Cogeco Câble inc.
TSX : CCA

October 16, 2006 23:59 ET

Customer growth drives Cogeco Cable's financial results

MONTREAL, Oct. 16 - Today, Cogeco Cable Inc. (TSX: CCA)
announced its financial results for the fourth quarter and fiscal year ended
August 31, 2006.

Growth by business acquisition

With the acquisition of Cabovisao - Televisao por Cabo, S.A., (Cabovisao)
as a contributing factor, the number of revenue-generating units(1) (RGUs)
jumped from about 1,348,000 at the beginning of the fiscal year to
approximately 2,185,000 at the end of August 2006. "The arrival of Cabovisao
in our Corporation, with about 629,000 RGUs, is very promising," said Mr.
Louis Audet, President and CEO of Cogeco Cable. "We are in a very good
position to sustain growth, in Canada with more than 208,000 RGUs added to our
base as a result of the positive impact of our Digital Telephony service and,
with the well-trained and enthusiastic people in Portugal, who are working to
grow our position in that market."

Customer growth drives progress

During the fourth quarter, the Canadian operations reported strong RGU
increases, adding more than 44,000 compared to about 10,000 for the same
period last year and growing revenue by 12.7% while operating income before
amortization improved by 11.8%. On a consolidated basis, revenue increased by
24.8%, operating income before amortization by 20% while net income more than
tripled to reach $34 million.

2007 projections

For the Canadian operations, management is maintaining its 2007
preliminary projections of last July. In Portugal, we expect to add more than
75,000 RGUs, essentially equally divided between basic cable, high speed
Internet (HSI), and telephony. Revenue generated from the Portuguese
operations should exceed $215 million and operating income before amortization
should reach approximately $70 million, an operating margin of 33%.
Consequently, Cogeco Cable's operating margin should be approximately 38%.
"For fiscal 2007, all Cogeco Cable employees, here and abroad will aim to
increase customer satisfaction through improved customer service and enhanced
product and service offerings. We will maintain tight controls over the
Corporation's costs and we will work to continue to improve our business
processes. With regards to our new Portuguese subsidiary, the Cabovisao
integration plan is well advanced and we believe Cabovisao will contribute to
the creation of value for Cogeco Cable's shareholders as early as this fiscal
year", concluded Mr. Audet.

-----------------------
(1) Revenue-generating units represent the sum of basic service, Digital
Television service, HSI service and Telephony service customers.

<<

FINANCIAL HIGHLIGHTS


($000s, except Fourth Quarters ended Years ended
percentages and August 31, August 31,
per share data) (unaudited) (audited)
2006 2005 % 2006 2005 %
Change Change
------- ------- ------ ------- ------- -------
Revenue $ 174,875 $ 140,178 24.8 $ 620,001 $ 554,404 11.8

Operating
income before
amortization 72,864 60,720 20.0 252,978 227,521 11.2

Net income 33,987 11,036 208.0 65,556 28,721 128.3

Cash flow from
operations (1) 56,714 46,509 21.9 194,739 170,938 13.9
Less:
Capital expend-
-itures and
increase in
deferred
charges 53,279 46,259 15.2 164,446 125,671 30.9
------ ------ ------- -------
Free cash
flow (1) 3,435 250 -- 30,293 45,267 (33.1)

Per share data
Basic net
income $ 0.85 $ 0.28 203.6 $ 1.64 $ 0.72 127.8


(1) Cash flow from operations and free cash flow do not have standard
definitions prescribed by Canadian generally accepted accounting
principles (GAAP) and should be treated accordingly. For more details,
please consult the Non-GAAP financial measures section.


FORWARD-LOOKING STATEMENT

Certain statements in this press release may constitute forward-looking
information within the meaning of securities laws. Forward-looking information
may relate to our future outlook and anticipated events, our business, our
operations, our financial performance, our financial condition or our results
and, in some cases, can be identified by terminology such as "may"; "will";
"should"; "expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate";
"predict"; "potential"; "continue"; "foresee", "ensure" or other similar
expressions concerning matters that are not historical facts. In particular,
statements regarding our future operating results and economic performance and
our objectives and strategies are forward-looking statements. These statements
are based on certain factors and assumptions, including expected growth,
results of operations, performance and business prospects and opportunities,
which we believe are reasonable as of the current date. While we consider
these assumptions to be reasonable based on information currently available to
us, they may prove to be incorrect. Forward-looking information is also
subject to certain factors, including risks and uncertainties (described in
"Uncertainty and main risk factors" of the Corporation's 2005 annual MD&A)
that could cause actual results to differ materially from what we currently
expect. These factors include technological changes, changes in market and
competition, governmental or regulatory developments, general economic
conditions, the development of new products and services, the enhancement of
existing products and services, and the introduction of competing products
having technological or other advantages, many of which are beyond our
control. Therefore, future events and results may vary significantly from what
we currently foresee. You should not place undue importance on forward-looking
information and should not rely upon this information as of any other date.
While we may elect to, we are under no obligation (and expressly disclaim any
such obligation) and do not undertake to update or alter this information
before next quarter.
This analysis should be read in conjunction with the Corporation's
financial statements, and the notes thereto, prepared in accordance with
Canadian GAAP and the MD&A included in the Corporation's 2005 Annual Report.
Throughout this discussion, all amounts are in Canadian dollars unless
otherwise indicated.


MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)


CORPORATE STRATEGIES AND OBJECTIVES

Cogeco Cable's objectives are to improve profitability and create
shareholder value. The strategies for reaching those objectives are constant
corporate growth through the diversification and improvement of products and
services as well as clientele and territories, effective management of capital
and tight cost control. The Corporation measures its performance with regard
to these objectives with revenue growth, RGU(1) growth and free cash flow(2).
Below are the recent achievements in furtherance of Cogeco Cable's objectives.

Sustained corporate growth and diversification of clientele and
territories

- On August 1, 2006, the Corporation completed the acquisition of
Cabovisao, the second largest cable operator in Portugal in terms of
the number of basic service cable customers served. On August 31, 2006,
Cabovisao had 826,369 homes passed, 629,041 RGUs and 269,694 basic
service customers, offering analog television, HSI and telephony
services. In addition, only one-month of financial results is
incorporated in those of the fourth quarter and fiscal year 2006.

Diversification and improvement of products and services

- Digital Television services:
- Launch of five new high definition (HD) channels, and two new
standard definition channels in most Ontario territories;
- Digital Telephony service:
- Available to 66% of homes passed in Cogeco Cable's territories,
as at August 31, 2006;
- Since June 1, 2006, deployment of Digital Telephony service in
Niagara Falls, Pelham, Wallaceburg, Essex, Cornwall, Gananoque,
North Bay, Peterborough, Sarnia, Beamsville, Bright's Grove,
Corunna, Lindsay in Ontario, and Salaberry-de-Valleyfield, Magog,
St-Sauveur, Piedmont, Ste-Adèle, St-Jovite, Mont-Tremblant, Alma,
Roberval and Ste-Agathe in Québec.
- HSI service:
- Download speed increase:
- Standard HSI service went from a maximum speed of 7 Mbps to
up to 10 Mbps.
- Pro HSI service went from a maximum speed of 10 Mbps to up to
16 Mbps.

RGU Growth

During the year, the number of RGUs for the Canadian operations increased
by 15.4%. In the third quarter of 2006, the Corporation had anticipated RGU
growth between 13% and 15% for all of fiscal year 2006. Higher than
anticipated HSI, Digital Television, Digital Telephony and basic customer
growth allowed Cogeco Cable to exceed the fiscal year objectives. With the
acquisition of Cabovisao on August 1, 2006, the Corporation added 629,041 RGUs
for a total of 2,184,977.

Revenue Growth

During the year, revenue for the Canadian operations increased by 8.8%
mainly due to stronger RGU growth. In its third quarter 2006 revised
guidelines, the Corporation had expected to achieve revenue growth between 8%
and 9%. The Portuguese subsidiary generated revenue of $16.9 million during
the fourth quarter and fiscal year 2006.


-----------------------
(1) See "Customers statistics" section for detailed explanations
(2) See "Non-GAAP financial" section for explanations


Free Cash Flow

For the fiscal year 2006, Cogeco Cable generated a higher than anticipated
free cash flow of $30.3 million of which its Canadian operations generated
$29.3 million. Capital expenditures and deferred charges amounted to $164.4
million of which $160.2 million was intended to support Canadian operations
and the remainder was earmarked for the Portuguese operations.


CUSTOMER STATISTICS

Canadian operations Net additions (losses)

Fourth Quarters Fiscal Years
----------------- ----------------
August 31,
2006 2006 2005 2006 2005
---------- ------- ------- ------- --------
RGUs(2) 1,555,936 44,243 9,559 208,203 81,834
Basic service
customers 833,177 685 (5,891) 11,744 (2,422)
HSI service
customers(3) 343,080 12,601 2,775 65,432 38,040
Digital Television
service customers 327,364 10,563 11,227 80,160 44,768
Digital Telephony
service customers 52,315 20,394 1,448 50,867 1,448


% of Penetration(1)

August 31,
--------------

2006 2005
------- -------
RGUs(2)
Basic service customers
HSI service customers(3) 44.3 37.7
Digital Television service customers 40.0 31.7
Digital Telephony service customers 10.4 0.2


(1 As a percentage of basic service customers in areas served.
(2)Represent the sum of basic service, HSI service, Digital Television
service and Digital Telephony service customers.
(3)Customers subscribing only to Internet services totalled 61,208 as at
August 31, 2006 compared to 55,057 as at August 31, 2005.

All services generated higher growth in the fourth quarter compared to the
same period last year, except for the Digital Television service. During
fiscal year 2006, the growth in Digital Telephony is mostly attributable to
the launch of this service in new markets. Coverage of homes passed has now
reached 66% compared to 21% last year. For the first time in many years, the
net additions of basic service customers was positive in the fourth quarter
and amounted to 685 compared to a loss of 5,891 for the same period last year.
The number of net additions of HSI service stood at 12,601 compared to 2,775
for the same period last year. The growth of HSI and basic service customers
compared to the same period last year is mostly due to promotional activities,
enhancement of the product offering and the impact of the bundled offer of
Television, HSI and Digital Telephony services (triple play).

The net additions of Digital Television service customers stood at 10,563
compared to 11,227 for the same period last year. For the fourth quarter of
fiscal 2006, the increase in the number of customers is essentially similar to
the fourth quarter of fiscal 2005. Customers continue to show strong interest
in the high definition (HD) technology


Portuguese Operations Net additions (losses)

Fourth Quarters Fiscal Years
------------------- ----------------
August 31,
2006 2006(3) 2005 2006(3) 2005
--------- ------ ------ ------ ------
RGUs(2) 629,041 3,141 _____ 3,141 _____
Basic service customers 269,694 1,117 _____ 1,117 _____
HSI service customers 136,278 1,165 _____ 1,165 _____
Telephony service
customers 223,069 859 _____ 859 _____



% of Penetration(1)

August 31,
-------------

2006 2005
------- --------
RGUs(2) _____ _____
Basic service customers _____ _____
HSI service customers 50.5 _____
Telephony service customers 82.7 _____


(1) As a percentage of basic service customers in areas served.
(2) Represent the sum of basic service, HSI service and Telephony service
customers.
(3) Customer additions are for the month of August 2006.

For the one-month operation period as a subsidiary, all services generated
customer growth. Basic service customers grew by 1,117; HSI by 1,165 customers
and telephony by 859 customers.


ACCOUNTING POLICIES AND ESTIMATES

Foreign Currency Translation

Financial statements of self-sustaining foreign subsidiaries are
translated using the rate in effect at the balance sheet date for assets and
liabilities, and using the average exchange rates during the year for revenues
and expenses. Adjustments arising from this translation are deferred and
recorded in the foreign currency translation adjustment account and are
included in income only when a reduction in the investment in these foreign
subsidiaries is realized.
Other assets and liabilities denominated in foreign currencies are
translated in Canadian dollars at the prevailing exchange rates at the balance
sheet date for monetary items and at the transaction date for non-monetary
items. Revenues and expenses are translated at average rates prevailing during
the period except for transactions being hedged which were translated using
the terms of the hedges. Amounts payable or receivable on cross-currency
swaps, all of which are used to hedge foreign currency debt obligations are
recorded concurrently with the unrealized gains and losses on the obligations
being hedged. Other foreign exchange gains and losses are included in net
income, except for unrealized foreign exchange gains and losses on long-term
debt denominated in foreign currencies, designated as a hedge of a net
investment in a self-sustaining foreign subsidiary, which are included in the
foreign currency translation adjustment account.

Non-Monetary Transactions

In June 2005, the Canadian Institute of Chartered Accountants issued
Handbook Section 3831, Non-Monetary Transactions, which revised and replaced
the current standards on non-monetary transactions. Under the new section, the
criterion for measuring non-monetary transactions at fair value is modified to
focus on the assessment of commercial substance instead of the culmination of
the earnings process. A non-monetary transaction has commercial substance when
the entity's future cash flows are expected to change significantly as a
result of the transaction. These standards are effective for non-monetary
transactions initiated in periods beginning on or after January 1, 2006.
During the third quarter, the Corporation adopted these new standards and
concluded that they had no significant impact on its consolidated financial
statements.
There has been no other significant change in Cogeco Cable's accounting
policies and estimates since August 31, 2005. A description of these policies
and estimates can be found in the Corporation's 2005 annual MD&A.

RELATED PARTY TRANSACTIONS

Cogeco Cable is a subsidiary of COGECO Inc., which holds 39.2% of the
Corporation's equity shares, representing 86.6% of the Corporation's voting
shares. Under a management agreement, the Corporation pays COGECO Inc. monthly
management fees equal to 2% of its total revenue for certain executive,
administrative, legal, regulatory, strategic and financial planning, and
additional services. In 1997, management fees were capped at $7 million per
year, subject to annual upward adjustments based on increases in the Consumer
Price Index in Canada. Accordingly, for fiscal year 2006, management fees have
been set at a maximum of $8.4 million. Cogeco Cable granted 31,743 stock
options to COGECO Inc.'s employees during fiscal year 2006, compared to 38,397
in the 2005 fiscal year. The Corporation did not grant any stock options to
COGECO Inc.'s employees during the fourth quarter of fiscal years 2006 and
2005. Further details regarding the management agreement and stock options
granted to COGECO Inc.'s employees are provided in the Corporation's 2005
annual MD&A. There were no other material related party transactions during
fiscal years 2006 and 2005.


OPERATING RESULTS


($000s, except Quarters ended Years ended
percentages) August 31, August 31,


2006 2005 % 2006 2005 %
Change Change
------ ------ ------ ------ ------ ------

Revenue $ 174,875 $ 140,178 24.8 $ 620,001 $ 554,404 11.8

Operating
costs 102,011 79,458 28.4 358,631 318,704 12.5
Management fees
- COGECO Inc. - - - 8,392 8,179 2.6

Operating
income before
amortization 72,864 60,720 20.0 252,978 227,521 11.2

Operating margin 41.7 % 43.3 % 40.8 % 41.0 %


Revenue

Consolidated revenue for the fourth quarter and fiscal year 2006 increased
by $34.7 million and $65.6 million, respectively.
For the fourth quarter and fiscal year 2006, revenue for the Canadian
operations rose by $17.8 million and $48.7 million or 12.7% and 8.8%
respectively compared to the same periods of fiscal 2005. This growth is
explained mainly by an increase in the number of HSI, Digital Telephony and
basic service customers as mentioned in the "Customer Statistics" section,
together with rate increases implemented in June and August of 2005. 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 has increased by $1
in Ontario, and other limited rate increases for selective tier services were
implemented in Québec. Furthermore, an August 2005 reduction in digital
terminal rental rates was more than offset by a greater number of customers
renting digital terminals. In addition, monthly rate increases of up to $3 per
customer, averaging $2 per basic service customer, took effect on June 15,
2006 in Ontario, and in August 1, 2006 in Québec. The Portuguese subsidiary's
revenue amounted to $16.9 million for the fourth quarter and for fiscal year
2006.

Operating Costs

Consolidated operating costs for the fourth quarter and the fiscal year
2006 increased by $22.6 million and $39.9 million, respectively.
For the fourth quarter and fiscal year 2006, Canadian operations'
operating costs including network fees but excluding management fees payable
to COGECO Inc. rose by $10.7 million or 13.4%, and by $28 million or 8.8%,
respectively. During the fourth quarter and fiscal year 2006, network fees
increased by 18.8% and 9.3% respectively, compared to the same periods last
year. Network fees increase was mainly attributable to the introduction of
Digital Telephony service, the wholesale rate increase for APTN as mandated by
the CRTC and RGU growth. These fees were partly offset by the decline of IP
transport costs even with the growth in the number of HSI customers. The
increase in other operating costs was related to servicing additional RGUs,
including Digital Telephony. For the fourth quarter and fiscal year 2006,
Cabovisao's operating costs amounted to $11.9 million.

Operating Income Before Amortization

Consolidated operating income before amortization for the fourth quarter
and fiscal year 2006 increased by $12.1 million and $25.5 million,
respectively. Cabovisao's operating income before amortization for the fourth
quarter and fiscal year 2006 amounted to $5.0 million.
For the fourth quarter and fiscal year 2006, operating income before
amortization for the Canadian operations rose by 11.8% and 9.0% respectively,
compared to the same periods last year as the increase in revenue outpaced the
rise in operating costs. Cogeco Cable's operating margin for the Canadian
operations decreased slightly from 43.3% to 43% in the fourth quarter of
fiscal year 2006, as a result of the launch of the Digital Telephony service.
For fiscal year 2006, the operating margin increased slightly to 41.1%
compared to 41%. The Portuguese operations generated an operating margin of
29.5% for the fourth quarter and fiscal year 2006. As a result, Cogeco Cable's
fourth quarter 2006 operating margin declined to 41.7% from 43.3% for the same
period last year and in fiscal year 2006 to 40.8% from 41% in fiscal year
2005.

FIXED CHARGES

Quarters ended August 31, Years ended August 31,
($000s, except
percentages)
2006 2005 % 2006 2005 %
Change Change
------ ------ ------ ----- ----- ------

Amortization $ 34,801 $ 29,460 18.1 $ 120,782 $ 125,088 (3.4)

Financial
expense 16,374 14,004 16.9 57,366 $ 55,692 3.0


Amortization for the Canadian operations amounted to $30.4 million for the
fourth quarter of fiscal year 2006 compared to $29.5 million for the same
period last year. Amortization increased during the fourth quarter of fiscal
year 2006 due to the higher level of capital expenditures arising from the
demand for customer premise equipment, scalable infrastructure,
upgrade/rebuild, support capital and deferred charges. Amortization for the
one-month operation of the Portuguese operations amounted to $4.4 million.
Amortization for the Corporation amounted to $120.8 million for fiscal
year 2006 compared to $125.1 million for the same period last year. In fiscal
year 2006, amortization declined since many cable modems and digital terminals
were fully amortized.
During the fourth quarter and fiscal year 2006, financial expense
increased compared to the same periods last year. This is due to the higher
level of Indebtedness (defined as bank indebtedness and long-term debt)
required to finance the acquisition of the Portuguese subsidiary Cabovisao.

INCOME TAXES

For the fourth quarter of fiscal year 2006, income taxes represented a
recovery of $12.3 million compared to an expense of $6.2 million in 2005
despite operating income growth. The income tax decrease was mainly
attributable to a change in the Canadian federal enacted income tax rate for
the Canadian operations. On May 2, 2006, the Federal government announced its
intention to reduce the corporate income tax rate progressively from 21% to
19% effective in January 2010 and to eliminate the corporate surtax of 1.12%
on January 1, 2008. These measures were considered substantially enacted on
June 6, 2006, and as a result an adjustment of $20 million was recorded in the
fourth quarter of fiscal year 2006 to reduce future income taxes. Income taxes
for fiscal year 2006 amounted to $9.3 million compared to $18 million for the
same period last year. The Portuguese operations had no material impact on the
income tax expense for the period.

NET INCOME

Net income for fourth quarter of fiscal year 2006 amounted to
$34 million, or $0.85 per share, compared to $11 million, or $0.28 per
share, for the same period last year. Excluding the effect of the income tax
recovery of $20 million, net income would have stood at $14 million for the
quarter or $0.35 per share. For fiscal year 2006, net income amounted to
$65.6 million, or $1.64 per share, $45.6 million or $1.14 respectively
excluding the impact of the income tax recovery, compared to $28.7 million, or
$0.72 per share for the same period in fiscal 2005. Net income has increased
in these periods due to the growth in operating income before amortization.
The Portuguese subsidiary had no significant impact on the net income.


CASH FLOW AND LIQUIDITY

Quarters ended Years ended
August 31, August 31,
($000s)
2006 2005 2006 2005
------ ------ ------ -----
Operating Activities
Cash flow from operations $ 56,714 $ 46,509 $ 194,739 $ 170,938
Changes in non-cash
operating items 50,495 46,096 1,051 23,657
------- ------- ------- -------
$ 107,209 $ 92,605 $ 195,790 $ 194,595
------- ------- ------- -------
------- ------- ------- -------
Investing Activities (1) $(630,523) $(45,895)$(739,022)$(123,703)
------- ------- ------- -------
------- ------- ------- -------
Financing Activities (1) $ 595,543 $(46,649)$ 615,400 $ (70,831)
------- ------- ------- -------
------- ------- ------- -------
Net change in cash and
cash equivalents $ 72,229 $ 61 $ 72,168 $ 61
------- ------- ------- -------
------- ------- ------- -------

(1) Excludes assets acquired under capital leases.


During the fourth quarter of fiscal year 2006, cash flow from operations
reached $56.7 million, 21.9% higher than the comparable period last year,
primarily due to the increase in operating income before amortization. Changes
in non-cash operating items generated greater cash inflows than the same
period last year, mainly as a result of an increase in accounts payable and
accrued liabilities resulting from an increase in capital expenditures.
During fiscal year 2006, cash flow from operations reached $194.7 million
or 13.9% higher than the same period last year, primarily due to the increase
in operating income before amortization. Changes in non-cash operating items
generated lower cash inflows compared to last year mainly as a result of lower
increases in accounts payable and deferred and prepaid income.
On June 2, 2006, the Corporation entered into an agreement with Cable
Satisfaction International Inc. ("CSII"), Catalyst Fund Limited Partnership I
and Cabovisao to purchase, for a total consideration of (euro)465.7 million,
all the shares of the second largest cable operator in Portugal, an indirect
wholly-owned subsidiary of CSII. The price included the purchase of senior
debt and reimbursement of certain other Cabovisao liabilities. The acquisition
was completed on August 1, 2006. The final purchase price will be determined
following the completion of a post-closing working capital adjustment. The
Corporation is assuming a (euro)20 million working capital deficiency.
The acquisition was accounted for using the purchase method. The results
of Cabovisao have been consolidated as of the acquisition date.
The preliminary allocation of the purchase price of the acquisition is as
follows:

------------------------------------------------------------------------
------------------------------------------------------------------------
(amounts are in thousands of dollars)
------------------------------------------------------------------------
Consideration
Paid
Estimated share purchase price $304,188
Secured lenders debt and certain specified
Cabovisao liabilities 274,761
Acquisition costs 4,193
------------------------------------------------------------------------
583,142
Amounts outstanding
Preliminary working capital adjustment 2,432
------------------------------------------------------------------------
585,574
------------------------------------------------------------------------

Net assets acquired
Cash and cash equivalents 5,711
Restricted cash 489
Accounts receivable 16,570
Prepaid expenses 1,324
Fixed assets 287,652
Accounts payable and accrued liabilities assumed (65,282)
Other specified Cabovisao liabilities assumed (91,914)
------------------------------------------------------------------------
154,550
------------------------------------------------------------------------

Excess of consideration over net assets acquired $431,024
------------------------------------------------------------------------
------------------------------------------------------------------------

Preliminary allocation of excess of consideration over
net assets acquired
Preliminary goodwill $431,024
------------------------------------------------------------------------
------------------------------------------------------------------------


Other investing activities, including capital expenditures segmented
according to the National Cable Television Association (NCTA) standard
reporting categories, are as follows:


Quarters ended Years ended
August 31, August 31,
($000s)
2006 2005 2006 2005
------- ------ ------ ------

Customer Premise Equipment (1) $ 16,011 $ 12,901 $ 59,441 $ 44,526
Scalable Infrastructure 10,195 10,397 25,298 19,363
Line Extensions 3,756 3,574 11,205 10,416
Upgrade / Rebuild 11,221 13,158 39,709 34,096
Support Capital 3,167 1,413 8,186 3,888
-------------------------------------
Total Capital Expenditures (2) $ 44,350 $ 41,443 $ 143,839 $ 112,289
-------------------------------------
Deferred charges and others 9,010 4,816 20,650 13,338
-------------------------------------
Total other investing activities $ 53,360 $ 46,259 $ 164,489 $ 125,627
-------------------------------------
-------------------------------------

(1) Includes mainly new and replacement drops as well as home terminal
devices.
(2) Includes capital leases, which are excluded from the statements of
cash flow.

During the fourth quarter and fiscal year 2006, capital expenditures
increased compared to last year mainly as a result of the following factors:

- The increase in customer premise equipment for the fourth quarter of
fiscal year 2006 resulted primarily from greater demand for HSI and
Digital Telephony services. For fiscal year 2006, the increase in
customer premise equipment resulted primarily from a rise in the number
of digital terminals rented to customers, a greater ratio of digital
terminals per digital home, and the increase in the number of Digital
Telephony and HSI customers.

- For fiscal year 2006, the growth in scalable infrastructure was mainly
attributable to the support of the Digital Telephony rollout.

- For fiscal year 2006, expenditures associated with the network upgrade
and rebuild program rose due to the acceleration of the program to
expand the bandwidth to 750 MHz and 550 MHz for the Ontario and Québec
networks, respectively, and to improve network reliability. An increase
in the number of households with access to the two-way service was also
a factor and the percentage of customers with access to the two-way
service rose from 89% as at August 31, 2005 to 93% as at August 31,
2006.

Capital expenditures by the Portuguese operations amounted to $4.2 million
during the fourth quarter and fiscal year 2006.
The fourth quarter and fiscal year 2006 increases of deferred charges are
explained by higher reconnect costs attributable to the significant level of
RGU increase.
Free cash flow for the fourth quarter of fiscal year 2006 recorded a
surplus of $3.4 million compared to $0.3 million the year before. For fiscal
year 2006, free cash flow amounted to $30.3 million compared to $45.3 million
last year. The fourth quarter free cash flow increase over the same period
last year is due to growth in operating income before amortization, partly
offset by a higher level of capital expenditures and deferred charges
generated by better-than-projected RGU growth and support the Digital
Telephony service roll-out.
For fiscal year 2006, free cash flow decrease over fiscal 2005, mainly as
a result of increased capital expenditures and deferred charges generated by
overall RGU growth, including improved service penetration as well as the
launch of the Digital Telephony service.
During the fourth quarter, the level of Indebtedness increased by
$607.2 million due to the Cabovisao acquisition, the increase in cash and cash
equivalents of $71.5 million and to the fees related to the new Term Facility
of $900,000,000, partly offset by an increase in non-cash operating items of
$50.5 million. For the same period last year, Indebtedness declined by
$45.1 million mainly due to non-cash operating items of $46.1 million. In
addition, a dividend of $0.04 per share for subordinate and multiple voting
shares, totalling $1.6 million, was paid during the fourth quarter of fiscal
years 2006 and 2005.
In fiscal year 2006, the level of Indebtedness grew by $631.7 million due
to the acquisition of Cabovisao completed in the fourth quarter, the increase
and cash and cash equivalents of $71.5 million and to the fees related to the
new Term Facility of $900,000,000, partly offset by generated free cash flow
of $30.3 million. For the same period last year, Indebtedness declined by
$67.6 million essentially due to generated free cash flow of $45.3 million and
an increase in non-cash operating items of $23.7 million. Dividends totalling
$6.4 million were paid during fiscal year 2006 compared to $4 million the year
before.
As at August 31, 2006, Cogeco Cable had a working capital deficiency of
$315 million compared to $121.5 million as at August 31, 2005. The greater
deficiency is mainly attributable to the increase in the current portion of
long-term debt as the Corporation's $125 million Second Secured Debentures
Series A matures in less than a year and the Cabovisao working capital
deficiency of $93.2 million at the end of fiscal year 2006. Cogeco Cable
maintains a working capital deficiency due to a low level of accounts
receivable since the majority of the Corporation's customers pay before their
services are rendered, unlike accounts payable and accrued liabilities, which
are paid after products or services are rendered. In addition, the Corporation
generally uses cash and cash equivalents to reduce Indebtedness.
As at August 31, 2006, the Corporation had used $623.3 million of its Term
Facility. On July 28, 2006, the Term Facility and the operating line of credit
of the Corporation were restructured by an amended and restated credit
agreement for credit facilities totalling $900,000,000. The Term Facility is
composed of four tranches: a first tranche, a revolving term facility for an
amount of $700,000,000 available in Canadian, U.S. or euro currencies; a
second tranche, a swingline of $25,000,000 available in Canadian or U.S.
currencies; a third tranche of $150,000,000 fully drawn, and a fourth tranche
of 17,358,700 Euros fully drawn. The Term Facility is repayable on July 28,
2011, except for the third tranche of $150,000,000 which is repayable as
follows: $15,000,000 on July 28, 2008, $22,500,000 on July 28, 2009,
$37,500,000 on July 28, 2010 and the balance on July 28, 2011. Earlier
repayments can be made without penalty. The Term Facility requires commitment
fees, and interest rates are based, on bankers' acceptance, LIBOR, EURIBOR,
bank prime rate loan or U.S. base rate loan plus stamping fees. The Term
Facility is secured by a first fixed and floating charge on the assets of the
Corporation and certain of its subsidiaries except for permitted encumbrances,
including purchased money obligations, existing funded obligations and charges
granted by any subsidiary prior to the date when it becomes a subsidiary
subject to a maximum amount.

FINANCIAL POSITION

As at August 31, 2006, the Corporation balance sheet included the assets
and liabilities of the recently acquired subsidiary, Cabovisao. Please refer
to the ''Cash Flow and Liquidity'' section for details.
The $43.5 million rise in fixed assets for the Canadian operations was
mainly related to increased capital expenditures. Deferred charges increased
by $9.1 million mostly due to fees related to the new financing and RGUs
growth and Indebtedness increased by $624.5 million, due to the factors
previously discussed in the "Cash Flow and Liquidity" section.
A description of Cogeco Cable's share data as of September 30, 2006 is
presented in the table below:


Number of Amount
shares/options ($000s)
-------------- --------------
Common Shares
Multiple voting shares 15,691,100 98,346
Subordinate voting shares 24,308,112 532,112

Options to Purchase Subordinate
Voting Shares
Outstanding options 715,571
Exercisable options 433,855


In the normal course of business, Cogeco Cable has incurred financial
obligations, primarily in the form of long-term debt, operating and capital
leases and guarantees. Except for the matters related to the acquisition of
Cabovisco and the new financing, Cogeco Cable's obligations, discussed in the
2005 annual MD&A, have not materially changed since August 31, 2005.

DIVIDEND DECLARATION

At its October 13, 2006 meeting, the Board of Directors of Cogeco Cable
declared a quarterly dividend of $0.04 per share for subordinate and multiple
voting shares, payable on November 10, 2006, to shareholders of record on
October 27, 2006.

FOREIGN EXCHANGE MANAGEMENT

Cogeco Cable has entered into cross-currency swap agreements to set the
liability for interest and principal payments on its US$150 million Senior
Secured Notes. These agreements have the effect of converting the US interest
coupon rate of 6.83% per annum to an average Canadian dollar fixed interest
rate of 7.254% per annum. The exchange rate applicable to the principal
portion of the debt has been fixed at CDN$1.5910. Amounts due under the
US$150 million Senior Secured Notes Series A decreased by CDN$12.3 million at
the end of of fiscal year 2006 compared to August 31, 2005 due to the Canadian
dollar's appreciation. Since the Senior Secured Notes Series A are fully
hedged, the fluctuation is offset by a variation in deferred credit described
in Note 9 of the fourth quarter interim financial statements. The
$72.9 million deferred credit represents the difference between the
quarter-end exchange rate and the exchange rate on the cross-currency swap
agreements, which determine the liability for interest and principal payments
on the Senior Secured Notes Series A.


FISCAL 2007 FINANCIAL GUIDELINES

($ million, except customer data) Revised Projections, Preliminary
October 16, 2006 Projections,
Fiscal 2007 Fiscal 2007
-------------- --------------
Financial Guidelines
Revenue 880 to 885 660 to 670
Operating income before amortization 335 to 338 264 to 267
Operating margin About 38% About 40%
Financial expense 85 55
Amortization 182 128
Net income 45 53
Capital expenditures and
deferred charges 225 to 230 180
Free cash flow 20 to 25 25 to 30

Customer Addition Guidelines
Basic service 25,000 to 30,000 3,000 to 6,000
HSI service 55,000 to 60,000 35,000 to 40,000
Digital Television service 55,000 to 60,000 55,000 to 60,000
Telephony service 67,000 to 72,000 45,000 to 50,000
RGU 202,000 to 222,000 138,000 to 156,000


The preliminary financial guidelines for fiscal 2007 exclude Cabovisao. In
its revised projections, management has maintained its preliminary financial
guidelines for the Canadian operations and added those of Cabovisao.

Canadian Operations

The revenue increase of approximately 10% to 12% should result mainly from
expanded penetration of HSI and Digital Telephony services as well as the
full-year impact of the 2006 RGU additions. In addition, rate increases of up
to $3 per customer in Quebec and Ontario, thus averaging $2 per basic service
customer as well as improved penetration of Digital Television services will
also contribute to the revenue increase. Cogeco Cable plans to expand its
basic service clientele through effective marketing, competitive product
offering and superior customer service. As the penetration of HSI and Digital
Television services increase, the demand for these products will likely slow
down but should be offset by increased demand for Digital Telephony service.
As a result, the Canadian operations operating income before amortization
should increase by 6% to 8% to reach $264 million to $267 million, for an
operating margin of about 40%. Amortization of capital assets and deferred
charges are expected to increase by $11 million, as a result of capital
expenditures and deferred charges that will be incurred for the RGU growth of
fiscal 2007 and the full-year impact of the 2006 RGU growth. Compared to
fiscal year 2006, the rise in capital expenditures and deferred charges will
result primarily from an increase of approximately $6 million associated with
the scalable infrastructure related to the head end equipment to support HSI,
Digital Television services and video on demand (VOD), $7 million related to
customer premise equipment and $4 million related to support capital for the
upgrade of business information systems.

Portuguese Operations

RGUs should increase by approximately 75,000 essentially equally divided
between basic cable, HSI and telephony customers. As a result, revenue should
reach $215 million to $220 million, using a conversion rate of $1.40 per euro,
while operating income before amortization should amount to between
$69 million to $71 million for an operating margin of approximately 33%.
Capital expenditures to support the projected revenue growth including $4.4
million for the launch of the Digital Television service should reach $45
million to $50 million, or approximately 22% of projected revenue.
Amortization of capital assets and deferred charges should amount to $54
million.

Consolidated Outlook

The revenue increase of approximately 41% to 42% should result primarily
from the full-year impact of Cabovisao operations and from the growth of
between 202,000 to 222,000 RGUs. Cogeco Cable expects to achieve an operating
income before amortization of approximately $335 million to $338 million
generating an operating margin of about 38%.
Capital expenditures and deferred charges are expected to be at around
$225 million to $230 million due to the inclusion of Cabovisao's operations
and to RGU growth. Amortization should amount to $182 million. Financial
expense should increase by $30 million to reach $85 million as a result of the
additional indebtedness to finance the Cabovisao acquisition.
Management expects that cash flows generated by operations will finance
capital expenditures and deferred charges. The Corporation expects to generate
free cash flow in the order of $20 million to $25 million due to the expected
launch of the Digital Television service in Portugal. Free cash flow that is
generated should be used primarily to reduce Indebtedness, thus improving the
Corporation's leverage ratios. Net income of approximately $45 million should
be achieved as a result of growth in operating income before amortization
exceeding the increase in fixed charges.

RISK FACTORS AND UNCERTAINTIES

This section outlines general as well as more specific risks faced by
Cogeco Cable and its subsidiaries that could significantly affect the
financial condition, operating results or business of the Corporation. It does
not purport to cover all contingencies, or to describe all possible factors
that might have an influence on the Corporation or its activities at any point
in time. Furthermore, the risks and uncertainties outlined in this section may
or may not materialize in the end, may evolve differently than expected, or
may have different consequences than those that are being currently
anticipated.
Cogeco Cable applies an on-going risk management process that includes a
quarterly assessment of risks for the Corporation and its subsidiaries, under
the oversight of the Audit Committee. As part of this process, the Corporation
endeavours to identify risks that are liable to have a major impact on the
Corporation's financial situation, revenue or activities, and to mitigate such
risks proactively as may be reasonable and appropriate under the
circumstances. This section reflects current views on uncertainties and main
risk factors considered as a part of this process.

Risks Pertaining to Markets and Competition

Broadband telecommunications markets in Canada and Portugal are very
dynamic and highly competitive. They involve intense rivalry between a variety
of terrestrial wireline and wireless, as well as satellite, service providers
over a widening suite of broadband services that include fixed and mobile
voice communications, Internet access, data communications, audio and video
content delivery, electronic programming guides and navigation, security and
other related or incidental services. While cable broadband telecommunications
providers have entered into the voice and data communications markets
traditionally dominated by incumbent telephone companies, the telephone
companies are increasingly involved in audio and video content delivery, as
part of a global phenomenon known as convergence. A number of new competitors
have also entered various telecommunications markets through the use of the
Internet and access to the facilities of telephone and cable
telecommunications companies.
In this converged environment, competition increasingly unfolds over
bundles of services offered at attractive package rates, as competitors strive
to meet all the communications needs of residential and business customers and
thus obtain maximum share of their overall communications budget. Rivalry
extends over the composition of service bundles, bundle prices and perceived
value, promotional or introductory offers, term of commitment by the customer,
terminal devices and customer service. The substantial cost of broadband
facilities and broadband customer acquisition, combined with the significant
annual growth rates of revenue generating units achieved by competitors
generally tend to make outright price wars on individual services and service
bundles less appealing as a competitive strategy. As markets mature and
penetration gains for high speed Internet access, digital video and digital
telephony services abate, retail pricing strategies may become more
aggressive, with resulting downward pressure on operating margins of both
individual services and service bundles.
Cogeco Cable provides "double-play" and "triple-play" service bundles in
its various geographic markets, with various combinations of voice, Internet
and video distribution services being offered at attractive bundle prices.
"Quadruple-play" service bundles that include mobile communications have
appeared in these markets, but so far they have had limited effect in the
marketplace. Cogeco Cable continues to focus at this time on its existing
lines of service with a view to capturing the remaining growth opportunities
for HSI, Digital Television and Digital Telephony services in its footprint,
making the most efficient use of its own hybrid fibre-coaxial (HFC) plant.
Mobile telephone operators are now offering audio and video content
distribution directly to their mobile telephone customers, but this new form
of content distribution has so far had no measurable impact on the use of
wireline and satellite content distribution. As markets evolve and mobility
becomes a more cost-effective substitute to wireline communications, Cogeco
Cable and its subsidiaries may need to add mobility components to its service
bundles, through suitable mobile virtual network arrangements with existing
mobile operators.
In Canada, Cogeco Cable faces competition in its service areas mainly from
two national direct-to-home satellite distribution services, Star Choice and
Bell ExpressVu (the latter controlled by BCE Inc., the largest and most widely
integrated Canadian telecommunications company), and from incumbent telephone
companies Telus, Bell Canada (controlled by BCE Inc.) and Bell Nordiq (also
controlled by BCE Inc.). Star Choice and Bell ExpressVu both offer a wide
range of competitive audio and video services on a fully digital basis. Telus,
Bell Canada and Bell Nordiq all offer a wide range of business and residential
Internet access, voice and data telecommunications services. Rogers, Telus and
Bell Canada respectively operate mobile telecommunications services in Ontario
and Quebec. In addition, Telus now offers audio and video distribution
services in the Lower St. Lawrence area in direct competition with Cogeco
Cable. Telus and Bell Canada have recently announced that they will become
income trusts. However, Cogeco Cable and Telus cooperate in other parts of
Cogeco Cable's footprint to offer Cogeco Cable's Digital Telephony service.
Bell Canada offers a new digital telephone service in Ontario and Québec and
is expected to launch some time in 2007 a new digital video distribution
service over its wireline network, starting with larger urban centres in
Ontario and Québec, some of which are included in Cogeco Cable's cable network
footprint. Cogeco Cable also competes with other telecommunications service
providers, including Vonage, Primus and Rogers Home Phone (formerly known as
Sprint), and with alternative service providers who use resale or third-party
access arrangements in effect. Although spectrum has been allocated for
broadband wireless distribution alternatives for quite some time, this form of
wireless competition has been slow to develop in Cogeco Cable's footprint. It
may however become a more significant competitive factor in coming years.
In Portugal, Cogeco Cable's subsidiary Cabovisao faces competition in its
service areas mainly from incumbent telecommunications carrier Portugal
Telecom, SGPS, S.A. (PT) and its subsidiaries, from diversified Portuguese
conglomerate Sonae, SGPS, S.A. (Sonae) and its subsidiaries, and from
telecommunications operator ONI, whose main shareholder is Energias do
Portugal (EDP), the incumbent electricity service provider in Portugal. In
addition to the national telephone network operator PT Communicaçoes, PT owns
TV Cabo, the largest cable broadband operator in Portugal, which also offers a
direct-to-home satellite television distribution service to the Portuguese
market. Sonae owns and operates the Clix and Novis services, which provide
voice, data, and high speed Internet services respectively to the residential
and business markets. PT and Sonae, provide mobile telecommunications services
in Portugal, through their respective subsidiaries TMN and OPTIMUS, as well as
Vodaphone. Other competitors include AR Telecom (formerly known as Jazztel),
Tele 2 and Redvo Telecom, a recently launched broadband microwave distribution
service using WiMax technology. Until recently, Cabovisao has been the only
provider of full "triple-play" service bundles in its footprint, but Clix has
recently launched a digital video distribution service over telephone lines,
and its competitive "triple-play" service bundles are expected to extend
progressively to approximately 60% of Cabovisao's footprint. TV Cabo has
started offering telephone services on Session Initiation Protocol (SIP) as
well as a digital video service, and is thus also in a position to offer
competitive "triple-play" service bundles to approximately 60% of Cabovisao's
footprint. Cabovisao's video distribution services are analog only, and do not
include true video-on-demand at this time, but Cabovisao is actively
considering the opportunity and timing for the roll-out of its own digital
services, as its HFC plant has the capacity to accommodate digital services in
addition to all its existing analog services.
The broadband telecommunications competitive landscape in Portugal differs
from that prevailing in Canada mainly in the following respects: the density
of urban dwelling units within the Corporation's footprint in Portugal is
approximately double that of its footprint in Canada, there is overlapping
competitive cable plant over approximately 60% of Cabovisao's footprint and
this competitive cable plant is presently controlled by the incumbent
telephone company, but there is only one Portuguese direct-to-home satellite
competitor, and direct-to-home satellite service penetration is very limited
in urban areas.
The level of piracy of video signals and the actual penetration of illicit
reception of video distribution services in households within the
Corporation's service areas may also have a significant effect on the
Corporation's business and the competitiveness of its service bundles.

Technological Risks

The evolution of telecommunications technologies is very rapid, fuelled by
a highly competitive global market for digital content, consumer electronics
and broadband products and services. The Corporation monitors the development
of technologies used for the transmission, distribution, reception and storage
of data and their deployment by various existing or potential competitors in
the broadband telecommunications markets.
There are now several terrestrial and satellite transmission technologies
available to deliver a range of electronic communications services to the home
with varying degrees of flexibility and efficiency, and they compete with
cable broadband telecommunications. While the broadband over power line (BPL)
alternative has made little headway to date, the competitive threat posed by
other alternatives such as 3G and Wi-Max broadband wireless technologies,
advanced digital subscriber line technologies such as VDSL+, and the
deployment of fibre to the premises (FTTP) or close to the premises (FTTN) by
incumbent telephone companies is growing with each passing year.
On the other hand, cable telecommunications also continue to benefit from
rapid improvements, particularly in the areas of modulation, digital
compression, fractioning of optoelectronic links, multiplexing, HD
distribution and switched video distribution. Management of the Corporation
remains of the view that broadband wireline distribution over fibre and
coaxial cable will continue to be an efficient, reliable, economical and
competitive platform for the distribution of a full range of electronic
communications products and services for the foreseeable future. The
competitiveness of the cable broadband telecommunications platform will
however continue to require additional capital investment on a timely basis in
an increasingly competitive and uncertain market environment.
The growth in penetration of broadband connections of all types, the rapid
increase in transmission speeds offered by competitors in the market, and the
emergence of the more powerful MPEG-4 video standard promote the increased
distribution and consumption of video content directly over the Internet.
Video content, which is bandwidth-intensive, already accounts for over 50% of
total peer-to-peer data traffic on the Internet. This may lead eventually to
fragmentation of the retail market for existing analog and digital video
distribution services provided by the Corporation, and gradual
disintermediation as between video content suppliers and the Corporation's
customers. In this context, revenue and margins derived from the Corporation's
high speed Internet access services may not entirely compensate for the loss
of revenue or margin derived from the Corporation's video distribution
services in the future. Alternative voice and data communications services are
proliferating as well over the Internet, with the resulting risk that
fragmentation and disintermediation may also occur in the future with respect
to the Corporation's digital telephone service.
Electronic communications increasingly rely on advanced security
technology and devices to ensure conditional access and service integrity.
Security technology is provided worldwide by a small pool of global suppliers
on a proprietary basis. Like other providers of electronic communications, the
Corporation depends on the effectiveness of security technology for many of
its services and the ability of security technology providers to offer
cost-effective and timely solutions as, if and when existing levels of
security are compromised.

Regulatory Risks

In Canada, broadband telecommunications facilities and services are
subject to regulatory requirements depending mainly on the type of facilities
involved, the incumbent status of service providers and their relative market
power, the technology used and whether the activities are categorized as
telecommunications or broadcasting. Canadian cable broadband
telecommunications facilities and services are subject to various requirements
mainly under federal legislation governing broadcasting, radiocommunication,
telecommunications, copyright, and privacy, and under provincial legislation
governing consumer protection and access to certain property and power
utilities support structures. Licences are still required for the operation of
larger (Class 1 and 2) cable systems, while smaller (Class 3) cable systems
are now mostly licence-exempt. Various licence and licence exemption
conditions continue to apply in Canada. Canadian cable operators are also
subject to Canadian ownership and control requirements.
A recently published report by the Telecommunications Policy Review Panel
(TPRP) contains a broad set of recommendations that include a timely
transition to deregulation of all telecommunications services, the creation of
a specialized telecommunications competition tribunal, a review of the
Telecommunications Act (Canada), and the removal of ownership restrictions for
telecommunications carriers, subject to certain conditions. The report also
considers that the traditional separation of broadcasting distribution and
telecommunications activities for regulatory purposes is no longer appropriate
in a converged market environment. The federal government is expected to table
a new bill on telecommunications in the near future. The federal government
has also requested that the CRTC report back by the end of 2006 and provide
answers to a broad range of questions on the future of the Canadian
broadcasting system, which includes the distribution of broadcasting services.
While this overall policy review process is unfolding, two key
telecommunications decisions of the CRTC concerning respectively the
regulatory status of voice-over-IP (VOIP) local access telephone services of
incumbent telephone companies and forbearance from regulation of local access
telecommunications services still regulated by the CRTC have been challenged
by incumbent telephone companies. The CRTC confirmed on September 1, 2006 its
decision to continue regulating VOIP local access telephone services of
incumbent telephone companies until certain conditions are met, but has agreed
to reconsider the required threshold of 25% loss of market share by incumbent
telephone companies in the relevant markets in order for deregulation to
occur. This decision may be further challenged by incumbent telephone
companies. It is not known at this time whether the federal government will
require the reconsideration of, or will set aside, the decision of the CRTC
respecting regulatory forbearance for local access telephone services
generally. The ultimate outcome and timing of the policy review process and
challenges to these key telecommunications decisions may have a significant
impact on the development of the Corporation's new digital telephone service
line of business, and incidentally on the marketing strategies for service
bundles that include digital telephone service.
The CRTC has recently initiated a policy review proceeding for
over-the-air television in Canada that raises the possible establishment of
fees for carriage of conventional over-the-air television signals by
broadcasting distributors, including cable, telephone and satellite
distributors. The World Intellectual Property Organization (WIPO) is also
considering the issue of fees for carriage as part of its proceedings leading
to the drafting of a new multilateral treaty concerning the protection of
broadcasting signals. At present, Canadian broadcasting distributors pay
carriage fees to pay and specialty programming services, but not to
conventional over-the-air television services. Next year, the CRTC is also
expected to launch a review of its broadcasting distribution policies. The
ultimate outcome and timing of these policy initiatives may have a significant
impact on the Corporation's cost of sales for its analog and digital services
and the penetration of its various tiers of video distribution services.
In Portugal, a broad reform of national legislation respecting electronic
communications has already occurred with the publication of Law 5/2004
(Electronic Communications Law, known as REGICOM) on February 10, 2004, in
line with the basic requirements of applicable European Commission directives.
Under this new national legislation, the Autoridade Nacional das Comunicaçoes
(ANACOM), has implemented a general authorization regime which no longer
involves the issuance of licences for wireline telecommunications activities.
The telecommunications markets in Portugal are fully open to competition since
January 1, 2000, and there are no foreign ownership restrictions applying to
electronic communications service providers or the ownership of broadband
telecommunications facilities in Portugal. Much of ANACOM's regulatory
oversight is focused at present on the analysis of the competitive state of
relevant telecommunications markets and the adoption of selected measures
where significant market power by a competitor is found to exist in a relevant
market. ANACOM has analyzed 16 of the 18 relevant retail and wholesale markets
identified by the European Commission and found that PT has significant market
power in most of these markets. As a result, various specific regulatory
requirements apply to the provision of certain services by PT companies. In
addition, pursuant to Directive 2002/77/EC of the European Commission
(Competition Directive), the cable television and telecommunications network
operations of incumbent telephone companies in EU member states must be kept
separate, and conducted through separate entities. TV Cabo, Cabovisao's direct
cable competitor for video distribution and HSI services, is operated through
PT Multimedia, an entity separate from PT Comunicaçoes, which operates PT's
telecommunications network (telephony and ADSL HSI services), and services
provided by each of these entities are billed separately. The ownership and
operating conditions of various entities of PT, including PT Multimedia, may
however change in the foreseeable future as a result of the pending takeover
bid by Sonae, alternative bids by other interested parties, or ownership or
restructuring proposals put forward by PT itself. There is a possible scenario
of having two full triple play companies, PT Comunicaçoes and PT Multimedia,
owned by separate groups, with the conclusion of the pending takeover bid by
Sonae, with each significant market power and possible new regulatory
requirements as a result.
On June 29, 2006, the European Commission launched a broad policy review
initiative on electronic communications with a view to boosting competition
among telecommunications operators of EU member states and building a single
market for services that use radio spectrum. The ultimate outcome and timing
of these legislative proposals, and their transposition into Portuguese
domestic law and policies, may eventually have an impact on the future on
Cabovisco's electronic communications activities and on the future state of
competition for the provision of electronic communications in Portugal.

Risks Pertaining to Operating Costs

Cogeco Cable applies itself on to keeping its cost of goods sold in check
so as to secure continued operating margin growth. The two largest drivers of
cost of goods sold are network fees paid to audio and video service suppliers,
and data transport and connectivity charges, mostly for Internet traffic. The
market for audio and video programming services in Canada is already
characterized by high levels of supplier integration, structural rigidities
imposed by the CRTC's regulatory framework for broadcasting distribution, and
the resulting strong bargaining position of program suppliers. The recently
announced takeover of CHUM Limited by Bell Globemedia Inc., if approved by the
CRTC and the Commissioner of Competition, would significantly increase the
level of concentration of Canadian conventional over-the-air, specialty and
pay television programming services in the Canadian marketplace generally, and
significantly would increase the market power of Bell Globemedia Inc. The
renewal of Cogeco Cable's affiliation agreements for CHUM and Bell Globemedia
specialty services are currently under negotiation.
As the markets for data transport and connectivity remain very competitive
in Canada and Portugal, Cogeco Cable and Cabovisao have negotiated cost
effective arrangements in the past for voice and data traffic. However, as
overall traffic increases and capacity on existing broadband
telecommunications facilities becomes more widely used, the Corporation may
not be able to secure further cost efficiencies in the future.
In Portugal, the offering of new digital audio and video services by
Cabovisao will require the negotiation of suitable arrangements with existing
or new program suppliers,. Although affiliation arrangements and program
service bundling and retailing are less constrained by regulations in Portugal
than in Canada, the negotiation of such new arrangements has not yet taken
place.

Risks Pertaining to Information Systems

Flexible, reliable and cost-effective information systems are an essential
requirement for the handling of sophisticated service options, customer
account management, internal controls, provisioning, billing and the roll-out
of new services. The Corporation uses different customer relations management
tools and databases for its operation respectively in Ontario, Québec and
Portugal. The agreement with the main third-party supplier of information
systems in Ontario will expire in 2008, and the terms that would apply for the
continued use of the relevant information systems in Ontario are under
negotiation.

Risks Pertaining to Disasters

The Corporation has a disaster recovery plan for dealing with the
occurrence of natural disasters, quarantine, power failures, terrorist acts,
intrusions, computer hacking or data corruption, but the operations and
facilities of Cabovisao are not yet integrated into this plan, given the fact
that Cabovisao became a subsidiary of Cogeco Cable only on August 1, 2006.
Cabovisao's insurance coverage has been integrated in Cogeco Cable's insurance
coverage. The emergency plans and procedures that are in place cannot provide
the assurance that the effect of any disaster can and will be mitigated as
planned. Cogeco Cable is not insured against the loss of data and relies on
data protection and recovery systems that it has put in place with third-party
service providers in Canada.

Risks Pertaining to the Financing of the Cabovisao Acquisition

The acquisition of Cabovisao has been financed through corporate credit
facilities of Cogeco Cable. The major part of the purchase price for Cabovisao
(approximately (euro)465.7 million) was borrowed directly in Euros, and
(euro) 104 million was borrowed in Canadian dollars and subsequently converted
into Euros. The remainder of the purchase price is assumed liabilities. There
are no financial hedging arrangements in effect at this time for interest
fluctuation risks on interest payments resulting from these borrowings, but
there is a natural hedging effect between the borrowings in Euros and the
inter-corporate debt interest payments and cash distributions in Euros
originating from the European subsidiaries. Also, for the purposes of this
acquisition, Cogeco Cable has set up a structure involving one of its
operating Canadian subsidiaries and intermediate holding and financing
entities located in Luxembourg with a view to maximizing returns. The
Corporation is presently considering financial arrangements to extend the term
with alternate sources of financing and to set the interest rate of the Term
Facilty.

NON-GAAP FINANCIAL MEASURES

This section describes Non-GAAP financial measures used by Cogeco Cable
throughout this MD&A. It also provides reconciliations between these Non-GAAP
measures and the most comparable GAAP financial measures. These financial
measures do not have standard definitions prescribed by Canadian GAAP and may
not be comparable with similar measures presented by other companies. These
measures include "cash flow from operations" and "free cash flow".

Cash Flow from Operations

Cash flow from operations is used by Cogeco Cable's management and
investors to evaluate cash flow generated by operating activities excluding
the impact of changes in non-cash operating items. This allows the Corporation
to isolate the cash flow from operating activities from the impact of cash
management decisions. Cash flow from operations is subsequently used in
calculating the Non-GAAP measure, "free cash flow". Cash flow from operations
is calculated as follows:


($ 000) Quarters ended Years ended
August 31, August 31,

2006 2005 2006 2005
------- ------- ------- -------
Cash flow from
operating activities $ 107,209 $ 92,605 $ 195,790 $ 194,595
Changes in non-cash
operating items (50,495) (46,096) (1,051) (23,657)
------- ------- ------- -------
Cash flow from operations $ 56,714 $ 46,509 $ 194,739 $ 170,938
------- ------- ------- -------
------- ------- ------- -------


Free Cash Flow

Free cash flow is used, by Cogeco Cable's management and investors, to
measure its ability to repay debt, distribute capital to its shareholders and
finance its growth. Free cash flow is calculated as follows:


($ 000) Quarters ended Years ended
August 31, August 31,

2006 2005 2006 2005
------ ------ ------ ------
Cash flow from operations $ 56,714 $ 46,509 $ 194,739 $ 170,938
Acquisition of fixed assets (44,082) (41,079) (140,941) (110,365)
Increase in deferred charges (8,929) (4,816) (20,607) (13,382)
Assets acquired under capital
leases - as per Note 12 b) (268) (364) (2,898) (1,924)
------ ------ ------ ------
Free cash flow $ 3,435 $ 250 $ 30,293 $ 45,267
------ ------ ------ ------
------ ------ ------ ------

ADDITIONAL INFORMATION

This MD&A was prepared on October 16, 2006. Additional information
relating to the Corporation, including its Annual Information Form, is
available on the SEDAR Web site at www.sedar.com.

ABOUT COGECO CABLE

Cogeco Cable (www.cogeco.ca), a telecommunications company offering a
diverse range of services to its customers in Canada and in Portugal, is the
second largest cable operator in Ontario, Québec and Portugal, in terms of the
number of basic cable service customers served. The Corporation invests in
state-of-the-art broadband network facilities, delivers a wide range of
services over these facilities with great speed and reliability at attractive
prices, and strives to provide both superior customer care and growing
profitability to satisfy its customers' varied electronic communication needs.
Through its two-way broadband cable networks, Cogeco Cable provides its
residential and commercial customers with analog and digital video and audio
services, high speed Internet access as well as telephony services. The
Corporation provides about 1,556,000 revenue-generating units (RGUs) to
approximately 1,477,000 homes passed in its Canadian service territory and
629,000 RGUs to approximately 826,000 homes passed in its Portuguese service
territory. Cogeco Cable's subordinate voting shares are listed on the Toronto
Stock Exchange (CCA).


Analyst Conference Call: Monday October 16th at 11:00 a.m.
(Eastern Daylight Time)
Media representatives may attend as listeners
only.

Please use the following dial-in number to have
access to the conference call by dialing 10
minutes before the start of the conference:

Canada/USA Access Number: 1 800 967-7134
International Access Number: +1 719 457-2625
Confirmation Code: 1255847
By Internet at: www.cogeco.ca/investors

A rebroadcast of the conference call will be
available until October 23 by dialing:
Canada and USA access number: 1 888 203-1112
International access number: + 1 719 457-0820
Confirmation code: 1255847


Supplementary Quarterly Financial Information


Quarters ended Fiscal 2006
------------------------------------
Nov. 30 Feb. 28 May. 31 Aug. 31
($000, except percentages
and per share data)

Revenue $ 143,413 $ 147,757 $ 153,956 $ 174,875
Operating income
before amortization 57,302 59,568 63,244 72,864
Operating margin 40.0% 40.3% 41.1% 41.7%
Amortization 28,277 28,656 29,048 34,801
Financial expense 13,582 13,776 13,634 16,374
Income taxes 6,445 6,936 8,191 (12,298)
Net income 8,998 10,200 12,371 33,987

Cash flow from operations 43,389 44,940 49,696 56,714

Net income per share $ 0.23 $ 0.26 $ 0.31 $ 0.85




Quarters ended Fiscal 2005
------------------------------------
Nov. 30 Feb. 28 May. 31 Aug. 31
($000, except percentages
and per share data)

Revenue $ 135,766 $ 138,389 $ 140,071 $ 140,178
Operating income
before amortization 53,194 55,297 58,310 60,720
Operating margin 39.2% 40.0% 41.6% 43.3%
Amortization 32,244 31,988 31,396 29,460
Financial expense 13,894 13,840 13,954 14,004
Income taxes 3,229 3,856 4,715 6,220
Net income 3,827 5,613 8,245 11,036

Cash flow from operations 39,192 41,675 43,562 46,509

Net income per share $ 0.10 $ 0.14 $ 0.21 $ 0.28



Cogeco Cable's operating results are not generally subject to material
seasonal fluctuations. However, the loss of basic service customers is usually
greater, and the addition of HSI customers is generally lower in the third
quarter, mainly due to students leaving campuses at the end of the school
year. Cogeco Cable offers its services in several university and college towns
such as Kingston, Windsor, St. Catharines, Hamilton, Peterborough,
Trois-Rivières and Rimouski. Furthermore, the fourth quarter's operating
margin is usually higher as no management fees are paid to COGECO Inc. Under a
Management Agreement, Cogeco Cable pays a fee equal to 2% of its total revenue
subject to a maximum amount. Since the maximum amount was reached during the
third quarter of fiscal years 2006 and 2005, Cogeco Cable paid no management
fees during fiscal year 2006 and 2005 fourth quarters.



COGECO CABLE INC.
Customer Statistics
August 31, August 31,
2006 2005
------------------------------------------------------------------------
Homes Passed
Ontario 1,002,187 986,401
Québec 474,717 462,332
------------ ------------
Canada 1,476,904 1,448,733
Portugal 826,369 -
------------ ------------
Total 2,303,273 1,448,733
------------ ------------
------------ ------------
Revenue Generating Units
Ontario 1,104,157 968,749
Québec 451,779 378,984
------------ ------------
Canada 1,555,936 1,347,733
Portugal 629,041 -
------------ ------------
Total 2,184,977 1,347,733
------------ ------------
------------ ------------
Basic Service Customers
Ontario 587,289 581,631
Québec 245,888 239,802
------------ ------------
Canada 833,177 821,433
Portugal 269,694 -
------------ ------------
Total 1,102,871 821,433
------------ ------------

Discretionary Service Customers
Ontario 463,783 461,038
Québec 192,895 183,320
------------ ------------
Canada 656,678 644,358
Portugal - -
------------ ------------
Total 656,678 644,358
------------ ------------
------------ ------------

Pay TV Service Customers
Ontario 84,425 80,817
Québec 38,455 35,407
------------ ------------
Canada 122,880 116,224
Portugal 100,079 -
------------ ------------
Total 222,959 116,224
------------ ------------
------------ ------------

High Speed Internet Service Customers
Ontario 269,328 226,133
Québec 73,752 51,515
------------ ------------
Canada 343,080 277,648
Portugal 136,278 -
------------ ------------
Total 479,358 277,648
------------ ------------
------------ ------------

Digital Video Service Customers
Ontario 213,556 159,734
Québec 113,808 87,470
------------ ------------
Canada 327,364 247,204
Portugal - -
------------ ------------
Total 327,364 247,204
------------ ------------
------------ ------------

Telephony Service Customers
Ontario 33,984 1,251
Québec 18,331 197
------------ ------------
Canada 52,315 1,448
Portugal 223,069 -
------------ ------------
Total 275,384 1,448
------------ ------------
------------ ------------

COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF INCOME



Three months Twelve months
ended August 31, ended August 31,
------------------------------------------------------------------------
(In thousands of
dollars, except
per share data) 2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited) (audited)(audited)

Revenue
Service $ 174,494 $ 139,064 $ 617,806 $ 550,711
Equipment 381 1,114 2,195 3,693
------------------------------------------------------------------------
174,875 140,178 620,001 554,404

Operating costs 102,011 79,458 358,631 318,704
Management fees - COGECO Inc. - - 8,392 8,179
------------------------------------------------------------------------

Operating income before
amortization 72,864 60,720 252,978 227,521
Amortization (note 5) 34,801 29,460 120,782 125,088
------------------------------------------------------------------------

Operating income 38,063 31,260 132,196 102,433
Financial expense (note 9) 16,374 14,004 57,366 55,692
------------------------------------------------------------------------

Income before income taxes 21,689 17,256 74,830 46,741
Income taxes (note 6) (12,298) 6,220 9,274 18,020
------------------------------------------------------------------------

Net income $ 33,987 $ 11,036 $ 65,556 $ 28,721
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings per share (note 7)
Basic $ 0.85 $ 0.28 $ 1.64 $ 0.72
Diluted 0.85 0.27 1.63 0.72
------------------------------------------------------------------------
------------------------------------------------------------------------

COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


Twelve months ended August 31,
------------------------------------------------------------------------
(In thousands of dollars) 2006 2005
------------------------------------------------------------------------
(audited) (audited)

Balance at beginning $ 58,604 $ 33,880

Net income 65,556 28,721

Dividends on multiple voting shares (2,512) (1,569)

Dividends on subordinate voting shares (3,888) (2,428)
------------------------------------------------------------------------
Balance at end $ 117,760 $ 58,604
------------------------------------------------------------------------
------------------------------------------------------------------------


COGECO CABLE INC.
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------
(In thousands of dollars) August 31, August 31,
2006 2005
------------------------------------------------------------------------
(audited) (audited)

Assets
Current
Cash and cash equivalents $ 71,516 $ 61
Restricted cash 569 -
Accounts receivable 43,728 26,485
Prepaid expenses 6,265 3,946
------------------------------------------------------------------------
122,078 30,492
------------------------------------------------------------------------

Fixed assets 1,021,538 697,526
Deferred charges 47,327 38,226
Customer base (note 8) 989,552 989,552
Goodwill (note 8) 422,108 -
------------------------------------------------------------------------
$ 2,602,603 $1,755,796
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' equity
Liabilities
Current
Accounts payable and accrued liabilities $ 283,087 $ 125,090
Income tax liabilities 444 678
Deferred and prepaid income 26,652 24,907
Current portion of long-term debt (note 9) 126,851 1,322
------------------------------------------------------------------------
437,034 151,997
------------------------------------------------------------------------

Long-term debt (note 9) 1,190,126 691,159
Deferred and prepaid income 10,525 10,522
Pension plans liabilities and accrued
employees benefits 2,091 1,903
Future income tax liabilities 217,636 210,731
------------------------------------------------------------------------
1,857,412 1,066,312
------------------------------------------------------------------------
Shareholders' equity
Capital stock (note 10) 630,458 630,220
Contributed surplus - stock-based compensation 1,425 660
Retained earnings 117,760 58,604
Foreign currency translation adjustment (note 11) (4,452) -
-------------------------------------------------------------------------
745,191 689,484
-------------------------------------------------------------------------
$ 2,602,603 $1,755,796
-------------------------------------------------------------------------
-------------------------------------------------------------------------

COGECO CABLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOW


Three months ended August 31, Twelve months ended August 31,
------------------------------------------------------------------------
(In thousands
of dollars) 2006 2005 2006 2005
------------------------------------------------------------------------
(unaudited)(unaudited)(audited) (audited)

Cash flow from operating
activities
Net income $ 33,987 $ 11,036 $ 65,556 $ 28,721
Items not affecting cash and
cash equivalents
Amortization (note 5) 34,801 29,460 120,782 125,088
Amortization of deferred
financing costs 416 241 1,140 958
Future income taxes (note 6) (13,398) 5,804 5,200 15,208
Stock-based compensation 85 220 636 681
Loss on disposal of fixed assets 957 - 1,129 82
Other (134) (252) 296 200
------------------------------------------------------------------------
56,714 46,509 194,739 170,938
Changes in non-cash operating items
(note 12a)) 50,495 46,096 1,051 23,657
------------------------------------------------------------------------
107,209 92,605 195,790 194,595
------------------------------------------------------------------------

Cash flow from investing activities
Acquisition of fixed assets
(note 12b)) (44,082) (41,079) (140,941) (110,365)
Increase in deferred charges (8,929) (4,816) (20,607) (13,382)
Business acquisition, net of cash
and cash equivalents acquired
(note 3) (577,431) - (577,431) -
Increase in restricted cash (91) - (91) -
Other 10 - 48 44
------------------------------------------------------------------------
(630,523) (45,895) (739,022) (123,703)
------------------------------------------------------------------------

Cash flow from financing activities
Decrease in bank indebtedness (7,693) (16,812) - (5,410)
Increase in long-term debt 633,402 - 633,402 -
Repayment of long-term debt (18,518) (28,258) (1,720) (62,166)
Increase in deferred
financing costs (10,110) - (10,110) -
Issue of subordinate voting shares 62 20 228 742
Dividends on multiple voting shares (628) (627) (2,512) (1,569)
Dividends on subordinate
voting shares (972) (972) (3,888) (2,428)
------------------------------------------------------------------------
595,543 (46,649) 615,400 (70,831)
------------------------------------------------------------------------

Net change in cash and
cash equivalents 72,229 61 72,168 61
Effect of exchange rate changes on
cash and cash equivalents
denominated in foreign currencies (713) - (713) -
Cash and cash equivalents at
beginning - - 61 -
------------------------------------------------------------------------
Cash and cash equivalents at end $ 71,516 $ 61 $ 71,516 $ 61
------------------------------------------------------------------------
------------------------------------------------------------------------
See supplemental cash flow information in note 12.


COGECO CABLE INC.
Notes to Consolidated Financial Statements
August 31, 2006
(amounts in tables are in thousands of dollars, except per share data)

1. Basis of Presentation

In the opinion of management, the accompanying unaudited interim
consolidated financial statements, prepared in accordance with
Canadian generally accepted accounting principles, contain all
adjustments necessary to present fairly the financial position of
Cogeco Cable Inc. as at August 31, 2006 and 2005 as well as its
results of operations and its cash flow for the three and twelve
month periods ended August 31, 2006 and 2005.

While management believes that the disclosures presented are
adequate, these unaudited interim consolidated financial statements
and notes should be read in conjunction with Cogeco Cable Inc.'s
annual consolidated financial statements. These unaudited interim
consolidated financial statements follow the same accounting policies
as the most recent annual consolidated financial statements, except
as mentioned in note 2.

The interim consolidated financial statements for the three month
period ended August 31, 2005 have not been subject to a review by the
Corporation's external auditors.

2. Recent accounting pronouncements

Non-Monetary Transactions

In June 2005, the Canadian Institute of Chartered Accountants issued
Handbook section 3831, Non-Monetary Transactions, which revised and
replaced the current standards on non-monetary transactions. Under
the new section, the criterion for measuring non-monetary
transactions at fair value is modified to focus on the assessment of
commercial substance instead of the culmination of the earnings
process. A non-monetary transaction has commercial substance when the
entity's future cash flows are expected to change significantly as a
result of the transaction. These standards are effective for non-
monetary transactions initiated in periods beginning on or after
January 1, 2006. During the third quarter, the Corporation adopted
these new standards and concluded that they had no significant impact
on these consolidated financial statements.

3. Business acquisition

Acquisition of Cabovisao - Televisao por Cabo, S.A.

On June 2, 2006, the Corporation entered into an agreement with Cable
Satisfaction International Inc. ("CSII"), Catalyst Fund Limited
Partnership I and Cabovisao - Televisao por Cabo, S.A. ("Cabovisao"),
to purchase, for a total consideration of (euro)465.7 million, all
the shares of the second largest cable operator in Portugal, an
indirect wholly-owned subsidiary of CSII. The price includes the
purchase of senior debt and reimbursement of certain other Cabovisao
liabilities. The acquisition was completed on August 1, 2006. The
final purchase price will be determined following completion of a
post-closing working capital adjustment. The Corporation is assuming
a (euro)20 million working capital deficiency of Cabovisao.

The acquisition was accounted for using the purchase method. The
results of Cabovisao have been consolidated as of the acquisition
date.

The preliminary allocation of the purchase price of the acquisition
is as follows:
------------------------------------------------------------------------

Consideration
Paid
Estimated share purchase price $ 304,188
Secured lenders debt and certain specified
Cabovisao liabilities 274,761
Acquisition costs 4,193
------------------------------------------------------------------------
583,142
Amounts outstanding
Preliminary working capital adjustment 2,432
------------------------------------------------------------------------
585,574
------------------------------------------------------------------------

Net assets acquired
Cash and cash equivalents 5,711
Restricted cash 489
Accounts receivable 16,570
Prepaid expenses 1,324
Fixed assets 287,652
Accounts payable and accrued liabilities assumed (65,282)
Other specified Cabovisao liabilities assumed (91,914)
------------------------------------------------------------------------
154,550
------------------------------------------------------------------------

Excess of consideration over net assets acquired $ 431,024
------------------------------------------------------------------------

Preliminary allocation of excess of consideration over net assets
acquired
Preliminary goodwill $ 431,024
------------------------------------------------------------------------
------------------------------------------------------------------------

In order to finance the cash component of the transaction, the Term
Facility and the operating line of credit of the Corporation were restructured
by an amended and restated credit agreement (see note 9).
Management is currently carrying out a more specific analysis and changes
will be made to the allocation of the excess of consideration over net assets
acquired as the information becomes available. For example, since the
measurement of the fair value of fixed assets had not yet been completed at
the time of the preliminary allocation, fixed assets have been presented at
cost. The measurement of indefinite and finite-lived intangible assets is also
under way. Furthermore, in accordance with the Portuguese Companies Income Tax
Code, accumulated tax losses can not be deducted if the ownership of at least
50% of the social capital changes from the moment when the tax losses were
generated, unless an authorization is granted before such change in the
ownership takes place. To this effect, a request for preservation of tax
losses was filed by Cabovisao on July 28, 2006. These losses have not been
included in the preliminary purchase price allocation. Finally, the
Corporation did not complete the assessment of possible costs related to the
restructuring and integration of the activities of Cabovisao potentially
giving rise to the recognition of a liability in the allocation of the
purchase price. As a result, the actual amounts allocated to the identifiable
assets acquired and liabilities assumed and the related operating results will
vary according to the amounts initially recorded, and such differences could
be significant.

4. Segmented Information

The Corporation's activities are comprised of all cable, high-speed
Internet access and telephony services. The Corporation considers
its cable distribution, high-speed Internet access and telephony
activities as a single operating segment. The Corporation's
activities are carried out in Canada and in Portugal.

The Portugal segment includes operating results since the date of the
acquisition of control on August 1, 2006.

The principal financial information per business segment is presented
in the tables below:

Canada Portugal
-------------------------------------------------------------------------
Three months ended August 31,
(unaudited) 2006 2005 2006 2005
-------------------------------------------------------------------------
Revenue $ 158,009 $ 140,178 $ 16,866 $ -
Operating costs 90,116 79,458 11,895 -
Management fees - - - -
Operating income before
amortization 67,893 60,720 4,971 -
Amortization 30,373 29,460 4,428 -
Operating income 37,520 31,260 543 -
Financial expense 16,103 14,004 271 -
Income taxes (12,612) 6,220 314 -
Net income (loss) 34,029 11,036 (42) -
------------------------------------------------------------------------
Net assets employed (1)(2) $ 1,649,631 $ 1,595,216 $561,192 $ -
Total assets (2) 1,842,312 1,755,796 760,291 -
Fixed assets (2) 741,024 697,526 280,514 -
Goodwill (2) - - 422,108 -
Acquisition of fixed assets 40,145 41,443 4,205 -
------------------------------------------------------------------------
------------------------------------------------------------------------

Consolidated
------------------------------------------------------------------------
Three months ended August 31,
(unaudited) 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenue $ 174,875 $ 140,178
Operating costs 102,011 79,458
Management fees - -
Operating income before amortization 72,864 60,720
Amortization 34,801 29,460
Operating income 38,063 31,260
Financial expense 16,374 14,004
Income taxes (12,298) 6,220
Net income (loss) 33,987 11,036
------------------------------------------------------------------------
Net assets employed (1)(2) $2,210,823$1,595,216
Total assets (2) 2,602,603 1,755,796
Fixed assets (2) 1,021,538 697,526
Goodwill (2) 422,108 -
Acquisition of fixed assets 44,350 41,443
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Total assets less cash and cash equivalents, accounts payable and
accrued liabilities, and deferred and prepaid income.
(2) As at August 31, 2006 and 2005.



Canada Portugal
------------------------------------------------------------------------
Twelve months ended August 31,
(audited) 2006 2005 2006 2005
------------------------------------------------------------------------

Revenue $ 603,135 $ 554,404 $ 16,866 $ -
Operating costs 346,736 318,704 11,895 -
Management fees 8,392 8,179 - -
Operating income before
amortization 248,007 227,521 4,971 -
Amortization 116,354 125,088 4,428 -
Operating income 131,653 102,433 543 -
Financial expense 57,095 55,692 271 -
Income taxes 8,960 18,020 314 -
Net income (loss) 65,598 28,721 (42) -
------------------------------------------------------------------------
Net assets employed (1) (2) $1,649,631$1,595,216 $ 561,192 $ -
Total assets (2) 1,842,312 1,755,796 760,291 -
Fixed assets (2) 741,024 697,526 280,514 -
Goodwill (2) - - 422,108 -
Acquisition of fixed assets 139,634 112,289 4,205 -
------------------------------------------------------------------------
------------------------------------------------------------------------

Consolidated
------------------------------------------------------------------------
Twelve months ended August 31,
(audited) 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------

Revenue $ 620,001 $ 554,404
Operating costs 358,631 318,704
Management fees 8,392 8,179
Operating income before amortization 252,978 227,521
Amortization 120,782 125,088
Operating income 132,196 102,433
Financial expense 57,366 55,692
Income taxes 9,274 18,020
Net income (loss) 65,556 28,721
------------------------------------------------------------------------
Net assets employed (1)(2) $2,210,823$1,595,216
Total assets (2) 2,602,603 1,755,796
Fixed assets (2) 1,021,538 697,526
Goodwill (2) 422,108 -
Acquisition of fixed assets 143,839 112,289
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Total assets less cash and cash equivalents, accounts payable and
accrued liabilities, and deferred and prepaid income.
(2) As at August 31, 2006 and 2005.

5. Amortization

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited)(audited)(audited)

Fixed assets $ 29,872 $ 23,985 $ 100,306 $ 102,597
Deferred charges 4,929 5,475 20,476 22,491
------------------------------------------------------------------------
$ 34,801 $ 29,460 $ 120,782 $ 125,088
------------------------------------------------------------------------
------------------------------------------------------------------------

6. Income taxes

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited)(audited)(audited)

Current $ 1,100 $ 416 $ 4,074 $ 2,812

Future (13,398) 5,804 5,200 15,208
------------------------------------------------------------------------
$(12,298) $ 6,220 $ 9,274 $ 18,020
------------------------------------------------------------------------
------------------------------------------------------------------------

The following table provides the reconciliation between Canadian
statutory federal and provincial income taxes and the consolidated income
tax expense:

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited)(audited) (audited)

Income taxes at combined income
tax rate of 35.09 %
(34.96 % in 2005) $ 7,611 $ 6,033 $ 26,258 $ 16,341

Loss or income subject to lower
or higher tax rates (363) (204) (226) (218)

Decrease in income taxes as a
result of decreases in
substantially enacted tax rates (19,982) - (19,820) -

Large corporation tax (1,815) 165 600 1,482

Income taxes arising from
non-deductible expenses 1,430 - 1,430 -

Withholding taxes on interest
of a foreign subsidiary 314 - 314 -

Other 507 226 718 415

------------------------------------------------------------------------
Income taxes at effective
income tax rate $(12,298) $ 6,220 $ 9,274 $ 18,020
------------------------------------------------------------------------
------------------------------------------------------------------------

7. Earnings per share

The following table provides a reconciliation between basic and
diluted earnings per share:
Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Net income $ 33,987 $ 11,036 $ 65,556 $ 28,721
Weighted average number of
multiple voting and
subordinate voting shares
outstanding 39,993,757 39,983,975 39,990,239 39,964,857
Effect of dilutive stock
options (1) 129,091 213,087 172,784 161,587
------------------------------------------------------------------------
Weighted average number of
diluted multiple voting and
subordinate voting shares
outstanding 40,122,848 40,197,062 40,163,023 40,126,444
-------------------------------------------------------------------------

Earnings per share
Basic $ 0.85 $ 0.28 $ 1.64 $ 0.72
Diluted 0.85 0.27 1.63 0.72
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) For the three and twelve month periods ended August 31, 2006,
172,844 and 150,647 stock options (19,906 and 55,665 in 2005) were
excluded from the calculation of diluted earnings per share since the
exercise price of the options was greater than the average share
price of the subordinate voting shares.

8. Customer base and goodwill
------------------------------------------------------------------------
Customer Base Goodwill Total
------------------------------------------------------------------------
------------------------------------------------------------------------
(audited) (audited) (audited)

Balance, beginning of year $ 989,552 $ - $ 989,552

Business acquisition (note 3) - 431,024 431,024

Foreign currency translation
adjustment - (8,916) (8,916)
------------------------------------------------------------------------
$ 989,552 $ 422,108 $ 1,411,660
------------------------------------------------------------------------
------------------------------------------------------------------------



9. Long-term debt
------------------------------------------------------------------------
Maturity Interest rate August 31, August 31,
2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(audited) (audited)
Parent company
Term Facility(1)
Term loan 2011 5.71(2) $ 150,000 $ -

Term loan -
(euro)17,358,700 2011 4.50(2) 24,573 -

Revolving loan -
(euro)317,000,000 2011 4.50(2) 448,745 -

Senior Secured
Debentures
Series 1 2009 6.75 150,000 150,000

Senior - Secured Notes
Series A -
US $150 million 2008 6.83(3) 165,795 178,065
Series B 2011 7.73 175,000 175,000
Second Secured
Debentures Series A 2007 8.44 125,000 125,000
Deferred credit(4) 2008 - 72,855 60,585

Subsidiaries
Obligations under
capital leases 2010 6.42 - 8.36 5,009 3,831
------------------------------------------------------------------------
1,316,977 692,481
Less current portion 126,851 1,322
------------------------------------------------------------------------
$ 1,190,126 $ 691,159
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) On July 28, 2006, the Term Facility and the operating line of credit
of the Corporation were restructured by an amended and restated
credit agreement for credit facilities totalling $900,000,000. The
Term Facility is composed of four tranches: a first tranche, a
revolving Term Facility for an amount of $700,000,000 available in
Canadian , U.S. or Euro currencies; a second tranche, a swingline of
$25,000,000 available in Canadian or U.S. currencies; a third tranche
of $150,000,000 fully drawn, and a fourth tranche of (euro)17,358,700
fully drawn. The Term Facility is repayable on July 28, 2011, except
for the third tranche of $150,000,000 which is repayable as follows:
$15,000,000 on July 28, 2008, $22,500,000 on July 28, 2009,
$37,500,000 on July 28, 2010 and the balance on July 28, 2011.
Earlier repayments can be made without penalty. The Term Facility
requires commitment fees, and interest rates are based, on bankers'
acceptance, LIBOR, EURIBOR, bank prime rate loan or U.S. base rate
loan plus stamping fees. The Term Facility is secured by a first
fixed and floating charge on the assets of the Corporation and
certain of its subsidiaries except for permitted encumbrances,
including purchased money obligations, existing funded obligations
and charges granted by any subsidiary prior to the date when it
becomes a subsidiary subject to a maximum amount. The provisions
under these facilities provide for restrictions on the operations and
activities of the Corporation. Generally, the most significant
restrictions relate to permitted investments, dividends on multiple
and subordinate voting shares and reimbursement of long-term debt as
well as incurrence and maintenance of certain financial ratios
primarily linked to the operating income before amortization,
financial expense and total indebtedness.

(2) Average interest rate on debt as at August 31, 2006, including
stamping fees.

(3) Cross-currency swap agreements have resulted in an effective interest
rate of 7.254% on the Canadian dollar equivalent of the U.S.
denominated debt.

(4) The deferred credit represents the amount which would have been
payable as at August 31, 2006 and August 31, 2005 under cross-
currency swaps entered into by the Corporation to hedge Senior
Secured Notes Series A denominated in US dollars.

Interest on long-term debt for the three and twelve month periods ended
August 31, 2006 amounted to $15,675,000 and $55,240,000 ($13,174,000 and
$52,868,000 in 2005).


10. Capital Stock

Authorized, an unlimited number

Class A Preference shares, without voting rights, redeemable by the
Corporation and retractable at the option of the holder at any time
at a price of $1 per share, carrying a cumulative preferential cash
dividend at a rate of 11% of the redemption price per year.

Class B Preference shares, without voting rights, could be issued in
series.

Multiple voting shares, 10 votes per share.

Subordinate voting shares, 1 vote per share.
------------------------------------------------------------------------
August 31, August 31,
2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(audited)(audited)
Issued

15,691,100 multiple voting shares $ 98,346 $ 98,346
24,308,112 subordinate voting shares
(24,293,486 as at August 31, 2005) 532,112 531,874
------------------------------------------------------------------------
$ 630,458 $ 630,220
------------------------------------------------------------------------
------------------------------------------------------------------------

During the period, subordinate voting share transactions were as follows:

Twelve months ended Twelve months ended
August 31, 2006 August 31, 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(audited) (audited)
------------------------------------------------------------------------
Number of Amount Number of Amount
shares shares
------------------------------------------------------------------------

Balance at beginning 24,293,486 $ 531,874 24,232,815 $ 531,070

Shares issued for cash under
the Employee Stock Purchase
Plan and the Stock Option Plan 14,626 228 60,671 742

Compensation expense previously
recorded in contributed surplus
for options exercised - 10 - 62
------------------------------------------------------------------------
Balance at end 24,308,112 $ 532,112 24,293,486 $ 531,874
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Stock-based plans

The Corporation established for the benefit of its employees and those of
its subsidiaries, an Employee Stock Purchase Plan and a Stock Option Plan for
certain executives which are described in the Corporation's annual
consolidated financial statements. During the year, the Corporation granted
136,059 stock options (140,766 in 2005) with an exercise price ranging from
$24.15 to $29.05 ($21.50 in 2005) of which 31,743 stock options (38,397 in
2005) were granted to COGECO Inc.'s employees. The Corporation records
compensation expense for options granted on or after September 1, 2003. As a
result, a compensation expense of $202,000 and $775,000 ($132,000 and $484,000
in 2005) was recorded for the three and twelve month periods ended August 31,
2006. If compensation expense had been recognized using the fair value-based
method at the grant date for options granted between September 1, 2001 and
August 31, 2003, the Corporation's net income and earnings per share for the
three and twelve month periods ended August 31, 2006 and 2005 would have been
reduced to the following pro forma amounts:

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited) (audited)(audited)
Net income
As reported $ 33,987 $ 11,036 $ 65,556 $ 28,721
Pro forma 33,967 10,940 65,475 28,337

Basic earnings per share
As reported $ 0.85 $ 0.28 $ 1.64 $ 0.72
Pro forma 0.85 0.27 1.64 0.71

Diluted earnings per share
As reported $ 0.85 $ 0.27 $ 1.63 $ 0.72
Pro forma 0.85 0.27 1.63 0.71
------------------------------------------------------------------------
------------------------------------------------------------------------

The fair value of each option granted was estimated on the grant date for
purposes of determining stock-based compensation expense using the Binomial
option pricing model based on the following assumptions:

------------------------------------------------------------------------
2006 2005
------------------------------------------------------------------------
Expected dividend yield 1.27 % 1.27 %

Expected volatility 39 % 43 %

Risk-free interest rate 3.70 % 3.70 %

Expected life in years 4.0 4.0
------------------------------------------------------------------------

The fair value of stock options granted for the twelve month period ended
August 31, 2006 was $9.32 ($7.46 in 2005) per option.

As at August 31, 2006, the Corporation had outstanding stock options
providing for the subscription of 715,571 subordinate voting shares.
These stock options can be exercised at various prices ranging from $7.05
to $40.75 and at various dates up to July 31, 2016.

11. Foreign Currency Translation Adjustment

The change in the foreign currency translation adjustment included in
shareholders' equity is the result of the fluctuation in the exchange
rates on translation of net investments in self-sustaining foreign
operations and foreign exchange gains or losses related to long-term
debt denominated in foreign currency used to hedge net investments.
The net change in foreign currency translation adjustment for 2006 is
as follows:
------------------------------------------------------------------------

------------------------------------------------------------------------
------------------------------------------------------------------------
(audited)
Effect of exchange rate variation on translation of
net investments in self-sustaining foreign subsidiaries $ (12,412)

Effect of exchange rate variation on translation of long-term
debt designated as hedge of a net investments in self-
sustaining subsidiaries, net of income taxes of $1,703,000 7,960
------------------------------------------------------------------------
$ (4,452)
------------------------------------------------------------------------
------------------------------------------------------------------------

12. Statements of cash flow

a) Changes in non-cash operating items

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited) (audited)(audited)

Accounts receivable $ 1,023 $ 1,159 $(1,131) $ 4,554
Income tax receivable 178 - - -
Prepaid expenses 244 (1,177) (1,020) 589
Accounts payable and accrued
liabilities 48,788 46,846 1,681 15,688
Income tax liabilities 450 (501) (228) (166)
Deferred and prepaid income (188) (231) 1,749 2,992
------------------------------------------------------------------------
$ 50,495 $ 46,096 $ 1,051 $ 23,657
------------------------------------------------------------------------
------------------------------------------------------------------------

b) Other information
Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited)(audited)(audited)

Fixed asset acquisitions through
capital leases $ 268 $ 364 $ 2,898 $ 1,924
Interest paid 11,805 11,055 54,892 54,438
Income taxes paid 478 917 4,308 2,978
------------------------------------------------------------------------
------------------------------------------------------------------------

13. Employee future benefits

The Corporation and its subsidiaries offer their employees contributory
defined benefit pension plans, a defined contribution pension plan or a
collective registered retirement savings plan which are described in the
Corporation's annual consolidated financial statements. The total
expenses related to these plans are as follows:

Three months ended Twelve months ended
August 31, August 31,
------------------------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
(unaudited)(unaudited) (audited)(audited)

Contributory defined benefit
pension plans $ 426 $ 205 $ 1,044 $ 657
Defined contribution pension plan
and collective registered
retirement savings plan 407 307 1,522 1,239
------------------------------------------------------------------------
$ 833 $ 512 $ 2,566 $ 1,896
------------------------------------------------------------------------
------------------------------------------------------------------------
14. Comparative figures
Certain comparative figures have been reclassified in order to conform to
the presentation adopted in the current period.
>>

Contact Information

  • For further information: Media, Marie Carrier, Director, Corporate
    Communications, (514) 874-2600; Source: Cogeco Cable Inc., Pierre Gagné, Vice
    President, Finance and Chief Financial Officer, (514) 874-2600