bce

Ottawa continues to encourage the formation of a fourth national wireless carrier to compete with market leaders Rogers, Telus and BCE. As a result, regulators have restricted these three from buying new radio frequencies, or spectrum. They may also force them to lease space on their networks to smaller competitors at heavily discounted rates. We feel Telus’s ongoing network investments and new customer-friendly service plans will keep attracting wireless users, despite a potential new rival. That will help it offset falling demand for traditional phone services and give it more room for dividend hikes and share buybacks. TELUS CORP. $39 (Toronto symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 615.5 million; Market cap: $24.0 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.telus.com) is Canada’s second-largest wireless carrier, after Rogers Communications, with 7.9 million subscribers. Wireless now supplies 54% of Telus’s revenue and 66% of its earnings....

These two telecom firms face the same regulatory hurdles as Telus (see page 101). But like Telus, they’re improving their services while keeping their operating costs down. That will let them both maintain their high dividend yields, but we prefer BCE for its greater geographic reach. BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 827.7 million; Market cap: $39.7 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest provider of telephone services, with 5.0 million customers in Ontario and Quebec. It also has 2.2 million high-speed Internet customers and 2.3 million TV subscribers. BCE also sells wireless services to 7.8 million customers across Canada, and its Bell Media segment owns CTV Television, specialty channels and radio stations....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day, at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

TIM HORTONS INC., $88.38, Toronto symbol THI, still plans to merge with Miami-based Burger King Worldwide (New York symbol BKW), even though the U.S. government is now clamping down on “tax inversion” deals like this one. The combined firm will be based in Oakville, Ontario, which will let it take advantage of Canada’s 15% corporate tax rate, compared to 35% in the U.S. Under the new rules, it’s now more difficult for the foreign parent firm to shift funds between subsidiaries....

BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 778.3 million; Market cap: $37.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT INC. $31 (Toronto symbol BA; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 227.8 million; Market cap: $7.1 billion; Price-to-sales ratio: 2.6; Dividend yield: 6.1%; TSINetwork Rating: Average; www.bellaliant.ca) that it doesn’t already own.

Bell Aliant investors have three options: $31.00 in cash; 0.6371 of a BCE share; or $7.75 in cash plus 0.4778 of a BCE share. BCE will cap the cash portion at 25% of the total payout.

We recommend the all-stock option. That way, you can defer capital gains taxes on the BCE shares you get. However, if adding more shares would push up your BCE holdings to more than, say, 10% of your portfolio, you should select the all-cash option.

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MANITOBA TELECOM $30.63 (Toronto symbol MBT; Shares outstanding: 77.4 million; Market cap: $2.4 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.mts.ca) jumped to just over $33 in response to BCE’s plan to buy 100% of Bell Aliant (see box on page 57). Investors believed Manitoba Telecom could also become a takeover target.

However, as part of the company’s 1997 privatization, the Manitoba government limits any single shareholder’s ownership to 20%. The shares have since moved down to where they were before BCE’s announcement.

Manitoba Telecom is still a hold.

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BCE INC. $48.88 (Toronto symbol BCE; Shares outstanding: 777.3 million; Market cap: $38.0 billion; TSINetwork Rating: Above Average; Dividend yield: 5.1%; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT $30.88 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $7.0 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.bellaliant.ca) that it doesn’t already own. The deal should close by November 30, 2014.

Merging the two firms will make it easier for BCE to expand its high-speed wireless and Fibe TV networks in Atlantic Canada.

Bell Aliant shareholders will have three options when they tender their shares: $31.00 in cash; 0.6371 of a BCE share (worth $31.14 at today’s price for BCE); or $7.75 in cash plus 0.4778 of a BCE share ($31.10).

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BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 778.3 million; Market cap: $37.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT INC. $31 (Toronto symbol BA; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 227.8 million; Market cap: $7.1 billion; Price-to-sales ratio: 2.6; Dividend yield: 6.1%; TSINetwork Rating: Average; www.bellaliant.ca) that it doesn’t already own. Bell Aliant investors have three options: $31.00 in cash; 0.6371 of a BCE share; or $7.75 in cash plus 0.4778 of a BCE share. BCE will cap the cash portion at 25% of the total payout. We recommend the all-stock option. That way, you can defer capital gains taxes on the BCE shares you get. However, if adding more shares would push up your BCE holdings to more than, say, 10% of your portfolio, you should select the all-cash option....

BCE INC. $48.88 (Toronto symbol BCE; Shares outstanding: 777.3 million; Market cap: $38.0 billion; TSINetwork Rating: Above Average; Dividend yield: 5.1%; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT $30.88 (Toronto symbol BA; Shares outstanding: 227.8 million; Market cap: $7.0 billion; TSINetwork Rating: Average; Dividend yield: 6.2%; www.bellaliant.ca) that it doesn’t already own. The deal should close by November 30, 2014. Merging the two firms will make it easier for BCE to expand its high-speed wireless and Fibe TV networks in Atlantic Canada. Bell Aliant shareholders will have three options when they tender their shares: $31.00 in cash; 0.6371 of a BCE share (worth $31.14 at today’s price for BCE); or $7.75 in cash plus 0.4778 of a BCE share ($31.10)....

MANITOBA TELECOM $30.63 (Toronto symbol MBT; Shares outstanding: 77.4 million; Market cap: $2.4 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.mts.ca) jumped to just over $33 in response to BCE’s plan to buy 100% of Bell Aliant (see box on page 57). Investors believed Manitoba Telecom could also become a takeover target. However, as part of the company’s 1997 privatization, the Manitoba government limits any single shareholder’s ownership to 20%. The shares have since moved down to where they were before BCE’s announcement. Manitoba Telecom is still a hold....