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Report on Business Quebecor doubles down on complaints against Bell as profit rises

At the CRTC hearing, Mr. Péladeau suggested the regulator was overstepping its jurisdiction.

Paul Chiasson/The Canadian Press

Quebecor Inc. chief executive officer Pierre-Karl Péladeau doubled down on his critiques of competitor Bell, and of Canada’s regulatory system for broadcasting, at his company’s annual meeting of shareholders on Thursday.

After a court order in April required Quebecor to continue providing the signal for its TVA Sports channel to Bell subscribers during a dispute over the terms for carrying the channel, Mr. Péladeau renewed his assertion that “the system is broken.”

Quebecor pulled the channel’s signal from Bell TV screens – and from smaller TV providers that license their signals through Bell – last month, just in time for puck drop in the first game of the National Hockey League playoffs. The move was a response to stalled negotiations between the companies.

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Quebecor said Bell was unwilling to pay a fair fee for the channel. And, in an advertising campaign, the company accused Bell of “unsportsmanlike conduct” for carrying its own French-language sports channel, RDS, in its most popular TV package while requiring customers to pay extra to add TVA Sports. (The latter channel is automatically included in a more expensive Bell TV bundle.)

“Why are other distributors in Quebec willing to pay a fair market price [for our sports content]? Because they’re not in a conflict of interest, as Bell is at the moment,” Mr. Péladeau said on Thursday.

“Quebecor isn’t saying anything new,” Bell spokesman Marc Choma said in an e-mail. “They’re overvaluing their product, based on all relevant metrics including, most of all, viewership. We’ve made multiple offers to Quebecor and they’ve made exactly none. That’s why we’ve requested final offer arbitration from the CRTC.”

Broadcasting regulations in Canada require companies to continue providing channels even during commercial disputes, and the channel blackout led the Canadian Radio-television and Telecommunications Commission (CRTC) to promptly call a hearing into the matter. It then filed a mandatory order requiring Quebecor to keep the channel on air. The consequences for violating such orders can include contempt-of-court proceedings, prosecution and fines.

At the CRTC hearing, Mr. Péladeau suggested the regulator was overstepping its jurisdiction. On Thursday, he said he intends to contest in Federal Court the jurisdiction and competency of the CRTC on pricing for specialty channels. Distributors and broadcasters should have the right to negotiate between themselves, he added.

In 2017, the company recorded a pretax loss of $21.3-million, according to the most recent CRTC data available. Mr. Péladeau told reporters after the meeting he had no regrets about launching TVA Sports.

“The only thing I would say is that we have been patient. But patience has a certain amount of capacity,” he said.

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“It’s wearing thin,” Quebecor board chair Brian Mulroney added.

TVA Sports had 1.8-million subscribers in 2017 compared with nearly 2.8-million subscribers for RDS, according to CRTC data. Mr. Péladeau estimated that being included in Bell’s most popular package would bring in another 150,000 subscribers. When asked if this change, along with being paid higher fees for the channel, would make TVA Sports profitable, Mr. Péladeau said it would come “very, very close.”

He argued that Bell is not negotiating in good faith.

“They don’t want – and I think this is bad for what we call the Canadian broadcasting system – for a competitor to succeed,” he said. "We believe in competition.”

Quebecor more than doubled its quarterly dividend to 11.25 cents as it reported its first-quarter profit rose compared with a year ago.

The increased payment to shareholders came as Quebecor says it earned $189-million or 74 cents a share in the first quarter of 2019, up from $57.1-million or 24 cents a share a year earlier.

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That surge was largely owing to a $97.2-million gain on the sale of the company’s 4Degrees Colocation Inc. data-centre business in the quarter.

Overall revenue increased by 2.5 per cent to nearly $1.03-billion for the first quarter, in line with analysts’ expectations.

On an adjusted basis, Quebecor said it earned 44 cents a share from continuing activities compared with 38 cents a share a year ago, also in line with forecasts.

But adjusted EBITDA increased by 1.2 per cent to $421-million, falling just short of analyst predictions. (EBITDA means earnings before interest, taxes, depreciation and amortization.) Desjardins Securities analyst Maher Yaghi said that was because the company spent more on handset subsidies at its growing wireless business.

Quebecor’s Vidéotron telecommunications division attracted 39,800 new mobile subscribers in the first quarter, beating analysts’ expectations. It also said it incurred higher expenses because of the launch of its new discount wireless operation, dubbed Fizz.

But the company says those costs are worth it as it fights the Big Three carriers, BCE Inc., which is Bell’s parent company, Rogers Communications Inc. and Telus Corp., to gain a larger share of Quebec’s wireless market.

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Jean-François Pruneau, president and chief executive of Vidéotron, said on a conference call with analysts that while the company now has about 18 per cent of the market, he expects it will eventually control more than 25 per cent and that Fizz can help it reach new demographics.

“Fizz clearly succeeds in the urban and young segment of the market,” Mr. Pruneau said.​

On the landline side of its business, Vidéotron lost 14,700 cable television customers, but added 6,300 internet subscribers.

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