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BCE Beats Both Earnings and Rev

Zacks Equity Research

Canada’s largest telephone operator, BCE Inc. (BCE) reported first-quarter 2013 adjusted earnings of 77 Canadian cents per share (76 cents per ADS) comfortably surpassing the Zacks Consensus Estimate of 70 cents. The results improved 5.8% from 69 Canadian cents (68 cents per ADS) in the year-ago quarter, aided by healthy growth in TV business, data services and growing adoption of smartphones along with cost-saving measures.

Revenues remained flat year over year at C$4.91 billion ($4.87 billion), but breezed past the Zacks Consensus Estimate of $4.52 billion. The strong performance was backed by strength in the Wireless, TV, Internet and business service segments plus a reduction in wireline voice erosion.

EBITDA grew 1.7% year over year to C$1.96 billion ($1.94 billion) in the reported quarter fueled by strong contributions from the Wireless and Media units.

Revenue Segments

Bell Wireless: Revenues from Bell Wireless increased 6.3% year over year to C$1.41 billion ($1.40 billion). Higher service revenues (up 7.2%), resulting from increased usage of data services, negated the low product revenues (down 1.1%).

BCE lost 8,957 net wireless subscribers during the reported quarter, bringing the total to 7.67 million, up 3.6% year over year. Post-paid net additions decreased by 4.9% to 59,497, while prepaid net losses slid to 68,454. Blended ARPU (average revenue per user) rose 3.9% year over year to C$55.92 ($55.49) on the back of growing market share plus more customers opting for mobile data services.

Churn rate (customer switch) improved to 1.7% from 1.8% in the year-ago quarter. Post-paid churn was 1.3% compared with 1.4% in the year-ago quarter, while prepaid churn improved to 3.8% from 3.9% in the year-earlier period due to lower customer deactivations.

Bell Wireline: Revenues from Bell Wireline fell 2.8% year over year to C$2.50 billion ($2.48 billion) due to lower local and access (down 6.8%), long distance (down 13.2%) and equipment and other revenues (down 4.7%). Data revenues increased marginally 0.8% owing to customer growth, more IP-based broadband connections and better data hosting services.

Network access services (:NAS) fell 7.8% year over year to 5.54 million. Residential NAS losses went down to 83,557 in the reported quarter compared with 71,119 in first quarter of 2012. Business NAS losses were 24,889 against 25,411 in the year-ago quarter. The decline was primarily due to heavy changeover to wireless services.

BCE activated just 1,931 high-speed Internet customers compared with 12,393 customers in the year-ago period. TV subscriber additions were 13,971, down 20.7% year over year. At the end of the first quarter, TV subscribers grew 2.8% year over year to 2.17 million.

Bell Media: Bell Media generated revenues of C$513.0 million ($509.0 million), up 0.2% year over year. The growth is attributed to strong advertising and high subscriber revenues.

Bell Aliant: Revenues from this segment inched up 0.3% year over year to C$684.0 million ($678.7 million), driven by enhanced Internet, TV and wireless activities.


BCE exited the quarter with C$1,115.0 million (approximately $1,106.4 million) of cash and cash equivalents compared with C$129.0 million (approximately $128.0 million) as of Dec 31, 2012. Capital expenditure was C$594.0 million ($589.4 million), down 12.6% year over year.

Other Stocks

Other telecom stocks worth considering are Cellcom Israel Ltd. (CEL), VimpelCom Ltd. (VIP) and Verizon Communications Inc. (VZ). All three carry a Zacks Rank #2 (Buy).

Our Take

BCE currently retains a Zacks Rank #3 (Hold). The company displays a robust wireless business model, improving wireline operations and expanding activities in the media sector. We believe that the company’s focus on investing in broadband networks and rendering better services, supported by a competitive cost structure will deliver positive results, going forward.

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