Canadian telecom stocks poised for rebound as wireless plan prices stabilize and debt reduction progress.

Canadian telecom stocks may be poised for a rebound as carriers stabilize wireless plan prices and progress on debt reduction. Telecom providers have increased prices at main and flanker brands, bucking the trend of discounting prices. While average wireless prices are still down from 2023, analysts say the shift could lead to improved earnings potential over time. The sector's valuation multiples are "bottoming," making it more appealing to investors.

Canadian telecom stocks may be on the cusp of a rebound, driven by stabilizing wireless plan prices and progress in debt reduction. Over the past few months, telecom providers have increased prices at main and flanker brands, reversing the trend of discounting prices to boost subscriber numbers [1]. While average wireless prices are still down from 2023, analysts believe this shift could lead to improved earnings potential over time.

Freedom Mobile, Rogers Communications Inc.'s Fido, BCE Inc.'s Virgin Plus, and Telus Corp.'s Koodo have all raised rates in recent weeks, according to Bank of Nova Scotia analyst Maher Yaghi. Despite the increase in prices, telecoms are earning less per customer than in previous years. More than half of Canadian wireless subscribers have switched to cheaper plans in recent years, reducing average revenue per user (ARPU) [1].

Analysts at Canadian Imperial Bank of Commerce and Desjardins predict that the Canadian telecom sector's valuation multiples are "bottoming," making it more appealing to investors who have shied away from the sector for the last two years [1]. Royal Bank of Canada analyst Drew McReynolds shared this view, noting that the sector has moved beyond the trough and is more likely to achieve mid-point guidance ranges for the year, although he expects subdued growth [1].

Stock prices for the four largest Canadian telecoms have rebounded in recent weeks, with BCE Inc. up 5%, Telus up 3%, Quebecor up 1.5%, and Rogers up 21% following the closing of its $4.7-billion deal to buy BCE’s stake in Maple Leaf Sports and Entertainment [1]. The companies are expected to release quarterly earnings in the coming weeks.

Additionally, the Canadian Radio-television and Telecommunications Commission (CRTC) upheld its decision allowing large telecoms to resell internet services on each other’s networks. Analysts anticipate updates to various deals and potential divestitures, including the sale of a minority stake in MLSE by Rogers, a tower sale by Telus, and an update on the close of BCE’s $1-billion Northwestel divestiture [1].

References:
[1] https://www.theglobeandmail.com/business/article-canadian-telecoms-boost-wireless-prices-giving-lift-to-sagging-stocks/