On Sep 26, leading Canadian telephone operator BCE Inc. (BCE - Analyst Report) was upgraded to a Zacks Rank #3 (Hold). The rating upgrade came on the back of recent developments in the company’s advanced networks Fibe TV and Fibe Internet services along with strength in the hosting and cloud platform.
BCE is poised to gain customers through its focus on technology upgrades which include increased deployment of Gigabit Fibe, 4G LTE mobile networks, upcoming 5G networks, IP phone services and post-paid businesses. The company continues to focus on six strategic areas including investment in broadband network and services, accelerating wireless services, leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure.
BCE’s wireless segment is expected to benefit from its post-paid business and robust activities as it continues to enjoy solid subscriber addition. Significant investments in network coverage, customer retention, lucrative data plans and the launch of new handsets along with the provision of net protection will drive customer addition. As of Jun 30, 2016, the company had 7,471,069 postpaid subscribers, up 3.7% year over year. The total wireless subscriber base increased 1.9% to 8,280,693.
In Aug 2016, BCE’s subsidiary, Bell Canada is leading the Canadian broadband communications market through its recent launch of Home Hub 3000 WiFi services with Wireless 4K Whole Home PVR from Fibe TV. This Wifi service is expected to be one of the most powerful home WiFi services in Canada and the world's first fully wireless IPTV (Internet Protocol television)service.
Meanwhile, BCE’s recent acquisition of Q9 Networks should boost the cloud suite. BCE had already taken over 35.4% of Q9 Networks for $180 million in Oct 2012 along with four other investors. The latest transaction, valued at approximately $675 million including Q9 Networks’ net debt but excluding Bell's existing ownership interest, is slated to close by the end of 2016.
Although BCE’s strategic moves to enhance employee skills, increase capital investments and reduce expenditures seem impressive, they might impact the company’s financials and growth prospects if not executed properly. Moreover, stringent regulatory measures, decline in network access services lines, price competition, exposure to labor union issues covered by collective bargaining agreements leading to work disruptions and higher labor costs, operational risks and construction and launch delays are major risks.
Stocks to Consider
A couple of better-ranked telecommunication stocks include NTT DOCOMO, Inc. (DCM - Snapshot Report) , Nippon Telegraph and Telephone Corporation (NTT - Snapshot Report) and KT Corp. , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The current year earnings estimates for NTT DOCOMO, Nippon Telegraph and Telephone Corporation and KT Corp have risen 7.02%, 22.92% and 10.53%, respectively, over the last 60 days.
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