By Steve Faguy
MONTREAL — Cogeco is closer than ever to launching a wireless service, but it still requires regulatory change before it can do so properly, company CEO Philippe Jetté told journalists on Wednesday as the company held its annual shareholders meeting in Montreal.
It’s one of several dossiers where Cogeco is seeking to either change the rules or fight to maintain them depending on their business interests.
Jetté (pictured, standing), who took over from controlling shareholder Louis Audet (seated) as CEO in 2018, said he is looking forward to presenting his company’s proposal for a “hybrid mobile network operator” to the CRTC at next month’s wireless policy review hearing, a framework that would allow Cogeco to cost-effectively enter the wireless market while also requiring it invests in network infrastructure.
The HMNO model allows Cogeco to rent radio access from existing providers but only where it has existing wireline or wireless facilities and continues to invest in network facilities.
“The reality of the (existing) regulatory framework did not allow Cogeco to buy frequencies and launch a network in a profitable way,” Jetté explained. Among the problems: the large licence areas in wireless spectrum auctions did not allow Cogeco to cost-effectively buy spectrum in its footprint, which covers 1.7 million homes in Quebec and Ontario but not in large markets like Montreal and Toronto. Jetté told shareholders he is “hopeful” smaller licence areas will be in place for the upcoming 3500 MHz auction. But even with smaller licence areas and an HMNO framework, building a network from scratch will take time.
“Bell and Rogers took 30 years to build their network,” Jetté noted.
If the CRTC agrees with the HMNO model, and Jetté said he’s “very confident” they will, the company would set up a wireless business. He said it would happen “very fast,” though he was not in a position to give a firm timeframe. “We wouldn’t take the time and energy to develop the model” if they didn’t think it would be used, he said.
“If they accepted our model, we could develop a profitable network… Without it, the operation would not be profitable.” – Philippe Jetté, Cogeco
“If they accepted our model, we could develop a profitable network,” Jetté said. “Without it, the operation would not be profitable.”
While Cogeco is arguing for more competition in wireless, it continues to argue against lower barriers to competition in wholesale wireline services. It, along with the other wired incumbents, has asked the federal government to overturn the CRTC’s recent decision reducing rates on wholesale broadband, arguing that the rates do not allow Cogeco to recoup its costs.
Jetté found no contradiction in the two positions, however. “We’re not asking for exceptions in wireless, we’re asking for synergy with wireline,” he said. “We believe in facilities-based infrastructure, whether wireline or wireless. We are pro-competition, we do not fear competition, we enjoy it, we will be there to compete.”
Cogeco’s financial situation is solid, and it has money to spare, said Chief Financial Officer Patrice Ouimet, with total liquidity around $1.5 billion and revenue and earnings both continuing to increase. The company is still “clearly in acquisition mode,” particularly in the U.S. cable market through its Atlantic Broadband subsidiary, Ouimet said. Last week, Cogeco announced a $50-million acquisition of Thames Valley Communications, serving 10,000 customers in southeast Connecticut, expected to close in three months.
Though it sold data services subsidiary Peer 1 last year for $720 million, radio, while a small portion of the company’s earnings, remains part of Cogeco’s “soul”, Jetté said, and there are no plans to sell its 23 stations, even though companies like Stingray, for example, might be very interested in acquiring a network of stations in Quebec.
Perhaps some acquisitions in radio, then? Jetté was coy about the possibility, repeating that if opportunities presented themselves, they would be studied. Cogeco Radio is at the CRTC-set station ownership limit in most of Quebec’s large markets including Montreal and Quebec City, but could always expand into smaller regions.
The 10 radio stations Cogeco acquired in Quebec from RNC Media in 2018 are in mid-size or smaller markets. Cogeco has freshened up their images but has maintained most of their existing brands.
Other topics brought up with Jetté:
– The new MediaFirst IPTV distribution platform is currently in beta testing. “We have several hundred customers with MediaFirst in their residence,” he said, and it will be rolled out progressively by region.
– Cogeco is pushing to win back customers it lost during a systems upgrade last year that caused all sorts of customer service headaches. “We fought every day during the transition,” Jetté said, and have reassured customers that their systems are solid now.
– “There is a process in place to replace Ken Smithard,” who is leaving as president of Cogeco Connexion this month. No replacement has yet been announced.
– Cogeco is opposing changes to the licence of Montreal’s Radio Classique (CJPX-FM), whose owner wants to to turn it into a pop music station as part of a proposed sale to Leclerc Communication. “Montreal should keep a classic music format,” Jetté said. “Radio is very mature, I think the rules work well, it’s not the time to change the rules in a mature market.” Cogeco and Bell Media are the only companies in the market with large commercial music stations.
– Cogeco is also worried about Bell’s acquisition of the V television network (which Cogeco used to own back when it was called TQS). It hasn’t opposed the deal directly like Quebecor has but said it wants fair competition guarantees to remain in place.
– Though Videotron is expanding into the Abitibi region to compete directly with Bell’s incumbent cable company there, Jetté isn’t too worried about similar competition creeping into his footprint. “In Abitibi Bell had, for all intents, a monopoly,” he said, adding that cable companies generally want to finish building in their zones before looking to expand into their neighbour’s back yards. Even when they do, they generally have to start over to improve their network.
– Nothing has changed with respect to Rogers’s approximately 40% stake in Cogeco Inc. The investment is “dormant” and expected to remain that way, he said.
At the shareholders’ meeting, new members of Cogeco Inc. and Cogeco Communications Inc.’s board of directors were approved. The latter adds former New Brunswick premier Bernard Lord, while the former gets Arun Bajaj, who heads human resources at Gildan Activewear. Audet remains on the boards as executive chair in the second year of a three-year transition period.
Photo by Steve Faguy.
