2015 in review
BCE is up about 5% since the beginning of the year. When you throw in the healthy dividend, you get a pretty good return in a Canadian market that has been decimated by the plunge in commodity prices.
The company remains focused on its plan to dominate the Canadian media and telecommunications space all along the value chain, and that strategy appears to be paying off.
BCE’s media division now holds sports franchises, a television network, specialty channels, radio stations, web pages, and an advertising company. BCE also owns an extensive retail network, which grew in 2015 with the 50% purchase of cellphone retailer Glentel. Rogers Communications Inc. (TSX:RCI.B)(NYSE:RCI) owns the other half of the company.
The two competitors have another joint interest, the 75% ownership stake in Maple Leaf Sports and Entertainment (MLSE), which owns the Toronto Maple Leafs, the Toronto Raptors, and the Toronto FC soccer team.
The sports portfolio is getting larger as BCE and MLSE’s third partner, Larry Tanenbaum, are in the process of buying the Toronto Argonauts.
On the telecom side, BCE has done a good job of boosting subscribers in a changing market. The CRTC cancelled all three-year mobile contracts in June, and that means BCE and its competitors have to step up their customer-service game in order to keep subscribers.
Q3 2015 wireless revenues rose 9.3% compared with the same period in 2014, driven by an increase of nearly 78,000 net new post-paid mobile subscribers. Customers are spending more as data consumption continues to rise. BCE’s blended average revenue per user rose to $65.34 in the third quarter, up from $61.59 in Q3 2014.
Overall, the company has delivered solid results this year and has demonstrated it is not shy about trimming back underperforming assets.
The media industry continues to face challenges in attracting advertisers, and that has resulted in job losses at CTV and some of BCE’s specialty channels. On the positive side, the new CraveTV streaming service is proving to be very popular.
A look at 2016
The big unknown in 2016 is the move to pick-and-pay TV packages. The CRTC announced new rules in early 2015 that will come into effect on March 1 next year.
BCE and its peers will be forced to dismantle their existing offerings and give consumers the option of building their own. A core package of educational content and local news channels will cost $25, and subscribers will then pick and pay for any additional content they want to watch.
The change threatens to hit content owners who produce programs that might not be popular in the new system. Subscriber revenues are one concern, but advertising sales are also at risk.
In the end, I think Canadians will simply add channels up to their current payment plan, so BCE shouldn’t be hit that badly on the subscriber fees. Any specialty channels that don’t hold their own will just be sold or shelved.
On the network side, BCE continues to invest in its state-of-the-art infrastructure. The company’s fibre-to-the-home initiative is popular and should help attract subscribers who want the fastest Internet and the best HD picture quality available.
Should you buy BCE?
The stock has performed extremely well since the financial crisis and continues to be a safe haven pick for investors who see risks in other sectors of the Canadian market. With a growing dividend that yields 4.7%, BCE looks like a solid choice for 2016.
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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.