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Fixed Income Quarterly—Telecom/Media/Cable
casting distributors will likely continue to have an advantage over pure-play OTT services in acquiring Canadian program- ming rights on all screens. The overall economic model of the media infrastructure is based on subscription and advertising platforms. Therefore, we believe content producers will be re- luctant to move to an OTT or à la carte model to protect their ability to monetize their rights of new commercially successful product. We are mindful of the potential for a generational shift in consumer behaviour that could negatively impact the subscription video model. Over the longer term, we anticipate earnings mix shifting away from video subscription services to broadband services. Those carriers that offer both services have a natural hedge.
Consumer Choice in Programming Services – The CRTC is concerned that consolidation and vertical integration in the Canadian broadcasting industry could have a considerable negative impact on consumer choice. The CRTC expects
Table 1: Senior Unsecured Debt Ratings
firms to make “significant strides” to offer consumers more choices in their near-term future with respect to their BDU offerings. The federal cabinet directed the CRTC to study the unbundling of television channels and report its conclusions by April 30, 2014.
Wireless Roaming Fees – In December 2013, the federal gov- ernment announced it would amend the Telecommunications Act to prevent wireless carriers from charging smaller carriers more than its own customers, even though CRTC work was far from completion.
Defined Benefit Pension Plans – Modest increases in interest rates expected in 2014 provide relief for industry balance sheets. BMO Economics forecasts 10-year government of Canada yields to increase to 3.15% in Q4/14 (2.46% March 2014) and 30-year government of Canada yields to increase to 3.68% in Q4/14 (2.96% March 2014).
DBRS
S&P
Moody's
Issuer:
Rating
Outlook
Rating
Outlook
Rating
Outlook
Bell Aliant BBB Bell Canada AL Cogeco BBBL MTS BBB Rogers BBB Shaw BBB TELUS AL Thomson Reuters BBBH
Stable BBB Stable BBB+ Stable BBB Stable BBB Stable BBB+ Stable BBB- Stable BBB+ Stable BBB+
Stable nr Stable Baa1 Stable nr Stable nr Stable Baa1 Positive Baa3 Stable Baa1 Stable Baa2
Stable
Stable Stable Stable Stable
Note: Cogeco Cable’s rating is on Senior Secured Debt Source: BMO Capital Markets, Credit rating agencies As at March 31, 2014