Thoughts for a Sunday morning: Over the past week or so, I’ve read countless stories on how Bell Canada (aka BCE Inc.) has become the target of private equity investors willing to spend as much as $30-billion. As far as I can tell, the biggest motivation for a private equity buy-out is unhapiness among institutional investors about BCE’s stock price, which has sadly lagged behind the performance Telus, Rogers and Shaw in recent years.
There’s also a sense that part of the stock “problem” is BCE senior management’s lack of aggressiveness in restructuring operations. I guess there’s something more that investors want BCE to do in addition to the moves it has made to cut thousands of jobs, sell off non-core assets (CGI, Telesat), reduce operating costs, etc . If private equity investors believe they can spend $30-billion, and still see a healthy return on investment, how are they going to do it? One suggestion is BCE can focus on its high-growth businesses such as satellite-TV and high-speed Internet at a time when its traditional businesses are under competitive siege. The problem with this theory is satellite-TV is not a high-growth business while the high-speed Internet unit has seen its growth go from strong to modest recently. So is the answer simply cutting more jobs or spinning off/improving Bell Mobility, which has struggled over the past couple of years while Rogers and Telus have enjoyed robust growth?
Frankly, the private equity focus on BCE is a mystery. For one, if private equity investors with billions of dollars burning in their pockets want to invest in a Canadian telecom company, they should take a run at Telus. Second, there has to be sexier places for private equity than the Canadian telecom market.