Telus could benefit from a Conservative government, Scotia says

2025 could be a much different year for Telus (Telus Stock Quote, Chart, News, Analysts, Financials TSX:T).

So says Scotia Capital analyst Mager Yaghi, who thinks a potentially different take on on foreign ownership restrictions could benefit Western Canada’s flagship telco.

As reported by the Globe and Mail, the analyst says a lot of the headwinds Telus has faced of late are not of their own doing, and they could, in fact, become tailwinds.

“The competitive structure that changed in 2023, which resulted in a downward spiral on wireless pricing, was a result of regulatory decisions – not to be confused by operational execution,” Yaghi wrote. “This is to say that the sector’s performance will be greatly affected if a new government takes the economy into another direction when it comes to inflation targets and trade wars (affecting long term rates), new regulatory policy on competition (ongoing FTTP market structure and broadcasting reviews by the CRTC, foreign ownership limits).”

The analyst speculated at what the new landscape might look like.

“The conservatives have indicated that if they form a new government, they could review foreign ownership limits and not just for telcos,” he noted. “If foreign ownership limits are relaxed a few telcos could be in play for foreign operators chief among them is TELUS which, given its limited wireline/federal government exposure and national wireless presence. It will be a double edge sword for the sector as on the one hand, some companies could get bid up while multiples on other companies which might not be open to being acquired see their multiples compress if a large U.S. player makes an entry in Canada. Clearly, many possible combinations could be entertained in this context, including the opening of some broadcasting ownership limits potentially allowing the spin out of BCE media operations. In a scenario where a larger player could enter the Canadian market, existing companies need to be more proactive to improve ROICs ahead of time. We see tower divestitures and/or combining the wireline assets of TELUS and BCE under a network sharing agreement similar to wireless also making more sense, and possibly Rogers/Quebecor forming a net.”

In a research update to clients January 8, Yaghi maintained his “Sector Perform” rating on Telus while lowering his price target on the stock from $23.25 to $22.50.