Rogers, Quebecor, Cogeco lag behind in pandemic pick up: analyst

Of Canada’s big three telecom companies, Rogers Communications Inc. is the one most affected by the COVID-19 Delta wave and the looming Omicron variant. However, with the Shaw Communications Inc. merger on the horizon, things should be picking up for the incumbent, according to a National Bank analyst. Quebecor Inc. and Cogeco Inc. are also lagging behind in their economic recovery, but it has nothing to do with the pandemic, Adam Shine wrote in a Thursday note. “Much has been written over the past two years, let alone last two months, about Rogers and its underperformance during the pandemic given its mix of assets, but its 3Q21 results reflected signs of progress with more traction ahead,” Shine wrote. Shine said Rogers’ shares are not likely to fall below the $55 mark, as management is “confident” it will gain approval to acquire Shaw with the expectation of a mandated divestiture of Shaw Wireless. “The company's prospects look brighter heading into 2022 than they appear to have been in recent years,” he wrote, noting that the Rogers family dispute over the company's board seems to have largely concluded. “The board has been legally reconstituted, while management changes have occurred with a permanence at key levels still to be fully determined over coming months.” Shine noted that government restrictions appear to be lessening thanks to the vaccination rollout, even with the threat of the Omicron variant, which will take some pressure off the stocks. During the initial phases of the lockdown, Canada’s four largest telecoms companies faced an average decline of 30 per cent, while Quebecor and Cogeco saw a 25 per cent and 18 per cent decline respectively. “Interestingly, the latter two names have since lagged for mostly different reasons, while Shaw was pushed higher by the Rogers takeout offer which came mid-March this year and Telus Corp. and BCE Inc. have benefited from solid ongoing execution,” he wrote, adding that “more benign than expected” CRTC decisions related to third-party internet access and mobile virtual network operators (MVNOs) helped the incumbents. Shine said management changes announced at Quebecor this past spring coincided with a decline in the stock that has been “exacerbated by market concerns regarding how it will pursue wireless outside of Quebec.” Shine said the company’s attempt to become the fourth national competitor has “seemingly been perceived by many as a risky bet” with material network investments to be required. He said the industry will first need clarity on the potential Shaw Wireless divestiture, a decision expected to be released in the second fiscal quarter of 2022. “If Quebecor doesn't get a chance to buy Shaw Wireless for $3.5 billion to $4.0 billion (no equity issuance expected), then it remains to be seen if a launch of Fizz Mobile outside of Quebec will be more limited in scope, especially if private equity ends up buying Shaw Wireless,” he noted. Shine said an MVNO agreement will be the alternate path for Quebecor if it wants to pursue business outside of its home province. The latter option would be done “on a more measured basis” compared to acquiring Shaw Wireless, according to Shine, because it would involve bringing aboard strategic, financial, and infrastructure partners to help mitigate cost and risks. Shine said Cogeco’s “disproportionate decline” over the past five months also had little to do with the pandemic and attributed it to a decline in U.S. political advertising in 2021 following the presidential election. Shine said since the end of 2019, Shaw, Telus and Bell have recovered their shares by 41 per cent, 17 per cent and seven per cent respectively, while Rogers has declined by 11 per cent, Cogeco by 14 per cent, and Quebecor by 15 per cent. — Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Rogers, Quebecor, Cogeco lag behind in pandemic pick up: analyst

News | December 2, 2021

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Rogers, Quebecor, Cogeco lag behind in pandemic pick up: analyst

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