Canada’s big three telcos are right to feel threatened by the potential entry of Verizon into the Canadian market, but fourth entrants into established markets generally don’t end up doing very well, cautions one fund manager.
Norman Levine, Managing Director, Portfolio Management Corp was on BNN’s Market Call yesterday to talk about the presently lively Canadian telco scene.
Levine, who bought BCE in the $23 range, says he is holding onto the stock.
“Our clients have big capital gains and are earning huge yield on the stock,” he says. The fund manager says that the threat of short-term disruption is not scaring him away from the name.
“The potential, and I will underline the word potential entry of Verizon is disruptive to the industry,” he says. “If they do come it will definitely be disruptive in the short run. History has shown that other countries that a fourth player is generally not successful in the long run. It’s nice for the government to want a fourth player, but it generally doesn’t work, two or three tends to be the optimal number in almost every country in the world.”
Levine says the fact that BCE has the smallest amount of its assets in wireless, when compared to Rogers and Telus, means the company will be the least affected by Verizon’s entry into the market.
The threat of the giant U.S. telco coming to Canada, meanwhile, has sent shares of Rogers, BCE and Telus to near 52-week lows. So is this a good time to be contrarian and pick them up?
Investors in any of the big three, says Levine, shouldn’t expect much in the near term.
“Collect your dividend, and when the noise subsides you should do better” he says.