Chief executive officer Mirko Bibic at the Campus Bell in Montreal on Jan. 3, 2020.Andrej Ivanov/The Globe and Mail
BCE Inc. BCE-T reported slightly higher revenue and lower profits as it added record numbers of mobile phone customers and internet users, and continued to invest in building out its 5G wireless and fibre-optic broadband networks.
Yet the company also faced higher operating costs in its third quarter, and continues to see a low demand for advertising through its media business as a result of inflation and remaining supply chain delays.
Analysts were impressed with the company’s addition of more than 224,000 mobile phone customers during the quarter, an increase of 64 per cent over last year, setting the company’s record for quarterly users gained.
On an investor call Thursday, chief executive officer Mirko Bibic attributed this to greater foot traffic as retail stores returned to full operation, as well as strong business customer demand and increased immigration following the pandemic slowdown.
“Just look at the kind of tailwinds that are operating in everyone’s favour. There’s immigration and federal governments have indicated that’s going to continue to grow over the foreseeable future,” Mr. Bibic said, referencing the federal government’s announcement on Tuesday that it would welcome 500,000 immigrants annually by 2025.
The company also saw the highest number of retail internet activations in 17 years, up from last year by 36 per cent, as a result of its growing fibre network.
The results came amid a period of increased network spending by the telecom. In May, 2021, BCE announced it would spend an additional $1.7-billion on its 5G wireless and fibre-optic internet networks over two years, on top of its usual $4-billion in spending.
Analysts also credited the first true “back-to-school” season since before the COVID-19 pandemic, and competitor Rogers Communications Inc.’s July 8 service outage, for the total customer uptick.
When asked about the effect of his competition’s service outage on BCE’s customer growth, chief financial officer Glen LeBlanc said he did not credit the outage “singularly” for the increased number of mobile subscribers. “Actually, the momentum has been there for quite a while,” he told analysts.
But Mr. LeBlanc noted the company was still seeing the effects of chip shortages, which continued to affect the company’s overall business-to-business sales.
Radio and television advertiser demand slowed in the media division in the third quarter as a result of lower consumer demand driven by inflation – Mr. Bibic called the slackening an “ad-recession” – as well as continuing supply chain issues. Meanwhile, the costs for broadcast rights increased, as sporting events put on hold during the pandemic resumed.
“This return to a more typical pre-COVID cost structure and the choppy advertising market are expected to weigh heavily on Bell Media even in Q4,” Mr. LeBlanc said.
BCE boosted its operating revenue for the three-month period ended Sept. 30 by 7.4 per cent to $6.02-billion, up from nearly $5.84-billion in the same quarter last year.
Its third-quarter profit fell 5.5 per cent to $715-million. The earnings amounted to 78 cents a share, down from 83 cents a share a year ago.
The company’s operating costs for the quarter were up by $38-million. Clean-up mainly due to Hurricane Fiona, which hit Canada in September, cost BCE $19-million. The company spent an equal amount on fuel, utilities and labour costs, which Mr. Bibic said had become more expensive as a result of inflation and higher-than-normal wage increases.
In a note to investors, Canaccord Genuity Corp. analyst Aravinda Galappatthige noted the contested merger between Rogers and Shaw Communications has continued to hold fourth-largest carrier Freedom Mobile back from making major market gains. Freedom has been credited in the past with driving competition in the wireless sector.
“With Shaw/Freedom seemingly less present in the market, at least in the near term, we expect incumbents results to remain strong,” Mr. Galappatthige said.
Shares of BCE were up 23 cents, or 0.4 per cent, to close at $61.97 on the Toronto Stock Exchange on Thursday.