Back to top

Analyst Blog

Bell Canada Inc. (BCE - Analyst Report), the largest telecom company in Canada, and its subsidiary Bell Aliant Inc. have threatened to trim down their unprofitable payphone business if industry regulators refuse to accept their request for rate hike.

The telecom company, which faces stiff competition from Rogers Communication Inc. (RCI - Analyst Report) had asked for a 100 percent rate hike, which could raise the local call charges from 50 cents to $1 and non-cash local call from $1 to $2. They have given an ultimatum to Radio-Television and Telecommunication Commission (CRTC) to accept their rate hike request failing which will force them to remove almost 25 per cent of their pay telephones.

Consumer advocates suggest that payphones still remain an essential communication means for the poor, who cannot afford cell phones or home phones. They believe that these public phones will also help in unwanted situations like disruptions in wireless services or low battery scenarios. However, Canadian telecom companies argue that if they can get the desired price flexibility it will help them to sustain their ailing payphone business and will provide them with the money needed to upgrade their much older payphones.

The rate dispute comes at a time when most of the telecom companies are trying to increase their more lucrative wireless subscriber base. Increased adaptation of smartphones and other wireless devices have resulted in reduction in payphone revenue for the carriers.

We believe if CRTC increases the rate it may handicap low income Canadians. On the contrary, if they don’t provide the price rise it may put payphones on the verge of extinction.      

The current Zacks Consensus Estimate for Bell Canada Inc. is pegged at 76 cents for the third quarter of 2012 with a growth rate estimate of (16.12%.) For 2012, the Zacks Consensus Estimate stands at $3.22 with a growth rate of 2.12% while for 2013, the Zacks Consensus Estimate stands at $3.29 with a growth rate of 2.34%.

Recommendation:   

We retain our long-term Neutral recommendation on Bell Canada Inc. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%