We downgrade our recommendation for Rogers Communications Inc. (RCI) to Neutral as a result of increased competition in the Canadian wireless market. Canadian wireless rates are among the highest in the world. In a bid to improve service and prices through competition, the Canadian federal government has licensed four new operators. Out of this four, Globalive — which will use the Wind Mobile brand — intends to offer service in most of the country.
Canadian cable TV segment is also getting very much competitive. Rogers’ closest rival, Shaw Communications Inc. (SJR), decided to test its super fast network to support Internet access speed of 1 Gbps. For this, the company is set to give trial run of its own fiber-to-the-home (FTTH) network in Vancouver and Calgary.
Furthermore, Bell Canada’s (BCE) entry into cable TV services is increasing competitive pressure, and may likely, in our view, shave Rogers’ market share and cap margin expansion. Bell Canada and Telus Corp. (TU) established partnership to launch their CDMA based wireless networks with HSPA technology in 2010.
Rogers is also feeling the brunt of the slowness in the economy. The general softness in the Canadian economy has negatively impacted Media’s advertising sales, and lowered net additions of most cable and Internet products. The lower net additions of cable telephony lines reflect the impact of a slowing Canadian economy. The softness at Media was due to weakness in advertising-related revenues in Publishing, Radio and Television, and at The Shopping Channel reflecting general retail sales declines.
Read the full analyst report on “RCI”
Read the full analyst report on “SJR”
Read the full analyst report on “BCE”
Read the full analyst report on “TU”
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