BCE continues to attract new wireless and TV customers, and its upcoming acquisition of Manitoba Telecom will further extend that reach. But the deal should also expand its earnings.
BCE INC. (Toronto symbol BCE; www.bce.ca) is Canada’s largest telephone service provider, with 6.5 million customers in Ontario, Quebec and the Atlantic provinces. It also has 3.4 million high-speed Internet users and 2.75 million TV subscribers. In all, these operations supply 55% of BCE’s revenue. The company also sells wireless services (32% of revenue) to 8.3 million cellphone users across Canada.
The remaining 13% of BCE’s revenue comes from its Bell Media division, which owns CTV Television, specialty channels and radio stations.
The company recently agreed to buy Manitoba Telecom for $3.9 billion. This business has 1.3 million telephone and wireless customers in Manitoba. The deal needs regulatory approval, but BCE expects to complete the purchase by the end of 2016.
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Meantime, the company earned $824 million in the quarter ended June 30, 2016. That’s up 12.1% from $735 million a year earlier. Per-share profits gained 8.0%, to $0.94 from $0.87, on more shares outstanding. Revenue rose 0.3%, to $5.34 billion from $5.33 billion.
During the quarter, BCE added 69,848 wireless subscribers under long-term contracts, net of cancellations. That’s up 14.4% from 61,033 a year earlier.
It also continues to benefit as more people upgrade to smartphones from regular cellphones. As of June 30, 2016, 82% of its wireless customers under long-term contracts used smartphones compared to 77% a year ago. These users pay higher fees for data downloads. That’s why the company’s average monthly revenue per user rose 2.9% in the quarter to $64.32.
Those gains helped BCE offset a 6.2% decline in the number of traditional telephone customers. However, the company continues to see strong demand for its TV offerings: it now has 1.27 million subscribers to its premium Fibe TV service, up 21.6% from a year ago. As well, high-speed Internet users increased 3.1%.
BCE expects to earn between $3.45 and $3.55 a share in 2016. The stock trades at a reasonable 18.0 times the midpoint of that range. The $2.73 dividend yields 4.3%.
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So far, BCE is getting the most of out of its recent acquisitions. Expect more of the same with ManTel. I wonder if SaskTel is next.
This stock is one that I have been following but always was hesitant to buy. I now feel confident enough to get it done. Thanks.