BCE Inc.
Toronto symbol BCE, provides local and long distance telephone services in Ontario and Quebec. It also operates a nationwide wireless service.
MANITOBA TELECOM SERVICES INC. $49 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; SI Rating: Average) is the leading provider of telecom services in Manitoba, with 1.8 million customers. It also provides telecom services to businesses across Canada through its MTS Allstream division. Manitoba Tel acquired Allstream in 2004 as way to cut its reliance on residential customers in a single province. However, the business telecom market is extremely competitive, and Allstream has not been as profitable as the company hoped. Based on the favourable reaction to BCE’s and Telus’s trust conversion plans, it’s more likely that Manitoba Tel will follow the same path. It would probably try to sell or spin off Allstream first, since the division’s uncertain cash flows would limit its appeal as a trust....
BCE INC. $33 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is Canada’s largest provider of traditional telephone services, with over 12 million customers in Ontario and Quebec. It also provides Internet access (Sympatico), satellite TV (Bell ExpressVu) and wireless services (Bell Mobility). In the past few months, the company has moved to unlock some of its value. It recently sold most of its interest in Bell Globemedia, the private company that owns The Globe and Mail and CTV Television. BCE also plans to sell a minority stake in satellite operator Telesat to the public. In July 2006, BCE merged its rural telephone business with 53.2%-owned subsidiary Aliant Inc. into a new income trust called Bell Aliant Regional Communications Income Fund....
Both BCE and Telus have unveiled plans to convert into income trusts, which helped spark a rise in their stock prices. Canada’s other big telecom company, Manitoba Telecom, moved up on rumors that it too would convert. The trust structure will let BCE and Telus avoid a big tax increase in the next few years as certain tax shelters expire. But investors have higher payout expectations of a trust compared with a regular company. Telecom companies must invest large sums in new equipment, or risk losing customers. These costs could hurt BCE’s and Telus’s ability to raise future cash distributions....
BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $34 (Toronto symbol BA.UN; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) provides telephone services to over 3.4 million customers in rural areas of Ontario and Quebec, and all of Atlantic Canada. This business accounts for roughly two-thirds of its revenue. It also provides computer services to businesses, and high-speed Internet access. Shareholders of Aliant Inc. received one trust unit for each common share held, and now own about 26.5% of the new trust. BCE shareholders received 0.0725 of a unit for each share held, and own roughly 28.5%. BCE owns the remaining 45%, and operates the new trust. Bell Aliant paid an initial cash distribution of $0.3996 a unit, to cover the last three weeks of July and all of August. It plans to pay a regular monthly distribution of $0.2283 a unit; the annual rate of $2.74 yields 8.1%....
MAPLE LEAF FOODS INC. $12 has moved down on fears that the high Canadian dollar would hurt pork exports to Japan. Rising fuel and other costs are also cutting into its earnings growth. But new facilities and equipment should improve its efficiency. A new share buyback plan will also help support the stock price. Buy. PETRO-CANADA $44 paid $30 million for oil sand leases adjacent to its MacKay River project in northern Alberta. The price is equal to 6% of the $474 million or $0.94 a share it earned before unusual items in the second quarter of 2006. The company aims to double MacKay River’s output by 2010. Buy. LOBLAW COMPANIES LTD. $51 will probably earn $3.23 a share in 2006, down 4% from 2005, as it continues to iron out problems with its new distribution network. The new system should cut Loblaw’s long-term costs and help it compete with Wal-Mart. But the stock will likely move sideways until earnings improve. Hold....
BCE INC. $26.07 (Toronto symbol BCE; SI Rating: Above-Average) completed its plan of arrangement with ALIANT INC. on July 7, 2006, with an effective date of July 10. BCE shareholders received 0.0725 trust units of BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND (Toronto symbol BA.UN: SI Rating: Extra risk) for each share they owned. They also received 0.915 of a new BCE common share for each old share. Aliant shareholders received one trust unit for each common share they held. If you hold your BCE shares in certificate form and not in a brokerage account, you’ll need to complete and return the forms the company sent to you....
BCE INC. $26.55 (Toronto symbol BCE; SI Rating: Above-Average) is reorganizing its businesses to unlock shareholder value. The company will combine its traditional telephone operations in rural areas of Ontario and Quebec with those of 53.2%-owned ALIANT INC. $35.30 (Toronto symbol AIT; SI Rating: Above average) into a new income trust called Bell Aliant Regional Communications Income Fund. BCE will assume control over Aliant’s wireless and other operations. BCE shareholders will receive 0.0725 trust units for each share they own. They will also receive 0.915 of a new BCE common share for each old share. Aliant shareholders will receive one trust unit for each common share they hold....
BCE INC. $27 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) is reorganizing its businesses to unlock some of its value. The biggest part of this plan will combine Bell Canada’s traditional telephone operations in rural areas of Ontario and Quebec with those of 53.2%-owned ALIANT INC. $37 (Toronto symbol AIT; Conservative Growth Portfolio, Utilities sector; SI Rating: Above average) into a new income trust called Bell Aliant Regional Communications Income Fund. BCE will assume control over Aliant’s wireless and other operations. BCE shareholders will receive 0.0725 trust units for each common share they own. Consequently, BCE will own 45% of the new trust and run it, and BCE shareholders will hold 28.5%. Aliant shareholders will receive one trust unit for each common share they hold. As a group they will own 26.5% of the new trust....
TELUS CORP. (Toronto symbols T $44 and T.NV $44; SI Rating: Above average) is Canada’s second-largest telecommunications provider, after BCE Inc. It provides local and long distance telephone services to roughly 5 million customers, mainly in Alberta, British Columbia and parts of Quebec. It also provides Internet access services to roughly 1 million subscribers. Telus’s revenue slipped from $7.1 billion in 2001 to $7.0 billion in 2002, but rose to $8.1 billion in 2005. It lost $0.51 a share (total $145.8 million) from continuing operations in 2001, as well as $0.75 a share ($235.8 million) in 2002, mainly due to restructuring costs following the Clearnet acquisition. However, earnings improved from $0.92 a share ($324.4 million) in 2003 to $1.94 a share ($700.3 million) in 2005. Most of Telus’s recent growth comes from its wireless division, which is Canada’s largest wireless service provider with 4.5 million customers (36% of the market). The company is also doing a good job of hanging on to its customers, and getting them to sign long-term service contracts....
In 2000, Telus Corp. acquired money-losing wireless provider Clearnet. It looked like a bad move at the time, but it has paid off. In 2005, wireless provided 40% of Telus’s revenue, 44% of its profit and 53% of its cash flow. New services such as video, music and game downloads should continue to spur wireless demand, and Telus’s profits. The stock has risen nine-fold (see box next page) in the past few years, but we foresee further gains. TELUS CORP. (Toronto symbols T $44 and T.NV $44; SI Rating: Above average) is Canada’s second-largest telecommunications provider, after BCE Inc. It provides local and long distance telephone services to roughly 5 million customers, mainly in Alberta, British Columbia and parts of Quebec. It also provides Internet access services to roughly 1 million subscribers. Telus’s revenue slipped from $7.1 billion in 2001 to $7.0 billion in 2002, but rose to $8.1 billion in 2005. It lost $0.51 a share (total $145.8 million) from continuing operations in 2001, as well as $0.75 a share ($235.8 million) in 2002, mainly due to restructuring costs following the Clearnet acquisition. However, earnings improved from $0.92 a share ($324.4 million) in 2003 to $1.94 a share ($700.3 million) in 2005....