Cogeco 2006 Annual Report Download - page 25

Management’s Discussion and Analysis COGECO CABLE INC. 2006 23
REVENUE
Fiscal 2006 consolidated revenue increased by $65.6 million, or 11.8%, compared to the same period last year to reach
$620 million.
For fi scal 2006, revenue for the Canadian operations rose by $48.7 million, or 8.8%, compared to fi scal 2005 mainly as a
result of an increase in the number of basic, HSI, Digital Television and Digital Telephony service customers as mentioned
in the “Customer Statistics” section, combined with various factors discussed below:
• HSI service customer additions during fi scal 2006 and the full-year impact of the 2005 net additions generated incremental
revenue of approximately $20.9 million over fi scal 2005. The addition of about 65,000 new HSI service customers
during fi scal 2006 contributed approximately $12.7 million to this growth and the addition of about 38,000 HSI service
customers during the corresponding period in 2005 accounted for about $8.2 million.
• Digital Telephony service additions during fi scal 2006 generated incremental revenue of about $10.7 million over fi scal
2005 due to continued service rollout in our markets.
• Basic cable service customer growth contributed an additional $4.2 million compared to fi scal 2005.
• Various rate increases during fi scal years 2005 and 2006 created incremental revenue of about $5.6 million as a result of:
— Monthly rate increases of at most $3 per customer and averaging $0.50 per basic service customer took effect on
June 15, 2005 in Ontario and on August 1, 2005 in Québec;
— The monthly rate for certain bundled services increased by $1 in Ontario, and other limited rate increases for selective
tier services being implemented in Québec. An August 2005 reduction in digital terminal rental rates was more than
offset by a greater number of customers renting digital terminals.
— Monthly rate increases of up to $3 per customer, averaging $2 per basic service customer, took effect on June 15, 2006
in Ontario and on August 1, 2006 in Québec.
In addition, new digital services, VOD and equipment rentals contributed about $9.8 million to revenue growth.
The organic growth, detailed above, was offset by a drop in equipment sales and by incremental promotional activities
amounting to approximately $2.5 million.
The improved penetration of HSI, Digital Telephony and Digital Television services and the rate hikes helped push ARPU
up from $55.43 in fi scal 2005 to $60.15 in fi scal 2006, an increase of 8.5%.
Cabovisão’s 2006 revenue amounted to $16.9 million, one-month of revenue. The Portuguese ARPU stood at $62.66 in
August 2006.
OPERATING COSTS AND MANAGEMENT FEES
Fiscal 2006 consolidated operating costs increased by $39.9 million or 12.5% to reach $358.6 million.
For fi scal year 2006, Canadian operations’ operating costs including network fees, but excluding management fees
payable to COGECO Inc., rose by $28 million or 8.8%. Network fees increased by 9.3% in fi scal 2006, compared to last year.
The network fees increase is mainly attributable to the introduction of the Digital Telephony service, the wholesale rate
increase for APTN as mandated by the CRTC and RGU growth. These fees were partly offset by IP transport costs even
with the growth in the number of HSI customers. The increase of other operating costs is related to servicing additional
RGUs, including Digital Telephony. Cabovisão’s operating costs for the one-month period included in fi scal 2006 amounted
to $11.9 million.
Management fees paid to COGECO Inc. amounted to $8.4 million, an increase of 2.6% over fi scal 2005, and are discussed
in detail in the “Related Party Transactions” section on page 13.