Csii's Financial Results for Second Quarter Ended June 30, 2000.

Business Editors

MONTREAL--(BUSINESS WIRE)--Aug. 18, 2000

CSII (TSE:CSQ.A.)

Cable Satisfaction International Inc. (TSE:CSQ.) announces its consolidated financial results for the second quarter ended June 30, 2000.

Quarter ended June 30, 2000

Cable Satisfaction International Inc. recorded consolidated operating revenues of $4.1 million in the second quarter ended June 30, 2000, compared with $5.5 million for the same quarter in 1999. This decrease reflects the sale, at the beginning of the first quarter of 2000, of World Satellite Guadeloupe ("WSG"), which had contributed operating revenues of $3.6 million in the second quarter of 1999.

A loss before interest, taxes, depreciation and amortization of $1.2 million was recorded in the second quarter of 2000, compared with earnings of $399,000 for the same period last year. This difference is mainly due to the fact that WSG's results were not included in the second quarter of 2000, unlike in the corresponding period of 1999 when WSG posted earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.2 million. The balance of the loss is explained by an increase in operating and administrative expenses for Cabovisao, attributable to the launching of Internet services, as well as the hiring of additional personnel required for the company's future growth.

Depreciation and amortization reached $2.2 million in the second quarter of the current year, compared to $2.0 million for the same period in 1999. Operating loss was $3.5 million in the second quarter of 2000, compared to $1.6 million in 1999.

Financial revenues of $3.3 million were recorded in the second quarter of 2000, compared to $177,000 for the same period last year. This increase is due to interest revenues generated by the Company's cash and cash equivalents.

Financial expenses for the second quarter of 2000 reached $9.0 million, compared to $1.3 million in 1999. This increase is mainly due to interest expenses related to Senior Notes issued during the first quarter of 2000.

A foreign exchange gain of $6.1 million was posted in the second quarter of 2000, compared to a gain of $245,000 for the same period in 1999. This is mainly attributable to an increase in the value of the U.S. dollar--the currency in which most of the Company's cash and cash equivalents are invested--in relation to the Canadian dollar. The second quarter net loss was $2.3 million, or $0.04 per share, compared with a net loss of $2.9 million, or $0.10 per share, for the same period in 1999.

Six months ended June 30, 2000

For the six months ended June 30, 2000, operating revenues were $8.4 million, compared with $10.9 million in 1999. A loss before interest, taxes, depreciation and amortization of $2.4 million was recorded during the first two quarters of 2000, compared with earnings of $811,000 in 1999. The decline is due to the fact that WSG's results were consolidated only up until its disposal date on January 18, 2000, whereas they had been consolidated for the first half of 1999. Consequently, operating revenues relating to WSG of only $679,000 were recorded for the first six months of 2000, compared to $7.2 million in 1999. Accordingly, WSG posted EBITDA of $186,000 for the six months ended June 30, 2000, compared to $2.4 million for the same period in 1999.

Including the gain on disposal of WSG in the first quarter amounting to $24.6 million, the Company recorded net earnings of $15.5 million, or $0.26 per share, for the first six months of 2000, compared with a net loss of $5.1 million, or $0.19 per share, in 1999.

Review of Operations

Portugal - The number of homes passed increased from 151,663 on June 30, 1999 to 267,929 at the end of the second quarter of 2000, an increase of 77 %. The number of basic service subscribers rose by 119 % to 74,420 on June 30, 2000 from 33,974 on June 30, 1999. The number of Pay TV subscribers reached 11,663, compared to 4,268 in the year-ago period, an increase of 173 %.

In addition, the number of subscribers to high-speed Internet access service offered in the Palmela and Aveiro regions increased to 1,542 as of June 30, 2000. It should be noted that Cabovisao will soon be offering high-speed Internet access service in other Portuguese regions, namely Beja, Castelo Branco, Belmonte, Caldas, Seia and Sines.

The growth in the number of subscribers to cable TV and to the newly launched Internet service generated an increase of 116 % in operating revenues, to $4.1 million for the second quarter of the current year from $1.9 million for the second quarter ended June 30, 1999. This increase would have been even more significant but for the decline in the value of the euro in relation to the Canadian dollar. In fact, with an exchange rate identical to that prevailing in the second quarter of 1999, operating revenues would have been $4.6 million, an increase of 142 %.

A loss before interest, taxes, depreciation and amortization of $670,000 was posted in the second quarter of 2000, compared to a loss of $462,000 for the same period the previous year. The higher loss is explained by the deployment of Internet services as well as by the hiring of additional personnel needed for the company's growth.

Rapid network deployment explains the 69 % increase in depreciation, which reached $2.2 million for the first quarter of 2000, compared to $1.3 million for the same period in 1999. Consequently, Cabovisao's operating loss reached $2.9 million, compared to $1.7 million in 1999.

For the six months ended June 30, operating revenues increased by 108 % to $7.7 million in 2000 from $3.7 million in 1999. With an exchange rate identical to that prevailing during the same period in 1999, operating revenues would have amounted to $8.9 million, an increase of 141 %. During the first six months of 2000, the loss before interest, taxes, depreciation and amortization reached $1.4 million in 2000, compared to $865,000 in 1999.

Other Developments

Csii has acquired international distribution rights for a prepaid smartcard reader system that will allow consumers to take advantage of all cable TV services, whether basic or specialty, used on a daily basis, per channel or per event. This equipment will allow permanent access to cable TV to 100 % of homes passed, while increasing use of the many cable services, Internet access as well as telephony over Internet Protocol. This new technology will also limit churn, thereby reducing operating costs.

Cabovisao has been granted a national license to provide fixed-line voice services in Portugal by the Instituto das communicacoes de Portugal (ICP). Valid for a period of 15 years, this licence is subject to Cabovisao's carrying out its obligations and observing regulations governing fixed-line telephony.

In addition, the construction of the national fiber optic backbone, which will allow us to offer the full range of digital economy services throughout Portugal, started last April.

Company to Pursue its Growth Strategy

The Special Committee mandated by the Board of Directors on June 1, 2000 to evaluate strategic alternatives for Csii has recommended that the Company continue to pursue the rapid growth of Cabovisao, and that discussions that could have led to the sale of the Company be terminated.

After careful consideration of all matters, together with its advisor, TD Securities, the Special Committee determined that it is in the best interests of shareholders for the Company to continue the implementation of its fully funded business plan. The Special Committee is of the opinion that the strong growth in Portugal and the entry into promising market niches will lead to a rapid increase in the Company's value.

Csii builds and operates large bandwidth hybrid fiber coaxial (HFC) networks and, through its subsidiary Cabovisao, provides cable television services and high-speed Internet access in Portugal, where it will also be offering telephony and high-speed data transmission services. Csii will also build a national fibre optic backbone to offer all the services of the new digital economy throughout Portugal.

The subordinate voting shares of Csii are listed on The Toronto Stock Exchange.