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BCE Continues to Manage Pandemic Pressures and Position Itself for Outperformance

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

As has been the case throughout the pandemic, BCE’s revenue and profits were depressed in the fourth quarter, with the wireless and media segments being hurt most. Even so, the firm again outperformed Rogers, its main competitor, and results were generally in line with FactSet consensus estimates. We expect substantial business improvement throughout the Canadian telecom industry when the pandemic ends, and BCE continues to position itself to outperform its peers, in our view, based on the investment it is making. The firm announced a capital spending acceleration over the next two years to more rapidly roll out its fiber-to-the-home and wireless home Internet footprints, which are primary reasons we prefer BCE to its Canadian peers. We plan to maintain our CAD 65 fair value estimate, and we think the stock is very attractive right now.

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Company Profile

Business Description

BCE is both a wireless and Internet service provider, offering wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers, with its roughly 10 million customers constituting about 30% of the market. It is also the ILEC (incumbent local exchange carrier--the legacy telephone provider) throughout much of the eastern half of Canada, including in the most populous Canadian provinces--Ontario and Quebec. Additionally, BCE has a media segment, which holds television, radio, and digital media assets. BCE licenses the Canadian rights to movie channels including HBO, Showtime, and Starz. In 2020, the wireline segment accounted for 55% of total EBITDA, while wireless composed 38%, and media provided the remainder.

1 Carrefour Alexander-Graham-Bell, Building A, 7th Floor
Verdun, QC, H3E 3B3, Canada
T +1 514 870-8777
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 52,000