Wireless to supercharge telecom in Q1: analysts

The first quarter of the year tends to be the slowest season for Canada’s telecommunications industry, but analysts expect strong wireless performance will continue to drive growth this year.

“We believe wireless will again be the highlight of this reporting season as the positive momentum from last year has likely continued,” Desjardins analyst Maher Yaghi said in a note to clients Thursday in the lead-up to communications giants reporting results in the coming weeks.

Sustained immigration, children getting cellphones at younger ages and relatively low wireless penetration (approximately 82 per cent of Canadians have a wireless subscription, according to the CRTC) all supported strong growth last year, Yaghi noted.

“The economic situation in Alberta has also improved — thus removing a drag that was present in the previous year,” he wrote.

“These factors lead us to believe that healthy subscriber growth will be constant through the end of 2017.”

Desjardins predicts average revenue per user won’t grow as fast as it used to as

upgrades its wireless network and becomes a viable fourth player in Ontario, Alberta and B.C., though Shaw’s “inferior network” should protect the Big Three’s prices in the near term.

RBC Capital Markets analyst Drew McReynolds expects balanced results from the large wireless operators this quarter although promotional activity remained “intense,” he wrote in a note to clients this week.

While outperformed Rogers and Telus in 2014 and 2015 in both financial and operating metrics, McReynolds said the gaps narrowed in 2016 as Rogers dropped “overly aggressive” legacy promotions and the Alberta’s economic headwinds eased up on Telus.

McReynolds noted that cable companies are outperforming the telecoms so far this year and reiterated its top picks as and Shaw given the potential for growth in wireless in a maturing market.

McReynolds cited persistently low interest rates as the key influencer on Canadian telecom stocks, whose valuations remain near cyclical peaks despite decelerating industry revenue growth.

Shaw reports its results next week, followed by Rogers and Bell later this month and Telus in early May.