Investment Q&A

MThe telcos industry has been consolidated over the years and competition has now come down to just three large players: BCE, T and RCI.B, with a couple of smaller regionals.  That being said, despite attractive industry dynamics, these players tend to compete irrationally by investing heavily to capture market share. For example, these companies compete for market share in phones and the Internet by using price wars, and this competition has led to poor returns for their shareholders over the last decade. The risk of disruption is if there is any technology that could prove to transfer signals in a more efficient and economical way (such as Starlink, which Elon Musk is working on), these companies could be at risk. Though the risk is quite low. Among the three telcos, we used to believe BCE was the best operator in terms of organic growth, balance sheet strength, dividend growth, etc. That being said, with the company’s recent acquisition, we think the thesis has changed for the worse, investors can choose not to allocate the portfolio to the Canadian telcos at all. We think one telco that is executing well is TMUS. We further discuss the telecommunications sector in this question from this morning.