National Post (National Edition)
Quebecor CEO wants to buy back media division
SPECTRUM WINDFALL
EMILY JACKSON Quebecor Inc. CEO Pierre Karl Péladeau said his top priority is buying back the remainder of the company’s media division after the massive cash influx from the sale of its out-of-province wireless spectrum, although he didn’t divulge any timing for such a deal.
The Montreal-based communications giant reported strong second-quarter results Thursday, driven by betterthan expected performance in both its telecom arm Vidéotron and media division. An $87.8-million gain from selling spectrum licences in Toronto to Rogers Communications Inc. pushed its profit up to $132.4 million from just $9.8 million in this period last year, with adjusted income jumping 19 per cent to $83.2 million.
Two weeks after the first spectrum sale, it repurchased a $38-million slice of its media business from the Caisse de dépôt et placement du Québec, bumping its ownership in Quebecor Media up to 81.53 per cent from 81.07 per cent.
Just two weeks later, it got an additional cash injection from selling seven spectrum licences to Shaw Communications Inc. for $430 million. This transaction won’t be recognized until the third quarter.
“I therefore feel our healthy balance sheet can currently support sound investment projects, such as the full buyback of our partner, or the investment to come in an IPTV (internet protocol television) program that would generate increasing value for our stakeholders including our shareholders,” Péladeau said in a conference call with analysts.
“Our priority would be to make a transaction with la Caisse,” he repeated later in the call, noting the familyrun business has stated this for the past decade. “Our goal, our promise was to be a full 100-per-cent shareholder of Quebecor Media.”
At one point, Quebecor was expected to make a play for the national wireless market with its brand Vidéotron, given its heavy investments in spectrum in previous auctions that favoured new entrants. While plans have clearly changed given its divestments, Péladeau highlighted the importance of selling to another new entrant, Shaw, which owns Freedom Mobile, formerly known as Wind Mobile.
“Most of our licence remains in the hand of another new entrant, which can only be positive for the Canadian competitive landscape,” Péladeau said.
Yet he also assured Innovation, Science and Economic Development Minister Navdeep Bains that Vidéotron intends to “actively participate” in the public consultation launched last week on the next spectrum auction, which will sell a valuable band of 600 MHz frequencies critical for coverage in harder-to-reach places.
The federal government proposed setting aside 43 per cent of the available spectrum for new entrants and holding an open bidding process for the rest. This will favour both Quebecor and Shaw in their bid to take on the Big Three of Rogers, BCE Inc. and Telus Corp., which have about 30 per cent each of the market share.
“We welcome the proposed favourable provisions for new entrants in this auction,” he said.
While Péladeau would not reveal Vidéotron’s plans for IPTV, he said that it won’t be long before the firm announces its strategy.
Cable TV and internet subscribers, however, dropped by 24,000 and 1,000 respectively, which Brouillette credited to the summer moving season.
Brouillette and Péladeau also touted Club Illico, its over-the-top video streaming platform that includes original content. Ninety per cent of its subscriber base, which hit 338,000 this quarter, also subscribes to TV packages, Brouillette said.
“We anticipated a few years ago that (over the top) would become a significant player in the game and therefore we need to participate there,” Péladeau said.
Meantime, Vidéotron’s wireless division beat analysts’ expectations by adding 32,000 subscribers. Vidéotron CEO Manon Brouillette said Vidéotron increased its market share to 15.3 per cent in its territory, beating Rogers but trailing Telus and market leader Bell. Its goal is to capture 25 per cent of the market share.
“We continue to see room for wireless growth as hightier handset offerings and a quality network rollout should help close the gap with incumbents,” Desjardins analyst Maher Yaghi wrote in a note.