Investing.com -- Barclays downgraded Rogers Communications (TSX:RCIa) to "Equal Weight" from "Overweight" and BCE Inc (NYSE:BCE) to "Underweight" from "Equal Weight" given persistent challenges in Canada’s telecom sector, including price wars and weakening growth drivers.
“The Canadian telecom operating environment may continue to see headwinds for a while and stretched balance sheets leave little room for error,” analyst at Barclays (LON:BARC) wrote.
Barclays highlighted aggressive pricing by Rogers (NYSE:ROG) and Quebecor after the Rogers-Shaw deal, forcing rivals BCE and Telus (NYSE:TU) to respond with steep promotions in wireless and wireline broadband. This competitive environment, compounded by structurally lower immigration levels, a critical growth driver, has left the sector vulnerable.
The brokerage also flagged concerns over elevated leverage, unsustainable dividend payout ratios, and distractions from unrelated M&A activities. Despite a steep sell-off, Barclays noted that Canadian telcos still trade at a premium to their slower-growing U.S. peers, leaving little room for optimism.
Barclays expects continued downside risks for the sector.
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