MANAGEMENT’S DISCUSSION AND ANALYSIS KEY CHANGES IN FINANCIAL RESULTS THIS YEAR COMPARED TO 2012 Operating Revenue Adjusted Operating Profit Operating Income and Net Income 36 ROGERS COMMUNICATIONS INC. 2013 ANNUAL REPORT Operating income was higher than last year while net income was lower. The increase in operating income is mainly because of the increase in adjusted operating profit. Net income was lower mainly because in 2012 we realized a $233 million gain on spectrum licenses that Inukshuk sold to our non-related venture partner as well as the related income tax benefits we recorded that year. Adjusted operating profit relating to Corporate items and intercompany eliminations was lower compared to last year because of continued investment in growth initiatives such as Rogers’ credit card, Outrank, Rogers Alerts and other digital opportunities. Media’s adjusted operating profit was lower compared to last year. The increase in operating revenue this year was more than offset by the combined impact of higher player salaries at the Toronto Blue Jays, the NHL player lockout in 2012 and the costs associated with broadcasting more NHL hockey games in 2013 because of the condensed 2012-2013 season which started in January 2013 and the compressed 2013-2014 season schedule associated with the upcoming winter Olympics. Cable adjusted operating profit was higher than last year because of the continued growth in revenue combined with a shift in our product mix towards higher margin Internet and phone products. Wireless adjusted operating profit was higher this year because of higher network revenue, our continued cost management and productivity initiatives implemented across various areas and lower cost of equipment. Media operating revenue was higher than last year mainly because of revenue growth at Sportsnet, higher attendance at Toronto Blue Jays games and higher sales at The Shopping Channel. Business Solutions operating revenue was higher than last year mainly because we completed the acquisitions of Blackiron Data and Pivot Data Centres earlier this year combined with the continued growth in on-net and next generation services, partially offset by planned decline in legacy voice and data services. Cable operating revenue was higher than last year mainly because of growth in Internet and phone revenues and the acquisition of Mountain Cable, partially offset by a decline in television revenue related principally from competitive TV subscriber losses. Wireless network revenue was higher than last year because of higher adoption and usage of wireless data services, partially offset by the introduction of lower priced roaming plans and pricing changes made over this year. 1 Adjusted operating profit is a Non-GAAP measure and should not be considered as a substitute or alternative for GAAP measure. It is not a defined term under IFRS, and does not have a standard meaning, so may not be a reliable way to compare us to other companies. See “Non-GAAP Measures” for information about these measures, including how we calculate them. 2 As defined. See “Additional GAAP Measures”. (In millions of dollars) Change see page Operating revenue changes – higher (lower): Network revenue – Wireless $ 29 39 Equipment sales – Wireless (39) 39 Cable 117 42 Business Solutions 23 45 Media 84 48 Corporate items and intercompany eliminations 6 Higher operating revenue compared to 2012 220 Adjusted operating profit changes – higher (lower): Wireless 94 39 Cable 113 42 Business Solutions 17 45 Media (29) 48 Corporate items and intercompany eliminations (36) Higher adjusted operating profit 1 compared to 2012 159 Higher stock-based compensation expense (7) 51 Lower restructuring, acquisition and other expenses 7 51 Higher depreciation and amortization (79) 51 Impairment recognized in 2012 80 51 Higher operating income 2 compared to 2012 160 Higher finance costs (71) 52 Gain on sale of interest in TVtropolis 47 52 Gain on Inukshuk spectrum distribution in 2012 (233) 52 Other 17 53 Lower income taxes 24 52 Decrease in net income from continuing operations compared to 2012 (56) Loss from discontinued operations in 2012 32 52 Decrease in net income compared to 2012 (24)