Leading Canadian telecom operator BCE Inc. (BCE - Free Report) reported mixed financial results in the third quarter of 2016. While the top line missed the Zacks Consensus Estimate, the bottom line surpassed the same.
This Zacks Rank #4 (Sell) company competes with peers like Rogers Communications Inc. (RCI - Free Report) , Shaw Communications Inc. (SJR - Free Report) and TELUS Corp. (TU - Free Report) in the highly competitive Canadian telecom market. While both TELUS and Shaw Communications carry a Zacks Rank #4, Rogers Communications carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quarterly net income was approximately $577 million, up 1.8% year over year. GAAP earnings per ADS (American Depository Share) were 67 cents, flat year over year. Adjusted net income per ADS came in at 70 cents, beating the Zacks Consensus Estimate by a penny.
Total revenue was approximately $4,147 million, up 1.2% year over year but well short of the Zacks Consensus Estimate of $4,291 million. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was about $1,715 million, increasing 2.2% year over year. Quarterly adjusted EBITDA margin was 41.4% compared with 40.9% in the prior-year quarter.
During the third quarter of 2016, BCE generated approximately $1,490.3 million of cash from operations, up 3.5% year over year. Free cash flow in the reported quarter was around $729.4 million, up 3.3% year over year.
Segments in Detail
Bell Wireless: Revenues from Bell Wireless increased 4.3% to $1,417.4 million. Services revenues climbed 5.7% to approximately $1,312.3 million while product revenues decreased 11.2% to approximately $97.4 million. Blended average revenue per user improved 3.7% year over year to $51.97. Postpaid customer churn was 1.26% against 1.31% in the year-ago quarter.
During the reported quarter, BCE added a net of 107,265 postpaid wireless subscribers compared with 77,655 in the prior-year quarter. As of Sep 30, 2016, the company had 7,578,334 postpaid subscribers, up 4% year over year. The total wireless subscriber base increased 2.4% to 8,380,949. At third-quarter end, 82% of the total postpaid wireless customers used smartphones compared with 78% at the end of the year-earlier quarter. The proportion of postpaid subscribers on LTE reached 78%, higher than 63% a year earlier.
Bell Wireline: Revenues from Bell Wireline declined 0.3% year over year to approximately $2,107 million. Wireline data revenues were up 3.6% to $1,405.9 million. Local and access revenues declined 5.6% to $582.6 million. Long distance revenues were down 6.4% to $587.5 million.
Total network access services (NAS) lines fell 6.4% year over year to 6,358,362, at the end of the reported quarter. Residential NAS losses during the reported quarter were 80,587 compared with 78,354 in the year-ago quarter. Business NAS losses increased to 37.734 from 29,722 a year ago.
As of Sep 30, 2016, BCE had 2,745,873 TV subscribers, up 1.7% (including 1,302,039 Fibe TV customers, an increase of 17.4%) and 3,458,160 high-speed Internet subscribers, up 2.5% year over year. In the third quarter, Bell Wireline added a net of 39,375 high-speed Internet customers and 36,253 Fibe TV customers, but lost 40,976 satellite TV subscribers.
Bell Media: Bell Media generated quarterly revenues of approximately $549.2 million, rising 3.5% year over year.
BCE issued its financial guidance for 2016. The company expects adjusted earnings per share of C$3.45–C$3.55 while free cash flow growth is likely to be around 4–12%. Annual dividend per share is projected at C$2.73, reflecting a dividend pay-out policy of 65–75%. Revenue growth is expected at around 1–3%, while EBITDA growth is estimated at roughly 2–4%. Capital intensity projection is pegged at approximately 17%.
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