Cogeco looking to expand in the U.S. cable market: Audet

MONTREAL — Cogeco Inc. CEO Louis Audet said Wednesday that the company will prioritize its U.S. cable and Internet business over a potential wireless initiative in Canada. Speaking to reporters in Montreal ahead of the company’s annual general meeting, Audet said Cogeco would like to make other cable acquisitions in the U.S. following a positive experience with its Atlantic Broadband subsidiary. “Yes, we’re looking, but such opportunities don’t appear every day. So you have to be patient, meet people, talk to them and try to convince them,” he said during the press conference, which took place mostly in French. Cogeco entered the U.S. market three years ago and last year expanded its footprint there with a $200-million US acquisition of additional cable assets in Connecticut. Audet noted that the U.S. market is dominated by massive acquisitions, like the $78.7 billion US deal between Charter Communications Inc. and Time Warner Cable Inc. “It’s true all eyes are currently turned toward the giant companies, but there is space for companies like us,” he said. When asked about potential expansion in Canada, Audet said: “It’s essentially in the U.S. that we’re thinking about, U.S. cable. I don’t want to rule out anything else, but if you look at what’s available, generally speaking, and the success we’ve enjoyed in U.S. cable, that would clearly be our preference.” He said the weaker Canadian dollar, which sank below 70 cents US Tuesday, wouldn’t affect those plans because Cogeco’s U.S. subsidiary, which it bought when the dollar was at parity, operates in the U.S. market and would borrow U.S. dollars to make acquisitions. Audet also said Cogeco currently has no plans to enter the wireless market, having concluded that making such a move would take too much time, be too difficult and involve “enormous” losses. Cogeco has previously indicated an interest in operating as a mobile virtual network operator (MVNO) if regulatory measures were favourable, but wireless policies the CRTC announced last year didn’t include mandated wholesale MVNO access. “It’s been a long time since we concluded that it’s not necessary to own a wireless company to be a successful TV and Internet service provider” and that conclusion still stands, he said. The company’s recent sale of its out-of-home services will allow Cogeco’s media division to focus on its radio stations, Audet said, adding that the company is also interested in opportunities to expand its radio business. However, he said chances to acquire radio assets in Canada don’t come around as often as opportunities to expand in the U.S. cable market. Audet was also asked whether he agreed with comments Quebecor Inc. CEO Pierre Dion made last year about Netflix Inc. taking up one-third of the capacity available on broadband networks but not investing in infrastructure. “I understand his frustration. We share it. All carriers do, even if they don’t say anything,” he said. “At peak times, Netflix makes up 30 to 40 per cent of traffic on our networks, but they don’t pay anything for that.” Despite that frustration, he said it’s not in the public interest for the government to begin putting in place new regulations on the Internet and that it’s important to maintain a free Internet. If the government intervenes in this case, that opens a door to it becoming involved in other similar cases, Audet said. “We believe that if the government begins to intervene in what’s allowed or not allowed on the Internet, you begin to have censorship,” he said, adding that’s also the company’s view on plans by the Quebec government to block some gambling websites. Audet said he still stands behind his comments that there is currently no demand for gigabit Internet service. He said gigabit Internet capacity is equivalent to simultaneously streaming 50 4K channels. “For the residential user… there is no demand for that. For some select industrial users, there is, and we provide it. When we have a business that needs it, we provide it … on a case-by-case basis,” he said. “Now it’s become the subject of bragging, it’s become a political football, it’s a-la-mode. People like to talk about it because it’s glitzy and it’s exciting. But practically nobody is using it,” he said. “If you’re over-providing, eventually customers will pay for it. We think common sense should prevail.” He added that should technology evolve in such a way to make such speeds necessary, Cogeco would be “delighted to provide” 1 GB Internet speeds. Deloitte Touche Tohmatsu Ltd. said today it expects three per cent of Canadians to subscribe to Gigabit Internet by the end of 2016. Cogeco shareholders on Wednesday approved the company’s plans to change the name of its Cogeco Cable Inc. division to Cogeco Communications Inc. and the name of its radio subsidiary from Cogeco Diffusion to Cogeco Media. The name of its Cogeco Cable Canada subsidiary became Cogeco Connexion, among other changes. Prior to its renaming, Cogeco Cable reported its first-quarter financial results. It said it earned $540.3 million in revenue in the three months ended on November 30, up from $497 million a year earlier. It earned $61.1 million in profits, up from $56.7 million in the same quarter last year. It lost TV subscribers and gained Internet customers in both Canada and the U.S. In Canada, Cogeco reported 761,209 TV customers, down by 4,149, and 716,577 Internet service customers, up by 12,022. In the U.S., TV subscribers were down 1,414 to 247,889 and Internet customers were up 6,642 to 236,557. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Cogeco looking to expand in the U.S. cable market: Audet

Broadcast | January 13, 2016

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Cogeco looking to expand in the U.S. cable market: Audet

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