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September 13, 2010
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BCE Inc. (BCE), Canada’s incumbent telecom carrier, agreed to acquire full control of Canada’s largest private television broadcaster, CTV Network, for C$1.3 billion (US$1.25 billion). BCE Inc. is 100% subsidiary of Bell Canada.
Acquiring full stake in CTV will accelerate Bell’s video growth for mobile, online services and satellite TV system with competitive cost structure. The transaction will reduce content costs for BCE’s mobile services, satellite TV system and will enhance the fiber-to-the-home (FTTH) network deployment in major urban areas. CTV enjoys leadership in specialty television, digital media, conventional TV and radio broadcasting.
Bell Canada currently owns a 15% equity stake in CTV and is expected to acquire the remaining 85% stake from Woodbridge Co., the Ontario Teachers' Pension Plan and Toronto Star owner Torstar Corp. The deal value including debt will be C$3.2 billion (US$3 billion).
The transaction is expected to complete by mid-2011 and is subject to approvals from the Canadian Radio-television and Telecommunications Commission (CRTC) as well as the Competition Bureau. Upon winning the approvals, BCE will acquire all of CTV's television assets, including its network and specialty cable channels such as TSN, Discovery, MTV, MuchMusic and Bravo.
Video is growing rapidly among Canadians who are switching to mobile, online and digital TV platforms for video content. Bell currently offers Canada's leading High Definition TV, online services and the most advanced mobile TV products. Moreover, Bell Canada is in the process of launching its Bell Fiber IPTV (internet protocol television) service in Toronto and Montreal in the second half of 2010.
BCE Inc. operates in an environment crowded with new wireless carriers. Bell Canada competes against two other national carriers Telus Corporation (TU) and Rogers Communications inc. (RCI) in the Canadian wireless market. The deal with CTV provides Bell Canada a competitive advantage in gaining market share.
Bell Canada is enhancing its wireline and wireless video capabilities with significant new investments in broadband networks. The company is rolling out high-speed fiber to more houses, apartments, condominiums and businesses in Quebec and Ontario to support new Internet and TV services. Bell is increasing its high speed packet access plus (HSPA+) wireless network, which already serves 93% of the Canadian population. Going forward, expanded handset penetration (supported by iPhones) coupled with wireless network advancement is expected to boost operating results from the carrier’s wireless business.
Although the wireline business segment faces stiff competition from cable companies and other alternative service providers, it continues to perform in line with the market expectations as strength in data and video services as well as stability in recurring business accounts offset weakness from the local consumer voice phone and long-distance segments. Increased investments in broadband in 2010 for the deployment of the high-speed FTTH network will facilitate the rollout of a broad range of new services.
We are currently maintaining our Neutral recommendation, supported by the Zacks #3 (Hold) Rank.
Read the full analyst report on "BCE"
Read the full analyst report on "TU"
Read the full analyst report on "RCI"
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