In a bold expansion move, BCE Inc., Canada’s largest telecommunications company, has entered the U.S. market. BCE agreed to purchase internet provider Ziply Fiber for $5 billion (US$3.6 billion), a step that CEO Mirko Bibic says demonstrates the company’s proactive strategy in enhancing its fiber reach. Ziply Fiber, with its current operations across Washington, Oregon, Idaho, and Montana, offers services to 1.3 million customers with plans to expand its fiber network.
Acquisition Funded by Sports Investment Sale
BCE will finance this acquisition largely through proceeds from selling its 37.5% stake in Maple Leaf Sports & Entertainment Ltd. (MLSE). Previously seen as a passive investment, MLSE is now providing the capital BCE needs to extend its business. Instead of reducing its debt levels as many analysts had expected, BCE will use these funds to drive new revenue streams through Ziply.
This deal shifts BCE’s focus toward operational investments that directly contribute to cash flow, rather than holding assets such as MLSE. With this acquisition, BCE’s projected fiber connections will total over three million in four years, with an eye toward eventual expansion to 12 million locations across North America.
Ziply Fiber Adds Fiber Reach, Debt Challenges
Despite the exciting expansion, the acquisition adds to BCE’s debt load, as Ziply carries a $2 billion debt. Although BCE’s financial strain remains significant, the company has decided to pause dividend increases in 2025 to stabilize its balance sheet. With BCE’s yield currently near 9%, the dividend has drawn income-seeking investors, who may react strongly to this pause.
BCE has faced debt rating downgrades in recent months. Many investors had hoped BCE would use the MLSE sale funds for debt reduction. Nevertheless, Bibic and BCE’s leadership view this move as a strategic investment in long-term growth.
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Challenges in the Canadian Telecommunications Market
BCE, alongside Rogers and Telus, has recently experienced a challenging Canadian telecommunications market. Increased competition, primarily from aggressive discounting by smaller rivals like Freedom Mobile, has reduced revenue potential in wireless and cable segments. This trend is compounded by Canada’s recent policy shift limiting immigration, a factor that previously bolstered telecommunications revenues through new customer growth.
The company’s extensive investment in fiber networks across Canada has been a priority under Bibic’s leadership. With total debt around $39 billion, BCE aimed to outpace its competitors by providing faster internet speeds through fiber-optic technology. However, the fiber buildout has been costly, and the return on investment has been delayed due to industry-wide pricing pressures and customer migrations to streaming services.
Seizing U.S. Growth with Ziply Fiber
By acquiring Ziply Fiber, BCE expects to leverage its expertise in fiber technology. The company plans to replace portions of Ziply’s copper wire network with fiber to offer high-speed internet, catering to rising demand in the Pacific Northwest. Bibic has positioned the acquisition as a pivotal opportunity to enter the U.S. market, calling it a “great trade.”
Despite BCE’s high debt, the acquisition presents an opportunity for BCE to integrate Ziply’s cash flow into its balance sheet. This move could provide BCE with a competitive advantage as it extends fiber capabilities beyond Canadian borders. Ziply Fiber, founded by Searchlight Capital in 2019, has gained popularity across Washington, Oregon, Idaho, and Montana, where demand for high-speed internet has surged.
The Future of BCE and Ziply Fiber’s Expansion
Bibic acknowledges that entering the U.S. market is a gamble, especially considering BCE’s debt concerns. However, he asserts that Ziply’s existing customer base and growth potential make it a worthwhile investment. Ziply’s operations align well with BCE’s fiber-optic strategy, as both companies prioritize network expansion.
BCE intends to upgrade Ziply’s current infrastructure, aiming to transform more connections from copper to fiber over the next four years. With this investment, BCE plans to establish itself as a leader in fiber-optic services in the Pacific Northwest, targeting residential and business customers.
Addressing Investor Expectations and Market Reactions
Investors in Canada have witnessed a turbulent period for telecom stocks as wireless, cable, and internet services face intense competition and changing market dynamics. As BCE embarks on this U.S. expansion, Bibic emphasized that the company remains committed to strategic growth.
To mitigate financial strain, BCE will introduce a dividend reinvestment plan, allowing investors to purchase stock at a discount. This measure aims to balance the company’s financial obligations while continuing to reward shareholders. Bibic believes the Ziply acquisition aligns with BCE’s long-term goals and signals a shift from traditional revenue sources to data-driven services.
While some investors expected a more conservative approach to debt management, BCE’s choice to reinvest in Ziply Fiber demonstrates a clear vision for growth. The company aims to maintain its market leadership in both Canada and the U.S. through technological advancements and operational investments.
Ziply Fiber: A Path to BCE’s U.S. Market Presence
For BCE, Ziply Fiber represents more than an acquisition—it’s a pathway to enter the U.S. telecommunications market. The move marks BCE’s return to the U.S. since its previous venture with Teleglobe, a long-distance carrier, which ended in financial losses following the 2002 dot-com bust. Bibic sees Ziply as an opportunity to regain a foothold in the U.S., backed by substantial fiber expansion and network improvements.
This $5 billion acquisition of Ziply Fiber underscores BCE’s commitment to growth in the fiber-optic industry. As the company navigates financial challenges, this strategic shift could transform its business model, positioning it for sustained growth across North America.
