David McFadgen, managing director of institutional equity research at ATB Cormark Capital Markets, recently shared his insights on top telecom stock picks during an interview on BNN Bloomberg.

Canadian Telecom Landscape

The discussion centered on the competitive dynamics within the Canadian telecom industry, particularly the intensifying wireless competition and evolving pricing strategies. McFadgen highlighted potential valuation gaps and upside opportunities in select telecom stocks.

Quebecor: A Disruptive Force

Quebecor is McFadgen’s top pick, largely due to its disruptive impact on the Canadian mobile market. The company’s acquisition of Freedom Mobile and the introduction of roaming-inclusive plans are pressuring the revenue streams of established telecom providers.

This strategy mirrors Quebecor’s successful entry into the cable telephony market, where a low-priced offering led to significant market share gains. The inclusion of roaming in all plans provides a competitive advantage for Canadian travelers, something incumbents are hesitant to match due to potential revenue loss.

Rogers: Undervalued Potential

Rogers is another attractive stock, with potential growth expected from the Shaw acquisition. Despite experiencing low single-digit organic growth, the company’s current valuation presents an opportunity for investors.

McFadgen notes that Rogers’ core business is valued at roughly seven times EBITDA, with its sports assets currently undervalued by the market. The potential buyout of the remaining interest in MLSE and a subsequent minority stake sale are seen as catalysts for unlocking value.

BCE: Stability and AI Initiatives

BCE is positioned as a stable, dividend-supporting company. While growth prospects may be more modest compared to its peers, BCE’s focus on AI and recent strategic deals in Saskatchewan contribute to its stability.

The company has adjusted its dividend to strengthen its financial position and aims to generate substantial revenue from AI initiatives by 2028. McFadgen emphasized the importance of understanding individual company strategies and competitive dynamics when evaluating the telecom sector.