On Aug 30, 2016, leading Canadian communications service provider BCE Inc. (BCE Quick QuoteBCE - Free Report) was downgraded to Zacks Rank #4 (Sell). Notably, the Wireline segment continues to witness a decline in revenue. However, BCE is experiencing steady progress in its attempts to reduce its network access services (NAS) line losses in residential segments and boost data service revenues.

Competition Strife in Wireless Segment

In the wireless segment, BCE competes against Rogers Communications Inc. (RCI Quick QuoteRCI - Free Report) and TELUS Corporation (TU Quick QuoteTU - Free Report) as well as small regional carriers across Canada. Additionally Shaw Communications Inc‘s entry in the Canadian wireless market after its takeover of WIND Mobile will exert further competitive pressures going ahead.

Operational Risks

Approximately 45% of BCE’s employees are represented by unions and covered by collective bargaining agreements. Renegotiating collective bargaining agreements could result in higher labor costs and work disruptions, including work stoppages or work slowdown. Further, satellites used by BCE are subject to significant operational risks. Satellites that have been commissioned are subject to construction and launch delays and could have an adverse effect on BCE’s business and financial results.

The Bottom Line

BCE faces stringent regulatory measures, decline in NAS lines, price competition, exposure to labor union issues covered by collective bargaining agreements resulting in work disruptions and higher labor costs remain concerns. Additionally, operational risks, construction and launch delays are major risks. Also, the Wireline segment continues to observe a decline in revenue. However, BCE expects wireline results to improve in 2016 and beyond as it gains from an increase in net revenue generation units. Additionally, BCE continues to invest in LTE, broadband and fiber infrastructure to improve its network. This should help the company gain customers and also put a check on churn.

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