RE:Give it too me straight, no need to be rude. Decisions in infrastructure economics are based on how the proposed ”project” compares to the counterfactual or do-nothing.
The “counterfactual”: With a payout ratio of over 100%, Bell was unable to support its dividend with its operating income, resorting to debt at higher interest rates as credit rating dropped from BBB+ to BBB. Ruling from the Canadian Radio-television and Telecommunications Commission (CRTC) requires Bell to allow smaller competitors to use their networks for a fee set by the CRTC. The goal is to increase competition and lower prices for Canadians. While this ruling is theoretically good for Canadians, it results in stiffer competition and lower revenue for Bell.
The “project’: Bell cut 9% of its workforce and scaled back its investment in building fibre networks in Canada by $1.1B CAD, just sold its minority stake in MLSE, a platform producing next to no cash, and is putting$4.2B in proceeds into cash-generating Ziply: $400m EBITDA (~ 0.5$ EBITDA/sh) projected to grow 11%, a rate hard to match in Canada as Bell throttled back planned spending on its domestic fibre network In the face of the aforementioned unfair rulings on network sharing. The « project » is also to double Ziply’s fibre reach to 3m locations by 2028 without increasing Bell’s overall capital spending.
Moody’s said the Ziply purchase is “credit positive” for Bell, and “will help Bell expand its geographic footprint and the operator will become the third largest fibre provider in North America with improved revenue and EBITDA growth trajectory.”