MANAGEMENT’S DISCUSSION  AN D ANALYSIS QUARTERLY TRENDS FOURTH QUARTER 2013 RESULTS Operating Revenue Wireless Our operating results generally vary from quarter to quarter because of changes in general economic conditions and seasonal fluctuations, in each of our business segments, which have a material impact. As such, one quarter’s operating results are not necessarily indicative of our results in a subsequent quarter. Wireless, Cable and Media each have unique seasonal aspects to their businesses. Fluctuations in net income from quarter to quarter can also be attributed to losses on the repayment of debt, foreign exchange gains or losses, changes in the fair value of derivative instruments, other income and expenses, impairment of assets and changes in income tax expense. Wireless network revenue was lower this quarter compared to the same period last year, mainly because of the recent introduction of lower priced roaming plans and pricing changes made over the past year primarily associated with our new simplified plans. Cable operating revenue was higher this quarter compared to the same period last year, mainly because of Internet growth and the acquisition of Mountain Cable, partially offset by a decline in television revenue with competitive TV subscriber losses. Business Solutions operating revenue was higher this quarter compared to the same period last year, mainly because we completed the acquisitions of Blackiron Data and Pivot Data Centres earlier this year, combined with the continuing growth in on-net and next-generation services. Media operating revenue was higher this quarter compared to the same period last year, mainly because of revenue growth at Sportsnet and higher sales at The Shopping Channel. The trends in Wireless revenue and adjusted operating profit reflect: Wireless adjusted operating profit was higher this quarter compared to the same period last year, mainly because of cost management and productivity initiatives implemented across various areas, including cost of equipment, offset by reduced network revenue described above. Cable adjusted operating profit was higher this quarter compared to the same period last year because of the continued shift in our product mix towards higher margin Internet and phone products. We continue to target higher value postpaid subscribers, which has contributed to the significantly heavier mix of postpaid versus prepaid subscribers. Growth in our customer base and overall market penetration have resulted in higher costs over time for customer service, retention, credit and collection; however, most of the cost increases have been offset by gains in operating efficiencies. Wireless’ operating results are influenced by the timing of our marketing and promotional expenditures and higher levels of subscriber additions and related subsidies, resulting in higher subscriber acquisition and activation-related expenses in certain periods. This increased activity generally occurs in the third and fourth quarters, and can also occur or be accentuated by the launch of popular new wireless handset models. GLYPH<129> the growing number of wireless voice and data subscribers GLYPH<129> decreased churn GLYPH<129> higher usage of wireless data GLYPH<129> higher handset subsidies as more consumers shift to smartphones GLYPH<129> a slight decrease in blended ARPU due to changes in wireless price plans. Adjusted Operating Profit Cable Operating Income and Net Income Media’s adjusted operating profit was lower this quarter compared to the same period last year. The increase in Media’s operating revenue this year was more than offset by the combined impacts of the lower number of games broadcast in the fourth quarter of 2012 resulting from the NHL lockout compared with having to broadcast more NHL hockey games in the fourth quarter of 2013 because of the compressed 2013-2014 schedule associated with the upcoming winter Olympics. Excluding the impact of these items, Media’s consolidated adjusted operating profit would have increased by 22 % . The trends in Cable services revenue and operating profit increases are primarily due to: Operating income was higher than the same quarter last year because stock-based compensation was lower and we realized an $80 million impairment charge in 2012. This was partially offset by higher depreciation and amortization, restructuring, acquisition and other expenses. Cable’s operating results are affected by modest seasonal fluctuations in subscriber additions and disconnections, typically caused by: Net income this quarter was lower than the same quarter last year because of the changes in revenue, adjusted operating profit and operating income. Also, in 2012 we realized a $233 million gain on spectrum licenses that Inukshuk sold to our non-related venture partner and recorded the related income tax benefits that year. The trends in Business Solutions operating profit margin primarily reflect the ongoing shift from lower-margin, off-net legacy long distance and data services to higher-margin, on-net next generation IP-based services. GLYPH<129> higher penetration and usage of Internet, digital and telephony products and services GLYPH<129> offset by competitive losses of television subscribers and pricing changes over the past year. GLYPH<129> university and college students moving GLYPH<129> individuals temporarily suspending service for extended vacations or seasonal relocations GLYPH<129> the concentrated marketing we generally conduct in our fourth quarter. Business S olutions Business Solutions does not generally have any unique seasonal aspects to its business. Net income from continuing operations was $320 million this quarter, with basic and diluted earnings per share from continuing operations of $0.62. In the fourth quarter of 2012, net income from continuing operations was $522 million, basic earnings per share from continuing operations was $1.01 and diluted earnings per share from continuing operations was $1.01. The decrease this quarter was largely because of the $233 million gain on spectrum licenses in 2012 noted above. 2013 ANNUAL REPORT ROGERS COMMUNICATIONS INC. 55