MONTREAL – While Q4 revenue at BCE remained virtually stagnant over the past year at nearly $5.161 billion, missing analyst estimates, it reported net earnings spiked by 45.7% from a year earlier in the quarter ended Dec. 31, rising to $708 million from $486 million. BCE also provided an update that it was still pursuing its purchase of Astral Media and expects that its new $3.38-billion proposal will address the CRTC’s concern that the original bid was “not a good deal for Canadians.”
Adjusted net earnings attributable to common shareholders were $506 million, an increase of 4.5% compared to Q4 2011. Bell Canada's parent also raised its quarterly dividend to $0.5825 a share, from $0.5675 a share.
BCE's cash flows from operating activities were $863 million in Q4, up 3.0% compared to $838 million last year, due to higher net earnings. Free cash flow this quarter, before a $750 million voluntary pension plan contribution, was $605 million, up 7.3% from $564 million in Q4 2011 on higher EBITDA year over year.
Bell operating revenues were $4.577 billion in Q4 2012, compared to $4.576 billion in Q4 2011, as higher year-over-year revenues driven by the “steadily growing contribution of Bell's growth services, including wireless, TV, Internet and media, were offset by the continued decline in Bell wireline's traditional voice and data services.” It also noted that Satellite TV net additions were negative in the quarter, reflecting aggressive customer conversion offers from cable competitors, the rollout of IPTV by competing service providers, and Bell customer migrations to Fibe TV.
"Bell's Q4 results capped off a solid year of strong operating performance led by Bell Wireless, Bell Media, and the accelerating success of Bell Fibe TV as we continued to expand our Fibe footprint in Montréal and Toronto and launched the country's largest fibre to the home rollout in Québec City," said George Cope, President and CEO of Bell and BCE Inc.
"Bell's investment in Canada's best broadband networks, products and content is delivering new choices for consumers and enhanced competition in TV, wireless and media. Bell has tremendous momentum in the marketplace, propelled by the fast expansion of Fibe TV, strong smartphone growth, and the unmatched innovation and investment in Canadian news, sports and entertainment content by Bell Media."
Advertising revenue was down approximately 1%, as the “impact of the NHL Lockout across Bell Media's specialty sports properties was largely offset by stronger advertising demand and shifting demand to its conventional and non-sports specialty TV channels.”
The outside date for the closing of the Bell/Astral deal has been extended to June 1, 2013 with Astral and Bell each having a further right to postpone it to July 31, 2013, if required, to obtain necessary regulatory approvals. Details of the new Astral-Bell proposal will be made available by the CRTC when it launches its public consultation on the application. The transaction remains subject to CRTC and Competition Bureau approval. A break-up fee of $150 million is payable by BCE to Astral should the transaction not close before the outside date for regulatory reasons.
Bell EBITDA was $1.582 billion in Q4, up 2.2%, reflecting strong double-digit EBITDA growth of 13.8% at Bell Wireless and 32.3% at Bell Media. Bell wireline's EBITDA decline of 6.6% in the quarter benefitted from a $35 million year-over-year reduction in wireline operating costs, which contributed to a 0.8 percentage-point improvement in Bell's consolidated EBITDA margin of 34.6%. For the full 2012 year, Bell operating revenues and Bell EBITDA were up 3.0% and 4.4%, respectively, at $17.642 billion and $6.591 billion. For 2011, Bell operating revenues and EBITDA reflect nine months of Bell Media revenues and EBITDA, as Bell completed its acquisition of CTV and created Bell Media on April 1, 2011.
Bell says it invested $779 million in new capital in Q4, bringing total capital expenditures to $2.923 billion in 2012, up 8.9% from the previous year. The investments support its continued deployment of broadband fibre to homes, neighbourhoods and businesses in Québec and Ontario and expansion of the Fibe TV service footprint, enhancement of customer service systems, the ongoing rollout of the 4G LTE mobile network in markets across Canada, and the addition of new Bell and The Source stores across Canada.
"Growth services such as Fibe, 4G LTE, and next-generation business services like cloud computing increasingly dominate our operating mix. At the same time, the Bell team is delivering significant improvements in customer service while reducing our operating costs. The strong EBITDA, cash flow and net earnings that result from the focused execution of our strategy enable us to continue to deliver on our commitment to return value to our shareholders," added Cope.
Bell says it’s dedicated to being recognized by “customers as Canada's leading communications company.” It intends to achieve this by executing on its six strategic imperatives: Invest in Broadband Networks and Services, Accelerate Wireless, Leverage Wireline Momentum, Expand Media Leadership, Improve Customer Service, and Achieve a Competitive Cost Structure.
"We enjoyed a successful 2012, surpassing our full-year guidance target for EBITDA which fuelled substantial earnings and strong free cash flow growth," said Siim Vanaselja, Chief Financial Officer for Bell and BCE. "Bell's operating momentum and financial foundation going into 2013 are strong. Our 2013 financial targets are underpinned by continued robust growth across Bell's growth businesses and improving wireline performance. This is expected to drive solid growth in underlying earnings and a 5% or better year-over-year increase in free cash flow. Our liquidity position and attractive credit profile fully supports our planned accelerated investment in wireline and wireless broadband network platforms and higher dividend for 2013."
Bell Wireless
Bell Wireless operating revenues increased 6.8% to $1.458 billion in Q4 2012. Service revenue grew 7.4% to $1.312 billion on strong postpaid subscriber growth and higher blended ARPU, fuelled by mobile data revenue growth of 28% this quarter. Despite average handset prices that were generally lower because of competitive holiday pricing, product revenues increased 2.3% to $132 million, reflecting higher sales of more expensive smartphones. Bell Wireless EBITDA increased 13.8% to $479 million this quarter, delivering a 2 percentage-point expansion in EBITDA service margin to 36.5%. This was achieved even with a $26 million year-over-year increase in combined subscriber acquisition costs and retention spending, which contributed to operating cost growth of 3.7% in the quarter.
For the full year, Bell Wireless operating revenues increased 6.5% to $5.573 billion with service revenues growing 6.5% to $5.081 million and product revenues up 3.8% to $438 million. EBITDA grew 15.7% to $2,110 million as service margin increased 3.3 percentage points to 41.5%, reflecting the “significant service revenue flow-through of superior postpaid subscriber gains achieved throughout the year and well-controlled operating costs that increased 1.6%, in aggregate, over the previous year.”
• Postpaid net additions in Q4 increased to 143,834, up 9% compared to 131,986 last year. Smartphone users represented 64% of total postpaid subscribers at the end of 2012, compared to 48% one year earlier.
• Postpaid gross activations were 394,706 in Q4, up 1.4% compared to 389,317 last year, led by strong sales of Apple iPhones and leading Android devices during the holiday period. Activations in western Canada continued to increase as Bell added more points of distribution.
• Prepaid net losses decreased to 38,829 in Q4, from 74,100 last year. Prepaid gross activations decreased 17.6% to 101,024, due to Bell's continued focus on acquiring postpaid customers and aggressive acquisition offers from competitors targeted at lower-ARPU subscribers.
• With postpaid additions of 143,834 and prepaid losses of 38,829, the Bell Wireless client base reached 7,681,032 at the end of the quarter, an increase of 3.4% over last year.
• Postpaid customer churn improved to 1.3% from 1.5% in Q4 2011, reflecting the benefits of investment in customer service and retention. Prepaid churn improved to 3.5% this quarter from 4.2% in Q4 2011, due to fewer customer deactivations year over year.
• Blended ARPU increased 4.1% in the quarter to $56.72, driven mainly by a greater number of postpaid customers in our subscriber base, increased postpaid market share in the higher-ARPU western Canada market, and more smartphone customers taking advantage of mobile data services. Similarly, for full-year 2012, blended ARPU increased 4.2% to $55.82.
• Cost of acquisition increased 6.7% this quarter to $480 per gross activation, reflecting a greater number of smartphone activations and higher handset subsidies consistent with the wider availability of the Apple iPhone 5 and competitive holiday pricing.
• Retention spending in the quarter increased to 12% of wireless service revenues, up from 11.4% in Q4 2011, as we matched competitors' aggressive handset offers.
Bell Wireline
Bell Wireline operating revenues decreased 3.7% to $2.608 billion in Q4, as competitive and wireless substitution pressures continued to impact traditional voice services. Reduced spending by business customers on wireline data products and information and communications technology (ICT) services, reflecting continued slow economic growth, as well as the re-pricing of connectivity services also contributed to the year-over-year decline in Bell Wireline revenue this quarter.
Although Bell Wireline EBITDA decreased 6.6% this quarter to $931 million, margins were in line with expectations at 35.7%, reflecting a $35 million, or 2.0%, reduction in operating costs over last year from ongoing spending controls and productivity gains achieved in our call centres and field service operations. For the full 2012 year, wireline operating revenues decreased 3.8% to $10,220 million, while wireline EBITDA was down 5.7% to $3,920 million. Wireline EBITDA margin has held relatively stable at 38.4%, down 0.7 percentage points year over year, the result of a $166 million, or 2.6%, improvement in operating costs that effectively absorbed expenses related to Fibe TV growth and softer business markets results.
• Bell Fibe TV added 48,234 net new customers compared to 27,967 in the fourth quarter of 2011. The Bell Fibe TV footprint expanded by 500,000 households in Q4 to reach 3.3 million at the end of 2012. Satellite TV net additions were negative in the quarter, reflecting aggressive customer conversion offers from cable competitors, the rollout of IPTV by competing service providers, and Bell customer migrations to Fibe TV. Consequently, total TV net additions were 19,218, compared to 27,702 in Q4 2011.
• The Bell TV subscriber base totalled 2,155,983 at the end of Q4, a year-over-year increase of 2.5%.
• Bell added 7,143 new net high-speed Internet customers in Q4, compared to 1,091 customers in Q4 2011. The improvement reflects the pull-through effect of Fibe TV service bundles, enhanced promotional offers, and continued broadband fibre network expansion, all of which contributed to lower residential and business customer churn year over year. Bell had 2,115,243 high-speed Internet customers at the end of 2012, a 0.1% year-over-year increase.
• Wireline data revenue was $1,448 million in the quarter, compared to $1,450 million in Q4 2011, as higher TV revenue driven by strong Fibe TV subscriber growth was offset by lower data product and ICT sales.
• Residential NAS net losses in Q4 2012 decreased to 87,029, a 3.0% improvement over the previous year, as Bell continued to reduce customer turnover as the Fibe TV service area expands. Wireless substitution, which continued to steadily increase, moderated the overall decrease in residential NAS. Business access losses increased to 36,641 from 13,947 in Q4 2011, reflecting higher wholesale customer deactivations and a continued lack of new business growth.
• Local and access revenues declined 7.6% to $635 million. Total NAS at the end of the quarter was 5,644,939, a 7.5% decline year over year, attributable to increased competition and a reduction in access lines and digital circuits as customers continue to adopt wireless and IP-based technologies.
• Long distance revenues declined 12.8% to $191 million. The year-over-year decline reflected fewer minutes of use by residential and business customers resulting from NAS line losses and technology substitution, ongoing rate pressures, and decreased sales of global long distance minutes.
• Equipment and other revenue decreased 6.3% to $255 million due mainly to lower year-over-year legacy wireline telecommunications equipment sales and promotional offers on TV set-top boxes.
Bell Media
Bell Media reported operating revenue of $591 million in Q4 2012, up 2.2% from last year. The increase was due to higher subscriber fee revenue, which grew approximately 7% year over year, driven by market-based rates charged to broadcast distributors through renegotiated agreements for certain Bell Media specialty TV services. Advertising revenue decreased slightly from last year, down approximately 1%, as the impact of the NHL Lockout across Bell Media's specialty sports properties was largely offset by stronger advertising demand and shifting demand to its conventional and non-sports specialty TV channels.
Bell Media's EBITDA was up 32.3% in Q4 2012 to $172 million, reflecting the flow-through of higher subscriber fee revenue and 6.5% lower operating costs due mainly to lower content and production costs as a result of the NHL lockout. For the full 2012 year, operating revenue and EBITDA were up 41.6% and 68.0%, respectively, to $2,183 million and $561 million.
• CTV completed the fall season with 13 of the Top 20 programs, up 2 from the same period last year, and with 19% more viewers in primetime than Canada's other 2 leading private networks combined.
• TSN and RDS drew 5.8 million viewers for The Grey Cup, up 27% from the prior year, with the half-time show attracting an average audience of 6.4 million viewers.
• RDS announced a new multiplatform docu-reality series, 24CH, offering Habs fans unprecedented access to their team on television, Internet, superphones and tablets, in time for the first game of the season.
• CTV's non-sports specialty services continued to post strong audience growth with 8 of the Top 20 TV programs and all 5 of the Top 5 fall series, led by double-digit increases for The Comedy Network and Bravo!
• Bell Media Radio launched its new web platform. There are 13 stations currently on the new technology, including Toronto's CHUMFM.com, the largest radio website.
• The Discovery Channel app reached 200,000 downloads. Social media campaigns for High Tech Toys Week and End of the World specials increased Daily Planet Facebook likes by 50%, while retweets increased 9-fold.
• Bell Media rebranded its Sympatico portal in English Canada as TheLoop.ca, a new brand destination that enhances and strengthens the most successful content on Sympatico with more original video hosted by distinctive Bell Media personalities.
• Cirque du Soleil and Bell Media announced the closing of the transaction to create Cirque du Soleil Média, a new joint venture to develop Québec-based media content for television, film, digital, and gaming platforms.
Bell Aliant
Bell Aliant's revenues decreased 1.0% to $694 million in Q4 2012, due to lower local and access, and long distance revenues, partly offset by higher data and wireless revenues. Bell Aliant's EBITDA decreased 2.2% to $314 million this quarter, due to lower revenues as operating costs were unchanged year over year. Similarly, for the full 2012 year, Bell Aliant revenues and EBITDA declined 0.5% and 1.9%, respectively, to $2,761 million and $1,292 million.
