On Sep 27, we maintained our Neutral recommendation on
Rogers Communications Inc.
). In the recently concluded second quarter, the company's bottom
line missed the Zacks Consensus Estimate but the top line
outpaced the same.
Rogers was the first company in Canada to launch LTE (Long Term
Evolution) network. Initially, the company deployed LTE network
in 90 cities of Canada, covering over 60% of Rogers' footprint.
The company also offered a variety of LTE-enabled smartphones.
Further, the company teamed up with a Hong Kong-based carrier to
offer the first LTE roaming service to its subscribers in Hong
Kong and also joined forces with Swisscom AG to offer roaming
service to subscribers traveling to Switzerland.
Rogers received CRTC's approval to gain complete control over
sports television network - Score Media Inc. - Canada's
third-largest specialty sports channel. The Score Media Inc.
acquisition will provide Rogers the right to access television
assets of the Score Television Network along with an additional
6.6 million television subscribers, thereby driving revenues.
Moreover, the company plans to acquire Pivot Data Centres Inc.
from private equity firm, Sverica International, for
approximately $150.7 million. Earlier, it bought BLACKIRON Data
from Primus Telecommunications Group for $200 million.
Rogers also received an authorization from the Office of the
Superintendent of Financial Institutions of Canada to start
credit card service. This facility will be launched in 2014.
Softness in the advertising market due to the lack of investment
in TV content may hurt profitability in the near future. The
increased competition in the cable TV business after BCE Inc.
entered the Canadian market could also add to the woes. Moreover,
the Canadian regulatory authority's decision to grant licenses to
four new operators in order to improve national wireless service,
subsequently increasing competition in the Canadian wireless
market, may further act as a headwind for Rogers.
Furthermore, the company has a highly leveraged balance sheet
with a debt-to-capitalization ratio of 0.71. Hence, we believe
that increased dividend payment coupled with an aggressive stock
buyback plan and deployment of 4G LTE across its footprints may
further exert pressure on Rogers' cash flow, moving ahead,
thereby widening its current debt-to-capitalization ratio.
Rogers Communications carries a Zacks Rank #4 (Sell).
Other Stocks Outlook in Related Industries
Other stocks in this sector like
) are set to gain from the extensive/increasing LTE deployment in
the upcoming days. Currently, all three have a Zacks Rank #3
BCE INC (BCE): Free Stock Analysis Report
ROGERS COMM CLB (RCI): Free Stock Analysis
SPRINT CORP (S): Free Stock Analysis Report
TELUS CORP (TU): Free Stock Analysis Report
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