As Quebecor Inc. leans heavily on its new wireless network for growth, early results are coming in far below analysts' expectations.
Bay Street had expected Quebecor's telecom division, Vidéotron Ltée, to pull in anywhere from 25,000 to 33,000 customers on its advanced wireless network, even though it was operational for only three weeks in the company's third quarter. But it drew only 8,400 new customers, perhaps a sign that making headway in wireless - which is key for the company as its core telecom services mature - will not be as easy as previous forays into new lines of business.
The subscriber numbers were the only disappointment as Quebecor reported a strong third quarter, with profit up nearly 20 per cent and stable growth across all of its telecom platforms, including cable TV, Internet and home phone. The Montreal-based communications company, which operates mainly in Quebec, beat analysts' estimates as it saw profit rise to $82.8-million, or $1.28 per share, up from $69.4-million, or $1.08, a year earlier.
Pierre Karl Péladeau, Quebecor's president and chief executive officer, said the wireless network launch was a milestone in the history of the company, which has built a reputation on "convergence" between its media and distribution businesses.
"This new service will be at the centrepiece of our strategy based on the convergence of content and platforms," Mr. Péladeau said Tuesday, noting that all of the smart phones on the company's new network have access to 14 TV channels and thousands of hours of programming.
Along with its 8,400 new wireless customers, Vidéotron also attracted 11,000 existing customers from a cellphone service it already offered on another provider's network.
Despite the slow results on wireless, analysts remain extremely bullish on Vidéotron's prospects. It was the quickest to launch of several regional cable companies that are building wireless networks in Canada, and has a track record of taking a large share in the home phone and Internet markets.
Vidéotron's president and chief executive officer, Robert Dépatie, was pleased with the early wireless numbers. He said BCE Inc.'s renewed aggression in the two companies' shared home market of Quebec had no effect on Vidéotron picking up customers.
He said Vidéotron ran out of some smart phone models (including the HTC Corp.-designed Nexus One "Googlephone") and would have picked up more subscribers had supplies lasted. He noted that "bundled" offers of TV, Internet and home phone services continue to pick up. "The attractiveness of our bundled offers continues to pay off," Mr. Dépatie said.
Strong growth at the Vidéotron unit, which saw operating revenues increase by almost 10 per cent, was offset by Quebecor's sagging media division, as well as several negative amortization, income tax and restructuring hits.
Because of flat advertising revenues and declining circulation at Quebecor daily newspapers, the media division saw revenues decline to $243.1-million, down $4.5-million from a year earlier. The company has been engaged in a bitter lockout with employees at Le Journal de Montréal, which has become a controversial symbol of Quebecor's attempts to cut costs and revive its news division.