Cogeco Communications (USA) Inc.

Overview Key strengths Key risks Dominant provider of broadband services in its incumbent markets, which account for about 80% of its total revenue. Increasing competition from local telcos that are aggressively building out fiber-to-the-home (FTTH) services. Favorable margins in the mid-40% area. Heightened competition in its overbuilder footprint. Good revenue visibility from increased demand for high-margin broadband. Competition from wireless players offering fixed wireless broadband services could limit net adds from DSL over the near to intermediate term. High industry barriers to entry given capital spending requirements and rights of way. Acquisitive growth strategy will likely keep leverage above 5x over the longer term. We estimate that Breezeline lost 25,000-35,000 data subscribers in Ohio in 2022 primarily due to billing

...Cogeco Communications (USA) Inc.'s (doing business as Breezeline) WideOpenWest (WOW) overbuilder assets in Ohio could continue to be a headwind to broadband subscriber growth in 2023. We estimate that Breezeline lost 25,000-35,000 data subscribers in Ohio in 2022 primarily due to billing migration issues, which resulted in 9,000 total broadband subscriber losses for the year. In 2023, we believe that the company can return to positive net adds on modest organic growth at its legacy operations, new builds, and edge-out activity, which will be partially offset by narrowing losses in Ohio. We expect any gains will likely be achieved in the second half of 2023, especially because seasonal disconnects may result in a temporary loss of about 2,000-4,000 subscribers in the first half of its fiscal year. Furthermore, we believe that the company's operations in Ohio will remain under pressure over the near-to-intermediate term due to heightened competition from Comcast and Charter, which can bundle...

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