BCE posts record growth in mobile phone customers, but warns of ‘advertising slump’ in media division

CEO Mirko Bibic at the Bell Campus in Montreal on January 3, 2020.Andrej Ivanov/The Globe and Mail

BCE Inc. ECB-T saw slightly higher revenue and lower profits as it added a record number of mobile phone customers and internet users, and continued to invest in building out its 5G wireless broadband networks and fiber optic.

Yet the company also struggled with higher operating costs in its third quarter and continues to see weak advertising demand through its media business due to inflation and ongoing channel delays. supply.

Analysts were impressed with the company’s addition of more than 224,000 mobile phone customers in the quarter, a 64% increase over last year, setting the company’s record for quarterly users earned.

In an investor call on Thursday, chief executive Mirko Bibic attributed this to increased foot traffic as retail stores resumed operations, as well as strong demand from business customers and an increase immigration following the downturn of the pandemic.

“Just look at the kind of tailwinds that work in everyone’s favor. There is immigration and the federal governments have indicated that will continue to grow for the foreseeable future,” Bibic said, referring to the federal government. announcement Tuesday that it would welcome 500,000 immigrants a year by 2025.

The company also recorded the highest number of retail internet activations in 17 years, up 36% from last year, thanks to the growth of its fiber optic network.

The results came amid a period of increased network spending by telecoms. In May 2021, BCE announced that it would spend an additional $1.7 billion on its 5G wireless and fiber optic internet networks over two years, in addition to its usual spending of $4 billion.

Analysts also credited the first true “back-to-school” season since before the COVID-19 pandemic, and competitor Rogers Communications Inc.’s service outage on July 8, for the total increase in customer base.

Asked about the effect of competitors’ service outages on BCE’s customer growth, chief financial officer Glen LeBlanc said he didn’t attribute the outage “singularly” to increased subscriber numbers. mobiles. “Actually, the momentum has been there for quite a while,” he told analysts.

But Mr. LeBlanc noted that the company was still feeling the effects of chip shortages, which continued to affect the company’s overall business-to-business sales.

Demand from radio and television advertisers slowed in the media division in the third quarter due to lower consumer demand driven by inflation – Mr Bibic called the slowdown an “advertising recession” – as well as ongoing supply chain issues. Meanwhile, broadcast rights costs have risen as sporting events suspended during the pandemic have resumed.

“This return to a more typical pre-COVID cost structure and the volatile advertising market should weigh heavily on Bell Media even in the fourth quarter,” LeBlanc said.

BCE increased its operating revenue for the three-month period ended Sept. 30 by 7.4% to $6.02 billion from nearly $5.84 billion in the same quarter last year.

Its third-quarter profit fell 5.5% to $715 million. Earnings were 78 cents per share, compared to 83 cents per share a year ago.

The company’s operating costs for the quarter increased by $38 million. The cleanup, mainly due to Hurricane Fiona, which hit Canada in September, cost BCE $19 million. The company spent an equal amount on fuel, utilities and labor costs, which Bibic said had become more expensive due to inflation and above-average wage increases. normal.

In a note to investors, Canaccord Genuity Corp. analyst Aravinda Galappatthige noted that the disputed merger between Rogers and Shaw Communications continued to prevent fourth carrier Freedom Mobile from making significant market gains. In the past, freedom has been credited with driving competition in the wireless industry.

“With Shaw/Freedom seemingly less present in the market, at least in the near term, we expect incumbent results to remain strong,” Galappatthige said.

BCE shares rose 23 cents, or 0.4%, to close at $61.97 on the Toronto Stock Exchange on Thursday.

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