New position: Rogers Communications

Call the cops, NCP has added a telecom stock!

Good evening everybody,

After a couple years of harmless trolling on X about the unsustainability of the Bell Canada dividend policy, Nugget Capital Partners (NCP) has taken the plunge and decided to add a significant stake in the Canadian telecommunications space. Over the past few years I felt it was an obviously bad place to be given there was a price war between providers and a new upstart in Freedom Mobile which was awarded to Quebecor Inc (TSX: QBR.B) which resulted in faltering service rates. In my own case, my cellphone bill has fallen from over $100 to $40 per month, although NCP has played it cheap by taking an unlimited plan only - no phone included on a ‘lifetime’ offer with Public Mobile which is now owned by TELUS Communications (TSX: T) which may not be suitable for everybody, as many Canadians prefer to take the latest technological device which normally means higher service rates. If you don’t want to own oil during an OPEC price war, why would someone want to own telecom stocks during a price war? It seemed obvious but many still got suckered. The negativity in the space is currently unprecedented with very little interest amongst investors which makes it highly attractive given the worst is likely behind us and priced in.

NCP was bearish on BCE & RCI.B for the past year and Tweeted about it numerous times. However, our bearishness has ended and we are now long.

Needless to say, like anything, every dog has it’s day - usually. In the case of the Canadian public telecom sector the space is still growing, albeit in different ways in the past. EBITDA growth is still positive, free cash flow is stable and margins have not seen much compression. As all technologies, evolution is part of business. Those who can’t keep up get left behind. In my view, the telecommunications space has been hit further by similar things that the Canadian real estate space has been hit with narrative wise, such as a reduction in immigration or what people think is one. Latest facts however shown a population growth of nearly ~1 million new Canadians in the first six months of the year. Hardly a population reduction as some feared or others had hoped for. Canadian mobile plans are continuing to grow and Canada remains one of the world’s most connected mobile countries in the world with nearly 100% of Canadians having access to a cellphone connection or high-speed Internet. Latest government statistics show ~98% of Canadians having access to a mobile phone with landline Internet continue to grow across the country.