MONTREAL – Videotron added 56,200 new telephony customers, 28,800 high speed Internet customers and 33,000 illico digital cable customers in the second quarter of 2006, ended June 30th.
However, it only netted a gain of 1,200 cable subscribers when the new digital subs are added to its basic sub losses (a turnaround from Q2 2005 where the company tallied a net loss of 11,900 subs). Subscriber churn is always higher in the second quarter for cable as students disconnect and go home for the summer. At the end of June, Videotron had over 283,000 voice over IP telephony customers, meaning by now the company is either at or just over the 300,000 mark.
Videotron’s performance helped drive Quebecor Media (which operates the cable company, TVA Group and the Sun Media newspapers, among other assets) revenues up $71.9 million to $743 million, operating income up $14 million to 207.8 million and net income up 67.2% to $59.2 million, all as compared to Q2 2005. Cartt.ca reported on TVA Group’s results last week.
Videotron’s monthly ARPU ("average revenue per user") increased by $9.31 (18.3%) to $60.17 in the second quarter of 2006, compared with $50.86 in the same quarter of 2005.
The Cable segment generated free cash flow from operations of $63.8 million in the second quarter of 2006, compared with $62.2 million in the same quarter of 2005, a $1.6 million increase due mainly to the increase in cash flows from operating activities, including the positive impact of the increase in operating income, which was partially offset by a $37.8 million increase in additions to property, plant and equipment resulting from investment in network modernization and the cable telephony project, says the company’s press release.
On a year-to-date basis, Videotron generated revenues of $615.9 million in 2006, a $104.4 million (20.4%) increase. The segment’s operating income rose by $38.9 million (19.4%) to $239.7 million.
Quebecor Inc.’s revenues (which includes the company’s massive printing division) totalled $2.35 billion in the second quarter of 2006, down $156.4 million (-6.2%) from the same period of 2005. The increase in Quebecor Media’s revenues "only partially offset a $226.1 million decrease at Quebecor World, which was mainly due to the impact of the conversion of its revenues into Canadian dollars," says the press release (estimated at $180.0 million), as well as continuing pricing pressures in North America and Europe and volume decreases in some business groups.
"Once again, significant increases in Videotron’s results, driven by strong customer growth for its digital cable television, Internet access and telephone services, helped boost Quebecor Media’s results in the second quarter of 2006," said Pierre Karl Peladeau, president and CEO of Quebecor Inc. "Videotron posted the highest customer growth rates of any major Canadian cable provider in the 12-month period ended June 30, 2006. Meanwhile, the transition period required for Quebecor World to complete its retooling programs continued. Quebecor World’s revenues and operating income were again negatively impacted by challenging conditions in print media markets as well as temporary inefficiencies and volume reductions caused by the installation of new presses. The impact was accentuated by the unfavourable effect of the conversion of Quebecor World’s results into Canadian dollars. Under the leadership of its new President and Chief Executive Officer, Wes Lucas, Quebecor World is continuing implementation of its long-term strategic plan, which includes the largest retooling program ever undertaken by Quebecor World in North America and Europe, as well as a number of restructuring initiatives, specifically in the Book and Magazine groups."
Despite the growth on the cable side, Quebecor Media recorded a net loss of $119.2 million in the first half of 2006, compared with net income of $48.2 million in the same period of 2005. The $167.4 million difference "was essentially due to the loss on debt refinancing. Excluding unusual items, i.e. the reserve for restructuring, impairment of assets and other special charges, the loss on debt refinancing and gains (losses) on sales of businesses, all net of income tax, Quebecor Media generated net income of $97 million in the first half of 2006, just under twice the net income of $48.3 million registered in the same period of 2005," says the press release.
Turning to the company’s "leisure and entertainment" division, revenues were up 26.8% to $66.7 million. Its operating loss was $500,000. The increase in revenues reflects the acquisition of Sogides ltee at the end of 2005 and a 5.8% increase in the revenues of retailer Archambault Group Inc. The drop in operating income was caused primarily by a decline in the Books segment’s operating results.
Interactive technologies and communications revenues were up 5.1% to $18.7 million due to the recruitment of new customers and increased sales to existing customers. The segment’s operating income was stable at $1.5 million in the second quarter of 2006. On July 11, 2006, Nurun announced the acquisition of Crazy Labs Webs Solutions, S.L., an interactive communications agency based in Madrid, Spain. On a year-to-date basis, revenues were up 10.2% to $36.7 million and operating income was up 36.4% to $3 million.
Revenue rose 28.2% to $15.9 million within the company’s Internet portals. Operating income went up 50% to $3.3 million, mainly because of the increase in revenues, which was partially offset by the operating loss of the new micasa.ca site and increases in some operating costs. Canoe’s year-to-date revenues totalled $31.6 million, an increase of 34.5% from the same period of 2005, and year-to-date operating income was $7.2 million, a 63.6% increase, says the press release.
