Bloomberg News

BCE Profit Tops Analyst Estimates as Data Spending Climbs

May 03, 2012

BCE Inc. (BCE), Canada’s second-largest wireless carrier, reported first-quarter profit that beat analysts’ estimates after customers spent more on smartphones and the company cut jobs and advertising spending.

Profit, excluding charges for severance and other costs, was 75 Canadian cents (76 cents), the Montreal-based company said today in a statement. Analysts predicted 73 cents, the average of estimates compiled by Bloomberg. Revenue climbed 9.9 percent to C$4.91 billion, compared with the C$4.95 billion average estimate.

Chief Executive Officer George Cope bought two TV companies and a stake in the owner of the Toronto Maple Leafs hockey team in the past year, betting smartphone customers will increase spending on BCE’s sports and entertainment programming. That is driving its efforts to distinguish it from new mobile carriers that offer no-frills calling plans and offset iPhone subsidies aimed at getting customers to commit to long-term contracts.

Bell Mobility, BCE’s mobile-devices business, added 62,576 phone subscribers on contract last quarter, compared with an estimate of 65,000 from Jeff Fan, a Scotia Capital Inc. analyst. The unit generated C$53.84 in average monthly revenue from both customers on contract and prepaid users, up from C$51.68 a year earlier. Fan, who has the equivalent of a hold rating on the stock, estimated C$53.66.

Wireline Business

“The quarter was helped by lower wireless costs,” Fan said in a research note today. “Looking ahead, we believe the results will get more challenging given the wireline revenue pressure.”

Sales at Bell’s wireline business slipped 3.5 percent to C$2.58 billion as fixed-line long-distance call revenue declined 9.4 percent.

BCE rose less than 1 percent to C$40.31 at the close in Toronto. The shares have lost 5.1 percent this year.

Net income advanced 14 percent to C$574 million, or 74 cents a share, from C$503 million, or 67 cents, a year earlier.

In March, Cope agreed to buy Astral Media Inc. (ACM/A) for C$3 billion to acquire French-language programming in Quebec including music and pay-TV channels MusiquePlus and Super Ecran. In December, BCE teamed up with rival Rogers Communications Inc. (RCI/B) in an agreement to buy a controlling stake in Maple Leaf Sports & Entertainment Ltd., owner of the Maple Leafs team and National Basketball Association’s Toronto Raptors, for $1.3 billion. A year ago, BCE paid a similar amount for broadcaster CTV.

iPhone Subsidies

Spending more on content isn’t without risks. Rogers fell the most in 18 months April 25, after reporting sales and profit that missed analysts estimates, hurt by iPhone subsidies and a slowdown in wireless data spending. While early smartphone adopters racked up bills browsing the Web and watching video, new smartphone customers are thriftier and are looking for basic data packages, Rogers CEO Nadir Mohamed said last month.

Rogers wireless first-quarter revenue slipped less than 1 percent to C$1.71 billion while data spending increased 16 percent. By contrast, Bell wireless revenue climbed 5.5 percent to C$1.31 billion as data revenue jumped 31 percent.

BCE reiterated its forecast for 2012, saying it expects revenue growth of 3 percent to 5 percent and earnings per share of C$3.13 to C$3.18.

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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