BCE Inc. (TSX:BCE)(NYSE:BCE) just announced plans to buy Manitoba Telecom Services Inc. (TSX:MBT) for $3.9 billion.

The deal adds one more piece to the puzzle in BCE’s Canadian telecom strategy and provides the company with a solid base to expand its presence in western Canada.

Will the deal go through?

MTS controls roughly 50% of the wireless market in Manitoba. Rogers has 30% of the province’s subscribers and BCE and Telus each have about 10%.

The Canadian government has pushed hard in recent years to increase competition in the telecom sector. BCE’s purchase of MTS will reduce the number of major competitors in the province from four to three, so there might be some pushback as a result.

BCE says it will sell one-third of the mobile subscribers and retail locations to Telus in a move designed to avoid issues with the CRTC. Some extra changes might be required, but I think the deal will be approved.


BCE plans to invest $1 billion over the next five years to upgrade the MTS network in both urban and rural communities. BCE also plans to roll out its Gigabit Fibe Internet offering within the first year after the transaction closes. The service delivers Internet speeds up to 20 times faster than those currently offered by MTS. That should help persuade provincial regulators the deal is good for residents.

Is the acquisition good for BCE’s shareholders?

The deal will help fortify BCE’s dominant position in the market.

The company says the transaction will be immediately accretive to free cash flow and offers significant synergies and tax savings. The price tag looks big, but BCE has the resources and will issue 28 million new shares for the equity component of the deal. The cash portion will be paid for using available sources of liquidity.

When it all wraps up, MTS shareholders will own about 3% of BCE’s common equity, so there is no concern regarding dilution of the stock.

Should you buy?

BCE remains a top pick in the Canadian media and communications space, and the move to buy MTS positions it well to continue its expansion west of Ontario. With a portfolio of strong media assets combined with the state-of-the art wireless and wireline networks, BCE is set to dominate for decades.

The company’s quarterly dividend of $0.3825 per share currently yields 4.7%. The MTS deal will add significant additional free cash flow and investors could see a nice dividend increase once the deal closes.

If you want a reliable long-term dividend pick, BCE remains a top choice.

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Fool contributor Andrew Walker has no position in any stocks mentioned. The Motley Fool owns shares of ROGERS COMMUNICATIONS INC. CL B NV. Rogers Communications is a recommendation of Stock Advisor Canada.