(Montreal) As it thinks about entering the wireless market in Canada, Cogeco Communications must turn its attention to a recent acquisition in the United States, the results of which are worrying financial analysts.
Updated yesterday at 4:40 p.m.
The cable company said it lost customers in Ohio where the company completed the acquisition of WideOpen West last year. It attributes these unsubscribes to the transition to its own brand and billing platform. “It was more difficult than expected, which, unfortunately, led to more unsubscriptions than anticipated,” explained the president and CEO, Philippe Jetté, during a conference with financial analysts.
After the earnings release, analysts raised concerns about the company’s US division. “The data on subscribers is lower than expected, reacts Jérôme Dubreuil, analyst at Desjardins Capital Markets. This raises serious questions about the intensification of competition in the United States and the effect of this trend on Cogeco’s activities. »
Maher Yagi of Scotiabank notes that competition is intensifying in the United States, but other cable companies are showing stagnation or modest growth in subscriber numbers. “Cogeco will have to quickly improve its number of subscribers in the United States, because it will be difficult to grow just by increasing revenues per subscriber since we are in a more competitive environment and where economic pressures are stronger. »
Inflation has an impact on Cogeco’s customers, explained the chief financial officer, Patrice Ouimet. “It’s more difficult for consumers. When you look at the prices of groceries, gas and now interest rates, they have an impact on consumers’ budgets. We saw more people dropping cable in the quarter. »
In Ohio, Cogeco plans to “phase-in” IPTV service by the end of December and hopes the service will increase average revenue per subscriber.
Questions about wireless
A few days after an important decision by the Canadian Radio-television and Telecommunications Commission (CRTC) regarding the future of its wireless expansion project, the management of Cogeco Communications is still evaluating its options.
The CRTC has clarified the regulatory conditions that will allow regional operators to lease access to the networks of major Canadian telecommunications companies, provided they have local frequency spectrum themselves. The goal is to foster greater competition in the Canadian wireless industry.
A clarification from the CRTC surprised company management and analysts. To access a major provider’s network, a company must operate mobile wireless service somewhere in Canada. Cogeco Communications does not offer this service, unlike Quebecor’s Videotron subsidiary, which could use the CRTC’s decision as a springboard to expand its activities outside Quebec.
“It’s a shame that the CRTC has added another eligibility criterion, deplores Mr. Jetté. We will understand what they mean by having operations somewhere in Canada. It’s a fuzzy definition. Hopefully we’ll have more details on what they mean by that. »
The executive reiterated that a foray into wireless would be conditional on such a venture being inexpensive in capital. Management wants clarification from the CRTC, but also more details on the rates negotiated with the major providers to access their network. “We need to understand all the parameters before we can start. »
The results
The difficulties in Ohio mask results generally better than expected for Cogeco, which posted net income of 111.8 million, up 8.1%, in the fourth quarter of its fiscal year ended August 31.
The Montreal company announced diluted earnings per share of $2.28. Prior to the earnings release, analysts had expected a profit of $2.03, according to data from the firm Refinitv.
Revenues, for their part, increased by 14.7% to 725.4 million. Excluding the exchange rate, the increase would have been 12.7%.
The stock was up $3.05, or 4.50%, at $70.80 at the end of trading on the Toronto Stock Exchange.