Several Promising Trends in Q2, but Quebecor Still Lags Bigger Peers and Needs Freedom Mobile

While Quebecor’s revenue declined for the second straight quarter (down 1% year over year in the second quarter, attributable solely to a decline in equipment sales that don’t contribute to profits), its performance improved in several important categories. Most notably, mobile phone services revenue continued to grow rapidly, as customer growth accelerated and average revenue per user continues to increase after several years of consistent declines. However, Quebecor is largely in a holding pattern until there is a regulatory decision on the Rogers-Shaw combination, which would result in Quebecor acquiring Shaw’s Freedom Mobile if the broader merger is approved. We are maintaining our CAD 35 fair value estimate and think Quebecor will be in a much stronger position with Freedom Mobile than without.