MONTREAL – Wireless gains helped to drive up third quarter revenues and profits at BCE.
For the period ended September 30, 2015, profits of $791 million were up 12.5% from $703 million in the same period last year. BCE's net earnings attributable to common shareholders were $739 million, up 23.2% due to higher adjusted EBITDA, higher other income driven by gains from BCE's minority interest equity investments and mark-to-market gains on equity derivative contracts entered into to economically hedge future payments under its share-based compensation plans, lower severance, acquisition and other costs, as well as a decrease in non-controlling interest as a result of the privatization of Bell Aliant.
Operating revenues of $5.345 billion increased 2.9% from $5.195 billion year-over-year on service revenue growth of 2.6% and a 6.2% increase in product revenue, driven by strong organic wireless, wireline residential and media revenue growth.
BCE's Q3 adjusted EBITDA was up 3.4% to $2.187 billion on positive year-over-year growth across all Bell operating segments, reflecting increases of 8.3% at Bell Wireless, 1.1% at Bell Wireline, and 0.5% at Bell Media. BCE's consolidated adjusted EBITDA margin increased to 40.9%, from 40.7% in Q3 2014, as stronger revenue growth and operating cost savings at Bell Wireline more than offset higher upfront wireless postpaid, Internet and IPTV subscriber acquisition costs, greater wireless retention spending, higher content costs at Bell Media, and the margin impact from ongoing decline in traditional voice services.
BCE added 77,655 net new wireless postpaid customers and reported a net loss of 19,112 prepaid subscribers; 67,908 net new IPTV (Fibe TV and FibreOp TV) customers and a net loss of 41,994 satellite TV customers; and the addition of 57,888 new high-speed Internet customers. Total net NAS line losses were essentially unchanged compared to last year at 108,076.
At September 30, 2015, BCE served a total of 8,183,367 wireless customers, up 1.8% from Q3 2014; total TV subscribers of 2,700,710, up 3.9% (including 1,108,699 IPTV customers, an increase of 29.3%); 3,374,239 Internet subscribers, up 4.0%; and total NAS lines of 6,795,576, a decrease of 5.9%.
“Our strategy of leading investment in Canada's broadband networks and service innovation, combined with strong execution by the national Bell team, continues to deliver exceptional financial and operating results," said BCE and Bell president and CEO George Cope, in a statement. "The next-generation capabilities of the Fibe network attracted approximately 126,000 net new broadband TV and Internet customers in Q3 – and have now also made Bell the largest TV provider in the country.”
Bell Wireless
– Postpaid gross additions totalled 353,652 in Q3, up 6.6% over last year, reflecting increased activity in the Canadian wireless market attributable to the double cohort.
– Postpaid net additions were 77,655, down from 91,779 last year, as a result of increased customer churn reflecting the seasonally high level of promotional activity combined with the double cohort impact. Postpaid customer churn in Q3 increased 0.11 percentage points over last year to 1.31%.
– Bell Wireless postpaid customers totalled 7,284,108 at the end of Q3 2015, a 4.2% increase over last year. Total Bell Wireless customers grew 1.8% to 8,183,367.
– The percentage of postpaid subscribers with smartphones increased to 78%, compared to 75% at the end of Q3 2014. The proportion of postpaid subscribers on the LTE network reached 63% at the end of the third quarter.
– Blended ARPU increased 6.1% to $65.34, driven by a higher percentage of customers on 2-year contracts, increased data usage on the LTE network, and a greater mix of postpaid customers in the total subscriber base.
– Cost of acquisition was up 6.2% to $446 per subscriber, due mainly to a higher postpaid customer mix.
– With more customer upgrades driven by an increased number of customer contract expirations attributable to the double cohort, retention spending increased to 11.7% of wireless service revenues, up from 10.2% last year.
Bell Wireline
– Bell TV added 67,908 net new Fibe TV and FibreOp TV customers this quarter, compared to the 74,450 achieved during an exceptionally strong back-to-school period in Q3 of last year. Less new IPTV footprint expansion in 2015 also impacted the magnitude of new IPTV subscriber activations this quarter. BCE served 1,108,699 IPTV subscribers at the end of Q3, up 29.3% compared to Q3 2014.
– Satellite TV net customer losses increased to 41,994 in Q3 from 36,872 last year, due to aggressive cable conversion offers in areas where BCE does not offer IPTV service and the net loss of wholesale subscribers attributable to the rollout of IPTV service by a competing TV provider in Western Canada.
– BCE became the largest TV provider in Canada in Q3 with a combined total of 2,700,710 subscribers, up 3.9% from 2,600,418 at the end of Q3 2014.
– High-speed Internet net additions totalled 57,888 in Q3, compared to 64,254 last year. Its high-speed Internet subscriber base reached 3,374,239 at the end of Q3, up 4.0% compared to Q3 2014.
– Residential NAS net losses increased to 78,354, compared to 70,782 in Q3 2014, as a result of more aggressive competitor promotions and service bundle discounts as well as steady wireless and Internet-based technology substitution for local services.
– Business NAS net losses improved by 20.3% to 29,722 from 37,270 last year, reflecting fewer customer deactivations in both small and mid-sized markets and increased demand for connectivity service as a result of the recent 2015 federal election.
Bell Media
– Conventional TV advertising growth was supported by Bell Media's new fall season programming, the live broadcast of the Emmy Awards, and the recent federal election.
– Specialty TV advertising revenues increased over last year, reflecting record audiences for its broadcast of the 2015 FIFA Women's World Cup Soccer, the recapture of advertising dollars that moved to the broadcaster of FIFA Men's World Cup Soccer last year, growth in non-sports specialty TV services Space and Discovery, and increased Astral Out of Home revenues resulting from new contract wins and acquisitions over the past year.
– Subscriber revenues increased modestly compared to Q3 2014 with higher revenues from CraveTV and its growing suite of TV Everywhere GO products.
"Robust wireless, Internet and IPTV customer activations, combined with higher average household revenue and a disciplined cost focus, delivered strong growth in Adjusted EBITDA, Adjusted EPS and free cash flow growth in Q3, providing the foundation for sustained financial performance going forward," added BCE and Bell CFO Glen LeBlanc. "Competitively well positioned across our Wireless, Wireline and Media segments, Bell's operating momentum remains strong as we enter the fourth quarter. We are comfortably on track with our 2015 financial plan, and well positioned to continue executing our dividend growth model in 2016."
