MONTREAL – BCE Inc. said its profits slipped 2.5% in the second quarter, largely due to costs from its CTV purchase, but the results still beat expectations from analysts.
It reported that net profit fell to $590 million, or 76 Canadian cents a share, from $605 million, or 80 cents a share, a year earlier. Revenue grew 11.6% to $4.96 billion. Analysts on average had expected Bell to earn revenue of $4.9 billion. BCE says its "comfortably on track" to meet its 2011 guidance.
In May, BCE raised its full-year guidance to reflect its purchase of broadcaster CTV, which is part of the new Bell Media unit. For its Bell Canada division, it projected revenue growth of 9%-11% and EBITDA growth of 8%-10% this year.
BCE says the boost in revenues came from its new Bell Media unit, steady growth in its enhanced Bell TV and Bell Mobile TV services, strong increases in postpaid wireless subscribers and smartphone penetration, and ongoing reductions in local landline losses.
"Bell is seeing double-digit revenue and EBITDA growth thanks to the strong contribution of Bell Media, steady growth in our enhanced Bell TV and Bell Mobile TV services, impressive increases in postpaid wireless subscribers and smartphone penetration, and ongoing reductions in local landline losses,” said George Cope, President and CEO of Bell Canada and BCE.
However its Bell Canada wireless operation continues to face intense competition. Bell posted a 8.2% drop in net new high-margin postpaid customers, as an increasing number of existing customers moved other providers. BCE’s postpaid customer base also generated less average revenue in the quarter.
Bell Wireless had revenue growth of 6.1%, wireless postpaid net additions of 94,309, accelerating smartphone penetration and robust data revenue growth of 34%. But EBITDA only increased 0.9% as the competitive environment forced it to spend more to retain existing and acquire new customers. This includes the higher subsidy costs associated with Bell’s efforts to capture an increasing portion of smartphone customers.
"I do believe 2011 will likely be the peak in terms of subsidies" because of changes in the smartphone market, Cope said. For example he remarked how in recent months android smartphones, which carry relatively lower subsidies, were the fastest growing product for Bell.
Cope acknowledged that the company needs to also further focus on western Canada, where its strong economy generates higher average revenue per wireless customer.
Bell Wireline delivered EBITDA growth of 2.5% on a 4.9% year-over-year reduction in operating costs. TV revenue growth of 6.0% and residential Internet revenue growth of 6.6% were the result of TV and Internet subscriber base growth. This was driven by the ongoing rollout of Bell Fibe TV, now available to more than 1.1 million households in Toronto and Montréal and Fibe Internet services.
“Savings in wireline operating costs amount to $160 million so far this year. Bell’s strong operational and marketplace execution is keeping us comfortably on track to meet all our financial targets for 2011,” added Cope.
