BCE acquisition of MTS clears first hurdle

One hurdle cleared. And, like our hurdles competitors in Rio (GO! Johnathon Cabral, Chanice Chase-Taylor, Phylicia George, Nikkita Holder, Sekou Kaba, Noelle Montcalm, Sage Watson and Angela Whyte), many yet to leap.  Shareholders have approved a takeover offer for Manitoba Telecom from BCE Inc.; the regulators are next.

Communications stock BCE Inc.’s (TSX—BCE) acquisition of Manitoba Telecom Services Inc. (TSX—MBT) has cleared its first hurdle. Shareholders of Manitoba Telecom Services Inc. (MTS) have approved BCE’s takeover offer for MTS. The transaction, however, still requires approval from several regulatory authorities.

If successful, the transaction, valued at $3.9 billion, is expected to close in late 2016 or early 2017. It should add some extra growth potential to BCE. Bell has announced a five-year, $1 billion commitment to expand broadband wireless and fibre communications services in Manitoba.

BCE is Canada’s largest communications stock. It provides wireless, TV, Internet and business communications services from Bell Canada and Bell Aliant. Its Bell Media subsidiary is a multimedia company with leading assets in television, radio, out of home and digital media.

The company beat analysts’ expectations by a penny a share when it released this year’s first quarter results. For the three months ended March 31 2016, BCE made $734 million (adjusted) or $0.85 a share, compared to $705 million, or $0.84 per share in the same period 2015.

The increase largely reflected a 3.3 per cent rise in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to $2.2 million. In turn, EBITDA, was driven by higher revenue flow through from the company’s wireless, Internet, Internet protocol television and media businesses, along with management of operating costs.

During the quarter, BCE increased its quarterly dividend by five per cent to $0.6825 per share. This was the twelfth increase since 2008. Healthy cash flows and a strong balance sheet should let BCE continue to invest in its businesses to sustain future growth, while supporting further dividend increases. Indeed such investments made Bell the country’s broadband growth leader in the first quarter, with the addition of 93,000 new postpaid wireless, TV and Internet customers.

BCE should earn $3.49 a share in 2016. The annual dividend of $2.73 a share yields about 4.4 per cent at recent prices. BCE is a buy for attractive dividend income.


The MoneyLetter, MPL Communications Inc.
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