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Top 5G Stock: Conservative BCE (TSX:BCE) or Aggressive TELUS (TSX:T)?

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Three companies are dominant forces in Canada’s telecom industry. Their combined market share is more than 90%. BCE (TSX:BCE)(NYSE:BCE) is the largest, followed by TELUS (TSX:T)(NYSE:TU). Rogers Communications is third, although it could become the second-largest if it obtains approval to acquire Shaw Communications.

Canada is at the doorstep of the next generation of the digital technologies era.  The rollout of the 5G network is most beneficial for developed economies. There’s a critical need to upgrade infrastructure and services from 4G to 5G. The upgrade should result in faster data rates.

According to GSMA Intelligence, 5G should deliver US$150 billion in additional value add to Canada’s gross domestic product (GDP). Thus, the race to become the top 5G stock has begun. Since the Rogers-Shaw deal is still up in the air, I’d limit the choices between BCE and TELUS.

5G investments

BCE is bigger than TELUS in terms of market capitalization, $59.79 billion versus $40.04 billion. The telecom giant announced in early February 2021 an additional spending of between $1 billion and $1.2 billion over the next two years. It will enable BCE to double the size of its next-generation 5G network.

BNN Bloomberg, BCE’s media asset, reports that TELUS increased its 2021 capital budget to $3.5 billion. Telus CEO Darren Entwistle said 90% of the accelerated spending plan will be for fiber optic networks, business processes improvements, and 5G wireless networks.

The infrastructure buildouts by the top two telcos will contribute billions to the domestic economy. For BCE, it would create around 5,300 direct and indirect jobs. On the other hand, TELUS projects its 5G expansion to create 38,000 jobs across the country.

Key 5G partnerships

In July 2021, BCE announced a strategic partnership with Alphabet’s Google Cloud. According to BCE, the multi-year partnership will power Bell’s company-wide digital transformation, enhance its network and IT infrastructure. The company will also leverage Google Cloud’s AI and big data expertise to gain unique insights through real-time network data analytics.

Apart from the 5G infrastructure buildout, TELUS aims to redefine automotive connectivity. The telco will work together with General Motors Canada to connect the latter’s next-generation vehicles to the former’s 5G network. Moreover, the collaboration is in preparation for the all-electric and autonomous vehicle future.

Perhaps more than the 5G rollout, your choice would depend on the overall makeup of BCE and TELUS. Look at the accompanying businesses apart from the core telecommunications services. BCE has Bell Wireline, Bell Wireless, and Bell Media. Some analysts say BCE’s media assets give it a distinct advantage. Others contend that TELUS may lack media assets, but it has growth catalysts in TELUS International, TELUS Health, and TELUS Agriculture.

Pure play dividend stocks

BCE trades higher ($66.02) than TELUS ($29.42) but pays higher dividends (5.3% versus 4.33%). Also, the larger telco hasn’t missed a dividend payment since 1881. TELUS isn’t inferior regarding dividend track records. Canada’s second-largest telco has earned Dividend Aristocrat status because it raised dividends for 18 consecutive years.

The communication needs of Canadians are ever-growing, so the telecom industry is as essential as railways. Also, the 5G network will drive growth further. Since the companies generate billions of dollars in revenue year after year, both stocks are suitable for long-term investors and retirees. Whether you choose one or the other, the dividends are safe and sustainable.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV, TELUS CORPORATION, and TELUS International (Cda) Inc.

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