By acquiring independent Internet service provider Oxio for $100 million, Cogeco believes it has found a way to better reach young Canadian adults looking for their first home, the sector’s most sought-after clientele telecommunications.
“They represent a disproportionate share of new buyers, because they have reached this stage of life where they are moving in large numbers into new housing,” explains the president of the Cogeco Connexion division, Frédéric Perron. “Roughly half of the people shopping for home internet service right now are Gen Z or Y.”
Above all, young Canadian adults are not afraid to deal with independent and local providers for their connectivity needs. Unsurprisingly, they are in the crosshairs of all major Internet service providers in Canada. It is not for nothing that Bell acquired the provider Ebox a year ago, and Telus has acquired at least two others in recent months.
A justified price
In all this movement, Cogeco, sometimes called the smallest of the major Canadian telecommunications companies, did not want to be sidelined. Cogeco Connexion, its division which brings together all of its Canadian cable television activities, is still the second largest provider of telecommunications services in Ontario and Quebec.
But the turnover of Cogeco is 2.7 billion dollars, approximately half lower than that of Quebecor, and six times lower than that of Bell.
The approximately 48,000 Oxio subscribers who come on top of the 1.6 million customers that Cogeco already has in Canada and the United States — the Montreal operator has a subsidiary in the United States called Breezeline — may seem few , but that’s enough to explain the price paid to acquire them, assures Frédéric Perron. The transaction was announced at the end of February, but its value was not published by Cogeco until mid-April, when the company published its financial statements for the quarter ended February 28.
Before knowing that Cogeco had offered 100 million dollars for Oxio, analysts estimated the price paid at most at 35 million.
“The estimates that were made before the sale price was announced were based on an assessment of Oxio’s customer base that was smaller than it actually was. We think we paid a fair price for these customers and also for what we can learn with what else we get from Oxio. »
Cogeco’s cable infrastructure extends from the Magdalen Islands in Quebec to Windsor in southern Ontario. With Oxio, the supplier will be able to serve customers as far away as Vancouver Island.
Growth in sight
Founded in 2019, Oxio quickly won a popular clientele of large suppliers by leveraging an all-digital marketing strategy. It relied heavily on the satisfaction of its first customers who, through the magic of social networks, solidified its reputation for offering simple and efficient customer service, sold at a reasonable price.
This positioning is what attracted Cogeco, which intends to preserve the independence of the Oxio brand. The Montreal company is thus acquiring a second brand that it will be able to extend across the country, a strategy already adopted by its competitors — such as Quebecor with Fizz, or Telus with Koodo — which Cogeco lacked, according to several industry experts. sector.
“A large portion of consumers want this experience. They will never call a call center to subscribe to the Internet,” says Frédéric Perron. “We define Oxio as a digital brand that will appeal to this growing range of customers who want a fully digital experience. »
A platform for the future
Unsurprisingly, the leader of Cogeco Connexion predicts growth in his activities in the coming months thanks to Oxio. It could accelerate if the Canadian Radio-television and Telecommunications Commission (CRTC) confirms its desire, announced at the end of winter, to lower the wholesale prices imposed by the owners of national networks on independent service providers. Internet. This could help Oxio reduce its costs and the selling price of its own services.
Its software platform to manage its operations will also make the sale of the various services offered by the Cogeco group more efficient: television, telephony, Internet. Cross-selling these services can quickly increase revenue from a limited customer base.
These services could eventually include wireless services, something that Cogeco’s senior management have been dreaming about for several months. Like his boss Philippe Jetté, president and CEO of Cogeco, Frédéric Perron does not reveal anything about his company’s ambitions in this sector. He repeated the comments made by Mr. Jetté. “We’ve said it before, we want to get into wireless, but we want to take the right steps to do it right. »
Cogeco has all the tools in hand to think about it more seriously. Already, the company meets the criteria of the CRTC to embark on the adventure. It has frequencies in certain regions of the country for a possible wireless network and it owns its own regional infrastructure.
With Oxio, she adds to her arsenal a national brand that is loved by her young customers. Customers who are also fond of wireless services…