Cogeco 2010 Annual Report Download - page 38

Management’s Discussion and Analysis (MD&A) COGECO CABLE INC. 2010 37
2010 VS 2009 fourth-quarter operating results
Customer statistics
Net additions
August 31, 2010 Quarter ended August 31, 2010
Canada Europe Consolidated Canada Europe Consolidated
RGU 2,350,577 828,772 3,179,349 43,707 20,596 64,303
Basic Cable service customers 874,505 260,267 1,134,772 433 1,591 2,024
HSI service customers 559,057 163,187 722,244 8,904 2,778 11,682
Digital Television service customers 559,418 159,852 719,270 17,472 12,017 29,489
Telephony service customers 357,597 245,466 603,063 16,898 4,210 21,108
Net additions (losses)
August 31, 2009 Quarter ended August 31, 2009
Canada Europe Consolidated Canada Europe Consolidated
RGU 2,159,863 732,375 2,892,238 27,740 20,430 48,170
Basic Cable service customers 864,805 259,480 1,124,285 (924) (5,318) (6,242)
HSI service customers 515,052 143,614 658,666 5,619 1,430 7,049
Digital Television service customers 498,398 102,753 601,151 9,674 23,456 33,130
Telephony service customers 281,608 226,528 508,136 13,371 862 14,233
In Canada, fiscal 2010 fourth-quarter RGU net additions was higher than in the comparable period of the prior year, and the Canadian
operations continue to generate RGU growth despite early signs of maturation of some of its services. The net customer additions for Basic
Cable service customers stood at 433 for the quarter, compared to a net customer loss of 924 in the fourth quarter of the prior year. In the
quarter, Telephony service customers grew by 16,898 compared to 13,371 for the same period last year, and the number of net additions to the
HSI service stood at 8,904 customers for the quarter, compared to 5,619 customers for the same period last year. HSI and Telephony net
additions continue to stem from the enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of
Television, HSI and Telephony services, and promotional activities. The Digital Television service net additions stood at 17,472 customers
compared to 9,674 customers for the three month period of the prior year. Digital Television service net additions are due to targeted marketing
initiatives to improve penetration and to the continuing interest for HD television services.
In Europe, fourth-quarter fiscal 2010 net additions show a return to customer growth for the Corporation’s European operations, and the Basic
Cable service customer base has begun to stabilize and reflect the benefits of Cabovisão’s customer retention and acquisition strategies
launched at the end of the 2009 fiscal year in order to reduce the customer attrition brought on by the difficult competitive landscape in Portugal
and the economic environment in Europe throughout the previous fiscal year. In the fourth quarter of fiscal 2010, the number of Basic Cable
service customers grew by 1,591 customers compared to a loss of 5,318 customers in the comparable period of the prior year. HSI service
customers increased by 2,778 customers for the quarter, compared to 1,430 customers in the fourth quarter of fiscal 2009. The number of
Digital Television service customers grew by 12,017 customers in the fourth quarter ended August 31, 2010, compared to 23,456 customers in
the comparable period of the previous fiscal year mainly due to the extensive Digital roll-out period during fiscal 2009. The Telephony service
customers gained 4,210 customers in the fourth quarter of fiscal 2010, compared to 862 customers for the comparable period of the preceding
year.
Operating results
Canada Europe Consolidated
Quarters ended August 31, 2010 2009
(
1
)
2010 2009
(
1
)
2010 2009
(
1
)
(in thousands of dollars, except percentages) $ $ $ $ $ $
Revenue 282,155 255,590 42,168 52,217 324,323 307,807
Operating costs 152,034 122,206 34,112 41,709 186,146 163,915
Operating income before amortization 130,121 133,384 8,056 10,508 138,177 143,892
Operating margin 46.1% 52.2% 19.1% 20.1% 42.6% 46.7%
(1) Certain comparative figures have been reclassified to conform to the current year’s presentation. Financial information has been restated to reflect the
application of the CICA Handbook Section 3064. Please refer to the “Critical accounting policies and estimates” section on page 11 for more details.
Fiscal 2010 fourth-quarter consolidated revenue improved by $16.5 million, or 5.4%, to reach $324.3 million, when compared to the prior year.
Driven by increased RGU, the introduction of HSI usage billing, various rate increases implemented at the end of fiscal 2009 and in fiscal 2010,
and the revenue related to the new LPIF, fourth-quarter Canadian operations revenue went up by $26.6 million, or 10.4%, to reach
$282.2 million. Fiscal 2010 fourth-quarter European operations revenue decreased by $10 million, or 19.2%, at $42.2 million as a result of a
lower average number of Basic Cable service customers throughout fiscal 2010 compared to fiscal 2009 despite RGU growth, the impact of
retention strategies implemented in the second half of fiscal 2009 in order to curtail customer attrition, and the decline of the Euro in relation to
the Canadian dollar. The average exchange rate prevailing during the fourth quarter of fiscal 2010 used to convert the operating results of the