Cogeco’s management considers the regulatory framework “more promising” than before and maintains that it remains determined to launch a wireless service. But it will nevertheless be necessary to wait still before knowing the precise plans of the Quebec telecommunications company.
“We always said we wanted to add a product if it was a profitable and sustainable operation. We don’t want to enter a market only to have to withdraw like several other players have done in Canada. Seven operators have entered and had to withdraw in recent years, ”explained Friday the big boss of Cogeco, Philippe Jetté, during a press briefing.
He says he is currently trying to understand how to make such an operation profitable in the long term.
You have to go through the steps one at a time. Until April, we are in a period when the CRTC will complete its work. We will try to understand the cost of renting to use the networks of the three major dominant players in the country [Bell, Telus et Rogers]. We will have to find out at what cost we can operate by renting access to these networks. Soon we will know these prices. This will determine the next steps and the go-to-market plan for mobile.
Philippe Jetté, CEO of Cogeco
At that point, he says, “we can adjust our plans for entering the market under the framework of mobile virtual network operators”.
Philippe Jetté recalls that the Canadian Radio-television and Telecommunications Commission (CRTC) presented a regulatory framework last year that created a favorable or “more promising” environment for new players like Cogeco.
He points out that as part of its decision, the CRTC introduced a new eligibility requirement, which is to already “commercially offer mobile wireless service somewhere in Canada” in order to lease the incumbents’ network. “Over the past two years, Cogeco has gradually begun to build the capabilities of its mobile wireless network,” he says.
The company now has a team of 30 to 40 people assigned to wireless and management intends to improve it as information becomes available.
Stock market downturn
Investors penalized the title of Cogeco Communications Friday in the wake of the presentation of the financial performance at the beginning of the year.
Cogeco Communications generated interesting results, but a downward revision of financial projections for fiscal 2023 casts a shadow over its performance.
Management anticipates lower revenue growth rates due to lower than expected customer numbers in Ohio (Cleveland-Columbus), economic conditions and increased competition.
Rising inflation and interest rates will continue to put pressure on revenue as some customers look for ways to reduce their monthly expenses, it said.
Executives note that partly in response to a tougher market, some telecom service providers have adopted bolder strategies and pricing.
Revenues and profits generated by Cogeco Communications in the first quarter nevertheless exceeded analysts’ expectations. Revenues reached 762 million while operating profit amounted to 367 million. Analysts had expected revenue of 748 million and an operating profit of 357 million. Earnings per share of $2.44 are also above expectations, which were $2.31.
The loss of just over 10,000 Internet subscribers in the United States is attributable in part to the integration of WideOpenWest in Ohio. Analyst Jérôme Dubreuil of Desjardins Securities indicates, however, that the net loss of approximately 4,000 Internet subscribers in the United States concerns customers outside of Ohio, which testifies to the impact of the competitive and economic environment.
Scotia analyst Maher Yaghi notes that competition is also fierce in Canada and that the intensification of competition from BCE is affecting Cogeco as well as the phenomenon of disconnection (cord cutting).
“Although Cogeco Communications is not expensive, I continue to expect growth prospects to be subdued in 2023, and I see little potential for making acquisitions in the United States to drive growth” , says Maher Yaghi.
In response, Cogeco Communications shares fell 11% on Friday to close at $72.88 on the Toronto Stock Exchange.
TD analyst Vince Valentini expected a tough day in the markets even though, he said, the stock was already likely pricing in weak growth for 2023.