Company Reports

We believe BCE retains one of the stronger competitive positions in Canadian telecom, despite intensifying competition and a mature domestic market that limits its growth prospects.

We transfer coverage of the Canadian telecom providers: Rogers, BCE, Telus, Quebecor, and Cogeco. These firms account for nearly all of the wireless and wireline services provided in Canada, with all but Cogeco operating national wireless networks, and Rogers and BCE the largest wireline networks.

BCE continued to add wireless and internet customers in the second quarter, but meaningful net additions remain elusive. The firm reported 1.5% top-line growth, but when excluding the Ziply acquisition, revenue was down 2%.

BCE made progress in adding both wireless and internet customers in the first quarter, but both levels remain relatively low, and stagnation on the top line continued in an environment that has plagued all major peers. Excluding last year's acquisition of Ziply, BCE's sales were flat year over year.

BCE has strong wireless, wireline, and media units, but all three face challenges to growth, due to a combination of competition, a diminishing industrywide supply of new potential customers, and a reliance on legacy services.

Adjusted for its Ziply acquisition, we estimate BCE's service revenue declined 1.5% in the fourth quarter and more than 1% in 2025, while the EBITDA margin on service revenue was roughly flat in both periods. We estimate revenue guidance is roughly flat in 2026, after adjusting for Ziply.

BCE's wireless results remained muted in the third quarter, as Quebecor's national wireless insurgence has diminished new customer additions and weighed on pricing. Total sales and profits were roughly flat with last year after excluding the contribution from the recent Ziply acquisition.

BCE has strong wireless, wireline, and media units, but all three face challenges to growth, due to a combination of competition, a diminishing industrywide supply of new potential customers, and a reliance on legacy services.

BCE revenue grew 1.3% in the second quarter, with both telecom and media posting growth. Adjusted EBITDA declined 1%, and the 44% margin was a 1-percentage-point decline from last year. The Ziply acquisition is now complete, and BCE will begin including results next quarter.

BCE’s heavy investment in its new fiber network over the last several years has propelled the company to leadership in high-speed internet services in its core territory in eastern Canada. The firm is among the top broadband providers in the country, with 8.5 million wireline subscriptions across internet, television, and other broadband services. It has taken broadband share from Rogers and Quebecor. We expect this trend to continue, as BCE still lags in term of market penetration versus its two main competitors and the availability of further fiber network expansion opportunities.

BCE posted a 1.3% revenue decline in the first quarter, while adjusted EBITDA was flat due to continued cost management as competition persists. The firm cut its dividend to CAD 1.75 for 2025, down from CAD 3.99, and introduced a new partnership for its Ziply business to improve its balance sheet.

BCE’s heavy investment in its new fiber network over the last several years has propelled the company to leadership in high-speed internet services in its core territory in eastern Canada. The firm is among the top broadband providers in the country, with 8.5 million wireline subscriptions across internet, television, and other broadband services. It has taken broadband share from Rogers and Quebecor. We expect this trend to continue, as BCE still lags in term of market penetration versus its two main competitors and the availability of further fiber network expansion opportunities.

BCE’s fourth-quarter results provided little relief for investors anticipating a rosier outlook for Canada’s wireless market in 2025. We’ve reduced our fair value estimate to CAD 45/USD 32 per share from CAD 50/USD 36 to reflect continued intense competition in the wireless business. We still think the shares are significantly undervalued, trading in 5-star territory.

BCE’s heavy investment in its new fiber network over the last several years has propelled the company to leadership in high-speed internet services in its core territory in eastern Canada. The firm is among the top broadband providers in the country, with 8.5 million wireline subscriptions across internet, television, and other broadband services. It has taken broadband share from Rogers and Quebecor. We expect this trend to continue, as BCE still lags in term of market penetration versus its two main competitors and the availability of further fiber network expansion opportunities.

After accounting for extended competition in the wireless industry and the firm’s planned acquisition of Ziply, we’ve reduced our fair value estimate to CAD 50 per share from CAD 56 (USD 36). We continue to think that BCE is worthy of a narrow moat rating and that its shares are significantly undervalued as it trades in 5-star territory.

BCE’s heavy investment in its new fiber network over the last several years has propelled it to being a leader in high-speed internet services in its core territory in eastern Canada. The firm is among the top broadband providers in the country, with 8.5 million wireline subscriptions across internet, television, and other broadband services. The firm has taken broadband share from Rogers and Quebecor. We expect this trend to continue, as BCE still lags in term of market penetration versus its two main competitors and the availability of further fiber network expansion opportunities.

Narrow-moat BCE's 2024 third-quarter results reflected stiff competition in the wireless market as the firm lowered full-year revenue guidance. Yet, management continues prioritizing profitability, driving adjusted EBITDA growth against declining revenue. We see the market as overly pessimistic about BCE and believe the wireless market will rebound, paving the way for pricing and subscriber growth improvements through our forecast. Yet, we have slightly lowered our fair value estimate to CAD 56 from CAD 60 to account for a lower near-term wireless revenue outlook.

BCE has been investing heavily over the past several years to upgrade its wireline network with fiber. In the time since, the firm has been outperforming competitors in adding new broadband subscribers. We expect the firm to continue taking share, but we expect the pace to ease, as the firm has slowed its fiber network buildout in response to regulatory mandates that it share the fiber network. BCE also remains a leader in providing wireless service throughout Canada and has a formidable media business.

We were surprised by BCE’s plan to acquire Ziply Fiber. Although the agreement expands BCE’s fiber network, we see little synergies between its Canadian fiber network and Ziply’s US Pacific Northwest operations. Additionally, we think the deal comes at a costly time for BCE, which has targeted balance sheet reduction after its MLSE sale, and as dividend growth—a key pillar of its capital allocation strategy—will take a back seat through 2025. However, the transaction isn’t large relative to BCE’s existing size, and we don’t expect to materially change our CAD 60 fair value estimate. While we don’t like this acquisition, we believe the market has overly punished the stock.

We view BCE’s 2024 second-quarter results favorably as the firm continues to add subscribers and deliver improving profitability in a challenging environment. Pricing promotions and elevated customer defections (churn) continue to challenge the firm, but a renewed focus on cost controls and capital efficiency should offset this pressure. We maintain our CAD 60 per share fair value estimate.