Neutral Stance on Rogers - Analyst Blog

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On Jan 16, we maintained our Neutral recommendation on Rogers Communications Inc. ( RCI ). In the recently concluded third quarter fiscal 2013, the company missed both the top and bottom line of the Zacks Consensus Estimate.

Why Maintained?

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, Rogers is the first Canadian carrier to offer LTE roaming service to its subscribers traveling to Hong Kong, Switzerland and South Korea.

Rogers is also the first Canadian carrier to strike a Connected Car M2M deal with Sprint to deliver navigation, entertainment, climate control, security and emergency services to its subscribers using the Sprint Velocity solution in their vehicles.

Rogers also happens to be the first Canadian carrier to initiate the suretap Wallet app in collaboration with MasterCard Canada. The service is available on few NFC-based smartphones and provides secure mobile payment service. Recently, the company entered into a 12-year broadcast and multimedia agreement with National Hockey League (NHL) for national rights to NHL games on all platforms and languages.

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 0.70. Hence, we believe that increased dividend payment coupled with an aggressive stock buy-back plan and deployment of 4G LTE across its footprints may further exert pressure on Rogers' cash flow, thereby widening its current debt-to-capitalization ratio.

Rogers Communications currently carries a Zacks Rank #4 (Sell).

Other Stocks Outlook in Related Industries    

Other stocks to consider in the cable and media industry include Cablevision Systems Corporation ( CVC ), Comcast Corporation ( CMCSA ) and Liberty Global Inc. ( LBTYA ). Currently, Cablevision has a Zacks Rank #1 (Strong Buy) while Comcast and Liberty Global has a Zacks Rank #2 (Buy).



COMCAST CORP A (CMCSA): Free Stock Analysis Report

CABLEVISION SYS (CVC): Free Stock Analysis Report

LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report

ROGERS COMM CLB (RCI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CMCSA , CVC , LBTYA , RCI

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