Canadian Competition Bureau - an independent law enforcement
agency, announced that it is suing the three big wireless carriers
of Canada and an industry association for about US$31.79 million
because of misleading advertisements of text messaging
According to the Competition Bureau,
Rogers Communication Inc.
Bell Canada Inc.
), the three telecom giants have aired some deceptive
advertisements indicating that some texts and applications were
free. However, these services are chargeable and customers only got
aware of it after receiving hefty mobile phone bills.
The Bureau points out that the companies in association with the
industry body sell premium rate services to their customers like
trivia questions and ringtones, parking fees payment, voting their
favorite contestants and costs as much as $10.25 per transactions.
In addition to the financial penalties they want the telecom
companies to make full refunds to their customers and stop those
Furthermore, the federal body is also seeking $1.3 million from
the Canadian Wireless Telecommunication Association (CWTA) against
the allegation, which is yet to be proven in the court. The main
industry body has argued that the wireless carriers do not have any
control over this premium rate services, developed by third
parties, but manage the billing on their behalf.
We believe if the telecom carriers are forced to postpone this
service then it will face a serious blow to their value added
service segment which generates a considerable part of their
wireless revenue. On the contrary, the third party carriers, who
are unfairly charging their customers, will escape unhurt and the
root cause of the problem will remain unresolved.
The current Zacks Consensus Estimate for Rogers Communication
Inc. is pegged at 87 cents for the third quarter with a growth rate
estimate of (0.95%). For 2012, the Zacks Consensus Estimate stands
at $3.09 with a growth rate of (3.81%) but for 2013, the Zacks
Consensus Estimate stands at $3.30 with a growth rate of 6.73%.
We retain our long-term Neutral recommendation on Rogers
Communication. Currently, Rogers has a Zacks #3 Rank, implying a
short-term Hold rating.
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