On Apr 11, 2014, we issued an updated research report on
Rogers Communications Inc.
). We believe that significant expansion of LTE networks and an
attractive dividend yield will support the stock price in the
Rogers has delivered negative earnings surprises in all four
quarters last year, with an average beat of negative 4.32%. The
company reported mixed fourth-quarter 2013 financial results,
where its 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, LTE network was deployed in 90
Canadian cities, which now covers over 60% of Rogers' footprint.
Furthermore, the company has also entered into a 20-year deal
with Videotron to expand the 4G LTE coverage across Québec and
the Ottawa region in Canada. Both the companies will share the
newly-built network across these rural areas of Canada, bridging
the gap between rural and urban network speed.
Recently, the company launched a first-ever mobile wallet called
Suretap, which is expected to encourage mobile payments in
Canada. The company also unveiled a digital subscription magazine
called Next Issue Canada. Moreover, the launch of the Share
Everything service plan - which allows individuals, families and
small businesses to share wireless data, provides unlimited
nationwide talk and text, call display and voicemail facilities
across 10 wireless devices - will not only drive ARPU but will
also drive subscriber growth. Moreover, increased dividend
payments coupled with share repurchase plans will continue to
boost shareholders wealth going forward.
On the flip side, Rogers' Cable operations are currently facing
) entry into cable TV services is imposing competitive pressure,
and may likely slash Rogers' market share and impede cap margin
expansion. Rogers' Media segment was affected by continued
softness in the advertising market. We believe that much of the
Media segment's growth is dependent on the strong viewership
rating of Rogers' radio and TV broadcasting operations. To remain
competitive, the company needs to heavily invest in new TV
programs and TV channels. This may result in huge cash drain from
Rogers' balance sheet.
Moreover, a highly leveraged balance sheet, weaker smartphones
activations in the fourth quarter of 2013 and stiff competition
from other industry players like
Shaw Communications Inc.
) will continue to act as headwinds for the company while moving
Rogers currently carries a Zacks Rank #3 (Hold).
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