We have issued an updated research report on BCE Inc. BCE on Apr 6, 2015. Going forward, BCE Inc.’s wireless segment will benefit from solid subscriber additions at the postpaid segment along with increased data usage by smartphone users.
At 2014-end, the company had 6,986,196 postpaid subscribers, up 4.6% year over year. Total wireless subscriber base grew 2.5% to 7,970,702. Blended average revenue per user (ARPU) rose 5.5% year over year to $53.81 on the back of higher data usage and improved rate plan pricing. Wireless data revenues surged 26%, constituting nearly half of Bell Wireless’ services revenues.
On the wireline front, BCE expects financial results to continue improving in 2015 and beyond, as it gains from the increase in net revenue generation units. The company continues to leverage from Fibe TV and Fibe-based Internet growth, price hike and an improved business market stemming from a steady economy. At the end of the fourth quarter, TV subscriber count grew 6.2% year over year to 2.64 million. In the fourth quarter, Bell Wireline added a net of 52,010 high-speed Internet customers, 58,371 Fibe TV customers and 76,074 IPTV customers, but lost 33,934 satellite TV subscribers. The company expects to reach out to 6 million homes by 2016.
Rogers Communications and BCE have reached an agreement to jointly own Canadian retailer, Glentel Inc. Per the deal, BCE will divest 50% of its ownership stake in Glentel to Rogers, following which both companies will have equal possession of Glentel's Canadian retail operations. Rogers has agreed to pay BCE 50% of the Glentel transaction value in cash. This should significantly reduce BCE’s costs to take over Glentel and help the company successfully complete the pending acquisition. We believe BCE’s decision to acquire Glentel will help the company ramp up its wireless revenues, increase ARPU and curtail churn rate.
On the flip side, in the fourth quarter of 2014, network access services (NAS) lines fell 6.7% year over year to 4,893,263. The decline was primarily due to competition from cable operators, business customer conversion from voice lines to IP-based services, and customer shift to high-speed Internet from relatively older technologies. Residential NAS losses during the quarter were 40,178 compared with 63,281 in the fourth quarter of 2013. Business NAS losses were 26,527 against 32,478 a year ago.
BCE currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked stocks worth considering in this sector include Chunghwa Telecom Co., Ltd. CHT, Level 3 Communications, Inc. LVLT and Vonage Holdings Corporation VG. All these stocks sport a Zacks Rank #1 (Strong Buy).
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