BCE notches highest wireless growth in 18 years, but lower revenue per user
CEO Cope credits fibre investment for growing wired base, driving IPTV sales
As BCE Inc.’s wireless business continued its growth spurt despite pricing pressures in the latest quarter, management announced plans to turn up the speed of its fibre internet in preparation for more competition for wired services.
Canada’s largest communications company said Thursday it added 122,092 wireless customers on contract in the three months ended June 30, beating analysts’ expectations of 104,000 for the highest volume it’s added in 18 years.
While the Montreal-based company is on a roll when it comes to subscribers, it posted slower revenue growth per wireless user. This marks an ongoing shift in an industry that’s used to constant revenue growth from consumers who buy fancier smartphones on which they can burn through more and more mobile data.
“Clearly, the migration to the higher speed devices and the LTE advanced, a lot of that has happened in the country,” chief executive George Cope said on a conference call with analysts, adding he doesn’t anticipate average revenue per user growth rates to be as high as they once were.
Bell’s average billings per user rose 0.6 per cent, in part due to a six-year government contract for 210,000 subscribers with low monthly bills. Without this contract, which comes with the benefit of no churn rate, Cope said the increase would have been 1.7 per cent.
Analysts also attributed lower revenue growth rates to higher adoption of Bell’s low-cost brand Lucky Mobile’s cheaper plans — Cope said the strategy is to eventually migrate these customers to pricier plans — and heightened competition from players such as Freedom Mobile, Shaw Communications Inc.’s value brand that sells data at significant discounts to the Big Three.
Overall profit dipped to $755 million, down 7.2 per cent from $814 million in the same period last year. Still, Bell’s financial results were in line with Bay Street’s expectations, with overall revenue up 1.7 per cent from the same period last year to $5.79 billion and adjusted earnings up two per cent to $2.4 billion. BCE shares fells two per cent to $54.17 in Toronto.
Bell’s media division adjusted earnings fell 8.5 per cent to $205 million due to lower TV advertising revenue and higher content costs for FIFA World Cup broadcast rights and CraveTV programming.
But Bell’s wired business posted more subscriber growth than expected. It added 10,816 internet customers up from an increase of 1,407 the year prior, and 809 television customers, up from a loss of 13,337 the year prior. It lost 70,665 telephone customers, more than the 67,005 it lost last year.
Cope credited Bell’s investment in fibre for expanding its customer base and driving IPTV sales. Plus, he said, fibre infrastructure will be critical for 5G, the next-generation mobile networks expected to power real-time applications such as self-driving cars. Bell has connected 4.2 million premises to fibre thus far, and plans to have 4.5 million premises (including 88 per cent of Toronto) connected by the end of the year.
Bell announced it would increase its top internet plans to 1.5 gigabit per second speeds, the fastest available in Canada. It will roll out the service in Toronto first. The move comes after its main competitor Rogers Communications Inc. launched Ignite TV, an IPTV platform to compete against Bell’s product. Both companies bundle TV and internet connections.
Cope described it as a “highly competitive marketplace,” adding that Bell is chasing the condo market with its Alt TV product that doesn’t require a set-top box to recognize changing consumer demands.
Barclays analyst Phillip Huang said in a note to clients that the ultra-fast internet launch is timed well for the competitive back-toschool season and should help Bell differentiate its product just as Rogers pushes out its new TV product.
Moreover, Huang believes there are more benefits to come as the fibre build has reached scale.
“We believe the fibre-to-thepremises expansion program is a game-changer that will provide the company with a long-term sustainable advantage in both wireline and future wireless applications,” he said.
Desjardins analyst Maher Yaghi agreed Bell’s marketing push in Toronto was likely behind its strong TV subscriber numbers. But he also noted the overall results were weighed down by wireless pricing.
“This issue is likely to be a focus for investors for the rest of the year and into 2019 as Freedom continues its go-to-market evolution,” he said.