Back at the helm of Quebecor Inc., Pierre Karl Péladeau has no plans to lead the company in a new direction, saying he will continue to follow a strategy based on media content complementing its much faster-growing telecom business.
Mr. Péladeau – who is the controlling shareholder and son of company founder Pierre Péladeau – left Quebecor for provincial politics in 2013, but stepped down as leader of the Parti Québécois last year. He returned as chief executive officer one month ago and commented publicly for the first time on Wednesday after the Montreal-based company released its fourth-quarter financial results.
The newly reinstated CEO joked that most of the questions on a conference call with analysts were directed toward Manon Brouillette, who has led the Videotron Ltd. telecom business since 2013. There’s good reason for their interest in her division, which includes a wireless operation that now claims 15 per cent of the Quebec market: Last year, telecom services accounted for 78 per cent of the company’s revenue and 97 per cent of its operating income.
Mr. Péladeau attributed Quebecor’s growth during what he called his “four-year sabbatical” to the team of professional managers who have run the company in his absence. “Thank you Julie, thank you Manon. Congratulations ladies,” he said on the call, referencing Ms. Brouillette and Julie Tremblay, who leads the company’s media division.
But he also took the opportunity to take some credit for Quebecor’s current fortunes, twice referencing his decision 16 years ago to buy the Videotron cable business, a deal that cost $5.5-billion.
That was key to shifting Quebecor away from its “historical roots,” he said, but he insisted the company’s newspaper, magazine and broadcast assets still play a central role in its oft-referenced “convergence” strategy of using content to “enhance our telecom distribution platform.”
“I think [Mr. Péladeau] was very much involved in putting the company where it is right now,” Desjardins Securities Inc. analyst Maher Yaghi said in an interview after the call. “When he left, the company’s strategy continued unchanged and now that he’s back, I don’t think it’s going to change either.”
Mr. Péladeau gave few hints about his plans for two major strategic decisions facing the company: the possible sale of its wireless-spectrum licences outside Quebec, and its plans to buy back the remaining 19-per-cent interest the Caisse de dépôt et placement du Québec holds in Quebecor Media, Quebecor’s main subsidiary.
The spectrum is a great asset he said, but added that he would not “negotiate publicly” for it. He also suggested he would be wary of allowing the company’s debt leverage to exceed a ratio of four times debt to EBITDA (earnings before interest, taxes, depreciation and amortization).
Quebecor reported a swing to profit in the fourth quarter, posting net income attributable to shareholders of $123.3-million, compared with a loss of $34.8-million a year earlier.
It said that was primarily owing to a $135.7-million variance in its favour on the valuation of financial instruments (the majority of that relating to gains and losses on embedded derivatives in convertible debentures, which can be exchanged for company shares).
Quebecor said its revenue grew 2.6 per cent to $1.05-billion. Adjusted income was $84.7-million or 69 cents a share, up from 47 cents a share in the fourth quarter of 2015, and ahead of average analyst estimates of 59 cents.
Videotron added 26,200 new wireless customers in the period, essentially flat compared with 2015. But analysts said the company offered fewer promotions in the quarter than its national rivals – BCE Inc., Rogers Communications Inc. and Telus Corp. – and actually paid less to win subscribers on a year-over-year basis.
Average revenue for each individual user of wireless services increased 5.5 per cent to $51.96.
Mr. Yaghi said that assuming Videotron could eventually claim 20 per cent of the Quebec wireless market, Quebecor can look forward to about another two years of boosted growth led by mobile services.
All 14 financial analysts who cover the company currently have “buy” ratings on its stock, favouring its growth potential amid a maturing telecom market. Its share price is up about 70 per cent over four years and, while it dipped when the company announced Mr. Péladeau’s return in February, its stock bounced back Wednesday as he pledged to stay the course.
Revenue at the telecom division was up 3.6 per cent to $805-million as Videotron also added 16,700 new Internet customers, up from 8,700 in the fourth quarter of 2015. The company shed 4,800 cable subscribers and 12,000 telephone customers, smaller losses than in the same period a year earlier.
Videotron has yet to announce plans for an Internet-protocol-based television platform, one that could better compete with rival BCE’s Fibe TV. Ms. Brouillette said the company is “still doing our homework” on that and would “announce something shortly.”
Sales at the media division, which includes the TVA Group broadcaster and newspapers such as Le Journal de Montreal and Le Journal de Quebec, were down 1.5 per cent to $266-million as newspaper and magazine advertising revenues continued to fall.
However the division’s adjusted operating income increased 10.8 per cent to $24.7-million, thanks in part to higher advertising revenues at TVA as well as cost savings from restructuring after cutting 220 jobs at the media group in November.Report Typo/Error