Cogeco 2007 Annual Report Download - page 35

Management’s Discussion and Analysis COGECO CABLE INC. 2007 33
All services generated higher growth in fi scal 2007 compared to fi scal 2006, except for the Digital Television service. During
fi scal 2007, Telephony service customers grew by 91,321 to reach 143,636 compared to a growth of 50,867 in fi scal 2006.
This growth is mostly attributable to the launch of the service in new markets and increased penetration in areas where the
service is already offered. Coverage of homes passed has now reached 78% compared to 66% last year. The net additions of
Basic Cable service customers reached 15,980, compared to 11,744 in fi scal 2006. The number of customers adhering
to the HSI service stood at 72,756 compared to 65,432 in fi scal 2006. Enhanced product offerings, the positive impact
of the three product bundle offer of Television, HSI and Telephony services ( Cogeco Complete Connection ) and focussed
promotional activities resulted in better HSI and Basic Cable service customer growth compared to fi scal 2006.
The net additions of Digital Television service customers stood at 52,515 compared to 80,160 in fi scal 2006. The net additions
decreased as it is a refl ection of some maturity in the digital TV segment following a period of robust growth, especially in
the second half of fi scal 2006. In addition, the Corporation adjusted its price gap differential between Analogue Television
and Digital Television services in the second half of fi scal 2006, which has also contributed to a moderation of the strong
growth experienced in fi scal 2006. However, customers continue to demonstrate strong interest in HD technology.
OPERATING RESULTS
YEARS ENDED AUGUST 31, 2007 2006 CHANGE
(in thousands of dollars except percentages) $ $ %
REVENUE 714,070 603,135 18.4
OPERATING COSTS 412,602 346,736 19.0
MANAGEMENT FEES—COGECO INC. 8,568 8,392 2.1
OPERATING INCOME BEFORE AMORTIZATION 292,900 248,007 18.1
OPERATING MARGIN 41.0% 41.1%
REVENUE
For fi scal 2007, revenue for the Canadian operations rose by $110.9 million, or 18.4%, compared to fi scal 2006, mainly as
a result of the various factors discussed below:
• HSI service net customer additions during fi scal 2007, of about 73,000, and the full-year impact of the 2006 net
additions, of about 65,000 customers, generated incremental revenue of approximately $26.1 million over fi scal 2006.
• Telephony service net customer additions during fi scal 2007, of about 91,000, and the full-year impact of the 2006
net additions, of about 51,000 customers, generated incremental revenue of about $37.5 million over fi scal 2006 due to
continued service rollout in the Corporation’s markets and the increased penetration in areas where the service is already
offered.
• Basic Cable service net customer growth during fi scal 2007, of about 16,000, and the full-year impact of the 2006 net
additions, of about 12,000 customers, contributed to improve revenue by $8.3 million.
• Various rate increases during fi scal 2006 and 2007 created incremental revenue of about $23.4 million as a result of:
– Monthly rate increases of at most $3 per customer and averaging $2 per Basic Cable service customer took effect
in June 2006 in Ontario and in August 2006 in Québec;
– Monthly rate increase of $1.50 for certain bundled services in Ontario in April 2007.
– Monthly rate increases of up to $3 per customer, averaging $1 per Basic Cable service customer, took effect in March
2007 in Ontario and in April 2007 in Québec.
In addition, new digital services and VOD services contributed to the revenue growth by an amount of $7.2 million and
equipment rentals were more favoured over equipement sales and generated net additional revenue of $5.7 million.
In fi scal 2007, ARPU increased by $9.60, or 16%, to reach $69.75 as a result of improved penetration of all services
combined with rate increases.