Cogeco tightens credit checks, weeds out non-paying customers

Tighter credit checks at cable and Internet provider Cogeco are getting rid of customers who don’t pay their monthly bills, chief executive Louis Audet said Thursday.

The company started cracking down about a year ago and as a result, employees spend less time doing a lot of work for “nothing,” Audet said

“We’re asking people if they agree that we do a credit check,” Audet said after Cogeco Inc. and Cogeco Cable reported their third-quarter results.

“If the likelihood that we get paid is too low, then we ask for a credit card number and if people don’t want to give it to us, we decline service,” he said in an interview.

In April 2012, Cogeco announced it was tightening credit conditions to crack down on what it called “promotion hoppers,” customers who jumped cable providers in search of deals.

Cogeco said at the time intense competition had increased as customers search for promotions.

Audet said Thursday that going from “discount to discount is not so bad,” but “never paying is bad.”

He wouldn’t say how many customers the policy has affected, but did say it has reduced the amount of “unproductive traffic immensely.”

Even though it’s a small segment of customers who won’t pay, eventually it affects customers who regularly pay their monthly bills, Audet said.

In its third-quarter results, Cogeco Inc. reported a slightly reduced profit, mostly due to acquisition costs, despite a big boost in revenues.

Cogeco said it earned $18.9 million or $1.12 per diluted share in the three months ended May 31. That was down 2.6 per cent from the $19.3 million or $1.15 per share it earned in the year-earlier period.

But revenue rose nearly 41 per cent to $504.4 million from $358 million.

Cogeco said the drop in net profit was mostly due to acquisition costs, as well as additional depreciation, amortization and financing expenses that included some $3.5 million to refinance long-term debt with respect to the recent acquisitions.

It recently bought U.S. cable company Atlantic Broadband and Toronto-based data services company Peer 1 Hosting.

The company’s main operating subsidiary, Cogeco Cable, reported its third-quarter revenue increased 45.3 per cent to $464.5 million. That’s up from $319.8 million in the same 2012 period.

Profit declined fractionally to $53.05 million, or $1.08 per diluted share, from $53.12 million or $1.09 per share in the prior-year period.

RBC Capital Markets analyst Drew McReynolds said financial results were slightly ahead of expectations.

But he said Cogeco Cable had 7,000 net fewer basic cable customer additions in the quarter, higher than his estimate of 5,000 fewer.

The company added 1,000 net Internet customers versus his prediction of 4,000 and 3,000 net additions for its telephone service, which met his estimate, McReynolds said in a research note.

Cogeco, through Cogeco Cable subsidiary, is Canada’s fourth-largest cable company, serving parts of Ontario and Quebec.

It also owns 13 radio stations in Quebec.