Cogeco CEO Louis Audet acknowledged that convincing companies to make decisions around data hosting, cloud and co-location services can take time.Graham Hughes/The Canadian Press
Cogeco Cable Inc. took the wraps off a new high-tech data centre in Montreal Friday, kicking off what it hopes will be a period of renewed growth for its enterprise services business.
The company announced in May that it was combining its two enterprise-focused subsidiaries, Cogeco Data Services and Peer 1 Hosting, a reorganization that will cost $15-million this year but one it hopes will eventually lead to $10-million in annual savings.
Cogeco said the 100,000 square-foot facility in Montreal represents an investment that will total more than $100-million "over time." But its opening actually represents a slowdown in capital spending for the division, with management predicting a return to improved growth and better free cash flow.
"We're now in the very comfortable situation where we own and operate 400,000 gross square feet of data-hosting capacity," Cogeco chief executive Louis Audet said in an interview Friday. The company also recently completed an expansion of its Barrie, Ont., facility and has a total of 21 data centres with locations in Vancouver, the United States, Latin America and Western Europe.
"For the time being, we have what we need to go forward. We have a lot of inventory to sell now, so we don't expect that we will have to invest as much as we have had in the past," Mr. Audet said. The company can expand the Montreal data centre in four additional phases as needed.
Montreal-based Cogeco brings in most of its money through its retail customer cable operations, and while its smaller U.S. business has been adding subscribers, its Canadian division has been grappling with declining cable customer numbers while looking for growth in Internet services.
At $303-million in 2014, Cogeco's enterprise services unit made up about 15 per cent of consolidated revenue and the company hopes its declining costs will soon lead to improved margins.
In a July research report, Barclays Capital telecom analyst Phillip Huang questioned how quickly those improvements would materialize, pointing to the "long sales cycles" characteristic of the enterprise services business.
Mr. Audet acknowledged that convincing companies to make decisions around data hosting, cloud and co-location services can take time.
"But Tony [Ciciretto, CEO of the enterprise division] and his team have been at this a long time. Customers could see this facility coming a long while ago. And of course they like to see it before they commit, but they knew it was coming. So yeah, it's a long sales cycle and you have to plan accordingly."
Offering data management services to enterprise clients has become an increasing focus for traditionally retail-focused telecommunications companies. Fellow Quebec operator Videotron Ltd. said Wednesday it, too, will expand its enterprise business to serve the Montreal area, announcing plans to invest $40-million in a 4,000 square-metre co-location facility set to open next summer.