BCE Takeover in Jeopordy?

BCE shares closed down almost 4% yesterday at $34.95 as some investors begin to have doubts whether the Ontario Teacher's Pension $52B takeover of Bell Canada will be completed.

Contributing to the uncertainty, was Blackstone Group LP's suggestion that a $6.4B deal to buy credit-card payment processor Alliance Data Systems Corp. might fall through.

In addition, amid the global credit crunch, due in large part to the US sub-prime mortgage fiasco - a wonderful example of greed and corruption - investors are concerned the $32B in debt funding necessary for the Teacher's to complete the deal, could evaporate.

In my view, the sooner the deal falls apart, the better for everyone involved. At a time, when Bell should be cannibalizing their own commoditized services with innovative offerings and expanding into their competitors' territories, they are nearly paralyzed as they focus on strict cost controls while employees wonder about their future.

Even if the deal closes successfully, there will likely be a lengthy period of adjustment as the new owners take control. Bell Canada needs to invest and innovate and I doubt that the new owners will be in an investing mood given that they are going in with a $32B debt obligation.

On the positive side, it's a great opportunity for TELUS, Rogers and Allstream.

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