The CEO of Rogers Communications Inc. (TSX:RCI.B) made a bombshell announcement earlier this year. CEO Joe Natale announced that the company is making progress toward the deployment of a 5G network.
The company has partnered with Swedish telecom equipment manufacturer Ericsson, the company involved with AT&T’s rollout of 5G in the U.S.
Ericsson’s top two competitors in the 5G industry are Huawei and Nokia. Huawei has faced setbacks in recent years after Australia, New Zealand, and the U.S. essentially blocked the Chinese company from taking a lead role in the 5G rollout in those countries.
Canada continues to be on the fence regarding a Huawei ban, but security experts indicate that a ban is likely, given the strained relations between China and Canada at the moment.
For those of you looking to get in on the 5G craze, Rogers presents a good opportunity based on its increasing net income and its diversification.
Increasing net income
Not to state the blisteringly obvious, but net income is one of the most important metrics of a company.
By looking at a company’s net income, investors can determine how well the business is doing, how well the business will do, and the challenges it will face going forward.
Rogers’ net income increased from $835 million in fiscal 2016 to $2.06 billion in fiscal 2018. This represents a compounded annual growth rate of 35.10%.
Given that share prices are correlated with net income, this is a good sign for investors as it indicates that Rogers continues to grow and will likely deliver generous returns in the future.
With the anticipated rollout of the 5G technology, I am confident that Rogers will win over more customers. This will further increase its revenues, which ultimately drives the bottom line.
Diversification
In addition to the eponymous company, Rogers owns many other companies in a variety of industries. This includes Fido, 37.5% of MLSE, and Rogers Bank, just to name a few.
Fido is the millennial division of Rogers. Its mascot is an adorable dog and it targets young professionals and students. The company is headquartered in Montreal, Quebec, and was acquired by Rogers in November 2004.
MLSE is the company behind Toronto’s major sports franchises including the Toronto Maple Leafs, Toronto Raptors, and the Toronto Argonauts, among others. Despite the Raptors winning the NBA championships this year, Torontonians are still eagerly awaiting the return of the Stanley Cup.
Finally, Rogers Bank is the financial services subsidiary of Rogers. It is responsible for the issuing and ongoing support for Rogers’ MasterCards and Fido’s MasterCard.
This diversification benefits Rogers as it allows it to profit from different industries.
Summary
For those of you looking to get in on the 5G action, Rogers is a good bet. Being one of Canada’s largest telecommunications company means that Rogers will be able to capitalize on 5G technology as soon as legally possible.
Its increasing net income indicates that it is a growing business, and its diversification should offer investors some assurance as to the stability of Rogers’ revenues in the future.
Overall, Rogers is a good pick if you are looking to bet on 5G.
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