BMO report dims views on Canada's telecom giants, predicting sales pressure and margin squeeze
Shares of BCE Inc. fell significantly, reaching their lowest point in over ten years, as reported by Financial Post.
Meanwhile, Rogers Communications Inc. saw its largest decrease of 2024. This downturn followed a pessimistic report from BMO Capital Markets on the outlook for Canada's telecom sector.
BMO's analyst, Tim Casey, revised his price target for Rogers down to $65 from $80 and downgraded his views on BCE and Quebecor Inc. These companies, including Telus Corp., constitute the leading entities in Canada's wireless and cable market.
Casey anticipates that increased competition and diminishing cable revenue will impact Rogers' primary sales into the third quarter. Additionally, a competitive pricing conflict in Quebec between BCE and Quebecor is leading to squeezed profit margins.
By 2 p.m. in Toronto, BCE's shares dropped by 2.5 percent to $44.74, marking its lowest intraday level since October 2013, with Rogers and Quebecor both experiencing a downturn of around three percent.
This decline in Rogers' share value occurs nearly one year after its significant acquisition of Shaw Communications Inc., a primary rival of Telus in various Western Canada markets.
While some analysts have expressed optimism regarding Rogers due to anticipated cost-saving measures and the potential for increased cash flow from its cable and internet operations following the merger, Casey's analysis suggests that intensified competition is eroding cable revenue.
Consequently, he has reduced his EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) projection for Rogers by approximately seven percent for the current year and six percent for the following year.
