BCE INC. $24 - Toronto symbol BCE

BCE INC. $24 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 803.1 million; Market cap: $19.3 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) has over 7.5 million telephone and Internet customers in Ontario and Quebec. It also has 6.5 million wireless subscribers across Canada. BCE continues to lose traditional phone customers, but these losses are slowing. Meanwhile, BCE’s cellphone business is growing strongly. The wireless division’s 2008 revenue rose 7.6%, and its subscriber base grew by 4.5%. Wireless accounts for 25% of BCE’s revenue and 43% of its profit. BCE hopes to spur sales of its wireless and other services, like satellite TV, with a new deal to buy “The Source”, a 756-store home-electronics chain in Canada. BCE already operates about 750 retail stores. Expanding into the highly competitive retail industry adds risk, particularly during a recession. But buying this chain is probably cheaper than opening new stores. To top it off, The Source is a major seller of rival wireless provider Rogers Communications’ products. BCE intends to replace these with its own after Rogers’ deal with The Source expires at the end of this year. BCE did not reveal how much it paid for The Source, but it did say the price was less than the $260 million U.S. that the former owner, bankrupt U.S.-based retailer Circuit City, paid in 2005. To put that in context, BCE earned $1.8 billion in 2008, down 3.9% from $1.9 billion in 2007. Earnings per share fell 3.8%, to $2.25 from $2.34 on more shares outstanding. Revenue fell 0.3%, to $17.7 billion from $17.75 billion. These figures exclude restructuring charges, mainly job cuts. BCE’s restructuring should lower its annual expenses by $400 million. BCE trades at 10.2 times it likely 2009 earnings of $2.35 a share. The $1.54 dividend yields 6.4%. BCE is a buy.