BCE Quarterly Profit Dips But Still Beats Expectations

by Gaurav Kheterpal on August 8, 2011

Things haven’t quite gone to plan for Bell this year. It had a dismal Q1 as profits declined by 29%. In June, it was forced to pay a $10 million penalty for misleading advertising claims. The company hit several roadblocks with CRTC and was finally forced to revise its Internet Billing Proposal.

Several analysts predicted a revival of fortunes was on the cards for Bell. The company posted better-than-expected adjusted earnings in the second quarter on higher revenue, thanks largely to significant contributions from its new Bell Media unit, steady growth in its enhanced Bell TV and Bell Mobile TV services, and a strong increase in its postpaid wireless subscriber base.

Though the company’s profits slipped 2.5% in the second quarter, but the results still beat expectations from analysts.

BCE posted a 13.5% revenue growth to achieve $4.36 billion for the second quarter. Net earnings stood at 590 million, compared to $605 million last year, and adjusted net earnings attributable to common shareholders of $663 million, an increase of 11.4%. The company attributes the decline in net earnings to the $164 million in costs related to the takeover of the CTV network, which was completed in April. Bell Wireline delivered EBITDA growth of 2.5% on a 4.9% year-over-year reduction in operating costs.

Bell’s overall wireless performance continues to be a mixed bag. The carrier’s revenues increased by 6.1%, with 94,309 new additions to the wireless postpaid segment thereby pushing data revenue growth by 34%.  Bell’s per activation cost shot up to C$400, up 19.4%. The average postpaid customer bill declined to C$63.18 a month, largely due to pricing pressure on voice rates. BCE added 94,000 postpaid subscribers but lost nearly 58,000 prepaid customers, thereby leading to a high churn ratio. The total gross activations were 474,900 for the second quarter of 2011, a decrease of 1.2% over the same period in 2010. Blended ARPU increased by $0.87 to $52.99, reflecting the significant increase in higher-value postpaid customers as a percentage of our wireless subscriber base.

There is little doubt that smartphone subsidies hit Bell in the second quarter. CEO George Cope believes that 2011 will likely be the peak in terms of subsidies, simply because of the competitive dynamics now in the smartphone market. He believes that subsidies may no longer be around next year as competition intensifies in Canada’s wireless sector.

Bell would take heart from the positive response to its Bell Media division where the profits climbed 5% to C$529 million as advertising revenue rebounded and added 5 cents per share in earnings. Cope says he’s seeing the success of Bell Media contributing to market share growth across all of Bell. The unit secured strong advertising revenue from all its media properties as well as strong subscriber fee revenue from its cable channel portfolio.

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Written by: Gaurav Kheterpal. www.digitcom.ca. Follow TheTelecomBlog.comby: RSS,TwitterFacebook, or YouTube.

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