Q: Telecommunication stocks in the US and Europe, such as AT&T and Vodafone, have consistently experienced a long-term downward trend. While investors appreciate the generous dividends, they are wary of the potential capital losses. The question arises: Will Canadian telecommunication stocks, like BCE and Telus, eventually mirror the trajectory of their US and European counterparts? Thank you.
5i Research Answer:
It is possible, but the Canadian market is still quite different than the US and Europe. The CRTC has essentially barred most foreign competition, and as a result, Canada's industry is more of an oligopoly, with just a handful of large players. This has kept our communications prices much higher than the rest of the world. If the government were to open up competition we would see more pressure on prices, and thus margins and profits. But, governments tend to move slowly, and past history has been more to 'block' new competition than encourage it.