In a dismal year for Canadian stocks, Rogers Communications Inc. stands out as a winner. Its shares are up nearly 13 per cent since the start of 2011.
The question now is whether the telecom giant can maintain its momentum over the year to come. Eleven out of 20 analysts following the stock rate it a "buy," while seven have it as a "hold," according to Bloomberg.
The Toronto-based firm is the country's leader in cable and wireless subscriptions and has surpassed consensus earnings forecasts in each of the last three quarters. Analysts say it will earn $3.14 a share this year, and $3.30 per share in 2012.
The emergence of scrappy new competitors in the wireless market has failed to put much of a dent in Rogers' fortunes. Globalive Communications Corp., Mobilicity and Public Mobile Inc. entered the market two years ago with prices far below those of the major telecom firms, but competition has driven their offers so low that most analysts doubt that the upstarts can maintain their promotional barrage.
The consensus is that the smaller players now face a choice between consolidation or bankruptcy. Either would reduce the number of competitors in the sector and could help to relieve the pressure driving the deep discounts.
As a result, RBC Dominion Securities Inc. analyst Drew McReynolds is bullish on Rogers. "Any new wireless entrant consolidation and/or bankruptcy over the next 12 months could be a positive catalyst for the stock," he says.
Rogers is well positioned in other areas as well. It owns the Toronto Blue Jays and has stakes in the Toronto Maple Leafs, Toronto Raptors and Toronto FC, giving it a firm grip on many of Canada's most valuable sports broadcasting properties. All this dovetails nicely with Rogers' media business, including Sportsnet and several sports radio stations.
And Rogers isn't resting on its laurels. It is developing a new home monitoring business that will let customers control their thermostat, security cameras, appliances, and lighting through their smart phones. Rogers intends to promote this service to its large existing base of wireless and cable customers.
The biggest wild card in Rogers' future is a possible change to the foreign ownership rules for the telecommunications industry. Industry Minister Christian Paradis is considering whether to allow foreign companies to own small telecom firms that have market share of 10 per cent or less, rather than capping their stake at 46.7 per cent as is now the case.
The move has the potential to attract a wave of foreign investment that could make the upstart telecoms more competitive and drive down wireless rates.
Rogers is pushing the federal government to treat all Canadian telecoms the same. "If the government wants to change the foreign ownership rules, they should change them for all players," Ken Engelhart, senior vice-president for regulatory affairs at Rogers recently told The Globe and Mail. "The government shouldn't be trying to jig the game by manipulating the rules. They should have an even set of rules that affect all players in the same fashion."
Mr. Paradis expects to make a decision in 2012 and has hinted that the result will be a win for customers. "We expect that globally competitive prices for consumers will flow from these fundamentals," he said.