Bell Canada parent comes up short of forecasts

Thu Feb 9, 2012 11:33am EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

(Reuters) - BCE Inc (BCE.TO: Quote), parent of Bell Canada, fell short of forecasts for profit and new wireless subscribers in the fourth quarter as price competition heated up during the holiday season and costs related to its Internet-based TV product weighed on results.

Shares of Canada's largest telecommunications company dropped 2 percent even though it reported a 8.5 percent increase in adjusted net profit for the final three months of the year. But that was shy of the average estimate of analysts, in part because fierce competition held back handset pricing during the holiday season.

To make matters worse, BCE added only 131,986 postpaid wireless customers in the quarter even with an extra boost from the October launch of Apple's iPhone 4S. Analysts were expecting 136,000 of such customers, who sign contracts for smartphone service and typically pay four times as much as prepaid customers. A year earlier Montreal-based BCE added 156,708 postpaid customers, half of all additions that quarter.

"Overall, the results show that competitive pressures in the market are accelerating," said Desjardins analyst Maher Yaghi in a note to clients.

Without question, smartphones are now the main drivers for BCE and its competitors. They now account for 48 percent of Bell's postpaid customers, up from 31 percent a year earlier.

While advanced devices such as iPhones can help subscriber numbers and revenue, they also shrink earnings as Bell and its competitors heavily subsidize the devices to attract customers to multi-year contracts.

BY THE NUMBERS

Net profit rose to C$486 million ($488 million), or 62 Canadian cents a share, from C$318 million, or 42 Canadian cents , a year earlier.

On an adjusted basis, earnings came in at C$484 million, or 62 Canadian cents. Analysts, on average, had expected earnings of 66 Canadian cents on that basis, according to Thomson Reuters I/B/E/S.   Continued...