MONTREAL – Growth in BCE’s wireless, wireline and media divisions helped to drive up first quarter profits by 30%, the company said Thursday.
For the period ended March 31, 2016, net earnings attributable to common shareholders of $707 million was up 32.9% from $532 million in the same period last year, due to lower severance, acquisition and other costs, higher adjusted EBITDA, and higher other income. The increase was partly offset by higher income taxes and increased depreciation and amortization expense attributable to a higher capital asset base in service. Adjusted net earnings increased 4.1% to $734 million compared to $705 million in Q1 2015.
Operating revenue was up 0.6% in Q1 to $5.27 billion, reflecting a 1.3% year-over-year increase in total service revenues driven by solid wireless, wireline residential and media growth. Product revenue declined 8.0% as a result of aggressive competitor promotional handset offers and reduced spending by business customers on wireline data products.
BCE's adjusted EBITDA grew 3.3% to $2.16 billion on positive year-over-year growth across all Bell operating segments: 6.9% at Bell Wireless, 1.3% at Bell Wireline and 2.8% at Bell Media. BCE's consolidated adjusted EBITDA margin increased to 41.0% from 40.0% year-over-year, reflecting strong wireless average revenue per user (ARPU) flow-through, increasing IPTV and Internet scale that is driving growth in three-product households and residential revenue, and disciplined cost management.
Overall in Q1 2016, BCE gained 25,805 net new wireless postpaid customers and reported a net loss of 35,673 prepaid subscribers; 47,740 net new Fibe TV customers and a net loss of 37,741 Satellite TV customers; and the addition of 19,783 new high-speed Internet customers. NAS line net losses totalled 107,632.
At quarter end, BCE had a total of 8,235,963 wireless subscribers, up 1.6% from the end of Q1 2015 (including 7,401,221 postpaid customers, an increase of 3.6%); total TV subscribers of 2,748,495, up 3.4% (including 1,230,531 Fibe TV customers, an increase of 24.3%); total high-speed Internet subscribers of 3,411,246, up 3.4%; and total NAS lines of 6,565,508, a decrease of 6.4%. The high-speed Internet and business NAS subscriber bases this quarter included beginning-of-year adjustments that reduced the number of subscribers by 21,684 and 15,526 respectively, to align Bell Aliant's reporting practices with Bell's.
After launching its CraveTV streaming service directly to consumers with an Internet connection in January, BCE said that it gained more than 100,000 subscribers within the first 90 days of the launch.
The company added that Bell plans to invest approximately $1 billion in broadband fibre deployment in 2016, extending service capability for its Bell Gigabit Fibe Internet service to approximately 3 million homes and businesses in Ontario, Quebec and Atlantic Canada by the end of the year.
“The Bell strategy of investment in the most advanced networks and product innovations, combined with a focus on operational efficiency at every level, is clearly delivering the better broadband customer experience," said George Cope, president and CEO of BCE and Bell Canada, in a statement. "The Bell team's strong operational execution, focus on growing broadband usage and effective cost management across our wireless, wireline and media segments has now delivered 42 consecutive quarters of uninterrupted year-over-year adjusted EBITDA growth."
Bell Wireless
– Postpaid net additions were 25,805 compared to 35,373 in Q1 of last year due to a 1.3% decrease in gross additions to 275,415, the result of reduced market activity particularly in the first half of the quarter;
– Bell Wireless postpaid customers totalled 7,401,221 at the end of Q1 2016, a 3.6% increase over last year. Total Bell Wireless customers grew 1.6% to 8,235,963;
– The percentage of postpaid subscribers with smartphones increased to 82% from 77% at the end of Q1 2015. The proportion of postpaid subscribers on LTE reached 73%, up from 52% a year earlier;
– Blended ARPU increased 3.6% to $63.02, driven by a higher percentage of customers on two-year contracts, increased data usage on its 4G LTE networks, and a greater mix of smartphone postpaid customers in the total subscriber base;
– Cost of acquisition increased 9.3% to $494 per subscriber, reflecting an increased postpaid customer mix and higher handset prices due to a weak Canadian dollar;
– Retention spending increased to 11.8% of wireless service revenues from 11.5% in Q1 2015 despite fewer year-over-year customer upgrades. This was due mainly to a higher sales mix of premium smartphones and a higher level of promotional sales activity.
Bell Wireline
– Bell TV added 47,740 net new Fibe TV customers compared to 60,863 in Q1 2015, reflecting less new footprint expansion. At the end of Q1 2016, BCE served 1,230,531 Fibe TV subscribers, up 24.3% compared to Q1 2015;
– Satellite TV net customer losses increased from 33,873 in Q1 last year to 37,741, due to aggressive cable conversion offers in areas where BCE does not offer IPTV and higher wholesale customer deactivations;
– Total TV subscribers for all BCE TV services increased 3.4% to 2,748,495 at the end of Q1;
– High-speed Internet net additions totalled 19,783, compared to 39,650 in Q1 2015. Despite the positive impact of Bell Fibe Internet's speed and reliability on customer churn, total Internet net additions decreased due primarily to fewer wholesale net customer additions;
– Residential NAS net losses increased 2.4% to 67,428 from 65,870 last year, the result of ongoing wireless and IP technology substitution and aggressive bundle promotions by cable competitors;
– Business NAS net losses were down 8.8% to 40,204 from 44,069 in Q1 2015. Reduced small business and large enterprise customer deactivations resulted from improved customer retention, fewer competitive losses and decreased business voice line conversion to IP-based services.
Bell Media
– Media revenue grew 2.1% to $741 million, up from $726 million in Q1 last year. Strong subscriber revenue growth reflected the national expansion of The Movie Network (TMN), favourable sports specialty TV rate adjustments with a broadcast distributor, and higher revenues from CraveTV and TV Everywhere GO products;
– Advertising revenue for conventional and specialty TV was impacted by reduced year-over-year spending by some key customer segments and higher viewership of the World Juniors in Q1 2015 when the event was held in Canada. Radio advertising also declined due mainly to a weaker economy in western Canada. Growth at Astral Out of Home moderated the decline in total advertising revenue in Q1.
"Highlighted by continued excellent wireless performance, disciplined and steady wireline growth and leading media results that collectively delivered a strong contribution to consolidated adjusted EBITDA, net earnings and free cash flow growth, our first-quarter results represent a solid start to the year," added BCE and Bell Canada CFO Glen LeBlanc. "BCE's focus on subscriber profitability and cost control, together with dependable free cash flow generation and an investment-grade balance sheet, enables us to make significant capital investments to sustain future growth, while also supporting BCE's increased common share dividend for 2016 announced on February 4. With strong first-quarter results in line with plan, no fundamental changes in our overall outlook, and a business that is competitively well-positioned across all services and in all markets, BCE today reconfirms our financial guidance for 2016."
