Investors too focused on Rogers wireless division: analyst

Investors are overly preoccupied with the wireless divisions of telecom companies, and as such have been overly punitive toward Rogers Communications Inc. this summer, according to a look in on the telecom industry published Thursday by National Bank Financial Markets analyst Adam Shine. In mid-June, when Rogers introduced its “unlimited” data plan, the other big telecom companies quickly followed suit, introducing or announcing their own unlimited plans. Prices then dropped across the industry, according to Consumer Price Index data from Statistics Canada released in August. Writing on Thursday this week, Shine reassured investors. “We fully expect Rogers and the industry to get through the J-Curve of its ‘unlimited’ plans through coming quarters,” he wrote, adding that Rogers is the most exposed to wireless of the six companies he looked at in the report, accounting for 60 per cent of the company’s revenues. “ ny negative headlines or less than positive chatter in the sector disproportionately hits Rogers shares,” Shine wrote. “We understand that investors are concerned about the near-term impact of ‘unlimited’ plans on Wireless growth,” Shine wrote, pointing out that the Rogers’ management has said the plans favour subscriber upgrades rather than downgrades. Shine wrote that the issue of MVNOs looms large. “nvestors are likely concerned about the prospect of mandated MVNO late next year which will inevitably only debut at a later date once pricing is properly established, which likely requires more hearings,” Shine wrote. Shine also said that the National Bank is lowering the earnings multiple used in its valuations by 25 basis points, from 7.75x to 7.5x, indicating slightly lowered performance expectations for the stock. The bank uses a multiple of 8.25x for BCE Inc. and 8.0x for Telus Corp. Shine concluded by saying that while “we try to refrain from telling Boards and management what to do,” Rogers should “find a way to highlight the obvious value” of other aspects of the company’s business, like its investments in Cogeco Inc. and the Blue Jays. In his note on Friday, Desjardins analyst Maher Yaghi said that the NDP’s telecom plan promoted by leader Jagmeet Singh last Friday -- which includes a price cap -- “would likely be a negative in terms of telecom stock valuation,” but also noted that it was unlikely that the NDP would win a majority. “We believe the sector is already under significant scrutiny from federal regulators and that the current leaders in the election race, the Liberals, consider the telecom issue a work in progress rather than a field in need of a revolution.” According to anonymous media reports, the Liberals are also considering including price caps in their election platform.

Investors too focused on Rogers wireless division: analyst

Brief | September 20, 2019

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Investors too focused on Rogers wireless division: analyst

Brief | September 20, 2019

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