MONTREAL – Bell Canada Enterprises’ growth platforms – wireless, video and high speed Internet – make up almost half of the company’s revenue these days and will hit 55% by the end of the year, the company announced today.
Facing "a significant step up," in wireline customer losses, said CEO Michael Sabia in a conference call with financial analysts this morning, revenues in the first quarter, ended March 31, 2006, still rose by 2.2% to $4.7 billion.
Those losses, say company executives, reveal a competitive market that the CRTC mis-read with its recent local forbearance decision – one which Bell will appeal.
The company was hit with $88 million in severance and real estate charges, which led to a dip in operating income to $907 million in the quarter, down from $1.043 billion in Q1 2005. EBITDA was unchanged in the quarter at $1.9 billion compared to the same period last year.
The company generated $940 million in cash from operations in the quarter compared to $916 million for the same period last year. Free cash flow in the quarter improved to negative-$48 million compared to negative-$172 million during Q1 05.
"BCE’s performance in the first quarter is on track against the two-year plan we laid out on February 1 to reposition Bell Canada by ramping up our growth services, expanding bandwidth, making service a market differentiator and lowering costs," added Sabia.
BCE announced the creation of the Bell Aliant Regional Communications Income Fund in the quarter, "unlocking value for shareholders and advancing the company’s asset review program," says the press release. The company also completed the disposition of a significant portion of its interest in CGI and announced plans for the recapitalization of Telesat and a public offering of a minority stake in the second half of 2006. The reduction of its ownership in Bell Globemedia, announced in December of 2005, is scheduled for completion in the second half of 2006.
(Bell Globemedia [home of CTV, TSN, OLN, Comedy Network, The Globe and Mail and other assets] revenues for the quarter were $394 million up 10.7% from the first quarter of 2005. Advertising revenues were up 9.2% "based on the continued strength of CTV’s programming lineup," said the release. "Subscriber revenues in the first quarter increased by 11.7%, based on growth in specialty channel subscriptions at CTV and on increases in paid readership and on-line subscriptions for The Globe and Mail. Despite the increased revenue, Bell Globemedia’s operating income decreased by 30% to $45 million because of higher programming costs associated with the resumption of NHL hockey broadcasts, costs of launching MTV and higher pension expense.)
Revenues from next generation services such as wireless, video and Internet generated 47% of Bell’s total revenues in the quarter, compared to 42% one year earlier. Each of these services recorded year-over- year double-digit revenue increases and are on track to reach approximately 55% of total Bell revenues by year-end.
Bell’s Video group (primarily ExpressVu) added 12,000 subscribers to reach 1,739,000 at the end of the first quarter. Churn remains low at 0.9% per month. There were net additions in the quarter of 71,000 high speed Internet customers, bringing the company’s total to 2,266,000 at the end of Q1. At Bell Mobility, 59,000 net activations happened in the quarter, bringing total subscribers to 5.5 million, a 10% year-over-year increase.
During the quarter, Bell extended fibre-to-the-node (FTTN) roll-out to 279 neighbourhood nodes in the first quarter, for a total of 2,327. This allows for a faster Sympatico experience and the deployment of IPTV, which is coming later in 2006.
When pressed in the conference calls with analysts and media Wednesday, Bell’s president and COO George Cope steadfastly refused to say just when this year the new video service would launch or what it might look like, citing competitive concerns. CEO Sabia said the IPTV technology still needs to be "hardened" and must feature "a compelling customer experience." When that’s done, "then we will roll that out," he said.
When asked about the regulation of the industry and the recent local forbearance decision, Sabia was adamant the CRTC was dead wrong, saying: "I think it’s an extremely high probability event that we will appeal that decision," he said.
"I think ongoing regulatory change is an important priority. I do believe when the industry looks back on March of 2006, a year or two years from now or whenever, they will look back on the publication of the Telecom Policy Review report as a very important event in the evolution or reshaping of the regulatory structure of this industry in Canada and I continue to be optimistic with respect to the impact of that very high quality piece of work in shaping the public policy agenda," said Sabia.
Sabia said that the telecom industry will very soon see where the federal government’s head is at when Cabinet decides (or not) on the appeal filed last year by the major incumbents over the CRTC’s May 2005 VOIP decision. In that decision, the CRTC said voice is voice and maintained regulations on incumbent telcos while voice newcomers like cable companies have a freer rein.
The deadline for a decision is May 12 and, said Sabia: "I do regard that as a meaningful signal of government thinking, so we’ll see."
