Cogeco Cable values service over price to keep TV customers

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MONTREAL – Despite fierce competition for TV customers, Cogeco Cable will keep its focus on service over price cuts to keep its customers, said CEO Louis Audet.

The company, which operates in parts of Ontario and Quebec, prefers to compete by adjusting customers’ packages to their needs, Audet said Thursday, the day after Cogeco Cable and parent Company Cogeco Inc. reporter higher quarterly profits.

Bell’s Fibe TV service is Cogeco’s most aggressive competitor on price, he said in an interview.

“We don’t like competing on price,” Audet said. “I’m not saying it’s zero, but we really don’t like competing on price.”

Audet said Cogeco will contact customers it believes will be “tempted” to leave, offering what he believes is better customer service.

“It’s a right-sizing exercise. Maybe the person wants a little less video, but they want higher Internet speeds.”

Cogeco Cable lost 10,305 cable subscribers in its second quarter compared with additions of just more than 6,000 in the same quarter last year. The company has a total of 1.96 million Canadian TV customers.

Cogeco competes with Quebec’s Videotron (TSX:QBR.B) and Toronto-based Rogers (TSX:RCI.) in addition to Bell’s Internet-based Fibe TV.

In addition to price competition, TV providers also are dealing with consumers who are watching television either online or with digital antennas.

The Convergence Consulting Group has estimated that traditional TV service providers — cable, telecom, satellite and IPTV — are facing negative subscriber growth this year as viewers find alternatives and the market matures. Toronto-based Convergence has estimated that Canadian TV service providers combined will lose a total of 32,000 subscribers overall in 2014.

Audet also said Cogeco has felt the impact of consumers hanging up on traditional telephone service and is becoming a “victim” of wireless substitution. It’s mostly young people and couples without children who are relying on mobile phones instead of traditional phones in their homes, he said.

The company lost almost 6,000 telephone customers in the quarter compared with additions of 5,550 in the same quarter last year. It had more than 473,000 residential phone customers.

Cogeco isn’t in the mobile phone business but Audet said Cogeco could consider it, depending on the outcome of a government review of how much big carriers such as Bell, Rogers and Telus (TSX:T) charge smaller rivals for using their networks.

Audet made the remarks a day after parent company Cogeco Inc. (TSX:CGO) and subsidiary Cogeco Cable (TSX:CCA) both reported increased revenue and profits in the second quarter.

Cogeco says it made a profit of $58.5 million, or $1.03 a diluted share, up from $48.9 million, or 87 cents a diluted share, during the same quarter a year ago. Revenue rose to $518.4 million from $458.5 million.

Meanwhile, Cogeco Cable reports a profit of $60.3 million, or $1.23 a diluted share, compared with $50.8 million, or $1.04 a diluted share, in the year-ago period. Revenue came in at $486 million, up from $429.6 million.

Also on Thursday Cable and media company Shaw Communications Inc. (TSX:SJR.B) posted higher net income of $222 million in the second quarter, as it benefited from the sale of two French-language channels.

The earnings, which amounted to 46 cents per share for the three month period ended Feb. 28, compared with net income of $182 million, or 38 cents per share, in the same quarter a year earlier.

The Calgary-based company reported that its revenue edged up two per cent to $1.27 billion, from $1.25 billion a year earlier.

Shaw said it recorded a $49-million gain in the quarter after it sold its 50 per cent interest in Historia and Series+ to Corus Entertainment. The deal closed on Jan. 1. During this period, the company also sold its 49 per cent stake in ABC Spark to Corus, and purchased a 20 per cent interest in Food Network Canada.

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