BCE Reports 2012 Q4 and Full-Year results
Feb 12, 2013 (Close-Up Media via COMTEX) --
BCE Inc., a Canadian communications company, reported BCE and Bell results for the fourth quarter of 2012 and announced its financial guidance for 2013, as well as a $0.06 per share increase in its annual common share dividend to $2.33.
In a release dated Feb. 6, the Company said that the dividend announcement represents BCE's ninth increase to the annual common share dividend, representing a 60 percent overall increase since the fourth quarter of 2008. The BCE annual common share dividend will increase from $2.27 to $2.33 per share effective with BCE's Q1 2013 dividend, payable on April 15, to shareholders of record at the close of business on March 15. Together with the earlier $0.10 per share increase announced on Aug. 8, 2012, BCE's annual common share dividend increase for 2013 is up 16 cents or 7.4 percent. The higher dividend for 2013 is supported by substantial free cash flow generation and our positive business outlook for 2013.
BCE reported Q4 2012 net earnings attributable to common shareholders of $708 million, or $0.91 per share, a 45.7 percent increase from $486 million, or $0.62 per share, in Q4 2011. Adjusted net earnings attributable to common shareholders were $506 million, an increase of 4.5 percent compared to Q4 2011, while Adjusted earnings per share (EPS) increased 4.8 percent to $0.65 from $0.62 in Q4 2011. The year-over-year increase in Adjusted EPS was mainly due to higher EBITDA, which exceeded plan in the quarter.
BCE's cash flows from operating activities were $863 million in Q4, up 3.0 percent compared to $838 million last year, due to higher net earnings. Free cash flow this quarter, before a $750 million voluntary pension plan contribution, was $605 million, up 7.3 percent from $564 million in Q4 2011 on higher EBITDA year over year.
Bell operating revenues were $4,577 million in Q4 2012, compared to $4,576 million in Q4 2011, as higher year-over-year revenues driven by the steadily growing contribution of Bell's growth services, including Wireless, TV, Internet and Media, were offset by the continued decline in Bell Wireline's traditional voice and data services.
Bell EBITDA was $1,582 million in Q4, up 2.2 percent, reflecting strong double-digit EBITDA growth of 13.8 percent at Bell Wireless and 32.3 percent at Bell Media. Bell Wireline's EBITDA decline of 6.6 percent in the quarter benefitted from a $35 million year-over-year reduction in Wireline operating costs, which contributed to a 0.8 percentage-point improvement in Bell's consolidated EBITDA margin of 34.6 percent. For the full 2012 year, Bell operating revenues and Bell EBITDA were up 3.0 percent and 4.4 percent, respectively, at $17,642 million and $6,591 million. For 2011, Bell operating revenues and EBITDA reflect 9 months of Bell Media revenues and EBITDA, as Bell completed its acquisition of CTV and created Bell Media on April 1, 2011.
Bell invested $779 million in new capital this quarter, bringing total capital expenditures to $2,923 million in 2012, up 8.9 percent from the previous year. These investments support the continued deployment of broadband fibre to homes, neighbourhoods and businesses in Quebec and Ontario and expansion of the Fibe TV service footprint, enhancement of customer service systems, the ongoing rollout of the 4G LTE mobile network in markets across Canada, and the addition of new Bell and The Source stores across Canada.
"Bell's Q4 results capped off a solid year of strong operating performance led by Bell Wireless, Bell Media, and the accelerating success of Bell Fibe TV as we continued to expand our Fibe footprint in Montreal and Toronto and launched the country's largest fibre to the home rollout in Quebec City," said George Cope, President and CEO of Bell and BCE Inc. "Bell's investment in Canada's best broadband networks, products and content is delivering new choices for consumers and enhanced competition in TV, wireless and media. Bell has tremendous momentum in the marketplace, propelled by the fast expansion of Fibe TV, strong smartphone growth, and the unmatched innovation and investment in Canadian news, sports and entertainment content by Bell Media.
"Growth services such as Fibe, 4G LTE, and next-generation business services like cloud computing increasingly dominate our operating mix. At the same time, the Bell team is delivering significant improvements in customer service while reducing our operating costs. The strong EBITDA, cash flow and net earnings that result from the focused execution of our strategy enable us to continue to deliver on our commitment to return value to our shareholders."
"We enjoyed a successful 2012, surpassing our full-year guidance target for EBITDA which fuelled substantial earnings and strong free cash flow growth," said Siim Vanaselja, Chief Financial Officer for Bell and BCE. "Bell's operating momentum and financial foundation going into 2013 are strong. Our 2013 financial targets are underpinned by continued robust growth across Bell's growth businesses and improving wireline performance. This is expected to drive solid growth in underlying earnings and a 5 percent or better year-over-year increase in free cash flow. Our liquidity position and attractive credit profile fully supports our planned accelerated investment in wireline and wireless broadband network platforms and higher dividend for 2013."
Bell Wireless Bell Wireless operating revenues increased 6.8 percent to $1,458 million in Q4 2012. Service revenue grew 7.4 percent to $1,312 million on strong postpaid subscriber growth and higher blended ARPU, fuelled by mobile data revenue growth of 28 percent this quarter. Despite average handset prices that were generally lower because of competitive holiday pricing, product revenues increased 2.3 percent to $132 million, reflecting higher sales of more expensive smartphones. Bell Wireless EBITDA increased 13.8 percent to $479 million this quarter, delivering a 2 percentage-point expansion in EBITDA service margin to 36.5 percent. This was achieved even with a $26 million year-over-year increase in combined subscriber acquisition costs and retention spending, which contributed to operating cost growth of 3.7 percent in the quarter.
For the full year, Bell Wireless operating revenues increased 6.5 percent to $5,573 million with service revenues growing 6.5 percent to $5,081 million and product revenues up 3.8 percent to $438 million. EBITDA grew 15.7 percent to $2,110 million as service margin increased 3.3 percentage points to 41.5 percent, reflecting the significant service revenue flow-through of superior postpaid subscriber gains achieved throughout the year and well-controlled operating costs that increased 1.6 percent, in aggregate, over the previous year.
-Postpaid net additions in Q4 increased to 143,834, up 9.0 percent compared to 131,986 last year. Smartphone users represented 64 percent of total postpaid subscribers at the end of 2012, compared to 48 percent one year earlier.
-Postpaid gross activations were 394,706 in Q4, up 1.4 percent compared to 389,317 last year, led by strong sales of Apple iPhones and leading Android devices during the holiday period. Activations in western Canada continued to increase as Bell added more points of distribution.
-Prepaid net losses decreased to 38,829 in Q4, from 74,100 last year. Prepaid gross activations decreased 17.6 percent to 101,024, due to Bell's continued focus on acquiring postpaid customers and aggressive acquisition offers from competitors targeted at lower-ARPU subscribers.
-With postpaid additions of 143,834 and prepaid losses of 38,829, the Bell Wireless client base reached 7,681,032 at the end of the quarter, an increase of 3.4 percent over last year.
-Postpaid customer churn improved to 1.3 percent from 1.5 percent in Q4 2011, reflecting the benefits of investment in customer service and retention. Prepaid churn improved to 3.5 percent this quarter from 4.2 percent in Q4 2011, due to fewer customer deactivations year over year.
-Blended ARPU increased 4.1 percent in the quarter to $56.72, driven mainly by a greater number of postpaid customers in our subscriber base, increased postpaid market share in the higher-ARPU western Canada market, and more smartphone customers taking advantage of mobile data services. Similarly, for full-year 2012, blended ARPU increased 4.2 percent to $55.82.
-Cost of acquisition increased 6.7 percent this quarter to $480 per gross activation, reflecting a greater number of smartphone activations and higher handset subsidies consistent with the wider availability of the Apple iPhone 5 and competitive holiday pricing.
-Retention spending in the quarter increased to 12 percent of wireless service revenues, up from 11.4 percent in Q4 2011, as we matched competitors' aggressive handset offers.
-Bell continues to offer customers access to Canada's largest 4G LTE network, increasing population coverage by over 22 percent and adding 25 new markets in Q4, resulting in access for approximately 4 million additional Canadians. 4G LTE from Bell now reaches more than 67 percent of the Canadian population, complementing Bell's 4G HSPA+ and enhanced 4G HSPA+ DC (Dual Cell) networks which offer coast-to-coast coverage to more than 97 percent and more than 83 percent of the Canadian population respectively.
The pace of wireline revenue erosion in Q4 2012 improved over the previous quarter as a result of increased TV revenues, driven by fast subscriber growth in Fibe TV and an improved local and access revenue trajectory as residential NAS losses continued to decrease year over year. Bell Wireline operating revenues decreased 3.7 percent to $2,608 million this quarter, as competitive and wireless substitution pressures continued to impact traditional voice services. Reduced spending by business customers on wireline data products and information and communications technology (ICT) services, reflecting continued slow economic growth, as well as the re-pricing of connectivity services also contributed to the year-over-year decline in Bell Wireline revenue this quarter.
Although Bell Wireline EBITDA decreased 6.6 percent this quarter to $931 million, margins were in line with expectations at 35.7 percent, reflecting a $35 million, or 2.0 percent, reduction in operating costs over last year from ongoing spending controls and productivity gains achieved in our call centres and field service operations. For the full 2012 year, wireline operating revenues decreased 3.8 percent to $10,220 million, while wireline EBITDA was down 5.7 percent to $3,920 million. Wireline EBITDA margin has held relatively stable at 38.4 percent, down 0.7 percentage points year over year, the result of a $166 million, or 2.6 percent, improvement in operating costs that effectively absorbed expenses related to Fibe TV growth and softer business markets results.
-Bell Fibe TV added 48,234 net new customers compared to 27,967 in the fourth quarter of 2011. The Bell Fibe TV footprint expanded by 500,000 households in Q4 to reach 3.3 million at the end of 2012. Satellite TV net additions were negative in the quarter, reflecting aggressive customer conversion offers from cable competitors, the rollout of IPTV by competing service providers, and Bell customer migrations to Fibe TV. Consequently, total TV net additions were 19,218, compared to 27,702 in Q4 2011.
-The Bell TV subscriber base totalled 2,155,983 at the end of Q4, a year-over-year increase of 2.5 percent.
-Bell added 7,143 new net high-speed Internet customers in Q4, compared to 1,091 customers in Q4 2011. The improvement reflects the pull-through effect of Fibe TV service bundles, enhanced promotional offers, and continued broadband fibre network expansion, all of which contributed to lower residential and business customer churn year over year. Bell had 2,115,243 high-speed Internet customers at the end of 2012, a 0.1 percent year-over-year increase.
-Wireline data revenue was $1,448 million in the quarter, compared to $1,450 million in Q4 2011, as higher TV revenue driven by strong Fibe TV subscriber growth was offset by lower data product and ICT sales.
-Residential NAS net losses in Q4 2012 decreased to 87,029, a 3.0 percent improvement over the previous year, as Bell continued to reduce customer turnover as the Fibe TV service area expands. Wireless substitution, which continued to steadily increase, moderated the overall decrease in residential NAS. Business access losses increased to 36,641 from 13,947 in Q4 2011, reflecting higher wholesale customer deactivations and a continued lack of new business growth.
-Local and access revenues declined 7.6 percent to $635 million. Total NAS at the end of the quarter was 5,644,939, a 7.5 percent decline year over year, attributable to increased competition and a reduction in access lines and digital circuits as customers continue to adopt wireless and IP-based technologies.
-Long distance revenues declined 12.8 percent to $191 million. The year-over-year decline reflected fewer minutes of use by residential and business customers resulting from NAS line losses and technology substitution, ongoing rate pressures, and decreased sales of global long distance minutes.
-Equipment and other revenue decreased 6.3 percent to $255 million due mainly to lower year-over-year legacy wireline telecommunications equipment sales and promotional offers on TV set-top boxes.
Bell Media reported operating revenue of $591 million in Q4 2012, up 2.2 percent from last year. The increase was due to higher subscriber fee revenue, which grew approximately 7 percent year over year, driven by market-based rates charged to broadcast distributors through renegotiated agreements for certain Bell Media specialty TV services. Advertising revenue decreased slightly from last year, down approximately 1 percent, as the impact of the NHL Lockout across Bell Media's specialty sports properties was largely offset by stronger advertising demand and shifting demand to its conventional and non-sports specialty TV channels.
Bell Media's EBITDA was up 32.3 percent in Q4 2012 to $172 million, reflecting the flow-through of higher subscriber fee revenue and 6.5 percent lower operating costs due mainly to lower content and production costs as a result of the NHL lockout. For the full 2012 year, operating revenue and EBITDA were up 41.6 percent and 68.0 percent, respectively, to $2,183 million and $561 million.
-CTV completed the fall season with 13 of the Top 20 programs, up two from the same period last year, and with 19 percent more viewers in primetime than Canada's other two leading private networks combined.
-TSN and RDS drew 5.8 million viewers for The Grey Cup, up 27 percent from the prior year, with the half-time show attracting an average audience of 6.4 million viewers.
-RDS announced a new multiplatform docu-reality series, 24CH, offering Habs fans access to their team on television, Internet, superphones and tablets, in time for the first game of the season.
-CTV's non-sports specialty services continued to post strong audience growth with eight of the Top 20 TV programs and all five of the Top five fall series, led by double-digit increases for The Comedy Network and Bravo!
-Bell Media Radio launched its new web platform. There are 13 stations currently on the new technology, including Toronto's CHUMFM.com, the largest radio website.
-The Discovery Channel app reached 200,000 downloads. Social media campaigns for High Tech Toys Week and End of the World specials increased Daily Planet Facebook likes by 50 percent, while retweets increased 9-fold.
-Bell Media rebranded its Sympatico portal in English Canada as TheLoop.ca, a new brand destination that enhances and strengthens the most successful content on Sympatico with more original video hosted by distinctive Bell Media personalities.
-Cirque du Soleil and Bell Media announced the closing of the transaction to create Cirque du Soleil Media, a new joint venture to develop Quebec-based media content for television, film, digital, and gaming platforms.
Bell Aliant's revenues decreased 1.0 percent to $694 million in Q4 2012, due to lower local and access, and long distance revenues, partly offset by higher data and wireless revenues. Bell Aliant's EBITDA decreased 2.2 percent to $314 million this quarter, due to lower revenues as operating costs were unchanged year over year. Similarly, for the full 2012 year, Bell Aliant revenues and EBITDA declined 0.5 percent and 1.9 percent, respectively, to $2,761 million and $1,292 million.
BCE's operating revenues were $5,161 million in Q4 2012, compared to $5,166 million in Q4 2011, reflecting stable year-over-year revenues at Bell and lower revenues at Bell Aliant. For the full 2012 year, revenues were up 2.5 percent at $19,975 million, due to higher revenues at Bell driven by the strong contribution of Bell Wireless and Bell Media.
BCE's EBITDA increased 1.4 percent to $1,896 million in Q4 2012 and 3.3 percent to $7,883 million for the full year as a result of 4.4 percent EBITDA growth at Bell, moderated by a year-over-year decrease at Bell Aliant.
BCE's cash flows from operating activities were $863 million in Q4, up 3.0 percent compared to $838 million last year, due to higher net earnings. Free cash flow this quarter, before and after the $750 million voluntary pension plan contribution, was $605 million and negative $145 million, respectively, compared to $564 million and negative $186 million, respectively, in the previous year. The year-over-year improvement was due primarily to higher EBITDA. For the full 2012 year, BCE's cash flows from operating activities were up 14.0 percent to $5,552 million. Free cash flow, before and after a voluntary pension contribution, was $2,420 million and $1,670 million compared to $2,261 million and $1,511 million in 2011, respectively.
BCE's net earnings attributable to common shareholders were $708 million, or $0.91 per share, in Q4 compared to $486 million, or $0.62 per share, in the same quarter last year. The year-over-year increase in earnings was due primarily to higher EBITDA and a $248 million non-cash gain related to our Inukshuk investment. Full-year net earnings attributable to common shareholders were $2,624 million or $3.39 per share, compared to $2,221 million or $2.88 per share in 2011.
BCE's Adjusted EPS was $0.65 per common share in the quarter, compared to $0.62 last year. This 4.8 percent increase was due to higher EBITDA. For the full 2012 year, BCE's Adjusted EPS was $3.18 per share, $0.05 higher than 2011.
On Nov. 19, 2012, following the CRTC's denial of their original application, Bell and Astral amended the terms of their proposed transaction and submitted a new application to the CRTC for approval of Bell's proposed acquisition of Astral. The new proposal seeks to address the CRTC's concerns, including complying with the relevant viewership thresholds and revising the package of tangible benefits to support the creation of exceptional Canadian TV and radio content, promote homegrown talent in a multi-platform universe, and foster consumer engagement in the broadcasting system. As a result of the amendments made to the terms of the original Arrangement Agreement between Astral and Bell, the outside date for the closing of the transaction has been extended to June 1, with Astral and Bell each having a further right to postpone it to July 31, if required, to obtain necessary regulatory approvals. Details of the new Astral-Bell proposal will be made available by the CRTC when it launches its public consultation on the application. The transaction remains subject to CRTC and Competition Bureau approval, other closing conditions and termination rights. A break-up fee of $150 million is payable by BCE to Astral should the transaction not close before the outside date for regulatory reasons. On Feb. 1, Astral paid a cash dividend of $0.50 per share on its class A non-voting shares and class B subordinate voting shares. Learn more about Astral-Bell at CanadiansDeserveMore.ca.
The 2013 Bell Let's Talk campaign in support of Canadian mental health highlights the impact of mental illness on our workplaces and economy. On the third annual Bell Let's Talk Day on Feb. 12, national spokesperson Clara Hughes will again invite to Canadians to join the conversation about mental health to help reduce the stigma around mental illness. On Feb. 12, Bell will donate 5 more to Canadian mental health initiatives for every text and long distance call by Bell and Bell Aliant customers, tweets using #BellLetsTalk, and Facebook shares of the Bell Let's Talk image.
Bell also announced its support of the new national Psychological Health and Safety in the Workplace standard, developed by CSA Group and Bureau de normalisation du Quebec in collaboration with the Mental Health Commission of Canada. Bell, the Great-West Life Centre for Mental Health in the Workplace and the federal government funded the development of the voluntary standard. The first of its kind in the world, the standard offers guidance to Canadian businesses and other organizations in promoting mental health and addressing mental illness in the workplace. With 500,000 Canadians missing work each day because of a mental illness, the impact in lost labour-market participation was an estimated $20.7 billion in 2012 alone.
Bell was recognized as one of Montreal's Top Employers for 2013 in the annual competition organized by Mediacorp Canada. A Montreal-based company since its founding in 1880, Bell was recognized for its significant investment in training and professional development, leading parental support programs, wide-ranging career possibilities, and a share purchase plan that enables all team members to share in the company's success. Bell is the largest communications company in Quebec, with more than 17,000 employees and more than 13,000 retirees, and plays a crucial role in the technological, economic and social prosperity of Quebec.
Our 2013 financial guidance builds on the positive operating momentum we delivered in 2012, reflecting continued strong progress in the execution of Bell's Strategic Imperatives and the ongoing transformation of its operating mix away from legacy wireline voice services.
The financial guidance targets for revenue growth, EBITDA growth, Adjusted EPS, free cash flow growth and capital intensity in 2013 do not reflect the financial impact from the pending acquisition of Astral. We anticipate updating our 2013 financial guidance upon closing of the Astral acquisition targeted for the second quarter of 2013.
Our financial reporting in 2013 will reflect the introduction of the new accounting standard for defined benefit pension plan expense that requires the expected accounting rate of return on pension assets to be reduced to the accounting pension discount rate. The non-cash impact on 2012 Adjusted EPS, which will be restated as a result of this new pension accounting standard is $0.22 per share, resulting in a decrease to reported Adjusted EPS from $3.18 per share to $2.96 per share. In 2013, Adjusted EPS will be impacted negatively by a further $0.06 per share, reflecting a lower discount rate at the end of 2012 compared to the end of the previous year. Additionally, due to the large non-cash impact on Adjusted EPS, BCE will report its dividend payout ratio in 2013 on the basis of free cash flow as it is better aligned with the payment of cash dividends.
BCE's Board of Directors declared a quarterly dividend of $0.5825 per common share, payable on April 15, to shareholders of record at the close of business on March 15.
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