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Telco competition taking aim at Rogers: Moody's

Rogers' (RCI.B-T) claim as king of the hill among the country's cable and telco companies is increasingly under threat, according to a new report from Moody's. While the report says operating results for every company in the telecommunications space is under pressure amid growing competition, Moody's says Rogers has the most at stake.

"Rogers has historically maintained Canada's leading wireless business and a solid cable-based fixed line broadband operation. However, the company's competitive advantages have been largely mitigated and its results are, therefore, the most vulnerable," Bill Wolfe said in a report on Wednesday.

"As wireless competition increases and as the telephone companies begin to offer faster Internet speeds and Internet protocol television (IPTV), Rogers' historically strong results will revert to the mean."

Moody's says that technological advances over the past six years allowed cable companies such as Rogers, Shaw and Quebecor to offer consumers a cable telephone package and faster Internet speeds than the traditional telcos, such as BCE (BCE-T) and Telus (T-T).

This competitive advantage "has recently started to change," Moody's says, as telcos upgrade to a new, cheaper method of delivering services (known as fiber to the node) that enables Internet protocol television products (IPTV) and competitive Internet speeds.

"To date the change is observed most prominently in areas in which TELUS competes with Shaw," Wolfe said.

Rogers' lead in the wireless space is also under pressure, according to Moody's.

"With the largest franchise and the biggest out-of-fixed-line footprint subscriber base, Rogers is the most vulnerable of the Canadian operators, but the subscriber numbers do not yet show significantly eroding growth," Wolfe said. "While Rogers' vulnerability has not yet shown in the subscriber figures, the company's leading ARPU position is reverting to the mean as competition intensifies."

The report comes after the country's leading telco companies and recent upstarts recently called on the federal government to provide greater clarity in the upcoming spectrum auctions. Upstarts, such as Wind Mobile, want the government to set aside spectrum that cannot be bought by the incumbents.

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