DIGITAL SERVICES SET THE SCENE FOR A CABLE TV COMEBACK

OTTAWA •

Cable TV, thanks to the popularity of digital services, finally stemmed a four-year exodus of subscribers last year but continued to lose market share to its wireless competitors, Statistics Canada reported yesterday.

“ The cable industry saw the first signs of an end to the erosion of its traditional customer base in 2004,” Statistics Canada said, reporting the number of cable subscribers edged up 0.4% to 7.6 million.

The modest increase in subscribers followed four consecutive years of declines during which the industry lost a total of 442,000 customers, the report on the two competing sectors noted.

“ The increasing popularity of digital cable was certainly a factor behind the improved customer loyalty for the cable industry,” it said.

Digital cable was the fastestgrowing market segment for the industry last year as the number of subscribers surged 33.5% to 1.8 million, it said.

High-speed Internet also continued to be a high-growth market for cable operators, with the number of subscribers increasing 20.1% to 2.8 million over the year.

Despite the turnaround, the market share of cable operators continued to shrink as their wireless competitors, principally directsatellite television providers, increased their share of the market to 23.4% from 22.5% in 2003, it said.

Still, that was the smallest year-over-year gain in market share since satellite television started competing against cable in 1997.

The number of subscribers to satellite and wireless cable television rose 5.4% to 2.3 million.

The total number of subscribers to multi-channel video services, meanwhile, increased 1.5% to 9.9 million, matching the increase in the number of Canadian households.

The financial performance of the cable industry also improved significantly last year with revenues rising 7.4% to $4.8 billion and profits soaring 39.2% to $1.1billion.

“ The financial performance of the wireless segment of the industry also improved, but the ink at the bottom of the income statement remained red,” Statistics Canada said.

“Wireless competitors have incurred losses before interest and taxes every year since joining the industry, but are now approaching the break-even point.”

Wireless providers lost $92.9million in 2004, down from $110.1-million in 2003, and $245.9-million in 2002.