BCE Releases 2011 Second Quarter Results

BCE Inc., a Canadian communications company, reported BCE andBell results for the second quarter (Q2) of 2011.

In a release on August 4, the company noted earnings details:

BCE delivered financial performance, with net earningsattributable to common shareholders of $590 million, compared to$605 million last year, and Adjusted net earnings attributable tocommon shareholders of $663 million, an increase of 11.4 percent.Bell had revenue growth of 13.5 percent and EBITDA growth of 10.2percent driven by the new Bell Media business unit formed at thestart of Q2.

Bell Wireless had revenue growth of 6.1 percent, wirelesspostpaid net additions of 94,309, accelerating smartphonepenetration and data revenue growth of 34 percent. EBITDA growth wasmoderated by increased investment in customer acquisition andretention.

Bell Wireline delivered EBITDA growth of 2.5 percent on a 4.9percent year-over-year reduction in operating costs. TV revenuegrowth of 6.0 percent and residential Internet revenue growth of 6.6percent reflected solid TV and Internet subscriber base growthdriven by the ongoing rollout of Bell Fibe TV and Fibe Internetservices.

"The Bell team is effectively executing our strategic imperatives- leveraging our leading broadband network and digital contentinvestments to drive smartphone, TV and Internet growth, while atthe same time enhancing our efficiency and competitiveness acrossall our business and consumer product lines," said George Cope,President and CEO of Bell Canada and BCE. "Bell is seeing double-digit revenue and EBITDA growth thanks to the strong contribution ofBell Media, steady growth in our enhanced Bell TV and Bell Mobile TVservices, impressive increases in postpaid wireless subscribers andsmartphone penetration, and ongoing reductions in local landlinelosses. Savings in wireline operating costs amount to $160 millionso far this year. Bell's strong operational and marketplaceexecution is keeping us comfortably on track to meet all ourfinancial targets for 2011."

"Bell has delivered steady operating performance through thefirst half of 2011, with revenue and EBITDA growth supportingsubstantial free cash flow and net earnings generation. We expect tomaintain good momentum in our core businesses for the remainder ofthe year. Accordingly, we are reconfirming our increased financialguidance for 2011, including growth in Adjusted EPS in the range of6 percent to 9 percent, supporting BCE's dividend growth model.Adjusted EPS increased 10.3 percent to $0.86 per common share in Q2from $0.78 per common share the year before," said Siim Vanaselja,CFO for Bell Canada and BCE. "During the quarter, we also loweredour average cost of debt by taking advantage of attractive capitalmarket conditions to issue $1 billion of long-term debt at anaverage interest rate of 4.3 percent, completing the permanent debtfinancing for the CTV acquisition and all our 2012 debt refinancingrequirements. These efforts, along with the issuance of BCEpreferred shares that generated $345 million in gross proceeds inJuly, further enhance our financial flexibility with an expectedyear-end cash balance of $700 million to $800 million."

Bell's operating revenues increased by 13.5 percent this quarter,to $4,362 million, as revenues from the acquisition of CTV on April1, now part of the new Bell Media unit, as well as higher wirelessand TV revenues, offset declines in local and access, long distanceand other revenues. Bell's EBITDA grew by 10.2 percent to $1,654million this quarter reflecting the addition of Bell Media's EBITDAand higher wireline and wireless EBITDA.

Bell Wireless operating revenues increased by 6.1 percent thisquarter with service revenues increasing by 5.7 percent and productrevenues increasing by 9.5 percent. Bell Wireless EBITDA increasedby 0.9 percent, as higher operating revenues were largely offset byan increase in acquisition and retention costs, as well as theimpact of certain non-recurring costs. Smartphones represented 56percent of gross postpaid activations this quarter and now make up38 percent of Bell's postpaid customer base, contributing to strongwireless data revenue growth of 34 percent. Blended ARPU increasedby $0.87 to $52.99, reflecting the significant increase in higher-value postpaid customers as a percentage of our wireless subscriberbase.

Bell Wireline operating revenues decreased by 2.0 percent as TVand residential Internet revenue growth was offset by declines inlocal and access, long distance, wireline data and equipmentrevenues. Bell Wireline increased ARPU across its portfolio of TV,Internet and Home phone residential services, as growing traction ofboth Fibe TV - now available to more than 1.1 million households inToronto and Montreal - and Fibe Internet drove increased triple-play household penetration. Bell Wireline EBITDA increased by 2.5percent in Q2, due to approximately $70 million of savings fromreduced labour, marketing and general and administrative costs,resulting in EBITDA margin expansion of 1.8 percentage points to40.7 percent.

NAS (network access service) line losses totaled 100,497 thisquarter, an improvement of 22.2 percent compared to last year. High-speed Internet subscribers increased by 1,275 in Q2 compared to adecrease of 3,899 last year driven largely by increased demand forBell Fibe Internet service. Total TV subscribers increased by 6,072compared to an increase of 9,775 in Q2 last year due to higher churnpartly offset by the steady market traction of Bell Fibe TV servicein Toronto and Montreal.

The Bell Media segment had revenues of $529 million this quarter,benefitting from robust advertising revenues in all media propertiesalong with strong subscriber fee revenue from Specialty TV channelssuch as TSN and digital services. Bell Media's EBITDA was $123million in the quarter, reflecting this solid revenue performanceand rigorous control over conventional TV programming costs andmarketing and sales expenses. As part of the purchase priceaccounting for CTV, Bell Media's EBITDA for the quarter reflects anon-cash charge of $21 million to amortize the fair value ofprogramming rights.

Bell continues to lead Canada's investment in broadbandinfrastructure, with $645 million in new capital invested thisquarter -17.7 percent more than the same period last year. Bell israpidly deploying broadband fibre to residential homes andbusinesses in Ontario and Quebec, including Canada's largest Fibreto the Home buildout in Quebec City, to support the expansion ofBell Fibe TV and Fibe Internet; constructing new data hostingcentres for Bell Business Markets; enhancing our world-leading HSPA+network, with dual-cell 42 megabits per second (Mbps) service nowdeployed to 67 percent of the Canadian population; and building BellMobility's next-generation 4G LTE wireless network, which is set forlaunch in certain Canadian markets this fall.

BCE's cash flows from operating activities were $1,381 millionthis quarter compared to $1,321 million in the same period last yeardue to higher net earnings. Free cash flow(3) was $427 million thisquarter compared to $602 million last year due to higher capitalexpenditures. Cash flows from operating activities and free cashflow were also impacted this quarter by the recent Canada Post workstoppage which delayed the mailing of invoices to customers and thereceipt of customer payments. Collections are expected to normalizein the third quarter.

BCE's net earnings attributable to common shareholders were $590million, or $0.76 per share, compared to $605 million, or $0.80 pershare, in the same quarter last year. The year-over-year decreasewas due mainly to the recognition of the $164 million CRTC tangiblebenefit obligation related to the acquisition of CTV, partly offsetby the $89 million gain on investment related to the re-evaluationof our 15 percent equity interest in CTV held prior to theacquisition. BCE's Adjusted EPS increased by 10.3 percent to $0.86from $0.78 last year due to higher EBITDA partly offset by higherdepreciation and interest expense.

BCE's operating revenues increased by 11.6 percent to $4,955million this quarter as higher revenues at Bell were partly offsetby lower revenues at Bell Aliant.

BCE's EBITDA increased by 7.8 percent to $1,986 million thisquarter as EBITDA growth at Bell was partly offset by lower EBITDAat Bell Aliant.

Bell Wireless

-Total Bell Wireless operating revenues increased by 6.1 percentto $1,276 million this quarter. Service revenues increased by 5.7percent to $1,174 million due to subscriber growth and wireless datarevenue growth of 34 percent. Product revenues increased by 9.5percent to $92 million due to significantly higher smartphone salesand a greater number of customer upgrades.

-Blended ARPU increased by $0.87 to $52.99 reflecting the year-over-year increase of higher value postpaid customers as apercentage of our subscriber base. Postpaid ARPU decreased by $0.48to $63.18 as growth in data usage was offset by lower voice ARPUdriven mainly by competitive pricing pressures. Prepaid ARPUdecreased by $1.47 to $16.88 due mainly to the migration of high-valued prepaid customers to postpaid plans.

-Bell Wireless EBITDA increased by 0.9 percent to $460 millionthis quarter as higher revenues were largely offset by an increasein acquisition and retention costs from a higher smartphone mix andcompetitive handset pricing as well as $12 million in non-recurringcosts. EBITDA margins on wireless service revenues decreased to 39.2percent this quarter from 41.0 percent last year.

-Postpaid gross activations were 341,645, or 13.7 percent higherthan last year, despite an increasingly competitive marketplace.Total gross activations were 474,900 this quarter, or 1.2 percentlower than last year. With our focus on postpaid customeracquisition and aggressive offers from new entrants, prepaid grossactivations decreased by 26.0 percent to 133,255.

-Smartphones represented 56 percent of postpaid gross activationsthis quarter, compared to 41 percent last year.

-Postpaid net additions remained strong this quarter at 94,309but decreased by 8.2 percent compared to last year due to increasedchurn. The prepaid client base declined by 57,802 this quarter,compared to a decrease of 4,295 last year, due to lower prepaidgross activations and higher churn.

-The Bell Wireless client base reached 7,283,847 at the end ofthe quarter, an increase of 4.2 percent over last year.

-Postpaid churn increased to 1.5 percent from 1.3 percent whileprepaid churn increased to 3.7 percent from 3.4 percent. Blendedchurn increased to 2.0 percent from 1.8 percent last year.

-Cost of acquisition increased by 19.4 percent this quarter, to$400 per gross activation, due to higher handset subsidies driven bya higher proportion of postpaid and smartphone activations.

Bell Wireline

The Bell Wireline segment delivered solid residential high-speedInternet and TV service revenue growth, growing traction of BellFibe TV and Fibe Internet services, and ongoing improvements innetwork access service (NAS) line erosion in both business andresidential segments. We also remained focused on reducing costs,which contributed to further Bell Wireline EBITDA margin improvementthis quarter.

-Bell Wireline operating revenues decreased by 2.0 percent to$2,630 million this quarter as TV and residential Internet revenuegrowth was offset by decreases in local and access, long distance,data and equipment & other revenues.

-Bell Wireline EBITDA increased by 2.5 percent this quarter, to$1,071 million as approximately $70 million of cost reductions morethan offset lower operating revenues. Bell Wireline's EBITDA marginincreased by 1.8 percentage points to 40.7 percent.

-TV revenues increased by 6.0 percent to $460 million thisquarter driven by subscriber growth and higher ARPU.

-Total TV subscribers increased by 6,072 this quarter compared toan increase of 9,775 in the same period last year. At the end of thequarter, there were 2,033,833 TV subscribers, or 2.8 percent morethan last year.

-High-speed Internet subscribers increased by 1,275 this quartercompared to a decrease of 3,899 in the same period last year. Bellhad 2,111,762 high-speed Internet subscribers, or 2.3 percent morethan last year, at the end of the quarter.

-Data revenues decreased by 3.1 percent to $933 million thisquarter as growth in residential Internet service revenues and IP-based services was offset by lower legacy data revenues and reducedproduct sales resulting principally from the non-recurrence ofrevenues generated in Q2 2010 from the G8/G20 Summit. Additionally,results for Q2 2010 include revenues for the Sympatico.ca portalwhile the corresponding amount for Q2 2011 is included in the BellMedia segment.

-Local and access revenues declined by 4.2 percent to $726million this quarter due to residential and business NAS erosionthat occurred over the last year.

-Total NAS declined by 100,497 this quarter compared to a declineof 129,147 last year. Business NAS decreased by 17,018 this quartercompared to a decline of 32,155 last year due to growth in wholesalenet additions and effective customer retention activities.Residential NAS declined by 83,479 compared to a decline of 96,992last year due to the increased penetration of service bundles whichhave been enhanced with our Fibe TV service offer, competitiveretention offers, customer winbacks and growth in wholesale netadditions. On a year-over-year basis, total NAS declined by 4.8percent.

-Long distance revenues declined by 1.7 percent to $227 millionthis quarter, reflecting a significant improvement compared toprevious quarters due to higher sales of global long distanceminutes.

-Equipment and other revenues decreased by 5.5 percent to $208million this quarter.

Bell Media

On April 1, Bell completed its acquisition of CTV and launchedthe new Bell Media business unit encompassing all CTV and other Bellcontent assets, including the Sympatico.ca portal.

-Bell Media's operating revenues were $529 million this quarter,fuelled by robust advertising revenues in all media properties alongwith strong subscriber fee revenue from Specialty TV channels suchas TSN and digital services. Advertising revenue growth is beingdriven by advertiser demand thanks to strong audience levels acrossBell Media's conventional and specialty TV channels and generalimprovement in the economy.

-Digital revenues also grew with the launch of Bell Mobility'senhanced Mobile TV service that offers live and on-demand access toTV content.

-Bell Media's EBITDA was $123 million this quarter reflectinghealthy topline performance. A $21 million non-cash amortizationcharge was recognized in the quarter, related to the finalization ofthe purchase price allocation for CTV.

-CTV was the most watched network for a tenth consecutive yearfor the 2010/2011 season, holding 9 out of the top 10 programsnationally among all viewers.

-TSN's coverage of game 7 of the Western Conference semi-final ofthe NHL playoffs drew more than 2 million viewers.

-TSN Radio, a new all-sports station built on the TSN brand, waslaunched in the Toronto market in April.

-The Royal Wedding provided ctv.ca with a single day record ofnearly 9 million page views.

-At the recent U.S. network Fall screenings in May 2011, BellMedia secured a mix of returning and new programs for itsconventional TV fall schedules on CTV and the newly rebranded and HD-equipped CTV Two network. The new schedules feature Canada's most-watched returning series along with a number of new, highly-anticipated programs for the Fall. Bell Media also secured thedigital rights to all of its new scripted series and a significantamount of its current lineup.

Bell Aliant Regional Communications Bell Aliant's revenuesdecreased to $692 million this quarter, or by 1.1 percent, due tolower local and access, long distance and equipment and otherrevenues. Bell Aliant's EBITDA decreased by 2.9 percent, to $332million due to lower revenues and an increase in pension currentservice costs.

Common Share Dividend BCE's Board of Directors has declared aquarterly dividend of $0.5175 per common share, payable on October15, to shareholders of record at the close of business on September15.

More Information:

Bell.ca

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