Cogeco's Lime Ridge Mall location in Hamilton, Ont., is seen on on Sept. 30, 2020.Glenn Lowson/The Globe and Mail
The U.S. broadband market is “highly fragmented” and contains many small and mid-sized cable operators that Cogeco would be interested in acquiring to become a bigger regional player, the company’s chief executive officer says.
The Montreal-based cable company, which made its foray into the United States in 2012 with its US$1.36-billion acquisition of Atlantic Broadband, could easily do another billion-dollar acquisition south of the border, CEO Philippe Jetté said Wednesday as he outlined Cogeco’s growth strategy.
Cogeco is also in talks with Canadian regulators about its plan to enter the mobile market, and Mr. Jetté said he is optimistic the Canadian Radio-television and Telecommunications Commission will force the national carriers to open up their wireless networks to resellers. That would allow Cogeco to start selling mobile services to its cable customers while it acquires more spectrum and builds out its own wireless networks.
“I believe that the CRTC will eventually open the market, but to those who want to invest, not to all resellers,” Mr. Jetté said in his first interview since Cogeco Inc. and subsidiary Cogeco Communications Inc. became the targets of a $10.3-billion hostile takeover bid.
The unsolicited offer from Rogers Communications Inc. and New-York based cable company Altice USA Inc. has raised questions about whether Cogeco is big enough to compete in a capital-intensive industry dominated by deep-pocketed rivals.
Mr. Jetté, who was appointed president and CEO of the two Cogeco companies in 2018, did not directly address the takeover offer, which was made public Sept. 2 and would see Rogers acquire Cogeco’s Canadian business while Altice snaps up its U.S. cable operations.
“The position of the Audet family has been made public and crystal clear,” Mr. Jetté said, referring to repeated rebuffs by Cogeco executive chairman Louis Audet, whose family controls the companies through their ownership of multiple voting shares.
“My job is to manage the company and execute on our growth strategy for the benefit of all stakeholders. That’s what I focus on," Mr. Jetté said as he described the company’s priorities.
Cogeco has committed to investing $1-billion over the next four years to expand and upgrade its cable networks in Ontario and Quebec. The cable operator sees itself as an important partner to federal and provincial governments as they look to dole out funding aimed at bringing high-speed internet to rural and remote communities.
It’s also looking to consolidate the U.S. broadband market, where it has made five acquisitions totalling roughly $4-billion over the past eight years and has become the ninth-largest cable operator. Cogeco is eyeing a number of regional players with footprints adjacent to Atlantic Broadband’s.
Earlier this month, at the Bank of Montreal’s virtual media and telecom conference, Cogeco chief financial officer Patrice Ouimet said there are about 35 U.S. companies on Cogeco’s list of potential targets. “We are not going for the very dense urban territories like New York. That’s not the type of business we’re good at pursuing,” Mr. Jetté said.
Because of the pandemic, market conditions are not ideal right now, the CEO said, but added Cogeco will be patient. The company has a strong balance sheet and support from the Caisse de dépôt et placement du Québec, Mr. Jetté said. The $333-billion fund, which has a 21-per-cent stake in Atlantic Broadband, has agreed to partner with Cogeco on its U.S. expansion. “We can easily do a billion-dollar acquisition right now, but it all depends. Do we do one big one, two smaller ones? It all depends on the fit,” Mr. Jetté said.
In the meantime, Cogeco is in talks with the CRTC and with Innovation, Science and Economic Development Canada – the federal ministry that’s responsible for doling out licences for spectrum, the airwaves used to deliver wireless signals – about its plans to offer mobile services.
The CRTC is in the midst of a review of Canada’s wireless industry that is expected to determine whether the large, national carriers should be required to sell network access to resellers, known in the industry as mobile virtual network operators, or MVNOs. While the national carriers have argued that such a policy would hamper investments in wireless networks, Cogeco has proposed a hybrid model that would only grant access to companies willing to eventually build their own infrastructure.
“The mobile market in Canada continues to be characterized by very limited competition and very high barriers to entry," Mr. Jetté said. “I continue to believe that Cogeco is a very credible potential new entrant. We have the foundation to enter the market … but only if the regulatory and policy environment is conducive.”
Cogeco has spectrum in the 2.5 GHz band in many of its Ontario markets, and in the 3.5 GHz band in parts of Quebec, but it would need to acquire more to fulfill its wireless ambitions. Currently, those spectrum licences are concentrated in the hands of a few big players, Mr. Jetté said. “It’s not efficiently used, and that’s why we need to revisit how allocations are made.”
Rogers, meanwhile, has pledged to invest $3-billion in Quebec and deliver fifth-generation wireless services to 95 per cent of Quebeckers within five years if its bid to acquire Cogeco is successful.
“Rogers has invested $60-billion in our world-class networks over the past 35 years and we’re rolling out Canada’s first and largest 5G network,” Rogers spokesperson Sarah Schmidt said in an e-mail. “Now is a critical time for significant investments in Quebec – that’s why Rogers has proposed to spend $3-billion to bring 5G to Quebeckers and expand connectivity to help make Quebec a global leader in technology and innovation.”
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