Cogeco’s summer acquisitions to help solidify, grow Montreal presence

Following a pair of strategic acquisitions this summer, Cogeco Cable Inc. is readying to expand its physical capabilities and geographic footprint in the commercial data services market, Cogeco Data Services president Tony Ciciretto told The Wire Report this week. “Our position right now is a position of growth,” Ciciretto said. “We’ve been able to secure two significant pieces of the puzzle for us that provides a much more in-depth offering for our customers.” Those two pieces are managed data services provider Quiettouch Inc. and private telecom provider MTO Telecom, which Cogeco acquired June 27 and Aug. 31, respectively. Ciciretto said the acquisitions offer a “significant step forward” for the company as it focuses on supporting its customers with a wider web of integrated network and data management services. Through the MTO Telecom acquisition, Cogeco picked up more than 1,500 kilometres of fibre-optic cable in commercial and industrial areas of Quebec and Ontario, much of it in Montreal. Through Quiettouch, the company gained a trio of data centres in Toronto and Vancouver as well as an expanded list of IT management services such as increased hosting and virtualization, firewall, data backup and co-location services. The acquisitions allow subsidiary Cogeco Data Services to respond to customer demands for more integrated systems. It allows the company to host data and protect it under a single service provider, a crucial component of the company’s strategic vision, Ciciretto said. “In this evolving market, we understand that there’s a very important need from our customers—and they tell us consistently—that they need an integrated offering,” he said. “We believe that the combination of Cogeco Data Services, MTO and Quiettouch is certainly an ideal fusion of complementary services and capabilities.” Cogeco Data Services is now working on a transition plan to integrate old and new services. Eventually, customers of all three companies will have access to the same services, Ciciretto said. “ essentially taking the best offerings of all three companies so we can go to market with a very significant integrated offering of data network and managed services,” he said. Telecom business analyst Iain Grant agreed that the strategy is a good way forward for the company. “If Cogeco’s initial services were on connectivity ... the next stage is to get into hosting,” Grant, managing director of the SeaBoard Group, said in an interview. With hosting capabilities already a part of the company’s corporate profile, managing that data was the next logical step up the value chain, Grant said. The new data management abilities will allow Cogeco to offer customized or semi-customized solutions, he said. “As you move up the value chain, you get more rewards, the margins improve and the customer becomes much closer to you since you are much closer to the customer,” Grant said. “You’re not just providing the connection now, you’re providing some of the intellectual property.” A key advantage to the MTO Telecom acquisition is the company’s centralization in downtown Montreal and the “very strong footprint” it allows Cogeco to plant in central Canada’s second-largest market, Ciciretto said. He said the company will look to capitalize on the “significant presence” MTO Telecom had in Montreal’s carrier market. With Montreal's infrastructure, he noted, Cogeco now owns more than 16,000 kilometres of optical fibre in Montreal and Toronto. Grant said this will allow Cogeco to cater to Toronto-area clients looking to expand or to attract customers that already operate in the two major markets. “Typically, CDS is focusing on a medium-sized company, not the large companies,” Grant said. “Bank of Montreal can do themselves. The ones who are smaller than Bank of Montreal will often turn to a telephone company or to a service integrator who can offer an entire package. The next tier down is where CDS is looking.” A telecommunications and management services analyst with research group Heavy Reading, analyst Alan Breznick agreed that the move is a good one for the company. “Whatever strengthens their position in Montreal seems to make a lot of sense to me,” Breznick said in an interview. If all goes well, Breznick said, the newest acquisitions could help Cogeco shake off the criticism of its 2006 purchase of Portuguese cable provider, Cabovisao, which has struggled since the 2008 global financial crisis. Earlier this year, Cogeco reported third quarter net customer losses and service downgrades for Cabovisao, resulting in the parent company writing off more than $225 million in net investment in its Portugal operations. “Certainly Cogeco has suffered because of their Portuguese cable venture. It always left a lot of people scratching their heads” Breznick said. “But I don’t think it necessarily discredits all of their future investments. I think it was a big roll of the dice that didn’t go well.” By investing in data management services within its prime Central Canada market, Cogeco has adopted a strategy employed by other North American cable companies, Breznick said. “If they are going to buy something, then buying something in terms of business telecoms makes a lot of sense,” he said. Cogeco will continue to look for further business opportunities, Ciciretto said, though he would not say whether any other acquisitions are imminent. “The strategy for us is to make sure we have an integrated offering,” he said. “We will continue to invest organically, and should we find attractive assets to acquire, we’ll do that as well to support our strategy and vision.” nkyonka@thewirereport.ca

Cogeco’s summer acquisitions to help solidify, grow Montreal presence

News | 09/16/2011 7:10 pm EDT

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