BCE Inc. to sell assets, possibly real estate, for network investments, say analysts

Following news that BCE Inc. is considering selling assets and investments to fund network improvements, industry observers suspect the company may look to sell off some real estate—but say its investments in CTVglobemedia Inc. are probably safe. Last week, Bloomberg quoted BCE chief financial officer Siim Vanaselja, who said the carrier plans to sell assets and venture-capital investments to support network upgrades. Vanaselja didn’t say when the transactions might occur. Bell declined a request for a follow-up interview, and industry analysts don’t exactly agree on where the money will come from, or where it could go. But Amit Kaminer, a telecom industry analyst at SeaBoard Group in Toronto, said he doesn’t see content as a primary sell-off target. “I don’t know about The Globe and Mail,” he said. “In terms of content, we’re going into a state of operation where the communications companies are vertically integrated. Standalone broadcasting and newspaper companies are actually being sold to mother ships like Bell, Shaw and Rogers.” Greg MacDonald, financial industry analyst at National Bank Financial in Toronto, added that content might not be BCE’s favoured sale item. “Carriers seem to be moving more towards owning content ... having a strategic interest in content so that they can have influence on the use of that content,” he said. “BCE recently made an investment in the Montreal Canadians, for that reason.” Nor would BCE necessarily divest itself of its satellite TV service, MacDonald said. The company needs a TV service in its bundle to effectively battle competitors like Rogers Communications Inc., which also offers communication service packages. Until BCE further builds out its fibre-to-the-node infrastructure to improve Internet and TV access, satellite infrastructure plays a key role. “Bundling has been an important way to sell wireline services for the past three to four years,” MacDonald said. Last year, BCE acquired 750 Source retail stores across Canada. In its 2009 annual report, the company credited that acquisition with helping it become a major communications retailer. “I’m not aware of any large asset inside of Bell that doesn’t make strategic sense for the company,” MacDonald said. But Brownlee Thomas, Montreal-based principal analyst at Forrester Research, said the carrier might consider letting go of its investment in CTVglobemedia and the national newspaper under that organization. “They could sell The Globe and Mail, and their investments in different content. This is the type of thing where every once in a while a company that has diversified its holdings needs to look at the portfolio and say, ‘Does it make sense?’” she said. MacDonald suggested Bell could sell off some of its real estate assets, following in the footsteps of other telcos. “Verizon just announced that it continues to sell real estate. Telephone companies own a lot of real estate. In today’s world, they really don’t have to,” he said. “Switching centres don’t have to be in downtown Toronto, downtown Montreal. It’s something to keep in mind.” According to BCE’s 2009 annual report, the firm last year spent $80 million on relocating employees and closing real estate facilities no longer needed. In 2008, the company invested in building campuses for workers in Calgary, Montreal, and Toronto. Thomas also pointed to real estate as a potential for-sale asset. When asked where she thinks BCE might spend the proceeds, she said wireless backhaul infrastructure. Backhaul connections from wireless towers to carriers’ core networks are under strain as wireless users increasingly transmit large amounts of data on their mobile devices. “That’s why you have to keep investing in the landline,” Thomas said, adding that it isn’t cost effective for carriers to rent space on other companies’ networks to supplement their traffic carriage requirements. “It’s always going to cost you more if you’re using someone else’s landline backhaul.” MacDonald noted that the carrier has work to do on its relatively new HSPA wireless access network. Unveiled last year in partnership with Burnaby, BC carrier Telus Corp., the infrastructure supports faster download speeds for mobile customers. “The HSPA network is not completely finished,” MacDonald said. “To Bell and Telus, having the best coverage is a competitive differentiator in their minds ... They want to mimic their existing CDMA coverage footprint with HSPA.” On Friday, BCE’s eastern-Canada subsidiary, Bell Aliant, announced a $2.1 million investment to bring HSPA access to the regional county municipalities of Fjord-du-Saguenay and Haute-Côte-Nord in Quebec. Duncan Stewart, director of research for Deloitte Canada in the areas of technology, media and telecommunications, suggested Bell would focus its investment in fibre-to-the-node infrastructure to improve broadband speeds. Telcos have traditionally lagged their cable-company competitors in that regard. “It’s starting to matter,” he said. “Not just in Canada, but all around the world, we’re starting to see phone companies lose share because of this disparity.” Fibre-to-the-node build outs lead to wireless services as well, he said. Many devices, such as Apple Inc.’s new iPad, use Wi-Fi to connect to the Web, and Wi-Fi access points connect to wireline networks. “People are estimating that between 40 and 60 per cent of all the data—even on the devices that handle both Wi-Fi and 3G—will go over Wi-Fi in the home, and then onto the Internet,” Stewart said. Stewart said he believes Bell will invest in its HSPA network enhancements the most, then the backhaul network, and thirdly fibre-to-the-node infrastructure. “It would probably be 60-30-10,” respectively, he said. news@thewirereport.ca

BCE Inc. to sell assets, possibly real estate, for network investments, say analysts

News | April 23, 2010

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