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BCE Lags Q2 Earnings, Tops Rev - Analyst Blog

By: Zacks.com
Posted: 8/12/2013 4:55:00 PM
Referenced Stocks: BCE;CHL;SKM;TKC

Canada's leading telephone operator, BCE Inc. ( BCE ), reported second-quarter 2013 adjusted earnings of 73 cents per share (77 Canadian cents) missing the Zacks Consensus Estimate of 75 cents. The results deteriorated 24% from 96 cents per ADS (97 Canadian cents) in the year-ago quarter. The decline in earnings is mainly attributable to the higher value of uncertain tax position and increased interest expenses related to the financing of the Astral acquisition.

Revenues increased 1.5% year over year to $4.88 billion (C$5.00 billion) and ahead of the Zacks Consensus Estimate of $4.78 billion. The strong performance was backed by strength in the Wireless, TV, Internet and business service segments plus a reduction in wireline voice erosion.

EBITDA grew 1.1% year over year to C$2.06 billion ($2.01 billion) in the reported quarter supported by strong contributions from the Wireless and Media units.

Revenue Segments

Bell Wireless : Revenues from Bell Wireless increased 5.4% year over year to C$1.44 billion ($1.41 billion). Service revenues were up 6.1%, (resulting from postpaid subscriber growth and increased usage of data services) and product revenues were up 2.9%, which aided the revenue growth.

BCE's net wireless subscribers during the reported quarter stood at 7.86 million, up 3.5% year over year. Post-paid net additions increased by 2.7% or 96,390, while prepaid net losses improved 3.7% or 52,824. Blended ARPU (average revenue per user) rose 2.7% year over year to C$56.85 ($55.56) on the back of higher proportion of postpaid customers in the total wireless subscriber base in addition to more customers opting for mobile data services.

Churn rate (customer switch) improved to 1.6% from 1.7% in the year-ago quarter. Post-paid churn remained unchanged at 1.3% as compared with the year-ago quarter due to continuous investments in customer service and retention. Prepaid churn also remained unchanged at 3.7% as compared to the year-earlier period.

Bell Wireline : Revenues fell 0.9% year over year to C$2.51 billion ($2.45 billion) due to lower local and access (down 7.1%), long distance (down 11.2%) and equipment and other revenues (down 4.7%). Data revenues increased marginally 4.0% to C$1.45 billion ($1.42 billion) owing to Fibe customer growth, increased IP-based broadband connections revenues and better data product sales.

Network access services (NAS) fell 7.7% year over year to 5.42 million. Residential NAS losses improved 11.8% or 11,029 in the second quarter of 2012. Business NAS losses improved 15.3% or 5,206 in the reported quarter.

BCE activated 3,901 high-speed Internet customers compared with a net loss of 664 customers in the year-ago period. Bell FibeTV subscribers at the end of the second quarter were 346,316 versus 158,324 million in the year-ago quarter. At the end of the second quarter, total TV subscribers grew 5.3% year over year to 2.37 million.

Bell Media : Bell Media generated revenues of C$559.0 million ($546.4 million), up 4.7% year over year. The growth is attributed to strong advertising and increase in speciality TV rates.

Bell Aliant : Revenues from this segment inched up 0.6% year over year to C$691.0 million ($675.0 million) based on increased growth in data, which was offset by continuous decline in local and access, long distance and equipment and Other revenues.

Astral Acquisition Completed

On July 5, 2013, Bell Media completed the acquisition of Montreal-based Astral Media for $3.27 billion. Bell Media now holds 25 television stations, including the very popular, The Movie Network and French language pay-TV service, Super Ecran. Bell Media will also hold 77 radio stations including top brands like NRJ, Rouge fm, Virgin Radio among others. Apart from enhancing Bell's presence in Quebec, the acquisition provides Bell's customers with various programming options.

Liquidity

BCE exited the quarter with C$2,208.0 million (approximately $2,158.1 million) of cash and cash equivalents compared with C$129.0 million (approximately $128.0 million) as of December 31, 2012. Capital expenditures were C$830.0 million ($811.2 million), down 12.8% year over year.

Dividend

The company's board of directors declared a quarterly dividend of 58.25 Canadian cents per share, payable on Oct 15, 2013 to shareholders of record on Sep 16, 2013.

Our Take

BCE currently retains a Zacks Rank #3 (Hold). The company displays a robust wireless business model, improving wireline operations and expanding activities in the media sector. We believe that the company's focus on investing in broadband networks and rendering better services, supported by a competitive cost structure will deliver positive results, going forward. However, stiff competition, continued decline in network access services, constant need to invest in technology and union issues remain the primary concerns for the company.

Other Stocks

Other telecom stocks worth considering are SK Telecom Co. ( SKM ), China Mobile Limited ( CHL ) and Turkcell Iletisim Hizmetleri AS ( TKC ). SKM carries a Zacks Rank #1 (Strong Buy) while the other two stocks carry a Zacks Rank #2 (Buy).



BCE INC (BCE): Free Stock Analysis Report

CHINA MOBLE-ADR (CHL): Free Stock Analysis Report

SK TELECOM CO (SKM): Free Stock Analysis Report

TURKCELL IL-ADR (TKC): Free Stock Analysis Report

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