BCE hikes dividend, posts wireless gains

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Iain Marlow

Globe and Mail Update
Last updated Thursday, May. 12, 2011 8:28AM EDT

BCE Inc. (BCE-T37.350.411.11%), Canada's largest communications company, reported strong first quarter results on Thursday posting a 5 per cent dividend increase and making further gains in wireless, even as overall profit dropped by about 28 per cent.

Overall profit dropped to $503-million or 67 cents a share in the first quarter from $706-million or 92 cents per share in the same quarter last year as fierce competition ramped up in the wireless space and core wired businesses, such as home phone, continued a gradual decline.

BCE CEO George Cope on buying CTV (part 1) However, adjusted earnings per share were up to 72 cents per share from 61 cents last quarter when the sale of non-core assets last year are factored out. Profit margins also improved, with earnings before interest, taxes, depreciation and amortization or EBITDA growth of 6.4 per cent, which the company said was the best performance in eight years.

George Cope, BCE's president and CEO, said in the release that the dividend increase to $2.07 per year is the result of strong expected growth from the company's recent purchase of CTV Inc., one of the country's largest broadcasters.

Analysts were cheered by the results on Thursday morning, as the company showed strong growth in profit margins and raised several aspects of its guidance - including revenue growth - on the back of strong wireless results and quick, clean growth from the early close of the CTV acquisition. That purchase, of course, has allowed Bell to focus on expanding its portfolio of mobile TV offerings. And Mr. Cope said that roughly 2,000 customers per week are signing up for mobile video offerings, buying access to such shows as BNN on their smart phones for a set monthly rate.

Bell Mobility, the company's wireless unit, continued to make strong headway in signing up high-value customers on smart phones and data plans, even as new competition ate into the company's less valuable pre-paid, or top-up, subscriber base and revenues from voice (as opposed to texting and data, such as e-mail or mobile video watching) continued to decrease. Bell also said, like others, that it would begin deploying a newer, more advanced wireless network using LTE, or Long Term Evolution, technology in some markets this year.

For a company that has struggled to catch up to Rogers Communications Inc. in smart phones, this quarter had some good news: Now, as much as 55 per cent of the total customers signing wireless contracts with Bell are doing so on smart phones, with voice and data plans to boot. But the overall mix of existing customers on smart phones still lags its two main competitors, Rogers and Telus Corp., according to RBC Capital Markets analyst Jonathan Allen.

In TV, gains of 12,000 customers in Bell's new, high-quality Internet protocol-based Fibe TV service were muted, Mr. Allen noted, because more customers were leaving Bell's satellite TV service than expected, crushing expectations of 80,000 or more subscriber additions with an actual increase of only 8,000.

The company is holding its annual general meeting in Toronto on Thursday morning.