Péladeau’s PQ affiliation could affect Quebecor’s fortunes: experts

Pierre Karl Péladeau’s decision to run for the sovereigntist Parti Québécois in the upcoming Quebec election could cause problems for the company he used to lead and of which he is still the controlling shareholder, marketing and government relations experts said. Despite the fact Péladeau resigned as CEO of Quebecor Inc. last year and quit his board duties with the company upon announcing his political intentions, observers said the perceived association he has with the company remains strong. Edgar Baum, the North American director of Brand Finance, which specializes in brand valuation, said Péladeau’s politics poses some risk to the value of Quebecor’s image. His company ranked Quebecor’s brand 28th this year among Canadian companies. “If you now have a portion of your population that becomes resentful of that association with , that’s going to become a problem for Quebecor,” he said in a phone interview. “The current management of Quebecor has been pulled into politics without wanting to be in that space.” Quebecor did not respond to requests for comment. Baum, who is based in Toronto, said Quebecor has a limited “window” of time in which to disassociate itself from Péladeau. Baum noted how the company had recently removed references to its former CEO from its website, adding that this might not be explicit enough. “You have to interrupt the market perception, and right now the market perception is that Quebecor is still Péladeau,” Baum said. He said that “perception” was only strengthened by Péladeau’s statement that he would not sell his shares in Quebecor if elected, even if the province’s ethics commissioner tells him to. He appeared to backtrack on that position in a quote later distributed in a release from the Parti Québécois. An ownership chart from the CRTC shows that, as of last December, Péladeau held about 72 per cent of Quebecor’s voting shares. Quebecor spent $233.3 million in this year’s 700 MHz spectrum auction, with much of that going toward for licences in Ontario, Alberta and British Columbia. Whether Quebecor’s efforts to sell wireless services in those parts of the country — if indeed it does attempt to expand there — are hurt by Péladeau’s separatist leanings depends on how aware Canadians outside of Quebec become of the fact that its wireless provider, Videotron, is part of Quebecor, Baum said. “If the media goes and raises this issue and keeps going at it in the marketplace and raises that awareness, it’s going to be a problem,” he said. Patrick McGovern, chief strategy officer at Blade Creative Branding in Toronto, said when it comes to the consumer product brands of Quebecor, such as Videotron, Canadians outside of Quebec probably don’t have a high-enough awareness of the connection to Quebecor and Péladeau for his stance on sovereignty to be a major issue. “They’re not likely to connect the dots between Videotron, Quebecor, Péladeau,” he said in a phone interview. If the PQ wins a majority government and this leads to another referendum on sovereignty, that awareness could heighten and become more of a liability to Quebecor, McGovern said. He said that within Quebec, Péladeau’s move to run for the PQ might help its brand. “Nationalism plays really well in Quebec,” he said, adding that even Quebecers who are not sovereigntists “accept that it’s part of the buzz in that province.” McGovern said Péladeau’s political activities could prove to be more of a problem for the company in its business-to-business relations, adding that there’s a greater awareness at the corporate level of Péladeau’s association with the company and its units. He used the roaming agreement Quebecor has with Rogers Communications Inc. as an example of the kind of arrangements that could be harder to come by going forward. “If the headlines start saying that Rogers wants to get cozier with Videotron … the public would see that as perhaps flirting with a political situation that is unpalatable,” McGovern said. “So, yes, Rogers might hesitate before they make a big announcement that’s going to lead to headlines about connecting their name with Quebecor and Videotron.” Patrick Gagnon, managing partner for Ottawa government relations firm the Parliamentary Group, said in a phone interview the issue of Quebec separation is “a very emotional debate, so people will become very emotional about where a company’s from, what a company plans to do.” He said there are plenty of cases where companies or individuals associated with them have taken controversial political positions, and it has “affected their bottom line, and yes, this is definitely one of them.” Gagnon, who was a Liberal MP representing the Quebec riding of Bonaventure–Iles-de-la-Madeleine from 1993 to 1997, added: “If you’re looking at it from an emotional or brand-awareness, it will not necessarily play well with the consumer.” He said Péladeau’s newly publicized sovereigntist association is unlikely to affect Quebecor’s dealings with the federal government, which are many given the regulation involved in activities such cellphone services and broadcasting. “It’s certainly to no one’s advantage to play favourites here and to penalize someone because a former president of your company has opted to take a position which is not popular with yours,” Gagnon said. “This is a large company that employs thousands of Quebecers, and Canadians I should add, and it’s in everyone’s interests that things work out.” Philippe Gervais, the Montreal-based vice-president of government relations firm the Capital Hill Group, said in an email that Péladeau’s politics could affect Quebecor’s dealings with the federal government. “As long as he is a major shareholder, yes ,” said Gervais, who worked for the federal Conservatives in the 2005-06 election campaign. “Black-and-white issues will not change. Grey zones where flexibility is sometimes found, well that will be much harder.” Gervais added that if he was a Quebecor shareholder, he would sell his shares. He noted a “growing movement” among English-speaking Montrealers to boycott Quebecor products and services and even companies that advertise with it. He said Quebecor’s future is “not as bright … as it was last week.” — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Péladeau’s PQ affiliation could affect Quebecor’s fortunes: experts

Broadcast | March 12, 2014

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Péladeau’s PQ affiliation could affect Quebecor’s fortunes: experts

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