BCE slashes dividend to fund $5-billion Ziply deal and cut debt amid economic uncertainty

Time of India

08-05-2025

BCE prioritizes US fiber growth over historic dividend stability
BCE Inc., one of Canada's largest telecom providers, has taken a dramatic step to fund its $5-billion acquisition of Ziply Fibre by cutting its annual dividend from $3.99 to $1.75 per share—a reduction of more than 56 per cent. This move, though long anticipated, marks a significant break from BCE's tradition of stable dividend growth, which had made its shares popular with income-seeking investors.
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As of Thursday, May 8 BCE's quarterly payout will drop to $0.4375 per share, ending years of consistent increases and bringing its dividend yield back to a sustainable range. Prior to the cut, the stock was yielding around 13 per cent, widely viewed as unsustainable, especially given BCE's more than $30-billion in long-term debt.
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CEO Mirko Bibic acknowledged the difficult choice in a statement:
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'There are a number of significant changes in our economic and operating environments that have occurred since the Fall of 2024 that we need to address. We have made the appropriate decision to adjust our annualized dividend to $1.75 per common share to strengthen our balance sheet while maintaining flexibility in the context of economic uncertainty.'
This change follows a period of intense pricing pressure in Canadian telecom, mounting regulatory uncertainty, and global economic instability.
PSP partnership to expand Ziply network reduces BCE's capital burden
BCE is taking on the U.S.-based Ziply Fibre to expand its footprint in the competitive North American telecom market. The company also unveiled a strategic partnership with PSP Investments, an Ottawa-based pension fund with $265-billion in assets under management.
Under the terms of the agreement, PSP will invest up to US$1.5-billion to expand Ziply's fiber network from 1.3 million to up to 8 million potential customers. BCE will retain 100 per cent ownership of Ziply's existing business and customer base, while PSP will own 51 per cent of the new customer expansion.
This setup will allow BCE to offload future capital expenditures associated with the US fiber buildout.
'Adding PSP as a majority owner in Ziply's expanded platform dramatically lowers BCE's future capital spending,' the company stated, addressing one of the key concerns among BCE shareholders.
PSP first invested in Ziply in 2019, later selling its stake to BCE in November 2024 before re-engaging through this co-investment deal.
Dividend cut signals strategic reorientation for BCE
While the dividend cut may unsettle dividend-focused investors, analysts and market watchers have long expected the move. BCE had been paying out more in dividends than it generated in free cash flow, raising sustainability questions amid a backdrop of rising interest rates and capital-intensive investments.
Mirko Bibic reinforced the company's need to refocus:
'With the current backdrop of macroeconomic and geopolitical instability, we need to stay more focused than ever on our core business and on winning customers over to Bell.'
The strategic pivot toward US fiber infrastructure via Ziply, combined with PSP's capital injection, is aimed at helping BCE deleverage its balance sheet while ensuring future growth opportunities in a saturated telecom market.
As BCE balances between dividend discipline and network expansion, its future performance will hinge on how successfully it can integrate Ziply and win market share in the competitive US fiber broadband landscape.