Quebecor's (TSE:QBR.A) Past Year: A Tale of Challenges and Opportunities

As an investor in Quebecor Inc. (TSE:QBR.A), the past year has been a rollercoaster ride, with the company facing various challenges and opportunities. In this article, we will delve into the factors contributing to Quebecor's underperformance, the impact of the Freedom Mobile acquisition, and strategic moves the company can make to improve profitability and attract investors.



Factors Contributing to Quebecor's Underperformance

Quebecor's underperformance in the past year can be attributed to several specific factors:

1. Revenue and Earnings Growth Concerns: In December 2023, a new major risk was identified related to revenue and earnings growth. This concern was highlighted in an update on December 5, 2023, stating that "Returns At Quebecor (TSE:QBR.A) Appear To Be Weighed Down" (Source: Dec 5 update).
2. Financial Position Strained: In August 2023, a new major risk was identified regarding Quebecor's financial position. This was mentioned in an update on August 11, 2023, stating "New major risk - Financial position" (Source: Aug 11 update).
3. Dividend Concerns: There were concerns about Quebecor's dividend policy. In May 2023, an update mentioned "Shareholders May Not Be So Generous With Quebecor Inc.'s (TSE:QBR.A) CEO Compensation And Here's Why" (Source: May 3 update). Additionally, in April 2023, there was a concern about the dividend being undemanding, as stated in an update: "There Is A Reason Quebecor Inc.'s (TSE:QBR.A) Price Is Undemanding" (Source: Apr 3 update).
4. Lack of New Directors: Insufficient new directors were identified as a concern in April and August 2023. This was mentioned in updates on April 2, 2023, and August 1, 2023, respectively (Source: Apr 2 and Aug 1 updates).
5. Acquisition Challenges: The acquisition of Freedom Mobile in June 2022 may have presented challenges. In November 2022, an update mentioned that Quebecor reportedly made a buyout offer to rival Corus but did not hear back (Source: Nov 4 update).



The Impact of the Freedom Mobile Acquisition

Quebecor's acquisition of Freedom Mobile on April 3, 2023, has significantly impacted its financial performance in a positive manner. In the first quarter of 2024, the Telecommunications segment increased its revenues by 27.5%, adjusted EBITDA by 21.4%, and adjusted cash flow from operations by 16.6% compared to the same period in 2023. This growth can be attributed to the contribution of the Freedom Mobile acquisition, as well as the increase in revenues from mobile services and equipment ($264.2 million or 95.7%) and Internet access ($5.8 million or 1.8%).

The acquisition has also driven customer base growth, with Quebecor adding 264,100 lines (15.2%) to its mobile telephony services over the past 12 months. Additionally, the Fizz brand, which is part of Quebecor's portfolio of complementary brands, is set to expand its Canadian presence, offering attractive plans to residents in several provinces.

Furthermore, the acquisition has helped Quebecor establish itself as Canada's fourth major national wireless carrier, contributing to a 26.2% drop in the wireless component of the Consumer Price Index (CPI) between March 2023 and March 2024. This demonstrates the positive impact of the acquisition on the overall telecommunications industry in Canada.



Strategic Moves for Quebecor

Based on the provided information, Quebecor can consider the following strategic moves to improve its profitability and attract investors:

1. Expand its wireless coverage: Quebecor can continue to invest in expanding its wireless coverage, particularly in outlying regions of Québec. This can be achieved through partnerships with the government, as seen in the announcement of installing at least 37 new cell towers in Abitibi-Témiscamingue and the Laurentians (May 6, 2024). This expansion can help attract more customers and increase market share.
2. Leverage the Freedom Mobile acquisition: The acquisition of Freedom Mobile has significantly contributed to Quebecor's growth. To further leverage this acquisition, Quebecor can:
* Integrate Freedom Mobile's services and offerings with its existing portfolio to create a more comprehensive product suite.
* Expand Freedom Mobile's services to new regions, utilizing Quebecor's existing infrastructure and resources.
* Continue to offer competitive pricing and plans to attract more customers and retain existing ones.
3. Focus on cost management: Quebecor can maintain its disciplined approach to managing operating costs, as demonstrated by the reduction in consolidated net debt by more than $140 million in the first quarter of 2024. This can help improve profitability and maintain a strong financial position.
4. Invest in high-growth areas: Quebecor can allocate capital to high-growth areas, such as 5G network expansion and innovative services. This can help the company stay competitive and attract tech-savvy customers.
5. Maintain a strong balance sheet: Quebecor can continue to manage its debt levels and maintain a strong balance sheet. This can help the company maintain its investment-grade rating on bonds and attract investors seeking stable, dividend-paying stocks.
6. Dividend growth and share buybacks: Quebecor can continue to grow its dividend and implement share buyback programs to return value to shareholders. This can help attract income-oriented investors and those seeking capital appreciation.
7. Diversify its business portfolio: While Quebecor has seen significant growth in its Telecommunications segment, it can explore opportunities to diversify its business portfolio. This can help mitigate risks associated with relying too heavily on a single segment and provide additional growth avenues.

By implementing these strategic moves, Quebecor can improve its profitability, attract investors, and maintain its competitive position in the market.