Cogeco 2002 Annual Report Download - page 11

10 Cogeco Cable Inc.
The internal growth detailed above, was largely offset
by an internal revenue loss of $34.3 million, of which
$24.9 million relates to basic and extended tier customer
losses, to aggressive promotions, to certain price re d u c t i o n s ,
and to a decline of equipment rental revenue. Various
other sources contributed an additional $9.4 million to
the total internal revenue loss.
•The loss of basic and extended tier customers in fiscal
years 2001 and 2002 had a negative impact of
$16.4 million on revenue. The loss of over 42,000 cus-
tomers taking basic or basic and extended tiers, dur-
ing fiscal 2002, led to an $8.1 million decline in rev-
enue, while the full year impact of a net loss of over
22,000 customers taking basic or basic and extended
tiers, during fiscal year 2001, reduced re v e n u e by a
further $8.3 million.
• The total internal revenue loss from promotions or
price reductions amounted to $6.6 million in fiscal
2002. Since the beginning of fiscal year 2002, to main-
tain its competitive position in Ontario and Quebec,
the Corporation has off e r ed monthly pro m o t i o n a l
rebates to its new high-speed Internet customers.
These ranged from a total of $40 to $120 per new cus-
tomer during the various promotional periods com-
p a red to $40 per new customer in the prior fiscal y e a r.
In addition, the Corporation off e red pro g r a m m i n g
c redits of up to $100 per new digital customer buying
a digital terminal. Temporary $2 price reductions on
certain discretionary tiers in Ontario and perm a n e n t
$1 monthly rate reductions that benefited some
bundle customers were also introduced to impro v e
customer re t e n t i o n .
•During the third quarter of fiscal year 2001, Cogeco
Cable introduced a digital decoder sales program.
This program became more aggressive in September
2001 and offered promotions with selling prices as
low as $59.99, without programming credits. As of
August 31, 2002, 62% of decoders in service were
purchased, compared to 20% last year, and as a
result, rental revenue has decreased by $1.9 million
during 2001-2002.
Average monthly revenue per basic service customer
increased from $41.78 in 2000-2001 to $43.57 in 2001–
2002, a 4.3% increase. Most of this increase resulted from
improved penetration of high-speed Internet and digital
services.
Operating Costs
Network fees, shown as a percentage of re v e n u e ,
i n c reased in 2001–2002, resulting from program supplier
fee increases and from the introduction of new digital
channels with lower margins. Average monthly network
fees per basic service customer went from $12.82 in
2000–2001 to $13.82 in 2001–2002 resulting in a net incre a s e
of $1 per basic service customer. The following factors
explain this increase: program supplier fee increases, the
i n c reased number of customers subscribing to pro d u c t
bundling, the launch of ARTV (a new tier channel in
Quebec) and the launch of 50 specialty channels avail-
able on the Ontario digital product offering. The savings
related to the cancellation of Excite@HomeT M royalties, as
Cogeco Cable became a fully integrated service
p rovider in Ontario, partially offset the above mentionned
i n c re a s e s .
Operating Costs
include the following:
(in millions of dollars) % of % of
2002 revenue 2001 revenue
Network fees $142.1 31.7% $134.7 30.7%
Other operating costs 129.8 29.0 136.1 31.0
Management fees 7.7 1.7 7.5 1.7
To t a l $ 2 7 9 . 6 6 2 . 4 % $278.3 63.4%