Scotia Capital Scotia Capital analyst Maher Yaghi increased his wireless subscription projections for the Canadian telecommunications sector on Monday, citing “a recent surge in population growth that Canada is witnessing, which should be sustainable given the governments’ immigration targets set for 2022, 2023, and 2024.”
Also pointing to “a more open economy,” he now sees a “better uptake” for wireless services, moving his estimates above the consensus on the Street and leading to higher target prices for the companies’ shares.
“Net wireless loading for publicly listed Canadian service providers totaled 450K in Q2, the highest level for a second quarter in the last 15 years. This level of wireless loading is usually reserved for a normal Q3 or Q4 (i.e., the back-to-school and winter holiday seasons),” said Mr. Yaghi. “In ‘normal’ times, Q2 usually saw 200K-350K net new activations. ... We don’t believe the industry is benefiting from a sudden improved wireless service penetration rate. The likely reasons behind this surge are pent-up demand from consumers going out to shop in brick and mortar stores as the economy reopened in March/April as well as a recent significant increase in immigration. Both of these factors are likely to have a sustainable impact on loading in the next few quarters.”
“Population growth was not even across Canada. Ontario and British Columbia saw an outsized increase compared to Quebec which was closer to recent levels. The reason we highlight these divergences is due to the higher market share that Rogers has in Ontario and TELUS in BC in normal times. This also could explain why Quebecor did not see a material increase in year-over-year net loading in Q2 vs previous years as population growth in Quebec has not increased to the same extent as Ontario or BC.”
While he said the financial impact on short-term results will be “small,” Mr. Yaghi said “the cumulative positive impact over multiple quarters from the higher loadings has led to a slight increase in a few target prices.”
His increases were:
- BCE Inc. ( “sector outperform”) to $69 from $68.50. The average on the Street is $68.60.
- Quebecor Inc. (, “sector perform”) to $32.25 from $32. Average: $34.52.
- Telus Corp. ( “sector outperform”) to $34.50 from $34. Average: $34.23.