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Why Canadian Telecom Shares Popped

By Brian D. Pacampara, CFA - Sep 3, 2013 at 12:50PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Canadian telecom stocks popped today after giant Verizon (VZ 0.54%) agreed to buy U.K.-based Vodafone Group's stake in Verizon Wireless for $130 billion.

So what: The deal pretty much squelches the possibility that Verizon will enter Canada, removing a cloud of uncertainty over Canada's "big three" telcos: Telus (TU 0.22%), Rogers (RCI 0.29%), and BCE (BCE 0.20%), which up today as high as 9%, 11%, and 6%, respectively. Specifically, the size of the acquisition makes the Canadian market just too small for Verizon to play in, reigniting good vibes over the big three's oligopolistic pricing power. 

Now what: It'll be business as usual for Canada's telcos. "Verizon is not going to Canada," said Verizon CEO Lowell McAdam in an interview with Bloomberg, and called the speculation over the possibility "way overblown." More importantly, with Telus, Rogers, and BCE still trading off their 52-week highs even after today's pop, there might be some value left in the group.  

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications and Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$44.78 (0.54%) $0.24
Vodafone Group Plc Stock Quote
Vodafone Group Plc
$14.80 (1.23%) $0.18
BCE Inc. Stock Quote
BCE Inc.
$49.61 (0.20%) $0.10
Rogers Communications Inc. Stock Quote
Rogers Communications Inc.
$44.68 (0.29%) $0.13
TELUS Corporation Stock Quote
TELUS Corporation
$22.69 (0.22%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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