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Robust wireless growth pushes BCE profit 8.7 per cent higher

BCE CEO George Cope attends the company's AGM in Toronto on Thursday May 9, 2013.


BCE Inc. posted an 8.7-per-cent increase in first-quarter net earnings on robust growth at its Bell Wireless division and the inclusion of Astral Media in its results.

The media and telecommunications company said on Tuesday that it booked a net profit of $615-million or 79 cents per share in the quarter, up from $566-million or 73 cents in the year-earlier period.

On an adjusted basis, net profit was $626-million or 81 cents per share compared with 77 cents.

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The returns beat analysts' consensus estimate of 76 cents per share for the quarter.

Operating revenue in the first quarter was $5.09-billion, up from $4.91-billion a year earlier, but just off the consensus estimate of $5.12-billion.

However, Barclays Capital Inc. analyst Phillip Huang said the solid earnings per share performance got a big boost from non-operating gains.

"EPS beat was mainly helped by higher other income (mark-to-market gains in derivatives, investment income) and lower [depreciation and amortization]," he said in a research note Tuesday.

BCE reaffirmed its revenue and profit forecast for 2014 and president and chief executive officer George Cope said on an analysts' call Tuesday that the company continues to "close the gap with our competitors" on the wireless front.

Rival Rogers Communications Inc. is still ahead of BCE as Canada's largest wireless service provider.

(Rogers also beat out BCE last year with a $5.2-billion deal for the rights to National Hockey League games. BCE owns the TSN sports network.)

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Bell Wireless operating revenue was up 4.5 per cent to $1.5-billion in the quarter, from $1.41-billion in the year-earlier period.

Postpaid net additions came in at 33,964 in the quarter, below the consensus estimate of 39,700. BCE said the decrease was due to slower market growth resulting from higher rate-plan pricing on new two-year contracts mandated by the new federal Wireless Code of Conduct, and fewer smartphone launches.

Average revenue per wireless user in the quarter was $57.90, up 3.5 per cent from a year earlier and above consensus of $57.33 and better than Rogers' $57.63.

"Bell continues to gain wireless market share and is showing continued improvement in customer quality and lower churn, which should continue to support the company going forward," Desjardins Securities analyst Maher Yaghi said in a research note Tuesday.

Bell Mobile TV had 1.33-million subscribers, up from about 800,000 at the same time last year, the company said.

Bell Fibe TV's net new customers in the quarter reached 54,680, up 15.2 per cent.

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There was a continued but moderating fall in legacy voice revenue.

Internet net additions in the quarter were strong at 15,627, compared with analysts' consensus of 10,400, said Mr. Yaghi.

At the Bell Media unit, operating revenue increased 41 per cent to $722-million, reflecting higher advertising and subscriber fee revenues from the acquisition of Astral Media and rate increases in specialty TV as well as higher revenues from new mobile content deals.

Total TV subscribers in the quarter were 2.52 million, up 8.1 per cent from the year-earlier quarter. Assets in the media unit include the CTV television network.

"Over all, results are in line and we are seeing positive trends in the wireline segment. The steady results set the tone for a good start to 2014," said Mr. Yaghi.

BCE's board of directors declared a quarterly dividend of 0.6175 cents per common share.

"Bell's strategic investments in advanced broadband networks and services, improved customer service and Canadian content development are driving the growth services – Wireless, TV, Internet and Media – that are rapidly transforming our business," said president and chief executive officer George Cope.

"Fast-growing Fibe TV is increasing Bell's share of the household as it drives significant gains in high-speed Internet additions and reductions in Home Phone losses. Bell Media, with Astral contributing to strong EBITDA and free cash flow growth, continues to expand its media leadership with outstanding new Canadian programming, TV Everywhere innovations and sports viewership growth."

BCE, the parent company of Bell Media, owns 15 per cent of The Globe and Mail.

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