MONTREAL – Gains at Bell Wireless helped to power a 74.9% jump in BCE's third quarter net earnings, the company announced Thursday.
BCE operating revenue grew 1.9% to $5,195 million in Q3, reflecting higher revenues at Bell and Bell Aliant. Adjusted EBITDA was up 2.5% to $2,115 million while adjusted EBITDA margin increased slightly to 40.7%, driven by “healthy growth” at Bell that was partly offset by a year-over-year decline at Bell Aliant.
BCE's net earnings attributable to common shareholders jumped 74.9% to $600 million year-over-year, which it said was due to a charge in Q3 2013 for the CRTC tangible benefits obligation that Bell was ordered to pay as part of the acquisition of Astral Media. Adjusted net earnings of $648 million increased 11.0% reflecting the flow-through of higher adjusted EBITDA from strong growth at Bell Wireless and a positive and growing contribution from Bell Wireline.
"Bell is focused on results, executing a strategy of TV, Internet, wireless and media innovation that's clearly winning with customers in the marketplace. This industry-leading Q3 performance proves Bell next-generation services like Fibe TV, Fibe Internet and mobile LTE have changed the game in Canadian communications," said George Cope, president and CEO of BCE Inc. and Bell Canada, in the news release.
Bell, which includes the Bell Wireless, Bell Wireline and Bell Media segments, saw Q3 operating revenues grow 1.8% to $4,607 million, reflecting a 2.2% increase in service revenues that was partly offset by a 2.7% decline in low-margin wireline product revenues. Total revenues generated by Bell's growth services (Wireless, TV, Internet/other wireline broadband, and Media) grew $134 million, a 3.7% increase over last year.
Bell adjusted EBITDA was up 3.4% to $1,798 million, driven by increases of 10.9% at Bell Wireless and 1.0% at Bell Wireline. This was moderated by an 8.5% decline at Bell Media, reflecting the impact of accelerating TV content and multi-platform rights costs. Bell's consolidated adjusted EBITDA margin increased to 39.0% in Q3 2014 from 38.4% in Q3 2013, due to higher Wireless ARPU, increasing Fibe TV scale and growth in three-product households, pricing discipline, diminishing wireline voice erosion, and lower wireline operating costs.
Bell Wireless operating revenues accelerated this quarter, increasing 7.0% to $1,598 million from $1,493 million in Q3 of 2013, the result of a greater mix of postpaid subscribers in its customer base, strong data revenue growth, and pricing discipline. Data revenue grew 23.9% this quarter due to increased smartphone penetration and usage, and higher average rate plan pricing, driving its highest blended ARPU growth rate in more than seven years. Product revenues were up 10.4% as a result of more handset upgrades and a greater number of higher-end smartphones in the sales mix.
Bell Wireless adjusted EBITDA increased 10.9% to $684 million on the strong blended ARPU growth. With high flow-through of revenue to adjusted EBITDA in Q3 2014, Bell Wireless service revenue margin expanded 1.6 percentage points to 46.6%, which the company said underscored its disciplined focus on profitable postpaid subscriber growth and customer retention spending.
Postpaid net additions totalled 90,976 compared to 102,714 last year; the percentage of postpaid subscribers with smartphones increased to 75%, compared to 69% at the end of Q3 2013; and postpaid customer churn remained stable at 1.20%; Total Bell Wireless customers grew 1.1% to 7,887,193.
Bell Wireline achieved positive service revenue growth of 0.2% in Q3, offset by a 7.7% decline in lower-margin product revenues that resulted in a 0.7% year-over-year decrease in total Wireline operating revenues to $2,465 million. Wireline residential revenue grew 3.4% in Q3, reflecting positive total net subscriber additions and higher ARPU across all consumer services.
High-speed Internet net subscriber additions totalled 49,555, up 39.1% compared to 35,634 last year, and Bell's high-speed Internet subscriber base increased 3.9% over last year to 2,253,363.
Bell Fibe TV added 61,519 net new customers in Q3 compared to 72,813 last year. The decrease reflects aggressive offers and service bundle promotions from cable competitors, more moderate footprint expansion compared to Q3 2013, and the positive impact in 2013 of early customer adoption of the Fibe wireless receiver. Bell Fibe TV subscribers totalled 642,162 at the end of Q3, up 53.2% from last year.
Satellite TV net customer losses increased to 37,025 in Q3 from 26,128 last year, the result of fewer retail activations due to aggressive offers from cable TV competitors in Bell service areas where Fibe TV is not available. Bell Satellite also had fewer wholesale activations due to the roll-out of IPTV service by competing wholesale providers in Western and Atlantic Canada.
Bell TV's subscriber base (Bell Satellite TV and Fibe TV) totalled 2,352,448 at the end of Q3, a 4.9% increase over last year.
Bell Media operating revenues were flat this quarter, increasing 0.2% to $665 million from $664 million last year. Growth in broadcast distributor subscriber fee revenues from the flow-through of market-based rate increases for Bell Media specialty TV services and higher revenues from TV Everywhere Go products was offset by decreased advertising revenues due to general market softness and a move of advertising dollars to the broadcast of 2014 FIFA World Cup Soccer.
As a result of significantly higher TV content costs for sports broadcast rights that continue to escalate for the industry as a whole, Bell Media adjusted EBITDA decreased 8.5% in Q3 to $182 million from $199 million last year.
Bell Media Radio saw growth in overall reach with 17.8 million listeners who spent 83.7 million hours tuned each week in Q3.
