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Quebecor's profit dips, but wireless network has its strongest quarterly growth

Pierre-Karl Peladeau, CEO of Quebecor, takes part in a press conference with Quebec City Mayor Regis Labeaume, not shown, at city hall in Quebec City, Tuesday March 1, 2011.


Montreal-based telecom and media conglomerate Quebecor Inc. suffered a 35 per cent drop in profit in the third quarter on weak broadcasting and newspaper revenues but saw strong subscriber growth with its various telecom services.

Net income was down to $26.1-million or 41 cents per share compared to $83.0-million or $1.29 per share in the same period last year. Revenues were up 4.6 per cent in the quarter to $1.01-billion. The results were roughly in line with analysts' expectations, though some results from Quebecor's telecom unit, Vidéotron Ltée, were slightly ahead.

Management said the company's vast media assets were suffering from a renewed downturn in advertising spending, a trend which has barely recovered since ad revenues tumbled during the 2008 financial crisis and has been acting as an almost permanent drag on the company's telecom results.

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The company launched a new wireless network in September, 2010, along with other new competitors such as Mobilicity and Wind Mobile, in order to expand its suite of telecom services to compete with BCE Inc. in Quebec. In the quarter, Quebecor said it added 47,500 net new subscribers and had reached a total of 253,900 subscribers -- 72,700 of which were transferred to the new network from a previous wireless service whereby Quebecor had an agreement to simply resell Rogers wireless service.

"Thanks in particular to effective strategies to market bundled services, including mobile telephone service, at a time when over-the-air analog television broadcasting was ending, Videotron posted the strongest quarterly growth in its total customer base since its acquisition by Quebecor Media in October 2000," said Pierre Karl Péladeau, Quebecor's president and chief executive officer.

RBC Capital Markets analyst Drew McReynolds expected more wireless additions, but said in a research note to clients that Vidéotron 's results got a boost from strong results in its cable TV business, as well as improving metrics in its Internet business. However, as Bell continues to roll out its new Internet protocol-based TV (IPTV) service in Montreal, he expects pressure to be put on Quebecor.

The company stressed in its release that the drop in profit was related mainly to investments in new products and services, including higher than expected costs related to subsidizing the expensive smart phones of customers signing up with Videotron's wireless network, which is geared toward mobile video from Quebecor's other broadcasting assets.

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