SPEECH BY LOUIS AUDET PRESIDENT AND CHIEF EXECUTIVE OFFICER OF COGECO LUNCHEON SPEECH TO THE CANADIAN CLUB OF MONTRÉAL
SPEECH BY LOUIS AUDET
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF COGECO
LUNCHEON SPEECH TO THE CANADIAN CLUB OF MONTRÉAL
WEDNESDAY, SEPTEMBER 26, 2012
Mr. Chairman of the Canadian Club,
Distinguished guests,
Dear friends,
Hello.
It is a pleasure for me to speak to you today about the outlook for Cogeco’s development. I
thank the Canadian Club for offering me this opportunity to join the long and distinguished list of
some 2,000 speakers who have addressed this forum over the last 100 years, sharing their
business or personal visions for the future of Canada, Québec and Montréal.
So it is Cogeco’s perspective that I am sharing with you today. Cogeco is the company
established 55 years ago by Henri Audet, our founder and President Emeritus, based on his
vision of the importance of communications for our community and its development. This
importance grows, and is reconfirmed, with each new technological advancement. These
advancements continue to derive their power from Moore’s law, so often mentioned and still so
relevant.
***
Firstly, I cannot ignore the debate that has engaged our industry and which the media have
amply covered during the last few weeks. I am, of course, referring to the public hearings held
by the CRTC in Montreal regarding the proposed acquisition by Bell of Astral Media. Cogeco
has participated in these hearings to strongly oppose this transaction.
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We have conclusively demonstrated that the Bell-Astral merger would create a level of media
concentration without precedent in Canada and would sadly position our country in second
place in the G-8 in that regard. The resulting entity would dominate television, radio and new
media, throughout Canada, in both official languages and on all platforms, whether fixed or
mobile.
We feel it is contrary to the interests of consumers, of the industry as a whole and of our
company to allow the creation of a giant such as this that can pull every string at once and
impose its own rules.
Like the great majority of players in our industry, as well as consumer protection groups and
more than 70,000 Canadian consumers who have expressed themselves clearly, we feel the
CRTC and the Commissioner of Competition must say no to this planned acquisition, in the best
interests of the Canadian broadcasting system and that of the entire communications industry,
as well as for the sake of competition and of Canadian consumers.
***
But I am here to talk to you today about Cogeco and about its birth, its growth and its plans. I
will be talking to you about a company that has been growing discreetly for more than 50 years ,
driven by a vision of prosperity built on values of excellence.
Allow me to draw you a picture of what it is that concerns us, the ways in which we support our
customers and the growth opportunities we foresee. To gain a better understanding of where we
are headed, I remind you of the guiding principles of our daily existence and our development,
in short, values consisting of dedication to customers, teamwork, innovation, respect and
integrity.
These values are like the five fingers on the hands we extend to serve a customer, to greet a
new employee or to create close links with the communities where we have a presence.
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Strong and proud of these principles, our company has experienced almost uninterrupted
growth, whether the economic climate has been favourable or stormy. Our history has been
marked by about 40 acquisitions, making Cogeco an integrated and future-focused
communications group. These acquisitions, combined with our internal growth strategy, have
enabled us to grow from $20 million in annual revenues at the time of our initial public offering in
1985 to $1.5 billion in projected revenues for fiscal 2013, resulting in a forecast EBITDA of $615
million.
Today, our largest business segment is that of cable distribution which allows the provision of
triple-play services – video, Internet and telephony – through state-of-the-art broadband
networks covering more than 1.6 million households and small- and medium-sized businesses
in Québec and Ontario.
To reach this level, we tripled our customer base in 1987 with the acquisition of Cablestrie. In
1990, we became a national company, doubling our customer base with the acquisition of
CyberMedix. In 1996, we succeeded again at doubling our customer base through the
acquisition from Rogers of 25 networks serving 300,000 customers in Ontario, more specifically
in the Golden Horseshoe. And there have been many more since!
What really matters for our customers is that we offer fully featured services and that we react
quickly to their queries. This is an area where we excel, having been named by Service Quality
Measurement Group, the best service provider in the North American Telecom-Television sector
for four of the last five years!
Back in 1995, Cogeco Cable became the first company in Canada to offer the Internet via cable!
Later, together with the other industry members, we were able to provide telephone service at
competitive prices. Since August, we have been offering central digital recording, connecting all
home televisions and allowing content to be recorded or watched from any of them. Our
customers now benefit from the highest Internet speeds in the cities we serve, with downloading
speeds of up to 60 Mbps. With current projects by CableLabs, of which we are a member, we
are expecting up to 1 Gbps in the near future! We currently have 870,000 video customers in
Canada, 72% of whom subscribe to our Internet service and 53% our telephone service, and
89% of them have converted to digital.
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We are currently moving toward the IPTV distribution model, with all the possibilities for
personalization this offers.
Using this same network, we can reach about 175,000 small and medium-sized businesses.
This is a major market we began serving five years ago, with penetration still gaining speed.
With dedicated point-to-point fibre links, multi-line telephone service, virtual PBX, unique lines
and multiple Internet servers, this market offers enormous development potential for us.
***
One of Cogeco Cable’s subsidiaries is called Cogeco Data Services. It was created in 2008
following the purchase from Toronto Hydro of the all-fibre optic network serving Toronto’s
financial centre. Next we acquired MTO Telecom, a fibre network operator serving the entire
Island of Montréal, as well as portions of Laval and the South Shore.
This enables us to provide data transport services to every large company in Montréal and
Toronto. These capacities are in addition to the extensive local fibre networks in the cities we
already serve and the continuous intercity fibre network we own between Windsor and the Gulf
of St. Lawrence.
In 2011, we acquired QuietTouch, a company specialized in data hosting in Toronto, to further
reinforce the kernel of expertise we had started to develop internally within Cogeco Data
Services. Such that today, with 100,000 square feet of data hosting space on offer in Toronto,
we are in a position to satisfy the most demanding of customers with data transport, data
hosting and managed services for large-enterprise customers.
Let me pause here to talk about the phenomenal growth occurring in the data hosting and
managed services market.
Due to increasing complexity in the IT industry, the advent of new technology and sensitivity to
significant capital costs, data centre outsourcing is a consideration for many IT leaders in
businesses today. The global market for outsourcing providers continues to grow, and the
Canadian market in particular is expected to see the highest growth in the next few years.
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The Canadian market for data centre services, which includes services outsourced to Cogeco
Data’s data centres, grew to $893.5 million in 2011, an increase of 8% over the previous year.
This steady growth is in part attributable to Canada’s largest regional markets – Montréal and
Toronto – where demand is strong, as well as the continued growth in managed services.
Furthermore, Cogeco Data Services is now the sole Internet service provider for all five public
school boards on the Island of Montréal (approximately 500 schools). In addition, Cogeco Data
Services is also the provider of voice service to two of these school boards – Pointe-de-l'Île et
Marguerite-Bourgeoys – totalling approximately 200 schools. Cogeco Data Services is also the
data transporter chosen by the Toronto District School Board, the Toronto District Catholic
School Board and the City of Toronto itself, which in total represent about 1,200 sites.
With this in mind, Cogeco Data Services takes great pride today in announcing that it will open a
new ultramodern data hosting centre on the island of Montréal in spring 2014, covering about
100,000 square feet in area. Our analyses show that this addition will be well received by
customers.
Cogeco is firmly committed to opening a new chapter in the telecommunications technology
revolution. The emphasis today is on mobility and multiple platforms. This transformation in the
use of technology has led to the phenomenon of cloud computing, in which Cogeco Data
Services is a dominant player. In other words, data are no longer stored on the hard drives of
our computers but in immense libraries remotely accessible on a range of platforms, both wired
and wireless.
In this new context, data hosting is likely to become the next cornerstone of the
telecommunications industry. And Cogeco Data Services is, and will be, a top choice in meeting
this need.
I am going to pause now as we watch an excerpt from a document introducing Cogeco Data
Services’ offering to our customers.
***
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Turning now to radio, Cogeco has more than 25 years of solid expertise, and our initiatives in
this area are bearing fruit at the 13 stations we own, all in Québec.
In Montréal, our stations 98,5 FM and Rythme FM are both number one in their respective
categories, one being talk radio and the other, music radio. Our English-language station, 92.5
The Beat, has seen excellent progress, especially among female listeners. FM 93 and 102,9 FM
in Québec City are also among the top-rated stations. With the success of talk radio in Montréal
and Québec City, Cogeco Diffusion extended this niche to Trois-Rivières, Gatineau and
Sherbrooke in August, creating Québec’s largest private network of talk radio stations.
Our commitment to radio broadcasting has been extended with the creation of Cogeco
Nouvelles, which has quickly become Québec’s largest private radio news agency, serving 42
stations all across the province. Because we are among those who see radio as a public service
platform, we have also reached an agreement with the Québec ministry of transport to launch
Radio Circulation 730, Montréal’s only station totally dedicated to traffic information.
We are very proud of our radio presence and of the renowned personalities who team up with
us. Cogeco Diffusion, although second in terms of size, is now the leader in the radio market in
Québec.
I am going to pause again so that we can watch a brief presentation by Cogeco Diffusion and its
various commercial activities, including Cogeco Métromedia, our new company specializing in
transit system advertising and which has exclusive advertising rights on buses in several
Québec municipalities, including Montréal, as well as in the Montréal métro.
***
This past July, we announced the purchase of Atlantic Broadband, for $1.36 billion U.S. This
company serves 250,000 customers in the states of Pennsylvania, Maryland, Delaware, South
Carolina and Florida. This is a terrific opportunity for us. Let me explain why.
Atlantic Broadband is built on a well-constructed network, serving markets that are unlikely to
attract large competitors. Penetration rates at Atlantic Broadband are below comparable levels
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in the American industry. With our expertise, we see great opportunities to increase service
penetration.
In the longer term, when the time is right, the excellent management team at Atlantic
Broadband, supported by its core infrastructure, are well positioned to acquire other cable
systems in the United States, much the way Cogeco Cable has done in Canada from 1987 to
2001. Unlike in Canada, the U.S. market is still fragmented, which is another promising avenue
for growth in years to come.
***
My friends, my goal today was to discuss Cogeco, which, despite its outstanding performance,
remains one of the best-kept secrets in the Canadian telecommunications industry.
Over the years, Cogeco has grown to offer an array of services ranging from
telecommunications to information technologies. This makes Cogeco a strategic asset for any
company seeking to take on the challenge of enhancing its productivity. What matters is the
ability to provide efficient, innovative services such as data storage and exchange, and to
provide high-performance interconnectivity between us and the rest of the world. For our
residential customers, this service offering at the crossroads between IT and telecom means a
more pleasant and productive life — easily allowing for telecommuting, for instance.
For the last 55 years, Cogeco has been at the forefront of its industry, providing its customers
with top-quality services. I am very proud of this company and of all its skilled team members,
who work with unwavering passion. Together, we are perpetuating the values taught by our
founder, who every day had the humility to challenge himself. He also had the strength to
believe in his vision and the ability to inspire the same in his colleagues.
***
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I would like to take this opportunity to echo the comments reported in the Globe and Mail these
past few days and made by Melanie Aitken, who just last Friday left her position as
Commissioner of Competition. She has warned us against the creation of “national champions”
through the application of permissive regulations, because this is generally done at the expense
of Canadian consumers and is very harmful to the competitiveness and productivity of our
country. These comments come at a very opportune time. Of course, as stated later by John
Manley, President and Chief Executive Officer of the Canadian Council of Chief Executives, we
do wish to witness the emergence of Canadian players able to compete on the international
scene, and, by the way, that is what we wish for our own company, Cogeco, but may I add,
certainly not at the expense of creating or reinforcing domestic monopolies!
William Robson, President of the C.D. Howe Institute, further reflected that we would want size
to be a consequence of good performance, not the result of exploiting captive domestic
markets.
With regards to the disappearance of world-class Canadian players, a phenomenon that many
people lament, I think we must seriously question ourselves as a society. As long as players in
the financial field consider that the only factor that really counts for Canadian or Québec society
is getting the highest price in an IPO, we will miss out on what is essential in creating a strong
and just national society. After taking into account the wishes – should they exist - of controlling
shareholders, as to whether or not they should continue along the same path, it is up to citizens
like you and me to send clear messages to the managers of our investment and retirement
funds.
***
To conclude, I would like to briefly share with you the great pride felt by the extended Cogeco
family, and by the Audet family in particular, in playing a role in the economic and social
development of Canada and Québec. We have the great privilege of accomplishing this in a
cutting-edge sector, telecommunications. And we have the good fortune to have our head office
here in Montréal, where we are continuing to build a management team whose calibre we intend
to become world-class.
Thank you for continuing to encourage and support us.
I wish you a good day, and I thank you again!