Quebecor QBR.B-T new wireless network is just around the corner – a good thing for the company, given the maturing nature of its core cable and Internet businesses.
The Montreal-based converged media and telecommunications company posted a dip in profit Wednesday with its second-quarter results, which were in line with or ahead of analysts’ expectations.
Weak cable and Internet subscriber numbers – and continued losses from withered advertising in its news media and broadcasting divisions – again revealed the pressing need for Quebecor, like other cable companies in Canada, to expand into the wireless cellphone space. This would also provide an additional platform from which to sell the company’s vast media assets.
But in wireless, they will run head-on into Montreal-based BCE Inc.’s Bell Canada, which is already agitating ahead of Quebecor’s wireless network launch, expected some time in the late summer.
“Bell is extremely aggressive, to a point that I don’t understand why they’re attacking on pricing so much,” Robert Dépatie, president and chief executive officer of Quebecor’s telecommunications unit, Vidéotron Ltée, told analysts on a conference call. “We have built our brand on customer service, values and product. We have no intention to match their pricing. If they want to do that war, they’re going to do it alone.”
Although Vidéotron has vowed not to match Bell’s aggressive pricing, many analysts expect the company to launch wireless service at a steep discount within a bundle of existing services, like the company did when it launched home phone service several years ago.
“We all know the incumbents, especially our friends Bell, were hit hard on the wireline business in Quebec when we launched,” Pierre Karl Péladeau, Quebecor’s president and chief executive officer, told analysts.
Bell has already begun to drop some prices in Quebec, as it is doing in some cases elsewhere. In Toronto, Bell is trying to wrest the residential TV markets from its cable competitor, Rogers Communications Inc., like it is attempting to do in Montreal against Vidéotron.
Quebecor posted profit of $65.5-million and earnings per share of $1.02, compared to $76.8-million and $1.19 for the same period last year. Revenue was up 5 per cent to $994-million. Operating income was also up. But heavy income tax and amortization hits in the quarter eroded any profit growth from those increases, the company said.
Cable subscribers were down 4,000 in the quarter, which the company blamed on Quebec’s moving season. But high-speed Internet and land line phone additions both fell below Montreal-based Desjardins Securities analyst Maher Yaghi’s forecasts, who nevertheless pointed to strong profit margins in cable as a sign that Quebecor, despite near-term uncertainties, continues to be a growth story.
“Over all, we remain positive on the company's long-term prospects, given the potential for a significant new leg of growth from wireless, supplemented by organic growth in cable from pricing increases despite slowing subscriber growth,” he wrote in a note to clients on Wednesday.
