BCE hit hard by COVID -19 slowdown.
• BCE In c .’ s second- quarter earnings reported Thursday confirmed the trend among Canadian telecom companies that it’s impossible to escape the economic ravages of the COVID-19 pandemic even as an essential service provider.
Bell’s revenue was down by 9.1 per cent year over year, and profits dropped by a staggering 64 per cent.
The pain was felt across all segments of the Bell Canada empire, but its media division was particularly hard hit.
In its shareholder report, the company said it took $ 448 million in impairment charges related to its Bell Media TV and radio properties due to “declines in advertising revenues, lower subscriber revenues and overall increases in discount rates resulting from the economic impact of the COVID-19 pandemic.”
BCE chief financial officer Glen Leblanc pointed out on the company’s earnings call that the media division is the smallest part of the company’s overall business.
But the pandemic’s negative impact also showed up in the company’s wireless segment, where operating revenue declined by 11 per cent to $1.9 billion.
“There was a roaming decline, clearly, with the halt in travel, and you can quantify that in the range of $60 million,” chief executive Mirko Bibic said. “And then there were Covid-related overage decline impacts as customers were staying home and offloading data usage to WI-FI.”
Bibic said the company’s decision to keep providing service to customers who can’t pay their bills during the pandemic was also a factor in the lower wireless revenues.
The decline in roaming and overage revenue has been a consistent theme across all three big legacy telecom companies in Canada, with Rogers Communications Inc. and Telus Corp. also reporting their earnings in the past couple weeks.
Bell posted a larger drop in profits than its rivals, although Rogers posted a larger decline in top- line revenue.
Rogers net income was down 53 per cent and Telus net income was down 39.4 per cent, compared to Bell’s 64 per cent decline.
Bell’s drop in profitability was partly explained by the writedown in the media division, but David Heger, an equity analyst at Edward Johns who covers the telecom sector, said subscriber revenue from phone and internet service is a lot more important than media revenue.
“It’s a relatively minor contributor to the overall results for Bell. Wireless is really the key growth driver and then everyone is hoping for (wireline) to just be relatively stable,” Heger said.
“Then you’ve kind of got the media as something on top, and when it does well, it’s great, but when it struggles a little more, it’s going to hurt results in the short term, but it’s not overall having that much of an impact.”
Due to the economic uncertainty caused by the coronavirus, including a possible second COVID-19 wave later this year, BCE said it would not be offering financial guidance for upcoming quarters.
Heger said the two metrics he’s going to be watching most closely in the coming quarters are the number of new subscribers added by BCE and its competitors, as well as average billings per user.
Rogers, Telus and Bell have all indicated that the rate of subscriber churn has been lower during the pandemic.
Retail stores had to close for at least part of the spring, and most customers aren’t looking to switch providers right now given everything else that is happening.
But there could be more activity coming to the wireless space when new phones hit the market, especially an anticipated 5G iphone this fall.
Heger said the average billings per user (which accounts for both what customers are paying for service each month and what they’re paying for equipment) will likely rebound more slowly, but that metric says a lot about the overall state of play with customers.
“( That metric) may improve quarter over quarter, but in terms of getting back to normal, it’s really going to take people returning to travel, and the worst of the pandemic being behind us,” he said.
BCE also reported lower capital spending in the second quarter, partly because fewer people want fibre optic internet installed in their home during the pandemic, and also because Bell scaled back its network construction.
But Leblanc told investors to expect that trend to turn around.
“Capex was lower, certainly, in the early months of March, April and May as we focused as an organization on stability, and making sure we secured our critical services,” he said. “Now we’re moving back to more construction and footprint expansion, so we will see capital (expenditure) increase.”