BCE (TSX: BCE) made some bold decisions that shareholders welcomed. The company began its restructuring from a telco to techno back in 2023 to exit or reduce exposure to markets regulated by the Canadian Radio-television and Telecommunications Commission (CRTC). BCE has been consistently losing market share in wireless to Telus Corporation. This happened as it reduced capital expenditures in fibre infrastructure. It slashed thousands of jobs, and sold its radio stations and ownership stake in Maple Leaf Sports and Entertainment (MLSE) to Rogers Communications for $4.7 billion.
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BCE continues to fight back against CRTC policies
BCE’s actions show it has been retaliating against the regulatory change that disrupted its oligopoly position. It has invested almost $23 billion to expand its pure fibre network since 2020. Now the CRTC’s decision requires Telus, Rogers, and BCE to resell their fibre network to competitors, reducing returns. With the moat of owning the most advanced and fastest fibre infrastructure gone, Quebecor and Cogeco Communications increased their market share by accessing competitors’ fibre infrastructure. They were not burdened with high interest costs on debt like Telus, Rogers, or BCE.
BCE is retaliating by reducing its exposure in CRTC-regulated segments. It is expanding in high-growth, less-regulated techno segments, like digital technology, cloud, and cybersecurity. The company-wide restructuring is a humongous task. Initially, it will pull down the company’s fundamentals.
BCE’s shares surge 13% after the dividend cut
BCE’s revenue kept falling as it closed stores and kept losing subscribers to competitive pricing. This reduced its net earnings and free cash flow. As a result, it became difficult for the company to fund its legacy dividends. These dividends were eating up its cash reserves, with a dividend payout ratio of over 100% since 2021.
BCE has been offloading non-core assets and using them to reduce debt. Initially, it promised to use the proceeds from MLSE to pay down debt. Later, it changed its course and decided to reinvest the money to acquire US-based Internet service provider Ziply Fiber for $7 billion.
BCE could not do all this while funding dividends. Once it had a clear capital allocation strategy, it slashed dividends by 56% in May 2025. This marked its first dividend cut in 16 years. Consequently, it freed up some capital, allowing it to execute its shift to techno.
BCE on path to the techno growth cycle
Once the dividend elephant was out, BCE made a series of investment announcements:
- It is buying back $1 billion in debentures to reduce debt.
- It announced plans for Bell AI Fabric. Under this initiative, it will open six artificial intelligence (AI) data centres with ~500MW of hydroelectric-powered AI compute capacity. The first data centre opened in June.
- It is taking funding from the Public Sector Pension Investment Board to develop approximately 1 million fibre passings in Ziply Fiber’s existing states. Furthermore, it targets to develop up to 5 million additional passings in four years.
The capital investment that once financed Canada’s fibre infrastructure will now move to the United States. There, it won’t share its infrastructure with competitors.
BCE, which provided wireless, wireline, internet, streaming services, and TV services in Canada, will now offer internet services in the US. It will also offer responsible AI computing services in Canada. The company stated that it will use its real estate assets to add AI compute capacity, with plans for expansion into Manitoba and Québec.
The second-quarter earnings set to be released on August 7, 2025, will show the financial impact of these moves. BCE’s revenue and profits could probably bottom out in 2025, setting the stage for techno revenue growth in 2026.
Is this stock a buy, hold, or sell right now?
Not all dividend cuts are bad news. Sometimes, you have to take a step back to move 10 steps forward. The stage is set for BCE’s stock to ride the recovery rally after a three-year downturn. If you already own BCE shares, they are worth holding onto for the long term. If you don’t own BCE shares, they are worth buying.
BCE has revised its long-term dividend payout target to 40% to 55% of free cash flow. This is down from the previous 65% to 75%. A lower payout range and a dividend cut give it flexibility to reinvest internal cash flow in the business. This can grow its FCF. The company’s shift to high-margin businesses could help it earn higher cash flows. This could allow it to accelerate its dividend growth rate in the future.
