Markets Unmoved by BCE Deal

Includes: BCE, RCI, TORSF, TU
by: Market Blog

by David Berman

BCE Inc.’s (NYSE:BCE) decision to pay for full control of CTV in a $1.3-billion deal marked a major change in Canada’s media landscape. For all the headlines, though, telecom stocks barely budged Friday: BCE shares rose 0.4 per cent, while rival Telus Corp. (NYSE:TU) rose 0.3 per cent and Rogers Communications Inc. (NYSE:RCI) rose 0.2 per cent.

Torstar Corp., (OTC:TORSF) which will relinquish its 20-per-cent stake in CTVglobemedia as part of the deal, was a notable exception: Its shares surged 21 per cent.

Amid all the renewed talk of “convergence” that accompanied the deal, it may have been the case that investors simply weren’t all that enchanted by a deal that likely won’t drive revenue or dividend growth at BCE in the near term. A decade ago, the mere mention of “convergence” was enough to make investors drool with delight.

"We have made no secret of our skepticism for content-conduit ‘convergence’ so we are not going to be bullish on the prospect for any revenue synergies from this deal,” Greg MacDonald, an analyst at National Bank Financial, said in a note. “Of course, there will be no real cost synergies so from a strategic perspective we would call it a small positive in that it gives Bell a hedge in the event that content-on-demand and mobile distribution rights gain more value.”

Mr. MacDonald doesn’t think the deal will affect BCE’s projected dividend growth, currently pegged at 3 per cent to 5 per cent. Mr. MacDonald has a “sector perform” recommendation on the stock, with a price target of $34.