MONTREAL – Despite an uptick in revenues driven by its wireless division, BCE saw its first quarter profits dragged down by a $137 million charge related to its satellite TV signal piracy lawsuit with rival Quebecor, the company said Thursday.
For the period ended March 31, 2015, net earnings attributable to common shareholders of $532 million was down 13.5% from $615 million in the same period last year. Adjusted net earnings were $705 million, up from $626 million last year, reflecting a 3.6% adjusted EBITDA increase to $2.1 billion, reduced non-controlling interest as a result of the Bell Aliant privatization, and lower income taxes.
BCE's adjusted EBITDA margin expanded 0.3% to 40.0% over last year on the high flow-through from increased wireless ARPU, strong revenue growth in Internet and TV, slower wireline voice erosion and synergies achieved by the privatization of Bell Aliant.
Operating revenues increased 2.8% to $5.24 billion from $5.10 billion year-over-year.
At quarter end, BCE had a total of 8,102,714 wireless subscribers, up 2.5% from the end of Q1 2014; total TV subscribers of 2,658,106, up 5.1% (including 990,325 IPTV customers, a year-over-year increase of 36.8%); 3,297,745 total Internet subscribers, up 4.3%; and total NAS lines of 7,017,161, a decrease of 6.0%.
The company also announced plans to invest $20 billion in capital from 2015 to the end of 2020. “Canadian consumers and businesses continue to have access to world-leading broadband technology, and Bell continues to lead with the advanced fibre and mobile networks that are driving growth in Wireless, Internet, TV and Media," said George Cope, president and CEO of BCE and Bell Canada, in a statement. "BCE expects to invest $20 billion in the nation's communications capabilities by the end of 2020, ensuring Canada remains competitive at a global level in next-generation broadband communications."
Bell Wireless
– Postpaid net additions totalled 35,373, up 3.7% compared to 34,104 last year, as higher investment in retention and service improvement resulted in fewer customer deactivations. Postpaid gross activations were essentially unchanged compared to Q1 2014;
– Bell Wireless postpaid customers totalled 7,145,420 at March 31 2015, a 4.6% increase from a year earlier. Total Bell Wireless customers grew 2.5% to 8,102,714;
– The percentage of postpaid subscribers with smartphones increased to 77% at March 31, 2015, up from 74% at the end of Q1 2014;
– Cost of acquisition increased to $452 per subscriber compared to $439 last year, reflecting the impact of a higher proportion of postpaid customers and the sale of more expensive smartphones;
– Retention spending as a percentage of wireless service revenues increased to 11.5% in Q1 2015 to $173 million, up from $141 million, or 10.2%, in the same quarter last year, driven by a higher volume of early customer handset upgrades to more expensive smartphones.
Bell Wireline
– High-speed Internet net additions increased 49.2% to 39,650 in Q1 2015, as higher Fibe and FibreOp service speeds and the pull-through of IPTV customer activations drove stronger subscriber growth and lower residential customer churn;
– IPTV added 60,863 net new customers this quarter, compared to 66,378 last year. The decrease was due mainly to less new IPTV footprint expansion compared to last year;
– Satellite TV net customer losses increased to 33,873 in Q1 2015 from 26,155 last year. This can be attributed largely to fewer new retail and wholesale activations as the roll-out of IPTV services by TV providers across Canada continues to expand;
– Residential NAS net losses in Q1 2015 improved 26.5% to 65,870 from 89,655 last year, driven by improved customer retention reflecting the pull-through impact of our IPTV service bundle offers and greater penetration of 3-product households;
– Business NAS net losses remained relatively stable at 44,069 in Q1 2015 compared to 43,085 last year. The modest increase was due mainly to higher deactivations in the large business market segment.
Bell Media
– Positive revenue growth of 0.6% in Q1 to $726 million, up from $722 million last year, reflected higher conventional TV advertising revenue generated from this year's live broadcasts of the Super Bowl and Academy Awards, as well as the recapture of advertising dollars following the shift in Q1 last year to the main broadcaster of the Sochi 2014 Winter Olympics;
– Specialty TV advertising revenues were relatively stable this quarter compared to Q1 2014, reflecting the programming strength of TSN, and increased audience levels at Space and Discovery, which offset softer performance at Bell Media's French-language specialty TV services;
– Subscriber revenues decreased compared to Q1 2014 due to the loss of revenue from the wind-down of TSN regional hockey channels for the Winnipeg Jets and Montréal Canadiens as well as Viewers Choice. This was moderated by higher revenues generated by on-demand video streaming service CraveTV, and by an expanded suite of TV Everywhere Go products.
"A strong start to the year as operating momentum across our growth services drove robust organic revenue and adjusted EBITDA growth in line with our financial guidance targets for the year," added BCE and Bell CFO Siim Vanaselja. "Bell Wireless delivered another excellent quarter of leading financial results, and Bell Wireline posted its third consecutive quarter of positive year-over-year EBITDA growth. We also saw sequential improvement in Bell Media's EBITDA this quarter with positive revenue growth from our strong programming line-up and TV ratings. Our reliable cash flow profile, underpinned by a strong investment-grade balance sheet, supports our ongoing strategic capital programs, as well as BCE's increased common share dividend for 2015 announced on February 5."
