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On Oct 10, 2013 we maintained our Neutral recommendation on Canadian telecom service provider Telus Corporation (TU - Analyst Report). We remain optimistic on the company’s wireless segment, technology upgrade, high rollout of smartphones and expansion of the 4G LTE network.

Furthermore, investments in Optik TV business and high-speed broadband technology and services will likely work in favor of Telus. Nevertheless, continuous access lines erosion along with competitive threats and reduced roaming charges keep us cautious. Telus currently carries a Zacks Rank #3 (Hold).

Why Maintained?

Deeper penetration of smartphones, improving churn, increasing average revenue per unit, accelerating wireless data services and growing wireline fiber optic networks are the catalysts for Telus’ future growth. Investments in high-speed broadband technology and services will provide balanced growth for its wireless and wireline businesses.

Expansion of 4G LTE network, offering of the latest LTE based handsets and launch of SharePlus rate plans that come with an unlimited talk and text option will expedite growth within Telus’ wireless segment. In an effort to compensate for the access line loss, Telus continues to add features as well as upgrade the existing features of its Optik TV and Optik High-Speed Internet broadband services that are gaining traction across British Columbia, Alberta and Eastern Quebec.

The company also remains committed to enhance shareholders’ wealth and has extended its dividend growth program by three years to 2016, with the projection of semi-annual dividend growth of approximately 10%. Telus also enhanced its share repurchase program and now expects to buy back up to $2.5 billion by 2016.

Moreover, the potential rollout of the 4G LTE wireless service in rural Canada might pose a serious threat if it fails to acquire the 700 MHz band from the expected auction in early 2014. Uncertainties in the regulation of spectrum bands arising from capital outlay, bid price, high competition and availability, might limit the company’s capacity in expanding wireless coverage with the updated technology.

Additionally, Telus continues to lose local access line to competition from cable TV operators, who have started offering phone service based on the less costly Voice-over-Internet Protocol (VoIP). We thus prefer to remain sidelined on the company.

Other Stocks

Among other stocks Shaw Communications Inc. (SJR - Analyst Report), BT Group plc. (BT - Snapshot Report) and Telefonica (TEF - Analyst Report), all with a Zacks Rank #2 (Buy), look attractive for the short term.

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