FIRESIDE CHAT

JANUARY, 1980

Hi, this is really in the form today, of a “fireside chat”. You know I called Martin Truax a couple of days ago and suggested that I’d like to make another tape, just to let you get an idea of what’s going on in the Company, and Martin said, “Well you cut the last two tapes in the studio atmosphere, why don’t we come out to the house?” So, what’s happened is that Al and Andrew and Jeff Franklin arrived here at the house first thing this morning and set this up in my own recreation room.

This is also the first chat that I have had with you as President of Premier Communications Limited. Now you may recall that I did mention some time ago that it seemed to make sense to me, to change the name of the Company from Premier Cable-vision to Premier Communications and that move was approved by the shareholders at the Annual Meeting on January 10th. Now the reason is very straight forward frankly, we’re expanding into a lot of new areas these days and as Premier is not really a cable licensee, per se, then it was confusing to people to use the name ‘cablevision’ in the name of the Company. York has a cablevision license, Vancouver has a cablevision license, so does Borden, but Premier really does not. But far more important, we are moving into new areas that are really not directly related to the cablevision business. And I’ll come back to a few of those in a moment. But let me first tell you what else happened at the Annual Meeting and at most Annual Meetings, not an awful lot of great excitement happens, but I did report on the first quarter results this year, that’s for the quarter ending November 30th. And there we found that the Company was doing quite well, didn’t really make an awful lot of forward progress over what happened in the corresponding year last year, but as I may have mentioned in some previous chats with you, the difficulty is that we’re faced with constantly rising costs and very little opportunity to get rate increases. The rate increase we looked for in Vancouver was turned down, temporarily we hope, we decided that it didn’t make much sense to go for a rate increase at this point in Victoria for a variety of reasons and we still don’t know what is going to happen at Fraser. So for a lot of these reasons, we’re finding that the revenue is staying fairly steady at the moment and the costs are going up. Well, so much for the financial side.

I said what I would like to do is just tell you a little bit about some of the new things that are happening within the Company. And one of the first things we announced, just a few days ago, is that we had completed the purchase of TV Week. Now we’re only 50% partners in TV Week, but our belief is that this is going to be of a major benefit in the British Columbia area to our subscribers. TV Week is a very highly regarded publication which gives TV listings, and happens to give the best coverage of anyone of our channel 10 operations and our other special programming operations. Now, this publication covers about 125,000 subscribers at the moment in the Lower Mainland area and on Vancouver Island. And our hope is that we’ll be able to expand their circulation a great deal, as a service partly to our customers. I have met now most of the people who are at the TV Week operation and they look like a great bunch of people to get along with. As a matter of fact, they had a very nice lunch for us the other day just to sort of welcome us as 50% partners in the operation. We thanked them very well for all this until we suddenly realized that of course, as partners, we were paying for half the lunch!

Well, that’s only one thing that we’ve been taking a look at. Another thing is that we are trying to develop new services for our customer base and one of the things we are looking at that I commented on to the Annual Meeting, was the possibility of getting in to the direct mail business. You know what we do each month or every couple of months, is send out something to our subscribers that is simply an invoice.

Perhaps we could do more for them than that. We believe that we could provide a whole range of very high quality products that we could offer on a direct mail purchase basis to our subscribers. Thereby providing another new type of service. Now we’ll be very sensitive to the fact that not all subscribers would want that kind of thing. They may not want more mail of that type, and if they don’t want it, we won’t send it to them. But we believe that if we do provide some things that are, perhaps related to the entertainment business, this would be helpful. Now these may be things such as video tape recorders or even TV sets for that matter. But we think there would be quite a variety of these kinds of products. So watch this space, you’ll likely hear some more about that in the next while.

Now another thing that we are taking a look at is of course the expansion in the United States, of this over-the-air pay television business. And I just got back from a two or three day trip visiting the various installations we have there in San Francisco, Seattle and Portland and so on, and these are coming along very well. We’ve built up an excellent staff in these areas and our feeling is that this will be a very major part of our business in the years to come.

Now I want to emphasize one thing, I talked a lot about things that are not exactly in the cablevision business and of course that’s why we changed the name of the Company, as I said earlier. But I don’t want anyone to misinterpret that and think that for any reason we are de-emphasizing cable. As far as we’re concerned, cable is the preferred means of getting signals into the home or into offices. And to demonstrate how much we believe in it, we just late last fall, put in an application to get cable licenses for a number of areas in the central/northern part of British Columbia. We established a company called Peace River Systems Limited and that covers areas such as Chetwynd, Mackenzie, Fort St. John, Dawson Creek and so on. And we believe that we can provide a very, very fine service to these people. We’re not of course sure that we’re going to get that license yet, but at least it indicates that we’re continuing to expand the cable business in Canada.

We also are looking at the cable business in the United States. Now as you may recall, because we are partially owned by CBS, and they are a broadcaster, we can’t directly own a cable company in the United States, at least not yet. But what we did do is like to make an investment in a company called Radiant TV, which operates in a small city called Camus, which is near Portland. And, we do have an option to buy 8 0% of the shares of that company, should we be allowed to get into the cablevision business directly in the United States.

Now, there is one other topic I did want to cover with you today and I am sure it’s the one that is of most interest of all the things I’ve talked about so far. And that is the upcoming joint operation between the Rogers/CCL Group and Premier Cablevision, pardon me, Premier Communications. What is happening here is that the major shareholders of Premier, have agreed to sell their shares to what would really be Canadian Cablesystems Limited, which I’ll just refer to as CCL. Now because the major shareholders have decided to do this does not mean it necessarily is going to happen, this still has to be approved by the C.R.T.C. and we just cannot predict at this point in time whether they are going to agree with this move or not. But we’re very excited about the possibilities, because what this would do by putting together the two largest firms in Canada, is to make, not only one of the biggest firms in North America, but we believe, one of the best. We feel that over the next few years, we are going to have to be part of a very, very major cable communications operation in North America. We are, believe it or not, in a competitive business. To a degree we’re competitors with the Telcos, the Bell Canada’s, the B.C. Tel’s, whatever. We’re also, to a degree, in competition with any other form of entertainment, in the home or even in the form of movies, or whatever. So to compete logically in this sort of business, we have to be big, well financed and very well staffed. Now, the plans are, at this point in time, to put these two companies together financially, but Premier Communications will stay as a separate company and it will stay with its head office in Vancouver.

When we put the two companies together, Premier will take over the operations essentially for the central and western part of North America. Now the implication of the Premier people will be, that we will pick up responsibility for the CCL operations in Alberta, primarily in the Calgary area. We’ll also pickup, because CBS will no longer be a shareholder at that point in time, the interest in some of the CCL cable operations in the United States, primarily in the Los Angeles area. Now, there will therefore be, not a great deal of change, other than just expansion, for the Premier people operating in the British Columbia area right now. I don’t expect either that there will be a great change for our people in the United States, except that they will in fact be part of a much larger operation than they are right now. I don’t expect either that there is going to be a great deal of change for our operations overseas in Ireland, because really that’s unlikely to be altered in any way by putting the two companies together, except again, that is our hope to keep expanding in the overseas areas, in fact other than in Canada and the United States. However, there will be some changes implied in what I’ve already said, for some of our staff in the Toronto area. Now in the same way that Premier will pick up responsibility for the western part of the United States and Canada, CCL will pick up responsibility for the eastern part of the continent. And that means that our subsidiaries in the Toronto metropolitan area, will then become part of the CCL/Rogers Group. Now I mention this because we will be filing with the C.R.T.C. on or about February the 18th, and between now and then we will be having some discussions with some other organizations about the possibility of doing some further rationalization of the Toronto area. Now when I made a tape in Toronto on November 2nd, I did cover a bit of this with the Toronto staff and tried to point out to them that some more rationalization was going to be almost inevitable in that area. As you are all aware, the Toronto map really looks like a big jigsaw puzzle. Now some of this is going to happen whether we put Premier and CCL together or not. But it is a possibility that we may end up as well as integrating Premier operations with the CCL operations, doing some trading with some of the other organizations working in the Toronto area. And I want to address this in particular, because I didn’t want anyone in the Toronto area to be the least bit concerned about this process.

Ted Rogers and I are very sensitive to the fact that what we will be doing, if indeed we have to do much in that area, will be to trade places not people, and we’ll make every effort to make sure that people who want to stay with the CCL/Premier operation in the area are given the opportunity to do so, those who want to move with whatever territory may be traded with other organizations, would have that opportunity. We’ve set up a joint group with Ron Chaston from our organization and Bill Rogers from CCL, to take a look at some of the implications of all this, and we’ll be reviewing these possible changes with you as time goes on.

I also want to emphasize that there is nothing imminent going to happen on this. There’s no way the C.R.T.C. could make a decision on putting the two companies together much before the end of August. And even if part of that decision involves some additional rationalization of the Toronto area, nothing is going to happen on that for some time after the decision is rendered. So we’ll have lots of time to sort out anything in that area that may be of concern to anyone.

Now let me shift back then to the very positive things that are going to happen as a result of putting these two companies together.

We believe that we can do some very exciting things that can only happen if the Company is a very, very big one and remember that the two companies together will make an organization that will be one of the biggest in North America, right up there with the top two or three companies of any part of the cable communications business. And we spent all last weekend and the we being Gordon Keeble and Harry Davis and Dave Liddell and myself with a lot of the people from the Rogers/CCL Group, just trying to figure out all the things that we could do in the way of new programming initiatives and new applications, and new engineering thrusts and so on. And, I can tell you that we came up with a longer list than we could implement if we were to put three or four companies together. So I do want to emphasize to you all, that we need all the people we can possibly get to make this happen. And we’re very proud of the Premier staff that we have got here and we know that their going to play an integral role in the whole integration as the years progress. Now I do emphasize finally that of course this hasn’t happened yet, its only been agreed to by the shareholders and we just don’t know what the C.R.T.C. is going to think about this operation. It’ll be a big decision for them to make. We expect the filing, as I mentioned, to take place about the middle of February, we expect a hearing, which will take place in Vancouver, to be held about the end of April or the first week of May. And it is our plan to simulcast that hearing with Toronto, so the people that want to make comments about the operation can do so in either city and be heard in the other.

Well, to sum all that up, we really expect that there is going to be a very, very exciting year ahead of us, and I’m going to keep in close touch with you all. I hope if you do have questions, or any concerns as we move through this process, that you won’t hesitate to talk to your Manager about them and we’ll see that we get answers to you as quickly as we can.

So, in the meantime, I hope you have a very fine 1980 and all the best wishes for the New Year.