MONTREAL – Videotron added 234,800 telephony customers, 154,000 Internet customers, 149,000 illico digital TV customers and 66,300 customers for all cable TV services (analog plus illico) in 2006, yet parent company Quebec Inc. still posted a net loss of $93.9 million.
The loss is a big reversal from 2005 when the company recorded a net profit of $69.7 million. The downturn was attributed in financial results released Wednesday to an “unusual loss on refinancing of Quebecor Media’s debt and lower unrealized gains on re-measurement of exchangeable debentures.”
Quebecor Media, which includes the TVA network and cableco Videotron, recorded a net loss of $167.7 million in 2006, compared with a net income of $96.5 million in 2005. The $266.2 million difference over the two years “was essentially due to the recognition of an unusual $342.6 million loss on debt refinancing in 2006, compared with a $60 million loss in 2005,” stated Quebecor Inc. in its financial results for the fourth quarter and year ended December 31.
Revenues at Quebecor Media’s cable segment jumped 21.2% to $1.31 billion in 2006 from $1.08 billion a year earlier due primarily to customer growth. Also, Videotron’s average revenue per user (ARPU) grew 18.3%, or by $9.51, to $61.37 in 2006.
But the increase in operating income only partially offset an unfavourable variation in the net change in non-cash balances related to operations and an $82.7 million increase in additions to property, plant and equipment, partly as a result of investment in network modernization and cable telephony.
Broadcasting revenues declined 2%, or by $8.1 million, to $393.3 million in 2006. Advertising revenues at TVA Network were down, but there were higher subscription revenues at the specialty channels Mystere, Argent, Prise 2, LCN, mentv and Mystery.
“The increased revenues and the impact of cost-control measures at Sun TV, as well as improved profitability at the specialty channels, did not entirely offset the impact of lower revenues and higher operating expenses at TVA Network, including content-related costs,” stated Quebecor in the financial results.
Quebecor Inc. was also brought down by poor performance at its commercial print division Quebecor World.
“Quebecor Media continued growing its revenues and operating income in 2006,” said Quebec Inc. president and CEO Pierre Karl Peladeau. “The strong performance was spearheaded by the cable segment, which posted significant increases in revenues and operating income driven by record customer growth for its digital cable television, Internet access and cable telephone services. At the same time, challenging conditions in the print markets and temporary inefficiencies caused by the installation of new presses continued to dampen Quebec World’s results.”
To reverse Quebecor World’s fortunes, the Quebec Inc. subsidiary has implemented a five-point strategic plan that involves: providing customers with superior value solutions; building high-performance teams; implementing continuous improvement programs, establishing a complete retooling program and improving financial flexibility.
