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BCE's Arm Invests $854M, Boosts Fibre-Optics Network Suite

Zacks Equity Research

BCE Inc.’s BCE subsidiary, Bell Canada on Mar 27, announced plans to invest $854 million in a project that aims to connect millions of homes and businesses in Montreal with their fastest broadband fibre technology. This investment, one of the largest-ever communications infrastructure project in Quebec, is likely to generate almost 2,700 direct and indirect jobs and an additional $2.2 billion for other economic development purposes. Bell Canada's fibre to the home (FTTH) connections is expected to reach out to 1.1 million residences and business locations in Quebec.

Bell Canada has partnered with a number of local suppliers such as Asplundh, Effigis Geo-Solutions, G-Tek, Infrastructel, Telecon, TCI and TRJ Telecom to complete the Montreal project.

Bell Canada will install more than 7,000 kilometers of new fibre and upgrade 25 central offices across Montréal. More than 90% of Bell's network in the city is on aerial structures which will help to speed the deployment of the new fibre links.

This is one of BCE’s strategic moves to generate higher revenues by bringing in customers. The company’s  has consistently remained focused on investment in broadband network and services, accelerating wireless services, leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure.

Deployment of Gigabit Fibe, 4G LTE mobile networks, upcoming 5G networks, IP phone services are some of the moves taken by the company that have helped it to draw new subscribers and generate substantial revenues at the Bell Wireless segment in the last reported quarter.

We believe that the broadband business will prove to be beneficial for a digital city like Montreal. This should also attract even more leading-edge businesses. The fibre optic network expansion is expected to be completed in five years, increasing its coverage to about 3.5 million homes and businesses in Quebec, Ontario, and Atlantic Canada.

Despite such positives, shares of BCE underperformed the Zacks categorized Diversified Communication Services industry in the past three months. The stock rallied 3.1% compared with the industry's gain of 7.2% over the same time frame.

Moreover, BCE continues to face multiple headwinds such as stringent regulatory measures, loss in network access services lines, price competition, labor union issues, collective bargaining agreements leading to work disruptions, higher labor costs, operational risks and construction delays. In the wireless segment, BCE competes against Rogers Communications Inc. RCI and TELUS Corporation TU as well as regional carriers in Canada. Cable TV operators such as Shaw Communications Inc. SJR pose threat on the wireline side.

BCE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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