Telecom sector facing ‘fragile’ investor sentiment amid price wars: analysts

The return of aggressive promotions from Canada’s big telecom companies this year could be good for consumers, but analysts warn that the “irrational” pricing could turn off investors.

Industry watchers had pointed out a relative slowdown in the back half of last year when it came to competitive intensity among the Big Three telecoms.

That followed more than two years of intense competition to gain customers that often featured heavy discounts being offered. It’s a trend that has been frequently attributed to Quebecor Inc.’s Videotron subsidiary acquiring Freedom Mobile in 2023 in an effort to create a fourth national carrier.

Despite prices moderating in late 2025, offers launched over the first three months of this year “rank among the most aggressive we have ever observed,” said Desjardins analyst Jerome Dubreuil.

He warned that could lead to lower valuations of the companies if the dynamic continues throughout the year.

“It is disappointing that the lessons from 2023-25 wireless pricing do not appear to have been internalized,” Dubreuil said in a note last week.

“The silver lining is that these promotions are occurring during a low-volume period. Nonetheless, this raises the broader question of whether such behaviour is simply characteristic of a four-player market.”

Scotiabank analyst Maher Yaghi said heightened promotional activity will likely leave telecom companies worse off when it comes to key performance metrics that are closely watched by investors.

That includes churn, a measure of those who cancelled their service, along with average revenue per user, or APRU.

“We are still struggling to understand the rationale behind the elevated discounting in Q1, which has likely resulted in higher churn and more pressure on ARPU without the offsetting and hoped-for subscriber loading improvement,” he said in a separate note.

Those factors are playing out at a time when fewer new subscribers have been up for grabs, given Canada’s slowing population growth.

Cellphone and internet providers have often cited the federal government’s decision to scale back its immigration targets as a key challenge holding back customer additions in recent earnings reports.

Last month, Statistics Canada said the country’s population edged down in the fourth quarter, dipping 0.2 per cent, with the decrease marking the first back-to-back drop ever recorded.

With fewer new Canadians to sell to, analysts say the industry’s major players are likely to feel the effects throughout 2026.

“Overall, given the current competitive environment and the population growth dynamics, we anticipate a relatively underwhelming quarter for the Canadian telecom companies,” Dubreuil said.

RBC’s Drew McReynolds called the three-month period “at least one step back for the industry” following a “constructive two steps forward on the wireless pricing environment through the majority of 2025.”

But National Bank analyst Adam Shine cautioned against extrapolating the first-quarter pricing dynamic through the rest of 2026 since one quarter “does not make a trend.”

He said in a note that telecom stocks have “over-corrected” lately, reflecting fragile investor sentiment toward the sector.

Still, he said it raises the question of whether the second half of last year or the beginning of this year will be seen as an anomaly moving forward.

“Managements will need to emphasize on coming (first-quarter earnings) calls that discipline is back in focus,” Shine said, urging providers to avoid “knee-jerk moves” in the coming months.

For investors, McReynolds said there are encouraging signs a couple weeks into the second quarter, with the bulk of those promotions having been shelved so far. He said he doesn’t yet expect the Big Three to lower their guidance for the year.

“However, we believe any continuation of such elevated promotional intensity as the year progresses would increasingly begin to bring 2026 guidance ranges into question, putting renewed downward pressure on valuations and putting fragile investor sentiment to the test,” said McReynolds.

This report by The Canadian Press was first published April 13, 2026.

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