Montréal, Québec – Quebecor Inc. (“Quebecor” or “the Corporation”) today reported its consolidated financial results for the second quarter of 2023. Quebecor consolidates the financial results of its wholly owned Quebecor Media Inc. (“Quebecor Media”) subsidiary.
Second quarter 2023 highlights
In the context of the acquisition of Freedom Mobile Inc. ("Freedom") on April 3, 2023, Quebecor recorded revenues of $1.40 billion, up $283.3 million (25.4%), adjusted EBITDA of $605.2 million, up $113.8 million (23.2%), and adjusted cash flows from operations of $455.3 million, up $94.3 million (26.1%) compared with the same period of 2022.
The Telecommunications segment increased its revenues by $288.6 million (31.6%), its adjusted EBITDA by $120.1 million (24.6%), and its adjusted cash flows from operations by $92.3 million (25.0%), reflecting, among other things, the contribution of the Freedom acquisition.
The Telecommunications segment’s revenues from mobile services and equipment increased by $275.9 million (104.2%) due to the impact of the Freedom acquisition and growth in the revenues of Videotron Ltd. ("Videotron"), and its revenues from Internet access services increased by $17.0 million (5.6%).
Organic growth added 24,600 revenue-generating units (“RGUs”) (0.4%) during the quarter, including 49,100 subscriber connections (2.8%) in mobile telephony and 5,300 Internet access subscriptions (0.3%).
Following the acquisition of Freedom, the Telecommunications segment now has 3,610,100 mobile telephony connections and 1,716,800 Internet access customers.
TVA Group Inc. ("TVA Group") recorded an $8.7 million (‑5.9%) decrease in revenues and negative adjusted EBITDA of $3.8 million, an unfavorable variance of $7.1 million compared with the second quarter of 2022.
The Sports and Entertainment segment’s revenues increased by $3.8 million (8.4%) and there was a $1.7 million unfavourable variance in its adjusted EBITDA in the second quarter of 2023.
Quebecor’s consolidated net income attributable to shareholders: $174.1 million ($0.75 per basic share), up $16.7 million ($0.09 per basic share) or 10.6%.
Adjusted income from continuing operating activities: $182.3 million ($0.79 per basic share), up $20.6 million ($0.11 per basic share) or 12.7%.
On April 3, 2023, Videotron acquired Freedom from Shaw Communications Inc. (“Shaw”). Videotron paid $2.07 billion in cash, net of cash acquired of $103.2 million. As part of the transaction, Videotron assumed certain liabilities, mainly lease obligations. The consideration paid is subject to certain post‑closing adjustments. The acquisition includes the Freedom brand’s entire wireless and Internet customer base, as well as its owned infrastructure, spectrum and retail outlets. The transaction also includes a long‑term undertaking by Shaw and Rogers Communications Inc. (“Rogers”) to provide Videotron with transport services (including backhaul and backbone), roaming services and wholesale Internet services. Through the acquisition of Freedom, Videotron has entered the British Columbia and Alberta telecommunications markets and strengthened its position in the Ontario market.
On April 3, 2023, Videotron entered into a new $2.10 billion secured term credit facility with a syndicate of financial institutions to finance the acquisition of Freedom. The term credit facility consists of three tranches of equal size maturing in October 2024, April 2026 and April 2027, bearing interest at floating rates. On April 10, 2023, Videotron entered into a floating‑to‑fixed interest rate swap agreement in connection with the $700.0 million tranche maturing in April 2027, fixing the interest rate at 5.203% based on Videotron’s then leverage ratio.
Comments by Pierre Karl Péladeau, President and Chief Executive Officer of Quebecor:
The acquisition of Freedom in April 2023 has positioned Quebecor as Canada’s fourth national wireless provider. Our mobile network now reaches nearly 70% of Canada’s population and we will be able to further expand our coverage by functioning as a mobile virtual network operator (“MVNO”). In just four months, we have lowered telecom prices across the country by increasing competition and delivered on the majority of the commitments we made to Canadians and to Innovation, Science and Economic Development Canada (“ISED Canada”).
We have rapidly enhanced our product and service offerings and significantly upgraded Freedom's wireless network. On July 27, 2023, we proudly unveiled an ultra‑competitive suite of wireless plans including true nationwide coverage. Now supported by a first class 5G network, our new plans enhance the customer experience in Ontario, British Columbia and Alberta.
Another important development was the Canadian Radio‑television and Telecommunications Commission (CRTC) decision issued on July 24, 2023, which selected Quebecor's proposed rates for MVNO access to Rogers’ network, enabling us to offer affordable and accessible plans in more Canadian regions.
Driven by the Freedom transaction, Quebecor delivered an outstanding financial performance in the second quarter of 2023 with increases of 25.4% in revenues, 23.2% in adjusted EBITDA and 26.1% in adjusted cash flows from operations. The Telecommunications segment reported increases of 31.6% in revenues, 24.6% in adjusted EBITDA and 25.0% in adjusted cash flows from operations, which rose to $461.7 million.
Our Telecommunications segment’s range of plans continued to attract more customers. Over the past twelve months, it has added 124,700 (7.5%) mobile telephony connections and 38,100 (2.4%) Internet access customers.
We now have a total of 3,610,100 subscriber connections to our mobile telephony service and 1,716,800 subscribers to our Internet access services nationwide and we are executing our development plan to increase market share and profitability. Our strong cash flows will also enable us to continue to invest in our networks and to enhance online services for our customers, building on the complementary strengths and successes of our Videotron, Freedom and Fizz brands.
TVA Group continued to be impacted by lower profitability across all of its businesses and all of the industries in which it operates, posting a $7.1 million unfavourable variance in adjusted EBITDA. The restructuring plan announced on February 16, 2023 has not yet generated sufficient savings to offset the major impact of the decline in the advertising market, which is the sole source of revenue for over‑the‑air television stations, and the absence of foreign productions in the film production and audiovisual services segment. Unfortunately, there is no reason to believe the situation will improve in the short or medium term, in view of the conditions throughout the entire North American broadcasting industry. Only Radio-Canada is not subject to the profit imperative, which forces us to make difficult decisions to ensure the business’s sustainability.
Despite the challenging environment, we continued to invest in content to protect our market share, both for TVA Network and the specialty channels. As a result, TVA Group's market share rose to 42.7%, up 0.4 points from the same period of 2022. TVA Network had four of the top five shows in Québec during the quarter. However, in order to be able to continue investing in programming and news content, it is imperative that we have a legislative and regulatory framework that applies to the web giants and requires them to contribute financially to Canada's broadcasting system. It is also critical to remove advertising from all of Radio‑Canada's platforms. The public broadcaster is engaging in unfair competition with private broadcasters in the race for ratings and advertising revenue, despite the fact that it receives huge amounts of government funding to fulfil its mandate.
Over the past several months, we have clearly demonstrated our ability to execute, and our determination to achieve, our goal of fostering healthy competition in the wireless marketplace for the benefit of all Canadian consumers. With our solid track record and strong financial position, we are more committed than ever to our cross‑Canada growth strategy and our goal of creating long‑term value for all our stakeholders.
We look to the future with confidence because of our agility and rigour, as demonstrated by our operating costs, which are the lowest in the Canadian telecom industry. And it should be noted that, despite the acquisition of Freedom without any issuance of capital stock, Quebecor's debt leverage ratio remains among the lowest in the industry.
For more details and to consult definitions of "adjusted EBITDA", "adjusted income from continuing activities", "adjusted cash flows from operations" and "revenue-generating unit" please refer to the attached PDF file for the complete version of the press release.
Chief Financial Officer
Quebecor Inc. and Quebecor Media Inc.
Quebecor Inc. and Quebecor Media Inc.