COVID dents profits at giants BCE and Telus
But both firms maintain their dividends
BCE Inc. and Telus Corp. both posted declines in first- quarter net income and pulled their financial guidance for the remainder of 2020 on Thursday, citing a lack of clarity due to the COVID-19 pandemic.
Bell reported operating revenue of $5.6 billion in the quarter ended March 31, a year-over-year decline of 0.9 per cent. The company’s net earnings were down 7.3 per cent, to $ 733 million from $791 million a year ago.
Telus, meanwhile, saw net income drop by 19 per cent year- over- year to $ 353 million, on operating revenue of $3.7 billion.
The results offered a window into how the telecom industry is navigating the pandemic, with the overall impression being that the core telecommunications business remains solid and vital, but that social distancing measures and economic turmoil are causing some strain overall.
When asked about the fragile small- and mediumsized business customers BCE serves, chief financial officer Glen Leblanc said he’s keeping an eye on cash collections every day.
“Naturally, the longer this goes on, Canadians are going to run into their own liquidity challenges, and they’re going to be looking for reasonable payment terms and payment arrangements, and we’re going to have to be cognizant of how that impacts reserves,” he said. “But I can assure you, I’m monitoring that daily.”
Bell said it will maintain plans to increase its dividend by five per cent for Q2, to a rate of $ 0.8325 per share. Telus held its dividend steady at $0.29125 per share.
“Given the uncertain magnitude, duration and potential outcomes of the COVID- 19 pandemic, the Board determined that it would be prudent at this time to sustain the current dividend per share and defer any dividend increase until the release of our third-quarter 2020 results in November,” Telus said in a news release.
Telus chief financial officer Doug French spoke with Financial Post, and said that the company is trying to make sure customers don’t cancel their service, especially cellphone customers who are currently spending most of their time at home.
“We continue to obviously focus on our customer loyalty and churn. We have the lowest churn rate in the industry and we’re making sure that we’re meeting the needs of our customers during this difficult time so they don’t even think about moving to other providers,” French said.
“We are not seeing a significant downgrade of rate plans in wireless. (However) we are seeing a mix change on our TV offerings where there’s a switch from certain programming to others that are more effective to meet our customers’ needs.”
The two giants did differ in one key area — the approach to network upgrades and capital expenditure. Speaking to equity analysts on the quarterly earnings call, Bell chief executive Mirko Bibic gave a full- throated defence of network expansion.
“This is not a time to pull back capital spending on critical network infrastructure. The country is depending on us,” Bibic said. “These are healthy investments for the long- term health of our company, our customers and our economy.”
Bibic said that Bell is actually ready to turn on its 5G wireless network any day now, but has opted to hold off on the formal upgrade until after things calm down a bit.
“We are ready with our initial 5G network, but frankly, we don’t think it’s the right time now to officially launch it for marketing purposes,” Bibic said. “I just don’t think customers are paying attention to this right now.”
Telus is also putting 5G on the back burner for the moment, French said.
“We’re in no hurry at the moment to implement any 5G solutions. We’re actually more worried about ensuring the continuity and the quality that we’re offering to our customers now,” he said.
French said he expects some capital expenditure will be shifted, due to the complexity of sending out crews due to COVID-19.
“There’s definitely capex spend that we would normally do that has to be reconsidered in a COVID world, just based on execution alone,” he said. “That being said, we’re continuing to invest in fibre and areas that strategically are going to differentiate us from our peers.”