Silk Road

Silk | | Canadian Telecom & Cable Services | February 20, 2012 | | Outlook - Industry looks promising due to increase in data demand, our opinion is to invest in select companies in this industry | Highlights | * Volatilities in the market encouraged investors to continue to invest in safe dividend paying shares in 2011. Telecom and Cable sector’s strong and consistent cash flows intrigued investors to buy those stocks and consequently, telecom & cable stocks posted very strong returns in most cases throughout 2011. Even though the total returns in 2011 did not reach the same levels as in 2010, telecom stocks still performed much stronger relative to the S&P/TSX Composite, which declined 8.7% on a total return basis for the year. * Each of the business segments in the telecom industry has a different driver for revenue growth. However all of these different drivers are influenced by the GDP. Even thou fixed line revenues have been hurt by wireless substitution and by cable companies, the fixed line revenues have also been hurt by slow home sales and high unemployment. We expect that the wireline revenue loss will decrease in the future as the Canadian GDP is expected to improve. * While most telecom and cable stocks provided very strong returns throughout the 2011, the competition increased among both the traditional telecommunications and cable companies, and newer non-traditional competitors. The competitors are focused more on pursuing geographic and product and service markets, which were not explored before. The competitive pressure on telecom companies is increasing with entry of the Canadian incumbent local exchange carriers (ILECs) into the digital television market, as well as cable providers into the digital phone market. There is no evidence indicating that the competition is likely to ease off in 2012. New entrants in wireless will keep the competition stakes high in that segment of the industry, while introduction of