Cogeco Communications (TSX:CCA) owns Cogeco Connexion, the company’s Canadian broadband services segment, and Atlantic Broadband, the company’s American broadband services segment. The activities of Cogeco Connexion are carried out in the provinces of Québec and Ontario. The activities of Atlantic Broadband are carried out in the United States in 11 states.
The company has a price-to-earnings ratio of 14.06, price-to-book ratio of 2.35, dividend yield of 2.25%, and market capitalization of $5.52 billion. Debt is very sparingly used at Cogeco Communications, as evidenced by a debt-to-equity ratio of just 1.13. The company has excellent performance metrics with an operating margin of 28.03% and a return on equity of 15.80%.
Cogeco Connexion and Atlantic Broadband offer a wide range of video, internet, and telephone services to residential customers. Services are offered on a standalone basis or bundled into double-play and triple-play offerings at competitive prices to promote cross-selling within the customer base and to attract new customers.
The company’s two segments offer multiple tiers of internet services with fast download speeds. These various service tiers were developed to appeal to a range of potential customers based on the download speeds required by different customer groups. Cogeco Connexion and Atlantic Broadband provide internet services using modems and wi-fi gateways either on a rental basis or as part of the internet service package, depending on the service areas.
Cogeco Connexion and Atlantic Broadband offer customers a full array of video services on a subscription basis. Customers are provided access to a basic video service, various tier packages, pay-per-view channels, video-on-demand services, and advanced video services.
The broadband services segment in Canada offers to video customers a mandatory, small entry-level basic service comprised of local, regional, community, and educational channels. This package also includes certain discretionary services, such as an interactive program guide.
The broadband services segment in the United States provides customers a basic level of service, which consists of local broadcast television and local community programming, including government and public access channels. Customers receive an interactive electronic programming guide and multiple channels of high-quality digital music.
Cogeco Connexion’s video service customers can obtain additional programming services by subscribing to one of the various tier packages, including pre-assembled packages as well as flexible packages containing between 10 and 40 programming services. Various digital tier packages, which focus on the interests of a particular customer demographic, are also offered by Atlantic Broadband.
Digital video service customers have access in Canada and the United States to an expanded menu of pay-per-view channels, which allow customers to pay to view a single showing of a recently released movie or a one-time special sporting event or music concert on a commercial-free basis. The video-on-demand service allows customers with digital services to choose from a library of hundreds of movies and other programming and to view them at a convenient time.
Cogeco Communications is well positioned to thrive in the high growth music- and video-streaming market. The company’s products are very diverse, and the stock could move significantly higher.