'Mouton noir' of Quebec TV needs a white knight by Peter Hadekel
Source : Montreal Gazette
December 19, 2007
Cogeco Inc. chief executive Louis Audet has been looking for ways to break out of the mid-sized niche his communications company is stuck in.
But life keeps getting in the way.
Yesterday, Audet and minority partner CTVglobemedia took the drastic step up of placing their jointly owned television network TQS under protection from creditors for 30 days.
Audet had hired investment dealer CIBC World Markets to look at strategic alternatives for the TV network, which includes five directly owned stations and seven affiliates.
The verdict? No mas.
Protection from creditors is a last-ditch attempt to find a solution and stem losses that have eaten through about $80 million of Cogeco's capital - all written down to zero.
In essence, it marks Cogeco's exit from the conventional television business, Audet said. The clear hope is that another buyer will step up and take TQS off his hands.
If not, the network that calls itself the "mouton noir" of Quebec TV might shut down.
It's certainly a black mark against the once-vaunted strategy of convergence that many communications companies have pursued.
For a cable operator like Cogeco, which became the majority shareholder in TQS in 2000, the idea was to own not only the pipes that deliver programming, but the content, too.
TQS offered access to a dozen local markets in Quebec, and the chance to be a major player in both advertising and programming.
But it hasn't been a winning play, as BCE Inc. found out when it bought the CTV network and then was forced to beat a retreat.
Problems at TQS have been building for a long time - indeed, the network has never made money since its inception in 1986.
It has faced a badly fragmented advertising market, which has grown worse since the arrival of specialty channels and competition from the Internet.
Yesterday, Audet went out of his way to blame the network's downfall on federally-owned Radio Canada and broadcasting regulators at the Canadian Radio-television Commission.
Société Radio Canada has been acting more like a commercial operator than a public broadcaster, he complained. It's been driving up acquisition costs for everyone else by paying top dollar for commercial programming, he alleged.
SRC recently revoked an agreement that allowed TQS to share antenna time at three stations, in Sherbrooke, Trois Rivières and Saguenay - a move that would take effect in the spring of 2009. That seems to have been the last nail in the coffin.
As for the CRTC, it refused to grant general interest television networks like TQS the same ability to charge subscriber fees for signal distribution as specialty networks, he noted.
Yet as painful as this is for the owners and employees of TQS, Audet has clearly turned the page. The writeoff is not the end of the world for Cogeco, which topped $1 billion in revenue in fiscal 2007 and turned a $74.7-million profit.
The future is definitely not in conventional television, especially in the struggling franco-phone market.
Cogeco is pursuing much better prospects, like getting its cable customers to become telephone subscribers as well. Efforts to market its triple play - cable, TV and high-speed Internet - have done better than expected.
Audet's ambitions have bumped up against the reality that in cable, the Canadian market offers no room to grow unless you buy someone else's franchise.
Cogeco Cable plays second fiddle to Vidéotron in Quebec and to Rogers in Ontario, not exactly a position of strength from which to deal.
But Audet's response has been to look to Europe. He leapt across the Atlantic in 2006 and scooped up Portugal's second-largest cable provider, Cabovisao, for $660 million.
At the time, investors saw it as a desperate move and beat down the share price of both Cogeco Cable Inc. and parent Cogeco.
Since then, however, shares of both have rebounded nicely as the Portuguese market has posted strong growth,
Yesterday, Audet said Cogeco is in a position to spend between 500 million and one billion euros on another acquisition in Europe.
That might make shareholders forget the unfortunate misadventure at TQS.
© Montreal Gazette
But life keeps getting in the way.
Yesterday, Audet and minority partner CTVglobemedia took the drastic step up of placing their jointly owned television network TQS under protection from creditors for 30 days.
Audet had hired investment dealer CIBC World Markets to look at strategic alternatives for the TV network, which includes five directly owned stations and seven affiliates.
The verdict? No mas.
Protection from creditors is a last-ditch attempt to find a solution and stem losses that have eaten through about $80 million of Cogeco's capital - all written down to zero.
In essence, it marks Cogeco's exit from the conventional television business, Audet said. The clear hope is that another buyer will step up and take TQS off his hands.
If not, the network that calls itself the "mouton noir" of Quebec TV might shut down.
It's certainly a black mark against the once-vaunted strategy of convergence that many communications companies have pursued.
For a cable operator like Cogeco, which became the majority shareholder in TQS in 2000, the idea was to own not only the pipes that deliver programming, but the content, too.
TQS offered access to a dozen local markets in Quebec, and the chance to be a major player in both advertising and programming.
But it hasn't been a winning play, as BCE Inc. found out when it bought the CTV network and then was forced to beat a retreat.
Problems at TQS have been building for a long time - indeed, the network has never made money since its inception in 1986.
It has faced a badly fragmented advertising market, which has grown worse since the arrival of specialty channels and competition from the Internet.
Yesterday, Audet went out of his way to blame the network's downfall on federally-owned Radio Canada and broadcasting regulators at the Canadian Radio-television Commission.
Société Radio Canada has been acting more like a commercial operator than a public broadcaster, he complained. It's been driving up acquisition costs for everyone else by paying top dollar for commercial programming, he alleged.
SRC recently revoked an agreement that allowed TQS to share antenna time at three stations, in Sherbrooke, Trois Rivières and Saguenay - a move that would take effect in the spring of 2009. That seems to have been the last nail in the coffin.
As for the CRTC, it refused to grant general interest television networks like TQS the same ability to charge subscriber fees for signal distribution as specialty networks, he noted.
Yet as painful as this is for the owners and employees of TQS, Audet has clearly turned the page. The writeoff is not the end of the world for Cogeco, which topped $1 billion in revenue in fiscal 2007 and turned a $74.7-million profit.
The future is definitely not in conventional television, especially in the struggling franco-phone market.
Cogeco is pursuing much better prospects, like getting its cable customers to become telephone subscribers as well. Efforts to market its triple play - cable, TV and high-speed Internet - have done better than expected.
Audet's ambitions have bumped up against the reality that in cable, the Canadian market offers no room to grow unless you buy someone else's franchise.
Cogeco Cable plays second fiddle to Vidéotron in Quebec and to Rogers in Ontario, not exactly a position of strength from which to deal.
But Audet's response has been to look to Europe. He leapt across the Atlantic in 2006 and scooped up Portugal's second-largest cable provider, Cabovisao, for $660 million.
At the time, investors saw it as a desperate move and beat down the share price of both Cogeco Cable Inc. and parent Cogeco.
Since then, however, shares of both have rebounded nicely as the Portuguese market has posted strong growth,
Yesterday, Audet said Cogeco is in a position to spend between 500 million and one billion euros on another acquisition in Europe.
That might make shareholders forget the unfortunate misadventure at TQS.
© Montreal Gazette
