BCE combines rural telephone lines with Aliant and Bell Nordiq

BCE Inc. is shuffling the corporate asset deck, spinning off its rural telephone lines in Ontario and Quebec and combining them with those of Aliant Inc. and Bell Nordiq in an income trust. The move is designed to better serve rural and regional telephone customers in Central Canada and in the four Atlantic Canadian provinces. "The centre piece of what we’re trying to accomplish here is…the creation of a company that can create, that can focus on the needs of regional customers," BCE CEO Michael Sabia said during a conference call with analysts. "We’re convinced that this is the best way to deliver high-quality communications services in regional markets." The new entity, which is expected to be formalized after the transaction closes in the third quarter of this year, will have the full range of products and services to offer customers. "The new organization will have full quadruple play capability, be in a very strong position, we believe, to bring that...bundling capability to compete with the cable companies as needed," Sabia said. Success of the new entity will largely be derived from a low level of competition in these particular markets, combined with the ability to leverage its economies of scale inherent in a larger operation. But the new income trust will face considerable competition from EastLink in some Atlantic Canadian markets, and there are some smaller operators in Ontario and Quebec that will provide some rivalry. Jay Forbes, CEO of Aliant, indicated the future is bright for this new income trust. "Local and long-distance voice services provide a solid foundation for stable, predictable earnings," he said, "while Internet and ICT offer good prospects for modest growth. The low customer density throughout most of the service territory provides a natural deterrent to competition and the extensive commercial agreements with Bell Canada will result in high quality support services and predictable operating costs." Responding to analysts’ queries on revenue growth, Forbes said it will come from both the consumer and business markets. "Whether it be taking ownership of the broadband home, or the provision of ICT solutions to both the enterprise and SMB marketplaces, we think that there is ample opportunity for revenue growth enhancement in this new entity," he said. Success of the new income trust will also depend on lower operating costs; as such, the new entity and BCE will enter into a series of outsourcing agreements. Things such as call centre and elements of network operations to product development and systems and technology are to fall under these outsourcing agreements. BCE expects to net approximately $350 million annually over 10 years as part of the deal.

BCE combines rural telephone lines with Aliant and Bell Nordiq

News | 03/29/2006 5:00 am EST

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