Buy Freedom Mobile | Kibekor ‘harvested ripe fruit’

The first reactions to the agreement regarding the purchase of Freedom Mobile by Quebecor are favorable for the Quebec telecommunications conglomerate. National Bank Financial is so excited that it has changed its recommendation and from now on it is proposing to buy the share of the owner of Videotron.

Posted at 6:00 AM

Richard Dufour

Richard Dufour

Kibecor, Rogers, and Shaw announced Friday evening an agreement under which Kibecor will agree to pay $2.85 billion to Freedom Mobile, a wireless services company active in Ontario, Alberta and British Columbia. The agreement will add nearly 1.3 million subscribers to Quebec’s customer base.

Not only does the deal get announced at a reasonable price, says analyst Adam Shane of National Bank of Finance, but it also requires neither a stock issue nor a financial partner for it to materialise.

This expert notes in a note written Sunday that he expects Freedom to adopt the name Fizz, Videotron’s low-cost cellular and Internet provider, and Quebecor to offer both wireless and bundle services (internet and wireless). -wired) in Ontario, Alberta and British Columbia through an agreement to resell Internet services to Rogers purchased in bulk through an agreement.

Rogers and Shaw agreed to sell Freedom Mobile this spring to persuade regulators to agree to Rogers’ acquisition of Shaw, a $26 billion deal (including debt).

Adam Shane says he disagrees with the Competition Bureau, which last week reiterated its opposition to Shaw’s marriage to Rogers, saying selling Freedom Mobile would not be an effective solution and would weaken Freedom as a competitor.

His colleague Jerome Dubreuil, at Desjardins Securities, adds that the freedom agreement allows Kibecourt to “harvest the ripe fruit” and expand its horizons at a “reasonable” price while increasing the likelihood of Rogers’ merger with Shaw.

Quebec’s track record, balance sheet, experience and assets are all elements that make it difficult for the regulator to ensure that the competitive environment will be significantly affected by Rogers’ merger with Shaw.

Jerome Dubrell

“It is difficult to predict the next action the Competition Bureau will take, but the regulator is encouraged to settle the file quickly so that Quebecor can compete effectively as quickly as possible,” he adds.

positive feedback

This analyst also expects a positive reaction from investors on Monday. “Although the market has so far looked generally unfavorable for the acquisition of Freedom by Quebecor, the deal made sense at a certain price. For $2.85 billion, Quebecor is making a deal at an attractive price, he says. He has previously estimated Shaw’s wireless assets More than 4 billion dollars.

However, Jerome Dubreuil specifies that Quibecourt leaders will have to provide more details surrounding the strategy and financial outlook to reassure investors and allow Quibecourt’s business to reduce the valuation discount currently observed on the title.

Starting wireless activities outside Quebec involves, among other things, financial risks.

Jerome Dubrell privately believes that Kibecourt can slow the pace of its share buybacks and dividend growth.

“Shaw has significantly slowed its capital expenditures since announcing its merger with Rogers, and Quebecor will have some catching up to do in terms of wireless investments. He estimates that Kibekor will simply have to invest $200 million in catch-up expenses during the first three years following the deal.

Jerome Dubreuy also expects that the competitive intensity – in other words, pressure on prices – will increase in the wireless market once the merger is complete.

The settlement of 850 million lawsuits filed by Quebec last fall against Rogers is also not part of the Mobile Freedom Agreement. Adam Shane points out, however, that the amicable negotiations that led to the Freedom Agreement could pave the way for Kibecourt to abandon the company’s legal action by claiming that Rogers “artificially caused an impasse” in an agreement made for the wireless network. 4G LTE shared in Quebec and the Ottawa region.

They are now 10 out of 12 analysts who recommend buying Kibekor.

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