Cogeco’s U.S. cable prospects more promising: Barclays

Cogeco Inc. can look to cable in the United States to see sustained growth compared to a harsher cable market in Canada, according to Barclays Capital analyst Phillip Huang. “Relative to Canadian cable, we believe growth in US cable is much more sustainable, driven by share gains and strong pricing power against limited competition for the foreseeable future,” Huang wrote in a Monday note. Last week, Cogeco purchased the remaining MetroCast assets — it bought the Connecticut operation in 2015 — of Harron Communications LP in the U.S. for $1.4 billion. The deal includes 120,000 Internet, 76,000 video and 37,000 phone subscribers. After it was announced, analysts noted the deal was positive partly because it positioned Cogeco to expand in an underpenetrated market with limited fibre-to-the-home (FTTH) competition. The newly acquired assets are in the states of New Hampshire, Maine, Pennsylvania, Maryland, and Virginia. On a third quarter conference call with analysts Friday, president and CEO Louis Audet pointed to the “booming” residential conditions in its operating territories, such as Miami, as an example of the positive growth opportunities in U.S. cable. In contrast, Huang noted Monday that Cogeco’s Canadian business is in the “most vulnerable competitive position in our telecom coverage universe and will face growing disadvantages” competing against scale players like BCE Inc. He added that despite Bell having yet to deploy fibre in Cogeco’s footprint, it plans to do so in such Ontario markets as Oakville and Hamilton, “which will inevitably erode the company’s market share, pricing power, and its current 53% margin.” Additionally, seeing as it doesn’t have a wireless business, Huang noted that the company is the only cable operator in the country that “does not have the ability to compete on quad-play in its territory.” Huang added management “should focus on supporting US cable growth by redeploying capital from the struggling Enterprise segment (i.e. sell the assets entirely).”

Cogeco’s U.S. cable prospects more promising: Barclays

Brief | July 17, 2017

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Cogeco’s U.S. cable prospects more promising: Barclays

Brief | July 17, 2017

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