By Steve Faguy
MONTREAL — VMedia, the independent internet and television service provider that pioneered delivering television services over IPTV systems in Canada, was quietly acquired by Quebecor last week – but that does not mean it intends to fade away.
Instead, Quebecor is financing its expansion, giving it the resources it needs to grow its subscriber base across the country and offer a bundling option that Quebecor’s Videotron can combine with its expansion of mobile services outside Quebec.
The purchase price of the deal was not disclosed. According to documents filed with the CRTC, Quebecor acquired all shares of VMedia from its shareholders, and took over control of VMedia subsidiary 2251723 Ontario Inc., which has licenses for TV distribution services in Quebec and Ontario, plus licence-exempt distributors elsewhere in the country.
“VMedia is now one of the key partners that will help accelerate Quebecor’s plan to increase competition in Canada and offer better multi-service offers, giving Canadian consumers more choices at a better price” — Quebecor
The application was published Friday, more than a month after it was approved administratively by the Commission and two days after the transaction closed. There was no public announcement of the deal by either party.
“We are very happy with the conclusion of this deal,” Quebecor said in a statement to Cartt.ca. “It will ensure VMedia, with the support of Quebecor, continues its momentum. The company has complementary innovative solutions that will be exploited to their full potential nationwide. VMedia is now one of the key partners that will help accelerate Quebecor’s plan to increase competition in Canada and offer better multi-service offers, giving Canadian consumers more choices at a better price.”
Quebecor confirmed it will keep the VMedia brand separate from Videotron, but declined to comment on future expansion plans.
George Burger, who co-founded VMedia in 2013, told Cartt.ca in an interview that he and the other key leaders at VMedia will remain with the company, which expects to continue as an independent unit within Quebecor.
“Every single person that works for us is going to continue to work for us,” he said.
Burger explained VMedia, which offered the first app-based TV delivery service in Canada, had seen its growth start to taper off as its target market embraced cord-cutting, regulatory challenges piled up and it lacked access to the capital that would have allowed it to aggressively compete with larger providers offering things like free installation and device subsidies.
“Unfortunately, when you’re appealing to hard-working Canadian families, there is a bit of a resistance when you give them a bill when they sign up with you that has a whole bunch of startup fees,” he said. “Very very often we have people who come to us — whether it’s a single mom or older couple — in the end when it comes to checking out and paying that startup cost, they simply can’t do it. Now we’ll have the opportunity to be able to minimize that.”
On top of those capital expenditures, “the cost of content is going through the roof, and that makes it harder for us to be really competitive,” he said.
“With a parent like Quebecor, who is dedicated to competition, it’s just a perfect opportunity to maximize the features available to us” — George Burger, VMedia co-founder
Discussions with Quebecor began at the end of 2021, Burger said, as the company announced it was expanding its wireless network beyond Quebec with its new 3.5 GHz spectrum. This acquisition of an internet and TV provider will allow Videotron to offer multi-service bundles to customers in Ontario, Manitoba, Alberta and British Columbia.
Quebecor has a tentative deal to acquire Freedom Mobile if Rogers’ acquisition of Shaw Communications is accepted, but the VMedia transaction and expansion is not contingent on Freedom’s acquisition.
VMedia was previously controlled by CEO Alexei Tchernobrivets (36%), chief architect Ivan Smirnov (25%), Burger (25%), Alec Frankel (4%), Aleksandra Davidovic (4%) and David Gottardo (6%), either directly or through family trusts. It provides services to 8,000 television subscribers, of which fewer than 1,200 were in Quebec, the application said. Burger said VMedia services more than 50,000 households in total.
“At the end of the day, we clearly got an offer we couldn’t refuse, but it was more than that,” Burger said. “It has been a bit of a source of frustration that we have not been able to raise the capital needed to expand our business and be able to do justice to the things we’ve built and the things we tried to achieve. With a parent like Quebecor, who is dedicated to competition, it’s just a perfect opportunity to maximize the features available to us.”
Quebecor’s submission to the CRTC also indicates the plan is for VMedia to grow.
“Combining (VMedia’s) unique television technology with the proven expertise and know-how of a vertically integrated company such as Quebecor Media, which has been in the television distribution business for nearly 60 years, would make it possible to offer consumers across the country television services of the highest quality. The transaction would also create synergies between the two companies that would yield economies of scale and improvements in services,” it writes. “It is clear that (VMedia’s) ability to develop more and better innovative products and competitive services, indeed its long-term financial sustainability, cannot be assured without the contribution of a major player such as Quebecor Media.”
On a regulatory level, the transaction only has minor implications. VMedia’s only broadcasting licence was a video-on-demand licence associated with its distribution service, which the CRTC agreed had zero value and did not require the payment of tangible benefits. With VMedia having a small number of customers, and most of them being outside Quebec, it will not significantly change the marketplace, where Videotron has a 49% share in Quebec and Bell and Rogers together have a 79% share in Ontario.
For VMedia customers, the situation remains status quo in the short term, with better offers and bundling options to come once Videotron Mobile expands westward.
“Nothing changes for them,” Burger said. “It’ll only get better.”
This article has been updated to reflect that Quebecor confirmed it would keep the VMedia brand separate from Videotron and that the CRTC decided it would not require payment of tangible benefits.
