Source: Globe and Mail
MONTREAL -- Pierre Karl Péladeau got a first-hand feel for the worsening economic conditions late last year when printing giant Quebecor World Inc. was forced into filing for bankruptcy protection.
A $400-million (U.S.) rescue package proposed by parent Quebecor Inc. and a private equity partner fell through at the eleventh hour and the printer sought shelter under the Companies' Creditors Arrangement Act.
"The liquidity crisis at Quebecor World around October and November of 2007 was the first tangible sign of what we were in for," says Mr. Péladeau, chief executive officer of family-controlled Quebecor Inc., which was founded by his late father, Pierre Péladeau.
"From that moment on we became aware that we were going to live through a number of turbulent situations for months, if not years, to come."
The crisis management at Quebecor World, however, didn't slow Mr. Péladeau's ambitious plans for the rollout of a wireless network in Quebec.
Nor did it put a crimp in a longer range project to transform Montreal-based Quebecor's newspaper holdings into properties that are more in line with the increasingly important role of the Internet.
It boils down to not falling into recession-think, not letting the short-term shocks get in the way of the big picture. To stay focused on the long term and what needs to be done today to ensure rewards further on down the road.
Investing in technology
Through subsidiary Quebecor Media Inc., Quebecor Inc. is intent on making its planned mobile-phone service a key component of its communications business.
Quebecor Media is set to spend more than $800-million (Canadian) on the build-out of the network over the next 18 months. The wireless project will involve use of content from other Quebecor Media platforms, which include newspapers in the Sun Media Corp. empire; the TVA television broadcasting group; the Canoe website and the Vidéotron cable, Internet and telephony unit.
"We're investing with a medium- and long-term perspective," Mr. Péladeau says.
"There is no future for a cable and telecom company that doesn't invest in its technology."
Bundling its cellphone offering with other services, such as residential telephone, Internet and cable TV, will allow Quebecor Media to take on established rivals such as Bell Canada with competitive pricing.
"The economic downturn doesn't mean there is a change in our wireless strategy," Mr. Péladeau says.
"In telecom, you have to take the long view. You can't stop investing because you're in a difficult economic situation."
Financing for the system doesn't require tapping capital markets and will come from internal cash-flow generation and existing credit facilities, he says.
"And even in a difficult environment, it would be hard to envisage that people will stop using their wireless phones," Mr. Péladeau says, adding that it's expected that significant savings will be the order of the day for customers once the bundling of services is set up.
"Wireless is the future."
As part of its larger multimedia strategy, Quebecor Media is overhauling its newspaper division and positioning it to be competitive in the digital era.
The current economic slowdown is walloping newspaper advertising. Sun Media is the country's biggest newspaper publisher, with 43 dailies and more than 200 community publications, and has been forced to take immediate action. It recently announced it is slashing 600 jobs - about 10 per cent of the total work force - to deal with the fallout from the deteriorating economic environment and the impact of the Web.
But the cutbacks are also one element of a larger strategy Mr. Péladeau is spearheading.
"Conventional newspapers are in a highly perturbed environment," he says.
It's not just about the current crisis: Readership and circulation erosion and falling advertising constitute a long-term trend.
The challenge is not only to weather the latest downturn but also to embrace the changes taking place, he says.
Radical times call for radical measures.
Last month, Mr. Péladeau took over the leadership of Sun Media as well as Quebecor Media's Canoe online operation.
The management shakeup meant the departure of Michael Sifton, who had headed up Sun Media after Quebecor Inc. took over his Osprey Media newspaper group of small Ontario newspapers last year.
Building into cyberspace
The goal under Mr. Péladeau's leadership is to create a seamless integration of the Sun Media newspapers and the Canoe portal.
That means winning over print reporters to the Quebecor Media vision of providing content across various platforms, including newspapers, the Web and mobile phones.
Content is increasingly in the form of video news items uploaded to the website.
"We have to adapt, we have to get greater flexibility from our reporters," Mr. Péladeau says.
He's entertaining no illusions about the receptivity of journalists.
Talks aimed at renewing the collective agreement at flagship francophone daily Le Journal de Montréal broke down last month. An arbitrator has been appointed at the request of the union, but the two sides appear to be far apart on many issues.
"At Sun Media, we want to accelerate the plan to better adapt to new technologies," Mr. Péladeau says.
"We have an advantage in that we are a diversified, well-balanced media company with a solid revenue base on the cable side," he says.
"That allows us to take on the challenge of developing a new model with the newspapers and Canoe."
Quebecor Inc. (QBR.B)
Close: $16.35, down 40¢
Growth of a media empire
2000: Quebecor Inc. acquires cable operator Vidéotron Ltée and television broadcaster TVA Group Inc.
2005: Vidéotron becomes the first major Canadian cable company to offer phone service via cable.
2007: Quebecor Media becomes the largest newspaper publisher in Canada, with the acquisition of Ontario publisher Osprey Media.
2008: Quebecor Media provides details of its plan to launch a wireless network in Quebec.
Source: Company publications
© Globe and Mail
