Rogers' Strategy Unaffected by New Wireless Competition

Last week's spectrum auction rules announcement shouldn't change Rogers Communication Inc.'s (RCI) long-term strategy, wrote UBS telecom analyst Jeffrey Fan in a recent research note.

While the door may be open for a new national entrant into the Canadian wireless market, there is a strong likelihood that the spectrum will introduce a number of regional players, Mr. Fan reports from UBS's Global Media & Communications Conference on Monday.

It has been widely reported that Rogers stands in-line to emerge on top of Bell and Telus after the auction is over, as new entrants will be allowed to piggyback onto its GSM network. New entrants might also pressure the company to lower its wireless data rates, which many have said has hindered the introduction of Apple Corp.'s (AAPL) iPhone into the country.

Mr. Fan said that Rogers' chief financial officer Bill Linton was slightly on the defensive on how the upcoming spectrum auction will impact the company, but was impressed enough by its management's insistence that it will not change its business strategy over the long term.

Mr. Fan said,

We believe the company is currently satisfied with its existing distribution channels for wireless, and as new competitor(s) emerge, will use its Fido brand to absorb competitive actions in the market.

Mr. Fan also added that Rogers will likely increase its dividend in its next offering and could buy back some shares due to its favorable cash flow position.

UBS maintained a 'buy' rating on Rogers' shares, with a C$53 price target.