Cogeco Communications Inc. will not take part in an auction for cellular airwaves this year, but hopes to see changes to government policy that could eventually let it get into the wireless business.
Philippe Jetté, chief executive of the Montreal-based cable company, said in an interview Friday that Cogeco decided not to register for an auction of spectrum – the radio waves that carry telecommunications signals – this March because the geographic areas the licences cover are too large. Cogeco wants to offer wireless service only in the parts of Ontario and Quebec where it sells cable and internet service, giving its customers the option to bundle in the mobile service.
“For example, we serve Burlington and Oakville, [Ont.] but it’s impossible to buy spectrum there without buying the whole of Toronto. You have to buy for all of the GTA and no business case would make sense to buy so much spectrum for Toronto and not use it," he said.
Mr. Jetté said he believes the federal government understands that complaint and he hopes to see smaller geographic areas included in future spectrum auctions. Cogeco has also been lobbying Ottawa to create new rules that would force large national carriers to lease airtime to smaller regional players.
The Canadian Radio-television and Telecommunications Commission will hold a public hearing this year on the wholesale wireless market and could potentially mandate such a model.
“Right now, the regulatory context doesn’t enable a regional player like Cogeco to play and benefit Canadian customers,” Mr. Jetté said.
The Cogeco CEO also addressed a rocky period for the company’s Canadian cable business as it introduced a new customer management system in April, replacing 22 legacy systems. The integration caused serious delays in service installation calls and led to overwhelmed call centres, prompting the company to halt marketing efforts to win new clients.
Mr. Jetté acknowledged that the “transition and stabilization period was first longer than anticipated but second, a lot more visible than we anticipated to our customers.” He said the problems have now finally been fixed.
“All our contact centres, sales and marketing has been re-engaged. We’re back to normal in terms of operating metrics,” he said. “We had to go through the storm. The storm passed and we’re on the other side.”
Cogeco said it cut 125 jobs (about 5 per cent of its total Canadian work force) as a result of the new system, which relies far less on manual processes, Mr. Jetté said, noting that it will save the company about $9-million a year.
Mr. Jetté took over the top job at Cogeco in September as Louis Audet, son of company founder and long-time CEO Henri Audet, transitioned to the role of executive chairman.
Cogeco reported its first-quarter earnings on Thursday and held a conference call for analysts as well as its annual general meeting on Friday morning. The company said revenues were down 1.4 per cent at its Canadian cable business as it shed about 35,000 total internet, cable and telephone subscribers amid problems with its customer management system.
Its U.S. cable business fared better, with a significant bump in both revenue and EBITDA due to acquisitions over the past year. Excluding those takeovers, analysts noted that underlying revenue and EBITDA still grew by about 6 and 11 per cent, respectively (EBITDA means earnings before interest, taxes, depreciation and amortization).
Cogeco’s data centre and enterprise service division continues to struggle, however, with revenues and EBITDA down 3 and 16 per cent, respectively. The business faces tough competition from U.S. giants Amazon and Google, and Mr. Jetté said while Cogeco still hopes to stabilize the division, he’s not ruling out the possibility of a sale.
The company said total revenue increased by 16 per cent to $643-million in the quarter (largely because of gains at its U.S. business), but profit declined by 1.6 per cent to $75-million. It earned $1.42 per share compared to $1.55 per share this time last year. Cogeco also declared a quarterly dividend of 52.5 cents, up from 47.5 cents per share this time last year.
Analysts characterized the results as “mixed” and the company’s stock was up more than 7 per cent on Friday.