This decline in price signals to me a great value in BCE Inc. (USA) (NYSE:BCE). The market appears to be factoring in some degree of likelihood that Verizon will purchase Wind Mobile. As these rumors dissipate, I expect BCE Inc. (USA) (NYSE:BCE) to see solid growth in its price.
BCE Inc. (USA) (NYSE:BCE) will continue to see gains in price per customer as it focuses in on signing up more lucrative postpaid customers. Gains will also come from continued cost cutting. The company trimmed costs by a whopping $1.5 billion last year and is in the middle of trimming an additional $170 million this year.
The two other large Canadian wireless providers, Rogers Communications Inc. (USA) (NYSE:RCI) and TELUS Corporation (USA) (NYSE:TU) have each seen double digit declines despite strong earnings and growth.
Rogers Communications Inc. (USA) (NYSE:RCI) recently reported net profit growth of 4% and grew its postpaid wireless subscription base 30% more than analysts predicted. Despite this the company has seen its stock take a dip of over 20% since mid-spring when rumors of Verizon’s entry into Canada started to be hear.
One reason Rogers Communications Inc. (USA) (NYSE:RCI) is well position for the future is that the company is more diversified than its Canadian competitors. Its media and cable revenue for the most recent quarter totaled over $1.3 billion and totaled almost 42% of revenue. Its media division led the charge with a 7% gain in revenue. This diversification can be a hedge to a potential Verizon entry into the market.
Likewise, TELUS Corporation (USA) (NYSE:TU) has seeen a roughly 20% drop in price since early May. Nonetheless the company looks very strong. Last week it reported profit, subscriber, and sales gains that beat analysts’ estimates. Wireless revenue itself increased almost 6% on strong postpaid subscriber growth.
For investors looking for great shareholder value TELUS Corporation (USA) (NYSE:TU) appears to be a strong opportunity. The company recently announced plans to buyback $1 billion of its own shares in 2013 and $500 million for the three years following. Earnings per share will see a nice bump this year and into the future from the buyback plan alone.
Verizon’s entry into Canada already (mostly) priced in
The sharp drops in share prices for Canada’s big 3 wireless companies can be attributed almost 100% to rumors of Verizon’s entry into the market. While it is difficult to gauge what the exact impact such an entry will have the double digit price drops despite strong fundamentals show that Verizon’s entry is already (mostly) priced in the Canadian companies’ stock price.
With the threat of Verizon’s entry unlikely, there is great value in each of the Canadian companies’ stock. For investors who have a medium degree of risk tolerance an investment in these companies have the potential to produce significant return if and when Verizon pulls back on their bid of entry into Canada. Plus, even if Verizon pulls the trigger, investors will still be holding stock in solid companies with large subscriber bases in a mature market.
The article Canada’s Big 3 Wireless Providers Show Value originally appeared on Fool.com is written by William Alder.
William Alder has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications (USA).
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