Canaccord analyst Dvai Ghose says the Canadian government’s expected decision to mandate “pick and pay” services probably won’t be a big blow to Canada’s telcos, but Shaw’s (TSX:SJR.B) overall exposure to cable and satellite means that company could be negatively impacted.
In today’s throne speech, which is to be delivered at 2pm EST, the Conservative government is expected to focus on consumer issues like the capping of roaming fees for cellular users and the unbundling of cable TV channels to allow more choice for subscribers.
Ghose points out that Shaw is at the top of the heap in terms of exposure to cable and satellite TV services, deriving 48% of its revenue from this source. By comparison, Rogers derives just 14% of its revenue from cable and satellite, while Bell comes in at just 11%.
The Canaccord analyst estimates that 8% of Shaw’s fiscal 2013 revenue came from specialty channels, compared to 5% for the likes of Rogers, Bell and Quebecor. He thinks there will be a negative impact for less popular specialty channels that are currently bundled with more popular ones.
In Quebec, notes Ghose, Bell and Videotron will see little impact because they have been offering a la carte choices for several years, and the majority of their customers are already subscribing to such services. He says it is curious that many in the industry argue that a la carte will not have much of an impact because the price per channel tends to rise under such plans. If this is true, wonders Ghose, why haven’t the incumbents adopted pick and pay already?
Ghose says he is taking a wait-and-see approach to the pick and pay situation. In a research update to clients Monday, he maintained his BUY ratings on Telus and Rogers and his SELL rating on Shaw. He believes the market may be overstating the wireless regulatory risk and understating the regulatory risk in cable.