JANUARY 10, 1980
It is a pleasure to outline some of the achievements of the past year and briefly discuss the fast moving events at Premier.
As this is my inaugural discussion with the shareholders, I should remind you that I was only here for five months of the year ended August 31st, 1979. Therefore much of the credit for what was basically a good year must go to the management team that has been in place throughout the entire period. New presidents always take some getting used to, but this management group as well as the Board and the staff have made the transition easy for me. This assistance from all sides has been much appreciated.
I mentioned that 1978/79 was basically a good year. Revenues climbed to an all time high of $36 million. The number of subscribers served by Premier increased by 4.4%. However, as predicted in last year’s Annual Report, the net earnings for the year declined somewhat as we continued to have difficulty obtaining rate increases from the Canadian Radio-television and Telecommunications Commission that take into account our sharply rising costs.
While we will continue to press for a more logical and consistent approach to rate increases, the lack of increases will continue to negatively affect our earnings picture. An additional complexity is the increasing uncertainty about the rate regulation process. The CRTC has a new Chairman and there are a number of new appointees expected to the CRTC. However, even this may be of less significance because it now appears likely that rate regulation will move to the provinces.
It is this concern amongst others that has led the management into new ventures in Canada that are not rate regulated, and into the more entrepreneurial environment of the United States.
MULTI-POINT DISTRIBUTION SERVICE
Since May 1979 we have initiated a number of new operations on the West Coast of the United States in the over-the-air pay television industry. Two of these, CALSAT and Northwest Entertainment Network Inc., are joint ventures. More recently we have opened our own wholly owned operation in the San Francisco area.
Pay television is a competitive business in the United States but we believe that the over-the-air form of pay television known as MDS is an effective way of providing pay television to communities that either are not cabled, or where the cost of cable may be an expensive addition when only pay tv is desired or needed. These start-up operations have not yet made a positive contribution to earnings, and are not likely to have a significant effect during the 1979/80 fiscal year. However, as this service meets a definite need and is essentially free of regulation in the United States, we believe it will be a significant factor in the company’s operations in the years to come.
SERVICING OUR SUBSCRIBERS
Other non-regulated areas we are investigating include providing services to our subscribers that do not directly involve cable. For example, we are concerned that our subscribers are not getting adequate information about the specialised programming we provide such as our Channel 10 community programming operation. This was one of the reasons we purchased a 50% interest in TV Week. This highly successful publication which serves the Lower Mainland and Vancouver Island in British Columbia will continue as a stand alone publication, but now the close cooperation with the Premier licensees should enable them to provide better programming information to our many subscribers. We believe we can in turn help TV Week by expanding their circulation.
A second type of service planned is the provision of high quality products to our subscribers. We are investigating a direct mail service to our subscribers, however, we are very sensitive to the subscribers’ privacy and will ensure that no subscriber receives mailings that he or she does not wish.
We believe that through bulk buying of select merchandise, we can provide our subscribers with a most useful new service.
These thrusts into non-regulated areas do not mean that Premier is de-emphasising its cable operation. Quite the contrary, we recently applied for the licenses to wire a number of north central B.C. communities including Fort St. John, Dawson Creek, Chetwynd, Mackenzie and other areas. The name of the proposed company is Peace River Systems Limited. The CRTC has not yet made a decision on which of several applicants will receive these licenses.
Secondly, we have taken an option to acquire shares of a new cable operation in the City of Camus in the State of Washington. We are providing debt financing in the amount of $800,000 U.S. and have an option until December 31st, 1994 through our Netherlands company to acquire 80% of the issued shares. There is precedent for this approach in FCC decision, although specific permission would have to be sought before the option could be exercised as long as we are still partially owned by CBS. The option could of course be sold should we continue to be constrained from direct entry into the cable television business in the United States by reason of the CBS position in Premier.
While these two initiatives in the cable field occurred after the end of the fiscal year, we of course did get approval during the last fiscal year for our 45% interest in Western Cablevision Limited who, along with its wholly owned subsidiary MSA Cablevision Limited, provides service to nearly 70,000 subscribers in New Westminster, Langley, Surrey, Abbotsford and Matsqui in British Columbia.
Our dedication to cable as a preferred means for delivering a variety of video and other signals to the home remains intact. This is particularly true in Canada where we hope that in the next 12 – 18 months we will get permission to proceed with pay television over cable.
A CHANGE OF NAME
We are proposing to the shareholders today that the name of the company be changed to Premier Communications Limited. This is a significant change for it recognises that Premier is becoming a more broadly based organisation with interests in a publishing business, direct mail and broadcast pay television -all forms of communications not involving cable. It was always confusing to the CRTC and others to call Premier a cablevision company when in fact it does not directly own any licenses for cable television. It is our subsidiaries who have licenses for individual areas, and it is these subsidiaries who are subject to CRTC or other regulations.
Premier is essentially a holding company for a variety of operations in the communications field, using the term communications in its broadest sense.
BID FOR PREMIER BY CCL
Of the many activities involving Premier over the last nine months none has drawn more attention than the proposal to put Premier and Canadian Cablesystems Limited together to form the largest cable communications operation in Canada, and one of the largest anywhere in the world.
I believe that the offer made to the major shareholders of Premier by CCL is at a fair and reasonable price. The approval for the transfer of ownership will be the subject of a Hearing by the CRTC around the end of April, 1980.
Management believes that such a joining of interests will be of significant benefit to the industry, the shareholders and of great importance to the subscribers.
The industry will be strengthened in much the way that the presence of an IBM or a Bell Telephone has respectively strengthened the computer and communications industries. The cable television industry needs a single strong presence that can provide financial, technical and programming leadership which can in turn be shared by other companies in the industry.
The present shareholders of Premier, we believe, will benefit by having the option of receiving a fair price for their shares or being part of a much larger operation which will be more diversified in its product lines and its geographic operations, and will benefit from the combining of the two management groups.
Finally, the subscriber will benefit through more variety in programming and better plant reliability and capability through the pooling of engineering talents. The subscriber should benefit through better price performance as the combined companies will be able to spread the expenses of engineering, share the risk of developing new applications and bring the benefits of bulk purchasing to help hold costs in line in the future.
For all these reasons the management of Premier will be working closely with the CCL management group to convince the CRTC that such a move will be a major step forward for all concerned.
I expect that 1980 and beyond will be very exciting years of Premier and hopefully for the combined CCL/Premier group. There is always some concern by the staff in each organisation when two companies plan to get together. However, the greatest need in our industry is for more people to undertake the many new projects which the combined companies could now undertake. I am sure one of our challenges will be to find enough people to do everything that needs to be done.
I know I speak for the shareholders and the Board of Directors when I indicate how much we all appreciate the continued fine efforts by the Premier staff at all levels. For my part, my first nine months have been among the most interesting and challenging of any period I can remember. My prediction for 1980 is that the last nine months will, in retrospect, appear as a quiet prelude to a very exciting time.