	$	(0.27	)	 	$	(0.10	)	 	$	—	 	 	$	(0.27	)
	Operating
profit margin (3)
	 	 	26.2	%	 	 	34.3	%	 	 	30.1	%	 	 	26.9	%
	Operating
cash flow from operations (4)
	 	$	70,229	 	 	$	106,796	 	 	$	81,309	 	 	$	52,307	 
	Additions
to PP&E
	 	 	188,305	 	 	 	126,016	 	 	 	149,036	 	 	 	101,195	 
	Property, plant and equipment
	 	 	2,371,133	 	 	 	2,299,109	 	 	 	2,287,385	 	 	 	2,246,546	 
	Total assets
	 	 	3,185,004	 	 	 	3,059,756	 	 	 	3,052,364	 	 	 	3,053,932	 
	Long-term debt
	 	 	2,360,075	 	 	 	2,254,038	 	 	 	2,358,443	 	 	 	2,267,917	 
	Shareholders’ equity
	 	$	300,456	 	 	$	338,815	 	 	$	352,385	 	 	$	351,301	 
	Wireless
subscribers (5)
	 	 	3,408,000	 	 	 	3,256,900	 	 	 	3,164,500	 	 	 	3,097,100	 
	One-way subscribers
	 	 	302,300	 	 	 	316,600	 	 	 	333,300	 	 	 	348,800	 





	(1)	 	As reclassified. See “Recent
Accounting Developments – Revenue Recognition” section.
	 
	(2)	 	Previous year quarterly comparison have been reclassified to conform to current presentation.
	 
	(3)	 	As previously defined. See
“Key Performance Indicators — Operating Profit and
Operating Profit Margin” section.
	 
	(4)	 	Operating cash flow from
operations before changes in non-cash operating items.
	 
	(5)	 	Wireless subscribers consist of Postpaid (voice and data) and prepaid. Previous year quarterly comparison have been reclassified to conform to current
presentation.









 



38



ADDITIONAL INFORMATION



     Additional information relating to the Company, including a discussion of
the most recent quarterly results, may be found on SEDAR at www.sedar.com.









 






	 	 	 
	 	 	
Consolidated Financial Statements of
	 	 	 
	 	 	
ROGERS WIRELESS
	 	 	
COMMUNICATIONS INC.
	 	 	 
	 	 	
Years ended December 31, 2003 and 2002







 








 




ROGERS WIRELESS COMMUNICATIONS INC.



MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING


December 31, 2003


The accompanying consolidated
financial statements of Rogers Wireless Communications
Inc. and its subsidiaries and all the information in Management’s Discussion
and Analysis are the responsibility of management and have been approved by the
Board of Directors.


The financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles. The financial statements
include certain amounts that are based on the best estimates and judgements of
management, and in their opinion present fairly, in all material respects,
Rogers Wireless Communications Inc.’s financial position, results of operations and cash
flows. Management has prepared the financial information presented elsewhere
in Management’s Discussion and Analysis and has ensured that it is consistent
with the financial statements.


Management of Rogers Wireless Communications Inc., in furtherance of the integrity of
the financial statements, has developed and maintains a system of internal
controls, which is supported by the internal audit function. Management
believes the internal controls provide reasonable assurance that transactions
are properly authorized and recorded, financial records are reliable and form a
proper basis for the preparation of financial statements and that Rogers
Wireless Communications Inc.’s assets are properly accounted for and safeguarded.


The Board of Directors is responsible for ensuring management fulfils its
responsibilities for financial reporting and is ultimately responsible for
reviewing and approving the financial statements. The Board carries out this
responsibility through its Audit Committee.


The Audit Committee meets periodically with management, as well as the internal
and external auditors, to discuss internal controls over the financial
reporting process, auditing matters and financial reporting issues; to satisfy
itself that each party is properly discharging its responsibilities; and, to
review Management’s Discussion and Analysis, the financial statements and the
external auditors’ report. The Audit Committee reports its findings to the
Board for consideration when approving the financial statements for issuance to
the shareholders. The Committee also considers, for review by the Board and
approval by the shareholders, the engagement or re-appointment of the external
auditors.


The financial statements have been audited by KPMG LLP, the external auditors,
in accordance with Canadian generally accepted auditing standards on behalf of
the shareholders. KPMG LLP has full and free access to the Audit Committee.




	 	 	 
	/s/ Nadir H. Mohamed
 
Nadir H. Mohamed, CA	 	
/s/ John R. Gossling
 
John R. Gossling, CA
	President and Chief Executive Officer	 	
Senior Vice President, Finance and Chief
	 	 	
Financial Officer









 








 


AUDITORS’ REPORT TO THE SHAREHOLDERS



We have audited the consolidated balance sheets of Rogers Wireless
Communications Inc. as at December 31, 2003 and 2002 and the consolidated
statements of income, deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.



We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.



In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
2003 and 2002 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.




/s/ KPMG LLP




Chartered Accountants




Toronto, Canada

January 28, 2004, except as to Note 19, which is as of
November 19, 2004.



 







 




ROGERS WIRELESS COMMUNICATIONS INC.

Consolidated Balance Sheets

(In thousands of dollars)




As at December 31, 2003 and 2002




	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	2003	2002
	 	 	 	 	
	

	Assets
	 	 	 	 	 	 	 	 
	Current
assets
	 	 	 	 	 	 	 	 
	
Cash and cash equivalents
	 	 	$	—	 	$	10,068	 
	Accounts

receivable, net of allowance
	 	 	 	325,210	 	 	289,907	 
	Other
current assets (note 6)
	 	 	 	38,619	 	 	32,977	 
	 
	 	 	 	
	 	 	
	 
	 
	 	 	 	363,829	 	 	332,952	 
	Property,

plant and equipment (note 3)
	 	 	 	2,299,919	 	 	2,371,133	 
	
Goodwill
	 	 	 	7,058	 	 	7,058	 
	Spectrum
licences (note 4)
	 	 	 	396,824	 	 	419,294	 
	Deferred
charges (note 5)
	 	 	 	38,163	 	 	51,145	 
	Other
long-term assets (note 6)
	 	 	 	1,550	 	 	3,422	 
	 
	 	 	 	
	 	 	
	 
	 
	 	 	$	3,107,343	 	$	3,185,004	 
	 
	 	 	 	
	 	 	
	 
	
Liabilities and Shareholders’ Equity
	 	 	 	 	 	 	 	 
	Liabilities:
	 	 	 	 	 	 	 	 
	Current
liabilities
	 	 	 	 	 	 	 	 
	Bank advances,
 arising from outstanding cheques
	 	 	$	4,233	 	$	—	 
	Accounts payable and
 accrued liabilities
	 	 	 	396,652	 	 	450,510	 
	
Current portion of long-term debt (note 8)
	 	 	 	2,378	 	 	5,163	 
	
Due to parent and affiliated companies (note 14(a))
	 	 	 	47	 	 	4,041	 
	Unearned revenue
	 	 	 	34,503	 	 	48,075	 
	 
	 	 	 	
	 	 	
	 
	 	 
	 	 	 	437,813	 	 	507,789	 
	Long-term debt (note 8)
	 	 	 	2,207,225	 	 	2,354,912	 
	Deferred gain (note 8(h))
	 	 	 	19,225	 	 	21,847	 
	 
	 	 	 	
	 	 	
	 
	 
	 	 	 	2,664,263	 	 	2,884,548	 
	Shareholders’ equity (note 9)
	 	 	 	443,080	 	 	300,456	 
	 
	 	 	 	
	 	 	
	 
	 
	 	 	$	3,107,343	 	$	3,185,004	 
	 
	 	 	 	
	 	 	
	 






Commitments (note 16)

Contingent liabilities (note 17)

Canadian and United States accounting policy differences (note 18)

Subsequent events (note 19)




See accompanying notes to consolidated financial statements.




On behalf of the Board:




	 	 	 
	 
	 	
Director
	 
	 	
Director







1








 





ROGERS WIRELESS COMMUNICATIONS INC.

Consolidated Statements of Income

(In thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Operating
revenue (notes 10 and 19)
	 	$	2,207,794	 	 	$	1,891,514	 
	Cost
of equipment sales  (note 19)
	 	 	380,771	 	 	 	296,794	 
	Sales and marketing expenses  (note 19)
	 	 	361,998	 	 	 	328,884	 
	Operating, general and administrative expenses (note 19)
	 	 	737,453	 	 	 	738,149	 
	Management fees (note 14(b)(i))
	 	 	11,336	 	 	 	11,006	 
	Change in estimates of sales tax and CRTC
contribution liabilities (note 11)
	 	 	—	 	 	 	(12,331	)
	Depreciation and amortization
	 	 	518,599	 	 	 	457,133	 
	 
	 	 	
	 	 	 	
	 
	Operating income
	 	 	197,637	 	 	 	71,879	 
	Interest expense on long-term debt
	 	 	193,506	 	 	 	195,150	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	4,131	 	 	 	(123,271	)
	Foreign exchange gain (note 2(g))
	 	 	135,242	 	 	 	6,410	 
	Gain on repayment of long-term debt (note 8(h))
	 	 	—	 	 	 	30,997	 
	Investment and other income
	 	 	861	 	 	 	417	 
	 
	 	 	
	 	 	 	
	 
	Income (loss) before income taxes
	 	 	140,234	 	 	 	(85,447	)
	Income taxes (note 12)
	 	 	2,393	 	 	 	5,258	 
	 
	 	 	
	 	 	 	
	 
	Net income (loss) for the year
	 	$	137,841	 	 	$	(90,705	)
	 
	 	 	
	 	 	 	
	 
	Basic and diluted earnings (loss)
per share (note 13)
	 	$	0.97	 	 	$	(0.64	)
	 
	 	 	
	 	 	 	
	 






See accompanying notes to consolidated financial statements.





2








 



ROGERS WIRELESS COMMUNICATIONS INC.

Consolidated Statements of Deficit

(In thousands of dollars)




Years ended December 31, 2003 and 2002




	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Deficit, beginning of year
	 	$	(1,582,730	)	 	$	(1,492,025	)
	Net income (loss) for the year
	 	 	137,841	 	 	 	(90,705	)
	 
	 	 	
	 	 	 	
	 
	Deficit, end of year
	 	$	(1,444,889	)	 	$	(1,582,730	)
	 
	 	 	
	 	 	 	
	 






See accompanying notes to consolidated financial statements.





3








 



ROGERS WIRELESS COMMUNICATIONS INC.

Consolidated Statements of Cash Flows

(In thousands of dollars)




Years ended December 31, 2003 and 2002




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	2003	 	2002
	 	 	 	 	
	 	

	Cash provided by (used in):
	 	 	 	 	 	 	 	 
	Operating activities:
	 	 	 	 	 	 	 	 
	 	Net income (loss) for the year
	 	$	137,841	 	 	$	(90,705	)
	 	Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
	 	 	 	 	 	 	 	 
	 	 	Depreciation and amortization
	 	 	518,599	 	 	 	457,133	 
	 	 	Unrealized foreign exchange gain
	 	 	(134,483	)	 	 	(5,633	)
	 	 	Gain on repayment of long-term debt
	 	 	—	 	 	 	(30,997	)
	 	 	Change in estimate of sales tax liability
	 	 	—	 	 	 	(19,157	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	521,957	 	 	 	310,641	 
	 	Change
in non-cash operating items (notes 7(a) and note 19)
	 	 	(25,440	)	 	 	53,664	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	496,517	 	 	 	364,305	 
	 	 
	 	 	
	 	 	 	
	 
	Financing activities:
	 	 	 	 	 	 	 	 
	 	Issue of long-term debt
	 	 	604,000	 	 	 	427,000	 
	 	Repayment of long-term debt
	 	 	(619,989	)	 	 	(377,093	)
	 	Proceeds on termination of cross-currency
interest rate exchange agreements (note 8(h))
	 	 	—	 	 	 	64,353	 
	 	Issue of capital stock
	 	 	4,783	 	 	 	2,820	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	(11,206	)	 	 	117,080	 
	 	 
	 	 	
	 	 	 	
	 
	Investing activities:
	 	 	 	 	 	 	 	 
	 	Additions
to property, plant and equipment (note 19)
	 	 	(499,612	)	 	 	(465,949	)
	 	 
	 	 	
	 	 	 	
	 
	Increase (decrease) in cash and cash equivalents
	 	 	(14,301	)	 	 	15,436	 
	Cash and cash equivalents (deficiency), beginning of year
	 	 	10,068	 	 	 	(5,368	)
	 	 
	 	 	
	 	 	 	
	 
	Cash and cash equivalents (deficiency), end of year
	 	$	(4,233	)	 	$	10,068	 
	 	 
	 	 	
	 	 	 	
	 





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.



For supplemental cash flow information, see note 7(b).



See accompanying notes to consolidated financial statements.





4








 




ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	1.	 	Nature of business:





	 	 	Rogers Wireless Communications Inc. is a public company, 55.8% owned by
Rogers Communications Inc. (“RCI”) and 34.2% (2002 — 34.3%) owned by AT&T
Wireless Services, Inc. (“AWE”). Rogers Wireless Communications Inc. and
its subsidiary companies are collectively referred to herein as the
“Company”.





	 	 	The Company operates in a single business segment as a provider of wireless
voice, data and messaging services nationwide in Canada, under licences
issued by Industry Canada.





	2.	 	Significant accounting policies:





	 	(a)	 	Consolidation:






	 		 	The consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles (“GAAP”) and differ
in certain significant respects from U.S. GAAP as described in note 18.
The consolidated financial statements include the accounts of Rogers
Wireless Communications Inc. and its subsidiary companies.
Intercompany transactions and balances are eliminated on consolidation.






	 	(b)	 	Property, plant and equipment:






	 		 	Property, plant and equipment (“PP&E”) are recorded at purchase cost.
During construction of new assets, direct costs plus a portion of
applicable overhead costs are capitalized. Repairs and maintenance
expenditures are charged to operating expense as incurred.






	 	(c)	 	Depreciation:






	 		 	PP&E are depreciated annually over their estimated useful lives as
follows:






	 	 	 	 	 
	Asset	 	Basis	 	Rate
	
	 	
	 	

	Buildings	 	
Diminishing balance
	 	5%
	Network equipment	 	
Straight line
	 	6-2/3% to 25%
	Network radio base station equipment	 	
Straight line
	 	12-1/2% to 14-1/3%
	Computer equipment and software	 	
Straight line
	 	14-1/3% to 33-1/3%
	Furniture, fixtures and office equipment	 	
Diminishing balance
	 	20%
	Leasehold improvements	 	
Straight line
	 	Over term of lease
	Other equipment	 	
Mainly diminishing balance
	 	30% to 33-1/3%







5








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 	(d)	 	Asset retirement obligations:






	 		 	Effective January 1, 2003, the Company adopted retroactively The
Canadian Institute of Chartered Accountants’ (“CICA”) Handbook Section
3110, “Asset Retirement Obligations”, which harmonizes Canadian GAAP
with U.S. Financial Accounting Standards Board’s (“FASB”) Statement No.
143, “Accounting for Asset Retirement Obligations”. The standard
provides guidance for the recognition, measurement and disclosure of
liabilities for asset retirement obligations and the associated asset
retirement costs. The standard applies to legal obligations associated
with the retirement of a tangible long-lived asset that result from
acquisition, construction, development or normal operations.






	 		 	The standard requires the Company to record the fair value of a
liability for an asset retirement obligation in the year in which it is
incurred and when a reasonable estimate of fair value can be made. The
standard describes the fair value of a liability for an asset
retirement obligation as the amount at which that liability could be
settled in a current transaction between willing parties, that is,
other than in a forced or liquidation transaction. The Company is
subsequently required to allocate that asset retirement cost to expense
using a systematic and rational method over the asset’s useful life.






	 		 	The adoption of this standard had no material impact on the Company’s
financial position, results of operations or cash flows.






	 	(e)	 	Long-lived assets:






	 		 	Effective January 1, 2003, the Company adopted CICA Handbook Section
3063, “Impairment of Long-Lived Assets”. Long-lived assets, including
PP&E and intangible assets with finite useful lives, are amortized over
their useful lives. The Company reviews long-lived assets for
impairment annually or more frequently if events or changes in
circumstances indicate that the carrying amount may not be recoverable.
If the sum of the undiscounted future cash flows expected to result
from the use and eventual disposition of a group of assets is less than
its carrying amount, it is considered to be impaired. An impairment
loss is measured as the amount by which the carrying amount of the
group of assets exceeds its fair value. At December 31, 2003, no such
impairment had occurred.







6








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 		 	For the year ended December 31, 2002, the Company’s policy was to
review the recoverability of PP&E annually or
more frequently if events or circumstances indicated that the carrying
amount may not be recoverable. Recoverability was measured by
comparing the carrying amounts of a group of assets to future
undiscounted net cash flows expected to be generated by that group of
assets. As at December 31, 2002, no impairment in the carrying amount
had occurred. Intangible assets with definite lives were tested for
impairment by comparing their book values with the undiscounted cash
flow expected to be received from their use. At December 31, 2002, no
impairment had occurred.






	 	(f)	 	Goodwill and other intangible assets:






	 	(i)	 	Goodwill:






	 		 	Goodwill is the residual amount that results when the purchase price
of an acquired business exceeds the sum of the amounts allocated to
the tangible and intangible assets acquired, less liabilities
assumed, based on their fair values. When the Company enters into a
business combination, the purchase method of accounting is used.
Goodwill is assigned as of the date of the business combination to
reporting units that are expected to benefit from the business
combination.






	 		 	Goodwill is not amortized but instead is tested for impairment
annually or more frequently if events or changes in circumstances
indicate that the asset might be impaired. The impairment test is
carried out in two steps. In the first step, the carrying amount of
the reporting unit, including goodwill, is compared with its fair
value. When the fair value of the reporting unit exceeds its
carrying amount, goodwill of the reporting unit is not considered to
be impaired and the second step of the impairment test is
unnecessary. The second step is carried out when the carrying
amount of a reporting unit exceeds its fair value, in which case,
the implied fair value of the reporting unit’s goodwill, determined
in the same manner as the value of goodwill is determined in a
business combination, is compared with its carrying amount to
measure the amount of the impairment loss, if any.







7








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 	(ii)	 	Intangible assets:






	 		 	Intangible assets acquired in a business combination are recorded at
their fair values and all intangible assets are tested for
impairment annually or more frequently when events or changes in
circumstances indicate that their carrying amounts may not be
recoverable. Intangible assets with determinable lives are
amortized over their estimated useful lives and are tested for
impairment as described in note 2(e). Intangible assets having an
indefinite life, such as spectrum licences, are not amortized but
instead are tested for impairment on an annual or more frequent
basis by comparing their fair value with book value. An impairment
loss on indefinite life intangible assets is recognized when the
carrying amount of the asset exceeds its fair value.






	 		 	The Company has tested goodwill and intangible assets with indefinite
lives for impairment at December 31, 2003 and 2002 and determined no
impairment in the carrying value of these assets existed.






	 	(g)	 	Foreign currency translation:






	 		 	Long-term debt denominated in U.S. dollars is translated into Canadian
dollars at the year-end rate of exchange. The effect of cross-currency
interest rate exchange agreements is shown separately in note 8.
Exchange gains or losses on translating long-term debt are recognized
in the consolidated statements of income. In 2003, foreign exchange
gains related to the translation of long-term debt totalled $134.5
million (2002 — $5.6 million).






	 	(h)	 	Deferred charges:






	 		 	The costs of obtaining bank and other debt financing are deferred and
amortized on a straight-line basis over the effective life of the debt
to which they relate.






	 		 	During the development and pre-operating phases of new products and
businesses, related incremental costs are deferred and amortized on a
straight-line basis over two years.







8








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 	(i)	 	Inventories:






	 		 	Inventories, consisting principally of wireless handsets and
accessories, are valued at the lower of cost on a first-in, first-out
basis, and net realizable value.






	 	(j)	 	Pension benefits:






	 		 	Substantially all of the Company’s employees are provided defined
benefit pensions through the RCI Pension Plan. The Company accounts
for its participation in the RCI Pension Plan as a defined contribution
plan and, accordingly, pension expense for the year is recognized for
the contributions required to be made to the RCI Pension Plan during
the year. For the year ended December 31, 2003, contributions of $3.6
million (2002 — nil) were required, resulting in pension expense of the
same amount. The Company does not provide its employees with
post-retirement benefits other than pensions.






	 		 	The Company also provides unfunded supplemental pension benefits to certain
executives. As at December 31, 2003, the accrued benefit obligation
relating to these supplemental plans amounted to approximately $1.4
million and the related expense for 2003 was $0.8 million (2002 — nil).






	 	(k)	 	Income taxes:






	 		 	Future income tax assets and liabilities are recognized for the future
income tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Future income tax assets and
liabilities are measured using enacted or substantively enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. A
valuation allowance is recorded against any future income tax asset if
it is more likely than not that the asset will not be realized. Income
tax expense is the sum of the Company’s provision for current income
taxes and the difference between opening and ending balances of future
income tax assets and liabilities.







9








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 	(l)	 	Financial instruments:






	 		 	The Company uses derivative financial instruments to manage risks from
fluctuations in exchange rates and interest rates. These instruments
include cross-currency interest rate exchange agreements, interest rate
exchange agreements, foreign exchange forward contracts and, from time
to time, foreign exchange option agreements. All such instruments are
used only for risk management purposes and are designated as hedges of
specific debt instruments. The Company accounts for these financial
instruments as hedges and, as a result, the carrying values of the
financial instruments are not adjusted to reflect their current fair
values. The net receipts or payments arising from financial
instruments relating to interest are recognized in interest expense on
an accrual basis. Upon redesignation or amendment of a derivative
financial instrument, the carrying value of the instrument is adjusted
to fair value. If the related debt instrument that was hedged has been
repaid, then the gain or loss is recorded as a component of the gain or
loss on repayment of the debt. Otherwise, the gain or loss is deferred
and amortized over the remaining life of the original debt instrument.






	 		 	These instruments, which have been entered into by the Company to hedge
exposure to interest rate and foreign exchange risk, are periodically
examined by the Company to ensure that the instruments are highly
effective at reducing or modifying interest rate or foreign exchange
risk associated with the hedged item.






	 	(m)	 	Revenue recognition:






	 		 	The Company earns revenue from subscribers for monthly fees for
wireless services and equipment, the use of wireless voice or data
services in excess of that included with the monthly fee, long-distance
calls, calls initiated or received outside of Canada by the Company’s
subscribers, referred to as “roaming”, calls initiated or received on
the Company’s network by other carriers’ subscribers, and fees for
optional services, such as voicemail.






	 		 	Monthly fees are recognized as revenue on a pro rata basis over the
month. Wireless airtime, long-distance, roaming and optional services
fees are recognized as revenue as the services are provided.







10








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 		 	Revenue from the sale of equipment is recorded when the equipment is
delivered and accepted by the independent dealer or customer.






	 		 	Unearned revenue represents amounts received from subscribers related
to services to be provided in future periods, and includes subscriber
deposits.






	 	(n)	 	Subscriber acquisition costs:






	 		 	Sales and marketing costs related to the acquisition of new
subscribers, including commission and equipment subsidies, are expensed
as incurred.






	 	(o)	 	Stock-based compensation and other stock-based payments:






	 		 	The Company has a stock option plan for employees and directors. All
stock options issued under this plan have an exercise price equal to
the fair market value of the underlying Class B Restricted Voting
Shares on the date of grant. As a result, the Company records no
compensation expense on the grant of options to the Company’s employees
under the plan. The Company discloses the pro forma effect of
accounting for these awards under the fair value-based method (note
9(d)).






	 		 	The Company accounts for all stock-based payments to non-employees and
employee awards that are direct awards of stock, call for settlement in
cash or other assets, or are stock appreciation rights that call for
settlement by the issuance of equity instruments using the fair
value-based method.






	 		 	The Company also has an employee share purchase plan. Under the terms
of the plan, participating employees with the Company at the end of the
term of the plan, which is usually one year, receive a bonus based on a
percentage of their purchase. Compensation expense is recognized in
connection with the employee share purchase plan to the extent of the
bonus provided to employees from the market price of the Class B
Restricted Voting shares on the date of issue. Consideration paid by
employees on the exercise of stock options or the purchase of shares is
recorded as share capital and contributed surplus. The stock option
plan and share purchase plan are more fully described in notes 9(d) and
(e).







11








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 		 	The Company has a Directors’ deferred share unit plan, under which
directors of the Company are entitled to elect to receive their
remuneration in deferred share units. Upon departure as a director,
these deferred share units will be redeemed by the Company at the then
current Class B Restricted Voting Shares’ market price. Compensation
expense is recognized in the amount of the directors’ remuneration as
their services are rendered. The related accrued liability is adjusted
to the market price of the Class B Restricted Voting Shares at each
balance sheet date and the related adjustment is recorded in operating
income. At December 31, 2003, a total of 17,932 (2002 — 13,273)
deferred share units were outstanding.






	 	(p)	 	Earnings per share:






	 		 	The Company uses the treasury stock method for calculating diluted
earnings per share. The diluted earnings per share calculation
considers the impact of employee stock options, as described in note
13.






	 	(q)	 	Guarantees:






	 		 	Effective on January 1, 2003, the Company adopted CICA Accounting
Guideline 14, “Disclosure of Guarantees” (“AcG-14”), which requires a
guarantor to disclose significant information about certain types of
guarantees that it has provided, including certain types of indemnities
and indirect guarantees of indebtedness to others, without regard to
the likelihood of whether it will have to make any payments under the
guarantees. The disclosure required by AcG-14 is in addition to the
existing disclosure required for contingencies.






	 		 	The Company has no guarantees requiring disclosure.






	 	(r)	 	Use of estimates:






	 		 	The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the year. Actual results could differ from
those estimates.







12








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 		 	Key areas of estimation where management has made difficult, complex or
subjective judgements, often as a result of matters that are inherently
uncertain, are the provision for bad debts, the ability to use income tax loss carryforwards and other future tax assets,
capitalization of labour and overhead, useful lives of depreciable
assets, asset retirement obligations, and the recoverability of PP&E,
goodwill and intangible assets. Significant changes in the
assumptions, including those with respect to future business plans and
cash flows, could change the recorded amounts by a material amount.






	 	(s)	 	Recent Canadian accounting pronouncements:






	 	(i)	 	Revenue arrangements with multiple deliverables:






	 		 	In December 2003, the Emerging Issues Committee issued Abstract 142,
“Revenue Arrangements with Multiple Deliverables”, which the Company
will apply prospectively beginning January 1, 2004. This Abstract
is consistent with the U.S. standard with the same title, and
addresses both when and how an arrangement involving multiple
deliverables should be divided into separate units of accounting and
how the arrangement’s consideration should be allocated among
separate units. See note 19(a) for the impact of adoption of this standard.






	 	(ii)	 	Hedging relationships:






	 		 	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 establishes new criteria
for hedge accounting and will apply to all hedging relationships in
effect on or after January 1, 2004. Effective January 1, 2004, the
Company will re-assess all hedging relationships to determine
whether the criteria are met or not and will apply the new guidance
on a prospective basis. To qualify for hedge accounting, the
hedging relationship must be appropriately documented at the
inception of the hedge and there must be reasonable assurance, both
at the inception and throughout the term of the hedge, that the
hedging relationship will be effective. Effectiveness requires a
high correlation of changes in fair values or cash flows between the
hedged item and the hedging item. The Company is currently
determining the impact of the guideline.







13








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	2.	 	Significant accounting policies (continued):





	 	(iii)	 	Stock-based compensation:






	 		 	In 2003, the CICA amended Handbook Section 3870, “Stock-based
Compensation and other Stock-based Payments”, to require the
recording of compensation expense on the granting of all stock-based
compensation awards, including stock options to employees,
calculated using the fair-value method. The Company will adopt this
standard on January 1, 2004, retroactively without restatement.
If the Company were to use the Black-Scholes Option Pricing model for
calculating the fair value of stock-based compensation, the Company
would record a charge to opening retained earnings on
January 1, 2004 of $2.3 million related to stock options granted on
or after January 1, 2002 (note 9(d)).






	 	(iv)	 	Generally accepted accounting principles:






	 		 	In June 2003, the CICA released Handbook Section 1100, “Generally
Accepted Accounting Principles”. This section establishes standards
for financial reporting in accordance with Canadian GAAP, and
describes what constitutes Canadian GAAP and its sources. This
section also provides guidance on sources to consult when selecting
accounting policies and determining appropriate disclosures when a
matter is not dealt with explicitly in the primary sources of GAAP.
The new standard is effective on a prospective basis beginning
January 1, 2004. See note 19(a) for the impact of adoption of this section on the consolidated financial statements.








14









 




ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	3.	 	Property, plant and equipment:





	 	 	Details of PP&E are as follows:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	 	 	 	 	 	 	Net book	 	 	 	 	 	Net book
	 	 	Cost	 	value	 	Cost	 	value
	 	 	
	 	
	 	
	 	

	Land and buildings
	 	$	200,395	 	 	$	167,519	 	 	$	187,992	 	 	$	162,013	 
	Network equipment
	 	 	2,638,090	 	 	 	1,369,704	 	 	 	2,427,517	 	 	 	1,363,028	 
	Network radio
base station equipment
	 	 	1,382,138	 	 	 	465,172	 	 	 	1,354,290	 	 	 	489,992	 
	Computer equipment
and software
	 	 	706,998	 	 	 	251,445	 	 	 	653,919	 	 	 	301,700	 
	Furniture, fixtures
and office equipment
	 	 	61,377	 	 	 	18,137	 	 	 	61,200	 	 	 	22,236	 
	Leasehold improvements
	 	 	37,588	 	 	 	22,752	 	 	 	38,884	 	 	 	26,808	 
	Other equipment
	 	 	13,387	 	 	 	5,190	 	 	 	17,929	 	 	 	5,356	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	$	5,039,973	 	 	$	2,299,919	 	 	$	4,741,731	 	 	$	2,371,133	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 






Depreciation expense for 2003 amounted to $483.1 million (2002 — $445.8
million).




PP&E not yet in service and therefore not depreciated at December 31, 2003
amounted to $102.6 million (2002 — $248.0 million).




15








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	4.	 	Spectrum and brand licences:





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	 	 	 	 	 	 	Net book	 	 	 	 	 	Net book
	 	 	Cost	 	value	 	Cost	 	value
	 	 	
	 	
	 	
	 	

	Spectrum licences
	 	$	396,824	 	 	$	396,824	 	 	$	396,824	 	 	$	396,824	 
	AT&T brand licence,
less accumulated
amortization of $37,800 (2002 - $15,330)
	 	 	37,800	 	 	 	—	 	 	 	37,800	 	 	 	22,470	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	$	434,624	 	 	$	396,824	 	 	$	434,624	 	 	$	419,294	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 






	 	 	The Company holds 23 spectrum licences providing for the use of 10
megahertz (“MHz”) or 20 MHz of radio frequency spectrum, depending on the
region in Canada, in the 1.9 gigahertz (“GHz”) band. The licences were
purchased in a spectrum auction conducted by Industry Canada in February
2001 at an aggregate cost of $396.8 million, including costs of
acquisition, and are renewable in 2011. The Company has determined that
these licences have indefinite lives for accounting purposes.





	 	 	The AT&T brand licence was acquired in 1996 at an aggregate cost of $37.8
million, which provided the Company with, among other things, the right to
use the AT&T brand name. The cost of the brand licence was deferred and
amortized on a straight-line basis to expense over the 15-year term of the
brand licence agreement. In December 2003, the Company announced that it
would terminate its brand licence agreement in early 2004 and change its
brand name to exclude the AT&T brand. Consequently, the Company determined
the useful life of the brand licence had ended on December 31,
2003 and accordingly, fully amortized the remaining net book value of $20.0 million.
Amortization expense of the brand licence cost for 2003 was $22.5 million
(2002 — $2.5 million).





	5.	 	Deferred charges:





	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Financing costs
	 	$	27,070	 	 	$	32,487	 
	Pre-operating costs
	 	 	—	 	 	 	2,976	 
	Other
	 	 	11,093	 	 	 	15,682	 
	 
	 	 	
	 	 	 	
	 
	 
	 	$	38,163	 	 	$	51,145	 
	 
	 	 	
	 	 	 	
	 








16








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	5.	 	Deferred charges (continued):





	 	 	Amortization of deferred charges for 2003
amounted to $13.0 million (2002 — $8.9 million). Accumulated amortization of deferred charges at December
31, 2003 amounted to $58.3 million (2002 — $45.3 million).





	 	 	In connection with the repayment of certain long-term debt during 2002, the
Company recorded a gain of $31.0 million, which included a write-off of
deferred financing costs of $0.7 million (note 8(h)).





	6.	 	Other assets:





	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Prepaid expenses
	 	$	20,630	 	 	$	20,519	 
	Inventories
	 	 	17,457	 	 	 	12,430	 
	Notes and loans receivable from employees
	 	 	1,532	 	 	 	2,752	 
	Other
	 	 	550	 	 	 	698	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	40,169	 	 	 	36,399	 
	Current
portion of other assets
	 	 	38,619	 	 	 	32,977	 
	 
	 	 	
	 	 	 	
	 
	 
	 	$	1,550	 	 	$	3,422	 
	 
	 	 	
	 	 	 	
	 






	7.	 	Consolidated statements of cash flows:





	 	(a)	 	Change in non-cash operating items:






	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Increase in accounts receivable
	 	$	(38,946	)	 	$	(10,210	)
	Decrease (increase) in other assets
	 	 	(3,770	)	 	 	19,256	 
	Increase (decrease) in accounts payable
and accrued liabilities
	 	 	37,464		 	 	22,996	 
	Increase (decrease) in unearned revenue
	 	 	(13,572	)	 	 	10,897	 
	Increase (decrease) in amounts due
affiliated companies, net
	 	 	(3,994	)	 	 	11,380	 
	Decrease in deferred gain
	 	 	(2,622	)	 	 	(655	)
	 
	 	 	
	 	 	 	
	 
	 
	 	$	(25,440	)	 	$	53,664	 
	 
	 	 	
	 	 	 	
	 








17








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	7.	 	Consolidated statements of cash flows (continued):





	 	(b)	 	Supplemental cash flow information:






	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Interest paid
	 	$	199,627	 	 	$	195,755	 
	Income taxes paid
	 	 	6,239	 	 	 	7,710	 






	8.	 	Long-term debt:





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Interest rate	 	2003	 	2002
	 	 	
	 	
	 	

	(a)Bank credit facility	 	Floating	 	$	138,000	 	 	$	149,000	 
	(b)Senior Secured Notes, due 2006
	 	 	10-1/2	%	 	 	160,000	 	 	 	160,000	 
	(c)Senior Secured Notes, due 2007
	 	 	8.30	%	 	 	253,453	 	 	 	309,775	 
	(d)Senior Secured Debentures, due 2008
	 	 	9-3/8	%	 	 	430,589	 	 	 	526,275	 
	(e)Senior Secured Notes, due 2011
	 	 	9-5/8	%	 	 	633,276	 	 	 	774,004	 
	(f)Senior Secured Debentures, due 2016
	 	 	9-3/4	%	 	 	200,193	 	 	 	244,680	 
	(g)Senior Subordinated Notes, due 2007
	 	 	8.80	%	 	 	231,443	 	 	 	282,875	 
	Mortgage payable and capital leases	 	Various	 	 	26,185	 	 	 	31,174	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	2,073,139	 	 	 	2,477,783	 
	
Current portion of long term debt
	 	 	 	 	 	 	(2,378	)	 	 	(5,163	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	 	2,070,761	 	 	 	2,472,620	 
	Effect of cross-currency interest
rate exchange agreements
	 	 	 	 	 	 	136,464	 	 	 	(117,708	)
	 
	 	 	 	 	 	 	
	 	 	 	
	 
	 
	 	 	 	 	 	$	2,207,225	 	 	$	2,354,912	 
	 
	 	 	 	 	 	 	
	 	 	 	
	 






     Further details of long-term debt are as follows:




	 	(a)	 	Bank credit facility:






	 		 	At December 31, 2003, $138.0 million (2002 — $149.0 million) of debt
was outstanding under the bank credit facility, which provides the
Company with, among other things, up to $700.0 million from a
consortium of Canadian financial institutions.








18








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	8.	 	Long-term debt (continued):





Under the credit facility, the Company may borrow at various rates,
including the bank prime rate to the bank prime rate plus 1-3/4% per
annum, the bankers’ acceptance rate plus 1% to 2-3/4% per annum and the
London Inter-Bank Offered Rate (“LIBOR”) plus 1% to 2-3/4% per annum.
The Company’s bank credit facility requires, among other things, that
the Company satisfy certain financial covenants, including the
maintenance of certain financial ratios.




Subject to the footnote (*) below, this credit facility is available on
a fully revolving basis until the first date specified below, at which
time the facility becomes a revolving/reducing facility and the
aggregate amount of credit available under the facility will be reduced
as follows:




	 	 	 	 	 
	 	 	Reduction at
	Date of reduction (*)	 	each date
	
	 	

	On April 30:
	 	 	 	 
	2006
	 	$	140,000	 
	2007
	 	 	140,000	 
	2008
	 	 	420,000	 






	 	*	 	The bank credit facility will mature on May 31, 2006 if
the Company’s Senior Secured Notes due 2006 are not repaid (by
refinancing or otherwise) on or prior to December 31, 2005. If
these notes are repaid, then the bank credit facility will mature
on September 30, 2007 if the Company’s Senior Secured Notes due
2007 are not repaid (by refinancing or otherwise) on or prior to
April 30, 2007.






	 		 	The credit facility requires that any additional senior debt (other
than the bank credit facility described above) that is denominated in a
foreign currency be hedged against foreign exchange fluctuations on a
minimum of 50% of such additional senior borrowings in excess of the
Canadian equivalent of U.S. $25.0 million.






	 		 	Borrowings under the credit facility are secured by the pledge of a
senior bond issued under a deed of trust, which is secured by
substantially all the assets of the Company and certain of its
subsidiaries, subject to certain exceptions and prior liens.






	 	(b)	 	Senior Secured Notes, due 2006:






	 		 	The Company’s $160.0 million Senior Secured Notes mature on June 1,
2006. These notes are redeemable in whole or in part, at the Company’s
option, at any time subject to a certain prepayment premium.








19








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	8.	 	Long-term debt (continued):





	 	(c)	 	Senior Secured Notes, due 2007:






	 		 	The Company’s U.S. $196.1 million Senior Secured Notes mature on
October 1, 2007. These notes are redeemable in whole or in part, at
the Company’s option, on or after October 1, 2002 at 104.15% of the
principal amount, declining rateably to 100% of the principal amount on
or after October 1, 2005, plus, in each case, interest accrued to the
redemption date.






	 	(d)	 	Senior Secured Debentures, due 2008:






	 		 	The Company’s U.S. $333.2 million Senior Secured Debentures mature on
June 1, 2008. These debentures are redeemable in whole or in part, at
the Company’s option, at any time on or after June 1, 2003 at 104.688%
of the principal amount, declining rateably to 100% of the principal
amount on or after June 1, 2006, plus, in each case, interest accrued
to the redemption date.






	 	(e)	 	Senior Secured Notes, due 2011:






	 		 	The Company’s U.S. $490.0 million Senior Secured Notes mature on May 1,
2011. During 2002, the Company repurchased U.S. $10.0 million
principal amount of these notes (note 8(h)). These notes are
redeemable in whole or in part, at the Company’s option, at any time
subject to a certain prepayment premium.






	 	(f)	 	Senior Secured Debentures, due 2016:






	 		 	The Company’s U.S. $154.9 million Senior Secured Debentures mature on
June 1, 2016. These debentures are redeemable in whole or in part, at
the Company’s option, at any time, subject to a certain prepayment
premium.






Each of the Company’s senior secured notes and debentures described above
is secured by the pledge of a senior bond that is secured by the same
security as the security for the bank credit facility described in (a)
above and ranks equally with the bank credit facility.






20








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	8.	 	Long-term debt (continued):





	 	(g)	 	Senior Subordinated Notes, due 2007:






	 		 	The Company’s U.S. $179.1 million Senior Subordinated Notes mature on
October 1, 2007. During 2002, the Company repurchased an aggregate
U.S. $35.9 million principal amount of these notes (note 8(h)). These
notes are redeemable in whole or in part, at the Company’s option, on
or after October 1, 2002 at 104.40% of the principal amount declining
rateably to 100% of the principal amount on or after October 1, 2005
plus, in each case, interest accrued to the redemption date. The
subordinated notes are subordinated to all existing and future senior
secured obligations of the Company (including the bank credit facility
and the senior secured notes and debentures). The subordinated notes
are not secured by the pledge of a senior bond.






Interest is payable semi-annually on all of the notes and debentures.




	 	(h)	 	Repayment of long-term debt:






	 		 	During 2002, an aggregate of U.S. $335.1 million notional amount of
cross-currency interest rate exchange agreements were terminated either
by unwinding or maturity, resulting in aggregate net cash proceeds of
$64.4 million. The Company used a portion of the total proceeds of
these transactions to repurchase in total U.S. $45.9 million principal
amount of Senior Secured Notes and Senior Subordinated Notes. As a
result, the Company recorded a gain of $30.7 million on the debt
repurchased, recorded a gain of $1.0 million from the unwinding of the
cross-currency interest rate exchange agreements, and wrote off $0.7
million in deferred financing costs, for a net gain of $31.0 million.
In addition, the Company had deferred a gain of $22.5 million on the
unwinding of the cross-currency interest rate exchange agreements,
which is being amortized to interest expense over the remaining life of
the related debt. Amortization in 2003 was $2.6 million (2002 — $0.7
million).






	 	(i)	 	Interest exchange agreements:






	 	(i)	 	At December 31, 2003 and 2002, total U.S. dollar
denominated long-term debt amounted to $1,353.3 million. The
Company has entered into several cross-currency interest rate
exchange agreements in order to reduce the Company’s exposure to
changes in the exchange rate of the U.S. dollar as compared to the
Canadian dollar. At December 31, 2003 and 2002 U.S. $885.0
million or 65.4% is hedged through cross-currency interest rate
exchange agreements at an average exchange rate of Canadian
$1.4466 to U.S. $1.00.








21








 





ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	8.	 	Long-term debt (continued):





	 	(ii)	 	The cross-currency interest rate exchange agreements have
the effect of converting the interest rate on U.S. $500.0 million
of long-term debt from an average U.S. dollar fixed interest rate
of 9.63% per annum to an average Canadian dollar fixed interest
rate of 10.29% per annum on $779.7 million (i.e., with an exchange
rate of Canadian $1.5595 to U.S. $1.00). The interest rate on an
additional U.S. $385.0 million has been converted from an average
U.S. dollar fixed interest rate of 9.38% per annum to $500.5
million at an average Canadian dollar floating interest rate equal
to the bankers’ acceptances rate plus 2.35% per annum, which
totalled 5.11% at December 31, 2003 (2002 — 5.22%) (i.e., with an
exchange rate of Canadian $1.3000 to U.S. $1.00).






The obligations of the Company to the counterparties under these
cross-currency interest rate exchange agreements are secured by
substantially all of the assets of the Company and generally rank equally
with the other secured indebtedness of the Company.




Total long-term debt at fixed interest rates at December 31, 2003 was
$1,571.1 million (2002 — $1,710.6 million) or 71.1% (2002 — 72.5%) of total
long-term debt. The Company’s effective weighted average interest rate on
all long-term debt as at December 31, 2003, including the effect of the
interest rate and cross-currency exchange agreements, was 8.32% (2002 —
8.42%).




	 	(j)	 	Principal repayments:






	 		 	At December 31, 2003, principal repayments due within each of the next
five years and in total thereafter on all long-term debt are as
follows:






	 	 	 	 	 
	Year ending December 31:	 	 	 	 
	2004
	 	$	2,378	 
	2005
	 	 	905	 
	2006
	 	 	182,674	 
	2007
	 	 	485,124	 
	2008
	 	 	568,589	 
	 
	 	 	
	 
	 
	 	 	1,239,670	 
	Thereafter
	 	 	833,469	 
	 
	 	 	
	 
	 
	 	 	2,073,139	 
	Effect of cross-currency interest rate exchange agreements
	 	 	136,464	 
	 
	 	 	
	 
	 
	 	$	2,209,603	 
	 
	 	 	
	 








22








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	8.	 	Long-term debt (continued):





	 	 	The provisions of the long-term debt agreements described above impose, in
most instances, restrictions on the operations and activities of the
Company. Generally, the most significant of those restrictions are debt
incurrence and maintenance tests, restrictions upon additional investments,
sales of assets, payment of dividends and the payment of principal or
interest on certain subordinated debt. In addition, the repayment dates of
certain debt agreements may be accelerated if there is a change in control
of the Company. At December 31, 2003, the Company was in compliance with
all terms of the long-term debt agreements.





	9.	 	Shareholders’ equity:





	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	Capital stock:
	 	 	 	 	 	 	 	 
	 	90,468,259 Class A Multiple Voting Shares
	 	$	962,661	 	 	$	962,661	 
	 	51,430,178 Class B Restricted Voting Shares
(2002 — 51,271,683)
	 	 	925,308	 	 	 	922,426	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	1,887,969	 	 	 	1,885,087	 
	 	Deduct amounts receivable from employees under
the share purchase plan
	 	 	—	 	 	 	(1,901	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	1,887,969	 	 	 	1,883,186	 
	Deficit
	 	 	(1,444,889	)	 	 	(1,582,730	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	$	443,080	 	 	$	300,456	 
	 	 
	 	 	
	 	 	 	
	 






	 	(a)	 	Capital stock:






	 		 	The Articles of Incorporation of the Company impose restrictions on the
issuance or transfer of any shares of the Company where such issuance
or transfer would, in the opinion of the Board of Directors of the
Company, jeopardize the ability of the Company to obtain, renew or
maintain licences relating to its business.








23








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	9.	 	Shareholders’ equity (continued):





	 	(b)	 	Rights and conditions:






	 		 	Both classes of common shares have an unlimited number of authorized
shares and are without par value.






	 		 	The Class A Multiple Voting Shares are entitled to 10 votes per share
and are convertible at any time on a one-for-one basis into Class B
Restricted Voting Shares.






	 		 	The Class B Restricted Voting Shares are entitled to one vote per share
on all matters other than the appointment of auditors and generally on
the election of directors. The Class B Restricted Voting Shares are
entitled to elect three directors, voting separately as a class.






	 	(c)	 	Capital stock changes:






	 	(i)	 	During 2003, the Company issued 158,495 (2002 — 19,759)
Class B Restricted Voting Shares upon the exercise of stock
options for cash of $2.9 million (2002 — $0.3 million).






	 	(ii)	 	During 2002, 135,325 Class B Restricted Voting Shares
were issued under the Company’s employee share purchase plan for
consideration of $1.9 million.






	 	(d)	 	Stock option plan:






	 		 	The Company’s stock option plan provides senior employee participants
an incentive to acquire an equity ownership interest in the Company
over a period of time and, as a result, reinforce executives’ attention
on the long-term interest of the Company and its shareholders. Under
the plan, options to purchase Class B Restricted Voting Shares of the
Company on a one-for-one basis may be granted to employees, directors
and officers of the Company by the Board of Directors or by the
Company’s Management Compensation Committee. There are 4,750,000
options authorized under the plan. The term of each option is 10
years; the vesting period is generally four years but may be adjusted
by the Management Compensation Committee on the date of grant. The
exercise price for options is equal to the fair market value of the
Class B Restricted Voting Shares, as quoted on The Toronto Stock
Exchange on the grant date.








24








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002







	9.	 	Shareholders’ equity (continued):





Details of the stock option plan are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	 	 	 	 	 	 	Weighted	 	 	 	 	 	Weighted
	 	 	 	 	 	 	average	 	 	 	 	 	average
	 	 	Number	 	exercise	 	Number	 	exercise
	 	 	of options	 	price	 	of options	 	price
	 	 	
	 	
	 	
	 	

	Options outstanding, beginning
of year
	 	 	3,471,017	 	 	$	25.04	 	 	 	3,641,613	 	 	$	25.57	 
	Granted
	 	 	1,111,200	 	 	 	20.47	 	 	 	269,800	 	 	 	16.58	 
	Exercised
	 	 	(158,495	)	 	 	18.18	 	 	 	(19,759	)	 	 	17.62	 
	Forfeited/expired
	 	 	(196,625	)	 	 	22.39	 	 	 	(420,637	)	 	 	24.50	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Options outstanding, end of year
	 	 	4,227,097	 	 	 	24.22	 	 	 	3,471,017	 	 	 	25.04	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Exercisable, end of year
	 	 	2,291,372	 	 	$	27.36	 	 	 	1,869,442	 	 	$	26.72	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 






At December 31, 2003, the range of exercise prices, the weighted
average exercise price and the weighted average remaining contractual
life are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Options outstanding	 	Options exercisable
	 	 	
	 	

	 	 	 	 	 	 	Weighted	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	average	 	Weighted	 	 	 	 	 	Weighted
	 	 	 	 	 	 	remaining	 	average	 	 	 	 	 	average
	Range of	 	Number	 	contractual	 	exercise	 	Number	 	exercise
	exercise prices	 	outstanding	 	life (years)	 	price	 	exercisable	 	price
	
	 	
	 	
	 	
	 	
	 	

	$11.82 - $16.88
	 	 	1,158,272	 	 	 	7.6	 	 	$	16.33	 	 	 	436,022	 	 	$	16.02	 
	$18.15 - $22.06
	 	 	1,891,825	 	 	 	7.5	 	 	 	21.12	 	 	 	1,117,450	 	 	 	21.14	 
	$25.96 - $32.75
	 	 	588,200	 	 	 	7.8	 	 	 	27.00	 	 	 	149,100	 	 	 	30.07	 
	$37.74 - $51.53
	 	 	588,800	 	 	 	6.3	 	 	 	46.87	 	 	 	588,800	 	 	 	46.87	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	Total
	 	 	4,227,097	 	 	 	7.4	 	 	 	24.22	 	 	 	2,291,372	 	 	 	27.36	 
	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 






There was no compensation expense related to stock options for 2003 or
2002.




Certain of the Company’s executives are also eligible to participate in
RCI’s stock option plan.






25









 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	9.	 	Shareholders’ equity (continued):





For stock options granted to employees on or after January 1, 2002, had
the Company determined compensation expense based on the “fair value”
at the grant date of such stock option awards consistent with the
method prescribed under CICA Handbook Section 3870, the Company’s net
income (loss) for the year and earnings (loss) per share would have
been reported as the pro forma amounts indicated below. The fair value
of the options is amortized on a straight-line basis over the vesting
period.




	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Net income (loss) for the year, as reported
	 	$	137,841	 	 	$	(90,705	)
	Stock-based compensation expense
	 	 	(1,920	)	 	 	(331	)
	 
	 	 	
	 	 	 	
	 
	Pro forma net income (loss) for the year
	 	$	135,921	 	 	$	(91,036	)
	 
	 	 	
	 	 	 	
	 
	Basic and diluted earnings (loss) per share,
as reported
	 	$	0.97	 	 	$	(0.64	)
	Effect of stock-based compensation expense
	 	 	(0.01	)	 	 	—	 
	 
	 	 	
	 	 	 	
	 
	Pro forma basic and diluted earnings (loss) per share
	 	$	0.96	 	 	$	(0.64	)
	 
	 	 	
	 	 	 	
	 






The weighted average estimated fair value at the date of the grant for
options granted by the Company in fiscal 2003 was $12.20
(2002 — $8.35)
per share. No options were granted by RCI to the Company’s employees
in 2003 and 2002.




The fair value of each option granted was estimated on the date of the
grant using the Black-Scholes fair value option pricing model with the
following assumptions:




	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Risk-free interest rate
	 	 	4.50	%	 	 	4.81	%
	Dividend yield
	 	 	—	 	 	 	—	 
	Volatility factor of the future expected market price of
the Company’s Class B Restricted Voting Shares
	 	 	55.17	%	 	 	51.95	%
	Weighted average expected life of the options	 	 	5.3 years	 	 	5 years
	 
	 	 	
	 	 	 	
	 








26








 



ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	9.	 	Shareholders’ equity (continued):





	 	(e)	 	Employee share purchase plan:






The employee share purchase plan was provided to enable employees of
the Company an opportunity to obtain an equity interest in the Company
by permitting them to acquire Class B Restricted Voting Shares. A
total of 800,000 Class B Restricted Voting Shares in aggregate were set
aside and reserved for allotment and issuance pursuant to the employee
share purchase plan.




Under the terms of the employee share purchase plan, participating
employees of the Company may have received a bonus at the end of the
term of the plan. The bonus was calculated as the difference between
the share price at the date the employee received the loan and the
lesser of 85% of the closing price at which the shares traded on The
Toronto Stock Exchange on the trading day immediately prior to the
purchase date or the closing price on a date that is approximately one
year subsequent to the original issue date.




Compensation expense recorded for the employee share purchase plan for
2003 was $0.3 million (2002 — $1.0 million).




	10.	 	Operating revenue:





	 	 	 Operating revenue is comprised of the following:





	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Postpaid (voice and data)
	 	$	1,911,073	 	 	$	1,628,095	 
	Prepaid
	 	 	91,255	 	 	 	91,151	 
	One-way messaging
	 	 	27,565	 	 	 	35,238	 
	 
	 	 	
	 	 	 	
	 
	 
	 	 	2,029,893	 	 	 	1,754,484	 
	Equipment sales
	 	 	177,901	 	 	 	137,030	 
	 
	 	 	
	 	 	 	
	 
	 
	 	$	2,207,794	 	 	$	1,891,514	 
	 
	 	 	
	 	 	 	
	 








27








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	11.	 	Change in estimates of sales tax and CRTC contribution liabilities:





	 	(a)	 	Sales tax liability:






	 		 	During 2002, the Company received clarification of a provincial sales
tax liability for a matter common to the wireless industry. As a
result, the Company revised its estimate with respect to this liability
and released a provision of $19.2 million associated with this matter,
which had been established in previous years.






	 	(b)	 	CRTC contribution liabilities:






	 		 	The Company is required to make payments equal to a percentage of
adjusted revenues in accordance with the revenue-based contribution
scheme implemented by the Canadian Radio-television and
Telecommunications Commission (“CRTC”). Prior to 2002, the calculation
of the amount payable was subject to a number of matters of
interpretation between the CRTC and the Company. These matters of
interpretation were clarified in April 2002 by the CRTC, resulting in
an additional amount of $6.8 million in respect of 2001 being payable
by the Company. This additional amount was recorded in 2002.






	12.	 	Income taxes:





	 	 	The income tax effects of temporary differences that give rise to
significant portions of future income tax assets and liabilities are as
follows:





	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	Future income tax assets:
	 	 	 	 	 	 	 	 
	 	Non-capital income tax losses and research
and development expenses carried forward
	 	$	357,795	 	 	$	333,191	 
	 	Deductions relating to long-term debt and
other transactions denominated in U.S. dollars
	 	 	18,049	 	 	 	49,581	 
	 	Future income tax deductions relating to
accounting accruals and goodwill
	 	 	7,898	 	 	 	8,449	 
	 	Other deductible differences
	 	 	3,156	 	 	 	4,116	 
	 	 
	 	 	
	 	 	 	
	 
	 	Total future income tax assets
	 	 	386,898	 	 	 	395,337	 
	 	Less valuation allowance
	 	 	(298,174	)	 	 	(304,732	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	88,724	 	 	 	90,605	 
	 	 
	 	 	
	 	 	 	
	 
	Future income tax liabilities:
	 	 	 	 	 	 	 	 
	 	Property, plant and equipment, and spectrum licences
	 	 	(88,724	)	 	 	(90,605	)
	 	 
	 	 	
	 	 	 	
	 
	 	Total future income tax liabilities
	 	 	(88,724	)	 	 	(90,605	)
	 	 
	 	 	
	 	 	 	
	 
	Net future income tax assets
	 	$	—	 	 	$	—	 
	 	 
	 	 	
	 	 	 	
	 








28








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	12.	 	Income taxes (continued):





	 	 	In assessing the realizability of future income tax assets, management
considers whether it is more likely than not that some portion or all of
the future income tax assets will be realized. The ultimate realization of
future income tax assets is dependent upon the generation of future taxable
income during the years in which the temporary differences are deductible.
Management considers the scheduled reversals of future income tax
liabilities, the character of the income tax assets and the tax planning
strategies in place making this assessment.





	 	 	As at December 31, 2003, the Company has determined that the realization of
its net future income tax asset of $298.2 million does not meet the
criteria of realization being “more likely than not”. Therefore, a full
valuation allowance has been recorded against this future income tax asset.





	 	 	Total income tax expense varies from the amounts that would be computed by
applying the statutory income tax rate to the loss before income taxes for
the following reasons:





	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	Statutory income tax rate
	 	 	36.3	%	 	 	38.4	%
	 
	 	 	
	 	 	 	
	 
	Income tax expense (recovery) on net income
(loss) before income taxes
	 	$	50,947	 	 	$	(32,803	)
	Increase
(decrease) in income taxes resulting from:
	 	 	 	 	 	 	 	 
	 	Change in the valuation allowance for
future income tax assets
	 	 	(5,912	)	 	 	36,294	 
	 	Adjustments to future income tax
assets and liabilities for changes in
substantively enacted tax rates
	 	 	(18,851	)	 	 	5,517	 
	 	Non-deductible amortization and write-off of
deferred foreign exchange
	 	 	834	 	 	 	68	 
	 	Non-taxable portion of foreign exchange
gain on long-term debt
	 	 	(24,429	)	 	 	(6,020	)
	 	Other items
	 	 	(2,589	)	 	 	(3,056	)
	 	Large Corporations Tax
	 	 	2,393	 	 	 	5,258	 
	 
	 	 	
	 	 	 	
	 
	Income tax expense
	 	$	2,393	 	 	$	5,258	 
	 
	 	 	
	 	 	 	
	 








29








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	12.	 	Income taxes (continued):





	 	 	As at December 31, 2003, the Company has the following non-capital income
tax losses available to reduce future years’ income for income tax
purposes:





	 	 	Income tax losses expiring in the year ending December 31:





	 	 	 	 	 
	2004
	 	$	238,500	 
	2005
	 	 	74,900	 
	2007
	 	 	259,000	 
	2008
	 	 	284,200	 
	2009
	 	 	112,200	 
	 
	 	 	
	 
	Total
	 	$	968,800	 
	 
	 	 	
	 






	13.	 	Earnings (loss) per share:





	 	 	The following table sets forth the calculation of basic and diluted
earnings (loss) per share:





	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	2003	 	2002
	 	 	 	 	
	 	

	Numerator:
	 	 	 	 	 	 	 	 
	 	Net income (loss) for the year — basic and diluted
	 	$	137,841	 	 	$	(90,705	)
	 	 
	 	 	
	 	 	 	
	 
	Denominator (in thousands):
	 	 	 	 	 	 	 	 
	 	Weighted average number of shares
outstanding — basic
	 	 	141,773	 	 	 	141,608	 
	 	Effect of dilutive securities:
	 	 	 	 	 	 	 	 
	 	 	Employee stock options
	 	 	260	 	 	 	—	 
	 	 
	 	 	
	 	 	 	
	 
	Weighted average number of shares
outstanding — diluted
	 	 	142,033	 	 	 	141,608	 
	 	 
	 	 	
	 	 	 	
	 
	Earnings (loss) per share — basic and diluted
	 	$	0.97	 	 	$	(0.64	)
	 	 
	 	 	
	 	 	 	
	 






	 	 	For 2003 and 2002, the effect of potentially dilutive stock options was
excluded from the computation of diluted earnings (loss) per share as their
effect is anti-dilutive. In addition, stock options totalling
approximately 3.1 million (2002 — 3.5 million) that are anti-dilutive were
excluded from the calculation.







30








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	14.	 	Related party transactions:





	 	 	The Company entered into the following related party transactions:





	 	(a)	 	The amount due to (from) RCI and its subsidiaries, and AWE is
comprised of the following:






	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	RCI
	 	$	24	 	 	$	3,588	 
	Rogers Cable Inc. (“Cable”)
	 	 	137	 	 	 	28	 
	AWE
	 	 	(114	)	 	 	425	 
	 
	 	 	
	 	 	 	
	 
	 
	 	$	47	 	 	$	4,041	 
	 
	 	 	
	 	 	 	
	 






	 		 	The above amounts reflect intercompany charges for capital and
operating expenditures and are short-term in nature.






	 	(b)	 	The Company has entered into certain transactions and agreements
in the normal course of business with RCI, RCI’s subsidiaries and AWE
as follows:






	 	(i)	 	Management fees:






	 		 	The Company has entered into a management agreement under which RCI
provides executive, administrative, financial and various additional
services to the Company. Interest is charged by RCI on unpaid
management fees at the bank prime rate plus 2% per annum. The
management agreement is subject to termination by either party at
the end of any calendar year on 12 months’ notice.






	 	(ii)	 	Cost-sharing arrangements:






	 		 	The Company has entered into certain cost-sharing arrangements with
RCI and its affiliates including accounting, purchasing, human
resources, customer service call centres and collections call
centres, real estate administration, accounts payable processing,
remittance processing, payroll processing, e-commerce, the RCI data
centre and other common services and activities. The Company shares
both the operating expense and PP&E expenditures related to these
activities on a cost recovery basis in accordance with the services
provided.








31








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	14.	 	Related party transactions (continued):





	 		 	The Company has entered into agreements with Cable to share, on a
pro rata basis, the cost of certain fibre-optic and microwave
transmission facilities. In addition, long-term service
arrangements exist with Cable for transmission services on
fibre-optic facilities owned by Cable.






	 		 	The Company purchases accounts receivable from Cable for customers
who receive a consolidated invoice. The Company receives a fee,
based on actual costs incurred, for billing and collection services.






	 		 	The Company also leases certain office space it owns to RCI and RCI’s subsidiaries.






	 	(iii)	 	Wireless products and services:






	 		 	The Company has entered into an agreement with Cable for the sale of
its products and services through Cable’s retail outlets. The
Company pays Cable for services provided in respect of subscriber
activation and customer service.






	 		 	In addition, the Company provides wireless services to RCI and RCI’s subsidiaries.






	 	(iv)	 	Advertising:






	 		 	The Company pays Rogers Media Inc. (“Media”), a subsidiary of RCI,
for various advertising on its radio and television broadcasting
stations and in its publications.






	 	(v)	 	Roaming agreement:






	 		 	The Company maintains a reciprocal agreement whereby AWE provides
wireless communications services to the Company’s subscribers when
they travel to the United States, and the Company provides the same
services to AWE subscribers when they travel to Canada.






	 	(vi)	 	Over-the-air activation:






	 		 	The Company utilizes the services of AWE for automated
“over-the-air” programming of subscriber handsets.








32








 





ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	14.	 	Related party transactions (continued):





	 		 	A summary of all significant charges from (to) related parties, which
have been accounted for at exchange amounts, is as follows:







	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	RCI:
	 	 	 	 	 	 	 	 
	 	Management fees
	 	$	11,336	 	 	$	11,006	 
	 	Rent income
	 	 	(7,980	)	 	 	(8,144	)
	 	Wireless
products and services
	 	 	(978	)	 	 	(79	)
	 	Cost of shared operating expenses
	 	 	192,292	 	 	 	208,257	 
	 	Cost of PP&E
	 	 	24,656	 	 	 	37,418	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	219,326	 	 	 	248,458	 
	 	 
	 	 	
	 	 	 	
	 
	Cable:
	 	 	 	 	 	 	 	 
	 	Wireless products and services for resale
	 	 	(14,926	)	 	 	(10,116	)
	 	Subscriber activation commissions and
customer service
	 	 	9,511	 	 	 	8,817	 
	 	Rent income
	 	 	(3,516	)	 	 	(3,587	)
	 	Wireless
products and services
	 	 	(2,355	)	 	 	(2,214	)
	 	Consolidated
billing services
	 	 	(1,499	)	 	 	(655	)
	 	Transmission facilities usage
	 	 	440	 	 	 	440	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	(12,345	)	 	 	(7,315	)
	 	 
	 	 	
	 	 	 	
	 
	Media:
	 	 	 	 	 	 	 	 
	 	Advertising
	 	 	3,000	 	 	 	2,940	 
	 	Rent income
	 	 	(8,493	)	 	 	(1,881	)
	 	Wireless services
	 	 	(516	)	 	 	(181	)
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	(6,009	)	 	 	878	 
	 	 
	 	 	
	 	 	 	
	 
	AWE:
	 	 	 	 	 	 	 	 
	 	Roaming revenue
	 	 	(13,030	)	 	 	(13,910	)
	 	Roaming expense
	 	 	13,628	 	 	 	18,028	 
	 	Over-the-air activation
	 	 	292	 	 	 	680	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	 	890	 	 	 	4,798	 
	 	 
	 	 	
	 	 	 	
	 
	 
	 	$	201,862	 	 	$	246,819	 
	 	 
	 	 	
	 	 	 	
	 








33








 





ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	14.	 	Related party transactions (continued):





	 	(c)	 	The Company has entered into certain transactions with companies,
the partners or senior officers of which are directors of the Company
and RCI. During 2003, total amounts paid by the Company to these
related parties for legal services and commissions paid on premiums
for insurance coverage aggregated $1.5 million (2002 —
$1.7 million) and for interest charges aggregated
$12.0 million (2002 — $8.3 million).






	15.	 	Financial instruments:





	 	(a)	 	Fair values:






	 		 	The Company has determined the fair values of its financial instruments
as follows:






	 	(i)	 	Cash and cash equivalents, accounts receivable, notes and
loans receivable from employees, amounts due to affiliated
companies, bank advances, and accounts payable and accrued
liabilities:






	 		 	The carrying amounts in the consolidated balance sheets approximate
fair values because of the short-term nature of these instruments.






	 	(ii)	 	Long-term debt:






	 		 	The fair values of each of the Company’s long-term debt instruments
are based on the year-end trading values.






	 	(iii)	 	Interest exchange agreements:






	 		 	The fair values of the Company’s cross-currency interest rate
exchange agreements are based on values quoted by the counterparties
to the agreements.








34








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	15.	 	Financial instruments (continued):





	 		 	The estimated fair values of the Company’s long-term debt and related
cross-currency interest rate exchange agreements as at December 31,
2003 and 2002 are as follows:






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	 	 	 	Carrying	 	Estimated	 	Carrying	 	Estimated
	 	 	 	amount	 	fair value	 	amount	 	fair value
	 	 	 	
	 	
	 	
	 	

	Liability (asset):
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Long-term debt
	 	$	2,073,139	 	 	$	2,281,633	 	 	$	2,477,783	 	 	$	2,332,673	 
	 	Cross-currency
interest rate
exchange
agreements
	 	 	136,464	 	 	 	120,419	 	 	 	(117,708	)	 	 	(240,707	)
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 
	 
	 	$	2,209,603	 	 	$	2,402,052	 	 	$	2,360,075	 	 	$	2,091,966	 
	 	 
	 	 	
	 	 	 	
	 	 	 	
	 	 	 	
	 






	 		 	Fair value estimates are based on relevant market information and
information about the financial instrument as at the measurement date.
These estimates inherently include subjective components involving
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.






	 	(b)	 	Other disclosures:






	 	(i)	 	The credit risk of the cross-currency interest rate
exchange agreements arises from the possibility that the
counterparties to the agreements may default on their obligations
under the agreements in instances where these agreements have
positive fair value to the Company. The Company assesses the
creditworthiness of the counterparties in order to minimize the
risk of counterparty default under the agreements. All of the
portfolio is held by financial institutions with a Standard and
Poors rating (or the equivalent) ranging from A+ to AA. The
Company has not required collateral or other security to support
the cross-currency interest rate exchange agreements due to the
Company’s favourable assessment of the creditworthiness of the
counterparties.






	 	(ii)	 	The Company has a significant concentration of credit
risk from a supplier of network infrastructure related to volume
rebates receivable totalling approximately $72.1 million, which is
included in accounts receivable at December 31, 2003.








35








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	16.	 	Commitments:





	 	(a)	 	The Company is committed, under the terms of licences issued by
Industry Canada, to spend 2% of certain revenues earned in each year
on research and development activities. The Company believes it is in
full compliance with this requirement.






	 	(b)	 	The future minimum lease payments under operating leases,
primarily for the rental of premises for the placement of towers,
radio base stations and transmission equipment, as well as for
administrative and distribution facilities at December 31, 2003, are
as follows:






	 	 	 	 	 
	Year ending December 31:
	 	 	 	 
	2004
	 	$	34,394	 
	2005
	 	 	30,543	 
	2006
	 	 	23,983	 
	2007
	 	 	16,050	 
	2008
	 	 	10,280	 
	2009 and thereafter
	 	 	19,342	 
	 
	 	 	
	 
	 
	 	$	134,592	 
	 
	 	 	
	 






	 		 	Rent expense for 2003 amounted to $35.0 million (2002 — $31.5 million).






	17.	 	Contingent liabilities:





	 	 	There exist certain legal actions against the Company, none of which is
expected to have a material adverse effect on the consolidated financial
position of the Company.







36








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences:





	 	 	The consolidated 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 (loss) in each year
would be adjusted as follows:





	 	 	 	 	 	 	 	 	 	 
	 	 	 	2003	 	2002
	 	 	 	
	 	

	Net income (loss) for the year based on
Canadian GAAP
	 	$	137,841	 	 	$	(90,705	)
	Interest capitalized (c)
	 	 	5,693	 	 	 	6,461	 
	Pre-operating costs capitalized, net (d)
	 	 	2,976	 	 	 	2,976	 
	Depreciation expense (f)
	 	 	(2,968	)	 	 	(2,248	)
	Financial instruments (g)
	 	 	(102,787	)	 	 	88,121	 
	 
	 	 	
	 	 	 	
	 
	Net income based on United States GAAP
	 	$	40,755	 	 	$	4,605	 
	 
	 	 	
	 	 	 	
	 
	Earnings per share under United States GAAP:
	 	 	 	 	 	 	 	 
	 	Basic and diluted
	 	$	0.29	 	 	$	0.03	 
	 
	 	 	
	 	 	 	
	 






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





	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Shareholders’ equity based on Canadian GAAP
	 	$	443,080	 	 	$	300,456	 
	“Pushed down” goodwill (a)
	 	 	770,757	 	 	 	770,757	 
	Amortization of goodwill (b)
	 	 	(248,890	)	 	 	(248,890	)
	Interest capitalized (c)
	 	 	31,243	 	 	 	25,550	 
	Pre-operating costs, net (d)
	 	 	—	 	 	 	(2,976	)
	Conversion costs (e)
	 	 	(3,911	)	 	 	(3,911	)
	Accumulated depreciation (f)
	 	 	(5,499	)	 	 	(2,531	)
	Financial instruments (g)
	 	 	9,861	 	 	 	112,648	 
	 
	 	 	
	 	 	 	
	 
	Shareholders’ equity based on United States GAAP
	 	$	996,641	 	 	$	951,103	 
	 
	 	 	
	 	 	 	
	 








37








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences (continued):





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





	 	(a)	 	“Push-down” accounting:






	 		 	Under United States GAAP, purchase transactions that result in an
entity becoming a wholly owned subsidiary establish a new basis of
accounting for the entity purchased and its assets and liabilities. As
a result of RCI’s acquisition of 100% of the Company in 1989 for United
States GAAP purposes, the Company must record as an asset in its
consolidated financial statements the amount of goodwill that was
recorded on the consolidated financial statements of RCI. As this
acquisition was financed principally by the parent company with
proceeds from other asset sales, the corresponding adjustment for the
assets recorded was an increase in shareholders’ equity.






	 		 	At the time of the acquisition by RCI, Canadian GAAP did not permit a
subsidiary company to alter the historical costs of its assets or
liabilities upon it being acquired.






	 	(b)	 	Amortization of goodwill:






	 		 	As a result of the “push-down” accounting described in (a) above, the
Company was required until 2001 to amortize the amount recorded as
goodwill under United States GAAP. The Company had been amortizing
this amount under United States GAAP over 40 years on a straight-line
basis.






	 	(c)	 	Interest capitalization:






	 		 	United States GAAP requires capitalization of interest costs as part of
the historical cost of acquiring certain qualifying assets which
require a period of time to prepare for their intended use. This is
not required under Canadian GAAP.






	 	(d)	 	Pre-operating costs:






	 		 	Under Canadian GAAP, the Company defers the incremental costs relating
to the development and pre-operating phases of new business, and
amortizes these costs on a straight-line basis over two years. Under
United States GAAP, these costs are expensed as incurred.








38








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences (continued):





	 	(e)	 	Conversion costs:






	 		 	Under Canadian GAAP, the Company capitalized certain costs incurred to
convert data to its new customer care and billing system. United
States GAAP required these costs to be expensed as incurred.






	 	(f)	 	Accumulated depreciation:






	 		 	As a result of the capitalization of interest to PP&E required under
United States GAAP described in (c) above, additional depreciation on
the interest capitalized is recorded under United States GAAP in
subsequent periods. As a result of conversion costs being expensed
under United States GAAP as described in (e) above, depreciation
expense is reduced under United States GAAP in subsequent periods.






	 	(g)	 	Financial instruments:






	 		 	Under Canadian GAAP, the Company accounts for its cross-currency
interest rate 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 pronouncement
entitled “Accounting for Derivative Instruments and Hedging Activities”
(“SFAS 133”), effective January 1, 2001. Changes in the fair value of
the derivative financial instruments, reflecting primarily market
changes in foreign exchange rates, interest rates, as well as the level
of short-term variable versus long-term fixed interest rates, are
recognized in income immediately. These gains and losses are
recognized together with foreign exchange translation gains and losses,
arising from changes in period-end foreign exchange rates, on the
respective long-term debt. Under United States GAAP, effective January
1, 2001, the Company recorded an increase of $29.2 million in the
carrying value of the derivative financial instruments, to a total of
$139.8 million, and a corresponding increase in the carrying value of
long-term debt. This increase in long-term debt has been recorded for
United States GAAP purposes as a cumulative transition adjustment that
is being amortized to net income over the remaining life of the
respective long-term debt.








39








 






ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences (continued):





	 	(h)	 	Operating income before depreciation and amortization:






	 		 	United States GAAP requires that depreciation and amortization and the
change in estimates of sales tax and CRTC contribution liabilities be
included in the determination of operating income and does not permit
the disclosure of a subtotal of the amount of operating income before
these items. Canadian GAAP permits the disclosure of a subtotal of the
amount of operating income before these items.






	 	(i)	 	Statements of cash flows:






	 	(i)	 	Canadian GAAP permits the disclosure of a subtotal of the
amount of cash provided by operations before changes in non-cash
working capital 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, under
United States GAAP, the total decrease in cash and cash
equivalents in 2003 in the amount of $14.3 million (2002 —
increase of $15.4 million) reflected in the consolidated
statements of cash flows would be decreased by $4.2 million (2002
 — $5.4 million) and cash flows under the heading “Financing
Activities” would be increased by $4.2 million (2002 — decrease by
$5.4 million).






	 	(j)	 	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. The net income for each of 2003 and 2002 under
United States GAAP as reported is the same as the comprehensive income
for the corresponding years under United States GAAP.








40








 




ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences (continued):





	 	(k)	 	Other disclosures:






	 		 	United States GAAP requires the Company to disclose accrued
liabilities, which is not required under Canadian GAAP. Accrued
liabilities included in accounts payable and accrued liabilities as at
December 31, 2003 were $327.2 million (2002 — $407.1 million). At
December 31, 2003, accrued liabilities in respect of PP&E
totalled $48.1 million (2002 — $156.2 million), accrued interest
payable totalled $30.6 million (2002 — $34.9 million), accrued
liabilities related to payroll totalled $37.2 million (2002 — $33.4
million), and accrued liabilities related to commissions and residuals
totalled $56.4 million (2002 — $50.4 million). At December 31, 2002, there were no accrued liabilities
that individually exceeded 5% of current liabilities.






	 	(l)	 	Stock-based compensation disclosures:






	 		 	For options granted to employees, had the Company determined
compensation costs based on the fair value at grant dates of the stock
options consistent with the method prescribed under FASB’s SFAS 123,
the Company’s net income for the year and earnings per share for the
year would have been reported as the pro forma amounts indicated below:






	 	 	 	 	 	 	 	 	 
	 	 	2003	 	2002
	 	 	
	 	

	Net income in accordance with
United States GAAP as reported
	 	$	40,755	 	 	$	4,605	 
	Stock-based compensation expense
	 	 	(12,149	)	 	 	(13,708	)
	 
	 	 	
	 	 	 	
	 
	Pro forma net income (loss)
	 	$	28,606	 	 	$	(9,103	)
	 
	 	 	
	 	 	 	
	 
	Basic and diluted earnings per share
	 	$	0.29	 	 	$	0.03	 
	Effect of stock-based compensation
	 	 	(0.09	)	 	 	(0.09	)
	 
	 	 	
	 	 	 	
	 
	Pro forma basic and diluted
net income (loss) per share
	 	 	0.20	 	 	 	(0.06	)
	 
	 	 	
	 	 	 	
	 






	 		 	See note 9(d) for further details of stock-based compensation.








41








 





ROGERS WIRELESS COMMUNICATIONS INC.

Notes to Consolidated Financial Statements (continued)

(Tabular amounts in thousands of dollars, except per share amounts)




Years ended December 31, 2003 and 2002




	18.	 	Canadian and United States accounting policy differences (continued):





	 	(m)	 	Recent United States accounting pronouncements:






	 		 	In 2002, the Emerging Issues Task Force (“EITF”) reached a consensus
regarding EITF Issue 00-21, “Accounting for Revenue Arrangements with
Multiple Deliverables”. The consensus addresses not only when and how
an arrangement involving multiple deliverables should be divided into
separate units of accounting but also how the arrangement’s
consideration should be allocated among separate units. The
pronouncement is effective for the Company commencing with its 2004
fiscal year. The Company is currently determining the impact of
prospectively adopting EITF 00-21.






	 		 	In 2003, the FASB issued Statement 150, “Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity”. This statement requires that under specified circumstances,
these instruments be reclassified from equity to liabilities on the
balance sheet. This statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective
for the Company’s year beginning January 1, 2004. The Company did not
enter into any financial instruments within the scope of this statement
after May 31, 2003, and is presently assessing the impact of this
statement on the Company’s consolidated financial statements.



 

		
	19. 	Subsequent Events:





	 	(a)	 	On January 1, 2004, the Company adopted the following new accounting policies
with retrospective application, and as a
result have reflected these new accounting policies in the consolidated
balance sheet as at December 31, 2002 and 2003 and
in the consolidated statements of income and cash flows for each of
the years in the two year period ended December 31, 2003.






	 	(i)	 	GAAP Hierarchy






     As a result of the retroactive application of CICA Handbook Section 1100, “Generally Accepted Accounting Principles.” the
Company adopted a classified balance sheet presentation. In addition, changes in non-cash working capital items related to PP&E have been
reclassified to Investing Activities, PP&E Expenditures on the consolidated statements of cash flows. As a result, changes in non-cash
working capital and cash flows from operating activities have been increased (decreased) by ($98.6) million, and $87.7 million for the
years ended December 31, 2002 and 2003, respectively, and
PP&E expenditure and cash flows used in investing activities have increased (decreased)
by ($98.6) million, and $87.7 million for the years ended December 31, 2002 and 2003, respectively.




	 	(ii)	 	Revenue Recognition






     As a result of retroactively adopting new Canadian accounting standards, including Emerging Issues Committee,
Abstract 142, “Revenue Arrangements with Multiple Deliverables” and CICA Handbook Section 1100,
regarding the timing of revenue recognition and the classification of certain items as revenue or expense, the Company
made the following changes to its classification of certain revenue and expense items:




	 	•	 	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 equipment are now classified as equipment revenue.
Previously, these amounts were recorded as a reduction to sales
expense in the case of a new subscriber, or as a reduction to operating,
general and administrative expense in the case of an existing subscriber.
	 
	 	•	 	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 or as operating, general and administrative
expense in the case of an existing subscriber. 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.
	 
	 	•	 	Certain other recoveries from subscribers related to collections activities are now recorded as network
revenue rather than as a recovery of operating, general and administrative expenses.







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



	 	 	 	 	 	 	 	 	 
	 	 	2003
	 	2002

	Postpaid (voice and data) revenue:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	$	1,920,993	 	$	1,632,874	 
	After adoption
	 	 	 	1,911,073	 	 	1,628,095	 
	Network revenue:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	2,039,813	 	 	1,759,263	 
	After adoption
	 	 	 	2,029,893	 	 	1,754,484	 
	Equipment sales:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	242,390	 	 	206,664	 
	After adoption
	 	 	 	177,901	 	 	137,030	 
	Total operating revenue:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	2,282,203	 	 	1,965,927	 
	After adoption
	 	 	 	2,207,794	 	 	1,891,514	 
	Cost of equipment sales:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	244,479	 	 	209,948	 
	After adoption
	 	 	 	380,771	 	 	296,794	 
	Sales and marketing expenses:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	522,716	 	 	462,784	 
	After adoption
	 	 	 	361,998	 	 	328,884	 
	Operating, general and administrative expenses:
	 	 	 	 	 	 	 	 
	Prior to adoption
	 	 	 	787,436	 	 	765,508	 
	After adoption
	 	 	 	737,453	 	 	738,149	 







             The above changes had no impact on operating income or net income (loss).



	 	(b)	 	On
February 20, 2004, the Company completed an offering of
U.S.$750.0 million aggregate
principal amount of Senior (Secured) Notes, due 2014. The Company used approximately
U.S.$734.7 million of the net proceeds to retire certain of its existing Senior Secured Notes and
Debentures and its Senior Subordinated Notes.






	 	(c)	 	On
October 8, 2004 the Company and its bank lenders entered into an amending agreement to
the Company's $700.0 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
$140.0 million on each of April 30, 2008 and April 30,
2009 with the maturity date on April 30, 2010. The
provision for early maturity in the event that the Company's
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.






	 	(d)	 	On
October 13, 2004, RCI announced the completion of its purchase
of the 48,594,172 Class B
Restricted Voting shares of RWCI owned by JVII General Partnership (""JVII''), 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
conversion of the Class A Multiple Voting shares
owned by JVII to such Class B shares upon closing.




     With
the completion of the purchase, RCI 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, and which combined represent a total ownership position of      approximately 89.3%
of the total issued and outstanding shares of both classes of such shares of RWCI.


     RCI
funded the approximate $1,767 million cash purchase price of the
48.6 million shares of RWCI
through a $1,750 million secured      bridge financing facility of up to two years with a group of Canadian
financial institutions. The facility stipulates mandatory      repayments, subject to certain exceptions, from the
incurrence of debt or equity of RCI or the Company.



	 	(e)	 	On
August 9, 2004, a proceeding under the Class Actions Act (Saskatchewan) was brought
against the Company 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.
The Company 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 the proceeding will qualify for certification as a class
action.






	 	(f)	 	On
September 20, 2004, the Company announced an agreement with Microcell Telecommunications Inc. ("Microcell'') to make an all cash tender offer of $35.00 per share to acquire Microcell. The
Company completed the acquisition on November 12, 2004. The funding for this acquisition was
comprised of the utilization of the Company's cash on hand, drawdowns under the Company's committed
$700.0 million bank credit facility, and proceeds from a bridge
loan from RCI of up to $900.0 million, of
which $850.0 million has been drawn. The bridge loan has a term
of up to two years from November 9,
2004 and was made on an subordinated unsecured basis. The bridge loan
bears interest at 6% per annum
and is prepayable in whole or in part without penalty. RCI funded the
$850.0 million drawdown on the
bridge loan using cash on hand, cash received from Rogers Cable in the form of a return of capital and
cash received from Rogers Media in the form of a repayment of an intercompany advance made to Rogers
Media by RCI. Each of Rogers Cable and Rogers Media made drawdowns under its respective committed
bank credit facilities to fund the cash transfers to RCI.




     On
April 21, 2004 a proceeding was brought against Microcell and its subsidiary, Microcell Solutions
Inc. and others alleging breach of      contract, breach of confidence, misuse of confidential information,
breach of a duty of loyalty, good faith and to avoid a conflict of duty      and self interest, and conspiracy. The
plaintiff is seeking damages in the amount of $160 million. The proceeding is at an early stage.      The
Company believes it has good defences to the claim.




	 	(g)	 	On
November 12, 2004, the Company announced its intention to complete an offering of
$460.0 million 7.625% Senior (Secured) Notes Due 2011,
U.S.$550.0 million
Floating Rate Senior (Secured) Notes Due 2010, U.S.$470.0 million 7.25% Senior (Secured)
Notes Due 2012, U.S.$550.0 million 7.5% Senior (Secured) Notes
Due 2015, and U.S.$400.0 million 8.0% Senior Subordinated Notes
Due 2012.




42