Lower profit for Canadian cablers

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OTTAWA -- Steep promotion costs for its telephone services led to Canadian cablecasters to post lower profit margins in 2006, while the country's satellite TV industry continued to turn their own fortunes around, Statistics Canada reported Friday.

The government statistics agency, in its latest report on domestic cable and satellite TV operators, said pretax profits for cablecasters came to CAN$1.5 billion ($1.48 billion) in 2006, the latest year Statscan has surveyed, which represents an increase of 11.6% from the previous year.

However, the industry's profit margin fell slightly because of a 61.1% increase in sales and promotion expenditures that, in all, ballooned to CAN$380.1 million ($376 million).

Statscan said cablecasters faced higher marketing and promotional costs for new phone services as they battle domestic phone giants to serve Canadians with triple-play TV, phone and Internet services.

Meanwhile, wireless competitors, mainly satellite TV operators, saw profits dip to CAN$37 million ($36.6 million) in 2006, from a year-earlier CAN$44 million. Despite the profit dip, Statscan said domestic satellite TV operators have emerged from years of red ink since their respective launches.

"This is a turnaround for this industry segment, considering it has posted losses before interest and taxes every year since its launch in 1997 until 2004," Statscan said.

The report said the number of subscribers to satellite TV reached 2.6 million in 2006, up 5.5% from 2005. Revenue for the wireless segment grew 17.5% to CAN$1.7 billion ($1.68 billion) in that period.

Cable gains came mostly from the acquisition of additional high-speed and telephony customers, according to Statscan.

Canada's cable companies had signed up 927,463 telephone subscribers at Aug. 31, 2006, about a year after they started offering telephony products, the report said.

The government agency noted the figure of nearly a million phone subscribers represents "a quantum leap" compared with a year earlier when only 211,683 Canadians got their phone service from cable providers.

"This significant breakthrough of cable operators into the telephony market illustrates the success of a strategy to ensure industry growth by diversifying the services offered," notes the report.

The total number of cable high-speed Internet subscribers increased 17.2% to 4 million at the end of August 2006, the latest year for which Statscan has figures, from August 2005.
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