Cogeco Expands into Wireless Market in the United States and Canada Despite Challenges and Disappointing Results

The big boss of the Montreal cable distributor, Philippe Jetté, unveiled this new project on Thursday during a conference to discuss the results of the fourth quarter ended August 31. “We are preparing the ground to enter the wireless market with commercial network access leasing agreements in the states where we operate.”

By offering wireless service in the United States, Cogeco could sell packages combining its cable services with those of wireless telephony, explained the president and CEO of the company.

Cogeco does not intend to hold spectrum in the United States and plans to offer its service only through access agreements to the networks of other telecommunications companies. This business model has the advantage of being “light” in terms of capital requirements, specified the chief financial officer, Patrice Ouimet.

Mr. Jetté judges that the context is more conducive to entry into the wireless market among our neighbors to the South. “Barriers to entry into the United States have been lowered significantly as telecom companies are ready to strike commercial deals. This is a significant change. There’s a market for it. It’s easier than it was a few years ago to reach a good deal.”

The company did not want to provide financial forecasts related to this project. Management has indicated that it will provide more details when it is closer to a launch. “For the details of what effect that would have on our results, I think that’s more of a question for fiscal year 2025,” Mr. Ouimet responded.

Strong competition in the United States

Cogeco’s plans are taking shape at a time when the company faces significant headwinds in the United States.

The integration of WideOpen West in Ohio, which adopted the Breezeline brand (American subsidiary of Cogeco), continues to weigh on the company’s results at the same time as competition is intensifying in the American market.

In fiscal 2023, Breezeline lost 35,676 customers to its internet service. Of these, 26,320 are related to activities in Ohio.

Analyst Maher Yaghi of Scotiabank points out that the results of US cable companies Comcast and Charter demonstrated the effects of competition from Verizon and T-Mobile, which are expanding their presence in other regions thanks to wireless access. wire to internet.

“It will be difficult for Cogeco to increase the number of customers in the United States due to competition from fixed wireless, the promotional environment in cable television and the integration of operations in Ohio.”

Discussions in Canada

Mr. Jetté provided few new details about the company’s plans in Canadian wireless.

Cogeco is still negotiating with major Canadian telecommunications companies to reach an agreement to access their network. The new regulatory framework adopted by the Canadian Radio-television and Telecommunications Commission (CRTC) requires telecommunications companies to provide access to their wireless network to other providers.

Unlike the regulatory context in the United States, companies that want to access the Canadian wireless network of a telecommunications company, as Cogeco wants to do, must hold spectrum and commit to investing in their own network. “We are making progress in our negotiations with telecoms companies. There is a point where arbitration is a provision provided for in the regulatory framework, but we are not there.”

Forecasts and results below expectations

Cogeco revealed financial results and forecasts slightly below analysts’ expectations.

The company said it expects its revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be flat for fiscal 2024. “Analyst consensus forecast growth of 1% for both indicators,” underlines Mr. Yaghi.

Cogeco also anticipates an increase in its capital expenditures, which would result in a reduction in its cash flows of around 5% to 15%.

The company revealed a profit of $86.5 million, down 17.6%. Diluted earnings per share were $1.95. Revenues, for their part, increased by 2.5% to $743 million. Without the currency conversion effect, the variation would be 0.8%.

Before the results were released, analysts expected earnings per share of $1.98 and revenue of $754 million, according to financial data firm Refinitiv.

Cogeco Communications shares gained $1.59, or 2.88%, to $56.75 on the Toronto Stock Exchange.

2023-11-03 03:21:17


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