Goff says he is increasingly bullish on the wireless space, and he likes the heavy exposure Telus has to it. He says that wireless contributes 65% of his 2013 earnings EBITDA estimate for Telus, slightly higher than Rogers Wireless, at 64%, and much higher than the 29% BCE collects.
In a research update to clients this morning, Goff maintained his BUY rating on Telus, but raised his target by two dollars to $78, the highest target of any analyst who currently covers the company.
Why favour Telus over BCE, when the pair have reasonably similar valuations? Goff says Telus is his preference in part because he believes that competition is likely to moderate in Western Canada, but heat up in the Central and Eastern parts of the country. The Byron Capital analyst notes that both companies recently reported their ninth consecutive quarter of year-over-year average revenue per user increases.
Goff also points out that Telus’s IPTV rollout is much further ahead of Bell’s, and doesn’t suffer from the same kind of cannibalization of its own services. He thinks about 15% – 20% of Bell FibeTV subscribers are migrations from Bell Satellite. Goff believes Telus was quite aggressive with equipment subsidies, but that has resulted in healthy IPTV subscriber growth.
Shares of Telus on the TSX closed today down .2% to $70.06.