Rogers and telus downgraded on risk verizon will enter Canadian market

rBC Capital Markets on Thursday downgraded Rogers Communications Inc. and Telus Corp. as it appears more likely Verizon Communications Inc. will enter the Canadian wireless market. The financial impact in 2013 and 2014 would be somewhat limited for Canada’s incumbent carriers if the U.S. telecom giant emerges as a new competitor, but analyst Drew Mcreynolds said the entry of a large strategic player such as Verizon would impair longerterm visibility for the sector. He also sees greater risk of a fundamental change to the rules governing wireless network access as Verizon and others may pressure Canadian regulators into granting more concessions to help establish a sustainable fourth wireless operator. Until the potential market impact of a Verizon move into Canada becomes clearer, Mr. Mcreynolds expects shares of both Telus and rogers to remain under considerable pressure. The analyst cut his rating on rogers shares to sector perform from outperform and lowered his price target to $43 from $54, a day after the stock fell 9.2% to $41.67. Mr. Mcreynolds also lowered his rating on Telus to sector perform and reduced his outlook for the stock to $31 from $38, following its 8% decline to $30.70 on Wednesday. The analyst’s assumptions factor in a gradual deterioration of wireless metrics such as average revenue per user, net additions, churn and network EBITDA margins. He also trimmed his mediumterm wireless assumptions for BCE Inc. and cut his price target on the stock to $40 from $48.