Monty resigns, Teleglobe left to sink or swim, BCE up over $4 today:
BCE Cuts Funds to Teleglobe, Chief Executive Quits
By Robert Melnbardis
MONTREAL (Reuters) - Jean Monty, chief executive of BCE Inc. (Toronto:BCE.TO - news), Canada's largest communications group, quit on Wednesday as the company pulled its funding lifeline to Teleglobe Inc. and forecast a second-quarter charge of up to C$8.5 billion to write down the investment.
Investors cheered the news, sending BCE up 16 percent or C$3.90 to C$26.90 at the opening bell on the Toronto Stock Exchange. BCE was once the second most valuable stock on the exchange but has slumped to eighth because of the woes at Teleglobe and concerns about other underperforming areas.
BCE said it expects Teleglobe to seek a merger or debt restructuring. Failing that, Teleglobe may have to consider a "court-supervised proceeding."
In unexpected announcements that also raised the prospect of a restructuring of the $2.7 billion of debt at voice and data network provider Teleglobe, BCE also said it would raise an estimated C$1.5 billion ($955 million) to C$2 billion by securitizing its directories business. Analysts said that generally amounts to pooling and selling receivables, an inexpensive way of providing funds.
The company said Monty, who masterminded the Teleglobe takeover, would be replaced by Michael Sabia.
"It's obvious that BCE has gone through a difficult period with Teleglobe, but it is important that we turn the page in all respects," Monty said.
The meeting and conference call, billed as a forum to discuss the company's first quarter earnings, instead focused on the plan to effectively abandon Teleglobe, which BCE bought full control of two years ago for C$7.4 billion.
"This decision is based on a number of factors, including: Teleglobe's revised business plan and outlook with associated funding requirements; a pragmatic assessment of Teleglobe's prospects; and a comprehensive analysis of the state of the industry," BCE said in a statement.
Analysts had said BCE would do well to walk from Teleglobe as the company also has many other concerns on its plate, including its money losing e-commerce business BCE Emergis (Toronto:IFM.TO - news) and South American mobile phone network operator Bell Canada International Inc. (Toronto:BI.TO - news).
MARKET WELCOMES BCE PLAN ON TELEGLOBE
BCE said its board reaffirmed its commitment to maintaining the company's common share dividend at C$1.20 a year.
"We view the news as very positive," Bob Hastings, analyst at Raymond James in Vancouver, told Reuters.
"The other thing is that with the dividend being safe, the stock should be a lot higher from where it is, on a yield basis alone," he added.
The 4.7 percent-yielding dividend is one reason why BCE has been known as a "widows and orphans" stock, safe enough for retail investors to tuck away in their pension funds and a key holding for big institutional investors.
SBC Communications Inc. (NYSE:SBC - news), the No. 2 U.S. local phone company, owns 20 percent of BCE's Bell Canada unit, the country's largest phone company. SBC has a put option to sell back its stake to BCE in the second half of this year and 2004, something that could cost BCE up to an estimated C$7.5 billion and which is also affecting its share price.
BCE said it will conditionally provide weekly funding to Teleglobe up to a maximum of US$100 million to US$125 million.
BCE made the announcement on money-losing, debt-burdened Teleglobe while releasing first-quarter results that came in as forecast with a profit of C$301 million or 37 Canadian cents a share.
Net earnings in the year-earlier quarter were C$887 million or C$1.10 a share, after a C$2.9 billion gain related mainly to the sale of shares of Nortel Networks Corp.(NYSE:NT - news).
BCE said revenue was C$5.2 billion versus C$5.1 billion.
The Montreal-based company had forecast a first-quarter profit of 34 to 37 Canadian cents a share, excluding charges or gains. That was an 8 percent decline an BCE's earlier forecast and compares with a profit of 38 Canadian cents a share in the year earlier quarter, excluding nonrecurring items.
BCE on Wednesday revised its guidance for the second quarter and the full year, excluding Teleglobe.
It said it expects second-quarter revenue of C$4.8 billion to C$5.1 billion and net earnings of 45 Canadian cents to 48 Canadian cents.
For the full year, BCE expects revenues of C$19.5 billion to C$20.5 billion and net profit of C$1.80 to C$1.90 a share.
($1=$1.57 Canadian) |
