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Quebecor reviewing part of wireless expansion plans following CRTC ruling, CEO says

Quebecor Inc. chief executive Pierre Karl Péladeau is blaming the federal telecommunications regulator as his company reconsiders part of its mobile expansion plans.
Quebecor headquarters is seen on Thursday, May 11, 2023 in Montreal. THE CANADIAN PRESS/Christinne Muschi

Quebecor Inc. chief executive Pierre Karl Péladeau is blaming the federal telecommunications regulator as his company reconsiders part of its mobile expansion plans.

Péladeau also took aim at industry rivals on Thursdayat the company's annual general meeting.

"We are willing to do what it takes to be a market disrupter, but for us to continue playing our role as a strong fourth player, the constant obstruction from the Big Three to all forms of competition must stop," Péladeau said in French.

"The incumbents will do anything to protect their monopoly for as long as possible in defiance of government policy."

Quebecor's "transformative" 2023 financial year — which saw its Videotron subsidiary complete its $2.85-billion acquisition of Freedom Mobile and unveil 5G plans for the carrier — positions the company to compete nationally, according to the CEO.

Péladeau touted plans to expand Quebecor's 5G networks in the coming years. In the meantime, he said, the company is taking advantage of the mobile virtual network operator (MVNO) framework put in place by the CRTC, which allows telecoms to offer cellphone service through rival carriers’ networks.

The rules are meant to increase cellphone competition by giving regional carriers a presence in regions they did not previously serve, with requirements to build their own networks in those areas within seven years.

But last month, the CRTC sided with Telus Corp. in an arbitration hearing regarding the rates Quebecor should pay to offer data to customers while using Telus' network. The commission said Telus' proposed MVNO rates would best encourage competition and investment.

"This decision will force us to review our wireless offerings and the launch of our services in some areas of Canada in view of the excessive operating costs that this will entail," Péladeau said Thursday.

He urged the regulator to "allow us to compete on a level playing field with the incumbent oligopoly regardless of market conditions."

"In order to continue offering innovative products at better prices, we need measures that are better suited to the current environment."

The CRTC earlier ruled in separate arbitration proceedings about MVNO data rates involving Quebecor and both Rogers Communications Inc. and BCE Inc. It ruled in Quebecor's favour over Rogers but sided with Bell's parent company in the other case. 

Péladeau said Quebecor's acquisition of Freedom Mobile in April 2023 "marked a major turning point for our corporation and was the springboard for our expansion across Canada."

Following the merger, Freedom announced it would offer a $50 monthly plan, its first with national coverage, that includes unlimited calls and texts as well as 40 gigabytes of data usable throughout Canada and the U.S. The carrier then added 5G capability for customers with plans that cost $45 per month or more in certain markets, saying more rollouts were in the works.

Quebecor also announced last month its discount brand Fizz would expand to Ontario, Manitoba, Alberta and B.C. through the MVNO framework, with plans to eventually extend its reach to 90 per cent of the Canadian population.

Péladeau said the CRTC's latest arbitration ruling would "create two classes of Canadians."

He said those who live in areas where Freedom has its own network "will enjoy the fruits of healthy competition" while others "will be denied the benefits of our full presence in Canada as the fourth mobile carrier."

Meanwhile, the company announced earlier this week that Freedom will begin offering home internet and television services. Both services are coming first to customers in Ontario before they are rolled out to other markets in the coming weeks.

"These additions will let Freedom reach a new customer segment seeking competitive and affordable service bundles," Péladeau said.

Strength in Quebecor's telecommunications business helped push its first-quarter profit up compared with a year ago, the company reported Thursday.

It said its net income attributable to shareholders totalled $173.2 million or 75 cents per share for the quarter ended March 31, up from a profit of $120.9 million or 52 cents per share a year earlier.

The results were "mixed" compared with forecasts "but likely better than feared given the elevated competitive intensity in Quebec" throughout the quarter, said RBC analyst Drew McReynolds in a note.

Revenue totalled $1.36 billion for the quarter, up from $1.12 billion in the first quarter of 2023, boosted by the acquisition of Freedom. 

Quebecor reported its mobile phone average revenue per user was $35.94 in the first quarter, down $2.97, or 7.6 per cent, from the first quarter of the prior year, mainly due to a change in the customer mix, including the dilutive impact of Freedom's prepaid services.

The company added 60,200 mobile phone subscriptions during the three-month period, compared with an increase of 26,200 in the same period of 2023.

Quebecor's adjusted income from operating activities amounted to 71 cents per share in its latest quarter, up from 59 cents per share in the same quarter last year.

The company also announced the appointment of Sylvie Lalande as its new board chair. Lalande, a member of the board since 2011 and vice-chair and lead director since 2018, fills the vacancy left by the death of former prime minister Brian Mulroney.

This report by The Canadian Press was first published May 9, 2024.

Companies in this story: (TSX:QBR.B)

Sammy Hudes, The Canadian Press