For telcos, it’s a scary world outside of Canada’s safe borders.
Cogeco Cable Inc. learned that the hard way. On Wednesday, the firm announced the sale of its Portuguese division, Cabovisão – Televisão por Cabo SA, for just $59-million, after buying it for $660-million in 2006.
The sale was widely expected, and Cogeco had written of what was left of the business last quarter, but the deal will echo through the industry as a reminder of just how good the telcos have it here. In Canada, foreign competition isn’t an issue, and a relatively strong economy enables Canadians to pay big bucks for cable.
Why go abroad when it’s so cozy here?
No doubt, competition within Canada is heating up as the firms try to eat each others' lunches. Telus, for instance, is moving in on Shaw’s cable market west of Manitoba. But for the most part, the telcos have got it pretty good.
Plus, they know the Canadian market intimately. Cogeco Cable thought it knew Portugal, and the sale Wednesday proves that just wasn’t the case. Back in 2009, when Cogeco wrote off half of the Portugeese asset’s book value, management was still optimistic about the European country, citing “lower cable penetration, lower PC penetration, and a gross domestic product per capita at about 70 per cent of the EU average, all of which are certain to rise to a higher value with the passage of time and, hence, be a source of growth for this company.” That was chief executive officer Louis Audet.
When that writedown went through, Cabovisao was 16 per cent of consolidated earnings before interest, taxes, depreciation and amortization, and Cogeco said it was doing everything it could to remedy its problems. “We are well aware of it and we are taking decisive steps to fix it. We have the experience, we have the management, and we have the balance sheet strength to fix it.”
The problem was, they couldn’t fix an entire country.
Cogeco is selling the asset to European Group, ALTICE.