Louis Audet leaves nothing to chance.
On a recent trip to Toronto, the president and chief executive officer of Montreal-based Cogeco Inc. and Cogeco Cable Inc. selects Far Niente, a busy downtown restaurant, for our lunch. He likes the food but, more important, it is only a short stroll from his morning meeting.
Far Niente means “doing nothing” in Italian, a nod to the traditional relaxed midday meal. But for Mr. Audet, our meeting is not about leisurely noshing – it is work. So, he has done everything he can to prepare – including reading every instalment of “The Lunch” since the series began in 2010.
“It’s interesting,” he says with a laugh. “I think you [Globe reporters] are generally kind to your interviewee, so that’s not so bad.”
Having the foresight to expect the unexpected is the mark of a seasoned executive. And Mr. Audet knows first-hand the cost of miscalculating risk.
Earlier this year, Cogeco sold its struggling Portuguese subsidiary, Cabovisao, for the equivalent of $59.3-million. It had acquired it for $660-million in 2006 – a deal many shareholders deemed a bad bet from the get-go.
Although he has firmly ruled out further European deals, there are lingering worries among investors that his acquisition strategy could once again veer off course. A misstep now could also divert his attention from the headwinds gathering here at home.
Cogeco Cable’s largely rural footprint has traditionally shielded it from cutthroat competition, but the growing popularity of advanced TV services from its phone company rivals is starting to pose a threat. Telecom giants BCE Inc. and Telus Corp. are poaching cable clients by dangling the prospect of superior technology and discounts for taking multiple services – including mobile phones, a service missing from Cogeco’s lineup. At the same time, those rivals are upping the ante in the business services market, a fast-growing area that includes corporate data-centre services.
In addition to battling its competitors, Cogeco must strike the right balance between profitability and growth. Investors may be salivating for fatter dividend increases, but Mr. Audet’s message is one of prudence. When it comes to investing in the business, Cogeco has every intention of sticking to its knitting.
“We concentrate on what we’re good at,” he explains as our waiter arrives to discuss the daily specials. When I opt for Atlantic salmon instead of the proffered rainbow trout, Mr. Audet orders the same, plus a salad, remarking: “That’s always a sure choice. A sure value.”
Unmoved by the waiter’s suggestion to begin our meal with poutine, he is later persuaded to try freshly squeezed tangerine juice instead of his usual standby, Diet Coke. As we sip, he reflects on why his Portuguese strategy went awry.
While meticulously cutting up his salad, he stresses that much of what happened – including an unfavourable government decision and the chilling economic impact of the European debt crisis – was simply beyond his control.
“We’re not happy about it – nor is anyone,” he says. “But that being said, we’ve come out with this still with the strongest balance sheet of public cable companies in North America.”
Analysts agree that Cogeco Cable’s ledger is in good shape. “Without Portugal, we see room for investor sentiment to improve,” Andrew Calder, a credit analyst with RBC Dominion Securities Inc., wrote in a research note this week.
But having gambled on Portugal and lost, Mr. Audet is now intent on making disciplined choices to fuel growth. His priorities include bolstering Cogeco’s fibre-optic cable network, which stretches from Windsor, Ont., to Gaspé, Que. There are also planned investments in its business data centres, which may not get investors’ pulses racing now, but are likely to do so when they become major moneymakers down the road.
There could also be acquisitions in other areas. In 2011, Cogeco acquired Corus Entertainment’s Quebec radio stations. Mr. Audet is open to buying more radio stations – if suitable assets come up for sale. It is unclear whether Cogeco would take a look at any of the 10 radio stations BCE is divesting to clinch regulatory approval for its takeover of Astral Media.
When asked about buying outside of Quebec, he pauses before providing his reply: “We consider ourselves to be a Canadian company. Then there is an issue of what makes sense. If you are going to travel to Western Canada, you’d better have a certain-size business.”
As a language buff – he speaks six, including Arabic – Mr. Audet has a knack for providing nuanced responses. Not one to tip his hand, every word counts, including those he chooses not to utter.
For instance, he tells me that Cogeco Cable is about a year away from finishing key upgrades to its cable network, but remains mum on its plans to offer a brand-new TV service that is comparable to the more-advanced TV now sold by its phone company rivals.
“I realize that I am not answering that question,” he says with a grin.
He claims to be only moderately worried about the growing competitive threat posed by Bell Canada in Ontario, and Telus Corp. in Quebec. “I view it as a temporary inconvenience,” he says.
In the meantime, his strategy to fend off those rivals does not include wireless. Cogeco Cable will likely sit out next year’s spectrum auction of the 700 MHz band. If wireless ever becomes a requirement for retaining customers, then he says he might consider striking a marketing arrangement with an existing wireless carrier.
“You can do that in six months’ time if you have to,” Mr. Audet says. “I think there are a variety of [wireless] suppliers out there with whom we could deal.”
At least one of those wireless carriers, Rogers Communications Inc., has long been thought to be harbouring fantasies of a Cogeco takeover, not an alliance. Rogers’ ownership stake includes more 10.6 million shares, or 32 per cent of Cogeco Cable’s outstanding shares, and nearly 40 per cent, or 5.9 million shares, of holding company Cogeco Inc.
Having done his homework, Mr. Audet is expecting my question. “It is simply not for sale,” he says of the family business. “Not because it is Rogers; it is not for sale for anyone. We don’t define ourselves in terms of money.”
I am still digesting that thought when the bill arrives. Mr. Audet offers to treat, but I insist on The Globe picking up the tab.
“The newspaper is paying today? Oh wow, so I’ve been an expensive date,” he jokes. “Thank you very much for lunch. I look forward to seeing what it has cost me.”Report Typo/Error
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