BCE’s wireline business is dragging it down, says Canaccord’s Ghose

Canaccord Genuity analyst Dvai Ghose says he expects just 35% of Bell Canada’s Q3 EBITDA will come from wireless, far less than the 65% both Rogers and Telus enjoy.

Canaccord Genuity analyst Dvai Ghose says BCE’s (TSX:BCE) wireline segment is a continuing drag on an otherwise solid business.

On November 7th, prior to the market open, BCE will release its third quarter results. The company is following on a Q2 in which it earned $571-million on revenue of $5-billion, up 1.5% over the same period last year.

Ghose says he assumes that Bell Mobility will continue to lead its peer group in metrics like average-revenue-per-user (ARPU), postpaid subscribers and earnings. He also expects a healthy contribution from recent BCE acquisition Astral Media, though he wonders aloud why the company is investing in legacy media assets. But the Canaccord Genuity analyst says Bell’s wireline exposure is “significant” and margins are continuing to erode.

Ghose says he expects just 35% of Bell Canada’s Q3 EBITDA will come from wireless, far less than the 65% both Rogers and Telus enjoy. He thinks one of the solutions available to BCE is to raise its IPTV penetration. He notes that Telus’s IPTV penetration is about 30%, compared to just 10% for Bell.

In a research update to clients yesterday, Ghose maintained his HOLD rating and C$45.00 one-year target on BCE.

Ghose says he expects BCE’s Q3 revenue will grow 3.3% to $5.1-billion. His EPS estimate is $.076, which is in line with the street consensus of $.077.

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