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, 2008

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

For the transition period from                      to                     

Commission file number: 333-13792

QUEBECOR MEDIA INC.

(Exact name of Registrant as specified in its charter)

Province of Quebec, Canada
(Jurisdiction of incorporation or organization)

612 St-Jacques Street
Montreal, Quebec, 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 (issued January 17, 2006)
7 ³ / 4 % Senior Notes due March 2016 (issued October 5, 2007)
(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
2,055,000 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 basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP       o       International Financial Reporting Standards as issued       o       Other       þ
by the International Accounting Standards Board

If “Other” has been checked in response to the previous question, 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			25
ITEM 4A — UNRESOLVED STAFF COMMENTS			79
ITEM 5 — OPERATING AND FINANCIAL REVIEW AND PROSPECTS			80
ITEM 6 — DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			135
ITEM 7 — MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			146
ITEM 8 — FINANCIAL INFORMATION			150
ITEM 9 — THE OFFER AND LISTING			152
ITEM 10 — ADDITIONAL INFORMATION			153
ITEM 11 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			174
ITEM 12 — DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			175
PART II
ITEM 13 — DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			176
ITEM 14 — MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			176
ITEM 15 — CONTROLS AND PROCEDURES			176
ITEM 16 — [RESERVED]			177
ITEM 16A — AUDIT COMMITTEE FINANCIAL EXPERT			177
ITEM 16B — CODE OF ETHICS			177
ITEM 16C — PRINCIPAL ACCOUNTANT FEES AND SERVICES			177
ITEM 16D — EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			178
ITEM 16E — PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			178
ITEM 16F — CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT			178
ITEM 16G — CORPORATE GOVERNANCE			179
PART III
ITEM 17 — FINANCIAL STATEMENTS			179
ITEM 18 — FINANCIAL STATEMENTS			180
ITEM 19 — EXHIBITS			180
Signature			186
Index to Consolidated Financial Statements			187
EX-1.15
EX-4.18
EX-7.1
EX-8.1
EX-11.1
EX-12.1
EX-12.2
EX-13.1
EX-13.2
EX-99.1

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 (Quebec) 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; all references in this annual report to “Osprey Media” are references to our wholly-owned subsidiary Osprey Media Publishing Inc. and its subsidiaries; all references to “Le SuperClub Videotron” are references to our indirect wholly-owned subsidiary Le SuperClub Videotron ltée; all references in this annual report to “TVA Group” are references 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 references to our wholly-owned subsidiary Nurun Inc. and its subsidiaries; and all references in this annual report to “Canoe” are references to our subsidiary Canoe Inc. and its subsidiary. All references to “Videotron Telecom” are references to Videotron Telecom Ltd., which prior to its merger with Videotron on January 1, 2006, had been our indirect wholly-owned subsidiary. All references in this annual report to “Quebecor” are references to Quebecor Inc., and all references to “Capital CDPQ” are refererences 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 originally issued on January 17, 2006 and our 7 ³ / 4 % Senior Notes due 2016 originally 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 significant differences between Canadian GAAP and the accounting principles generally accepted in the United States, or U.S. GAAP, as they relate to our consolidated financial statements, see Note 27 to our audited consolidated financial statements for the years ended December 31, 2006, 2007 and 2008 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

ii

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, 2008.

iii

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:

	•		our ability to successfully build and deploy our new wireless services network on the timeline that we are targeting, and to implement successfully our strategy of becoming a facilities-based wireless provider;
	•		general economic, financial or market conditions and variations in the businesses of our local, regional or national newspapers and broadcasting advertisers;
	•		the intensity of competitive activity in the industries in which we operate, including competition from other communications and advertising media and platforms;
	•		fragmentation of the media landscape;
	•		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;
	•		our ability to successfully restructure our newspapers operations to optimize their efficiency in the context of the changing newspapers industry;
	•		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, including the current labour dispute affecting our Journal de Montreal newspaper;
	•		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, the tightening of credit markets, 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

iv

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 (loss) income as disclosed in our consolidated financial statements:

(2)

For the purpose of calculating the ratio of earnings to fixed charges, (i) earnings consist of net (loss) income plus non-controlling interest in subsidiary, income taxes, fixed charges, amortized capitalized interest, less interest capitalized and (ii) fixed charges consist of interest expensed and capitalized, plus amortized premiums, discounts and capitalized expenses relating to indebtedness and an estimate of the interest within rental expense.

(3)

Our 2008 coverage deficiency was significant due to the non-cash charge related to an impairment of goodwill and intangible assets in the amount of $671.2 million pursuant to Canadian GAAP ($667.4 million pursuant to U.S. GAAP). Our 2006 coverage deficiency was significant due to the non-cash charge related to an impairment of goodwill and intangible assets in the amount of $180.0 million and to our loss on debt refinancing in the amount of $342.6 million pursuant to Canadian GAAP ($275.7 million pursuant to U.S. GAAP). We believe cash flows from continuing operating activities and available sources of financing will be sufficient to cover our operating, investing and financing needs during the twelve months following December 31, 2008.

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

Risks Relating to Our Business

Our cable and telecommunications businesses operate in highly competitive industries with emerging technological developments, and our inability to compete successfully could have a material adverse effect on our business, prospects, revenues, 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 Montreal and several other communities in the Province of Quebec. The same ILEC has also acquired a cable network in our main service area. 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 Wi-Fi 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, particularly as a result of the Canadian federal government’s decision in 2007 to lift winback restrictions on ILECs and to change the criteria for forbearance from regulation of local exchange services. Since this decision, the CRTC has approved numerous applications for local forbearance submitted by Bell Aliant, Bell Canada, Télébec and TELUS-Quebec, in both the residential and business local exchange markets. As a result, Videotron’s incumbent local service competitors are now free from regulation of local exchange services in the vast majority of residential markets in which Videotron competes, as well as in a large number of business markets, including all of the largest metropolitan markets in Quebec. These rulings granting the ILECs’ forbearance applications enable ILECs to adjust their local exchange service prices for the approved exchanges without approval from the CRTC. Such price flexibility for local exchange services could have an adverse effect on our ability to compete successfully with ILECs in the local telephony market.

     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 Wi-Fi, WiMax, “hotspots” or trunk

radio systems, which have the technical capability to handle wireless data communication and 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. The cost of implementing or competing against future technological innovations may be prohibitive to us, and we may lose customers if we fail to keep pace with these changes. Any of these factors could adversely affect our ability to operate our MVNO-based wireless business successfully and profitably.

     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 business, prospects, revenues, financial condition and results of operations.

Delays in the launch of our facilities-based wireless services, including due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain market share and could adversely affect our ability to deploy and operate our wireless operations successfully and profitably.

     In July 2008, in the context of Canada’s spectrum auction for third generation Advanced Wireless Services (“3G” or “AWS”), we acquired spectrum licenses for AWS covering all regions of the province of Quebec and certain areas of Ontario. We were the successful bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec, except the Outaouais region where we obtained 20 MHz spectrum licenses and certain regions of Quebec where we obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. These licenses, the control of which was transferred from Quebecor Media to Videotron subsequent to the completion of the auction, were issued by Industry Canada on December 23, 2008. The spectrum enables Videotron to pursue the buildout of an AWS network infrastructure and to become a facilities-based provider offering advanced wireless services, including high-speed Internet, mobile television and a variety of other advanced functions that can be accessed through mobile devices referred to as smartphones.

     We are a new entrant in the wireless business in Canada, and, recently, most of the incumbent carriers have launched lower cost services in order to acquire additional market share and increase their wireless telephony penetration rate in our territory. Any delay in the launch of Videotron’s wireless services could result in a more challenging market to penetrate. Any such delays could therefore also require us to deploy additional efforts and marketing expenses to meet our customer acquisition objectives, and there is a risk that we will be unable to meet our customer acquisition objectives on the timeline that we are targeting or at all.

     Under Industry Canada’s new policy concerning mandatory roaming and antenna site and tower sharing, parties are required to consider tower-sharing arrangements in respect of existing towers prior to proposing the construction of new antenna tower structures. We are therefore dependent on the participation of incumbent operators to satisfy this requirement. Although incumbent carriers are required to respond to tower-sharing requests, there can be no assurance that they will accede to such requests or otherwise negotiate tower-sharing rates and terms that are economically or technologically acceptable to new entrants, such as Videotron. Industry Canada has established an arbitration process to encourage commercially reasonable outcomes, but such a process may prove lengthy and burdensome, and could delay the launch of our wireless services network, which could adversely affect our ability to operate our wireless business successfully and profitably.

     In addition, Industry Canada’s new policy concerning antenna site and tower sharing includes requirements with respect to land-use authority and public consultation regarding proposed tower installations or modifications. We must therefore undertake public notification and address local and neighborhood concerns before building a new tower structure. These procedures could lead to delays in acquiring and developing new sites for cellular towers and could make it more costly to pursue our strategy of building an AWS network, which could adversely affect our ability to deploy and operate our wireless operations successfully and profitably.

     In order to build our wireless network infrastructure in a timely manner Videotron has entered into commercial relationships with certain key suppliers. The inability of our key suppliers to meet our procurement and timing

requirements could result in delays in the launch of our wireless network and in additional expenses, which could adversely affect our ability to deploy and operate our wireless business successfully and profitably.

We may encounter difficulties in reaching out-of-territory and in-territory roaming agreements with incumbent wireless operators.

     Under Industry Canada’s new policy concerning mandatory roaming and antenna site and tower sharing, incumbent wireless operators are required, for a period of up to 10 years from the effective date of new entrants’ wireless licenses (December 23, 2008, in the case of Videotron), to permit new wireless entrants’ customers to roam on their networks outside the regions where such entrants won licenses in the 2008 AWS auction. Incumbents are also required to permit new entrants’ customers to roam on their networks within the regions where such new entrants have won licenses for a period of 5 years (a period that could be extended to 10 years in certain circumstances). However, the rates and terms for such roaming are not prescribed and will be determined by negotiation between new entrants, such as Videotron, and the incumbents. There can be no assurance that incumbents will advance these negotiations rapidly or that they will propose rates and other terms which are economically or technologically acceptable to new entrants. Industry Canada has established an arbitration process to encourage commercially reasonable outcomes, but such a process is lengthy and burdensome, and could further delay the launch of our wireless services, which could adversely affect our ability to operate our wireless business successfully and profitably.

     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.

Videotron is using a new technology for which only a limited number of handsets might be available at the time of commercial launch.

     AWS in the 2GHz range is a spectrum that has not been broadly used until recently for mobile telephony. While certain wireless device suppliers in the United States have recently begun to offer their products on the AWS technology, there are still a limited number of handsets available. As a result, the handset portfolio for AWS we will offer at the time of the commercial launch of our wireless services may not be as broad as that of certain other providers and we could potentially incur higher costs of customer acquisition due to a smaller market for this type of technology, which could adversely affect our ability to operate our wireless business profitably.

We are regularly required to make capital expenditures to remain technologically and economically competitive. We may not be able to obtain additional capital to implement our business strategies and make certain capital expenditures.

     Our strategy of maintaining a leadership position in the suite of products and services we offer and launching new products and services requires capital investments in our network and infrastructure to support growth in our customer base and demands for increased bandwidth capacity and other services. In this regard, we have in the past 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 additional capital expenditures in the short and medium term to expand and maintain our systems and services, including our expenditures relating to advancements in Internet access and high definition television, or HDTV, as well as the cost of our wireless services infrastructure buildout. In October 2008, we and Videotron announced our intention to invest between $800 million and $1.0 billion over the next four years to roll out our own AWS network. This amount includes the cost of the acquired spectrum and operating licenses (which has already been paid), the cost of network buildout and initial operating costs (but excludes any capitalized interest). There can be no assurance that we will be able to obtain the funds necessary to finance 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 financing on acceptable terms, we may not be able to implement our business strategies and effect capital expenditures required to maintain our leadership position, and our business, financial condition, results of operations, reputation 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: “— Our cable and telecommunications businesses operate in highly competitive industries with emerging technological developments, and our inability to compete successfully could have a material adverse effect on our business, prospects, revenues, financial condition and results of operations,” “—Delays in the launch of our wireless services, including due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain market share and could adversely affect our ability to deploy and operate our wireless operations successfully and profitably,” “— 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” and “— 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 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 change, 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, reputation, prospects, financial condition or results of operations.

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 such as AWS, pursuing cross-promotional opportunities, maintaining our advanced broadband network, pursuing enhanced content development to reduce costs, further integrating the operations of our subsidiaries, leveraging geographic clustering and maximizing customer satisfaction. We may not be able to implement these strategies fully or realize their anticipated results without incurring significant costs or at all. In addition, our ability to successfully implement these strategies could be adversely affected by a number of factors beyond our control, including operating difficulties, increased ongoing operating costs, regulatory developments, general or local economic conditions, increased competition, technological change and the other factors described in this “Risk Factors” section. We may also be required to make capital expenditures in addition to those originally planned for the buildout of our AWS operations which may affect our ability to implement our business strategy should we not be able to secure additional financing on acceptable terms or generate sufficient internally generated funds to cover these requirements. 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 business, results of operations and financial condition 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 in 2007, and further expand the types of businesses in which we participate, such as our expansion into facilities-based wireless telephony operations, 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 or business expansion.

     In addition, 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. Furthermore, if we are not successful in managing and integrating any acquired businesses, or if we are required to incur significant or unforeseen costs, our business, results of operations and financial condition could be adversely affected.

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, train and retain 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 efficiency, performance and content quality, continue to enhance our operational and management systems, and continue to effectively attract, train, motivate and manage our employees. In connection with our current expansion as a facilities-based wireless services provider, Videotron currently anticipates a near-term need to attract and train a substantial number of new employees, including many skilled employees, to staff this operation. If we are not successful in these efforts, it may have a material adverse effect on our business, prospects, results of operations and financial condition.

Our newspapers and broadcasting businesses face substantial competition for advertising. In addition, advertising spend is being affected by the recent deterioration in certain economic conditions as well as the continuing fragmentation of the media landscape.

     Advertising revenue is the primary source of revenue for our newspapers business and our broadcasting business. Our revenues and operating results in these businesses depend on the relative strength of the economy in our principal newspaper and television markets as well as the strength or weakness of local, regional and national economic factors, since these economic factors affect the levels of retail, national and classified newspaper advertising revenue, as well as television advertising revenue. Since a significant portion of our advertising revenue is derived from retail and automotive sector advertisers, the recent weakness in these sectors and in the real estate industry has had an adverse impact on the revenues and results of operations of our newspapers business. Continuing or deepening softness in the Canadian or U.S. economy could further adversely affect key national advertising, such as automotive, retail and classified employment revenue.

     In addition to the impact of economic cycles, the newspaper industry is seeing fundamental changes, including the growing availability of free access to media, shifting readership habits, digital transferability, the advent of real-time information and secular changes in the advertising market. As a result, competition in the advertising market comes not only from other newspapers (including other national, metropolitan (both paid and free) and suburban newspapers), magazines and more traditional media platfrorms, such as broadcasters, cable systems and networks, satellite television and radio, direct marketing and solo and shared mail programs, but also from digital media technologies, which have introduced a wide variety of media distribution platforms (including, most significantly, the Internet and distribution over wireless devices) to consumers and advertisers. While we continue to pursue initiatives to offer value-added advertising solutions to our advertisers, such as our recent launch of online e-editions of a number of our newspapers, we may not be successful in retaining our historical share of advertising revenues.

     In broadcasting, the proliferation of cable and satellite channels, advances in mobile and wireless technology, the migration of television audiences to the Internet and the viewing public’s increased control over the manner, content and timing of their media consumption through personal video recording devices, have resulted in greater fragmentation of the television viewing audience, making it more difficult to retain or grow our historical share of advertising revenues.

     These factors could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects. See also the risk factor titled “— Our newspapers business and our broadcasting business each face

substantial competition for readership and audience share, respectively. Our newspapers circulation levels and broadcasting audience share may continue to decline as consumers migrate to other media alternatives, which could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects,” and “Item 4. Information on the Company — Regulation — Canadian Broadcast Programming (Off the Air and Thematic Television) — Advertising.”

Our newspapers business and our broadcasting business each face substantial competition for readership and audience share, respectively. Our newspapers circulation levels and broadcasting audience share may continue to decline as consumers migrate to other media alternatives, which could have a material adverse effect on our revenues, results of operations, financial condition, business and prospects.

     Revenue generation in the newspapers business depends in large part on advertising revenues, which are in turn driven by readership and circulation levels, as well as market demographics, price, service and advertiser results. Readership and circulation levels tend to be based upon the content of the newspaper, service, availability and price. In recent years, we, along with the newspaper industry as a whole, have experienced difficulty maintaining circulation volume and revenues because of, among other things, competition from other newspapers and other media platforms (often free to the user), such as the Internet and wireless devices, as well as the declining frequency of regular newspaper buying, particularly among young people, who increasingly rely on non-traditional media as a source of news. A prolonged decline in readership and circulation levels in our newspapers business would have a material effect on the rate and volume of our newspaper advertising revenues (as rates reflect circulation and readership, among other factors), and it could also affect our ability to institute circulation price increases for our print products, all of which could have a material adverse effect on our results of operations, financial condition, business and prospects. To maintain our circulation base, we may incur additional costs, and we cannot assure you that we will be able to recover these costs through increased circulation and advertising revenues.

     In our broadcasting business, audience share and ratings information, as well as audience demographics and price, are the principal drivers in the competition for television advertising. As with the newspapers industry, the traditional television audience has grown increasingly fragmented, due in large part to the proliferation and growth in popularity of cable and satellite channels, and the migration to alternative content delivery sources, such as the Internet and wireless devices, which are increasingly being used for distribution of (and access to) news, entertainment and other information. If the broadcasting market continues to fragment, our audience share levels and our advertising revenues, results of operations, financial condition, business and prospects could be materially adversely affected.

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

     A significant portion of the revenues at our newspaper operations and our broadcasting 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 popularity of other competing content in the marketplace, availability of alternative forms of entertainment, general economic conditions, shifting consumer preferences, 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 ability to generate advertising revenue through our broadcasting operations or our newspapers business is limited, we may need to develop new or alternative revenue sources, and we may incur additional costs in order to be able to continue providing attractive television programming or to maintain our newspapers’ circulation base, which costs we might not be able to recover through advertising and/or circulation revenues. There can be no assurance that we would be able to develop any such new revenue or financing sources or maintain our circulation base, 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.

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 we offer affect the attractiveness of our services to customers and, accordingly, the rates 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 business, financial condition and 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, pursuant to a request made by over-the-air television stations (OTAs), to revisit the concept of a subscriber fee that would be payable for the carriage of the signals of OTAs. In October 2008, the CRTC once again denied this request, although it is possible that the CRTC may re-examine the issue in the future.

     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.

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.

We may be adversely affected by variations in the cost of newsprint. In addition, our newspaper 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 2008, our newspaper operations’ total newsprint consumption was approximately 176,000 metric tonnes. Newsprint represents our single largest raw material expense and one of our most significant operating costs. Newsprint expense represented approximately 11.2 % ($106.9 million) of our Newspapers segment’s cost of sales, selling and administrative expenses for the year ended December 31, 2008. 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 affect on our results of operations.

     In order to obtain more favourable pricing, we source substantially all of our newsprint from a single newsprint producer. Pursuant to the terms of our agreement with this producer, we obtain newsprint at a discount to market prices, receive additional volume rebates for purchases above certain thresholds, and benefit from a ceiling on the unit cost of newsprint. Our agreement with this supplier is a short-term agreement, and there can be no assurance that we will be able to renew this agreement or that this supplier will continue to supply newsprint to us on favourable terms or at all after the

expiry of our agreement. 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 materially adversely affect on the profitability of our newspaper business and our results of operations.

     In addition, since newspaper publishing is labour intensive and our operations are located across Canada, our newspaper 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 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.

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

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 of 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 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 operations, particularly to our cable, 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 we require or 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. See also the risk factor “—Delays in the launch of our wireless services, including due to issues relating to infrastructure buildout and tower-sharing requirements, could impair our ability to gain market share and could adversely affect our ability to deploy and operate our wireless operations successfully and profitably” above.

We are dependent upon our information technology systems and those of certain third-parties and the inability to enhance our systems, or to protect them from 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. In addition, although we use industry standard network and information technology security and survivability/disaster recovery practices, a security breach or disaster could have a material adverse effect on our reputation, business, prospects, financial condition and results of operations.

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

     As of December 31, 2008, approximately 39% of our employees were represented by collective bargaining agreements. Through our subsidiaries, we are currently a party to 112 collective bargaining agreements:

	•		Videotron is party to 5 collective bargaining agreements, representing approximately 2,850 employees. Of these collective bargaining agreements, one (representing approximately 40 employees) has expired, and negotiations are ongoing. Two others, representing approximately 2,510 employees, or 88% of Videotron’s unionized employees, will expire in December 2009. The remaining two collective bargaining agreements, representing approximately 300 employees, or 10% of Videotron’s unionized workforce will expire between December 31, 2010 and August 31, 2011;
	•		Sun Media (including Osprey Media) is party to 84 collective bargaining agreements, representing approximately 2,480 employees. One collective bargaining agreement, representing 6 employees, is under negotiation. 8 collective bargaining agreements, representing approximately 510 employees, or 20% of its unionized workforce, have expired. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2009. One collective agreement, representing approximately 40 employees, is under arbitration. The other collective bargaining agreements are scheduled to expire on various dates through April 2012;
	•		TVA Group is party to 15 collective bargaining agreements, representing approximately 810 employees. Of this number, 5 collective bargaining agreements, representing approximately 120 employees, or 15% of its unionized workforce, have expired. Negotiations regarding these collective bargaining agreements are either in progress or will be undertaken in 2009. 3 collective bargaining agreements, representing approximately 550 employees, or 68% of its unionized workforce, will expire at the end of 2009. The others are scheduled to expire at various dates between April 20, 2011 and October 31, 2013; and
	•		The other 8 collective bargaining agreements, representing approximately 520 employees or 8% 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. A labour dispute involving the editorial, classified, sales support and business office staff of the Journal de Montreal is currently ongoing and, on January 24, 2009, we announced the lock-out of these employees. We cannot predict the outcome of the current dispute at the Journal de Montreal , although we currently anticipate that any prolonged lock-out or strike would have an adverse effect on operations at the newspaper, despite our current ability to continue its circulation. Nor can we predict the outcome of our other 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, results of operations and reputation. Even if we do not experience strikes or other forms of labour protests, the outcome of labour negotiations could adversely affect our business and results of operations, including if current or future labour negotiations or contracts were to further restrict our ability to maximize the efficiency of our operations. In addition, our ability to make short-term adjustments to control compensation and benefits costs is limited by the terms of our collective bargaining agreements.

Two of our publications represent a significant portion of the revenues generated by our newspapers business.

     The Journal de Montreal and the Toronto Sun have historically represented a significant portion of the revenues generated by our newspapers business, and we expect that they will continue to do so for the foreseeable future. For the year ended December 31, 2008, the Journal de Montreal accounted for approximately 13.6% of the revenues generated by our newspapers business and the Toronto Sun accounted for approximately 8.1% of the revenues generated by our newspapers business. A significant decline in the performance of either the Journal de Montreal or the Toronto Sun or in general advertising spending in the respective markets they serve could cause the revenues of our newspapers segment to decrease significantly and could have an adverse effect on our financial condition and results of operations. A labour dispute involving the editorial, classified, sales support and business office staff of the Journal de Montreal is currently ongoing, which is likely to adversely affect current operations at this publication. See the risk factor “— We may be adversely affected by strikes and other labour protests” above.

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. Although, in the opinion of our management, the outcome of current pending claims and other litigation is not expected to have a material adverse effect on our reputation, results of operations, liquidity or financial position, a negative outcome in respect of any such claim or litigation could have such an adverse effect. Moreover, the cost of defending against lawsuits and diversion of management’s attention could be significant. See also “Item 8. Financial Information — Legal Proceedings” in this annual report.

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, our management is responsible for establishing and maintaining adequate internal control structures and procedures for financial reporting, and to prepare a report which contains an 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, 2008, 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.

We will adopt new accounting standards in 2011, and this adoption may have a material impact on our financial statements.

     In February 2008, Canada’s Accounting Standards Board confirmed that Canadian GAAP, as used by publicly accountable enterprises, will be fully converged to International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board. For our 2011 interim and annual financial statements, we will be required to report under IFRS and to provide IFRS comparative information for the 2010 fiscal year.

     IFRS uses a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosures. In order to prepare for the transition to IFRS, we have established an IFRS implementation

team which includes senior levels of management from all relevant departments and subsidiaries, and have engaged an external expert advisor.

     We have completed a diagnostic impact assessment, including a high-level analysis of potential consequences to financial reporting, business processes, internal controls, and information systems. Initial training has been provided to key employees and further investment in training and resources will be made throughout the transition to facilitate a timely and efficient changeover to IFRS. We continue to monitor and assess the impact of evolving differences between Canadian GAAP and IFRS. At this time, the impact of this changeover on our future financial position and results of operations is not yet determinable.

     The adoption will result in changes to our reported financial position and results of operations, and these changes may be material. Moreover, the restatement of our 2010 financial statements for comparative purposes may be significant. In addition, IFRS could have an effect on the computation of our debt covenants and of certain other contractual obligations. In particular, although the adoption IFRS will not change our actual cash flows, our covenants linked to financial ratios may be affected by the adoption of IFRS in ways that are difficult to predict at this time.

Risks Relating to Our Industry

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. Laws and 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. Changes to the laws, regulations and policies governing broadcast television, specialty program services and program distribution through cable or alternate means, the introduction of new laws, regulations, policies or terms of license or changes 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. We outline certain elements of this regulatory framework below. For a more complete description of the regulatory environment affecting our business, see “Item 4. Information on the Company — 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. Our cable operations 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.

     The issuance of licenses for the use of radiofrequency spectrum in Canada is administered by Industry Canada under the Radiocommunication Act . Use of spectrum is governed by conditions of license which address such matters as license term, transferability and divisibility, technical compliance, lawful interception, research and development requirements, and requirements related to antenna site sharing and mandatory roaming.

     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 periodically. Broadcasting of programs and distribution of programs on the Internet and on wireless devices had been exempted from regulation since exemption orders issued in 1999 and 2007 respectively. On October 15, 2008, the CRTC announced that it will hold a public hearing beginning on February 17, 2009 to consider

issues relating to broadcasting in the new media and the following six main themes: (i) defining broadcasting in new media; (ii) the significance of broadcasting in new media and its impact on the Canadian broadcasting system; (iii) are incentives or regulatory measures necessary or desirable for the creation and promotion of Canadian broadcasting content in new media?; (iv) are there issues concerning access to broadcasting content in new media?; (v) other broadcasting or public policy objectives; and (vi) the appropriateness of the new media exemption order. Subject to the outcome of these hearings, it is possible that the CRTC may impose a tax on cable and telecommunications companies in order to create a national fund that would finance Canadian programming.

     On November 20, 2008, the CRTC initiated a public proceeding to consider Internet traffic management practices for both wholesale and retail Internet services. Among the issues to be considered in this proceeding are trends in traffic growth and network congestion, technical and economic solutions to address network congestion, the end user impacts of these solutions, notification requirements, and the potential for unjust discrimination toward Internet content or application providers. A decision is expected in November 2009. Any restrictions the CRTC might impose on the traffic management practices of Internet service providers could limit our ability to recover the costs of our access network.

     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. See “Item 4. Information on the Company — Regulation — Ownership and Control of Canadian Broadcasting Undertakings — Diversity of Voices”.

     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 was 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. As a result of this review, on October 30, 2008, the CRTC issued a new distribution regulatory framework entitled “ Regulatory frameworks for broadcasting distribution undertakings and discretionary programming services ”. Pursuant to this new regulatory framework, the CRTC announced various changes to the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services, the majority of which will be implemented via amendments to the Broadcasting Distribution Regulations and will take effect on August 31, 2011. See “Item 4. Information on the
Company — Regulation — Canadian Broadcasting Distribution (Cable Television) — Distribution of Canadian Content and Broadcasting Distribution Regulations”.

     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 “Item 4. Information on the Company — Regulation — Canadian Broadcasting 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. The major Canadian cable operators, including Videotron, challenged certain elements of this ruling, and the CRTC issued a revised decision on May 30, 2008. 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 for a period of three years. Videotron remains a member in good standing of the agency.

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.

Industry Canada may not renew Videotron’s AWS licenses on acceptable terms, or at all.

     Videotron’s AWS licenses were issued on December 23, 2008, for a term of ten years. At a minimum of two years before the end of this term, and any subsequent terms, Videotron may apply for license renewal for an additional license term of up to ten years. AWS license renewal, including whether license fees should apply for a subsequent license term, will be subject to a public consultation process initiated in year eight.

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. Several third-party Internet service providers are now interconnected to Videotron’s cable network and are thereby providing retail Internet access services.

     The CRTC also requires 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 need to support increasing costs in securing access to support structures needed for our cable 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 to the structures of telephone utilities cannot be secured, we may apply to the CRTC to obtain a right of access under the Telecommunications Act (Canada).

     We have entered into comprehensive support structure access agreements with all of the major hydro-electric companies and all of the major telecommunications companies in our service territory. Our agreement with Hydro-Quebec, by far the largest of the hydro-electric companies, expires in December 2010.

     On October 30, 2008, TELUS filed an application with the CRTC seeking an order to direct the ILECs to file new costs, terms and conditions for support structure service. TELUS further requested that current telecommunications support structure rates be declared interim, and that monthly rental rates be adjusted retroactively to the date of its application to reflect any revised rates once a new tariff receives final approval. The major Canadian cable operators, including Videotron, have opposed TELUS’ application, whereas Bell Canada and its affiliates have supported it. If a review of monthly rental rates does proceed and if it results in an increase in rates, it may have a significant impact on Videotron’s network cost structure.

Long-Distance Equal Access could adversely affect our revenues.

     The CRTC’s current three-year “Work Plan” includes a review of the regulatory treatment of Wireless Service Providers (WSPs), which could encompass a review of the issue of long-distance equal access for WSPs. Equal access would permit wireless customers to choose their long distance provider rather than relying on the long distance services of their contracted wireless carrier. This could result in lower revenues for long-distance services, which could adversely affect the profitability of our wireless telephony business.

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 facilities 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 soil remediation 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 conducting or planning any material study or remedial measure, and none has been 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.

Risks Relating to our Senior Notes and our Capital Structure

Our indebtedness and significant interest payment requirements 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, 2008, we had $4.3 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 operations to making interest and principal payments on our indebtedness, thereby 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, and a further $350.0 million under our existing term credit facilities. If we or our subsidiaries incur additional debt, the risks we now face as a result of our leverage could intensify. For more information regarding our long-term debt and its maturities, as well as our 2008 and 2009 financing transactions, see Notes 5, 16 and 29 of our audited consolidated financial statements for the year ended December 31, 2008 included under “Item 17. Financial Statements” of this annual report. See also the risk factor, “— Restrictive covenants in our outstanding debt instruments may reduce our operating and financial flexibility, which may prevent us from capitalizing on certain business opportunities” below.

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 to which we are currently subject. 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 or our subsidiaries may need to refinance certain of our indebtedness. The inability to do so on favourable terms, or at all, could have a material adverse effect on us.

     We or our subsidiaries may need to refinance certain of our respective existing debt instruments at their term. The ability to obtain additional financing to repay such existing debt at maturity will depend upon a number of factors, including prevailing market conditions and our operating performance. The tightening of credit availability and the well-publicized challenges affecting global capital markets could also limit our or our subsidiaries’ ability to refinance existing maturities. There can be no assurance that any such financing will be available to us on favourable terms or at all. See also the risk factor “— If the world-wide financial crisis continues, the volatility and disruptions in the capital and credit markets could adversely affect our business, including affecting the cost of new capital, our ability to refinance our scheduled debt maturities and meet our other obligations as they come due” below.

If the world-wide financial crisis continues, the volatility and disruptions in the capital and credit markets could adversely affect our business, including affecting the cost of new capital, our ability to refinance our scheduled debt maturities and meet our other obligations as they come due.

     The capital and credit markets have been experiencing extreme volatility and disruption. In the fourth quarter of 2008, the volatility and disruption reached unprecedented levels. The markets have exerted extreme downward pressure on stock prices and upward pressure on the cost of new debt capital and have severely restricted credit availability for most issuers.

     The disruptions in the capital and credit markets have also resulted in higher interest rates or greater credit spreads on issuance of debt securities and increased costs under credit facilities. Continuation of these disruptions could increase our interest expense, adversely affecting our results of operations and financial position.

     Our access to funds under our existing credit facilities is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our credit facilities are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

     Longer term volatility and continued disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

     Continued market disruptions could cause broader economic downturns, which may lead to lower demand for certain of our products and increased incidence of customers’ inability to pay or timely pay for the services or products that we provide. Events such as these adversely impact our results of operations, cash flows and financial position.

We may be adversely affected by exchange rate fluctuations.

     Most of our revenues and expenses are received or denominated in Canadian dollars. However, certain expenditures, such as the purchase of set-top boxes and cable modems and certain capital expenditures, including certain costs related to the buildout of our wireless network, 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 outstanding at December 31, 2008, and we intend in the future to enter into such transactions for new U.S. dollar-denominated debt, these hedging transactions could, in certain circumstances, 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, or we may in the future be unable to enter into such transactions on favorable terms or at all.

     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 we are party to is estimated using period-end market rates and reflect the amount we would receive or pay if the instruments were terminated and settled at those dates, as adjusted for counterparties’ non-performance risk. At December 31, 2008, the net aggregate fair value of our cross-currency interest rate swaps and forward foreign-exchange swap agreements was $200.6 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.

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 Senior Notes could adversely affect their market price and liquidity.

     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 transfer or resale 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 following a change of control as required by the respective indentures governing our notes 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 fund 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. Our failure to offer to repurchase 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 Quebec. 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, Montreal, Quebec, Canada H3C 4M8, and our telephone number is (514) 380-1999. Our corporate website may be accessed through the URL http://www.quebecor.com. The information found on our corporate website does not, however, form part of this annual report and is not incorporated herein by reference. 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 (Quebec). 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 Videotron for $5.3 billion. At the time of the acquisition, the assets of Groupe Videotron included all of the shares of Videotron, a 99.9% voting interest in TVA Group, all of the shares of Le SuperClub Videotron ltée and Protectron Inc., a 66.7% voting interest in Videotron 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, 2005, we have completed several business acquisitions, combinations, divestiture projects and financing transactions through our direct and indirect subsidiaries, including, among others, the following:

	•		On March 5, 2009, Videotron issued US$260.0 million aggregate principal amount of its 9 1 / 8 % Senior Notes due 2018 for net proceeds of $332.4 million (including accrued interest and net of financing expenses). Videotron used the proceeds to repay drawings on its senior secured credit facility and for general corporate purposes.
	•		In October 2008, we and Videotron announced our intention to invest between $800.0 million and $1.0 billion over the next four years to roll out our own AWS network. This amount includes the cost of the acquired spectrum and operating licenses (which has already been paid), the cost of network buildout and initial operating costs (but excludes any capitalized interest). We plan to fund future investments in AWS through cash flow generation and available credit facilities. We currently anticipate that our new High Speed Packet Access (HSPA) network will be operational in 9 to 15 months.
	•		In July 2008, in the context of Canada’s spectrum auction for third generation AWS, we acquired spectrum licenses for AWS covering all regions of the province of Quebec and certain areas of Ontario. We were the successful bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec, except the Outaouais region where we obtained 20 MHz spectrum licenses and certain regions of Quebec where we obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. These licenses, the control of which was transferred from Quebecor Media to Videotron subsequent to the completion of the auction, were issued by Industry Canada on December 23, 2008. The spectrum enables Videotron to pursue the buildout of an AWS network infrastructure and become a facilities-based provider offering advanced wireless services, including high-speed Internet, mobile television

			and a variety of other advanced functions that can be accessed through mobile devices referred to as smartphones.
	•		On June 2, 2008, TVA Group repurchased 3,000,642 Class B shares under the Substantial Issuer Bid filed on March 31, 2008 and amended on May 14, 2008, for aggregate cash consideration of $51.4 million. During the financial year ended December 31, 2006, Quebecor Media’s interest in TVA Group increased as a result of various Normal Course Issuer Bids. In 2006, 9,800 Class B shares were repurchased under Normal Course Issuer Bids for cash consideration of $0.2 million. As a result of these repurchases, Quebecor Media’s interest in TVA Group increased by 5.7%, from 45.2% on January 1, 2006 to 50.9% as of December 31, 2008.
	•		On April 15, 2008, Videotron issued US$455.0 million aggregate principal amount of its 9 1 / 8 % Senior Notes due 2018 for net proceeds of $447.8 million. Videotron used the proceeds to repay drawings on its senior secured credit facility and for general corporate purposes.
	•		On April 7, 2008, Videotron amended its Senior Secured Credit Facility to increase its commitments under the facility from $450.0 million to $575.0 million and extend the maturity date to April 2012. Pursuant to these amendments, Videotron may, subject to certain conditions, increase the commitments under its Senior Secured Credit Facility by an additional $75.0 million (for aggregate commitments of $650.0 million).
	•		On February 26, 2008, Quebecor Media, through a wholly-owned subsidiary, completed its acquisition, pursuant to a public offer and subsequent compulsory acquisition procedure, of 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. 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 this public offer was approximately $75.2 million.
	•		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 in full the $420.0 million drawn on the senior bridge credit facility entered into to finance the acquisition of Osprey Media (which facility was then terminated), 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.
	•		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.

	•		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.

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 Quebec 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 Quebec. Through our Sun Media and Osprey Media operating subsidiaries, we are the largest newspaper publisher in the Province of Quebec 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 50.9% of the equity and control 99.9% of the voting power, we are the largest private-sector television broadcaster in Quebec 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 Quebec 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 Quebec and is one of the largest producers of French-language music products in Quebec 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 corporate and franchised video rental stores, which is the largest chain of video stores in Quebec. 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.

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

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, which we currently offer on an MVNO-basis (utilizing wireless voice and data services provided by Rogers Wireless Inc. (“Rogers Wireless”), a subsidiary of Rogers Communications Inc.), but will offer as a facilities-based wireless provider when our AWS wireless network is operational;
	•		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 Quebec’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 telephony and high-speed Internet access products, and are now in the buildout phase of becoming a facilities-based wireless provider.

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:

•

Strengthen our position as a telecommunications leader with our new AWS wireless services . With our newly-obtained AWS licenses, Videotron plans to bring consumers and small businesses an

			offering of advanced wireless telecommunications services that is unprecedented in Quebec, based on effective, reliable technology, diverse and convergent content and unambiguous business policies. We currently anticipate that our new High Speed Packet Access (HSPA) network will be operational in 9 to 15 months.
	•		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) 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.
	•		Leverage growth opportunities and convergence opportunities. We are the largest private-sector French-language programming broadcaster, a leading producer of French-language programming, the largest newspaper publisher based on total paid and unpaid circulation, and a leading English- and French-language Internet news and information portal in Canada. As a result, we are able to generate and distribute content across a spectrum of media properties and platforms. In addition, these multi-platform media assets enable us to provide advertisers with integrated advertising solutions. 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 continue to explore and implement initiatives to leverage growth and convergence opportunities, including efforts to accelerate the migration of content generated by our various publications and broadcasters to our other media platforms, and the integration of our newspapers operations and internet/portal operations under a single executive leadership.
	•		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.
	•		Leverage geographic clustering. Our Videotron subsidiary holds cable licenses that cover approximately 80% of Quebec’s approximately 3.1 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.

Cable

     Through Videotron we are the largest cable operator in the Province of Quebec 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 Quebec. We offer pay television, Internet access, cable telephony and mobile wireless telephony services. Our cable network covers approximately 80% of Quebec’s approximately 3.1 million residential and commercial premises passed by cable. Our cable licenses include licenses for the greater Montreal area, the second largest urban area in Canada. The greater Montreal 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, 2008, we had over 1.7 million basic cable customers (which we define as customers receiving basic cable service, including analog and digital customers), representing a basic penetration rate of 67.5%. 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, 2008, we had 927,332 digital customers, representing 54.1% of our basic customers and 36.5% of our total homes passed. We have also rapidly grown our cable Internet access customer base, and as of December 31, 2008, we had 1,063,847 cable Internet access customers, representing 62.0% of our basic customers and 41.8% 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 also allows us to offer a telephony service using VoIP technology to our residential and commercial customers. As of December 31, 2008, we had 851,987 cable telephony customers, representing 49.7% of our basic customers and 33.5% of our total homes passed. In addition, as of December 31, 2008, approximately 99% of all of our cable customers were in areas in which our cable telephony service was available.

     We also currently offer MVNO-based mobile wireless telephony services utilizing the GSM/GPRS network of Rogers Wireless Inc. (“Rogers Wireless”), a subsidiary of Rogers Communications Inc. As of December 31, 2008, 63,402 lines had been activated. On March 31, 2008, we qualified as a new market entrant in the spectrum auction for third generation Advanced Wireless Services (“3G” or “AWS”). In July 2008, we acquired spectrum licenses for AWS covering all regions of the province of Quebec and certain areas of Ontario. We were the successful bidder for 40 MHz spectrum licenses in all parts of the Province of Quebec, except the Outaouais region where we obtained 20 MHz spectrum licenses and certain regions of Quebec where we obtained 50 MHz spectrum licenses. We also acquired 20 MHz spectrum licenses in Eastern Ontario and 10 MHz spectrum licenses in the city of Toronto. These licenses, the control of which was transferred from Quebecor Media to Videotron subsequent to the completion of the auction, were issued by Industry Canada on December 23, 2008. These spectrum licenses enable us to pursue the buildout of an AWS network infrastructure and become a facilities-based provider offering advanced wireless telephony services, including high-speed Internet, mobile television and a variety of other advanced functions that can be accessed through mobile devices referred to as smartphones.

     In October 2008, we and Videotron announced our intention to invest between $800 million and $1.0 billion over the next four years to roll out our own AWS network. This amount includes the cost of the acquired spectrum and operating licenses (which has already been paid), the cost of network buildout and initial operating costs (but excludes any capitalized interest). We plan to fund future investments in AWS through cash flow generation and available credit facilities. We currently anticipate that our new High Speed Packet Access (HSPA) network will be operational in 9 to 15 months.

     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, the widest range of French-language programming in Canada and exclusive content on our video-on-demand service. 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 Videotron, we also operate the largest chain of video and video game rental stores in Quebec and among the largest of such chains in Canada, with a total of 246 retail locations (of which 208 are franchised).

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

     For the year ended December 31, 2008, our cable operations generated revenues of $1.80 billion and operating income of $797.2 million. For the year ended December 31, 2007, our cable operations generated revenues of $1.55 billion and operating income of $642.7 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, 2007, the most recent date for which data is available, there were approximately 7.6 million cable television customers in Canada, representing a basic cable penetration rate of approximately 55.9% of homes passed. For the twelve months ended August 31, 2007 (the most recent data available), total industry revenue was estimated to be over $7.1 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 Quebec. As of August 31, 2008, Quebec is home to approximately 23.3% of Canada’s population and approximately 23.9% of its basic cable customers. Based on the CRTC statistics, basic cable penetration in Quebec, which was approximately 53.9% as of August 31, 2008, has

traditionally been lower than in other provinces in Canada, principally due to the higher concentration of French-speaking Canadians in Quebec. It is estimated that over 80% of Quebec’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 Quebec’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 340 channels, including 161 English-language channels, 55 French-language channels, 35 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 Quebec, 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.

      Traditional Cable Television Services

     Customers subscribing to our traditional analog “basic” and analog “extended basic” services generally receive a line-up of 44 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 26 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 Cable-Based Products and Services

     Cable’s large 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 2008, we also launched and effected a gradual roll-out of our Wideband services, which offer speeds of up to 900 times the speed of a conventional telephone modem. We currently plan to continue extending the coverage of this service in 2009. As of December 31, 2008, we had 1,063,847 cable Internet access customers, representing 62.0% of our basic customers and 41.8% 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 53.9% as of September 30, 2008.
	•		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, 2008, we had 927,322 customers for our digital television service, representing 54.1% of our basic customers and 36.5% 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, 2008, we had 1,209,595 set-top boxes deployed, of which approximately 97% were owned by customers and 3% were leased.
	•		Cable Telephony . In January 2005, we launched our cable telephony service using VoIP technology in selected areas of the Province of Quebec, and since then we have been progressively rolling-out

			this offering among our other residential and commercial customers in the Province of Quebec. As of December 31, 2008, our cable telephony service is available to 99% 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, 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, 2008, we had 851,987 subscribers to our cable telephony service, representing a penetration rate of 49.7% of our basic cable subscribers and 33.5% of our homes passed.
	•		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 sometimes group movies, events or TV programs available on video-on-demand and offer them on a weekly basis. Regulations prevent from offering such blocks of programs for a longer period. We also offer pay television channels on a subscription basis that permits our customers to access and watch most of the movies available on the linear Pay TV channels these clients subscribe to.
	•		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.

      Wireless Telephony

     On August 10, 2006, we launched our MVNO-based mobile wireless telephony services in the Quebec City area, utilizing the Rogers Wireless GSM/GPRS network. Since then, the service has been completely rolled out throughout the Province of Quebec. Through our strategic relationship with Rogers Wireless, we offer Quebec 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, 2008, 63,402 lines had been activated.

     Following our participation in Canada’s spectrum auction for third generation AWS, we are currently pursuing the buildout of a network infrastructure to become a facilities-based provider offering advanced wireless telephony services. Our objective is to bring consumers and small businesses an offering of advanced wireless telecommunications services

that is based on effective, reliable technology, diverse and convergent content and unambiguous business policies. See “— Business
Overview — Cable”.

      Customer Statistics Summary

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

     In the year ended December 31, 2008, we recorded a net increase of 77,519 basic cable customers. During the same period, we also recorded net additions of: 130,858 subscribers to our cable Internet access service; 159,111 customers to our digital television service, the latter of which includes customers who have upgraded from our analog cable service; and 215,635 customers to our cable telephony services. In 2008, we activated 18,325 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 Quebec and Ontario.

      Video Stores

     Through Le SuperClub Videotron, we also operate the largest chain of video and video game rental stores in Quebec and among the largest of such chains in Canada, with a total of 246 retail locations (of which 208 are franchised). With 140 retail locations offering our suite of services and products, Le SuperClub Videotron is both a showcase and a

valuable and cost-effective distribution network for Videotron’s growing array of advanced products and services, such as cable Internet access, digital television and mobile wireless telephony. Le SuperClub Videotron announced in 2008 its intention to franchise most of its remaining corporate locations and is currently in the process of doing so.

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, 2008, the average monthly fees for basic and extended basic service were $24.57 and $38.49, respectively, and the average monthly fees for basic and extended basic digital service were $14.00 and $42.75, 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, 2008, our cable systems consisted of 19,331 km of fiber optic cable and 36,740 km of coaxial cable, passing approximately 2.5 million homes and serving approximately 1.9 million customers. Our network is the largest broadband network in Quebec covering approximately 80% of cable homes passed and, according to our estimates, more than 80% of the businesses located in the major metropolitan areas of each of Quebec and Ontario. Our extensive network supports direct connectivity with networks in Ontario, Eastern Quebec, 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 a fiber optic 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 optical nodes, 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 and cable modems.

     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 570 homes each to be served by fiber optic cable. To allow for this configuration, secondary headends were put into operation in the greater Montreal area and in the greater Quebec 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 570 homes, which is critical to our advanced services, such as video-on-demand, Switched Digital Video Broadcast and the continued expansion of our interactive services. Our network design also allows for further segmentation from 500 to 250 or 125 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 respect of the suite of products and services that we offer and launching new products and services requires investments in our network to support growth in our customer base and increases in bandwidth requirements. Approximately 99% of our network in Quebec 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 investment in the network will be required.

     In October 2008, we and Videotron announced our intention to invest between $800 million and $1.0 billion over the next four years to roll out our own AWS network. This amount includes the cost of the acquired spectrum and operating licenses (which has already been paid), the cost of network buildout and initial operating costs (but excludes any capitalized interest). We plan to fund future investments in AWS through cash flow generation and available credit facilities. We currently anticipate that our new High Speed Packet Access (HSPA) network will be operational in 9 to 15 months.

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 Videotron 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 Quebec) 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 provide 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 we offer, 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.
	•		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.
	•		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.
	•		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.

	•		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.
	•		Other Cable Distribution. Currently, a cable operator offering television distribution and providing cable-modem Internet access service is serving the greater Montreal area. This cable operator is owned by the regional ILEC.
	•		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.
	•		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).
	•		Telephony Service. Our cable telephony service competes against other telephone companies, including both the incumbent telephone service provider in Quebec, which controls a significant portion of the telephony market in Quebec, as well as other VoIP telephony service providers and mobile wireless telephone service providers.
	•		Mobile wireless telephony services . Our current MVNO-based 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. As a facilities-based wireless provider, we will 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 Wi-Fi, WiMax, “hotspots” or trunk radio systems, which have the technical capability to handle wireless data communication and mobile telephone calls. Our wireless business will also compete with rivals for dealers and retail distribution outlets.
	•		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

     Our newspaper publishing operations, which we operate through our Sun Media and Osprey Media operating subsidiaries, are the largest newspaper publisher in Quebec and in Canada based on total paid and unpaid circulation. With a 20.9% market share, Sun Media itself is also the second largest newspaper publisher in Canada in terms of weekly paid circulation, according to statistics published by the Canadian Newspaper Association, or “CNA”, for the six months ended March 31, 2007, which is the most recent available data. Our Newspapers segment publishes 37 paid-circulation dailies and 217 community newspapers, magazines, weekly buyers guides, farm publications and other specialty publications. As of December 31, 2008, the combined weekly circulation of our Newspapers segment’s paid newspapers was approximately 15.9 million copies, according to internal statistics.

     Sun Media publishes 201 publications across Canada, both in urban markets, including nine of the top ten urban markets in Canada, and in community markets. Sun Media publishes 17 paid daily newspapers, and according to the NADbank ^® Study referred to below in section “— Newspaper Operations — The Urban Daily Group — Paid daily newspapers” of this annual report, each of Sun Media’s eight urban daily newspapers ranks either first or second in its market in terms of weekly readership. Sun Media also publishes 178 weekly newspapers, shopping guides and agricultural and other

specialty publications, as well as six free daily commuter publications: 24 Hours in Toronto, Vancouver, Ottawa, Calgary and Edmonton and 24 Heures in Montreal.

     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.

     Since the fourth quarter of 2008, Quebecor Media’s Newspapers segment has included Canoe, an integrated company offering e-commerce, information and communication services. Canoe operates the Internet portal network of the same name, which logs over 7.0 million unique visitors per month in Canada, including more than 3.2 million in Quebec (according to comScore Media Metrix figures for November 2008). The network owns or operates a family of sites that includes canoe.ca , canoe.qc.ca , La Toile du Quebec ( toile.com ), tva.canoe.com and lcn.canoe.com. Canoe also operates a number of e-commerce sites: jobboom.com (employment), micasa.ca (real estate), autonet.ca (automobiles), reseaucontact.com (dating), space.canoe.ca and espace.canoe.ca (social networking), classifieds.canoe.ca and classees.canoe.ca (classified ads), and canoeklix.com (cost-per-click advertising solutions).

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

     Quebecor Media owns 100% of the voting and equity interests in each of Sun Media and Osprey Media. Quebecor Media, directly and through TVA Group, holds 93.2% of the equity and 99.9% of the voting interest in Canoe. Canoe is an affiliate of Sun Media and of Osprey Media, but is not a subsidiary of Sun Media or Osprey Media and is not included in either of their consolidated financial statements.

     For the year ended December 31, 2008, our newspaper operations generated revenues of $1.18 billion and operating income of $227.1 million, with 77.5% of these revenues derived from advertising, 15.9% from circulation, and 6.7% from commercial printing and other revenues. For the year ended December 31, 2007, our newspaper operations generated revenues of $1.07 billion and operating income of $232.8 million, with 79.2% of these revenues from advertising, 15.5% from circulation, and 5.3% from commercial printing and other revenues.

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 “CNA’s Circulation Data”), 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 %).

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

     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 limited growth, if any, for traditional newspaper publishers, for many years, and the newspaper industry is now undergoing fundamental changes, including the growing availability of free access to media, shifting readership habits, digital transferability, the advent of real-time information and secular changes in the advertising market. As a result of these changes in the market, competition in the newspaper industry now comes not only from other newspapers (including other national, metropolitan (both paid and free) and suburban newspapers), magazines and more traditional media platforms, such as broadcasters, cable systems and networks, satellite television and radio, direct marketing and solo and shared mail programs, but also from digital media technologies, which have introduced a wide variety of media distribution platforms (including, most significantly, the Internet and distribution over wireless devices) to consumers and advertisers. As a result, the newspapers industry is facing challenges to retain its revenues and circulation/readership, as advertisers and readers become increasingly fragmented in the increasingly populated media landscape.

Advertising and Circulation

     Advertising revenue is the largest source of revenue for our newspaper operations, representing 77.5% of our newspaper operations’ total revenues in 2008. 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, 2008 (49.1% for the year) followed by retail advertising (31.9% for the year) and national advertising (16.4% 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 approximately 48.2% of all of our classified advertising, in terms of revenue, for the year ended December 31, 2008. 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 the 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, 2008, our top ten national advertisers accounted for approximately 7.6% of the total advertising revenue and approximately 5.9% 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 15.9% of total revenues of our newspapers segment in 2008. 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.

     In order to respond to the ongoing transformation of the newspaper industry, which has affected advertising revenues and circulation levels in recent years, and to make adjustments in respect of the recent deterioration of economic conditions that have affected many of our advertisers (such as in the automotive sector), we are undertaking initiatives to leverage synergies and convergence among our subsidiaries, including those which are part of our newspaper operations. These initiatives include the integration under a unified executive leadership of Sun Media’s operations and the Internet/Portal operations of Canoe, as well as the launch in the autumn of 2008 of online e-editions of a number of Sun Media’s newspapers. This latter initiative provides our advertisers with added-value and exposure on the Internet platform, which we hope will allow us to retain and secure certain advertising revenues.

Newspaper Operations

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

	•		the Urban Daily Group; and
	•		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.

     We operate a printing facility located in Islington, Ontario. 24 Hours in Toronto and the Toronto Sun are printed at this facility. In addition, we operate a printing facility located in Mirabel, Quebec. This printing facility prints the Journal de Montreal and 24 Heures (Montreal), as well as certain of Sun Media’s Quebec community publications.

      The Urban Daily Group

     Sun Media’s Urban Daily Group is comprised of eight paid daily newspapers, six 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, 2008, on a combined weekly basis, the eight paid daily newspapers in Sun Media’s Urban Daily Group have a circulation of approximately 6.0 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 weekly readership. 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 ^® 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 “NADbank ^® 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 weekly readership during that period:

      Journal de Montreal. The Journal de Montreal is published seven days a week and is distributed by Messageries Dynamiques , Sun Media’s division that specializes in the distribution of publications. According to the CNA’s Circulation Data, the Journal de Montreal ranks second in paid circulation among non-national dailies in Canada and first among French-language dailies in North America. The Journal de Montreal is the number one newspaper in its market in terms of weekly readership according to the NADbank ^® Study. The main competitors of the Journal de Montreal are La Presse and The Montreal Gazette .

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

      Journal de Quebec. The Journal de Quebec is published seven days a week and is distributed by Messageries Dynamiques. The Journal de Quebec is the number one newspaper in its market in terms of weekly readership according to the NADbank ^® Study. The main competitor of the Journal de Quebec is Le Soleil .

     The following table presents the average daily paid circulation of the Journal de Quebec 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 number two non-national daily newspaper in its market in terms of weekly readership according to the NADbank® Study.

     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:

     The London Free Press also publishes the London Pennysaver , a free weekly community shopping guide with circulation of approximately 145,800 as of December 31, 2008, according to internal statistics.

      Ottawa Sun. The Ottawa Sun is published seven days a week and is distributed throughout the Ottawa region through its own distribution network. The Ottawa Sun is the number two newspaper in its market in terms of weekly readership according to the NADbank ^® Study. It competes daily with the English language broadsheet, the Ottawa Citizen , and also with the French language paper, Le Droit .

     The following table reflects the average daily paid circulation of the Ottawa Sun for the periods indicated:

     The Ottawa Sun also publishes the Ottawa Pennysaver , a free weekly community shopping guide with circulation of approximately 168,400 as of December 31, 2008, according to internal statistics.

      Winnipeg Sun. The Winnipeg Sun is published seven days a week. It serves the metropolitan Winnipeg area and has its own distribution network. The Winnipeg Sun is the number two newspaper in its market in terms of weekly readership according to the NADbank ^® Study, and it competes with the Winnipeg Free Press .

     The following table reflects the average daily circulation of the Winnipeg Sun for the periods indicated:

      Edmonton Sun. The Edmonton Sun is published seven days a week and is distributed throughout Edmonton through its own distribution network. The Edmonton Sun is the number two newspaper in its market in terms of weekly readership according to the NADbank ^® Study, and it competes with Edmonton’s broadsheet daily, the Edmonton Journal .

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