Leading Canadian telephone operator BCE Inc. BCE reported strong financial results for the first quarter of 2015 on the back of impressive performance by its wireless service division. Both the top and the bottom line outpaced the respective Zacks Consensus Estimate.
Quarterly net income was approximately $429.7 million, down 13.9% year over year. GAAP earnings per share were 51 cents, down 20.3% year over year. Adjusted net income per ADS (American Depository Share) was 70 cents, significantly above the Zacks Consensus Estimate of 63 cents.
Total revenue came in at approximately $4,232 million, up 2.8% year over year and also surpassed the Zacks Consensus Estimate of $4,195 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $1,691.3 million, up 3.6% year over year. Quarterly adjusted EBITDA margin stood at 40% against 39.7% in the prior-year quarter.
Cash Flow
During the first quarter of 2015, BCE generated approximately $844 million of cash from operations, up 6.4% year over year. Free cash flow, in the reported quarter was around $186.6 million, down 11.8% year over year.
Segments in Detail
Bell Wireless: Revenues from Bell Wireless increased 9.7% year over year to around $1,322.2 million. Higher service revenues resulting from increased postpaid subscriber mix and better-blended ARPU (average revenue per user) boosted the results. Services revenues were around $1,211.6 million, up 8.1% while Product revenues were up 35.1% to $102.6 million.
Blended ARPU rose 5.3% year over year to $49.13 on the back of higher data usage and improved rate plan pricing. Wireless data revenue surged 24.4% constituting more than half of the Bell Wireless services revenues. Postpaid customer churn was 1.18% against 1.24% in the year-ago quarter.
During the reported quarter, BCE added a net 35,373 postpaid wireless subscribers compared with 34,104 in the prior-year quarter. As on Mar 31, 2015, the company had 7,145,420 postpaid subscribers, up 4.6% year over year. Total wireless subscriber base grew 2.5% to 8,102,714. At first-quarter end, 77% of the total postpaid wireless customers used smartphones compared with 74% at the end of the prior-year quarter.
Bell Wireline: Revenues from Bell Wireline rose 0.3% year over year to approximately $2,444.9 million. Wireline data revenues were up 3.5% to $1,419.1 million. Local and access revenues declined 5% to $665.6 million. Long distance revenues were down 5.8% to $172 million.
Network access services (NAS) lines fell 6% year over year to 7,017,161. The decline was primarily due to competition from cable operators, business customer conversion from voice lines to IP-based services, and customer shift to high speed Internet from older technologies. Residential NAS losses during the reported quarter were 65,870 compared with 89,655 in the year-ago quarter. Business NAS losses were 44,069 against 43,085 a year ago.
As of Mar 31, 2015, BCE had 2,658,106 TV subscribers, up 5.1% (including 990,325 IPTV customers, an increase of 36.8%) and 3,297,745 high-speed Internet subscribers, up 4.3% year over year. In the first quarter, Bell Wireline added a net 39,650 high-speed Internet customers, 60,863 IPTV customers but loss 33,873 satellite TV subscribers.
Bell Media: Bell Media generated revenues of approximately $586.4 million, up 0.6% year over year. The upside was driven by higher conventional TV advertising revenues generated from live broadcasts of programs like the Super Bowl and Academy Awards of 2015.
Guidance
For fiscal 2015, BCE reaffirmed its financial guidance. The company expects adjusted earnings per share of C$3.28–C$3.38 while free cash flow growth will be around 8–15%. Annual dividend per share will be C$2.60 reflecting a dividend pay-out policy of 65–75%. Revenue growth for BCE is expected around 1–3%, while EBITDA growth is estimated at around 2–4%. Capital intensity projection for BCE is around 17%.
Stocks to Consider
BCE currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in this industry are Verizon Communications Inc. VZ Level 3 Communications Inc. LVLT and Vonage Holdings Corp. VG. All three stocks carry a Zacks Rank#2 (Buy).
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