BAY STREET DARLING
Investors like Québecor
With ambitions of becoming a national wireless carrier and owning a hockey team, Québecor Inc. is a company with big dreams — but it can keep shareholders happy even if it never achieves them, analysts say.
Since last June, when the company announced it was “ready, willing and able” to become the fourth national wireless carrier the federal government wants, Québecor has taken some baby steps but no big leaps.
Instead, chief executive officer Pierre Dion will be able to talk up his success building the company’s cable and wireless business in its home base of Quebec and selling underperforming assets when Québecor releases its fourth- quarter and full- year results Wednesday.
Greg MacDonald, a telecom analyst with Macquarie Capital Markets Canada Ltd., said Dion’s dreambig, take- it- slow approach is fine by him. Even if Québecor never takes the plunge into a national wireless expansion or buys a professional hockey team, MacDonald believes it’s the most attractive telecommunications stock in the country.
“This stock works for me without any of that,” he said. “This is just the best- looking stock in the sec- tor. I think it’s got years of upside.”
He has company in the bullish camp on Bay Street. Of 17 analysts surveyed by Bloomberg, 15 have a buy recommendation on Québecor, while the other two are telling clients to sell the stock.
Despite its national ambitions, Québecor has spent the past year becoming more focused on its core Quebec market in wireless and cable. The company has sold the international design and technology consulting firm Nurun for $ 125 million, 74 Quebec- based weeklies for $ 75 million and is awaiting regulatory approval for the sale of Sun Media’s 175 English- language newspapers and digital publications to Postmedia Network Canada Corp. for $ 316 million.
That left the company with more than $ 500 million that it could spend on something fun like a National Hockey League team. Québecor has already purchased naming rights on a new $ 400- million arena being built in Quebec City.
Desjardins Securities analyst Maher Yaghi said buying a hockey team would be a fine thing to do, helping Québecor boost ratings on its cable channels and winning the company goodwill from its Quebec base. However, he said, he would prefer the company spend the money on something a little less exciting: buying back the 25 per cent stake in Québecor Media held by Caisse de dépôt et placement du Québec.
“The hockey team is not important,” Yaghi said. “It’s better to control 100 per cent of QMI. It would crystallize value for shareholders quite quickly.”
Québecor purchased spectrum in Ontario and Quebec in the latest spectrum auction, but Yaghi said that doesn’t mean the company has abandoned its ambitions beyond those provinces. If and when Québecor does make a move to go national, it would almost certainly be by partnering with another company with spectrum rights in other areas, he said.
Québecor has long maintained
The hockey team is not important. It’s better to control 100 per cent of QMI. It would crystallize value for shareholders.
it’s waiting for the right set of regulatory conditions, including more favourable wholesale roaming rules, before making the investments necessary to become a fourth national carrier. Euro Pacific Canada analyst Rob Goff said that from a shareholder’s perspective, the company’s willingness to be patient is good news.
“If the big ventures do not come to fruition, the company hits a stage of financial flexibility much sooner,” he said. “Ultimately, that could translate into a much more aggressive dividend policy. That policy could pull with it a very significant re- valuation of the shares.”