Desjadins Analyst: BCE Maintains Guidance; Reiterates 'Hold' Rating

Desjardins Securities maintains its guidance on soon-to-be-taken-out BCE Inc. (BCE) as the telecom giant posted second-quarter revenues that were in line with expectations and continues to restructure.

In a note clients, Desjardins analyst Joseph MacKay reiterated his hold rating and C$42.75 target price on Canada's largest telecommunications company, representing the per-share value of a C$52-billion takeover bid led by private-equity giant Ontario Teachers' Pension Plan.  The analyst wrote that revenue, at C$4.42-billion, and Earnings Before Interest, Taxes, Depreciation and Amortization [EBITDA] at C$1.74-billion, were both on par with his expectations.

He also pointed out to the one-time nature of the charges that weighed down BCE's second quarter results.

Mr. MacKay wrote:

Recurring [Earnings Per Share] EPS in the quarter was C$0.57, also in line when excluding the . . . tax and Sympatico equipment writedowns.

He also noted one-time restructuring charges following the departure of 180 employees during the quarter, weighing down EPS another C$0.06 for the quarter.

The restructuring announced on July 28 will imply an extra 2500 managerial lay-offs or 15% of the management workforce, and should further enhance financials. Mr. MacKay estimated the plan would cost an $230-million to implement and result in a $300-million annual saving.

Finally, the take-over by Teachers' Plan seems to be back on solid ground, acrucial event for the valuation of the stock according to Mr. MacKay.

He wrote:

Our target is based on the price of the shareholder-approved privatization, which is expected to close on or before December 11, 2008.

Comments

[John Seaton:]

The Emperor has no clothes. BCE is a dog and these out of touch analysts like Dejardin's Joseph Mac Kay don't know what they are talking about. Bell has mistreated Canadians to such a degree that the common mantra is "I hate Bell." It will take many years to overcome this hate of Bell image and gain the trust of Canadians if this is even possible.
I became active in trying to stop this purchase for two reasons. Firstly my wife is a retired teacher on pension. She instinctively feels, that knowing Bell, this is a bad deal with too much debt that may jeprodize her pension plan. Secondly the treatment we recived from Kevin Krull, president of residental services, concerning a disputed long distance bill, alerted us to the inept management of this team. For example, increasing the text message rate at a sensitive time when Canadians were becoming doubtful about this deal was not the best move. It almost seemed that Bell management was showing Jim Leech of the Teachers Pension Fund who would be in control.
My case was as follows. We made phone calls from the US with our Bell calling card. We paid monthly for Bell's "24/7 First Rate Service' which guaranteed ten cents per minute for calls within Canada and twenty cents for calls to the US and thirty cents using the card away from home. We received a bill for one thousand dollars. We expected two hundred dollars at the most. We were not warned with notices on our monthly statement etc that Bell cards are no good in the US. The calls go through rogue US carriers at extreme rates.
Bell blamed us. We paid six hundred dollars We refuse to pay the balance. For four hundred dollars Bell brought all this on themselves. I found out they have a whole department to handle this problem. I was not alone as they led me to believe. I have heard of many such cases as I warn other seniors of this problem. Wait until teachers visiting the US receive large bills.
While sitting around a camp fire with seniors last week I heard of Don's plight. He kept having monthly funds deducted from his bank for a satellite service he does not have. He had to change his bank account to escape Bell's satelite service. Some other seniors had long distance billing horror stories similarto mine.
Investigate for yourselves and decide. Remember we have not heard from the owners of the Teachers Pension Fund--the retired teachers and the current working teachers now contributing. they may want to pay the cancellation loss fee and pass on this deal.

2008 Aug 08 10:17 AM