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PRINT EDITION
BCE profit drops despite record wireless subscriber gains
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By CHRISTINE DOBBY
  
  

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Friday, August 3, 2018 – Page B1

BCE Inc. added a record number of new wireless subscribers in the second quarter but also revealed slowing price growth as it grapples with increased competition plus a wave of lower-revenue customers from a large government contract.

Canada's largest communications company said Thursday it added 122,092 wireless customers on contract in the period, well ahead of forecasts and the most in a second quarter since 2000. This comes after Rogers Communications Inc. also reported 122,000 new mobile customers in the period, indicating the market is still expanding at a fast pace.

Telus Corp., the third national carrier, reports its results on Friday.

But the average monthly amount BCE charges edged up just 0.6 per cent, to $67.71, compared with the 4-per-cent increase it reported this time last year.

It said that was due to lower data-overage charges - as subscribers move into plans with higher data caps and pay fewer penalties - and an increase in customers on lower-priced plans, after BCE won a six-year contract to supply federal government employees and stepped up the promotion of its discount brand, Lucky Mobile.

The company also reported strong internet and television subscriber numbers in the quarter.

However, its overall financial results fell short of investor expectations, pulled down by lower advertising revenue and higher costs at its Bell Media division, which it attributed in part to the broadcast rights for the FIFA World Cup soccer tournament.

Chief executive George Cope said on an investor call that excluding the effect of the government wireless contract, average monthly billing would have increased 1.7 per cent. He noted that while customers on that contract bring in less revenue, there is almost no subscriber turnover.

(Rogers, which previously held that contract, recorded a onetime adjustment to its overall wireless base last year, subtracting 207,000 subscribers all at once rather than reporting its gradual loss of government customers every quarter as they migrate over to BCE when their service contracts expire.)

Desjardins Securities analyst Maher Yaghi wrote in a report that the industry is facing pressure on wireless pricing amid increased competition from Shaw Communications Inc.'s Freedom Mobile, which is improving its network in Ontario, British Columbia and Alberta.

Freedom launched a new marketing strategy this week to target Big Three customers concerned about data overage charges.

"This issue is likely to be a focus for investors for the rest of the year and into 2019," Mr. Yaghi said.

On the residential-services side of the business, BCE also added more subscribers than expected, with 10,816 new internet customers, up from an increase of 1,400 this time last year.

Boosted by new subscribers to its IPTV (internet protocol television) service and a slower rate of decline at its satellite TV business, it added 809 net TV customers, compared with a loss of 13,337 in the second quarter of 2017.

BCE and Rogers are fighting for the Toronto internet and TV market, with BCE investing in faster fibre-optic service to homes and Rogers launching a new IPTV service.

BCE said on Thursday that it will start offering 1.5-gigabit-persecond home internet service - up from a top speed of 1 gigabit a second - beginning this month in Ontario.

It kicked off a broad marketing push for its fibre-optic internet service in April.

Meanwhile, earlier this week, Rogers launched a TV and newspaper advertising campaign for its new Ignite TV service and said it is now available to all customers in its Ontario cable-service footprint.

Mr. Cope told analysts that BCE's overall rate of subscriber growth should position the company well to continue its dividend growth strategy into 2019.

For the past decade, BCE has increased its shareholder payout by 5 per cent or more annually.

BCE's total revenue increased 1.7 per cent to $5.79-billion, while adjusted EBITDA was up 2 per cent to $2.43-billion - both just short of forecasts.

Second-quarter profit fell 7.2 per cent to $755-million, or 79 cents a share.

On an adjusted basis, it earned 86 cents per common share, which missed the average analyst forecast of 88 cents.

BCE said profit declined due to higher depreciation charges, as it has invested more in its broadband and wireless networks, as well as a higher year-over-year loss on its joint-venture investment in Maple Leaf Sports & Entertainment Ltd., which owns a number of Toronto professional sports teams.

(MLSE had higher revenue this time last year from an expansion fee paid to NHL team owners when the Vegas Golden Knights joined the league.)

Associated Graphic

BCE and Rogers are fighting for the Toronto TV and internet market. BCE said on Thurdsay that it will start offering 1.5-gigabit-per-second home internet service beginning this month in Ontario.

CHRIS WATTLE/REUTERS


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