Canadian Telecom Sector: A New Era of Competition
By Andre-Philippe Hardy and Drew McReynolds
Published May 3, 2023 | 12 min listen
In this episode of the Industries in Motion podcast, Drew McReynolds, Managing Director and Telecommunications & Media Analyst, and Andre-Philippe Hardy, Head of Canadian & APAC Research at RBC Capital Markets, examine what will be a new competitive and regulatory landscape for Canadian telecom companies following the recent merger of Rogers and Shaw and the sale of Freedom Mobile to Quebecor.
Disclosures and Disclaimers
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We believe the Canadian telecom sector is at another major structural crossroad in 2023 with the Rogers-Shaw-Quebecor transactions, 5G and higher interest rates putting competitive structure, growth and valuations to the test. In our view, the Rogers-Shaw and Quebecor-Freedom Mobile transactions carry a very high degree of industrial logic and tick almost all of the boxes for Canadian telecom policy makers. In the wake of these transactions, we expect the telecom industry to become increasingly competitive in the months and years ahead while garnering greater regulatory scrutiny.
What does this mean for consumers and wireless prices? As part of gaining government approval for its acquisition of Freedom Mobile, Quebecor has committed to ensuring that its wireless plans in BC, Alberta, Ontario are at least 20% lower than the equivalent plans offered by the big three wireless providers (Rogers, BCE and TELUS). We also expect Quebecor to accelerate 5G deployment, be much more promotionally active and fully leverage the benefits of additional network support that Rogers will be providing to Freedom Mobile as part of the transaction. In addition, the CRTC is implementing a new wireless regime across the country to the benefit of regional wireless players like Freedom Mobile. In aggregate, all of these developments in our view should translate to a more competitive wireless market with declining wireless prices for consumers.
Contributing to a more competitive telecom sector over the next few years will be ongoing 5G deployment and an expansion of new internet options. On the 5G front, the 3800 MHz spectrum auction takes place later this year enabling the Canadian operators to begin fully deploying the most important spectrum for 5G thereby delivering on the long-standing promise of greater speed/capacity and lower latency. On the internet front, we expect major fiber deployment by the incumbent telcos, emerging satellite broadband and fixed wireless alternatives and forthcoming regulation that is likely to attract more resellers to translate to a much more competitive internet market across Canada. Against this backdrop, we believe the Canadian telecom industry is truly embarking on a new era of competition.
Drew McReynolds
Canadian Telecommunications & Media Research
Drew is a Managing Director of RBC Capital Markets and is responsible for providing equity research on the Canadian telecommunications and media sector. Drew has over two decades of experience in equity research, taking a unique inflection period approach to analyzing the significant structural changes across the sector. Over the past decade, Drew has consistently been among the top-ranked analysts in Greenwich and Brendan Wood surveys in both telecom and media, and has received multiple StarMine awards for stock picking. Prior to joining RBC Capital Markets in 1999, Drew spent five years in the banking and financial services practice of Ernst & Young as an auditor and consultant in Canada and Southeast Asia. Drew received an honors bachelor of commerce from Queen's University in 1994, earned a CA designation in 1998 and completed the CFA program in 1999.
André-Philippe Hardy
Head of Canadian & APAC Research
André-Philippe Hardy is Head of Canadian & APAC Research at RBC Capital Markets, a premier investment bank that provides a focused set of products and services to corporations, institutional investors and governments around the world. RBC Capital Markets’ Canadian equity research team is consistently top-ranked by institutional investors, as per the Brendan Wood International, Greenwich and Institutional Investor surveys. Prior to becoming Head of Canadian Research in November 2013 (he was appointed Head of APAC Research in November 2019), André led RBC Capital Markets’ Canadian financial services Equity Research team for six years, with direct coverage of banks and insurance companies. Throughout his career as an equity analyst, Andre was ranked consistently as a top analyst in his sectors in industry surveys, while his stock-picking success was validated by his StarMine rankings and his work was often quoted in the financial press. His primers on banking and insurance were unique products, which were widely read by investors as well as management teams. Andre joined RBC Capital Markets in 2007 after almost a decade in the equity research departments of Merrill Lynch Canada and TD Securities.
5GAndré-Philippe HardyDrew McReynoldsIndustries in MotionInterest RatesTelecommunications