MONTREAL – Despite an uptick in fourth quarter revenues, BCE saw net earnings fall 8.5%, the company reported Thursday.
For the period ended December 30, 2015, net earnings attributable to common shareholders were $496 million, down from $542 million year-over-year. The company attributed the drop to higher severance, acquisition and other costs, which totalled $152 million in Q4 2015, of which $120 million related mainly to workforce restructuring initiatives. Excluding the impact of severance, acquisition and other costs, net losses on investments, and early debt redemption costs, adjusted net earnings increased 0.8% to $615 million.
Operating revenue increased 1.4% in the period to $5.603 billion, led by results at Bell Wireless and Bell Media that drove service revenue growth of 1.6%. This was partly offset by a 1.5% year-over-year decline at Bell Wireline, due to the impact of continued slow economic growth and competitive pricing pressures on service and product revenues in Bell Business Markets.
BCE's adjusted EBITDA in Q4 grew 2.5% to $2.1 billion, driven by increases of 6.8% at Bell Wireless and 1.5% at Bell Wireline. Bell Media adjusted EBITDA declined 4.2% due to higher content costs. Higher wireless adjusted EBITDA, the result of profitable postpaid growth and strong service revenue flow-through, and lower wireline operating costs contributed to a 0.4 percentage-point improvement in BCE's consolidated adjusted EBITDA margin to 37.0%, up from 36.6% in Q4 2014.
The company gained 91,308 net new wireless postpaid customers and reported a net loss of 28,844 prepaid subscribers; 74,092 net new Fibe TV customers and a net loss of 36,306 Satellite TV customers; and the addition of 38,908 new high-speed Internet customers. NAS line net losses totalled 106,910.
At the end of 2015, BCE served a total of 8,245,831 wireless customers, up 1.6% from Q4 2014 (including 7,375,416 postpaid customers, an increase of 3.7%); total TV subscribers of 2,738,496, up 3.6% (including 1,182,791 Fibe TV customers, an increase of 26.7%); total high-speed Internet subscribers of 3,413,147, up 3.5%; and total NAS lines of 6,688,666, a decrease of 6.2%.
“The Bell team's exceptional performance in Q4 and throughout 2015 underscores the enduring strength of our strategy to lead Canada's broadband revolution with unmatched innovation in the growth services of communications: Wireless, TV, Internet and Media”, said BCE and Bell president and CEO George Cope, in a statement. "We saw strong performance across our business segments in a highly competitive fourth quarter. Backed by the fastest networks, the most innovative communications products and a clear lead in content across all screens, the Bell team is delivering for both customers and shareholders."
Bell Wireless
– Postpaid gross additions totalled 387,696 in Q4, up 1.4% over the year before, reflecting increased market activity driven by aggressive holiday promotions and an increased number of off-contract customers. For full-year 2015, postpaid gross additions totalled 1,338,141, up 3.6% from 1,291,207 in 2014.
– Postpaid net additions were 91,308 in Q4, down from 118,120 the year before, the result of increased customer churn attributable to the seasonally high level of promotional activity combined with a greater number of off-contract postpaid subscribers. Similarly, full-year 2015 postpaid net additions were 265,369 compared to 311,954 in 2014. Postpaid customer churn in Q4 and full-year 2015 increased 0.09 and 0.06 percentage points respectively over 2014 to 1.38% and 1.28%.
– Bell Wireless postpaid customers totalled 7,375,416 at the end of 2015, a 3.7% increase over 2014. Total Bell Wireless customers grew 1.6% to 8,245,831.
– The percentage of postpaid subscribers with smartphones increased to 78%, compared to 76% at the end of 2014. The proportion of postpaid subscribers on its LTE network reached 68% at the end 2015, up from 47% a year earlier.
– Blended ARPU increased 4.4% to $63.67 in Q4, 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. For full-year 2015, blended ARPU increased 5.3% to $63.09.
– Cost of acquisition was up 6.1% to $525 per subscriber in Q4, due mainly to a higher postpaid customer mix and richer handset offers. For full-year 2015, COA increased 5.9% to $467.
– Retention spending increased to 14.3% of wireless service revenues from 13.5% in 2014, reflecting more customer upgrades, driven by an increased number of customer contract expirations as a result of the double cohort, and a higher mix of premium smartphones. Retention spending for full-year 2015 was 12.6% of wireless service revenues.
Bell Wireline
– Bell TV added 74,092 net new Fibe TV customers in Q4, compared to 76,074 in 2014, reflecting less new footprint expansion in 2015. Similarly, full-year 2015 Fibe TV net additions were 253,329 compared to 276,034 in 2014. At the end of 2015, BCE served 1,182,791 Fibe TV subscribers, up 26.7% over the previous year.
– Satellite TV net customer losses increased to 36,306 in Q4 from 33,884 the year before, due mainly to the net loss of wholesale subscribers attributable to the rollout of IPTV service by a competing TV provider in Western Canada. For full-year 2015, Satellite TV net customer losses were 145,949 compared to 122,674 in 2014.
– BCE said it was the fastest growing broadband TV provider in Canada in 2015 with a combined total of 2,738,496 subscribers, up 3.6% from 2,642,608 at the end of 2014.
– High-speed Internet net additions totalled 38,908 this quarter, compared to 52,010 in Q4 2014. Despite 12% higher retail residential additions in Q4, reflecting stronger growth in Québec and Ontario, total Internet net additions were down compared to a year earlier, the result of lower wholesale net customer additions. With full-year 2015 Internet net additions of 155,052 compared to 160,390 in the previous year, BCE recorded a high-speed Internet subscriber base of 3,413,147 at the end of 2015, up 3.5% over 2014.
– Residential NAS net losses in Q4 were essentially unchanged at 58,081, compared to 57,232 in Q4 2014, even with sustained aggressive competitor promotions, service bundle discounts and ongoing wireless and Internet-based technology substitution for local services. For full-year 2015, residential NAS net losses improved 9.0% to 278,124 from 305,729 in 2014, benefitting from the pull-through impact of Fibe TV service bundle offers and greater penetration of 3-product households.
– Business NAS net losses in Q4 were 48,829 compared to 35,773 the year before. The increase was due to higher deactivations attributable to cost efficiency initiatives by large enterprise customers and disconnections resulting from the end of the federal election. For full-year 2015, business NAS net losses were relatively stable at 160,310 compared to 158,988 in 2014.
Bell Media
– Advertising revenues increased compared to Q4 2014 on conventional TV growth driven by the federal election and strong performance of Bell Media's new primetime shows for the Fall season. Growth at Astral Out of Home, attributable to new contract wins and acquisitions over the past year, also contributed to higher total advertising revenues.
– Subscriber revenues this quarter were up over the year before, reflecting steady growth from CraveTV and its TV Everywhere GO products, as well as favourable rate adjustments with a number of TV broadcast distributors.
"Having achieved all financial targets in 2015, with substantial growth in adjusted net earnings and free cash flow driven by healthy year-over-year increases in revenue and adjusted EBITDA, Bell's operating momentum and financial foundation going into 2016 are very strong," added BCE and Bell CFO Glen LeBlanc. "Our 2016 financial targets reflect continued projected wireless profitability, a second consecutive year of positive wireline adjusted EBITDA growth, an improving financial profile for Bell Media, and an attractive balance sheet supported by good liquidity and an investment-grade credit profile."
BCE is projecting revenue growth in the range of 1% – 3 % in 2016, and adjusted EBITDA growth of 2% – 4%, both of which are in line with its 2015 targets.
