George Cope, President and CEO of BCE speaks to The Globe and Mail editorial board on Thursday July 25, 2013.The Globe and Mail
Bell Canada says it has plans to bring its Fibe television service to even more communities, after parent company BCE Inc. posted financial results suggesting it made gains on rivals such as Rogers Communications Inc. in the final quarter of last year.
The Montreal-based telecommunications giant, which ended last year with 479,430 Fibe TV subscribers, wants to broaden its network footprint beyond the 4.3 million households it can currently reach.
Urban homeowners seem to be embracing Internet-protocol television (IPTV) service as an alternative to cable – in the fourth quarter of 2013, Bell Fibe TV added 60,301 net new customers, up 25 per cent from the same period of 2012. The company wants to be able to offer Fibe to five million homes by the end of 2014, with a final goal of six million.
Bell's bet on Fibe is part of a longer-term strategy to break the cable companies' dominance of key markets in Ontario and Quebec. For years, Bell struggled to win over city dwellers with its satellite-based TV service – often thwarted by condo bylaws that banned the use of clunky dishes on balconies. The launch of Fibe in 2010 has allowed Bell to run fibre-optic cable into condos and homes in cities such as Toronto, Montreal and Quebec City.
But the strategic importance of Fibe stretches beyond poaching more television subscribers from its cable competitors, which also include Vidéotron Ltée. In 2013, 80 per cent of new Fibe TV customers also signed up for high-speed Internet and home phone service. That's key because Internet, rather than TV, is the future anchor product for cable companies.
Chief executive officer George Cope said Thursday he has never been so comfortable with Bell's competitive position because Fibe is helping to grow Internet market share. Moreover, in areas where Bell only provides fibre to a curb-side box or neighbourhood node (and line running into the home is still copper wire), it is using other techniques, such as the bonding of copper pairs, to provide a speed boost for Internet customers.
"We are having no speed competitive issues at all, which is why our market share of Internet is improving with Fibe TV," Mr. Cope said on a conference call with analysts. "All the condos that are built in the cities now have fibre right to them. All condos that didn't are being rebuilt with fibre right to them. Every new neighbourhood in any part of our footprint is built with fibre right to the home. And fibre to the node; we've definitely gotten closer to the home over the last two to three years."
Last year, Bell pushed into suburbancommunities such as Ottawa, Hamilton, Markham, Vaughan, Richmond Hill, Barrie, Milton, Newmarket, Stoney Creek and Aurora in Ontario, and Quebec communities of Laval, South Shore Montreal and North Shore Montreal.
Bell's ambitions of making more inroads into Toronto's condo market were also given a boost this week. The CRTC issued a decision stating that as of March 31, Rogers would not be allowed to provide telecom services to the York Harbour Club unless Bell was also given access to the 502-unit development. The regulator's decision was in response to a grievance that Bell filed last fall.
During the fourth-quarter, Bell added 15,690 net new high-speed Internet customers, as more customers opted for service bundles. In total, Bell's high-speed Internet count stood at 2.18 million at the end of last year.
More details will emerge about BCE's competition position when its cable rivals post their next batch of earnings. Rogers is scheduled to report results Feb. 12, while Quebecor Inc., Vidéotron's parent, is expected to report in mid March.
"Fibe TV continues to show good momentum and supports positive year-over-year growth in wireline EBITDA [earnings before interest, taxes, depreciation and amortization]. The steady results set a tone for a good start to 2014," wrote Maher Yaghi of Desjardins Securities Inc. in a note to clients. "As penetration for IPTV increases, BCE should continue to post improving results in wireline, which is important for the long-term sustainability of the dividend."
In conjunction with its fourth-quarter results, BCE also increased its annual common share dividend by 14 cents per share to $2.47, starting April 15. On an adjusted basis, which excludes extraordinary items, earnings per share amounted 70 cents versus year-earlier 60 cents. Analysts had expected adjusted EPS of 0.694 cents, according to Bloomberg.
(BCE owns a 15-per-cent stake in The Globe and Mail.)
Rita Trichur