POST PANDEMIC OPTIMISM FROM BCE

First revenue gain since 2019 beats estimates

BCE Inc. president and CEO Mirko Bibic says he is optimistic about the company’s recovery from the pandemic after revenue in the first quarter of 2021 grew for the first time since COVID-19 struck.

The Montreal-based company, which operates as Bell Canada, said revenue for the period ended March 31 rose by 1.2 per cent to $5.7 billion as compared to the same period last year, beating analyst estimates. On an adjusted EBITDA basis, BCE brought in $2.42 billion, a half-percent increase from 2020.

“I think that the results that you see now are more a function of Bell getting much better at operating in this environment,” Bibic said in an interview. “I’m fairly optimistic.”

Bell’s operating revenue has grown in successive quarters since the pandemic hit, including this one. But net earnings this quarter slumped 6.3 per cent to $687 million on a year-overyear basis due to severance costs from workforce reductions, particularly in the company’s media business, plus depreciation of infrastructure assets and amortization, said Glen Leblanc, chief financial officer.

On a per-share basis, earnings were down 5.3 per cent to $0.71. After factoring out losses from labour reductions, depreciation and amortization, adjusted EPS was down one cent from last year to $0.78.

Bibic noted a strong resurgence in wireline revenues indicated people, forced into the home because of government lockdowns, really began to value “higher quality” connections.

Revenues for the internet and cable side of the business rose by 1.5 per cent from last year to $3.08 billion, a figure that gave wireline its best performance in two years, analysts said.

“To be able to do better during COVID than we did a year ago, when there was no COVID, it speaks to some pretty strong execution by the team here,” Bibic said, adding that the majority of their first quarter in 2020 occurred before initial shutdowns. “It really shows that consumers are going to choose higher quality connections over lower quality connections at any time, and particularly in this kind of environment, where internet connectivity ... is so important.”

Bell’s wireline business saw a 4.3 per cent increase in retail internet customers year over year and a 43.2 per cent jump for fibre internet, where just over 36,800 net new customers were added.

It also added more than 10,600 IPTV customers, far more than the 2,850 in the first quarter of 2020. Satellite continued to decline.

Aravinda Galappatthige, an analyst at Canaccord

Genuity, said wireline drove the earnings to surpass expectations.

Wireless revenues saw a 3.2 per cent increase to $2.1 billion, however average billing per user (ABPU) saw a decline. ABPU for mobile phones dropped 3.4 per cent to $70.34, which Bibic and Leblanc attributed to lockdowns limiting roaming and overage charges.

“Roaming and data overage remain headwinds, which is not a surprise to anyone,” Leblanc told analysts in a morning call. “Normalizing for the $62 million, Covid-driven reduction in mobile roaming in Q1 service revenue was actually up 1.9 per cent.”

Bibic, who said roaming and overage charges bring in high margins, believes once borders open and travel resumes, that line in the balance sheet will grow.

Net additions of postpaid mobile customers — those who pay for their service at the end of a billing cycle — totalled close to 33,000. Meanwhile, prepaid mobile customers, who pay upfront for services, fell by more than 30,000, which the company attributed a slowdown in immigration and international travel to Canada.

The CEO also noted that the company’s more than 50 per cent increase of mobile-connected devices indicate “we’re entering the era here of widespread adoption of the Internet of Things.”

The Internet of Things (IOT) is a term used to describe a network that has numerous devices on it, other than phones or computers. This includes cars, wearables and even medical devices.

The IOT is part of the company’s push to expand its fibre network and 5G coverage and will equate to $4.5 billion in investment over four years. Already in the first quarter, capital expenditures exceeded $1.01 billion. Bell has $940 million in free cash flow, some of which it intends to spend at the upcoming spectrum auction for 5G.

WE’RE ENTERING THE ERA HERE OF WIDESPREAD ADOPTION OF THE INTERNET OF THINGS.