Quebecor’s growing problems at home make Freedom deal a must for Pierre Karl Péladeau

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For Quebecor chief executive officer Pierre Karl Péladeau, English Canada beckons.

The Montreal-based telecommunications giant he controls is facing a wall in Quebec. Its French-language media businesses are treading water and its cable operations are beset by cord-cutters. Even its once-booming internet and wireless franchises have run up the limits of expansion in Quebec, where its market share has topped out amid slower population growth than in the rest of Canada.

That is why Mr. Péladeau, who traded business for Quebec politics in 2014 before returning to his first love in 2017, needs Quebecor’s QBR-B-T proposed $2.85-billion purchase of Freedom Mobile to close tout de suite.

Federal Innovation Minister François-Philippe Champagne, who must approve the transfer of Freedom’s wireless licences to Quebecor’s Videotron unit, is still thinking about it. The sale of Freedom is a side-deal to Rogers Communications’ RCI-B-T proposed $20-billion takeover of Shaw Communications SJR-B-T. And Mr. Champagne continues to get an earful from MPs, consumers and competition experts who oppose that deal.

Without its sweetheart deal to access Rogers’ network infrastructure – a feature of its Freedom purchase that is being contested before the Canadian Radio-television and Telecommunications Commission – it is unclear Quebecor could mount much of a challenge to Bell and Telus outside Quebec. But breaking out of Quebecor’s home market is no longer a choice for Mr. Péladeau, who had previously toyed with a foray into English Canada’s wireless sector only to end up selling unused wireless spectrum in Western Canada and Ontario that it had acquired in 2008.

The Freedom “transaction represents a springboard to a new era of goals for Quebecor, recognizing that after an impressive run in telecom and wireless growth since our acquisition of Videotron in 2000, we are now reaching a natural point in the cycle of slowing penetration in a more mature market,” Mr. Péladeau said last week as Quebecor announced weak fourth-quarter results that laid bare the challenges it faces at home.

While Quebecor’s legacy media businesses account for an increasingly small proportion of the company’s overall revenues, they remain at the heart of its corporate identity and cross-promotion strategies in Quebec.

Quebecor’s TVA Group subsidiary, which has long dominated private French-language television in Quebec, announced the elimination of 140 jobs, or about 10 per cent of its work force, after posting an $8.9-million loss for 2022, compared with a $30.5-million profit in 2021. Mr. Péladeau, who also serves as interim CEO of TVA Group, blamed the popularity of foreign streaming services and unfair competition from Radio-Canada, the CBC’s French-language network.

The public broadcaster remains engaged in a battle for advertising with TVA in Quebec, where viewers remain largely loyal to homegrown programming. With the audience for conventional television shrinking in Quebec as elsewhere, TVA has had to invest heavily in locally-produced content to preserve its market share. But that strategy is yielding diminishing returns, and Mr. Péladeau warns it cannot continue.

“All levels of government must act before it is too late,” he said last week. “The CRTC needs to address certain issues, particularly Radio-Canada’s unfair behaviour in scooping up advertising dollars, which are our conventional network’s only source of revenue, whereas the public broadcaster is heavily government-subsidized.”

The situation is even bleaker at TVA Sports, the subscriber-based specialty channel that holds the French-language broadcast rights for 22 regular season Montreal Canadiens games and NHL playoffs matches. TVA Sports has racked up more than $200-million in pre-tax losses since its creation, and Mr. Péladeau recently suggested he could be forced to pull the plug altogether. That is not the first time he has made that threat. But this time, it looks real.

The channel was launched in 2011 as part of broad bet by Quebecor on pro sports that included its bid to revive an NHL franchise in Quebec City. Videotron also acquired the naming rights on a $400-million taxpayer-funded arena that opened in the Quebec capital in 2015.

Since then, the NHL has bypassed Quebec City in awarding franchises to Las Vegas and Seattle, while TVA Sports remains saddled with the NHL broadcasting rights for which it overpaid in 2013. Not even the Canadiens’ fairy-tale ride to the Stanley Cup finals in 2021 was enough to turn the financial tide for TVA Sports, which posted a pre-tax loss of almost $11-million in the year to Aug. 31, 2021. The financial situation has worsened considerably since then.

Broadcasting rights account for almost 80 per cent the channel’s expenses, with TVA Sports paying around $60-million a year to televise NHL games. There is speculation that Quebecor could seek to sell NHL rights for the remainder of its contract, which expires in 2026, with rival BCE being the most likely buyer. BCE’s Réseau des sports already broadcasts some NHL games.

The only problem is that Quebecor and BCE have been locked in a bitter years-long fight over the fees that BCE’s Bell TV unit pays to carry TVA Sports. Shutting TVA Sports and surrendering Quebecor’s NHL rights to BCE would require Mr. Péladeau to swallow his pride. That does not come easily to him.