BCE reports year-over-year drop in its first-quarter profit as competition drives down prices

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BCE Inc. BCE-T reported a year-over-year drop in its first-quarter profit as heightened industry competition drove down prices and increased customer turnover.

The Montreal-based telecom giant had $457-million in net earnings, down 42 per cent from a year earlier owing in part to severance costs relating to its most recent restructuring. The telecom reduced its work force by 4,800 positions – or 9 per cent – in February, after slashing its headcount by 1,300 positions the previous June. The profit amounted to 44 cents a share, down from 79 cents a year earlier.

Mirko Bibic, BCE’s president and chief executive officer, said during a conference call Thursday that the telecom was focused on “realigning costs to address near-term competitive and economic pressures, and effectively balancing growth with profitability in a highly competitive marketplace.”

BCE’s revenue for the three-month period ended March 31 was $6.01-billion, down 0.7 per cent from $6.05-billion during the same period last year.

BCE added 45,247 net new postpaid wireless subscribers during the quarter, up 4.5 per cent from a year earlier. (Postpaid subscribers are those who are billed at the end of the month for the services they used, versus prepaid customers, who pay upfront for wireless services.)

Scotiabank analyst Maher Yaghi called the wireless results “better than expected” but noted that average revenue per user, known as ARPU, declined 1 per cent year-over-year while postpaid wireless churn – the rate of customer turnover on a monthly basis – was “quite elevated.”

“The main reason for the elevated churn, in our view, is the positioning of all players in the market with significant promotions combined with a higher percentage of bring-your-own-device customers in the base allowing for easy switching,” Mr. Yaghi wrote in a note to clients.

“We believe the industry needs to see a reduction in churn otherwise long-term margins could come under pressure,” he wrote, adding that he expects the number of net new subscribers to slow down as immigration trends level off.