Why is Quebecor Stock so Cheap?

We still need cheaper wireless in Canada, but we think the new competition’s already on sale.

Andrew Willis 12 January, 2024 | 4:25AM
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Key Takeaways for Quebecor Stock:

  • Telecom makes up 85% of Quebecor’s revenue, and in terms of growth prospects the company has won wireless licenses in Ontario, Manitoba, Alberta and British Columbia.
  • We expect Quebecor to get off to a fast start in new markets and to immediately provide significant competition in wireless services for Bell, Rogers and Telus.
  • Without a fixed-line network and name recognition in new markets, Quebecor will need to compete on price. Prices fell sharply in the industry last year, while there are reports that both Rogers and Bell may return to raising prices soon.

 

Andrew Willis: The year is 2024 and cellphone plans with more minutes and data than ever are now cheaper than ever. Canadian consumers are currently enjoying a breath of fresh air in the telecom space as a new competitor, Quebecor (QBR), moves from coast to coast.

Since closing its acquisition of Freedom Mobile last April, and winning wireless licenses in Ontario, Manitoba, Alberta and British Columbia, Quebecor is moving beyond Québec. Equity analyst Matthew Dolgin expects the company to get off to a fast start in the new markets and provide legitimate competition to the Big Three national telecom providers.

Quebecor Shaking up the Canadian Telecom Sector

To compete with the likes of Bell (BCE), Rogers (RCI.B) and Telus (T), Quebecor will need to rely on price, which might explain the intensity of the discounts seen recently. The environment is great for consumers, but Quebecor stock investors should keep in mind that it can come at the cost of slimmer margins. Still, with a national expansion, this growth opportunity could be a great deal - even by Canadian wireless standards.

For Morningstar, I’m Andrew Willis.

bulls Quebecor Bulls Say

  • Quebecor’s national wireless ambitions should benefit from a favorable regulatory environment. It should be able to offer promotions and gain share without taking significant economic losses.
  • The unique culture within Quebec combined with Quebecor’s status as a local provider will allow it to maintain market share, profit margins, and returns on invested capital that competitors have been unable to achieve.
  • The Media and Sports & Entertainment segments are poised to recover as a postpandemic society returns.

bears Quebecor Bears Say

  • As a national wireless carrier, Quebecor will have none of the advantages that have made it successful in Quebec.
  • As BCE completes its fiber-to-the-home buildout in Quebec, Quebecor will finally face a competitor that can offer comparable service, which will eat into its market share and ability to maintain such high margins.
  • Secular declines in television and wireline voice customers as well as more focus on lower-value Fizz customers will keep a lid on average revenue per telecom customer, limiting growth and further pressuring margins.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Quebecor Inc Shs -B- Subord.Voting28.55 CAD0.11Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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