BCE Q4 2024: $5.7B Asset Sales Near $7B Target, Leverage Cut
- Robust capital allocation strategy: BCE’s plan to monetize noncore assets—targeting up to $7 billion in total (already achieving around $5.7 billion from MLSE and Northwestel with an additional $1.3 billion expected)—strengthens the balance sheet and reduces leverage, enabling reinvestment in growth initiatives.
- Resilient pricing environment: Executives highlighted that if recent green shoots in broadband and wireless pricing prove sustainable, BCE could secure revenue performance at the high‐end of its guidance range, potentially driving margin expansion.
- Strategic network and digital momentum: The emphasis on expanding premium fiber investments—both in Canada and via the Ziply Fiber acquisition in the U.S.—along with a strong digital media pivot underpins a long‑term growth narrative by capturing new subscribers and offering high-quality network services.
- Regulatory Risk Impacting Fiber Build-Out: The guidance indicates that due to a recent CRTC decision, BCE will likely miss its original fiber deployment target (8.3 million homes), suggesting regulatory pressures could slow its domestic network expansion and dampen future revenue growth.
- Reliance on Sustained Pricing Increases: The company’s revenue guidance heavily depends on continued pricing improvements in a highly competitive wireless and broadband market, which may not materialize consistently and could negatively affect margins.
- Uncertainty in Dividend and Capital Allocation Strategy: BCE’s dividend policy remains under review amid an elevated payout ratio and significant planned noncore asset sales, creating uncertainty for investors regarding future yield and capital allocation moves.
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Capital Allocation
Q: U.S. fiber, noncore, dividend policy changes?
A: Management stressed that growth in U.S. fiber is driven by closing the Ziply deal and exploring third-party capital to reduce funding needs. They clarified that while noncore assets (including elements of Bell Media’s digital pivot) are part of their strategic mix, dividend policy remains under review and could be adjusted before year-end if conditions change. -
Leverage Targets
Q: Desired leverage reduction and asset sale timeline?
A: The team is focused on lowering the net leverage from 3.8x through strong free cash flow and noncore divestitures, with several initiatives underway to maintain an investment-grade rating, though detailed timing remains unspecified. -
Revenue Guidance
Q: Tariffs or regulation affect revenue guidance?
A: Management noted that there are currently no tariffs, but pending regulatory decisions—especially from the CRTC—could impact performance. They expect revenue to range between -3% and +1%, largely depending on whether recent pricing improvements are sustained. -
Asset Sales
Q: Revenue high-end, noncore sales details?
A: They indicated that if pricing holds firm, revenue could achieve +1% growth, and of the $7bn target for asset sales, $5.7bn is already accounted for with MLSE and Northwestel, leaving about $1.3bn in additional noncore divestitures aimed solely at deleveraging—not sale-leaseback transactions. -
US Fiber & Internet
Q: Off-balance U.S. fiber; internet pricing driver?
A: Management explained that any U.S. fiber deployment might be structured to include third-party capital, helping ease funding requirements. Meanwhile, disciplined pricing is expected to keep Internet revenue growing in the mid-single digits, supported by their strong network position. -
CapEx Strategy
Q: CapEx changes post CRTC decision?
A: They noted that the CapEx budget is set at approximately $3.4bn this year, but future allocations will depend on the final regulatory ruling. The Canadian fiber build-out target has been revised downward, with long-term plans to transition from legacy copper to more efficient technologies. -
Fiber Investment
Q: Canadian fiber vs. U.S. and tower monetization?
A: Management emphasized that they remain committed to investing in owned network infrastructure in Canada despite the regulatory challenges, while also actively assessing opportunities to unlock additional value from telecom assets, such as towers, independently of the $7bn noncore asset target. -
DRIP & Wireless
Q: DRIP timeline and back book update?
A: While no specific date was provided, the DRIP program will be phased out as balance sheet improvements are realized. Concurrently, their focus is on reducing customer churn rather than aggressively re-pricing the existing wireless back book.
Research analysts covering BCE.