Bell subs feel impact of ‘aggressive’ cable competition in Q2

BCE Inc. is hoping the second half of the year results in a boost for its internet business, after a second quarter that analysts called “surprisingly weak” and “softer than expected.” In its second-quarter results reported Thursday, the company said it added 1,407 high-speed internet subscribers in the three months ended June 30, an 81-per-cent decrease from the 7,539 subscribers added in the same period a year earlier. In a Thursday note, Canaccord Genuity analyst Aravinda Galappatthige called the additions “softer than expected” and “well below” his forecast, which estimated 7,800 new internet subscribers for the quarter. Bell ended the quarter with 3.7 million internet subscribers, an 8.8-per-cent increase over the same period in 2016, which includes 17,426 new fibre-to-the-home (FTTH) customers for the second fiscal quarter — for a total fibre footprint of 3.4 million locations — and also a larger subscriber base due to the acquisition of Manitoba Telecom Services customers. Those gains were tempered by “increased residential churn driven by highly aggressive offers from cable competitors, particularly in our non-FTTH footprint and greater student deactivations,” the report said. “While just a difference of a few thousands subs on a base of 3.7m, broadband net adds was surprisingly weak, essentially flat… despite a rapidly expanding FTTP footprint,” Barclays analyst Phillip Huang said in a Thursday morning note. “As we go forward in the second half of the year, we expect stronger internet additions, particularly as our fibre footprint continues to roll out,” Bell CEO George Cope said during a morning call with analysts. In addition to a wider fibre footprint, Cope said he was also encouraged by the introduction of the company’s Alt TV service, which launched in May. The IPTV offering is an app-based, live version of Bell’s Fibe TV service designed to attract cord-cutters and cord-nevers. “We are extremely bullish on what we’re doing on the TV side,” Cope said, adding that the thing he was “most pleased with this morning is the Alt TV in the marketplace now, which will drive broadband and also the acceleration of the fibre — even an extra hundred thousand households drives it quicker than where we though we would be.” Bell ended the quarter with 2.8 million TV subscribers, up 2.7 per cent from the same period a year earlier, “partly due to the subscribers acquired by MTS,” the company said. Of those subscribers, 1.48 million were IPTV customers, with 16,427 added in the quarter — a 53-per-cent decline from the number of net additions in the second quarter of 2016, “driven by an increased number of retail customers coming off promotional offers, aggressive residential offers for service bundles from cable competitors, … the impact of maturing Fibe TV markets, minimal new footprint expansion in 2017 and accelerating substitution of traditional TV services with OTT services,” Bell said. “When we look at the relative TV performance of our cable peers we’re really pleased with the IPTV growth,” Cope said, highlighting Alt TV’s aim of reaching the parts of the market where TV subscriptions are declining. The service also “opens up additional revenue stream for our media assets, and quite frankly other Canadian companies’ media assets because we’ll be able to monetize advertising dollars through streaming services on Alt TV and, over time, we do expect to see competitive responses to that as well in the marketplace,” Cope added. On the landline side, Bell lost 94,959 phone customers, for a total subscriber base of 6.48 million, a negligible increase from the same quarter a year earlier. The quarter’s saving grace was found in Bell’s wireless division, which boasted a 12.9-per-cent growth in revenue to $1.96 billion from the earnings of $1.74 billion in the second quarter of 2016. Bell added 88,611 postpaid wireless subscribers in the quarter, a 26.9-per-cent increase to the net adds a year earlier, for a total postpaid subscriber base of 8.13 million. The company’s total wireless subscriber base of 8.9 million includes 476,932 subscribers picked up from the MTS acquisition. Average revenue per user (ARPU) grew 4.6 per cent to $67.28, compared to $64.32 in the second quarter of 2016. The company’s postpaid churn rate of 1.08 per cent “is our lowest reported quarterly churn rate in 11 years,” Cope said. Overall, Bell saw its revenue rise in the second fiscal quarter to nearly $5.7 billion, up 6.7 per cent from the comparable period a year earlier, while posting a profit of $811 million, which was 2.3 per cent lower than the profit a year prior. — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell subs feel impact of ‘aggressive’ cable competition in Q2

News | August 3, 2017

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Bell subs feel impact of ‘aggressive’ cable competition in Q2

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