Scotia Capital released a report earlier today called: “Embrace the Evolution: Analyzing the Financial Impact of Changes in Pay TV, Broadband, and Home Phone Services.”
Among its findings, Scotia says the business rationale for cable consolidation is increasing. “In Canada, we believe the combination of Rogers Communications and Shaw Communications makes more business sense than ever before.”
Some of the highlights include:
- Cable and telco wireline revenue growth will remain positive, at approximately 1.0%-1.5% over the next 10 years, as the industry’s focus shifts from traditional pay TV and home phone to broadband Internet;
- Over the next 10 years, cable and telco wireline EBITDA growth will be approximately 2.5%-3.0%;
- Cable and telco wireline cash flow (cash EBIT) growth will be in the range of 4.5%-5.0% over the next 10 years, primarily driven by EBITDA growth;
- Cablecos will show higher growth than telco wireline segments over the next 10 years;
- Although the long term view is growth over a 10 year period, there remain challenges over the next few years;
- Canadian pay TV segment is about to experience more revenue and margin pressure than ever before;
- To protect the TV business and to enhance the user interface and experience, pay TV operators will shift capex toward cloud architecture and IP video delivery;
Scotia Capital observed that telephone companies have been experiencing residential phone decline (driven by wireless substitution) for many years and cable companies are now seeing it, too. “We estimate that, in 2013, over 500K lines were cut because of wireless substitution – the highest annual figure ever for this metric in Canada.”
It is worth the time to read the analysis, led by Jeff Fan.
Jeff will be moderating a session at The 2014 Canadian Telecom Summit called “The Continuing Evolution of TV.”
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