MONTREAL — Quebecor Inc. is stepping up its competitive stance in the telecom and media sectors as it pushes ahead with a new wireless business and the launch of a 24-hour English news channel early next year.
“Obviously, the next big thing is our new wireless launch,” CEO Pierre Karl Peladeau said Wednesday, after the company reported its second quarter earnings.
“This new fourth pillar of our telecom operation, combined with our very successful convergence strategy, is positioning our company to a new growth segment, which will permit our company to deliver outstanding results.”
About 95 per cent of Quebecor’s advanced wireless network has been completed in anticipation of the late summer launch, Peladeau told a conference call.
He said he expects the cellphone market to be highly competitive with established wireless players like Bell (TSX:BCE). The two rivals are already competing for TV, Internet and home phone subscribers in Quebec.
As for the English-language Sun TV news channel, Peladeau said the CRTC is currently reviewing its licence application and the launch is expected in the first quarter of next year. Quebecor already has a French language all-news channel.
Peladeau said his company is “migrating” from a newspaper company to a multimedia company that distributes content on multiple platforms. He noted the company has already seen some success sharing content among its TV stations and print publications.
Quebecor said profits dropped during the quarter ended June 30 as it faced higher expenses.
The Montreal-based newspaper publisher, broadcaster and cable TV operator posted net income of $65.5 million for the quarter, a decrease from $76.8 million in the comparable period a year ago.
On a per share basis that’s $1 versus $1.19 a share in the same time last year.
Quebecor said it booked a series of higher expenses in the period, including a $31.2 million increase in income taxes and $16.7 million on valuation and financial instruments expenses.
Revenue increased five per cent to $994 million from $946.4 million a year ago.
The telecom division, which includes the Videotron cable TV, Internet and phone business, saw a $55.7-million increase in revenue, while at the news media segment, which operates the Sun newspaper chain and other publications, revenue fell about $4.3 million.
Peladeau said Videotron cable lost 4,000 cable TV subscribers in the quarter, its first negative TV subscriber growth in many quarters.
“This year we experienced 13 per cent more residential moves than the previous year, resulting in our first negative TV subscriber growth over the last 20 quarters as well as a slower growth in all of our services.”
UBS analyst Phillip Huang described Quebecor’s results as “financials strong, subscribers light” in a research note.
Huang said overall financial results were better than expected but noted that he had expected 4,000 net new cable TV subscribers, not a loss.
The conference call was later told it took only five days to recover the net customers losses as a result of the June 30 moving day, specific to Quebec.
Huang had estimated an increase of 18,000 Internet subscribers for the quarter, while Videotron posted 10,000 and also estimated 36,000 phone customers rather than Videotron’s 22,000.
Videotron’s penetration now stands at 69 per cent of the market, compared with 68 per cent last year, the company said.
Quebecor’s broadcasting unit, which operates the TVA network in Quebec, saw revenue fall by $4.5 million.
Peladeau said operating costs were down $8 million, or four per cent, in the quarter and $22 million to date with most of the savings coming from salaries and benefits.
About 250 editorial staff at Quebecor’s flagship newspaper, Le Journal de Montreal, have been locked out since January 2009 in a labour dispute.
Peladeau noted TV advertising was hurt somewhat by the Vancouver Winter Olympics and viewership suffered due to hockey fans watching the Montreal Canadiens playoff efforts last spring.
Shares in Quebecor were down almost four per cent, or $1.36, at $32.90 in afternoon trading Wednesday on the Toronto Stock Exchange.