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    Supreme Court to hear BCE appeal of Quebec decision  
    Bloomberg News  

Chris Fournier

    July 10, 2008  

Videotron's Depatie Relishes Wireless Fight With BCE (Update2)



July 10 (Bloomberg) -- If Videotron Ltee's Robert Depatie learned anything from selling ketchup and salad dressing for two decades, it was how to elbow aside competitors.

``I came from a business that was extremely competitive,'' the chief executive officer at Montreal-based Videotron, Canada's third-largest cable-television company, said in an interview. ``You fight for an inch on the shelf.''

These days, the 49-year-old former H.J. Heinz Co. executive is diversifying his TV business to take on BCE Inc., owner of former monopoly Bell Canada, in a C$12.5 billion ($12.4 billion) wireless market. In a country with the lowest mobile-phone usage in the developed world, there's room for a provider willing to offer cheaper, more flexible service, industry analysts say.

Videotron, a unit of Quebecor Inc., plans to sell a complete package of cable, Internet, home phone and now mobile. The company is bidding in a government auction for wireless licenses, following through on a pledge to build a new Quebec network in the home turf of BCE, Canada's largest phone company.

For BCE, the timing of Videotron's push couldn't be worse. Losses at the company's traditional land-line business are accelerating, with more than a million customers switching to competitors in the past three years.

``Bell should be afraid, very afraid,'' said Iain Grant, managing director of research firm SeaBoard Group in Montreal.

BCE spokesman Pierre Leclerc says his company's service is improving, and it's offering more flexible appointment times and faster installations to retain customers.

Big Investment

Starting a profitable wireless service won't be easy or cheap. Videotron's bids for the spectrum required to transmit wireless calls already exceed the C$500 million that Quebecor predicted as recently as February it would take to build a network.

Moreover, trying to win customers by lowering prices would probably be countered by the three dominant providers -- Bell Canada, Vancouver's Telus Corp. and Rogers Communications Inc. in Toronto. The three control more than 90 percent of the national mobile-phone market.

Quebecor fell 88 cents, or 3.1 percent, to C$27.27 at 4:10 p.m. in Toronto Stock Exchange trading. The shares have declined 24 percent this year.

A Montreal native who took management courses at the University of Western Ontario, Depatie says he welcomes the challenge. More competition ``forces you to get better,'' he says.

About 61 percent of Canadians own wireless handsets, the lowest rate among the 23 developed countries tracked by Merrill Lynch & Co. The U.S. has 84 percent penetration.

Gadget Lover

Videotron started cable service in 1964 and went public on the Montreal Stock Exchange 21 years later. Quebecor acquired the business in 2000 for C$5.4 billion after a bidding war with Rogers, Canada's largest cable provider.

Depatie, a gadget lover who wears Ulysse Nardin watches and Italian suits and collects motorcycles, started his career in the food business with distributor Aliments Bessy's Foods in 1980. He moved to Nabisco Canada a year later.

At Heinz, Depatie added products and expanded distribution, increasing sales and profit. It's a formula he brought with him when he joined Videotron in 2001.

The company has signed about 700,000 subscribers, or almost one in 10 Quebecers, to a cable-phone service it started three years ago. The combination of cable, high-speed Internet and telephone service has the fastest subscriber growth in the Canadian industry, said Scotia Capital analyst John Henderson in Toronto.

Bell Canada

To make sure customers are happy, Depatie analyzes 35 benchmarks, such as the percentage of problems resolved after one call and how long people wait on the phone before talking to an agent.

Bell Canada's customer service isn't as organized or as good, said Forrester Research Inc.'s Brownlee Thomas, a telecommunications analyst for 25 years.

``Bell will still call you and try to sell you something you've already got,'' said Montreal-based Thomas. ``Or you left them, and they don't know that you left them. They don't know anything about you.''

BCE's Leclerc said his company is doing everything it can for its customers. ``Our service is getting better every day, and we're working to improve it on every front,'' he said.

Videotron's first-quarter sales jumped 20 percent to C$430.6 million. BCE's rose less than 1 percent. Revenue in Rogers's most recently reported quarter increased 14 percent, while No. 2 cable company Shaw Communications Inc. climbed 13 percent.

TV Shows

The mobile-phone market may give Videotron more room to grow. Offering wireless downloads of programs such as ``Le Banquier,'' the French-Canadian version of ``Deal or No Deal,'' will persuade more Quebecers to get mobile phones, Depatie said. The program is the most popular show on Quebecor's TVA network.

More than 80 percent of Quebec's 7.6 million people speak French as their first language, according to a government Web site. Quebec is Canada's second-largest province after Ontario.

Montreal-based BCE is counting on a leveraged buyout to reignite growth. A group led by the Ontario Teachers' Pension Plan, BCE's largest shareholder, plans to purchase the company for C$52 billion by Dec. 11.

BCE's Bell unit must work harder to retain customers, Claude Lamoureux, former head of the Ontario pension group, said in an interview last month. The company lost 511,000 local-phone subscribers in 2007, after 463,000 in 2006 and 297,000 in 2005.

The buyout's C$34 billion of debt financing may hinder efforts to offer deals that keep customers or win them back.

That has helped Depatie feel ``extremely good about the future,'' he said. ``There will obviously be opportunities in the wireless world.''


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