Quebecor says newspaper sale not connected to wireless expansion

Quebecor Inc. says there is no connection between the $316-million proposed sale of its English-language newspapers to Postmedia Network Canada Corp. and its intention of expanding its mobile services across Canada. The company also said Monday that it is evaluating the “long-term viability” of its Sun News Network television channel, which is not part of the sale that includes its Sun-branded newspapers. Postmedia and Quebecor announced in news releases Monday that 175 of Sun Media's publications will become the property of Postmedia in exchange for a cash payment of $316 million, subject to adjustments such as a $10-million credit to Postmedia in relation to Sun Media properties sold before the closing of the transaction. Papers going to Postmedia in the proposed transaction include the Sun newspapers in Toronto, Ottawa, Winnipeg, Calgary and Edmonton, smaller-city dailies such as the London Free Press, as well as several weekly and specialty newspapers. Postmedia says it is the largest publisher of paid English newspapers in Canada by circulation. Its publications include the National Post, Montreal Gazette, Ottawa Citizen, Edmonton Journal, Calgary Herald and Vancouver Sun. Martin Tremblay, vice-president of public affairs for Quebecor, said in an email: "The sale of Sun Media's English newspapers and our intentions regarding wireless across Canada are not related. This sale is clearly motivated by the fact that the Canadian newspaper business absolutely needs consolidation to remain viable and to compete with digital media." In September, Quebecor announced it had sold consultancy business Nurun to France's Publicis Groupe SA for $125 million in cash. At the time, Tremblay said that sale had no relationship to Quebecor's wireless expansion plans, and that it was "consistent with our desire to focus all our activities on the four lines of business that define our mission of being the Canadian leader in telecommunications, news media and entertainment and culture." Last December, Quebecor sold 74 weekly newspapers in Quebec to Transcontinental Inc. for $75 million. Then in February, Quebecor spent $233.3 million on wireless spectrum licences in government's 700 MHz auction. It bought spectrum in its home market of Quebec, as well as Ontario, British Columbia and Alberta. Quebecor has repeatedly said a potential expansion of its wireless service across Canada depends on whether the federal government can regulate better terms for using other carriers' networks and towers. It's a message Quebecor reiterated last week at the CRTC's hearing on the wholesale wireless market. Barclays telecom analyst Phillip Huang said in a research note Monday that the newspaper sale provides Quebecor with "dry power for the wireless opportunity." "As we have written in the past, Quebecor currently faces the greatest growth opportunity and required investment in wireless," Huang said. "Quebecor's wireless business is at a crucial juncture." He added: "Perhaps a greater driver of capital requirement is the potential opportunity to expand the wireless business outside of Quebec, which may include acquiring a stake in smaller players (Wind and Mobilicity) and participation in the upcoming spectrum auctions (AWS-3, 2.5GHz, 600MHz). We believe management would prefer to keep its powder dry should all the right conditions fall into place for the company to pursue wireless expansion." RBC Dominion Securities analyst Drew McReynolds said in a research note that the newspaper sale gives Quebecor "additional balance sheet flexibility" in a few different regards, including taking its wireless service national, or purchasing the stakes it does not yet own in divisions such as Quebecor Media and TVA Group. When asked about the future of Sun News Network in the context of the Postmedia newspaper deal, Tremblay replied: "Regarding Sun News, we have already explained our concerns about its long-term viability and the importance to have fair distribution agreements with BDU's. On that specific matter, the CRTC released two decisions last week regarding distribution respectively by Rogers and Telus . We are presently studying the financial impacts of these decisions." Sun News was at an impasse in negotiations with both Rogers and Telus on carriage agreements, and subsequently went to arbitration before the CRTC. The regulator sided with Rogers and approved its proposal in that instance, though Sun News won the other arbitration case against Telus. Financial details were not outlined in either decision. The proposed newspaper sale needs approval by the Competition Bureau. Competition Commissioner John Pecman said in a news release Monday: "While media ownership concentration can raise other public interest concerns, under the Competition Act, the bureau's mandate is to review mergers exclusively to determine whether they are likely to result in a substantial lessening or prevention of competition." — With reporting by Derek Abma at dabma@thewirereport.ca and editing Anja Karadeglija at akarad@thewirereport.ca

Quebecor says newspaper sale not connected to wireless expansion

News | October 6, 2014

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Quebecor says newspaper sale not connected to wireless expansion

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