BCE devoted a significant chunk of its investor day this week to showcasing its growing AI expertise.Sean Kilpatrick/The Canadian Press
U.S. President Donald Trump has served up a $1.5-billion opportunity for BCE Inc. to build a domestic champion in artificial intelligence.
BCE, parent to Bell Canada, devoted a significant chunk of its investor day on Tuesday to showcasing its growing AI expertise. The pitch was aimed in part at some of the country’s largest telecom customers – governments, banks, insurers and hospitals – that face security issues that stem from the America First philosophy underlying Mr. Trump’s policies.
In 2018, during Mr. Trump’s first term, Washington passed the U.S. CLOUD Act. In a line, the legislation gave U.S. authorities the power to compel U.S. tech companies such as Amazon.com Inc. and Microsoft Corp. to provide data to them, regardless of where the data are stored.
For Canadian governments and financial institutions that need to control their data, the CLOUD Act crystallized the importance of data sovereignty. They realized their growing AI operations need to live in this country on domestically owned infrastructure.
On Tuesday, Bell showcased how it plans to use AI to help customers meet that need for sovereignty, while turning around the fortunes of an enterprise division that has been in decline for the better part of a decade.
The centrepiece of Bell’s strategy is a division called Bell AI Fabric. Think of the business as a high-tech factory and warehouse where Bell customers operate and store their AI operations. Data enter and exit the facility on Bell’s high-speed fibre networks.
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In describing an AI business with significant barriers to entry, Bell chief executive officer Mirko Bibic said customers have made it clear they want to know exactly where their data are stored and who has access.
“Bell’s strategy is to turn this jurisdictional risk into a primary competitive advantage,” analyst Maher Yaghi at Bank of Nova Scotia said in a recent report.
“They are not trying to be cheaper or have more features than Amazon Web Services,” Mr. Yaghi said. “Instead, they are positioning themselves as the trusted sovereign Canadian partner.”
The first stage of the project will see Bell build five data centres in British Columbia for approximately $300-million. The telecom has locked in all-important power supplies through a contract with BC Hydro for 500 megawatts of hydro-generated electricity. (Bell’s decision to launch in B.C. likely sent heads spinning at Vancouver-based rival Telus Corp., which is building its own AI facilities for clients.)
Rather than stretch the balance sheet and expertise by flying solo on the data centres, Bell announced partnerships on the project with AI infrastructure company Groq and developer Cohere in recent months.
In highlighting the potential of Fabric AI and two other AI-related platforms – systems management service Ateko and online security provider Bell Cyber – Mr. Bibic and his team flip the narrative around Bell’s enterprise division, which serves business customers, from decline to growth.
Bell projected its enterprise business – which includes the three AI platforms – will post revenue of $5.2-billion this year, down $100-million from performance five years ago, as customers drop legacy businesses such as landlines. Going forward, revenue from the legacy operations is expected to continue to decline by up to 2 per cent annually.
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However, Bell’s three AI-based businesses are forecast to have $700-million in revenue this year, grow at a 24-per-cent to 29-per-cent clip over the next three years and kick off 20-per-cent-plus returns on Bell’s investment. Fabric AI is projected to have $400-million in revenue by 2028, while the entire AI platform will have revenue of $1.5-billion.
Over all, revenue from Bell’s enterprise division will start growing again, at up to a 4-per-cent annual clip, while EBITDA (earnings before interest, taxes, depreciation and amortization) rises by up to 3 per cent.
The morning after Bell’s investor day – the company’s first in more than a decade – analysts at TD Securities and RBC Capital Markets put “buy” recommendations on BCE stock. Analysts Drew McReynolds and Ryland Conrad at RBC said the upgrade reflected Bell’s ”favourable evolution” into businesses with growth potential and “structural tailwinds including fibre, sovereign policies, AI and streaming/digital advertising.”
Helping Canadian companies and governments keep data safe and secure at home has the potential to change the fortunes of Bell’s enterprise telecom business.
Editor’s note: This article has been updated to correct the name the Bell AI Fabric platform.