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24 COGECO CABLE INC. 2008 Management’s Discussion and Analysis
CAPITAL EXPENDITURES
Capital expenditures, segmented according to the National Cable Television Association (“NCTA”) standard reporting categories,
are as follows:
YEARS ENDED AUGUST 31, 2009 2008 2007
GUIDELINES(1)
(in thousands of dollars) $ $ $
CUSTOMERS PREMISE EQUIPMENT(2) 90,100 96,326 98,192
SCALABLE INFRASTRUCTURE(3) 63,300 47,006 43,392
LINE EXTENSIONS 34,000 13,929 11,164
UPGRADE/REBUILD 53,100 56,873 58,640
SUPPORT CAPITAL 32,500 19,782 12,578
TOTAL CAPITAL EXPENDITURES (4) 273,000 233,916 223,966
(1) SEE “FISCAL 2009 FINANCIAL GUIDELINES” SECTION ON PAGE 37 FOR FURTHER DISCUSSION.
(2) INCLUDES MAINLY NEW AND REPLACEMENT DROPS AS WELL AS HOME TERMINAL DEVICES.
(3) INCLUDES HEAD-END EQUIPMENT AND EXPENDITURES RELATED TO TELEPHONY.
(4) INCLUDES CAPITAL LEASES THAT ARE EXCLUDED FROM THE STATEMENTS OF CASH FLOWS.
In fiscal 2008, the variances related to capital expenditures are mainly attributable to the following factors:
• An increase in support capital due to the improvement in information systems to sustain the business operations, to the
acquisition of vehicles, and to leasehold improvements in the Corporation’s head office;
• An increase in scalable infrastructure capital spending mainly due to the timing of the expansion and head-end
improvements, system powering and equipment reliability to sustain increased customer demand for HSI and Telephony
services.
For fiscal 2009, capital expenditures are expected to reach approximately $273 million, an increase of $39.1 million compared to
fiscal 2008, mainly due to the following factors:
• Capital expenditures arising from the recent acquisitions;
• An increase in scalable infrastructure to support expansion and head-end improvements as well as network reliability to
sustain increased customer demand;
• An increase in support capital attributable to additions and improvements in facilities and information systems in Canada.
On the network side, numerous technology advancements will also help reduce capital expenditures in general. Improvements in
compression and multiplexing techniques will continue to occur, as they did significantly in the past few years, and will allow for
more television signals to be transmitted within a given bandwidth without signal degradation. A good part of the increased
bandwidth needs, generated by growth in Digital services such as HD television, HSI and VOD, will be accommodated through
further cost-efficient node splitting. Future migration to more advanced DOCSIS standards will allow for the use of more robust
modulation techniques in the return path as well as substantially higher transmission speeds. More importantly, the gradual
migration of cable systems to all-digital networks will allow operators to recuperate the bandwidth currently used for Analogue
distribution and use it for Digital signal distribution, including HD television signals. This migration to all-digital systems will take
some time to complete and capacity upgrades should be completed by 2010. As a result, capacity upgrades will consume relatively
less capital than in the past.