‘Fibre footprint’ helps BCE beat profit forecast
BCE Inc.’s profit edged up in the latest quarter as it added more subscribers than expected in both its wireless and wireline divisions, with chief executive officer George Cope crediting the boost in internet and television subscribers to investment in high-speed fibre connections and a new, cheaper TV-streaming product.
Canada’s largest telecommunications company, which is in the midst of an expensive fibre-to-thehome (FTTH) network build in the key Toronto market, reported Thursday a profit of $770 million in the three months ended Sept. 30, up 2.4 per cent from $752 million in the same period last year.
While wireless remained a key growth driver — Bell added 117,182 postpaid subscribers, the highest in its third quarter in five years and above analysts’ predictions of 111,000 — that was largely in-line with expectations as consumers’ ever-increasing demand for data continues to boost Canada’s entire wireless industry.
Cope expects the strength to continue into the holiday season given the new Apple Inc. iPhones and watch. “We love having new product for the fourth quarter,” he said on a conference call with analysts.
He would not comment on the volume of iPhone 8 and 8+ devices sold, saying “it’s only fair” to leave that to Apple.
On Rogers Communications Inc. quarterly call, its CEO Joe Natale said demand for the iPhone 8 was “anemic” as consumers wait for the iPhone X.
But the real surprise came from Bell’s wireline division, which beat Bay Street’s expectations. It added 44,424 internet customers and 36,399 IPTV customers, topping consensus estimates of 29,000 and 26,000 respectively. Including its satellite TV customers, it added 1,738 TV subscribers overall.
It even lost fewer telephone subscribers than expected, losing 57,381 residential land lines compared to 80,587 in the same period last year.
“Our fibre footprint obviously (is) beginning to provide the returns we want to see,” Cope said.
Bell expects to have enough homes connected in Canada’s largest city to start a mass advertising campaign by early 2018. This will increase competitive intensity, as the upgraded connections enable speeds that Bell’s top rival Rogers Communications Inc. already offers across its entire footprint.
Cope also pointed to the success of Bell’s relatively new Alt TV service, a cheaper offering that allows customers to watch TV over the internet via an app and doesn’t require a set-top box or installation.
“It allows us to focus specifically in the condo marketplace where there may have been cord cutters,” Cope said. While Alt TV didn’t make up the majority of its new TV subscribers, Cope said its low-cost nature is margin neutral.
Bell’s new low-cost internet product also led to more customer additions, Cope said. Bell started selling internet under its flanker brand Virgin, a strategy Rogers also employs with its lower-cost brand Fido. There’s “clearly a consumer market for differentiated brands,” Cope said, adding this is better for Bell than if consumers choose wholesale brands such as TekSavvy or Distributel.
Bell’s overall revenue rose five per cent to $5.68 billion and adjusted earnings rose 5.8 per cent to $2.36 billion. Earnings per share dropped one cent to 86 cents per share due to higher shares outstanding from the Bell MTS acquisition.