TORONTO (Reuters) - BCE Inc (BCE.TO), Canada’s largest telecommunications company, reported better-than-expected adjusted profit on Tuesday, helped by the inclusion of TV and radio content producer Astral Media and strong growth in its wireless business.
Price hikes tied to a new industry code that shortens the duration of contracts as well as the lack of iconic smartphone device launches acted as a drag on wireless growth in the first quarter, the Montreal-based company said.
Higher content costs and lower ad revenue also hurt media earnings, it added.
“Wireless growth is clearly punching above its weight,” BCE Chief Executive Officer George Cope said on a call with analysts. He said improving landline earnings later in the year should offset content cost pressures for media.
BCE, which operates under the Bell brand, maintained its revenue and profit forecast for 2014.
Bell added 33,964 net contract wireless subscribers in the three months to the end of March, compared to almost 60,000 in the same quarter a year ago. Such customers are coveted because they sign multi-year contracts and pay more each month than prepaid subscribers.
The average Bell wireless customer’s monthly bill was C$57.90, a rise of 3.5 percent.
By comparison, market-leader Rogers Communications Inc (RCIb.TO) added just 2,000 net postpaid wireless customers and its average wireless customer, a blend of contract and prepaid subscribers, paid C$57.63 a month in the first quarter.
BCE’s net income attributable to shareholders rose to C$615 million ($561 million), or 79 Canadian cents per share, from C$566 million, or 73 Canadian cents per share, a year earlier.
On an adjusted basis, the company earned 81 Canadian cents per share. Operating revenue rose 3.7 percent to C$5.10 billion.
Analysts had expected earnings of 76 Canadian cents per share on revenue of C$5.12 billion, according to Thomson Reuters
Dvai Ghose, an analyst with Canaccord Genuity, said BCE would have just missed estimates without counting non-operating gains.
“Headline EPS beat is a little misleading, while strong wireline subscriber results are positive, wireline financials and wireless COA (cost of acquisition) were a little disappointing and media is a concern,” he wrote in a note.
The company lost out to Rogers on the rights to broadcast National Hockey League games starting with the 2014/15 season, its first major media disappointment after buying Astral in mid-2013 and CTV in 2011.
BCE executives said the loss of hockey broadcasting would not affect results until next year, and that content costs were higher overall even without the NHL.
Bell added 15,627 landline Internet customers and 54,680 customers signed up to Fibe TV, which BCE runs over its Internet network and has helped offset a long-term decline in the number of people with a landline telephone connection. That number was offset by more than 26,000 losses from satellite TV.
BCE’s shares, which have risen about 8 percent in the last six months, slipped 0.8 percent to C$48.59 on the Toronto Stock Exchange.
($1 = 1.0963 Canadian dollars)
Additional reporting by Ashutosh Pandey; Editing by Ted Kerr, Don Sebastian, Chizu Nomiyama and Paul Simao