Verizon Communications Inc. (VZ), TELUS Corporation (USA) (TU), Rogers Communications Inc. (USA) (RCI): Analysts Are Wrong About Canada’s Big Telecoms

Verizon is set to move in

While Verizon Communications Inc. (NYSE:VZ) hasn’t purchased Wind yet, the company has stated it is interested in acquiring the company. With the financial resources of Verizon, the United States’ leading mobile-phone service provider, the company could take a large chunk of market share away from Canada’s Big 3.

The median analyst price target for the next 12 months at Verizon Communications Inc. (NYSE:VZ) is $55. The company is currently priced at around $50. The majority of 33 analysts polled suggested to hold the company, and I concur. However, if the firm does make a move to acquire Wind, I would purchase shares of the stock, and sell TELUS Corporation (USA) (NYSE:TU) and Rogers Communications Inc. (USA) (NYSE:RCI) if I were holding them.

The trend indicates lower profits at Canadian telecom firms

Canadian telecommunications has long been a sector ripe with opportunity for corporations to completely take over without much consideration for anything besides profits. Low regulations and a near monopoly have allowed companies to get away with low service standards and high fees.

However, the landscape is changing rapidly, with new companies entering the market to compete with the Big 3 and regulators tightening up. The Canadian government, for example, proposed restricting phone contracts to two years. TELUS Corporation (USA) (NYSE:TU) is currently offering reduced prices and giving away merchandise if people opt for a 3-year contract. That locks many people into plans they end up hating. Furthermore, regulators are no longer allowing ridiculous charges for international roaming, which has sometimes billed individuals tens of thousands of dollars in a swift blow. Certainly, now is the time to get out of the Canadian telecommunications companies and keep an eye on Verizon Communications Inc. (NYSE:VZ), who could make an entry any day.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications (USA).

The article Analysts Are Wrong About Canada’s Big 3 Telecoms originally appeared on Fool.com.

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