Cogeco Inc. will look south to increase the size of its cable TV business as few opportunities exist in Canada, CEO Louis Audet says.
The head of the media and cable company said Tuesday that the Quebec company sees a possible acquisition of a small U.S. cable company later next year, after it pays down more debt.
Cable companies in Canada are big, reasonably profitable and generally not for sale, said Audet, whose company is the country’s fourth-largest cable TV provider.
“What you see is pretty much what you get unless something really special comes out of left field,” he said before the company’s annual meeting.
“The potential exists in the U.S. where it doesn’t in Canada.”
Deals for cable companies in Canada have been few and far between in recent years.
Rogers Communications Inc. tried to buy Quebec cable operator Vidéotron Ltée in 2000, but lost out to Quebecor Inc., which was backed by the Caisse de dépôt et placement du Québec.
Meanwhile, media and cable TV company Shaw Communications Inc. sold its Ontario-based Mountain Cablevision Ltd. to Rogers last January.
Audet’s family-controlled company, though, has been sought after.
Rogers has shown interest in buying Cogeco Cable, owning a minority stake. But Audet, Cogeco’s controlling shareholder, has shown no interest in selling the company his father founded in 1957 with a TV station in Trois-Rivieres, Que.
Cogeco got a toehold in the U.S. market with a $1.36-billion (U.S.) deal to buy Atlantic Broadband in 2012, its first big acquisition since its failed venture into Portugal.
Atlantic Broadband has operations in Pennsylvania, Florida, Maryland, Delaware and South Carolina and also offers Internet and telephone services to residential and business customers.
While the company waits for an opportunity in the United States, Audet said it will have to grow through the services it offers, including cable TV and expanding business services.
“Cable was traditionally built on the residential market. But what you see today, not just from us, but from other cable operators is extending networks to industrial parks and bringing on larger customers,” he said.
“These are typically larger customers who will pay you $600 a month or $1,200 a month.”
Cogeco, like its peers, has been offering data services to businesses. The company bought Internet infrastructure provider PEER 1 Network Enterprises in late 2012. PEER 1, whose headquarters and primary network centres are in Vancouver, specializes in data hosting for companies, among other services.
Audet said Cogeco’s data services and PEER 1 both have growth rates of more than 15 per cent a year.
Canaccord Genuity analyst Dvai Ghose said he doesn’t expect any consolidation in Canada’s cable TV market for the foreseeable future.
“Unlike in the U.S., foreigners cannot control Canadian cable companies,” Ghose said in a recent note.
“While the market perennially speculates about a Rogers’ acquisition of Shaw, we do not believe that regulators would allow Rogers to acquire Shaw at this time.”
Cogeco reported strong financial results for the fourth quarter, late Monday.
Cogeco said profit attributable to owners of the corporation amounted to $23.1-million or $1.37 per diluted share. That’s up from $18.5-million or $1.10 in the same year-earlier period.
Revenue increased 41 per cent to $517-million from $366.6-million.
Subsidiary Cogeco Cable Inc. saw its revenue soar 44.9 per cent to $475-million, up from $327.9-million in the year-earlier period.
Profit increased to $49.7-million or $1.01 per diluted share, up from $42.1-million or 86 cents per diluted share a year ago.