Quebecor says Nurun sale unrelated to wireless expansion

Quebecor Inc. and industry analysts on Tuesday downplayed any connection between the company's sale of consulting subsidiary Nurun and aspirations Quebecor has for expanding its wireless service across Canada. The Montreal-based company announced in a press release Tuesday that Nurun, which provides advisory services in areas such as digital products, website design and online transactions, has been sold to France's Publicis Groupe SA for $125 million in cash. Quebecor CEO Pierre Dion said in the release that the sale "is consistent with our desire to focus all our activities on the four lines of business that define our mission of being the Canadian leader in telecommunications, news media and entertainment and culture." When asked if the sale was made to raise money for a national wireless expansion, Quebecor spokesman Martin Tremblay said in an email: "There are no such connections to be made. As described in our press release, this decision is consistent with our desire to focus all our activities on the four lines of business that define our mission of being the Canadian leader in telecommunications, news media and entertainment and culture." In June Dion said during the Canadian Telecom Summit he intends to go national if there are additional regulations that would bring down wholesale roaming costs. Desjardins Securities telecom analyst Maher Yaghi said he doesn’t think the sale is related to Quebecor's plans for expanding mobile service across Canada. He said in an email that "the company has been divesting of non-core operations for a couple years now." BMO Capital Markets analyst Tim Casey said in an email: "I wouldn’t draw the dots directly from this sale to wireless. Nurun seemed to be suffering from slowing organic growth and lacked the scale to attract multinational clients. I think it's more about a focus on core ops than investing in a fourth player." Greg MacDonald, an analyst with Macquarie Capital Markets, said in an email that there is no connection between the Nurun sale and Quebecor's wireless-expansion plans as Nurun is "non-core to the company." Canaccord Genuity analyst Dvai Ghose said the amount paid for Nurun does not come close to raising what Quebecor needs to expand its wireless service nationally. "We believe that the $125 million in proceeds is small compared with the $2 billion or so that we estimate is required for national wireless expansion and so do not view this transaction as overly material when it comes to national expansion," Ghose said in a research note. He added that it is "more of a risk than an opportunity" for Quebecor to attempt a national wireless expansion, given the poor track record of new entrants in the Canadian wireless sector, the need for funding partners, Quebecor's "weak balance sheet and relatively inexperienced senior management," and the "disappointing" results so far from Quebecor's mobile business in Quebec. On the other hand, Barclays analysts Phillip Huang and Ali Pervez said in a research note they expect proceeds from the Nurun sale to be "redeployed to drive wireless growth." The Barclays analysts said Quebecor is facing pressure to increase marketing spending in its existing territory, with increasing market share from the upcoming availability of the iPhone 6 cited as an example. Huang and Pervez added: "Perhaps a greater driver of capital requirement is the potential opportunity to expand the wireless business outside of Quebec, which may include the acquisition of smaller players (Wind and/or Mobilicity) and participation in upcoming spectrum auctions (AWS-3, 2.5GHz, 600MHz)." — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Quebecor says Nurun sale unrelated to wireless expansion

News | September 2, 2014

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Quebecor says Nurun sale unrelated to wireless expansion

News | September 2, 2014

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