Foreign players ‘eating our lunch’
Quebecor Inc. chief executive Pierre Karl Péladeau called for new broadcast regulations to deal with online competitors after his company reported “disappointing” results in its media division.
The Montreal-based company said Thursday that media revenue fell to $187 million in the three months ended June 30, down 6.5 per cent from the same period last year due to soft advertising revenue and weakness at its TVA sports unit since the Montreal Canadiens didn’t make the NHL playoffs.
While Quebecor’s overall financial results met with analysts’ expectations thanks to continued success in its larger telecommunications division — telecom revenue increased 2.5 per cent to $847 million, pushing overall adjusted earnings up 3.2 per cent to $417 million — Péladeau said the challenges in the media division reinforce his thesis that broadcast rules need to evolve.
“What we’re seeing is foreign media-slash-internet companies that are eating our lunch,” Péladeau said on a conference call with analysts.
“Will the regulator continue to let that situation happen? I guess that they need a little ... wake up and find out that we need to have a new regulatory landscape.”
It’s not clear exactly what regulatory changes Péladeau has in mind, but he noted the traditional model required operators to have licences if they wanted to broadcast something in a protected national territory.
Over the past decade, that has changed as consumers increasingly access content over the internet, where content purveyors such as YouTube and Netflix operate outside the regulatory regime.
In June, Ottawa announced a seven-member panel to review broadcasting and telecommunications laws in a bid to modernize legislation for the digital era. At the time, the government said that any player that profits in Canada should contribute to Canadian content, although it didn’t specify how.
Quebecor’s call for new rules comes after it completed its transaction to buy the entirety of Quebecor Media from the Caisse de dépôt et placement du Québec for $1.69 billion. The deal closed on June 22.
“With access to all the cash flows generated by the subsidiary, the corporation will now be better equipped to seize business opportunities as they arise, to achieve its objectives with respect to its dividend payment policy, and to take full control of its development projects,” Péladeau said in a statement.
The transaction supports Quebecor’s strategy of convergence between media and the pipes that carry it, he said, adding the strategy has recently been emulated with the AT&T-Time Warner merger in the U.S. and Nine and Fairfax in Australia.
IN LINE WITH THE GENERAL STRENGTH IN THE CANADIAN WIRELESS MARKET.
As the media landscape confronts change, analysts focused on strong performance from Quebecor’s wireless business. Videotron added 31,900 wireless subscribers and average billings per user edged up 0.7 per cent to $53.70.
“Quebecor’s continued strength in wireless is in line with the general strength in the Canadian wireless market in 2Q18, but we are pleased to see this performance after BCE reported strong net additions in the same quarter,” Desjardins analyst Maher Yaghi noted to clients.
The slower growth in revenue per user is being seen across the industry given pressure from increased promotions, Yaghi said.
Videotron chief executive Manon Brouillette said the slower revenue growth is due in part to an increase in bring-your-own-device plans, but said BYOD reduces the cost of acquisition since they don’t require device subsidies. About 45 per cent of new customers in the quarter joined on BYOD plans, she said, adding the churn rate is similar to other customers.
Barclays analyst Phillip Huang expects a strong second half of the year for Videotron’s cable division, which lost 20,000 TV subscribers and 500 internet subscribers due to the moving season.