CIBC in its Q1 Canadian Telecom Earnings Recap Says Quebecor Remains its "Top Pick" Post Quarter
CIBC Capital Markets provided its first-quarter Canadian Telecom Earnings Recap in a note dated May 15 and said its "top pick" following first-quarter remains Quebecor (QBR-A.TO, QBR-B.TO).Among the Canadian telecoms, Q1 revenue and adj. EBITDA came "roughly in line" with consensus, said CIBC. Core telecom margins were up an average of 30 basis points in Q1 and CIBC continues to expect a focus on efficiency in a lower-growth telecom environment.In wireless, average revenue per user (ARPU) declines continue to moderate with wireless service revenue growth of 22 bps at the Big 3, but up 9% at Quebecor, driven by subscriber and APRU growth, stated CIBC.In internet, CIBC noted Telus (T.TO) and BCE (BCE.TO) took the "highest share of net adds", with all companies in its coverage continuing to focus on out-of-footprint expansion via TPIA and/or FW.Competitive pricing escalated through Q1, with flanker brands reducing low-tier prices to ~$25 late in the quarter, said CIBC and added that average Q1 ARPU was down 92 bps Y/Y, an improvement from a 121 bps decline in Q4.Quebecor recorded its second consecutive quarter of ARPU growth (+1.4%), the only Canadian telecom to see ARPU growth after multiyear industry declines, noted CIBC.It further noted that immigration remains a headwind, with industry mobile net additions down 26% Y/Y in the quarter."Q1 equipment revenue dropped 3% across the Big 3, which we view as a healthy barometer of a moderating device subsidy environment, consistent with lower subsidy rates observed in our channel checks," said CIBC. "We observe pricing stabilizing post-Q1, with flagship and flanker pricing up 5% and 3% Y/Y, respectively. Rogers (42%) took the highest share of industry wireless net additions in Q1, followed by Quebecor (37%), TELUS (15%) and BCE (6%)."Telus (44%) and BCE (29%) took the highest share of internet net additions this quarter, noted CIBC, driven by a combination of increased penetration in footprint as well as out-of-footprint expansion in the east (Telus) and in the west (BCE).Quebecor reported its third consecutive quarter of internet revenue growth (+3.2%), added CIBC."All companies within our coverage are exploring out-of-footprint expansion to some degree," said CIBC. "We expect out-of-footprint expansion via TPIA to be a growth opportunity, but to come at a lower margin vs. the owner economics in footprint."Deleveraging remains a focus for the sector, noted CIBC, with average leverage of 3.4x at the end of Q1."BCE and TELUS reiterated their deleveraging targets (3.5x and 3.0x by the end of 2027, respectively), said CIBC. "Rogers reduced its F2026 capex guidance by ~24% at the midpoint, with the savings flowing to FCF."CIBC expects Rogers to use the additional FCF to accelerate deleveraging. Quebecor continues to have the lowest leverage among the telecoms at 2.86x, added CIBC.Price: $49.23, Change: $+0.65, Percent Change: +1.34%