BCE, Bell Canada's parent company, reported higher revenue in the latest quarter but a lower profit as costs rose.Sean Kilpatrick/The Canadian Press
BCE Inc.’s BCE-T chief executive officer is calling on Canada’s broadcasting and telecommunications regulator to help the country’s media sector cope with a challenging advertising market and competition from foreign giants.
During a conference call Thursday to discuss the Montreal-based company’s second-quarter results, Mirko Bibic said “more needs to be done by the CRTC, faster,” to ease the pressures on the industry.
“The ecosystem in Canada is under severe stress and requires urgent government assistance,” Mr. Bibic said, as BCE reported higher second-quarter revenue but a steep drop in profit owing to higher expenses.
“When massive U.S. companies with global scale and global footprints are having extreme difficulty contending with the difficult advertising markets, you have to ask how Canadian broadcasters are expected to navigate” them with such an unfair regulatory playing field, he added.
In June, BCE’s Bell Media filed an application asking the CRTC (Canadian Radio-television and Telecommunications Commission) to waive local news and Canadian programming requirements for its television stations.
Mr. Bibic said he’s encouraged that the federal government is “trying to help out on the news side of things” with Bill C-18, the Online News Act, and that the industry is “pushing back against the very aggressive moves by Meta and Google.”
The tech giants have announced plans to block news content for Canadians in response to Bill C-18, which forces them to pay media organizations for that content. Meta has already begun rolling out the change.
BCE, the parent company of Bell Canada, had $6.07-billion in revenue for the three-month period ended June 30, up 3.5 per cent year-over-year, as it added new wireless and internet customers. But its media division, which owns CTV, TSN, CP24 and a number of specialty TV news and radio channels, saw its revenue decline 1.9 per cent year-over-year to $805-million, the result of lower advertising revenue.
BCE’s profit fell sharply to $397-million, down 39 per cent from $654-million in the same quarter last year. That amounted to 37 cents a share, down from 66 cents.
The company attributed the decline to higher expenses, including a $377-million non-cash loss on its share of an obligation to repurchase a minority stake in one of its joint venture equity investments, as well as higher interest costs, increased depreciation and amortization expenses and higher income taxes.
BCE also saw higher costs from its work force reduction initiative. The company announced back in June that it was eliminating roughly 1,300 positions as part of a significant reorganization. It expects to see the financial benefits in the second half of the year.
After adjusting for several items, including losses on investments, severance, acquisition and other costs, BCE had $722-million in profit, down 8.7 per cent from $791-million a year earlier. The adjusted earnings amounted to 79 cents a share, down from 87 cents a share in the same period last year.
Analysts had been expecting adjusted earnings of 80 cents a share and $6.06-billion in revenue, according to the consensus estimate from S&P Capital IQ.
The telecom added 111,282 net new postpaid wireless subscribers during the quarter, up 33.8 per cent from the 83,197 of a year ago. (Postpaid subscribers are those who are billed at the end of the month for the services they have used, whereas prepaid customers pay up front for wireless services.)
“We achieved these wireless and internet subscriber results against the backdrop of declining prices, demonstrating that our industry is delivering the highest-quality services at decreasing prices despite persistent inflation,” Mr. Bibic said.
Desjardins analyst Jérome Dubreuil said BCE is slightly behind its financial targets for the year but added that “there has been limited impact on financials so far from lower wireless prices in the market.”
“BCE will have to report faster growth in the rest of the year to achieve guidance,” Mr. Dubreuil wrote in a research note.
BCE’s chief financial officer, Glen LeBlanc, said he’s confident the telecom will deliver on its guidance.
“I know that, historically, we probably have a smoother free cash flow profile than we have this year, but it really was a product of us taking the opportunity to spend heavily in the front half of this year,” Mr. LeBlanc told analysts during Thursday’s conference call. “You make hay in this business when the sun shines.”
Scotiabank analyst Maher Yaghi said that although BCE’s subscriber growth in both its internet and wireless business was strong, its free cash flow, which decreased to $1.02-billion, was “weaker than anticipated.”
Mr. Yaghi also noted that although Bell Canada signed up significantly more wireless customers than it did in the second quarter of last year, its wireless loading trailed that of Rogers RCI-B-T, which added 170,000 net new postpaid wireless subscribers during the quarter.
Shares of BCE fell 65 cents, or 1.16 per cent, to $55.52 on the Toronto Stock Exchange on Thursday.