Incumbent competition ‘very aggressive’ against Fizz at launch

Quebecor Inc.’s company brass says its Fizz flanker brand is picking up speed in acquiring new subscribers during the first few months of 2019, following some turbulence from unexpected technical issues and intense competition after launching last quarter. Videotron CEO Jean-François Pruneau said Fizz “loaded up quite nicely” for the first few days and weeks, but the company “pulled off” on their marketing campaign after discovering “unexpected” technical issues which “impacted somewhat our performance for the balance of Q4.” The new brand also faced a “relative spike in targeted tactics from competition around the launch season.” “Obviously the incumbents were prepared for our launch,” he said during Quebecor’s Wednesday earnings call for its fourth quarter 2018, which ended Dec. 31. “They were, I would say, very aggressive, especially on handset promotions for the Black Friday season and same as well for the Christmas period. Performance was good in Q4 but obviously impacted by the technical issues that we experienced.” But Pruneau said its traction is accelerating now that the technical hiccups (he didn’t specify, but it had suffered from outages, customers being unexpectedly unsubscribed and other glitches, according to a report in Mobile Syrup) have been settled and marketing campaigns are in full swing. “The success in Q1 is incredible,” he said. “Much higher than our expectations.” The no-frills flanker brand Fizz officially launched in November last year, targeting younger Canadians offering low rates and custom plans. Quebecor plans to launch a similar Fizz internet product this year, which the company has just finished beta-testing. Overall, its combined wireless offerings are off to a good start this year. After two months in 2019, the company’s total mobile subscriber growth exceeds last year’s Q1 by 10,000 subscribers, he said. Quebecor’s fourth quarter ended with analysts commenting on the company’s strong overall financials but they pointed out it added fewer internet and wireless subscriber adds than expected, despite launching Fizz, and highlighted that it saw a drop in its wireless average billion per user (ABPU) metric. Videotron pulled in wireless net additions of 33,100, but wireless ABPU was down 0.6 per cent from the same quarter the previous year to $53.25 -- its first decline since 2014, according to Canaccord Genuity analyst Aravinda Galappatthige. The company attributed the drop in ABPU to growth in its popular bring your own device (BYOD) offers, along with multi-line plans and the launch of Fizz, which is also a BYOD service. Desjardins analyst Maher Yaghi wrote in a note that the lower-than-expected ABPU is in line with wireless incumbents, but it’s “still disappointing since does not have to face Freedom’s push over most of its footprint.” Black Friday was intense last quarter from industry promos with larger data buckets, driven by Shaw Communication Inc.’s Freedom. Larger industry data buckets growing faster than demand were also a drag on average revenue metrics, company officials noted Wednesday, but said it’s not had a “major” impact on ABPU. Pruneau said if Fizz is successful, ABPU will continue to feel downward pressure, at least in the short term. But he argued on the call that while BYOD customers command a lower ABPU, they produce higher EBITDA and higher lifetime value. He said in the long run, the industry’s average revenue from users should go up because “consumers are looking for more wireless data...speed, and eventually lower latency, and that’s something we’re going to be able to monetize.” Wireless services continue to lead revenue growth for the company, with subscribers surpassing 1.1 million total subscribers by end of 2018. Overall revenue reached $1.09 billion for the quarter, up 2.6 per cent from $1.06 billion year over year. Quebecor’s net income for the quarter reached $116.8 million, up from $70.4 million the same period for 2017. Telecommunications revenues grew 2.9 per cent year over year to $866 million. Videotron lost 6,400 basic cable subscribers, an improvement from the same quarter last year when it lost 8,500. Internet subscribers increased by 7,000 while cable telephony losses totalled 17,200. It ended the quarter with 1.6 million TV subscribers and 1.7 million internet subscribers. Officials also noted on the call that the company has reached an agreement with Alphabet Inc.’s YouTube to be the first over-the-top content provider for Quebecor’s new IPTV service Helix, which is expected to be priced at a premium. The new Helix product, based on Comcast Corporation’s Xfinity X1 platform, was announced last October and is expected to launch this year with a “large-scale roll-out,” according to a company news release Wednesday. “Employee trials are well underway, with anticipation of a soft commercial launch in the coming weeks,” Pruneau said on the call. Club Illico added 17,900 subscribers in the quarter. Subscription growth drove a $7.3 million revenue increase -- 18 per cent -- to $47 million for the year. Quebecor’s media division posted $198 million in the fourth quarter, a $1.5 million or 0.8 per cent from decrease the quarter the year before. Broadcast revenues dropped $3.7 million, or 3.2 per cent, which the company’s earnings filings attributed mainly to “lower advertising revenues at TVA Network and TVA Sports, as well as lower commercial production revenues, partially offset by higher subscription revenues at the specialty channels.” — With reporting by Kyle Duggan at kduggan@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Incumbent competition ‘very aggressive’ against Fizz at launch

News | 03/13/2019 4:25 pm EDT

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