MONTREAL – "This was another quarter of real progress capping off a productive year," said Michael Sabia, CEO of Bell Canada, in the press release announcing its 2007 financial results. "We had good earnings and free cash flow growth and with 5.4% EBITDA growth at Bell we had our best improvement since 2004 in operating profitability in the quarter and for the year as a whole."
(The company did not host an analyst or press conference call, as had been its custom, likely due to the fact any such call would have bogged down on queries about the privatization deal some reports say is in jeopardy, because of the state of the markets.)
"Our wireline segment showed a significant improvement because of across the board productivity gains and a successful change in trajectory in our enterprise business," Sabia added. "In addition, we had a strong quarter for wireless gross activations in Q4. Going forward, we need to improve our high-speed Internet additions and accelerate the turnaround in wireless through improved churn and mix."
"In the quarter, we were pleased with customer response to our wireless offers and our hand-set line up. This enabled us to build on our progress in Q3 and to gain further market traction," said George Cope, president and COO of Bell Canada – and CEO in waiting. "We were particularly encouraged by the high take rate of data capable handsets this quarter, recognizing that the high level of these activations and upgrades had an impact on our EBITDA growth."
Bell Mobility had 510,000 gross activations this quarter, a 16.7% increase compared to the same period last year and its best ever result. Net activations for the quarter were 195,000, or 8% lower than last year due mainly to higher prepaid churn. Wireless network revenues increased by 6.6% and blended ARPU increased by $2 to $55. Wireless EBITDA increased by 5.4%.
"In our wireline business, EBITDA grew by 5.4% as cost containment across all units, our strategy to move away from low margin equipment sales, and lower pension costs, offset the erosion of higher margin legacy services,” Cope said.
Customer winbacks contributed to a year-over-year improvement in residential line (NAS) losses for both the quarter and for the full year. For business NAS, the anticipated decision by a major wholesale customer to start to move its lines onto its own network contributed to a decrease of 80,000 NAS this quarter. There will be an opening period adjustment to the business NAS balance for Q1 2008 to recognize the further migration of this customer’s remaining 273,000 lines. The migration of these wholesale lines does not have a material revenue impact given the nature of the contract with this customer, said the Bell release.
Residential NAS declined by 117,000 this quarter, an improvement over the decline of 149,000 experienced last year reflecting the continuing growth in customer winbacks and the positive customer response to Bell’s Home Phone packages and service bundles. For the full year, the decline in residential NAS levels improved with 511,000 losses in 2007 compared with 535,000 in 2006.
Bell’s operating revenues grew to $3.815 billion, a 1.7% increase compared to Q4 of last year as revenue growth in wireless, video and data more than offset declines in local and access and long distance service revenues, reads the press release. The service mix continues to improve with revenues from growth services contributing 59% of Bell’s revenue at the end of 2007. For the full year, Bell’s operating revenues grew by 1.4% to $14,743 million. Bell’s strategy of not pursuing low margin equipment sales reduced revenues for the year by an estimated $200 million.
Bell’s EBITDA grew by 5.4% compared to Q4 2006 to $1,333 million due to cost containment, ARPU growth and lower pension costs, leading to an improvement in Bell’s EBITDA margin of 1.2 percentage points to 34.9% this quarter. With cost containment of $189 million in the quarter, totalling $532 million for the year, the company exceeded its productivity targets. For the full year, Bell’s EBITDA grew by 4.1% to $5,496 million. Bell’s operating income was $538 million, or 0.7% higher than last year, as higher EBITDA and lower amortization expenses were almost entirely offset by higher restructuring and other charges. For the full year, Bell’s operating income grew 4.7% to $2,609 million, adds the release.
Bell invested $765 million of capital this quarter and $2,420 million in 2007 with a continued focus on improving the customer experience and expanding the range of services available to customers through expenditures in areas such as Bell’s high-speed Evolution, Data Optimized (EVDO) wireless network and Fibre-to-the-node (FTTN). At year end, Bell’s high-speed EVDO Rev A network covered approximately 75% of the Canadian population and Bell had deployed 4,828 neighbourhood nodes through its FTTN program.
BCE’s cash from operating activities increased by 13.2% to $1,720 million this quarter due to higher EBITDA, interest income and tax refunds. For the full year, cash from operating activities increased by 6.3% to $5,704 million. Free cash flow(3) increased significantly to $393 million this quarter compared to $200 million in the same period last year due to higher cash from operating activities. For the full year, free cash flow grew by 30% to $891 million due to the growth experienced in Q4.
