The Beginning of the End for BCE

Here's a theory about the decision to blow up BCE and turn Bell Canada into an income trust. Perhaps the biggest strategic mistake made by BCE CEO Michael Sabia was not buying Microcell Telecommunications, the country's fourth-largest wireless carrier, when he had the chance a few years ago. Instead of acting aggressively and having to deal with the federal competition bureau, Sabia allowed Rogers to swoop in and acquire Microcell for $1.4-billion. Yes, Microcell used GSM while Bell Mobility was on CDMA but the other benefits (a larger exposure to the fast-growing wireless business, tax-loss carry-forwards, etc.) far outweighed any technology issues. Why BCE didn't move more quickly and/or aggressively is a huge mystery. After all, technology could not have been an issue given Telus, which also uses CDMA, had put Microcell in play by making the initial bid. Instead, BCE's failure to buy Microcell left it with just 20% of its revenue coming from wireless and that (along with a host of other issues) made BCE a low-growth entity. As a result, the move to an income trust became more of an option. Another spin on the Microcell story is Manitoba Telecom should have made a strong bid for the wireless carrier. Instead, Manitoba Tel decided to buy Allstream for $1.8-billion, which now shows all signs of being an expensive strategic mistake.