UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

OR

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 333-13792

QUEBECOR MEDIA INC.

(Exact name of Registrant as specified in its charter)

Province of Québec, Canada
(Jurisdiction of incorporation or organization)
612 Saint-Jacques Street
Montréal, Québec, Canada H3C 4M8
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class		Name of each exchange on which registered
None		None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

7 ³ / 4 % Senior Notes due March 2016
(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

123,602,807 Common Shares
110,000 Cumulative First Preferred Shares, Series C
2,555,000 Cumulative First Preferred Shares, Series G

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes                 þ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes                 þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes                 o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o            Accelerated filer o            Non-accelerated filer þ

Indicate by check mark which financial statement item the registrant has elected to follow.

þ Item 17            o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes                 þ No

 

 

TABLE OF CONTENTS

		Page
Explanatory Notes		ii
Industry and Market Data		ii
Presentation of Financial Information		ii
Exchange Rate Information		iii
Cautionary Statement Regarding Forward-Looking Statements		iv
PART I
ITEM 1 — IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			1
ITEM 2 — OFFER STATISTICS AND EXPECTED TIMETABLE			1
ITEM 3 — KEY INFORMATION			1
ITEM 4 — INFORMATION ON THE COMPANY			21
ITEM 4A — UNRESOLVED STAFF COMMENTS			74
ITEM 5 — OPERATING AND FINANCIAL REVIEW AND PROSPECTS			75
ITEM 6 — DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			120
ITEM 7 — MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			132
ITEM 8 — FINANCIAL INFORMATION			136
ITEM 9 — THE OFFER AND LISTING			138
ITEM 10 — ADDITIONAL INFORMATION			139
ITEM 11 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			160
ITEM 12 — DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			161
PART II
ITEM 13 — DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			162
ITEM 14 — MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			162
ITEM 15 — CONTROLS AND PROCEDURES			162
ITEM 16 — [RESERVED]			163
ITEM 16A — AUDIT COMMITTEE FINANCIAL EXPERT			163
ITEM 16B — CODE OF ETHICS			163
ITEM 16C — PRINCIPAL ACCOUNTANT FEES AND SERVICES			163
ITEM 16D — EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			164
ITEM 16E — PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			164
PART III
ITEM 17 — FINANCIAL STATEMENTS			164
ITEM 18 — FINANCIAL STATEMENTS			164
ITEM 19 — EXHIBITS			164
Signature			169
Index to Consolidated Financial Statements			170
Certificate of Amendment
By-Law No 2007-2
Fourth Amended and Restated Credit Agreement
Calculation of Ratio of Earnings to Fixed Charges
Subsidiaries of Quebecor Media Inc.
Certification of Pierre Karl Peladeau (S.302)
Certification of Louis Morin (S.302)
Certification of Pierre Karl Peladeau (S.906)
Certification of Louis Morin (S.906)

EXPLANATORY NOTES

     In this annual report, unless otherwise specified, the terms “we,” “our,” “us,” the “Company” and “Quebecor Media” refer to Quebecor Media Inc., a company constituted under Part 1A of the Companies Act (Québec) and its consolidated subsidiaries, collectively. All references in this annual report to “Videotron” are references to our wholly-owned subsidiary Videotron Ltd. and its subsidiaries; all references to “Sun Media” are references to our indirect wholly-owned subsidiary Sun Media Corporation and its subsidiaries; all references in this annual report to “Osprey Media” are to our indirect wholly-owned subsidiary Osprey Media Group Inc. and its subsidiaries; all references to “Le SuperClub Videotron” are to our indirect wholly-owned subsidiary Le SuperClub Vidéotron ltée and its subsidiaries; all references in this annual report to “TVA Group” are to our public subsidiary TVA Group Inc. and its subsidiaries; all references to “Archambault Group” are references to our wholly-owned subsidiary Archambault Group Inc. and its subsidiaries; all references in this annual report to “Nurun” are to our indirect wholly-owned subsidiary Nurun Inc. and its subsidiaries; and all references in this annual report to “Canoe” are to our subsidiary Canoe Inc. and its subsidiaries. All references to “Vidéotron Telecom” are to Videotron Telecom Ltd., which prior to its merger with Vidéotron on January 1, 2006, had been our indirect wholly-owned subsidiary. All references in this annual report to “Quebecor” are references to Quebecor Inc., all references to “Quebecor World” are to Quebecor World Inc., and all references to “Capital CDPQ” are to CDP Capital d’Amérique Investissements inc.

     In this annual report, all references to the “CRTC” are references to The Canadian Radio-television and Telecommunications Commission.

     In this annual report, all references to our “Senior Notes” are references to, collectively, our 7 ³ / 4 % Senior Notes due 2016 issued on January 17, 2006 and our 7 ³ / 4 % Senior Notes due 2016 issued on October 5, 2007.

INDUSTRY AND MARKET DATA

     Industry statistics and market data used throughout this annual report were obtained from internal surveys, market research, publicly available information and industry publications, including the CRTC, A.C. Nielsen Media Research, the Bureau of Broadcast Management (BBM), Kagan Research LLC, the Canadian Newspaper Association, the Audit Bureau of Circulations, NADbank ^® Inc. and ComScore Media Metrix. Industry publications generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of this information is not guaranteed.

     Information contained in this document concerning the media industry, our general expectations concerning this industry and our market positions and market shares may also be based on estimates and assumptions made by us based on our knowledge of the industry and which we believe to be reliable. We believe, however, that this data is inherently imprecise, although generally indicative of relative market positions and market shares. Industry and company data is approximate and may reflect rounding in certain cases.

PRESENTATION OF FINANCIAL INFORMATION

     Our consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in Canada, or Canadian GAAP. For a discussion of the principal differences between Canadian GAAP and the accounting principles generally accepted in the United States, or U.S. GAAP, see Note 26 to our audited consolidated financial statements for the years ended December 31, 2005, 2006 and 2007 included under “Item 17. Financial Statements” of this annual report. We prepare our financial statements in Canadian dollars. In this annual report, references to Canadian dollars, Cdn$ or $ are to the currency of Canada, and references to U.S. dollars or US$ are to the currency of the United States.

     We use certain financial measures that are not calculated in accordance with Canadian GAAP or U.S. GAAP to assess our financial performance. We use these non-GAAP financial measures, such as operating income, cash flows from segment operations, free cash flows from continuing operations and average monthly revenue per user, because we believe that they are meaningful measures of our performance. Our method of calculating these non-GAAP financial measures may differ from the methods used by other companies and, as a result, the non-GAAP financial measures presented in this annual

report may not be comparable to other similarly titled measures disclosed by other companies. We provide a definition of the non-GAAP financial measures used in this annual report under “Item 5. Operating and Financial Review and Prospects”. We provide a definition of operating income, and a reconciliation of operating income to the most directly comparable financial measure under Canadian GAAP and under U.S. GAAP in footnote 1 to the tables under “Item 3. Key Information — A. Selected Financial Data”. When we discuss cash flow from segment operations in this annual report, we provide the detailed calculation of the measure in the same section. When we discuss free cash flow from continuing operations in this annual report, we provide a reconciliation to the most directly comparable GAAP financial measure in the same section.

     Unless otherwise indicated, information provided in this annual report, including all operating data presented, is as of December 31, 2007.

EXCHANGE RATE INFORMATION

     We prepare our financial statements in Canadian dollars. The following table presents the average, high, low and end of period noon buying rates for the periods indicated, in the City of New York for cable transfers in foreign currencies, as published by the Federal Reserve Bank of New York, or the “noon buying rate”. Such rates are presented as U.S. dollars per $1.00 and are the inverse of rates published by the Federal Reserve Bank of New York for Canadian dollars per US$1.00. On March 14, 2008, the inverse of the noon buying rate was $1.00 equals US$1.0135. We do not make any representation that Canadian dollars could have been converted into U.S. dollars at the rates shown or at any other rate.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This annual report contains forward-looking statements with respect to our financial condition, results of operations, business and certain of our plans and objectives. These forward-looking statements are made pursuant to the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate as well as beliefs and assumptions made by our management. Such statements include, in particular, statements about our plans, prospects, financial position and business strategies. Words such as “may,” “will,” “expect,” “continue,” “intend,” “estimate,” “anticipate,” “plan,” “foresee,” “believe” or “seek” or the negatives of these terms or variations of them or similar terminology are intended to identify such forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements, by their nature, involve risks and uncertainties and are not guarantees of future performance. Such statements are also subject to assumptions concerning, among other things: our anticipated business strategies; anticipated trends in our business; and our ability to continue to control costs. We can give no assurance that these estimates and expectations will prove to have been correct. Actual outcomes and results may, and often do, differ from what is expressed, implied or projected in such forward-looking statements, and such differences may be material. Some important factors that could cause actual results to differ materially from those expressed in these forward-looking statements include, but are not limited to:

	•		general economic, financial or market conditions;
	•		the intensity of competitive activity in the industries in which we operate, including competition from alternative means of programs and content transmission;
	•		unanticipated higher capital spending required to address continued development of competitive alternative technologies or the inability to obtain additional capital to continue the development of our business;
	•		our ability to implement successfully our business and operating strategies and manage our growth and expansion;
	•		the outcome of Canada’s upcoming wireless spectrum auction and our ability to successfully pursue a strategy of becoming a facilities-based wireless provider;
	•		our ability to continue to distribute a wide range of television programming and to attract large audiences and readership;
	•		variations in the cost, quality and variety of our television programming;
	•		cyclical and seasonal variations in our advertising revenue;
	•		disruptions to the network through which we provide our digital television, Internet access and telephony services, and our ability to protect such services from piracy;
	•		labour disputes or strikes;
	•		changes in our ability to obtain services and equipment critical to our operations;
	•		changes in laws and regulations, or in their interpretations, which could result in, among other things, the loss (or reduction in value) of our licenses or markets or in an increase in competition, compliance costs or capital expenditures;
	•		our substantial indebtedness and the restrictions on our business imposed by the terms of our debt; and
	•		interest rate fluctuations that affect a portion of our interest payment requirements on long-term debt.

     We caution you that the above list of cautionary statements is not exhaustive. These and other factors are discussed in further detail elsewhere in this annual report, including under “Item 3. Key Information — Risk Factors” of this annual report. Each of these forward-looking statements speaks only as of the date of this annual report. We disclaim any obligation to update these statements unless applicable securities laws require us to do so. We advise you to consult any documents we may file or furnish with the U.S. Securities and Exchange Commission, or the SEC, as described under “Item 10. Additional Information — Documents on Display”.

PART I

The following table provides a reconciliation under U.S. GAAP of operating income to net income (loss) as disclosed in our financial statements:

B — Capitalization and Indebtedness

     Not applicable.

C — Reasons for the Offer and Use of Proceeds

     Not applicable.

D — Risk Factors

      This section describes some of the risks that could affect our business, financial condition and results of operations as well as the market value of our issued and outstanding Senior Notes. The factors below should be considered in connection with any forward-looking statements in this document and with the cautionary statements contained in the “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this document.

      The risks below are not the only ones that we face. Some risks may not yet be known to us and some that we do not currently believe to be material could later turn out to be material. Any of these risks could materially affect our business, financial condition and results of operations.

We operate in highly competitive industries with emerging technological developments, and our inability to effectively compete could have a material adverse effect on our business, prospects, financial condition and results of operations.

     We operate in highly competitive industries. In our cable operations, we compete against direct broadcast satellite providers, or DBS (which is also called DTH in Canada, for “direct-to-home” satellite), multi channel multipoint distribution systems, or MDS, satellite master antenna television systems and over-the-air television broadcasters. In addition, we compete against incumbent local exchange carriers, or ILECs, which have secured licenses to launch video distribution services using video digital subscriber line, or VDSL, technology. The CRTC has approved a regional license for the main ILEC in our market to provide terrestrial broadcasting distribution in Montréal and several other communities in the Province of Québec. The same ILEC has also acquired a cable network in our main service area which currently serves approximately 15,000 customers. We also face competition from illegal providers of cable television services and illegal access to non-Canadian DBS (also called grey market piracy) as well as from signal theft of DBS that enables customers to access programming services from U.S. and Canadian DBS without paying any fees (also called black market piracy). Competitors in the video business also include the video stores industry (rental & sale) and other alternative entertainment media. In addition, the Internet, as well as distribution over mobile devices, may become competitive broadcast distribution platforms in the future.

     In our Internet access business, we compete against other Internet service providers, or ISPs, offering residential and commercial Internet access services as well as open WIFI networks in some cities. The CRTC also requires us to offer access to our high speed Internet system to our ISP competitors and several third party ISPs have access or have requested access to our network. CRTC rules also require that we allow third party ISPs to provide voice or telephony applications in addition to retail Internet access services.

     Our voice-over-IP (or “VoIP”) telephony service has numerous competitors, including ILECs, competitive local exchange carriers, or CLECs, wireless telephone service operators and other providers of telephony services, and competitors that are not facilities based and therefore have a much lower infrastructure cost. Competition from ILECs is expected to increase in 2008 and subsequent years, particularly as a result of the federal government’s recent decision to lift winback restrictions on ILECs and to change the criteria for forbearance from regulation of local exchange services.

     With our current Mobile Virtual Network Operator (or “MVNO”)-based wireless telephony service, we compete against a mix of corporations, some of them being active in some or all the products we offer, while others only offer mobile wireless telephony services in our market. In addition, users of wireless voice and data systems may find their communications needs satisfied by other current or developing technologies, such as WIFI, “hotspots” or trunk radio systems, which have the technical capability to handle mobile telephone calls. There can be no assurance that current or future competitors will not provide services comparable or superior to those we provide or may in the future provide, or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, or introduce competing services. Any of these factors could adversely affect our ability to operate our MVNO-based wireless business successfully and profitably.

     In our broadcasting and publishing operations, we compete for advertising revenue and viewers/readers. Competition for newspaper advertising revenue is largely based on readership, circulation, market demographics, price and content of the newspaper. Competition for readers is largely based on price, editorial content, quality of delivery service

and availability of publications. Competition for advertising revenue and readers comes from local, regional and national newspapers, radio, broadcast and cable television, direct mail and other communications and advertising media that operate in our markets. In recent years, competition has intensified as a result of digital media technologies. Distribution of news, entertainment and other information over the Internet, as well as through other media platforms, such as cellular phones and wireless devices, continues to grow in popularity. These technological developments are increasing the number of media choices available to advertisers and audiences. As media audiences fragment, advertisers will continue to allocate a portion of their advertising budgets to non-traditional media, such as Web sites and search engines. In addition, consolidation in the Canadian broadcasting, publishing and other media industries has increased significantly, and our competitors include market participants with interests in multiple industries and media, some of which have greater financial and other resources than we do.

     We may not be able to compete successfully in the future against existing or potential competitors, and increased competition could have a material adverse effect on our advertising and circulation revenues, prospects, financial condition and results of operations.

Certain risks associated with our participation in Canada’s Auction for Spectrum Licenses for Advanced Wireless Services and other Spectrum in the 2GHz range.

     We have filed an application to participate in Canada’s Auction for Spectrum Licenses for Advanced Wireless Services and other Spectrum in the 2GHz Range, which is scheduled to commence on May 27, 2008 (the “3G Spectrum Auction”). If our application is accepted by Industry Canada, we intend to focus in the 3G Spectrum Auction on those areas that we believe present attractive growth prospects for our service offering, based on an analysis of demographic, economic and other factors (including factors relating to the Province of Québec, in which we operate), and intend to be financially disciplined with respect to prices we are willing to pay for any such licenses. We can provide no assurance, however, that our bidding strategy in the 3G Spectrum Auction will be successful or that spectrum in the auction that meets our internally developed criteria will be available to us at acceptable prices.

     Subject to applicable 3G Spectrum Auction rules and our own strategic considerations, we may also enter into agreements with one or more partners relating to licenses outside of the Province of Québec, with a view to launching a national wireless service operation in Canada. We have not determined whether we will enter into any such agreement, and there can be no assurance that we would be able to enter into any such agreement on commercially compelling terms or at all. If we are successful in the 3G Spectrum Auction and are awarded spectrum, it is currently anticipated that the spectrum for the Province of Québec, if obtained, will be transferred to our wholly-owned subsidiary Videotron , and we are currently considering various alternatives regarding our potential acquisition of spectrum outside the Province of Québec and the launch of a national wireless service.

     If we are successful in the 3G Spectrum Auction, we expect to incur significant operating expenses and capital expenditures to acquire the licenses and build-out and launch this service in the markets in which licenses are granted to us. Any such 3G undertaking will require us to obtain additional financing, and we can provide no assurance that we would be able to obtain any such financing on commercially reasonable terms or at all. Moreover, any such 3G investment would, in the future, also require ongoing capital expenditures for the maintenance, expansion and upgrade of the mobile wireless network.

     In June 2007, Industry Canada released a new antenna tower policy that includes requirements with respect to land-use authority and public consultation regarding proposed tower installations or modifications. These procedures could make it more costly for us to pursue a strategy of building a 3G network and could lead to delays in acquiring new sites for cellular towers.

     The licensing, construction and operation of wireless communications systems in Canada are subject to the licensing requirements and oversight of Industry Canada. In addition, various aspects of wireless communications operations, including the ability of wireless providers to enter into interconnection agreements with traditional wireline telephone companies, are subject to regulation by the CRTC. The government agencies having jurisdiction over any wireless business that we may

develop could adopt regulations or take other actions that could adversely affect our wireless business and operations, including actions that could increase competition or that could increase our costs.

     We anticipate that the 3G Spectrum Auction will be highly competitive, since, at March 10, 2008, thirty groups had filed applications to participate. If we were to become a facilities-based wireless provider, we would compete primarily with established incumbent wireless service providers and MVNOs, and could in the future compete with other new entrant companies, including other MVNOs. In addition, users of wireless voice and data systems may find their communications needs satisfied by other current or developing technologies, such as WIFI, “hotspots” or trunk radio systems, which have the technical capability to handle mobile telephone calls. Our facilities-based wireless provider business would also compete with rivals for dealers and retail distribution outlets. There can be no assurance that current or future competitors will not provide services comparable or superior to those we would provide, or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, or introduce competing services. Any of these factors could adversely affect our ability to launch a facilities-based wireless business successfully and profitably.

     In addition, there can be no assurance that any 3G technology that we may in the future deploy as part of the build-out and launch of a facilities-based wireless service will be competitive or compatible with other technologies. As with any new technology, there is a risk that the new technology may not perform as expected and we may be unable to deliver next generation services in a cost-effective manner. In addition, there are currently various 3G wireless network standards and competing technologies that are being developed and implemented in Canada and other parts of the world. None of the competing technologies is directly compatible with the others. If the 3G technology that gains the most widespread acceptance is not compatible with a network that we may in the future develop, competing services based on such alternative technology may be preferable to subscribers.

We compete, and will continue to compete, with alternative technologies, and we may be required to invest a significant amount of capital to address continuing technological evolution and development.

     The media industry is experiencing rapid and significant technological changes, which has resulted in alternative means of program and content transmission. The continued growth of the Internet has presented alternative content distribution options that compete with traditional media. Furthermore, in each of our broadcasting markets, industry regulators have authorized DTH, microwave services and VDSL services and may authorize other alternative methods of transmitting television and other content with improved speed and quality. We may not be able to successfully compete with existing or newly developed alternative technologies, such as digital television over Internet Protocol connections (IPTV), or we may be required to acquire, develop or integrate new technologies ourselves. The cost of the acquisition, development or implementation of new technologies could be significant and our ability to fund such implementation may be limited and could have a material adverse effect on our ability to successfully compete in the future. Any such difficulty or inability to compete could have a material adverse effect on our business, financial condition or results of operations.

We are regularly required to make capital expenditures to remain technologically and economically competitive. We may not be able to obtain additional capital to continue the development of our business.

     Our cable business has required substantial capital for the upgrade, expansion and maintenance of our network and the launch and expansion of new or additional services and we expect we will in the future need to make additional capital expenditures to maintain and expand services such as Internet access, high definition television, or HDTV, and telephony services. Our strategy of maintaining a leadership position in the suite of products and services currently offered by us and launching new products and services requires capital investments in our network to support growth in our customer base and increases in bandwidth requirements. For that reason, we recently upgraded our networks in Québec City and in the central region of Québec from a bandwidth of 480 MHz to 750 MHz or greater. With the completion of this project, approximately 97% of our network in Québec has been upgraded to a bandwidth of 750 MHz or greater.

     In the future, we may not be able to obtain the funds necessary to finance investments in respect of our capital improvement programs, new strategies and services or other capital expenditure requirements, whether through internally generated funds, additional borrowings or other sources. If we are unable to obtain these funds, we would not be able to implement our business strategies and effect capital expenditure required to maintain our leadership position, and our business,

financial condition, results of operations and prospects could be materially adversely affected. Even if we are able to obtain adequate funding, the period of time required to upgrade our network could have a material adverse effect on our ability to successfully compete in the future.

     See also the following risk factors in this section: “— We operate in highly competitive industries with emerging technological developments, and our inability to effectively compete could have a material adverse effect on our business, prospects, financial condition and results of operations,” “— Certain risks associated with our participation in Canada’s Auction for Spectrum Licenses for Advanced Wireless Services and other Spectrum in the 2GHz range” and “— We compete, and will continue to compete, with alternative technologies, and we may be required to invest a significant amount of capital to address continuing technological evolution and development.”

We may not successfully implement our business and operating strategies.

     Our business strategies are based on leveraging an integrated platform of media assets. Our strategies include offering multi-platform advertising solutions, launching and deploying additional value-added products and services, pursuing cross-promotional opportunities, maintaining our advanced broadband network, pursuing enhanced content development to reduce costs, further integrating the operations of our operating subsidiaries, leveraging geographic clustering and maximizing customer satisfaction. Our ability to successfully implement these strategies could be adversely affected by a number of factors beyond our control, including operating difficulties, regulatory developments, general or local economic conditions, increased competition, technological change and the other factors described in this “Risk Factors” section. Any material failure to implement our strategies could have a material adverse effect on our reputation, business, financial condition, prospects and results of operations and on our ability to meet our obligations, including our ability to service our indebtedness.

We have grown rapidly and are seeking to continue our growth. This rapid growth presents significant strains on our management. If we do not effectively manage our growth, our financial results and operations could be adversely affected.

     We have experienced substantial growth in our business and have significantly expanded our operations in recent years. We have in the past and may in the future seek to make opportunistic or strategic acquisitions (such as our acquisition of Osprey Media) and further expand the types of businesses in which we participate under appropriate conditions. This growth has placed, and will continue to place, a significant demand on our management. We can provide no assurance that we will be successful in either developing or fulfilling the objectives of any such acquisition. Such acquisitions and expansion may require us to incur significant costs or divert significant resources, and may limit our ability to pursue other strategic and business initiatives, which could have an adverse effect on our business, financial condition, prospects or results of operations. In addition, if we are not successful in managing and integrating any acquired businesses, or if we are required to incur significant or unforeseen costs, it could have a material adverse effect on our business, reputation, financial condition or results of operations.

We may not successfully integrate the operations of Osprey Media.

     Our ability to realize the benefits of our acquisition of Osprey Media, including operating efficiencies related to the sharing of management, production, printing and distribution, will depend in part upon whether the operations of Osprey Media can be integrated with our existing newspaper operations in an efficient and effective manner. The integration of these business organizations and operations could interfere with the activities of these companies, which could have material adverse effects on their operations, and failure to successfully integrate, or significant delays in integrating, these business organizations could have an adverse effect on our results of operations and could result in the failure to achieve certain of the anticipated benefits of our acquisition of Osprey Media. Furthermore, the integration of the business organizations may be more costly than anticipated and may divert management attention away from the activities or day-to-day operation of one or more of our businesses, which could have adverse effects on their operations.

Our financial performance could be materially adversely affected if we cannot continue to distribute a wide range of television programming on reasonable terms.

     The financial performance of our cable service business depends in large part on our ability to distribute a wide range of appealing, conveniently-scheduled television programming at reasonable rates. We obtain television programming from suppliers pursuant to programming contracts. The quality and amount of television programming offered by us affect the attractiveness of our services to customers and, accordingly, the prices we can charge. We may be unable to maintain key programming contracts at commercially reasonable rates for television programming. Loss of programming contracts, or our inability to obtain programming at reasonable rates, or our inability to pass on rate increases to our customers could have a material adverse effect on our results of operations.

     Our ability to distribute television programming at a reasonable cost is also linked to the risk of being imposed a carriage fee for over-the-air television. In November 2007, the CRTC agreed to revisit the concept of a subscriber fee proposed by over-the-air television stations (OTAs) for the carriage of their signals by broadcaster distribution undertakings, such as cable and satellite.

     In addition, our ability to attract and retain cable customers depends, to a certain extent, upon our capacity to offer quality content and a variety of programming choices and packages. If the number of specialty channels being offered decreases significantly or if the content offered on such channels does not receive audience acceptance, it may have a significant negative impact on revenues from our cable operations.

Our content may not attract large audiences, which may limit our ability to generate advertising and circulation revenue.

     Revenues from our broadcasting operations and publishing operations are derived from advertising and circulation revenues. Advertising and circulation revenues are largely dependent upon audience acceptance or readership, which is in large part a function of the content and quality offered, and is influenced by factors such as reviews by critics, promotions, quality and acceptance of other competing content in the marketplace, availability of alternative forms of entertainment, general economic conditions, public tastes generally and other intangible factors. In addition, the increase in narrowcast programming or specialty services in Canada has caused the conventional television audience to become increasingly fragmented. These factors continue to evolve rapidly and many are beyond our control. Lack of audience acceptance for our content or shrinking or fragmented audiences or readership could limit our ability to generate advertising and circulation revenue. If our television operations’ ability to generate advertising revenue is limited, we may need to develop new or alternative financing sources in order to be able to continue providing attractive television programming for broad audiences. There can be no assurance that we would be able to develop any such new financing sources, and any such limitation of our ability to generate revenue together with an inability to generate new financing sources could have a material adverse effect on our business, financial condition and results of operations.

We may be adversely affected by variations in our costs, quality and variety of our television programming.

     The most significant cost in our broadcasting business is television programming. Our broadcasting operations may be exposed in the future to volatile or increased television programming costs which may adversely affect our operating results. To that effect, in a submission to the CRTC pursuant to Broadcasting Notice of Public Hearing CRTC 2006-5, dated June 12, 2006, and entitled “Review of certain aspects of the regulatory framework for over-the-air television,” we requested that our regulator lift the current obligations imposed on TVA to buy an earmarked percentage of programs from independent producers that are all members of a single union. This request was denied.

     Developments in cable, satellite, Internet, wireless and other forms of content distribution could also affect both the availability and the cost of programming and increase competition for advertising revenue. The production and distribution costs of television and other forms of entertainment may also increase in the future. Moreover, programs may be purchased for broadcasting two to three years in advance, making it difficult to predict how such programs will perform. In some instances, programs must be replaced before their costs have been fully amortized, resulting in accounting adjustments that would accelerate the recognition of expenses.

Our advertising revenue is subject to cyclical and seasonal variations and prevailing economic conditions, which may cause our results to vary. In addition, traditional television audiences are being fragmented.

     Some of our businesses are cyclical in nature and have experienced significant seasonality due to, among other things, seasonal advertising patterns and seasonal influences on people’s viewing, reading and listening habits. Because we depend upon the sale of advertising for a significant portion of our revenue, our operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. In addition, because a significant portion of our revenue is derived from retail and auto-sector advertisers, which have historically been sensitive to broader economic cycles, our business, financial condition or results of operations could be materially adversely affected by a downturn in the retail or automotive sectors. In addition, the traditional television audience has grown increasingly fragmented, due in part to the evolution of alternative content delivery sources, such as the Internet and electronic mobile devices. If the television market continues to fragment, our business, financial condition and results of operations could be materially adversely affected. See also “Item 4. Information on the Company — Business Overview — Regulation — Canadian Broadcast Programming (Off the Air and Thematic Television) — Advertising” elsewhere in this annual report.

We provide our digital television, Internet access and telephony services through a single clustered network, which may be more vulnerable to widespread disruption.

     We provide our digital television, Internet access and telephony services through a primary headend and our analog television services through twelve additional regional headends in our single clustered network. This characteristic means that a failure in our primary headend could prevent us from delivering some of our products and services throughout our network until we have resolved the failure, which may result in significant customer dissatisfaction. To reduce our risk, we completed the construction of a back-up primary headend.

We depend on third-party suppliers and providers for services and other items critical to our operations.

     We depend on third-party suppliers and providers for certain services and other items that are critical to our cable business and our telephony and wireless operations. These materials and services include set-top boxes, cable and telephony modems, servers and routers, fiber-optic cable, telephony switches, inter city links, support structures, software, the “backbone” telecommunications network for our Internet access and telephony service, and construction services for expansion and upgrades of our network. These services and equipment are available from a limited number of suppliers. If no supplier can provide us with the equipment or services that comply with evolving Internet and telecommunications standards or that are compatible with our other equipment and software, our business, financial condition and results of operations could be materially adversely affected. In addition, if we are unable to obtain critical equipment, software, services or other items on a timely basis and at an acceptable cost, our ability to offer our products and services and roll out our advanced services may be delayed, and our business, financial condition and results of operations could be materially adversely affected.

We are dependent upon our information technology systems and those of certain third-parties and the inability to enhance our systems or a security breach or disaster could have an adverse impact on our financial results and operations.

     The day-to-day operation of our business is highly dependent on information technology systems, including those of certain third-party suppliers. An inability to maintain and enhance our existing information technology systems or obtain new systems to accommodate additional customer growth or to support new products and services could have an adverse impact on our ability to acquire new subscribers, retain existing customers, produce accurate and timely billing, generate revenue growth and manage operating expenses, all of which could adversely impact our financial results and position. We use industry standard network and information technology security, survivability and disaster recovery practices.

Malicious and abusive Internet practices could impair our cable data services.

     Our cable data customers utilize our network to access the Internet and, as a consequence, we or they may become victim to common malicious and abusive Internet activities, such as unsolicited mass advertising (or spam) and dissemination of viruses, worms and other destructive or disruptive software. These activities could have adverse consequences on our network and our customers, including degradation of service, excessive call volume to call centers and damage to our customers’ equipment and data or ours. Significant incidents could lead to customer dissatisfaction and,

ultimately, loss of customers or revenue, in addition to increased costs to us to service our customers and protect our network. Any significant loss of cable data customers or revenue or significant increase in costs of serving those customers could adversely affect our growth, financial condition and results of operations.

We may not be able to protect our services from piracy, which may have a negative effect on our customer base and lead to a possible decline in revenues.

     In our cable, Internet access and telephony operations, we may not be able to protect our services from piracy. We may be unable to prevent unauthorized access to our analog and digital programming, as well as our Internet access services. We use encryption technology to protect our cable signals from unauthorized access and to control programming access based on subscription packages. We may not be able to develop or acquire adequate technology to prevent unauthorized access to our services, which may have a negative effect on our customer base and lead to a possible decline in our revenues.

We may be adversely affected by variations in the cost of newsprint. In addition, our operations are labour-intensive, resulting in a relatively high fixed-cost structure.

     Newsprint, which is the basic raw material used to publish newspapers, has historically been and may continue to be subject to significant price volatility. During 2007, our newspaper operations’ total newsprint consumption was approximately 170,000 metric tonnes. Newsprint represents our single largest raw material expense and one of our most significant operating costs. Newsprint expense represented approximately 12.7% ($106.3 million) of our Newspapers segment’s cost of sales, selling and administrative expenses for the year ended December 31, 2007. We currently anticipate that the market price of newsprint will increase in 2008, based on recent announcements from our supplier citing higher manufacturing costs. Changes in the price of newsprint could significantly affect our earnings, and volatile or increased newsprint costs have had, and may in the future have, a material adverse effect on our financial condition and results of operations.

     In order to obtain more favourable pricing, we source substantially all of our newsprint from a single newsprint producer. We currently obtain newsprint from this supplier at a discount to market prices, and receive additional volume rebates for purchases above certain thresholds. There can be no assurance that this supplier will continue to supply newsprint to us on favourable terms or at all. If we are unable to continue to source newsprint from this supplier on favourable terms, or if we are unable to otherwise source sufficient newsprint on terms acceptable to us, our costs could increase materially, which could have a significant negative impact on our results.

     In addition since newspaper publishing is labour intensive, our business has a relatively high fixed cost structure. During periods of economic contraction, our revenue may decrease while certain costs remain fixed, resulting in decreased earnings.

We may be adversely affected by strikes and other labour protests.

     At December 31, 2007, approximately 38% of our 17,300 employees were represented by collective bargaining agreements. Through our subsidiaries, we are currently a party to 115 collective bargaining agreements:

	•		Videotron is party to 5 collective bargaining agreements, representing approximately 2,558 employees. Of these collective bargaining agreements, one (representing approximately 40 employees) has expired. Negotiations regarding this collective bargaining agreement will be undertaken in 2008. Two others, representing approximately 2,308 employees, or 90% of Videotron’s unionized employees, will expire in December 2009. The remaining two collective bargaining agreements, representing 210 employees, or 8% of Videotron’s unionized workforce, will expire between January 2010 and August 2011;
	•		Sun Media is party to 48 collective bargaining agreements, representing approximately 2,004 employees. Of these, 12 collective bargaining agreements, representing approximately 941 employees, or 47% of Sun Media’s unionized workforce, have expired. Negotiations regarding these 12 collective bargaining agreements are either in progress or will be undertaken in 2008. The other 36 of Sun Media’s collective bargaining agreements,

representing approximately 1,063 employees, or 53% of its unionized workforce, are scheduled to expire on various dates through December 2010;

	•		Osprey Media is party to 40 collective bargaining agreements, representing approximately 820 employees. All of Osprey Media’s collective bargaining agreements are scheduled to expire on various date between June 2008 and April 2011;
	•		TVA Group is party to 15 collective bargaining agreements, representing approximately 830 employees. Of this number, 7 collective bargaining agreements, representing approximately 120 employees, or 14% of its unionized workforce, are expired. Negotiations regarding these 7 collective bargaining agreements are either in progress or will be undertaken in 2008. 8 of TVA Group’s collective bargaining agreements, representing approximately 710 employees, or 86% of its unionized workforce, will expire between October 2008 and the end of December 2009; and
	•		The other 7 collective bargaining agreements, representing approximately 370 or 6% of our unionized employees, will expire between the end of April 2009 and June 2010.

     We have in the past experienced labour disputes which have disrupted our operations, resulted in damage to our network or our equipment and impaired our growth and operating results, including a current labour dispute affecting unionized pressroom, newsroom and office employees of the Journal de Québec that began on April 22, 2007, and, recently, a labour disruption involving the pressroom at the Journal de Montréal between June 2006 and February 2007. We cannot predict the outcome of any current or future negotiations relating to labour disputes, union representation or the renewal of our collective bargaining agreements, nor can we assure you that we will not experience work stoppages, strikes, property damage or other forms of labour protests pending the outcome of any current or future negotiations. If our unionized workers engage in a strike or if there is any other form of work stoppage, we could experience a significant disruption of our operations, damages to our property and/or service interruption, which could adversely affect our business, assets, financial position and results of operations. Even if we do not experience strikes or other forms of labour protests, the outcome of labour negotiations could adversely affect our business and operating results.

We may be adversely affected by litigation and other claims.

     In the normal course, we are involved in various legal proceedings and other claims relating to the conduct of our business. For example, in July 2007, a motion to certify a class action was filed in the Province of Québec with respect to interruptions in Videotron’s Internet service. Although, in the opinion of our management, the outcome of this class action and other claims is not expected to have a material adverse effect on our results, liquidity or financial position, a negative outcome could have such an adverse effect. Moreover, the cost of defending against lawsuits and diversion of management’s attention could be significant.

We depend on key personnel.

     Our success depends to a large extent upon the continued services of our senior management and our ability to retain skilled employees. There is intense competition for qualified management and skilled employees, and our failure to recruit, retain and train such employees could have a material adverse effect on our business, financial condition or operating results. In addition, to implement and manage our businesses and operating strategies effectively, we must maintain a high level of content quality, efficiency and performance and must continue to enhance our operational, financial and management systems, and attract, train, motivate and manage our employees. If we are not successful in these efforts, it may have a material adverse effect on our business, results of operations and financial condition.

We have substantial debt and significant interest payment requirements, which could adversely affect our financial condition and therefore make it more difficult for us to fulfill our obligations, including our obligations under our Senior Notes.

     We currently have a substantial amount of debt and significant interest payment requirements. As of December 31, 2007, we had $3.0 billion of consolidated long-term debt. Our substantial indebtedness could have significant consequences, including the following:

	•		increase our vulnerability to general adverse economic and industry conditions;
	•		require us to dedicate a substantial portion of our cash flow from continuing operations to make interest and principal payments on our indebtedness, reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes;
	•		limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;
	•		place us at a competitive disadvantage compared to our competitors that have less debt or greater financial resources; and
	•		limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds on commercially reasonable terms, if at all.

     Although we are leveraged, the respective indentures governing our outstanding Senior Notes, as well as our existing credit facilities, permit us to incur substantial additional indebtedness in the future, including up to an additional $100.0 million that we may borrow under our revolving credit facility. We are also permitted to borrow up to a further $350.0 million under our existing credit facilities. For more information regarding our long-term debt and our 2007 financing transactions, see Notes 4 and 5 of our audited consolidated financial statements for the year ended December 31, 2007 included under “Item 17. Financial Statements” of this annual report. If we or our subsidiaries incur additional debt, the risks we now face as a result of our leverage could intensify.

Restrictive covenants in our outstanding debt instruments may reduce our operating and financial flexibility, which may prevent us from capitalizing on certain business opportunities.

     Our Senior Secured Credit Facilities and the respective indentures governing our outstanding Notes contain a number of operating and financial covenants restricting our ability to, among other things:

	•		borrow money or sell preferred stock;
	•		issue guarantees of debt;
	•		make certain types of investments;
	•		pay dividends and make other restricted payments;
	•		create or permit certain liens;
	•		use the proceeds from sales of assets and subsidiary stock;
	•		enter into asset sales;
	•		create or permit restrictions on the ability of our restricted subsidiaries, if any, to pay dividends or make other distributions;
	•		engage in certain transactions with affiliates; and
	•		enter into mergers, consolidations and transfers of all or substantially all of our assets.

     If we are unable to comply with these covenants and are unable to obtain waivers from our lenders, we would be unable to make additional borrowings under our credit facilities, our indebtedness under these agreements would be in default and could, if not cured or waived, result in an acceleration of our debt and cause cross-defaults under our other debt, including our Senior Notes. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. In addition, if we incur additional debt in the future, we may be subject to additional covenants, which may be more restrictive than those that we are subject to now. Even if we are able to comply with all applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

We are a holding company and depend on our subsidiaries to generate sufficient cash flow to meet our debt service obligations, including payments on our Senior Notes.

     We are a holding company and a substantial portion of our assets are the capital stock of our subsidiaries. As a holding company, we conduct substantially all of our business through our subsidiaries, which generate substantially all of our revenues. Consequently, our cash flow and ability to service our debt obligations, including our outstanding notes, are dependent upon the earnings of our subsidiaries and the distribution of those earnings to us, or upon loans, advances or other payments made by these entities to us. The ability of these entities to pay dividends or make other loans, advances or payments to us will depend upon their operating results and will be subject to applicable laws and contractual restrictions contained in the instruments governing their debt. Each of Videotron and Sun Media has outstanding publicly held notes and each of Videotron, Sun Media and Osprey Media has credit facilities that limit the ability of each to distribute cash to us.

     The ability of our subsidiaries to generate sufficient cash flow from operations to allow us to make scheduled payments on our debt obligations, will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our or their control. We cannot assure you that the cash flow and earnings of our operating subsidiaries and the amount that they are able to distribute to us as dividends or otherwise will be sufficient for us to satisfy our debt obligations. If we are unable to satisfy our obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any such alternative refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, could have a material adverse effect on our business, financial condition and results of operations.

We may need to refinance certain of our indebtedness. Our inability to do so on favourable terms, or at all, could have a material adverse effect on us.

     We may need to refinance certain of our existing debt instruments at their term. Our ability to obtain additional financing to repay our existing debt at maturity will depend upon a number of factors, including prevailing market conditions and our operating performance. There can be no assurance that the terms and conditions of such additional financing will be favourable to us or that any such financing will be available at all.

We may be adversely affected by exchange rate fluctuations.

     Most of our revenues and expenses are received or denominated in Canadian dollars. However, certain capital expenditures, such as the purchase of set-top boxes and cable modems and certain capital expenditures, are paid in U.S. dollars. Also, a substantial portion of our debt is denominated in U.S. dollars, and interest, principal and premium, if any, thereon is payable in U.S. dollars. For the purposes of financial reporting, any change in the value of the Canadian dollar against the U.S. dollar during a given financial reporting period would result in a foreign exchange gain or loss on the translation of any unhedged U.S. dollar denominated debt into Canadian dollars. Consequently, our reported earnings and debt could fluctuate materially as a result of foreign exchange gains or losses. Although we have entered into transactions to hedge the exchange rate risk with respect to 100% of our U.S. dollar-denominated debt, these hedging transactions could, in certain instances, prove economically ineffective and may not be successful in protecting us against exchange rate fluctuations, or we may in the future be required to provide cash and other collateral to secure our obligations with respect to such hedging transactions.

     In addition, certain cross-currency interest rate swaps entered into by Quebecor Media and its subsidiaries include an option that allows each party to unwind the transaction on a specific date at the then-fair value.

     The fair value of the derivative financial instruments are estimated using period-end market rates and reflect the amount Quebecor Media would receive or pay if the instruments were closed out at those dates. At December 31, 2007, the

net aggregate fair market value of the derivative financial instruments was negative $538.5 million. See also “Item 11. Quantitative and Qualitative Disclosures About Market Risk” of this annual report.

     Certain of the commodities we consume in our daily operations are traded on commodities exchanges or are negotiated on their respective markets in U.S. dollars, and, therefore, although we pay our suppliers in Canadian dollars, the prices we pay for such commodities may be affected by fluctuations in the exchange rate. We have entered into or may in the future enter into transactions to hedge the exchange rate risk related to the prices of some of those commodities. However, fluctuations of the exchange rate for the portion of our commodities purchases that are not hedged could affect the prices we pay for such commodities and could have an adverse effect on our results of operations.

We are subject to extensive government regulation. Changes in government regulation could adversely affect our business, financial condition, prospects and results of operations.

     Broadcasting operations in Canada are subject to extensive government regulation. Regulations govern the issuance, amendment, renewal, transfer, suspension, revocation and ownership of broadcast programming and distribution licenses. With respect to distribution, regulations govern, among other things, the distribution of Canadian and non-Canadian programming services and the maximum fees to be charged to the public in certain circumstances. In addition, there are significant restrictions on the ability of non-Canadian entities to own or control broadcasting licenses in Canada. See “Item 4. Information on the Company — Business Overview — Regulation”.

     Our broadcasting distribution and telecommunications operations (including Internet access service) are regulated respectively by the Broadcasting Act (Canada) and the Telecommunications Act (Canada) and regulations thereunder. The CRTC which administers the Broadcasting Act and the Telecommunications Act , has the power to grant, amend, suspend, revoke and renew broadcasting licenses, approve certain changes in corporate ownership and control, and make regulations and policies in accordance with the Broadcasting Act and the Telecommunications Act , subject to certain directions from the Federal Cabinet. We are also subject to technical requirements and performance standards under the Radiocommunication Act (Canada) administered by Industry Canada. Furthermore, the Federal Government introduced a bill in a previous session of Parliament which would permit the Competition Bureau, under the Competition Act (Canada), to impose fines of up to $15.0 million on telecommunications companies that do not comply with this law. We do not know whether this bill will be re-introduced in Parliament or whether it will become law.

     At the present time, the CRTC, through an exemption order, does not regulate the content of the Internet or interactive television and does not regulate broadcast distribution via the Internet. However, the CRTC has a policy of reviewing any of its exemption orders every five to seven years.

     On January 15, 2008, the CRTC issued its determination in Broadcasting Public Notice CRTC 2008-4, entitled “Diversity of Voices.” In this public notice, the CRTC introduced new policies with respect to cross-media ownership; the common ownership of television services, including pay and specialty services; and the common ownership of broadcasting distribution undertakings. The CRTC’s existing policies with respect to the common ownership of over-the-air television and radio undertakings remain in effect. The CRTC will generally permit ownership by one person of no more than one conventional television station in one language in a given market. The CRTC, as a general rule, will not approve applications for a change in the effective control of broadcasting undertakings that would result in the ownership or control, by one person, of a local radio station, a local television station and a local newspaper serving the same market. Where a person that controls a local radio station and a local television station acquires a local newspaper serving the same market, the CRTC will, at the earliest opportunity, require the licensee to explain why, in light of this policy, its radio or television licence(s) should be renewed. The CRTC, as a general rule, will not approve applications for a change in effective control that would result in the control, by one person, of a dominant position in the delivery of television services to Canadians that would impact on the diversity of programming available to television audiences. As a general rule, the CRTC will not approve transactions that would result in the control by one person of more than 45% of the total television audience share — including audiences to both discretionary and OTA services. The CRTC will carefully examine transactions that would result in the control by one person of between 35% and 45% of the total television audience share — including audiences to both discretionary and OTA services. Barring other policy concerns, the CRTC will process expeditiously transactions that would result in the control by one person of less than 35% of the total television audience share — including audiences to both discretionary and OTA services. The

CRTC, as a general rule, will not approve applications for a change in the effective control of broadcasting distribution undertakings (BDUs) in a market that would result in one person being in a position to effectively control the delivery of programming services in that market. The CRTC is not prepared to allow one person to control all BDUs in any given market.

     On July 5, 2007, the CRTC announced a review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services (Broadcasting Notice of Public Hearing CRTC 2007-10). As part of this review, the CRTC is considering reducing the amount of regulation for broadcasting distribution undertakings and discretionary programming services to the minimum essential to achieve the objectives under the Broadcasting Act , relying instead on market forces wherever possible. Whether any changes, and if so what changes, to either regulatory framework will arise from this review cannot be predicted with certainty.

     Changes to the regulations and policies governing broadcast television, specialty program services and program distribution through cable or alternate means, the introduction of new regulations, policies or terms of license or change in the treatment of the tax deductibility of advertising expenditures could have a material adverse effect on our business, financial condition, prospects and results of operations. For example, the Supreme Court of Canada decided in April 2002 that the Radiocommunication Act (Canada) covers and prohibits both the “black market” reception of satellite television signals ( i.e. the unauthorized decoding of Canadian and foreign encrypted satellite signals) and the “grey market” reception of satellite television signals ( i.e. the reception of foreign signals through subscriptions in Canada paid to foreign satellite television providers), but expressly did not rule on the question of the constitutionality of the legislative prohibition against grey market reception. On October 28, 2004, a Québec court of first instance held that the provisions of the Radiocommunication Act (Canada), which prohibited grey market reception of satellite signals, violated the principle of freedom of expression guaranteed by the Canadian Charter of Rights and Freedoms and were therefore invalid. The Québec court suspended its declaration of invalidity for a one-year period starting on the date of the judgment. The Government of Canada filed an appeal of the decision in order to attempt to render the prohibition of grey market reception valid under the Canadian Charter of Rights and Freedoms. On March 31, 2005, the Québec Superior Court overturned the earlier ruling of unconstitutionality on the basis that the first instance judge erred in ruling on the constitutionality of the prohibition against grey market reception in that case as it involved black market reception. In September 2006, the Québec Court of Appeal upheld the lower court’s decision.

     On December 18, 2006, the federal government issued a policy direction to the CRTC which requires the CRTC to now take a more market-based approach to implementing the Telecommunications Act . This policy direction applies prospectively to the wide-variety of telecommunications-related regulatory issues that the CRTC handles. Application of this policy could result in future material changes to telecommunications regulation.

     As described more fully under the heading “Item 4. Information on the Company — Business Overview — Regulation — Canadian Broadcast Distribution (Cable Television) — Licensing of Canadian Broadcasting Distribution Undertakings,” the CRTC has approved, since August 2007, the applications of a number of ILECs for forbearance from regulation of residential and business local exchange services affecting a large portion of the market in which Videotron operates. These rulings allow ILECs the right to adjust their prices for local exchange services in the approved exchanges without the need for CRTC approval. Such price flexibility by our ILEC competitors for local exchange services could have an adverse impact on our ability to compete successfully with them in the local telephony market.

     On December 20, 2007, the CRTC granted conditional approval to a new telecommunications consumer agency, to which Videotron had previously adhered voluntarily. Among other things, the CRTC ruled that all telecommunications service providers with annual revenues in excess of $10.0 million must become members of the agency, and directed that certain modifications be made to the agency’s governance and complaint resolution procedures. On February 4, 2008, the major Canadian cable operators, including Videotron, filed an application to review and vary the CRTC’s decision, asserting that the CRTC had overstepped its legislative authority. A ruling on this application is expected in due course.

     For a more complete description of the regulatory environment affecting our business, see “Item 4. Information on the Company — Business Overview — Regulation”.

The CRTC may not renew our existing distribution licenses or grant us new licenses on acceptable terms, or at all.

     Our CRTC distribution licenses must be renewed from time to time, typically every seven years, and cannot be transferred without regulatory approval.

     While CRTC regulations and policies do not require CRTC approval before a broadcaster purchases an unregulated media entity, such as a newspaper, the CRTC may consider the issue of our cross-media ownership at license renewal proceedings, and may also consider the issue in deciding whether to grant new licenses to us. The CRTC further has the power to prevent or address the emergence of undue competitive advantage on behalf of one licensee where it is found to exist.

     The CRTC may require us to take measures which could have a material adverse effect on the integration of our assets, our employees and our ability to realize certain of the anticipated benefits of our acquisitions. Our inability to renew any of our licenses or acquire new interests or licenses on acceptable terms, or at all, could have a material adverse effect on our business, financial condition or results of operations.

We are required to provide third-party Internet service providers with access to our cable systems, which may result in increased competition.

     The four largest cable operators in Canada, including Videotron, have been required by the CRTC to provide third-party Internet service providers with access to their cable systems at mandated cost-based rates. The CRTC has further directed us to file, at the same time we offer any new retail Internet service speed, proposed revisions to our third-party internet access (or “TPIA”) tariff to include this new speed offering. TPIA tariff items have been filed and approved for all Videotron Internet service speeds, except certain recent speed offerings available over only a portion of Videotron’s network. Several third-party Internet service providers are now interconnected to our cable network and so providing retail Internet access services to the general public.

     The CRTC also requires the large cable carriers, such as us, to allow third party Internet service providers to provide voice or telephony applications in addition to retail Internet access services.

     As a result of these requirements, we may experience increased competition for retail cable Internet and residential telephony customers. In addition, because our third-party Internet access rates are regulated by the CRTC, we could be limited in our ability to recover our costs associated with providing this access.

     On March 3, 2008, the CRTC released a decision affirming that cable TPIA services are not ‘essential services’, yet mandated that they continue to be provided at cost-based rates until such time as it has been demonstrated that a functionally equivalent, practical and feasible wholesale alternative exists.

We may have to support increasing costs in securing access to support structures needed for our network.

     We require access to the support structures of hydro-electric and telephone utilities and to municipal rights of way to deploy our cable network. Where access cannot be secured, we may apply to the CRTC to obtain a right of access under the Telecommunications Act (Canada).

     In July 2006, we secured our access to support structures of the largest hydro-electric company operating in Québec (Hydro-Québec) by ratifying a Pole Agreement which will be ending in December 2010. We have also entered into or expect to enter into similar arrangements with a number of smaller hydro-electric companies.

We are subject to a variety of environmental laws and regulations.

     We are subject to a variety of environmental laws and regulations. Certain of our operations are subject to federal, provincial, state and municipal laws and regulations concerning, among other things, emissions to the air, water and sewer discharge, the handling and disposal of hazardous materials and waste, recycling, the cleanup of contaminated sites or otherwise relating to the protection of the environment. In addition, laws and regulations relating to workplace safety and worker health, which, among other things regulate employee exposure to hazardous substances in the workplace, also govern our operations. Failure to comply with present or future laws or regulations could result in substantial liability to us.

Environmental laws and regulations and their interpretation have changed rapidly in recent years and may continue to do so in the future. Our properties, as well as areas surrounding those properties, particularly those in areas of long-term industrial use, may have had historic uses, or may have current uses, in the case of surrounding properties, which may affect our properties and require further study or remedial measures. We are not currently planning any material study or remedial measure, and none is currently required by regulatory authorities. However, we cannot provide assurance that all environmental liabilities have been determined, that any prior owner of our properties did not create a material environmental condition not known to us, that a material environmental condition does not otherwise exist as to any such property, or that expenditure will not be required to deal with known or unknown contamination.

Our auditors are not required to issue a report on our internal control over financial reporting in this annual report.

     Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have, as a non-accelerated filer, recently completed the process of documenting, reviewing and, where appropriate, improving our internal control over financial reporting in connection with our first annual management assessment of the effectiveness of our internal control over financial reporting. Management’s report on our internal controls over financial reporting is included in “Item 15. Controls and Procedures” of this annual report. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related temporary SEC rules, this annual report does not include a report of the Company’s registered public accounting firm on our internal control over financial reporting.

     While we have concluded that our internal control over financial reporting was effective as of December 31, 2007, we cannot be certain that, when our auditors are required to perform an audit of our internal control over financial reporting, they will deliver their report without identifying areas for further attention or improvement, including material weaknesses.

There is no public market for our Senior Notes.

     There is currently no established trading market for our issued and outstanding Senior Notes and we do not intend to apply for listing of any of our notes on any securities exchange or on any automated dealer quotation system. No assurance can be given as to the prices or liquidity of, or trading markets for, any series of our Senior Notes. The liquidity of any market for our notes will depend upon the number of holders of our Senior Notes, the interest of securities dealers in making a market in our Senior Notes, prevailing interest rates, the market for similar securities and other factors, including general economic conditions, our financial condition and performance and our prospects. The absence of an active market for our notes could adversely affect the market price and liquidity of our Senior Notes.

     In addition, the market for non-investment grade debt has historically been subject to disruptions that caused volatility in prices. It is possible that the market for our Senior Notes will be subject to disruptions. Any such disruptions may have a negative effect on your ability to sell our notes regardless of our prospects and financial performance.

Non-U.S. holders of our Senior Notes are subject to restrictions on the resale or transfer of our notes.

     Although we have registered our Senior Notes under the Securities Act, we did not, and we do not intend to, qualify our notes by prospectus in Canada, and, accordingly, the notes remain subject to restrictions on resale and transfer in Canada. In addition, non-U.S. holders remain subject to restrictions imposed by the jurisdiction in which the holder is resident.

We may not be able to finance an offer to purchase our Senior Notes as required by the respective indentures governing our notes following a change of control because we may not have sufficient funds at the time of the change of control or our Senior Secured Credit Facilities may not allow the repurchases.

     If we experience a change of control, as that term is defined in the indenture governing our Senior Notes, or if we or our subsidiaries dispose of significant assets under specified circumstances, we may be required to make an offer to repurchase all of our notes prior to maturity. We cannot assure you that we will have sufficient funds or be able to arrange for additional financing to repurchase the notes following such change of control or asset sale. There is no sinking funds with respect to our outstanding Senior Notes.

     In addition, under our Senior Secured Credit Facilities, a change of control would be an event of default. Any future credit agreement or other agreements relating to our senior indebtedness to which we become a party may contain similar provisions. Similarly, our failure to offer to purchase our Senior Notes upon a change of control would, pursuant to the terms of the respective indentures governing our outstanding notes, constitute an event of default under the indentures. Any such default could in turn constitute an event of default under future senior indebtedness, any of which may cause the related debt to be accelerated after the expiry of any applicable notice or grace periods. If debt were to be accelerated, we may not have sufficient funds to repurchase the notes and repay the debt.

Canadian bankruptcy and insolvency laws may impair the trustees’ ability to enforce remedies under our Senior Notes.

     The rights of the trustees, who represent the holders of our Senior Notes, to enforce remedies could be delayed by the restructuring provisions of applicable Canadian federal bankruptcy, insolvency and other restructuring legislation if the benefit of such legislation is sought with respect to us. For example, both the Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada) contain provisions enabling an insolvent person to obtain a stay of proceedings against its creditors and to file a proposal to be voted on by the various classes of its affected creditors. A restructuring proposal, if accepted by the requisite majorities of each affected class of creditors, and if approved by the relevant Canadian court, would be binding on all creditors within each affected class, including those creditors that did not vote to accept the proposal. Moreover, this legislation, in certain instances, permits the insolvent debtor to retain possession and administration of its property, subject to court oversight, even though it may be in default under the applicable debt instrument, during the period that the stay against proceedings remains in place.

     The powers of the court under the Bankruptcy and Insolvency Act (Canada) and particularly under the Companies’ Creditors Arrangement Act (Canada) have been interpreted and exercised broadly so as to protect a restructuring entity from actions taken by creditors and other parties. Accordingly, we cannot predict whether payments under our outstanding notes would be made during any proceedings in bankruptcy, insolvency or other restructuring, whether or when the trustees could exercise their respective rights under the respective indentures governing our Senior Notes or whether and to what extent holders of the notes would be compensated for any delays in payment, if any, of principal, interest and costs, including the fees and disbursements of the respective trustees.

U.S. investors in our Senior Notes may have difficulties enforcing civil liabilities.

     We are incorporated under the laws of the Province of Québec. Substantially all of our directors, controlling persons and officers, are residents of Canada or other jurisdictions outside the United States, and all or a substantial portion of their assets and substantially all of our assets are located outside the United States. We have agreed, under the terms of the respective indentures governing our Senior Notes, to accept service of process in any suit, action or proceeding with respect to the indentures or the Senior Notes brought in any federal or state court located in New York City by an agent designated for such purpose, and to submit to the jurisdiction of such courts in connection with such suits, actions or proceedings. Nevertheless, it may be difficult for holders of our Senior Notes to effect service of process upon us or such persons within the United States or to enforce against us or them in the United States, judgments of courts of the United States predicated upon the civil liability provisions of the U.S. federal or state securities laws or other laws of the United States. In addition, there is doubt as to the enforceability in Canada of liabilities predicated solely upon U.S. federal or state securities law against us and our directors, controlling persons and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts.

ITEM 4 — INFORMATION ON THE COMPANY

A — History and Development of Quebecor Media

     Our legal and commercial name is Quebecor Media Inc. Our registered office is located at 612 St. Jacques Street, Montréal, Québec, Canada H3C 4M8, and our telephone number is (514) 954-0101. Our corporate website may be accessed through the URL http://www.quebecor.com. The information found on our corporate website is, however, not part of this annual report. In respect of our issued and outstanding notes, our agent for service of process in the United States is CT Corporation System , 111 Eighth Avenue, New York, New York 10011.

     Quebecor Media was incorporated in Canada on August 8, 2000 under Part 1A of the Companies Act (Québec). In connection with our formation, our parent company, Quebecor, transferred all the shares of its wholly-owned subsidiary Quebecor Communications Inc., or QCI, to us, which made QCI our wholly-owned subsidiary. The assets of QCI, as of the date of the transfer in October 2000, included a 70% interest in Sun Media (which was subsequently increased to 100%); a 57.3% interest in Nurun; all the assets of the Canoe network; and all the assets of our Leisure and Entertainment segment. Concurrently with that transfer, we sold our interest in our subsidiary TQS Inc. to Quebecor, which subsequently sold such interest to a private consortium. In addition, Quebecor and Capital CDPQ contributed $0.9 billion and $2.8 billion, respectively, in cash in exchange for common shares of the capital stock of Quebecor Media. On December 31, 2001 QCI was liquidated into Quebecor Media.

     In October 2000, we acquired all of the outstanding shares of Groupe Vidéotron for $5.3 billion. At the time of the acquisition, the assets of Groupe Vidéotron included all of the shares of Vidéotron, a 99.9% voting interest in TVA Group, all of the shares of Le SuperClub Vidéotron ltée and Protectron Inc., a 66.7% voting interest in Vidéotron Telecom (which was merged with Videotron on January 1, 2006), a 54.0% voting interest in Netgraphe Inc. (which changed its name, effective December 31, 2004, to Canoe Inc., and which we refer to in this report as “Canoe”) and a minority interest in Microcell Telecommunications Inc.

     Since December 31, 2004, we have completed several business acquisitions, combinations, divestiture projects and financing transactions through our direct and indirect subsidiaries, including, among others, the following:

	•		On January 9, 2008, Quebecor Media, through a wholly-owned subsidiary, commenced an offer (the “Offer”) to purchase for cash all of the issued and outstanding common shares of Nurun (including common shares issuable upon the exercise of outstanding options, conversion or exchange rights) not already held by Quebecor Media and its affiliates, at a price of $4.75 per common share. As of January 9, 2008, Quebecor Media, together with its affiliates, held 19,576,605 common shares of Nurun, representing approximately 57.5% of the currently issued and outstanding common shares. The Offer was open until February 19, 2008. On February 19, 2008, Quebecor Media announced that it had taken up and acquired an aggregate of 14,640,550 Nurun common shares, representing 91.54% of all Nurun common shares not previously held by Quebecor Media and its affiliates, resulting in Quebecor Media owning, directly and indirectly, 96.20% of all issued and outstanding Nurun common shares, and, on February 26, 2008, Quebecor Media announced that it had acquired the remaining Nurun common shares by means of a statutory compulsory acquisition procedure (commonly known as a squeeze-out) under the applicable provisions of the Canada Business Corporations Act at the same price as the offer price. The Nurun common shares were delisted from the Toronto Stock Exchange on February 27, 2008. The aggregate cash consideration paid by Quebecor Media pursuant to the Offer was approximately $75.4 million.
	•		On October 31, 2007, Sun Media entered into a subordinated loan agreement with Quebecor Media of $237.5 million. Sun Media used the proceeds of this subordinated financing and $43.4 million of cash from continuing operations to repay the balance of its Term Loan B, and settle related hedging contracts for a total cash consideration of $277.8 million. In addition, on October 31, 2007, Sun Media entered into a Fifth Amending Agreement to its credit agreement. The agreement extends the term to October 31, 2012 and modifies covenants related to leverage and interest coverage ratios, removes the fixed charge ratio and modifies certain definitions.

	•		On October 5, 2007, Quebecor Media completed a placement of US$700.0 million aggregate principal amount of its 7 3 / 4 % senior notes due 2016. Quebecor Media used the net proceeds of $672.2 million (including accrued interest of $16.6 million and before financing costs of $9.8 million) from the placement, as well as its cash and cash equivalents, to repay $420.0 million drawn on the senior bridge credit facility entered into to finance the acquisition of Osprey Media, to repay US$179.7 million outstanding under Sun Media Corporation’s Term Loan B, and to settle the $106.0 million liability related to derivative financial instruments connected to the Sun Media Corporation Term Loan B. The new senior notes were offered on a private placement basis principally in the United States. Pursuant to the terms and conditions set forth in a registration rights agreement, we agreed to file an exchange offer registration statement with the SEC with respect to a registered offer to exchange without novation these privately-placed notes for our new SEC-registered 7 3 / 4 % Senior Notes due 2016 evidencing the same continuing indebtedness and having substantially identical terms. We filed a registration statement on Form F-4 with the SEC on November 20, 2007 and commenced the registered exchange offer on February 21, 2008. We currently anticipate completing the registered exchange offer in early April 2008.
	•		In early August 2007, Quebecor Media completed its acquisition of Osprey Media for an aggregate purchase price of approximately $414.4 million (excluding assumed Osprey Media debt of $161.8 million). The purchase price was financed through a senior bridge credit facility that Quebecor Media fully repaid with a portion of the proceeds of the offering of its Senior Notes in October 2007. Osprey Media is one of Canada’s leading publishers of daily and non-daily newspapers, magazines and specialty publications. With the acquisition of Osprey Media, Quebecor Media became the largest newspaper publisher in Canada, based on total paid and unpaid circulation.
	•		On November 28, 2007 and December 14, 2007, Industry Canada released a policy framework and a licensing framework, respectively, for the 3G Spectrum Auction. Several of the framework elements are expressly intended to encourage new entrants into the Canadian mobile wireless industry, most notably the setting aside of 40 MHz (out of a total of 105 MHz) of spectrum nationally for new entrants, and a decision to mandate digital roaming and antenna tower and site sharing by way of new licence conditions applicable to all existing and new mobile wireless licensees. These licence conditions were finalized on February 29, 2008. The 3G Spectrum Auction is scheduled to commence on May 27, 2008. We have announced that we have filed an application to participate in this auction.
	•		During the financial years ended December 31, 2006 and 2005, Quebecor Media’s interest in TVA Group increased as a result of the Substantial Issuer Bid dated May 19, 2005 and various Normal Course Issuer Bids. In 2006 and 2005 respectively, 9,800 and 3,739,599 Class B shares were repurchased under the Normal Course Issuer Bids and the Substantial Issuer Bid and for cash consideration of $0.2 million and $81.9 million, respectively. As a result of these repurchases, Quebecor Media’s interest in TVA Group increased by 5.5 percent, from 39.7% on January 1, 2005 to 45.2% as of December 31, 2007.
	•		Between the refinancing on January 17, 2006 and the end of 2006, the balance of Videotron’s revolving credit facility was reduced by $188.0 million, using cash flows provided by operating activities, and repayments and repurchases totalling $39.0 million were made with respect to the bank credit facilities of Sun Media Corporation and Quebecor Media. On December 29, 2006, Sun Media Corporation repurchased a portion of its term loan “B” for $15.0 million and closed out the corresponding portion of its hedge agreements.
	•		On January 17, 2006, Quebecor Media issued US$525.0 million aggregate principal amount of its 7 3 / 4 % Senior Notes due March 2016. Quebecor Media also established new credit facilities consisting of a Term Loan A credit facility in the amount of $125.0 million, maturing in 2011, a Term Loan B credit facility in the amount of US$350.0 million, maturing in 2013, and a five-year revolving credit facility in the amount of $100.0 million, expiring in 2011.
	•		Also on January 17, 2006, Quebecor Media repurchased US$561.6 million in aggregate principal amount of its Senior Notes due 2011 (representing 95.7% of the Senior Notes due 2011 outstanding) and US$275.6 million in aggregate principal amount at maturity of our Senior Discount Notes due 2011 (representing 97.4% of the Senior Discount Notes due 2011 outstanding). On July 15, 2006, Quebecor Media purchased the balance of its then-outstanding Senior Notes due 2011 and Senior Discount Notes due 2011. Quebecor Media paid total cash consideration of US$1.4 billion to purchase the notes, including the premium and the cost of settlement of

cross-currency swap agreements. The refinancing entailed disbursements exceeding the book value of the repurchased notes, including repayment of liabilities related to cross-currency swap agreements and disbursements related to the loss on debt refinancing and on swap agreements, by $380.0 million, which was financed by issuing long-term debt. In respect of these repurchases, Quebecor Media recognized a $342.1 million loss on debt refinancing ($218.7 million net of income tax) in 2006. See also “Item 5. Operating and Financial Review and Prospects” in this annual report.

	•		On December 12, 2005, Quebecor Media completed its acquisition of Sogides Ltée (now Groupe Sogides inc.), which we refer to as Sogides, a major Québec-based book publishing and distribution group which owns the publishing houses Les Éditions de l’Homme, Le Jour, Utilis, Les Presses Libres and Groupe Ville-Marie Littérature inc. (which includes L’Hexagone, VLB Éditeur and Typo), and owns the distributor Messageries ADP, which is a distributor for more than 160 Québec-based and foreign publishing houses. With this acquisition, Quebecor Media offers a more complete selection of books by Québec authors, will be able to promote Québec writers in Europe through the Sogides network on that continent, and becomes the largest Québec-based publisher and distributor of French-language books in the Province of Québec. For the acquisition of Sogides, we paid cash consideration of $24.0 million, and an additional contingent amount of $5.0 million, which was paid in January 2008.
	•		On September 16, 2005, Videotron issued US$175.0 million aggregate principal amount of its 6 3 / 8 % Senior Notes due December 15, 2015. The net proceeds from this sale of Videotron’s 6 3 / 8 % Senior Notes were used primarily to refinance the repurchase of all the outstanding Senior Notes issued by our CF Cable TV subsidiary and a portion of the repurchase by Quebecor Media of its Senior Notes due 2011 and Senior Discount Notes due 2011.
	•		In August 2005, we announced a plan to invest in a new printing facility located in Toronto, Ontario. In early 2007, Sun Media transferred the printing of 24 Hours Toronto to this new facility and, in late 2007, began printing a portion of the Toronto Sun at this site. In addition, in August 2005, we announced a plan to relocate the printing of certain Sun Media publications to a new 235,000 square foot printing facility owned by us, located in Saint-Janvier-de-Mirabel, Québec. During the fourth quarter of 2006, this new printing facility began printing certain Québec community publications, as well as the Ottawa Sun , 24 Hours in Ottawa and 24 Heures (Montréal and Ottawa-Gatineau). In 2007, portions of the Journal de Montréal and the Journal de Québec were also printed at this site. The new facilities should make it possible to further consolidate some of Quebecor Media’s printing operations in Ontario and Québec, improve the quality of its newspaper products and create additional revenue opportunities as well as strengthen the convergence among our Toronto media properties. Since the implementation of the Toronto and Saint-Janvier-de-Mirabel, Québec initiatives, Quebecor Media has acquired Osprey Media and has been actively reviewing Osprey Media’s operations in order to leverage the synergies between its current operations and those of Osprey Media. In addition, Quebecor Media has undertaken a number of production and sales initiatives with its clients with a view to improving the product and service offering with more types of printed products as well as improving the turnaround time for the printing of daily publications. Such integration, production and sales initiatives will require additional printing capacity. On October 11, 2007, Quebecor Media acquired a building from Quebecor World for a total net consideration of $62.5 million. At the same time, Quebecor World signed a long term operating lease with Quebecor Media to rent a small part of the building for a 17-year period. The two transactions were settled by means of the payment of a net cash consideration of $43.9 million to Quebecor World on the transaction date, and an undertaking by Quebecor Media to pay a sale price balance of $7.0 million in 2013. The building houses three new presses owned by Quebecor Media and is used to print some of its Ontario newspapers.
	•		On July 19, 2005, we repurchased and retired US$128.2 million in aggregate principal amount of our 11 1 / 8 Senior Notes due 2011 and US$12.1 million in aggregate principal amount at maturity of our 13 3 / 4 % Senior Discount Notes due 2011 pursuant to cash tender offers commenced on June 20, 2005. We paid aggregate cash consideration of $215.3 million to purchase these notes, including the redemption premium and the cost of settlement of related cross-currency swap agreements, recognizing a $60.8 million loss on settlement of debt ($41.0 million after taxes).

•

In January 2005, Vidéotron launched its telephony services in the Province of Québec, using VoIP technology. Vidéotron became the first major cable company in Canada to offer consumers residential telephone service over cable. See “Business Overview — Cable” below.

B — Business Overview

Overview

     We are one of Canada’s leading media companies, with activities in cable distribution, residential and mobile wireless telecommunications, newspaper publishing, television broadcasting, book, magazine and video retailing, publishing and distribution, music recording, production and distribution and new media services. Through our operating subsidiaries, we hold leading positions in the creation, promotion and distribution of news, entertainment and Internet-related services that are designed to appeal to audiences in every demographic category.

     Through our Videotron operating subsidiary, we are the largest cable operator in the Province of Québec and the third largest in Canada, in each case based on the number of cable customers, a major Internet service provider and a provider of telephony services in the Province of Québec. Through our Sun Media and Osprey Media operating subsidiaries, we are the largest newspaper publisher in the Province of Québec and in Canada, based on total paid and unpaid circulation. We have established the number one or two market position, in terms of paid circulation, in each of our eight urban daily markets. Through our public TVA Group operating subsidiary, of which we own 45.2% of the equity and control 99.9% of the voting power, we are the largest private-sector television broadcaster in Québec in terms of market share, the largest private-sector French-language television broadcaster in North America in terms of market share, and one of the largest private-sector producers of French-language television programming in Québec in terms of number of hours of production and broadcasting of French-language programming. We are also engaged in book publishing and distribution; magazine publishing and production; the distribution and retailing of cultural products through companies such as Archambault Group, which owns one of the largest chains of music, book, video and musical instruments stores in Québec and is one of the largest producers of French-language music products in Québec and one of the largest independent distributors of music (traditional distribution and digital download) and video products in Canada; film and television distribution through TVA Films; and video and video game rental and retailing through Le SuperClub Videotron’s chain of video rental stores, which is the largest chain of video stores in Québec. In the new media sector, we have developed, through Canoe, two of Canada’s leading English and French-language Internet news and information portals, as well as leading Internet sites dedicated to automobiles, employment, personals, social communities, web search, real estate and classifieds. Through our Nurun subsidiary, we provide global and local clients with consulting services, which include strategic planning and online branding, design and development of websites, intranets, extranets as well as user interfaces for new interactive media (mobile telephones, interactive television), the integration of technical platforms, the design and management of marketing programs, online media buys and eCRM campaigns, as well as the analysis of data collected through these various interactive channels.

     Our subsidiaries operate in the following business segments: Cable, Newspapers, Broadcasting, Leisure and Entertainment, Interactive Technologies and Communications, and Internet/Portals.

Competitive Strengths

     We believe that our diversified portfolio of media assets provides us with a number of competitive advantages, including the ability to:

	•		cross-promote our brands, programs and other content across multiple media platforms;
	•		provide advertisers with an integrated solution for local, regional and national multi-platform advertising;
	•		offer a differentiated, bundled suite of entertainment, information and communication services and products, including digital television, cable Internet access, video-on-demand and other interactive television services, as well as residential and commercial cable telephony services using VoIP technology, and mobile wireless telephony services on an MVNO-basis utilizing wireless voice and data services provided by Rogers Wireless Inc. (“Rogers Wireless”), a subsidiary of Rogers Communications Inc.;

	•		deliver high-quality services and products, including, for example, our standard cable Internet access service that enables our customers to download data at a higher speed than that currently offered by standard digital subscriber line, or DSL, technology, and the widest range of French-language programming in Canada;
	•		leverage our content, management, sales and marketing and production resources to provide superior information and entertainment services to our customers;
	•		extend our market reach by leveraging our multimedia platform and cross-marketing expertise and experience to enhance our national media platform;
	•		leverage our single, highly contiguous network that covers approximately 80% of Québec’s total addressable market and five of the province’s top six urban areas. We believe that our single cluster and network architecture provides many benefits, including a higher quality and more reliable network, the ability to rapidly and efficiently launch and deploy new products and services, and a lower cost structure through reduced maintenance and technical support costs; and
	•		leverage our advanced broadband network, 99% of which is bi-directional which allows us to offer a wide range of advanced services on the same media, such as analog and digital television, video-on-demand, cable Internet access and cable telephony services. We are committed to maintaining and upgrading our network capacity and, to that end, we currently anticipate that future capital expenditures over the next five years will be required to accommodate the evolution of our products and services and to meet the demand for increased capacity resulting from the launch of our telephony service and the offering of our other advanced products and services.

     We have a strong, market-focused management team that has extensive experience and expertise in a range of areas, including marketing, finance, telecommunications, publishing and technology. Under the leadership of our senior management team, we have, despite intense competition, successfully increased sales of our digital television products and improved penetration of our high-speed Internet access product as well as launched our VoIP telephony services.

Our Strategy

     Our objective is to increase our revenues and profitability by leveraging the integration and growth opportunities presented by our portfolio of leading media assets. We attribute our strong historical results and positive outlook for growth and profitability to an ability to develop and execute forward-looking business strategies. The key elements of our strategy include:

	•		Introduce new and enhanced products and services. We expect a significant portion of our growth in our Cable segment revenues to be driven by the introduction of new products and services (such as Wideband internet technology that is expected to enable us to offer customers internet access speeds of up to 100 mbps) and by the continuing penetration of our existing suite of products and services such as digital cable services, cable Internet access, cable telephony services, high-definition television, video-on-demand and interactive television. Our objective is also to increase our revenue per subscriber by focusing sales and marketing efforts on the bundling of these value-added products and services.
	•		Offer multi-platform media advertising solutions. Our multi-platform media assets enable us to provide advertisers with an integrated advertising solution. We are able to provide flexible, bundled advertising packages that allow advertisers to reach local, regional and national markets, as well as special interest and specific demographic groups. We will focus on further integrating our television, newspaper and magazine publishing, and Internet advertising platforms to enable us to tailor advertising packages to customers’ needs.
	•		Cross-promote brands, programs and other content. The geographic overlap of our cable, television, newspaper and magazine publishing, music and video store chains, and Internet platforms enables us to cost effectively promote and co-brand media properties. We will continue to promote initiatives to advance these cross-promotional activities, including the cross-promotion of various businesses, cross-divisional advertising and shared infrastructures.
	•		Use content across media properties. We are the largest private-sector French-language programming broadcaster, a leading producer of French-language programming, the largest newspaper publisher, and a

leading English- and French-language Internet news and information portal in Canada. Our objective is to further accelerate the distribution of our content across platforms.

	•		Leverage geographic clustering. Our Videotron subsidiary holds cable licenses that cover approximately 80% of Québec’s approximately 3.3 million homes and commercial premises passed by cable. Geographic clusters facilitate bundled service offerings and, in addition, allow us to tailor our offerings to certain demographic markets. We aim to leverage the highly clustered nature of our systems to enable us to use marketing dollars more efficiently and to enhance customer awareness, increase use of products and services and build brand support.
	•		Maximize customer satisfaction and build customer loyalty. Across our media platform, we believe that maintaining a high level of customer satisfaction is critical to future growth and profitability. An important factor in our historical growth and profitability has been our ability to attract and satisfy customers with high quality products and services and we will continue our efforts to maximize customer satisfaction and build customer loyalty.
	•		Manage expenses through success-driven capital spending and technology improvements. In our Cable segment, we aim to support the growth in our customer base and bandwidth requirements through strategic success-driven modernizations of our network and increases in network capacity. In our Newspaper segment, we have undertaken restructurings of certain printing facilities and news production operations, and invested in certain technology improvements with a view to modernizing our operations and cost structure. In addition, we continuously seek to manage our salaries and benefits expenses, which comprise a significant portion of our costs.

     Through our direct and indirect interests in several businesses, we operate in the following industry segments: Cable, Newspapers, Broadcasting, Leisure and Entertainment, Interactive Technologies and Communications and Internet/Portals.

Cable

     Through our cable television operations, we are the largest cable operator in the Province of Québec and the third largest in Canada, in each case based on the number of cable customers, a major Internet service provider and a provider of telephony services in the Province of Québec. We offer pay television, Internet access, cable telephony and mobile wireless telephony services. Our cable network covers approximately 80% of Québec’s approximately 3.3 million residential and commercial premises passed by cable. Our cable licenses include licenses for the greater Montréal area, the second largest urban area in Canada. The greater Montréal area represents one of the largest contiguous clusters in Canada and is among the largest in North America as measured by the number of cable customers. This concentration provides us with improved operating efficiencies and is a key element in the development and launch of our bundled service offerings.

     As of December 31, 2007, we had approximately 1.64 million basic cable customers (which we define as customers receiving basic cable service, including analog and digital customers), representing a basic penetration rate of 65.6%. Through our extensive broadband coverage, we also offer digital television and cable Internet access services to approximately 99% of our total homes passed. We have rapidly grown our digital customer base in recent years, and at December 31, 2007, we had 768,211 digital customers, representing 46.9% of our basic customers and 30.8% of our total homes passed. We have also rapidly grown our cable Internet access customer base, and as of December 31, 2007, we had 932,989 cable Internet access customers, representing 57.0% of our basic customers and 37.4% of our total homes passed. We believe that the continued increase in the penetration rate of our digital television, cable Internet access, telephony and wireless voice and data services will result in increased average revenue per customer (ARPU).

     Our bi-directional hybrid fiber coaxial (HFC) network enabled us to launch, in January 2005, a telephony service using VoIP technology to our residential and commercial customers. As of December 31, 2007, we had 636,666 cable telephony customers (including 314 Softphone customers), representing 38.8% of our basic customers and 25.5% of our total homes passed. In addition, as of December 31, 2007, approximately 98% of all of our cable customers were in areas in which our cable telephony service was available.

     On August 10, 2006, we launched, on a Mobile Virtual Network Operator (or “MVNO”) basis utilizing the Rogers Wireless GSM/GPRS network, our mobile wireless telephony services in the Québec City area. Since then, this service has been completely rolled-out throughout the Province of Québec. As of December 31, 2007, over 45,682 lines had been activated.

     We have filed an application to participate in Canada’s 3G Spectrum Auction, which is scheduled to commence on May 27, 2008. If our application is accepted by Industry Canada, we intend to focus in the 3G Auction on those areas that we believe present attractive growth prospects for our service offering, based on an analysis of demographic, economic and other factors.

     We offer our advanced products and services, which include video-on-demand and selected interactive television services, as a bundled package that is unique among the competitors in our market. We differentiate our services by offering a higher speed Internet access product and the widest range of French-language programming in Canada. We believe that our bundled packages of products and services, together with our focus on customer service and the breadth of our French-language offerings, have resulted in improved customer satisfaction, increased use of our services and higher customer retention.

     Through Le SuperClub Vidéotron, we also operate the largest chain of video and video game rental stores in Québec and among the largest of such chains in Canada, with a total of 258 retail locations (of which 206 are franchised) and more than 1.65 million video club rental members.

     We own a 100% voting and 100% equity interest in Videotron.

     For the year ended December 31, 2007, our cable operations generated revenues of $1.55 billion and operating income of $642.7 million. For the year ended December, 31, 2006, our cable operations generated revenues of $1.30 billion and operating income of $512.5 million.

Cable Television Industry Overview

     Cable television has been available in Canada for more than 50 years and is a well developed market. Competition in the cable industry was first introduced in Canada in 1997. As of August 31, 2006, the most recent date for which data is available, there were approximately 7.4 million cable television customers in Canada, representing a basic cable penetration rate of approximately 58.3% of homes passed. For the twelve months ended August 31, 2006, total industry revenue was estimated to be over $6.0 billion and is expected to grow in the future because Canadian cable operators have aggressively upgraded their networks and have begun launching and deploying new products and services, such as cable Internet access, digital television services and, more recently, telephony services. The following table summarizes the most recent available annual key statistics for the Canadian and U.S. cable television industries.

     The traditional cable business, which is the delivery of video via hybrid fiber coaxial network, is fundamentally similar in the U.S. and Canada. Different economic and regulatory conditions, however, have given rise to important differences between the two markets. Canadian operators have more limited revenue sources than U.S. operators due to Canadian regulations which prevent cable operators from generating revenue from local advertising. However, the lack of local advertising revenues allows Canadian cable operators to benefit from lower programming costs as compared to U.S. cable operators.

     A significant portion of Canada’s cable television customers are based in Québec. As of August 31, 2007, Québec is home to approximately 23.4% of Canada’s population and approximately 23.7% of its basic cable customers. Based on the CRTC statistics, basic cable penetration in Québec, which was approximately 53.4% as of August 31, 2007, has traditionally been lower than in other provinces in Canada, principally due to the higher concentration of French-speaking Canadians in Québec. It is estimated that over 80% of Québec’s population is French-speaking. Contrary to the English-speaking provinces of Canada, where programming in English comes from all over North America, programming in French is available over-the-air in most of Québec’s French-speaking communities. The arrival of a variety of French-language specialty channels not available over-the-air and, more recently, the introduction of HD content, contributed to a penetration increase.

      Expansion of Digital Distribution and Programming

     In order to compete with the direct broadcast satellite offerings, the cable industry began deploying digital technology, which allows for a large number of programming channels and advanced services to be offered.

     In addition, in recent years, the choice and range of television programming has expanded substantially in Canada. In November 2000, the CRTC released its decisions on the applications for new digital pay and specialty television channels. In total, the CRTC approved 21 Category One licenses (16 English-language and five French-language) and 262 Category Two licenses, as well as two pay-per-view and four video-on-demand licenses. Cable service providers using digital technology are required to carry all of the approved Category One services appropriate to their markets while Category Two licensees who do not have guaranteed distribution rights must negotiate with cable service providers for access. Since then, the CRTC has licensed dozens of Category Two additional programming licenses. The increase in programming content as a result of the launch of approximately 50 of these programming services is believed to be a key factor in driving increases in digital cable penetration in Canada.

     Many programming services have announced their intention to convert to high-definition format. We believe that the availability of HDTV programming will increase significantly in the coming years and will result in a higher penetration level of digital distribution.

     In recent years, digital cable has significantly expanded the range of services that may be offered to our customers. We are now offering to our digital cable customers more than 380 channels, including 173 English-language channels, 90 French-language channels, 30 HDTV channels, 10 time-shifting channels and 63 radio/music channels.

     Our strategy, in the coming years, will be to try to continue the expansion in our offering and maintain the quality of our programming. Our cable television service depends in large part on our ability to distribute a wide range of appealing, conveniently-scheduled television programming at reasonable rates and will be an important factor in our success to maintain the attractiveness of our services to customers.

Products and Services

     We currently offer our customers analog cable television services and programming as well as new and advanced high-bandwidth products and services such as cable Internet access, digital television, premium programming and selected interactive television services. We continue to focus on our cable Internet access, digital television and telephony services, which are increasingly desired by customers. With our advanced broadband network, our objective is to increase penetration of value-added services such as video-on-demand, high-definition television, personal video recorders, as well as interactive programming and advertising.

     We offer cable telephony service in Québec, a product that leverages our customer base with what was at the time Videotron Telecom’s telecommunications network and expertise. We integrated Videotron Telecom’s operations within our own operations pursuant to the merger of Videotron Telecom with and into Videotron on January 1, 2006.

     On August 10, 2006, we launched our MVNO-based mobile wireless telephony services throughout the Province of Québec, utilizing the Rogers Wireless GSM/GPRS network. Through our strategic relationship with Rogers Wireless, the operator of Canada’s largest integrated wireless voice and data network, we offer Québec consumers a quadruple play of television, broadband Internet, cable telephony and Videotron branded mobile wireless telephony services. Our services include international roaming and popular options such as voicemail, call waiting, call display, call forwarding, text messaging and conference calling. We are responsible for acquiring and billing customers, as well as for providing customer support under our own brand.

     In order to increase our offering of products and services and be more competitive, we have filed an application to participate in Canada’s 3G Spectrum Auction, which is scheduled to commence on May 27, 2008. If our application is accepted by Industry Canada, we intend to focus in the 3G Auction on those areas that we believe present attractive growth prospects for our service offering, based on an analysis of demographic, economic and other factors (including factors relating to the Province of Québec, in which we operate), and intend to be financially disciplined with respect to prices we are willing to pay for any such licenses. Subject to applicable 3G Spectrum Auction rules and our own strategic considerations, we may also enter into agreements with one or more partners relating to licenses outside of the Province of Québec, with a view to launching a national wireless service operation in Canada. We have not determined whether we will enter into any such agreement, and there can be no assurance that we would be able to enter into any such agreement on commercially compelling terms or at all. If we are successful in the 3G Spectrum Auction and are awarded spectrum, it is currently anticipated that the spectrum for the Province of Québec, if obtained, will be transferred to our wholly-owned subsidiary Videotron, and we are currently considering various alternatives regarding our potential acquisition of spectrum outside the Province of Québec and the launch of a national wireless service. See also “Item 3. Risk Factors” of this annual report, including the risk factor titled “Certain risks associated with our participation in Canada’s Auction for Spectrum Licenses for Advanced Wireless Services and other Spectrum in the 2GHz range.”

      Traditional Cable Television Services

     Customers subscribing to our traditional analog “basic” and analog “extended basic” services generally receive a line-up of 45 channels of television programming, depending on the bandwidth capacity of their local cable system. Customers who pay additional amounts can also subscribe to additional channels, either individually or in packages. We aim to tailor our channel packages to satisfy the specific needs of the different customer segments we serve.

     Our analog cable television service offerings include the following:

	•		Basic Service. All of our customers receive a package of basic programming, consisting of local broadcast television stations, the four U.S. commercial networks and PBS, selected Canadian specialty programming services, and local and regional community programming. Our basic service customers generally receive 27 channels on basic cable.
	•		Extended Basic Service. This expanded programming level of services, which is generally comprised of approximately 18 channels, includes a package of French- and English-language specialty television programming and U.S. cable channels in addition to the basic service channel line-up described above. Branded as “Telemax”, this service was introduced in almost all of our markets largely to satisfy customer demand for greater flexibility and choice.

      Advanced Products and Services

     Cable’s high bandwidth is a key factor in the successful delivery of advanced products and services. Several emerging technologies and increasing Internet usage by our customer base have presented us with significant opportunities to expand our sources of revenue. We currently offer a variety of advanced products and services, including cable Internet access, digital television, cable telephony and selected interactive services. We intend to continue to develop and deploy additional services to further broaden our service offering.

	•		Cable Internet Access. Leveraging our advanced cable infrastructure, we offer cable Internet access to our residential customers primarily via cable modems attached to personal computers. We provide this service at speeds of up to 360 times the speed of a conventional telephone modem. In February 2008, we also effected a limited launch (to our customers in Laval, Québec only) of our Wideband services, which offer speeds of up to 900 times the speed of a conventional telephone modem. We currently plan to extend the coverage of this offering later in 2008. As of December 31, 2007, we had 932,989 cable Internet access customers, representing 57.0% of our basic customers and 37.4% of our total homes passed. Based on internal estimates, we are the largest provider of Internet access services in the areas we serve with an estimated market share of 52.9% as of December 31, 2007.
	•		Digital Television. We have installed headend equipment capable of delivering digitally encoded transmissions to a two-way digital-capable set-top box in the customer’s home. This digital connection provides significant advantages. In particular, it increases channel capacity, which allows us to increase both programming and service offerings while providing increased flexibility in packaging our services. Our basic digital package includes 25 television channels, 45 audio services providing CD-quality music, 16 AM/FM radio channels, an interactive programming guide as well as television-based e-mail capability. Our extended digital basic television offering, branded as “ à la carte ” ( i.e. individual channel selections), offers customers the ability to select more than 200 additional channels of their choice, including U.S. super-stations and other special entertainment programs, allowing them to customize their choices. This also offers customers significant programming flexibility including the option of French-language only, English-language only or a combination of French- and English-language programming, as well as many foreign-language channels. We also offer pre-packaged themed service tiers in the areas of news, sports and discovery. Customers who purchase basic service and one customized package can also purchase channels on an à la carte basis at a specified cost per channel per month. As part of our digital service offering, customers can also purchase near-video-on-demand services on a per-event basis. As of December 31, 2007, we had 768,211 customers for our digital television service, representing 46.9% of our basic customers and 30.8% of our total homes passed. Our customers currently have the option to purchase or lease the digital set-top boxes required for digital service. We believe that the sale of equipment to customers improves customer retention, and, as of December 31, 2007, we had over 953,000 set-top boxes deployed, of which approximately 96% were sold to customers and 4% were leased.
	•		Cable Telephony . In January 2005, we launched our cable telephony service using VoIP technology in selected areas of the Province of Québec, and since then we have been progressively rolling-out this offering among our other residential and commercial customers in the Province of Québec. As of December 31, 2007, our cable telephony service is available to 96.9% of our homes passed. Our cable telephony service includes both local and long-distance calling, and permits all of our telephony customers, both residential and commercial, to access all service features mandated by CRTC Decision 97-8 and other regulatory decisions and orders,

			including: enhanced 911 Emergency service; number portability from and to any local exchange carrier; a message relay service allowing subscribers to communicate with the hearing impaired; and a variety of personal privacy features including universal call tracing. We also offer free basic listings in local telephone directories, as well as full operator assistance, including: operator-assisted calls; collect and third-party calls; local, national and international directory assistance; person-to-person calls; and busy-line verification. Finally, we offer as part of our telephony service a host of convenient, optional features, including: name and number caller ID; call waiting with long-distance distinctive ring and audible indicator tone; name and number caller ID on call waiting; visual indicator of a full voice mail box and audible message waiting indicators; automatic call forwarding; three-way conference calling; automatic recalling; and last incoming call identification and recall. VoIP allows us to deliver new cutting-edge features, such as voice-mail to e-mail functionality launched in December 2005, which allows customers to access their voice-mail via e-mail in the form of audio-file attachments. In keeping with our competitive strength of providing differentiated, bundled service offerings, we offer free installation of our telephony service to existing cable television and/or Internet customers and to new bundled customers. We also offer discounts to our bundled customers, when compared to the sum of the prices of the individual services provided to these customers. In addition, we offer discounts for a second telephone line subscription. On October 24, 2007, we launched our Softphone service, our new computer-based service providing users with more flexibility when traveling, the ability to make local calls anywhere in the world, and new communications management capabilities. As of December 31, 2007, we had 636,666 subscribers to our cable telephony service (including 314 Softphone customers), representing a penetration rate of 38.8% of our basic cable subscribers and 25.5% of our homes passed.
	•		Mobile Wireless Telephony Services . On August 10, 2006, we launched our MVNO-based mobile wireless telephony services in the Québec City area, utilizing the Rogers Wireless GSM/GPRS network. Since then, the service has been completely rolled out throughout the Province of Québec. Through our strategic relationship with Rogers Wireless, the operator of Canada’s largest integrated wireless voice and data network, we offer Québec consumers a quadruple play of television, broadband Internet, cable telephony and Videotron branded mobile wireless telephony services. Our services include international roaming and popular options such as voicemail, call waiting, call display, call forwarding, text messaging and conference calling. We are responsible for acquiring and billing customers, as well as for providing customer support under our own brand. As of December 31, 2007, over 45,682 lines had been activated. In order to offer our customers integrated mobile multimedia services and be more competitive, we have filed an application to participate in Canada’s 3G Spectrum Auction, which is scheduled to commence on May 27, 2008.
	•		Video-On-Demand. Video-on-demand service enables digital cable customers to rent from a library of movies, documentaries and other programming through their digital set-top box. Our digital cable customers are able to rent their video-on-demand selections for a period of 24 hours, which they are then able to watch at their convenience with full stop, rewind, fast forward, pause and replay functionality during that period. Our video-on-demand service is available to 99% of the homes passed by us. We also offer pay television channels on a subscription basis that permit our customers to access and watch any of their video-on-demand selections at any time at their convenience.
	•		Other Products and Services. To maintain and enhance our market position, we are focused on increasing penetration of high-definition television and personal video recorders, as well as other high-value products and services.

     The following table summarizes our customer statistics for our analog and digital cable and advanced products and services:

     In the year ended December 31, 2007, we recorded a net increase of 65,686 basic cable customers. During the same period, we also recorded net additions of: 141,023 subscribers to our cable Internet access service; 144,565 customers to our digital television service, the latter of which includes customers who have upgraded from our analog cable service; and 238,836 customers to our cable telephony services. In 2007, we activated 33,856 lines for our mobile wireless telephony services.

      Business Telecommunications Services

     We integrated Videotron Telecom’s operations within our own operations pursuant to the merger of Videotron Telecom with and into us on January 1, 2006. Our Business Telecommunications segment provides a wide range of network solutions, Internet services, application/server hosting, local and long-distance telephone service, and studio-quality audio-video services to large and medium-sized businesses, ISPs, application service providers (“ASP”), broadcasters and carriers in both Québec and Ontario.

      Video Stores

     Through Le SuperClub Vidéotron, we also operate the largest chain of video and video game rental stores in Québec and among the largest of such chains in Canada, with a total of 258 retail locations (of which 206 are franchised) and more than 1.65 million video club rental members. With 158 retail locations located in our markets, Le SuperClub Vidéotron is both a showcase and a valuable and cost-effective distribution network for our growing array of advanced products and services, such as cable Internet access, digital television and mobile wireless telephony.

Pricing of our Products and Services

     Our revenues are derived principally from the monthly fees our customers pay for cable services. The rates we charge vary based on the market served and the level of service selected. Rates are usually adjusted annually. We also offer discounts to our bundled customers, when compared to the sum of the prices of the individual services provided to these customers. As of December 31, 2007, the average monthly fees for basic and extended basic service were $23.67 and $37.53, respectively, and the average monthly fees for basic and extended basic digital service were $14.00 and $42.48, respectively. A one-time installation fee, which may be waived in part during certain promotional periods, is charged to new customers. Monthly fees for rented equipment, such as set-top boxes and cable modems, are also charged to customers.

     The CRTC only regulates rates for basic cable service. Fees for extended cable service (over and above basic cable service rates), pay-television and pay-per-view services, and rentals for set-top boxes are priced by us on a commercial, free-market basis and are not regulated by the CRTC.

     Although our service offerings vary by market, because of differences in the bandwidth capacity of the cable systems in each of our markets and competitive and other factors, our services are typically offered at monthly price ranges, which reflect discounts for bundled service offerings, as follows:

Our Network Technology

     As of December 31, 2007, our cable systems consisted of 18,637 km of fiber optic cable and 35,115 km of coaxial cable, passing approximately 2.5 million homes and serving approximately 1.79 million customers. Our network is the largest broadband network in Québec covering approximately 80% of cable homes passed and more than 80% of the businesses located in the major metropolitan areas of each of Québec and Ontario. Our extensive network supports direct connectivity with networks in Ontario, Eastern Québec, the Maritimes and the United States.

     The following table summarizes the current technological state of our systems, based on the percentage of our customers who have access to the bandwidths listed below and two-way (or “bi-directional”) capability:

     Our cable television networks are comprised of four distinct parts including signal acquisition networks, main headends, distribution networks and subscriber drops. The signal acquisition network picks up a wide variety of television, radio and multimedia signals. These signals and services originate from either a local source or content provider or are picked up from distant sites chosen for satellite or over-the-air reception quality and transmitted to the main headends by way of over-the-air links, coaxial links or fiber optic relay systems. Each main headend processes, modulates, scrambles and combines the signals in order to distribute them throughout the network. Each main headend is connected to the primary headend in order to receive the digital MPEG2 signals and the IP Backbone for the Internet services. The first stage of this distribution consists of either a fiber optic link or a very high capacity microwave link which distributes the signals to distribution or secondary headends. After that, the signal uses the hybrid fiber coaxial cable network made of wide-band amplifiers and coaxial cables capable of serving up to 30 km in radius from the distribution or secondary headends to the subscriber drops. The subscriber drop brings the signal into the customer’s television set directly or, depending on the area or the services selected, through various types of customer equipment including set top boxes.

     We have adopted the hybrid fiber coaxial (HFC) network architecture as the standard for our ongoing system upgrades. Hybrid fiber coaxial network architecture combines the use of fiber optic cable with coaxial cable. Fiber optic cable has excellent broadband frequency characteristics, noise immunity and physical durability and can carry hundreds of video and data channels over extended distances. Coaxial cable is less expensive and requires greater signal amplification in order to obtain the desired transmission levels for delivering channels. In most systems, we deliver our signals via fiber optic cable from the headend to a group of nodes to the homes passed served by that node. Our system design provides for cells of approximately 655 homes each to be served by fiber optic cable. To allow for this configuration, secondary headends were put into operation in the greater Montréal area and in the greater Québec City area. Remote secondary headends must also be connected with fiber optic links. The loop structure of the two-way networks brings reliability through redundancy, the cell size improves flexibility and capacity, while the reduced number of amplifiers separating the home from the headend improves signal quality and reliability. Our network design provides us with significant flexibility to offer customized programming to individual cells of approximately 655 homes, which is critical to our ability to deploy certain advanced services in the future, including video-on-demand and the continued expansion of our interactive services. Our network design also allows for further segmentation to 500 or 250 homes where cable, Internet and telephony service penetration requires higher network capacity. We also believe that our network design provides high capacity and superior signal quality that will enable us to provide to our current and future customers new advanced products and services in addition to those currently offered by us.

     Our strategy of maintaining a leadership position in the suite of products and services currently offered by us and launching new products and services requires investments in our network to support growth in our customer base and increases in bandwidth requirements. For that reason, we recently upgraded our networks in Québec City and in the Central Region of Québec from a bandwidth of 480 MHz to 750 MHz or greater. With the completion of this project, approximately 97% of our network in Québec has been upgraded to a bandwidth of 750 MHz or greater. Also, in light of the greater availability of HDTV programming, the ever increasing speed of Internet access and increasing demand for our cable telephony service, further investments in the network will be required.

Marketing and Customer Care

     Our long term marketing objective is to increase our cash flow through deeper market penetration of our services and continued growth in revenue per customer. We believe that customers will come to view their cable connection as the best distribution channel to the home for a multitude of services. To achieve this objective, we are pursuing the following strategies:

	•		continue to rapidly deploy advanced products and services such as cable Internet access, digital television, cable telephony and mobile wireless telephony services;
	•		design product offerings that provide greater opportunity for customer entertainment and information choices;
	•		target marketing opportunities based on demographic data and past purchasing behavior;
	•		develop targeted marketing programs to attract former customers, households that have never subscribed to our services and customers of alternative or competitive services;
	•		enhance the relationship between customer service representatives and our customers by training and motivating customer service representatives to promote advanced products and services;
	•		leverage the retail presence of Le SuperClub Vidéotron and third-party commercial retailers;
	•		cross-promote the wide variety of content and services offered within the Quebecor Media group (including, for example, the content of TVA Group productions and the 1-900 service for audience voting during reality television shows popular in Québec) in order to distribute our cable, data transmission, cable telephony and mobile wireless telephony services to our existing and future customers;
	•		introduce new value-added packages of products and services, which we believe increases average revenue per user, or ARPU, and improves customer retention; and
	•		leverage our business market, using the Videotron Telecom network and expertise with our commercial customer base, which should enable us to offer additional bundled services to our customers and may result in new business opportunities.

     We continue to invest time, effort and financial resources in marketing new and existing services. To increase both customer penetration and the number of services used by our customers, we use coordinated marketing techniques, including door-to-door solicitation, telemarketing, media advertising, e-marketing and direct mail solicitation.

     Maximizing customer satisfaction is a key element of our business strategy. In support of our commitment to customer satisfaction, we operate a 24-hour customer service hotline seven days a week for nearly all of our systems, in addition to our web-based customer service capabilities. All of our customer service representatives and technical support staff are trained to assist our customers with respect to all products and services offered by us, which in turn allows our customers to be served more efficiently and seamlessly. Our customer care representatives continue to receive extensive training to develop customer contact skills and product knowledge, which are key contributors to high rates of customer retention as well as to selling additional products and services and higher levels of service to our customers. To assist us in our marketing efforts, we utilize surveys, focus groups and other research tools as part of our efforts to determine and proactively respond to customer needs.

Programming

     We believe that offering a wide variety of conveniently scheduled programming is an important factor in influencing a customer’s decision to subscribe to and retain our cable services. We devote resources to obtaining access to a wide range of programming that we believe will appeal to both existing and potential customers. We rely on extensive market research, customer demographics and local programming preferences to determine our channel and package offerings. The CRTC currently regulates the distribution of foreign content in Canada and, as a result, we are limited in our ability to provide such programming to our customers. We obtain basic and premium programming from a number of suppliers, including TVA Group.

     Our programming contracts generally provide for a fixed term of up to seven years, and are subject to negotiated renewal. Programming tends to be made available to us for a flat fee per customer. Our overall programming costs have increased in recent years and may continue to increase due to factors including, but not limited to, additional programming being provided to customers as a result of system rebuilds that increase channel capacity, increased costs to produce or purchase specialty programming and inflationary or negotiated annual increases.

Competition

     We operate in a competitive business environment in the areas of price, product and service offerings and service reliability. We compete with other providers of television signals and other sources of home entertainment. In addition, as we expand into additional services such as Internet, cable telephony and mobile wireless telephony services, we may face additional competition. Our principal competitors include over-the-air television and providers of other entertainment, direct broadcast satellite, digital subscriber line (DSL), private cable, other cable distribution, ILECs and wireless distribution. We also face competition from illegal providers of cable television services and illegal access to both foreign DBS (also called grey market piracy) as well as from signal theft of DBS that enables customers to access programming services from U.S. and Canadian direct broadcast satellite services without paying any fee (also called black market piracy).

•

Over-the-air Television and Providers of Other Entertainment. Cable television has long competed with broadcast television, which consists of television signals that the viewer is able to receive without charge using an over-the air antenna. The extent of such competition is dependent upon the quality and quantity of broadcast signals available through over-the-air reception compared to the services provided by the local cable system. Cable systems also face competition from alternative methods of distributing and receiving television signals and from other sources of entertainment such as live sporting events, movie theatres and home video products, including videotape recorders, DVD players and video games. The extent to which a cable television service is competitive depends in significant part upon the cable system’s ability to provide a greater variety of programming, superior technical performance and superior customer service than are available over the air or through competitive alternative delivery sources.

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Direct Broadcast Satellite. Direct broadcast satellite, or DBS, is a significant competitor to cable systems. DBS delivers programming via signals sent directly to receiving dishes from medium- and high-powered satellites, as opposed to cable delivery transmissions. This form of distribution generally provides more channels than some of our television systems and is fully digital. DBS service can be received virtually anywhere in Canada through the installation of a small rooftop or side-mounted antenna. Like digital cable distribution, DBS systems use video compression technology to increase channel capacity and digital technology to improve the quality of the signals transmitted to their customers.

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DSL. The deployment of digital subscriber line technology, known as DSL, provides customers with Internet access at data transmission speeds greater than that available over conventional telephone lines. DSL service is comparable to cable-modem Internet access over cable systems. We also face competition from other providers of DSL service.

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VDSL. The CRTC and Industry Canada have authorized video digital subscriber line, or VDSL, services. VDSL technology increases the capacity of DSL lines available, which permits the distribution of digital video. We expect that we will soon face competition from incumbent local exchange carriers, which have been granted licenses to launch video distribution services using this technology. ILECs are currently installing this new technology, which operates over the copper lines in phone lines, in our markets. This technology can achieve speeds as high as 52 Mbps upstream, but VDSL can only operate over a short distance of about 4,000 feet (1,200 metres). As a result, telephone companies are replacing many of their main feeds with fibre-optic cable. By placing a VDSL transceiver, a VDSL gateway, in larger multiple dwelling units, the distance limitation is overcome. Further, as a result of such improvements in broadband speeds over DSL and the evolution of compression technology, incumbent telephone carriers in our service areas may be in a position to enable delivery of digital television over their cable Internet connections (IPTV) in the coming years. Advanced trials are underway in Canada and in other countries. Tests in our service markets are still being performed. If successful, IPTV may provide telecommunications carriers with a way to offer services similar to those offered by cable operators in the consumer market.

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Private Cable. Additional competition is posed by satellite master antenna television systems known as “SMATV systems” serving multi-dwelling units, such as condominiums, apartment complexes, and private residential communities.

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Other Cable Distribution. Currently, a cable operator offering television distribution and providing cable-modem Internet access service is serving the greater Montréal area. This cable operator, which has approximately 15,000 customers, is owned by the regional ILEC.

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Wireless Distribution. Cable television systems also compete with wireless program distribution services such as multi-channel multipoint distribution systems, or MDS. This technology uses microwave links to transmit signals from multiple transmission sites to line-of-sight antennas located within the customer’s premises.

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Grey and Black Market DBS Providers. Cable and other distributors of television signals continue to face competition from the use of access codes and equipment that enable the unauthorized decoding of encrypted satellite signals, from unauthorized access to our analog and digital cable signals (black market) and from the reception of foreign signals through subscriptions to foreign satellite television providers that are not lawful distributors in Canada (grey market).

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Telephony Service. Our cable telephony service competes against other telephone companies, including both the incumbent telephone service provider in Québec, which controls a significant portion of the telephony market in Québec, as well as other VoIP telephony service providers and mobile wireless telephone service providers.

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Mobile wireless telephony services. Our mobile wireless telephony service competes against a mix of competitors, some of them being active in all the products we offer, while others only offer mobile wireless telephony services in our market. If we were to become a facilities-based wireless provider, we would compete primarily with established incumbent wireless service providers and MVNOs, and could in the future compete with other new entrant companies, including other MVNOs. In addition, users of wireless voice and data systems may find their communications needs satisfied by other current or developing technologies, such as WIFI, “hotspots” or trunk radio systems, which have the technical capability to handle mobile telephone calls. Our facilities-based wireless provider business would also compete with rivals for dealers and retail distribution outlets.

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Other Internet Service Providers. In the Internet access business, cable operators compete against other Internet service providers offering residential and commercial Internet access services. The CRTC requires the large Canadian incumbent cable operators to offer access to their high speed Internet system to competitive Internet service providers at mandated rates.

Newspapers

     Through our newspaper publishing operations, we are the largest newspaper publisher in Québec based on total paid and unpaid circulation. Sun Media is also the second largest newspaper publisher in Canada, with a 20.9% market share in terms of weekly paid circulation as of September 30, 2007, according to statistics published by the Canadian Newspaper Association, or “CNA.” With our acquisition of Osprey Media, we are, through our Sun Media and Osprey Media operating subsidiaries, the largest newspaper publisher in Québec and in Canada, based on total paid and unpaid circulation. See “— Acquisition of Osprey Media” below. Our Newspapers segment publishes 37 paid-circulation dailies and 223 community newspapers, magazines, weekly buyers guides, farm publications and other specialty publications. As of December 31, 2007, the combined weekly circulation of our Newspapers segment’s paid newspapers was approximately 8.8 million copies, according to internal statistics.

     Sun Media publishes 17 paid daily newspapers and serves eight of the top ten urban markets in Canada. According to the Audit Bureau of Circulations, each of Sun Media’s eight urban daily newspapers ranks either first or second in its market in terms of weekly paid circulation as of September 30, 2007, including the second and third largest non-national dailies in Canada: the Journal de Montréal , with a weekly paid circulation of 1.8 million copies, and the Toronto Sun , with a weekly paid circulation of 1.5 million copies. Sun Media also publishes 183 weekly newspapers, shopping guides and agricultural and other specialty publications, as well as seven free daily commuter publications: 24 Hours in Toronto, Vancouver 24 Hours in Vancouver, and 24 Heures in Montréal, 24 Hours in Ottawa, 24 Heures in Ottawa-Gatineau, 24 Hours in Calgary and 24 Hours in Edmonton.

     Osprey Media publishes local daily and non-daily newspapers in Ontario, together with other print products including magazines. Osprey Media’s publications are comprised of 20 daily newspapers and 33 non-daily newspapers, as well as numerous specialty publications, including shopping guides. The vast majority of Osprey Media’s revenues are generated from its newspapers. Osprey Media’s publications have an established presence on the Internet and offer classified and local advertising, as well as other services for local advertisers and readers. Osprey Media also engages in the distribution of inserts and flyers and commercial printing for third parties, and operates several trade shows.

     Our Newspapers segment is also engaged in the distribution of newspapers and magazines through Sun Media’s Messageries Dynamiques and NetMedia businesses, and it offers commercial printing and related services to other publishers through its national network of printing and production facilities. Finally, through Quebecor MediaPages, launched in November 2007, our Newspapers segment also conducts a combination of print and online directory publishing operations.

     We own a 100% voting and a 100% equity interest in each of Sun Media and Osprey Media.

     For the year ended December 31, 2007, our newspaper operations, including Osprey Media, generated revenues of $1.03 billion and operating income of $225.9 million, with 79.3% of these revenues derived from advertising, 16.2% from circulation, and 4.5% from commercial printing and other revenues. Excluding Osprey Media, our newspaper operations generated revenues of $932.6 million and operating income of $200.6 million for the year ended December 31, 2007. For the year ended December 31, 2006, our newspaper operations (not including Osprey Media) generated revenues of $928.2 million and operating income of $207.6 million, with 78.9% of these revenues from advertising, 17.0% from circulation, and 4.1% from commercial printing and other revenues.

Acquisition of Osprey Media

     In early August 2007, Quebecor Media completed its acquisition of Osprey Media for aggregate consideration of approximately $414.4 million (excluding assumed debt of $161.8 million). The acquisition of Osprey Media increases our scale in the population-dense Ontario market and complements our existing newspaper business. Osprey Media’s focus on community newspapers and limited geographic overlap with our assets increases the stability and diversification of our newspaper portfolio. Our objective is also to realize operating efficiencies through the sharing of management, production, printing and distribution.

Canadian Newspaper Publishing Industry Overview

     Newspaper publishing is the oldest segment of the advertising-based media industry in Canada. The industry is mature and is dominated by a small number of major newspaper publishers largely segmented in different markets and geographic areas, of which Sun Media and Osprey Media combined are the largest, with a combined average weekly circulation (paid and unpaid) of approximately 15.9 million copies, according to internal statistics. According to the CNA’s circulation data for the six months ended March 31, 2007, the most recent data available, Sun Media’s and Osprey Media’s combined 26.4% market share of paid weekly circulation for Canadian daily newspapers is exceeded only by CanWest MediaWorks Inc., with a 27.3% market share, and is followed by Torstar Corporation (14.2%), Power Corporation (10.0%), and CTVglobemedia (6.6%).

     The newspaper market consists primarily of two segments, broadsheet and tabloid newspapers, which vary in format. With the exception of the broadsheet the London Free Press , all of Sun Media’s urban paid daily newspapers are tabloids.

     According to the CNA, there are approximately 100 paid circulation daily newspapers, numerous paid non-daily publications and free-distribution daily and non-daily publications. Of the 100 paid circulation daily newspapers, 25 have average weekday circulation in excess of 50,000 copies. These include 19 English-language metropolitan newspapers, 4 French-language daily newspapers and 2 national daily newspapers. In addition to daily newspapers, both paid and unpaid non-daily newspapers are distributed nationally and locally across Canada. Newspaper companies may also produce and distribute niche publications that target specific readers with customized editorial content and advertising.

     Newspaper publishers derive revenue primarily from the sale of retail, classified, national and insert advertising, and to a lesser extent through paid subscriptions and single copy sales of newspapers. The mature nature of the Canadian newspaper industry has resulted in stable revenue levels (and limited growth) for many years. Most daily newspapers are well established in their communities, and many have been in existence for over 100 years.

Advertising and Circulation

     Advertising revenue is the largest source of revenue for our newspaper operations, representing 79.3% of our newspaper operations’ total revenues in 2007. Advertising rates are based upon the size of the market in which each newspaper operates, circulation, readership, demographic composition of the market and the availability of alternative advertising media. Our strategy is to maximize advertising revenue by providing advertisers with a range of pricing and marketing alternatives to better enable them to reach their target audience. Our newspapers offer a variety of advertising alternatives, including full-run advertisements in regular sections of the newspaper targeted to different readers (including automotive, real estate and travel), geographically-targeted inserts, special interest pullout sections and advertising supplements.

     The principal categories of advertising revenues in our newspaper operations are classified, retail and national advertising. Classified advertising has traditionally accounted for the largest share of our advertising revenues in our urban daily newspapers for the year ended December 31, 2007 (48.3% for the year) followed by retail advertising (31.4% for the year) and national advertising (17.8% for the year). Classified advertising is made up of four principal sectors: automotive, private party, recruitment and real estate. Automotive advertising is the largest classified advertising category, representing about 46.1% of all of our classified advertising in terms of revenue for the year ended December 31, 2007. Retail advertising is display advertising principally placed by local businesses and organizations. Most of our retail advertisers are department stores, electronics stores and furniture stores. National advertising is display advertising primarily from advertisers promoting products or services on a national basis. Our national advertisers are principally in the retail automotive sector.

     In our smaller community papers, substantially all of the advertising revenues are derived from local retailers and classified advertisers. These newspapers publish advertising supplements with specialized themes such as agriculture, tourism, home improvement and gardening to encourage advertisers to purchase additional linage in these special editions.

     We believe our advertising revenues are diversified not only by category (classified, retail and national), but also by customer and geography. For the year ended December 31, 2007, our top ten national newspaper advertisers accounted for approximately 6.7% of the total advertising revenue and approximately 5.3% of the total revenue of our newspapers segment. In addition, because we sell advertising in numerous regional markets in Canada, the impact of a decline in any one market can be offset by strength in other markets.

     Circulation sales are our newspaper operations’ second-largest source of revenue and represented 16.2% of total revenues of our newspapers segment in 2007. In the large urban markets, newspapers are available through newspaper boxes and retail outlets Monday through Sunday. We offer daily home delivery in each of our newspaper markets. We derive our circulation revenues from single copy sales and subscription sales. Our strategy is to increase circulation revenue by adding newspaper boxes and point-of-sale locations, as well as expanding home delivery. In order to increase readership, we are expanding coverage of local news in our newspapers and targeting editorial content to identified groups through the introduction of niche products.

Newspaper Operations

     We operate our newspaper business through two principal subsidiaries, namely Sun Media and Osprey Media. We operate in urban and community markets through two groups of products:

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the Urban Daily Group; and

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the Community Newspaper Group.

     A majority of Sun Media’s newspapers in the Community Newspaper Group are clustered around our eight paid urban dailies in the Urban Daily Group. Sun Media has strategically established its community newspapers near regional printing facilities in suburban and rural markets across Canada. This geographic clustering enables us to realize operating efficiencies and economic synergies through sharing of management, production, printing, and distribution, as well as accounting and human resources functions.

     Quebecor Media is investing in a new printing facility located in Toronto, Ontario. In early 2007, we transferred the printing of 24 Hours in Toronto to this new facility and, in late 2007, we began printing a portion of the Toronto Sun at this site. In addition, Quebecor Media has invested in a new 235,000 square foot printing facility located in Saint-Janvier-de-Mirabel, Québec. During the fourth quarter of 2006, this new printing facility began printing certain of our Québec community publications, as well as the Ottawa Sun , 24 Hours in Ottawa and 24 Heures (Montréal and Ottawa-Gatineau). In 2007, portions of the Journal de Montréal and the Journal de Québec were also printed at this site. The new facilities should make it possible to further consolidate some of our printing operations in Ontario and Québec, improve the quality of our newspaper products and create additional revenue opportunities. In addition, we have undertaken a number of production and sales initiatives with our clients with a view to improving the product and service offering with more types of printed products as well as improving the turnaround time for the printing of daily publications.

      The Urban Daily Group

     Sun Media’s Urban Daily Group is comprised of eight paid daily newspapers, seven free daily commuter publications and three free weekly publications.

      Paid daily newspapers

     Sun Media’s paid daily newspapers are published seven days a week and are all tabloids with the exception of the broadsheet the London Free Press . These are mass circulation newspapers that provide succinct and complete news coverage with an emphasis on local news, sports and entertainment. The tabloid format makes extensive use of color, photographs and graphics. Each newspaper contains inserts that feature subjects of interest such as fashion, lifestyle and special sections. In addition, Sun Media’s Urban Daily Group includes a distribution business, Messageries Dynamiques.

     As of December 31, 2007, on a combined weekly basis, the eight paid daily newspapers in Sun Media’s Urban Daily Group have a circulation of approximately 6.1 million copies, according to internal statistics. These newspapers hold either the number one or number two position in each of their respective markets in terms of circulation. In addition, on a combined basis, over 50% of Sun Media’s readers do not read our principal competitor’s newspaper in each of our urban daily markets, according to data from the NADbank ^® 2007 Study referred to below.

     Paid circulation is defined as average sales of a newspaper per issue. Readership (as opposed to paid circulation) is an estimate of the number of people who read or looked into an average issue of a newspaper and is measured by an independent survey conducted by NADbank Inc. According to the NADbank ^® 2007 Study, the most recent available survey, readership estimates are based upon the number of people responding to the Newspaper Audience Databank survey circulated by NADbank Inc. who report having read or looked into one or more issues of a given newspaper during a given period equal to the publication interval of the newspaper.

     The following table lists Sun Media’s paid daily newspapers and their respective readership in 2007 as well as their market position by paid circulation during that period:

      Journal de Montréal. The Journal de Montréal is published seven days a week and is distributed by Messageries Dynamiques , our business that specializes in the distribution of publications. According to the Audit Bureau of Circulations, the Journal de Montréal ranks second in paid circulation among non-national dailies in Canada and first among French-language dailies in North America. The average daily circulation of the Journal de Montréal exceeds the circulation of each of its main competitors in Montreal, namely La Presse and the Montreal Gazette , according to Audit Bureau of Circulations data as of September 30, 2007.

     The following table presents the average daily circulation of the Journal de Montréal for the periods indicated:

      Journal de Québec. The Journal de Québec is published seven days a week and is distributed by Messageries Dynamiques. The Journal de Québec is the number one newspaper in its market, based on average daily circulation, according to Audit Bureau of Circulations data as of September 30, 2007. The main competitor of the Journal de Québec is Le Soleil .

     The following table presents the average daily paid circulation of the Journal de Québec for the periods indicated:

      Toronto Sun. The Toronto Sun is published seven days a week and has its own distribution network to serve the greater metropolitan Toronto area. The Toronto Sun is the third largest non-national daily newspaper in Canada in terms of circulation, according to the Audit Bureau of Circulations.

     The Toronto newspaper market is very competitive. The Toronto Sun competes with Canada’s largest newspaper, the Toronto Star and to a lesser extent with the Globe & Mail and the National Post , which are national newspapers. As a tabloid newspaper, the Toronto Sun has a unique format compared to these broadsheet competitors. The competitiveness of the Toronto newspaper market is further increased by several free publications and niche publications relating to, for example, entertainment and television.

     The following table presents the average daily circulation of the Toronto Sun for the periods indicated:

      London Free Press. The London Free Press , one of Canada’s oldest daily newspapers, emphasizes national and local news, sports and entertainment and is distributed throughout the London area through its own network. It is the only local daily newspaper in its market.

     The following table reflects the average daily circulation of the London Free Press for the periods indicated: