Cogeco 2004 Annual Report Download - page 8

MANAGEMENT’S DISCUSSION AND ANALYSIS
6Cogeco Cable Inc. 2004
OVERVIEW OF OUR BUSINESS
Cogeco Cable is the second largest cable system operator in Ontario
and Québec and ranks fourth in Canada in terms of the number
of basic-service customers. Cogeco Cable provides video, digital
and HSI services to about 824,000, 208,000 and 245,000 cus-
tomers, respectively.
Corporate Strategy and Objectives
Cogeco Cable’s objective is to maximize shareholder value by
focusing on the following: increasing customer loyalty, offering
continuously improved services that satisfy customer needs,
exercising greater cost control, and effectively managing capital.
To do so, the Corporation has adopted the following strategies:
Customer Satisfaction
The first strategy revolves around customer satisfaction. In a world
where product and service offerings are becoming increasingly
complex, Cogeco Cable stays apprised of customer demands and
market trends in order to satisfy needs as effectively as possible.
Research forms the foundation of the thinking process and new
services development, the result of which is a highly-targeted
marketing effort by which customers can match the Corporation’s
offers to their exact wants. In other words, Cogeco Cable’s service
and product offering is adjusted regularly to remain the top choice
in its markets. This strategy generates revenue growth through
increased customer loyalty, the sale of new services, and reduced
costs, given that customer loyalty is less costly than acquiring
new customers.
Clear and Efficient Processes
Reviewing its processes is the pivotal strategy by which Cogeco
Cable intends to provide assurance to the marketplace about
its business practices. The Corporation is currently reviewing
its internal processes to meet the requirements stipulated in
CSA 52-109 within the provided deadline, that is, August 31, 2005.
The Corporation intends not only to meet the prescribed require-
ments, but also to increase the efficiency of its processes with
aview to better serving customers and drive down its costs.
Still the Fastest Internet Service
Fast download speed is highly-valued by customers, and Cogeco
Cable’s HSI service remains the fastest in the marketplace.
Regardless of the connection type chosen by customers, Cogeco
Cable’s download speeds were significantly faster than the
competitors’ throughout 2004. The Corporation intends to maintain
this competitive advantage and to deploy HSI services that meet
the demands of a fast-changing marketplace.
Enhanced Digital Cable Offering
In line with Cogeco Cable’s commitment to delivering the most
complete television-viewing experience possible, new services are
constantly being offered to customers. Digital services provide
customers with choice, control and convenience, not to mention
clearly improved sound and picture quality. All of these benefits
are increasingly valued by customers and have resulted in an
increased number of customers subscribing to this service.
In addition, digital services through cable technology makes
interactivity possible; VOD and SVOD are examples of unique
advantages provided by cable that are increasingly valued by
customers. The Corporation will continue to anticipate products
and services that will peak the interest of consumers and is
committed to providing a line of products and services designed
to satisfy the greatest possible demand.
IP Telephony
IN 2005, COGECO CABLE PLANS TO GRADUALLY LAUNCH
IP TELEPHONY SERVICES, WHICH WILL ENHANCE ITS OFFERING.
IP telephony will usher in services that will be offered on the IP
cable platform. A gateway to a market that, until today, was
difficult to penetrate due to technologies and the regulatory
environment, IP telephony should make cable operators more
competitive and enhance their offerings.
Throughout 2004, Cogeco Cable conducted IP telephony tests in
approximately 1,000 homes in the Burlington/Oakville (Ontario)
and Trois-Rivières (Québec) markets. These tests proved satisfac-
tory, and Cogeco Cable is now set to finalize its business plan
for this new service. In 2005, Cogeco Cable plans to gradually
launch IP telephony services; to do so, it will use a technology
compatible with both PacketCable and SIP (Session Initiation
Protocol) standards. CableLabs, the industry’s research and
development organization, has developed PacketCable standards.
SIP is a standard approved by the Internet Engineering Task Force
and is used in part in many other standards, such as PacketCable.
In order to offer an IP telephony service that measures up to
customer demand, Cogeco Cable is in the final steps of nego-
tiations for the purchase of IP softswitches.
As the business plan for this new service is being finalized, the
projections for this service’s incidence on the Corporation’s
overall financial results for 2005 include capital expenditures
of $5 million. Updated financial projections related to this project
will be announced as the business plan reaches a higher degree
of precision. As such, this service’s revenue and operating
expenses are not included in the 2005 financial forecasts at this
stage. Despite this initial investment, Cogeco Cable expects to
further grow Free Cash Flow in fiscal 2005.