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Cogeco Cable acquires Toronto managed services provider

The acquisition of Quiettouch Inc. may be profitable but probably not enough to extend Cogeco's national reach, one analyst says

Cogeco Cable Inc. took a step toward broadening its managed services portfolio and its reach within the large enterprise market with the acquisition of Quiettouch Inc. announced in June. Quiettouch, based in Toronto and Vancouver, provides managed security and recovery services, data centre services and network services.

Both Quiettouch and Cogeco are unable to comment further on the details of the acquisition before the transaction is fully closed later this summer.Cogeco, which provides Internet and telephony services and has a data services subsidiary, did write in a press statement that this acquisition will help it move into the medium and large enterprise market.

The attractiveness of the acquisition is clear, according to Darin Stahl, a lead analyst with London, Ont.-based Info-Tech Research Group. Sixty-four per cent of enterprises will do some kind of data centre outsourcing, Of that market, 40 per cent will do managed services, he said.

“It’s extremely profitable,” he said, since managed services provide margins of 25 per cent and higher. “Adding the managed services really kind of helps attract business at an enterprise level, he said. “That relationship is really sticky; it lasts a long time.”

Still, the acquisition may not help Cogeco compete nationally, since its large competitors such as Telus also have strong managed services portfolios. “They’re really only going to be extremely successful in the Ontario and Quebec markets,” he said. “There’s just a number of vendors out there already in the space,” he said. “A lot of them will offer managed services or kind of a hybrid.”

“They’re going to have to grow some to compete with the nationals,” he added. In terms of making Cogeco itself a more attractive acquisition target, if a larger provider were looking to acquire Cogeco assets, it would likely be for the geographic customer base rather than its own managed service portfolio, he said.

Ottawa, for example, has the “contract engine” that is the federal government, which would be an advantage for service providers looking to grow in Ontario, Stahl said. “IT groups and particularly large enterprises need very much diversity.”