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BCE Inc. (BCE $33.17)
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Rogers Communications Inc. Class B Non-voting Shares (RCI.B $46.19)
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TELUS Corporation (T $17.44)
Analyst Vince Valentini is no longer recommending buying shares of the Montreal-based communications services company. He cites concerns about the price war in the Canadian wireless sector, which has also led him to discontinue his recommendations for shares of competitors Rogers and Telus. The expected weak growth in the wireless market and the intensity of competition have prompted the TD expert to lower his expectations for the industry's major players. He noted "very aggressive" offers to attract customers, particularly at the end of March, and observes a race to the bottom with no winners. "This pricing doesn't stimulate better subscriber growth across the sector; on the contrary, it leads to an increase in churn."
Thank you
TD Securities downgraded all three major Canadian telecom companies (BCE, RCI.B, T) to a HOLD. The flanker brands (Fido, Chatr for Rogers, Virgin Pulus, Lucky for Bell, and Koodo and Public for Telus) have offered strong promotions ($25 for 80GB Canada-US-Mexico plans) and these promotions have not resulted in meaningful subscriber growth. The result has actually been elevated churn and negative repricing. This is likely a result of getting close to late-cycle for mobile phones, where almost everyone already has mobile service, and so the end result is more churn rather than net new user growth. We think that these dynamics can place continued downward pressure on the telecoms, where they will likely need to seek growth opportunities elsewhere (Bell AI Fabric for example).