BCE’S COPE SAYS FIBRE INVESTMENT WILL PAY BIG DIVIDENDS IN 5G ERA.
Bell has pumped billions into fibre networks
BCE Inc. started the year with solid performance thanks to ongoing growth in its wireless division, but chief executive George Cope believes the billions Bell has invested into fibre networks will mean big payoffs in years to come.
“Our position with fibre for 5G and the (Internet of Things) world is going to be the envy of the world,” Cope said in a in a presentation to shareholders at Canada’s largest telecommunications company’s annual general meeting in Toronto on Thursday.
Bell’s “significant focus” on broadband networks — the wireless and fixed networks that power Canadian’s insatiable appetite for data — aligns with the industry’s shift toward the internet as the backbone of communications and their race to provide the fastest networks.
Cope’s comments came after Bell reported a $701 million profit in the three months ended Mar. 31, up 3.1 per cent from the same period last year. Its financial results were just shy of analysts’ estimates with adjusted earnings stable at $0.80 compared to expectations of $0.82, but it beat expectations on wireless by adding 68,487 customers on contract — the best in the quarter since 2011.
While Bell’s stock price has been a “little rough” this year due to interest rates — it’s down about 11 per cent to $53.20 at close Thursday from $59.79 at the start of 2018 — Cope said the company has “never been better positioned.”
Bell is spending $4 billion annually for a total of $20 billion over five years to improve its broadband networks, Cope said, describing broadband as “the future of this organization.”
Investments in fibre-tothe-home connections that provide 1 gigabit per second internet speeds will fuel an increasing array of connected devices, Cope said. When he started at Bell a decade ago, homes typically had three connected devices compared to about 12 today. Soon, he expects homes to have 30 each.
Fibre will also be critical for next-generation 5G wireless networks, as it will be used as backhaul to connect a larger number of cell sites for a speed advantage, he said. Bell will add about 10,000 sites this year (many are small cells that fit on street infrastructure like telephone poles).
“It’s an incredible strategic position. We are well, well ahead of our No. 1 one competitor in that way,” Cope told reporters after the event.
For this quarter, at least, Bell didn’t match the wireless results of its top competitor Rogers Communications Inc., which surprised investors by adding 95,000 wireless subscribers. Shaw Communications Inc.’s Freedom Mobile also topped Bell by adding 93,500 customers in the three months ended Feb. 28, although that includes the busy holiday shopping period so isn’t directly comparable.
But that didn’t seem to faze Cope given the “incredible” growth in the overall wireless market.
“A healthy market is good for all investors,” Cope said to reporters.
Bell added 19,647 internet subscribers as it expanded its fibre network in Toronto, a $1.5-billion project that Cope said will connect 87 per cent of single family units in Canada’s largest city by the end of 2018. It will spend another $1 billion connecting homes across the Greater Toronto Area, Cope said.
The growth in internet came despite aggressive bundle promotions from cable competitors. Rogers “really stepped up its retention efforts” in March, Barclays analyst Phillip Huang noted.
Bell started mass marketing its 1-Gbps speed service last month with ads aimed at millennials such as, “the 6ix just got cranked up to 10.” It’s also trying to attract the younger market of condo dwellers, who are less inclined to subscribe to traditional television packages, with Alt TV, a smaller TV package that is delivered over the internet without a set-top box.
The competition for customers has come amidst increased scrutiny of sales practices. In a recent small claims court case, a judge ruled that Bell’s behaviour was “unacceptable” when it increased prices on a customer after verbally agreeing to a 24-month figure.
Cope would not comment on the court case, but said pricing reflects a highly competitive market where the product usage is increasingly 35 per cent annually.
In its media division, Bell said its online streaming service CraveTV grew in the quarter. Expanded programming, however, resulted in higher costs and a 3 per cent drop in media division margins.
Television growth also slowed due to higher penetration and customers’ preference for over-the-top services like Netflix Inc. Bell added 13,573 internet-protocol television customers, a drop from 22,402 gained in the same period last year. It lost 26,054 satellite customers and 57,533 land line customers.
Bell also saw positive effects from its acquisition of MTS in Manitoba and its win of a federal government contract for 230,000 wireless subscribers from Rogers.
Analysts described the quarter as steady with financial performance in line with expectations.