Quebecor says it doesn't want to repeat struggles of other wireless companies

MONTREAL – Quebecor Inc. (TSX:QBR.B) has taken note of the competitive landscape and plans to proceed with caution in building its wireless business outside of Quebec.

“We are obviously well aware that some have tried to compete in the past in the Canadian wireless business and have struggled,” CEO Robert Depatie told analysts on a conference call Thursday.

The Quebec company recently bought wireless spectrum in Ontario, Alberta and British Columbia for $233 million, opening an opportunity for it to expand beyond its provincial borders to become a major wireless carrier after Rogers (TSX:RCI.B), Telus (TSX:T) and Bell (TSX:BCE).

Industry Minister James Moore told reporters when the results of the airwaves auction were released in February that he expected Quebecor to become Canada’s fourth carrier.

New wireless players Public Mobile, Wind Mobile and Mobilicity were launched in recent years in the hopes of making inroads against the Big Three. But Public Mobile was bought last fall by Telus, Wind Mobile is up for sale and Mobilicity is under creditor protection and also up for sale.

“Repeating that history is not in our plans,” Depatie said. “… All of our energies in the next few months will be spent at determining whether the right conditions could be implemented before we deploy additional resources in such a venture. To wait and see is also an option.”

Quebecor’s Videotron launched its wireless service in 2010 in Quebec and has about 500,000 customers.

This week’s announcement that owner Pierre Karl Peladeau is a candidate for the pro-independence Parti Quebecois in the April 7 provincial election may also impact expansion plans, said Canaccord Genuity analyst Dvai Ghose.

“We wonder how much the federal government can assist Videotron’s wireless potential national expansion when its controlling shareholder is an avowed Quebec separatist,” Ghose wrote in a research note.

Quebecor said that Peladeau, who stepped down as CEO a year ago, has resigned from all positions with the company — including as chairman of the Quebecor board, Quebecor Media board and of subsidiary TVA Group — since his announcement.

It’s expected that Peladeau, if elected, will be required by the province’s ethics commissioner to put his shares in Quebecor in a blind trust.

Quebecor owns the province’s most-read tabloid newspaper and its most-watched TV network. It also operates a 24-hour news TV channel and Videotron, Canada’s third-largest cable services provider.

In its financial results, Quebecor Inc. reported $62.5 million of net income in the fourth quarter, up from $6.2 million a year earlier, as the company cut expenses in its news media operations and signed a deal with Rogers for the French-language broadcast rights for NHL games in Canada.

Net earnings attributable to shareholders was $43.4 million, or 35 cents per basic share, for the three months ended Dec. 31, versus $7.1 million or six cents in the same year-earlier period.

Adjusted earnings from continuing operations came in at $68 million, or 55 cents per basic share, for the fourth quarter, compared with $52.3 million, or 42 cents per basic share, in the same period of 2012. Revenues for the quarter remained relatively flat, up 0.5 per cent at $1.12 billion.

Analysts’ estimates compiled by Thomson Reuters had called for 53 cents of adjusted earnings on $1.15 billion in revenues.

Quebecor said that its fourth quarter benefited from a $66.5 million favourable variance in losses and gains on valuations and translations of financial instruments. It also saw an $8 million drop in financial expenses and an $8.7-million favourable variance in losses on debt refinancing.

Quebecor said the gains were partially offset by a $15.3-million unfavourable variance charge for restructuring its operations, impairment of assets and other special items, and a $3.2 million increase in amortization charges.

On the Toronto Stock Exchange, Quebecor shares closed down 15 cent at $24.79 on Thursday.