BCE reports Q1 net earnings of $615 million, up almost nine per cent

OTTAWA - Canada's new wireless code of conduct is taking a bite out of BCE Inc.'s wireless business, but chief executive George Cope was upbeat about the company results that helped drive higher profits in the first quarter.

Cope said the move to two-year contracts from three-year agreements under the new code has pushed up prices.

"We're thrilled with the financial results of the wireless business, but clearly the industry has slowed a little bit as a result of the wireless code," Cope said Tuesday following the BCE annual meeting.

"But, frankly, it was a really good first quarter and, if you look historically, the first quarter is the slowest because the fourth quarter is so strong."

He added that a lack of any big new offerings from the smartphone makers also affected the results.

The Canadian Radio-television and Telecommunications Commission brought in a new wireless code of conduct in December. The changes included the right for consumers to cancel their wireless contracts after two years without fees, as well as certain limits on roaming and excess data charges.

BCE reported Tuesday a first-quarter profit of $615 million or 79 cents per share, compared with $566 million or 73 cents per share in the same quarter a year ago, helped by growth in its wireless and media divisions.

Operating revenues grew 3.7 per cent to $5.09 billion from $4.91 billion a year ago.

Adjusted net earnings were $626 million or 81 cents per share, up from $599 million or 77 cents per share a year ago.

Analysts on average had expected a profit of 76 cents per share on $5.12 billion in revenue, according to data compiled by Thomson Reuters.

BCE also confirmed its guidance outlined earlier this year for revenue growth in the range from two to four per cent and adjusted earnings per share in the $3.10 to $3.20 range.

The results came as Bell added 33,964 postpaid net wireless customers, mostly smartphone subscribers on two-year contracts. That compared with 59,497 in the same quarter last year.

Wireless revenues increased 4.5 per cent to $1.47 billion in the quarter, from $1.40 billion last year, as average revenue per user increased 3.5 per cent to $57.90.

Barclays analyst Phillip Huang said the overall wireless results were "solid."

"Continued improvement in subscriber mix and data growth drove ARPU growth acceleration," Huang noted, adding that the turnover of Bell wireless customers also improved slightly.

On the downside, the corporate business was a source of weakness in the quarter as companies reduced the number of phone lines and converted to Internet-based services.

Bell lost 35,595 lines at businesses, up 43 per cent or 10,706 compared with a year ago.

Canaccord Genuity analyst Dvai Ghose noted the weakness in the business segment reflected general economic weakness in Quebec and Ontario.

"With no obvious turnaround in key verticals, like manufacturing and retailing, we expect continued weakness in the enterprise segment," Ghose wrote in a note to clients.

Revenues for Bell Media, which includes TV and specialty TV channels, increased by 40.7 per cent to $722 million thanks to higher advertising and subscriber fees from the Astral acquisition. Rate increases in specialty TV services and higher revenues from new mobile content deals also helped Bell Media's revenues.

BCE acquired Astral Media last year and its stable of TV channels and radio stations in a deal worth $3.8 billion.

Revenues for subsidiary Bell Aliant (TSX: BA) decreased 1.2 per cent to $676 million in the first quarter due to continued declines in local and long-distance phone customers and competition.

As of March 31, BCE said it had 7.9 million wireless subscribers, up 1.2 per cent from a year ago. The number of Internet subscribers grew 3.4 per cent to 3.16 million.

Bell Fibe TV added 54,680 net new customers during the quarter, up 15.2 per cent. The company says its total number of TV subscribers rose 8.1 per cent to 2.52 million.