There were few places for Canadian equities to hide in 2008. Even Canada’s normally secure telecommunications services companies were unable to find shelter.

Shares in Montreal-based giant BCE Inc. slid by 42.4% between Jan. 1 and Dec. 5, when the stock closed at $22.85 a share — thanks, in part, to the collapse of a private buyout. Rogers Communications Inc. of Toronto and Telus Corp. of Vancouver also saw their share prices fall over the same period, but by smaller amounts — by 23.5% to $34.40 (Rogers) and by 28.9% to $35.16 (Telus).

Although demand for telephone and data services is expected to continue to grow in the recessionary environment of 2009, only Rogers is rated a “buy” by a solid majority of analysts who cover the company. And that’s despite the uncertainty surrounding the company’s longer-term plans following the recent death of its founder and chairman, Ted Rogers.

The main reason for analysts’ optimism is Rogers’ heavy exposure to fast-growing wireless services. By Dec. 31, 2009, wireless is expected to make up 57.6% of Rogers’ anticipated total revenue of $12.3 billion, vs 50.1% for Telus and 32.2% for BCE. This is partially the result of the popularity of Apple Inc.’s iPhone, for which Rogers is the exclusive distributor in Canada.

Rogers launched the iPhone on July 11 and activated 255,000 subscribers during the quarter ended Sept. 30 — 110,000 more than the preliminary estimate of Jeffrey Fan, an analyst with UBS Securities Canada Inc. in Toronto. About one-third of these subscribers were new to Rogers; the others had upgraded from Rogers’ other wireless phones. By Dec. 31, Rogers should have almost eight million wireless subscribers.

Although the introduction of the iPhone resulted in higher costs as the company established systems for serving new customers and subsidized the handsets, this is expected to pay off down the road. That’s because iPhone subscribers tend to pay more for Rogers’ wireless services. However, it will take a few quarters before the iPhone has a significant impact on Rogers’ top line.

In a Dec. 2 research note, Fan suggests that revenue at Rogers Wireless will increase by 11.5% to $7.1 billion in 2009, up from an estimated $6.4 billion in 2008. Rogers’ cable and telephone group and the media unit are expected to increase revenue by a comparatively modest 5.4% and 2.3%, respectively, in the same period. Fan’s note says that Rogers’ total sales will jump by 8% to $12.3 billion in 2009, vs $11.4 billion in 2008.

The wireless unit is crucial to Rogers’ profitability as well as to revenue. Fan anticipates that wireless will account for almost 70% of the firm’s earnings before income taxes, depreciation and amortization in 2009. That’s much higher than for either Telus or BCE. Fan projects Rogers will achieve net earnings of $2.42 a share in 2009, up by 24.1% from $1.95 a share in 2008. Fan believes that will support a share price of $42 in 12 months, which is discounted to take into account new wireless competition.

The Government of Canada auctioned off $4.25 billion worth of spectrum this past summer for advanced wireless services. Rogers’ wireless unit acquired about $1 billion worth of new spectrum. The new high-speed, video-enabled services are expected to begin rolling out sometime in 2010.

Vince Valentini, an analyst with TD Newcrest, a unit of TD Securities Inc. in Toronto, puts a 2010 price target of $44 a share for Rogers, 16 times his estimated earnings for 2010. Valentini’s Oct. 29 report projects earnings of $2.82 a share in 2010, up by 20.5% from an estimated $2.34 a share in 2009. The report suggests revenue will reach $12.8 billion in 2010, up by 6.1% from $12.1 billion in 2009.

Both Fan’s and Valentini’s reports have a “buy” rating on Rogers and expect investors to do very well in the next 12 to 18 months. But Valentini’s report warns: “To be honest, we are a bit gun shy to get any more bullish than we are already until we see signs of stabilization in the capital markets.”

Rogers appears well placed to withstand a lengthy market downturn. It has no debt maturing until May 2011. As of Sept. 30, Rogers had about $1.8 billion in untapped credit available on a $2.4-billion credit facility that matures in July 2013. The company also closed a US$1.7-billion debt offering in August, the month before the bankruptcy of New York-based Lehman Brothers Holdings Inc. triggered panic in the markets. Proceeds from the debt issue were used to pay for Rogers’ purchase of spectrum.

@page_break@Thanks to Nadir Mohamed, Rogers’ president and chief operating officer, the company has reduced its once towering debt to levels that make it less vulnerable. Prior to the spectrum auction, Rogers’ total long-term debt had dropped to $6 billion from $7.9 billion in 2004. This represents 56% of the company’s total market capitalization, down from 78.3% in 2004.

Mohamed is considered the front-runner to become Rogers’ next CEO. Acting CEO Alan Horn and chief financial officer Bill Linton are also strong candidates. Given that Ted Rogers made it clear that his successor should come from within the company, it seems likely that one of them will succeed him.

That said, the Rogers family trust will continue to control the firm, which means Ted’s son, Edward, will be the controlling shareholder for at least the next two years.

Rogers Wireless cannot afford to be too conservative, however. Telus Mobility and BCE unit Bell Mobility announced plans in October to build next-generation networks based on the world’s most popular stream of wireless technology, global system for mobile (GSM). Currently, Telus Mobility and Bell Mobility rely on code division multiple access, which is used by less than 12% of the world’s mobile services subscribers. Rogers Wireless’ network uses GSM, which is used by all other subscribers. As GSM and its successors are so widely used, it is easier to develop services for it.

As Canada’s only GSM provider, Rogers has been able to charge a small premium, a reason why its wireless unit is outperforming those of its rivals. But Telus Mobility and Bell Mobility expect to have their new networks up and running by early 2010. The relatively speedy deployment is helped by the two firms’ agreement to share part of the cost of building the national network.

But for now, analysts clearly favour Rogers. As of Dec. 5, 90% of the analysts surveyed by Bloomberg LP consider Rogers a “buy,” vs 58% for Telus and just 36% for BCE.

Joseph Mackay, an analyst with Desjardins Securities Inc. in Toronto, has a “buy” rating on both Telus and BCE. His Nov. 10 report notes that the launch of Telus Mobility’s discount brand, Koodo, this past March has been more successful than expected. Wireless revenue in the third quarter jumped by 8.7% to $1.2 billion from $1.1 billion in the same period a year earlier. Mackay has a one-year price target for Telus of $46 a share, or 12 times estimated 2009 earnings of $3.85 a share, vs his projection of $3.44 a share for 2008.

Mackay’s 2009 price target for BCE is $29.75 share. That’s considerably lower than the $42.75 a share the Ontario Teachers’ Pension Plan Board was expecting to pay before that privatization deal fell through, but richer than BCE’s Dec. 5 closing price. Mackay’s price target for BCE is 12.8 times his 2009 earnings estimate of $2.33 a share. This implies an earnings increase of 5.9% vs his estimate of $2.20 a share in 2008. IE