Canada’s largest telecom company by revenue warned that a prolonged trade war will drag on economic growth, which was already hampered by a drop in domestic immigration targets.
“Everyone is going to have to get comfortable with lower volumes of sales,” BCE Inc. Chief Executive Officer Mirko Bibic said in an interview with Bloomberg.
“And then, if customers get concerned around the economic impacts of tariffs, and there’s less demand for second lines, third lines — there will still be a demand as penetration goes up, but penetration may not go up as fast.”
Canada plans to admit nearly 20% fewer permanent residents this year than in 2024, as well as fewer foreign students. This smaller pool led to a 56% year-over-year drop in net postpaid wireless subscriber additions during BCE’s fourth quarter.
On the trade front, Bibic said tariffs don’t affect the company directly. But he’s watching their “secondary impacts” on consumer sentiment and business spending.
“If it suppresses both of those in a dramatic fashion, then the impact will be potentially significant,” he said.
Before the trade war began, BCE projected its adjusted earnings before interest, tax, depreciation and amortization for 2025 would range between 2% lower and 2% higher than in 2024.
Shares are near their lowest levels since 2011, having fallen 27% over the past 12 months. The stock has regained some ground over the past few weeks and closed at C$34.01 on Tuesday.
Dividend questions
BCE — also known as Bell — maintained its quarterly dividend at just below C$1 per share in February, bucking calls from analysts for a cut. The stock has a yield of 11.7%.
“We’re going to have to provide clarity to the capital markets, because shareholders are asking,” Bibic said of the dividend. “Over the medium and long term, we’ve got to grow this franchise in order to return capital to shareholders in whatever form that takes.”
BCE’s payout ratio is above the Montreal-based company’s policy range, and Bibic doesn’t like the current share price or dividend yield, he told a conference on March 4.
The telecom operator had boosted its payout steadily since 2009, making it a reliable source of income for retail investors. Less than half the company’s shareholders are institutional, according to data compiled by Bloomberg, unlike rivals such as Rogers Communications Inc. and Telus Corp.
BCE needs to cut its dividend by at least 50% to make its payout more sustainable, calculated Maher Yaghi and Jean-Michel Gauthier, analysts with Bank of Nova Scotia. Any less and shareholders will wonder about subsequent cuts, leading to significant underperformance, the analysts wrote.
Trade-related recession risks would be suitable justification for a cut, TD Cowen analyst Vince Valentini said in an interview.
Bibic declined to discuss the company’s dividend plans, but said Bell’s board of directors will continue reviewing the payout. Factors they will consider include the macroeconomic environment, regulation, competition and the company’s progress against its strategic goals.
Ziply deal
One of his priorities is to build and buy fiber optic broadband connections — underscored by BCE’s proposed C$5 billion ($3.5 billion) acquisition of US-based Northwest Fiber LLC, which does business as Ziply Fiber, announced in November. The deal sent the shares tumbling.
Yaghi called the purchase “perplexing” at the time — and expensive, with BCE paying more than 14 times Northwest’s 2025 estimated Ebitda.
Valentini said investors have since warmed to Ziply as an asset, but “the investment community and the analyst community still think it was inappropriate for them to use their balance sheet in that way,” he said.
Bibic said foreign acquisitions like Ziply boost both Canada and the company.
“We should always want — and in this environment it’s particularly important — to have strong domestic champions, and strong Canadian companies,” he said.
“And if we have Canadian companies who are expanding beyond Canadian borders, while continuing to operate strongly in Canada, that makes Canada stronger. Because all the benefits, if we execute properly, will come back home.”
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Stephanie Hughes and Thomas Seal, Bloomberg News
With assistance from Christine Dobby.
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