BCE raises its div­i­dend by 7.7pc, aims to elim­i­nate pen­sion deficit

The Pak Banker - - Company& -

OT­TAWA: BCE, Canada's No. 1 com­mu­ni­ca­tions com­pany, ex­ec­u­tives an­nounced a 7.7-per-cent com­mon share div­i­dend in­crease and threw $750-mil­lion of cash at the com­pany's pen­sion plan deficit, sig­nalling Bell is as con­fi­dent as ever as it heads out of one tu­mul­tuous year and into an­other.

The div­i­dend in­crease, to $1.97, was larger and ear­lier than an­a­lysts had ex­pected, and the com­pany also com­mit­ted to erad­i­cat­ing its pen­sion deficit by 2014. The moves comes at the end of a year dur­ing which the com­pany saw spec­tac­u­lar growth in its wire­less busi­ness, par­tic­u­larly gain­ing ground on Rogers Com­mu­ni­ca­tions Inc. in the smart-phone space.

But for al­most ev­ery lu­cra­tive smart-phone sub­scriber BCE gained over the past year, the na­tional tele­com gi­ant spent more than $500 sub­si­diz­ing their high-end de­vice, which ate into the com­pany's earn­ings.

That ini­tial out­lay is ex­pected to pay off over the next year, how­ever. As Bell turns its at­ten­tion to rolling out its In­ter­net pro­to­col TV (IPTV) ser­vice, the Mon­tre­al­based provider will rely on monthly pay­ments from those wire­less cus­tomers to ab­sorb the fi­nan­cial sting of the new, and en­tirely nec­es­sary, TV ven­ture - paving the way for stronger earn­ings in 2011 than this year.

"[Bell] Mo­bil­ity should be po­si­tioned to be­gin de­liv­er­ing much higher re­turns, yearover-year, than you saw in 2010 and, con­se­quently, we have a buf­fer there that can be used to ab­sorb some of the early startup costs for IPTV," BCE chief fi­nan­cial of­fi­cer Siim Vanaselja in an in­ter­view. Com­bined with pay­ing down the pen­sion deficit, that "is go­ing to be a big boost to our earn­ings and our cash flow."

Fri­day's an­nounce­ments, Mr. Vanaselja said, were about be­ing "fi­nan­cially pru­dent" with the com­pany's ex­tra cash. It's a good thing the com­pany's bal­ance sheet is now cause for com­fort, be­cause the wider Cana­dian tele­com in­dus­try is in turmoil: New wire­less providers have launched with cut­throat rate plans, Bell's Mon­treal-based neme­sis Que­becor Inc. has just launched its own wire­less net­work that plugs into the com­pany's wildly pop­u­lar French­language broad­cast­ing prop­er­ties, and the fed­eral In­dus­try Min­is­ter is weigh­ing how to struc­ture the next govern­ment wire­less auc­tion and whether to per­mit for­eign giants to bid for li­cences.

Amid this tu­mult, how­ever, Bell seems to be do­ing fine, de­spite a dip in prof­its near the end of the year partly due to smart-phone sub­si­dies. Toronto-based Rogers, on the other hand, which has long led the Cana­dian wire­less in­dus­try, is be­gin­ning to see that lead eroded by new wire­less play­ers such as Mo­bilic­ity and Wind Mo­bile, as well as the ad­vanced net­work shared be­tween Bell and Telus Corp. that launched in late 2009. Rogers, whose ex­ec­u­tives called this "the new com­pet­i­tive re­al­ity," were also hit by the cost of sub­si­diz­ing ex­pen­sive smart phones.

"There is pres­sure," Rogers pres­i­dent and chief ex­ec­u­tive of­fi­cer Nadir Mohamed said at an in­vestor con­fer­ence this week. "Frankly, I don't see that go­ing away."

Iron­i­cally, Bell is rid­ing the new wave of com­pe­ti­tion rather than fac­ing it head on - not just with its new wire­less net­work, but with a high-qual­ity TV prod­uct that pres­i­dent and CEO Ge­orge Cope has said could de­stroy the "last mo­nop­oly" cable com­pa­nies have in ur­ban Canada.

Ma­her Yaghi, an an­a­lyst with Des­jardins Se­cu­ri­ties in Mon­treal, said Bell's per­for­mance may bur­nish the shine on tele­com stocks even as con­cerns about com­pe­ti­tion rise.

"That ex­tra kick in cash flow is go­ing to po­si­tion the com­pany in a bet­ter com­pet­i­tive pro­file," Mr. Yaghi said. He added that de­spite com­pet­i­tive con­cerns, "2011 ac­tu­ally looks like a good year for BCE." More­over, con­sumers up­set about cell­phone prices and com­pli­cated bills seem to have dis­cov­ered the most ef­fec­tive place to di­rect pentup frus­tra­tion:

Shortly af­ter Que­bec in­tro­duced a tough con­sumer pro­tec­tion law that lim­its con­tract can­cel­la­tion fees, a sim­i­lar but wider-reach­ing bill has been tabled in the On­tario leg­is­la­ture by Lib­eral MPP David Ora­zi­etti.

"The com­ments and con­cerns that I hear from con­sumers on this is­sue, they're sig­nif­i­cant. We've had a high vol­ume of re­sponse to our of­fice," said Mr. Ora­zi­etti, who in­tro­duced his bill last month. "I think it was strik­ingly ob­vi­ous that greater pro­tec­tions need to be pro­vided for con­sumers."

The bill would re­duce can­cel­la­tion fees, clar­ify con­tracts and make the costs of us­ing a cell­phone more trans­par­ent.

These new laws would al­low con­sumers to move more eas­ily be­tween com­pet­ing cell­phone providers, which could ben­e­fit the coun­try's new, small wire­less com­pa­nies. Car­ri­ers also may find it tougher to push through price in­creases as con­sumers be­come more em­pow­ered, which may even­tu­ally af­fect mar­gins, an­a­lysts sug­gest. -PB News

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.