Cogeco Cable believes Toronto Hydro Telecom deal will pay off

Tag : cca cable

MONTREAL - Toronto Hydro Telecom Inc. is an under-utilized gem thatwill provide great growth opportunities for its new owner, CogecoCable Inc. (TSX:CCA) president Louis Audet said Thursday.

The Montreal-based cable company is buying the Toronto Hydro Corp.subsidiary for $200 million in a deal that will give Cogeco Cablean important foothold in the lucrative Toronto market.

"Essentially, this is a company that provides, for the most part,data services to large businesses," Audet told a conference call."It does so, extremely well, extremely efficiently and atreasonable prices for the customers.

"It has, in absolute numbers, very few customers compared to thepotential of businesses it passes directly and an even smallerpercentage compared to businesses it could pass that are not thatfar from the network.

"That’s why the growth should continue in the future.It’s barely scratched the surface."

The sale, which was announced last month, is expected to close onJuly 31.

Cogeco Cable is the second-largest cable operator in Ontario,Quebec and Portugal, in terms of the number of basic cable servicecustomers served. In Quebec, the No. 1 player is Videotron and inOntario the leader is Rogers Cable.

Toronto Hydro Telecom offers data communications and othertelecommunications services to business customers and organizationsthroughout the Toronto area.

Audet dismissed comments that acquiring the Toronto company wouldbe "dilutive."

"Our job is to find opportunities that will lead to profitablegrowth," he said a day after Cogeco Cable announced a jump in itsthird-quarter profit to $31.1 million or 64 cents a share from$20.4 million or 45 cents a share a year earlier.

"Ideally, we’ll try to find something that is accretive thefirst year. Failing that, we’ll find something that’saccretive the second year.

"Something may look dilutive in the short term. Our job is to findways to make it grow so much that, one year hence, you don’thave to ask yourself whether it’s dilutive."

The deal is not Cogeco Cable’s first foray into southernOntario.

In March, it bought MaXess Networx, the telecom division of EnwinEnergy Ltd., the City of Windsor’s energy company.

MaXess Networx operated a broadband network that sold varioustelecom services - from e-mail and high-speed Internet to videoconferencing - to companies and other organizations in southwesternOntario.

And last month Cogeco completed the acquisition of FibreWiredBurlington Hydro Communications.

Audet also addressed the performance of Portuguese cable firmCabovisao-Televisao por Cabo SA, which it bought in 2006 for about$600 million.

He said an extremely competitive situation in the European countryhas limited growth.

"This is not an issue that will resolve itself in six months,"Audet noted.

"This is likely an issue that will carry on for a while still.While it’s inconvenient and not as nice as we’d like itto be, we still think fundamentally, in the long term, this companyhas great inherent value because it’s serving a market, theeconomy of which will recover."

Audet suggested Cogeco Cable could be on the lookout for futurepurchases, but not at any cost.

"The notion that we would go out and blow our brains on anacquisition, the economics of which would not make sense within afew years, is totally unjustified.