MONTREAL — A strong performance by the wireless division of Bell Canada helped its parent company BCE Inc. to a 25 per cent jump in fourth-quarter profit, driven in no small part by its high-value mobile phone customers.
Profits rose 25.4 per cent to $439 million from $350 million in the comparable period of 2009, BCE (TSX:BCE) reported Thursday.
“We’re clearly starting to see the benefit of our execution in the marketplace,” chief executive George Cope told analysts on a conference call to discuss the company’s financial results.
Montreal-based BCE’s earnings per share were 58 cents, up from 46 cents a year earlier. Adjusted earnings per share — stripping out one-time items — were 60 cents, slightly below average analyst expectations of 61 cents, according to Thomson Reuters.
The wireless division added almost 157,000 new customers on long-term contracts in what Cope described as its best fourth quarter since 2002. A number of these customers were smartphone users on BlackBerrys, iPhones and Android devices — who typically generate high monthly revenue.
“So, a very successful year for us in the wireless market,” he said.
Cope said almost 30 per cent of its wireless customers on contracts are smartphone users, leaving plenty of room for more growth. He noted that the average monthly revenue generated by a smartphone customer is about $90.
He also said Bell now has 33 per cent of the market in customers on long-term contracts, up from 18 per cent three years ago, with Rogers (TSX:RCI.B) and Telus (TSX:T) sharing the remainder.
“It was another exceptional quarter of wireless subscriber activations,” noted chief financial officer Siim Vanaselja.
But in the lower end of the market, generally comprised of prepaid phones for talking and texting, competition is fierce with new players like Public Mobile and Mobilicity. In this market, BCE didn’t fare as well.
The prepaid client base dropped by 39,926 in the quarter, compared with a gain of 52,938 in the same quarter last year, BCE said.
RBC Capital Markets analyst Jonathan Allen described BCE’s fourth quarter as “getting more mobile.”
“Bell added an impressive 157,000 postpaid customers (versus 98,000 expected) and likely took modest share from the other incumbents,” Allen wrote in a research note.
“Higher loading and cost-of-acquisition, however, was a significant pressure on margins, which fell from 41 per cent to 33 per cent, year over year,” Allen wrote.
Cope told analysts that usage-based Internet billing, now being re-examined by the CRTC, applies to small providers to which Bell sells network space and affects “less than one per cent of users in Canada.”
He said cable companies have been using this kind of Internet billing in the wholesale market for the last 10 years.
He noted that Bell’s retail customers have been billed for how much Internet bandwidth they use for five years.
In its wireline division, which provides Internet, TV and telephone services, revenues decreased by 2.5 per cent to $2.7 million in the quarter and were affected by decreases in local and long distance services.
But high-speed Internet subscribers increased by 12,099 in the quarter, a jump of 55 per cent compared with the same period last year.
At the end of the quarter, Bell said it had almost 2.1 million high-speed Internet subscribers, a two per cent increase over last year.
TV revenues increased by 7.9 per cent to $450 million in the quarter due to subscriber growth and upgrades to higher-priced packages. Bell recently rolled out its Internet Protocol TV service in Toronto and Montreal.
Total TV subscribers increased by 23,019 this quarter, down from an increase of 40,889 in the same period last year. At the end of the quarter, there were about two million TV subscribers, or 3.7 per cent more than at the end of last year.
In its financial results, BCE said its operating profit rose to $836 million from $751 million and adjusted EPS was 60 cents, up 17.6 per cent from the year before.
Operating revenues rose slightly to $4.68 billion from $4.65 billion, with most of that generated by BCE’s main subsidiary Bell Canada.
BCE is awaiting regulatory approval from the CRTC for its $1.3-billion purchase of the CTV assets that it didn’t already own.
BCE, the parent company of Bell Canada, wants to put video content including television, sports and news programs, not only on its CTV television services but on also personal computers, tablets and smartphones.
Its shares were down 38 cents at $36.21 in afternoon trading Thursday on the Toronto Stock Exchange.