MANAGEMENT’S DISCUSSION AND ANALYSIS
FOURTH QUARTER 2013 RESULTS
Operating Revenue
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.
Adjusted Operating Profit
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.
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%.
Operating Income and Net Income
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.
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.
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.
QUARTERLY TRENDS
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