By Adriano Marchese

Canada's telecom sector continues to struggle, weighed down by sputtering subscriber growth from slowing immigration, a price war denting margins and hefty debt loads.

Analysts see some glimmers of relief but largely believe that investor sentiment toward the space will still be challenged until companies can string together a couple of quarters of improving results and demonstrate stability on pricing.

The first chance for that comes in the next few weeks as companies report earnings. Rogers Communications is scheduled to report its quarterly earnings on Wednesday, while BCE, Telus and Quebecor are on tap for early May.

The companies are largely confronting the same challenges. Canada's population growth, which for years has been fueled by immigration, has stalled, shrinking the pool of potential customers signing up for plans. At the same time, carriers have dangled more deals to woo customers to their service, which has come as Quebecor has emerged as a national player.

Analysts are looking for signs that prices are stabilizing. TD Cowen's Vince Valentini said the average price for mobile plans is increasing slightly but the trend has been inconsistent.

"Investors are desperately waiting for a floor on pricing," Valentini said. "Show us that we're not on an accelerating pace down on both mobile plan volume and pricing."

Valentini said that carriers tend to hold the line on pricing discipline early in the quarter, then panic if subscription numbers aren't up to snuff and slash plan prices.

One solid month won't be enough to sway investors. "Even if April continues to show good pricing, you're not going to be out of the woods until you get at least one quarter, probably two, of proof," he said.

Telecom companies have underperformed the broader markets lately. Shares in Rogers Communications and BCE are both down by around one-third over the past year, while Telus is down 5%. The S&P TSX index was up around 10% during that time.

The exception is Quebecor--up 15%--which is considered the challenger in the space and has gained market share since acquiring Freedom Mobile from Shaw Communications two years ago.

Balance sheet pressure is the other major overhang. Rogers, for instance, expects to reduce its debt by C$7 billion through an infrastructure deal with Blackstone, while BCE has plans to raise C$7 billion through noncore asset sales, including the sale of Maple Leaf Sports and Entertainment to Rogers for C$4.7 billion. Analysts say these moves only scratch the surface.

"It is hard to convince investors to pay up for acquired growth when the base business is showing weak growth and leverage is elevated," Maher Yaghi said in a Scotiabank report. He said that carriers have to show strong cash flow and deliver it consistently if they plan to rebuild investor trust.

RBC analysts don't see meaningful improvement until at least next year. Analyst Drew McReynolds thinks that the negative trends seen in 2024 are likely to persist through 2025, "making any meaningful Canadian telecom comeback more of a 2026 story."

Consensus on revenue growth for the Big 4 reflects the malaise. Telus is expected to grow 1.2% to C$4.99 billion, while Quebecor revenue is seen being flat at C$1.36 billion. Rogers is forecast to rise 1.6% to C$4.98 billion and BCE revenue is projected to fall to C$5.91 billion, down 1.7%.

Still, McReynolds sees room for a narrative shift if pricing stabilizes and sentiment rebounds from a low base. That could be "one small step for growth, and possibly one giant leap for sentiment."

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

April 21, 2025 11:53 ET (15:53 GMT)

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