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Rogers Communications to Outperform

BCE RCI

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We are upgrading our recommendation on Rogers Communications Inc. (RCI - Analyst Report) to Outperform based on its current valuation, which is trading at significantly low multiples compared to the industry average and the S&P 500, with respect to several valuation metrics. We believe massive expansion of LTE networks and an attractive dividend yield will also boost the stock price in the near future.

As of now, Rogers expanded its superfast LTE network to 60% of Canada. Management has aimed to achieve 100% foothold by the end of 2013. Deployment of LTE network has resulted in a 80% year over year increase of Internet usage by its subscribers. Growing demand for mobile data and huge activation of latest smartphones will pave the way for Rogers’ future growth. The strategic decision taken by management to diversify in the mobile banking segment will also open up an additional revenue stream for the company. 

In last August, Rogers Communications together with Bell Canada, a division of BCE Inc. (BCE - Analyst Report) completed the joint acquisition of 75% stake in Maple Leaf Sports & Entertainment (MLSE). With this acquisition, Rogers will be able to deliver highly quality sports content to its subscribers anywhere, anytime, on any platform through its wireless/cable networks and robust portfolio of media assets. The sports contents of MLSE are in high demand in Canada.

Rogers Communications has decided to gain complete control over sports television network Score Media Inc. – Canada's third largest specialty sports channel – by purchasing its full stake for $167 million. The transaction awaits shareholder and other customary approvals. The proposed acquisition of Score Media Inc. will provide Rogers the right to access television assets of the Score Television Network, that includes Voice to Visual Inc., mixed martial arts promotion The Score Fighting Series, and The Score Television Network.

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