bce

TRANSCANADA CORPORATION $37 (Toronto symbol TRP; SI Rating: Above average) has raised $1.7 billion in an issue of common shares. The company will use the cash to fund its $3.4 billion U.S. purchase of natural gas pipelines and storage facilities in Texas and several midwestern states. Dilution fears have hurt the stock in the past few weeks. The extra shares will cut the company’s 2007 earnings by roughly $0.05 a share; TransCanada earned $1.90 a share in 2006, excluding unusual items. But the steady cash flow from these new assets will help offset the dilution. TransCanada also received regulatory approval for a crucial part of its Keystone pipeline project, which would transport crude oil from Alberta to the U.S. Midwest. Keystone will cut TransCanada’s reliance on gas pipelines, and help it take advantage of expanding production in Alberta’s oil sands region....

BCE INC. $30 (Toronto symbol BCE) has completed the sale of its Telesat satellite business for $3.25 billion, or 13.5% of its market cap of $24 billion. The company will use $1.2 billion of that to buy back 5% of its stock. It will probably use the rest to expand its high-speed Internet service, or make acquisitions. It may also increase its $1.46 dividend (4.9% yield). Best Buy. EMERA INC. $21 (Toronto symbol EMA) has acquired a 19% stake in the main electrical utility on the Caribbean island of St. Lucia for $22 million U.S. That’s roughly a third more than the $19.5 million or $0.18 a share it earned in the third quarter of 2006. This is the company’s first investment in this region, but it cuts its reliance on Atlantic Canada. Best Buy. TORSTAR CORP. $19 (Toronto symbol TS.B) recently launched Olive Canada Network, a new service that makes it easier for advertisers to place ads on Torstar’s own web sites, as well as a wide variety of other online sites. The company hopes this new operation will expand revenue from its Internet operations, which now supply roughly 2% of its total revenue. Best Buy.

BCE INC. $30.94 (Toronto symbol BCE; 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). BCE continues to restructure its operations to focus on its core businesses. This includes an agreement to sell its Telesat Canada communications satellite subsidiary to a private group of investors. BCE also plans to change its name to Bell Canada. The company will probably use the cash to buy back stock, and fund new investments in its wireless and other businesses without taking on new debt. It will also help BCE maintain its $1.32 dividend, which now gives it a current yield of 4.3%....

MANITOBA TELECOM SERVICES INC. $44 (Toronto symbol MBT; Conservative Growth Portfolio, Utilities sector; SI Rating: Average) earned $0.52 a share from continuing operations, down 14.8% from $0.61 a year earlier. If you disregard restructuring costs, profits grew slightly. Revenue fell 5.9%, to $477.9 million from $507.7 million, due to strong competition in the local and long distance businesses. The stock fell 10% on news of Ottawa’s new plan to tax income trusts, but quickly recovered. That’s because bigger phone companies like BCE and Telus could use the accumulated losses of Manitoba Tel’s struggling Allstream business telecom division to cut their own tax bills. These losses expire in 2014. The company’s $2.60 dividend (5.9% yield) is also now more attractive to income-seeking investors. Manitoba Telecom is a buy.

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....