MONTREAL – No big money increases. No huge financial hits seems to summarize the year so far for Bell Canada Enterprises.
It’s losing local phone customers (134,000) in the second quarter of 2006, ended June 30th, and adding others in video (19,000 adds in the quarter), wireless (90,000) and high speed Internet (47,000).
However, overall growth was slower in the quarter in all segments. Bell now has 1.75 million video customers (mostly Bell ExpressVu), 5.6 million wireless customers and 2.3 million Internet customers.
BCE’s total revenues of $4.8 billion in the quarter increased 1% over the same period last year. Bell Canada’s revenues – $4,296 million – were up 0.9%, ‘based on double-digit revenue growth from services such as wireless, video and high speed Internet and Information, Communication and Technology (ICT) solutions," says the press release.
The $980 million of operating income reported by BCE for the quarter is down from $1,087 million for the same period last year, but it reflects a $50 million charge related to a previously announced workforce reduction program, the related closing of real estate facilities, transaction costs incurred to form the Bell Aliant Regional Communications Income Fund, as well as an increase in amortization and pension costs over last year, "consistent with our expectations," says the company.
BCE’s EBITDA of $1,973 million is largely attributable to a 1% increase in Bell Canada’s EBITDA to $1,857 million this quarter.
The higher overall revenues, combined with improved EBITDA performance, allowed Bell Canada’s EBITDA margin for the quarter to remain steady at 43.2%, "a major performance objective for Bell as its revenue mix evolves in an open, competitive market," says the release.
"Bell Canada made steady progress against key elements of its business plan and delivered steady financial results in the quarter even when compared to a strong second quarter last year," said Michael Sabia, president and CEO of BCE and CEO of Bell Canada. "A relentless focus on execution across the company is producing measurable results as we work to transform Bell Canada."
"Our response in an increasingly competitive market has been targeted and disciplined," he said. "We have improved our service levels, stepped up our cost reduction initiatives, and improved our profitability per customer."
Sabia pointed to 5 million fewer calls into the company’s CSRs so far this year as a key metric (more problems solved with a customer’s first call), during this morning’s conference call with financial analysts along with 90 to 99% satisfaction rates among certain groups of customers. "I don’t think Bell has performed at that level of service quality for quite a long time, if ever," said Sabia.
The CEO acknowledged the need to ramp up growth in its wireless division to catch up to its rivals (Rogers added 130,000 wireless customers in the second quarter, to pass 6.4 million subs).
"We’re clearly making progress (with wireless) and it is on a better path. But we need to accelerate that progress," he said.
That task rests with new Mobility president Wade Oosterman, who was hired yesterday. "He will have a very very positive affect on the acceleration of that business," said Sabia.
The company’s residential phone performance in the quarter looked like this:
* Revenues for the second quarter were $1,900 million, compared to $1,890 million in the same period last year, a 0.5% increase.
* Operating income of $510 million in the quarter is down 7.6% over the same period last year, due mainly to the increase in amortization and pension costs.
* At the end of the quarter, 24% of Ontario and Québec households within the Bell footprint subscribed to three or more products, compared to 20% this time last year.
The business segment generated revenue growth as a result of higher wireless subscriptions and increased sales of IP-based connectivity and ICT solutions to both enterprise and small and medium-sized business (SMB) customers:
* Revenues for the second quarter were up 2.1% to $1,530 million, compared to $1,499 million for the same period last year.
* Operating income of $199 million for the quarter is down 10% over the same period last year, mainly as a result of higher amortization and pension costs.
* SMB contributed significantly to business segment results in the quarter.
Wireless continued its strategy to shift its subscriber base towards higher value customers.
* Revenue growth of 11.2% to $857 million in the second quarter compared to $771 million in the second quarter of 2005.
* Post-paid ARPU of $63 per month, an increase of $2 compared to the same quarter in 2005, due to an improved mix of higher value subscribers as well as higher data revenues from services such as text messaging, mobile browsing, video streaming and gaming.
* Wireless EBITDA in the second quarter is up 10.2% to $367 million due to revenue growth and lower subscriber acquisition costs.
* Wireless EBITDA margin is down to 41.8%, partly attributable to the recognition in the second quarter of 2005 of deferred revenues related to unused prepaid minutes.
* 106,000 postpaid activations were offset by the cancellation of inactive pre-paid subscribers, generating 90,000 net activations in the quarter.
* Blended churn for the quarter stable at 1.6% per month, while postpaid churn has improved by 0.3% to 1.1% in the second quarter.
Bell’s video group reported strong financial performance for the quarter.
* Revenue growth of 21.2% in the second quarter.
* ARPU up $4 year over year to $54, reflecting the success of the company’s upsell strategy to premium programming packages, higher pay-per-view subscriptions, price increases implemented over the past year and continued traction of the set-top box (STB) rental program.
* EBITDA of $66 million in the quarter, up significantly from $6 million in the second quarter of 2005.
* While the 19,000 subscribers added this quarter represent a decrease from the same period last year, the total subscriber base is up 10.2% year over year.
* Churn remains low at 1% per month.
In high-speed:
* Total subscribers ended the quarter up 14.1% year over year.
* Although net additions in the quarter of 47,000 are down compared to the second quarter of 2005, subscriber growth picked up month by month throughout the quarter.
* Bell remains Canada’s leading Internet service provider.
For a report on Bell Globemedia, see the related story on Cartt.ca.
– Greg O’Brien
