The Motley Fool

Where to Hide in Canada’s Telco Space if Verizon Comes North

One of the big pieces of news to roll through last week was that U.S. telecom giant Verizon (NYSE:VZ) is considering setting up a wireless operation here in Canada.  And while we noted the probability of this occurring is pretty low, the company did indeed admit to at least sniffing around.

Even though this is not great news for Canada’s wireless incumbents, the shares of the Big 3, namely, Rogers (TSX:RCI.B), Telus (TSX:T), and BCE (TSX:BCE) have held in relatively well in the face of this competitive threat.  Clearly, Mr. Market agrees that the probability of Verizon entering our market is a long shot.

And while the market might be ignoring this scenario, the sell-side is not.  Regardless of the probability, Verizon’s possible entry makes for a compelling story.

The analyst at Desjardin Securities put out a piece today that runs through the scenario and the potential impacts a competitor like Verizon might have on the wireless industry.  The disruption that Verizon is sure to bring to our market will have a sizeable impact on both the incumbent’s current market share, as well as margins.

The names in Canada’s telecom space that appear to be least exposed to this issue are Shaw Communications (TSX:SJR.B) and Bell Aliant (TSX:BA).  Neither have any material exposure to wireless.  Beyond these names, the Desjardins analyst also expects that Quebecor (TSX:QBR.B) and BCE will come out relatively unscathed.  Quebecor has a strong regional presence in Quebec and is currently growing its wireless share, and BCE has a relatively low exposure to wireless as part of its business mix.  At least compared to Rogers and Telus, who would be most negatively impacted by the Verizon scenario.

Foolish Takeaway

Stocks in this space are down since the VZ news broke but this has more to do with the broad market’s performance and what’s going on with interest rates.  Stay tuned however as should it become more likely that Verizon is going to indeed make a move into Canada, it won’t be a good thing for the likes of Rogers and Telus especially.

Canada’s telecom space is a haven for investors that are looking for yield.  To add some diversity to your income-producing portfolio, simply click here to download our FREE report “13 High Yielding Stocks to Buy Today”.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own any of the companies mentioned in this report.  The Motley Fool has no position in any stocks mentioned at this time

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.