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Morningstar | BCE Is in Position to Benefit From a Better-Quality Wireline Network and Strong Wireless Position

We think BCE, with its Bell brand, is the most favorably positioned of the four biggest Canadian providers of wireline and wireless services, as we like its competitive edge in both.BCE is the biggest Canadian broadband provider, with just under 3 million residential customers and a footprint that reaches three-quarters of the population. Its two biggest competitors, Rogers (in Ontario), and Videotron (in Quebec) each have closer to 2 million subscribers. What's more, we believe that Bell, as a legacy phone provider, has historically competed with an inferior network, contributing to better penetration rates for cable companies Rogers and Videotron (each providing service to 50%-60% of homes passed in 2018, compared with 35% for Bell, based on our estimations). BCE is now building fiber-to-the-home over much of its footprint, which we think will meaningfully reduce operating costs, allow it to offer speeds comparable to or better than competitors, and charge higher prices. We expect it to improve its penetration rate and take some share.We see BCE as being in the best position in Canadian wireless, where Bell, Rogers, and Telus collectively serve about 90% of the market with similar share. BCE's network sharing agreement with Telus, and Rogers' failure to keep pace with network enhancement, have eroded Rogers' network edge. Industry tests now find Telus and BCE to provide significantly faster speeds, giving them an edge in many geographies with customers who value speed most. However, we think Telus now has more competition for customers who put less weight on network quality and more on price. Shaw's Freedom Mobile is continuing its expansion and offering service for about half the price, though on a slower network. We think Shaw's wireless gains will occur disproportionately in its wireline footprint in the west, where it can allow customers to use its expansive Wi-Fi network and could conceivably bundle services. With a largely overlapping footprint with Shaw, we view Telus as the most vulnerable. We think BCE, with its eastern footprint, is relatively less vulnerable to Shaw.