Go to the Globe and Mail homepage

Jump to main navigationJump to main content

AdChoices
“[BCE is] a formidable competitor – it’s bigger than we are – but we’re not empty handed here," Cogeco CEO Louis Audet, shown in this file photo, said Friday. (J.P. Moczulski/The Canadian Press)
“[BCE is] a formidable competitor – it’s bigger than we are – but we’re not empty handed here," Cogeco CEO Louis Audet, shown in this file photo, said Friday. (J.P. Moczulski/The Canadian Press)

Cogeco confident in Canadian operations amid tough competition from Bell Add to ...

As Cogeco Communications Inc. looks to the U.S. for growth, the company insists it is “well-equipped” to defend against Canadian rival BCE Inc., which has been steadily investing in fibreoptic technology to take on cable operators like Cogeco with better Internet speeds and TV service.

Montreal-based Cogeco said Thursday that it lost 8,000 television customers at its Canadian cable business in its fiscal third quarter, more than analysts predicted, but roughly in line with the number it lost at this time last year. But the company also added 5,000 new Internet subscribers in the period and overall revenue and operating profit at the division were bolstered through price increases.

Earlier this week, Cogeco announced a major U.S. acquisition, with a $1.4-billion (U.S.) deal to acquire the remainder of the MetroCast brand of cable assets that its U.S. subsidiary Atlantic Broadband did not already own. The deal – which is expected to close early next year and includes a $315-million contribution from new minority partner pension giant Caisse de dépôt et placement du Québec – will increase Cogeco’s U.S. subscriber base by almost 40 per cent and the company says it will look for further opportunities to buy into mid-size U.S. cities in the future.

But its Canadian cable operations remain the largest part of its business and it is here that it faces tougher competition from its telephone company competitor BCE, which has invested more in fibre upgrades in Canada compared with telcos in Cogeco’s U.S. markets. In an environment where more people are cutting TV service altogether, that means even tougher competition for Canadian customers who have other alternatives for television and high-speed Internet.

“[BCE is] a formidable competitor – it’s bigger than we are – but we’re not empty handed here, we’re very well-equipped to resist the competition,” Cogeco chief executive officer Louis Audet said on a conference call Friday. “Of course, when someone starts offering a new service, there is some erosion, but I think we’re able to manage that erosion to our best possible advantage.”

Mr. Audet said Cogeco’s DVR platform Tivo competes well against BCE’s IPTV (Internet protocol television) service Fibe TV, which is generally available only where BCE has invested in fibre to the neighbourhood or directly to customers’ homes.

BCE has also focused its fibre investments mainly in major cities such as Toronto and Montreal, while Cogeco operates in suburban and smaller cities in Ontario and Quebec.

Yet, as of the end of February, Cogeco faced some sort of IPTV competition across 48 per cent of its service area in Canada. Compare that with the United States, where Scotia Capital analyst Jeff Fan estimates Atlantic Broadband faces fibre competition in only 26 per cent of its markets.

Mr. Audet also sees room to grow in Florida, where Atlantic Broadband has been investing heavily in the Miami market, which he described as “literally booming with construction of new business and residential towers.” Barclays Capital analyst Phillip Huang says the U.S. strategy makes sense, but cautions that Canada still represents 56 per cent of Cogeco’s operations.

“While we are positive on Cogeco’s U.S. cable business, we believe its Canadian business has the most vulnerable competitive position in our telecom coverage universe and will face growing structural disadvantages in competing against scale players [e.g. BCE] in the coming years,” he said.

Two analysts reduced their ratings on the stock this week, one to a “sell” and one to a “hold,” noting Cogeco’s share price has been on a run lately – it has gained about 20 per cent over the past six months – leaving little further room to grow.

After an initial bump on Monday in reaction to the MetroCast acquisition announcement, Cogeco’s stock did dip mid-week, but the company’s shares were up a further 4.1 per cent on Friday to close at $83.71 (Canadian).

Cogeco reported better than expected financial results Thursday (after markets closed), with a profit of $76.2-million, or $1.55 per share, ahead of consensus analyst estimates of $1.42 per share.

Revenue and EBITDA were both up 4.6 per cent in the quarter at $565-million and $254-million, respectively (EBITDA means earnings before interest, taxes, depreciation and amortization).

Report Typo/Error

Follow on Twitter: @christinedobby

Also on The Globe and Mail

Carrick Talks Money: Is Canada returning to an 'inflation nation'? (The Globe and Mail)
 

More Related to this Story

Next story

loading

Trending

loading

Most popular videos »

More from The Globe and Mail

Most popular