Maybe I’m missing something here but I still don’t get the bidding war for BCE Inc. (aka Bell Canada) now being orchestrated by BCE senior management. So, what you’ve got a low-growth telecom carrier scrambling to jump-start its financial prospects (mostly through cut-cutting) in an increasingly competitive marketplace…and apparently several private-equity players willing to cough up $30-billion +. And if a deal goes through, the new owner will be saddled with a pile of debt and a highly-leveraged balance sheet, which could stifle BCE’s ability to make the investments needed to compete against aggressive cable rivals such as Videotron, Rogers and Cogeco.
I’m not a number-cruncher but let’s take a look at BCE’s business units:
- local telephone: more competition from cablecos who are using television and local phones as key tools within bundles, while Bell struggles to get IP-TV out the door.
- wireless: the market has lots of room for growth so that’s a positive for Bell Mobility. But the business has been struggling in recent years amid billing woes and management turnover. Now, it looks like a new rival will enter the scene with Quebecor’s announcement yesterday to do business in Quebec.
- satellite-TV: low growth with revenue driven mostly by price increases.
- high-speed Internet: modest growth with penetration rates now above 50%. Again, most growth driven by prices increases.
- enterprise: extremely competitive marketplace with lots of players (Allstream, Rogers, Telus) driving hard for business.
Given BCE has already slashed thousands of jobs, what are potential buyers focused on? Are there plans to slash thousands more jobs? Or do they think spinning off assets such as Bell Mobility and ExpressVu will unlock oodles of value? One thing to keep amid all this M&A frenzy is mind is how much money there is to be made by investment banks involved in any deals. This explains why there’s so much interest in the future of Telus, Shaw and Quebecor. It’s all about the money, baby.
Update: Jim Courtney provides some nice insight into Bell’s various business units – in many ways supporting my “I Don’t Get It” theory.
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