Brooke ThackrayRogers Communications (B)RCI.B.TOCOMMENTJul 12, 2013

Thinks dividend is safe, as the payout ratio is lower than some other telcos. Plus, the yield is lower than peers. Telco sector is not in favour, but RCI.B has outperformed. 

Riskiest of the telcos right now. Higher debt. When you "flip" these sports assets (high valuation, but not cashflow positive), there's valuation risk. Lots of noise.

They have business in Ontario and Quebec, and a large cable business in some US states, but that is facing strong competition from fixed-wireless, fibre providers and satellite companies like Starlink. He's bearish all Canadian telcos, which are impacted by weak immigration and wireless competition is aggressive as the CRTC clamps down on fees and contracts. For Rogers, the business is mature and demands a lot of capex and carries $40B of debt.

No idea why Rogers bought the rest of MLSE today, but wouldn't be surprised if they sold a piece to private equity.

Likes it for buying Freedom Mobile, the low-cost mobile carrier. In contrast, Rogers has limited growth. QBR is taking market share from Rogers. Because of a regulation change, Freedom users now have far better coverage outside their core areas across Canada. He prefers Quebecor because of Freedom.

No growth in this industry. Less immigration = less growth. That overhang has hurt the entire space. He owns this name for clients who want income. Undervalued. Low dividend payout. Potential catalysts as they monetize sports assets. Better potential total return.

He was probably feeling defensive last year with these picks, same as he is now. Sports asset value has increased dramatically, and it'll be able to monetize that. Huge positive announced last quarter that capex would be cut dramatically, which will increase FCF.

Bought because he liked the margin of safety. Pays a smaller dividend, so the remaining FCF could be used to pay down debt, buy back stock, or make other acquisitions. MLSE purchase probably wasn't such a bad move. Reducing capex, substantially increased guidance for FCF.

Likes it the best in the group because it's crystallized its sports assets.

It's outperformed BCE and Telus which she owns for the dividend (Telus has the most turnaround potential). The street expects Rogers to spin off their sports division. You can't go wrong with any telcos, which aren't getting any love now. They are undercutting each other are prices. She likes it for defence and yields, though is not high-growth

Trying to monetize sports division, but a ways to go. Falling behind on network quality and investments such as Shaw acquisition. Unfocused. Personal note:  He changed his cell to Rogers, can't believe how bad it is.

Growth has sold off and the market is running to income names. In Canada, income names he likes are Rogers and Brookfield Infrastructure.

He doesn't own telecom. It looks a little better than Telus and is more diversified. Also the payout ratio is much less at 20%. He sees some but not a lot of earnings growth.

Pricing pressure in the sector. Doesn't see appetite for another big telecom merger anytime soon. 

In the sector, he'd probably look at BCE or RCI.B.

A lot of these companies have high debt levels. It has had a full recovery from the bottom of its breakdown to $34 which is a big drop for such a big company. Above a $55 consolidation range indicates a positive signal.