Cogeco Cable reports higher third quarter revenue, but lower profit

MONTREAL – Cogeco Cable (TSX:CCA) and its parent company Cogeco Inc. (TSX:CGO) are reporting higher revenue but lower profits for the third quarter.

The cable company made a profit of $35.5 million, or 73 cents per share, compared with $48.1 million, or 98 cents per share, in fiscal 2013. Revenue was $496.4 million, up from 464.4 million.

Revenue beat street estimates but profits were below what was expected.

For the parent company, third-quarter profit amounted to $35.6 million, or 69 cents per share, compared to profit of $50.0 million, or $1.03 per share, in the year-ago quarter. Revenue was $536 million, up from $504.4 million.

Cogeco Cable had an impairment of $32.2 million related to an Internet Protocol Television solution project on which its Canadian cable services segment had worked.

Cogeco Cable paid a quarterly dividend of 30 cents to the holders of subordinate and multiple voting shares, an increase from 26 cents per share in the third quarter of fiscal 2013. The parent company paid a dividend of 22 cents per share, up from 19 cents in the year ago quarter.

Analysts generally expected Cogeco Cable’s results for the March-May quarter would be in line with the second quarter ended Feb. 28. Earnings were estimated at $1.23 per diluted share and revenue was expected at $488.7 million, according to date compiled by Thomson Reuters.

In the second quarter, Cogeco Cable had a profit of $60.3 million, or $1.23 a diluted share, and $486 million in revenue. Its parent company also owns a Quebec-based media business but generates most of its revenue and profit through the cable division.

Over the past few months, Cogeco Cable has been rolling out enhanced high-speed Internet service in some of the communities it serves in Ontario and Quebec. The enhancements included faster versions of existing packages and the launch of a new, even faster service that claims download speeds of up to 120 million bits per second.

In Magog, Que., about 130 kilometres east of Montreal, Cogeco Cable launched a free public WiFi service along two streets in the downtown area. It was described as a pilot project for the community of about 26,500 residents, which has a vision of becoming one of the province’s first “smart” cities.

A similar strategy has been undertaken in Calgary with Shaw Cable (TSX:SJR.B), which has decided against investing in a conventional wireless service — which would require federal licences — in favour of free WiFi in public places for its customers in several communities throughout Alberta.

In April, when Cogeco Cable and its parent issued their results for the second quarter ended Feb. 28, president and CEO Louis Audet said the Montreal-based companies would attempt to avoid discounts to keep television customers from switching to a rival service offered by BCE Inc.’s Bell.

Canada’s large telephone companies, such as Bell, Bell Aliant (TSX:BA), Telus (TSX:T) and Manitoba Telecom (TSX:MBT), have been winning over thousands of cable subscribers for the past several years by offering fibre-optic television service in addition to conventional phone, mobile phone and Internet.