Canada’s telecom sector won’t be quiet in 2024 as dominant players prepare to contend with burning issues such as competition, consumer rights, affordability, and universal access.
An industry shakeup is likely next year because of the mandate by Industry Minister Francois-Philippe Champagne requiring the Canadian Radio-television and Telecommunications Commission (CRTC) to prioritize the issues mentioned above. But one interesting item on the directive involves the top two telcos.
BCE and TELUS must provide independent competitors access to their fibre-to-the-home networks in Ontario and Quebec within six months, but they oppose the proposal. Meanwhile, if you want exposure to the sector, the third- and fourth-largest telcos are viable options.
Rogers Communications (TSX: RCI.B) and Quebecor (TSX: QBR.B) are slowly gaining ground following the former’s merger with Shaw Communications. Shaw gave up Freedom Mobile in favour of the latter. Both telecommunications stocks love the fruits of their respective deals.
Synergies from the merger
Rogers’ President and CEO, Tony Staffieri, said the Q3 2023 results reflect seven straight quarters of growth and momentum. In the three months that ended Sept. 30, 2023, total revenue jumped 36% to $5 billion versus Q3 2022, although net loss reached $99 million compared to the $371 million a year ago.
Management said Rogers incurred a net loss due to higher finance costs and costs related to the Shaw transaction. The bright side is that the Shaw integration is proceeding well and enhancing the investment thesis for the stock. Thus far, Rogers has realized approximately $140 million in cost savings during the quarter.
Its CFO, Glenn Brandt, expects $360 million or more in synergies from the merger by year-end. Besides investing over $1 billion in wireless and wireline network infrastructure, Rogers launched 5G service for all transit riders in the busiest sections of the Toronto Transit Commission (TTC) subway system.
Other business highlights during the quarter were higher year-over-year revenues from cable (+105%), total service (+40%), wireless (+15%), and media (+11%). Rogers’ strongest loading on record was the postpaid mobile phone net additions of 225,000 in Q3 2023.
Year-to-date, postpaid mobile phone net additions climbed 39% to 490,000 versus Q3 2022. If you invest today, Rogers trades at $60.69 per share and pays a 3.3% dividend.
Top performer
Quebecor is the top-performing telco stock at the start of December. At $31.12 per share, current investors are up 7.1% year-to-date and enjoy a 3.86% dividend. The $7.3 billion telco is out to cement its industry position as Canada’s fourth national carrier. Its CEO, Pierre Karl Péladeau, said Freedom Mobile is a growth driver.
In Q3 2023, consolidated revenue and net income rose 23.8% and 15.7% to $1.4 billion and $209.1 million, respectively, versus Q3 2022. Quebecor’s telecommunications revenue alone climbed 30.6% year over year to $1.2 billion.
Integrating Freedom’s operations is ongoing and should result in the best product offerings, service, and prices. Also, the upgrade of Freedom’s wireless network continues and the rollout of 5G services has begun.
Exciting year ahead
Next year should be exciting for the telecom industry. Rogers Communications and Quebecor could steal the limelight from BCE and TELUS. The CRTC might also have a new regulatory framework and new rules in 2024 that benefit customers.
