Download - Global Maxfin Capital Inc.

Equity Research
TELECOMMUNICATIONS COMMENT
D. Joseph MacKay, CA, CFA– Analyst
647.776.1750 • [email protected]
Industry Canada Pushes Forward With Consumer First Policies
July 08, 2014
Industry Canada announced yesterday that it will auction off Advanced Wireless Services 3 (AWS-3) spectrum licenses in
2015. To encourage increased competition, the Federal government is setting aside one 30 MHz block of spectrum in each
region of the country for operating new entrants. Wireless carriers with less than 10% national and 20%
provincial/territorial wireless subscriber market share will be eligible to bid on licenses where they are currently providing
service. Industry Canada intends to have strict provisions on the auctioned spectrum and has indicated that its auction
period will be shorter and simpler than previous auctions. Industry Canada intends to hold public consultations over the
summer to develop the auction and licensing framework.
ANALYSIS| AWS-3 spectrum covers the 1755-1780 MHz and 2155-2180 MHz bands and is adjacent to the AWS
spectrum auctioned in 2008, which raised $4.2B. The Federal Communications Commission (FCC) is scheduled to begin an
auction in the US of 65 MHz of AWS-3 spectrum on November 13, 2014, and has set the minimum reserve amount at
US$10B. AWS-3 handsets are expected to be made available in mid-2015.
By setting the eligibility to bid at less than 10% national and 20% provincial/territorial, wireless subscriber market share
would exclude the big three wireless carriers (Bell/TELUS/Rogers) as well as regional players SaskTel (Private) and
Manitoba Tel (MBT-T, Not Rated) from bidding. Bidders for the new spectrum appear to be limited to Videotron (QBR.bT, Not Rated) Wind Mobile (VIP-US, Not Rated), and Mobilicity (Private) which is currently in creditor protection. In
addition, by setting the eligibility requirement as an “operating new entrant” a larger wireless operator (i.e., Videotron,
Verizon) may be motivated to acquire or consolidate Wind/Mobilicity now that a clear path for LTE spectrum is available.
IMPACT| We view the announcement by Industry Canada to be negative for Rogers Communications (RCI.b-T, $47.00,
Hold), TELUS (T-T, $42.00, Hold) and BCE (BCE-T, Not Rated) given their exposure to the Canadian wireless industry
and the potential for increased government regulation/oversight. In addition, the new spectrum auction rules could result in
industry consolidation and/or attract larger foreign wireless operators increasing competition within the Canadian wireless
market.
EXHIBIT 1 – TELECOMMUNICATIONS COMPARABLES
Company
Canadian Comparables
Rogers Communications Inc
Cogeco Cable Inc
Telus Corp
BCE Ince.
Bell Aliant Inc
Shaw Communications Inc
U.S. Comparables
AT&T
Verizon
Comcast
Cablevision
Ticker
Local
Price
Mkt Cap
EV
Local ($M) Local ($M)
Div
$
Div
Yield
EV/
EV/
EBITDA 14E EBITDA 15E
P/E
14E
P/E
15E
Target
Total
Return
Rating
Hold
Buy
Hold
NA
NA
NA
NA
NA
NA
NA
NA
RCI'b-T
CCA-T
T-T
BCE-T
BA-T
SJR'b-T
42.25
58.83
38.89
48.21
27.73
27.78
21,762
2,885
24,190
37,703
6,336
12,080
36,554
5,807
32,242
59,589
9,280
16,564
1.83
1.20
1.52
2.47
1.90
1.10
4.2%
1.9%
3.7%
5.0%
6.8%
4.0%
7.4x
6.5x
7.7x
6.8x
7.4x
7.2x
7.3x
6.2x
7.3x
6.6x
7.3x
7.0x
14.0x
12.8x
16.1x
15.4x
17.6x
15.7x
14.5x
12.2x
15.1x
15.0x
17.2x
14.9x
47.00
74.00
42.00
NA
NA
NA
15.4%
27.7%
11.7%
NA
NA
NA
T-US
VZ-US
CMCSA-US
CVC-US
36.07
49.68
54.30
18.02
186,010
205,856
117,832
3,959
262,275
205,856
159,789
12,556
1.84
2.12
0.90
0.60
5.1%
4.3%
1.7%
3.3%
6.1x
6.9x
7.0x
7.1x
5.9x
6.6x
6.6x
6.9x
13.6x
14.0x
18.7x
22.5x
13.0x
12.9x
16.7x
23.3x
NA
NA
NA
NA
NA
NA
NA
NA
7.0x
7.0x
6.8x
6.8x
16.0x
15.5x
15.5x
14.9x
Mean
Median
Source: Thomson One, GMCI estimates
See back page for analyst certification and disclosures
TELECOMMUNICATIONS
RESEARCH DISCLOSURES
Analyst Certification
The Global Maxfin Capital Inc (“GMCI”) research analyst whose name appears on the front page of this research
report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect
the research analyst’s personal views about the company and the securities that are the subject of this report and all
other companies and securities mentioned in this report and (ii) no part of the research analyst’s compensation was,
is, or will be directly or indirectly, related to the specific recommendations or views expressed by the research analyst
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D. Joseph MacKay, CA, CFA– Analyst |647.776.1750| [email protected]
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TELECOMMUNICATIONS
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Applicable Disclosures for coverage companies in report (Yes ● / No ○):
T-T
RCI-B-T
1) As of the end of the month immediately preceding the date of issuance of this research report or
○
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securities directly or through derivative.
the preceding 12 months other than investment advisory or trading services.
the date of issuance of the report.
director or employee of the issuer.
Distribution of Recommendations
25
21
20
15
10
5
5
0
Strong Buy
Buy
2
Hold
0
0
1
Sell
Under Review
Suspended
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D. Joseph MacKay, CA, CFA– Analyst |647.776.1750| [email protected]
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TELECOMMUNICATIONS
CORPORATE DIRECTORY
Equity Research
Institutional Sales & Trading
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Tel: (647) 776-1763
Email: [email protected]
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Senior Vice President, Equity Research Analyst
Tel: (647) 776-1750
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D. Joseph MacKay, CA, CFA– Analyst |647.776.1750| [email protected]
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