On Mar 19, 2014, we issued an updated research report on
Canadian telecom major
). We believe management's six strategic initiatives will deliver
profits consistently in the coming quarters. However, access line
loss, increased competition and higher expenses could drag the
margins down. The leading telecom operator holds a Zacks Rank #3
BCE will benefit from robust activities in the wireless
business, strong subscriber addition, drop in churn rates, the
Astral acquisition and focus on technology upgrades. The
company's wireless segment is expected to benefit from its
post-paid business as it continues to enjoy solid subscriber
BCE expects smartphone subscriber addition, higher LTE data
usage and increased access rates on new two-year contracts to be
accretive to ARPU growth. The company will also leverage from
Fibe TV and Fibe based Internet growth, price hike and an
improved business market stemming from a steady economy.
BCE's Bell Media segment is performing better than expected
with rapid growth in video usage, increase in contract-based
specialty TV rate and contribution from the Astral business.
Further, solid cash flow generation and pay-out ratio are the
other positives for the company.
The immediate concern for BCE is the Canadian government's
focus on reducing tariffs and enhancing customer choices by
bringing in more competition within the wireless segment.
Further, we believe Videotron's spectrum wins in Ontario, British
Colombia and Alberta not only builds up competitive pressure on
BCE, but also opens up the prospect of another large telecom
carrier in Canada.
BCE's local line access for traditional telephony service
continues to decline due to higher wireless substitution and
competition. This is reflected by persistent erosion in overall
network access services on a year-over-year basis, hurting
revenues of the local and long-distance operations.
Key Pick from the Sector
Better-ranked companies within the telecommunication sector
SK Telecom Co Limited
Shenandoah Telecommunications Inc.
Level 3 Communications Inc.
). SKM and SHEN carry a Zacks Rank #1 (Strong Buy) while LVLT
currently holds a Zacks Rank #2 (Buy).
BCE INC (BCE): Free Stock Analysis Report
LEVEL 3 COMM (LVLT): Free Stock Analysis
SHENANDOAH TELE (SHEN): Free Stock Analysis
SK TELECOM CO (SKM): Free Stock Analysis
To read this article on Zacks.com click here.