Cogeco 2003 Annual Report Download - page 4

LOUIS AUDET
President and
Chief Executive Officer
MAURICE MYRAND
Chairman of the Board
During fiscal 2002-2003, the Cogeco Cable team achieved
many of its key strategic objectives. Operating Income was
increased by 9% to reach $183 million, earnings per share
were increased and positive Free Cash Flow of $3 million was
achieved for the first time in many years. Basic customer
losses were greatly reduced and high-speed Internet and
digital service subscriptions have grown substantially
compared to last year.
Revenue has grown by 7% to reach $479 million.
We were able to increase our Operating Income margin by
0.7% to reach 38.3% as a result of increased revenue, while
both programming and operating expenditures were kept in
check, increasing by only 6% in the aggregate to $296 million,
thanks to strong controls and a continued thorough review
of all classes of expenses.
High-speed Internet connections have continued to
blossom, growing 30% during the year, despite the $5 rate
increase introduced in the second half of fiscal 2002. Thus,
we added 46,987 new customers, to reach 205,179. In most
of our service areas, the Cogeco high-speed Internet service
is operated at downstream speeds that beat the digital
subscriber line (DSL) competition by a factor of up to 2:1,
an advantage we intend to continue to market aggressively.
We also started offering our HSI Lite and Pro services at
$29.95/month and $69.95/month respectively, in Ontario, in
early Fall 2002, and in Québec, in May 2003, thus satisfying
various consumer segments. We continue to offer our HSI Lite
product as a retention tool only and are monitoring this sales
approach very closely. New product enhancements will be
announced in the Winter of 2004 as we pursue adding value to
this customer favourite. As at August 31, 2003, close to 32%
in Ontario and 20% in Québec of our basic customers in areas
served, used one of our high-speed Internet services.
Our high-speed Internet service continues to receive
favourable reviews from customers as evidenced by the
independent comparative ranking of world providers posted
on the www.broadbandreports.com site where Cogeco Cable’s
high-speed Internet service has been steadily given high
overall marks among all Canadian providers! According to the
same source, we also rank consistently among the 20 fastest
providers in the world week after week! The window on the
world that is high-speed Internet is still, in our opinion, very
favourably priced for consumers and Forrester Research
sees this service continuing to grow well into 2008.
With regards to our digital service, during the
first half of the fiscal year, we virtually completed our
extension of Cogeco Cable’s digital footprint in Québec to
reach 95%, (Ontario was already close to 100%), thus greatly
enhancing the appeal of our service to customers in these
regions. In fact, with a total of 183,087 digital terminals now
in service, 26% more than last year, penetration of digital
terminals stands at 27% in Québec as compared to 21%
in Ontario, where the black market has had somewhat of
adampening effect on digital penetration.
Building on the strength of our digital platform,
we deployed our Cogeco Cable VOD service in the
October 2002 to March 2003 period, when the service became
available, to 85% of our homes passed, one of the largest
deployments, on a percentage basis, in North America!
Customers may now order a movie or program of their choice
from our inventory of about 200 titles, conveniently through
the remote control of their existing digital terminals, at the
exact moment of their choosing, with the ability to pause,
rewind and fast forward, with a 24-hour viewing window,
at competitive prices! Customers love this service. We plan
to progressively add more titles to the current inventory as
we sign additional VOD license agreements with program
suppliers, a lengthy process which has now been concluded
with, among the largest, Alliance Atlantis and MGM.
The video-on-demand platform is a key competitive
advantage of cable over satellite, which we intend to build
on, as consumers begin an inexorable long-term migration
from on-schedule viewing to on-demand viewing. During
Message to Shareholders