BCE Sales Top Estimates as Wireless Users Stay, Pay for Data

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BCE Inc., Canada’s biggest telecommunications operator by revenue, reported sales that topped analysts’ estimates as more customers upgraded to smartphones with two-year plans and higher data usage.

Second-quarter revenue rose 4.4 percent to C$5.22 billion ($4.78 billion), the Montreal-based company said in a statement today. Analysts had projected sales of C$5.21 billion. Adjusted profit rose to 82 Canadian cents a share, compared with 77 Canadian cents a year earlier and the average estimate of 84 Canadian cents, according to data compiled by Bloomberg. The company reaffirmed its full-year forecast.

BCE, known by its brand name Bell, boosted sales by retaining more monthly subscribers and generating higher revenue from customers, on average. Last month, it agreed to buy the shares in Bell Aliant Inc. it doesn’t already own for C$3.95 billion. Total ownership of the provider of phone, TV and Internet service in eastern Canada will give BCE cost-saving opportunities amid growing competition from smaller rivals like Quebecor Inc. and Wind Mobile.

Customer retention and average monthly bills “were very strong, some of the best we’ve had in years,” BCE Chief Executive Officer George Cope said today on a conference call.

“The Canadian consumers’ adoption of smartphones and uses of these devices and, as I mentioned, the improvement in our speed of our LTE by 50 percent over the next four or five weeks, that is only going to drive more and more demand for usage of the product,” Cope said, referring to the company’s long-term evolution network.

Phone Bills

Wireless customers paid an average of C$59.49 a month, including both prepaid and postpaid customers, up 4.6 percent. Dvai Ghose, an analyst at Canaccord Genuity Group Inc., said it was the company’s highest growth rate in almost seven years and topped his estimate of C$58.72 a month.

Bell also improved its rate of losses among monthly customers, known as churn, to 1.16 percent.

“Bell continues to gain wireless market share and is showing continued improvement in customer quality and lower churn,” Maher Yaghi, an analyst at Desjardins Securities Inc., said in a note today to clients. The company’s IPTV expansion along with improving wireline results also helps the “long-term sustainability” of BCE’s dividend, Yaghi wrote.

BCE dominates the Canadian wireless market along with Rogers Communications Inc. and Telus Corp. BCE added 66,186 new monthly wireless customers in the quarter, down from 96,390 a year before lower-priced three-year contracts were eliminated because of new federal rules.

BCE’s Expansion

BCE’s Fibe TV, which uses a fiber optic network, drew 46,533 new subscribers in the quarter, fewer than a year ago, in part, because of price cuts and promotions from cable competitors. The service now has 580,643 subscribers.

“The strategy continues to be to expand our fiber footprint and launch as many new LTE markets as we can, as quickly as we can,” said Cope.

BCE shares fell less than 1 percent to C$48.66 at 10:09 a.m. in Toronto, giving the company a market value of about C$37.9 billion.

Ghose said BCE’s per-share earnings missed estimates because of “higher than expected depreciation and negative contribution from other income.”

BCE, Rogers and Telus are confronting the threat of new competition as Quebecor aims to become the fourth national carrier. Cope noted that 18 of Canada’s top 20 markets already have four wireless operators competing regionally for subscribers.

“I’m probably as optimistic today about wireless growth as I have been over the last 10 years,” Cope said. “I still think it’s early days for this industry.”

Telus reported second-quarter adjusted earnings today of 63 Canadian cents per share, beating analysts’ average estimate of 58 Canadian cents per share. The Vancouver-based company, which is fighting BCE for the title of Canada’s second-biggest telecommunications firm, grew revenue in both its mobile and household businesses during the second quarter.

“We are one of the few service providers on the planet that is growing all three, revenue, ebitda and customer connections so we’re very proud of that fact,” Telus CEO Joe Natale said in an interview.

Last month, Rogers posted profit that met analysts’ profit and sales estimates as the company initiated a turnaround plan to try to return to growth.

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