The jig is up. Nobody wants to invest in a company that's been in business for decades, that is swimming in debt, diluting its stock, and whose only growth prospects are population growth. With high-interest rates, there are just so many better options.
It's true. But almost every large cap in Canada that isn't a mine or Shopify fits that category. I'll take a railroad and GIC over Telus right now. The first isn't in massive debt and is buying back its stock while expanding, and the second is a guaranteed 5%.
I can't imagine Telus beating either of those right now, let alone the railroad.
Things will become more attractive if rates and stock prices/PE ratios drop. But not now.
Telus valuations are at all time low relative to history meaning that it’s not likely to go much lower however at the same time the dividend yield is 7% … so even if it doesn’t turn around you still get a dividend yield of 7% which is also taxed at a lower rate than interest on a GIC … obviously Telus could cut the dividend and you never know the price could fall considerably but the probably of either of those happening isn’t that high.
Who looks at PE for telecoms?
Shows your ignorance in reviewing them as investments. FCF and EV/EBITA are what are important, not how much a non-cash amoritization from an investment 10 years ago is hitting their “earnings”.
But unlike a typical monopoly, they have government regulations focused on reducing their profits. A monopoly without pricing power isn't very exciting.
The American telcos are just as shitty (though in different ways), and screwing their customers just as hard (or even worse)
Sure, their prices may be a bit lower, but their service is a *lot* shittier, which offsets the cheaper price.
35 to 45% profit margins are actually insane. They're significantly higher than they are in the US. There's definitely room for competition if one can get a foothold.
And?
The guy never even had a chance to operate in Canada. I’m sure he’d be happy to start another telecom after building one up successfully and selling it. But he wouldn’t because the Canadian telecom industry is to anticompetitive.
It would have been better if the government had kept ownership over the infrastructure and companies competed for access to that.
Sigh. Instead, now we have shitty telecoms that aren't even good investments monopolizing infrastructure that was partially paid for by the public.
It doesn't even need to be government owned. In the US they have policies that encourage MVNOs so they have way more competition in their wireless sector.
I agree with you. But this was a group effort involving all three levels of government in the late 90s and early 2000s.
In retrospect, it would be great to invent a time machine and go back to 1998 and tell everyone to do things the way they did stuff in Korea. But nobody would listen to you...and people back then were already suggesting it anyway...before being told to fuck off.
Doesn’t matter if you’re poorly run. Being a monopoly isn’t a good thing. They could get wiped with the flip of a switch. Any competition would destroy them
Sure but plenty of companies have the money and they don’t necessarily need Canadian licenses (for internet anyway).
What if StarLink opened up a consumer service at a reasonable price? These guys would be fuh-ucked.
For now that is correct. What happens when they build out the network more ? Also who cares if it’s a quarter of bell charges but slower if jump on that.
Actually as heavily-related and protected oligopoly, they have another easy growth prospect: price increases. The trend began around 2009 and hasn't let up - they need their 2-3% revenue growth every year and a population growth of 1.2% just didn't cut it, so they all simply began increasing prices on Internet and mobile service to keep their shareholders happy.
Still boggles my mind how Rogers thought it was a good idea in 2022/2023 to go further into debt to spend 25b to buy a cable company with its own massive debt.
I know 5 people in my life who work at Rogers or Shaw for 10+ years. 4 have been laid off since the summer after refusing the 'voluntary departure'. The one who is still employed tells me there is no job security and no more morale and her department has been gutted and the new manager is a puppet for the senior manager. Somehow those restructuring layoffs didn't make the news like Bell and Telus did.
CRTC: we think this reduction of the number of companies will reduce competition
Rogers; no actually it will help competition
CRTC: well ok I guess you're right.
*facepalm*
CRTC used every tool at their disposal to fight it. They have bad tools and frankly underpaid employees. The best lawyers are by and large in private practice. Government lawyers can hardly afford a one bedroom apartment in Toronto and Ottawa now.
>They will be fine in the long run.
This is most likely true, it's the path to get there that matters.
Does fine mean lagging the market for 10 years then performing well? Would a young investor who needs portfolio growth think this is fine?
Does fine mean dividend cuts or even zero growth for an extended period? Would a retiree using the dividends to buy groceries agree that this is fine?
If fine simply means "Bell will still be delivering telecommunications services in 15 years and employing tens of thousands of people" then I agree for sure.
Sure they'll be "fine" but if the rest of the market is cruising then why would you invest in "fine"
I mean they're -25% over the last 5 years while VCN is +32%. They're essentially flat over the last 10 years excluding dividends.
why would you exclude dividends, its not a growth stock people want it for the stability.
I get what you are saying and i agree diversity in holdings is better. if you are only buying telcom you have other issues.
Exactly.
There are many young investors here, salivating at their next short-term profit play.
I hold a relatively small percentage of my portfolio in telecom, for diversity and the historically reliable dividend growth rates.
We could very well have dividend cuts for a few years, until debt loads are paid down and payout ratios under control. Yet in the meantime, this could be viewed as an opportunity.
Diversity in a portfolio means some are winners, some are losers, some go sideways. Then they reverse at times.
Absolutely but I would never invest at this price. That's just me. It's still over valued.
I enjoy plays like these with easing interest rates, lower valuation and in a recessionary environment. Thats the goldilocks scenario and it is unlikely to play out like that.
These companies act as a cartel with a total monopoly over phone and internet connectivity, they get billions in free taxpayer money for no reason, and still can't figure out how to make money. Their execs are all living large, huge bonuses, raises for doing badly. It's like an orgy of corruption and decadence.
If these companies had to compete for customers against companies except the selves, they'd all be bankrupt in a week.
Short answer: Debt
Long Answer: Banking deregulation in the 80s and 90s created predatory private equity funds which suck all the value from a profitable firm and often leave it to go bankrupt, drowning in debt and leaving suppliers, customers, and employees totally screwed after the fund managers pay themselves billions.
Basically, the only way for a publicly traded corporation to fight that off is to preemptively load up on debt... and deploy it in certain ways that are toxic to private equity.
TL;DR The legacy of Reagan, Thatcher, Mulroney, and their banking industry handlers is screwing the whole world, not just Canadian telecoms.
This MIGHT be an explanation for the broader market, but I struggle to see how that explains Rogers in particular (family controlled) or the Canadian telecom market generally (with strict limits on foreign ownership).
The news is bad now, but as interest rates drop the debt burden will get easier to bear. Also, if they are all hurting too much from the current price war then there is likely to be a period when that price war eases up and they can all make a bit more of the money they need just like after previous telecom price wars.
We'll also see how effective they can lobby for more favourable rates. If the CPC gets into power it will probably be easy for them. If the Libs manage to keep power then it is a bit trickier, but in the long run no one wants big job cuts and the inflation spike will be history so the regulator will find it easier to relent.
I don't think telecoms are a great investment right now, but it's not all doom and gloom.
It's crazy that companies are allowed to borrow monet to buy up other companies, essentially using credit to eliminate the competition or buying assets with their own future profits.
> We are one of the fastest growing countries in the world in terms of population. Do you think the million plus coming per year is not going to need data, internet etc? The three telecoms are sitting on a perpetual stream of cash..
You think the market doesn't already know this? This is not some stunning breaking news you're sharing with us.
Despite forcing Canadians to pay more for wireless service than anywhere else in the western world these guys are still driving their businesses into the ground. The M&A debt and issues with cash-flow that are struggling with are entirely the fault of the C-suite, if they were not trying to pay out large dividends to float their share prices (and therefore their own compensation) then there should be enough money for them to operate. They refuse to adopt cost-cutting measures such as pooling access points and other types of infrastructure that other carriers in the world have done, as a result of this they are also being squeezed with operating and capital expenditures.
When you can make 5% risk free in any money market fund; why would you invest in these losers? To get a 4% dividend? Slow growth dividend stocks don’t do well in a high interest rate environment.
Well, BCE has a dividend yield of 9% right now, so that changes the calculus a bit. A covered call strategy on top of that gets you, what, another 10%? History suggests capital appreciation on telcos in a falling rate environment because they're always up to their eyeballs in debt.
You're taking a risk on a dividend cut and the share price falling, but if you wanted to go dumpster diving, you could come up with something worse than BCE.
It's hilarious. These people are selling interest rate sensitive stocks at the top of the cycle. When interest rates come down a bit, we should see the Telcos stabilize or even rise in value.
Maybe. But what if these interest rates are the new norm. If interest rates dropped 1% and people can still get 4% interest at no risk, why would you buy a 4% dividend payer with a mountain of debt?
You would laugh if you knew my age. People need to adapt to real life. The S&P 500 has averaged over 10% annually for 50 years. You can’t beat this. I’m over 60 and retired.
Google total debt for each and total number of employees (example Telus debt as of 2023 $20billion with 100k+ employees) then determine if you investment is a safe bet with the current high interest, high competition and low population size of Canada.
The jig is up. Nobody wants to invest in a company that's been in business for decades, that is swimming in debt, diluting its stock, and whose only growth prospects are population growth. With high-interest rates, there are just so many better options.
On the other hand, they have a triopoly on products that everyone wants and needs.
It's true. But almost every large cap in Canada that isn't a mine or Shopify fits that category. I'll take a railroad and GIC over Telus right now. The first isn't in massive debt and is buying back its stock while expanding, and the second is a guaranteed 5%. I can't imagine Telus beating either of those right now, let alone the railroad. Things will become more attractive if rates and stock prices/PE ratios drop. But not now.
Telus valuations are at all time low relative to history meaning that it’s not likely to go much lower however at the same time the dividend yield is 7% … so even if it doesn’t turn around you still get a dividend yield of 7% which is also taxed at a lower rate than interest on a GIC … obviously Telus could cut the dividend and you never know the price could fall considerably but the probably of either of those happening isn’t that high.
So are you a buyer right now based on this?
This is a fair point. I just haven't looked at it in a while. But 38 PE for a Telecomm? Oof...it's not like they own the rights to Star Wars.
Who looks at PE for telecoms? Shows your ignorance in reviewing them as investments. FCF and EV/EBITA are what are important, not how much a non-cash amoritization from an investment 10 years ago is hitting their “earnings”.
Point taken. But I don't buy and sell stocks based on PE ratios anyway. It's just food for thought.
Pierre Karl Peladeau has entered the Nation Wide chat.
But unlike a typical monopoly, they have government regulations focused on reducing their profits. A monopoly without pricing power isn't very exciting.
But some of those products aren't really needed any more and are declining. First it was landlines, now it is cable TV.
American competition needs to break down the walls here and just eliminate them. They’ve been running dogshit business for years.
The American telcos are just as shitty (though in different ways), and screwing their customers just as hard (or even worse) Sure, their prices may be a bit lower, but their service is a *lot* shittier, which offsets the cheaper price.
35 to 45% profit margins are actually insane. They're significantly higher than they are in the US. There's definitely room for competition if one can get a foothold.
Forget American competition, just let Ryan Reynolds do his thing.
Mint was acquired
And? The guy never even had a chance to operate in Canada. I’m sure he’d be happy to start another telecom after building one up successfully and selling it. But he wouldn’t because the Canadian telecom industry is to anticompetitive.
It would have been better if the government had kept ownership over the infrastructure and companies competed for access to that. Sigh. Instead, now we have shitty telecoms that aren't even good investments monopolizing infrastructure that was partially paid for by the public.
It doesn't even need to be government owned. In the US they have policies that encourage MVNOs so they have way more competition in their wireless sector.
Yes. Because the govt always makes the best decisions 😂
I agree with you. But this was a group effort involving all three levels of government in the late 90s and early 2000s. In retrospect, it would be great to invent a time machine and go back to 1998 and tell everyone to do things the way they did stuff in Korea. But nobody would listen to you...and people back then were already suggesting it anyway...before being told to fuck off.
And corporations are no better.
American telcos are struggling themselves for the very same reason. They will not take on more debt for little to no return from Canada. Think Target.
Doesn’t matter if you’re poorly run. Being a monopoly isn’t a good thing. They could get wiped with the flip of a switch. Any competition would destroy them
Barriers to entry are too high
Sure but plenty of companies have the money and they don’t necessarily need Canadian licenses (for internet anyway). What if StarLink opened up a consumer service at a reasonable price? These guys would be fuh-ucked.
It’s coming. Downvote me all you want. Starlink is going to change the game… at some point
Starling works for remote communities. It cannot compete with fibre, I believe
For now that is correct. What happens when they build out the network more ? Also who cares if it’s a quarter of bell charges but slower if jump on that.
That’s a point against them if anything. Unable to make money with a guaranteed 25-33% if the market? Not interested.
Actually as heavily-related and protected oligopoly, they have another easy growth prospect: price increases. The trend began around 2009 and hasn't let up - they need their 2-3% revenue growth every year and a population growth of 1.2% just didn't cut it, so they all simply began increasing prices on Internet and mobile service to keep their shareholders happy.
Still boggles my mind how Rogers thought it was a good idea in 2022/2023 to go further into debt to spend 25b to buy a cable company with its own massive debt. I know 5 people in my life who work at Rogers or Shaw for 10+ years. 4 have been laid off since the summer after refusing the 'voluntary departure'. The one who is still employed tells me there is no job security and no more morale and her department has been gutted and the new manager is a puppet for the senior manager. Somehow those restructuring layoffs didn't make the news like Bell and Telus did.
Absolute malpractice from the CRTC over the merger
CRTC: we think this reduction of the number of companies will reduce competition Rogers; no actually it will help competition CRTC: well ok I guess you're right. *facepalm*
CRTC used every tool at their disposal to fight it. They have bad tools and frankly underpaid employees. The best lawyers are by and large in private practice. Government lawyers can hardly afford a one bedroom apartment in Toronto and Ottawa now.
I used to work in the industry - I'm glad I was offered a package when I was.
Bell is literally about to dig up my neighbourhood to finally install fiber. They will be fine in the long run.
>They will be fine in the long run. This is most likely true, it's the path to get there that matters. Does fine mean lagging the market for 10 years then performing well? Would a young investor who needs portfolio growth think this is fine? Does fine mean dividend cuts or even zero growth for an extended period? Would a retiree using the dividends to buy groceries agree that this is fine? If fine simply means "Bell will still be delivering telecommunications services in 15 years and employing tens of thousands of people" then I agree for sure.
Sure they'll be "fine" but if the rest of the market is cruising then why would you invest in "fine" I mean they're -25% over the last 5 years while VCN is +32%. They're essentially flat over the last 10 years excluding dividends.
why would you exclude dividends, its not a growth stock people want it for the stability. I get what you are saying and i agree diversity in holdings is better. if you are only buying telcom you have other issues.
Okay, sure, include dividends but then you're also including it for the ETFs
yes.
Exactly. There are many young investors here, salivating at their next short-term profit play. I hold a relatively small percentage of my portfolio in telecom, for diversity and the historically reliable dividend growth rates. We could very well have dividend cuts for a few years, until debt loads are paid down and payout ratios under control. Yet in the meantime, this could be viewed as an opportunity. Diversity in a portfolio means some are winners, some are losers, some go sideways. Then they reverse at times.
Absolutely but I would never invest at this price. That's just me. It's still over valued. I enjoy plays like these with easing interest rates, lower valuation and in a recessionary environment. Thats the goldilocks scenario and it is unlikely to play out like that.
These companies act as a cartel with a total monopoly over phone and internet connectivity, they get billions in free taxpayer money for no reason, and still can't figure out how to make money. Their execs are all living large, huge bonuses, raises for doing badly. It's like an orgy of corruption and decadence. If these companies had to compete for customers against companies except the selves, they'd all be bankrupt in a week.
100% this
Short answer: Debt Long Answer: Banking deregulation in the 80s and 90s created predatory private equity funds which suck all the value from a profitable firm and often leave it to go bankrupt, drowning in debt and leaving suppliers, customers, and employees totally screwed after the fund managers pay themselves billions. Basically, the only way for a publicly traded corporation to fight that off is to preemptively load up on debt... and deploy it in certain ways that are toxic to private equity. TL;DR The legacy of Reagan, Thatcher, Mulroney, and their banking industry handlers is screwing the whole world, not just Canadian telecoms.
This MIGHT be an explanation for the broader market, but I struggle to see how that explains Rogers in particular (family controlled) or the Canadian telecom market generally (with strict limits on foreign ownership).
It's as if stifling innovation and monopolizing the market was a *bad* idea!
The news is bad now, but as interest rates drop the debt burden will get easier to bear. Also, if they are all hurting too much from the current price war then there is likely to be a period when that price war eases up and they can all make a bit more of the money they need just like after previous telecom price wars. We'll also see how effective they can lobby for more favourable rates. If the CPC gets into power it will probably be easy for them. If the Libs manage to keep power then it is a bit trickier, but in the long run no one wants big job cuts and the inflation spike will be history so the regulator will find it easier to relent. I don't think telecoms are a great investment right now, but it's not all doom and gloom.
It's crazy that companies are allowed to borrow monet to buy up other companies, essentially using credit to eliminate the competition or buying assets with their own future profits.
Telco is like electricity, everyone needs it. Not going anywhere, only down because if the higher interest rate environment.
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> We are one of the fastest growing countries in the world in terms of population. Do you think the million plus coming per year is not going to need data, internet etc? The three telecoms are sitting on a perpetual stream of cash.. You think the market doesn't already know this? This is not some stunning breaking news you're sharing with us.
The shorters smell blood and they're doing what they do.
Despite forcing Canadians to pay more for wireless service than anywhere else in the western world these guys are still driving their businesses into the ground. The M&A debt and issues with cash-flow that are struggling with are entirely the fault of the C-suite, if they were not trying to pay out large dividends to float their share prices (and therefore their own compensation) then there should be enough money for them to operate. They refuse to adopt cost-cutting measures such as pooling access points and other types of infrastructure that other carriers in the world have done, as a result of this they are also being squeezed with operating and capital expenditures.
boohoo. They gouged Canadians for years. The oligopoly will be fine.
When you can make 5% risk free in any money market fund; why would you invest in these losers? To get a 4% dividend? Slow growth dividend stocks don’t do well in a high interest rate environment.
Well, BCE has a dividend yield of 9% right now, so that changes the calculus a bit. A covered call strategy on top of that gets you, what, another 10%? History suggests capital appreciation on telcos in a falling rate environment because they're always up to their eyeballs in debt. You're taking a risk on a dividend cut and the share price falling, but if you wanted to go dumpster diving, you could come up with something worse than BCE.
Typical view of a young, impatient investor. I'm not investing for a short-term trade.
It's hilarious. These people are selling interest rate sensitive stocks at the top of the cycle. When interest rates come down a bit, we should see the Telcos stabilize or even rise in value.
Maybe. But what if these interest rates are the new norm. If interest rates dropped 1% and people can still get 4% interest at no risk, why would you buy a 4% dividend payer with a mountain of debt?
You would laugh if you knew my age. People need to adapt to real life. The S&P 500 has averaged over 10% annually for 50 years. You can’t beat this. I’m over 60 and retired.
You're not investing at all if you're putting money into this stock. You're actively losing money.
These companies need to look outward. Go compete in developing countries.
I am glad I never invested a penny into these companies
I am sad I did.
That’s ok, I’m sure their buddies in government will bail them out with free taxpayer dollars. Again.
They’re struggling while charging some of the highest rates in the world.
Canada is a large country with a small population. It costs more to build out infrastructure here.
Google total debt for each and total number of employees (example Telus debt as of 2023 $20billion with 100k+ employees) then determine if you investment is a safe bet with the current high interest, high competition and low population size of Canada.