THE CABLE SECTOR DRIVES COGECO’S 2008 FIRST QUARTER PERFORMANCE.

Press release

For immediate release

THE CABLE SECTOR DRIVES COGECO’S 2008 FIRST QUARTER PERFORMANCE

Montréal, January 9, 2008 – Today, COGECO Inc. (TSX: CGO) announced its financial results

for the first quarter 2008 ended November 30, 2007.

First quarter 2008 consolidated results show sustained growth:

• Revenue increased by 11.2% to $292.8 million;

• Operating income before amortization grew by 17.7% to $104 million;

• Free cash flow

(1)

reached $25.3 million.

Cable sector

• Revenue-generating units (RGUs)

reached 2,568,689 with 83,024 net additions;

• On September 5

, a new management structure was implemented that will enable

Canadian operations to develop better synergies and therefore have a positive impact

on the way Cogeco Cable delivers its services.

Media sector

Radio

• Fall BBM’s reports that the Rythme FM network continues to lead in the Montreal and

Trois-Rivières markets while the 93

station in Québec City and Rythme FM in

Sherbrooke continue to expand their audience.

Television

• TQS’s revenue decreased during the first quarter due to difficult conditions for the

conventional television market. However, TQS maintained a tight cost control.

• TQS inc. (“TQS”) announced on December 18, 2007, that it had obtained an order by

Québec Superior Court under the Companies’ Creditors Arrangement Act (“CCAA”),

issued for an initial period of 30 days, with a view to protect itself, its subsidiaries and

its parent 3947424 Canada Inc. (the “TQS Group”) from claims by creditors and to

allowing it to reorganize its operations.

“COGECO’s first quarter financial result is very positive. In the cable sector, Cogeco Cable has

continued on its growth trajectory and is in an excellent position to achieve superior growth in

2008. Our cable subsidiary continues to enhance the features of its services, to attract new

customers and to sell additional services to existing customers, thanks to its versatile delivery

system,” said Louis Audet, President and CEO of COGECO.

“With regards to the court order

Free cash flow does 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.

Represent the sum of Basic Cable, high speed internet (HSI), Digital Television and Telephony service customers.

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involving TQS, after careful thought, the time has come to end its participation in the general interest

television sector. COGECO’s portion of the impairment of assets amounts to approximately

$18.5 million. In radio, we are well positioned to keep our leading position in key markets and gain market

share in our o ther marke ts.

We are looking forward to achieving a strong fiscal 20 08,” add ed Mr. Aude t.

FINANCIAL HIGHLIGHTS

Quarters ended November 30,

($000s, except percentages and

per share data)

(unaudited)

2007 2006

Change

Revenue

292,770 $ 263,292 11.2

Operating income before amortization

104,010 88,367

17.7

Net Income (loss)

(9,976)

6,751 -

Cash flow from operations

(1)

83,858 66,035 27.0

Less:

Capital expenditures and increase in

deferred charges

58,549 74,615 (21.5)

Free cash flow

(1)

25,309 (8,580) -

Per share data

Basic net income (loss)

(0.60) $ 0.41

(1)

Cash flow from operations and free cas h flow do not have st andard de finitions prescribe d by Canadian ge nerally ac cepted ac countin g principle s

(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 the section “Uncertainties and main

risk factors” of the Company’s 2007 annual Management’s Discussion and Analysis (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 informat ion before next quarter.

This analysis should be read in conjunction with the Company’s financial statements, and the notes thereto,

prepared in accordance with Canadian GAAP and the MD&A included in the Company’s 2007 Annual

Report. Throughout this discussio n, all amounts are in Canadian dollars unless otherwise indicated.

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MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

CORPORATE STRATEGIES AND OBJECTIVES

COGECO’s objectives are to maximize shareholder value by increasing profitability and by

ensuring continued growth. The strategies for reaching those objectives, supported by tight cost

control and business processes, are specific to each sector. For the cable sector, sustained

corporate growth and continuous improvement of networks and equipment are the main strategies

used. The media sector focusses on continuous improvement of its programming to increase its

market share, and therefore, its profitability The Company measures its performance against these

objectives with growth of operating income before amortization, free cash flow

and RGU

growth

for the cable sector. Below are the recent achievements of the cable and media sectors in

furtherance of COGECO’s objectives.

Tight control over costs and business processes

• For the first quarter 2008, the Company’s operating costs increased by 7.9% compared to

a revenue growth of 11.2% during the period;

• The design of internal controls over financial reporting as per National Instrument 52-109 is

still underway. As discussed in the 2007 annual MD&A, the Company had identified certain

material weaknesses in the design of internal controls over financial reporting and there

have been improvement in the design of internal controls on some significant processes

during the quarter. The documentation and remediation of internal controls weaknesses are

progressing normally.

Cable sector

Continuous improvement of the service offering and expansion of the customer base

Canadian operations

• Digital Television services:

o September 4, launch of The Setanta International Sports Pak in Ontario, a new

premium digital service;

o October 2, launch of RDS HD in Québec, a speciality channel transmitting in High

Definition (“HD”) various sports events, including all Montreal Canadians hockey

games;

o October 11, launch of Leafs TV HD, a Canadian digital specialty sports channel in

HD transmitting all Toronto Maple Leafs hockey team games;

o October 31, launch of Mpix On Demand in Ontario;

o December 5, launch of the Motorola DCT3080, a new digital video recorder (DVR)

model in Quebec.

• Telephony service:

o September 25, new International calling service with a supplier of choice in Québec

and Ontario;

• HSI services:

ο November 7, launch of Wi-Fi into Kingston and Windsor.

See the “non-GAAP financial measures” section for explanations.

See the “Customer statistics” section of the cable sector section for detailed explanations.

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Portuguese operations

• Cabovisão

- Televisão por Cabo, S.A. (Cabovisão) continued its Digital Television service

deployment;

• New image and communication concept: Cabovisão, infinite possibilities.

Continuous improvement of networks and equipment

• For the first quarter of 2008, Cogeco Cable has invested approximately $21.7 million in its

infrastructure including headends and network upgrade / rebuild.

Media sector

• During the first quarter, TQS obtained an order by Québec Superior Court under the

Companies’ Creditors Arrangement Act with a view to protecting TQS and its subsidiaries

from claims by creditors and to allowing it to reorganize its operations.

• With the announcement of the Fall BBM survey, RYTHME FM was confirmed in top

position in the Montreal and Trois-Rivières markets. The 93

station in Québec City and

Rythme FM in Sherbrooke continue to expand their audience.

RGU growth

During the first quarter 2008, the consolidated number of RGUs, in the cable sector, increased by

3.3% to reach over 2.5 million units. Cogeco Cable is expecting an annual RGU growth of

approximately 10% and is maintaining its guidelines.

Revenue and operating income before amortization growth

First quarter 2008 consolidated revenue increased by $29.5 million, or 11.2%, to reach

$292.8 million while operating income before amortization grew by $15.6 million, or 17.7%, to

reach $104 million. These increases were mainly due to stronger RGU growth combined to rate

increases in the cable sector. Subsequent to the filing of TQS under CCAA, management has

revised downwards its guidelines for revenue and now expects to achieve revenue of

approximately $1,120 million and has revised upwards its guidelines for operating income before

amortization to approximately $431 million. Please consult the “Fiscal 2008 financial guidelines”

section for further details.

Free cash flow

In the first quarter of fiscal 2008, COGECO generated free cash flow of $25.3 million, compared to

a negative free cash flow of $8.6 million for the same period last year. This increase resulted from

the cable sector and was attributable to several factors: an increase in operating income before

amortization, a decrease in capital expenditures and deferred charges and a reduction in financial

expense. Cogeco Cable reduced its capital expenditures compared to last year by $16.5 million

from $67.2 million to $50.7 million, mainly due to a $12 million expenditure in the first quarter of

fiscal 2007 for the purchase of home terminal devices for the Canadian operations to build an

inventory to sustain last year RGU growth. Subsequent to the decision of ceasing its activities in

the television industry, the Company has revised upwards its initial guidelines for free cash flow

from $65 million to approximately $73 million. Please consult the “Fiscal 2008 financial guidelines”

section for further details.

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OPERATING RESULTS – CONSOLIDATED OVERVIEW

Quarters ended November 30,

(unaudited)

(

$000s, except percentages)

2007

2006

Change

Revenue $

292,770 $

263,292 11.2

Operating costs 188,760 174,925 7.9

Operating income before amortization

104,010 88,367 17.7

Operating margin 35.5 %

33.6 %

Revenue

First quarter 2008 revenue rose by $29.5 million, or 11.2%, to reach $292.8 million. Cable

revenue, driven by a strong RGU growth combined with rate increases, went up by $29.8 million,

or 13.4% in the first quarter of 2008, while media revenue decreased slightly by $0.4 million, or

0.9%.

Operating income before amortization

Operating income before amortization grew by $15.6 million, or 17.7%, to reach $104 million in the

first quarter of 2008 compared to the corresponding period of last year. The cable sector

contributed to the growth by $14.7 million due to RGU growth and various rate increases outpacing

operating cost increases and the media sector contributed $0.5 million as a result of costs

reductions in television.

FIXED CHARGES

Quarters ended November 30,

(unaudited)

($000s, except percentages)

2007 2006

Change

Amortization $ 54,155 $ 45,839 18.1

Financial expense

17,606

21,759 (19.1)

First quarter 2008 amortization expense amounted to $54.2 million compared to $45.8 million for

the same period the year before. The rise in amortization expense was due to the cable sector and

attributable to the following factors: the completion in the fourth quarter of fiscal 2007 of the

purchase price allocation of the Cabovisão acquisition, which included the valuation of tangible

and intangible assets for an additional amortization expense of approximately $4.4 million and

from additional capital expenditures arising from the required customer premise equipment to

sustain RGU growth.

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First quarter 2008 financial expense decreased over the same period last year by $4.2 million, or

19.1%, to reach $17.6 million. This decrease is due to the Company’s cable subsidiary which

reduced its level of Indebtedness (defined as bank indebtedness and long-term debt) from the net

proceeds of subordinate voting shares issued during fiscal 2007.

IMPAIRMENT OF ASSETS OF A SUBSIDIARY

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged

CIBC World Markets to advise on and assess strategic options for the TQS network in the face of

financial difficulties. TQS’ position in the Québec Francophone over-the-air television market

deteriorated markedly in spite of the measures and investments initiated by the Company over the

last several months. The gradual loss of advertising revenue to specialty TV networks and content

accessible over the Internet, combined with increased production costs, the Canadian Radio-

television and Telecommunications Commission’s (CRTC) refusal to grant general interest

television networks the same ability to charge subscriber fees for signal distribution as the

speciality television networks, the programming strategy of Société Radio-Canada (SRC), which

acts like a commercial player rather than a publicly-owned television broadcaster and SRC’s notice

of disaffiliation in Saguenay, Sherbrooke and Trois-Rivières after a 50-year partnership all

contributed to this decision. After considering CIBC World Markets’ report, the Board of Directors

of TQS concluded that it was in the best interest of TQS, its employees and creditors to request

court protection. On December 18, 2007, the Québec Superior Court issued an order under the

Companies’ Creditors Arrangement Act (Canada) protecting TQS Inc., its subsidiaries and its

parent 3947424 Canada Inc. (“the TQS Group”) from claims by their creditors for an initial

suspension period ending on January 17, 2008. Under the order, RSM Richter Inc. has been

appointed as monitor, with a mandate to support the applicants, under Court supervision, in

preparing a creditors arrangement plan.

As a result, the Company recorded an asset impairment loss of $30.3 million representing the net

assets of the TQS Group as at November 30, 2007. The impact of this impairment loss on the

Company’s statement of income is as follows:

($ 000s)

Impairment of assets of a subsidiary 30,298

Non-controlling interest 11,798

Impairment loss net of non-controlling interest 18,500

INCOME TAXES

First quarter 2008 income tax amounted to $9.3 million compared to $6.5 million for the same

period last year. The increase was mainly due to higher operating income before amortization

combined with the fixed charges decline.

On October 16, 2007, the Canadian federal government announced in its Economic Statement

reduction in corporate income tax rates. According to the new legislation, corporate income tax

rates will be further reduced from 20.5% to 19.5% effective January 1, 2008, from 20% to 19%

effective January 1, 2009, from 19% to 18% effective January 1, 2010, from 18.5% to 16.5%

effective January 1, 2011, and to 15% effective January 1, 2 012. These corporate income tax rates

were considered substantively enacted on December 14, 2007. The reduction of these corporate

income tax rates will reduce future income tax expense by approximately $23 million in the second

quarter of fiscal 2008.

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NON-CONTROLLING INTEREST

The non-controlling interest represents an interest of approximately 67.6% in Cogeco Cable’s

results and a 40% interest in TQS. During the first quarter of 2008, the non-controlling interest

amounted to $2.5 million mainly due to the cable sector strong results, partly offset by an

adjustment of $11.8 million resulting from the impairment of assets in the television sector. The

non-controlling interest for the comparable period of last year amounted to $7.6 million.

NET INCOME (LOSS)

First quarter 2008 net loss amounted to $10 million, or $0.60 per share. The net loss was

essentially the result of the impairment of assets of a subsidiary in the media sector, partly offset

by the growth in operating income before amortization exceeding those of the fixed charges in the

cable sector. Excluding the effect of the impairment of assets of a subsidiary, net income would

have amounted to $8.5 million, or $0.51 per share, compared to a net income of $6.8 million, or

$0.41 per share, for the same period last year.

CASH FLOW AND LIQUIDITY

Quarters ended November 30,

(unaudited)

($000s)

2007 2006

Operating Activities

Cash flow from operations

83,858

66,035

Changes in non-cash operating items

(42,997) (85,758)

40,861

(19,723)

Investing Activities

(1)

(58,414)

(74,297)

Financing Activities

(1)

(29,714)

39,796

Net change in cash and cash equivalents

(47,267) $ (54,224)

Effect of exchange rate changes on cash and cash

equivalents denominated in foreign currencies

(153)

1,616

Cash and cash equivalents at beginning

65,564

71,516

Cash and cash equivalents at end

18,144

18,908

(1) Excludes assets acquired under capital leases.

First quarter 2008 cash flow from operations reached $83.9 million, 27% higher than for the

comparable period last year, primarily due to the increase in operating income before amortization

and to a reduction in financial expense in the cable sector. Changes in non-cash operating items

generated lower cash outflows compared to the same period last year, mainly as a result of certain

non-recurring payments executed by the Portuguese cable subsidiary in accordance with the

terms of the acquisition in the first quarter of fiscal 2007.

In the first quarter of fiscal 2008, investing activities stood at $58.4 million mainly due to capital

expenditures of $51 million and from an increase of $7.4 million in deferred charges in the cable

sector. The capital expenditures from the cable sector decreased compared to the same period

last year mainly due to lower RGU growth and to the timing of customer premise equipment

acquired in the first quarter of fiscal 2007 to build an inventory for the Canadian operations. The

Portuguese operations’ capital expenditures increased compared to the same period last year as a result

of the Digital Television deployment and the network extensions to serve additional homes passed.

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First quarter deferred charges remained essentially the same and are mainly attributable to

reconnect costs in the cable sector.

First quarter 2008 free cash flow reached to $25.3 million compared to a deficit of $8.6 million for

the same period in the preceding year. Free cash flow increased over the same period last year

mainly in the cable sector and was attributable to several factors: a growth in operating income

before amortization, a lower level of capital expenditures required to serve RGU growth and to

support Telephony growth, a build-up of home terminal devices for an amount of $12 million during

the first quarter of fiscal 2007 to serve RGU rapid growth and a reduction in financial expense.

First quarter 2008 debt repayment net of increase in bank indebtedness amounted to $27.9 million.

This net repayment came from the generated free cash flow of $25.3 million and the reduction of

$47.3 million in cash and cash equivalents partly used to offset the $43 million reduction in

changes in non-cash operating items. These factors have been partly offset by a dividend payment

of $1.2 million described below. For the same period last year, the increase in long-term debt and

bank indebtedness amounted to $41.5 million due to a decrease of $85.8 million in non-cash

operating items explained by the repayment of certain suppliers subsequent to the Cabovisão

acquisition in the cable sector and by the free cash flow deficit of $8.6 million, partly offset by a

$54.2 million decrease in cash and cash equivalents. In addition, a dividend of $0.07 per share for

subordinate and multiple voting shares, totalling $1.2 million, was paid during the first quarter of

fiscal 2008 compared to a dividend of $0.0625 per share or $1 million for the first quarter of fiscal

2007.

As at November 30, 2007, the Company had a working capital deficiency of $390 million compared

to $127.3 million as at August 31, 2007. The greater deficiency was mainly attributable to the

US$150 million Senior Secured Notes Series A and the related derivative financial instruments due

in October 2008 in the cable sector. COGECO maintains a working capital deficiency due to a low

level of accounts receivable since the majority of the cable subsidiary’s customers pay before their

services are rendered, contrary to accounts payable and accrued liabilities, which are paid after

products or services are rendered. In addition, the cable subsidiary generally uses cash and cash

equivalents to reduce Indebtedness.

As at November 30, 2007, the cable subsidiary had used $432.9 million of its $900 million Term

Facility and the Company had drawn $23.5 million of its Term Facility.

Transfers of funds from non-wholly owned subsidiaries to COGECO are subject to approval by the

subsidiaries’ Board 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, 2007, there have been major changes to “Fixed assets”, “Cash and cash

equivalents”, “Accounts receivable”, “Broadcasting rights”, “Accounts payable and accrued

liabilities”, “Broadcasting rights payable”, “Derivative financial instruments, “Non-controlling

interest” and “Indebtedness”.

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The decrease of $1.1 million in fixed assets was the result of the following factors: an impairment

of $10.7 million in television assets, an increase in capital expenditures to sustain RGU growth and

the appreciation of the euro currency over the Canadian dollar in the cable sector. The

$47.4 million and $36.6 million reductions in cash and cash equivalents and accounts payable and

accrued liabilities respectively, were mainly due to the cable sector and related to suppliers’

payments. The $8.5 million increase in accounts receivable is mostly due to the higher period of

activity in the media sector. The decrease of $5.5 million in broadcasting rights was the result of

the impairment in television assets. The broadcasting rights payable have increased by $8.3

million due to the media sector. The non-controlling interest rise of $4.8 million was the net effect

of the improved results in the cable sector, partly offset by an adjustment of $ 11.8 million related

to the impairment of television’s assets. Finally, derivative financial instruments have increased by

$91.3 million and Indebtedness has decreased by $113.1 million as a result of accounting changes

and factors previously discussed in the “Cash Flow and Liquidity” section. Please consult

“Accounting policies and estimates” section for further details.

A description of COGECO’s share data as at December 31, 2007 is presented in the table below:

Number of shares/

options

Amount

($000s)

Common Shares

Multiple voting shares

Subordinate voting shares

1,842,860

14,830,086

119,075

Options to Purchase Subordinate Voting Shares

Outstanding options

Exercisable options

191,258

In the normal course of business, COGECO has incurred financial obligations, primarily in the

form of long-term debt, operating and capital leases and guarantees. COGECO’s obligations,

discussed in the 2007 annual MD&A, have not materially changed since August 31, 2007

except that on December 14, 2007, the Company concluded an amended and restated credit

agreement with a group of four Canadian banks led by the Canadian Imperial Bank of

Commerce (“CIBC”), which will now act as agent for the banking syndicate. The annually

renewable three-year amended credit agreement establishes a revolving credit of $50 million to

which may be added a further credit of $25 million under certain conditions. The amended

credit agreement maintains certain financial commitments with the same security by the

Company, its subsidiary Cogeco Radio-Television Inc. and indirect subsidiary, Cogeco

Diffusion Inc. The Company posted a guarantee for a maximum amount of $12 million in favour

of CIBC, which is also TQS’ banker, in the event of any default by TQS under the terms of its

own credit agreement. TQS’ credit agreement provides security over its assets, including its

accounts receivable. If the guarantee were to be called in, the Company would be subrogated

to the rights of CIBC and benefit from the same security. Furthermore, on January 8, 2008,

Cogeco Cable and Solidarity Fund QFL entered into an agreement to issue senior unsecured

debenture with par value of $100 million by way of private placement, subject to usual market

conditions. The debenture which must be issued by no later than May 9, 2008, will bear

interest at a fixed rate determined at the then prevailing rate of the ten-year Government of

Canada bond plus a spread of 220 basis points, and will mature ten years after issuance. The

debenture will be callable under certain conditions.

DIVIDEND DECLARATION

At its January 9, 2008 meeting, the Board of Directors of COGECO declared a quarterly eligible

dividend of $0.07 per share for subordinate and multiple voting shares, payable on February 6,

2008, to shareholders of record on January 23, 2008.

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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 U.S. 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 CAN$1.5910. Amounts due under the US$150 million Senior

Secured Notes Series A decreased by CAN$8.4 million at the end of the first quarter compared to

August 31, 2007 due to the Canadian dollar’s appreciation. The fair value of cross-currency swaps

increased by $7.8 million of which $8.4 million offset the foreign exchange gain on the $US debt.

The difference of $0.6 million was recorded as a reduction of comprehensive income.

As noted in the MD&A of the 2007 Annual Report, Cogeco Cable’s investment in the Portuguese

subsidiary, Cabovisão, is exposed to market risk attributable to fluctuations in foreign currency

exchange rates, primarily changes in the value of the Canadian dollar versus the euro. This risk is

mitigated since the major part of the purchase price for Cabovisão was borrowed directly in euros.

This debt is designated as a hedge of net investments in self-sustaining foreign subsidiaries and,

accordingly, Cogeco Cable realized a foreign exchange gain of CAN$4 million in the first quarter

2008, which is presented in other comprehensive income. The exchange rate used to convert the

euro currency into Canadian dollars for the balance sheet accounts as at November 30, 2007 was

$1.4630 per euro compared to $1.4390 per euro as at August 31, 2007. The average exchange

rate prevailing during the first quarter 2008 used to convert the operating results of the Portuguese

operations was $1.4119 per euro compared to $1.4363 per euro for the same period last year.

CABLE SECTOR

CUSTOMER STATISTICS

Net additions (losses) % of Penetration

(1)(4)

Quarters ended

November 30,

2007 2007 2006 2007 2006

RGUs

(2)

2,568,689 83,024 114,279

Basic Cable service customers

1,156,157 12,997 23,493

HSI service customers

(3)

604,959 29,100 37,012 54.8 48.3

Digital Television service customers

396,132 16,253 21,224 47.3 42.0

Telephony service customers 411,441 24,674 32,550 42.5 34.6

(1)

As a percentage of Basic Cable service customers in areas served.

(2)

Represent the sum of Basic Cable, HSI, Digital Television and Telephony service customers.

(3)

Customers subscribing only to HSI or Telephony services totalled 83,267 as at November 30, 2007 compared to 61,336 as at November 30, 2006.

(4)

An audit of homes passed in Ontario was completed during the first quarter of fiscal 2007 and, as a result , the number of homes passed was reduced by 42,386.

In Canada, first quarter 2008 RGUs’ net additions were lower than for the same period last year

and reflect early sign of maturation in most services. In Portugal, Cabovisão faced fierce

competition and as a result all services generated lower customer growth. RGU’s grew at a slower

pace since competition offered deep discounts to attract customers during the first half of the

quarter. Cabovisão did not match the competition high discounting offering. However, since then,

pricing has become more rational. The performance of Cabovisão since its acquisition by Cogeco

Cable has been well above management’s original expectations and growth prospects for the

future remain excellent.

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The number of net additions in Basic Cable in the Canadian market stood at 8,064 customers

compared to a growth of 16,240 customers for the same period last year due to the expiration of

certain promotional offers. In Portugal, Basic Cable service grew by 4,933 customers compared to

7,253 customers.

In Canada, the number of net additions to HSI service stood at 25,294 customers compared to

28,935 customers for the same period last year. During the first quarter 2008, HSI customer net

additions is mostly due to the enhancement of the product offering, the impact of the bundled offer

of Television, HSI and Telephony services (Cogeco Complete Connection), and promotional

activities. HSI service customers in Portugal increased by 3,806 customers compared to 8,077

customers in 2007.

Canadian net additions of Digital Television service stood at 16,253 customers compared to

21,224 customers for the same period last year. The decrease in net additions this quarter

compared to the same quarter last year reflects greater maturity of the digital TV segment

following a period of robust growth, especially in fiscal 2006. Since then, the Company also

adjusted the service offering and price gap differential between Analogue Television services and

Digital Television, which has also contributed to a moderation of the strong growth experienced in

the past years. Nevertheless, customers continue to demonstrate strong interest in HD technology.

Telephony customers grew in both operating units. In Canada, net additions stood at 23,215 to

reach 166,851 compared to a growth of 26,616 for the same period last year. This growth is mostly

attributable to the launch of the service in new markets and increased penetration in areas where

the service is already offered. Coverage of homes passed has now reached 78% compared to

72% last year. Telephony service in Portugal grew by 1,459 customers compared to 5,934

customers for the same period of the preceding year.

OPERATING RESULTS

Quarters ended November 30,

(unaudited)

($000s, except percentages)

2007 2006

Change

Revenue

251,833 $ 222,002

13.4

Operating costs

148,461 133,900

10.9

Management fees - COGECO Inc.

5,035 4,440 13.4

Operating income before

amortization

98,337 83,662 17.5

Operating margin

39.0 % 37.7

Revenue

First quarter 2008 consolidated revenue grew by $29.8 million, or 13.4%, to reach $251.8 million.

Canadian operations revenue, driven by an increased number of RGU’s combined to rate

increases, went up by $28.3 million, or 16.9%. Portuguese operations revenue amounted to

$55.6 million, an increase of $1.5 million, or 2.8% compared to the same period last year due to

RGU growth and rate increases which was partly offset by the strength of the Canadian dollar

against the euro.The average exchange rate prevailing during the first quarter 2008 used to

convert the operating results of the Portuguese operations was $1.4119 per euro compared to

$1.4363 per euro for the same period last year.

- 12 -

Operating costs

First quarter 2008 operating costs increased by $14.6 million, or 10.9%, to reach $148.5 million.

The increase in operating costs was mainly attributable to servicing additional RGUs in Canada,

including Telephony service increased penetration, and in Portugal, to the timing of certain

marketing initiatives, including a major campaign to improve brand awareness, costs to better

service additional RGU’s and costs related to the design of internal controls and review of

business processes to comply with National Instrument 52-109.

Operating income before amortization

First quarter 2008 operating income before amortization increased by $14.7 million, or 17.5%, to

reach $98.3 million, due to RGU growth and various rate increases outpacing operating cost

increases. As a result, first quarter 2008 operating margin reached 39% compared to 37.7% for the

same period last year.

MEDIA SECTOR

OPERATING RESULTS

Quarters ended November 30,

(unaudited)

($000s, except percentages)

2007

2006

Change

Revenue

40,988 $ 41,341 (0.9)

Operating costs

37,436 38,287 (2.2)

Operating income

before amortization

3,552 3,054 16.3

Operating margin

8.7 % 7.4 %

Revenue

First quarter 2008 revenue stood at $41 million, a decrease of $0.4 million, or 0.9%, compared to

the same period last year. During this period, radio revenue increased by 6.4%, to reach

$8.3 million, mainly due to improved audience ratings while television revenue decreased by 2.5%,

or $0.9 million, to $32.7 million, due to difficult market conditions for conventional television.

Operating costs

First quarter 2008 operating costs decreased by $0.9 million, or 2.2%, to $37.4 million, compared

to the same period last year. During this period, radio’s operating costs increased by $0.7 million,

to reach $6.9 million, due to higher programming costs compared to the same period last year

while television’s operating costs decreased by $2.2 million, to $29.9 million due to significant

costs reductions.

- 13 -

Operating income before amortization

Operating income before amortization improved by $0.5 million in the first quarter 2008 compared

to last year. For the first quarter, TQS’s operating income before amortization increased by

$1.4 million, to reach $2.8 million, as a result of significant cost reductions, partly offset by a

decline in revenue. Radio’s operating income before amortization decreased by $0.2 million, to

$1.4 million, mainly due to an increase in programming costs outpacing the increase in revenue

during the quarter.

FISCAL 2008 FINANCIAL GUIDELINES

The Company is maintaining its guidelines in the cable sector, except for the reduction of income

tax rates announced by the Canadian federal government on October 16, 2007 that will have a

favourable impact of approximately $7 million on net income in the second quarter of fiscal 2008.

The Company has also revised its most recent guidelines of the media sector to take into

consideration the impact of the impairment loss of assets of $18.5 million in the first quarter of

2008 and that the television business unit is no longer part of COGECO’s consolidated activities

since December 18, 2007.

($ million, except customer data)

Revised

Projections

Fiscal 2008

January 9, 2008

Projections

Fiscal 2008

Consolidated Financial Guideli nes

Revenue 1,120 1,190

Operating income before amortization

431 425

Net income

22 30

Free cash flow 73 65

Cable sector–

Financial Guidelines

Revenue 1,050 1,050

Operating income before amortization 425 425

Operating margin 40% to 41% 40% to 41%

Financial expense 72 72

Amortization 215 215

Capital expenditures and deferred charges 260 260

Free cash flow 65 65

Customer Addition Guidelines

Basic Cable service 30,000 30,000

HSI services 75,000 75,000

Digital Television service 54,000 54,000

Telephony service 100,000 100,000

RGUs 259,000 259,000

Media sector–

Financial Guidelines

Revenue 70 140

Operating income before amortization

6 1 to 3

Amortization

3 7

Capital expenditures and deferred charges

1 7

- 14 -

UNCERTAINTIES AND MAIN RISK FACTORS

There have been no significant changes in the risk factors and uncertainties facing COGECO

since August 31, 2007, except as described below.

On December 18, 2007, the Québec Superior Court issued an order under the Companies’

Creditors Arrangement Act (Canada) protecting the TQS Group from claims by their creditors for

an initial suspension period ending on January 17, 2008. While this initial suspension period may

be further extended by the Court upon application, there is no assurance that an extension will

actually be applied for or granted by the Court. There is also no assurance that a plan of

arrangement or a transaction can be actually developed and approved within the initial suspension

period or any extension thereof. Finally, there is no assurance that CIBC, the TQS Group’s

secured lender, will not eventually demand payment of TQS’ operating loan, exercise its security

over the TQS Group, which includes its accounts receivable, or demand payment under the

guarantee provided by the Company to CIBC for an amount of 60% of the outstanding loan up to

$12 million. Neither the Company nor any of its subsidiaries (excluding the TQS Group) have any

other outstanding commitment to finance or support the continuation of the business activities of

the TQS Group.

The CRTC collects two different types of fees from broadcast licensees. These are known as Part I

and Part II fees. In 2003 and 2004, lawsuits were commenced in the Federal Court, alleging that

the Part II licence fees are taxes rather than fees and that the regulations authorizing them are

unlawful. On December 14, 2006, the Federal Court ruled that the CRTC did not have the

jurisdiction to charge Part II fees. The Court ruled that licensees were not entitled to a refund of

past fees paid. Both the Crown and the applicants have appealed this case to the Federal Court of

Appeal. The applicants are seeking an order requiring a refund of past fees paid. The Crown is

seeking to reverse the finding that Part II fees are unlawful. On October 1st, 2007, the CRTC sent

a letter to all broadcast licensees. The letter stated that the CRTC will not collect Part II license

fees due on November 30, 2007 and subsequent years unless the Federal Court of appeal or the

Supreme Court of Canada (should the case be appealed to that level) reverses the Federal Court's

decision. The Appeal hearing was held on December 4

and 5

in Ottawa. During the hearing,

questions were raised by the hearing panel concerning the appropriateness of considering Part II

Licence Fees as a tax rather than a fee under the relevant portion of the Broadcasting Act. The

decision of the Federal Court of Appeal is not expected before several months. The Company

believes that there is a reasonable likelihood that the Federal Court’s decision will be reversed.

The Company has accrued $9.7 million with respect to these fees for fiscal year 2007 and the first

quarter of fiscal 2008. In the unlikely event that the Federal Court of Appeal or the Supreme Court

of Canada, should this case be appealed to that level, maintains the decision from the Federal

Court, this would have a beneficial impact on the future financial results of the Company.

ACCOUNTING POLICIES AND ESTIMATES

There has been no significant change in COGECO’s accounting policies and estimates and future

accounting pronouncements since August 31, 2007, except as described below. A description of

the Company’s policies and estimates can be found in the 2007 annual MD&A.

Financial instruments

Effective September 1, 2007, the Company adopted the Canadian Institute of Chartered

Accountants (“CICA”) Handbook Section 1530, Comprehensive Income, Section 3855, Financial

Instruments – Recognition and Measurement, Section 3861, Financial Instruments – Disclosure

and Presentation and Section 3865, Hedges.

- 15 -

Statement of Comprehensive Income

A new statement entitled consolidated statements of comprehensive income was added to the

Company’s consolidated financial statements and includes net income as well as other

comprehensive income. Other comprehensive income represents changes in shareholders’ equity

arising from transactions and events from non-owner sources, such as changes in foreign currency

translation adjustments of net investments in self-sustaining foreign subsidiaries and long-term

debt designated as hedge of net investments in self-sustaining foreign subsidiaries and changes in

the fair value of effective cash flow hedging instruments.

Recognition and Measurement of Financial Instruments

Under these new standards, all financial assets, including derivatives, must be classified as

available for sale, held for trading, held to maturity, or loans and receivables. All financial liabilities,

including derivatives, must be classified as held for trading or other liabilities. All financial

instruments classified as available for sale or held for trading are recognized at fair value on the

consolidated balance sheet while financial instruments classified as loans and receivables or other

liabilities will continue to be measured at amortized cost using the effective interest rate method.

The standards allow the Company to designate certain financial instruments, on initial recognition,

as held for trading.

All of the Company's financial assets are classified as held for trading or loans and receivables.

The Company has classified its cash and cash equivalents as held for trading. Accounts receivable

have been classified as loans and receivables. All of the Company financial liabilities were

classified as other liabilities, except for the Company’s subsidiary’s cross-currency swaps which

were classified as held for trading. Held for trading assets and liabilities are carried at fair value on

the balance sheet, with changes in fair value recorded in the consolidated statements of income,

except for the changes in fair value of the cross-currency swaps which are designated as cash

flow hedges of the Senior Secured Notes Series A and are recorded in other comprehensive

income. Loans and receivables and all financial liabilities are carried at amortized cost using the

effective interest method. Upon adoption, the Company determined that none of its financial assets

are classified as available for sale or held to maturity. Except for the treatment of transaction costs

and derivative financial instruments mentioned below, the provisions of the new accounting

standards had no impact on the consolidated financial statement on September 1, 2007 and

November 30, 2007.

Transaction costs

Effective September 1, 2007, transaction costs are capitalized on initial recognition and presented

as a reduction of the related financing, except for transaction costs on the revolving loan and the

swingline facility which are presented as deferred charges. These costs are amortized over the

term of the related financing using the effective interest rate method, except for transaction costs

on the revolving loan and the swingline facility which are amortized over the term of the related

financing on a straight-line basis. Previously, all transaction costs were capitalized and amortized

on a straight-line basis over the term of the related financing, over a period not exceeding five

years. The impact of these adjustments reduced deferred charges by $1.2 million, reduced long-

term debt by $3.1 million, increased future income tax liabilities by $0.6 million, increased non-

controlling interest by $0.9 million and increased retained earnings by $0.4 million.

- 16 -

Cash flow hedge

All derivatives are measured at fair value with changes in fair value recorded in the consolidated

statements of income unless they are effective cash flow hedging instruments. The changes in fair

value of cash flow hedging derivatives are recorded in other comprehensive income, to the extent

effective, until the variability of cash flows relating to the hedged asset or liability is recognized in

the consolidated statements of income. Any hedge ineffectiveness is recognized in the

consolidated statements of income immediately. Accordingly, the Company’s subsidiary’s cross-

currency swaps must be measured at fair value in the consolidated financial statements. Since

these cross-currency swaps are used to hedge cash flows on Senior Secured Notes Series A

denominated in U.S. dollars, the changes in fair value are recorded in other comprehensive

income. The impact of measuring the cross-currency swaps at fair value on the interim

consolidated financial statements on September 1, 2007, increased derivative financial

instruments liabilities by $83.5 million, decreased deferred credit presented in long-term debt by

$80.2 million, decreased future income tax liabilities by $1.1 million, decreased non-controlling

interest by $1.5 million and decreased opening accumulated other comprehensive income by

$0.7 million. The impact of measuring the cross-currency swaps at fair value on the interim

consolidated financial statements for the three month period ended November 30, 2007 increased

derivative financial instruments liabilities by $7.8 million, increased future income tax liabilities by

$0.2 million, increased non-controlling interest by $0.3 million and increased accumulated other

comprehensive income by $0.1 million.

Net investment hedge

Financial statements of self-sustaining foreign subsidiaries are translated using the rate in effect at

the balance sheet date for asset and liability items, and using the average exchange rates during

the period for revenue and expenses. Adjustments arising from this translation are deferred and

recorded as foreign currency translation adjustment in accumulated other comprehensive income

and are included in income only when a reduction in the investment in these foreign subsidiaries is

realized. Unrealized foreign exchange gains and losses on long-term debt denominated in foreign

currency, that is designated as a hedge of net investments in self-sustaining foreign subsidiaries,

are recorded as foreign currency translation adjustment in accumulated other comprehensive

income, net of income taxes. As a result, an amount of $1.0 million was reclassified as at August

31, 2007 from the foreign currency translation adjustment to the accumulated other comprehensive

income and the Company’s comparative financial statements were restated in accordance with

transition rules.

Embedded derivatives

All embedded derivatives that are not closely related to the host contracts, are measured at fair

value, with changes in fair value recorded in the consolidated statements of income. On

September 1, 2007 and at November 30, 2007, there are no significant embedded derivatives or

non-financial derivatives that require separate fair value recognition on the consolidated balance

sheet. In accordance with the new standards, the Company selected September 1, 2002, as its

transition date for adopting the standard related to embedded derivatives.

Upcoming standards

In 2006, the CICA issued Handbook Section 3862, Financial Instruments – Disclosures, and

Section 3863, Financial Instruments – Presentation. These Sections are to be applied to interim

and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The

Company is currently evaluating the impact of these new standards.

- 17 -

Accounting changes

In July 2006, the CICA issued Section 1506, Accounting Changes, which modifies certain aspects

of the previous standard. A reporting entity may not change its accounting method unless required

by primary source of GAAP or to provide a more reliable and relevant presentation of the financial

statements. In addition, changes in accounting methods must be applied retroactively and

additional information must be disclosed. This section applies to interim and annual financial

statements relating to fiscal years beginning on or after January 1, 2007. During the first quarter,

the Company adopted this new standard and concluded that it had no significant impact on these

consolidated financial statements.

NON-GAAP FINANCIAL MEASURES

This section describes non-GAAP financial measures used by COGECO 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”, “free cash flow” and “net income

excluding impairment of assets of a subsidiary”.

Cash flow from operations

Cash flow from operations is used by COGECO’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 Company 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)

(3,

Quarters ended November 30,

(unaudited)

2007 2006

Cash flow from operating activities $ 40,861 $ (19,723)

Changes in non-cash operating items

42,997 85,758

Cash flow from operations $ 83,858 $ 66,035

Free cash flow

Free cash flow is used by COGECO’s management and investors to measure COGECO’s ability

to repay debt, distribute capital to its shareholders and finance its growth. Free cash flow is

calculated as follows:

($ 000)

Quarters ended November 30,

(unaudited)

2007

2006

Cash flow from operations

83,858 $ 66,035

Acquisition of fixed assets

(50,959) (67,198)

Increase in deferred charges

(7,517) (7,212)

Assets acquired under capital leases – as per

Note 11 b)

(73) (205)

Free cash flow

25,309 $ (8,580)

- 18 -

Net income excluding impairment of assets of a subsidiary

Net income excluding impairment of assets of a subsidiary is used by COGECO’s management

and investors in order to evaluate what would have been the net income excluding the impairment

of assets of a subsidiary. This allows the Company to isolate the one time adjustments in order to

evaluate the net income from ongoing activities.

($ 000)

Quarters ended November 30,

(unaudited)

2007 2006

Net income (loss)

(9,976) $ 6,751

Impairment of assets net of non-controlling interest

18,500 -

Net income excluding impairment of assets of a

subsidiary

8,524 $ 6,751

ADDITIONAL INFORMATION

This MD&A was prepared on January 9, 2008. Additional information relating to the Company,

including its Annual Information Form, is available on the SEDAR web site at www.sedar.com.

ABOUT COGECO

COGECO is a diversified communications company. Through its Cogeco Cable subsidiary,

COGECO provides approximately 2,569,000 revenue-generating units (RGUs) to 2,365,000

homes passed in its Canadian and Portuguese service territories. Through its two-way broadband

cable networks, Cogeco Cable provides its residential and commercial customers with Analogue

and Digital Television, High Speed Internet as well as Telephony services. Through its Cogeco

Radio-Television subsidiary, COGECO owns and operates the RYTHME FM radio stations in

Montréal, Québec City, Trois-Rivières and Sherbrooke as well as the 93

station in Québec City.

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).

- 19 -

– 30 –

Source: COGECO Inc.

Pierre Gagné

Vice President, Finance and Chief Financial Officer

Tel.: (514) 874-2600

Information: Media

Marie Carrier

Director, Corporate Communications

Tel.: (514) 874-2600

Analyst Conference Call: Thursday, January 10, 2008 at 11:00 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 dialing 5 minutes before the start of the

conference:

Canada/USA Access Number: 1 866 321-8231

International Access Number: + 1 416 642-5213

Confirmation Code: 3458791

By Internet at www.cogeco.ca/investors

A rebroadcast of the conference call will be available until January

16, by dialling:

Canada and USA access number: 1 888 203-1112

International access number: + 1 647 436-0148

Confirmation code: 3458791

- 20 -

Supplementary Quarterly Financial Information

(unaudited)

Quarters ended November 30, August 31, May 31, February 28,

2007

(1)

2006

(1)

2007

(1)

2006

(1)

2007

(1)

2006 2007

(1)

2006

($000, except percentages

and per share data)

Revenue $ 292,770 $ 263,292 $ 269,326 $

199,351 $

277,364 $

189,718 $ 261,120 $

177,359

Operating income before

amortization

104,010

88,367 98,180

68,645 95,495

66,111 83,669

57,765

Operating margin 35.5% 33.6% 36.5% 34.4% 34.4% 34.8% 32.0% 32.6%

Amortization 54,155 45,839 56,018 36,446 48,835 30,658 45,112 30,217

Financial expense 17,606 21,759 19,190 16,864 21,851 14,120 24,181 14,231

Impairment loss 30,298 - -

- - - - -

Income taxes (recovery) 9,277 6,463 (368) (13,950)

9,679 8,461 2,580 5,706

Non-controlling interest 2,543 7,557 19,763 19,022 12,007

7,293 8,240 4,842

Gain (loss) on dilution (107) (7) 27,011 - (64) - 30,990 -

Net income (loss) (9,976) 6,751 30,384 10,300 3,059 5,529 34,546 2,679

Cash flow from

operations

83,858 66,035 75,035 51,729 76,282 52,093 59,266 41,644

Net income (loss) per

share $ (0.60) $ 0.41 $ 1.82 $

0.62 $

0.18 $

0.33 $ 2.08 $

0.16

(1)

Include operating results of the cable subsidiary, Cabovisão, since the date of acquisition of control on August 1, 2006.

Cable sector operating results are generally not subject to material seasonal ﬂuctuations.

However, the loss of Basic Cable service customers is usually greater, and the addition of HSI

service customers is generally lower in the fourth quarter, mainly due to students leaving

campuses at the end of the school year. However, the media sector’s operating results may be

subject to significant seasonal variations. The revenue depends on audience ratings and the

market for conventional radio and television advertising expenditures in the Province of Québec.

Advertising sales, mainly national advertising, are normally weaker in the second and fourth

quarters and, as a result, the operating margin is generally lower in those quarters.

COGECO INC. - 21 -

Customer Statistics

November 30, August 31,

2007 2007

Homes Passe

Ontario

(1)

1,002,971 997,498

Québec 491,788 486,592

Canada 1,494,759 1,484,090

Portugal 869,940 859,376

Total 2,364,699 2,343,466

Revenue Generating Unit

Ontario 1,306,163 1,256,244

Québec 555,171 532,264

Canada 1,861,33

4 1,788,508

Portugal 707,35

5 697,157

Total 2,568,689 2,485,66

Basic Cable Service Customer

Ontario 599,733 594,889

Québec 257,488 254,268

Canada 857,221 849,157

Portugal 298,936 294,003

Total 1,156,157 1,143,160

Discretionnary Service Customer

Ontario 484,611 468,764

Québec 208,976 204,585

Canada 693,587 673,349

Portugal - -

Total 693,587 673,349

Pay TV Service Customer

Ontario 92,036 88,835

Québec 44,355 42,180

Canada 136,391 131,015

Portugal 55,867 54,723

Total 192,258 185,738

High Speed Internet Service Customer

Ontario 335,152 316,363

Québec 105,978 99,473

Canada 441,130 415,836

Portugal 163,829 160,023

Total 604,959 575,859

Digital Television Service Customers

Ontario 255,919 246,267

Québec 140,213 133,612

Canada 396,132 379,879

Portugal - -

Total 396,132 379,879

Telephony Service Customer

Ontario 115,359 98,725

Québec 51,492 44,911

Canada 166,851 143,636

Portugal 244,590 243,131

Total 411,441 386,767

(1) An audit of homes passed in Ontario was completed during the first quarter of fiscal 2007 and, as a result,

the number of homes passed was reduced by 42,386

- 22 -

COGECO INC.

CONSOLIDATED STATEMENTS OF INCOME

Three months ended November 30,

(In thousands of dollars, except per share data)

2007

2006

(unaudited)

Revenue $ $ 292,770

$ 263,292

Operating costs

188,760

174,925

Operating income before amortization 104,010

88,367

Amortization (note 3)

54,155

45,839

Operating income 49,855

42,528

Financial expense (note 4)

17,606

21,759

Impairment of assets of a subsidiary (note 14 c))

30,298

–

Income before income taxes an d following items 1,951

20,769

Income taxes (note 5)

9,277

6,463

Loss on dilution resulting from shares issued by a

subsidiary

107

Non-controlling interest

2,543

7,557

Share in the earnings of a general partnership

–

Net income (loss) $ $ (9,976)

$ 6,751

Earnings (loss) per share (no t e 6)

Basic

$ (0.60)

$0.41

Diluted

$ (0.60)

0.41

- 23 -

COGECO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended November 30,

(In thousands of dollars)

2007

2006

(unaudited)

Net income (loss) $ (9,976)

$ 6,751

Other comprehensive income

Unrealized gains and losses on derivative financial i nstruments designated as cash flow

hedges, net of income taxes of $1,143,000 and non-controlling interest of $4,500,000

(2,153)

–

Reclassification of realized g ains a nd losses to net income on derivative financial

instruments designated as cash flow hedges, net of income taxes of $1,345,000 a nd

non-controlling interest of 4,792,00 0

2,293

–

Unrealized gain on translatio n of net investments in self-sustaining foreign subsi diaries, net

of non-controlling interest of $6,994,000 ($25 ,632,000 in 2006)

3,346

16,538

Unrealized loss on translati on of long-term debt designated as hedge of net investments in

self-sustaining foreign subsidiaries, net of non-contro lling interest of $4,313,000 (net of

income taxes of $1,703,000 and non-controlling interest of $18,453,000 in 2006)

(2,063)

(11,905)

1,423

4,633

Comprehensive income (loss) $ (8,553)

$ 11,384

- 24 -

COGECO INC.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Three months ended November 30,

(In thousands of dollars)

2007

2006

(unaudited)

Balance at beginning , as reported $ 274,946

$ 204,734

Changes in accounting p olicy (note 1)

424

–

Balance at beginning , as restated 275,370

204,734

Net income (loss)

(9,976)

6,751

Dividends on multiple voting shares

(129)

(116)

Dividends on subordinate voting shares

(1,038)

(919)

Balance at end $ 264,227

$ 210,450

- 25 -

COGECO INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

November 30,

2007

August 31,

2007

(unaudited)

(audited)

Assets

Current

Cash and cash equivalents

$ 18,144

$ 65,564

Accounts receivable

84,832

76,345

Income tax receivable

2,320

3,138

Prepaid expenses

6,895

9,117

Broadcasting rights

19,147

14,647

Future income tax assets

14,157

17,986

145,495

186,797

Income tax receivable

1,368

1,345

Broadcasting rights

7,484

17,456

Investments

739

Fixed assets

1,143,863

1,144,923

Deferred charges

55,788

55,450

Intangible assets (note 7)

1,082,367

1,086,750

Goodwill (note 7)

348,298

342,584

$ 2,785,402

$ 2,836,044

Liabilities and Shareholders' equity

Liabilities

Current

Bank indebtedness

$ 14,210

$ 7,458

Accounts payable and accrued liab ilities

212,709

249,343

Broadcasting rights payable

16,196

8,531

Income tax liabilities

3,552

1,350

Deferred and prepaid income

30,402

29,879

Derivative financial instruments

91,294

–

Current portion of long-term debt (note 8)

167,119

17,578

535,482

314,139

Long-term debt (note 8)

766,893

1,036,256

Share in the partner’s deficiency of a general partnership

1,036

Deferred and prepaid income

11,939

11,501

Broadcasting rights payable

5,006

4,408

Pension plans liabiliti es

8,984

8,822

Future income tax liabilities

269,143

267,646

Non-controlling interest

804,566

799,776

2,403,049

2,443,584

Shareholders' equity

Capital stock (note 9)

119,078

Treasury shares (note 9)

(1,522)

(1,054)

Contributed surplus - stock-based compen sation

880

499

Retained earnings

264,227

274,946

Accumulated other comprehensive income (loss) (note 10)

(310)

(1,009)

382,353

392,460

$ 2,785,402

$ 2,836,044

- 26 -

COGECO INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended November 30,

(In thousands of dollars)

2007

2006

(unaudited)

Cash flow from operating activities

Net income (loss)

$ (9,976)

$ 6,751

Adjustments for:

Amortization (note 3)

54,155

45,839

Amortization of deferred financing costs

722

646

Impairment of assets of a subsidiary (note 14 c))

30,298

–

Future income taxes (note 5)

5,178

3,879

Non-controlling interest

2,543

7,557

Loss on dilution resulting from shares issue d b y a

subsidiary

107

Stock-based compensation

388

967

Loss (gain) on disposal of fixed assets

281

(11)

Other

162

400

83,858

66,035

Changes in non-cash oper ating items (note 11a))

(42,997)

(85,758)

40,861

(19,723)

Cash flow from investing activities

Acquisition of fixed assets (not e 11b))

(50,959)

(67,198)

Increase in deferred charges

(7,517)

(7,212)

Decrease in restricted cash

–

Other

(58,414)

(74,297)

Cash flow from financing activities

Increase in bank indebtednes s

6,752

39,725

Increase in long-term debt

10,000

Repayment of long-term debt

(34,665)

(8,270)

Issue of subordinate voting shares

–

120

Acquisition of treasury shares (note 9)

(468)

–

Dividends on multiple voting shares

(129)

(116)

Dividends on subordinate voting shares

(1,038)

(919)

Issue of subordinate voting shares by a subsidiary to non-controlling interest, net of issue

costs

3,056

228

Dividends paid by a subsidiary to non-controlling inter est

(3,272)

(972)

(29,714)

39,796

Net change in cash and cas h equivalents (47,267)

(54,224)

Effect of exchange rate changes on cash and cash equ ivalents denominated in foreign

currencies

(153)

1,616

Cash and cash equivalents at beginning

65,564

71,516

Cash and cash equivalents at end $ $ 18,144

$ 18,908

See supplemental cash flow information in note 11.

- 27 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(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 (“GAAP”), contain all adjustments necessary to

present fairly the financial position of COGECO Inc. as at November 30, 2007 and August 31, 2007 as well as its

results of operations and its ca sh flow for the three month periods ended November 30, 2007 and 2006.

While management believes that the disclosures presented are adequate, these unaudited interim consolidated

financial statements and notes should be read in conjunction with COGECO Inc.’s annual consolidated financial

statements for the year ended August 31, 2007. These unaudited interim consolidated financial statements follow the

same accounting policies as the most recent annual consolidated financial statements, except for the adoption of new

accounting policy on financial instrum ents described below.

Financial instruments

Effective September 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants (“CICA”)

Handbook Section 1530, Comprehensive Income, Section 3855, Financial Instruments – Recognition and

Measurement, Section 3861, Financial Instrum ents – Disclosure and Presentation and Section 3865, Hedges.

Statement of Compreh ensive Income

A new statement entitled consolidated statements of comprehensive income was added to the Company’s

consolidated financial statements and includes net income as well as other comprehensive income. Other

comprehensive income represents changes in shareholders’ equity arising from transactions and events from non-

owner sources, such as changes in foreign currency translation adjustments of net investments in self-sustaining

foreign subsidiaries and long-term debt designated as hedge of net investments in self-sustaining foreign subsidiaries

and changes in the fair value of effective cash flow hedging instruments.

Recognition and Measurement of Financial Instruments

Under these new standards, all financial assets, including derivatives, must be classified as available for sale, held for

trading, held to maturity, or loans and receivables. All financial liabilities, including derivatives, must be classified as

held for trading or other liabilities. All financial instruments classified as available for sale or held for trading are

recognized at fair value on the consolidated balance sheet while financial instruments classified as loans and

receivables or other liabilities will continue to be measured at amortized cost using the effective interest rate method.

The standards allow the Company to designate certain financial instruments, on initial recognition, as held for tradin g.

All of the Company's financial assets are classified as held for trading or loans and receivables. The Company has

classified its cash and cash equivalents as held for trading. Accounts receivable have been classified as loans and

receivables. All of the Company financial liabilities were classified as other liabilities, except for the Company’s

subsidiary’s cross-currency swaps which were classified as held for trading. Held for trading assets and liabilities are

carried at fair value on the balance sheet, with changes in fair value recorded in the consolidated statements of

income, except for the changes in fair value of the cross-currency swaps which are designated as cash flow hedges of

the Senior Secured Notes Series A and are recorded in other comprehensive income. Loans and receivables and all

financial liabilities are carried at amortized cost using the effective interest method. Upon adoption, the Company

determined that none of its financial assets are classified as available for sale or held to maturity. Except for the

treatment of transaction costs and derivative financial instruments mentioned below, the provisions of the new

accounting standards had no impact on the consolidated financial statement on September 1, 2007 and

November 30, 2007.

- 28 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

1. Basis of Presentation (continued)

Transaction costs

Effective September 1, 2007, transaction costs are capitalized on initial recognition and presented as a reduction of

the related financing, except for transaction costs on the revolving loan and the swingline facility which are presented

as deferred charges. These costs are amortized over the term of the related financing using the effective interest rate

method, except for transaction costs on the revolving loan and the swingline facility which are amortized over the term

of the related financing on a straight-line basis. Previously, all transaction costs were capitalized and amortized on a

straight-line basis over the term of the related financing, over a period not exceeding five years. The impact of these

adjustments reduced deferred charges by $1.2 million, reduced long-term debt by $3.1 million, increased future

income tax liabilities by $0.6 million, increased non-controlling interest by $0.9 million and increased retained earnings

by $0.4 million.

Cash flow hedge

All derivatives are measured at fair value with changes in fair value recorded in the consolid ated statements of income

unless they are effective cash flow hedging instruments. The changes in fair value of cash flow hedging derivatives

are recorded in other comprehensive income, to the extent effective, until the variability of cash flows relating to the

hedged asset or liability is recognized in the consolidated statements of income. Any hedge ineffectiveness is

recognized in the consolidated statements of income immediately. Accordingly, the Company’s subsidiary’s cross-

currency swaps must be measured at fair value in the consolidated financial statements. Since these cross-currency

swaps are used to hedge cash flows on Senior Secured Notes Series A denominated in U.S. dollars, the changes in

fair value are recorded in other comprehensive income. The impact of measuring the cross-currency swaps at fair

value on the interim consolidated financial statements on September 1, 2007, increased derivative financial

instruments liabilities by $83.5 million, decreased deferred credit presented in long-term debt by $80.2 million,

decreased future income tax liabilities by $1.1 million, decreased non-controlling interest by $1.5 million and

decreased opening accumulated other comprehensive income by $0.7 million. The impact of measuring the cross-

currency swaps at fair value on the interim consolidated financial statements for the three month period ended

November 30, 2007 increased derivative financial instruments liabilities by $7.8 million, increased future income tax

liabilities by $0.2 million, increased non-controlling interest by $0.3 million and increased accumulated other

comprehensive income by $0.1 million.

Net investment hedge

Financial statements of self-sustaining foreign subsidiaries are translated using the rate in effect at the balance sheet

date for asset and liability items, and using the average exchange rates during the period for revenue and expenses.

Adjustments arising from this translation are deferred and recorded as foreign currency translation adjustment in

accumulated other comprehensive income and are included in income only when a reduction in the investment in

these foreign subsidiaries is realized. Unrealized foreign exchange gains and losses on long-term debt denominated

in foreign currency, that is designated as a hedge of net investments in a self-sustaining foreign subsidiaries are

recorded as foreign currency translation adjustment in accumulated other comprehensive income, net of income

taxes. As a result, an amount of $1.0 million was reclassified as at August 31, 2007 from the foreign currency

translation adjustment to the accumulated other comprehensive income and the Company’s comparative financial

statements were restated in accordance with transition rules.

Embedded derivatives

All embedded derivatives that are not closely related to the host contracts, are measured at fair value, with changes in

fair value recorded in the consolidated statements of income. On September 1, 2007 and at November 30, 2007,

there are no significant embedded derivatives or non-financial derivatives that require separate fair value recognition

on the consolidated balance sheet. In accordance with the new standards, the Company selected September 1,

2002, as its transition date for adopting the standard related to embedded derivatives.

- 29 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

1. Basis of Presentation (continued)

Upcoming standards

In 2006, the CICA issued Handbook Section 3862, Financial Instruments – Disclosures, and Section 3863, Financial

Instruments – Presentation. These Sections are to be applied to interim and annual financial statements relating to

fiscal years beginning on or after October 1, 2007. The Company is currently evaluating the impact of these new

standards.

Accounting changes

In July 2006, the CICA issued Section 1506, Accounting Changes, which modifies certain aspects of the previous

standard. A reporting entity may not change its accounting method unless required by primary source of GAAP or to

provide a more reliable and relevant presentation of the financial statements. In addition, changes in accounting

methods must be applied retroactively and additional information must be disclosed. This section applies to interim

and annual financial statements relating to fiscal years beginning on or after January 1, 2007. During the first quarter,

the Company adopted this new standard and concluded that it had no significant impact on these consolidated

financial statements.

2. Segmented Information

The Company’s activities are divided into two business segments: Cable and Media. The Cable segment is

comprised of Cable Television, High Speed Internet and Telephony services, and the Media segment is comprised of

Radio and Television operations.

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

Head Office

Cable Media and elimination Consolidated

Three months ended November 30,

(unaudited)

2007 2006 2007 2006 2007 2006 2007 2006

Revenue $ 251,833 $ 222,002 $ 40,988 $ 41,341 $ (51) $ (51) $ 292,770 $ 263,292

Operating costs 153,496 138,340 37,436 38,287 (2,172) (1,702) 188,760 174,925

Operating income before

amortization

98,337

83,662 3,552 3,054 2,121

1,651

104,010 88,367

Amortization 52,687 44,309 1,423 1,485 45 45 54,155 45,839

Operating income 45,650 39,353 2,129 1,569 2,076 1,606 49,855 42,528

Financial expense 16,912 21,221 244 187 450 351 17,606 21,759

Impairment of assets of a subsidiar y – –30,298 – – – 30,298 –

Income taxe s 8,375 5,597 183 152 719 714 9,277 6,463

Net assets employed

(1) (2)

$ 2,445,924 $ 2,398,297 $ 38,122 $ 60,076 $ 6,960 $ 8,445 $ 2,491,006 $ 2 466 818

Total assets

(2)

2,677,884 2,714,339 96,976 109,548 10,542 12,157 2,785,402 2 836 044

Fixed assets

(2)

1,130,081 1,119,498 13,339 24,937 443 488 1,143,863 1 144 923

Goodwill

(2)

348,298 342,584 – – – – 348,298 342 584

Acquisition of fixed assets 50,727 67,171 305 232 – – 51,032 67,403

(1)

Total assets less cash and cash equivalents, accounts payable and accrued liabilities, broadcasting rights payable and deferred and prepaid income.

(2)

As at November 30, 2007 and August 31, 2007.

- 30 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

2. Segmented Information (continued)

The following tables sets out certain geo graphic market information based on client’s location:

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Revenue

Canada $ 237,178 $ 209,221

Europe 55,592 54,071

$ 292,770 $ 263,292

As at November 30, As at August 31,

2007 2007

(unaudited) (audited)

Fixed assets

Canada $ 833,448 $ 837,407

Europe 310,415 307,516

$ 1,143,863 $ 1,144,923

Goodwill

Canada $ – $–

Europe 348,298 342,584

$ 348,298 $ 342,584

3. Amortization

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Fixed assets $ 46,138 $ 40,495

Deferred charges 5,574 5,344

Intangible assets 2,443 –

$ 54,155 $ 45,839

- 31 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

4. Financial expense

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Interest on long-term debt $ 16,842 $ 20,451

Amortization of deferred financing costs 407 646

Other 357 662

$ 17,606 $ 21,759

5. Income Taxes

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Current $ 4,099 $ 2,584

Future 5,178 3,879

$ 9,277 $ 6,463

The following table provides the reconciliation between Canadian statutory federal and provincial income taxes and

the consolidated income tax expense:

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Income before income taxes $ 1,951 $ 20,769

Combined income tax rate 33.93 % 34.74 %

Income taxes at combined income tax rate $ 662 $ 7,216

Loss or income subject to lower or higher tax rates (385) (33)

Income taxes arising from non-deductible expenses 123 –

Effect of foreign income tax rate differences (1,164) (824)

Variation of the valuation allowance 10,280 –

Other (239) 104

Income taxes at effective income tax rate $ 9,277 $ 6,463

- 32 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

6. Earnings per Share

The following table provides reconciliation between basic and diluted earnings (loss) per share:

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Net income (loss) $ (9,976) $ 6,751

Weighted average number of multiple voting and subordinate voting shares

outstanding

16,672,652

16,556,333

Effect of dilutive stock options

(1)

– 96,624

Weighted average number of diluted multiple voting and subordinate voting shares

outstanding

16,672,652

16,652,957

Earnings (loss) per share

Basic $ (0.60) $ 0.41

Diluted (0.60) 0.41

(1)

The weighted average dilutive potential number of subordinate voting shares, which were antidilutive for the three month period ended November 30, 2007,

amounted to 82,154. For the three month period ended November 30, 2006, 36,443 stock options 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.

7. Goodwill and Other Intangible Assets

November 30,

2007

August 31,

2007

(unaudited) (audited)

Customer relationships $ 67,475 $ 68,858

Broadcasting licenses

25,120 28,120

Customer base

989,772 989,772

1,082,367 1,086,750

Goodwill

348,298 342,584

$ 1,430,665 $ 1,429,334

- 33 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

7. Goodwill and Other Intangible Assets (continued )

a) Intangible assets

During the first three months, intangible assets variations were as follows:

Customer

relationships

Broadcasting

licenses

Customer

base

Total

(unaudited) (unaudited) (unaudited) (unaudited)

Balance as at August 31, 2007 $ 68,858 $ 28,120 $ 989,772 $ 1,086,750

Amortization (2,443) – – (2,443)

Impairment of assets of a subsidiary – (3,000) – (3,000)

Foreign currency translation adjustment 1,060 – – 1,060

Balance as at November 30, 2007 $ 67,475 $ 25,120 $ 989,772 $ 1,082,367

b) Goodwill

During the first three months, goodwill variation was as follows:

(unaudited)

Balance as at August 31, 2007 $ 342,584

Foreign currency translation adjustment

5,714

Balance as at November 30, 2007 $ 348,298

- 34 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

8. Long-Term Debt

Maturity Interest rate

November 30,

2007

August 31,

2007

(unaudited) (audited)

Parent company

Term Facility 2010 6.66 %

(1)

$ 23,302 $ 25,538

Obligations under capital leases 2010 6.49 – 6.61 101 108

Subsidiaries

Term Facility

Term loan - €104,551,500 2011 5.38

(1)

151,862 150,450

Term loan – €17,358,700 2011 5.25

(1)

25,190 24,979

Revolving loan – €174,000,000

(€196,725,000 as at August 31, 2007)

2011

5.38

(1)

254,562 283,087

Senior Secured Debentures Series 1 2009 6.75 149,636 150,000

Senior – Secured Notes

Series A – US$150 million 2008 6.83

(2)

149,638 158,430

Series B 2011 7.73 174,203 175,000

Deferred credit

(3)

2008 – – 80,220

Obligations under capital leases 2011 6.42 – 8.30 5,210 5,760

Other – – 308 262

934,012 1,053,834

Less current portion 167,119 17,578

$ 766,893 $ 1,036,256

(1)

Average interest rate on debt as at November 30, 2007, including stamping fees.

(2)

Cross-currenc y swap agreements have resulted in an effective interest rate of 7.254% on the Canadian dollar equivalent of the U.S. denominat ed

debt of the Company’s subsidiary, Cogeco Cable Inc.

(3)

The deferred credit represents the amount that was deferred for hedge accounting purpose as at August 31, 2007 under cross-currency swaps

entered into by the Company’s subsidiary, Cogeco Cable Inc., to hedge Senior Secured Notes Series A denominated in U.S. dollars. In

accordance with the standards on financial instruments, the Company’s subsidiary’s cross-currency swaps are now presented as derivative

financial instrument liabilities (see note 1).

- 35 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

9. Capital Stock

Authorized, an unlimited number

Preferred shares of first and second rank, could be issued in series and non-voting, except when specified in the

Articles of Incorporation of the Company or in the Law.

Multiple voting shares, 20 votes per share.

Subordinate voting share, 1 vote per share.

November 30,

2007

August 31,

2007

(unaudited) (audited)

Issued

1,842,860 multiple voting shares $ 12 $ 12

14,829,792 subordinate voting shares 119,066 119,066

$ 119,078 $ 119,078

During the period, subordinate voting share transactions were as fo llows:

Three months ended Twelve months ended

November 30, 2007 August 31, 2007

(unaudited) (audited)

Number of

Amount

Number of

Amount

Balance at beginning 14,829,792 $ 119,066 14,702,556 $ 117,540

Shares issued for cash under the Employee Stock Purchase Plan

and the Stock Option Plan

–

120,196

1,526

Conversion of multiple voting shares into subordinate voting

–

7,040

–

Balance at end 14,829,792 $ 119,066 14,829,792 $ 119,066

- 36 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

9. Capital Stock (continued)

Stock-based plans

The Company offers, 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 Company’s annual consolidated financial

statements. During the first quarter, no stock options were granted to employees by COGECO Inc. However, the

Company’s subsidiary, Cogeco Cable Inc., granted 97,214 stock options (197,407 in 2006) with an exercise price of

$49.82 ($26.63 in 2006), of which 22,683 stock options (56,335 in 2006) were granted to COGECO Inc.’s employees.

In 2006, the Company’s subsidiary also granted 376,000 conditional stock options with an exercise price of $26.63 of

which 262,400 stock options were granted to COGECO Inc.’s employees. These conditional options vest over a

period of three years beginning one year after the day such options are granted and are exercisable over ten years.

The vesting of these options is conditional to the achievement of certain yearly financial objectives by the Portuguese

subsidiary, Cabovisão — Televisão por Cabo, S.A., over a period of three years. The Company records

compensation expense for options granted on or after September 1, 2003. As a result, a compensation expense of

$320,000 ($261,000 in 200 6) was recorded for the three month period end ed November 30, 2007.

The fair value of stock options granted by the Company’s subsidiary, Cogeco Cable Inc., for the three month period

ended November 30, 2007 was $12.88 ($7.37 in 2006) per option. The fair value 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:

2007 2006

Expected dividend yield

0.90 % 1.27 %

Expected volatility

27 % 32 %

Risk-free interest rate

4.25 % 4.05 %

Expected life in years

4.0 4.0

As at November 30, 2007, the Company had outstanding stock options providing for the subscription of 191,258

subordinate voting shares. These stock options can be exercise d at various prices ranging fro m $14.00 to $37.50 and

at various dates up to October 19, 2011.

TQS Inc., an indirect subsidiary of the Company, has also a stock option plan for certain executives and key

employees which is described in the Company’s annual consolidated financial statements. During the three months

period ended November 30, 2007, no stock options (156,156 in 2006) was granted by TQS Inc. No compensation

expense was recorded for the three m onth period ended November 30, 2007 and 2006 related to this plan.

The Company and its subsidiary, Cogeco Cable Inc., had also Performance Unit Plans for key employees which

were terminated in June 2007. A compensation expense of $706,000 was recorded for the three months period ended

November 30, 2006 related to these plans.

Effective October 13, 2006, the Company established a senior executives and designated employee incentive unit

plan (the “Incentive Share Unit Plan”) which is described in the Company’s annual consolidated financial statements.

During the first three months, the Company granted 12,852 Incentive Share Units (none in 2006). These shares were

purchased for a cash consideration of $468,000 and are held in trust for participants until they are completely vested.

The trust, considered as a variable interest entity, is consolidated in the Company’s financial statements with the

value of the acquired shares presented as treasury shares in reduction of capital stock. A compensation expense of

$68,000 (none in 2006) was recorded for the three months period ended November 3 0, 2007 related to this plan.

- 37 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

10. Accumulated Other Comprehensive Income (Loss)

Translation of net

investments in self-

sustaining foreign

subsidiaries

Cash flow hedges

Total

(unaudited) (unaudited) (unaudited)

Balance as at August 31, 2007 $ (1,009) $ – $ (1,009)

Cumulative effect of changes in accounting policy (note 1)

– (724) (724)

Other comprehensive income

1,283 140 1,423

Balance as at November 30, 2007 $ 274 $ (584) $ (310)

11. Statem ents of Cash Flow

a) Changes in non-cash operating items

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Accounts receivable $ (12,153) $ (18,649)

Income tax receivable 827 (1,672)

Prepaid expenses 2,036 (3,516)

Broadcasting rights (6,477) (396)

Accounts payable and accrued liabilities (38,689) (74,866)

Broadcasting rights payable 8,263 5,553

Income tax liabilities 2,231 3,867

Deferred and prepaid income 965 3,921

$ (42,997) $ (85,758)

b) Other information

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Fixed asset acquisitions through capital leases $ 73 $ 205

Financial expenses paid 21,387 24,618

Income taxes paid (recovered) (24) 1,279

- 38 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

12. Employee Future Benefits

The Company and its Canadian subsidiaries offer their employees contributory defined benefit pension plans, a

defined contribution pension plan or collective registered retirement savings plans which are described in the

Company’s annual consoli dated financial statements. The total expenses relate d to these plans are as follows:

Three months ended November 30,

2007 2006

(unaudited) (unaudited)

Contributory defined benefit pension plans $ 807 $ 819

Defined contribution pension plan and collective registered retirement savings plans 900 621

$ 1,707 $ 1,440

13. Contingent liability

The Canadian Radio-television Telecommunications Commission (“CRTC”) collects two different types of fees from

broadcast licensees. These are known as Part I and Part II fees. In 2003 and 2004, lawsuits were commenced in the

Federal Court, alleging that the Part II licence fees are taxes rather than fees and that the regulations authorizing

them are unlawful. On December 14, 2006, the Federal Court ruled that the CRTC did not have the jurisdiction to

charge Part II fees. The Court ruled that licensees were not entitled to a refund of past fees paid. Both the Crown and

the applicants have appealed this case to the Federal Court of Appeal. The applicants are seeking an order requiring

a refund of past fees paid. The Crown is seeking to reverse the finding that Part II fees are unlawful. On October 1st,

2007, the CRTC sent a letter to all broadcast licensees, including the Company’s subsidiaries Cogeco Cable Inc and

Cogeco Radio-Television Inc. The letter stated that the CRTC will not collect Part II license fees due on November

30, 2007 and subsequent years unless the Federal Court of appeal or the Supreme Court of Canada (should the

case be appealed to that level) reverses the Federal Court's decision. The Appeal hearing was held on December

4th and 5th, 2007 in Ottawa. During the hearing, questions were raised by the hearing panel concerning the

appropriateness of considering Part II Licence Fees as a tax rather than a fee under the relevant portion of the

Broadcasting Act. The decision is not expected before several months. The Company believes that there is a

reasonable likelihood that the Federal Court's decision will be reversed. The Company’s subsidiaries had accrued

$9.7 million with respect to these fees for fiscal year 2007 and the first quarter of fiscal 2 008. In the unlikely event that

the Federal Court of Appeal or the Supreme Court of Canada, should this case be appealed to that level, maintains

the decision from the Federal Court, this would have a beneficial impact on the future financial results of the

Company.

- 39 -

COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

14. Subsequent events

a) Corporate income tax rate s

On October 16, 2007, the Canadian federal government announced in its Economic Statement reduction in corporate

income tax rates. According to the new legislation, corporate income tax rates will be further reduced from 20.5% to

19.5% effective January 1, 2008, from 20% to 19% effective January 1, 2009, from 19% to 18% effective January 1,

2010, from 18.5% to 16.5% effective January 1, 2011, and to 15% effective January 1, 2012. These corporate income

tax rates were considered substantively enacted on December 14, 2007. The reduction of these corporate income tax

rates will reduce future income tax expenses by approximately $23 million and increased non-controlling interest by

approximately $16 million in the second quarter of fiscal 2008.

b) Amended and restated credit agreement

On December 14, 2007, the Company concluded an amended and restated credit agreement with a group of four

Canadian banks led by the Canadian Imperial Bank of Commerce (“CIBC”), which will now act as agent for the

banking syndicate. The annually renewable three-year amended credit agreement establishes a revolving credit of

$50 million to which may be added a further credit of $25 million under certain conditions. The amended credit

agreement maintains certain financial commitments with the same security by the Company, its subsidiary Cogeco

Radio-Television Inc. and indirect subsidiary, Cogeco Diffusion Inc. The Company posted a guarantee for a maximum

amount of $12 million in favour of CIBC, which is also TQS’ banker, in the event of any default by TQS under the

terms of its own credit agreement. TQS’ credit agreement provides security over its assets, including its accounts

receivable. If the guarantee were to be called in, the Company would be subrogated to the rights of CIBC and benefit

from the same security.

c) Order under the Companies’ Creditors Arrangement Act (Canada) protecting TQS Inc., its subsidiaries and

its parent 3947424 Canada Inc. (“the TQS Group”)

In October 2007, the Board of Directors of TQS, an indirect subsidiary of the Company, engaged CIBC World Markets

to advise on and assess strategic options for the TQS network in the face of financial difficulties. TQS’ position in the

Québec Francophone over-the-air television market deteriorated markedly in spite of the measures and investments

initiated by the Company over the last several months. The gradual loss of advertising revenue to specialty TV

networks and content accessible over the Internet, combined with increased production costs, the Canadian Radio-

television and Telecommunications Commission’s (“CRTC”) refusal to grant general interest television networks the

same ability to charge subscriber fees for signal distribution as the speciality television networks, the programming

strategy of Société Radio-Canada (“SRC”), which acts like a commercial player rather than a publicly-owned

television broadcaster and SRC’s notice of disaffiliation in Saguenay, Sherbrooke and Trois-Rivières after a 50-year

partnership all contributed to this decision. After considering CIBC World Markets’ report, the Board of Directors of

TQS concluded that it was in the best interest of TQS, its employees and creditors to request court protection. On

December 18, 2007, the Quebec Superior Court issued an order under the Companies’ Creditors Arrangement Act

(Canada) protecting TQS Inc., its subsidiaries and its parent 3947424 Canada Inc. (“the TQS Group”) from claims by

their creditors for an initial suspension period ending on January 17, 2008. Under the order, RSM Richter Inc. has

been appointed as monitor, with a mandate to support the applicants, under Court supervision, in preparing a

creditors arrangement plan.

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COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

14. Subsequent events (continued)

As a result, the Company recorded an asset impairment loss of $30.3 million representing the net assets of the TQS

Group as at November 30, 2007. The impact of this impairment loss on the Company’s consolidated statements of

income is as follows:

(unaudited)

Impairment of assets of a subsidiary $ 30,298

Non-controlling interest

(11,798)

$ 18,500

Also, effective December 18, 2007, the Company will cease to consolidate the financial statements of the TQS Group.

The Company’s consolidated balance sheet as at November 30, 2007, includes the following assets and liabilities

pertaining to the TQS Group:

(unaudited)

Accounts receivable $ 30,000

Prepaid expenses

243

Broadcasting rights

26,631

Fixed assets

10,000

Bank indebtedness

(14,004)

Accounts payable and accrued liabilities

(29,525)

Income tax liabilities

(90)

Deferred and prepaid income

(32)

Broadcasting rights payable

(21,202)

Long-term debt

(248)

Share in the partner’s deficiency of a general partnership

(518)

Pension plan liabilities

(1,423)

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COGECO INC.

Notes to Consolidated Financial Statements

November 30, 2007

(amounts in tables are in thousands of dollars, except per share data)

14. Subsequent events (continued)

The results of the TQS Group included in the consolidated statements of income for the three-month period ended

November 30, 2007 were as follows:

(unaudited)

Revenue $ 32,758

Operating costs

29,957

Operating income before amortization

2,801

Amortization

1,116

Operating income

1,685

Financial expense

238

Income before income taxes and non-controlling interest

1,447

Income taxes

–

Non-controlling interest

579

Net income

$ 868

d) Senior unsecured debenture

On January 8, 2008, the Company’s subsidiary, Cogeco Cable Inc., and the Solidarity Fund QFL entered into an

agreement to issue senior unsecured debenture with par value of $100 million by way of private placement, subject to

usual market conditions. The debenture which must be issued by no later than May 9, 2008, will bear interest at a

fixed rate determined at the then prevailing rate of the ten-year Government of Canada bond plus a spread of 220

basis points. The debenture will be callable under certain conditions.

15. Comparative figures

Certain comparative figures have be en reclassified in order to conform to the presentation ad opted in 2007.

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Press release details

THE CABLE SECTOR DRIVES COGECO’S 2008 FIRST QUARTER PERFORMANCE.

SUSTAINABILITY

Cogeco Fund

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