Chains share delivery service

Two of Canada’s largest newspaper chains are teaming up in a distribution agreement designed to cut costs amid declining advertising revenue.

MONTREAL — Two of Canada’s largest newspaper chains are teaming up in a distribution agreement designed to cut costs amid declining advertising revenue.

Quebecor Inc. (TSX:QBR.A, TSX:QBR.B) said Thursday it has signed an agreement with CanWest Global Communications (TSX:CGS) to distribute the Montreal-based company’s Sun Media papers in Toronto, Ottawa and Calgary.

“These agreements will result in significant savings in circulation costs,” Sun Media chief operating officer Yvan Gingras said during a conference call about second-quarter results.

Details of the accord, which could be expanded to other markets, including Quebec, were not provided. Less than 100 Quebecor employees will be affected by the move.

The agreement means one carrier will deliver competing newspapers. Routes were divided between the two companies ensuring neither abandoned a market.

Quebecor spokeswoman Isabelle Dessureault wouldn’t indicate how the deal materialized, but said management on both sides frequently discuss industry trends and concerns, chief among them, the economy.

There are no plans to expand the co-operation to printing or editorial content, although Dessureault said Quebecor is willing to print CanWest publications and sell its news and photo content.

She said the deal is focused for now only on distribution and the two companies are far away from any merger.

“It’s not what is going to save CanWest from bankruptcy.”

CanWest couldn’t be reached for comment.

While Winnipeg-based CanWest is struggling to survive its massive debt, Quebecor’s shares surged to their highest level in 10 months Thursday after it reported that second-quarter profit soared by more than a third.

The company’s shares rose 8.87 per cent, gaining $1.75 to close at $21.47 on the Toronto Stock Exchange. That’s the highest level since last October.

The Montreal-based media and telecommunications company reported net income of $76.8 million or $1.19 per share for the quarter ended June 30, up 33.6 per cent from year-earlier profits of $57.5 million or 90 cents per share.

Adjusted earnings from continuing operating activities, which exclude one-time items, climbed to $56.3 million or 88 cents per share from $41.5 million or 45 cents per share recorded during the corresponding quarter of 2008.

Quarterly revenues were relatively flat at $939.4 million, down 0.3 per cent from $942.3 million booked the year before.

Quebecor chief executive Pierre Karl Peladeau said he was pleased with Quebecor Media’s operating performance in the quarter, led by the strength of its Videotron cable service.

“Economic conditions continue to be challenging in our country but focused strategies and disciplined management of our subsidiaries resulted in increased profitability,” Peladeau told analysts.

Quebecor said its quarterly results were driven by a 28 per cent increase in operating income from its telecommunications division, which reported customer growth across all its services, although some at a slower pace than last year.

Jeffrey Fan of Scotia Capital said the results reflects the strongest growth within the Canadian cable industry.

“The subscription metrics don’t seem like their impacted by any of the moves that Bell (TSX:BCE) has done. So the outlook is very bright for them,” he said.

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