BCE (but also Telus and Rogers)

Just this week our minister Tony Clements announced that the federal government has plans to “liberalize” the telecommunications (and broadcasting ? ) industry in order to create a little more competition. Canadian rates for cell phones and fixed lines are often twice  what they are in other civilized countries ,which difference is not entirely explained by the more challenging expanse of the Canadian territory. More probable , the 3 main companies providing these services, each with a quasi geographic monopoly, have , so far at least, managed to keep their monopoly rents at the expense of the public. Slowly this is changing and , perhaps, the rate of change will accelerate! Under such circumstances BCE would be extremely vulnerable as it is most dependent on fixed lines and is(or was), by far, one of the worst managed companies in Canada, something it could only afford thanks to those same rents. Its attempt to go private at about $41/42 a few years ago became a disaster despite the fact that the company was able to , literally “walk on water” as it negotiated some of the foreign content and other issues with the relevant authorities. Here are the charts;

BCE June 2010 bce june 2010 2

On the left is the long term picture. From an perspective a multiyear A-B-C is a reasonable expectation (for a good comparison look at GE , General Electric; the comparison is not that far-fetched as BCE is the widows and orphans stock par excellence , whereas GE is the only stock left standing from the original Dow Jones Index, see below for your convenience)

ge june 2010

Remember that you can enlarge these charts by clicking on them, and then you can put them side by side if you wish. The chart on the right is the short term (3 years) chart. The stock drops pretty well precisely 50% of its value ( mainly due to the failed privatization  attempt which coincided with the second coming of the great depression. Now we have regained 50%  and in the process have closed the gap. However, this being a C wave  and therefore requiring 5 waves, it is not at all clear that we have had 5 waves, in fact  one more down seems very plausible which would fit the big picture handsomely. By the way, a drop to about $15 would still keep the stock above the long-term trendline; all this would do is erase the brief madness between 99 and 01 and, paradoxically return the stock to blue-chip status. Definitely a sell, just in case!