File photo of BCE CEO George Cope.Chris Young/The Canadian Press
As the wireless industry begins to mature, Canada's biggest cellular carriers say they are looking for growth from customers willing to spend more on smartphone plans with larger data buckets.
BCE Inc. reported fourth-quarter earnings Thursday that outpaced analyst projections as it continued a trend among wireless providers of focusing on earning more from each subscriber.
The Montreal-based telecom and media company said Thursday it added 117,000 postpaid wireless customers in the fourth quarter, more than the 108,000 analysts predicted, and increased its overall average revenue per user (ARPU) by 5.5 per cent to $61.12.
(BCE owns 15 per cent of The Globe and Mail.)
"We clearly know we are attracting the right type of [wireless] clients," BCE chief executive officer George Cope said on a call with analysts Thursday morning. "I think the best testament to that is ARPU growth we're seeing across the base."
He said "pricing discipline" – the industry's term for maintaining prices even as competitors offer better deals to try to gain market share – has helped the company increase its average revenue.
"But I think, importantly, it's just our customers using the devices more and more because of the broadband capabilities of LTE [long-term evolution]," he added.
Mr. Cope said 47 per cent of BCE's postpaid customers are now using LTE, the latest generation of wireless services. The faster downloading and streaming speeds on LTE means customers tend to use more data and spend more money on larger plans.
BCE is not alone in its strategy aimed at increasing ARPU, but it appears to have an edge over its chief rival Rogers Communications Inc.
Rogers, Canada's largest wireless carrier with about 9.45 million customers, said last week it lost 58,000 postpaid customers in the fourth quarter. CEO Guy Laurence attributed the departures to a shift in the company's mix of customers as he pursues a transformation plan aimed at attracting higher-spending subscribers.
"The results clearly show that Bell is continuing to take wireless-subscriber, revenue and cash-flow share from Rogers," Canaccord Genuity head of research Dvai Ghose wrote in a research note Thursday. "We also expect strong Q4/14 wireless results from Telus [Corp.] next week."
BCE and Telus Corp. have been gaining on Rogers since they launched a shared network in 2009, upgrading to a technology that finally allowed them to offer customers the popular Apple Inc. iPhone. BCE now has 8.1 million total subscribers and Telus, which reports next Thursday, had about eight million as of the third quarter.
The fight for wireless subscribers will intensify later this year with the "double cohort" effect, which will see a greater-than-usual number of customers shopping for new deals at the same time as three-year agreements entered into before a new national code expire at the same time as a wave of two-year contracts.
Surging revenue in BCE's wireless division, along with strong subscriber numbers in its television, Internet and home-phone business, contributed to total sales in the quarter of $5.53-billion, up 2.7 per cent from last year and about $70-million ahead of analyst estimates.
Profit increased by 9.5 per cent to $542-million and adjusted earnings per share were up 2.9 per cent to 72 cents, one cent ahead of projections.
BCE's wireless division reported revenue of $1.65-billion in the quarter, up 9.6 per cent from the same time last year. The company also added more Internet subscribers than expected, with a total of 52,000 new customers, including numbers from Bell Aliant Inc., the Atlantic Canada communications provider BCE privatized last year.
Although its satellite television business lost about 34,000 customers, BCE added 58,000 new IPTV (Internet protocol television) subscribers.
The company's wireline division, which includes Internet, television and its declining home phone business, posted a 1-per-cent increase in operating revenue to $2.63-billion in the period, which it said was the first quarter of positive growth since the second quarter of 2010.
Bell Media reported a 3.9-per-cent drop in sales in the fourth-quarter to $789-million, attributing the decline in part to a one-time gain last year that did not recur in 2014, as well as to the loss of some hockey audiences as Rogers assumed the national NHL rights in the fall.
Some growth in advertising revenue from specialty channels, particularly its sports stations TSN and RDS, helped Bell Media offset a decline in ad spending on conventional television, the company said.
BCE's earnings report came one week after the Canadian Radio-television and Telecommunications Commission announced it would ban the long-standing practice of substituting Canadian commercials for American ads during Super Bowls (beginning in 2017) as well as on specialty channels.
Bell Media currently has the Canadian Super Bowl rights and BCE's chief legal and regulatory officer Mirko Bibic sought a meeting with the commission over the decision but was publicly rebuffed. Mr. Cope did not address the controversy during the company's earnings call Thursday.
In financial guidance also announced Thursday, BCE said it expects adjusted profit of $3.28 to $3.38 per share for the full 2015 year.
BCE also announced a dividend hike, increasing its annual payout by 5.3 per cent to $2.60 per year, beginning with the quarterly dividend payment in April.