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Introduction & Market Context
Cogeco Communications Inc. (TSX:CCA) presented its Q3 2025 Investor Update on July 15, highlighting its strategic transformation and wireless expansion plans amid a challenging telecommunications landscape. The stock closed at $70.90, down 1.4% on the day of the presentation, reflecting ongoing market concerns despite the company’s efforts to reposition itself for future growth.
The presentation comes after a mixed Q1 2025 performance where Cogeco beat earnings expectations with an EPS of $1.90 versus the forecast of $1.64, but saw its consolidated revenue decline by 2.7% year-over-year. This context frames the company’s current strategic initiatives as it works to address competitive pressures in both its Canadian and U.S. markets.
Strategic Transformation Overview
A central theme of Cogeco’s presentation was its transformation into a unified North American organization, with Breezeline (U.S.) and Cogeco Connexion (Canada) now managed as a single entity. This restructuring aims to drive synergies, increase digitization, accelerate advanced analytics, complete network expansion, and ramp up wireless operations.
As shown in the following strategic overview:
The company emphasized that this transformation will create a nimbler structure with increased flexibility, better customer service, and closer top leader proximity to customer and frontline teams. This organizational shift represents a significant pivot as Cogeco seeks to enhance its competitive positioning in both markets.
Wireless Expansion Strategy
Perhaps the most significant development highlighted in the presentation is Cogeco’s expansion into wireless services. Cogeco Mobile is set to launch in 12 markets across Ontario and Québec "in the coming weeks," while Breezeline Mobile has already launched in the U.S. in 2024. This represents a major step in expanding the company’s addressable market.
The company’s wireless strategy in Canada is supported by substantial spectrum investments, as illustrated in this coverage map:
Cogeco has invested $588 million in acquired spectrum, with 100% of its broadband footprint covered by wireless spectrum for the launch of MVNO wireless services. Notably, 92% of this spectrum is powered by 5G-optimized 3500 & 3800 MHz technology, positioning the company competitively in the wireless space.
This wireless expansion comes at a critical time, as mentioned in the recent earnings call where executives addressed analyst concerns about the company’s wireless strategy amid competitive pressures.
Financial Performance Highlights
Cogeco Communications presented its financial performance with an emphasis on stable EBITDA margins despite revenue challenges. The company reported LTM revenue of $2.9 billion, with $1.5 billion from Cogeco Connexion (Canada) and $1.4 billion from Breezeline (U.S.).
The following chart illustrates the company’s margin and profitability trends:
The presentation highlighted an adjusted EBITDA margin of 49.3% for the LTM period, which the company notes is higher than the industry average. However, profit attributable to owners decreased from $402 million in F2021 to $327 million in the LTM period, with diluted earnings per share declining from $8.40 to $7.83 during the same timeframe.
Free cash flow has shown improvement, as depicted in this chart:
Free cash flow increased from $489 million in F2021 to $558 million in the LTM period, while cash flow from operating activities grew from $1,019 million to $1,192 million. The company has directed an increasing portion of free cash flow to network expansions, rising from $108 million to $173 million over the same period.
Revised Fiscal 2025 Outlook
Cogeco Communications provided updated financial guidelines for fiscal 2025, revising several key metrics from its original projections:
The company maintained its revenue projection of $2,977 million (stable to low single-digit decline) and adjusted EBITDA of $1,442 million (stable). However, it revised its net capital expenditures guidance to $600-$650 million from the previous $638 million, and adjusted its capital intensity projection to 20.5%-22.5% from 21.4%.
These revisions align with comments from the recent earnings call, where the company anticipated low single-digit decreases in revenue and EBITDA for Q3 2025, focusing on cost efficiency and transformation initiatives.
Debt Profile and Capital Allocation
Cogeco Communications emphasized its stable debt profile and consistent capital return to shareholders. The company reported a net debt to adjusted EBITDA ratio of 3.1x as of May 31, 2025, which differs from the 3.4x mentioned in the recent earnings report, suggesting some improvement in this metric.
The company highlighted its dividend history, showing consistent growth from $0.56 per share in F2010 to $3.69 in F2025:
With a current dividend yield of 5.2% and a dividend payout ratio of 30% for F2024 (24% excluding network expansions), Cogeco continues to prioritize shareholder returns while maintaining financial flexibility for strategic investments. This aligns with the earnings report noting that the company has raised its dividend for 21 consecutive years.
Available liquidity stands at $1,330 million with cash and cash equivalents of $245 million. The weighted average cost of debt is 5.4%, with an average term to maturity for long-term debt of 4.5 years, and the company maintains investment-grade credit ratings of BBB- (S&P) and BBB (low) (Morningstar DBRS).
Subscriber Profile and Network Expansion
Cogeco’s presentation detailed its subscriber base and network expansion efforts. As of May 31, 2025, the company reported:
The company serves a total of 3.89 million homes passed, with 2.85 million primary service units. Internet service remains the core business with 1.54 million subscribers, followed by video services (826,328 subscribers) and wireline phone services (475,739 subscribers).
Fiber-to-the-home expansions in both Canada and the U.S. have resulted in nearly 279,000 additional homes passed since the beginning of F2022, representing approximately 10% organic growth. This expansion, combined with the upcoming wireless service launch, forms the foundation of Cogeco’s strategy to enhance its competitive position in the North American telecommunications market.
Full presentation:
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