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BCE: Stock of the Week

Guess what Bell’s biggest business is.

Andrew Willis 23 January, 2023 | 4:28AM
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Andrew Willis: Unlike its other two Canadian telecom peers, Rogers (RCI.B) and Telus (T), Bell (BCE)’s biggest business is wireline. That old DSL internet jack and a growing fibre network now cover three-quarters of the Canadian market – bringing in 52% of Bell’s income.

And that fibre-to-the-home [FTTH] buildout happening at Bell was already 50% complete by the end of 2021, reaching 6 million homes. Looking ahead, the company expects it will reach another 650 to 750 thousand new homes per year.

While so much attention is paid to wireless 5G network developments, fibre has been quietly establishing the new at-home backbone of the internet. This exponential upgrade from conventional cable internet and 100-fold leap from DSL hasn’t come cheap, however, as it’s grown one physical installation at a time.

Bell began laying the foundation for telecommunications in Canada in the 1930s but did so as part of an alliance to reach from coast-to-coast. This time around, they shouldered the costs to create their own footprint with fibre - one that equity analyst Matthew Dolgin says comes with immense buildout costs but makes it very unlikely we’ll see a new competitor any time soon. Existing competition from the likes of Rogers remains with hybrid fibre-coax networks that can cost less to maintain, but relative to DSL, fibre should meaningfully reduce operating costs for Bell.

On the wireless front, we’ve seen the evolution of a sharing agreement between Bell and Telus result in them leapfrogging Rogers in many “best network” surveys. So the company seems well-positioned on both wireless and wireline fronts for the long term – and can probably afford to continue charitable giving, through campaigns like “Let’s Talk Day” – without all the publicity.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BCE Inc61.78 CAD0.00Rating
Rogers Communications Inc Shs -B- Non-Voting65.92 CAD0.00Rating
TELUS Corp28.47 CAD0.00Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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