BCE lowers growth guidance
BCE Inc. blamed new federal regulations for limiting its prospects for growth, but CEO George Cope said the telecom giant will work aggressively to defend its competitive advantage in the growing Internet protocol television market.
The country’s l argest telecom company reported solid fourth- quarter results, buoyed by strong performance in the crucial mobile phone segment.
Bell reported an adjusted profit of $667 million in the three months ending Dec. 31, up 8.5 per cent from the same period last year, and announced a dividend hike of 5.1 per cent. This marked the ninth consecutive year of dividend growth above 5 per cent.
Still, it announced lower growth expectations for 2017. In a call with analysts, executives blamed regulatory pressures for dampening the earnings growth by about 1 per cent. The company’s shares fell about 1.5 per cent on the news.
“There clearly was … an impact on some of the regulatory decisions, the underlying organic business is as you’ve seen in the past,” Cope said.
Cope and CFO Glen LeBlanc cited Canadian Radiotelevision and Telecommunications policies, including lower wholesale prices for high- speed Internet access, customer refunds on cancelled services and the Super Bowl advertising policy that eliminates domestic ads from the American broadcast.
The guidance, however, does not reflect the planned acquisition of Manitoba Telecom Services, a deal that still needs approval from the Competition Bureau and the federal government.
Cope said he expects Ottawa to make a decision by the end of the first quarter, at which point the guidance will be refreshed. He assured analysts he expects the dividend to increase again in 2017 whether or not the transaction closes.
Overall financial results were in line with Bay Street’s expectations, including a 1.8 per cent increase in operating revenue to $5.7 billion.
Bell added 112,000 postpaid wireless subscribers, up 23.1 per cent from 2015 and above consensus estimates of 99,000, beating its top rival Rogers Communications Inc.’s additions of 93,000 subscribers in the last stretch of the year. Average revenue per user in the wireless division increased 4.7 per cent yearover- year as data usage skyrocketed 41 per cent.
“People use the product more and more … I think that lends well for shareholders in the wireless space,” Cope said.
Bell’s product revenue decreased due to aggressive promotions on mobile handsets in the quarter, when some providers offered the new iPhone 7 for zero dollars.
Competition is expected to heat up in the television market as Bell works to maintain leadership with its Internet protocol TV product, Cope said. He said more advanced features are coming to the product to position Bell well for 2018, when Rogers is expected to launch IPTV using Comcast’s X1 platform.
Rogers originally planned to launch IPTV in 2017, but axed in- house development of its own product and signed a deal with Comcast instead.
“Clearly we are going to be pushing our product and the advantage of this product and rolling out other features on this product,” he said, adding Bell plans to accelerate the fibre rollout in Toronto. “We hadn’t expected that window.”
Bell added 18,000 Internet subscribers, lower than consensus estimates of 27,000, and lost 1,000 TV subscribers. It gained 37,000 IPTV subscribers but lost 36,000 satellite TV subscribers.
Cope emphasized the success of Internet where it offers IPTV and fibre has been extended directly to peoples’ homes.
Approximately 2.9 million homes and businesses had fibre-to-the-premises connections at the end of 2016. The total is expected to increase by 600,000 to 800,000 annually over the next five years, Cope said.
Bell Media revenue grew 3.6 per cent to $ 845 million as advertising revenue was essentially flat. Video streaming service CraveTV posting its best month ever in December 2016, Cope said. Despite the growth, Bell’s media division laid off more than two dozen employees this week. It cited the declining advertising market and the CRTC’s new Super Bowl ad policy as factors in the restructuring.
Analysts from Desjardins, Citi and RBC described the quarter as “decent,” “good” and “solid,” but their enthusiasm was dampened by the weaker than expected guidance for the upcoming year.