BCE posts strong wireless results, sets sights on streaming growth
Broadband ‘surprisingly weak’ as firm bets on TV product to lure subscribers
BCE Inc.’s wireless division once more outshone its traditional wired business in financial results released Thursday, but chief executive George Cope said the telecom giant’s most critical play this quarter was launching a new television product targeted at cord cutters and “cord nevers.”
Alt TV, a live TV streaming service available to Bell internet subscribers that’s cheaper than typical packages since it requires no settop box or installation, launched in May and has been immaterial to results thus far, Cope told analysts on a conference call. But he said he expects growth in products like it as more consumers stream content via over-the-top apps.
“Strategically, I think it’s the most important thing we did in the quarter,” Cope said in an interview.
“We think that’s obviously going to be quite important going forward because there’s a viewership market there we have not been participating in and it’s growing.”
His comments come after Canada’s broadcast regulator released numbers that found fewer customers cancelled their TV subscriptions in 2016 compared to 2015. While the total number of TV subscribers remained relatively flat at 11.1 million, the number of households grew to 14.1 million, according to census data. This indicates fewer households are signing up for TV subscriptions in the first place, even if more consumers are sticking to their packages.
It’s that market — people who otherwise wouldn’t buy a TV package and are happy to rely on streaming video on the internet — that Bell wants to reach. Telus Corp. has a similar product, and Cope said he expects cable competitors to follow suit.
“We’ve got to have all content available and then let the consumer select, that is absolutely where the market is and where we have to be,” he said, adding that Bell includes Netflix in its IPTV ecosystem and will add YouTube later this month.
That’s part of the reason Bell is “aggressively” building its fibre network with ultra-fast internet speeds, he said. Cope drew a parallel to the growth in wireless — mobile internet usage was up 26 per cent year over year — after Bell built a faster network.
Bell reported that it’s ahead of schedule in building fibre-to-thehome connections, which offer speeds that Bell’s cable rivals are able to offer across their entire footprints with less capital investment. Bell expects to connect 100,000 more premises than anticipated by year-end for a total of 3.7 million homes and businesses.
“We expect stronger internet additions particularly as our fibre rolls out,” Cope told analysts.
Where Bell already has fibre, Cope said it added 17,000 new internet customers and “literally had no (telephone line) losses.”
“It’s really quite interesting what the power of that is,” he said.
Still, Bell lost 13,000 television subscribers and only added 1,000 internet customers in the three months ending June 30. Churn increased in areas where Bell has yet to build fibre connections, places where its top competitor Rogers Communications Inc. has been aggressively promoting its internet speeds.
It added 89,000 postpaid wireless subscribers, beating analysts’ expectations of 70,000. Average revenue per user increased by 4.6 per cent to $67.28 per month and churn, the number of customers leaving the company, dropped to an 11-year low of 1.08 per cent.
Analysts were pleased with the impressive wireless numbers, but noted the weaker-than-expected broadband results.
Barclays analyst Phillip Huang noted to clients that the broadband results were “surprisingly weak” given Bell added about 200,000 new fibre-to-the-home connections this quarter.
“This is due to increased churn in areas where FTTH is not yet available from intensified cable bundle competition.”
“Wireless saves the day again,” Desjardins analyst Maher Yaghi noted to clients, adding it “continued to be a positive surprise” in terms of subscribers and revenue.
He believes Bell’s focus on increasing its fibre footprint will be key to reversing negative trend in wireline subscribers.
“The company’s FTTH program should help improve wireline results in 2018 when a large part of the Greater Toronto Area upgrade is completed,” he wrote.