BCE Inc. Freezes Dividend Growth as It Expands to the U.S. with $3.6 Billion Ziply Fiber Acquisition

The Deal That Could Reshape BCE’s Future

BCE’s acquisition of Ziply Fiber marks its first major expansion into the U.S. broadband market. Ziply Fiber currently serves 1.3 million locations across Washington, Oregon, Idaho, and Montana. With plans to expand to more than 3 million locations over the next four years, BCE is positioning itself as a player in the highly competitive U.S. fiber-optic market, taking on companies like Comcast and AT&T.

The announcement comes less than two months after BCE sold its stake in Maple Leaf Sports and Entertainment (MLSE) to Rogers Communications Inc. for C$4.7 billion, a move aimed at reducing debt levels. However, BCE has now shifted plans and intends to allocate the majority of that cash—expected at C$4.2 billion—to finance the Ziply Fiber purchase.

Dividend Freeze After 16 Years of Growth

One of the most unexpected elements of BCE’s announcement was its decision to pause dividend growth through 2025. BCE has raised its dividend annually for 16 years, making it a cornerstone of the company’s investment appeal, particularly for income-focused investors. However, BCE is halting this trend to prioritize capital allocation for the Ziply Fiber acquisition and fund future fiber infrastructure growth.

Additionally, BCE plans to issue new equity through its Dividend Reinvestment Plan (DRIP) by offering shares at a discount. This approach allows BCE to raise capital while rewarding existing shareholders who opt to reinvest dividends directly into the company.

Investor Reaction and Stock Performance

Following the announcement, BCE shares dropped 9.7% in Toronto to close at C$40.47, the lowest price since May 2012, marking a more than four-year stock decline. While shareholders were initially unsettled by the dividend freeze, CEO Mirko Bibic emphasized that the acquisition decision was a strategic one aimed at securing BCE’s long-term fiber growth in a high-demand market.

“We’re managing this for the long term,” Bibic explained in an interview, underscoring that the expansion of BCE’s fiber infrastructure aligns with the company’s growth strategy. He also pointed out that analysts had anticipated a dividend pause given the capital intensity of fiber expansion and the MLSE sale’s focus on strengthening BCE’s financial position.

Strategic Timing of the Ziply Fiber Deal

Bibic revealed that discussions with Ziply Fiber’s management, which operates under Searchlight Capital in partnership with three Canadian pension funds, only began in late September—shortly after the MLSE transaction was made public. This swift progression underscores BCE’s focus on taking advantage of high-growth opportunities in the fiber-optic sector.

By acquiring Ziply Fiber, BCE gains access to an established infrastructure network in the Pacific Northwest with significant growth potential, a strategic asset as fiber-optic broadband demand surges in North America.

What’s Next for BCE?

As BCE pushes into the U.S. market, the company is betting that a larger fiber network footprint will enhance its competitive advantage and open up new revenue streams. By pausing its dividend growth and utilizing a DRIP discount, BCE signals a shift toward reinvesting cash into its infrastructure—a move that may pay off in the long run for growth-minded investors looking beyond the traditional telecom dividend model.

BCE’s focus on fiber expansion is an ambitious strategy aimed at driving sustainable growth, despite initial investor unease.