Quebecor Earnings: Media Weakness Blunts Solid Telecom Results, but Freedom Plans Are Most Critical

Quebecor’s performance accelerated across its telecom business in the first quarter, but overall results were held back by rising media costs. With over 80% of the firm’s sales and all its profits attributable to telecom, the underlying trends were very encouraging. However, with the acquisition of Freedom Mobile at the beginning of the second quarter, prospective telecom performance will ride on much more than the narrower business that drove first-quarter results. We are maintaining our CAD 35 fair value estimate until we learn more specifics about the Freedom customer base and financial profile that Quebecor acquired. We will get insight into these components and the initial performance with next quarter’s results.