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BCE, Telus Profit Beats Estimates on Subscriber Gains

Aug. 8 (Bloomberg) -- BCE Inc. and rival Telus Corp. reported second-quarter profit and sales that beat analysts’ estimates as the Canadian wireless carriers added more smartphone subscribers than predicted.

Excluding severance, acquisition costs and other expenses, BCE’s earnings were 77 Canadian cents (74 cents) a share, the Montreal-based company said today, topping the analysts’ consensus of 76 cents. Telus reported profit of 54 cents on that basis, compared with an average estimate of 52 cents.

BCE CEO Chief Executive Officer George Cope is busy integrating Astral Media Inc. after winning regulatory approval in June to buy the Quebec broadcaster for C$3 billion. Cope is using Astral to attract more smartphone subscribers with sports, news and drama programming. Telus, meanwhile, has avoided acquiring broadcasting assets and instead is putting profits into overhauling its networks.

BCE added 96,390 wireless contract customers last quarter, compared with the 86,000 predicted by analysts. Average revenue per user increased 2.7 percent to C$56.85 in the quarter, outpacing a 1.5 percent gain in quarterly sales to C$5 billion.

BCE also boosted the forecast for its main Bell business. The company now expects revenue growth of 2 percent to 4 percent, up from a February prediction of no more than 2 percent, helped by the Astral acquisition.

BCE shares were little changed at C$42.15 at 10:20 a.m. in Toronto. Telus declined 1.3 percent to C$30.71. BCE’s stock had dropped less than 1 percent this year through yesterday, while Telus had fallen 4.4 percent.

Telus, Verizon

Telus’s sales climbed 6.1 percent to C$2.83 billion last quarter. The company also said today it plans to double its share buyback to up to C$1 billion this year and then up to C$500 million in 2014, 2015 and 2016.

Telus added 100,000 contract subscribers, topping an estimate for 92,000 new customers. Rogers Communications Inc., Canada’s mobile-phone leader, added 98,000 contract subscribers during the same period. The wireless units of BCE and Vancouver-based Telus are closely matched, though BCE remains a larger company because of its landline and broadcasting businesses.

Cope has been vocal about what he says is an unlevel playing field for potential competitors from outside Canada. He issued a statement last month calling on the government to reverse a policy that he said would unfairly subsidize the entry of U.S. carriers such as Verizon Communications Inc. into the company’s home market.

Potential Bid

Verizon, which has a market value about double that of BCE, Telus and Rogers combined, said in June that it’s weighing a bid to buy Wind Mobile, the largest of three new Ontario-based carriers. BCE has said the government’s decision to prevent Canada’s largest phone companies from buying smaller rivals will open the door for New York-based Verizon to acquire those businesses at “cut-rate prices.”

The government must close that loophole, Cope said today. He also reiterated the government should scrap a rule that would give Verizon preferred access to new Canadian wireless spectrum and the right to access Canadian carrier networks.

“It’s very clear that Verizon does not need government handouts,” he said.

(BCE held a conference call at 8 a.m. to discuss the results. Go to {BCE CN <Equity> CWP <GO>} for a replay. Go to {T CN <Equity> CWP <GO>} for a webcast of Telus’ conference call, scheduled for noon New York time.)

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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