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Summary
- Telus Corporation (TSX:T) announced acquisition of Lionbridge AI for a purchase price of approximately C$1.2 billion.
- In the third quarter of 2020, the consolidated revenue of Telus Corporation increased by 7.7 per cent to C$4 billion.
- BCE Inc holds a strong financial position in Q3 2020 with an available liquidity of C$5.2 billion.
Leading Canadian telecom giant Telus Corporation (TSX:T) last week announced the acquisition of Lionbridge AI, a crowd-based training data and annotation platform that powers machine learning through use of AI algorithms. The C$1.2-billion (approximately) acquisition deal is expected to close by December 31, 2020.
Following this development, telecom stocks surged on the Toronto Stock Exchange (TSX). In the COVID-infected world, these stocks have presented a lucrative investment opportunity for investors as well. Apart from TELUS, communication giants such as BCE Inc.(TSX:BCE) are trending on the TSX this week.
Through this acquisition, Telus (TSX:T) is looking at expanding its suite of digital offerings for Canadian customers with addition of data annotation capabilities of Lionbridge AI. As demand for high-quality, multilingual data annotation increases, Lionbridge’s AI capabilities will support Telus to meet the growing customer demand.
BCE Inc, on the other hand, holds a strong financial position in Q3 2020 with an available liquidity of C$5.2 billion at the end its latest quarter. The telecom leader is set to rollout high-speed internet services in Quebec, through its subsidiary Bell. The effort is also led by Telus, Hydro-Québec, and the Ministry of Economic Development, Innovation and Export Trade.
Let us delve deeper into the stock performance and financials of TELUS Corporation (TSX:T) and BCE Inc (TSX:BCE).
TELUS Corporation (TSX:T)
Current Stock Price: C$23.32
TELUS Corporation is among the largest wireless service providers in Canada with 9 million mobile phone subscriber base, capturing almost 30 per cent of the total market. In recent times, the company has upgraded its legacy copper network to bring fiber network services to home, improving its wireline footprint, competing with other cable providers.
Despite pandemic-led slowdown, the stock witnessed a slight decline of 7.23 per cent YTD. Current market capitalization of the company is C$29.95 billion while earnings per share (EPS) is C$1.18.
Following the acquisition of Lionbridge, the stock holds price-to-earning (P/E) ratio of 19.80, price-to-book (P/B) ratio of 2.486, price-to-cash flow (P/CF) ratio of 6.20 and debt-to-equity (D/E) ratio of 1.55, as per data on the TMX portal.
The stock holds a positive return on equity (RoE) and return on assets at 12.78 per cent and 3.78 per cent, respectively.
Quarterly dividend payout stands at C$0.311, yielding 5.338 per cent.
For the third quarter of 2020 (period ended September 30), the company’s consolidated revenue increased by 7.7 per cent to C$4 billion, and its EBITDA decreased by 3.1 per cent to C$1.39 billion. Its consolidated capital expenditure decreased by 0.9 per cent to C$741 million due to 4G network expenditures. The free cash flow decreased by 49.7 per cent to C$161 million, as of September 30, 2020, as compared to C$320 million in the same period last year.
Massachusetts-based Lionbridge is proprietary data annotation platform used by more than a million annotators and linguists. Data annotation essentially means labeling data in text, images, video, and audio to be decoded easily by AI systems in more than 300 languages and dialects for some of the major tech companies globally.
BCE Inc (TSX:BCE)
Current Stock Price: C$52.93
BCE Inc, formerly known as Bell Canada Enterprises Inc, is among the largest communication companies in Canada providing wireless, broadband, internet, phone, and television services. Headquartered in Montreal, Quebec, the company also has a media segment called ‘Bell Media Inc.’ that is into television and radio production.
In October, the company extended its wireless internet services to rural Atlantic Canada with a target to reach 70,000 households by the end of 2020 and about 200,000 households in the next two years.
Telus stock is down 12 per cent this year. However, the stock has bounced back by nearly 14 per cent since its pandemic-driven low of C$ 46.44 on March 23.
Current market capitalization of the firm is C$47.86 billion and earnings per share is C$2.52. The stock holds P/E ratio of 21.00, P/B ratio of 2.863, P/CF ratio of 5.80 and D/E ratio of 1.66. Quarterly dividend payout declared by the company is C$0.833. Current dividend yield is 6.291 per cent.
The company’s net earnings were down by 19.7 per cent Y-o-Y to C$740 million in the third quarter of 2020 (period ended September 30). The company’s operating revenues was down 2.6 per cent Y-o-Y from C$5.9 billion in Q3 2019, to C$5,787 million in Q3 2020, and adjusted EBITDA down 4.4 per cent y-o-y to C$2,454 million. The cash flow from operating activities decreased 6.6 per cent to C$2,110 million and free cash flow saw 11.5 per cent drop to C$1,034 million in Q3 2020.
