Would it effect their performance if they divested of their sports teams. Are the teams a distraction? or do they add to the bottom line. My opinion is they should concentrate on the telco business.
Thanks
Here is RCI.B’s performance in the last five years compared to the other telcos:
RCI.B: 5-year revenue growth 6%, 5-year EBITDA growth 8%, 5-year dividend growth 0.6%
T: 5-year revenue growth 7%, 5-year EBITDA growth 3%, 5-year dividend growth 6.7%
BCE: 5-year revenue growth 1%, 5-year EBITDA growth 1%, 5-year dividend growth 5%
The market values the telcos business as a pure player at a much higher multiple than a diversified media company, BCE is trading at 15x Forward P/E, T is trading at 21x Forward P/E, while RCI.B only trades at 11x. Also, the market partially put a discount multiple on RCI.B because the company recently did a very large transaction to acquire Shaw Communication for $26B, making the debt load very high. We think this may not be the best capital allocation strategy.
Some telcos tried to diversify their core operations by owning different media assets with the purpose of stabilizing earnings over the years. If RCI.B divests the sports assets, the two separate companies would likely be re-rated higher by the market.