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Canada’s largest telephone operator BCE Inc. (BCE - Analyst Report) reported fourth-quarter 2012 adjusted earnings of 65 Canadian cents per share (66 cents per ADS) missing the Zacks Consensus Estimate by a penny. The results improved 4.8% from 62 Canadian cents (63 cents per ADS) in the year-ago quarter, supported by healthy growth in Fiber, 4G Long Term Evolution and cloud computing services.

Revenue remained flat year over year at C$5.16 billion ($5.20 billion), but surpassed the Zacks Consensus Estimate of $5.18 billion. Strong performances in the Wireless, TV, Internet and Media segments were offset by the weakness in the Wireline’s voice and data services.

For full-year 2012, BCE posted earnings per share of C$3.18 ($3.21 per ADS), up 29.5% year over year. Revenues increased 2.5% year over year to C$19.97 billion ($20.14 billion).

EBITDA grew 1.4% year over year to C$1.89 billion ($1.91 billion) in the reported quarter fueled by strong contributions from Bell Wireless and Bell Media.

Revenue Segments

Bell Wireless: Revenue from Bell Wireless increased 6.9% year over year to C$1.44 billion ($1.45 billion). Higher service revenue (up 7.4%), resulting from post-paid subscriber and wireless data revenue growth coupled with better product revenue (up 2.3%) coming from more smartphone sales boosted the results.

BCE added 105,005 net wireless subscribers during the reported quarter, bringing the total to 7.68 million, up 3.4% year over year. Post-paid net additions increased by 9.0% to 143,834, while prepaid net losses slid 47.6% to 38,829 from the year-ago quarter. Blended ARPU (average revenue per user) rose 4.1% year over year to C$56.72 ($57.21) on the back of growing market share plus more customers opting for mobile data services.

Churn rate (customer switch) improved to 1.7% from 2.0% in the year-ago quarter.  Post-paid churn was 1.3% compared with 1.5% in the year-ago quarter, while prepaid churn improved to 3.5% from 4.2% in the year-ago quarter due to lower customer deactivations.

Bell Wireline: Revenues from Bell Wireline fell 3.7% year over year to C$2.61 billion ($2.63 billion) due to lower local and access (down 7.6%), long distance (down 12.8%) and equipment and other revenues (down 6.3%).

Network access services (NAS) fell 7.5% year over year to 5.64 million. The decline was primarily due to strict competition from wireless and IP-based technologies that prompted Bell to reduce its access lines and digital circuits. Residential NAS losses went down to 87,029 in the reported quarter compared with 89,733 in fourth quarter 2011. Business NAS losses were 36,641 against 13,947 in the year-ago quarter.

BCE activated 7,143 high-speed Internet customers compared with just 1,091 customers in the year-ago period. TV subscriber additions were 19,218, down 30.6% year over year. At the end of the fourth quarter, TV subscribers grew 2.5% year over year to 2.16 million.

Bell Media: Bell Media generated revenues of C$591.0 million ($596.1 million), up 2.2% year over year. The growth is attributed to strong advertising and high subscriber revenues from specialty sports and non-sports TV channels.

Bell Aliant: Revenues from this segment inched down 1.0% year over year to C$694.0 million ($700.0 million), hurt by reduced local and long-distance revenue.

Liquidity

BCE exited 2012 with C$127.0 million (approximately $128.1 million) of cash and cash equivalents compared with C$174.0 million (approximately $175.5 million) in 2011. Capital expenditure for BCE during the year was C$3.51 billion ($3.54 billion), up 8.0% year over year.

Other Stocks

Among other foreign telecom firms, Telus Corporation (TU - Analyst Report) is expected to release its fourth quarter results on Feb 8, while Rogers Communications Inc. (RCI - Analyst Report) will release the same on Feb 15.

Another foreign stock worth considering is Cellcom Israel Ltd. (CEL - Snapshot Report) which carries a Zacks Rank #1 (Strong Buy).

Our Take

BCE currently retains a Zacks Rank #3 (Hold). Looking ahead, we expect the company to see faster growth in the wireless segment, expand its position in the media market, enrich its broadband networks and improve customer service.
 

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