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38 COGECO CABLE INC. 2015 MD&A
TELEPHONY
Fiscal 2015 fourth-quarter telephony service customers net losses stood at 5,227 compared to 2,538 for the same period of the prior year mainly
due to the increasing mobile penetration rate in North America and various unlimited offers by mobile operators causing customers to cancel their
landline telephony services for mobile telephony services only.
OPERATING RESULTS
Quarters ended August 31, 2015 2014 Change
(in thousands of dollars, except percentages) $$ %
Revenue 316,218 315,404 0.3
Operating expenses 152,220 150,234 1.3
Adjusted EBITDA 163,998 165,170 (0.7)
Operating margin 51.9% 52.4%
REVENUE
Fiscal 2015 fourth-quarter revenue increased by $0.8 million, or 0.3%, to reach $316.2 million compared to $315.4 million for the same period
last year, primarily due to rate increases implemented in April 2014 and February 2015 in Québec and Ontario and the continued Internet revenue
growth, offset by a decline in video and telephony revenue due to intense competitive environment and service category maturity.
OPERATING EXPENSES
Fiscal 2015 fourth-quarter operating expenses increased by $2.0 million, or 1.3%, to $152.2 million compared to $150.2 million for the same
period last year. Operating expenses increased during the quarter as a result of higher programming and content costs and additional marketing
initiatives related to the launch of TiVo digital advanced video services, mostly offset by cost reduction initiatives. In addition, operating expenses
were negatively impacted in the fourth quarter of fiscal 2015 by non-recurring costs of $3.4 million related to the implementation of a new time
and labor management system which provide real-time access to time worked, absence days taken and time banks available.
ADJUSTED EBITDA AND OPERATING MARGIN
As a result of operating expense growth exceeding revenue growth, including $3.4 million in non-recurring costs related to a new time and labour
system, fiscal 2015 fourth-quarter adjusted EBITDA amounted to $164.0 million, or 0.7% lower than in the same period of the prior year and
consequently, operating margin decreased to 51.9% from 52.4% compared to fiscal 2014 fourth quarter.
AMERICAN CABLE SERVICES
CUSTOMER STATISTICS
Quarters ended August 31,
Net additions (losses)
August 31,
2015
(1) 2015 (1) 2014
PSU 571,160 59,328 488
Video service customers 249,303 26,237 (1,231)
Internet service customers 229,915 24,948 1,074
Telephony service customers 91,942 8,143 645
(1) Includes 57,746 PSU (27,256 video services, 22,673 Internet services and 7,817 telephony services customers) from the acquisition of MetroCast Connecticut
in the fourth quarter of fiscal 2015.
Fiscal 2015 fourth-quarter PSU net additions amounted to 59,328, of which 57,746 net additions came from the acquisition of MetroCast Connecticut
in the fourth quarter of fiscal 2015. The PSU growth is mainly explained as follow:
VIDEO
Fiscal 2015 fourth-quarter video service customers net additions stood at 26,237, of which 27,256 net additions came from the acquisition of
MetroCast Connecticut. The net variance is due to competitive offers in the industry, partly offset by the growth of TiVo's digital advanced video
services launched during the first quarter of fiscal 2014.
INTERNET
Fiscal 2015 fourth-quarter Internet service customers net additions amounted to 24,948, of which 22,673 net additions came from the acquisition
of MetroCast Connecticut. The net variance is due to the launch of TiVo's services, additional marketing initiatives which focused on bundle
package offerings, thus increasing overall demand for the Internet residential services and commercial Internet customers.