BCE Shares Rise as Profit Hit Is Lighter Than Expected

(Bloomberg) -- BCE Inc. shares opened higher after the company said its fourth-quarter adjusted earnings were 81 Canadian cents per share, down from 86 cents a year earlier but beating analysts’ expectations of 77 cents.

Key Insights

• Revenue fell 2.8% to C$6.1 billion ($4.8 billion), narrowly missing average analyst estimates as the pandemic continues to hit wireless service and product sales.
• Canada’s largest telecommunications provider by market value added 92,928 postpaid wireless subscribers. Average billing per user fell 3.9% to C$64.71. Roaming, a critical source of revenue for telecom companies, fell as lockdown orders meant customers stayed at home.
• A decline in live sports broadcasting, crucial to the media division, was offset by subscriber growth in BCE’s version of Netflix, called Crave, which holds Canadian streaming rights for HBO, Showtime and Starz. The company is cutting hundreds of jobs across its media division, including union members in television newsrooms and non-union workers in administration and sales.
• BCE announced that it would devote C$1 billion to C$1.2 billion in capital investment to 5G infrastructure over the next two years and increase its dividend 5.1% to C$3.5 per share.
  • “These initiatives reflect our commitment to lead the build-out of Canada’s next-generation digital infrastructure while also delivering increased dividend returns to the shareholders who have invested in Bell’s strategy of broadband innovation and growth,” Chief Executive Officer Mirko Bibic said.
• BCE forecast 2% to 5% revenue growth in 2021, compared with a 3.8% decline in 2020.

• “For the moment we have a stable regulatory environment that makes this type of large scale investment possible,” Bibic said Thursday during a conference call with analysts. “Now isn’t the time for policymakers and regulators to move away from encouraging network investment. Now is the time to collaborate and partner with government.”

  • Analysts expect the Canadian Radio-television and Telecommunications Commission to change a 2019 ruling that slashed how much internet service providers are allowed to charge resellers for access to their networks. Political pressure has also ramped up to try to push telecom companies to lower wireless prices.
• Bloomberg Intelligence analyst John Butler said that “BCE’s growth remains under pressure” from the coronavirus pandemic but that there are prospects for a rebound. “The pandemic has provided what we view as a lasting lift to broadband subscribers, as demand has gotten a good boost,” Butler wrote.
• Rival Telus Corp. is expected to report earnings next week.

Market Reaction

• BCE shares rose more than 1.5%, to C$55.71, at 9:50 a.m.

Earlier: BCE Sees 2021 Adjusted Ebitda +2% to +5%

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