TORONTO – Thanks in part to yesterday’s announcement by the federal government that it is about to remove many of the regulatory restraints on the country’s incumbent telephone companies – and to improved performances in most of its divisions, Bell Canada executives were in an upbeat mood this morning as they faced investors during the company’s annual business review.
"Bell is on an improved trajectory, one based on the successful execution of the business plan we put into place three years ago," said Michael Sabia, president and CEO of Bell Canada Enterprises and CEO of Bell Canada, in a statement. "We now have a simplified business structure, an improved revenue mix between growth and legacy products and services, and a strengthened operational capacity. The result is improved sustainable growth in revenues and operating earnings. This new business and financial model allows us to invest significantly in growth platforms and to share our progress with shareholders, providing them with improved returns now and in the future."
The company also said – to no one’s surprise – that it will not proceed with an income trust conversion but will continue on the path towards elminiating the BCE holding company, renaming the entire operation Bell Inc., with two divisions: Bell Canada and Bell Aliant.
As for 2007 financial guidance (which does not include Bell Aliant), the company said it projects revenue growth at Bell Canada will be 3% – 5%; EBITDA growth, 4% – 6%; capital intensity, 16% – 17%; free cash flow of $700 million – $900 million.
The company also boosted its dividend to shareholders by 11% to $1.46.
A target revenue growth of 3% to 5% in 2007 is expected to result from Bell’s enhanced ability to compete within growth markets (data, wireless, video) and against the maturing cable telephony sector. Growth services combined are expected to represent approximately 60% of total revenue at the end of 2007. Bell’s wireless subscriber base is expected to grow by 8% to 10% in 2007, video subscribers by 5% to 7% and high-speed Internet subscribers by 8% to 10%, said the company.
The statement did not refer to the company’s IPTV plans (other than to say its plan is still to bring fibre to the node and not to the curb, where other North American telcos have pushed to, in order to launch IPTV), but there is more to come on this later.
"With network access services (NAS) erosion stabilizing, improving growth services margins and ongoing productivity improvements, Bell expects EBITDA growth of 4% to 6% in 2007. Expected productivity improvements of approximately $450 million in 2007 should further enhance the competitive cost structure, enabling Bell to shift investment toward long-term growth and enhanced service delivery," said the release.
With expected capital intensity of 16% to 17%, Bell will continue to make disciplined capital expenditure investments in its strategic growth platforms. Roughly 75% of capex will be allocated to its strategic priorities, such as enhancing customer service, its wireless operations and the company’s advanced residential broadband network.
"Bell expects it will have no significant federal cash taxes through 2010, due to organizational simplification enabling accelerated use of Bell’s R&D tax credits," it added.
"We will execute on our priorities based on a foundation of market leadership behaviour and a balance between profitable growth and enhanced market share," said George Cope, Bell Canada’s president and COO. "With an increasingly cost-efficient structure, Bell is well positioned to leverage our unique network, product and brand assets to offer a differentiated customer service experience."
"Going forward into 2007, our competitive cost structure and state-of-the-art networks will allow us to intensify service improvements while stepping up performance and profitability of our growth engines," said Cope.
More to come.
