Thursday, March 02, 2006

Canadian Telcos

Some would argue that as a whole, the telco 'sector' - BCE, Manitoba Telecom, etc. - is facing its twilight, with a glut of competition for their traditional and internet services from smaller regional providers and a new-but-growing roster of voice over IP (VOIP) services. Even the discussion here about widespread flight to cheaper long distance is indicative of the kind of pressure these companies face to continue to increase shareholder value.

In this context, I came across an interesting discussion on the Financial Webring Forum, a site I like to visit now and then. While the regulars are predictable is their positions, the quality of the research that goes into preparing responses and topic postings is impressive.

The post looked at Aliant (AIT), and one of the most striking observations was that though this wasn't a high growth stock, the company has managed to increase its dividend at more than twice the rate of inflation for the last five years. Interesting, no?

Further, another post highlighted the fact that:
...there will be two documents released in March [2006] that have the potential to move the share prices of all telecom companies in Canada, and Aliant in particular.

First, the CRTC is expected to release a decision on "local forbearance", i.e. deregulation of local telephone services. The decision will set out general criteria for deregulation, applicable to all telcos. However, in the case of Aliant, they will actually rule on whether telephone service in Halifax Charlottetown and environs should be deregulated NOW. If the answer is yes, expect a boost to Aliant share price. If the answer is no....

Second, the Telecommunications Policy Review Panel will release its report on changes to the regulatory framework. Again, there is a potential for share price movements, not just of the telcos, but for the cablecos as well.

The impacts of the second are much less immediate, but could potentially be much more profound.
I will be watching for these ...

FD: I own a single share of BCE.

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Disclaimer: These articles are for information only, and are not to be construed as financial advice, legal advice, or a solicitation to buy or sell securities.