TSX drops as Verizon threat hits telecoms, golds dive
By John Tilak
TORONTO (Reuters) - Canada's main stock index stumbled on Wednesday after telecoms stocks suffered deep losses on reports that U.S. giant Verizon Communications Inc (VZ.N: Quote) is looking to enter the market, while gold miners shares were pummeled as bullion prices tumbled.
Weakness in the two sectors more than offset gains in financial shares after U.S. data helped calm fears of a rollback in economic stimulus programs.
Revised figures showed U.S. economic growth in the first quarter was slower than first reported, held back by a moderate pace of consumer spending, weak business investment and declining exports.
Reports that Verizon has offered to buy Canadian startup Wind Mobile and is also in talks with rival startup Mobilicity pulled telecoms shares down 5.4 percent.
"Verizon is a monster," said Lorne Steinberg, president of Lorne Steinberg Wealth Management. "They would have a huge negative impact on the incumbents."
Verizon is a far larger company than any of the three companies - BCE Inc BCE.TO, Telus Corp T.TO, and Rogers Communications Inc (RCIb.TO: Quote) - that now dominate the Canadian telecoms market, he added. "This would bring down the pricing and hurt the margins even if market shares did not change."
He said the move would be similar to Wal-Mart Stores Inc's (WMT.N: Quote) entry to Canada in 1994, which shook up the retailing sector.
The three big Canadian telecoms companies all fell hard. BCE lost 4 percent to C$41.57, Telus fell 8 percent to $30.70, and Rogers Communications was down 9.2 percent at C$41.67. The three played a major role in the index's fall. Continued...