BCE posts higher Q2 results as wireless customers upgrade smartphone plans

MONTREAL - BCE Inc. (TSX:BCE), Canada's largest telecom company, posted higher profits in the second quarter as more wireless customers upgraded to smartphones with bigger data plans.

"Canadian consumers adoption of smartphones and usage of these devices, and the improvement in our speed of the LTE by 50 per cent over the next four or five weeks - that is only going to drive more and more demand for usage of the product," BCE chief executive George Cope said during a conference call with analysts.

"The (revenue per user) that we're seeing on the market is not from price increases; it's generally from pricing discipline, but also from increased usage of the product."

Operating revenue on the wireless side was up 5.7 per cent to $1.5 billion, driven by a higher postpaid subscriber mix, greater data usage and higher average rate plan pricing as customers moved to two year from three year contracts.

Wireless customers paid an average of $59.49 a month for service, up 4.6 per cent from last year.

Cope said wireless is an area he expects will grow.

"One of the interesting things for Canada is...we still haven't been as aggressive in terms of the tablet market," he said.

"I think we'll see that evolve and start to, over time, look a little bit more like the US, so there's incremental revenue there and I probably am as optimistic today on wireless growth as I have been over the last 10 years. I still think it's early days for this industry."

Bell also made some strides when it comes to churn, or the rate at which customers are lost, amid efforts to improve customer satisfaction.

"Bell continues to gain wireless market share and is showing continued improvement in customer quality and lower churn," Desjardins Securities analyst Maher Yaghi said in a note to clients.

"We continue to like the company's prospects, given the strong trends in wireless and the improving operational results in wireline."

BCE reported net earnings attributable to common shareholders was $606 million, or 78 cents per share for the three months ended June 30, up from $571 million or 74 cents per share in the same period a year earlier.

Adjusted earnings grew to 82 cents per share from 77 cents, while operating revenues increased 4.4 per cent to $5.22 billion as company booked higher advertising and subscriber fee revenues from its Astral assets.

Analysts ahead expected adjusted earnings per share of 84 cents.

Among its other segments, BCE said wireline residential services revenue grew 1.3 per cent, fuelled by combined Bell Fibe TV and Internet net customer activations.

That countered the ongoing loss of voice and data revenues, competitive pricing pressures in residential, business and wholesale markets, and lower business data product sales.

Revenue at Bell Media was up 36 per cent to $761 million, including Astral Media residential local access line losses.

Cope said the media segment continued to experience weakness in the advertising market, although he said Bell's numbers suggest the company is "competing very well in the Canadian marketplace."

BCE has several top TV shows and new programs scheduled for the fall season, he said, and is expanding TSN from two to five feeds to address growing consumer demand for sports content.

BCE said last month it was privatizing its Halifax-based affiliate Bell Aliant (TSX:BA) in a $3.95 billion deal, and Cope said Thursday that BCE had received Competition Act clearance on Aug. 5, which was the only approval required to go ahead with the deal.

Competitor Telus Corp. (TSX:T) also reported its earnings Thursday, and said second-quarter profits jumped 33 per cent to $381 million on growth in both its wireless and wireline businesses. Operating revenue grew 4.4 per cent to $2.95 billion, as it added 78,000 wireless customers on contracts, 23,000 subscribers for its television services and 15,000 high-speed Internet customers.

On the Toronto stock market Thursday, shares in BCE were trading down 13.5 cents to $48.74, while Telus was up 14 cents to $38.10.

- By Romina Maurino in Toronto.

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