Cogeco Communications Inc. is benefiting from a pandemic-related boost in its broadband business, a division that the company’s chief executive says is well positioned for long-term growth.
Cogeco added 8,943 net new internet subscribers in Canada and 13,523 in the United States in the three-month period ended Aug. 31, surpassing analyst expectations as people who had previously relied on their mobile phones for connectivity signed up for home internet service. Network usage has soared since the global health crisis began, with public-health measures shifting workplaces, schools and entertainment online.
“Broadband continues to grow … we see in times of pandemic that there is a very solid and growing demand for home connectivity,” Cogeco CEO Philippe Jetté said during a conference call to discuss the company’s results.
The CEO also reiterated the family controlled company’s assertion that it is not for sale. Cogeco Communications and its parent company, Cogeco Inc., are in the midst of fending off an unsolicited $11.1-billion takeover bid by Rogers Communications Inc. and New York-based cable company Altice USA Inc.
The offer, which expires on Nov. 18, would see the company’s assets split up, with Rogers acquiring the Canadian operations and Altice snapping up the U.S. cable business, Atlantic Broadband.
However, the deal has failed to win the approval of the Audet family, which controls Montreal-based Cogeco through multiple voting shares and has stated repeatedly that the business is not for sale. “Today, Cogeco enjoys a unique and enviable position as the only broadband services company with a significant presence in both Canada and the United States," Mr. Jetté said.
The takeover proposal has raised questions about Cogeco’s ability to grow in an industry dominated by deep-pocketed competitors such as Rogers, whose CEO Joe Natale has said that the rollout of fifth-generation wireless technology will reshape the telecom sector. Mr. Natale has said that Rogers is best suited to building out 5G in Quebec.
But Mr. Jetté pushed back against the notion that the deployment of 5G will diminish Cogeco’s growth prospects. Mobile networks are convenient for people on the go, and 5G is the “future of mobile telecommunications,” Mr. Jetté said. “But inside the home, there is a massive amount of data that more and more devices are consuming, and this home needs to be fed by wired networks," he added.
He also noted that Cogeco has a watchlist of 30 to 40 regional cable companies in the U.S. it would be interested in acquiring, and reiterated that the cable operator could easily make a $1-billion-plus acquisition in that market. (Cogeco recently announced a deal to acquire DERYtelecom, a Quebec-based cable company, for $405-million.)
“Fiscal 2021 looks very promising, despite the unfavourable economic impacts related to the pandemic, as we will continue to manage our costs closely and pursue profitable growth through various organic initiatives and acquisitions,” Mr. Jetté said.
Cogeco Communications reported $90.8-million, or $1.88 per diluted share, in profit attributable to owners of the corporation, up from $89.8-million, or $1.80 per diluted share, a year ago. Its fourth-quarter revenue was $605.2-million, up 3.7 per cent from $583.7-million during the same period last year.
Parent company Cogeco Inc. had $30.7-million, or $1.92 per diluted share, in profit attributable to owners of the corporation, down from $31.4-million or $1.93 per diluted share a year ago. Its fourth-quarter revenue was $624.2-million, up from $610.5-million. The results were impacted by its media business, which took a hit as some advertisers pulled back during the pandemic.
Analysts called the financial results strong. “The beat on internet [subscriber additions] was even more impressive than the financials, in our view, with U.S. adds 5.5 times higher than [a year ago],” TD Securities analyst Vince Valentini said in a note to clients.
Canaccord Genuity analyst Aravinda Galappatthige noted that the U.S. cable division also fared better than anticipated, adding 5,500 television subscribers versus 5,300 during the same period last year.
Shares of Cogeco Inc. closed down 2.3 per cent on the TSX to $79.61, while the more widely held Cogeco Communications Inc. stock was down 1.6 per cent to $93.85.
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