http://biz.yahoo.com/ap/070630/canada_bce.html?.v=2

TORONTO (AP) -- BCE Inc., Canada's largest telecommunications company, said Saturday it has reached an agreement to be bought by a group led by the Ontario Teachers Pension Plan for C$51.7 billion (US$48.5 billion), in the largest takeover in Canadian history.

Probably the best sale.........BCE remains Canadian.....very unlikely that any sales of divisions would occur.......Company should remain basically as it is........Sabia should get a nice retirement package.

Ya, I agree. I think the Teachers Pension Plan sees it as an investment only. I can't imagine them shaking things up much.

-Mike

I can't imagine them shaking things up much.

Teachers is largest holder of BCE stock (6%). Their dissatisfaction with BCE performance was what started the whole sale scenario.

There will be big shakeups at Bell, because this is a leveraged bid with at least $12B in new debt + $9B of old debt coming to maturity in the next 2 years.

Expect to see 30 to 35% of BCE employees gone within 3 years (outsourced) + push on for IPTV. Expect to see the whole management crew at Bell Mobility shown the door - something that Sabia should have done years ago.

I would expect to see some pieces spun off just to get the debt down. I would doubt that the wireless business will get hit hard. Wireless props up the rest of the company. Same thing at TELUS which is why the only thing they really talked about was wireless. It is the goose that lays the golden egg.

Actually, it's a cash deal is for $42.75/share + assumption of current debt.

Teachers PP + Canadian partners are putting up about $5B to retain 53%; Providence + Madison (US partners) are putting up about $3B to hold 47%;
a consortium of (mostly Canadian) banks is putting up $24B as a loan; and Bell existing debt with repayment dates beyond 2010 are being "assumed".

Add it all up and you get around a $51B deal -- with the US partners paying $3B to get 47% of Bell Canada. That's a leveraged buyout.

If the company goes broke? After the banks are paid, unsecured debt (Canadian and US partners, and existing bond holders), get the crumbs. If the company is successful and, in five years, is re-sold to the public for $100B (that's the plan), then that $3B for 47% of the company is suddenly worth an awful lot. Like I said, that's what makes this a "leveraged" buyout.

There will be a push to pay down the debt and pay back the initial investment to "lower risk" and the most logical piece to break off is ExpressVu -- assuming there is a buyer. The problem is many have valued the company at around $3B ... not enough to make much of a dent. And now that it is finally generating positive cash flow, perhaps up to $300M/yr, the best thing the new Bell might do is sit tight with upgrades and let the business reap in profits for a few years and let the NEXT buyers -- in five years time -- re-invest.

It's not certain, saddled with such an enormous amount of debt, if Bell will want to quicken the pace on something like IPTV which requires a few billion more to role out properly over the next two years; so far they have earmarked about $1B only.

If Bell has been investigating money into IPTV like some people say, they're not going to sell off all their Video subscribers, and then try to get them back with IPTV. That would be foolish. Voice, Video and Internet are all intertwined today, I don't seem them letting go of any of it.

-Mike

I don't understand the purchase.

Expressvu is a liability. With HDTV going mainstream, ExpressVu is running into a bandwidth crunch. They're already running all "HD" channels at 720p, including channels that you can get OTA at 1080i. Any worse and they'll be in DirectTV lawsuit-land. ExpressVu and StarChoice are in a similar position to XM and Sirius. They use totally different hardware+codecs. This means that there aren't major savings in a merger. Bell is going to need more bandwidth and/or satellites soon, just to accomadate HDTV. And we haven't touched the costs of a hardware swap to reduce rampant piracy. In plain English, ExpressVu is going to need MAJOR capital expenditures soon, or else their cashflow-positive situation will soon evaporate.

IPTV and ExpressVu-for-Condos is in an even worse situation. There is currently NO HDTV available to THE PUBLIC. Bell has chosen to hitch their wagon to Microsoft. The STB software, that Microsoft promised, has been delayed even more than Vista. It'll eventually get done, but it'll be too late.

What do I suggest, you ask...
1) Scrap IPTV. It may not be feasable in anybody's hands, let alone in Bell's hands. A pair of copper wires will lose everytime in a head-on contest with 800-mhz-bandwidth co-axial cable. With luck, they may find a dot-com startup, with more IPO money than brains, who's willing to buy the IPTV plant.
2) Sell off ExpressVu satellite service to CBC. CBC can satellite broadcast itself in HDTV, with room for CTV, Global, CITY, OMNI, TVA, etc, etc. Since it'll be an unencrypted "national basic HDTV" service, Bell's current piracy problems become moot.

Bell's strength is in its telecom core competency. That includes landline (including ADSL), cell, and digital/VOIP. While cable can easily beat ADSL (copper wire) downloads, the upload situation is the reverse. Phone systems have been 2-way since day 1. Cable started off 1-way, to the viewer. Cable systems were retro-fitted with low-bandwidth upstream channels, so that customers could order PPV, etc. 2-way P2P, e.g. BitTorrent, brings cable to its knees, while ADSL doesn't skip a beat.

A leaner/meaner Bell that sticks with its core competencies should be a stock-market darling.

If Bell has been investigating money into IPTV like some people say, they're not going to sell off all their Video subscribers, and then try to get them back with IPTV. That would be foolish. Voice, Video and Internet are all intertwined today, I don't seem them letting go of any of it.

Bell has been investing money in IPTV at a much slower rate than they promised they would back in 2003/2004. They earmarked $1.3B from 2005-2007 (three years) to build out fibre to "pass" 4.3M homes in the Windsor-Quebec telephone corridor. This year they announced they'd only spent about $400M so far and would drag the process out till 2010. These are all facts which Bell includes in quarterly and annual financial reports and "management discussions" in writing.

Delivering internet, video and voice over one landline network is a very good idea, if executed on a timely basis. The satellite delivery of TV is an entirely different business, despite some overlap in contractual issues with programmers and some synergy in developing head ends.

Bottom line: yes, Bell ought pursue IPTV as an additional long-term revenue generator ... but it has to really step up to the plate with urgency, and resources. They have already lost 1 million residential phone lines in the past couple of years ... how many more will be lost before IPTV is ready to rock and roll to a significant part of its base?

IPTV and ExpressVu-for-Condos is in an even worse situation. <snip> Bell has chosen to hitch their wagon to Microsoft. The STB software, that Microsoft promised, has been delayed even more than Vista. It'll eventually get done, but it'll be too late.

AT&T U-Verse is essentially exactly the same IPTV system Bell is testing to supplant the current VDSL TV For Condos. As recently as Xmas 2006, U-Verse had 3,000 customers. They are up to 20,000 as of the end of May. Last week they reported they expect to be able to add actual customers at the rate of about 10,000 a week -- so a base of 250,000 perhaps by Xmas 2007. The key issue with the software/hardware solution has been scalability; that seems to have been addressed. But TWO HD streams is still at least 12 months away, according to AT&T this week; so call it 2009 before it is available widely.

It will be a non-trivial task for Bell to add 20,000 IPTV customers by this time next year given they don't intend to release it before at least Q4 2007. The lack of a robust HD service is the Achilles heel; and the cable rivals aren't hanging around idle in the meantime.

Bell's strength is in its telecom core competency. That includes landline (including ADSL), cell, and digital/VOIP. While cable can easily beat ADSL (copper wire) downloads, the upload situation is the reverse. Phone systems have been 2-way since day 1. Cable started off 1-way, to the viewer. Cable systems were retro-fitted with low-bandwidth upstream channels, so that customers could order PPV, etc. 2-way P2P, e.g. BitTorrent, brings cable to its knees, while ADSL doesn't skip a beat.

Yes, cable started out 1-way but it has been aggressively building out 2-way. DOCSIS 2.0, DOCSIS 3.0 and hybrid schemes in between ladder up to much greater upload; timelines leading into 2010 suggest a lot more can be squeezed out of the existing network. Plus most of the work is needed in the engineering centres, not building out the last mile to the customer. SDV (delivering some channels to the STB on request instead of all channels all the time) provides near unlimited video capacity. That, in turn, allows the cableco to "bond" existing network resources to dramatically increase capacity such as uploads. The VDSL2+ solution is to string a second set of copper wire for the last mile to the customer ... every single customer; this is where the "head end" solutions have so much more leverage.

Unlike Bell IPTV, none of this cable stuff is theoretical: SDV is running in major US cablecos now; and live customer production level testing of 100 Mbps Internet service with fast upload channels is in progress in Canada and the US. Cablevision, a cable operator on Long Island about the size of Rogers, offers 30 Mbps down/5 Mbps up today. What's Bell's best offering? 16 Mbps down/1 Mbps up ... virtually identical to Rogers Extreme Plus. ADSL may not skip a beat but Bell doesn't offer any upload advantage over cable today.

I'll just end by saying, this isn't really about technology nearly as much as it is about determined steady focus, sustained committed investment, and rolling out services incrementally but in a timely fashion pacing or beating the competition. Bell is clearly not executing in this fashion -- and that's the core reason it was sold this morning.

Assuming this deal goes through The Teachers pension plan will own directly or indirectly 40% of CTVglobemedia. 20% Direct the rest as a result of buying Bell. Will the CRTC take a look at another shuffling of the ownership of CTVlobemedia. If they were looking to shed some parts of this purchase down the road what do you think are the most likely targets.

Would you keep the broadcast side the CTVglobemedia bohemoth or look at ditching the distribution side Evu?

Probably the best sale.........BCE remains Canadian.....very unlikely that any sales of divisions would occur.......Company should remain basically as it is........Sabia should get a nice retirement package.
I wouldn't count on the company remaining "basically as is" in this scenario. I have seen this before... when the company is made private the objective is likely to cut costs, shut down or sell off non-performing units, to make the books look much better 3 to 5 years down the road so it can be made public again for a tidy profit.

In any case, that is probably the price to pay for being in a monopoly position for a long time where managers were content to do the bare minimum so they could reach retirement and start collecting pensions.

Assuming this deal goes through The Teachers pension plan will own directly or indirectly 40% of CTVglobemedia. 20% Direct the rest as a result of buying Bell. Will the CRTC take a look at another shuffling of the ownership of CTVlobemedia.
Rogers owns TV and radio stations and Rogers Sportsnet, and carries them on its cable systems. Having ExpressVu owned by the same owners as CTVGlobemedia is not a new precedent. I'm uncomfortable with the current situation. I believe that Rogers BDU operations should be split off and sold to a different owner than its radio/TV/pay-TV channels (or visa versa). Then we can look at applying the same rules to Bell.

If they were looking to shed some parts of this purchase down the road what do you think are the most likely targets.

Would you keep the broadcast side the CTVglobemedia bohemoth or look at ditching the distribution side Evu?
I'd keep CTV. Network TV still has a few good years left.

ExpressVu may be currently cash flow positive, but it has run into a brick wall in terms of bandwidth, with HDTV going mainstream. It'll require HUGE Capex in the next several years, and then there's the piracy issue. If they're smart, they might be able to roll both fixes into one set of new hardware. If I were the new owners, I'd have half a mind to cut future losses, and shut down ExpressVu entirely.

IPTV has limited potential for growth as well. Stringing a second copper pair to every household, to enable ONE HDTV channel at a time is going to be expensive.

IPTV has limited potential for growth as well. Stringing a second copper pair to every household, to enable ONE HDTV channel at a time is going to be expensive.

I don't get this at all. If you are running a line why not run fiber and be done with it. I can't say I have read any reports saying that the demand for more bandwidth is going to cool. If you are running a second copper strand then you are probably putting a new box in the house as well. The dinosau ... err phone companies need a dramatic step to get back in the game and a second twisted pair isn't it.

Can't see this being good for Canadians, one more company owned by the Teachers Union, look at the Toronto Maple Leafs as example of the union making a lot of money, and basically not caring if the team actually wins. Should be some kind of limitation of how much a Union owns in this country. Fewer and fewer companies own our tv networks, it's basically down to a couple, and that will give us no choice in having more tv networks from the US.

I just hope that heads will roll at Wynford Drive, the management are so damned complacent.

Can't see this being good for Canadians, one more company owned by the Teachers Union, look at the Toronto Maple Leafs as example of the union making a lot of money, and basically not caring if the team actually wins. Should be some kind of limitation of how much a Union owns in this country. Fewer and fewer companies own our tv networks, it's basically down to a couple, and that will give us no choice in having more tv networks from the US.
This isn't just union pension funds. I believe that another group looking at buying BCE was led by CPP (Canda Pension Plan) managers. If the managers did NOT operate this way, they would be at least fired, if not sent to jail. Have you heard of "fudiciary duty"? The pension funds are the people whose job it is to keep their members (and members' widows and orphans) out of poverty after the member retires and/or dies.

If you want ownership that wants to win at all costs (and I'm talking all sports, not just hockey), then you're stuck with a bunch of eccentric egotistic billionaires like Balsillie and Steinbrenner who also have enough ego that they want to own a major league team. For these guys, losing 10 or 20 million a year is nothing. The only problem is that there aren't enough of these guys. Not only do you kiss small-market teams good-bye; you'd be back down to a 6-team NHL.

Have you heard of "fudiciary duty"?
Have you ever heard of ethics and social responsibility. According to you, BCE should be treated as a means of short term profit for the rich and powerful, regardless of the effect on the company or its customers and employees. It's a sad statement that companies and the people involved are treated this way. I remember when companies were a means of producing goods and services at reasonable cost, not an entity for pillage and short term profit.

What is even sadder is the the teachers' union is doing this. Unions were formed to protect the interests of workers, all workers. The only people who will be living in poverty are BCE employees who have lost their jobs due to outsourcing and have lost their pensions and benefits due to this buyout. If what you say comes to pass, the teachers are just lining their pockets at the expense of their fellow Canadians while providing nothing of value in return. The cost of EV's service is approaching a level where many Canadians cannot afford it, including their own employees. Increased debt load caused by a leveraged buyout can only make that situation worse.

The pension funds are the people whose job it is to keep their members (and members' widows and orphans) out of poverty after the member retires and/or dies.
Insurance benefits should provide for the children of a worker who dies. Pensions provide for the widow of a retired worker. Very few retirees support children directly. I doubt any retired teachers will be living in poverty even if their union chooses less aggressive investments that can benefit other Canadians.

I said Quote: Have you heard of "fudiciary duty"?

Have you ever heard of ethics and social responsibility. According to you, BCE should be treated as a means of short term profit for the rich and powerful, regardless of the effect on the company or its customers and employees.

It's a sad statement that companies and the people involved are treated this way. I remember when companies were a means of producing goods and services at reasonable cost, not an entity for pillage and short term profit.
I didn't say "short-term". A "widows-and-orphans" outfit like a pension fund is usually in an investment for a few years at least. They are the least likely to do a quick flip or break-up and sell-off. The Ontario Teachers Pension Fund doesn't run the day-to-day affairs of the Maple Leafs. They just sit back and collect the dividends for their members. I don't blame the Leafs problems on the pension fund. The Leafs didn't become what they are because the pension fund invested in the Leafs. Rather, the pension fund invested in the Leafs because of what they (the Leafs) are.

The cost of EV's service is approaching a level where many Canadians cannot afford it, including their own employees. Increased debt load caused by a leveraged buyout can only make that situation worse.
Satellite ANYTHING is expensive; deal with it. Given the size of the Canadian market, I don't see how we can support 2 national satellite services. I think that satellite radio and satellite TV will eventually go the way of Iridium, even in the USA. The economics of satellite suck.

And then you'll have just your cable company to provide ALL your services. Who needs competition! I'm sure Rogers won't abuse a monopoly. :rolleyes:

-Mike