BCE Beats Profit Estimates as Smartphone Subscribers Gain

BCE Inc., Canada’s second-largest wireless carrier, topped second-quarter profit estimates and increased its annual forecast after adding more smartphone subscribers on lucrative long-term contracts.

Profit, excluding some items, was C$1.02 ($1.02), the Montreal-based company said today in a statement. Analysts predicted 81 cents, the average of estimates compiled by Bloomberg. The target for annual earnings was lifted to a range of C$3.15 to C$3.20 a share, from C$3.13 to C$3.18.

Chief Executive Officer George Cope is making acquisitions to push the company into new markets while luring customers to Bell Mobility, the mobile-devices business. Cope purchased broadcaster CTV last year and is buying Astral Media Inc. and part of the Toronto Maple Leafs hockey team and the Toronto Raptors basketball franchise, aiming to get smartphone users to spend more on BCE’s sports and entertainment programs.

Net income rose 31 percent to C$773 million, or C$1 a share, from C$590 million, or 76 Canadian cents, a year earlier, helped by a 21 percent gain in wireless operating profit.

“While Bell still remains behind its peers, it made up substantial ground this quarter,” said Maher Yaghi, a Desjardins Securities analyst in Montreal who has a buy rating on the stock.

BCE shares, which yesterday rose to their highest level since Jan. 3, 2001, climbed 2.4 percent to C$44.30 at the close in Toronto.

Wireless Revenue

The company lifted wireless data revenue by 31 percent at Bell Mobility, the mobile-devices business. Bell added 102,067 phone subscribers on contract last quarter, compared with 95,000 estimated by Yaghi. The unit generated C$55.37 in average monthly revenue from both contract and prepaid users. Yaghi estimated C$53.84.

“We continue to see the migration to the smartphone driving growth” in data revenue, Cope said on a conference call today with analysts.

Revenue was little changed from a year earlier at C$4.92 billion, missing the C$4.96 billion average estimate. Revenue growth is expected to be at the lower end of a range of 3 percent to 5 percent, BCE said.

BCE today said it will raise its annual dividend to C$2.27 a share from C$2.17.

Bell and rivals Rogers Communications Inc. and Telus Corp. together control more than 90 percent of Canada’s wireless market. Telus added 112,000 contract subscribers last quarter, while Rogers gained 87,000.

BCE agreed to spend C$1.1 billion with other investors in June to buy data-center operator Q9 Networks Inc.

Astral Deal

Montreal-based rival Quebecor Inc. has complained that BCE’s ownership of Astral will give it too much dominance of the local television market, and Canada’s Competition Bureau yesterday said it will review those concerns. The company is “very confident” it will complete its acquisition of Astral Media and the deal is expected to close in the fourth quarter, Cope said.

BCE will divest a number of radio stations to meet regulations on market concentration, he said.

“We find it ironic that one of our competitors, which has a large market channel in Quebec, is somehow concerned they’re going to have competition,” he said, with reference to Quebecor.

link under Investor Relations to listen to a replay of the call.)

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