Quebecor – Possibly the best telecom opportunity

Quebecor is a leading Canadian company in telecommunications, entertainment, and news media. The company’s popularity can be measured by the fact that Quebecor’s newspapers reach more than 4 million readers per week on all platforms.

Quebecor owns a 100% stake in Quebecor Media which operates through three business segments – telecommunications (Videotron – 82% of last nine months’ revenues), media (TVA – 15%), sports and entertainment (3%). Quebecor Media is one of Canada’s largest telecommunications and media groups.

Quebecor’s brands are popular due to their high-quality and availability on multi-platforms in the form of bundled products. Its Videotron brand is a telecommunications and entertainment leader in Canada. Videotron has been named as Quebec’s most respected telecommunications provider for the 14th time in a row, while its TVA Network was the most-watched network in Quebec.

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Investment Data
 

Revenue Growth & Market Exposure

Quebecor has been in business for more than 60 years and is known for good customer service in Canada. Its Videotron provides Internet, business and mobile telephony, cable television, private network, and data hosting solutions for businesses of all sizes in Quebec.

Videotron has bagged one million subscribers to its home-grown mobile telephony service in just seven years of its launch. The number of subscriber connections to the mobile telephony service stood at more than 1.45 million as of September 2020. Its TVA Network is a leader with a ~41% market share and 90% average live viewing rate. Videotron has partnered with Samsung Electronics to build out LTE-A and 5G access networks.

Quebecor’s media platforms reach 99% of Quebecers every week and it is a leader in news media, book publishing, music recording, distribution of cultural products. Its Club illico is the most popular French-language subscription video on demand (SVOD) service in Quebec registering a growth of 9% in the subscriber base YoY.

Quebecor has been investing heavily to boost the capacity and speed of its wireline network over the past five years and has continued to roll out of ultra-fast service across its service area. The company’s home entertainment and management platform, HELIX has been very successful and achieved 508,000 revenue-generating units from just 190,000, a year ago.

Quebecor witnessed a decline in mobile ABPU due to a decrease in overage and roaming revenues due to the COVID‑19 pandemic, but grew its revenues and adjusted EBITDA in the third quarter of 2020.

The company continued to make major infrastructure investments, and successfully connected more than 30,000 new homes to high‑speed Internet in several regions of Quebec during the third quarter. Quebecor’s wireline services now reach more than 90% of Quebec’s population.

However, its advertising revenues and sporting events broadcast by the TVA Sports channel continued to decline. But film production and audiovisual services business have gradually resumed.

Dividends

Quebecor is a Dividend Aristocrat. It sports an average dividend yield of 2.5% and has a low payout ratio of ~36%. The company has raised its dividends by a ~50% CAGR over the last five years. Its last dividend hike was nearly 77%.

Quebecor has repurchased a total of more than 35 million shares in the last nine years. The company is targeting to gradually increase its dividends to 30%-50% of net free cash flows within two years. Stable and resilient cash flow generation and a strong business model should help the company grow its dividend stream in the future. 

As an integrated communications company, Quebecor will benefit from the huge surge in demand for data and advanced communication solutions in the long term. Its networks remain resilient to cope with the significant increase in traffic and demand and the company generated a 13% increase in cash flow from operations in the last year.

Strong customer focus, a broad range of diversified and innovative products, and fast and reliable connections have enabled Quebecor to retain a leading market share position in its core markets. The company is well-positioned to gain from the deployment of LTE-A and 5G access networks and continues to expand its network to cover growing numbers of customers across Quebec.

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Competition

Quebecor competes with other media and communications giants like BCE, Telus Corp, Rogers Communication, Shaw Communication, and Cogeco in Canada.

The company faces intense competition in mobile and cable telephony, Internet access, cable television and OTT video markets. Bell Canada Enterprises is Canada’s largest communication company with ~22.4 million customer connections, while Telus Corporation is the second-largest telecom company in Canada, and Rogers Communication is a diversified communication and media company.

Shaw Communication is Canada’s leading network company. Quebecor’s focus on one geography (Quebec) gives it an edge over its peers.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BCEBCEBCECommunication ServicesTelecommunication Services0.5857.9041.7023.0523.052.510.06046.041.394443.500.111568Tollbooth - RegulatedNOYESYESNOCanada1
TSE:TTTelusCommunication ServicesTelecommunication Services0.6725.8226.2827.3427.340.940.04824.821.324341.250.118077Tollbooth - RegulatedNOYESYESNOCanada1
TSE:RCI.BRCI.BRogersCommunication ServicesTelecommunication Services0.4460.4724.5419.3219.323.130.03313.310.639042.000.046824Tollbooth - RegulatedNONONONOCanada1
TSE:SJR.BSJR.BShaw CommunicationsCommunication ServicesTelecommunication Services0.3633.5713.3925.3525.351.320.03533.530.8977121.190.035324Tollbooth - RegulatedNONONONOCanada1
TSE:QBR.BQBR.BQuebecor Inc.Communication ServicesTelecommunication Services0.5834.588.5015.5815.582.220.03183.180.495541.100.259864Tollbooth - RegulatedNONOYESNOCanada1
TSE:CCACCACogeco Cable IncCommunication ServicesTelecommunication Services0.67118.485.6414.4714.478.190.02162.160.312642.560.125877Tollbooth - RegulatedYESYESYESNOCanada1
TSE:CGOCGOCogecoCommunication ServicesTelecommunication Services0.6897.361.4011.3611.368.570.02242.240.254442.180.156277Tollbooth - RegulatedYESYESYESNOCanada1

Bottom Line

Quebecor is giving a tough fight to the Canadian Big Three.

It was recently added to the Canadian Dividend Aristocrat list raising dividends by a whopping 78%. Quebecor stands a good chance to gain from huge investments in the new infrastructure rollout and the launch of Helix home entertainment and connected lifestyle platform.

A customer-centric focus and solid financial position should help create future shareholder value.

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DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.