Rogers Reports Third Quarter 2008 Financial and Operating Results



    
      Consolidated Revenue Grows 14% to $3.0 Billion, Adjusted Operating
     Profit Increases 4% to $1.0 Billion, and Net Income Increases 84% to
                                $495 Million;

        Solid Liquidity Position Further Strengthened with Successful
               US$1.75 Billion Investment Grade Debt Offering;

    Wireless Net Subscriber Additions of 239,000 with Continued Growth in
             ARPU and Reductions in Churn, Cable Operations adds
       160,000 Net Additions of Revenue Generating Units on its Cable
           Facilities and Drives Further Margin Expansion to 41.7%;

       Strong Apple iPhone Sales of Approximately 255,000 Units Drive
               Higher Wireless Acquisition and Retention Costs
    

    TORONTO, Oct. 28 /CNW/ - Rogers Communications Inc. today announced its
consolidated financial and operating results for the three and nine months
ended September 30, 2008.

    
    Financial highlights are as follows:

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

    Operating revenue   $ 2,982  $ 2,611       14  $ 8,394  $ 7,436       13
    Operating profit(1)   1,085      986       10    3,176    2,215       43
    Net income              495      269       84    1,140      383      198
    Net income per
     share:
      Basic             $  0.78  $  0.42       86  $  1.79  $  0.60      198
      Diluted              0.78     0.42       86     1.79     0.60      198

    As adjusted:(2)
      Operating
       profit(1)        $ 1,025  $   984        4  $ 3,092  $ 2,728       13
      Net income            465      268       74    1,096      753       46
      Net income per
       share:
        Basic           $  0.73  $  0.42       74  $  1.72  $  1.18       46
        Diluted            0.73     0.42       74     1.72     1.17       47
    -------------------------------------------------------------------------

    (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; and (v) in respect of net
        income and net income per share, debt issuance costs, loss on
        repayment of long-term debt and the related income tax impact of the
        above amounts.

    Highlights of the third quarter of 2008 include the following:

    -   Generated continued double-digit growth in quarterly revenue of 14%,
        while net income increased to $495 million (or to $465 million on an
        adjusted basis), and adjusted operating profit less interest expense
        and PP&E additions was steady at $442 million.

    -   Wireless subscriber net additions totalled 239,000, with postpaid net
        additions of 191,000. Postpaid monthly ARPU (average revenue per
        user) increased 4% year-over-year to $78.46 driven in part by the 38%
        growth in data revenue to $253 million, representing 16.5% of network
        revenue.

    -   Wireless launched the Apple iPhone 3G in Canada on July 11, 2008 and
        activated approximately 255,000 of the devices during the quarter.
        Approximately one-third of these activations were to subscribers new
        to Wireless with the other two-thirds being to existing Rogers
        Wireless subscribers who upgraded to the iPhone and committed to new
        term contracts. The vast majority of iPhone subscribers have attached
        both voice and monthly data packages and are generating monthly ARPU
        considerably above the monthly ARPU generated from Wireless' overall
        subscriber base. The initial sales volumes of this device drove
        significantly higher acquisition and retention costs at Wireless.

    -   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 was the only carrier to
        successfully acquire 20 MHz of spectrum across all
        13 provinces/territories with winning bids that totalled
        approximately $1.0 billion, or approximately $1.67/MHz/pop.

    -   Cable's Internet subscriber base grew during the quarter by 29,000 to
        1.6 million, and digital cable households increased by 58,000 to
        reach 1.5 million of which more than 500,000 households now receive
        high-definition television ("HDTV") services. Cable ended the quarter
        with 800,000 residential voice-over-cable telephony subscriber lines,
        reflecting net additions of 55,000 lines for the quarter, of which
        approximately 23,000 were migrations from the circuit-switched
        platform. This brings the total penetration of cable telephony
        customers to 35% of basic cable subscribers up from 26% at
        September 30, 2007.

    -   Independent research firm comScore Inc. found Rogers Hi-Speed
        Internet to be the fastest and most reliable Internet access service
        for residential customers in the Greater Toronto Area. The results,
        which were based on over 120,000 network speed tests conducted over a
        four month period in early 2008, showed that the Rogers Hi-Speed
        Internet product delivers faster speeds across all service tiers when
        compared to Cable's primary DSL competitor.

    -   Media successfully re-branded the recently acquired channel m
        television station in Vancouver to OMNI BC and launched two new OMNI
        stations in Edmonton and Calgary. OMNI's multilingual/multicultural
        television stations now cover all major markets across Canada and
        reach approximately 75% of the country's ethnic population. On
        July 31, 2008, Media also completed the acquisition of the remaining
        two-thirds interest in Outdoor Life Network ("OLN") that it did not
        already own, which joins Media's other specialty television assets,
        including Sportsnet, The Biography Channel, G4TechTV and The Shopping
        Channel.

    -   Rogers successfully closed US$1.75 billion investment grade debt
        offerings on August 6, 2008, consisting of US$1.4 billion of 6.8%
        Senior Notes due 2018, and US$350 million 7.5% Senior Notes due 2038.
        Proceeds of the offerings were used in part to fund the $1.0 billion
        purchase of 20 MHz of national spectrum in the recently concluded AWS
        auction.

    -   Rogers had, at September 30, 2008, approximately $1.8 billion
        available credit under its $2.4 billion committed bank credit
        facility that matures in July 2013, which, along with no debt
        maturities until May 2011, combines to provide a position of
        substantial liquidity.

    -   Rogers purchased for cancellation 3,077,400 outstanding Class B Non-
        Voting shares during the quarter for $96.7 million under Board
        approval to repurchase up to $300 million of outstanding shares.
    

    "The double-digit revenue growth and continued healthy level of
subscriber additions that Rogers generated in the third quarter reflect the
quality and utility of our service offerings in the face of an increasingly
challenging economic backdrop which we are well financed to endure," said Ted
Rogers, President and CEO of Rogers Communications Inc. "The results for the
quarter also clearly reflect the substantial and very successful investment
Rogers has made to bring Apple's iPhone 3G to more than a quarter million
Canadians over a very short period of time. While the upfront cost associated
with adding this many iPhone subscribers so rapidly is high, it is an
investment that we expect will provide considerable returns in the form of
higher revenue per customer and lower churn in subsequent periods."
    This management's discussion and analysis ("MD&A"), which is current as
of October 27, 2008, should be read in conjunction with our Third 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, and Canadian specialty channels including
        Biography, G4TechTV and Outdoor Life Network; 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 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars, except
     per share amounts)    2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------
    Operating revenue
      Wireless          $ 1,727  $ 1,442       20  $ 4,680  $ 4,037       16
      Cable
        Cable Operations    724      657       10    2,137    1,923       11
        RBS                 131      140       (6)     394      431       (9)
        Rogers Retail       108      104        4      300      288        4
        Corporate items
         and eliminations    (2)      (2)       -       (7)      (7)       -
    -------------------------------------------------------------------------
                            961      899        7    2,824    2,635        7
      Media                 386      339       14    1,102      953       16
      Corporate items
       and eliminations     (92)     (69)      33     (212)    (189)      12
    -------------------------------------------------------------------------
    Total                 2,982    2,611       14    8,394    7,436       13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Adjusted operating
     profit (loss)(1)
      Wireless              693      686        1    2,167    1,931       12
      Cable
        Cable Operations    302      256       18      873      733       19
        RBS                  12        7       71       45        4      n/m
        Rogers Retail         4        2      100        2       (1)     n/m
    -------------------------------------------------------------------------
                            318      265       20      920      736       25
      Media                  43       46       (7)      96      110      (13)
      Corporate items
       and eliminations     (29)     (13)     123      (91)     (49)      86
    -------------------------------------------------------------------------
    Adjusted operating
     profit(1)            1,025      984        4    3,092    2,728       13
    Stock option plan
     amendment(2)             -        -      n/m        -     (452)     n/m
    Stock-based
     compensation
     recovery (expense)(2)   62      (11)     n/m      125      (58)     n/m
    Integration and
     restructuring
     expenses(3)             (2)      (5)     (60)     (10)     (21)     (52)
    Adjustment for CRTC
     Part II fees
     decision(4)              -       18      n/m      (31)      18      n/m
    -------------------------------------------------------------------------
    Operating profit(1)   1,085      986       10    3,176    2,215       43
    Other income and
     expense, net(5)        590      717      (18)   2,036    1,832       11
    -------------------------------------------------------------------------
    Net income          $   495  $   269       84  $ 1,140  $   383      198
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per
     share:
      Basic             $  0.78  $  0.42       86  $  1.79  $  0.60      198
      Diluted              0.78     0.42       86     1.79     0.60      198

    As adjusted:(1)
      Net income        $   465  $   268       74  $ 1,096  $   753       46
      Net income per
       share:
        Basic           $  0.73  $  0.42       74  $  1.72  $  1.18       46
        Diluted            0.73     0.42       74     1.72     1.17       47

    Additions to
     property, plant and
     equipment
     ("PP&E")(1)
      Wireless          $   205  $   164       25  $   619  $   570        9
      Cable
        Cable Operations    187      176        6      493      464        6
        RBS                  11       18      (39)      25       58      (57)
        Rogers Retail         5        5        -       12       12        -
    -------------------------------------------------------------------------
                            203      199        2      530      534       (1)
      Media                  11       27      (59)      49       45        9
      Corporate              17        7      143       40       23       74
    -------------------------------------------------------------------------
    Total               $   436  $   397       10  $ 1,238  $ 1,172        6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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. 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars)              2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------

    Net income          $   495  $   269       84  $ 1,140  $   383      198
    Income tax expense       14      166      (92)     337      165      104
    Other expense
     (income), net          (12)      10      n/m      (25)       6      n/m
    Change in the fair
     value of derivative
     instruments            (20)       5      n/m      (21)      31      n/m
    Loss on repayment of
     long-term debt           -        -      n/m        -       47      n/m
    Foreign exchange
     loss (gain)             16       (1)     n/m       22      (53)     n/m
    Debt issuance costs      16        -      n/m       16        -      n/m
    Interest on
     long-term debt         147      140        5      418      441       (5)
    -------------------------------------------------------------------------
    Operating income        656      589       11    1,887    1,020       85
    Depreciation and
     amortization           429      397        8    1,289    1,195        8
    -------------------------------------------------------------------------
    Operating profit      1,085      986       10    3,176    2,215       43
    Stock option plan
     amendment                -        -      n/m        -      452     (100)
    Stock-based
     compensation
     (recovery) expense     (62)      11      n/m     (125)      58      n/m
    Integration and
     restructuring expenses   2        5      (60)      10       21      (52)
    Adjustment for CRTC
     Part II fees decision    -      (18)    (100)      31      (18)     n/m
    -------------------------------------------------------------------------
    Adjusted operating
     profit             $ 1,025  $   984        4  $ 3,092  $ 2,728       13
    -------------------------------------------------------------------------
    

    Net Income and Net Income Per Share

    We recorded net income of $495 million and $1,140 million for the three
and nine months ended September 30, 2008, respectively, or basic and diluted
earnings per share of $0.78 and $1.79, respectively, compared to net income of
$269 million and $383 million, or basic and diluted earnings per share of
$0.42 and $0.60, in the corresponding periods in 2007.

    Income Tax Expense

    Due to our non-capital loss carryforwards, our income tax expense for the
three and nine months ended September 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 nine months ended September 30,
2008 were 2.8% and 22.8%, respectively. The effective income tax rates
differed from the 2008 statutory income tax rate of 32.7% primarily due to an
income tax credit of $65 million recorded in respect of 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. In addition, during the three
months ended September 30, 2008, we recorded a future income tax recovery of
$48 million primarily relating to a net decrease in the valuation allowance
recorded in respect of realized and unrealized capital losses. The effective
income tax rates for the three and nine months ended September 30, 2007 were
38.2% and 30.1%, respectively. The effective income tax rate for the three
months ended September 30, 2007 differed from the 2007 statutory income tax
rate of 35.2% primarily due to a future income tax charge recorded for a
reduction in our future tax assets to reflect a decrease in the estimated
income tax rate that will apply on the utilization of our income tax losses.
The effective income tax rate for the nine month period ended September 30,
2007 differed from the 2007 statutory income tax rate of 35.2% 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     Nine months ended
                                 --------------------------------------------
    (In millions of dollars)      September  September  September  September
                                   30, 2008   30, 2007   30, 2008   30, 2007
    -------------------------------------------------------------------------
    Statutory income tax rate          32.7%      35.2%      32.7%      35.2%
    -------------------------------------------------------------------------

    Income before income taxes    $     509  $     435  $   1,477  $     548

    Income tax expense at statutory
     income tax rate on income
     before income taxes          $     166  $     153  $     483  $     193
    Increase (decrease) in income
     taxes resulting from:
      Ontario harmonization credit      (65)         -        (65)         -
      Stock-based compensation            -          -          -        (19)
      Vidéotron Ltée termination
       payment                            -          -          -        (25)
      Change in the valuation
       allowance for future
       income taxes                     (48)         -        (45)         -
      Change in estimated
       applicable income
       tax rate                         (21)        12        (22)        26
      Other items                       (18)         1        (14)       (10)
    -------------------------------------------------------------------------

    Income tax expense            $      14  $     166  $     337  $     165
    -------------------------------------------------------------------------

    Effective income tax rate           2.8%      38.2%      22.8%      30.1%
    -------------------------------------------------------------------------
    

    Debt Issuance Costs

    We recorded debt issuance costs of $16 million during the three and nine
months ended September 30, 2008, due to the fees and expenses incurred in
connection with the US$1.75 billion investment grade debt offerings that were
closed on August 6, 2008.

    Change in Fair Value of Derivative Instruments

    The changes in fair value of the derivative instruments in the three and
nine months ended September 30, 2008 were primarily the result of the changes
in the Canadian dollar relative to that of the U.S. dollar related to the
cross-currency interest rate exchange agreements hedging the US$350 million
Senior Notes due 2038, that have not been designated as hedges for accounting
purposes.

    Foreign Exchange Loss (Gain)

    During the three months ended September 30, 2008, the Canadian dollar
weakened by 4.1 cents versus the U.S. dollar resulting in a foreign exchange
loss of $16 million, primarily related to our U.S. dollar-denominated
long-term debt that is not hedged for accounting purposes. During the nine
months ended September 30, 2008, the Canadian dollar weakened by 7.2 cents
versus the U.S. dollar. This resulted in a foreign exchange loss of $22
million. During the corresponding periods of 2007, the Canadian dollar
strengthened by 6.7 cents and 16.9 cents, respectively, versus the U.S.
dollar. This resulted in foreign exchange gains of $1 million and $53 million,
respectively, during the three and nine months ended September 30, 2007
primarily related to our U.S. dollar-denominated long-term debt that is not
hedged for accounting purposes.

    Interest on Long-Term Debt

    The $7 million increase in interest expense for the three months ended
September 30, 2008, compared to the corresponding period of the prior year, is
due to the $1.1 billion net increase in long term debt at September 30, 2008
compared to September 30, 2007, including the impact of cross-currency
interest rate exchange agreements, and including the August 2008 issuance of
US$1.75 billion aggregate principal amount of Senior Notes, offset by the
decrease in our bank credit facility. The net increase in our long term debt
was largely due to the payment of an aggregate $1.0 billion for the
acquisition of spectrum licenses in the AWS spectrum auction, primarily in the
latter part of the quarter.
    The $23 million decrease in interest expense for the nine months ended
September 30, 2008, compared to the corresponding period of the prior year,
primarily reflects the reduction in the average interest rate on our long term
debt for the nine months ended September 30, 2008 (7.4%) compared to
September 30, 2007 (7.8%). This reduction in the average interest rate
reflects the full period impact of repayments made in 2007 of three debt
issues with comparatively higher interest rates.

    Operating Income

    The increase in operating income in the three months ended September 30,
2008, compared to the corresponding period of the prior year, reflects the
growth in revenue of $371 million exceeding the growth in operating expenses
of $304 million. For the nine months ended September 30, 2008, the growth in
revenue of $958 million exceeded the growth in operating expenses of
$543 million, excluding a one-time charge incurred in the nine months ended
September 30, 2007 of $452 million related to the introduction of a cash
settlement feature for employee stock options. 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
nine months ended September 30, 2008, compared to the corresponding periods of
the prior year, primarily 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
                    Charge        Three months ended       Nine months ended
                     Upon            September 30,           September 30,
    (In millions   Adoption  ------------------------------------------------
     of dollars)  in Q2 2007        2008        2007        2008        2007
    -------------------------------------------------------------------------
    Wireless      $       46  $       (7) $        2  $       (9) $        9
    Cable                113         (17)          3         (39)         13
    Media                 84         (11)          3         (22)          9
    Corporate            209         (27)          3         (55)         27
                 ------------------------------------------------------------
                  $      452  $      (62) $       11  $     (125) $       58
    -------------------------------------------------------------------------
    

    At September 30, 2008, we had a liability of $298 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
nine months ended September 30, 2008, $5 million and $65 million,
respectively, was paid to holders of options and restricted share units upon
exercise using the SAR feature.

    Adjusted Operating Profit

    Wireless and Cable both contributed to the increase in adjusted operating
profit for the three and nine months ended September 30, 2008 compared to the
three and nine months ended September 30, 2007. This increase was partially
offset by a decrease in Media's adjusted operating profit for the three and
nine months ended September 30, 2008, compared to the corresponding periods in
2007. Wireless' quarterly adjusted operating profit reflects the significant
costs associated with heavy initial sales volumes of the iPhone 3G as
discussed below. Refer to the individual segment discussions for details of
the respective increases in adjusted operating profit.
    For the three months ended September 30, 2008, adjusted operating profit
increased to $1,025 million, from $984 million in the corresponding period of
the prior year. Adjusted operating profit for the three months ended
September 30, 2008 and 2007, respectively, excludes: (i) stock-based
compensation (recovery) expense of $(62) million and $11 million; (ii)
integration and restructuring expenses of $2 million and $5 million; and (iii)
an adjustment of CRTC Part II fees related to prior periods of $(18) million
in the three months ended September 30, 2007. See the section entitled
"Government Regulation and Regulatory Developments" for further details.
    For the nine months ended September 30, 2008, adjusted operating profit
increased to $3,092 million, from $2,728 million in the corresponding period
of the prior year. Adjusted operating profit for the nine months ended
September 30, 2008 and 2007, respectively, excludes: (i) stock-based
compensation (recovery) expense of $(125) million and $58 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 nine months ended September 30, 2007; (iii) integration and
restructuring expenses of $10 million and $21 million; and (iv) an adjustment
of CRTC Part II fees related to prior periods of $31 million and
$(18) million. See the section entitled "Government Regulation and Regulatory
Developments" for further details.
    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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars, except
     margin)               2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Postpaid          $ 1,457  $ 1,274       14  $ 4,122  $ 3,585       15
      Prepaid                78       75        4      215      203        6
      One-way messaging       2        3      (33)       8       10      (20)
                       ------------------------------------------------------
      Network revenue     1,537    1,352       14    4,345    3,798       14
      Equipment sales       190       90      111      335      239       40
                       ------------------------------------------------------
    Total operating
     revenue              1,727    1,442       20    4,680    4,037       16
                       ------------------------------------------------------

    Operating expenses
     before the undernoted
      Cost of equipment
       sales                378      178      112      679      495       37
      Sales and
       marketing expenses   186      181        3      477      467        2
      Operating, general
       and administrative
       expenses             470      397       18    1,357    1,144       19
                       ------------------------------------------------------
                          1,034      756       37    2,513    2,106       19
                       ------------------------------------------------------
    Adjusted operating
     profit(1)(2)           693      686        1    2,167    1,931       12
    Stock option plan
     amendment(3)             -        -      n/m        -      (46)     n/m
    Stock-based
     compensation
     recovery
     (expense)(3)             7       (2)     n/m        9       (9)     n/m
                       ------------------------------------------------------
    Operating profit(1) $   700  $   684        2  $ 2,176  $ 1,876       16
                       ------------------------------------------------------
                       ------------------------------------------------------

    Adjusted operating
     profit margin as %
     of network
     revenue(1)            45.1%    50.7%             49.9%    50.8%

    Additions to
     PP&E(1)            $   205  $   164       25  $   619  $   570        9
    -------------------------------------------------------------------------

    (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 $4 million and
        $11 million for the three and nine months ended September 30, 2008,
        respectively, and $8 million and $23 million, for the three and nine
        months ended September 30, 2007, respectively, related to the
        Inukshuk wireless broadband initiative.
    (3) See the section entitled "Stock-based Compensation".


    Summarized Wireless Subscriber Results

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

    Postpaid
      Gross additions(1)    396      383       13      972      991      (19)
      Net additions         191      195       (4)     379      423      (44)
      Adjustment to
       postpaid
       subscriber base(2)     -        -        -        -      (65)      65
      Total postpaid
       retail
       subscribers        6,293    5,756      537    6,293    5,756      537
      Average monthly
       revenue per user
       ("ARPU")(3)      $ 78.46  $ 75.15  $  3.31  $ 75.46  $ 71.82  $  3.64
      Average monthly
       usage (minutes)      583      582        1      586      565       21
      Monthly churn        1.11%    1.12%  (0.01%)    1.09%    1.14%  (0.05%)
    Prepaid
      Gross additions       177      179       (2)     459      479      (20)
      Net additions          48       48        -       26       45      (19)
      Adjustment to
       prepaid subscriber
       base(2)                -        -        -        -      (26)      26
      Total prepaid
       retail
        subscribers       1,451    1,399       52    1,451    1,399       52
      ARPU(3)           $ 18.22  $ 18.15  $  0.07  $ 16.91  $ 16.41  $  0.50
      Monthly churn        3.04%    3.20%  (0.16%)    3.41%    3.52%  (0.11%)
    -------------------------------------------------------------------------

    (1) During the third quarter of 2008, an adjustment associated with
        laptop wireless data card subscribers resulted in the addition of
        approximately 11,000 subscribers to Wireless' postpaid subscriber
        base. This adjustment is included in gross additions.
    (2) 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.
    (3) 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 nine months ended
September 30, 2008, compared to the corresponding periods of the prior year,
was driven predominantly by the continued growth of Wireless' postpaid
subscriber base and improvements in postpaid ARPU. The 4.4% year-over-year
increase in postpaid ARPU reflects the impact of higher wireless data revenue,
as well as increased usage of various calling features. The year-over-year
growth in the voice component of blended ARPU continued to decelerate during
the quarter to approximately 1.5%, reflecting the impact of a softer economy
on roaming, long-distance and out-of-bucket voice usage combined with a
general increase in the level of competitive intensity.
    Wireless' success in maintaining postpaid churn reflects targeted
customer retention activities and continued enhancements in network coverage
and quality.
    Wireless subscriber net additions in the quarter were strong in
comparison to the unusually strong third quarter of 2007 during which Wireless
benefited from the March 2007 implementation of number portability in Canada.
    For the three and nine months ended September 30, 2008, wireless data
revenue increased by approximately 38% over the corresponding periods of 2007,
to $253 million and $683 million, respectively. This increase in data revenue
reflects the continued growth of text and multimedia messaging services,
wireless Internet access, smartphone devices, downloadable ring tones, music
and games, and other wireless data services, partially offset by the impact of
certain data services price plan changes made during the quarter. Further data
pricing changes designed to drive increased consumer adoption became effective
on October 1, 2008. For the three and nine months ended September 30, 2008,
data revenue represented approximately 16.5% and 15.7%, respectively, of total
network revenue, compared to 13.5% and 12.9% in each of the corresponding
periods of 2007.

    Wireless Equipment Sales

    On July 11, 2008, Wireless launched the Apple iPhone 3G in Canada, under
the Rogers Wireless and Fido brands. A wide variety of service plans are
available for voice and data combined, with all iPhone 3G price plans
requiring three year term contracts. The iPhone 3G handsets are currently
priced at $199 and $299 for the 8GB and 16GB models, respectively, which
reflects significant handset subsidies that Wireless incurs for each unit
sold.
    During the quarter, Wireless generated strong activations of
approximately 255,000 iPhone 3G devices. Approximately one-third of these
sales were to subscribers new to Wireless with two-thirds being to existing
Rogers Wireless subscribers who upgraded to the iPhone and committed to new
three year term contracts. The vast majority of iPhone subscribers have
attached both voice and monthly data packages and are generating monthly ARPU
substantially above the monthly ARPU generated from Wireless' overall
subscriber base. The high upfront cost associated with adding iPhone
subscribers so rapidly is an investment made to obtain customers with
significantly higher than average ARPU for multi year terms which we expect
will have the effect in subsequent periods of being accretive to overall ARPU
while reducing overall churn.
    The year-over-year increase in revenue from equipment sales, including
activation fees and net of equipment subsidies, reflects the large volume of
iPhones sold in the third quarter of 2008.

    
    Wireless Operating Expenses

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

    Operating expenses
      Cost of equipment
       sales            $   378  $   178      112  $   679  $   495       37
      Sales and
       marketing
        expenses            186      181        3      477      467        2
      Operating, general
       and administrative
       expenses             470      397       18    1,357    1,144       19
                       ------------------------------------------------------
    Operating expenses
     before the
     undernoted           1,034      756       37    2,513    2,106       19
    Stock option plan
     amendment(1)             -        -      n/m        -       46      n/m
    Stock-based
     compensation
     (recovery)
     expense(1)              (7)       2      n/m       (9)       9      n/m
                       ------------------------------------------------------
    Total operating
     expenses           $ 1,027  $   758       35  $ 2,504  $ 2,161       16
                       ------------------------------------------------------
                       ------------------------------------------------------

    Average monthly
     operating expense
     per subscriber
     before sales and
     marketing
     expenses(2)        $ 24.91  $ 20.74       20  $ 22.61  $ 20.39       11

    Sales and marketing
     costs per gross
     subscriber
     addition(2)        $   464  $   392       19  $   440  $   388       13
    -------------------------------------------------------------------------

    (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 includes retention costs and excludes sales and marketing
        expenses and stock-based compensation (recovery) expense.
    

    As a result of the significant number of iPhone activations, certain
Wireless metrics for the third quarter of 2008, including cost of equipment
sales, retention costs, cost of acquisition per subscriber and operating
expense per subscriber, increased measurably which had a dilutive impact on
Wireless' operating profit growth. However, the large majority of iPhone 3G
subscribers subscribe to both voice and data service plans, which has, to
date, resulted in a significantly higher than average postpaid ARPU from these
customers. Consequently, Wireless' ARPU levels are expected to be positively
impacted over the term of the iPhone 3G subscribers' three year contracts. See
the sections entitled "Caution Regarding Forward-Looking Statements, Risks and
Assumptions" and "2008 Guidance" below.
    Cost of equipment sales increased for the three and nine months ended
September 30, 2008, compared to the corresponding periods of the prior year.
This is primarily the result of the large volume of iPhone sales.
    The year-over-year increases in operating, general and administrative
expenses, excluding retention spending discussed below, in the three and nine
months ended September 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 wireless 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 devices and services. 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
$170 million and $359 million, respectively, in the three and nine months
ended September 30, 2008, compared to $102 million and $293 million,
respectively, in the corresponding periods of the prior year. As a direct
result of the iPhone launch, Wireless had a higher than normal rate of upgrade
activity by existing subscribers during the quarter. Approximately two-thirds
of the 255,000 iPhone device activations in the third quarter of 2008 were
hardware and service plan upgrades by existing subscribers which drove the
largest portion of increase in retention, with growth in the subscriber base,
in general, increasing retention spending compared to prior periods.
    Wireless estimates that the incremental hardware subsidy and data plan
commission costs associated with the significant iPhone 3G volumes during the
quarter drove approximately $95 million of incremental expenses versus what
the same volume of devices would have been with the device sales mix which
existed prior to the introduction of the iPhone.

    Wireless Adjusted Operating Profit

    The relatively flat year-over-year adjusted operating profit reflects
primarily the significant increase in cost of equipment sales from the handset
subsidies related to iPhone 3G volumes, partially offset by the increase in
network revenue. Primarily as a result of the investment in a significant
number of high ARPU, but high subsidy iPhone activations, Wireless' adjusted
operating profit margin on network revenue (which excludes equipment sales
revenue) decreased to 45.1% and 49.9%, respectively, for the three and nine
months ended September 30, 2008, compared to 50.7% and 50.8% in the
corresponding periods of 2007, respectively.

    Spectrum Auction Conclusion

    Wireless participated in the AWS spectrum auction in Canada which
commenced on May 27, 2008 and concluded on July 21, 2008. Wireless acquired
20 MHz of spectrum across all 13 provinces/territories with winning bids that
totalled approximately $1.0 billion, or approximately $1.67/MHz/pop. Final
payment was submitted on September 3, 2008. Once Industry Canada has reviewed
and approved the required documentation pertaining to Canadian ownership and
other matters, the licences will be granted.

    
    Wireless Additions to Property, Plant and Equipment

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

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

    Additions to PP&E
      HSPA ("High-Speed
       Packet Access")  $    57  $    36       58  $   239  $   259       (8)
      Network - capacity     53       48       10      146      131       11
      Network - other        64       34       88      152       75      103
      Information and
       technology and
       other                 30       42      (29)      80       93      (14)
      Inukshuk                1        4      (75)       2       12      (83)
                       ------------------------------------------------------
    Total additions
     to PP&E            $   205  $   164       25  $   619  $   570        9
    -------------------------------------------------------------------------
    

    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 various 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars, except
     margin)             2008(1)  2007(2)   % Chg   2008(1)  2007(2)   % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Cable
       Operations(3)    $   724  $   657       10  $ 2,137  $ 1,923       11
      RBS                   131      140       (6)     394      431       (9)
      Rogers Retail         108      104        4      300      288        4
      Intercompany
       eliminations          (2)      (2)       -       (7)      (7)       -
                       ------------------------------------------------------
    Total operating
     revenue                961      899        7    2,824    2,635        7
                       ------------------------------------------------------

    Operating profit
     (loss) before the
     undernoted
      Cable Operations(3)   302      256       18      873      733       19
      RBS                    12        7       71       45        4      n/m
      Rogers Retail           4        2      100        2       (1)     n/m
                       ------------------------------------------------------
    Adjusted operating
     profit(4)              318      265       20      920      736       25
    Stock option plan
     amendment(5)             -        -      n/m        -     (113)    (100)
    Stock-based
     compensation
     recovery (expense)(5)   17       (3)     n/m       39      (13)     n/m
    Integration and
     restructuring
     expenses(6)             (2)      (5)     (60)     (10)     (21)     (52)
    Adjustment for CRTC
     Part II fees
     decision(7)              -       15     (100)     (25)      15      n/m
                       ------------------------------------------------------
    Operating profit(4) $   333  $   272       22  $   924  $   604       53
                       ------------------------------------------------------
                       ------------------------------------------------------

    Adjusted operating
     profit (loss)
     margin(4)
      Cable Operations(3)  41.7%    39.0%             40.9%    38.1%
      RBS                   9.2%     5.0%             11.4%     0.9%
      Rogers Retail         3.7%     1.9%              0.7%   (0.3%)

    Additions to PP&E(4)
      Cable
       Operations(3)    $   187  $   176        6  $   493  $   464        6
      RBS                    11       18      (39)      25       58      (57)
      Rogers Retail           5        5        -       12       12        -
                       ------------------------------------------------------
    Total additions
     to PP&E            $   203  $   199        2  $   530  $   534       (1)
    -------------------------------------------------------------------------

    (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. 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars, except
     margin)               2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------

    Operating revenue
      Core Cable        $   419  $   386        9  $ 1,239  $ 1,143        8
      Internet              176      153       15      513      448       15
      Rogers Home Phone     129      118        9      385      332       16
                       ------------------------------------------------------
    Total Cable
     Operations
     operating revenue      724      657       10    2,137    1,923       11
                       ------------------------------------------------------

    Operating expenses
     before the undernoted
      Sales and
       marketing expenses    62       66       (6)     190      188        1
      Operating, general
       and administrative
       expenses             360      335        7    1,074    1,002        7
                       ------------------------------------------------------
                            422      401        5    1,264    1,190        6
                       ------------------------------------------------------
    Adjusted operating
     profit(1)              302      256       18      873      733       19
    Stock option plan
     amendment(2)             -        -      n/m        -     (106)    (100)
    Stock-based
     compensation
     recovery (expense)(2)   16       (1)     n/m       37      (11)     n/m
    Integration and
     restructuring
     expenses(3)             (1)      (4)     n/m       (2)      (9)     n/m
    Adjustment for CRTC
     Part II fees
     decision(4)              -       15      n/m      (25)      15      n/m
                       ------------------------------------------------------
    Operating profit(1) $   317  $   266       19  $   883  $   622       42
                       ------------------------------------------------------
                       ------------------------------------------------------

    Adjusted operating
     profit margin(1)      41.7%    39.0%             40.9%    38.1%
    -------------------------------------------------------------------------

    (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. See the section entitled "Government Regulation and
        Regulatory Developments" for further details.


    Summarized Subscriber Results

    -------------------------------------------------------------------------
                             Three months ended          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (Subscriber
     statistics in
     thousands, except
     ARPU)                 2008   2007(1)    Chg      2008   2007(1)     Chg
    -------------------------------------------------------------------------
    Cable homes
     passed(2)                                       3,530    3,543      (13)

    Basic Cable
      Net additions
       (losses)(3)           18        9        9        5       (2)       7
      Total Basic Cable
        subscribers(4)    2,316    2,275       41    2,316    2,275       41
      Core Cable
       ARPU(5)          $ 60.85  $ 56.69  $  4.16  $ 60.03  $ 55.86  $  4.17

    High-speed Internet
      Net additions          29       55      (26)      83      118      (35)
      Total Internet
       subscribers
       (residential)
       (4)(6)(7)          1,563    1,419      144    1,563    1,419      144
      Internet ARPU(5)  $ 38.37  $ 36.71  $  1.66  $ 37.59  $ 36.46  $  1.13

    Digital Cable
      Terminals, net
       additions            110       83       27      267      264        3
      Total terminals
       in service(4)      2,146    1,761      385    2,146    1,761      385
      Households, net
       additions             58       55        3      130      158      (28)
      Total households(4) 1,489    1,292      197    1,489    1,292      197

    Cable telephony
     subscriber lines
      Net additions and
       migrations(8)         55       81      (26)     142      225      (83)
      Total Cable
       telephony
       subscriber lines(4)  800      591      209      800      591      209

    Circuit-switched
     subscriber lines
      Net losses and
       migrations(8)        (44)      (7)     (37)     (80)     (33)     (47)
      Total circuit-
       switched subscriber
       lines(7)             255      338      (83)     255      338      (83)

    Revenue Generating
     Units ("RGUs")(9)
      Net additions         116      193      (77)     280      466     (186)
      Total RGUs          6,423    5,915      508    6,423    5,915      508
    -------------------------------------------------------------------------

    (1) Certain of the comparative figures have been reclassified to conform
        to the current year presentation.
    (2) During the three months ended September 30, 2008, a change in
        subscriber reporting resulted in a decrease to cable homes passed of
        approximately 140,000.
    (3) During the three months ended September 30, 2008, a reclassification
        of certain subscribers had the impact of increasing basic cable net
        additions by approximately 16,000. In addition, basic cable net
        subscriber additions for the nine months ended September 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.
    (4) Included in total subscribers at September 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 on June 12, 2008. These
        subscribers are not included in net additions for the three or nine
        months ended September 30, 2008.
    (5) As defined. See the sections entitled "Key Performance Indicators and
        Non-GAAP Measures" and "Supplementary Information".
    (6) 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 nine months ended
        September 30, 2008.
    (7) Included in total subscribers at September 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 nine months ended September 30, 2007.
    (8) Includes approximately 23,000 and 39,000 migrations from circuit-
        switched to cable telephony for the three and nine months ended
        September 30, 2008, respectively, and includes approximately 8,000
        and 39,000 migrations from circuit-switched to cable telephony for
        the three and nine months ended September 30, 2007, respectively.
    (9) 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 nine months ended September 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, combined with the
year-over-year increase in the number of analog cable customers. In addition,
the impact of certain price changes introduced in March 2008 and in March 2007
contributed to the growth in revenue of both our digital and basic cable
services.
    Basic cable net subscriber additions for the three months ended
September 30, 2008 reflect an adjustment of approximately 16,000 subscribers
resulting from a reclassification of certain subscribers and also the positive
seasonal impact of colleges and universities reconvening following the summer
break. Net basic cable subscriber additions, for the nine months ended
September 30, 2008, include the negative 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.
    The digital cable subscriber base grew by 15% from September 30, 2007 to
September 30, 2008. Digital penetration now represents approximately 64% of
basic cable households. Increased demand for HDTV and personal video recorder
("PVR") digital set-top box equipment and pay-per-use purchases, combined with
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 58,000 and 130,000 households, respectively, in the
three and nine months ended September 30, 2008. HDTV subscribers at Cable were
up 61% from September 30, 2007 to September 30, 2008, from 311,000 to 500,000.

    Internet (Residential) Revenue

    The year-over-year increases in Internet revenues for the three and nine
months ended September 30, 2008, primarily reflect the 10% increase in the
size of the Internet subscriber base combined with certain Internet services
price increases made during the previous twelve months. The average monthly
revenue per Internet subscriber has increased in the quarter compared to the
corresponding period in 2007 due to various pricing adjustments over the prior
year.
    With the high-speed Internet base now at approximately 1.6 million,
Internet penetration is approximately 44% of the homes passed by our cable
networks.
    An overall economic slowdown in Ontario has resulted in lower net
additions of most of our cable products compared to the previous year, and has
most impacted sales of our Internet products. The lower high-speed Internet
net additions also reflect the growing penetration of broadband in Canada.

    Rogers Home Phone Revenue

    The revenue growth of Rogers Home Phone for the three and nine months
ended September 30, 2008, reflects the year-over-year growth in the customer
base. Cable continues to focus principally on growing its on-net cable
telephony subscriber base, and as part of this on-net focus, began to
significantly de-emphasize circuit-switched sales earlier this year and
intensified its efforts to convert circuit-switched subscribers that are
within the cable territory onto its cable telephony platform. Of the
55,000 net subscriber additions to cable telephony during the quarter,
approximately 23,000 were migrations of subscribers from our circuit-switched
to our cable telephony platform. The lower net addition of cable telephony
service lines versus the previous year reflects the impact of a slowing
Ontario economy and sagging consumer confidence combined with increased
win-back activities by incumbent telecom providers. The cable telephony
subscriber base grew 35% from September 30, 2007 to September 30, 2008. At
September 30, 2008, cable telephony subscribers represented 35% of basic cable
subscribers and 24% of the homes passed in which cable telephony is available.
    The greater number of circuit-switched net line losses during 2008
compared to the corresponding periods of 2007 reflect Cable's migrations of
subscribers within the cable areas from the circuit-switched platform onto the
cable telephony platform, combined with a significant de-emphasis since early
2008 on the sales and marketing of the lower margin circuit-switched telephony
product in markets outside of the cable footprint. Because of the strategic
decision to deemphasize sales of the circuit-switched telephony product
outside of the cable footprint, Cable expects that circuit-switched net line
losses will continue as that base of subscribers shrinks over time.

    Cable Operations Operating Expenses

    The increase in Cable's operating expenses for the three and nine months
ended September 30, 2008 compared to the corresponding periods of 2007 was
primarily driven by the increases in the digital cable, Internet and Rogers
Home Phone subscriber bases, resulting in higher costs associated with
programming content, customer care, network operations, information technology
and credit and collections. In addition, $5 million of CRTC Part II fees, for
the three months ended September 30, 2008, are included in operating, general
and administrative expenses, which are not included in operating, general and
administrative expenses in the corresponding period of 2007. See the section
entitled "Government Regulation and Regulatory Developments". Partially
offsetting these increases was a reduction in certain costs associated with
Cable's Internet product resulting from a renegotiated agreement with Yahoo!
which became effective January 1, 2008, and a year-over-year reduction in
selling expenditures resulting from lower volumes of RGU net additions than in
the corresponding periods of the prior year.

    Cable Operations Adjusted Operating Profit

    The year-over-year growth in adjusted operating profit was primarily the
result of the revenue growth described above, partially offset by the changes
in Cable's operating expenses. As a result, Cable Operations adjusted
operating profit margins increased to 41.7% and 40.9%, respectively, for the
three and nine months ended September 30, 2008, compared to 39.0% and 38.1% 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
255,000 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars, except
     margin)               2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------

    RBS operating
     revenue            $   131  $   140       (6) $   394  $   431       (9)
                       ------------------------------------------------------
    Operating expenses
     before the
     undernoted
      Sales and
       marketing
       expenses               6       17      (65)      19       57      (67)
      Operating,
       general and
       administrative
       expenses             113      116       (3)     330      370      (11)
                       ------------------------------------------------------
                            119      133      (11)     349      427      (18)
                       ------------------------------------------------------
    Adjusted operating
     profit(1)               12        7       71       45        4      n/m
    Stock option plan
     amendment(2)             -        -      n/m        -       (2)    (100)
    Stock-based
     compensation
     recovery
     (expense)(2)             -       (1)    (100)       1       (1)     n/m
    Integration and
     restructuring
     expenses(3)             (1)      (1)       -       (4)     (12)     (67)
                       ------------------------------------------------------
    Operating profit
     (loss)(1)          $    11  $     5      120  $    42  $   (11)     n/m
                       ------------------------------------------------------
                       ------------------------------------------------------

    Adjusted operating
     profit margin(1)       9.2%     5.0%             11.4%     0.9%
    -------------------------------------------------------------------------

    (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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (Subscriber
     statistics
     in thousands)         2008     2007      Chg     2008     2007      Chg
    -------------------------------------------------------------------------

    Local line
     equivalents(1)
      Net additions
       (losses)              (8)       3      (11)     (30)      13      (43)
      Total local line
       equivalents(2)                                  207      231      (24)

    Broadband data
     circuits(3)
      Net additions           4        1        3        2        3       (1)
      Total broadband
       data circuits(2)(4)                              34       34        -
    -------------------------------------------------------------------------

    (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 September 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 nine months ended September 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.
    (4) 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 nine months ended
        September 30, 2008.
    

    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 focus on retaining its existing
medium-enterprise and carrier customer base, but late in 2007 it suspended
most sales and marketing initiatives related to acquiring new medium and large
business customers other than purely on-net opportunities within Cable's
footprint. RBS continues to focus on managing the profitability of its
existing customer base and evaluates profitable opportunities within the
medium and large enterprise and carrier segments, while core operations
focuses on continuing to grow Rogers' penetration of telephony and Internet
services into the small business and office home office markets within Cable's
territory. For the three and nine months ended September 30, 2008, RBS
long-distance revenue declined $2 million and $28 million, respectively, and
data revenue declined $5 million and $9 million, respectively.

    RBS Operating Expenses

    Carrier charges, included in operating, general and administrative
expenses, decreased by $19 million for the nine months ended September 30,
2008, compared to the corresponding period of 2007, due to the decrease in
revenue and focus on on-net services. Carrier charges still represented
approximately 56% of revenue in the nine months ended September 30, 2008,
essentially unchanged from the corresponding period of 2007.
    The decreases in other operating, general and administrative expenses for
the three and nine months ended September 30, 2008, $17 million and
$57 million, respectively, are primarily related to lower sales, marketing,
technical service and information technology costs compared to the
corresponding periods of the prior year. The reduction in sales and marketing
expenses for the three and nine months ended September 30, 2008, compared to
the corresponding periods of the prior year, reflects streamlining initiatives
associated with the refocusing of RBS' business as discussed above.

    RBS Adjusted Operating Profit

    The changes described above resulted in RBS adjusted operating profit of
$12 million and $45 million for the three and nine months ended September 30,
2008, respectively, compared to an adjusted operating profit of $7 million and
$4 million, respectively, in the corresponding periods of 2007.

    
    ROGERS RETAIL

    Summarized Financial Results

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

    Rogers Retail
     operating revenue  $   108  $   104        4  $   300  $   288        4
                       ------------------------------------------------------
    Operating expenses      104      102        2      298      289        3
                       ------------------------------------------------------
    Adjusted operating
     profit (loss)(1)         4        2      100        2       (1)     n/m
    Stock option plan
     amendment(2)             -        -      n/m        -       (5)    (100)
    Stock-based
     compensation
     recovery
     (expense)(2)             1       (1)     n/m        1       (1)     n/m
    Integration and
     restructuring
     expenses(3)              -        -      n/m       (4)       -      n/m
                       ------------------------------------------------------
    Operating profit
     (loss)(1)          $     5   $    1      n/m  $    (1) $    (7)     (86)
                       ------------------------------------------------------
                       ------------------------------------------------------
    Adjusted operating
     profit (loss)
     margin(1)              3.7%     1.9%              0.7%    (0.3%)
    -------------------------------------------------------------------------

    (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 increases in Rogers Retail revenue for the three and nine months
ended September 30, 2008, compared to the corresponding periods 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 nine months ended September 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          Nine months ended
                                September 30,              September 30,
                       ------------------------------------------------------
    (In millions of
     dollars)              2008     2007    % Chg     2008     2007    % Chg
    -------------------------------------------------------------------------

    Additions to PP&E
      Customer premises
       equipment        $    72  $    78       (8) $   171  $   213      (20)
      Scalable
       infrastructure        58       37       57      168       95       77
      Line extensions        10       14      (29)      31       42      (26)
      Upgrades and
       rebuild                8       10      (20)      16       29      (45)
      Support capital        39       37        5      107       85       26
                       ------------------------------------------------------
    Total Cable
     Operations             187      176        6      493      464        6
    RBS                      11       18      (39)      25       58      (57)
    Rogers Retail             5        5        -       12       12        -
                       ------------------------------------------------------
                        $   203  $   199        2  $   530  $   534       (1)
    -------------------------------------------------------------------------
    

    The increase in Cable Operations PP&E additions for the three months
ended September 30, 2008, is primarily attributable to a larger subscriber
base, increased demand for data products and the deployment of new
technologies. This resulted in increased spending on scalable infrastructure
related to, amongst other things, network capacity and investment in
switched-digital technology, as well as increased support capital. Spending on
CPE has decreased in the three and nine months ended September 30, 2008,
compared to the corresponding periods of the prior year resulting from lower
additions of RGUs compared to the corresponding periods of the prior year.
    The reduction in RBS PP&E additions for the three and nine months ended
September 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 locations.

    
    MEDIA
    -----

    Summarized Media Financial Results

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

    Operating revenue   $   386  $   339       14  $ 1,102  $   953       16
                       ------------------------------------------------------

    Operating expenses
     before the
     undernoted             343      293       17    1,006      843       19
                       ------------------------------------------------------
    Adjusted operating
     profit(3)               43       46       (7)      96      110      (13)
    Stock option plan
     amendment(4)             -        -      n/m        -      (84)    (100)
    Stock-based
     compensation
     recovery
     (expense)(4)            11       (3)     n/m       22       (9)     n/m
    Adjustment for CRTC
     Part II fees
     decision(5)              -        3     (100)      (6)       3      n/m
                       ------------------------------------------------------
    Operating
     profit(3)          $     54  $   46       17  $   112  $    20      n/m
                       ------------------------------------------------------
                       ------------------------------------------------------

    Adjusted operating
     profit margin(3)      11.1%    13.6%              8.7%    11.5%

    Additions to
     property, plant
     and equipment(3)   $    11  $    27      (59) $    49  $    45        9
    -------------------------------------------------------------------------

    (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. See the section entitled "Government Regulation and
        Regulatory Developments" for further details.
    

    Media Revenue

    The increase in Media revenue for the three and nine months ended
September 30, 2008, over the corresponding periods in 2007, primarily reflects
the acquisition of Citytv. This acquisition closed on October 31, 2007 and
contributed $32 million and $112 million to revenue in the three and nine
months ended September 30, 2008, respectively, or approximately 68% and 75%,
respectively, of the revenue increases.
    Overall, general softness in the Canadian economy and the Ontario
economy, specifically, has negatively impacted Media's advertising sales.
Organic revenue growth at Media's Sportsnet and Sports Entertainment divisions
compared to the three months ended September 30, 2007 was partially offset by
lower sales at The Shopping Channel and softer advertising revenue, while
revenue levels for the quarter at the Publishing and Radio divisions were
relatively unchanged from the prior year.

    Media Operating Expenses

    The increase in Media operating expenses for the three and nine months
ended September 30, 2008, compared to the corresponding periods in 2007,
primarily reflects the addition of $35 million and $111 million, respectively,
of Citytv operating costs and the charge for terminating the concession
agreement at Rogers Centre during the first quarter of 2008. In addition,
$1 million of CRTC Part II fees, for the three months ended September 30,
2008, are included in operating, general and administrative expenses, which
are not included in operating, general and administrative expenses in the
corresponding period of 2007. See the section entitled "Government Regulations
and Regulatory Developments". These increases were partially offset by cost
savings across various functions.

    Media Adjusted Operating Profit

    The decrease in Media's adjusted operating profit for the nine months
ended September 30, 2008, compared to the corresponding period of 2007,
primarily reflects the aforementioned concession agreement termination fee,
the inclusion of CRTC Part II fees, programming cost increases at Sportsnet,
and advertising revenue softness. Excluding the revenue and operating profit
of Citytv, Media's adjusted operating profit for the three and nine months
ended September 30, 2008 would have been $46 million and $95 million,
respectively, or adjusted operating profit margins of 13% and 10%,
respectively.

    Media Additions to PP&E

    The majority of Media's PP&E additions in the three and nine months ended
September 30, 2008, reflect building improvements and studio construction
related to the relocation of Rogers Sportsnet facilities, the construction of
a new television production facility for the combined Ontario operations of
Citytv and OMNI, and the acquisition of certain assets as part of the
termination of the concession services agreement at Rogers Centre.

    
    CONSOLIDATED LIQUIDITY AND CAPITAL RE

SOURCES Operations Three Months Ended September 30, 2008 For the three months ended September 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 $897 million from $875 million in the corresponding period of 2007. The $22 million increase is primarily the result of a $41 million increase in adjusted operating profit, offset by a $7 million increase in interest expense. Taking into account the changes in non-cash working capital items for the three months ended September 30, 2008, cash generated from operations was $890 million, compared to $982 million in the corresponding period of 2007. The cash generated from operations of $890 million, together with the receipt of $1,794 million aggregate gross proceeds from the issuance of US$1.75 billion of public debt, resulted in total net funds of approximately $2,684 million generated or raised in the three months ended September 30, 2008. Net funds used during the three months ended September 30, 2008 totalled approximately $2,676 million, the details of which include the following: - additions to PP&E of $489 million, including $53 million of related changes in non-cash working capital; - payment of the spectrum auction purchase price and associated costs aggregating $1,008 million; - net repayments under our bank credit facility aggregating $475 million; - the payment of quarterly dividends of $160 million on our Class A Voting and Class B Non-Voting shares; - the payment of $375 million on the termination and re-couponing of three existing swaps aggregating US$575 million notional principal amount; - the purchase for cancellation of 3,077,400 Class B Non-Voting shares for an aggregate purchase price of $96.8 million; - additions to program rights of $17 million; and - acquisitions and other net investments aggregating $55 million, including $39 million to acquire the two-thirds of OLN not previously owned. Taking into account the cash deficiency of $45 million at the beginning of the period and the fund uses described above, the cash deficiency at September 30, 2008 was $37 million. Nine Months Ended September 30, 2008 For the nine months ended September 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 $2,718 million from $2,344 million in the corresponding period of 2007. The $374 million increase is primarily the result of a $364 million increase in adjusted operating profit and a $23 million decrease in interest expense. Taking into account the changes in non-cash working capital items for the nine months ended September 30, 2008, cash generated from operations was $2,467 million, compared to $1,986 million in the corresponding period of 2007. The cash generated from operations of $2,467 million together with the receipt of $1,794 million aggregate gross proceeds from the issuance of US$1.75 billion of public debt, and $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 $4,263 million generated or raised in the nine months ended September 30, 2008. Net funds used during the nine months ended September 30, 2008 totalled approximately $4,239 million, the details of which include the following: - additions to PP&E of $1,345 million, including $107 million of related changes in non-cash working capital; - payment of the spectrum auction purchase price and associated costs aggregating $1,008 million; - net repayments under our bank credit facility aggregating $675 million; - the payment of quarterly dividends of $400 million on our Class A Voting and Class B Non-Voting shares; - the payment of $375 million on the termination and re-couponing of three existing swaps aggregating US$575 million notional principal amount; - the purchase for cancellation of 4,077,400 Class B Non-Voting shares for an aggregate purchase price of $136.7 million; - additions to program rights of $95 million; and - acquisitions and other net investments aggregating $204 million, including the acquisition of Aurora Cable, the two-thirds of OLN not previously owned, 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 September 30, 2008 was $37 million. Financing Our long-term debt instruments are described in Note 15 to the 2007 Annual Audited Consolidated Financial Statements and Note 7 to the Unaudited Interim Consolidated Financial Statements for the three and nine months ended September 30, 2008. Three Months Ended September 30, 2008 As mentioned above, during the three months ended September 30, 2008, an aggregate $475 million net repayment was made under our bank credit facility. As of September 30, 2008, we had an aggregate $565 million of bank debt drawn under our $2.4 billion bank credit facility that matures in July 2013, leaving approximately $1.8 billion available to be drawn. This liquidity position is also enhanced by the fact that our earliest scheduled debt maturity is in May, 2011. On August 6, 2008 RCI issued US$1.75 billion aggregate principal amount of public debt securities, comprised of US$1.4 billion of 6.80% Senior Notes due 2018 (the "2018 Notes") and US$350 million of 7.50% Senior Notes due 2038 (the "2038 Notes"). The 2018 Notes were issued at a discount of 99.854% to yield 6.82% and the 2038 Notes were priced at a discount of 99.653% to yield 7.529%. RCI received aggregate net proceeds of US$1,735 million (Cdn$1,778 million) from the issuance of the 2018 Notes and the 2038 Notes after deducting the respective issue discounts and underwriting commissions. The 2018 Notes and the 2038 Notes are unsecured and are guaranteed on an unsecured basis by each of Rogers Wireless Partnership and Rogers Cable Communications Inc. and rank pari passu with all of RCI's other senior unsecured and unsubordinated notes and debentures and bank credit facility. Effective August 6, 2008, RCI entered into an aggregate US$1.75 billion notional principal amount of cross-currency interest rate exchange agreements ("swaps"). An aggregate US$1.4 billion notional principal amount of these swaps hedge the principal and interest obligations for the 2018 Notes through to maturity in 2018 while the remaining US$350 million aggregate notional principal amount of swaps hedge the principal and interest on the 2038 Notes for ten years to August 2018. These swaps have the effect of: (a) converting the US$1.4 billion aggregate principal amount of 2018 Notes from a fixed coupon rate of 6.80% into Cdn$1,435 million at a weighted average fixed interest rate of 6.80%; and (b) converting the US$350 million aggregate principal amount of 2038 Notes from a fixed coupon rate of 7.50% into Cdn$359 million at a weighted average fixed interest rate of 7.53%. The swaps hedging the 2018 Notes have been designated as hedges against the designated U.S. dollar-denominated debt for accounting purposes, while the swaps hedging the 2038 Notes have not been designated as hedges for accounting purposes. Also effective on August 6, 2008, RCI re-couponed three of our existing swaps by terminating the original swaps aggregating US$575 million notional principal amount and, at the same time, entering into three new swaps aggregating US$575 million notional principal amount at then-current market rates. In each case, only the foreign exchange rate and the Canadian dollar fixed interest rate were changed and all other terms for the new swaps are identical to the respective terminated swaps they are replacing. The termination of the three original swaps resulted in RCI paying US$360 million (Cdn$375 million) for the aggregate out-of-the-money fair value for the terminated swaps on the date of termination, thereby reducing by an equal amount, the fair value of the derivative instruments liability on that date. The three new swaps have the effect of converting US$575 million aggregate notional principal amount of US dollar denominated debt from a weighted average U.S. dollar fixed interest rate of 7.20% into Cdn$589 million ($1.025 exchange rate) at a weighted average Canadian dollar fixed interest rate of 6.88%. In comparison, the original swaps had the effect of converting US$575 million aggregate notional principal amount of U.S. dollar-denominated debt from a weighted average U.S. dollar fixed interest rate of 7.20% into Cdn$815 million ($1.4177 exchange rate) at a weighted average Canadian dollar fixed interest rate of 7.89%. Each of the three new swaps has been designated as a hedge against the designated U.S. dollar-denominated debt for accounting purposes. Nine months Ended September 30, 2008 During the nine months ended September 30, 2008, an aggregate $675 million net repayment was made under our bank credit facility. As of September 30, 2008, we had an aggregate $565 million of bank debt drawn under our $2.4 billion bank credit facility that matures in July 2013, leaving approximately $1.8 billion available to be drawn. This liquidity position is also enhanced by the fact that our earliest scheduled debt maturity is in May, 2011. 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 and, on August 1, 2008, RCI repurchased for cancellation 3,000,000 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 $93.9 million. Each of these purchases 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. In addition, in August and September 2008, RCI purchased an aggregate 77,400 of our Class B Non-Voting shares directly under the NCIB for an aggregate purchase price of $2.9 million. 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 were cancelled on September 3, 2008 upon payment in full for the spectrum licences in the recent auction. See the section entitled "Spectrum Auction Conclusion" in the Wireless segment review for further discussion. Additional Revolving Credit Facility In order to ensure that we had sufficient liquidity after taking into account the 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. No funds were drawn under this credit facility and RCI terminated the credit facility in August 2008 subsequent to the closing of our US$1.75 billion public debt issue. 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 July 2008 Fitch assigned its BBB rating to each of the 2018 Notes and the 2038 Notes. 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 July 2008 Moody's assigned its Baa3 rating to each of the 2018 Notes and the 2038 Notes and affirmed each of the ratings and positive outlook noted above. 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. In July 2008 Standard & Poor's assigned its BBB- rating to each of the 2018 Notes and the 2038 Notes and affirmed each of the ratings noted above. 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. As discussed above, effective August 6, 2008 RCI entered into an aggregate US$1.75 billion notional principal amount of swaps. An aggregate US$1.4 billion notional principal amount of these swaps hedge the principal and interest obligations for the 2018 Notes through to maturity in 2018 while the remaining US$350 million aggregate notional principal amount of swaps hedge the principal and interest on the 2038 Notes for ten years to August 2018. The swaps hedging the 2018 Notes have been designated as hedges against the designated U.S. dollar-denominated debt for accounting purposes, while the swaps hedging the 2038 Notes have not been designated as hedges for accounting purposes. Also effective on August 6, 2008 and as discussed above, RCI re-couponed three of our existing swaps by terminating the original swaps aggregating US$575 million notional principal amount and, at the same time, entering into three new swaps aggregating US$575 million notional principal amount at then-current market rates. In each case, only the foreign exchange rate and the Cdn$ fixed interest rate were changed and all other terms for the new swaps are identical to the respective terminated swaps they are replacing. The termination of the three original swaps resulted in us paying US$360 million (Cdn$375 million) for the aggregate out-of-the-money fair value for the terminated swaps on the date of termination, thereby reducing by an equal amount, the fair value of the derivative instruments liability on that date. Each of the three new swaps has been designated as a hedge against the designated U.S. dollar-denominated debt for accounting purposes. As a result of the activity described above, on September 30, 2008, 100% of our U.S. dollar-denominated debt was hedged on an economic basis while 94% of our U.S. dollar-denominated debt was hedged on an accounting basis. That is, as stated above, the US$350 million aggregate notional principal amount of swaps hedging the 2038 Notes do not qualify as hedges for accounting purposes. Consolidated Hedged Position ------------------------------------------------------------------------- (In millions of dollars, except percentages) September 30, 2008 December 31, 2007 ------------------------------------------------------------------------- U.S. dollar-denominated long-term debt US $ 5,940 US $ 4,190 Hedged with cross-currency interest rate exchange agreements US $ 5,940 US $ 4,190 Hedged exchange rate Cdn $ 1.2031 Cdn $ 1.3313 Percent hedged 100.0%(1) 100.0% ------------------------------------------------------------------------- Amount of long-term debt(2) at fixed rates: Total long-term debt Cdn $ 8,348 Cdn $ 7,454 Total long-term debt at fixed rates Cdn $ 7,783 Cdn $ 6,214 Percent of long-term debt fixed 93.2% 83.4% ------------------------------------------------------------------------- Weighted average interest rate on long-term debt 7.42% 7.53% ------------------------------------------------------------------------- (1) Pursuant to the requirements for hedge accounting under Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3865, Hedges, on September 30, 2008, RCI accounted for 94% of its cross- currency interest rate exchange agreements as hedges against designated U.S. dollar-denominated debt. As a result, 94% of RCI's consolidated U.S. dollar-denominated debt is hedged for accounting purposes versus 100% on an economic basis. (2) Long-term debt includes the effect of the cross-currency interest rate exchange agreements. Composition of Fair Value Liability for Derivative Instruments ------------------------------------------------------------------------- (In millions of dollars) September 30, 2008 December 31, 2007 ------------------------------------------------------------------------- Foreign exchange related $ 953 $ 1,719 Interest related 75 85 --------------------------------------- Total carrying value $ 1,028 $ 1,804 ------------------------------------------------------------------------- The reduction in the fair value liability for derivative instruments as at September 30, 2008 versus December 31, 2007 is a result of the following: (i) the August 2008 re-couponing of three swaps aggregating US$575 million described above; and, (ii) the weakening of the Canadian dollar relative to the U.S dollar at September 30, 2008 versus December 31, 2007. Maturity of Swaps Two of our swaps mature on December 15, 2008 and, as a result, we will receive US$400 million and pay $475 million on the settlement at maturity. Subsequent to quarter-end, in October 2008, we entered into forward foreign exchange contracts, which will also settle on December 15, 2008, to sell the US$400 million in exchange for $476 million. As a result of the maturity of the swaps, our US$400 million 8.00% Senior Subordinated Notes due 2012 will no longer be hedged subsequent to December 15, 2008. Outstanding Share Data Set out below is our outstanding share data as at September 30, 2008. For additional information, refer to Note 19 to our 2007 Annual Audited Consolidated Financial Statements and Note 6 to the Unaudited Interim Consolidated Financial Statements for the three and nine months ended September 30, 2008. ------------------------------------------------------------------------- September 30, 2008 ------------------------------------------------------------------------- Common Shares(1) Class A Voting 112,462,014 Class B Non-Voting 523,202,909 ------------------------------------------------------------------------- Options to purchase Class B Non-Voting shares Outstanding options 15,944,896 Outstanding options exercisable 11,074,529 ------------------------------------------------------------------------- (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. On August 19, 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 $158 million was paid on October 1, 2008 to shareholders of record on September 3, 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 entered into an agreement with a supplier to purchase handsets in the amount of approximately $150 million. This commitment has been fulfilled at September 30, 2008; - The Blue Jays signed two players to multi-year contracts totalling $81 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. Payments are scheduled from 2008 through 2012, and at September 30, 2008, there is a remaining commitment of $69 million; and - Changes to our bank credit facility balance, the entering into of cross-currency interest rate exchange agreements, and the issuance of long-term debt 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 revised 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. The Auction commenced on May 27, 2008 and concluded on July 21, 2008. Rogers was the only party to successfully obtain 20 MHz of AWS spectrum nationally. Review of Broadcasting Regulations including Fee-for-Carriage and Distant Signal Fees The CRTC has advised that it will release its Decision on the Review of Broadcasting Regulations proceeding initiated by Broadcasting Notice of Public Hearing 2007-10 on October 30, 2008. This proceeding is a comprehensive review of the regulations affecting cable operators and pay and specialty services, and specifically addresses the issues of fee-for-carriage for over-the-air television and distant signals. 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 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. A consolidated radio tariff proceeding is scheduled to commence on December 2, 2008, where the Copyright Board will consider tariff proposals filed by music collectives: SOCAN, NRCC, CSI, AVLA/SOPROQ, and ArtistI. The Canadian Association of Broadcasters ("CAB") is representing radio broadcasters and will argue for an "all-in broadcaster tariff" that, if achieved, will effectively rationalize payments and reduce the impact of the collectives' multiple tariff demands. The CAB is arguing that from a pure economic standpoint, the combined rate should be 2.8% for all tariffs. In the alternative "multiple tariff" approach, the maximum combined rate should be 5.96%. With respect to talk-based radio stations, the CAB is arguing that the existing 20% "low music rate" should continue, and a "very low music rate" for stations at or below 5% music use (exclusive of production music) should be set at a "double discount". Copyright Legislation The federal government introduced amendments to the Canadian copyright legislation in the House of Commons on June 12, 2008. 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. Since an election was called, this Bill died on the order paper. The Conservative government has pledged to reintroduce similar legislation. 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. The Conservative government has stated that they have no immediate plans to implement this aspect of the 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. On October 15, 2007, the CRTC sent a letter to all broadcast licencees stating that the CRTC would not collect Part II fees due in November, 2007. As a result, in the three months ended September 30, 2007, the Company reversed its accrual of $18 million related to Part II fees from September 1, 2006 to June 30, 2007. 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 to recording $5 million and $2 million in the second quarter of 2008, for Cable and Media, respectively, we continue to record these fees on a prospective basis in operating, general and administrative expenses. 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, received a first reading in the House of Commons. However, due to the federal election on October 14, 2008, this Bill will not proceed. Bill C-555 was a private members bill and not government legislation. If passed, the bill would have required 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 have also required 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. The Conservative government has stated they will strengthen the Commissioner for Complaints for Telecommunications Services, introduce a Wireless Code of Conduct, prohibit charges for unsolicited incoming SMS messages and give the CRTC power to block unfair charges. Rogers does not currently charge for incoming SMS messages. UPDATES TO RISKS AND UNCERTAINTIES Our significant risks and uncertainties are discussed 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: Wireless Technologies On October 10, 2008, Bell Canada and TELUS each announced that they jointly plan to overlay their Code Division Multiple Access/Evolution Data Optimized ("CDMA/EVDO") based wireless networks with HSPA technology targeting service availability in early 2010. This is expected to enable these companies access to a wider selection of wireless devices, and to compete for HSPA roaming revenues which are expected to grow over time as HSPA becomes more widely deployed around the world, both of which would increase competition at Wireless. 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. Claim Regarding our Fixed Wireless Business In April 2004, a proceeding was brought against Fido and other Canadian wireless carriers claiming damages totalling $160 million, breach of contract, breach of confidence, breach of fiduciary duty and, as an alternative to the damages claims, an order for specific performance of a conditional agreement relating to the use of 38 MHz of MCS Spectrum. The plaintiff has also brought a proceeding against Inukshuk Wireless Partnership, our 50% owned joint venture asserting a claim against the MCS Spectrum licences that were transferred from Fido to Inukshuk. Inukshuk brought a motion to have the separate action against it dismissed. In May, 2008, the Court dismissed the separate action brought against Inukshuk. The Plaintiff is appealing this decision. The proceeding against Fido is at an early stage. We believe we have good defences to the claim and no amounts have been provided in the accounts. 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 and smartphone devices, 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 Bell Canada and TELUS each acquired a mix of 10 MHz and 20 MHz spectrum licences across the country with the exception of Bell Canada in the Eastern Townships, Quebec licence territory, where Bell did not obtain spectrum. MTS Allstream Inc., and Saskatchewan Telecommunications Holding Corporation acquired spectrum only 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 Prince Edward Island 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 Vidéotron Ltée. ("Vidéotron"), is the largest cable provider in Quebec. Vidéotron 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 covering its respective cable markets in British Columbia, 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, with participation from Weather Investments SPA, controlled by Egypt's Naguib Sawiris (or its subsidiary, Orascom Telecom Holding S.A.E.), acquired varying amounts of spectrum across Canada and the Northern Territories with the exception of Quebec. Finally, Data and 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 nine months ended September 30, 2008 and 2007, total amounts paid to these related parties, directly or indirectly, are as follows: ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ------------------------------------------------- (In millions of dollars) 2008 2007 % Chg 2008 2007 % Chg ------------------------------------------------------------------------- Printing, legal services and commissions paid on premiums for insurance coverage $ 2 $ - n/m $ 4 $ 1 n/m ------------------------------------------------------------------------- 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 nine months ended September 30, 2008, the fees charged to our controlling shareholder for personal use of the aircraft and other administrative services were approximately $0.5 million (2007 - $0.7 million). 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 nine months ended September 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 11 to the Unaudited Interim Consolidated Financial Statements for the three and nine months ended September 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 12 to the Unaudited Interim Consolidated Financial Statements for the three and nine months ended September 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 We are making the following changes to the 2008 annual financial and operating guidance ranges which were provided on January 7, 2008. At Wireless, we are noting a positive bias towards the high ends of both the network revenue and subscriber net addition ranges, and are modestly lowering the adjusted operating profit guidance range principally to reflect costs associated with the high volume of iPhone sales. At Cable Operations, we are noting a positive bias towards the higher end of the adjusted operating profit range and towards the lower end of both the PP&E expenditure and revenue ranges, in each case reflecting lower than planned levels of RGU net additions. We are lowering the full year 2008 guidance range for RGU net additions primarily to reflect the shift to deemphasize out of region sales of circuit switched telephony, representing a change of approximately 70,000 RGU's for the year, combined with a heightened level of consumer caution occurring in Cable's largely Ontario footprint. At Media, we are adjusting the revenue and adjusted operating profit ranges downward, principally to reflect the impact of the economic slowdown on advertising sales at our Publishing and Broadcasting divisions, combined with previously disclosed costs which arose in the first half of 2008 associated with a contract termination fee for concession services at Rogers Centre and the reinstatement of Part II CRTC regulatory fees. On a consolidated basis we are lowering the high end of the adjusted operating profit range, primarily reflecting the high volumes of iPhone 3G. All other of the 2008 annual financial and operating guidance ranges, which were provided on January 7, 2008, remain unchanged and are posted on the Investor Relations section of Rogers.com. This information is forward-looking and should be read in conjunction with the section below entitled "Caution Regarding Forward-Looking Statements, Risks and Assumptions". Changes to Full Year 2008 Guidance ------------------------------------------------------------------------- (Millions of dollars, Initial 2008 Updated except subscribers) Guidance Range(*) Guidance Range ------------------------------------------------------------------------- Consolidated Adjusted operating profit(1) 4,000 to 4,200 4,000 to 4,100 Supplementary Detail: Revenue Media 1,525 to 1,575 1,480 to 1,510 Adjusted operating profit(1) Wireless(2) $2,875 to $2,975 $2,800 to $2,850 Media(3) 165 to 180 145 to 155 Net subscriber additions (000s) Residential cable revenue generating units (RGUs)(4) 550 to 625 410 to 440 ------------------------------------------------------------------------- (*) Issued January 7, 2008 (1) Excludes stock-based compensation expense and integration and restructuring related expenditures. (2) Excludes operating losses related to the Inukshuk fixed wireless initiative estimated at $25-$30 million in 2008. (3) Includes losses from Sports Entertainment estimated at $20-$25 million in 2008. (4) Residential cable revenue generating units (RGUs) are comprised of basic cable subscribers, digital cable households, residential high-speed Internet subscribers and residential cable and circuit-switched telephony subscribers. SUPPLEMENTARY INFORMATION Calculations of Wireless Non-GAAP Measures --------------------------------------------------- --------------------- (In millions of dollars, Three months ended Nine months ended subscribers in thousands, September 30, September 30, except ARPU figures and --------------------- --------------------- operating profit margin) 2008 2007 2008 2007 --------------------------------------------------- --------------------- Postpaid ARPU (monthly) Postpaid (voice and data) revenue $ 1,457 $ 1,274 $ 4,122 $ 3,585 Divided by: average postpaid wireless voice and data subscribers 6,190 5,651 6,069 5,546 Divided by: 3 months for the quarter and 9 months for year-to-date 3 3 9 9 --------------------- --------------------- $ 78.46 $ 75.15 $ 75.46 $ 71.82 --------------------------------------------------- --------------------- Prepaid ARPU (monthly) Prepaid (voice and data) revenue $ 78 $ 75 $ 215 $ 203 Divided by: average prepaid subscribers 1,427 1,377 1,413 1,375 Divided by: 3 months for the quarter and 9 months for year-to-date 3 3 9 9 --------------------- --------------------- $ 18.22 $ 18.15 $ 16.91 $ 16.41 --------------------------------------------------- --------------------- Cost of acquisition per gross addition Total sales and marketing expenses $ 186 $ 181 $ 477 $ 467 Equipment margin loss (acquisition related) 81 40 156 106 --------------------- --------------------- $ 267 $ 221 $ 633 $ 573 --------------------- --------------------- --------------------- --------------------- Divided by: total gross wireless additions (postpaid, prepaid and one-way messaging) 575 564 1,438 1,477 --------------------- --------------------- $ 464 $ 392 $ 440 $ 388 --------------------------------------------------- --------------------- Operating expense per average subscriber (monthly) Operating, general and administrative expenses $ 470 $ 397 $ 1,357 $ 1,144 Equipment margin loss (retention related) 107 48 188 150 --------------------- --------------------- $ 577 $ 445 $ 1,545 $ 1,294 --------------------- --------------------- --------------------- --------------------- Divided by: average total wireless subscribers 7,720 7,152 7,594 7,051 Divided by: 3 months for the quarter and 9 months for year-to-date 3 3 9 9 --------------------- --------------------- $ 24.91 $ 20.74 $ 22.61 $ 20.39 --------------------------------------------------- --------------------- Equipment margin loss Equipment sales $ 190 $ 90 $ 335 $ 239 Cost of equipment sales (378) (178) (679) (495) --------------------- --------------------- $ (188) $ (88) $ (344) $ (256) --------------------- --------------------- --------------------- --------------------- Acquisition related $ (81) $ (40) $ (156) $ (106) Retention related (107) (48) (188) (150) --------------------- --------------------- $ (188) $ (88) $ (344) $ (256) --------------------- --------------------- --------------------- --------------------- --------------------------------------------------- --------------------- Adjusted operating profit margin Adjusted operating profit $ 693 $ 686 $ 2,167 $ 1,931 Divided by network revenue 1,537 1,352 4,345 3,798 --------------------- --------------------- Adjusted operating profit margin 45.1% 50.7% 49.9% 50.8% --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Calculations of Cable Non-GAAP Measures --------------------------------------------------- --------------------- (In millions of dollars, Three months ended Nine months ended subscribers in thousands, September 30, September 30, except ARPU figures and --------------------- --------------------- operating profit margin) 2008 2007 2008 2007 --------------------------------------------------- --------------------- Core Cable ARPU Core Cable revenue $ 419 $ 386 $ 1,239 $ 1,143 Divided by: average basic cable subscribers 2,295 2,270 2,293 2,273 Divided by: 3 months for the quarter and 9 months for year-to-date 3 3 9 9 --------------------- --------------------- $ 60.85 $ 56.69 $ 60.03 $ 55.86 --------------------------------------------------- --------------------- Internet ARPU Internet revenue $ 176 $ 153 $ 513 $ 448 Divided by: average Internet (residential) subscribers 1,529 1,389 1,516 1,365 Divided by: 3 months for the quarter and 9 months for year-to-date 3 3 9 9 --------------------- --------------------- $ 38.37 $ 36.71 $ 37.59 $ 36.46 --------------------------------------------------- --------------------- Cable Operations adjusted operating profit margin: Adjusted operating profit $ 302 $ 256 $ 873 $ 733 Divided by revenue 724 657 2,137 1,923 --------------------- --------------------- Cable Operations adjusted operating profit margin 41.7% 39.0% 40.9% 38.1% --------------------------------------------------- --------------------- RBS adjusted operating profit margin: Adjusted operating profit $ 12 $ 7 $ 45 $ 4 Divided by revenue 131 140 394 431 --------------------- --------------------- RBS adjusted operating profit margin 9.2% 5.0% 11.4% 0.9% --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Calculation of Adjusted Operating Profit, Net Income and Earnings Per Share --------------------------------------------------- --------------------- Three months ended Nine months ended (In millions of dollars, September 30, September 30, number of shares outstanding --------------------- --------------------- in millions) 2008 2007 2008 2007 --------------------------------------------------- --------------------- Operating profit $ 1,085 $ 986 $ 3,176 $ 2,215 Add (deduct): Stock option plan amendment - - - 452 Stock-based compensation (recovery) expense (62) 11 (125) 58 Adjustment for CRTC Part II fees decision - (18) 31 (18) Integration and restructuring expenses - Cable 2 5 10 21 --------------------- --------------------- Adjusted operating profit $ 1,025 $ 984 $ 3,092 $ 2,728 --------------------- --------------------- --------------------- --------------------- Net income $ 495 $ 269 $ 1,140 $ 383 Add (deduct): Stock option plan amendment - - - 452 Stock-based compensation (recovery) expense (62) 11 (125) 58 Adjustment for CRTC Part II fees decision - (18) 31 (18) Integration and restructuring expenses - Cable 2 5 10 21 Loss on repayment of long-term debt - - - 47 Debt issuance costs 16 - 16 - Income tax impact 14 1 24 (190) --------------------- --------------------- Adjusted net income $ 465 $ 268 $ 1,096 $ 753 --------------------- --------------------- --------------------- --------------------- Adjusted basic earnings per share: Adjusted net income $ 465 $ 268 $ 1,096 $ 753 Divided by: weighted average number of shares outstanding 637 639 639 638 --------------------- --------------------- Adjusted basic earnings per share $ 0.73 $ 0.42 $ 1.72 $ 1.18 --------------------- --------------------- --------------------- --------------------- Adjusted diluted earnings per share: Adjusted net income $ 465 $ 268 $ 1,096 $ 753 Divided by: diluted weighted average number of shares outstanding 637 639 639 644 --------------------- --------------------- Adjusted diluted earnings per share $ 0.73 $ 0.42 $ 1.72 $ 1.17 --------------------------------------------------- --------------------- SUPPLEMENTARY INFORMATION Rogers Communications Inc. 2008 ------------------------------------------------------- (In millions of dollars, except per share amounts) Q1 Q2 Q3 ------------------------------------------------------- Income Statement Operating revenue Wireless $ 1,431 $ 1,522 $ 1,727 Cable 925 938 961 Media 307 409 386 Corporate and eliminations (54) (66) (92) ------------------------------------------------------- 2,609 2,803 2,982 ------------------------------------------------------- Operating profit before the undernoted Wireless 705 769 693 Cable 303 304 318 Media 2 52 43 Corporate and eliminations (26) (36) (29) ------------------------------------------------------- 984 1,089 1,025 Stock option plan amendment(1) - - - Stock-based compensation recovery (expense)(1) 116 (53) 62 Integration and restructuring expenses(2) (5) (3) (2) Adjustment for CRTC Part II fees decision(3) - (37) - Contract renegotiation fee(4) - - - ------------------------------------------------------- Operating profit(5) 1,095 996 1,085 Depreciation and amortization 440 420 429 ------------------------------------------------------- Operating income 655 576 656 Interest on long-term debt (138) (133) (147) Other income (expense) (3) 11 - Income tax reduction (expense) (170) (153) (14) ------------------------------------------------------- Net income (loss) for the period $ 344 $ 301 $ 495 ------------------------------------------------------- ------------------------------------------------------- Net income (loss) per share: Basic $ 0.54 $ 0.47 $ 0.78 Diluted $ 0.54 $ 0.47 $ 0.78 Additions to PP&E(5) $ 321 $ 481 $ 436 ------------------------------------------------------- 2007 2006 ---------------------------------------------------------------- -------- (In millions of dollars, except per share amounts) Q1 Q2 Q3 Q4 Q4 ---------------------------------------------------------------- -------- Income Statement Operating revenue Wireless $ 1,231 $ 1,364 $ 1,442 $ 1,466 $ 1,257 Cable 855 881 899 923 842 Media 266 348 339 364 317 Corporate and eliminations (54) (66) (69) (66) (46) ---------------------------------------------------------------- -------- 2,298 2,527 2,611 2,687 2,370 ---------------------------------------------------------------- -------- Operating profit before the undernoted Wireless 581 664 686 658 521 Cable 228 243 265 265 238 Media 19 45 46 63 48 Corporate and eliminations (14) (22) (13) (29) (39) ---------------------------------------------------------------- -------- 814 930 984 957 768 Stock option plan amendment(1) - (452) - - - Stock-based compensation recovery (expense)(1) (15) (32) (11) (4) (12) Integration and restructuring expenses(2) (1) (15) (5) (17) (4) Adjustment for CRTC Part II fees decision(3) - - 18 - - Contract renegotiation fee(4) - - - (52) - ---------------------------------------------------------------- -------- Operating profit(5) 798 431 986 884 752 Depreciation and amortization 400 398 397 408 395 ---------------------------------------------------------------- -------- Operating income 398 33 589 476 357 Interest on long-term debt (149) (152) (140) (138) (151) Other income (expense) 7 (24) (14) - (17) Income tax reduction (expense) (86) 87 (166) (84) (13) ---------------------------------------------------------------- -------- Net income (loss) for the period $ 170 $ (56) $ 269 $ 254 $ 176 ---------------------------------------------------------------- -------- ---------------------------------------------------------------- -------- Net income (loss) per share: Basic $ 0.27 $ (0.09) $ 0.42 $ 0.40 $ 0.28 Diluted $ 0.26 $ (0.09) $ 0.42 $ 0.40 $ 0.27 Additions to PP&E(5) $ 394 $ 381 $ 397 $ 624 $ 554 ---------------------------------------------------------------- -------- (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 ------------------------------------------------------- (In millions of dollars, except per share amounts) Q1 Q2 Q3 ------------------------------------------------------- Income Statement Operating revenue Wireless $ 1,431 $ 1,522 $ 1,727 Cable 925 938 961 Media 307 409 386 Corporate and eliminations (54) (66) (92) ------------------------------------------------------- 2,609 2,803 2,982 ------------------------------------------------------- Adjusted operating profit(2) Wireless 705 769 693 Cable 303 304 318 Media 2 52 43 Corporate and eliminations (26) (36) (29) ------------------------------------------------------- 984 1,089 1,025 Depreciation and amortization 440 420 429 ------------------------------------------------------- Adjusted operating income 544 669 596 Interest on long-term debt (138) (133) (147) Other income (expense) (3) 11 16 Income tax reduction (expense) (133) (183) - ------------------------------------------------------- Adjusted net income for the period $ 270 $ 364 $ 465 ------------------------------------------------------- ------------------------------------------------------- Adjusted net income per share: Basic $ 0.42 $ 0.57 $ 0.73 Diluted $ 0.42 $ 0.57 $ 0.73 Additions to PP&E(2) $ 321 $ 481 $ 436 ------------------------------------------------------- 2007 2006 ---------------------------------------------------------------- -------- (In millions of dollars, except per share amounts) Q1 Q2 Q3 Q4 Q4 ---------------------------------------------------------------- -------- Income Statement Operating revenue Wireless $ 1,231 $ 1,364 $ 1,442 $ 1,466 $ 1,257 Cable 855 881 899 923 842 Media 266 348 339 364 317 Corporate and eliminations (54) (66) (69) (66) (46) ---------------------------------------------------------------- -------- 2,298 2,527 2,611 2,687 2,370 ---------------------------------------------------------------- -------- Adjusted operating profit(2) Wireless 581 664 686 658 521 Cable 228 243 265 265 238 Media 19 45 46 63 48 Corporate and eliminations (14) (22) (13) (29) (39) ---------------------------------------------------------------- -------- 814 930 984 957 768 Depreciation and amortization 400 398 397 408 395 ---------------------------------------------------------------- -------- Adjusted operating income 414 532 587 549 373 Interest on long-term debt (149) (152) (140) (138) (151) Other income (expense) 7 23 (14) - (16) Income tax reduction (expense) (86) (104) (165) (109) (14) ---------------------------------------------------------------- -------- Adjusted net income for the period $ 186 $ 299 $ 268 $ 302 $ 192 ---------------------------------------------------------------- -------- ---------------------------------------------------------------- -------- Adjusted net income per share: Basic $ 0.29 $ 0.47 $ 0.42 $ 0.47 $ 0.30 Diluted $ 0.29 $ 0.47 $ 0.41 $ 0.47 $ 0.30 Additions to PP&E(2) $ 394 $ 381 $ 397 $ 624 $ 554 ---------------------------------------------------------------- -------- (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, debt issuance costs 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 Nine months ended September 30, September 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Operating revenue $ 2,982 $ 2,611 $ 8,394 $ 7,436 Operating expenses: Cost of sales 442 248 895 716 Sales and marketing 343 364 953 986 Operating, general and administrative 1,110 1,008 3,360 3,046 Stock option plan amendment - - - 452 Integration and restructuring 2 5 10 21 Depreciation and amortization 429 397 1,289 1,195 ------------------------------------------------------------------------- Operating income 656 589 1,887 1,020 Interest on long-term debt (147) (140) (418) (441) Debt issuance costs (16) - (16) - Foreign exchange gain (loss) (16) 1 (22) 53 Loss on repayment of long- term debt - - - (47) Change in fair value of derivative instruments 20 (5) 21 (31) Other income (expense), net 12 (10) 25 (6) ------------------------------------------------------------------------- Income before income taxes 509 435 1,477 548 ------------------------------------------------------------------------- Income tax expense: Current 1 1 2 1 Future 13 165 335 164 ----------------------------------------------------------------------- 14 166 337 165 ------------------------------------------------------------------------- Net income for the period $ 495 $ 269 $ 1,140 $ 383 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income per share: Basic $ 0.78 $ 0.42 $ 1.79 $ 0.60 Diluted 0.78 0.42 1.79 0.60 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Balance Sheets (In millions of dollars) ------------------------------------------------------------------------- September December 30, 2008 31, 2007 ------------------------------------------------------------------------- Assets Current assets: Accounts receivable $ 1,319 $ 1,245 Other current assets 339 304 Future income tax assets 438 594 ----------------------------------------------------------------------- 2,096 2,143 Property, plant and equipment 7,515 7,289 Goodwill 3,181 3,027 Intangible assets 1,908 2,086 Investments 392 485 Deferred charges 104 111 Derivative instruments 130 - Other long-term assets 1,214 184 ------------------------------------------------------------------------- $ 16,540 $ 15,325 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Bank advances, arising from outstanding cheques $ 37 $ 61 Accounts payable and accrued liabilities 2,020 2,260 Current portion of long-term debt 1 1 Current portion of derivative instruments 121 195 Unearned revenue 226 225 ----------------------------------------------------------------------- 2,405 2,742 Long-term debt 7,509 6,032 Derivative instruments 1,037 1,609 Other long-term liabilities 181 214 Future income tax liabilities 232 104 ------------------------------------------------------------------------- 11,364 10,701 Shareholders' equity 5,176 4,624 ------------------------------------------------------------------------- $ 16,540 $ 15,325 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Shareholders' Equity (In millions of dollars) Nine months ended September 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 - - 12 275 Dividends declared - - - - Repurchase of Class B Non-Voting shares - - (4) (4,077) Other comprehensive income - - - - ------------------------------------------------------------------------- Balances, September 30, 2008 $ 72 112,462 $ 479 523,203 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 - 1,140 - 1,140 Shares issued on exercise of stock options - - - 12 Dividends declared - (478) - (478) Repurchase of Class B Non-Voting shares (129) (4) - (137) Other comprehensive income - - 15 15 ------------------------------------------------------------------------- Balances, September 30, 2008 $ 3,560 $ 1,000 $ 65 $ 5,176 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months ended September 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 - - 37 3,555 Stock-based compensation - - - - Dividends declared - - - - Other comprehensive income - - - - ------------------------------------------------------------------------- Balances, September 30, 2007 $ 72 112,462 $ 462 526,793 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other compre- Total Retained hensive share- Contributed earnings income holders' surplus (deficit) (loss) equity ------------------------------------------------------------------------- Balances, January 1, 2007 $ 3,736 $ (30) $ (214) $ 3,989 Net income for the period - 383 - 383 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) - - 28 Stock-based compensation 12 - - 12 Dividends declared - (185) - (185) Other comprehensive income - - 169 169 ------------------------------------------------------------------------- Balances, September 30, 2007 $ 3,689 $ 168 $ (45) $ 4,346 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Comprehensive Income (In millions of dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Net income for the period $ 495 $ 269 $ 1,140 $ 383 Other comprehensive income (loss): Change in fair value of available-for-sale investments: Increase (decrease) in fair value 19 (20) (86) 108 Change in fair value of cash flow hedging derivative instruments: Decrease (increase) in fair value of liability 300 (297) 292 (656) Reclassification to net income of foreign exchange gain (loss) (222) 281 (350) 708 Reclassification to net income of accrued interest 30 33 100 81 --------------------------------------------------------------------- 127 (3) (44) 241 Related income taxes 33 (22) 59 (72) ----------------------------------------------------------------------- 160 (25) 15 169 ------------------------------------------------------------------------- Total comprehensive income $ 655 $ 244 $ 1,155 $ 552 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Rogers Communications Inc. Unaudited Interim Consolidated Statements of Cash Flows (In millions of dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 ------------------------------------------------------------------------- Cash provided by (used in): Operating activities: Net income for the period $ 495 $ 269 $ 1,140 $ 383 Adjustments to reconcile net income for the period to cash flows from operating activities: Depreciation and amortization 429 397 1,289 1,195 Program rights and Rogers Retail rental amortization 31 17 103 57 Future income taxes 13 165 335 164 Unrealized foreign exchange loss (gain) 12 - 12 (46) Change in fair value of derivative instruments (20) 5 (21) 31 Loss on repayment of long- term debt - - - 47 Stock option plan amendment - - - 452 Stock-based compensation expense (recovery) (62) 11 (125) 58 Amortization of fair value increment on long-term debt (1) (1) (4) (5) Other - 12 (11) 8 ----------------------------------------------------------------------- 897 875 2,718 2,344 Change in non-cash operating working capital items (7) 107 (251) (358) ----------------------------------------------------------------------- 890 982 2,467 1,986 ------------------------------------------------------------------------- Financing activities: Issuance of long-term debt 3,019 1,340 3,799 4,786 Repayment of long-term debt (1,700) (1,846) (2,680) (5,138) Premium on repayment of long- term debt - - - (59) Financing costs incurred - - - (4) Payment on re-couponing of cross-currency interest rate exchange agreements (375) - (375) - Payment on settlement of cross-currency interest rate exchange agreements and forward contracts - - - (873) Proceeds on settlement of cross-currency interest rate exchange agreements and forward contracts - - - 838 Repurchase of Class B Non- Voting shares (97) - (137) - Issuance of capital stock on exercise of stock options - 1 2 26 Dividends paid on Class A Voting and Class B Non-Voting shares (160) (80) (400) (131) ----------------------------------------------------------------------- 687 (585) 209 (555) ------------------------------------------------------------------------- Investing activities: Additions to property, plant and equipment ("PP&E") (436) (397) (1,238) (1,172) Change in non-cash working capital items related to PP&E (53) (25) (107) (139) Acquisition of spectrum licences (1,008) - (1,008) - Acquisitions, net of cash and cash equivalents acquired (44) - (191) (129) Additions to program rights (17) (18) (95) (41) Other (11) (4) (13) (9) ----------------------------------------------------------------------- (1,569) (444) (2,652) (1,490) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 8 (47) 24 (59) Cash deficiency, beginning of period (45) (31) (61) (19) ------------------------------------------------------------------------- Cash deficiency, end of period $ (37) $ (78) $ (37) $ (78) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information: Income taxes paid $ 1 $ 1 $ 1 $ 1 Interest paid 97 107 370 428 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The change in non-cash operating working capital items is as follows: Decrease (increase) in accounts receivable $ (134) $ 2 $ (74) $ (71) Decrease (increase) in other assets 45 28 (71) (88) Increase (decrease) in accounts payable and accrued liabilities 103 93 (105) (183) Decrease in unearned revenue (21) (16) (1) (16) ------------------------------------------------------------------------- $ (7) $ 107 $ (251) $ (358) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents (deficiency) is 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 third 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 MD&A 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 8:30 a.m. ET today, October 28, 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. %CIK: 0000733099

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 Contact: Jan Innes, (416) 935-3525,
jan.innes@rci.rogers.com

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