Cogeco Still Seeks U.S. Cable Deals

About eight months after closing a $200 million deal to buy the Connecticut cable assets of MetroCast Communications, Atlantic Broadband parent Cogeco Cable said it will continue to look for opportunistic deals in the U.S., as well as wireless partnerships in its native Canada.

Cogeco bought Atlantic Broadband in 2012 for $1.4 billion and had expected to use the company to acquire other smaller operators in the U.S. While that hasn’t quite turned out as planned – the purchase of MetroCast’s Connecticut operations in August was the first deal Atlantic Broadband has done since 2012 – Cogeco CEO Luis Audet said the company still is open to doing deals.

On a conference call with analysts to discuss fiscal second quarter results April 14, Audet said Cogeco is still seeking “value-creating opportunistic acquisitions especially in cable in the United States.”

“I think we're in a position where we could do acquisitions if they present themselves, if they make sense, if they are profitable for our shareholders,” Audet continued, adding that in the past, Cogeco’s growth was 50% organic and 50% through acquisitions.

Part of Audet’s optimism about U.S. deals could be fueled by Atlantic’s continued success.  In the fiscal second quarter, U.S. cable revenue rose 18% (6% of which was from the Connecticut acquisition). Video subscriber losses doubled to 2,000 in the period, but that was due mainly to a decision to exit certain unprofitable businesses in Connecticut and the conversion of a few Multiple Dwelling Unit (MDU) customers from bulk to retail service.

Cogeco’s expansion plans aren’t limited to the U.S. market. On the call, Audet said the operator was keen to offer wireless service in Canada, but only through a MVNO agreement. He pointed to Shaw Communications’ recent purchase of Wind Mobile, adding that the deal has been a brilliant move for Shaw – the Canadian operator now has about 700,000 wireless customers in Ontario.

“If ever they want to work with us in partnership we’ll be delighted,” Audet said.

Barclays Research media and telecom analyst Philip Huang said in a note to clients that the MVNO approach makes sense, adding that it would provide a relatively economic path to a wireless offering.

“With all the other major cable companies in Canada (i.e. RCI, SJR, QBR, and Eastlink) now also operating wireless businesses, we believe [Cogeco] is feeling greater urgency to revisit options to add wireless to its portfolio of services,” Huang wrote.