Whither Belus?

It seems like 100 years ago since the Ontario Teachers Pension Plan Board had its sights on taking BCE Inc. (BCE:TSX) private. You may recall, at the time, there was thought that Telus (T:TSX) was waiting in the wings as the perfect industry bidder for BCE, and the only party that could compete at the lofty multiples being considered by OTPPB et al.

Although Telus decided to not bid in the end (see prior post “Telus shocks, Teachers can only smile” June 26-07), plenty has changed over the past three years.

What hasn’t changed much is the fact the market roughly values Bell and Telus well below your average sleepy U.S. pipeline company, and certainly below the competitive U.S. wireless market (multiples are approximate):

BCE:
2010 avg earnings estimate: $2.63 (11x)
2011 avg earnings estimate: $2.72 (11x)

T:
2010 avg earnings estimate: $3.01 (12x)
2011 avg earnings estimate: $3.19 (12x)

Don’t you find it odd that despite what we’re told is the highly profitable Canadian market, these multiples are anything but exciting?

With the pending putative reshaping of the Canadian telecom market (see prior post “BNN TV “SqueezePlay” Interview” April 14-10), Bell and Telus have a short window to capitalize on their entrenched market positions. Before the regulatory walls come down even further.

Whether or not the new wireless entrants are succeeding isn’t the point. Competition appears to be coming to Canada, whether it be in the form of GlobalLive, Mobilicity, or AT&T.

Bell and Telus have the luxury of time right now to merge their businesses, and get ready to take on all comers. Shareholders would be better off, and consumers will still have choice when it comes to their home phone, wireless, internet and TV feeds.

Why wait another three years?

MRM
(I own BCE)