Quebecor's Telecom Dominance Shines Amid Media Struggles in Q1 2025

Quebecor Inc. (TSX: QBR.A) delivered a mixed performance in its Q1 2025 earnings, showcasing its telecom prowess while grappling with persistent challenges in its media division. The results underscore the company’s ability to capitalize on Canada’s competitive telecom landscape, even as regulatory and industry-wide pressures weigh on its media segment. Let’s dissect the numbers and strategic moves driving Quebecor’s trajectory.

Telecom Strength Anchors Growth

The Telecommunications segment remains the engine of Quebecor’s success. In Q1, it added 54,400 new mobile lines, marking a 9.6% year-over-year increase in mobile subscribers—the fastest growth rate among Canada’s major telecom providers. This momentum is fueled by aggressive network investments and innovative service launches:

• 5G+ Expansion: Freedom Mobile is rolling out 3,800 MHz spectrum across Ontario, Alberta, and British Columbia, enabling download speeds exceeding 1 Gbps. All Freedom plans now include 5G+ access at no extra cost, a strategic move to differentiate itself in a crowded market.
• New Services: Fizz TV, an all-digital, pick-and-pay TV service, attracted 12,000 subscribers in weeks post-launch. Meanwhile, Freedom expanded data-heavy plans in Manitoba, including international roaming options, further boosting customer retention.

Financials: Cash Flow Strength and Debt Discipline

Quebecor’s financial health stands out:
- Operating cash flows rose 8.1% to $420.2 million, driven by cost controls and disciplined capital allocation.
- Net debt leverage fell to 3.26x, the lowest among Canada’s telecom peers, reflecting $155 million in debt reduction during the quarter.
- Share repurchases: The company canceled 1.83 million Class B shares for $60.8 million, signaling confidence in its valuation.

Media Segment Struggles: A Call for Regulatory Reform

The TVA Group’s media division reported a negative adjusted EBITDA of $20.5 million, driven by:
- A decline in advertising revenue, as advertisers shift budgets to foreign digital platforms.
- Reduced production activity at its MELS studios, due to fewer international film projects.

Management is advocating for systemic changes to level the playing field:
- Tax reforms: Eliminate tax deductions for foreign platform advertising and incentivize domestic media investment.
- CBC/Radio-Canada reforms: Restructure the public broadcaster to avoid competing with private networks for ad revenue.

Risks and Opportunities Ahead

• Telecom Competition: While Quebecor’s pricing discipline has avoided aggressive price wars, rivals like Telus and Rogers could intensify promotional efforts.
• Media Recovery: The TVA Group’s turnaround hinges on regulatory action and stabilization in the ad market.
• Bundling Potential: Fizz TV and Freedom Home Internet could boost ARPU if adoption rates accelerate.

Investment Takeaways

Quebecor’s telecom dominance and financial discipline position it well for long-term growth, even as media headwinds persist. Key positives:
- Low leverage (3.26x) and strong cash flows provide flexibility for reinvestment or shareholder returns.
- Innovation leadership: 5G+ and Fizz TV reflect its ability to disrupt markets.
- Regulatory advocacy: Its push for media reforms aligns with broader industry needs, though success is uncertain.

However, investors should monitor:
- Media division performance: Can TVA stabilize without regulatory changes?
- Competitor moves: Will rivals undercut Quebecor’s pricing or service offerings?

Conclusion

Quebecor’s Q1 results highlight a company thriving in its core telecom business while navigating significant challenges in media. With a 12-month mobile subscriber growth rate of 9.6% and a lowest-in-class leverage ratio, its telecom division is a clear differentiator. The media segment’s struggles, however, demand both operational resilience and policy shifts. For investors, Quebecor offers exposure to a disciplined, growth-oriented telecom leader—provided the company can stabilize its media operations or secure favorable reforms.

In a sector where infrastructure and innovation reign, Quebecor’s focus on 5G+ and bundled services positions it to capitalize on Canada’s digital future. The question remains: Can its media division rebound, or will it remain a drag? The answer could determine Quebecor’s trajectory in the years ahead.