BCE Inc.’s BCE subsidiary, Bell Canada has gained Manitoba Telecom Services (MTS) shareholders’ approval for the latter’s acquisition. Shareholders gave the nod after Bell Canada made a $2.5 billion acquisition offer for the Manitoba-based MTS in a bid to enhance its presence in western Canada. To fend off regulatory concerns, Bell Canada will transfer a third of the postpaid connections gained through the acquisition to its nearest national competitor, Telus Corporation TU. The transaction is expected to close by the end of this year.
Additional Investments
Following the latest approval, Bell Canada has committed to invest $800 million in the improvement and expansion of broadband infrastructure in the region. The company will also roll out its Gigabit Internet service within a year. This investment will allow Bell to compete effectively with the local cable internet providers in Manitoba. We note that the company has been aggressively expanding its Fiber to the Home (FTTH) coverage across Canada and its internet TV service, Fibe TV, is presently ranked as the number one broadband TV service in the country.
Possible Synergies
Presently, MTS offers broadband and IPTV service to around 70% homes in Manitoba. Through the latest acquisition, Bell Canada will be able to expand its broadband internet subscriber base by 6.6% and IPTV customer base by 8.6%. Bell Canada’s data centre and cloud computing operations are also likely to get a boost with the integration of MTS’ existing data centre in Winnipeg. Thus, the horizontal integration of the MTS buyout will drive Bell Canada’s top line, going forward.
The Bottom Line
Shaw Communications Inc.’s SJR foray into the Canadian wireless market with the acquisition of WIND Mobile has intensified competition in the space. The company also faces competitive pressure from Rogers Communications Inc. RCI. Thus, the acquisition of MTS bodes well for BCE as it will consolidate its position as the primary telecom provider in Canada.
BCE currently carries a Zacks Rank #2 (Buy).
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