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or Name
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BCE Inc (2)
Symbol BCE
Shares Issued 897,968,882
Close 2018-05-02 C$ 53.92
Market Cap C$ 48,418,482,117
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BCE earns $709-million in Q1

2018-05-03 07:14 ET - News Release

Mr. George Cope reports

BCE REPORTS FIRST QUARTER 2018 RESULTS

BCE Inc. has released results for the first quarter of 2018 in accordance with the newly adopted international financial reporting standard 15 (IFRS 15), and applied these new accounting policies retrospectively to its 2017 results to facilitate year-over-year comparability.

  
                        FINANCIAL HIGHLIGHTS                                                   
                 (in millions except per-share amounts) 

                                                      Q1 2018     Q1 2017
BCE
Operating revenues                                     $5,590      $5,336
Net earnings                                              709         688
Net earnings attributable to common shareholders          661         642
Adjusted net earnings                                     719         703
Adjusted EBITDA                                         2,254       2,166
EPS                                                      0.73        0.73
Adjusted EPS                                             0.80        0.80
Cash flows from operating activities                    1,496       1,313
Free cash flow                                            537         489
 

"Network leadership continues to drive Bell's progress in broadband customer additions, service usage and revenue growth as we welcomed approximately 102,000 net new postpaid wireless, Internet and IPTV customers in the first quarter of 2018. With Canada's best national mobile network, we delivered almost double the number of wireless postpaid subscribers gained in the first quarter of 2017 and our best first quarter result since 2011; continued strong increases in revenue and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization]; and growing customer satisfaction reflected in our fourth consecutive quarter of reduced postpaid churn. Bell's growing all-fibre network is propelling solid wireline financial performance with continued increases in Fibe TV and Internet customer additions, strong performance by Bell Business Markets, and reduced landline losses as households increasingly opt for Fibe service bundles. In a transforming media marketplace, Bell Media continued to build its lead across specialty, pay and conventional TV and other media while executing its strategy to deliver the best content across multiple platforms," said George Cope, president and chief executive officer of BCE and Bell Canada.

"Leadership in network, service and content innovation is core to Bell's continued growth in broadband services. We are proud to hold our annual general meeting of shareholders in Toronto today, where Bell recently turned on our unparalleled pure fibre network and announced our next major rollout to centres throughout the fast-growing GTA/905 region, adding to the increasing number of cities and almost four million Canadians across seven provinces benefiting from Bell's all-fibre broadband network."

Bell is focused on achieving a clear goal -- to be recognized by customers as Canada's leading communications company -- through the execution of six strategic imperatives: invest in broadband networks and services, accelerate wireless, leverage wireline momentum, expand media leadership, improve customer service, and achieve a competitive cost structure.

Business developments

Bell pure fibre: it is on in Toronto, rolling out to Greater Toronto Area/905

Bell launched its all-fibre broadband network in Toronto in April, connecting homes and businesses throughout Canada's most populous city with the world's best Internet technology. Built for the future, the Bell fibre-to-the-premises (FTTP) network delivers symmetrical access speeds up to a gigabit per second (Gbps) now and up to 40 Gbps and beyond in future. Bell also announced plans to expand FTTP to the fast-growing GTA/905 region surrounding Toronto. Broadband innovations included the launch of the exclusive Bell Whole Home Wi-Fi service that delivers smart and fast Wi-Fi to every room in the home, and expanded access to Bell's Alt TV service with Amazon Fire TV Stick and Android TV devices including Sony, NVIDIA, Xiaomi and other Google certified products.

Virgin Mobile No. 1 in customer service, Lucky Mobile expands to Manitoba and Saskatchewan

The J.D. Power 2018 Canada wireless customer care study ranked Virgin Mobile Canada highest in overall customer care satisfaction for the second consecutive year. Bell's low-cost prepaid service Lucky Mobile expanded to Manitoba and Saskatchewan in March and now offers budget-conscious Canadians service plans starting as low as $10. Wireless network innovation included the successful completion of wireless to the home (WTTH) trials in the 3.5-gigahertz and 28 GHz spectrum bands. WTTH will leverage 5G to deliver broadband speeds to small population centres; Bell plans to roll out initial WTTH services to more than 20 rural communities in Ontario and Quebec this year.

Bell Media invests in Pinewood; Sony acquires international rights to the Launch

Bell Media continued to drive its strategy to develop the best creative content for both Canadian and international audiences, acquiring a majority stake in Pinewood Toronto Studios, one of the largest purpose-built production studios in Canada, and announcing that Sony Pictures Television had acquired international distribution rights for CTV's highly successful Canadian music competition series format the Launch. The inaugural season of the Launch debuted at No. 1 in its timeslot on CTV and has delivered a string of No. 1 musical hits in Canada.

Innovation in Smart Cities and the Internet of things

In addition to Bell's extensive Smart City pilot project with the City of Kingston, which employs Internet of things (IoT) data monitoring solutions to improve municipal operating efficiencies and enhance services for residents, BCE is working with Echologics to deliver a wireless IoT water management solution for Medicine Hat, Alta.; providing touch-screen smart kiosks and free Wi-Fi access for downtown St. Catharine's, Ont.; and partnering with Icicle Technologies to offer a comprehensive IoT-based production management system for Canada's food industry.

Recognition for Bell Let's Talk, Bell Media, diversity leadership

Bell stood out at the Canadian Screen Awards in March as the Bell Let's Talk mental health initiative received the 2018 humanitarian award from the Academy of Canadian Cinema & Television and Bell Media was honoured with 52 awards, including best national newscast for the CTV National News with Lisa LaFlamme; seven awards, more than all other sports broadcasters combined, for TSN; and best reality series for the Amazing Race Canada. For the second year in a row, Bell has been named one of Canada's best diversity employers by Mediacorp, recognizing Bell's commitment to providing an inclusive and accessible workplace that reflects Canada's diversity.

BCE results

"BCE's results in the first quarter of 2018 mark a solid beginning to the year in a competitive and fast-changing marketplace. Strong operational and financial performance in wireless and wireline, including the contribution of Bell MTS, and ongoing cost discipline are delivering the free cash flow that enables our lead in broadband network investment while also driving shareholder value. This includes BCE's increased common share dividend for 2018 announced on Feb. 8 -- our 14th such increase since the fourth quarter of 2008, representing dividend growth of 107 per cent -- and our recently completed $175-million share buyback program," said Glen LeBlanc, chief financial officer for BCE and Bell. "BCE's first quarter results are in line with 2018 guidance growth targets, which are unchanged with the move to IFRS 15 reporting as our business outlook and financial plan remain firmly on track."

BCE operating revenue was up 4.8 per cent in the first quarter to $5,590-million. Service revenue grew 3.2 per cent to $4,964-million, and product revenue increased 19.2 per cent to $626-million. This reflects increases at both Bell Wireless and Bell Wireline, including favourable financial contributions from Bell MTS, partly offset by a modest year-over-year revenue decline at Bell Media.

Net earnings increased 3.1 per cent to $709-million and net earnings attributable to common shareholders grew 3.0 per cent to $661-million. Net earnings per common share were unchanged compared with the first quarter of 2017 at 73 cents per share, the result of a higher average number of BCE common shares outstanding due to the shares issued for the acquisition of Manitoba Telecom Services (MTS) on March 17, 2017. Higher net earnings were the result of operating revenue growth driving higher adjusted EBITDA as well as lower severance, acquisition and other costs, partly offset by increased depreciation and amortization expense and higher other expense attributable mainly to net mark-to-market losses on equity derivatives used as economic hedges of share-based compensation plans.

Excluding severance, acquisition and other costs, net gains or losses on investments, net mark-to-market changes on derivatives used to economically hedge equity-settled share-based compensation plans, early debt redemption costs and impairment charges, adjusted net earnings were up 2.3 per cent to $719-million, driven by strong year-over-year growth in adjusted EBITDA. Adjusted EPS was unchanged compared with the first quarter of 2017 at 80 cents per common share.

Adjusted EBITDA grew 4.1 per cent to $2,254-million on increases of 6.9 per cent at Bell Wireless and 3.1 per cent at Bell Wireline, which included an incremental contribution from the MTS acquisition that lapped during the quarter on March 17. Bell Media adjusted EBITDA was down 3.0 per cent due to the combined impact of lower advertising revenue and higher programming costs compared with last year. BCE's consolidated adjusted EBITDA margin decreased to 40.3 per cent from 40.6 per cent in the first quarter of 2017, due to a $14-million charge for the period May, 2015, to December, 2017, to account for lower final rates set by the CRTC (Canadian Radio-television and Telecommunications Commission) in its recent wholesale domestic roaming tariff decision. Excluding this retroactive regulatory impact, adjusted EBITDA was up 4.7 per cent this quarter.

Consistent with higher planned spending in 2018 on BCE's broadband wireline and wireless network infrastructure, total consolidated capital expenditures increased 9.3 per cent to $931-million in the first quarter from $852-million last year. This represented a capital intensity ratio (capital expenditures as a percentage of total revenue) of 16.7 per cent compared with 16.0 per cent in the first quarter of 2017. The increase was due to continued expansion of broadband fibre and mobile LTE, including the deployment of wireless small cells to optimize mobile coverage, signal quality and data backhaul, and continuing investment in Manitoba to improve broadband network coverage, capacity and speeds.

BCE cash flows from operating activities were $1,496-million, up 13.9 per cent from $1,313-million in the first quarter of 2017, the result of higher adjusted EBITDA, lower acquisition and other costs paid, and a positive change in working capital. Free cash flow was $537-million, 9.8 per cent higher than the first quarter of 2017, driven by increased cash flows from operating activities excluding acquisition and other costs paid, partly offset by higher capital expenditures.

BCE reported 68,487 net new wireless postpaid subscribers and a decrease of 24,110 net wireless prepaid customers; 19,647 net new high-speed Internet customers; 13,573 net new IPTV customers and a decrease of 26,054 net satellite TV customers. Residential NAS line net losses totalled 57,533.

At the beginning of the first quarter of 2018, the high-speed Internet, IPTV and NAS subscriber bases were increased by 19,835, 14,599 and 23,441, respectively, mainly to reflect the acquisition of a small telecom provider in the quarter. The high-speed Internet subscriber base was also adjusted to reflect the transfer of 16,116 fixed wireless Internet customers from Bell Wireless.

BCE customer connections across wireless, Internet, TV and residential NAS totalled 19,072,421 at March 31, 2018, up 0.9 per cent from last year. The total includes 9,195,048 wireless customers, up 2.8 per cent over last year (including 8,471,021 postpaid customers, an increase of 4.0 per cent); total high-speed Internet subscribers of 3,845,739, up 3.5 per cent; total TV subscribers of 2,834,418 (including 1,578,489 IPTV customers, an increase of 7.7 per cent), down 0.1 per cent over all; and residential NAS lines of 3,197,216, down 6.0 per cent.

BCE operating results by segment

Bell Wireless

A consistent focus on subscriber profitability and disciplined operational execution drove another quarter of strong wireless financial results. Total operating revenue increased 10.1 per cent to $1,946-million, with service revenue growing 6.1 per cent to $1,512-million, and product revenue up 26.9 per cent to $434-million.

Service revenue growth was driven mainly by a larger postpaid subscriber base and the financial contribution from Bell MTS. Service revenue was impacted unfavourably by the retroactive regulatory charge noted above. Excluding this one-time impact, wireless service revenue was up 7.1 per cent.

Higher product revenue was the result of more new gross customer activations and handset upgrades, and a higher sales mix of premium smart phones.

Wireless adjusted EBITDA increased 6.9 per cent to $822-million on the high flow-through of strong revenue growth, which yielded a revenue margin of 42.2 per cent. Operating costs increased 12.6 per cent, driven by the incremental expense contribution of Bell MTS, increased cost of goods sold reflecting the higher volumes of handset sales, higher costs to support a growing customer base and increasing data usage, and increased advertising. Excluding the retroactive regulatory impact, wireless adjusted EBITDA increased 8.7 per cent in the first quarter:

  • Postpaid net additions increased 91.4 per cent to 68,487, the company's best first quarter performance since 2011. This was driven by 17.1 per cent higher gross additions of 347,319, reflecting Bell's mobile network speed and technology leadership, effective sales execution across the company's retail channels, the continued onboarding of customers from a long-term mobile services contract win with Shared Services Canada, the contribution of Bell MTS, and lower customer churn which improved 0.04 percentage point to 1.13 per cent.
  • Lucky Mobile, Bell's new low-cost prepaid service, is driving an improved prepaid subscriber trajectory with 57,471 prepaid gross additions in the first quarter, up 10.9 per cent over last year, supporting a 31.3-per-cent decrease in net prepaid customer losses to 24,110.
  • Bell Wireless postpaid customers totalled 8,471,021 at March 31, 2018, a 4.0-per-cent increase over the first quarter of 2017. Total wireless customers increased 2.8 per cent to 9,195,048.
  • Blended average billing per user (ABPU) increased 1.4 per cent to $66.56, driven by a higher postpaid subscriber mix, more customers moving to higher-value monthly plans with larger data allotments, increased roaming revenue and the flow-through of pricing changes. Blended ABPU in the first quarter of 2018 was adjusted to exclude the $14-million regulatory impact. Blended ABPU is equivalent to blended ARPU reported prior to the adoption of IFRS 15.

Bell Wireline

Wireline operating revenue increased 3.6 per cent to $3,084-million, service revenue increased 3.5 per cent to $2,892-million and product revenue rose 4.3 per cent to $192-million. The year-over-year revenue increases were driven by Internet and IPTV subscriber base growth, higher household ARPU, improved Bell Business Markets performance including higher Internet protocol (IP) broadband connectivity revenue and stronger sales of data product and business service solutions to large enterprise customers, and the incremental financial contribution of Bell MTS.

Wireline adjusted EBITDA was up 3.1 per cent to $1,302-million on strong revenue flow-through, slower NAS erosion and disciplined cost management. Operating costs increased 4.0 per cent to $1,782-million, due mainly to the incremental expense contribution of Bell MTS and higher postemployment benefit plans service costs. Wireline adjusted EBITDA margin declined 0.2 percentage point to 42.2 per cent as a result of the year-over-year increase in postemployment benefit plans service costs:

  • High-speed Internet net subscriber additions totalled 19,647, up 31.1 per cent compared with 14,989 in the first quarter of 2017. The significant growth in net additions reflects the continuing expansion of Bell's all-fibre footprint, which drove subscriber growth and lower residential customer churn despite aggressive cable bundle promotions, as well as the pull-through of Internet customer activations from Alt TV, Bell's app-based live TV streaming service.
  • BCE's high-speed Internet customer base totalled 3,845,739 at the end of the first quarter, up 3.5 per cent over last year.
  • Bell TV added 13,573 net new IPTV subscribers, a decrease from 22,402 gained in the first quarter of 2017 due to a higher rate of penetration in current Fibe markets and continuing over-the-top substitution. These factors were partly offset by customer additions from Bell's new Alt TV streaming service. BCE's total IPTV customer base grew to 1,578,489 at March 31, 2018, up 7.7 per cent over last year.
  • Satellite TV net customer losses were down 31.6 per cent to 26,054 from 38,065 in the first quarter of 2017, with reduced deactivations and migrations reflecting a more mature subscriber base geographically better suited for satellite TV service.
  • At March 31, 2018, Bell had a total of 2,834,418 TV subscribers, compared with 2,837,353 at the end of the first quarter of 2017.
  • Wireline data service revenue increased 5.9 per cent to $1,820-million, the result of growing Internet and IPTV subscriber bases, higher ARPU from customer upgrades to faster Internet speeds and 2017 price changes, increased business IP broadband connectivity revenue, and the favourable impact of Bell MTS.
  • Wireline product revenue was up 4.3 per cent to $192-million, due mainly to higher sales of telecommunications equipment to large enterprise customers.
  • Other services revenue increased 43.2 per cent to $63-million, driven by the incremental financial contributions from the acquisitions of MTS and AlarmForce Industries.
  • Residential NAS net losses were down 21.6 per cent to 57,533 from 73,421 in the first quarter of 2017, reflecting improved customer retention in Bell's fibre footprint. Bell residential NAS access lines totalled 3,197,216 at March 31, 2018, a 6.0-per-cent decline from 3,399,981 last year.
  • Total wireline voice revenue decreased 3.2 per cent to $950-million due to NAS access line reductions, decreased usage of traditional long distance, greater use of inclusive long-distance residential plans and lower sales of international long-distance minutes to wholesale customers compared with the first quarter of 2017.

Bell Media

Media operating revenue remained stable in the first quarter, declining just 0.3 per cent to $749-million as lower advertising revenue was largely offset by higher subscriber revenue.

Advertising revenue for conventional and specialty TV decreased due to a continuing soft advertising market and a shift in spending by advertisers to the main broadcaster of the PyeongChang 2018 Winter Olympics. Subscriber revenue increased, reflecting continued steady growth in CraveTV and TV Everywhere GO platforms, while digital media properties and out-of-home advertising also reported revenue growth.

Media adjusted EBITDA was down 3.0 per cent in the first quarter to $130-million, the result of higher operating costs driven by sports broadcast rights and CraveTV programming expansion.

  • CTV was the most-watched television network among key demographics in prime time for the 14th consecutive winter broadcast season with nine of the top 20 programs.
  • TSN remained Canada's No. 1 specialty sports channel and the top specialty network over all. TSN audiences grew 15 per cent over the first quarter of 2017 as a result of key programming such as the 2018 IIHF World Junior Championship, the Scotties Tournament of Hearts and the PyeongChang 2018 Olympic Winter Games.
  • Bell Media remained Canada's top radio broadcaster in winter 2018, reaching an average audience of 16.8 million listeners that spent more than 71 million hours tuned in each week.
  • Bell Media remained the digital media leader among Canadian broadcast and video network competitors in terms of views, minutes watched and videos served with monthly averages of 482 million total views, one billion minutes spent and 58-million videos served. The company reached 65 per cent of digital audiences in the first quarter with 20 million unique monthly visitors.

Common share dividend

BCE's board of directors has declared a quarterly dividend of 75.5 cents per common share, payable on July 15, 2018, to shareholders of record at the close of business on June 15, 2018.

Outlook for 2018

As a result of the adoption of IFRS 15, BCE has updated its adjusted EPS dollar guidance range upward. All other financial guidance targets for 2018 remain unchanged.

                                                Feb. 8 guidance              May 3 guidance

Revenue growth                                            2%-4%                       2%-4%
Adjusted EBITDA growth                                    2%-4%                       2%-4%
Capital intensity                                   approx. 17%                 approx. 17%
Adjusted EPS                                        $3.42-$3.52                 $3.45-$3.55
Adjusted EPS growth                                       1%-4%                       1%-4%
Free cash flow growth                                     3%-7%                       3%-7%
Annualized common dividend per share                      $3.02                       $3.02
Dividend payout policy                65%-75% of free cash flow   65%-75% of free cash flow

Call with financial analysts

BCE will hold a conference call for financial analysts to discuss first quarter 2018 results on Thursday, May 3, at 8 a.m. Eastern Time. Media are welcome to participate on a listen-only basis. Please dial toll-free 1-800-377-0758 or 416-340-2219. A replay will be available for one week by dialling 1-800-408-3053 or 905-694-9451 and entering pass code 8461008 followed by the number sign.

A live audio webcast of the conference call will be available on BCE's website. The MP3 file will be available for download on this page later in the day.

About BCE Inc.

BCE is Canada's largest communications company, providing advanced Bell broadband wireless, TV, Internet and business communication services throughout the country.

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