MONTREAL – Cogeco and subsidiary Cogeco Cable held their annual general meetings in Montreal on Wednesday, preceded by a conference call with analysts and a meeting with journalists. Here’s what we heard.
Wireless
“It’s been 10 years that you’ve asked me that question,” Cogeco CEO Louis Audet told journalists, and he had it again in the investor conference call. But the logic hasn’t changed, even as Shaw’s acquisition of Wind Mobile makes Cogeco the largest Canadian cable or telecom provider without a wireless service.
“Our perception since the beginning is that if we enter this industry it has to be profitable by itself,” he explained. “We concluded that it would be too difficult, that it would cost too much… If we have the choice to invest in Wind or invest in the U.S. networks, we’d choose to invest in the U.S.”
Audet said it might make sense for Shaw to acquire Wind, but “when we look at the data coldly, we conclude that it’s not necessary to have a wireless network.” American cable companies, he reminded us, don’t have their own wireless networks either.
Audet said Cogeco might be interested in becoming a mobile virtual network operator, but Cogeco’s MVNO regulatory framework proposal was turned down by the CRTC last fall. “If these conditions are such that we can make money, we would be eager to have it,” he said, but that’s not the case until the regulations change.
Cogeco continues to operate free Wi-Fi in cities covered by its cable network, but “we provide that as a courtesy.”
Rebranding
Audet said that with the expansion into data services, the name Cogeco Cable “doesn’t reflect the new reality of the company,” so shareholders were asked to change its name to Cogeco Communications Inc.
After the change was approved, the company announced new names for its subsidiaries — Radio division Cogeco Diffusion becomes Cogeco Media, Canadian cable service Cogeco Cable Canada becomes Cogeco Connexion, community TV channel TVcogeco becomes Cogeco TV — and new logos for each, with a unified look based on the familiar stylized C (see new org chart).
U.S. cable subsidiary Atlantic Broadband keeps its name and logo, and Cogeco will still trade on the TSX under the 
same ticker symbol CGO.
Cable acquisitions
“We would very much like to make more cable acquisitions,” Audet said.
“We’re looking, but there aren’t opportunities every day.” Audet pointed to smaller companies, those with a few thousand customers, “that would interest fewer people” as acquisition targets, such as Connecticut’s MetroCast, which Atlantic Broadband recently acquired for $200 million.
Cogeco might be open to Canadian acquisitions as well, Audet said, but he doesn’t see much opportunity there, a mantra he has repeated for some years.
Cable subscription losses
Cogeco Cable continues to lose TV subscribers in Canada to competitors Bell and Telus as those companies roll out fibre-optic networks and IPTV service, as well as to cord cutters. About 43% of Cogeco’s territory now faces IPTV competition, the company told analysts. However, Audet credited Cogeco’s TiVo-based video recorders as helping to slow the loss of subscribers, even though he admitted to analysts earlier that average revenue per user hasn’t gone up as hoped, which he attributed to generous promotions given to subscribers.
Pick and pay
Audet said Cogeco is ready to implement new regulations on cable channel packaging imposed by the CRTC. Cogeco will begin offering small packages in March, and offer all channels on a pick-and-pay basis as well in December. He noted that Cogeco was one of the few providers in favour of pick-and-pay and has offered custom packages in Quebec for several years now.
Cogeco Metromedia
Cogeco divulged that the sale price for transit advertising unit Cogeco Métromedia was $47.5 million, about $6 million more than Cogeco paid to buy it in 2011. “It was for us an acquisition at a just price,” Audet said, particularly since the company found little growth opportunity in the sector. “It allowed us to concentrate on radio.”
Asked about selling to Bell, which Audet had warned was getting too big with the acquisition of Astral Media in 2013, he said he hasn’t changed his mind on Bell’s size, but “I think we made an excellent business decision for our shareholders.”
Broadcasting
Despite the sale of the advertising arm, Audet reassured journalists that “we want to stay in radio.” If anything, Audet suggested Cogeco is more likely to acquire than to sell, though they’ve been focused on the digital side recently. “If we could buy other radio stations in French Canada and maybe a bit in English Canada as well, we might be interested. But these opportunities don’t come up too often.”
Cogeco owns 13 radio stations in Quebec, including the Rythme FM network. All but one — Montreal’s 92.5 The Beat — are French-language stations.
Internet speeds
More than 95% of Cogeco’s territories in Canada now have 120 mbps residential Internet service, and some markets have 200. Audet said Cogeco doesn’t see getting gigabit Internet to residential consumers as a priority, however. “Gigabit Internet is like streaming 50 Ultra HD signals simultaneously into your home,” he said. “For residential users, there is no demand. For select industrial users, there is, and we provide it. It’s become a subject of bragging, it’s become a political football.”
Audet said Cogeco isn’t afraid of innovation, but that it has to make sense to consumers and shareholders. “The investments we make are eventually paid for by our customers. So if you’re over-providing, eventually the customers will pay for it. We think common sense should prevail.”
Not to say gigabit Internet won’t become necessary someday. “Maybe one day we will all communicate via holograms,” Audet said, half-jokingly.
Business data services
Audet is hoping for growth of 12% in this sector, which represents about 15% of the company’s business. After the acquisition of Peer 1 Hosting, Cogeco has merged it with its own data service and rebranded the combined organization Cogeco Peer 1. “This will be a transition year for us,” Audet said.
Regulations
Audet expressed frustration that 30 to 40% of traffic during peak periods is used for Netflix, a broadcaster which has no regulatory responsibilities in Canada (or employees or tax obligations), but he said it’s still in the best interest of the public that the CRTC take a hands-off approach to regulating the Internet. “Our worry is that if the government starts to intervene in what is acceptable and not online, we’ll have censorship.”
He cited Cogeco’s opposition to a plan by the Quebec government announced during last year’s provincial budget to ask Internet providers to block illegal gambling websites. (No legislation has yet been introduced to implement this plan.) Audet said he’s opposed to such censorship except where there’s a broad consensus such as with child pornography.
Refugees
Two months after calling on the Canadian government to do more to bring in refugees, Audet said he’s “very enthusiastic” about the government’s response to the crisis. “I see an immigration minister who’s much more open than the previous one,” he said. The company is working on determining its contribution to the effort, and has put René Guimond, senior vice-president of public affairs and communications, in charge of making a recommendation. “It’s a complex dossier. We want to intervene where it will really counts,” Guimond said.
Activist shareholders
MEDAC, a group of activist shareholders, brought three propositions to the table at the shareholders’ meeting, only one of which was approved — a motion to separate voting results by single-vote and multi-vote shares. It proposed a 15-year limit on board members’ terms, which Cogeco dismissed, noting that besides Audet the average board member’s term is 8.7 years. It also sought a more detailed succession plan in case of a serious illness or sudden departure of Audet and sought reassurance that Cogeco would keep its headquarters in Quebec despite a minority interest in the company by Rogers. Cogeco’s chairman Jan Peeters said Cogeco has “absolutely no intention of moving its headquarters outside Quebec.”
Photo by Steve Faguy
