Telecoms actions: political football?



The Canadian telecommunications industry is made up of three major players: AEC (TSX: BCE) (NYSE: BCE), Telus (TSX: T) (NYSE: TU), and Rogers Communications (TSX: RCI.B) (NYSE: RCI). These leading telecommunications stocks continue to be excellent long-term investments for those approaching or retiring, in large part due to the defensive growth profiles of these companies as well as their superior dividend yields. the average.

However, a series of events posed an intriguing problem for investors. Telecom stocks appear to be the target of politicians in this federal election.

Let’s see what investors should be watching with telecom stocks right now.

Telecom stocks under siege?

Given that Canada’s Big Three Telecommunications hold about 90% of the market, it is perhaps not surprising to see this sector targeted by politicians. Canadians pay some of the highest wireless bills in the world. This is something politicians may want to address (or at least promise to tackle) during a campaign.

If the purchase by Rogers of Shaw Communications (TSX: SJR.B) (NYSE: SJR) materialize, yet more power would be in the hands of three telecommunications stocks.

The main reason for the high phone bills is the lack of competition in the industry, according to Conservative leader Erin O’Toole.

His take on this industry is that maybe less consolidation is better. As a result, investors betting on the Rogers-Shaw deal may have more difficulty justifying such a deal in a Conservative government. Concerns about affordability are likely to outweigh concerns about shareholder rights. At least that’s part of a party’s plans.

The NDP has also said it is calling for a cap on wireless bills for certain plans. The fact that telecoms stocks appear to be political football at the moment has done little to stop the surge in stock prices in this sector. However, the political landscape will certainly be one for investors in any of these stocks to watch.

At the end of the line

Telecommunications players in Canada continue to invest heavily in 5G infrastructure and the expansion of wireless services across the country. Therefore, it can certainly be argued with the Competition Bureau that further consolidation is required to achieve this.

Of course, many different political outcomes are possible. However, investors should keep in mind that telecom stocks remain a hot topic at this time.

These companies provide huge catalysts (like 5G) to enable Canada to increase its gross domestic product. However, these companies also have the potential to essentially tax the working class, which politicians don’t like.

That said, the fact that these high yield bond proxies pay large dividends and have ample room for growth is appealing. I think in the long run telecoms stocks will continue to perform very well. However, in the short term there can be some volatility. Investors should prepare accordingly.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .

Foolish contributor Chris MacDonald has no position on the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION.


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