Cogeco (TSE:CGO) said its Canadian operations finished fiscal 2026 with reaccelerating internet customer growth, strong wireless sales and year-over-year adjusted EBITDA growth, while its U.S. business faced worsening competitive conditions that drove elevated internet customer losses.
During the company’s fourth-quarter earnings call, President and CEO Fred Perron said the Canadian business continued to perform well, supported by the oxio digital brand, which he said has been recognized as Canada’s “most loved telecom brand.” Perron said oxio sales have set new internal records and that the company sees substantial remaining opportunity for the brand.
Cogeco has also continued to upgrade its Canadian network, with 1 gigabit residential service now available to about 95% of its Canadian footprint and 2 gigabit service available to roughly 50%, Perron said.
U.S. Competition Weighs on Outlook
The company’s outlook for fiscal 2027 reflects a more difficult U.S. market. Cogeco Communications expects revenue to decline by a low- to mid-single-digit percentage on a constant-currency basis, while adjusted EBITDA is expected to decline by a mid- to high-single-digit percentage.
Chief Financial Officer Patrice Ouimet said the outlook reflects Canadian customer growth being offset by U.S. pricing pressure and subscriber losses in what the company expects will remain a highly competitive and promotional market.
Perron said the most significant sources of pressure in the U.S. are various forms of network overbuilding and rebuilding. Those include DSL providers upgrading to fiber networks, private-equity-backed fiber overbuilders entering existing markets and larger cable operators expanding into Cogeco’s footprint, often with fiber offerings.
He said new entrants have used aggressive sales tactics and promotions to fill newly built networks, including reports of offers such as fiber service for $50 with a 10-year price lock. Perron said he would not expect a significant improvement in U.S. subscriber trends during fiscal 2027.
Cogeco’s U.S. business, Breezeline, is responding with new products and sales channels. The company recently launched an over-the-top television streaming offering through a partnership with DIRECTV. Ouimet said the product is expected to contribute positively to future adjusted EBITDA and free cash flow.
However, the DIRECTV arrangement will reduce Cogeco’s reported video subscriber figures over time because DIRECTV subscribers will not be counted among company-owned brands. Revenue will also be lower than under a traditional video model because Cogeco will report commissions earned rather than the full subscription amount, Ouimet said.
The company is also expanding its welo digital brand across the U.S. Perron said welo will be offered across 70% of the company’s U.S. footprint after planned launches in four additional states. He said customer satisfaction and margins for welo are strong, though the company is forecasting only a modest subscriber inflection during the coming year.
Canadian Operations Expected to Remain Stable
When asked about the outlook for Canada, Ouimet said Cogeco expects revenue and adjusted EBITDA to be relatively stable during fiscal 2027, with a range around that expectation. He cited pricing, ongoing customer additions, product mix and the company’s transformation efforts as factors in the outlook.
Ouimet cautioned that fourth-quarter Canadian EBITDA growth benefited in part from non-recurring year-end items and should not necessarily be extrapolated. Perron added that the company benefited from promotion expiries in the prior year that are not expected to recur to the same extent.
The increasing contribution of oxio also affects Cogeco’s product mix. Perron said internet margins for oxio are comparable with those of the Cogeco brand, though the digital brand tends to carry less television service.
Cogeco said wireless remains a priority in both Canada and the U.S. The company has moved Canadian wireless operations into the Canadian business segment, making fiscal 2027 comparisons consistent year over year, Ouimet said.
Free Cash Flow, Capital Spending and Debt Reduction
Cogeco Communications generated CAD 554 million in free cash flow during fiscal 2026, near the upper end of its original guidance range, Perron said. He said that represented 33% growth over three years. On a constant-currency basis, Ouimet said full-year free cash flow rose 7.3%.
For fiscal 2027, Cogeco Communications expects:
- Capital expenditures of CAD 425 million to CAD 475 million.
- Free cash flow of CAD 500 million to CAD 550 million.
- Financial expenses of CAD 250 million to CAD 300 million.
- Current income taxes of CAD 30 million to CAD 60 million.
Ouimet said U.S. EBITDA pressure, higher financial expenses and higher income taxes are expected to be partly offset by capital efficiencies. Perron said the planned reduction in capital expenditures is supported by transformation-program benefits, including vendor and team consolidation, as well as the near completion of network expansion and speed-upgrade projects.
He said the company is comfortable that lower spending will not harm revenue because its networks have reached sufficient speed levels for current needs.
Cogeco’s consolidated debt leverage ratio was 3.1 times at the end of the fourth quarter, down from 3.2 times in the preceding quarter. During the quarter, the company refinanced maturing debt with a new CAD 200 million Canadian tranche and repurchased US$46 million of Term Loan B debt securities.
Ouimet said Cogeco expects to use excess cash for further debt repayment in Canada and the U.S. At the midpoint of its fiscal 2027 guidance, he said the company expects leverage to decline modestly to around 3 times by year-end.
Dividend Raised for 23rd Consecutive Year
Cogeco increased dividends at both Cogeco Communications and Cogeco Inc. by 2%, marking the company’s 23rd consecutive annual dividend increase.
Ouimet said the smaller increase compared with the prior year’s 7% rise reflected a decision to balance shareholder distributions with debt repayment amid greater business volatility. He said the company continues to support dividend growth but is directing more cash toward reducing debt.
Cogeco also said its transformation program remains focused on reducing operating expenses and capital expenditures. Perron said artificial-intelligence agents are now deployed across most key operating functions and that automation is beginning to produce results. The company expects AI initiatives to help offset cost pressures during fiscal 2027, although Perron described the impact as still being in a pre-inflection stage.
About Cogeco (TSE:CGO)
Cogeco Inc is a North American leader in the telecommunications and media sectors. Through Cogeco Communications Inc, we provide world-class Internet, wireless, video and wireline phone services to 1.6 million residential and business subscribers in Canada and thirteen states in the United States. Through Cogeco Media, we operate 21 radio stations in Canada, primarily in the province of Quebec, as well as a news agency. We take pride in our strong presence in the communities we serve and in our commitment to a sustainable future.
