Canada's BCE expects to save C$1.5 billion in costs by 2028

BCE (BCE.TO) has significantly increased its 2028 cost-saving target by 50% to C$1.5 billion, projecting approximately 15% compounded annual free cash flow growth and 2-4% revenue growth from 2025-2028 under a new three-year strategic plan. This initiative, unveiled at its first investor day in over a decade, is driven by substantial investments in fiber infrastructure, North American expansion including the C$5 billion Ziply Fiber acquisition, and the integration of AI to streamline operations and fuel future growth.

Analysis

BCE (BCE.TO) has significantly upgraded its financial outlook, raising its 2028 cost-saving target by 50% to C$1.5 billion following its first investor day in over a decade. The company projects robust compounded annual free cash flow growth of approximately 15% after lease liabilities from 2025 to 2028. This strategic plan also anticipates compounded annual revenue growth between 2% and 4% over the same period.

These ambitious targets are underpinned by a multi-faceted strategy focused on operational simplification and North American expansion. BCE has invested nearly C$24 billion since 2020 to upgrade its high-speed fiber and wireless networks, including a C$5 billion acquisition of U.S. internet provider Ziply Fiber to expand its fiber footprint. The company plans to launch new internet services in British Columbia and Alberta, intensifying competition with Rogers Communications and Telus Corp.

Further cost efficiencies are expected beyond 2029 as BCE transitions from legacy copper networks to lower-maintenance fiber technologies. A key component of its future growth strategy involves doubling down on artificial intelligence, with plans for a national AI compute project and integration of AI into customer service and network operations. This technological pivot aims to streamline operations and enhance service delivery.

Key Decisions for Investors

• Investors should consider BCE's updated guidance, which includes a 50% increase in cost-saving targets and projected 15% FCF growth, as a strong indicator of management's confidence and operational efficiency.
• Monitor the execution of BCE's C$24 billion network investment and the integration of the C$5 billion Ziply Fiber acquisition, as these are critical for achieving the 2-4% revenue growth targets and expanding market share against competitors.
• Evaluate the long-term impact of BCE's AI integration strategy and its transition from legacy infrastructure, which could provide sustained operational leverage and competitive advantage beyond the initial three-year plan.