BCE INC. $44 - Toronto symbol BCE

BCE INC. $44 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 773.9 million; Market cap: $34.1 billion; Priceto- sales ratio: 1.6; Dividend yield: 5.2%; TSINetwork Rating: Above Average; www.bce.ca) has 5.9 million telephone customers in Ontario and Quebec, as well as 2.1 million high-speed Internet subscribers and 2.1 million TV clients. In addition, the company’s wireless business now has 7.5 million subscribers across Canada.

BCE continues to expand its media division, which includes the 28-station CTV Television Network, 30 specialty channels and 33 radio stations. The company recently agreed to buy Astral Media (Toronto symbols ACM.A and ACM.B), which owns 22 TV stations, 84 radio stations and several pay TV and specialty channels, such as The Movie Network, Family Channel and Teletoon. Astral also owns billboards and sells other outdoor advertising in Quebec, Ontario and B.C.

The purchase price is $3.4 billion, including $380 million of Astral’s debt. BCE will pay roughly 75% of this cost in cash and 25% in common shares.

The company aims to close the deal by the end of 2012. However, competition regulators may force BCE to sell some of its media properties before they grant their approval.

Meanwhile, the company earned $788 million, or $1.02 a share, in the three months ended June 30, 2012. That’s up 18.9% from $663 million, or $0.86 a share, a year earlier.

Revenue fell 0.6%, to $4.9 billion from $5.0 billion. Revenue at the company’s traditional telephone business (which supplies 57% of BCE’s overall revenue) fell 3.9%, partly due to strong competition from cable companies.

However, some of BCE’s land line clients are switching to mobile phones. That helped fuel a 6.7% revenue increase at the wireless division (31% of total revenue). Revenue at BCE’s media division (12%) rose 0.9%. The company raised the rates it charges cable companies and other distributors to carry its specialty TV channels. That offset lower advertising revenue at its TV and radio stations.

BCE trades at 13.8 times the $3.20 a share that it should earn in 2012. The company has also raised its quarterly dividend by 4.6%, to $0.5675 a share from $0.5425. The new annual rate of $2.27 a share yields 5.2%.

BCE is a buy.

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