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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (45968)	12/10/2009 12:53:35 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71087

Telecom Dividends: Not as They Appear December 09, 2009 \| about: BCE / RCI / TU By Simon Avery Investors have been snapping up Canadian telecom stocks in the last few months, attracted by some of the best dividend yields on the market. Since October, shares of BCE (BCE) are up 11%, Rogers (RCI) up 17% and Telus (TU) up 9% (as of Tuesday’s close). The trend reflects a sector strategy used by some investors, who look at the high dividends and the fact that telecoms have until recently lagged the broader market gains. This sector rally in Canada has moved with a global rally in telecom and cable company stocks, says Dvai Ghose, telecom and cable analyst at Genuity Capital Markets. But today he is asking the question: “Is the current sector rally justifiable?” In a research note he warns not to disregard the market forces at play in Canada on these companies. “We urge investors not to ignore the significant incremental challenges facing the Canadian telcos and cablecos in 2010.” The key issues for Rogers include the likelihood it will lose market share to Bell and Telus in wireless after they launched a new network together. Last quarter, Rogers reported better profitability in its wireless, thanks to lower subsidies on handsets. That news has helped propel the stock. But the savings mean Rogers is losing market share to Bell and Telus, which could hurt longer-term, Mr. Ghose says. For Bell and Telus, the risk is handset subsidies growing too quickly as they attract more smart phone customers, which could in turn squeeze their profitability, he warns. All three companies face the risk of lower revenue and profits with the arrival of new wireless competition. Several networks are scheduled to launch in the coming months. To compete better, the three incumbents have removed certain fees that until now have gone straight to the bottom line. “Given these challenges, we would, in general, take profits in the sector,” Mr. Ghose writes. seekingalpha.com