BCE says business activity picking up but second wave of COVID-19 makes holiday season tough to predict

BCE Inc. saw business activity pick up as its stores reopened and live sports resumed, but the company’s chief executive officer says the second wave of the COVID-19 pandemic makes it difficult to predict how the telecom industry will fare during the holiday shopping season.

Montreal-based BCE added 128,168 net new wireless subscribers during the third quarter and 81,696 net new residential internet and IPTV customers during a period of heavy promotional activity by wireless providers.

“I’m expecting continued momentum in [the fourth quarter],” Mirko Bibic, president and CEO of BCE and Bell Canada, said Thursday during a conference call to discuss the company’s financial results. But whether or not the pace of improvement will be as strong as it was going from the spring second quarter – considered a low-water mark for the industry as much of the country was in lockdown – to the third remains to be seen, Mr. Bibic added.

“The pace of improvement in [the fourth quarter] is going to be a function of the COVID impacts on the economy generally, and those impacts will be industrywide,” Mr. Bibic said.

Mr. Bibic made his comments as BCE reported $5.79-billion in third-quarter revenue, down 2.6 per cent from a year ago as the pandemic continued to weigh on its media and wireless businesses and prompted some business customers to cut or delay spending.

Bell Media’s results rebounded from the second quarter when the pandemic prompted major sports leagues to suspend their seasons. As those games returned, so did advertisers across all of Bell Media’s platforms, including its sports broadcaster, TSN. However, the segment’s revenues were still down roughly 16 per cent from a year ago, to $628-million, as economic uncertainty kept some advertisers on the sidelines.

Roaming revenues, which the company collects when wireless customers use their devices abroad, have plummeted since the pandemic halted travel, and are expected to remain a headwind for the foreseeable future, BCE’s chief financial officer Glen LeBlanc said.

Mr. Bibic characterized the three-month period ended Sept. 30 as “intensely competitive,” with wireless carriers emerging from lockdowns and offering discounts on phones to attract new customers.

He urged the federal government to swiftly implement changes to the Broadcasting Act tabled Tuesday that would require online streaming services such as Netflix, Disney+ and Spotify to contribute financially to the creation of Canadian content. Bill C-10 would also give the Canadian Radio-television and Telecommunications Commission the ability to force streaming platforms to promote Canadian content. Both of those rules apply to Canadian broadcasters such as Bell Media,

He also noted that the government has yet to implement sales taxes on foreign streaming services. “We just need to get going on that. I can’t understand why we’re still talking about this,” Mr. Bibic said.

Bell, which operates the streaming service Crave, has been calling for a “level playing field” for foreign and domestic broadcasters for some time, Mr. Bibic said.

BCE had $740-million in profit during the quarter, down nearly 20 per cent from $922-million a year ago. The earnings amounted to 77 cents a share, down from 96 cents during the same period last year.

The company attributed the decline to lower adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and higher expenses related to losses on derivatives used for hedging

Revenue was down from $5.94-billion during the same period last year, but came in slightly above the consensus analyst estimate of $5.7-billion from S&P Capital IQ.

Shares of BCE Inc. closed down 2 per cent to $53.23 on Thursday.

RBC analyst Drew McReynolds called it a strong quarter for BCE’s internet business, while growth in its wireless segment was steady.

“The company remains committed to meeting planned capital investments for 2020 and sustaining the current dividend and, in our view, has substantial financial strength and liquidity to do so,” Mr. McReynolds said in a note to clients.

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