MONTREAL – When a U.S. branch of Montreal-based Cogeco Communications paid US$1.4 billion for the rest of the MetroCast cable network this year, onlookers wondered how big the company wants to grow down south.
Pretty big, CEO Louis Audet suggested Wednesday at an investor conference in Montreal run by CIBC. “We have the potential for our U.S. operations to become bigger one day than our Canadian operations” in Quebec and Ontario, he said. “There is sufficient acquisition potential for that to occur … Now you need to work hard and be a bit lucky.”
Cogeco’s first U.S. acquisition was the 2012 US$1.36 billion purchase of Atlantic Broadband. MetroCast has networks in five Eastern U.S. states.
The Canadian market is tight, he admitted, and the deals have been “megatransactions” [for example, 2013’s purchase of Hamilton’s Mountain Cable by Rogers from Shaw Communications, which also involved buying Shaw’s wireless spectrum]. While Cogeco has been involved in bidding, Audet said “we’re disciplined about what we do, we do our due diligence in depth … and we chose and compete in situations where it’s worth it.”
And while the MetroCast deal included a $315 million equity investment by Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), Audet still wants to get his debt ratio down. Selling the Peer1 data centre business isn’t yet one of the ways, he said, despite the fact that “growth is not there.”
“We’re agnostic” on selling. “We’re not satisfied we have done everything that can be done to reach that conclusion (to sell). We’re still in turnaround mode, we’re two years into a three year plan. We’re behind this business and we want to make it work. We’re not traders, we’re fixers, and when we can’t fix we do something else. But right now we’re fixers.”
Amazon and Microsoft have opened data centres here since Cogeco bought Peer1 at the end of 2012, he noted, whose business customers can “self-serve” by ordering computing and storage capacity online and on demand. That has changed the market, Audet said. Peer1 is “the most competitive and customer-friendly option when the customer has a significant constant growing payload,” he added, but the bigger players have made it harder to sign customers. “So we have to hone our selling skills.”
Audet also said he’s in no rush to switch from coaxial cable to fibre optic to the home, as his telco competitors are doing, thanks to cable’s DOCSIS 3.1 protocol, which can push Internet speeds over 1 Gbps. “We have more than enough – and for many years – carrying capacity.”
Nor is he worried about the fact that his competitors (Bell, Rogers and Vidéotron) all have cellular offerings. “When new spectrum came up for sale seven years ago we passed because we didn’t have the size to get involved without going bankrupt … It turns out we don’t need a wireless business to be successful.”
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