Cogeco 2003 Annual Report Download - page 13

considered satisfactory and contract negotiations are proceeding
in the normal course of business.
Information Systems
The Corporation has concluded a new agreement
commencing on September 1, 2003 for the continued use and
maintenance of the customer management system used in Ontario
and supplied by DST Innovis. The Corporation will continue to use
a different customer management platform in Québec and has
implemented substantial changes separately to that platform
rather than taking an integrated systems approach. These
developments bring more certainty and predictability of costs
to the customer management function in the medium term.
The current IT environment, combined with the extensive
reliance of the Corporation on its information systems for the
conduct of its activities and operation of its business, involves
significant risks of data loss and business interruption in the
event of major disasters, terrorist action, unauthorised access,
or malicious tampering. Insurance undertakers no longer provide
coverage for these risks under the existing insurance programs,
which are managed through internal controls, security and
disaster recovery plans and procedures. There is no assurance
that these plans and procedures will effectively prevent or limit
loss of data or business interruption in a particular event, or
that data or business recovery will take place as planned.
Labour Relations
The collective agreements in the Québec Division expired
on December 31, 2002, and negotiations for renewal terms are
under way. Approximately 27% of the Corporation’s aggregate
workforce is covered by these collective agreements. While labour
relations are considered satisfactory and negotiations are
progressing in the normal course, the impact of renewal terms will
not be known until negotiations are concluded. Management does
not expect any labour disruptions at this time. There are no
collective agreements in the Ontario Division.
(2) Performance Highlights
In fiscal 2003, Cogeco Cable exceeded most of its financial
and customer additions objectives.
Customer Statistics
Basic service customer loss was 1.9% during fiscal 2003
compared to an initial target of 2.3% and the 4.8% loss during
fiscal 2002. Despite rate increases discussed further in the
“Revenue” section, these losses were lower than anticipated
owing to effective marketing and customer service, combined with
the continued success of service bundling. The installed digital
terminal base expanded by 26% with 183,087 digital terminals
in service as of August 31, 2003, exceeding the original target
of 170,000.
Subscriptions to the HSI service rose by 30%. HSI
customer additions were lower than anticipated due, in part,
to a slowing demand for HSI as the penetration rate increases.
Additionally, Cogeco Cable’s current strategy is to maximize
profitability per HSI customer by focusing its acquisition efforts
on the HSI Standard and Pro segments of the market. Unlike its
competitors, HSI Lite is only offered on a retention basis.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Cogeco Cable Inc. 2003 11
Cogeco Cable exceeded most
of its financial and customer
additions objectives.
2003 2002 August 31,
Actual Guidance Actual 2003 2002
Customer Statistics
Revenue generating units 1,188,369 64,011 58,000 41,405 NA NA
Basic service customers 820,657 (15,711) (19,000) (42,398) NA NA
HSI customers(2) 205,179 46,987 55,000 50,254 28.5 22.1
Digital terminals(3) 183,087 38,137 25,000 39,658 22.8 18.4
Bundled service customers(4) 288,080 46,394 NA 53,760 35.1 28.9
Net additions (losses) % of Penetration(1)
August 31, 2003
(1) As a percentage of basic service customers in areas served.
(2) 5,652 HSI Lite and 577 HSI Pro customers are included. Taking into account pending
orders, the number would amount to 210,974 compared to 164,318 a year earlier.
(3) 77% of terminals were purchased compared to 62% a year earlier.
(4) 48% of bundled service customers had the digital service compared to 44% last year.