BCE Inc.

History

The Bell Telephone Company of Canada Ltd. was created by an act of Parliament on 29 April 1880. Later known as Bell Canada, its charter granted it the right to construct telephone lines alongside all public rights-of-way in Canada. Under a licensing agreement with the US-based America Bell Telephone Company, Bell also manufactured telephones and telephone equipment, an activity that would be spun off in a separate company that later became Northern Telecom and then Nortel Networks. In 1983 all the Bell Canada group of companies (also known as the "Bell Group") were placed under a new holding company, Bell Canada Enterprises Inc. (BCE). This corporate reorganization resulted in Bell Canada and its subsidiaries, including Northern Telecom (later Nortel Networks) and over 80 others, becoming subsidiaries of the new holding company, BCE. Under the new parent, each company was owned directly by BCE, which had the benefit of freeing the manufacturing company, Nortel, and other holdings from the heavily regulated telephone company, Bell Canada. Under a variety of leaders, BCE has embarked on a series of diversifications, consolidations, and corporate strategies. In 1988 Bell Canada Enterprises was renamed BCE Inc.

1983-1998: diversification and expansion

In 1983, A. Jean de Grandpré, chairman of Bell Canada, was appointed as the first chairman and chief executive officer of BCE. BCE soon embarked on a major diversification into property development, the energy sector, financial services, and other sectors. Within a few years it became the first Canadian company to report CAD$1 billion in profits.

1998-2002: convergence strategy / internet boom and bust

When Jean Monty assumed the job of CEO in 1998, he pursued a convergence strategy, attempting to combine both content creation and distribution within BCE, and to take greater advantage of the emerging Internet market. BCE's acquisition in 2000 and subsequent financing of overseas carrier Teleglobe cost billions of dollars. BCE sold Teleglobe two years later; Jean Monty resigned and was succeeded by Michael Sabia as CEO.

2002-present: refocus on core business

Michael Sabia refocused BCE on its core telecommunications business, prompting BCE to buy back the 20% share in Bell Canada that it had sold in 1999 to Ameritech (which was subsequently acquired by SBC Corporation). BCE also spun off operating units that it did not consider to be core to its business, including Emergis in 2004, and Bell Globemedia and Telesat Canada in 2006.

On February 1, 2006, stating the need to remain competitive, Bell Canada announced job cuts of 3,000 to 4,000 employees by the end of 2006.

On April 28, BCE announced that CEO Michael Sabia was taking a 455% pay increase, his salary being raised from C$1.21 million a year to $6.71 million a year. The pay included a $1.25 million salary, a $2.2 million bonus that Sabia converted to deferred share units, a long-term incentive payout of $3 million and other compensation, the filing shows. Bell Canada also posted record revenue increases for the previous fiscal year.

2006 conversion to income trust

Under pressure from investors, on October 11, 2006, BCE announced it would be wound down, with its remaining assets converted to an income trust so its income could be distributed directly to shareholders through dividends, avoiding corporate taxes. The new entity was planned to be named "Bell Canada Income Fund". As part of this restructuring, Bell Aliant offered to take Bell Nordiq private, while remaining separate from the new Bell trust. Due to announced changes in taxation law by the Canadian federal government, on December 12, 2006, BCE announced it would not proceed with its planned conversion to an income trust. It then started planning a restructuring that would have eliminated the BCE holding company, but this was put on hold when the company began attracting takeover bids.

2007-2008 proposed takeover

Due to its stagnant share price, starting in April 2007, BCE was courted for acquisition by pension funds and private equity groups, including a consortium led by the Canada Pension Plan Investment Board (with Kohlberg Kravis Roberts as one of the participants), a consortium led by the Ontario Teachers' Pension Plan, and a consortium that included Cerberus Capital Management. On June 30, 2007, BCE accepted a bid of $42.75 per share in cash, for a total valuation of $51.7 billion, from the group led by the Ontario Teachers' Pension Plan, and including Providence Equity Partners, Madison Dearborn Partners, Merrill Lynch Global Private Equity, and Toronto-Dominion Bank. The proposed deal would have been the largest acquisition in Canadian history and the largest leveraged buyout ever. The deal was approved by BCE shareholders, Quebec Superior Court (whose ruling was overturned by the Quebec Court of Appeal, but was later upheld by the Supreme Court of Canada), and the CRTC, subject to certain conditions for its corporate governance structure to ensure that Bell remained under Canadian control. (See BCE Inc v 1976 Debentureholders for further information).

Due to the tightening of the credit market caused by the subprime mortgage crisis, the investment banks financing the deal—led by Citigroup, Deutsche Bank and the Royal Bank of Scotland—started negotiations on May 16, 2008, to revise the terms of their loans with higher interest rates and greater restrictions to protect themselves. On July 4, 2008, BCE announced that a final agreement had been reached on the terms of the purchase, with all financing in place, and Michael Sabia left BCE, with George Cope assuming the position of CEO on July 11.

On November 26, 2008, BCE announced that KPMG had informed BCE that it would not be able to issue a statement on the solvency of the company after its privatization, one of the required conditions of the buyout. As a result, the purchase was cancelled.

2010 convergence and consolidation

With Shaw Communications purchasing the Global Television Network, Vidéotron launching its wireless telephone network with video content as a key selling point, and the enormous popularity of wireless and Internet video and other media streams at the 2010 Vancouver Olympics, Bell once again sought to bring a content provider into its portfolio. In September 2010, Bell announced a deal to reacquire full control of the broadcasting properties owned by CTVglobemedia including the CTV Television Network. Bell also obtained a 15% interest in The Globe and Mail, CTVglobemedia's other major asset, with the remaining 85% owned by the Thomson family. Through this acquisition, Bell responded to an increasing trend away from traditional cable and satellite delivery channels and towards new distribution methods over the Internet and wireless networks. The CRTC approved the transaction in March 2011.

In 2016, BCE announced that it had entered an agreement to acquire Manitoba Telecom Services (MTS) in a transaction worth $3.9 billion. The deal has been approved by both companies' shareholders and boards of directors, and is expected to close in late 2016 or early 2017 pending regulatory approval from the Competition Bureau and other agencies.

Major subsidiaries

As of 2015, BCE Inc. has three main subsidiaries: Bell Canada, Bell Mobility, and Bell Media, comprising over 80% of BCE's revenue.

Bell Canada

This is formed primarily of the historic core of the company in central, Atlantic, and northern Canada.

Bell Media

Bell Media is the BCE broadcast and media subsidiary. In 2000, BCE bought the CTV Television Network for $2.3 billion. The company combined CTV with its holdings in the Globe and Mail newspaper to form Bell Globemedia, with BCE owning 70% and Thomson Newspapers and Woodbridge Co. Ltd. the remainder. In 2005, BCE sold its controlling interest in Bell Globemedia for $183 million to Woodbridge, Torstar, and the Ontario Teachers' Pension Plan, with BCE retaining a 20% stake. The company was subsequently renamed CTVglobemedia. In 2010 BCE bought out the other owners, acquiring CTV's specialty television, digital media, conventional TV and radio broadcasting platforms. In August 2015, BCE sold its remaining 15% stake in the Globe and Mail to Woodbridge. Bell Media's subsidiaries:

Other holdings

Below is partial list of the holdings of the BCE conglomerate.

Montreal Canadiens

In 2009 BCE partnered with the Molson family in acquiring the Montréal Canadiens Hockey Club and the Bell Centre. The $575 million purchase was termed "the richest deal in NHL history"; BCE's share was reported to be $40 million.

Maple Leaf Sports and Entertainment

In 2011, together with Rogers Communications and Kilmer Sports (holding company of Larry Tanenbaum), BCE acquired Maple Leaf Sports & Entertainment, owner of the Toronto Maple Leafs professional hockey team. BCE's interest is held in partnership with Rogers Communications through the holding company 8047286 Canada Inc., 50% owned by Rogers and 50% by BCE holding company 7680147 Canada Inc., which is in turn 74.67% owned by BCE and 25.33% by BCE Master Trust Fund (investment fund of Bell's pension plan).

Bell Aliant

Bell Aliant was a subsidiary company formed in 1999 from the merger of the four BCE-controlled telephone companies serving Canada's Atlantic provinces. In 2016, the operations of Bell Aliant were consolidated into those of Bell Canada.

BCE Development

BCE Development was founded as Daon Development by Vancouver-based developer Jack Poole in 1964. In the mid-1970s Daon became known for expanding aggressively in the United States. The company first entered the American market in 1976 and nearly quadrupled its total assets to $1.67 billion in four years. It borrowed heavily to finance deals for premium office space and condominium conversions. By 1981, the company had assets worth more than $2 billion. When interest rates soared, however, Daon was caught overextended, could not meet its debt payments, and was forced into a major restructuring with its bankers. In 1985 BCE acquired 68% of Daon from its creditors and changed its name to BCE Development Corporation in February 1986. In March 1986 it agreed to acquire US $1 billion of commercial real estate from the American subsidiary of the Oxford Development Group Ltd., more than doubling BCED's portfolio. BCE stated its goal was to convert from a land developer to a developer of prime commercial properties.

In July 1990 BCE Inc. sold 50% ownership in BCE Development to Carena Developments Ltd. (controlled by the Toronto branch of the Bronfman family). BCED was renamed Brookfield Development Inc. (now Brookfield Asset Management) followed in 1994 by the remaining 50%.

Montreal Trust

In March 1989 BCE bought a 64% stake in Montreal Trust from Power Financial for $547-million. The diversification was considered a "natural evolution" due to BCE's long-standing interest in financial services, its familiarity in selling services to the public, and its in-house money management operations. In 1993, BCE sold Montreal Trust to Scotiabank for about $290-million, taking a substantial loss.

Nortel Networks

When BCE was created in 1983, Northern Telecom was transferred from a subsidiary of CRTC-regulated Bell Canada to a non-regulated subsidiary of BCE. In 1998, with Nortel's acquisition of Bay Networks, the company's name was changed to Nortel Networks. As a consequence of the stock transaction used to purchase Bay Networks, BCE's holding was diluted to a minority stake. In 2000, BCE spun out Nortel, distributing its stock in Nortel to its shareholders. Nortel's share price collapsed with the dot-com crash of 2000 and combined with a mishandling of a subsequent accounting investigation, the company never fully recovered. It was liquidated in 2009.

Teleglobe Inc.

In 1987 BCE purchased a 30% stake in Memotec Data Corporation for $196 million. When Memotec purchased international telecommunications carrier Teleglobe Canada from the Canadian government in 1987, the company was renamed Teleglobe Inc. In March 2000, BCE announced the purchase of the Teleglobe shares it did not own for $9.65 billion. In April 2002, BCE announced it was cutting off long-term funding of Teleglobe, would give up on the company, and take a charge of up to $8.5 billion. In 2005 Teleglobe was sold to the Tata Group and is now known as VSNL International Canada. In September 2002 it sold its voice and data business for $197 million.

Telesat Canada

In 1970 Bell Canada acquired a minority interest in satellite telecommunications carrier Telesat Canada. In 1998 BCE raised its stake to 100% at a cost of CAD$158 million for the 42% of shares it did not already own. In December 2006, BCE announced the sale of Telesat to Loral Space & Communications and the Public Sector Pension Investment Board for CAD$3.28 billion.

TransCanada Pipelines

In 1983, BCE acquired a controlling 42% stake in TransCanada PipeLines Limited (TCPL). In 1990 it announced its departure from the energy sector and sold its stake in TCPL for $1.1 billion.

Corporate governance

As of 2016 the current members of the board of directors of BCE are: Thomas O'Neill (chair), Barry Allen, André Bérard, Ronald Brenneman, Sophie Brochu, Robert Brown, George Cope, Anthony Fell, Edward Lumley, Jim Prentice, Robert Simmonds, Carole Taylor, and Paul Weiss.

Since inception, BCE has had four CEOs: