By Ahmad Hathout
Bell CEO Mirko Bibic said Thursday that the higher rate of customers switching to other carriers is “concerning,” but that the telco is mitigating that with bundled offers.
Last week, Rogers CEO Tony Staffieri blamed competition from aggressively priced mobile wireless offers in the market and ease of switching for its postpaid churn rate rising to 1.1 per cent in the quarter compared to the same period last year. While Staffieri said he expects the trend to continue, he added the company isn’t worried about it.
Bell’s postpaid churn rate for the first quarter that ended on March 31 was up to 1.21 per cent compared to 0.9 per cent in the same period last year. While the telco added 366,874 gross postpaid subscribers in the quarter, an increase of 34.6 per cent year-over-year, its net gain was only 4.5 per cent over that period, for a total of 45,247 subscribers in the quarter. Good enough for its best quarter in six years.
Still: “Right now, in the near-term and in the near-past, you’ve seen a customer that has been feeling the pinch from a struggling economy and is shopping for deals,” Bibic said on the call with analysts.
“You have aggressive price activity by certain of our competitors in the marketplace, so that’s encouraging consumers to switch from amongst those carriers, so those carriers are basically swapping customers, and I’m not sure anyone is particularly winning.”
Quebecor’s Freedom, for example, had been pushing in the fourth quarter and has holding in the first quarter low-cost promotional offers that have contributed to an average revenue per user that is far below its competitors. That, Quebecor’s chief said, is part of its strategy to bring customers into the fold and hold them with compelling offers.
For Bibic, the strategy for Bell is to “focus on the premium loadings and on the household bundles.
“In the long-term, we’re going to continue doing what we’re doing,” Bibic said. “So it’s the premium product, premium loading strategy, it’s the household bundling, it’s better personalization, continuing to drive a better customer experience, which has been a core focus of ours for the last four or five years. And I think it’s working.
“We have by far the best internet product in the marketplace,” he said. “Customers who are choosing fibre churn at a lower rate; customers who are on gig-plus speeds are churning at a lower rate; and customers who are buying gig-plus speeds and mobility from us are churning at a lower rate.
“So that’s how we’re going to continue to manage this.”
The company finished the quarter with a total postpaid wireless base of 9.36 million, up 3.6 per cent compared to the equivalent period. Its average monthly revenue per user for that segment was flat year-over-year at $58.
For the prepaid segment, the company lost roughly 20,000 subscribers in the quarter, 20 per cent higher year-over-year with a higher churn of 5.74 per cent over that period. The total prepaid base by quarter-end was 844,177, 2.1 per cent lower than last year.
Like Staffieri, Bibic said there is still room to grow in the market. Two of those growth funnels are from new customers to the segment and new immigrants to Canada – the average annual rate of which has increased recently.
He pointed to Bell’s distribution deals that are contributing to capturing as much of the latter market as possible. The telco has a distribution deal with Staples, Best Buy Express, and most recently with Loblaw’s launch of No Name Mobile, which runs on the Bell network.
Last year, the telco partnered with an organization called the Institute for Canadian Citizenship to provide new immigrants with special offers on its telecom services and with Air Canada to provide newcomers with complementary SIM cards.
“You are seeing the building blocks being put in place and you’re going to see us gather a more appropriate share in that segment,” Bibic said of the newcomer market.
On fibre, Bibic gave a special nod to progress in Quebec as the “star of the show for Q1.” While the company doesn’t break down its gains by province, Bibic giggled when he reflected on the number of new fibre internet subscribers the telco gained in the province in which it’s headquartered.
“Our fibre internet net adds were very, very strong in the province of Quebec,” he said. “We’ve punched through now in terms of creating a general consumer awareness that fibre is better than cable, and that comes through the promotional work that we’ve been doing – both in terms of advertising and in terms of pricing.”
The telco saw a 13.9 per cent jump in net new internet subscribers for a total gain in the quarter of 31,078. The total subscriber base grew by 5.1 per cent over the year to just about 5 million by the end of March.
Bell has been actively fighting an interim decision by the CRTC that forces it to negotiate access to both its middle- and last-mile fibre facilities. It has yet to argue its case before the Federal Court of Appeal, but has recently asked the regulator to ban the three largest carriers from access.
Bibic noted on the call that the company is aiming to pass with its fibre network 8.3 million locations by the end of next year. That projection, he said, was trimmed down because of the CRTC’s decision, which Bell has long held is anti-investment.
Elsewhere in the company, the telco reported higher net additions on the IPTV side.
The company gained 14,174 IPTV subscribers in the quarter, 30 per cent more than the first quarter last year. The total subscriber base grew to nearly 2.1 million, up 4.3 per cent over that period.
It also added 66,406 net new mobile connected device subscribers in the quarter, up 6.1 per cent from last year. The total subscriber base by quarter-end was up 11.5 per cent to just about 2.8 million.
The media segment this quarter generated $725 million, a decline of 7.1 per cent versus the comparable quarter, and down more substantially from the $822 million it made the previous quarter.
While traditional TV and radio advertising saw lower demand, advertising revenues increased by 1.6 per cent compared to the same period last year due to growth in digital advertising revenues and the Super Bowl, to which Bell has broadcasting rights.
Bell Media, like other broadcasters, has also pleaded with the CRTC to provide it with regulatory relief in the face of a downturn in the advertising market. The regulator has maintained that these issues will be resolved with the implementation of the new Broadcasting Act, which will force online streamers to contribute to the Canadian system.
Due to what it says is a tough regulatory environment, Bell said it has been shifting its investing focus on sectors that don’t see a lot of regulatory hurdles, including cloud and security.
In fact, the company is actively branding itself a “techo” more than a “telco.”
Overall, the techo’s revenues this quarter were flat at $6 billion compared to the same period last year, but net earnings were down 42 per cent over that period to $457 million.
The decline was attributed to higher severance, acquisition and other costs related mainly to workforce reduction initiatives, including 4,800 positions across the company announced in February.
The company blamed the cuts in part on “unsupportive” government policies.
