Rogers vs. Telus: How to Bet This Horse Race

by: FP Trading Desk November 21, 2008 | about stocks: RCI / TU    

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With wireless rivals Rogers Communications Inc. (RCI) and Telus Corp.(TU)  trading at roughly equal valuations these days, in the mid-to-low $20 range, its time to consider which horse to bet on.

"With significantly divergent growth patterns," between the two companies, Rogers is the stock Scotia Capital analyst John Henderson is putting money on, offering five reasons why Ted and Co. will outpace Telus.

Reason No. 1: Projected diluted-earnings growth at Rogers is expected to climb 18% next year and 24% in 2010, the analyst said in note to clients on Friday. Earnings per share at Telus are expected to decline 1% and 11%, respectively, adjusted for one-time tax items.

No. 2: A strong corollary to reason No. 1 -- stock prices aren't reflecting difference in growth. Rogers trades at 6.7% free cash flow yield, and 13.9 times price/earnings ratio. Telus meanwhile, is at 5.2% and 12.8 times, respectively.

No. 3: Rogers asset mix of 65% wireless, 30% cable and 5% other media is superior, the analyst says.

No. 4: Pensions. While obligations are rising at Telus, they're "immaterial" at Rogers.

No. 5: Finally, Networks. Telus is two years behind Rogers on its 3G, or smartphone network deployment, and has no backward compatibility with older 2G networks. Rogers does.

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This article has 4 comments:

  •  
    Nov 21 02:57 PM
    "roughly equal valuations these days, in the mid-to-low $20 range"

    Huh? Share price is meaningless. You call that a basis for a trading decision? There's a 2:1 ratio in their market caps which I think is a slightly (but only slightly) more relevant size comparison. The rest of the article is similarly meaningless.
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  •  
    Nov 21 05:33 PM
    I'm with zeppo.
    Reply | Link to Comment
  •  
    Nov 22 09:37 AM
    rogers is also in danger of being a 1-man show. When Ted resigns, you don't know what is to come. Telus has the governance in place to be a continuous achiever.

    Telus has superior products, pricing and service, but who knows it may go the Betamax way.
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  •  
    Nov 26 12:54 PM
    On Nov 22 09:37 AM Michael D. wrote:
    > Telus has superior products, pricing and service, but who knows it
    > may go the Betamax way.

    No GSM, so they are busy trying to build out a new network. Maybe it will be on line for the 2010 olympics, otherwise Ted will be getting those roaming charges from pretty well everyone except the Americans. Products? The cool wireless stuff appears on the GSM/3G networks first (dare I say iPhone?) Pricing? Surely you jest when they ding customers for incoming text messages? I suppose Koodo is a step in the right direction though. Maybe they're great when compared to Bell.
    Reply | Link to Comment
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