Rogers Reports Second Quarter 2008 Financial and Operating Results



    
     Consolidated Revenue Grows 11% to $2.8 Billion, Adjusted Operating
      Profit Increases 17% to $1.1 Billion, and Net Income Increases to
                                $301 Million;

         Wireless Maintains Strong Postpaid Net Subscriber Additions,
                   with ARPU up 4% and Churn Down to 1.06%;

          Cable Drives Continued Growth in Net Additions of Revenue
               Generating Units and Margin Expansion Continues
    

    TORONTO, July 29 /CNW/ - Rogers Communications Inc. today announced its
consolidated financial and operating results for the three and six months
ended June 30, 2008.

    Financial highlights are as follows:

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     per share amounts)       2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Operating revenue       $ 2,803  $ 2,527     11  $ 5,412  $ 4,825     12
    Operating profit(1)         996      431    131    2,091    1,229     70
    Net income (loss)           301      (56)   n/m      645      114    n/m
    Net income (loss)
     per share:
      Basic                 $  0.47  $ (0.09)   n/m  $  1.01  $  0.18    n/m
      Diluted                  0.47    (0.09)   n/m     1.01     0.18    n/m

    As adjusted:(2)
      Operating profit(1)   $ 1,089  $   930     17  $ 2,067  $ 1,744     19
      Net income                364      299     22      631      485     30
      Net income per share:
        Basic               $  0.57  $  0.47     21  $  0.99  $  0.76     30
        Diluted                0.57     0.47     21     0.99     0.75     32
    -------------------------------------------------------------------------

    (1) Operating profit should not be considered as a substitute or
        alternative for operating income or net income, in each case
        determined in accordance with Canadian generally accepted accounting
        principles ("GAAP"). See the section entitled "Reconciliation of Net
        Income to Operating Profit and Adjusted Operating Profit for the
        Period" for a reconciliation of operating profit and adjusted
        operating profit to operating income and net income under Canadian
        GAAP and the section entitled "Key Performance Indicators and Non-
        GAAP Measures".
    (2) For details on the determination of the 'as adjusted' amounts, which
        are non-GAAP measures, see the sections entitled "Supplementary
        Information" and "Key Performance Indicators and Non-GAAP Measures".
        The 'as adjusted' amounts presented above are reviewed regularly by
        management and our Board of Directors in assessing our performance
        and in making decisions regarding the ongoing operations of the
        business and the ability to generate cash flows. The 'as adjusted'
        amounts exclude (i) the impact of a one-time non-cash charge related
        to the introduction of a cash settlement feature for employee stock
        options; (ii) stock-based compensation (recovery) expense; (iii)
        integration and restructuring expenses; (iv) an adjustment for
        Canadian Radio-television and Telecommunications Commission ("CRTC")
        Part II fees related to prior periods resulting from a recent Federal
        Court of Appeal decision; and (v) in respect of net income and net
        income per share, loss on repayment of long-term debt and the related
        income tax impact of the above amounts.

    Highlights of the second quarter of 2008 include the following:

    -   Generated continued double-digit growth in quarterly revenue and
        adjusted operating profit of 11% and 17%, respectively, while net
        income increased to $301 million (or to $364 million on an adjusted
        basis), and adjusted operating profit less interest expense and PP&E
        additions rose 20% to $475 million.

    -   Wireless subscriber postpaid net additions were 92,000, while
        postpaid subscriber monthly churn was reduced to 1.06% from 1.15% in
        the second quarter of 2007. Wireless postpaid monthly ARPU (average
        revenue per user) increased 4% year-over-year to $75.48 driven in
        part by the 34% growth in data revenue to $224 million, representing
        15.5% of network revenue.

    -   Cable ended the quarter with 745,000 residential voice-over-cable
        telephony subscriber lines, reflecting net additions of 41,000 lines
        for the quarter, of which approximately 13,000 were migrations from
        the circuit-switched platform. This brings the total penetration of
        cable telephony customers to 32% of basic cable subscribers up from
        22% at June 30, 2007.

    -   Cable's Internet subscriber base grew by 13,000, in the seasonally
        slow quarter, to 1.5 million, and digital cable households increased
        by 23,000 to reach 1.4 million. During the quarter, Cable increased
        the download speeds for its Internet access services, and also
        implemented monthly usage allowances and monitoring tools, while
        usage-based billing on a per gigabyte basis for very heavy usage
        customers was phased in.

    -   High-definition TV ("HD") subscribers at Cable were up 59% from
        June 30, 2007 to June 30, 2008, from 287,000 to 455,000, while the
        number of quarterly purchases of Rogers on Demand product from the
        second quarter 2007 to the second quarter 2008 increased by
        approximately 20%.

    -   Wireless announced that it would launch the highly anticipated
        Apple iPhone 3G in Canada on July 11, 2008 under both its Rogers
        Wireless and Fido brands with a wide variety of service plans
        available for voice and data combined.

    -   Canada's Advanced Wireless Services ("AWS") wireless spectrum auction
        ended on July 21, 2008 following 39 days and 331 rounds of bidding
        with bids totalling $4.25 billion. Wireless acquired 20 MHz of
        spectrum across all 13 provinces/territories with winning bids that
        totalled approximately $1.0 billion representing approximately $1.67
        per MHZ pop.

    -   Wireless announced the launch of its Fido UNO and Rogers Home Calling
        Zone plans that allow customers to make unlimited calls within their
        home using their wireless phone via a home WiFi broadband connection.
        This converged service utilizes technology known as Unlicensed Mobile
        Access ("UMA") and provides Rogers customers the convenience of
        having one phone, one number, one address book and one voicemail
        which they can use inside and outside of their home.

    -   Cable announced that its agreement to acquire Aurora Cable TV Limited
        ("Aurora Cable") had been approved by the CRTC and the transaction
        was completed on June 12, 2008. Aurora Cable passes approximately
        26,000 homes and provides cable television, Internet and telephony
        services in the Town of Aurora and the community of Oak Ridges, in
        Richmond Hill, Ontario.

    -   Cable and Media recorded charges of approximately $30 million and
        $7 million, respectively, for CRTC Part II fees relating to the
        period from September 1, 2006 to March 31, 2008 ($25 million and
        $6 million for the period September 1, 2006 to December 31, 2007 for
        Cable and Media, respectively) as a result of an unfavourable Federal
        Appeal court ruling. Rogers will continue to record these fees on a
        prospective basis, including $5 million and $2 million recorded in
        the second quarter of 2008, for Cable and Media, respectively. An
        application for leave to appeal has been filed with the Supreme Court
        of Canada although there is no assurance that the court will overturn
        this decision.
    

    "The results for the second quarter reflect a good balance of continued
healthy subscriber growth, double-digit revenue and operating profit growth,
with continued margin expansion," said Ted Rogers, President and CEO of Rogers
Communications Inc. "While the competitive landscapes in which our businesses
operate are constantly evolving, our unique combination of leading networks,
powerful brand and distribution, and leadership in service and bundling
capabilities positions Rogers uniquely for continued growth and success well
into the future."



    MANAGEMENT'S DISCUSSION AND ANALYSIS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008

    This management's discussion and analysis ("MD&A"), which is current as
of July 28, 2008, should be read in conjunction with our Second Quarter 2008
Interim Unaudited Consolidated Financial Statements and Notes thereto, our
2007 Annual MD&A and our 2007 Annual Audited Consolidated Financial Statements
and Notes thereto. The financial information presented herein has been
prepared on the basis of Canadian generally accepted accounting principles
("GAAP") for interim financial statements and is expressed in Canadian
dollars. Please refer to Note 26 to our 2007 Annual Audited Consolidated
Financial Statements for a summary of the differences between Canadian GAAP
and United States ("U.S.") GAAP for the year ended December 31, 2007.
    In this MD&A, the terms "we", "us", "our", "Rogers" and "the Company"
refer to Rogers Communications Inc. and our subsidiaries, which are reported
in the following segments:

    
    -   "Wireless", which refers to our wireless communications operations,
        including Rogers Wireless Partnership ("RWP") and Fido Solutions
        Inc.;

    -   "Cable" (formerly "Cable and Telecom"), which refers to our wholly-
        owned cable television subsidiaries, including Rogers Cable
        Communications Inc. ("RCCI"); and

    -   "Media", which refers to our wholly-owned subsidiary Rogers Media
        Inc. and its subsidiaries, including Rogers Broadcasting, which owns
        a group of 53 radio stations, the Citytv television network, the
        Rogers Sportsnet television network, The Shopping Channel, the OMNI
        television stations, channel m TV, a multicultural television station
        acquired on April 30, 2008, and Canadian specialty channels including
        Biography and G4TechTV; Rogers Publishing, which publishes
        approximately 70 magazines and trade journals; and Rogers Sports
        Entertainment, which owns the Toronto Blue Jays Baseball Club
        ("Blue Jays") and the Rogers Centre. Media also holds ownership
        interests in entities involved in specialty television content,
        television production and broadcast sales.
    

    "RCI" refers to the legal entity Rogers Communications Inc., excluding
our subsidiaries.
    Throughout this MD&A, percentage changes are calculated using numbers
rounded to which they appear.


    SUMMARIZED CONSOLIDATED FINANCIAL RESULTS

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     per share amounts)       2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Wireless              $ 1,522  $ 1,364     12  $ 2,953  $ 2,595     14
      Cable
        Cable Operations        718      646     11    1,413    1,266     12
        RBS                     130      146    (11)     263      291    (10)
        Rogers Retail            92       93     (1)     192      184      4
        Corporate items and
         eliminations            (2)      (4)   (50)      (5)      (5)     -
                            -------------------------------------------------
                                938      881      6    1,863    1,736      7
      Media                     409      348     18      716      614     17
      Corporate items and
       eliminations             (66)     (66)     -     (120)    (120)     -
                            -------------------------------------------------
    Total                     2,803    2,527     11    5,412    4,825     12
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     profit (loss)(1)
      Wireless                  769      664     16    1,474    1,245     18
      Cable
        Cable Operations        293      243     21      571      477     20
        RBS                      16        4    n/m       33       (3)   n/m
        Rogers Retail            (5)      (4)    25       (2)      (3)   (33)
                            -------------------------------------------------
                                304      243     25      602      471     28
      Media                      52       45     16       53       64    (17)
      Corporate items and
       eliminations             (36)     (22)    64      (62)     (36)    72
                            -------------------------------------------------
    Adjusted operating
     profit(1)                1,089      930     17    2,067    1,744     19
    Stock option plan
     amendment(2)                 -     (452)   n/m        -     (452)   n/m
    Stock-based compensation
     recovery (expense)(2)      (53)     (32)    66       63      (47)   n/m
    Integration and
     restructuring expenses(3)   (3)     (15)   (80)      (8)     (16)   (50)
    Adjustment for CRTC
     Part II fees decision(4)   (37)       -    n/m      (31)        -   n/m
                            -------------------------------------------------
    Operating profit(1)         996      431    131    2,091     1,229    70
    Other income and
     expense, net(5)            695      487     43    1,446     1,115    30
                            -------------------------------------------------
    Net income (loss)       $   301  $   (56)   n/m  $   645  $    114   n/m
                            -------------------------------------------------
                            -------------------------------------------------
    Net income (loss) per
     share:
      Basic                 $  0.47  $ (0.09)   n/m  $  1.01  $   0.18   n/m
      Diluted                  0.47    (0.09)   n/m     1.01      0.18   n/m

    As adjusted:(1)
      Net income            $   364  $   299     22  $   631  $    485    30
      Net income per share:
        Basic               $  0.57  $  0.47     21  $  0.99  $   0.76    30
        Diluted                0.57     0.47     21     0.99      0.75    32

    Additions to property,
     plant and equipment
     ("PP&E")(1)
        Wireless            $   251  $   174     44  $   414  $    406     2
        Cable
          Cable Operations      185      163     13      306       288     6
          RBS                    10       17    (41)      14        40   (65)
          Rogers Retail           4        4      -        7         7     -
                            -------------------------------------------------
                                199      184      8      327       335    (2)
        Media                    17       11     55       38        18   111
        Corporate                14       12     17       23        16    44
                            -------------------------------------------------
    Total                   $   481  $   381     26  $   802  $    775     3
                            -------------------------------------------------
    -------------------------------------------------------------------------

    (1) As defined. See the sections entitled "Supplementary Information" and
        "Key Performance Indicators and Non-GAAP Measures".
    (2) See the section entitled "Stock-based Compensation".
    (3) Costs incurred relate to the integration of Call-Net Enterprises Inc.
        ("Call-Net") and Futureway Communications Inc. ("Futureway"), the
        restructuring of Rogers Business Solutions ("RBS") and the closure of
        certain Rogers Retail stores.
    (4) Relates to an adjustment for CRTC Part II fees related to prior
        periods resulting from a recent Federal Court of Appeal decision. See
        the section entitled "Government Regulation and Regulatory
        Developments" for further details.
    (5) See the section entitled "Reconciliation of Net Income to Operating
        Profit and Adjusted Operating Profit for the Period".
    n/m: not meaningful.
    

    For discussions of the results of operations of each of these segments,
refer to the respective segment sections of this MD&A.

    Reconciliation of Net Income to Operating Profit and Adjusted Operating
    Profit for the Period

    The items listed below represent the consolidated income and expense
amounts that are required to reconcile net income as defined under Canadian
GAAP to the non-GAAP measures operating profit and adjusted operating profit
for the period. See the "Supplementary Information" section for a full
reconciliation to adjusted operating profit, adjusted net income, and adjusted
net income per share. For details of these amounts on a segment-by-segment
basis and for an understanding of intersegment eliminations on consolidation,
the following section should be read in conjunction with Note 2 to the
Unaudited Interim Consolidated Financial Statements entitled "Segmented
Information".

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                                     June 30,                 June 30,
                            -------------------------------------------------
    (In millions of dollars)  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Net income (loss)       $   301  $   (56)   n/m  $   645  $   114    n/m
    Income tax expense
     (recovery)                 153      (87)   n/m      323       (1)   n/m
    Other income, net            (5)      (3)    67      (13)      (4)   n/m
    Change in the fair value
     of derivative instruments   (5)      22    n/m       (1)      26    n/m
    Loss on repayment of
     long-term debt               -       47   (100)       -       47   (100)
    Foreign exchange loss
     (gain)                      (1)     (42)   (98)       6      (52)   n/m
    Interest on long-term
     debt                       133      152    (13)     271      301    (10)
                            -------------------------------------------------
                            -------------------------------------------------
    Operating income            576       33    n/m    1,231      431    186
    Depreciation and
     amortization               420      398      6      860      798      8
                            -------------------------------------------------
    Operating profit            996      431    131    2,091    1,229     70
    Stock option plan
     amendment                    -      452   (100)       -      452   (100)
    Stock-based compensation
     (recovery) expense          53       32     66      (63)      47    n/m
    Integration and
     restructuring expenses       3       15    (80)       8       16    (50)
    Adjustment for CRTC
     Part II fees decision       37        -    n/m       31        -    n/m
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted operating
     profit                 $ 1,089  $   930     17  $ 2,067  $ 1,744     19
    -------------------------------------------------------------------------
    

    Net Income (Loss) and Net Income (Loss) Per Share

    We recorded net income of $301 million for the three months ended
June 30, 2008, or basic and diluted earnings per share of $0.47, compared to
net loss of $56 million, or basic and diluted loss per share of $0.09, in the
corresponding period in 2007. For the six months ended June 30, 2008, we
recorded net income of $645 million, or basic and diluted earnings per share
of $1.01, compared to net income of $114 million, or basic and diluted
earnings per share of $0.18, in the corresponding period of 2007.

    Income Tax Expense

    Due to our non-capital loss carryforwards, our income tax expense for the
three and six months ended June 30, 2008 and 2007, substantially represents
non-cash income taxes. As illustrated in the table below, our effective income
tax rates for the three and six months ended June 30, 2008 were 33.7% and
33.4%, respectively. The effective income tax rates for the three and six
months ended June 30, 2007 were 60.8% and (0.9%), respectively. The effective
income tax rates differed from the 2007 statutory income tax rate of 35.8%
primarily due to the $25 million future income tax recovery recorded with
respect to the Vidéotron Ltée termination payment to reverse a charge recorded
by us in 2006 (see Note 7 of our 2007 Annual Audited Consolidated Financial
Statements). In addition, in 2007 we recorded a future income tax recovery
associated with the reclassification of contributed surplus upon the
introduction of a cash settlement feature for employee stock options.

    
    -------------------------------------------------------------------------
                                     Three months ended    Six months ended
                                    -----------------------------------------
                                      June 30,  June 30,  June 30,  June 30,
    (In millions of dollars)            2008      2007      2008      2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Statutory income tax rate            32.7%     35.8%     32.7%     35.8%
    -------------------------------------------------------------------------

    Income (loss) before income
     taxes                            $    454  $   (143) $    968  $    113

    Income tax expense (recovery)
     at statutory income tax rate
     on income before income taxes    $    148  $    (51) $    316  $     40
    Increase (decrease) in income
     taxes resulting from:
      Stock-based compensation               2       (24)        3       (19)
      Vidéotron Ltée termination
       payment                               -       (25)        -       (25)
      Change in the valuation allowance
       for future income taxes               2         -         3         -
      Other items                            1        13         1         3
                                     ----------------------------------------

    Income tax expense (recovery)     $    153  $    (87) $    323  $     (1)
    -------------------------------------------------------------------------

    Effective income tax rate            33.7%     60.8%     33.4%     (0.9%)
    -------------------------------------------------------------------------
    

    In the third quarter of 2008, we anticipate that we will record the
benefit of an income tax credit of approximately $70 million arising from the
harmonization of the Ontario provincial income tax system with the Canadian
federal income tax system. The resulting income tax credit will be available
to reduce future Ontario income taxes over the next five years.

    Foreign Exchange Loss (Gain)

    During the three months ended June 30, 2008, the Canadian dollar
strengthened by 0.9 cents versus the U.S. dollar resulting in a foreign
exchange gain of $1 million. During the six months ended June 30, 2008, the
Canadian dollar weakened by 3.1 cents versus the U.S. dollar. This resulted in
a foreign exchange loss of $6 million. During the corresponding periods of
2007, the Canadian dollar strengthened by 9.0 cents and 10.2 cents,
respectively, versus the U.S. dollar. This resulted in foreign exchange gains
of $42 million and $52 million, respectively, during the three and six months
ended June 30, 2007 primarily related to our U.S. dollar-denominated long-term
debt not hedged for accounting purposes.

    Interest on Long-Term Debt

    The year-over-year decreases in interest expense are primarily due to the
$501 million decrease in long-term debt at June 30, 2008 compared to June 30,
2007, including the impact of cross-currency interest rate exchange
agreements.
    This decrease in debt was the result of the $500 million decrease in bank
debt at June 30, 2008 compared to June 30, 2007. In addition, the prior year
interest expense included interest on several debt issues repaid during the
2007 period, including the February 2007 repayment at maturity of Cable's $450
million 7.60% Senior Notes due 2007, the May 2007 redemption of Wireless'
US$550 million Floating Rate Senior Notes due 2010, and the June 2007
redemption of Wireless' US$155 million 9.75% Senior Debentures due 2016.

    Operating Income

    The year-over-year increases in operating income reflect the impact of a
one-time charge of $452 million recorded in the second quarter of 2007 related
to the introduction of a cash settlement feature for employee stock options,
combined with the growth in revenue of $276 million and $587 million,
exceeding the growth in operating expenses, excluding the one-time charge of
$452 million, of $185 million and $239 million, in the three and six months
ended June 30, 2008, respectively. See the section entitled "Segment Review"
for a detailed discussion of respective segment results.

    Depreciation and Amortization Expense

    The increase in depreciation and amortization expense for the three and
six months ended June 30, 2008, compared to the corresponding periods of the
prior year, reflects an increase in depreciation on PP&E expenditures.

    Stock-based Compensation

    On May 28, 2007, our stock option plans were amended to attach cash
settled share appreciation rights ("SARs") to all new and previously granted
options. As a result, all outstanding stock options were classified as
liabilities and are now carried at their intrinsic value, as adjusted for
vesting, measured as the difference between the current stock price and the
option exercise price. The intrinsic value of the liability is now marked to
market each period and is amortized to expense over the period in which the
related services are rendered, which is usually the graded vesting period, or,
as applicable, over the period to the date an employee is eligible to retire,
whichever is shorter.
    A summary of stock-based compensation (recovery) expense is as follows:

    
                 ------------------------------------------------------------
                                Stock-based Compensation Expense (Recovery)
                                       Included in Operating, General
                                        and Administrative Expenses
    -------------   One-time   ----------------------------------------------
                    Non-cash     Three months ended       Six months ended
                  Charge Upon         June 30,                June 30,
    (In millions    Adoption   ----------------------------------------------
     of dollars)   in Q2 2007     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Wireless        $     46    $      8    $      4    $     (2)   $      7
    Cable                113          11           7         (22)         10
    Media                 84           9           4         (11)          6
    Corporate            209          25          17         (28)         24
                 ------------------------------------------------------------
                    $    452    $     53    $     32    $    (63)   $     47
    -------------------------------------------------------------------------
    

    At June 30, 2008, we have a liability of $366 million related to
stock-based compensation recorded at its intrinsic value, including stock
options, restricted share units and deferred share units. In the three and six
months ended June 30, 2008, $39 million and $60 million, respectively, was
paid to option holders upon exercise of options using the SAR feature,
including stock options and restricted share units.

    Adjusted Operating Profit

    Wireless, Cable and Media all contributed to the increase in adjusted
operating profit for the three months ended June 30, 2008 compared to the
three months ended June 30, 2007. For the six months ended June 30, 2008,
Wireless and Cable contributed to the increase in adjusted operating profit,
offset by a decrease in Media's adjusted operating profit, compared to the six
months ended June 30, 2007. Refer to the individual segment discussions for
details of the respective increases in adjusted operating profit.
    For the three months ended June 30, 2008, adjusted operating profit
increased to $1,089 million, from $930 million in the corresponding period of
the prior year. Adjusted operating profit for the three months ended June 30,
2008 and 2007, respectively, excludes: (i) stock-based compensation expense of
$53 million and $32 million; (ii) the impact of a one-time non-cash charge
upon adoption of $452 million resulting from the introduction of a cash
settlement feature for employee stock options in the three months ended June
30, 2007; (iii) integration and restructuring expenses of $3 million and $15
million; and (iv) an adjustment of CRTC Part II fees related to prior periods
resulting from a recent Federal Court of Appeal decision of $37 million for
the three months ended June 30, 2008.
    For the six months ended June 30, 2008, adjusted operating profit
increased to $2,067 million, from $1,744 million in the corresponding period
of the prior year. Adjusted operating profit for the six months ended June 30,
2008 and 2007, respectively, excludes: (i) stock-based compensation (recovery)
expense of $(63) million and $47 million; (ii) the impact of a one-time
non-cash charge upon adoption of $452 million resulting from the introduction
of a cash settlement feature for employee stock options in the six months
ended June 30, 2007; (iii) integration and restructuring expenses of $8
million and $16 million; and (iv) an adjustment of CRTC Part II fees related
to prior periods resulting from a recent Federal Court of Appeal decision of
$31 million for the six months ended June 30, 2008.
    For details on the determination of adjusted operating profit, which is a
non-GAAP measure, see the sections entitled "Supplementary Information" and
"Key Performance Indicators and Non-GAAP Measures".


    SEGMENT REVIEW

    WIRELESS
    --------

    Summarized Wireless Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     margin)                  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Postpaid              $ 1,371  $ 1,207     14  $ 2,665  $ 2,311     15
      Prepaid                    71       67      6      137      128      7
      One-way messaging           3        3      -        6        7    (14)
                            -------------------------------------------------
      Network revenue         1,445    1,277     13    2,808    2,446     15
      Equipment sales            77       87    (11)     145      149     (3)
                            -------------------------------------------------
    Total operating revenue   1,522    1,364     12    2,953    2,595     14
                            -------------------------------------------------
    Operating expenses
     before the undernoted
      Cost of equipment
       sales                    156      173    (10)     301      317     (5)
      Sales and marketing
       expenses                 151      146      3      291      286      2
      Operating, general
       and administrative
       expenses                 446      381     17      887      747     19
                            -------------------------------------------------
                                753      700      8    1,479    1,350     10
                            -------------------------------------------------
    Adjusted operating
     profit(1)(2)               769      664     16    1,474    1,245     18
    Stock option plan
     amendment(3)                 -      (46)   n/m        -      (46)   n/m
    Stock-based compensation
     recovery (expense)(3)       (8)      (4)   100        2       (7)   n/m
                            -------------------------------------------------
    Operating profit(1)     $   761  $   614     24  $ 1,476  $ 1,192     24
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     profit margin as % of
     network revenue(1)       53.2%    52.0%           52.5%    50.9%

    Additions to PP&E(1)    $   251  $   174     44  $   414  $   406      2
    -------------------------------------------------------------------------

    (1) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (2) Adjusted operating profit includes a loss of $3 million and
        $9 million, and $8 million and $15 million, for the three and
        six months ended June 30, 2007 and 2008, respectively, related to the
        Inukshuk wireless broadband initiative.
    (3) See the section entitled "Stock-based Compensation".


    Summarized Wireless Subscriber Results

    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (Subscriber statistics           June 30,                 June 30,
     in thousands, except   -------------------------------------------------
     ARPU, churn and usage)   2008     2007     Chg    2008     2007     Chg
    -------------------------------------------------------------------------

    Postpaid
      Gross additions           283      322    (39)     576      608    (32)
      Net additions              92      133    (41)     188      228    (40)
      Adjustment to postpaid
       subscriber base(1)         -      (65)    65        -      (65)    65
      Total postpaid retail
       subscribers                                     6,102    5,561    541
      Average monthly
       revenue per user
       ("ARPU")(2)          $ 75.48  $ 72.65 $ 2.83  $ 73.95  $ 70.18 $ 3.77
      Average monthly usage
       (minutes)                604      576     28      588      555     33
      Monthly churn           1.06%    1.15% (0.09%)   1.08%    1.16% (0.08%)

    Prepaid
      Gross additions           149      156     (7)     282      300    (18)
      Net additions (losses)      8        5      3      (21)      (3)   (18)
      Adjustment to prepaid
       subscriber base(1)         -      (26)    26        -      (26)    26
      Total prepaid retail
       subscribers                                     1,403    1,351     52
      ARPU(2)               $ 16.86  $ 16.36 $ 0.50  $ 16.27  $ 15.58 $ 0.69
      Monthly churn           3.39%    3.68% (0.29%)   3.60%    3.69% (0.09%)
    -------------------------------------------------------------------------

    (1) During the second quarter of 2007, Wireless decommissioned its Time
        Division Multiple Access ("TDMA") and analog networks and
        simultaneously revised certain aspects of its subscriber reporting
        for data-only subscribers. The deactivation of the remaining TDMA
        subscribers and the change in subscriber reporting resulted in the
        removal of approximately 65,000 subscribers from Wireless' postpaid
        subscriber base and the removal of approximately 26,000 subscribers
        from Wireless' prepaid subscriber base. These adjustments are not
        included in the determination of postpaid or prepaid monthly churn.
    (2) As defined. See the section entitled "Key Performance Indicators and
        Non-GAAP Measures". As calculated in the "Supplementary Information"
        section.
    

    Wireless Network Revenue

    The increase in network revenue for the three and six months ended June
30, 2008, respectively, compared to the corresponding periods of the prior
year, was driven principally by the continued growth of Wireless' postpaid
subscriber base and improvements in postpaid ARPU. The year-over-year increase
in postpaid ARPU reflects the impact of higher wireless data revenue, as well
as increased usage of long-distance and greater penetration of calling
features.
    Prepaid revenue increased as a result of both improved ARPU and the
year-over-year growth in the subscriber base. The year-over-year improvement
in prepaid ARPU is the result of both increased data usage and greater average
minutes of voice usage resulting from more appealing prepaid offerings aimed
at higher ARPU customers.
    Wireless' success in the continued reduction in postpaid churn reflects
targeted customer retention activities and continued enhancements in network
coverage and quality.
    The year-over-year reduction in the number of postpaid subscriber net
additions reflects the unusually strong second quarter of 2007 during which
wireless number portability ("WNP") became effective, increased competitive
activity in the market and what we believe may have been a modest slowdown in
overall wireless purchasing activity during the second quarter of 2008.
    For the three and six months ended June 30, 2008, wireless data revenue
increased by 34% and 40%, respectively, over the corresponding periods of
2007, to $224 million and $431 million, respectively. This increase in data
revenue reflects the continued growth of text and multimedia messaging
services, wireless Internet access, BlackBerry and other PDA devices,
downloadable ring tones, music and games, and other wireless data services.
For the three and six months ended June 30, 2008, data revenue represented
approximately 15.5% and 15.3%, respectively, of total network revenue,
compared to 13% in each of the corresponding periods of 2007.

    Wireless Equipment Sales

    The year-over-year decrease in revenue from equipment sales, including
activation fees and net of equipment subsidies, reflects the lower volume of
gross additions in the three and six months ended June 30, 2008 compared to
the corresponding periods of the prior year.

    Wireless Operating Expenses

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of dollars,         June 30,                 June 30,
     except per subscriber  -------------------------------------------------
     statistics)              2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Operating expenses
      Cost of equipment
       sales                $   156  $   173    (10)  $  301  $   317     (5)
      Sales and marketing
       expenses                 151      146      3      291      286      2
      Operating, general
       and administrative
       expenses                 446      381     17      887      747     19
                            -------------------------------------------------
    Operating expenses
     before the undernoted      753      700      8    1,479    1,350     10
    Stock option plan
     amendment(1)                 -       46    n/m        -       46    n/m
    Stock-based compensation
     (recovery) expense(1)        8        4    100       (2)       7    n/m
                            -------------------------------------------------
    Total operating
     expenses               $   761  $   750      1  $ 1,477  $ 1,403      5
                            -------------------------------------------------
                            -------------------------------------------------
    Average monthly operating
     expense per subscriber
     before sales and
     marketing expenses(2)  $ 21.38  $ 20.28      5  $ 21.44  $ 20.24      6

    Sales and marketing costs
     per gross subscriber
     addition(2)            $   439  $   385     14  $   425  $   386     10
    -------------------------------------------------------------------------

    (1) See the section entitled "Stock-based Compensation".
    (2) As defined. See the section entitled "Key Performance Indicator and
        Non-GAAP Measures" section. As calculated in the "Supplementary
        Information" section. Average monthly operating expense per
        subscriber before sales and marketing expenses excludes stock-based
        compensation (recovery) expense.
    

    Cost of equipment sales decreased for the three and six months ended June
30, 2008, compared to the corresponding periods of the prior year. This is
primarily the result of the lower gross additions and corresponding level of
handset subsidies.
    The modest increase in sales and marketing expenses for the three and six
months ended June 30, 2008 compared with the corresponding periods of the
prior year, is primarily related to marketing efforts targeted at acquiring
higher ARPU customers on longer term contracts.
    During the second quarter, Wireless launched its Fido UNO and Rogers Home
Calling Zone plans which allow customers to make unlimited calls within their
home using their wireless phone via a home WiFi broadband connection. This
converged service utilizes technology known as Unlicensed Mobile Access and
provides Rogers' customers the convenience of having one phone, one number,
one address book and one voicemail which they can use inside and outside of
their home.
    The year-over-year increases in operating, general and administrative
expenses in the three and six months ended June 30, 2008, compared to the
corresponding periods of 2007, were partially driven by growth in the Wireless
subscriber base. In addition, there were higher costs to support increased
usage of data and roaming services, as well as increases in customer care,
credit and collection, and information technology costs as a result of the
complexity of supporting more sophisticated services and devices. These costs
were partially offset by savings related to operating and scale efficiencies
across various functions.
    Total retention spending, including subsidies on handset upgrades, was
$96 million and $189 million, respectively, in the three and six months ended
June 30, 2008, compared to $92 million and $191 million, respectively, in the
corresponding periods of the prior year. Growth in the subscriber base has
increased retention spending slightly in the three months ended June 30, 2008,
compared to the corresponding period of the prior year. In the six months
ended June 30, 2007, additional retention spending was incurred due to the
transition of customers to Wireless' more advanced Global System for Mobile
Communications ("GSM") network and devices from our older generation Time
Division Multiple Access ("TDMA") network, which was decommissioned in May
2007, and the retention efforts surrounding the introduction of WNP in March
2007.

    Wireless Adjusted Operating Profit

    The strong year-over-year growth in adjusted operating profit was the
result of the significant growth in network revenue. As a result, Wireless'
adjusted operating profit margin on network revenue (which excludes equipment
sales revenue) increased to 53.2% and 52.5%, respectively, for the three and
six months ended June 30, 2008, compared to 52.0% and 50.9% in the
corresponding periods of 2007, respectively.

    Recent Developments

    We have entered into a contract with Apple Canada Inc. to sell the iPhone
3G handsets throughout Canada. Pursuant to the agreement, we have a commitment
to purchase a specified number of handsets, resulting in a minimum commitment
of $150 million. We have agreed to subsidize the retail price of these
handsets during the term of the agreement.
    On June 9, 2008, Wireless announced that it would launch the Apple iPhone
3G in Canada. The launch took place on July 11, 2008, under both of our Rogers
Wireless and Fido brands. A wide variety of service plans are available for
voice and data combined, with all price plans requiring three year term
contracts.
    The iPhone 3G handsets are currently priced at $199 and $299 for the 8MB
and 16MB models, respectively, which reflects significant handset subsidies
that Wireless incurs for each unit sold. Depending on, among other things, the
volume of iPhones that Wireless sells, it is likely that Wireless' cost of
acquisition ("COA") per subscriber in the second half of 2008 will increase
from the first two quarters of 2008. However, as it is anticipated that iPhone
subscribers will generally subscribe to both voice and data service plans, the
ARPU per iPhone 3G subscriber is also expected to be higher than Wireless'
average postpaid ARPU that is generated from the majority of its other
devices. As such, Wireless' ARPU levels are expected to be positively impacted
over the term of the iPhone 3G subscriber contracts. See the sections entitled
"Caution Regarding Forward-Looking Statements, Risks and Assumptions" and
"2008 Guidance" below.
    Wireless participated in the AWS spectrum auction in Canada which
commenced on May 27, 2008 and concluded on July 21, 2008. In addition to the
90 MHz of AWS spectrum being auctioned, 10 MHz of 1900 PCS and 5 MHz of 1670
MHz were available through the auction process. As at July 21, 2008, Wireless'
committed expenditure is $1.0 billion. Wireless is required to submit payment
in full by September 3, 2008. Only when Industry Canada has received full
payment and has reviewed and approved the required documentation pertaining to
Canadian ownership and other matters, will the licences be granted.

    Wireless Additions to Property, Plant and Equipment

    Wireless additions to PP&E are classified into the following categories:

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                                     June 30,                 June 30,
                            -------------------------------------------------
    (In millions of dollars)  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Additions to PP&E
      HSPA ("High-Speed
       Packet Access")      $   120  $    74     62  $   182  $   223    (18)
      Network - capacity         52       42     24       93       83     12
      Network - other            51       25    104       88       41    115
      Information and
       technology and other      28       30     (7)      50       51     (2)
      Inukshuk                    -        3   (100)       1        8    (88)
                            -------------------------------------------------
    Total additions to
     PP&E                   $   251  $   174     44  $   414  $   406      2
    -------------------------------------------------------------------------
    

    Additions to Wireless PP&E reflect spending on network capacity, such as
radio channel additions and network enhancing features. Additions to PP&E
associated with the deployment of HSPA were mainly for the continued roll-out
to markets across Canada and the upgrade to faster network throughput speeds.
Other network-related PP&E additions included national site build activities,
additional spending on test and monitoring equipment, network sectorization
work, operating support system activities, investments in network reliability
and renewal initiatives, and new product platforms. Information and technology
and other initiatives include billing and back office system upgrades, and
other facilities and equipment spending.


    CABLE
    -----

    Summarized Cable Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     margin)                 2008(1)  2007(2) % Chg   2008(1)  2007(2) % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Cable Operations(3)   $   718  $   646     11  $ 1,413  $ 1,266     12
      RBS                       130      146    (11)     263      291    (10)
      Rogers Retail              92       93     (1)     192      184      4
      Intercompany
       eliminations              (2)      (4)   (50)      (5)      (5)     -
                            -------------------------------------------------
    Total operating revenue     938      881      6    1,863    1,736      7
                            -------------------------------------------------
    Operating profit (loss)
     before the undernoted
      Cable Operations(3)       293      243     21      571      477     20
      RBS                        16        4    n/m       33       (3)   n/m
      Rogers Retail              (5)      (4)    25       (2)      (3)   (33)
                            -------------------------------------------------
    Adjusted operating
     profit(4)                  304      243     25      602      471     28
    Stock option plan
     amendment(5)                 -     (113)  (100)       -     (113)  (100)
    Stock-based compensation
     recovery (expense)(5)      (11)      (7)    57       22      (10)   n/m
    Integration and
     restructuring expenses(6)   (3)     (15)   (80)      (8)     (16)   (50)
    Adjustment for CRTC
     Part II fees decision(7)   (30)       -    n/m      (25)       -    n/m
                            -------------------------------------------------
    Operating profit(4)     $   260  $   108    141  $   591  $   332     78
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     profit (loss) margin(4)
      Cable Operations(3)     40.8%    37.6%           40.4%    37.7%
      RBS                     12.3%     2.7%           12.5%    (1.0%)
      Rogers Retail           (5.4%)   (4.3%)          (1.0%)   (1.6%)

    Additions to PP&E(4)
      Cable Operations(3)   $   185  $   163     13  $   306  $   288      6
      RBS                        10       17    (41)      14       40    (65)
      Rogers Retail               4        4      -        7        7      -
                            -------------------------------------------------
    Total additions to
     PP&E                   $   199  $   184      8  $   327  $   335     (2)
    -------------------------------------------------------------------------

    (1) The operating results of Aurora Cable are included in Cable's results
        of operations from the date of acquisition on June 12, 2008.
    (2) The operating results of Futureway are included in Cable's results of
        operations from the date of acquisition on June 22, 2007.
    (3) Cable Operations segment includes Core Cable services, Internet
        services and Rogers Home Phone services.
    (4) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (5) See the section entitled "Stock-based Compensation".
    (6) Costs incurred relate to the integration of Call-Net and Futureway,
        the restructuring of RBS and the closure of certain Rogers Retail
        stores.
    (7) Relates to an adjustment for CRTC Part II fees related to prior
        periods resulting from a recent Federal Court of Appeal decision. See
        the section entitled "Government Regulation and Regulatory
        Developments" for further details.
    

    The following segment discussions provide a detailed discussion of the
Cable operating results.


    CABLE OPERATIONS

    Summarized Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     margin)                  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Core Cable            $   417  $   384      9  $   820  $   757      8
      Internet                  171      152     13      337      295     14
      Rogers Home Phone         130      110     18      256      214     20
                            -------------------------------------------------
    Total Cable Operations
     operating revenue          718      646     11    1,413    1,266     12
                            -------------------------------------------------
    Operating expenses
     before the undernoted
      Sales and marketing
       expenses                  64       61      5      128      122      5
      Operating, general
       and administrative
       expenses                 361      342      6      714      667      7
                            -------------------------------------------------
                                425      403      5      842      789      7
                            -------------------------------------------------
    Adjusted operating
     profit(1)                  293      243     21      571      477     20
    Stock option plan
     amendment(2)                 -     (106)  (100)       -     (106)  (100)
    Stock-based compensation
     recovery (expense)(2)      (10)      (7)    43       21      (10)   n/m
    Integration and
     restructuring expenses(3)   (1)      (3)   n/m       (1)      (4)   n/m
    Adjustment for CRTC
     Part II fees decision(4)   (30)       -    n/m      (25)       -    n/m
                            -------------------------------------------------
    Operating profit(1)     $   252  $   127     98  $   566  $   357     59
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     profit margin(1)         40.8%    37.6%           40.4%    37.7%
    -------------------------------------------------------------------------

    (1) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (2) See the section entitled "Stock-based Compensation".
    (3) Costs incurred relate to the integration of Call-Net and Futureway.
    (4) Relates to an adjustment for CRTC Part II fees related to prior
        periods resulting from a recent Federal Court of Appeal decision. See
        the section entitled "Government Regulation and Regulatory
        Developments" for further details.


    Summarized Subscriber Results

    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (Subscriber statistics           June 30,                 June 30,
     in thousands,          -------------------------------------------------
     except ARPU)             2008    2007(1)   Chg    2008    2007(1)   Chg
    -------------------------------------------------------------------------

    Cable homes passed                                 3,648    3,515    133

    Basic Cable
      Net losses(2)             (13)     (12)    (1)     (13)     (11)    (2)
      Total Basic Cable
       subscribers(3)                                  2,298    2,266     32
      Core Cable ARPU(4)    $ 60.73  $ 56.34 $ 4.39  $ 59.62  $ 55.45 $ 4.17

    High-speed Internet
      Net additions              13       21     (8)      54       63     (9)
      Total Internet
       subscribers
       (residential)(3)(5)                             1,534    1,364    170
      Internet ARPU(4)      $ 37.41  $ 36.87  $ 0.54 $ 37.19  $ 36.33 $ 0.86

    Digital Cable
      Terminals, net additions   54       61      (7)    157      181    (24)
      Total terminals in
       service(3)                                      2,036    1,678    358
      Households, net
       additions                 23       34     (11)     72      103    (31)
      Total households(3)                              1,431    1,237    194

    Cable telephony
     subscriber lines
      Net additions and
       migrations(6)(7)          41       69     (28)     87      143    (56)
      Total Cable telephony
       subscriber lines(3)                               745      509    236

    Circuit-switched
     subscriber lines
      Net losses and
       migrations(6)(7)         (22)     (10)    (12)    (36)     (27)    (9)
      Total circuit-switched
       subscriber lines                                  298      344    (46)

    Revenue Generating Units
     ("RGUs")(8)
      Net additions              42      102     (60)    164      271   (107)
      Total RGUs                                       6,306    5,720    586
    -------------------------------------------------------------------------

    (1) Certain of the comparative figures have been reclassified to conform
        to the current year presentation.
    (2) Basic cable net losses for the six months ended June 30, 2008 reflect
        the impact of the conversion of a large municipal housing authority's
        cable TV arrangement with Rogers from a bulk to an individual tenant
        pay basis, which had the impact of reducing basic cable subscribers
        by approximately 5,000.
    (3) Included in total subscribers at June 30, 2008 are approximately
        16,000 basic cable subscribers, 11,000 high-speed Internet
        subscribers, 8,000 terminals in service, 6,000 digital cable
        households and 2,000 cable telephony subscriber lines, representing
        35,000 RGUs, acquired from Aurora Cable. These subscribers are not
        included in net additions for the three and six months ended
        June 30, 2008.
    (4) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (5) During the first quarter of 2008, a change in subscriber reporting
        resulted in the reclassification of approximately 4,000 high-speed
        Internet subscribers from RBS' broadband data circuits to Cable
        Operations' high-speed Internet subscriber base. These subscribers
        are not included in net additions for the six months ended
        June 30, 2008.
    (6) Included in total subscribers at June 30, 2007 are approximately
        3,000 high-speed Internet subscribers and 21,000 circuit-switched
        telephony subscriber lines, representing 24,000 RGUs, acquired from
        Futureway. These subscribers are not included in net additions for
        the three and six months ended June 30, 2007.
    (7) Includes approximately 13,000 and 16,000 migrations from circuit-
        switched to cable telephony for the three and six months ended
        June 30, 2008, respectively, and includes approximately 14,000 and
        32,000 migrations from circuit-switched to cable telephony for the
        three and six months ended June 30, 2007, respectively.
    (8) RGUs are comprised of basic cable subscribers, digital cable
        households, residential high-speed Internet subscribers and Rogers
        Home Phone subscribers.
    

    Core Cable Revenue

    Within Cable Operations, the increase in Core Cable revenue for the three
and six months ended June 30, 2008, compared to the corresponding periods of
the prior year, reflects the growing penetration of our digital cable product
offerings, including increased HDTV adoption and increasing usage of the
On-Demand platform, combined with the year-over-year increase in the number of
basic cable customers. In addition, the impact of the rate increases
introduced in March 2008 and March 2007 contributed to the growth in revenue
of both our digital and basic cable services.
    From a subscriber perspective, the second quarter of each year is
historically a seasonally slow period during which colleges and universities
break for the summer and Cable experiences a relatively high number of
seasonal disconnects as a result. Many of these subscribers will in turn
reactivate their services during the third quarter coincident with the start
of the new academic year. As Cable's penetration of digital cable, Internet
and Home Phone continue to increase, the impact of seasonal disconnections
increases as well and this effect contributed to the year-over-year decline in
the number of net RGU additions at Cable this quarter.
    Basic cable net losses for the three months ended June 30, 2008 reflect
the normal seasonality, while the net losses for the six months ended June 30,
2008 were also negatively impacted by the conversion of a large municipal
housing authority's cable TV arrangement with Rogers from a bulk to an
individual tenant pay basis, which had the impact of reducing basic cable
subscribers by approximately 5,000.
    The digital cable subscriber base grew by 16% from June 30, 2007 to June
30, 2008. Digital penetration now represents 62% of basic cable households.
Strong demand for HD and personal video recorder ("PVR") digital set-top box
equipment and pay-per-use purchases, combined with the success of
multi-product marketing campaigns, which package cable television, high-speed
Internet and Rogers Home Phone services, contributed to the growth in the
digital subscriber base of 23,000 and 72,000 households, respectively, in the
three and six months ended June 30, 2008. HD subscribers at Cable were up 59%
from June 30, 2007 to June 30, 2008, from 287,000 to 455,000.

    Internet (Residential) Revenue

    The increase in Internet revenues of 13% and 14% for the three and six
months ended June 30, 2008 respectively, from the corresponding periods in
2007, primarily reflects the 12% year-over-year increase in the number of
Internet subscribers combined with price increases to our Internet offerings.
    While the three months ended June 30, 2008 were impacted to a greater
extent than 2007 by seasonal disconnects, Internet penetration continued to
increase and now stands at approximately 67% of basic cable households and 42%
of homes passed with approximately 1.5 million total Internet customers.

    Rogers Home Phone Revenue

    The revenue growth of Rogers Home Phone was 18% and 20% for the three and
six months ended June 30, 2008, respectively, due to an increased customer
base from 853,000 at June 30, 2007 to 1,043,000 at June 30, 2008. Cable
continues to focus on growing cable telephony while de-emphasizing
circuit-switched phone lines. Cable telephony service lines experienced growth
of 41,000 and 87,000 for the three and six months ended June 30, 2008,
respectively. The net addition of service lines is lower than the comparable
2007 three and six month periods due to an increased competitive response by
the Telco incumbents and fewer migrations from the circuit-switched to the
cable telephony platform. Circuit-switched services incurred greater net line
losses to date in 2008, compared to the corresponding periods of 2007, as
Cable has chosen to reduce sales and marketing activity on this product. The
cable telephony subscriber base grew 46% from June 30, 2007 to June 30, 2008.
For the six months ended June 30, 2008, cable telephony subscribers
represented 32% of basic cable subscribers and 22% of the homes passed in
which cable telephony is available, compared to 22% and 16% respectively, for
the six months ended June 30, 2007.

    Cable Operations Operating Expenses

    The increase in Cable's operating expenses for the three and six months
ended June 30, 2008 compared to the corresponding periods of 2007 were
primarily driven by the timing of promotional activities and the increases in
digital cable, Internet and Rogers Home Phone subscriber bases, resulting in
higher costs associated with programming content, customer care, technical
service and network operations. Partially offsetting these increases was a
reduction in costs associated with Cable's Internet product resulting from a
renegotiated agreement with Yahoo! which became effective January 1, 2008, and
overall cost efficiencies across various functions. The cost efficiency gains
are due to achieving operational scale and improving the customer experience
resulting in lower related costs.

    Cable Operations Adjusted Operating Profit

    The year-over-year growth in adjusted operating profit was primarily the
result of growth in revenue and subscribers, combined with the reduced costs
associated with Internet services. As a result, Cable Operations adjusted
operating profit margins increased to 40.8% and 40.4%, respectively, for the
three and six months ended June 30, 2008, compared to 37.6% and 37.7% in the
respective corresponding periods in 2007.
    Cable Operations' base of circuit-switched local telephony customers,
which was acquired in July 2005 through the acquisition of Call-Net, is
generally less capital intensive than its on-net cable telephony business but
also generates lower margins. As a result, the inclusion of the
circuit-switched local telephony business, which includes approximately
298,000 customers which have not been migrated to our cable network telephony
platform, with Cable Operations' telephony business, has a dilutive impact on
operating profit margins.


    ROGERS BUSINESS SOLUTIONS

    Summarized Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     margin)                  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    RBS operating revenue   $   130  $   146    (11) $  263  $   291     (10)
                            -------------------------------------------------
    Operating expenses
     before the undernoted
      Sales and marketing
       expenses                   6       19    (68)     13       40     (68)
      Operating, general and
       administrative
       expenses                 108      123    (12)    217      254     (15)
                            -------------------------------------------------
                                114      142    (20)    230      294     (22)
                            -------------------------------------------------
    Adjusted operating
     profit (loss)(1)            16        4    n/m      33       (3)    n/m
    Stock option plan
     amendment(2)                 -       (2)  (100)      -       (2)   (100)
    Stock-based compensation
     recovery(2)                  -        -    n/m       1        -     n/m
    Integration and
     restructuring
     expenses(3)                 (2)     (12)   (83)     (3)     (12)    (75)
                            -------------------------------------------------
    Operating profit
     (loss)(1)              $    14  $   (10)   n/m  $   31  $   (17)    n/m
                            -------------------------------------------------
                            -------------------------------------------------

    Adjusted operating
    profit (loss) margin(1)   12.3%     2.7%          12.5%    (1.0%)
    -------------------------------------------------------------------------

    (1) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (2) See the section entitled "Stock-based Compensation".
    (3) Costs incurred relate to the integration of Call-Net and the
        restructuring of Rogers Business Solutions.


    Summarized Subscriber Results

    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                                     June 30,                 June 30,
    (Subscriber statistics  -------------------------------------------------
     in thousands)            2008     2007     Chg    2008     2007     Chg
    -------------------------------------------------------------------------

    Local line
     equivalents(1)(2)
      Net additions (losses)     (6)       7    (13)     (22)      10    (32)
      Total local line
       equivalents                                       215      229    (14)

    Broadband data circuits(3)
      Net additions (losses)     (1)       1     (2)      (2)       1     (3)
      Total broadband data
       circuits                                           30       33     (3)
    -------------------------------------------------------------------------

    (1) Local line equivalents include individual voice lines plus Primary
        Rate Interfaces ("PRIs") at a factor of 23 voice lines each.
    (2) Included in total subscribers at June 30, 2007 are approximately
        14,000 local line equivalents and 1,000 broadband data circuits
        acquired from Futureway. These subscribers are not included in net
        additions for the three and six months ended June 30, 2007.
    (3) Broadband data circuits are those customer locations accessed by data
        networking technologies including DOCSIS, DSL, E10/100/1000, OC 3/12
        and DS 1/3.
    

    RBS Revenue

    The decrease in RBS revenues reflects a decline in lower margin resale
and long-distance businesses, with a shift in focus to increasing the strength
of profitable relationships and leveraging revenue opportunities over Cable's
existing network. RBS continues to refocus on retaining its existing
medium-enterprise and carrier customer base, but late in 2007 it suspended
aggressive sales and marketing initiatives related to acquiring new medium and
large business customers. RBS continues to evaluate areas of profitable
business within the medium and large enterprise segments, while Core Cable
focuses on continuing to grow Rogers' penetration of Internet and telephony
services into the small business and small office home office markets within
Cable's territory. For the three and six months ended June 30, 2008, RBS
long-distance revenue declined $12 million and $26 million, respectively, and
data revenue declined $4 million and $5 million, respectively.

    RBS Operating Expenses

    Carrier charges, included in operating, general and administrative
expenses, decreased by $8 million and $21 million for the three and six months
ended June 30, 2008, respectively, due to the decrease in revenue and focus on
on-net services. Carrier charges still represented approximately 55% and 54%
of revenue in the three and six months ended June 30, 2008, compared to 55%
and 57% of revenue in the corresponding periods of 2007.
    The decreases in other operating, general and administrative expenses for
the three and six months ended June 30, 2008, $20 million and $43 million,
respectively, are primarily related to lower sales, marketing and information
technology costs compared to the corresponding periods of the prior year. The
reduction in sales and marketing expenses for the three and six months ended
June 30, 2008, compared to the corresponding periods of the prior year,
reflects streamlining initiatives, including headcount reductions, associated
with the refocusing of RBS' business.

    RBS Adjusted Operating Profit

    The changes described above resulted in RBS adjusted operating profit of
$16 million and $33 million for the three and six months ended June 30, 2008,
compared to an adjusted operating profit (loss) of $4 million and $(3) million
in the corresponding periods of 2007.


    ROGERS RETAIL

    Summarized Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                                     June 30,                 June 30,
                            -------------------------------------------------
    (In millions of dollars)  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Rogers Retail
     operating revenue      $    92  $    93     (1) $   192  $   184      4
                            -------------------------------------------------

    Operating expenses           97       97      -      194      187      4
                            -------------------------------------------------
    Adjusted operating
     loss(1)                     (5)      (4)    25       (2)      (3)   (33)
    Stock option plan
     amendment(2)                 -       (5)  (100)       -       (5)  (100)
    Stock-based compensation
     expense(2)                  (1)       -    n/m        -        -    n/m
    Integration and
     restructuring
     expenses(3)                  -        -    n/m       (4)       -    n/m
                            -------------------------------------------------
    Operating loss(1)       $    (6) $    (9)   (33) $    (6) $    (8)   (25)
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     loss margin(1)           (5.4%)   (4.3%)          (1.0%)   (1.6%)
    -------------------------------------------------------------------------

    (1) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (2) See the section entitled "Stock-based Compensation".
    (3) Costs related to the closure of certain Rogers Retail stores.
    

    Rogers Retail Revenue

    The increase in Rogers Retail revenue of $8 million for the six months
ended June 30, 2008, compared to the corresponding period of 2007, was the
result of increased sales of wireless products and services, partially offset
by the continued decline in video rentals.

    Rogers Retail Adjusted Operating Profit

    Adjusted operating profit at Rogers Retail was relatively unchanged for
the three and six months ended June 30, 2008, compared to the corresponding
periods of the prior year, and reflects the trends noted above.


    CABLE ADDITIONS TO PP&E

    The Cable Operations segment categorizes its PP&E expenditures according
to a standardized set of reporting categories that were developed and agreed
to by the U.S. cable television industry and which facilitate comparisons of
additions to PP&E between different cable companies. Under these industry
definitions, Cable Operations additions to PP&E are classified into the
following five categories:

    
    -   Customer premises equipment ("CPE"), which includes the equipment for
        digital set-top terminals, Internet modems and the associated
        installation costs;

    -   Scalable infrastructure, which includes non-CPE costs to meet
        business growth and to provide service enhancements, including many
        of the costs to-date of the cable telephony initiative;

    -   Line extensions, which includes network costs to enter new service
        areas;

    -   Upgrades and rebuild, which includes the costs to modify or replace
        existing coaxial cable, fibre-optic equipment and network
        electronics; and

    -   Support capital, which includes the costs associated with the
        purchase, replacement or enhancement of non-network assets.

    Summarized Cable PP&E Additions

    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                                     June 30,                 June 30,
                            -------------------------------------------------
    (In millions of dollars)  2008     2007   % Chg    2008     2007   % Chg
    -------------------------------------------------------------------------

    Additions to PP&E
      Customer premises
       equipment            $    53  $    69    (23) $    99  $   135    (27)
      Scalable infrastructure    75       36    108      110       58     90
      Line extensions            12       15    (20)      21       28    (25)
      Upgrades and rebuild        5       15    (67)       8       19    (58)
      Support capital            40       28     43       68       48     42
                            -------------------------------------------------
    Total Cable Operations      185      163     13      306      288      6
    RBS                          10       17    (41)      14       40    (65)
    Rogers Retail                 4        4      -        7        7      -
                            -------------------------------------------------
                            $   199  $   184      8  $   327  $   335     (2)
    -------------------------------------------------------------------------
    

    The increase in Cable Operations PP&E additions for the quarter ended
June 30, 2008, is primarily attributable to a larger subscriber base and
increased demand for data products. This resulted in increased spending on
scalable infrastructure, as well as increased support capital. Spending on CPE
has decreased in the three and six months ended June 30, 2008, compared to the
corresponding periods of the prior year, due to the continued drawdown of
inventory levels.
    The reduction in RBS PP&E additions for the three and six months ended
June 30, 2008, compared to the corresponding periods of the prior year,
reflects the refocusing of RBS's business as discussed above.
    Rogers Retail PP&E additions are attributable to improvements made to
certain retail stores.


    MEDIA
    -----

    Summarized Media Financial Results

    
    -------------------------------------------------------------------------
                                Three months ended       Six months ended
    (In millions of                  June 30,                 June 30,
     dollars, except        -------------------------------------------------
     margin)                2008(1)(2)  2007  % Chg  2008(1)(2)  2007  % Chg
    -------------------------------------------------------------------------

    Operating revenue       $   409  $   348     18  $   716  $   614     17
                            -------------------------------------------------
    Operating expenses
     before the undernoted      357      303     18      663      550     21
                            -------------------------------------------------
    Adjusted operating
     profit(3)                   52       45     16       53       64    (17)
    Stock option plan
     amendment(4)                 -      (84)  (100)       -      (84)  (100)
    Stock-based compensation
     recovery (expense)(4)       (9)      (4)   125       11       (6)   n/m
    Adjustment for CRTC
     Part II fees decision(5)    (7)       -    n/m       (6)       -    n/m
                            -------------------------------------------------
    Operating profit
     (loss)(3)              $    36  $   (43)   n/m  $    58  $   (26)  n/m
                            -------------------------------------------------
                            -------------------------------------------------
    Adjusted operating
     profit margin(3)         12.7%    12.9%            7.4%    10.4%

    Additions to property,
     plant and equipment(3) $    17  $    11     55  $    38  $    18    111
    -------------------------------------------------------------------------

    (1) The operating results of Citytv are included in Media's results of
        operations from the date of acquisition on October 31, 2007.
    (2) The operating results of channel m are included in Media's results of
        operations from the date of acquisition on April 30, 2008.
    (3) As defined. See the section entitled "Key Performance Indicators and
        Non-GAAP Measures".
    (4) See the section entitled "Stock-based Compensation".
    (5) Relates to an adjustment for CRTC Part II fees related to prior
        periods resulting from a recent Federal Court of Appeal decision. See
        the section entitled "Government Regulation and Regulatory
        Developments" for further details.
    

    Media Revenue

    The increase in Media revenue for the three and six months ended June 30,
2008, over the corresponding periods in 2007, primarily reflects the
acquisition of Citytv. This acquisition closed on October 31, 2007 and
contributed $46 million and $80 million, respectively, to revenue in the three
and six months ended June 30, 2008, or approximately 75% and 78%,
respectively, of the revenue increases. In addition, Media's OMNI Television,
Radio and Sportsnet businesses each experienced organic revenue growth
compared to the three and six months ended June 30, 2007. These increases were
partially offset by softer advertising revenue at Publishing, modestly lower
sales of fine jewelry and home goods at The Shopping Channel, and the
variation in timing of revenue-sharing payments from Major League Baseball at
Sports Entertainment.

    Media Operating Expenses

    The increase in Media operating expenses for the three and six months
ended June 30, 2008, compared to the corresponding periods in 2007, primarily
reflects the addition of $41 million and $77 million, respectively, of
operating costs relating to the acquired Citytv business, the $9 million
charge for terminating the concession agreement at Rogers Centre during the
first quarter of 2008, as well as the buyout of certain player and coaching
contracts during the second quarter of 2008.

    Media Adjusted Operating Profit

    The increase in Media's adjusted operating profit for the three months
ended June 30, 2008, compared to the corresponding period of 2007, primarily
reflects the addition of the Citytv business resulting in the contribution of
$5 million to adjusted operating profit. The decrease in Media's adjusted
operating profit for the six months ended June 30, 2008, compared to the
corresponding period of the prior year, primarily reflects a contract
termination fee for concession services at Rogers Centre, buyouts of player
and coaching contracts, foreign exchange on U.S. dollar revenues, programming
cost increases at Sportsnet, and revenue softness at Publishing and The
Shopping Channel.

    Media Additions to PP&E

    The majority of Media's PP&E additions in the three and six months ended
June 30, 2008, reflect building improvements related to the relocation of
Rogers Sportsnet production facilities, the continued investment in a new
television production facility and the acquisition of certain assets as part
of the termination of a concession services agreement at Rogers Centre.

    CONSOLIDATED LIQUIDITY AND CAPITAL RE

SOURCES Operations Three Months Ended June 30, 2008 For the three months ended June 30, 2008, cash generated from operations before changes in non-cash operating items, which is calculated by removing the effect of all non-cash items from net income, increased to $952 million from $786 million in the corresponding period of 2007. The $166 million increase is primarily the result of a $159 million increase in adjusted operating profit and a $19 million decrease in interest expense. Taking into account the changes in non-cash working capital items for the three months ended June 30, 2008, cash generated from operations was $878 million, compared to $589 million in the corresponding period of 2007. The cash generated from operations of $878 million, together with the receipt of $2 million from the issuance of Class B Non-Voting shares under the exercise of employee stock options, resulted in total net funds of approximately $880 million generated or raised in the three months ended June 30, 2008. Net funds used during the three months ended June 30, 2008 totalled approximately $858 million, the details of which include the following: - additions to PP&E of $453 million, including $28 million of related changes in non-cash working capital; - net repayments under our bank credit facility aggregating $35 million; - the payment of quarterly dividends of $160 million on our Class A Voting and Class B Non-Voting shares; - the purchase for cancellation of 1,000,000 Class B Non-Voting shares for an aggregate purchase price of $39.9 million; - additions to program rights of $42 million; and - acquisitions and other net investments aggregating $128 million, including the acquisition of Aurora Cable and channel m. Taking into account the cash deficiency of $67 million at the beginning of the period and the fund uses described above, the cash deficiency at June 30, 2008 was $45 million. Six Months Ended June 30, 2008 For the six months ended June 30, 2008, cash generated from operations before changes in non-cash operating items, which is calculated by removing the effect of all non-cash items from net income, increased to $1,821 million from $1,469 million in the corresponding period of 2007. The $352 million increase is primarily the result of a $323 million increase in adjusted operating profit and a $30 million decrease in interest expense. Taking into account the changes in non-cash working capital items for the six months ended June 30, 2008, cash generated from operations was $1,577 million, compared to $1,004 million in the corresponding period of 2007. The cash generated from operations of $1,577 million together with the receipt of $2 million from the issuance of Class B Non-Voting shares under the exercise of employee stock options resulted in total net funds of approximately $1,579 generated or raised in the six months ended June 30, 2008. Net funds used during the six months ended June 30, 2008 totalled approximately $1,563 million, the details of which include the following: - additions to PP&E of $856 million, including $54 million of related changes in non-cash working capital; - net repayments under our bank credit facility aggregating $200 million; - the payment of quarterly dividends of $240 million on our Class A Voting and Class B Non-Voting shares; - the purchase for cancellation of 1,000,000 Class B Non-Voting shares for an aggregate purchase price of $39.9 million; - additions to program rights of $78 million; and - acquisitions and other net investments aggregating $149 million, including the acquisition of Aurora Cable, channel m and CIKZ-FM Kitchener. Taking into account the cash deficiency of $61 million at the beginning of the period and the fund uses described above, the cash deficiency at June 30, 2008 was $45 million. Financing Our long-term debt instruments are described in Note 15 to the 2007 Annual Audited Consolidated Financial Statements and Note 5 to the Unaudited Interim Consolidated Financial Statements for the three and six months ended June 30, 2008. Three Months Ended June 30, 2008 As mentioned above, during the three months ended June 30, 2008, an aggregate $35 million net repayment was made under our bank credit facility. Six Months Ended June 30, 2008 As mentioned above, during the six months ended June 30, 2008, an aggregate $200 million net repayment was made under our bank credit facility. Normal Course Issuer Bid In January 2008, RCI filed a normal course issuer bid ("NCIB") which authorizes us to repurchase up to the lesser of 15,000,000 of our Class B Non-Voting shares and that number of Class B Non-Voting shares that can be purchased under the NCIB for an aggregate purchase price of $300 million. On May 21, 2008, RCI repurchased for cancellation 1,000,000 of its Class B Non-Voting shares pursuant to a private agreement between RCI and an arm's-length third party seller for an aggregate purchase price of $39.9 million. The purchase was made under an issuer bid exemption order issued by the Ontario Securities Commission and will be included in calculating the number of Class B Non-Voting shares that RCI may purchase pursuant to the NCIB. Wireless Spectrum Auction Letters of Credit and Payment for Auctioned Spectrum In order to participate in the auction of wireless spectrum licences which commenced May 27, 2008, we arranged for the issuance of standby letters of credit aggregating $534 million pursuant to the terms and conditions of the auction. These letters of credit will be cancelled upon payment in full of $1.0 billion on September 3, 2008 for spectrum licences in the recent auction. Payment will be funded with drawdowns under RCI's $2.4 billion bank credit facility. See the section entitled "Recent Developments" in the Wireless segment review for further discussion. Additional Revolving Credit Facility In order to ensure that we have sufficient liquidity following payment for the wireless spectrum auction, in July 2008, RCI entered into a credit agreement with Canadian financial institutions for an unsecured revolving credit facility of up to $500 million available until maturity 364 days following the closing date. Credit Ratings Upgrades In June 2008, Fitch Ratings upgraded each of the following: the issuer default rating for RCI to BBB (from BBB-); the rating for RCI's senior unsecured debt to BBB (from BBB-); and the rating for RCI's senior subordinated debt to BBB- (from BB+). All of these ratings have a Stable outlook (from Positive prior to this upgrade). In June 2008, Moody's Investors Service revised RCI's ratings outlook to Positive (from Stable) while affirming its Baa3 rating on RCI's senior unsecured debt and Ba1 on RCI's senior subordinated debt. In June 2008, Standard & Poor's Ratings Services revised RCI's ratings outlook to Positive (from Stable) while affirming its BBB- corporate credit rating, BBB- rating on RCI's senior unsecured debt and BB+ on RCI's senior subordinated debt. Interest Rate and Foreign Exchange Management Economic Hedge Analysis For the purposes of our discussion on the hedged portion of long-term debt, we have used non-GAAP measures in that we include all cross-currency interest rate exchange agreements (whether or not they qualify as hedges for accounting purposes) since all such agreements are used for risk-management purposes only and are designated as a hedge of specific debt instruments for economic purposes. As a result, the Canadian dollar equivalent of U.S. dollar-denominated long-term debt reflects the contracted foreign exchange rate for all of our cross-currency interest rate exchange agreements regardless of qualifications for accounting purposes as a hedge. During the three and six months ended June 30, 2008, there was no change in our U.S. dollar-denominated debt or in our cross-currency interest rate exchange agreements. On June 30, 2008 all of our U.S. dollar-denominated debt was hedged on an economic basis and on an accounting basis. Consolidated Hedged Position ------------------------------------------------------------------------- (In millions of dollars, except percentages) June 30, 2008 December 31, 2007 ------------------------------------------------------------------------- U.S. dollar-denominated long-term debt US $ 4,190 US $ 4,190 Hedged with cross-currency interest rate exchange agreements US $ 4,190 US $ 4,190 Hedged exchange rate Cdn $ 1.3313 Cdn $ 1.3313 Percent hedged 100.0%(1) 100.0% ------------------------------------------------------------------------- Amount of long-term debt(2) at fixed rates: Total long-term debt Cdn $ 7,254 Cdn $ 7,454 Total long-term debt at fixed rates Cdn $ 6,214 Cdn $ 6,214 Percent of long-term debt fixed 85.7% 83.4% ------------------------------------------------------------------------- Weighted average interest rate on long-term debt 7.35% 7.53% ------------------------------------------------------------------------- (1) Pursuant to the requirements for hedge accounting under Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3865, Hedges, on June 30, 2008, RCI accounted for 100% of its cross- currency interest rate exchange agreements as hedges against designated U.S. dollar-denominated debt. (2) Long-term debt includes the effect of the cross-currency interest rate exchange agreements. Composition of Fair Market Value Liability for Derivative Instruments ------------------------------------------------------------------------- (In millions of dollars) June 30, 2008 December 31, 2007 ------------------------------------------------------------------------- Foreign exchange related $ 1,571 $ 1,719 Interest related 172 85 --------------------------------------- Total carrying value $ 1,743 $ 1,804 ------------------------------------------------------------------------- Outstanding Share Data Set out below is our outstanding share data as at June 30, 2008. For additional information, refer to Note 19 to our 2007 Annual Audited Consolidated Financial Statements and Note 4 to the Unaudited Interim Consolidated Financial Statements for the three and six months ended June 30, 2008. ------------------------------------------------------------------------- June 30, 2008 ------------------------------------------------------------------------- Common Shares(1) Class A Voting 112,462,014 Class B Non-Voting 526,249,809 ------------------------------------------------------------------------- Options to purchase Class B Non-Voting shares Outstanding options 16,132,223 Outstanding options exercisable 11,287,296 ------------------------------------------------------------------------- (1) Holders of our Class B Non-Voting shares are entitled to receive notice of and to attend meetings of our shareholders, but, except as required by law or as stipulated by stock exchanges, are not entitled to vote at such meetings. If an offer is made to purchase outstanding Class A Voting shares, there is no requirement under applicable law or RCI's constating documents that an offer be made for the outstanding Class B Non-Voting shares and there is no other protection available to shareholders under RCI's constating documents. If an offer is made to purchase both Class A Voting shares and Class B Non-Voting shares, the offer for the Class A Voting shares may be made on different terms than the offer to the holders of Class B Non-Voting shares. Dividends and Other Payments on Equity Securities On November 1, 2007, we declared a quarterly dividend of $0.125 per share on each of the outstanding Class A Voting and Class B Non-Voting shares. This quarterly dividend totalling $80 million was paid on January 2, 2008 to shareholders of record on December 12, 2007. On January 7, 2008, our Board of Directors approved an increase in the annual dividend from $0.50 to $1.00 per Class A Voting and Class B Non-Voting share effective with the next quarterly dividend. The new annual dividend of $1.00 per share is paid in quarterly amounts of $0.25 per each outstanding Class A Voting and Class B Non-Voting share. Such quarterly dividends are only payable as and when declared by our Board of Directors and there is no entitlement to any dividend prior thereto. On February 21, 2008, we declared a quarterly dividend at the increased quarterly rate of $0.25 per share on each of the outstanding Class A Voting shares and Class B Non-Voting shares. This quarterly dividend totalling $160 million was paid on April 1, 2008 to shareholders of record on March 6, 2008. On April 29, 2008, we declared a quarterly dividend at the increased quarterly rate of $0.25 per share on each of the outstanding Class A Voting shares and Class B Non-Voting shares. This quarterly dividend totalling $160 million was paid on July 2, 2008 to shareholders of record on May 13, 2008. COMMITMENTS AND CONTRACTUAL OBLIGATIONS Our material obligations under firm contractual arrangements, including commitments for future payments under long-term debt arrangements, capital lease obligations and operating lease arrangements, are summarized in our 2007 Annual MD&A, and are further discussed in Notes 15, 23 and 24 of our 2007 Annual Audited Consolidated Financial Statements. There have been no significant changes to these material contractual obligations since December 31, 2007, except as follows: - We have entered into an agreement with a supplier to purchase handsets in the amount of approximately $150 million. See the section entitled "Recent Developments" in the Wireless segment review for further discussion; - We have committed to purchase certain wireless spectrum as part of the AWS spectrum auction. See the section entitled "Recent Developments" in the Wireless segment review for further discussion; - The Blue Jays signed two players to multi-year contracts totalling $80 million, ranging from four to six years; - The Buffalo Bills will play a series of eight games over a five-year period at the Rogers Centre in Toronto, beginning in August 2008, resulting in a commitment of $78 million of payments scheduled from 2008 through 2012; and - Changes to our bank credit facility balance previously discussed in the "Consolidated Liquidity and Capital Resources" section. GOVERNMENT REGULATION AND REGULATORY DEVELOPMENTS The significant government regulations which impact our operations are summarized in our 2007 Annual MD&A. The significant changes to those regulations since December 31, 2007, are as follows: AWS Spectrum Auction On February 27, 2008, Industry Canada issued Responses to Questions for Clarification on the AWS Policy and Licencing Frameworks, which answered questions about the AWS spectrum auction and about tower sharing and roaming obligations of licencees. This was followed on February 29, 2008 by conditions of licence which will impose those obligations on wireless carriers. The documents clarified that roaming must provide connectivity for digital voice and data services regardless of the spectrum band or underlying technology used. The policy does not require a host network carrier to provide a roamer with a service which that carrier does not provide to its own subscribers, nor to provide a roamer a service, or level of service, which the roamer's network carrier does not provide. The policy also does not require seamless communications hand-off between home and host networks. Commercial Radio Copyright Tariffs On February 22, 2008, the Copyright Board reaffirmed the rates it set in 2005 for fees payable to the Society of Composers, Authors and Music Publishers of Canada ("SOCAN") and Neighbouring Rights Collective of Canada ("NRCC") for use of music from 2003 to 2007, in February 2008. In its reaffirmation of the SOCAN-NRCC decision the Copyright Board also granted the Canadian Association of Broadcasters' request for a consolidated tariff proceeding, which would set an overall valuation for the use of music by commercial radio, which would then be divided amongst the collectives. Copyright Legislation The federal government has introduced amendments to the Canadian copyright legislation in the House of Commons. The Bill will require Internet service providers ("ISPs") to use a "notice and notice" regime whereby notices would be sent to the ISPs alleging copyright infringement. The ISP would then forward these notices to its customers. This is similar to the procedure currently used by us and therefore would not impose any new costs. The copyright legislation would also legalize forms of copying currently used by Cable's customers, but in its current form would not permit cable operators to use network PVR technology. Canadian Television Fund ("CTF") On June 5, 2008, the CRTC reported to the government (Canadian Heritage) on proposed changes to the CTF. It recommended separating private and public funding into two streams and creating two separate boards of directors. The CRTC denied proposals by some cable operators to opt-out of paying contributions. The report did not propose increases in the contributions currently paid by broadcasting distribution undertakings ("BDU") such as Cable. Essential Facilities On June 22, 2008, the Federal Court of Appeal denied the leave to appeal application from Bell Canada et al which sought to appeal the CRTC's essential facilities decision. Bell Canada and other parties have also applied to the CRTC with review and vary applications seeking to reverse some limited aspects of the essential facilities decision. Rogers has generally opposed these review and vary applications. Restrictions on Non-Canadian Ownership and Control On June 26, 2008, the Competition Policy Review Panel issued its report. While this panel and its report have no force of law, the report recommended that non-Canadians be permitted to start new telecommunications carriers in Canada and purchase existing carriers which have less than 10 percent of the Canadian telecommunications market. The report further recommends that after five years, there should be no foreign ownership rules for all telecommunications carriers and BDU's (cable and direct-to-home operators). Similar recommendations have been made as a result of previous studies over the past several years which did not result in any changes by government, and there is no indication when, or if, the government will act on any of the recommendations of this most recent report. Part II Fees The CRTC collects two different types of fees from broadcast licencees which are known as Part I and Part II fees. In 2003 and 2004, lawsuits were commenced in the Federal Court alleging that the Part II licence fees are taxes rather than fees and that the regulations authorizing them are unlawful. On December 14, 2006, the Federal Court ruled that the CRTC did not have the jurisdiction to charge Part II fees. Both the Crown and the applicants appealed this case to the Federal Court of Appeal. On April 28, 2008, the Federal Court of Appeal overturned the Federal Court and ruled that Part II fees are valid regulatory charges. As a result, during the three months ended June 30, 2008, Cable and Media recorded charges of approximately $30 million and $7 million, respectively, for CRTC Part II fees covering the period September 1, 2006 to March 31, 2008 ($25 million and $6 million for the period September 1, 2006 to December 31, 2007 for Cable and Media, respectively). In addition, we recorded $5 million and $2 million in the second quarter of 2008, for Cable and Media, respectively, which is included in operating, general and administrative expenses. We will continue to record these fees on a prospective basis. An application for leave to appeal has been filed with the Supreme Court of Canada although there is no assurance that the Court will hear the appeal or overturn this decision. New Media Proceeding The CRTC has commenced a major proceeding dealing with what it refers to as new media. They are reviewing any existing new media exemption order which exempts all broadcasting content on the Internet from regulation. They are also considering ways in which Canadian new media content could be subsidized. We expect some parties to argue in the proceeding that ISPs, such as Cable, should pay contributions to a fund to subsidize Canadian new media content. Proposed Legislation Bill C-555, An Act to Provide Clarity and Fairness in the Provision of Telecommunications Services in Canada, has received its first reading in the House of Commons. Bill C-555 is a private members bill and not government legislation. If passed, the bill would require the Minister of Industry to amend the licence conditions of PCS and cellular spectrum licences to prohibit carriers from charging additional fees or charges that are not part of the subscriber's monthly fee or monthly rate plan. The bill would also require the CRTC to inquire into, and make a report on, a wide range of issues including billing, cell phone locking, information regarding network speeds and limitations, network management practices and the Commissioner for Complaints for Telecommunications Services. The Office de la Protection du Consommateur in Quebec is proposing to introduce amendments to the Consumer Protection Act that would affect sequential performance contracts provided remotely, including wireless, wireline and Internet service contracts. If passed, the amendments would limit the term of such contracts to two years, impose a limit on the early cancellation fees that can be charged to customers, prohibit the setting of an expiry date on prepaid phone cards, regulate the content and the form of such contracts as well as the termination and renewal rights of the consumers. The amendments also propose to institute a right of action to consumer protection associations to apply for discontinuance of practices or contractual clauses that contravene the Consumer Protection Act. UPDATES TO RISKS AND UNCERTAINTIES Our significant risks and uncertainties are summarized in our 2007 Annual MD&A, which was current as of February 20, 2008. The significant changes to those risks and uncertainties since that date are as follows: Proposed Class Action (911 Fees) On June 25, 2008, a proceeding was commenced in Saskatchewan under that Province's Class Actions Act against providers of wireless communications services in Canada. The proceeding involves allegations of, among other things, breach of contract, misrepresentation and false advertising in relation to the 911 fee charged by us and the other wireless communication providers in Canada. The Plaintiffs are seeking unquantified damages and restitution. The Plantiffs intend to seek an order certifying the proceeding as a national class action in Saskatchewan. Any potential liability is not yet determinable. There is no Guarantee that Wireless' Service Revenue Will Exceed Increased Handset Subsidies Wireless' business model, as is generally the case for other North American wireless carriers, is substantially based on subsidizing the cost of the handset to the customer to reduce the barrier to entry, while in return requiring a term commitment from the customer. For certain handsets, Wireless will commit with the supplier to a minimum subsidy. Wireless' business could be materially adversely affected if by virtue of law or regulation or negative customer behaviour, Wireless was unable to require term commitments or early cancellation fees from its customers or did not receive the service revenues that it anticipated from the customer commitment. The AWS Spectrum Auction Could Increase Competition Industry Canada's auction for AWS spectrum concluded on July 21, 2008. Each of the three large incumbent wireless operators, Rogers, Bell Canada and TELUS, acquired spectrum licences of varying sizes and in varying markets across Canada. Rogers acquired 20MHz of spectrum across the country while, MTS Allstream Inc., and Saskatchewan Telecommunications Holding Corporation acquired spectrum in Manitoba and Saskatchewan, respectively. Through the auction and as described below, five new entrants acquired substantial regional holdings of AWS spectrum, and several much smaller companies acquired small amounts of spectrum in generally isolated locations. These new entrants could provide Wireless with substantial competition in the regions in which they have acquired licences. These new entrants may also partner with one another or our other competitors providing competition to Wireless in more than one region or on a national scale. Three existing cable companies acquired spectrum, substantially in the regions where they already offer cable television, internet and telephone service. This acquisition of spectrum provides them with the potential ability to offer more comprehensive bundles of communications services including wireless services than they currently offer over their own facilities. Bragg Communications Inc., operating under the name Eastlink, is the dominant cable provider in the provinces of Nova Scotia and PEI and has additional cable operations across the country in various small towns across Canada. Eastlink acquired spectrum in each of its cable markets. Quebecor Media Inc., operating under the name Videotron Ltd. ("Videotron"), is the largest cable provider in Quebec. Videotron was the only potential new entrant to acquire spectrum in the province of Quebec and also acquired spectrum in Eastern Ontario and in Toronto. Shaw Communications Inc., which is the dominant cable provider in Western Canada and parts of northern Ontario, acquired spectrum cable markets in B.C., Alberta, Manitoba, Saskatchewan and in Sault Ste. Marie and Thunder Bay in Ontario. Globalive Communications Corp. ("Globalive"), a privately-held company, is the parent company of Yak Communications Canada Corp. which is a resale-based long distance service provider in Canada. Globalive is heading a consortium with participation from Weather Investments SPA, controlled by Egypt's Naguib Sawiris (or its subsidiary, Orascom Telecom Holding S.A.E.) and Novator Partners, founded by Iceland's Bjorgolfur Thor Bjorgolfsson). The Globalive consortium acquired spectrum across Canada and the Northern Territories with the exception of Quebec. Finally, Data & Audio-Visual Enterprises Wireless Inc. ("DAVE"), a new, privately-held company established by Canadian and U.S. investors, acquired spectrum in Eastern Ontario, Southern Ontario, and Victoria, Vancouver, Edmonton, Red Deer, and Calgary. Currently, no single potential entrant has acquired spectrum sufficient to become a national licencee as defined by industry Canada to qualify for mandated roaming on a national basis for 10 years. KEY PERFORMANCE INDICATORS AND NON-GAAP MEASURES We measure the success of our strategies using a number of key performance indicators that are defined and discussed in our 2007 Annual MD&A. These key performance indicators are not measurements under Canadian or U.S. GAAP, but we believe they allow us to appropriately measure our performance against our operating strategy as well as against the results of our peers and competitors. They include: - Network revenue and ARPU; - Subscriber counts and subscriber churn; - Operating expenses and average monthly operating expense per wireless subscriber; - Sales and marketing costs (or cost of acquisition) per subscriber; - Operating profit; - Adjusted operating profit; - Adjusted operating profit margin; and - Additions to PP&E. See the "Supplementary Information" section for calculations of these Non-GAAP measures. RELATED PARTY ARRANGEMENTS We have entered into certain transactions with companies, the partners or senior officers of which are or have been Directors of our Company and/or its subsidiary companies. During the three and six months ended June 30, 2008 and 2007, total amounts paid to these related parties, directly or indirectly, are as follows: ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, ------------------------------------------------- (In millions of dollars) 2008 2007 % Chg 2008 2007 % Chg ------------------------------------------------------------------------- Printing, legal services and commissions paid on premiums for insurance coverage $ 1 $ 1 - $ 2 $ 1 100 ------------------------------------------------------------------------- Fees charged to our controlling shareholder for the personal use of corporate aircraft and for other administrative services are subject to formal agreements approved by the Audit Committee. For the six months ended June 30, 2008 and 2007, the fees charged to our controlling shareholder for personal use of the aircraft and other administrative services were approximately $0.5 million and $0.5 million, respectively. These transactions are recorded at the exchange amount, being the amount agreed to by the related parties. CRITICAL ACCOUNTING POLICIES AND ESTIMATES In our 2007 Annual Audited Consolidated Financial Statements and Notes thereto, as well as in our 2007 Annual MD&A, we have identified the accounting policies and estimates that are critical to the understanding of our business operations and our results of operations. For the six months ended June 30, 2008, there are no changes to the critical accounting policies and estimates of Wireless, Cable and Media from those found in our 2007 Annual MD&A. NEW ACCOUNTING STANDARDS Capital Disclosures Effective January 1, 2008, we adopted the new recommendations of the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1535, Capital Disclosures ("CICA 1535"). CICA 1535 requires that an entity disclose information that enables users of its financial statements to evaluate an entity's objectives, policies and processes for managing capital, including disclosures of any externally imposed capital requirements and the consequences for non-compliance. These new disclosures are included in Note 9 to the Unaudited Interim Consolidated Financial Statements for the three and six months ended June 30, 2008 and 2007. Financial Instruments Effective January 1, 2008, we adopted the new recommendations of CICA Handbook Section 3862, Financial Instruments - Disclosures ("CICA 3862"), and Handbook Section 3863, Financial Instruments - Presentation ("CICA 3863"). CICA 3862 requires entities to provide disclosures in their financial statements that enables users to evaluate the significance of financial instruments on the entity's financial position and its performance and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks. CICA 3863 establish standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are offset. The adoption of these standards did not have any impact on the classification and measurement of our financial instruments. The new disclosures pursuant to these new Handbook Sections are included in Note 10 to the Unaudited Interim Consolidated Financial Statements for the three and six months ended June 30, 2008 and 2007. Recent Accounting Pronouncements International Financial Reporting Standards ("IFRS") In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB confirmed that IFRS will be mandatory in Canada for profit-oriented publicly accountable entities for fiscal periods beginning on or after January 1, 2011. Our first IFRS financial statements will be for the year ending December 31, 2011 and will include the comparative period for 2010. Starting in the first quarter of 2011, we will provide unaudited consolidated financial information in accordance with IFRS including comparative figures for 2010. We are evaluating accounting policy differences between Canadian GAAP and IFRS based on management's current understanding of these standards. However, the financial reporting impact of the transition to IFRS has not yet been determined. SEASONALITY Our operating results are subject to seasonal fluctuations that materially impact quarter-to-quarter operating results, and thus one quarter's operating results are not necessarily indicative of a subsequent quarter's operating results. Each of Wireless, Cable and Media has unique seasonal aspects to their businesses. For specific discussions of the seasonal trends affecting the Wireless, Cable and Media segments, please refer to our 2007 Annual MD&A. 2008 GUIDANCE At this point in the year we have no specific revisions to the 2008 annual financial and operating guidance ranges which we provided on January 7, 2008. However, we note that Wireless' launch of the iPhone 3G on July 11, 2008 as discussed above is expected to cause COA to increase in the second half of 2008 and be greater than contemplated in our original 2008 guidance thus impacting Wireless' operating profit in the same period. However, Wireless' adjusted operating profit for the first two quarters of 2008 has and continues to trend stronger than originally anticipated in our 2008 guidance, and as such, we currently expect these two trends will for the most part offset each other for the full year 2008 in respect of Wireless' adjusted operating profit results. See the section entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions" below. SUPPLEMENTARY INFORMATION Calculations of Wireless Non-GAAP Measures --------------------------------------------------- --------------------- (In millions of dollars, Three months ended Six months ended subscribers in thousands, June 30, June 30, except ARPU figures and --------------------- --------------------- operating profit margin) 2008 2007 2008 2007 --------------------------------------------------- --------------------- Postpaid ARPU (monthly) Postpaid (voice and data) revenue $ 1,371 $ 1,207 $ 2,665 $ 2,311 Divided by: average postpaid wireless voice and data subscribers 6,055 5,538 6,006 5,488 Divided by: 3 months for the quarter and 6 months for year-to-date 3 3 6 6 --------------------- --------------------- $ 75.48 $ 72.65 $ 73.95 $ 70.18 --------------------------------------------------- --------------------- Prepaid ARPU (monthly) Prepaid (voice and data) revenue $ 71 $ 67 $ 137 $ 128 Divided by: average prepaid subscribers 1,404 1,365 1,403 1,369 Divided by: 3 months for the quarter and 6 months for year-to-date 3 3 6 6 --------------------- --------------------- $ 16.86 $ 16.36 $ 16.27 $ 15.58 --------------------------------------------------- --------------------- Cost of acquisition per gross addition Total sales and marketing expenses $ 151 $ 146 $ 291 $ 286 Equipment margin loss (acquisition related) 40 39 75 66 --------------------- --------------------- $ 191 $ 185 $ 366 $ 352 --------------------- --------------------- --------------------- --------------------- Divided by: total gross wireless additions (postpaid, prepaid and one-way messaging) 435 481 862 913 --------------------- --------------------- $ 439 $ 385 $ 425 $ 386 --------------------------------------------------- --------------------- Operating expense per average subscriber (monthly) Operating, general and administrative expenses $ 446 $ 381 $ 887 $ 747 Equipment margin loss (retention related) 39 47 81 102 --------------------- --------------------- $ 485 $ 428 $ 968 $ 849 --------------------- --------------------- --------------------- --------------------- Divided by: average total wireless subscribers 7,562 7,034 7,524 6,992 Divided by: 3 months for the quarter and 6 months for year-to-date 3 3 6 6 --------------------- --------------------- $ 21.38 $ 20.28 $ 21.44 $ 20.24 --------------------------------------------------- --------------------- Equipment margin loss Equipment sales $ 77 $ 87 $ 145 $ 149 Cost of equipment sales (156) (173) (301) (317) --------------------- --------------------- $ (79) $ (86) $ (156) $ (168) --------------------- --------------------- --------------------- --------------------- Acquisition related $ (40) $ (39) $ (75) $ (66) Retention related (39) (47) (81) (102) --------------------- --------------------- $ (79) $ (86) $ (156) $ (168) --------------------- --------------------- --------------------- --------------------- --------------------------------------------------- --------------------- Adjusted operating profit margin Adjusted operating profit $ 769 $ 664 $ 1,474 $ 1,245 Divided by network revenue 1,445 1,277 2,808 2,446 --------------------- --------------------- Adjusted operating profit margin 53.2% 52.0% 52.5% 50.9% --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Calculations of Cable Non-GAAP Measures --------------------------------------------------- --------------------- (In millions of dollars, Three months ended Six months ended subscribers in thousands, June 30, June 30, except ARPU figures and --------------------- --------------------- operating profit margin) 2008 2007 2008 2007 --------------------------------------------------- --------------------- Core Cable ARPU Core Cable revenue $ 417 $ 384 $ 820 $ 757 Divided by: average basic cable subscribers 2,289 2,272 2,292 2,275 Divided by: 3 months for the quarter and 6 months for year-to-date 3 3 6 6 --------------------- --------------------- $ 60.73 $ 56.34 $ 59.62 $ 55.45 --------------------------------------------------- --------------------- Internet ARPU Internet revenue $ 171 $ 152 $ 337 $ 295 Divided by: average Internet (residential) subscribers 1,524 1,374 1,510 1,353 Divided by: 3 months for the quarter and 6 months for year-to-date 3 3 6 6 --------------------- --------------------- $ 37.41 $ 36.87 $ 37.19 $ 36.33 --------------------------------------------------- --------------------- Cable Operations adjusted operating profit margin: Adjusted operating profit $ 293 $ 243 $ 571 $ 477 Divided by revenue 718 646 1,413 1,266 --------------------- --------------------- Cable Operations adjusted operating profit margin 40.8% 37.6% 40.4% 37.7% --------------------------------------------------- --------------------- RBS adjusted operating profit (loss) margin: Adjusted operating profit (loss) $ 16 $ 4 $ 33 $ (3) Divided by revenue 130 146 263 291 --------------------- --------------------- RBS adjusted operating profit (loss) margin 12.3% 2.7% 12.5% (1.0%) --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Calculation of Adjusted Operating Profit, Net Income and Earnings Per Share --------------------------------------------------- --------------------- Three months ended Six months ended (In millions of dollars, June 30, June 30, number of shares --------------------- --------------------- outstanding in millions 2008 2007 2008 2007 --------------------------------------------------- --------------------- Operating profit $ 996 $ 431 $ 2,091 $ 1,229 Add (deduct): Stock option plan amendment - 452 - 452 Stock-based compensation (recovery) expense 53 32 (63) 47 Adjustment for CRTC Part II fees decision 37 - 31 - Integration and restructuring expenses - Cable 3 15 8 16 --------------------- --------------------- Adjusted operating profit $ 1,089 $ 930 $ 2,067 $ 1,744 --------------------- --------------------- --------------------- --------------------- Net income (loss) $ 301 $ (56) $ 645 $ 114 Add (deduct): Stock option plan amendment - 452 - 452 Stock-based compensation (recovery) expense 53 32 (63) 47 Adjustment for CRTC Part II fees decision 37 - 31 - Integration and restructuring expenses - Cable 3 15 8 16 Loss on repayment of long-term debt - 47 - 47 Income tax impact (30) (191) 10 (191) --------------------- --------------------- Adjusted net income $ 364 $ 299 $ 631 $ 485 --------------------- --------------------- --------------------- --------------------- Basic earnings per share: Adjusted net income $ 364 $ 299 $ 631 $ 485 Divided by: weighted average number of shares outstanding 639 639 639 638 --------------------- --------------------- Adjusted basic earnings per share $ 0.57 $ 0.47 $ 0.99 $ 0.76 --------------------- --------------------- --------------------- --------------------- Diluted earnings per share: Adjusted net income $ 364 $ 299 $ 631 $ 485 Divided by: diluted weighted average number of shares outstanding 639 639 639 646 --------------------- --------------------- Adjusted diluted earnings per share $ 0.57 $ 0.47 $ 0.99 $ 0.75 --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Rogers Communications Inc. 2008 2007 ------------------------------ --------------------- -------------------- (In millions of dollars, except per share amounts) Q1 Q2 Q1 Q2 ------------------------------ --------------------- -------------------- Income Statement Operating revenue Wireless $ 1,431 $ 1,522 $ 1,231 $ 1,364 Cable 925 938 855 881 Media 307 409 266 348 Corporate and eliminations (54) (66) (54) (66) ------------------------------ --------------------- -------------------- 2,609 2,803 2,298 2,527 ------------------------------ --------------------- -------------------- Operating profit before the undernoted Wireless 705 769 581 664 Cable 303 304 228 243 Media 2 52 19 45 Corporate and eliminations (26) (36) (14) (22) ------------------------------ --------------------- -------------------- 984 1,089 814 930 Stock option plan amendment(1) - - - (452) Stock-based compensation recovery (expense)(1) 116 (53) (15) (32) Integration and restructuring expenses(2) (5) (3) (1) (15) Adjustment for CRTC Part II fees decision(3) - (37) - - Contract renegotiation fee(4) - - - - ------------------------------ --------------------- -------------------- Operating profit(5) 1,095 996 798 431 Depreciation and amortization 440 420 400 398 ------------------------------ --------------------- -------------------- Operating income 655 576 398 33 Interest on long-term debt (138) (133) (149) (152) Other income (expense) (3) 11 7 (24) Income tax reduction (expense) (170) (153) (86) 87 ------------------------------ --------------------- -------------------- Net income (loss) for the period $ 344 $ 301 $ 170 $ (56) ------------------------------ --------------------- -------------------- ------------------------------ --------------------- -------------------- Net income (loss) per share: Basic $ 0.54 $ 0.47 $ 0.27 $ (0.09) Diluted $ 0.54 $ 0.47 $ 0.26 $ (0.09) Additions to PP&E(5) $ 321 $ 481 $ 394 $ 381 ------------------------------ --------------------- -------------------- 2007 2006 ------------------------------ --------------------- -------------------- (In millions of dollars, except per share amounts) Q3 Q4 Q1 Q2 ------------------------------ --------------------- -------------------- Income Statement Operating revenue Wireless $ 1,442 $ 1,466 $ 1,005 $ 1,094 Cable 899 923 772 787 Media 339 364 240 334 Corporate and eliminations (69) (66) (33) (36) ------------------------------ --------------------- -------------------- 2,611 2,687 1,984 2,179 ------------------------------ --------------------- -------------------- Operating profit before the undernoted Wireless 686 658 412 490 Cable 265 265 222 237 Media 46 63 14 53 Corporate and eliminations (13) (29) (30) (24) ------------------------------ --------------------- -------------------- 984 957 618 756 Stock option plan amendment(1) - - - - Stock-based compensation recovery (expense)(1) (11) (4) (13) (10) Integration and restructuring expenses(2) (5) (17) (11) (2) Adjustment for CRTC Part II fees decision(3) 18 - - - Contract renegotiation fee(4) - (52) - - ------------------------------ --------------------- -------------------- Operating profit(5) 986 884 594 744 Depreciation and amortization 397 408 386 395 ------------------------------ --------------------- -------------------- Operating income 589 476 208 349 Interest on long-term debt (140) (138) (161) (155) Other income (expense) (14) - 1 17 Income tax reduction (expense) (166) (84) (35) 68 ------------------------------ --------------------- -------------------- Net income (loss) for the period $ 269 $ 254 $ 13 $ 279 ------------------------------ --------------------- -------------------- ------------------------------ --------------------- -------------------- Net income (loss) per share: Basic $ 0.42 $ 0.40 $ 0.02 $ 0.44 Diluted $ 0.42 $ 0.40 $ 0.02 $ 0.44 Additions to PP&E(5) $ 397 $ 624 $ 340 $ 403 ------------------------------ --------------------- -------------------- (1) See section entitled "Stock-based Compensation". (2) Costs incurred relate to the integration of Fido, Call-Net, the restructuring of Rogers Business Solutions, and the closure of certain Rogers Retail stores. (3) In the third quarter of 2007, an accrual for CRTC Part II fees was reversed, resulting from a notice received from the CRTC that Part II fees due in November 2007 would not be collected. In the second quarter of 2008, Part II fees related to prior periods were accrued due to a Federal Court of Appeal decision which stated that the fees were a valid regulatory charge. See the section entitled "Government Regulation and Regulatory Developments" for further details. (4) One-time charge resulting from the renegotiation of an Internet- related services agreement with Yahoo!. (5) As defined. See the section entitled "Key Performance Indicators and Non-GAAP Measures". SUPPLEMENTARY INFORMATION Rogers Communications Inc. Adjusted Quarterly Summary(1) 2008 2007 ------------------------------ --------------------- -------------------- (In millions of dollars, except per share amounts) Q1 Q2 Q1 Q2 ------------------------------ --------------------- -------------------- Income Statement Operating revenue Wireless $ 1,431 $ 1,522 $ 1,231 $ 1,364 Cable 925 938 855 881 Media 307 409 266 348 Corporate and eliminations (54) (66) (54) (66) ------------------------------ --------------------- -------------------- 2,609 2,803 2,298 2,527 ------------------------------ --------------------- -------------------- Adjusted operating profit(2) Wireless 705 769 581 664 Cable 303 304 228 243 Media 2 52 19 45 Corporate and eliminations (26) (36) (14) (22) ------------------------------ --------------------- -------------------- 984 1,089 814 930 Depreciation and amortization 440 420 400 398 ------------------------------ --------------------- -------------------- Adjusted operating income 544 669 414 532 Interest on long-term debt (138) (133) (149) (152) Other income (expense) (3) 11 7 23 Income tax reduction (expense) (133) (183) (86) (104) ------------------------------ --------------------- -------------------- Adjusted net income for the period $ 270 $ 364 $ 186 $ 299 ------------------------------ --------------------- -------------------- ------------------------------ --------------------- -------------------- Adjusted net income per share: Basic $ 0.42 $ 0.57 $ 0.29 $ 0.47 Diluted $ 0.42 $ 0.57 $ 0.29 $ 0.47 Additions to PP&E(2) $ 321 $ 481 $ 394 $ 381 ------------------------------ --------------------- -------------------- 2007 2006 ------------------------------ --------------------- -------------------- (In millions of dollars, except per share amounts) Q3 Q4 Q1 Q2 ------------------------------ --------------------- -------------------- Income Statement Operating revenue Wireless $ 1,442 $ 1,466 $ 1,005 $ 1,094 Cable 899 923 772 787 Media 339 364 240 334 Corporate and eliminations (69) (66) (33) (36) ------------------------------ --------------------- -------------------- 2,611 2,687 1,984 2,179 ------------------------------ --------------------- -------------------- Adjusted operating profit(2) Wireless 686 658 412 490 Cable 265 265 222 237 Media 46 63 14 53 Corporate and eliminations (13) (29) (30) (24) ------------------------------ --------------------- -------------------- 984 957 618 756 Depreciation and amortization 397 408 386 395 ------------------------------ --------------------- -------------------- Adjusted operating income 587 549 232 361 Interest on long-term debt (140) (138) (161) (155) Other income (expense) (14) - 1 17 Income tax reduction (expense) (165) (109) (39) 67 ------------------------------ --------------------- -------------------- Adjusted net income for the period $ 268 $ 302 $ 33 $ 290 ------------------------------ --------------------- -------------------- ------------------------------ --------------------- -------------------- Adjusted net income per share: Basic $ 0.42 $ 0.47 $ 0.05 $ 0.46 Diluted $ 0.41 $ 0.47 $ 0.05 $ 0.45 Additions to PP&E(2) $ 397 $ 624 $ 340 $ 403 ------------------------------ --------------------- -------------------- (1) This quarterly summary has been adjusted to exclude the impact of the adoption of a cash settlement feature for employee stock options, stock-based compensation (recovery) expense, integration and restructuring expenses, adjustments to CRTC Part II fees related to prior periods, a one-time charge related to the renegotiation of an Internet-related services agreement, losses on repayment of long-term debt and the income tax impact related to the above items. See the section entitled "Key Performance Indicators and Non-GAAP Measures". (2) As defined. See the section entitled "Key Performance Indicators and Non-GAAP Measures". Rogers Communications Inc. Unaudited Interim Consolidated Statements of Income (In millions of dollars, except per share amounts) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Operating revenue $ 2,803 $ 2,527 $ 5,412 $ 4,825 Operating expenses: Cost of sales 225 250 453 468 Sales and marketing 311 317 610 622 Operating, general and administrative 1,268 1,062 2,250 2,038 Stock option plan amendment - 452 - 452 Integration and restructuring 3 15 8 16 Depreciation and amortization 420 398 860 798 ------------------------------------------------------------------------- Operating income 576 33 1,231 431 Interest on long-term debt (133) (152) (271) (301) ------------------------------------------------------------------------- 443 (119) 960 130 Foreign exchange gain (loss) 1 42 (6) 52 Loss on repayment of long-term debt - (47) - (47) Change in fair value of derivative instruments 5 (22) 1 (26) Other income, net 5 3 13 4 ------------------------------------------------------------------------- Income (loss) before income taxes 454 (143) 968 113 ------------------------------------------------------------------------- Income tax expense (recovery): Current (1) - 1 - Future 154 (87) 322 (1) ----------------------------------------------------------------------- 153 (87) 323 (1) ------------------------------------------------------------------------- Net income (loss) for the period $ 301 $ (56) $ 645 $ 114 ------------------------------------------------------------------------- Net income (loss) per share: Basic $ 0.47 $ (0.09) $ 1.01 $ 0.18 Diluted 0.47 (0.09) 1.01 0.18 ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Balance Sheets (In millions of dollars) ------------------------------------------------------------------------- June 30, December 31, 2008 2007 ------------------------------------------------------------------------- Assets Current assets: Accounts receivable $ 1,194 $ 1,245 Other current assets 375 304 Future income tax assets 457 594 ------------------------------------------------------------------------- 2,026 2,143 Property, plant and equipment 7,423 7,289 Goodwill 3,139 3,027 Intangible assets 1,981 2,086 Investments 377 485 Deferred charges 107 111 Other long-term assets 190 184 ------------------------------------------------------------------------- $ 15,243 $ 15,325 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Bank advances, arising from outstanding cheques $ 45 $ 61 Accounts payable and accrued liabilities 1,998 2,260 Current portion of long-term debt 1 1 Current portion of derivative instruments 173 195 Unearned revenue 248 225 ------------------------------------------------------------------------- 2,465 2,742 Long-term debt 5,958 6,032 Derivative instruments 1,570 1,609 Other long-term liabilities 204 214 Future income tax liabilities 271 104 ------------------------------------------------------------------------- 10,468 10,701 Shareholders' equity 4,775 4,624 ------------------------------------------------------------------------- $ 15,243 $ 15,325 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Shareholders' Equity (In millions of dollars) Six months ended June 30, 2008 ------------------------------------------------------------------------- Class A Voting Class B Non-Voting shares shares ---------------------- ---------------------- Number Number Amount of shares Amount of shares ------------------------------------------------------------------------- (000s) (000s) Balances, January 1, 2008 $ 72 112,462 $ 471 527,005 Net income for the period - - - - Shares issued on exercise of stock options - - 11 245 Dividends declared - - - - Repurchase of Class B Non-Voting shares - - (1) (1,000) Other comprehensive loss - - - - ------------------------------------------------------------------------- Balances, June 30, 2008 $ 72 112,462 $ 481 526,250 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other compre- Total hensive share- Contributed Retained income holders' surplus earnings (loss) equity ------------------------------------------------------------------------- Balances, January 1, 2008 $ 3,689 $ 342 $ 50 $ 4,624 Net income for the period - 645 - 645 Shares issued on exercise of stock options - - - 11 Dividends declared - (320) - (320) Repurchase of Class B Non-Voting shares (38) (1) - (40) Other comprehensive loss - - (145) (145) ------------------------------------------------------------------------- Balances, June 30, 2008 $ 3,651 $ 666 $ (95) $ 4,775 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Six months ended June 30, 2007 ------------------------------------------------------------------------- Class A Voting Class B Non-Voting shares shares ---------------------- ---------------------- Number Number Amount of shares Amount of shares ------------------------------------------------------------------------- (000s) (000s) Balances, January 1, 2007 $ 72 112,468 $ 425 523,232 Net income for the period - - - - Class A Voting shares converted to Class B Non-Voting shares - (6) - 6 Stock option plan amendment - - - - Shares issued on exercise of stock options - - 34 3,494 Stock-based compensation - - - - Dividends declared - - - - Other comprehensive income - - - - ------------------------------------------------------------------------- Balances, June 30, 2007 $ 72 112,462 $ 459 526,732 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other compre- Total hensive share- Contributed income holders' surplus Deficit (loss) equity ------------------------------------------------------------------------- Balances, January 1, 2007 $ 3,736 $ (30) $ (214) $ 3,989 Net income for the period - 114 - 114 Class A Voting shares converted to Class B Non-Voting shares - - - - Stock option plan amendment (50) - - (50) Shares issued on exercise of stock options (9) - - 25 Stock-based compensation 12 - - 12 Dividends declared - (105) - (105) Other comprehensive income - - 194 194 ------------------------------------------------------------------------- Balances, June 30, 2007 $ 3,689 $ (21) $ (20) $ 4,179 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Comprehensive Income (In millions of dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income (loss) for the period $ 301 $ (56) $ 645 $ 114 Other comprehensive income (loss): Change in fair value of available-for-sale investments: Increase (decrease) in fair value 6 34 (105) 124 Change in fair value of cash flow hedging derivative instruments: Increase in fair value of liability (159) (338) (8) (359) Reclassification to net income of foreign exchange loss (gain) 39 375 (128) 427 Reclassification to net income of accrued interest 35 28 70 48 --------------------------------------------------------------------- (79) 99 (171) 240 Related income taxes 40 (28) 26 (46) ----------------------------------------------------------------------- (39) 71 (145) 194 ------------------------------------------------------------------------- Total comprehensive income $ 262 $ 15 $ 500 $ 308 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Cash Flows (In millions of dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Cash provided by (used in): Operating activities: Net income (loss) for the period $ 301 $ (56) $ 645 $ 114 Adjustments to reconcile net income (loss) for the period to cash flows from operating activities: Depreciation and amortization 420 398 860 798 Program rights and Rogers Retail rental amortization 37 21 72 40 Future income taxes 154 (87) 322 (1) Unrealized foreign exchange gain - (38) - (46) Change in fair value of derivative instruments (5) 22 (1) 26 Loss on repayment of long-term debt - 47 - 47 Stock option plan amendment - 452 - 452 Stock-based compensation expense (recovery) 53 32 (63) 47 Amortization of fair value increment on long-term debt (2) (2) (3) (4) Other (6) (3) (11) (4) ----------------------------------------------------------------------- 952 786 1,821 1,469 Change in non-cash operating working capital items (74) (197) (244) (465) ----------------------------------------------------------------------- 878 589 1,577 1,004 ------------------------------------------------------------------------- Investing activities: Additions to property, plant and equipment ("PP&E") (481) (381) (802) (775) Change in non-cash working capital items related to PP&E 28 (26) (54) (114) Acquisitions, net of cash and cash equivalents acquired (124) (86) (147) (129) Additions to program rights (42) (9) (78) (23) Other (4) (11) (2) (5) ----------------------------------------------------------------------- (623) (513) (1,083) (1,046) ------------------------------------------------------------------------- Financing activities: Issuance of long-term debt 530 2,678 780 3,446 Repayment of long-term debt (565) (2,595) (980) (3,292) Premium on repayment of long-term debt - (59) - (59) Financing costs incurred - (4) - (4) Payment on settlement of cross-currency interest rate exchange agreements and forward contracts - (873) - (873) Proceeds on settlement of cross-currency interest rate exchange agreements and forward contracts - 838 - 838 Repurchase of Class B Non-Voting shares (40) - (40) - Issuance of capital stock on exercise of stock options 2 11 2 25 Dividends paid on Class A Voting and Class B Non-Voting shares (160) (26) (240) (51) ----------------------------------------------------------------------- (233) (30) (478) 30 ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 22 46 16 (12) Cash deficiency, beginning of period (67) (77) (61) (19) ------------------------------------------------------------------------- Cash deficiency, end of period $ (45) $ (31) $ (45) $ (31) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Income taxes paid $ - $ - $ - $ 1 Interest paid 169 194 273 321 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The change in non-cash operating working capital items is as follows: Decrease (increase) in accounts receivable $ (58) $ (220) $ 60 $ (73) Decrease (increase) in other assets (26) 1 (116) (116) Increase (decrease) in accounts payable and accrued liabilities 17 45 (208) (276) Increase (decrease) in unearned revenue (7) (23) 20 - ------------------------------------------------------------------------- $ (74) $ (197) $ (244) $ (465) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents (deficiency) are defined as cash and short-term deposits which have an original maturity of less than 90 days, less bank advances. The preceding MD&A and financial statements should be read in conjunction with the second quarter 2008 Notes to the Unaudited Interim Consolidated Financial Statements that can be found at www.rogers.com and on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. Caution Regarding Forward-Looking Statements, Risks and Assumptions This MD&A includes forward-looking statements and assumptions concerning our business, its operations and its financial performance and condition approved by management on the date of this MD&A. These forward-looking statements and assumptions include, but are not limited to, statements with respect to our objectives and strategies to achieve those objectives, statements with respect to our beliefs, plans, expectations, anticipations, estimates or intentions, including guidance and forecasts relating to revenue, adjusted operating profit, PP&E expenditures, free cash flow, expected growth in subscribers and the services to which they subscribe, the cost of acquiring subscribers and the deployment of new services and all other statements that are not historical facts. Such forward-looking statements are based on current objectives, strategies, expectations and assumptions that we believe to be reasonable at the time, including but not limited to, general economic and industry growth rates, currency exchange rates, product pricing levels and competitive intensity, subscriber growth and usage rates, changes in government regulation, technology deployment, device availability, the timing of new product launches, content and equipment costs, the integration of acquisitions, and industry structure and stability. Except as otherwise indicated, this MD&A and our forward looking statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be considered or announced or may occur after the date of the financial information contained herein. We caution that all forward-looking information, including any statement regarding our current intentions, is inherently subject to change and uncertain and that actual results may differ materially from the assumptions, estimates or expectations reflected in the forward-looking information. A number of factors could cause actual results to differ materially from those in the forward-looking statements or could cause our current objectives and strategies to change, including but not limited to economic conditions, technological change, the integration of acquisitions, unanticipated changes in content or equipment costs, changing conditions in the entertainment, information and communications industries, regulatory changes, litigation and tax matters, the level of competitive intensity and the emergence of new opportunities, many of which are beyond our control and current expectation or knowledge. Therefore, should one or more of these risks materialize, should our objectives or strategies change, or should any other factors underlying the forward-looking statements prove incorrect, actual results and our plans may vary significantly from what we currently foresee. Accordingly, we warn investors to exercise caution when considering any such forward-looking information herein and that it would be unreasonable to rely on such statements as creating any legal rights regarding our future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any forward-looking statements or assumptions whether as a result of new information, future events or otherwise, except as required by law. Before making any investment decisions and for a detailed discussion of the risks, uncertainties and environment associated with our business, fully review the sections of this MD&A entitled "Updates to Risks and Uncertainties" and "Government Regulation and Regulatory Developments", and also the sections entitled "Risks and Uncertainties Affecting our Businesses" and "Government Regulation and Regulatory Developments" in our 2007 Annual MD&A. Additional Information Additional information relating to our company and business, including our 2007 Annual Report and 2007 Annual Information Form, may be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. About the Company We are a diversified Canadian communications and media company. We are engaged in wireless voice and data communications services through Wireless, Canada's largest wireless provider and the operator of the country's only national GSM/HSPA based network. Through Cable we are one of Canada's largest providers of cable television services as well as high-speed Internet access and telephony services. Through Media, we are engaged in radio and television broadcasting, televised shopping, magazines and trade publications, and sports entertainment. We are publicly traded on the Toronto Stock Exchange (TSX: RCI.A and RCI.B) and on the New York Stock Exchange (NYSE: RCI). For further information about the Rogers group of companies, please visit www.rogers.com. Quarterly Investment Community Conference Call As previously announced by press release, a live Webcast of our quarterly results conference call with the investment community will be broadcast via the Internet at www.rogers.com/webcast beginning at 9:30 a.m. ET today, July 29, 2008. A rebroadcast of this call will be available on the Webcast Archive page of the Investor Relations section of www.rogers.com for a period of at least two weeks following the conference call.

For further information:

For further information: Investment Community Contacts: Bruce M. Mann,
(416) 935-3532, bruce.mann@rci.rogers.com; Dan Coombes, (416) 935-3550,
dan.coombes@rci.rogers.com; Media Contacts: Corporate and Media - Jan Innes,
(416) 935-3525, jan.innes@rci.rogers.com; Wireless - Elizabeth Hamilton, (416)
935-8710, elizabeth.hamilton@rci.rogers.com; Cable - Nancy Cottenden, (416)
935-4726, nancy.cottenden@rci.rogers.com


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