MONTREAL – Lower restructuring costs combined with growth in BCE’s wireless and wireline divisions helped boost fourth quarter profits by 32.5%, the company said Thursday.
For the period ended December 30, 2016, net earnings attributable to common shareholders jumped 32.5% to $657 million from $496 million year-over-year. The company attributed the increase to growth in operating revenue that drove higher adjusted EBITDA, as well as decreased severance, acquisition and other costs and lower other expense, partly offset by increased amortization expense and higher income taxes.
Severance, acquisition and other costs were lower this quarter due mainly to higher wireline and media workforce restructuring costs in Q4 2015, the company continued. Other expense improved as a result of lower year-over-year asset impairment charges related to Bell Media properties. Excluding the impact of severance, acquisition and other costs, net losses on investments, and early debt redemption costs, adjusted net earnings increased 8.5% to $667 million compared to $615 million in the same period last year.
Operating revenue increased 1.8% in Q4 to $5.70 billion, reflecting a 2.3% year-over-year increase in service revenue driven by solid wireless, residential services and media top-line growth. Product revenue decreased 3.2% to $533 million, the result of aggressive competitor discounting and promotions for mobile handsets and lower wireline product sales to business customers.
BCE's adjusted EBITDA in Q4 increased 2.3% to $2.12 billion, driven by year-over-year increases of 5.1% at Bell Wireless, 0.9% at Bell Wireline and 2.2% at Bell Media. The company’s consolidated adjusted EBITDA margin increased modestly to 37.2% this quarter from 37.0% last year, reflecting the flow-through of higher wireless average revenue per user (ARPU), increasing broadband Internet and IPTV scale and lower wireline operating costs.
The Montreal-based telco gained 112,393 net new wireless postpaid customers this quarter and reported a net loss of 24,470 prepaid subscribers; 35,905 net new Fibe TV customers and a net loss of 36,869 satellite TV customers; and the addition of 18,402 net new high-speed Internet customers. NAS line net losses totalled 100,630.
At the end of 2016, BCE served a total of 8,468,872 wireless customers, up 2.7% from Q4 2015 (including 7,690,727 postpaid customers, an increase of 4.3%); total TV subscribers of 2,744,909, up 0.2% (including 1,337,944 Fibe TV customers, an increase of 13.1%); total high-speed Internet subscribers of 3,476,562, up 1.9%; and total NAS lines of 6,257,732, a decrease of 6.4%.
"Our Q4 performance was a strong finish to a year in which the Bell team consistently executed our broadband leadership strategy, delivering value for our customers, communities and shareholders alike”, said BCE and Bell president and CEO George Cope, in a statement. "Unceasing network and service innovation is key to Bell's growing leadership in broadband communications, reflected in Q4 with a gain of more than 54,000 Fibe TV and Internet net customer additions, and approximately 240,000 in 2016; more than 112,000 new postpaid wireless customers in the quarter and 315,000 in 2016, increases of 23% and 19% respectively; and the accelerating growth of Bell Media's CraveTV streaming service."
Bell Wireless
– Postpaid gross additions totalled 434,008, up 11.9% over Q4 2015, reflecting increased market activity driven by richer promotions throughout the holiday period compared to last year and overall strong sales execution across its channels. For full-year 2016, postpaid gross additions increased 5.2% to 1,408,030 from 1,338,141 in 2015.
– Postpaid net additions grew 23.1% to 112,393, from 91,308 in Q4 2015, the result of higher gross additions. For the full year 2016, postpaid net additions were up 18.8% to 315,311 from 265,369 in 2015, driven by higher gross additions and lower customer churn.
– Bell Wireless postpaid customers totalled 7,690,727 at the end of 2016, a 4.3% increase over 2015. Total wireless customers grew 2.7% to 8,468,872.
– The percentage of postpaid subscribers with smartphones increased to 83% from 78% at the end of 2015, while the proportion of postpaid subscribers on LTE reached 81%, up from 68% a year earlier.
– Blended ARPU increased 4.7% to $66.69 in Q4, driven by a higher postpaid subscriber mix, a greater percentage of subscribers on higher-rate two-year plans, increased data usage on its 4G LTE and LTE-A mobile networks, and pricing discipline. For full-year 2016, blended ARPU increased 3.8% to $65.46.
– Cost of acquisition (COA) was up 3.0% to $541 per subscriber in Q4, due to richer handset promotions in line with competitor offers, a higher sales mix of premium smartphones, more postpaid gross additions compared to last year, and higher handset costs due to the weak Canadian dollar. For full-year 2016, COA increased 5.8% to $494.
– Retention spending increased to 16.4% of wireless service revenue from 14.3% in Q4 2015, reflecting a higher mix of premium handset upgrades and more aggressive promotional market activity. Retention spending for full-year 2016 was 13.2% of total wireless service revenue.
Bell Wireline
– Bell TV added 35,905 net new Fibe TV customers, compared to 74,092 in Q4 2015, reflecting limited new footprint expansion combined with the increasing maturity of established Fibe TV markets, fewer satellite TV customer migrations, and promotional bundle offers that were generally less rich than the year before. Fibe TV net additions totalled 155,153 in 2016 compared to 253,329 the year before. At the end of 2016, BCE served 1,337,944 Fibe TV subscribers, up 13.1% year over year.
– Satellite TV net customer losses were relatively stable this quarter at 36,869 compared to 36,306 in Q4 2015. For full-year 2016, Satellite TV net customer losses increased 1.9% to 148,740 from 145,949 in 2015, due to the cable competitors targeted acquisition offers in areas where IPTV service is not available. At the end of 2016, BCE had a combined total of 2,744,909 TV subscribers, compared to 2,738,496 at the end of 2015.
– High-speed Internet net additions totalled 18,402 this quarter, compared to 38,908 in Q4 2015. Despite strong year-over-year growth in new customer activations within its fibre-to-the-home (FTTH) service footprint, total Internet net additions decreased as a result of higher residential customer churn due to more aggressive promotional bundle offers from the cable competitors and a higher volume of Bell customers with expired promotions as well as fewer wholesale subscriber activations.
– Full-year 2016 Internet net additions of 85,099 were down from 155,052 in 2015. BCE’s high-speed Internet subscriber base was 3,476,562 at the end of 2016, up 1.9% over 2015.
– Total NAS access lines at the end of 2016 were 6,257,732, or 6.4% lower than the year before, resulting in local and access revenue declines in Q4 and full-year 2016 of 6.1% and 5.6%, respectively, to $753 million and $3,089 million. Long distance revenue was down 12.7% to $178 million this quarter and 10.8% to $741 million in 2016 due to fewer NAS access lines and lower sales of international long distance minutes compared to 2015.
Bell Media
– Higher subscriber revenue driven by the national expansion of The Movie Network (TMN) in March 2016 and continued growth in CraveTV and TV Everywhere GO streaming products increased media operating revenue by 3.6% to $845 million, up from $816 million in Q4 2015.
– Advertising revenue in Q4 was essentially unchanged compared to last year as declines in conventional TV, mainly reflecting the non-recurrence of revenue generated in Q4 2015 from the federal election and a soft radio advertising market, were offset by growth in outdoor advertising at Astral Out of Home (OOH) from acquisitions and new contract wins in 2016, and higher year-over-year revenues from Bell Media's specialty entertainment and news channel services.
"Again in 2016, BCE achieved all of our financial guidance targets”, added BCE and Bell CFO Glen LeBlanc. "Going into 2017, BCE's operations and financial foundation are strong. Our healthy balance sheet is underpinned by investment-grade credit metrics and good liquidity, together with a defined benefit pension plan that is very well funded and attractively positioned to benefit from a rising interest rate environment."
BCE increased its annual dividend by 5.1% to $2.87. For 2017, it is projecting revenue growth in the range of 1% – 2%, and adjusted EBITDA growth of 1.5% – 2.5%.
The full details of BCE’s Q4 2016 financial results are available here.
