Frederic Perron, the new CEO of Cogeco, took over from Philippe Jetté earlier this year.Andrej Ivanov/The Globe and Mail
Roughly four months into his tenure as president and chief executive officer of Cogeco, Frédéric Perron faces a daunting task: finding opportunities for profitable, sustainable growth in a sluggish industry.
Canadian telecom shares have been under pressure for months as a slew of headwinds – including heightened competition, lower levels of immigration and the continued decline of cable TV – weigh on their growth prospects.
But Mr. Perron, who took over from Philippe Jetté as the head of Cogeco Inc. CGO-T and Cogeco Communications Inc. earlier this year, is bullish, not only about the sector but also about his company’s position within it.
“I’ve seen this movie before, and it does pass,” said Mr. Perron, who has worked at telecoms in five different countries, including holding executive roles at Vodafone in Britain and the Czech Republic and leading T-Mobile’s consumer business in Poland.
“Typically what happens is prices stabilize at a new level that customers are comfortable with, and you’ve got a new platform for growth. And at the end of the day, what we sell is a product that customers very much want,” he told The Globe during an interview Monday.
Montreal-based Cogeco and its Cogeco Communications subsidiary, which sells internet, video and phone services in Canada and in parts of the United States, have seen their stock prices decline over the past three years. Shares of Cogeco Communications, the more widely held stock, were trading at $55.50 on Monday afternoon, roughly half of what they were worth in the summer of 2021.
That’s significantly below the unsolicited offer that Rogers Communications Inc. RCI-B-T and New York-based cable company Altice USA Inc. ATUS-N had made to Cogeco’s shareholders in the fall of 2020. The offer, which would have paid $123 per share of Cogeco and $150 per share of Cogeco Communications, was rejected by the Audet family, which controls the Cogeco companies through a dual share structure. (Rogers, a long-time Cogeco shareholder, dumped its entire stake in the companies late last year, allowing Cogeco to buy back some shares.)
“It shouldn’t be too surprising that the board and Audet family are dissatisfied with the share performance/valuation,” Veritas analyst Desmond Lau said a research note.
Some of the factors that affect telecoms’ share prices, such as interest rates, are beyond Cogeco’s control. But Mr. Perron believes that if Cogeco can deliver sustainable growth in revenue, EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow, the stock price will follow.
That growth will be organic rather than through acquisitions, the CEO said. After a buying spree that included snapping up an Ohio-based broadband network from WideOpenWest Inc. for US$1.1-billion in 2021, Cogeco is putting a pause on large acquisitions, and may even be open to selling some of its U.S. assets “if it makes sense strategically, operationally and financially,” Mr. Perron said.
During Cogeco’s recent earnings call, Mr. Perron laid out his five-step plan for creating shareholder value. The first, which is already under way, is to achieve synergies by combining the company’s Canadian and U.S. operations.
The new structure, which the company announced in late May, will result in some head count reductions, particularly in the management ranks, Mr. Perron told The Globe. But the company is creating new roles as well, and expects to see improved performance by combining best practices from both markets: “There are some things that our U.S. team is excellent at, and there are some things that our Canadian team is excellent at. So making sure that we become excellent at everything everywhere is part of what we call synergies,” Mr. Perron explained.
Mr. Perron sees an opportunity to trim costs and improve customer satisfaction by conducting more of Cogeco’s sales and customer service online.Andrej Ivanov/The Globe and Mail
He also sees an opportunity to trim costs and improve customer satisfaction by conducting more of Cogeco’s sales and customer service online. The company’s chatbot, Charlie, has exceeded expectations south of the border and will be deployed in Canada in the coming weeks, Mr. Perron said.
Cogeco’s third priority is to hire more data scientists so that it become more sophisticated in its efforts to attract and retain customers.
Finally, the company will continue carefully expanding its network into rural areas, using government subsidies whenever possible, and push wireless service as part of a bundle to customers that subscribe to its internet or cable TV services.
Wireless is a new area for Cogeco. The company recently launched cellphone service in the U.S. by striking a deal to piggyback on AT&T’s network. Bundling is important for telecoms because it helps them attract and retain customers, Mr. Perron said. “As the industry matures, you see bundles being more and more prevalent the same way Canadians are used to buying a lot of their financial products from the same bank.”
In Canada, Cogeco is still working to negotiate access to the large wireless carriers’ networks under the CRTC’s mobile virtual network operator, or MVNO, regime. (In 2021, after a lengthy review, the telecom regulator ruled that Rogers, BCE Inc., Telus Corp. and SaskTel must sell wireless network access to eligible regional competitors who commit to building out their own infrastructure.) Mr. Perron said he’s “encouraged by how the discussions are evolving.”
And while Cogeco faces competition from much larger rivals, Mr. Perron is optimistic, portraying it as an advantageous position.
“I’m really happy to be a mid-sized player who hasn’t fully penetrated in wireless yet, who’s in both countries, because it gives us a lot of runway still,” he said.