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Quebecor Inc. - Little Known Telecom Growth Play

Apr. 02, 2018 3:51 AM ETQuebecor Inc. (QBCAF), QBCRF, QBR.A:CA, QBR.B:CA
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Jaulian Financial


  • Double digit annual growth in mobile subscribers due to lower penetration levels in Quebec.
  • Large cash pile to sustain growth capex and share repurchases.
  • Prospects of increase in cash dividend as the management attains its long term financial leverage targets.

Company Description

Quebecor Inc. (OTCPK:QBCRF) is a Quebec-based telecom company offering wireless telecommunication, cable and television services in Quebec. In terms of scale, it has a 16% market share in wireless telephony in its coverage area (Quebec and some parts of Ontario). Its subsidiary, Videotron is the largest cable operator in Quebec and the third largest in Canada. It also offers conventional and specialty television through its subsidiary, TVA Group.

Source: Company financial statements

Investment Thesis

Strong subscriber growth prospects

The company has enjoyed double-digit annual growth of 20.5%pa in mobile subscribers in the past five years due to lower wireless penetration levels in Quebec.

Lower penetration levels in its primary market bode well for the growth prospectus of the company. According to Canadian Radio-television and Telecommunications Commission (CRTC) data for 2016, the province of Quebec had a wireless penetration level of 73.5% compared to Canadian national average of 84.3%. Similarly, Average revenue per user (ARPU) in Quebec was lower at $55.36/month compared to national average of $64.91/month.

Smart phone ownership at 70% in Quebec was also reportedly lower than national average of 77%.

These indicators make Quebec a market with higher growth potential than the Canadian national average. The company is likely to focus its energies on its home market, Quebec, as evident from its recent sale of non-core spectrum licenses in other provinces. The company has capitalized on this potential by strengthening its service offering through LTE technology, Apple devices and data packages.

Large cash pile to sustain growth capex and share repurchases

The company has an enviable balance sheet flexibility to fund its growth plans. Its CAD2billion growth dry powder comprises of a cash pile of CAD865 million and additional borrowing capacity. The cash has accumulated after sale of spectrum licenses to Shaw and Rogers during 2017. The company

This article was written by

Jaulian Financial profile picture
I love to write about stocks, that's all. There is nothing profound in the musings here. Don't consider any of these ramblings as investment advice.My areas of interest are sustainable competitive advantage, margin of safety and asymmetric risk reward opportunities.

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