Freedom Mobile’s May 25 press release launching a nationwide mobile plan for $50 is a shot across the bow of its larger peers, including Rogers Communications (CA:RCI.B), its former parent, BCE (CA:BCE), and Telus (CA:T). (All figures in Canadian dollars unless otherwise specified.)
Quebecor’s (CA:QBR.B) Videotron subsidiary has introduced a plan that includes unlimited calls and texts with 40 gigabytes of data for use in Canada and the U.S. The value provided by the plan will most certainly take business from its competitors in the near term.
To be sure, there are more than two dozen wireless brands across the country. As TechDaily reported in June 2022, the majority of wireless spectrum is owned by a few dominant mobile carriers, but services are offered by multiple subsidiary brands like Koodo, Public Mobile, Virgin, Fido, Chatr and Lucky Mobile.
QBR.B stock has been the best performer of the four wireless stocks, increasing 14.4% over the last 12 months, while the others have been in the red, with Telus shares down the most, at 16.4%. (See chart below.)
Meanwhile, on Fintel’s Quant Dashboards, Quebecor scores the highest of the four on the Fund Sentiment metric, at 89.05. That score ranks it at number 1,551 out of 37,671 stocks analyzed. The Fund Sentiment score is based on published buying and selling behavior of institutions, including hedge funds, pension funds and family offices.
In the meantime, telecommunications consultant Mark Goldberg told BNN Bloomberg that Freedom Mobile had exceeded the Federal government’s expectations as part of the conditions mandated for its approval of Rogers’ acquisition of Shaw Communications.
“This isn’t just 20 per cent. It’s a unique package,” Goldberg told Bloomberg. “This is a statement by Freedom that they’re going to be establishing themselves in the marketplace.”
In early May, Rogers lowered the price per gigabyte of data on one of its most popular data plans. It now provides 50 gigabytes of data for $85. While that’s a step in the right direction for Canadian consumers, it’s still nearly 40% more expensive than Freedom Mobile’s plan.
If you weren’t considering buying Quebecor stock, Freedom Mobile’s latest move should make you revisit it.
The company’s three operating segments accomplished a 2.5% increase in revenue in the first quarter to $1.12 billion. On the bottom line, its adjusted net income from continuing operations rose 5.7% over last year to $136.0 million. In addition, its free cash flow from continuing operations in the first quarter was $147.0 million, 41% higher than a year earlier.
Its telecommunications business, which operates under the Videotron banner, accounts for 83% of Quebecor’s revenue and virtually all of its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
Videotron paid $2.17 billion in cash for Freedom Mobile and assumed $680 million in debt for a total purchase price of $2.85 billion. It finished the first quarter with $6.03 billion in total long-term debt. The acquisition increases its debt by nearly 50%. Approximately 71% of its debt is fixed rate rather than variable. Almost half of its debt matures in five years or longer.
As part of Videotron’s commitment to the federal government, the company notified its Freedom customers that their current prices would be locked in for life. In addition, their roaming data caps would increase by 10%.
Between Freedom Mobile and its VMedia business, it can now provide multi-service bundles in four provinces outside Quebec, including Ontario, Manitoba, Alberta and British Columbia.
In addition, Videotron is spending $150 million over the next two years so that 90% of its Freedom customers have 5G service.
In Quebec, it continues to take market share. It added 26,200 mobile connections and 8,800 internet subscribers in the first quarter.
Fourth National Carrier
With the April 3 closing of its acquisition of Freedom Mobile. Videotron became Canada’s fourth national wireless carrier, with more than 3.5 million mobile customers.
“Today marks the beginning of a new era for Canadians,” Quebecor CEO Pierre Karl Péladeau said about the transaction’s closing in April. “Joining Videotron’s track record of success in Quebec with Freedom’s highly skilled teams will bring our customers the benefit of our combined expertise and our unwavering customer-centric focus.”
Videotron currently has an enterprise value of $13.96 billion, 7.66x its EBITDA cheaper than Rogers (10.94x), BCE (9.64x), and Telus (9.65x).
Freedom Mobile’s new plan and compelling valuation make Quebecor stock an interesting play.
This article originally appeared on Fintel
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