(Montreal) Cogeco Communications has unveiled better-than-expected results for its second quarter, as the cable company connects new Canadian households and subscriber losses moderate in the United States.
The Quebec company continues to contend with headwinds in Ohio, United States, where it is rebranding its WideOpen West acquisition.
Chairman and CEO Philippe Jetté said in a conference call with analysts Friday that the company lost 5,500 internet subscribers in Ohio in the quarter ended Feb. 28.
Excluding WideOpen West, the company would have added 1,700 new subscribers. “We would have liked gains [in Ohio], but it’s an improvement over the previous quarter [which saw the loss of 14,000 customers in the United States]. »
In the United States, Cogeco’s revenues decreased by 5.2% in constant currency. This is a “significant” decline, said analyst Jérôme Dubreuil of Desjardins Capital Markets. He attributes the decline to headwinds in Ohio as well as the decline of cable for television and telephone. “Prices remain good, but organic growth is weaker. »
Analyst Vince Valentini of TD Securities believes the company is holding up well against increased competitive intensity in both Canada and the United States.
The analyst says he is pleased to see that competition has not had too great an effect in the United States outside of Ohio. Adding 8,000 subscribers in Canada is also good news, he said. “Given Bell’s recent vigorous offensive, I believe the results will be well received,” comments Valentini.
Regarding a possible entry into the mobile telephony market in Canada, Cogeco is still awaiting regulatory clarifications from the Canadian Radio-television and Telecommunications Commission (CRTC).
The company has considered entering the mobile phone market for almost five years, but management has always maintained that its decision would depend on the regulatory framework allowing it to lease network access from large Canadian telecommunications companies, namely Bell, Telus and Rogers.
In January, Mr. Jetté said the terms disclosed so far were “promising” and that the Montreal-based company should present a detailed plan in this regard by the end of the year.
Things have been fine ever since. The manager points out that the spectrum held by the company covers nearly 91% of households in the territories served by Cogeco’s cable service. He expects to get the green light from the CRTC “very soon.” “The next step will be to negotiate a price [to rent access to their network] with the three operators (Bell, Rogers and Telus) and then you can find us in the market. »
Mr. Jetté declined to comment on recent Globe and Mail news that claims Rogers and Cogeco are taking advice from bankers about a possible sale of Rogers’ 37% stake in Cogeco. An exchange of assets, i.e. the purchase of Rogers’ stake for communication infrastructures held by Cogeco in Ontario, would be considered, according to the Toronto daily. “I have no comment,” Mr. Jetté said.
Management also provided forecasts of the revenue to be expected from the acquisition of independent supplier Oxio, announced in February. The company could add “just over 2%” to the revenue base annually, said chief financial officer Patrice Ouimet.
In the short term, however, the effect should be neutral on company earnings. “It’s not a significant number. What is important is that the business grows rapidly,” the CFO replied.
Cogeco posted net income of $104.3 million, down 13.1% in the quarter ended February 28. Earnings per share fell 8% to $2.19. Revenue rose 1.1% to 736.6 million. Excluding the effect of the change in the value of the U.S. dollar, this figure would have fallen by 1.8% due to lower incomes south of the border. Analysts had expected earnings per share of $2.08 and revenue of $740.4 million, according to Refinitiv. The stock alternated between red and green during Friday’s session on the Toronto Stock Exchange. However, it lost 83 cents, or 1.27%, to $64.65 in the afternoon.
