bce

BROOKFIELD RENEWABLE ENERGY PARTNERS L.P. $26.32 (Toronto symbol BEP.UN; Units outstanding: 104.7 million; Market cap: $2.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.2%; www.brpfund.com) has finished merging its assets with the extensive hydroelectric and wind power holdings of Brookfield Asset Management (symbol BAM on Toronto). Brookfield Renewable now owns 170 hydroelectric generating stations, three wind farms and two natural-gas-fired plants. It has 4,536 megawatts of generating capacity in total. Roughly 40% of Brookfield Renewable’s generating capacity is in Canada, with another 40% in the U.S. and 20% in Brazil. The company sells virtually all of its power under agreements that are an average of 24 years in length....

MANITOBA TELECOM SERVICES INC. $33 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 66.2 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.2; Dividend yield: 5.2%; TSINetwork Rating: Average; www.mtsallstream.com) has 1.3 million telephone and wireless customers in Manitoba. This business now accounts for 55% of the company’s revenue. The remaining 45% comes from its Allstream division, which provides integrated telephone, Internet and other communication services to businesses across Canada.

Like BCE and Telus, Manitoba Telecom continues to profit from fast-growing demand for smartphones and wireless service. It ended 2011 with 496,432 wireless subscribers, up 2.6% from a year earlier. About 41% of users under long-term contracts had data plans, up from 27% in 2010.

The company is also seeing strong demand for its fibre-optic Internet and TV services. It now has 188,946 high-speed Internet customers (up 2.9% from 2010) and 95,456 TV subscribers (up 6.1%).

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BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 227.8 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells telephone and Internet services to 2.6 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. It also sells wireless services through an alliance with BCE; BCE owns 45% of the company.

The company continues to replace its copper-wire cables with fibre-optic lines. This lets its sell more high-speed Internet and digital TV services, and offset declining demand for its regular phone services, which still account for 60% of its revenue.

Bell Aliant’s fibre-optic systems now reach 458,000 homes. The company plans to expand this to 650,000 homes by the end of 2012.

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BCE INC. $41 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 774.0 million; Market cap: $31.7 billion; Price-to-sales ratio: 1.6; Dividend yield: 5.3%; TSINetwork Rating: Above Average; www.bce.ca) is
Canada’s largest provider of telephone services.

BCE’s main subsidiary, Bell Canada, has 6.1 million telephone customers in Ontario and Quebec, as well as 2.1 million high-speed Internet customers and 2.1 million TV subscribers. Bell Canada supplied 53% of BCE’s 2011 revenue.

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BCE INC. $39.64, Toronto symbol BCE, is buying Astral Media Inc. (Toronto symbols ACM.A and ACM.B). Montreal-based Astral owns 22 TV stations, 84 radio stations and several pay TV and specialty channels, such as The Movie Network, Family Channel and Teletoon. It also owns billboards and sells other outdoor advertising services 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. To put this purchase in context, BCE earned $2.4 billion, or $3.13 a share, in 2011....

The arrival of new wireless providers has put pressure on Canada’s three main telecommunications companies (BCE, Telus and Rogers). To remain competitive, all three are offering subscribers better long-term deals. They are also making big investments in new wireless and high-speed Internet technologies. However, these moves are also dampening their profits. Still, demand for wireless services continues to rise, and we feel BCE’s broad geographic reach puts it in the best position to profit from that trend. The improving economy should also push up ad sales at its TV stations and other media businesses. Moreover, the company recently went through a significant restructuring. That will increase its long-term profits and give it more cash for dividends....

While BCE remains our favourite telco, we still have a high opinion of these three. Each faces unique challenges, and their concentration in certain regions adds risk. However, ongoing investments in their networks will continue to help them hang on to customers in the face of strong competition from cable companies and Internet-based phone services. That will also let them maintain or increase their dividends. TELUS CORP. (Toronto symbols T $57 and T.A $57; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 325.0 million; Market cap: $18.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 4.3%; TSINetwork Rating: Above Average; www.telus.com) gets most of its growth from wireless services. Its 7.3 million subscribers across Canada now supply 52% of its earnings....

ISHARES S&P/TSX 60 INDEX FUND $17.91 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, the fund holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 6.9%; TD Bank, 6.4%; Bank of Nova Scotia, 5.2%; Suncor Energy, 5.0%; Barrick Gold, 4.5%; Canadian Natural Resources, 4.0%; Potash Corp., 3.7%; Goldcorp, 3.6%; Bank of Montreal, 3.4%; CN Railway, 3.1%; BCE Inc., 2.9%; CIBC, 2.8%; Enbridge, 2.7%; TransCanada Corp., 2.7%; Cenovus Energy, 2.5%; and Manulife Financial, 1.9%.

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BELL ALIANT INC. $28 (Toronto symbol BA: Shares outstanding: 227.8 million; Market cap: $6.4 billion; TSINetwork Rating: Average; Yield: 6.8%; www.aliant.ca) sells telephone and Internet services to 2.8 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. The company also sells wireless services through an alliance with BCE, which owns 43.8% of Bell Aliant.

We’re lowering Bell Aliant’s TSINetwork Rating to Average from Above Average. It’s still prominent in its industry, with a record of steady profits and dividends, and its balance sheet remains strong. But it faces rising competition across all of its businesses. In addition, many of its phone customers are switching to wireless devices—owning a telephone land line is becoming less and less of a habitual behaviour for many Canadians.

Bell Aliant is still a buy.

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BELL ALIANT INC. $28 (Toronto symbol BA, Conservative Growth Portfolio, Utilities sector; Shares outstanding: 229.1 million; Market cap: $6.4 billion; Price-to-sales ratio: 2.3; Dividend yield: 6.8%; TSINetwork Rating: Average; www.bellaliant.ca) sells telephone and Internet services to 2.6 million customers in Atlantic Canada, as well as rural parts of Ontario and Quebec. The company also sells wireless services through an alliance with BCE Inc., which owns 43.8% of Bell Aliant.

We’ve lowered Bell Aliant’s TSINetwork Rating to Average from Above Average. It’s still prominent in its industry, with a record of steady profits and dividends, and its balance sheet remains strong. However, it faces rising competition across all of its businesses. In addition, many of its phone customers are giving up their land lines and switching to wireless devices.

Bell Aliant is still a buy.

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