Cogeco says it’s not worried about internet speed coverage

Cushioned between a subscriber base that on average doesn’t take gigabit download speeds and a future secure with the latitude to expand to at least 10 gigabit speeds, Cogeco Inc. executives said on Friday that they are comfortable delivering whatever speeds the market asks for going forward. The Montreal-based cable company has set a target to deliver gigabit speeds to 60 per cent of its footprint by the end of fiscal 2019, but its executives weren’t concerned when an analyst raised the fact that competitors are nearing 100 per cent of their footprint with those speeds. “It’s really market driven,” Cogeco’s president Philippe Jetté said on a first quarter conference call about why the target is only 60 per cent. “Our networks are ready and prepared to augment this in a very, very short time period, so if we see market appetite, we can quickly dial up this number.” Two events have driven this response from Cogeco: first, the company said Friday that “our average customer definitely does not take a gig much less than this;” and second, the existing technology on coaxial cable and DOCSIS 3.1 is about to get a lot better. In a blog post earlier this week, president and CEO of CableLabs Phil McKinney announced that the existing infrastructure will see improvements that will catapult download speeds to at least 10 gigabits per second. Cogeco is a member company of Cablelabs, a supplier of the technologies said to drive those enhancements. Other Canadian cable players that are members of Cablelabs and have also hitched a ride on the 10G bandwagon are Rogers Communications Inc. and Shaw Communications Inc. Field trials for the new speed and capacity are set to begin in 2020, according to the official website 10gplatform.com. “A gig is a tremendous amount of capacity for a house,” Patrice Ouimet, senior vice-president and CFO, said on the call. Coupling that with the 10G initiative, he said “it provides a lot of runway in front of us in terms of being able to upgrade our network.” Cogeco also noted that its option to stretch to greater speeds on existing technology means they can keep costs “reasonable.” The company’s quarter ended on Nov. 30, and showed it actually lost 2,623 internet subscribers compared to a gain of 11,350 in the same quarter in 2017. Reasons for the loss include its move to a new customer management system in Canada that congested its contact centre, competitive offers in the industry and “seasonal” disconnects from some of its United States properties. The company’s total internet base by the end of the quarter was roughly 1.2 million (779,000 in Canada and 425,600 in the U.S.), up from 1.05 in the same period a year prior. In Canada, the company lost 3,281 internet customers over the year compared to a gain of 9,565 and Canadian broadband service revenues were down 1.4 per cent to $322.47 million. Those declines were also blamed on the system migration, but also, novelly, a $3.2 million one-time payment following a December Copyright Board decision increasing the rates TV service providers have to pay to broadcast distant Canadian and American television signals, retroactive to 2014 and renewed until 2023. The system implementation issues, which included an added cost of $4.5 million, matched Desjardins analyst Maher Yaghi’s expectations, he said in a late Thursday note. Cogeco’s other segments, video services and telephone, didn’t fare much better when it came to customer adds -- in this case, subtractions. In Canada, the company lost 13,069 video customers in the quarter, worse than the 5,032 it lost in the same period the year before. The total video base sits at 675,699 in Canada, 988,398 total with U.S. numbers. The company also lost 18,940 Canadian telephone subs compared to 5,662 over the same period -- the total base in Canada is at 376,933, for a total of 518,932. The company as a whole booked total revenues of $674 million, a 15.1 per cent increase over the same period in 2017, but profit decline 3.1 per cent to 79.15 million over the same period. The communications segment, which makes up the vast majority of the operations and houses Canadian, American and business services, saw revenues increase 16.3 per cent to $643 million due in large part to its Metrocast acquisition in the U.S. in 2017. That means that its U.S. broadband segment was carrying the load. Profit in that segment was down 1.6 per cent to $75.2 million. The company, however, has been struggling a little with its business information technology segment, home to its Peer 1 division. It saw a revenue decline of 3.2 per cent due to increased competition and “pricing pressures” in the hosting and network connectivity business. TD Bank analyst Vince Valentini asked executives on the call about whether the company expects to ride with its data centres issues or “participate in the pretty significant wave of” acquisition activity in the space -- in light of Videotron’s sale of its data centre business last month for $259 million. Shaw sold its ViaWest data centre segment for $2.3 billion in 2017, making double what it paid for it. "At this time, we continue to focus on what we have, making sure we continue to generate positive cash flow increase the performance of the business,” Ouimet said, admitting the company hit some pricing pressure they “didn’t fully anticipate.” “We remain open to all options.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Cogeco says it’s not worried about internet speed coverage

News | January 11, 2019

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Cogeco says it’s not worried about internet speed coverage

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