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BCE Beats Q3 Earnings, Revenues on Strong Wireless Growth - Analyst Blog

Leading Canadian telephone operator BCE Inc. ( BCE ) reported robust financial results for the third quarter of 2014. Bothe the top and the bottom lines outpaced the respective Zacks Consensus Estimate.

Quarterly net income attributable to common shareholders was approximately $551.5 million, up 74.9% year over year. GAAP earnings per share were 71 cents, up 75% year over year. Adjusted net income per ADS (American Depository Share) was 73 cents, which surpassed the Zacks Consensus Estimate of 70 cents.

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Total revenue came in at approximately $4,775 million, up 1.9% year over year and also outpaced the Zacks Consensus Estimate of $4,588 million. The impressive performance was on the back of solid wireless and broadband growth.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $1,944 million, up 2.5% year over year. Quarterly adjusted EBITDA margin was 40.7% as against 40.5% in the prior-year quarter.

Cash Flow

During the third quarter of 2014, BCE generated approximately $1,730 million of cash from operations, up 8.8% year over year. Free cash flow, in the reported quarter was around $766.5 million, up 11.6% year over year.

Segments in Detail

Bell Wireless: Revenues from Bell Wireless increased 7% year over year to approximately $1,468.7 million. Higher services revenues (up 10.9%) resulting from higher postpaid subscriber mix and better-blended ARPU (average revenue per user) boosted the results. Blended ARPU rose 5.9% year over year to $56.74 on the back of higher data usage and improved rate plan pricing. Wireless data revenue leaped 23.9% while product revenues improved 10.4% in the third quarter.

During the reported quarter, BCE added a net 91,779 postpaid wireless subscribers but lost 8,143 prepaid subscribers. Postpaid customer churn rate remained stable year-over-year at 1.20%. On Sep 30, 2014, the company had 8,035,130 wireless subscribers, up 1.1% year over year.

Bell Wireline: Revenues from Bell Wireline fell 0.7% year over year to approximately $2,265.6 million due to 7.7% decline in product revenues partially offset by 0.2% growth in wireline service revenue and 3.1% rise in wireline data revenue.

Network access services (NAS) fell 7.1% year over year to 4,959,941. The decline was primarily due to competition from cable operators, business customer conversion from voice lines to IP-based services, and customer shift to high speed Internet from older technologies. Residential NAS losses during the quarter were 43,178 compared with 58,957 in the third quarter of 2013. Business NAS losses were 31,854 against 28,526 a year ago.

On Sep 30, 2014, BCE had total TV subscribers of 2,600,418, up 6.7% (including 857,473 IPTV customers, an increase of 47.2%); 3,245,016 Internet subscribers, up 4.2%; and total NAS lines of 7,223,858, a decrease of 6.6%.

Bell Media: Bell Media generated revenues of approximately $611.2 million, were up by a mere 0.2% year over year. Higher revenues from broadcast distributor subscriber fee for Bell Media specialty TV services and higher revenues from TV Everywhere GO products was offset by decreased advertising revenues. Notably, Bell Media has entered into a distribution agreement with Telus Corp. ( TU ).

Bell Aliant: Revenues from this segment grew 0.4% year over year to around $642.5 million, as growth in Internet, TV, other data and wireless revenues surpassed the declines in local, long distance and other revenues.

Guidance

For fiscal 2014, BCE reaffirmed its financial guidance. The company expects earnings per share of C$3.10-$3.20 while free cash flow growth will be around 3-7%. Annual dividend per share will be $2.47 reflecting a dividend pay-out policy of 65-75%.

Excluding Bell Alliant, revenue growth for Bell is expected around 2-4%, while EBITDA growth is estimated at around 3-5%. Capital intensity projection for Bell is around 16-17%.

Zacks Rank

BCE currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include SK Telecom Co. Ltd. ( SKM ) and Chunghwa Telecom Co. Ltd. ( CHT ). While SK Telecom currently carries a Zacks Rank #1 (Strong Buy), Chunghwa has a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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