BCE Inc. headquarters in Montreal in August, 2023. Although analysts had anticipated a slowdown on BCE’s new subscriber growth in the third quarter, the company still fell short of those already tempered expectations.Christinne Muschi/The Canadian Press
Bell Canada parent company BCE Inc. BCE-T posted a net loss of $1.2-billion in its third quarter, as heightened competition in wireless and a $2.1-billion writedown of its television and radio properties added to the telecom giant’s recent woes.
BCE shares tumbled nearly 10 per cent Monday when the company announced it was acquiring internet provider Ziply Fiber for $5-billion, while also putting dividend hikes on hold to help fix its balance sheet. The stock was down another 4 per cent in midday trading Thursday to about $38.33 per share, the lowest point since the fall of 2011, pushing its dividend yield well above 10 per cent.
BCE on Thursday revised its 2024 revenue guidance downward to reflect sustained competitive wireless pricing pressures. The company said it now expects revenue to decline 1.5 per cent, compared with previously anticipated growth of 0 to 4 per cent.
The Ziply deal triggered concerns about heavy capital spending and less of a focus on reducing debt. But on an call with analysts Thursday morning, BCE chief executive officer Mirko Bibic emphasized the potential for long-term returns, and underscored the company’s openness to exploring more opportunities in the United States. He noted that fibre buildout there is much less expansive than in Canada and that the company would consider assets that could blend with Ziply Fiber’s existing buildout.
“It’s a great growth opportunity that’s right in our swim lane,” he said. “If there are other opportunities where we can turbocharge the already high Ziply Fiber growth, we’ll take a look.”
Fibre revenue growth in the U.S. is significantly outpacing that of overall residential services. A July analysis of U.S. telcos by S&P Global Market Intelligence found that fibre revenues grew by 16.7 per cent in 2023, compared with just 4.2-per-cent growth for residential services as a whole.
In Canada, Mr. Bibic said BCE is capturing most of the new growth in the areas it serves because of its fibre offerings. The company’s internet revenues were up by 5 per cent this quarter.
Meanwhile, although analysts had anticipated a slowdown on BCE’s new wireless subscriber growth, the company still fell short of those already tempered expectations.
The telecom industry over all is under pressure from heightened competitive activity and slower growth, as federal visa caps have slowed immigration, a major source of new subscribers.
Average revenue per user and wireless revenue were both down, while churn – the percentage of customers who cancelled or did not renew subscriptions during the quarter – was up a “concerning” level, said Bank of Nova Scotia analyst Maher Yaghi, reflecting the “significant destabilization” that Quebecor’s Freedom Mobile is exerting on the market.
“Solving for the high churn rate in post paid will need to be addressed quickly in order to stabilize financial performance from further deterioration,” Mr. Yaghi said in a note to investors Thursday morning.
The company added 102,196 net wireless customers, lagging Quebecor Inc. (132,100) and Rogers Communications Inc. (194,000) this quarter, and missed analyst consensus by nearly 20,000 customers, according to Desjardins analyst Jerome Dubreuil. The company added just 33,000 net postpaid subscribers, far short of analysts’ expectations of more than 70,000, he said.
BCE said it was discontinuing some lower-cost prepaid services and focusing on winning higher-margin customers on its premium Bell brand to make up for competitive pressures, noting that other companies were offering steep discounts to attract customers “at any cost.”
“We chose not to match every promotional offer just for the sake of capturing a higher number of subscriber activations,” Mr. Bibic said. When questioned by an analyst over whether the company could lose market share with this strategy, he maintained that the company’s core Bell brand market share was “stable to growing.”
The $1.2-billon loss followed a profit of $707-million last year. The company said the writedown of its media assets reflects a further decline in advertising demand and spending, and higher interest and severance costs. The loss translated to $1.36 a share, compared with a profit of 70 cents a share last year.
On an adjusted basis, the company saw a decline in profitability and revenue. The company reported earnings of $688-million, down 7.2 per cent from last year. The company’s revenue dropped slightly, down 1.8 per cent.
This quarter, the company also announced the sale of its 37.5-per-cent stake in Maple Leaf Sports & Entertainment to Rogers Communications Inc. for $4.7-billion.