MONTREAL — BCE’s strong performance in the wireless market in its most recent fiscal quarter helped to offset softening gains in its wireline business, enabling the company to meet analysts’ growth expectations for both its overall revenue and wireless subscriber increases.
BCE reported operating revenues of $5.7 billion in the second quarter of 2017, up 6.7% from $5.34 billion in the same quarter last year. The company’s adjusted EBITDA was $2.38 billion in Q2 2017, representing a 5% increase from its adjusted EBITDA of $2.69 billion in Q2 2016.
These results were in-line with street expectations, according to a “first look” analysis shared with Cartt.ca this morning by Canaccord Genuity Corp. analyst Aravinda Galappatthige.
“Wireless numbers were strong, not just in terms of service revenue growth and EBITDA, but all key metrics. The beat in wireless EBITDA was offset by a lighter wireline result. Subscriber trends in wireline continue to soften with IPTV and Internet net adds easing considerably. Media was a little better than expected. Recall this is the first full quarter with MTS, hence y/y (year-over-year) growth numbers are inflated. We have estimated organic numbers wherever possible,” Galappatthige wrote in the Canaccord Genuity analysis.
Bell Wireless reported revenue growth of 12.9% to $1.96 billion in the second quarter of 2017, up from $1.74 billion in Q2 2016. Service revenue increased 12.8% to $1.83 billion as a result of strong postpaid wireless subscriber base growth, higher blended average revenue per user (ARPU) and a full quarter of contribution from Bell MTS, the company said. Product revenue was up 13.9% to $131 million, the result of higher sales of premium mobile devices and more customer transactions.
“BCE turned in another solid performance in wireless with adj (adjusted) EBITDA up 10.2% to $851M (million), just ahead of our $847M (forecast), helped by strong service revenues,” Galappatthige said. “At $67.28, blended ARPU was well above our $66.25 forecast and up 4.6%. Meanwhile postpaid net adds once again beat expectations, coming in at 88.6k (88,611) vs. our 75k and well ahead of 69.8k last year. This was just below Rogers’ 93k (93,000 postpaid net adds) in Q2. Nevertheless, this further corroborates the fact that the wave of strength in wireless fundamentals across incumbents continues to have momentum.”
In terms of other Bell Wireless results, postpaid customer churn decreased 0.07 percentage points in Q2 2017 to 1.08%, reflecting the business unit’s focus on continued investments in network speed and quality, customer retention and service improvement, BCE said. Overall, Bell Wireless postpaid customers totalled 8,126,264 at June 30, 2017, an 8.8% increase over Q2 last year. Total wireless customers grew 7.5% to 8,901,291, which included a reduction of 104,833 postpaid customers in this quarter to reflect the divestiture of subscribers to Telus as part of BCE’s MTS acquisition earlier this year.
Despite slower gains in IPTV and broadband Internet subscribers, the Bell Wireline business unit saw accelerated revenue growth in Q2 2017, reporting a 4.8% increase over Q2 2016 to $3.12 billion, thanks to a 5.3% increase in service revenue to $2.88 billion. Wireline adjusted EBITDA increased 2.6% to $1.31 billion in Q2, reflecting the flow-through of strong service revenue growth as operating costs increased 6.4% to $1.82 billion, mainly reflecting the acquisitions of MTS and data centre operator Q9 Networks, higher marketing expenses to support residential subscriber acquisition and retention, and higher customer service support costs.
Bell TV added 16,427 net new Fibe TV subscribers in Q2 2017, a decrease from 35,255 Fibe TV subscribers gained last year, due to a higher number of Bell retail customers with expired pricing promotions combined with more aggressive cable service bundle offers, minimal new footprint expansion, increasing maturity of current Fibe TV markets, and accelerating over-the-top substitution, BCE said. Satellite TV net customer losses improved 10.2% to 29,764 compared to last year. At the end of Q2 2017, BCE had a total of 2,824,016 TV subscribers, up 2.7% compared to 2,750,596 at end of Q2 2016.
BCE gained 17,426 net new fibre-to-the-home (FTTH) Internet customers in Q2 2017, driven by a rapidly expanding broadband fibre footprint that grew to 3.4 million locations at the end of the quarter, up from 3.2 million at the end of Q1 2017. This was moderated by higher customer churn in areas where Bell FTTH service is not available and higher year-over-year student deactivations, resulting in total high-speed Internet net additions of 1,407 in the seasonally low second quarter, down from 7,539 in Q2 2016, BCE said. BCE’s high-speed Internet customer base totalled 3,718,677 at the end of Q2 2017, up 8.8% compared to Q2 2016.
Bell Media’s operating revenue totalled $796 million in the second quarter of 2017, up 2.2% from $779 million in Q2 2016, thanks to higher advertising and subscriber revenues, BCE said. Despite continued soft TV and radio advertising markets, Bell Media’s advertising revenue increased as a result of growth in outdoor advertising and higher year-over-year revenues from Bell Media’s English specialty entertainment channels and digital properties. Subscriber revenue increased modestly on higher revenues from CraveTV and TV Everywhere GO products.
Bell Media’s adjusted EBITDA was up 0.4% to $224 million, from $223 million in Q2 2016, due to higher year-over-year revenue that more than offset a 2.9% increase in operating costs attributable to CraveTV programming expansion, HBO and Showtime content growth, and other increased costs in the quarter.
“Bell’s strategy to lead Canadian investment and innovation in broadband networks and services continues to drive solid customer additions and financial performance across every communications business segment,” said George Cope, president and CEO of BCE and Bell Canada, in a press release announcing the company’s second quarter results.
“We achieved exceptional growth in wireless as more Canadians take advantage of the best smartphones on the fastest national wireless network, our rapidly expanding all-fibre network delivered further gains in Fibe Internet and TV additions, and Bell Media continues to set the pace in Canadian multimedia as home of the best in entertainment, news, sports and music programming,” Cope said. “We’re keeping the momentum going with continued leadership in mobile LTE network speed and capability, ongoing television advancements including the ground-breaking Alt TV (Bell’s app-based live TV streaming service), and a growing leadership position in the Internet of Things and business data centre services.”
To access BCE’s full financial results for the second quarter of 2017, click here.
