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The howls of protest over iPhone pricing by Rogers Communications Inc. might be a sore-point among consumers. But investors have a different issue with the telecom company: the ongoing wireless spectrum auction, which is bringing new players into Canada's tight market and higher licence costs.
Jeffrey Fan, an analyst at UBS, recommended investors sell Rogers shares in the short-term (along with rival telecom incumbent Telus Corp.), despite the fact that Rogers' once-strong stock price has already withered 25 per cent since hitting a peak last November. The stock fell 5.3 per cent on Monday, but was up slightly on Tuesday morning.
“We expect the near-term news flows pertaining to partnerships and alliances among the new entrants following the end of the auction will have a negative impact on their share prices,” Mr. Fan said in a note to clients.
Over the longer term, the prospect looks considerably better for Rogers, which is why he is maintaining a long-term "buy" recommendation on the stock. But even then he lowered his target price on the shares to $51 from $54 previously.
“Once the new entrant strategies are known and the partnership announcements are behind us, the focus will likely then turn to the new entrants' progress and the challenges that the incumbents will create ahead of the new entrants, which may then help the shares recover,” Mr. Fan said.
Rogers shares traded at $38.76 in Toronto, up 0.7 per cent.
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