MONTREAL – Bell Canada’s sassy buck-toothed duo, Frank and Gordon the beavers, may have been euthanized this week, but they sure worked hard the last quarter.
Bell Canada Enterprises (which is still a public company for a bit longer) reported its second quarter results today and had its best wireless quarter in two and a half years. And, it is dumping its beavers in favor of a new marketing campaign which is set to take flight during the Olympics, which begin this weekend.
Bell Mobility’s net adds were up 32%, its best postpaid gain since Q4 2005. Total additions in the quarter ended June 30th were 111,000. Q2 was also the third consecutive quarter of fewer year-over-year residential line losses while Bell revenues rose 1.7% to $3.7 billion. EBITDA growth was 3.6% before unusual items and free cash flow of $410 million was up 73% as compared to Q2 2007. Cash from operations was $1.534 billion, up 9%.
"This was a quarter of strong progress against our strategic imperatives, especially the significant acceleration of our wireless business," said George Cope, president and CEO of BCE and Bell Canada, in a press release. "Wireless saw improvements in financial and operating metrics in the quarter, including the highest level of postpaid net activations since the fourth quarter of 2005, significant growth in total net activations, improvements in churn, COA and postpaid ARPU, and double-digit growth in operating revenue and EBITDA."
“The Bell Wireless segment achieved 111,000 postpaid net activations compared to 43,000 in Q2 2007. Total net activations this quarter grew to 83,000, or by 31.7%. Postpaid churn improved to 1.1% and blended churn improved to 1.6% from 1.4% and 1.8% respectively last year. Cost of acquisition decreased by 5.7% to $417 per gross activation. Total Bell Wireless operating revenues increased by 10.7% and Bell Wireless EBITDA(2) grew by 10.8%. Postpaid ARPU increased $1 to $66,” he said. Bell Mobility now has 6.33 million customers, up 7.6% over last year
"Wireline momentum continued with improvements in residential local lines losses for a third consecutive quarter – 34,000 fewer NAS losses than in the same quarter last year – continued solid financial results, and an ongoing acceleration of our turnaround in the business market. We were disappointed with our high-speed Internet business this quarter, but we are taking action to improve performance in the second half of the year," Cope said.
Residential NAS declined by 125,000 this quarter, as compared to 159,000 in the second quarter of last year.
Growth in customer winbacks and the success of The Bell Better Home marketing program led to year-over-year improvement in the rate of residential local line (NAS) losses, said the press release. Total NAS declined by 10.7% over the last twelve months. However, normalized for the previously announced contract termination with a major wholesale customer (Shaw) and a beginning-of-year adjustment to our residential NAS base following a review of historical records, total NAS declined by 6.2%.
Bell’s operating revenues grew by 1.7% to $3,700 million this quarter as growth in wireless, video, and data revenues more than offset declines in local and access, long distance, and equipment and other revenues. Revenues from Bell’s growth services portfolio of wireless, video, high-speed Internet and other services, such as ICT solutions, grew by 8.3%.
High-speed Internet customer connections decreased by 1,000 this quarter due to weaker sales in retail channels and lower overall market demand due to the relatively high broadband Internet penetration rate in Canada, reports the company. At the end of Q2 2008, Bell had 2,013,000 high-speed Internet customer connections, an increase of 3.4% compared to the end of Q2 2007.
Video revenues increased by 10.6% to $356 million this quarter due largely to an ARPU increase of $6 to $64. Video EBITDA was $47 million this quarter, or 30.9% lower than last year, reflecting the adverse effect from the judicial decision related to CRTC video broadcast licence fees (the Part II decision).
Total video subscribers increased by 8,000, an increase of 15,000 net additions compared to the same quarter last year, to reach 1,831,000. Video subscriber churn improved by 0.2 percentage points to 1.1%.
Bell’s overall EBITDA growth of 0.4% was adversely affected by two unusual items: a Federal Court of Appeal decision related to CRTC broadcast licence fees in the amount of $31 million for periods dating back to September 2006, and a writedown of assets in the amount of $14 million associated with the termination of Sympatico’s PC equipment sales program.
Excluding these items, Bell’s EBITDA grew by 3.6% reflecting higher wireless revenues and lower subscriber acquisition costs and the solid financial performance of the Video and Enterprise units, says the company release. Bell’s operating income was $682 million, or 0.6% lower than last year as higher operating revenues and lower net benefit plans cost were more than offset by the two unusual charges and higher depreciation and amortization expense. Adjusted for the two unusual charges that affected EBITDA, Bell’s operating income grew by 6.0%.
Bell invested $583 million of capital this quarter, or 8.6% more than Q2 2007. Underscoring Bell’s commitment to its strategic imperatives including to accelerate wireless and to invest in broadband networks and services, capital expenditures focused on enhancing the wireless network and the continuing expansion of the Fibre-to-the-node (FTTN) program.
