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Quebecor sells its Nurun subsidiary to French firm for $125 million

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MONTREAL - Quebecor Inc. said Tuesday it has sold its digital design and marketing services subsidiary Nurun to French advertising company Publicis Groupe for $125 million.

The company said the sale is part of its move to focus on what it considers its core operations.

"We have therefore sold Nurun, a consulting firm specializing in digital innovation, design and technology, since its operations no longer fit with our core businesses," chief executive Pierre Dion said in a news release on Tuesday.

Nurun, which has 11 offices and 1,100 employees around the world, will continue to operate under its current management team with Jacques-Herve Roubert as president and chief executive, the company said.

"Publicis Groupe is a leader in digital communications, and we believe Nurun’s growing business will benefit from being a part of it," Roubert said in a statement.

Quebecor and its Quebecor Media subsidiary are focused on telecommunications, news media, broadcasting and publishing.

The Quebec company bought wireless spectrum earlier this year in Ontario, Alberta and British Columbia for $233 million, giving it the possibility of expanding beyond its provincial borders.

Some analysts have said the company may work with other carriers, or buy Wind Mobile, to launch a national service, but no deals have been announced so far.

Canaccord Genuity analyst Dvai Ghose said the sale of Nurun is small compared with the $2 billion or so he estimates would be needed for national wireless expansion.

"We continue to view national wireless expansion as more of a risk than an opportunity for Quebecor due to the history of telecom new entrant failures in Canada," Ghose wrote in a note.

Barclays analyst Philip Huang, who has been less certain that expansion outside of Quebec is out of the question, wrote Tuesday that Quebecor management would probably prefer to see if all the right conditions fall into place before deciding.

However, Huang added that Quebecor's wireless business in its home province is strong — with about 12 per cent of the total market — and may be undervalued due to its potential to significantly grow Quebecor's profits over the coming year.

"While this transaction is not very material to Quebecor, we view it favorably as it reflects management's ongoing discipline to refocus its resources on the core businesses (cable, wireless and media), and Nurun has become less important to investors," Huang said.

"Quebecor currently faces the greatest growth opportunity and required investment in wireless."

Among the potential uses for the money from Nurun would be for Quebecor's Videotron to offer Apple's iPhone 6, which is expected to be formally announced next week on Sept. 9 and possibly available in U.S. stores later this month, and participation in upcoming auctions of wireless spectrum licences to strengthen its network.

The Nurun money could also be used to speed up the parent company's purchase of the 25 per cent of Quebecor Media that it doesn't already own, Huang wrote.

Ottawa has said it wants at least four wireless carriers competing in each of Canada's major regions to compete against the big three carriers, Rogers (TSX:RCI.B), Telus (TSX:T) and Bell (TSX:BCE).

Quebecor shares closed Tuesday at $28.13, up 39 cents and above the previous 52-week high of $27.87 set on Friday.

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