Quebecor Earnings: Wireless Performance Disappoints but Doesn’t Change Our Long-Term Outlook

After a promising third quarter—in what was Quebecor’s first since acquiring Freedom Mobile and gaining a national wireless presence—Quebecor’s wireless performance relative to competitors took a step backward during the fourth quarter. New customer additions, average revenue per user, or ARPU, and telecom profits were all weaker than we expected. However, the relative performance is generally consistent with our view that Quebecor’s national presence will bring much more competitive intensity to Canada’s wireless industry but won’t result in major market share shifts. We expect only modest sales growth for Quebecor over our forecast, yet the stock still appears materially undervalued relative to our unchanged CAD 40 fair value estimate.