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Strong First Quarter Results for COGECO Inc.

(January 26, 2012)

MONTREAL, QUEBEC -- (Marketwire) -- 01/26/12 -- Today, COGECO Inc. (TSX:CGO) ("COGECO" or the "Corporation") announced its financial results for the first quarter of fiscal 2012, ended November 30, 2011, in accordance with the newly adopted International Financial Reporting Standards ("IFRS").

For the first quarter of fiscal 2012:

-- Revenue increased by 13.4% to reach $387.5 million; -- Operating income before depreciation and amortization(1) increased by 5.6% to reach $145 million when compared to the first quarter of fiscal 2011; -- Operating margin(1) decreased to 37.4% from 40.2% in the first quarter when compared to the same period of the previous fiscal year, mainly as a consequence of the expenditures incurred to migrate Cogeco Cable's Television service customers from analog to digital distribution and by the growth from the radio activities for which the operating margin is generally lower than for the cable sector; -- Profit for the period increased by 20.4% to reach $47.9 million when compared to $39.8 million in the first quarter of the prior year; -- In the first quarter of the year, a positive free cash flow(1) of $27.6 million was generated compared to a negative free cash flow of $24.3 million for the same period of the prior year. This variance is mostly attributable to the difference in the recognition of current income tax expense for both periods combined with the improvement of operating income before depreciation and amortization, partly offset by the increase in acquisition of property, plant and equipment; -- A quarterly dividend of $0.18 per share was paid to the holders of subordinate and multiple voting shares, an increase of $0.06 per share, or 50%, when compared to a dividend paid of $0.12 per share in the first quarter of fiscal 2011; -- In the cable sector, primary service units ("PSU")(2) grew by 45,129 net additions in the first quarter, for a total of 2,609,683 PSU as at November 30, 2011.

"COGECO Inc. reported very favorable results for the first quarter. Cogeco Cable improved on last year's first-quarter performance, adding a total of 45,129 PSU. Although our quarterly performance was even better than last year's, we must stay the course with our vigilant and disciplined approach to operating controls given the economic uncertainty in world markets," stated COGECO President and CEO Louis Audet.


"With regards to our radio operations, we successfully integrated our newly acquired radio stations. The latest survey results for fall 2011 show that we've adopted winning strategies, as most of our stations scored excellent performance ratings, particularly in Montreal and Quebec City, where we're market leaders," added Mr. Audet.

(1) The indicated terms do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the Management's Discussion and Analysis. (2) Represents the sum of Television, High Speed Internet ("HSI") and Telephony service customers.

ABOUT COGECO

COGECO is a diversified communications Corporation. Through its Cogeco Cable subsidiary, COGECO provides its residential customers with Audio, Analogue and Digital Television, as well as HSI and Telephony services using its two-way broadband cable networks. Cogeco Cable also provides, to its commercial customers, through its subsidiary Cogeco Data Services, data networking, e-business applications, video conferencing, hosting services, Ethernet, private line, VoIP, HSI access, data storage, co-location services, managed IT services, cloud services and other advanced communication solutions. Through its subsidiary, Cogeco Diffusion, COGECO owns and operates 13 radio stations across most of Quebec with complementary radio formats serving a wide range of audiences. Cogeco Diffusion also operates Cogeco News, its news agency, feeding 24 independent and community radio stations across Quebec. COGECO's subordinate voting shares are listed on the Toronto Stock Exchange (TSX:CGO). The subordinate voting shares of Cogeco Cable are also listed on the Toronto Stock Exchange (TSX:CCA).

Analyst Conference Call: Thursday, January 26, 2012 at 9:30 a.m. (EST) Media representatives may attend as listeners only. Please use the following dial-in number to have access to the conference call by dialling five minutes before the start of the conference: Canada/USA Access Number: 1 888 820-0231 International Access Number: + 1 416 640-5926 Confirmation Code: 8378457 By Internet at www.cogeco.ca/investors A rebroadcast of the conference call will be available until April 26, 2012, by dialling: Canada and USA access number: 1 888 203-1112 International access number: + 1 647 436-0148 Confirmation code: 8378457

SHAREHOLDERS' REPORT

First quarter ended November 30, 2011

FINANCIAL HIGHLIGHTS

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarters ended November 30, 2011 2010 Change ($000, except percentages andper share data) $ $ % ---------------------------------------------------------------------------- (unaudited) (unaudited) Operations Revenue 387,538 341,714 13.4 Operating income before depreciation and amortization(1) 145,009 137,267 5.6 Operating margin(1) 37.4% 40.2% - Operating income 78,102 75,287 3.7 Profit for the period 47,923 39,808 20.4 Profit for the period attributable to the owners of the Corporation 18,770 16,391 14.5 ---------------------------------------------------------------------------- Cash Flow Cash flow from operating activities 15,702 57,615 (72.7) Cash flow from operations(1) 109,397 42,542 - Acquisitions of property, plant and equipment and intangible assets 81,838 66,842 22.4 Free cash flow(1) 27,559 (24,300) - ---------------------------------------------------------------------------- Financial condition(2) Property, plant and equipment 1,287,081 1,272,251 1.2 Total assets 2,840,309 2,871,648 (1.1) Indebtedness(3) 1,103,343 1,056,214 4.5 Shareholders' Equity 1,075,323 1,040,680 3.3 Equity attributable to owners of the Corporation 355,259 342,525 3.7 ---------------------------------------------------------------------------- Primary service units(4) growth 45,129 49,220 (8.3) ---------------------------------------------------------------------------- Per Share Data(5) Earnings per share Basic 1.12 0.98 14.3 Diluted 1.11 0.97 14.4 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

(1) The indicated terms do not have standardized definitions prescribed by International Financial Reporting Standards ("IFRS") and therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section of the Management's Discussion and Analysis. (2) At November 30, 2011 and August 31, 2011. (3) Indebtedness is defined as the total of bank indebtedness, promissory note payable, principal on long-term debt, balance due on a business acquisition and obligations under derivative financial instruments. (4) Represents the sum of Television, High Speed Internet ("HSI") and Telephony service customers. (5) Per multiple and subordinate voting share.

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

First quarter ended November 30, 2011

TRANSITION TO IFRS

On January 1, 2011, the Canadian generally accepted accounting principles ("GAAP"), as used by publicly accountable enterprises, were fully converged to International Financial Reporting Standards ("IFRS"). Accordingly, the Corporation has prepared its first condensed interim consolidated financial statements for the three-month period ended November 30, 2011 in accordance with IFRS. Prior to the adoption of IFRS, for all periods up to and including the year ended August 31, 2011, the Corporation's consolidated financial statements were prepared in accordance with Canadian GAAP. IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences related to recognition, measurement and disclosures.

The date of the opening balance sheet under IFRS and the date of transition to IFRS are September 1, 2010. The financial data for fiscal 2011 have therefore been restated. The Corporation is also required to apply IFRS accounting policies retrospectively to determine its opening statement of financial position, subject to certain exemptions. However, the Corporation is not required to restate figures for periods prior to September 1, 2010 that were previously prepared in accordance with Canadian GAAP.

The new significant accounting policies under IFRS are disclosed in Note 2 to the condensed interim consolidated financial statements for the three-month period ended November 30, 2011, while Note 17 explains adjustments made by the Corporation in preparing its IFRS opening consolidated balance sheet as of September 1, 2010 and in restating its previously published Canadian GAAP condensed interim consolidated financial statements for the three-month period ended November 30, 2010 and the year ended August 31, 2011. Note 17 also provides details on exemption choices made by the Corporation with respect to the general principle of retrospective application of IFRS. The changes to critical accounting policies as a result of IFRS, and their impacts on accounting estimates, are described under "Changes in critical accounting policies and estimates" below.

FORWARD-LOOKING STATEMENTS

Certain statements in this Management's Discussion and Analysis ("MD&A") may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to COGECO's future outlook and anticipated events, business, operations, financial performance, financial condition or 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 the Corporation's future operating results and economic performance and its 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 COGECO believes are reasonable as of the current date. While management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect. The Corporation cautions the reader that the economic downturn experienced over the past few years makes forward-looking information and the underlying assumptions subject to greater uncertainty and that, consequently, they may not materialize, or the results may significantly differ from the Corporation's expectations. It is impossible for COGECO to predict with certainty the impact that the current economic uncertainties may have on future results. Forward-looking information is also subject to certain factors, including risks and uncertainties (described in the "Uncertainties and main risk factors" section of the Corporation's 2011 annual MD&A) that could cause actual results to differ materially from what COGECO currently expects. 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 the Corporation's control. Therefore, future events and results may vary significantly from what management currently foresees. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While management may elect to, the Corporation is under no obligation (and expressly disclaims any such obligation), and does not undertake to update or alter this information before the next quarter.

All amounts are stated in Canadian dollars unless otherwise indicated. This report should be read in conjunction with the Corporation's consolidated financial statements and MD&A for the fiscal year ended August 31, 2011 included in the Corporation's 2011 Annual Report. It should also be read in conjunction with the information on the adjustments to the fiscal 2011 financial figures upon adoption of IFRS, explained in Note 17 of the condensed interim consolidated financial statements for the three-month period ended November 30, 2011.

Corporate strategies and objectives

COGECO Inc.'s ("COGECO" or the "Corporation") objectives are to maximize shareholder value by increasing profitability and ensuring continued growth. The strategies employed to reach these objectives, supported by tight controls over costs and business processes, are specific to each sector. For the cable sector, sustained corporate growth and the continuous improvement of networks and equipment are the main strategies used. The radio activities focus on continuous improvement of programming in order to increase market share, and, thereby, profitability. COGECO uses operating income before depreciation and amortization(1), operating margin(1), free cash flow(1) and primary service units ("PSU")(2) growth in order to measure its performance against these objectives for the cable sector.

Cable sector

During the first three months of fiscal 2012, the Corporation's subsidiary, Cogeco Cable Inc. ("Cogeco Cable" or the "Cable subsidiary"), invested approximately $33 million in its network infrastructure and equipment to upgrade its capacity, improve its robustness and extend its territories in order to better serve and increase its service offerings for new and existing clientele.

PSU growth and service offerings in the cable sector

During the first quarter ended November 30, 2011, the number of PSU in the Cable subsidiary increased by 45,129, or 1.8%, to reach 2,609,683 PSU, mainly as a result of targeted marketing initiatives in the Canadian operations and of the continuing interest for high definition ("HD") television service which offset the loss in the European operations resulting primarily from a decreased demand for services. As of fiscal 2012, Cogeco Cable has modified its key performance indicator for growth to a PSU concept instead of a revenue-generating units ("RGU") concept. Cogeco Cable expects a PSU growth of 90,000 net additions for the 2012 fiscal year which amounts in terms of RGU to 225,000 net additions for fiscal 2012 year as presented in the Fiscal 2012 financial guidelines of the 2011 Annual Report.

Operating income before depreciation and amortization and operating margin

First-quarter operating income before depreciation and amortization increased by 5.6% when compared to the first quarter of fiscal 2011 to reach $145 million and operating margin decreased to 37.4% from 40.2%.

Free cash flow

For the three-month period ended November 30, 2011, COGECO reports positive free cash flow of $27.6 million, compared to negative free cash flow of $24.3 million for the first quarter of the previous fiscal year, representing an increase of $51.9 million. This variance is mostly attributable to the difference in the recognition of current income tax expense for both periods combined with the improvement of operating income before depreciation and amortization, partly offset by the increase in acquisition of property, plant and equipment.

Other

BBM Canada's fall 2011 survey in the Montreal region, conducted with the Portable People Meter ("PPM"), shows that 98.5 FM is the leading radio station in the Montreal francophone market with listeners and men two years old and over ("2+"), while Rythme FM has maintained its leadership position in the female 2+ segment. In the other Quebec regions, our radio stations registered good ratings.

On December 6, 2011, COGECO Inc. concluded an agreement to acquire Metromedia CMR Plus Inc. ("Metromedia"), subject to customary closing adjustments and conditions. Metromedia is a Quebec company that operates an advertising rep house in the public transit sector. Metromedia represents over 100 public transit markets notably in Montreal, in other Quebec regions as well as in major cities and numerous markets in the rest of Canada. The transaction was completed on December 26, 2011.

On February 1, 2011, a subsidiary of the Corporation, Cogeco Diffusion Acquisitions Inc. ("Cogeco Diffusion"), completed the acquisition of 11 radio stations in the province of Quebec ("Quebec Radio Stations Acquisition"), which was originally announced on April 30, 2010 and then subject to the Canadian Radio-television and Telecommunications Commission ("CRTC") approval. When the CRTC approved the Quebec Radio Stations Acquisition, there was an order to divest three radio stations in order to comply with the common ownership policy in the Quebec City and Sherbrooke markets.

On November 30, 2011, Cogeco Diffusion concluded an agreement for the sale of two of its four Quebec City FM radio stations, CJEC-FM and CFEL-FM, subject to CRTC approval and customary closing adjustments and conditions. On December 6, 2011, Cogeco Diffusion closed its Sherbrooke radio station, CJTS-FM. On January 19, 2012, the CRTC approved the sale of CJEC-FM and CFEL-FM which should be completed on January 30, 2012 and marked the end of the process established with the CRTC for the divestiture of these three radio stations.

(1) The indicated terms do not have standardized definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. For more details, please consult the "Non-IFRS financial measures" section. (2) Represents the sum of Television, High Speed Internet ("HSI") and Telephony service customers.

OPERATING RESULTS - CONSOLIDATED OVERVIEW

-------------------------------------------------------------------------- -------------------------------------------------------------------------- Quarters ended November 30, 2011 2010 Change ($000, except percentages) $ $ % -------------------------------------------------------------------------- (unaudited) (unaudited) Revenue 387,538 341,714 13.4 Operating costs(1) 242,529 204,447 18.6 -------------------------------------------------------------------- Operating income before depreciation and amortization 145,009 137,267 5.6 -------------------------------------------------------------------- Operating margin 37.4% 40.2% - -------------------------------------------------------------------------- -------------------------------------------------------------------------- (1) Represents the sum of salaries, employee benefits and outsourced services as well as other external purchases included in the Interim Consolidated Statements of Profit or Loss.

Revenue

Fiscal 2012 first-quarter revenue rose by $45.8 million, or 13.4% to reach $387.5 million primarily due to the cable sector and the results of the Quebec Radio Stations Acquisition.

Cable revenue rose by $26.5 million, or 8%, to reach $356.9 million, when compared to the prior year. For further details on the Cogeco Cable's operating results, please refer to the "Cable sector" section.

Revenue from the radio activities improved by $19.4 million in the first quarter to reach $30.6 million, mainly as a result of the Quebec Radio Stations Acquisition.

Operating costs

For the first quarter of fiscal 2012, operating costs increased by $38.1 million to reach $242.5 million, an increase of 18.6% compared to the first quarter of the prior year.

Operating costs in the Cable sector increased by $18.9 million, or 9.7%, for the first quarter when compared to the same periods of the prior year. For further details on Cogeco Cable's operating results, please refer to the "Cable sector" section.

Operating costs from the other sector, including radio activities, grew by $19.2 million in the first, mainly from the Quebec Radio Stations Acquisition.

Operating income before depreciation and amortization and operating margin

Mainly as a result of the growth in the cable sector and Quebec Radio Stations Acquisition, operating income before depreciation and amortization grew by $7.7 million, or 5.6%, in the first-quarter to reach $145 million, when compared to the same period of the previous year. COGECO's first-quarter operating margin decreased to 37.4%, from 40.2% in the first quarter of the previous year. This variation is mostly attributable to the incremental deployment and support costs related to the migration of Television service customers from analog to digital in the cable sector and from the growth in the radio activities for which the operating margin is generally lower than the cable sector. For further details on the Corporation's operating results, please refer to the "Cable sector" section.

FIXED CHARGES

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarters ended November 30, 2011 2010 Change ($000, except percentages) $ $ % ---------------------------------------------------------------------------- (unaudited) (unaudited) Depreciation and amortization 66,907 61,980 7.9 Financial expense 17,667 16,862 4.8 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

First-quarter 2012 depreciation and amortization amounted to $66.9 million, compared to $62 million for the same period of the prior year. The increase is mainly due to additional acquisitions of property, plant and equipment in the Cogeco Cable's Canadian operations arising mainly from customer premise equipment acquisitions to support PSU growth as well as reduction of the depreciation period for some home terminal devices in Canada, partly offset by the write-down of property, plant and equipment in Portugal in the third quarter of 2011.

First-quarter financial expense amounted to $17.7 million, compared to $16.9 million in the prior year. The increase is mainly due to the new financing related to the Quebec Radio Stations Acquisition.

INCOME TAXES

Fiscal 2012 first-quarter income tax expense amounted to $12.5 million, compared to $18.6 million in the prior year. Fiscal 2012 first quarter income tax expense decrease is mainly due to the implementation of certain tax measures of the 2011 federal budget limiting the tax deferrals for corporations with a significant interest in a partnership. Under the transitional relief measures, some income will be taxed over a period of five years rather than being taxed all in fiscal 2012 and, with the effect of the decrease in income tax rates over the five years, resulted in a tax expense reduction of $3.5 million in the first quarter of fiscal 2012 in the cable sector.

The changes limiting the tax deferrals described above will have an additional cash outflow impact of approximately $13 million for Cogeco Cable during the fiscal 2012, none of which have been disgorged during the quarter.

PROFIT FOR THE PERIOD

Fiscal 2012 first quarter profit for the period amounted to $47,9 million compared to $39,8 million for the same period in fiscal 2011. Profit progression for the period has resulted mainly from the operating income before depreciation and amortization growth and the decrease in income tax expense in the first three months of the 2012 fiscal year.

Fiscal 2012 first quarter profit for the period attributable to the owners of the Corporation amounted to $18.8 million, or $1.12 per share, compared to $16.4 million, or $0.98 per share, for the same period in fiscal 2011. Profit progression for the period has resulted mainly from the operating income before depreciation and amortization growth and the decrease in income tax expense in the first three months of the 2012 fiscal year.

The non-controlling interest represents a participation of approximately 67.9% in Cogeco Cable's results. During the first quarter of fiscal 2012, the profit attributable to non-controlling interest amounted to $29.2 million due to the cable sector's positive results, compared to $23.4 million in the first quarter of fiscal 2011.

CASH FLOW AND LIQUIDITY

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarters ended November 30, 2011 2010 ($000) $ $ ---------------------------------------------------------------------------- (unaudited) (unaudited) Operating activities Cash flow from operations 109,397 42,542 Changes in non-cash operating activities (75,341) (62,762) Amortization of deferred transaction costs and discounts on long-term debt (762) (778) Income taxes received (paid) (36,027) 2,077 Current income tax expense 21,491 80,143 Financial expense paid (20,723) (20,469) Financial expense 17,667 16,862 ---------------------------------------------------------------------------- 15,702 57,615 ---------------------------------------------------------------------------- Investing activities (81,633) (66,842) ---------------------------------------------------------------------------- Financing activities 30,988 171,267 ---------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents denominated in a foreign currency (338) (229) ---------------------------------------------------------------------------- Net change in cash and cash equivalents (35,281) 161,811 ---------------------------------------------------------------------------- Cash and cash equivalents, beginning of period 55,216 35,842 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period 19,935 197,653 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Fiscal 2012 first-quarter cash flow from operations reached $109.4 million compared to $42.5 million for the same period last year. This increase of $66.9 million is primarily due to the reduction in current income tax recovery, partly offset by the increase in operating income before depreciation and amortization. Changes in non-cash operating activities generated cash outflows of $75.3 million compared to $62.8 million for the same period in fiscal 2011, mainly as a result of a decrease in trade and other payables for both periods.

In the first quarter of fiscal 2012, investing activities, including mainly acquisitions of property, plant and equipment and intangible assets, amounted to $81.6 million, an increase of $14.8 million, or 22.1% when compared to $66.8 million for the corresponding period of last year. The most significant variations are in the cable sector and are due to the following factors:

-- An increase in customer premise equipment spending mainly due to the timing of equipment purchases to support PSU and Digital Television growth in the Canadian operations and conversion from analog to digital distribution. This increase was partly offset by the decrease in customer premise equipment spending reflecting PSU loss in the European operations; -- An increase in scalable infrastructure in the Canadian operations to improve network capacity in existing areas served; -- An increase in support capital spending stemming from the construction and acquisition of new facilities in the Canadian operations.

In the first quarter, positive free cash flow amounted to $27.6 million, compared to negative free cash flow of $24.3 million in the comparable period of fiscal 2011, representing an increase of $51.9 million. The growth in free cash flow over the prior year is due to the increase in operating income before depreciation and amortization combined with the current income tax expense reduction, partly offset by the increase in property, plant and equipment acquisitions.

In the first three months of fiscal 2012, Indebtedness affecting cash increased by $46.9 million mainly due to the cash outflows of $75.3 million from the changes in non-cash operating activities, to $14.5 million and $3.1 million of income tax and financial expense payments made during the quarter but recorded in 2011 fiscal year and dividend payment of $11.3 million, partly offset by the positive free cash flow of $27.6 million and the decrease in cash and cash equivalents of $35.3 million. In the first three months of fiscal 2011, Indebtedness affecting cash increased by $182.1 million mainly due to the cash outflows of $62.8 million from the changes in non-cash operating activities, increase in cash and cash equivalents of $161.8 million, negative free cash flow of $24.3 million and the dividend payment of $7.6 million, partly offset by $80.1 million of income tax expense recorded in the first quarter of fiscal 2011 but not paid due to modifications made to Cogeco Cable's corporate structure. Indebtedness in 2011 mainly increased through the issuance of $200 million Senior Secured Debentures Series 2 by Cogeco Cable Inc., partly offset by a net repayment of $13.8 million on the Cogeco Cable Term Revolving Facility.

During the first quarter of fiscal 2012, a dividend of $0.18 per share was paid by the Corporation to the holders of subordinate and multiple voting shares, totalling $3 million, compared to a dividend of $0.12 per share, or $2 million the year before. In addition, dividends paid by a subsidiary to non-controlling interests in the first quarter of fiscal 2012 amounted to $8.2 million, for consolidated dividend payments of $11.3 million, compared to $5.6 million for consolidated dividend payments of $7.6 million in the first quarter of the prior year.

As at November 30, 2011, the Corporation had a working capital deficiency of $155.6 million compared to $188.7 million as at August 31, 2011. The decrease in the deficiency is mainly attributable to the cable sector and caused by a decrease in trade and other payables and income tax liabilities, partly offset by decreases in cash and cash equivalents and in income taxes receivable and by an increase in bank indebtedness. As part of the usual conduct of its business, COGECO maintains a working capital deficiency due to a low level of accounts receivable as a large portion of the Cogeco Cable's customers pay before their services are rendered, unlike trade and other payables, which are paid after products are delivered or services are rendered, thus enabling the cable subsidiary to use cash and cash equivalents to reduce Indebtedness.

At November 30, 2011, the Corporation had used $39 million of its $100 million Term Revolving Facility for a remaining availability of $61 million and Cogeco Cable had used $151.2 million of its $750 million Term Revolving Facility for a remaining availability of $598.8 million.

Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to approval by the subsidiaries' Boards of Directors and may also be restricted under the terms and conditions of certain debt instruments. In accordance with applicable corporate and securities laws, significant transfers of funds from COGECO may be subject to approval by minority shareholders.

FINANCIAL POSITION

Since August 31, 2011, there have been significant changes to the balances of, "trade and other payables", "property, plant and equipment", "income taxes receivable", "income tax liabilities", "future income tax liabilities", "long-term debt", "cash and cash equivalents", "bank indebtedness" and "non-controlling interest".

The $73 million decrease in trade and other payables is related to the timing of payments made to suppliers. The $14.8 million increase in property, plant and equipment reflects the acquisitions discussed in the "Cash flow and Liquidity" section net from the depreciation expense. The decrease of $24.3 million in income taxes receivable, of $38.8 million in income tax liabilities and of $7.8 million in future income tax liabilities primarily reflect the timing of the recognition of income tax liabilities as a result of modifications made to the corporate structure combined with the increase in operating income before depreciation and amortization. The increase of $31.7 million in bank indebtedness, of $23.5 million in long-term debt and the decrease of $35.3 million in cash and cash equivalents are due to the factors previously discussed in the "Cash Flow and Liquidity" section. The $18.9 million increase in non-controlling interest is due to improvements in the cable subsidiary's operating results in the current fiscal year.

A description of COGECO's share data as at December 31, 2011 is presented in the table below:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Number of Amount shares/options ($000) ---------------------------------------------------------------------------- Common shares Multiple voting shares 1,842,860 12 Subordinate voting shares 14,989,338 121,976 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

In the normal course of business, COGECO has incurred financial obligations, primarily in the form of long-term debt, operating and finance leases and guarantees. COGECO's obligations, discussed in the 2011 Annual Report, have not materially changed since August 31, 2011, except as mentioned below.

On November 30, 2011, the Corporation renewed its credit agreement for a $100 million credit facility in the form of a four-year Term Revolving Facility. The renewed Term Revolving Facility will mature on February 1, 2016, but may be extended by additional one-year periods on an annual basis, subject to lenders' approval. The Term Revolving Facility is indirectly secured by a first priority fixed and floating charge on substantially all present and future real and personal property and undertaking of every nature and kind of the Corporation and certain of its subsidiaries, excluding the capital stock and assets of the Corporation's subsidiary, Cogeco Cable Inc., and guaranteed by its subsidiaries, excluding Cogeco Cable.

On November 7, 2011, the Corporation completed, pursuant to a private placement, the issue of 6.50 % Unsecured Notes for a total of $35 million maturing November 7, 2021. Interest on these Notes is payable semi-annually in arrears on November 7 and May 7 of each year commencing May 7, 2012. Net proceeds of approximately $35 million was used to reduce COGECO Inc.'s bank indebtedness.

On November 22, 2011, Cogeco Cable renewed its credit agreement for a $750 million credit facility, with an option to increase to a total amount of up to $1 billion, subject to lenders' participation, in the form of a five year Term Revolving Facility. The renewed Term Revolving Facility was arranged by a group of financial institutions led by Canadian Imperial Bank of Commerce and Bank of Montreal. The renewed Term Revolving Facility will mature on November 22, 2016, but may be extended by additional one-year periods on an annual basis, subject to lenders' approval. The Term Revolving Facility is indirectly secured by a first priority fixed and floating charge on substantially all present and future real and personal property and undertaking of every nature and kind of Cogeco Cable and certain of its subsidiaries, and provides for certain 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.

DIVIDEND DECLARATION

At its January 25, 2012 meeting, the Board of Directors of COGECO declared a quarterly eligible dividend of $0.18 per share for multiple voting and subordinate voting shares, payable on February 22, 2012, to shareholders of record on February 8, 2012. The declaration, amount and date of any future dividend will continue to be considered and approved by the Board of Directors of the Corporation based upon the Corporation's financial condition, results of operations, capital requirements and such other factors as the Board of Directors, at its sole discretion, deems relevant. There is therefore no assurance that dividends will be declared, and if declared, their amount and frequency may vary.

FINANCIAL MANAGEMENT

The Corporation has established guidelines whereby swap agreements can be used to manage risks associated with fluctuations in interest and foreign currency exchange rates related to its long-term debt. All such agreements are exclusively used for hedging purposes. In order to minimize the risk of counter-party default, Cogeco Cable completes transactions with financial institutions that carry a credit rating equal or superior to its own credit rating.

Cogeco Cable has entered into cross-currency swap agreements to set the liability for interest and principal payments on its US$190 million Senior Secured Notes Series A maturing on October 1, 2015. These agreements have the effect of converting the U.S. interest coupon rate of 7.00% per annum to an average Canadian dollar interest rate of 7.24% per annum. The exchange rate applicable to the principal portion of the debt has been fixed at $1.0625 per US dollar. During the first three months of fiscal 2012, amounts due under the US$190 million Senior Secured Notes Series A increased by $7.8 million due to the US dollar's appreciation relative to the Canadian dollar. The fair value of cross-currency swaps increased by a net amount of $7 million, of which an increase of $7.8 million offsets the foreign exchange loss on the debt denominated in US dollars. The difference of $0.7 million was recorded as a decrease of other comprehensive income, net of income taxes. In the first quarter of fiscal 2011, amounts due under the US$190 million Senior Secured Notes Series A decreased by $7.6 million due to the US dollar's depreciation over the Canadian dollar. The fair value of cross-currency swaps decreased by a net amount of $6.3 million, of which $7.6 million offsets the foreign exchange gain on the debt denominated in US dollars. The difference of $1.2 million was recorded as an increase of other comprehensive income, net of income taxes.

Furthermore, Cogeco Cable's net investment in self-sustaining foreign subsidiaries is exposed to market risk attributable to fluctuations in foreign currency exchange rates, primarily changes in the values of the Canadian dollar versus the Euro. The Corporation recorded a foreign exchange loss of $0.3 million in the first quarter, compared to a foreign exchange loss of $1.9 million in the comparable period of the prior year, which was deferred and recorded in the interim consolidated statement of comprehensive income, net of income taxes. The exchange rate used to convert the Euro currency into Canadian dollars for the balance sheet accounts as at November 30, 2011 was $1.3706 per Euro compared to $1.4071 per Euro as at August 31, 2011. The average exchange rate prevailing during the first quarter of fiscal 2012 used to convert the operating results of the European operations was $1.3891 per Euro compared to $1.3833 per Euro in the first quarter of fiscal 2011. Since the Corporation's condensed interim consolidated financial statements are expressed in Canadian dollars but a portion of its business is conducted in the Euro currency, exchange rate fluctuations can increase or decrease revenue, operating income before depreciation and amortization, profit for the period and the carrying value of assets and liabilities.

The following table shows the Canadian dollar impact of a 10% fluctuation in the average exchange rate of the Euro currency into Canadian dollars on European operating results in the cable sector for the first three months ended November 30, 2011:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended November 30, 2011 Exchange rate As reported impact ($000) $ $ ---------------------------------------------------------------------------- (unaudited) (unaudited) Revenue 41,515 4,152 Operating income before depreciation and amortization 4,748 475 Profit for the period 3,399 340 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

The Corporation is also impacted by foreign currency exchange rates, primarily changes in the values of the US dollar relative to the Canadian dollar with regards to purchases of certain equipment, as the majority of customer premise equipment in the cable sector is purchased and subsequently paid in US dollars. Please consult the "Fixed charges" section of this MD&A and the "Foreign Exchange Risk" section in note 14 of the consolidated financial statements for further details.

CABLE SECTOR

CUSTOMER STATISTIC

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- November 30, 2011 Net additions % of Penetration(1) Quarters ended November 30, November 30, 2011 2010 2011 2010 ---------------------------------------------------------------------------- PSU 2,609,683 45,129 49,220 Television service customers(2) 1,137,219 3,457 7,626 44.9 45.6 HSI service customers 780,723 17,073 20,464 30.8 29.6 Telephony service customers 691,741 24,599 21,130 27.3 24.9 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) As a percentage of Homes Passed (2) The number of Television service customers includes 886,861 Digital Television service customers.

In the cable sector, first quarter PSU net additions amounted to 45,129, compared to 49,220 PSU in the comparable period of the previous fiscal year.

Fiscal 2012 first-quarter PSU net additions were lower than in the comparable period of the prior year, as the strong PSU growth generated by the Canadian operations, despite higher penetration rates, category maturity and aggressive competition, was offset by PSU losses in the European operations reflecting the continuing difficult economic conditions in Portugal. The Portuguese government has implemented financial reforms which include increases in sales and income taxes combined with reductions in government spending on social programs, thus reducing consumer disposable income. These measures have generated consumer spending constraints while the intensity of the competitive environment remained. The rate of growth for our services has diminished in this environment, with net customer losses in Television and HSI service customers.

The net customer additions for Television service customers stood at 3,457 for the first quarter, compared to 7,626 for the same period of the prior year. Television service customers net additions in fiscal 2012 is mainly due to the back to school period for college and university students, to network expansions and the bundling effect of continued growth in HSI and Telephony services. In the quarter, Telephony service customers grew by 24,599 compared to 21,130 for the same period last year, and the number of net additions to the HSI service stood at 17,073 customers compared to 20,464 customers in the first quarter of the prior year. HSI and Telephony net additions continue to stem from the enhancement of the product offering, the impact of the bundled offer (Cogeco Complete Connection) of Television, HSI and Telephony services, and promotional activities which was offset by the economic environment in Portugal. For the three month period ended November 30, 2011, additions to the Digital Television service which are included in the Television service customers, stood at 43,955 compared to 41,649 for the comparable periods of the prior year. Digital Television service net additions are due to targeted marketing initiatives to improve penetration, the launch of new HD channels, the continuing interest for HD television service and the deployment of Digital Terminal Adapters technology to migrate customer from analog to digital services.

OPERATING RESULTS

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Quarters ended November 30, 2011 2010 Change ($000, except percentages) $ $ % ---------------------------------------------------------------------------- (unaudited) (unaudited) Revenue 356,939 330,467 8.0 Operating costs(1) 213,226 194,316 9.7 Management fees - COGECO Inc. 7,142 6,644 7.5 -------------------------------------------------------------- Operating income before depreciation and amortization 136,571 129,507 5.5 -------------------------------------------------------------- Operating margin 38.3% 39.2% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (1) Represents the sum of salaries, employee benefits and outsourced services as well as other external purchases included in the Interim Consolidated Statements of Profit or Loss.

Revenue

Fiscal 2012 first-quarter revenue rose by $26.5 million, or 8%, to reach $356.9 million, when compared to the prior year.

Revenue for the Canadian operations grew by $28.2 million, or 9.8%, to reach $315.4 million. The increase in revenue was driven by PSU growth, rate increases implemented in October 2011 and April 2011 combined with the acquisitions of MTO Telecom Inc. ("MTO") and Quiettouch Inc. ("QTI").

In the first quarter of fiscal 2012 European operation's revenue decreased by $1.7 million, or 4%, at $41.5 million as a result of a decreased demand for services, partly offset by a higher value of the Euro over the Canadian dollar when compared to prior year. Revenue from the European operations in the local currency for the 2012 first quarter amounted to EUR29.9 million, a decrease of EUR1.4 million, or 4.4%, when compared to the same period of the prior year.

Operating costs

For the first quarter of fiscal 2012, operating costs increased by $18.9 million, to reach $213.2 million, an increase of 9.7% compared to the prior year.

In the Canadian operations, for the three months ended November 30, 2011, operating costs increased by $21.1 million, or 13.6%, at $176.5 million. The increase in operating costs is mainly attributable to servicing additional PSU, the launch of new HD channels, additional programming costs, deployment and support costs related to the migration of Television service customers from analog to digital and the acquisitions of MTO and QTI.

As for the European operations, fiscal 2012 first-quarter operating costs decreased by $2.2 million, or 5.7%, at $36.8 million, mainly due to the PSU losses and timing of marketing initiatives partly offset by a higher value of the Euro over the Canadian dollar when compared to prior year. Operating costs of the European operations for the first quarter in the local currency amounted to EUR26.5 million, a decrease of EUR1.7 million, or 6.1% when compared to the corresponding period of the prior year.

Operating income before depreciation and amortization and operating margin

Fiscal 2012 first-quarter operating income before depreciation and amortization increased by 5.5% to reach $136.6 million. Cogeco Cable's first-quarter operating margin decreased to 38.3% from 39.2% in the comparable period of the prior year.

Operating income before depreciation and amortization in the Canadian operations rose by $6.6 million, or 5.3%, to reach $131.8 million in the first quarter, mainly due to the increased revenue exceeding the increase in operating costs. Cogeco Cable's Canadian operations' operating margin decreased to 41.8% in the first quarter compared to 43.6% for the same period of the prior year mainly due to the incremental deployment and support costs for the migration of Television service customers from analog to digital.

For the European operations, operating income before depreciation and amortization increased to $4.7 million in the first quarter from $4.3 million for the same period of the prior year, representing an increase of $0.5 million, or 11.2%, mainly due to decreases in operating costs which outpaced the decreases in revenue. European operations' operating margin increased to 11.4% from 9.9% in the first quarter of fiscal 2012. Operating income before depreciation and amortization in the local currency amounted to EUR3.4 million compared to EUR3.1 million in the first quarter of the prior year, representing an increase of 10.7%.

CONTROLS AND PROCEDURES

The President and Chief Executive Officer ("CEO") and the Senior Vice President and Chief Financial Officer ("CFO"), together with Management, are responsible for establishing and maintaining adequate disclosure controls and procedures and internal controls over financial reporting, as defined in NI 52-109. COGECO's internal control framework is based on the criteria published in the report "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission and is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The CEO and CFO, supported by Management, evaluated the design of the Corporation's disclosure controls and procedures and internal controls over financial reporting as at November 30, 2011, and have concluded that they were adequate. Furthermore, no significant changes to the internal controls over financial reporting occurred during the quarter ended November 30, 2011.

UNCERTAINTIES AND MAIN RISK FACTORS

There has been no significant change in the uncertainties and main risk factors faced by the Corporation since August 31, 2011. A detailed description of the uncertainties and main risk factors faced by COGECO can be found in the 2011 Annual Report.

CHANGES IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Corporation adopted the IFRS conceptual framework for its accounting policies on September 1, 2011 (see "Transition to IFRS" above"). Accordingly, the following paragraphs provide an analysis of accounting policies considered to be critical for which changes required under the adoption of IFRS were determined to be material. This "Changes in critical accounting policies and estimates" section should be read in conjunction with the Corporation's annual MD&A for the 2011 year, which provides a description of other accounting policies considered to be critical but for which the adoption of IFRS did not have a significant impact.

A. IMPAIRMENT OF NON FINANCIAL ASSETS

At the end of each reporting period, the Corporation reviews the carrying value of its property, plant and equipment and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

For the purpose of impairment testing, assets that cannot be tested on an individual basis are grouped together into the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets ("cash-generating unit" or "CGU"). Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGU, or otherwise they are allocated to the smallest group of CGU for which a reasonable and consistent allocation basis can be identified.

An impairment loss is recognized when the carrying amount of an asset or a CGU exceeds its recoverable amount for the amount of this excess. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. The impairment loss is recognized immediately in profit or loss in the period in which the loss is incurred.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in profit or loss.

For the purpose of impairment testing, goodwill is allocated to each of the Corporation's CGUs that are expected to benefit from the synergies of the related business combination. An impairment loss recognized for goodwill cannot be reversed.

B. PROVISIONS

Provisions represent liabilities of the Corporation for which the amount or timing is uncertain. A provision is recorded when the Corporation has a legal or constructive present obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized represents management's best estimate of the amount required to settle the obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When the effect of the time value of money is material, the amount of a provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as financial expense.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be meas
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