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George Cope President and CEO of BCE.

Chris Young/Chris Young/THE CANADIAN PRESS

After a three-year overhaul that slashed jobs, refocused strategy and returned billions of dollars to shareholders, BCE Inc. has announced results that make it clear the telecom giant's turnaround story is still a long way from complete.

The company's fourth-quarter performance and outlook for this year, announced on Thursday, fell short of expectations and sent the shares sliding 3 per cent, one of the steepest declines in more than a year.

Canada's biggest communications company boosted sales by 10 per cent last quarter, driven by strong performance in wireless. But excluding the media division, which was formed last year following BCE's acquisition of CTV Inc., the core communications business actually shrank marginally. The weak economy, the consumer trend of cutting land lines in favour of wireless, and promotional discounts in TV and internet services all ate into BCE's growth.

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Over the past decade, North American telecoms have said that new opportunities from emerging wireless technology and broadband would more than offset the declining business in transmitting voice over land lines. But BCE, the parent company of Bell Canada, continues to struggle with that transition, partly because its old business relied so heavily on voice lines. Its profit surged 53 per cent last quarter, but that was largely because the previous period included a one-time accounting charge.

On Thursday, management said that marrying its recently acquired media content with its broadband and wireless technology would now be a pillar of its corporate strategy. Executives added that customers are already showing strong interest in mobile TV, a factor that helped boost wireless data revenue by 32 per cent last quarter.

BCE's media unit, which includes specialty channels TSN, MTV Canada and the Comedy Network, outperformed internal expectations, but analysts said earnings were disappointing as advertising revenue dipped 4 per cent year-over-year.

"In the near-term [the CTV acquisition is]a tack-on of a media company to a telecom company. In the medium to long-term, I think there is real value," said Greg MacDonald, an analyst with Macquarie Capital Markets Canada Ltd. The purchase of CTV, along with Bell Canada's decision to buy a majority stake with Rogers Communications Inc. in Maple Leaf Sports and Entertainment Ltd., was a "masterstroke" because it will lock in digital content at a predictable price, in an environment that will change rapidly in the next five years, he added.

Bell Canada said that last quarter it added more than 27,700 television subscribers, many to its new, high-quality Bell Fibe TV service. Fibe is an Internet protocol TV (IPTV) service that requires large investments to lay fibre optic cable.

BCE has come under criticism for choosing to roll out its IPTV product more gradually than Telus Corp. , with some warning that the longer BCE takes, the less competitive advantage the service will offer over cable company offerings. But George Cope, the president and chief executive officer of BCE and Bell Canada, defended the strategy on Thursday, saying the company has accelerated its rollout of IPTV and has just doubled the reach of its next-generation wireless technology, called LTE, to 14 cities.

Siim Vanaselja, chief financial officer of Bell Canada and BCE, said the media assets BCE has acquired are already an integral part of the company and will help it deliver steady overall revenue growth of between at least 2 per cent and 3 per cent a year.

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That level of growth will translate into a minimum 5-per-cent gain in earnings and cash flow. "As long as we can do that, we can keep growing the dividend at a rate of 5 per cent," he said. "I think the dividend is very safe."

BCE shares offer a dividend yield of 5.1 per cent today, after cumulative growth of 49 per cent over the last three years.

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