MONTREAL – BCE credited growth in wireless postpaid subscribers as well as new Internet and IPTV customers for a 1.1% increase in third quarter net earnings.
The company said Thursday that net earnings and net earnings attributable to common shareholders for the period ended September 30 totalled $800 million and $752 million, up 1.1% and 1.8% respectively from $791 million and $739 million last year. These year-over-year increases were due to growth in operating revenue that drove higher adjusted EBITDA and lower severance, acquisition and other costs, partly offset by higher other expense. Adjusted net earnings dipped 0.8% to $784 million compared to $790 million in Q3 2015.
Operating revenue in Q3 was up 1.2% to $5.41 billion. Led by year-over-year increases at Bell Wireless and Bell Media and with higher residential Internet and TV revenues, total service revenue grew 1.8% to $5.02 billion. Product revenue decreased 7.0% to $383 million due to aggressive competitor promotional wireless device discounting and reduced wireline data product sales to large business customers.
BCE's adjusted EBITDA grew 2.2% to $2.24 billion as a result of increases of 5.0% at Bell Wireless, 0.6% at Bell Wireline and 2.2% at Bell Media. This drove a 0.5 percentage-point improvement in consolidated adjusted EBITDA margin to 41.4% from 40.9% in Q3 2015, reflecting continued strong wireless service revenue flow-through, steadily increasing Internet and IPTV scale that is driving growth in overall household revenue, lower total wireline operating costs, and improved business performance.
The Montreal-based company gained 107,265 net new wireless postpaid customers and reported a net loss of 7,009 prepaid subscribers; 36,253 net new Fibe TV customers and a net loss of 40,976 satellite TV customers; and the addition of 39,375 new high-speed Internet customers. NAS line net losses totalled 118,321.
At quarter end, BCE had a total of 8,380,949 wireless customers, up 2.4% year-over-year (including 7,578,334 postpaid customers, an increase of 4.0%); total TV subscribers of 2,745,873, up 1.7% (including 1,302,039 Fibe TV customers, an increase of 17.4%); total high-speed Internet subscribers of 3,458,160, up 2.5%; and total NAS lines of 6,358,362, a decrease of 6.4%.
After launching CraveTV directly to consumers with an Internet connection in January, BCE said that its subscribers to the streaming service have surpassed 1 million.
“Bell is building Canada's best networks and most innovative communications products, a strategy that continues to deliver leading growth in broadband customer additions and strong financial performance across our business segments”, said George Cope, president and CEO of BCE and Bell Canada, in a statement. “In Q3, we welcomed 183,000 new postpaid wireless, Fibe TV and broadband Internet customers and continued to build our leadership in Canadian media, resulting in our strongest increase in service revenue this year alongside ongoing growth in earnings and cash flow. In fact, Q3 was the 44th consecutive quarter in which Bell delivered year-over-year adjusted EBITDA growth.”
Bell Wireless
– Postpaid net additions were up 38.1% to 107,265 from 77,655 in Q3 2015, the result of higher gross additions and lower customer churn compared to last year;
– Bell Wireless postpaid customers totalled 7,578,334 at September 30, 2016, a 4.0% increase over last year. Total Bell Wireless customers grew 2.4% to 8,380,949;
– The percentage of postpaid subscribers with smartphones increased to 82% from 78% at Q3 last year, while the proportion of postpaid subscribers on LTE reached 78%, up from 63%;
– Blended ARPU increased 3.7% to $67.76, driven by a higher percentage of customers on 2-year plans, a greater mix of postpaid smartphone subscribers in the total subscriber base, and increased data usage on its 4G LTE and LTE-A mobile networks;
– Cost of acquisition was up 2.9% to $459 per subscriber, reflecting a higher sales mix of premium smartphones, more postpaid gross additions compared to last year, higher handset prices due to a weak Canadian dollar, and increased marketing costs related to Olympics advertising;
– Retention spending increased to 12.7% of wireless service revenues from 11.7% in Q3 2015, despite fewer customer device upgrades compared to last year. This resulted from a higher sales mix of premium smartphone handsets and increased promotional market activity.
Bell Wireline
– Bell TV added 36,253 net new IPTV customers, compared to 67,908 in Q3 2015, which reflects minimal new footprint expansion and the increasing maturity of established Fibe TV markets, fewer satellite TV customer migrations, and acquisition and bundle offers that were generally less aggressive than last year. At the end of Q3 2016, BCE served 1,302,039 IPTV subscribers, up 17.4% over Q3 last year;
– Satellite TV net customer losses improved 2.4% to 40,976 compared to last year. The total number of Bell TV subscribers increased 1.7% to 2,745,873 at the end of Q3;
– High-speed Internet net additions totalled 39,375, down from 57,888 last year. Despite a record quarter of customer activations in its FTTH footprint, total Internet net additions decreased year over year due to fewer wholesale subscriber net additions and higher deactivations reflecting aggressive student bundle offers from cable competitors. BCE's high-speed Internet customer base totalled 3,458,160 at the end of Q3, up 2.5% compared to Q3 2015;
– Residential NAS net losses increased 2.8% to 80,587, from 78,354 in Q3 2015, due to reduced pull-through from fewer year-over-year Fibe TV activations and steadily increasing wireless and Internet-based technology substitution for local services;
– Business NAS net losses increased 27.0% to 37,734, from 29,722 last year, reflecting a greater number of deactivations attributable to increased business voice line conversions to IP-based services and higher demand for access lines in Q3 2015 due to the federal election.
Bell Media
– Media revenue grew 3.5% to $716 million, up from $692 million in Q3 2015, due to higher subscriber revenues compared to last year. Strong subscriber revenue growth was driven by the national expansion of The Movie Network (TMN) in March and continued growth in CraveTV and TV Everywhere GO products;
– Advertising revenue in Q3 for conventional and specialty TV declined compared to last year due to a continuing soft advertising market that saw a shift in spending to the main broadcaster of the Rio 2016 Olympics and the non-recurrence of revenue generated in Q3 2015 from the federal election. Radio advertising also decreased, mainly as a result of a weaker economy in western Canada and a general decline in audience levels. Growth in outdoor advertising at Astral Out of Home from acquisitions and new contract wins in 2016 moderated the decline in total advertising revenues this quarter.
"We performed well across the business in Q3, posting another sound quarter of service revenue, adjusted EBITDA and margin growth, driven by exceptional wireless postpaid subscriber and financial results, a ninth consecutive quarter of positive wireline adjusted EBITDA growth, and a strong contribution to free cash flow from Bell Media," added BCE and Bell Canada CFO Glen LeBlanc. "With a focus on profitable subscriber growth, we continued to leverage our advanced broadband networks and services to deliver strong wireless and residential wireline net customer additions in a financially disciplined manner, providing the foundation for sustained financial performance going forward. With strong year-to-date results, our 2016 financial plan remains on track as we today reconfirm all our guidance targets for the year."
