Bell Mobility Cellular Prpsd Sr Debs Rtd BBB+ by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/1/97-- Standard & Poor's today assigned its triple-'B'-plus rating to Bell Mobility Cellular Inc.'s (BMC) proposed C$150 million senior unsecured debentures due June 2, 2008.

The company's triple-'B'-plus corporate credit and senior unsecured debt ratings were affirmed.

The ratings reflect BMC's strong market positions in Ontario and Quebec, the continuing growth of the Canadian wireless industry, and the company's conservative operating and financial strategies. BMC's link to BCE Inc., Canada's largest telecommunications company, is an additional positive consideration. These factors are partly offset by the company's level of planned infrastructure investments and the threat of competition from new market entrants.

BMC is one of two companies licensed to provide cellular telephone service in Ontario and Quebec and, serving in excess of one million subscribers, BMC enjoys a market share of 54%. BMC also benefits from its affiliation with Mobility Canada. BMC's parent company, BCE Mobile Communications Inc., is the principal shareholder of Mobility Canada, which brings together wireless companies across Canada. Mobility Canada allows its shareholders to provide a national seamless wireless service. The shareholders of Mobility Canada collectively serve 3.7 million subscribers and have a market share in excess of 60%. Reflecting the ongoing growth of the wireless industry within Canada, BMC continues to experience rapid customer and revenue growth. The company's subscriber base increased 25% in the period from June 30, 1996 to June 30, 1997. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins also continue to improve, reflecting the benefits derived from economies of scale as the company's subscriber base grows. In the first half of 1997, cellular EBITDA margins grew to 49%. The company also benefits from low levels of churn amounting to 1.3% per month in the first half of 1997, which continues to be a key area of focus given the high costs of customer acquisition and growing competition.

However, the threat of competition is growing within the Canadian wireless industry. While Industry Canada awarded 10MHz personal communications services (PCS) licenses to the incumbent cellular service providers in December 1995, two new competitors each received 30 MHz PCS licenses. The emergence of new competition may ultimately lead to reduced pricing, while churn and marketing spending may face upward pressure. However, the arrival of new market entrants also can be expected to accelerate any increases in the annual rate of growth in penetration, reflecting growing consumer awareness arising from increased marketing. At the same time and in common with other industry participants, BMC is making significant investments in its infrastructure to deploy digital technology in its network and prepare for the introduction of PCS. As such, capital spending is expected to remain high in the near term. In the first half of 1997, capital expenditure grew to C$207 million from C$135 million a year earlier. Nevertheless, BMC remains well capitalized, with total debt at approximately 1.6 times the last twelve months' EBITDA.

OUTLOOK: STABLE

Revenues and cash flows are expected to increase as penetration levels rise and enhanced services are introduced to BMC's growing subscriber base. Planned capital spending is likely to preclude BMC from generating significant levels of free operating cash flow in the immediate future. -- CreditWire

CONTACT: Edward Lawrence, Toronto, 416/202-6003