We reaffirm our long-term Neutral recommendation on
Rogers Communications Inc.
). The company's fourth quarter of 2012 financial results
outpaced the Zacks Consensus Estimates.
Why Kept at Neutral?
Rogersis the largest telecom operator of Canada. Rogers was
the first company in Canada to launch LTE (Long Term Evolution)
network. At present, the company has expanded its LTE network to
60% of Canada. Management expects to achieve 100% foothold by
late 2013. Deployment of LTE network has resulted in an 80% year
over year increase of Internet usage by its subscribers.
Meanwhile, the stock price has moved up 50% in the last year
and is currently trading at the high-end of its 52-week price
range. We believe that Rogers is fairly valued at this stage and
the stock price will not provide above market gain any time soon.
Rogers currently has a Zacks Rank #2 (Buy).
Balanced View on Rogers
Rogers' wireless operations, which account for nearly 57.7% of
the company's total revenue and almost 65% of its EBITDA, are
well positioned in the Canadian market. In the fourth quarter of
2012, the wireless segment activated 940,000 smartphones (up
18.8% year over year). Growing demand for mobile data and huge
activation of the latest smartphones will pave the way for
Rogers' future growth.We believe that significant expansion of
LTE networks and an attractive dividend yield will support the
stock price in the near future.
Rogers has entered into an agreement with
Shaw Communications Inc.
) to acquire Shaw's cable system in Hamilton, Ontario and secure
an option to purchase Shaw's Advanced Wireless Services (AWS)
spectrum holdings in 2014. Rogers will sell its one-third
interest in specialty channel -Tvtropolis - to Shaw and also
entered into negotiations with Shaw for the provision of certain
services in Western Canada.
Nevertheless, Rogers' Cable operations are currently facing
) entry into cable TV services through its subsidiary Bell Canada
is increasing competitive pressure, and will probably slash
Rogers' market share and cap margin expansion. BCE Inc. is
aggressively rolling out IPTV network. Another competitor,
), is rapidly gaining market traction. At the end of 2012, TELUS
had 678,000 IPTV customers, up 33% year over year. Such robust
growth in IPTV subscribers was mainly attributed to higher demand
for its Optik TV services.
BCE INC (BCE): Free Stock Analysis Report
ROGERS COMM CLB (RCI): Free Stock Analysis
SHAW COMMS-CL B (SJR): Free Stock Analysis
TELUS CORP (TU): Free Stock Analysis Report
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