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Big telecoms face pick-and-pay challenge as they report Q3 earnings

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(Globalpost/GlobalPost)

MONTREAL - The booming wireless business is expected to keep Canada's big three telecom companies in the black for their third-quarter earnings, but the industry is back on the federal government's radar over its lack of consumer choice for selecting TV channels.

Rogers, the country's largest cable TV and wireless provider, reports its quarterly earnings Thursday, followed in early November by Bell and Telus.

Rogers (TSX:RCI.B) is expected to report adjusted earnings per share of 96 cents on $3.257 billion of revenue in its third quarter, according to analysts' estimates.

But it's not all smooth sailing for the three providers. The federal government, in a throne speech last week, outlined plans to mandate broadcasters to unbundle some of their TV offerings.

Forcing cable and satellite TV providers to offer so-called 'pick-and-pay' services is part of the government's response to consumers frustrated over being made to buy large bundles of channels they don't want when they sign up for services.

But Canaccord Genuity analyst Dvai Ghose said the risk to Rogers' bottom line would be limited.

"While the government wants a la carte TV choice, we estimate that only 14 per cent of Rogers' 2013 revenue will come from cable TV," he said in a research note.

Television insiders say such a move by government would likely result in some channels disappearing and end up costing consumers more, not less.

Bell, Rogers and Telus are already feeling the heat from Internet video subscription services such as Netflix and, last quarter, banded together to fight the entry of U.S. competitor Verizon into Canada.

Analyst Troy Crandall said the 'pick and pay' pricing issue should be a much easier fight for the telecoms because the industry has been slowly moving toward more consumer choice.

"I don't necessarily think they're sweating it that much," said Crandall, of investment firm MacDougall, MacDougall and MacTier.

"If it means moving a la carte, I think they would rather have that than losing the customer."

Crandall said Canadian content rules for programming would make it challenging for TV providers to up their individual channel selection. Consumers would likely still have to take a basic cable package "loaded up" with Canadian content and then separately choose the channels they want for a small charge.

In Quebec, Videotron and Bell already offer "pick-and-pay" channels along with basic service.

Telus offers bundled channels plus what it calls "theme packs" based on viewers' interests and Rogers has experimented with pick and pay in London, Ont.

Still, "the choice that consumers want is far greater than what the system is willing to provide," said analyst Eamon Hoey, of Hoey Associates Management Consultants Inc. in Toronto.

Bell (TSX:BCE) reports Nov. 7 and is expected to have adjusted EPS of 77 cents on $5.157 billion in revenues, according to analysts' estimates.

Telus (TSX:T) will report Nov. 8 and is expected to have adjusted EPS of 53 cents on $2.892 billion in revenue.

http://www.globalpost.com/dispatch/news/the-canadian-press/131023/big-telecoms-face-pick-and-pay-challenge-they-report-q3-earn