Rebound by TSX telecoms may be short-lived: analyst

OTTAWA (Reuters) - A relative rebound in the Toronto Stock Exchange's telecom index may be short-lived as ebbing consumer confidence and a weak economy post big barriers to growth, an analyst said on Friday.

As competition in the sector grows, Canadian telecommunication companies will need aggressive price plans and bigger advertising budgets to attract and keep customers, said Dundee Capital Markets portfolio strategist Martin Roberge.

But even companies rewarded with a sturdy customer base could be hit by falling prices, the quantitative analyst said in a note.

A "telecom bomb" in the Consumer Price Index showed that Internet access prices plunged 3.4 percent in August, the biggest month-over-month decline ever registered.

"So far, firmer data prices have somewhat offset lower wireless and Internet prices," Roberge wrote.

"But this support could well disappear as BCE works very hard to recover market share lost to Rogers and Telus over the past few years."

In turn, the average revenue per user will stay under pressure for some time, he said.

"We doubt that Canadian telecom stocks have priced in these cyclical roadblocks, with the index trading at a hefty 33 percent premium to the market," Roberge wrote.

The telecom sector index , which also includes Manitoba Telecom and Bell Aliant , has gained 2.45 percent since Sept 18.

(Reporting by Susan Taylor)