RE: RE: BCE meets the street Win, Win, WinTelus reports stellar results and BCE looks even better. Crazy.
I recall a fund manager on BNN explaining why his firm has no BCE. I recall thinking that he sounded a tad defensive.
If it wasn't for the political uncertainty, the share price would already a full dollars higher. At the same time, the uncertainty helps keep out new entrants and acts as a brake on infrastructure investment programs. Profit margins are bound to be higher. It is a natural outcome of the protectionist regulatory regime chosen by Canada's duly elected parliament.
This is the strangest win-win policy situation for incumbent Canadian telecom companies I could imagine.
=> Harper does nothing. Win.
=> Harper allows foreign ownership but with conditions, i.e., capital can now flow. The threat of new entry sends prices down--consumers win--and the inflow of foreign investment capital sends company valuations upwards--shareholders benefit. Infrastructure investment programs are accelerated. Consumers benefit soon. Win, especially if the following accompanies:
=> Harper allows incumbents to merge and form giant oligopoly telecom firms. Economies of scale drive productivity. Consumers get better product for less; shareholders get increased earnings. Win. On the other hand:
=> Harper could try by royal decree (variation order) to increase competition a little but without significantly upsetting the foreign capital restrictions. The real barriers to entry stay intact. Win.
An investor who can stomach some volatility should make out well. Of course, there is some risk that the Harper Conservatives will nationalize telecom infrastructure coast-to-coast to deliver "fairly priced" entertainment to deserving Canadians.
On some days, I can't tell the difference between the Conservatives and Jack Layton's NDP. Investors should be prepared for the worst possible outcome. Either that or simply enjoy the humour of the moment, and perhaps diversify to a politically safe country like Colombia. -TR