TORONTO – Quebecor Media chief financial officer Jean-Francois Pruneau said Wednesday morning his company would love to be part of a national wireless play, has talked to investors and others about it, but is still awaiting the right conditions.
The big attraction at this point, he told Scotiabank’s telecom and cable investors conference in Toronto, is that the initial network builds have been done. “We don’t have to invest from the ground up, like the new entrants had to do,” he said, meaning any new national wireless company Videotron may be part of, would be “buying this at a fraction of what has been spent.”
With the federal government solidly in the corner of ensuring the right conditions for a fourth wireless player to thrive are in place (making sure domestic roaming rates are kept low, and access to spectrum is easier, most especially), the investment conditions for Videotron to grow beyond Quebec look increasingly more positive. However, Pruneau would not tip his hand, yet, but clearly lots of conversations have happened, and continue. (Videotron is also the proud owner of prime 700 MHz spectrum in areas – Alberta and B.C. – beyond its normal coverage region).
“It’s not our plan to be alone in the game and try to make it all ourselves.” – Jean-Francois Pruneau, Quebecor
He explained Videotron has no plan to go out and build a new national network from the beginning and if it does move on this, it will be “starting from an existing network – and there’s two choices, or maybe one,” Pruneau explained. “It’s not our plan to be alone in the game and try to make it all ourselves.”
To that end, he said the company has been in talks with “West Face and those guys – so they know we have assets to contribute… and we have operating expertise that is worth a lot.” West Face is one of the new key backers of the recapitalized Wind Mobile in Canada, as we have reported previously. As well, he acknowledged, with Videotron in the ownership mix of such a company “the exit is more obvious to those guys.”
Pruneau added that with the addition of the iPhone to Videotron’s product mix and the launch of LTE, the average revenue per user for new subscribers coming on have climbed to more than $51 a month, which dwarfs Wind, whose ARPU is in the “lower 30s,” he said. “With the right network you can bring that up definitely,” he said.
When the discussion turned to Videotron’s home base of Quebec, Pruneau rightly sung the praises of being able to offer a bundle of wireless, broadband, TV and home phone, while also leveraging all the content it owns, too – and how that has significantly helped building out its wireless business there, all under one well-liked brand. “It’s a key factor in attracting customers,” he said.
Scotiabank’s telecom and media analyst Jeff Fan then asked how the company squares all those offerings and that success in Quebec (the company now has close to 600,000 wireless subscribers), with the rollout nationally, where customers in the rest of Canada don’t know the Videotron brand, nor will the company be able to bundle anything with wireless.
“You build a different model,” said Pruneau. You build one that contemplates earning “10 to 15% market share and it works,” he said. “We know we don’t have the same tools so it won’t be as successful,” as in Quebec so the company won’t, for example, invest the same in customer service as it does at home. In Quebec, Videotron prides itself with staffing its call centres so that 98% of calls are answered within 30 seconds by a real person. That level of investment in customer service wouldn’t happen in a national wireless play, he explained.
He reiterated though that a national wireless play won’t happen without the right conditions, chief among them a favourable decision from the CRTC on domestic roaming (the hearing on that wrapped up a month ago). While that line item is very small for the likes of Bell and Rogers and Telus, it’s a big deal for Videotron and other smaller wireless companies who have to allow their customers to roam on the networks of others. Videotron can’t compete if they must offer higher retail prices due to high roaming costs, so it has to eat those charges. “And if you want the financials to work, those costs have to be low,” he said.
Pruneau added it is not the company’s plan to roam forever on low rates, but that it needs time while it builds out more network for its customers to roam – and to gather more customers. “We’ve experienced what it is to not be a facilities-based operator,” and the company didn’t like it, Pruneau said. “When you do that, you’re at the mercy” of the network owner and how they choose to invest in their technology.
