Cogeco sells struggling Portugal cable unit
(Reuters) - Canada's Cogeco Cable CCA.TO has sold its struggling Portuguese unit, Cabovisao, to European media and telecom investment group Altice for 45 million euros ($60 million), Cogeco said on Wednesday.
Cabovisao provided Cogeco with roughly 13 percent of its total revenue in fiscal 2011, but the venture was losing subscribers due to a pricing war with state-owned Portugal Telecom and ZON Multimedia ZON.LS that shrunk profit margins.
Cogeco's main business is to provide cable-TV, high-speed Internet and telephone services in mostly rural areas of Ontario and Quebec.
UBS analyst Phillip Huang said the price was roughly one-tenth of what Cogeco paid for Cabovisao in 2006, but that the sale rids it of a troubled unit that had drained cash for two years.
"Some investors have a negative value on Cabovisao given its negative free cash flow over the past two years," he wrote in a note to clients. "As such, the sale of Cabovisao removes this overhang on the stock."
He said the company could use the proceeds to increase its dividend or expand its enterprise data service.
Cogeco stock jumped 5.1 percent to C$49.81 by early afternoon on the Toronto Stock Exchange.
Cogeco took a charge of C$225.9 million ($229.4 million) to write off the last of its Cabovisao investment last July.
(Reporting by Alastair Sharp in Toronto; editing by Rob Wilson and Peter Galloway)
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