November 3, 2011 / 2:34 PM / 6 years ago

BCE profit rises, helped by TV, tax change

(Reuters) - BCE Inc (BCE.TO), Canada’s largest telecom company, posted a 41 percent jump in third-quarter profit on Thursday, helped by a tax reversal and its acquisition of CTV, Canada’s largest private broadcaster.

The Montreal-based company, parent of Bell Canada, said it had cut 1,200 management jobs by the end of October as it reduces the cost of running its declining landline phone business, while the wireless division profited as more customers signed up for smartphones and increased their usage.

“One place where Bell clearly should take credit is in cost-cutting and not paying taxes,” Canaccord Genuity’s Dvai Ghose said. “But there were some very mixed at best operating results.”

The company said growth of its landline Internet business had been held back by growing competition while government and corporate business remained weak.

“Overall, the results were in line but do show that competitive pressures in the market are accelerating,” Desjardins analyst Maher Yaghi wrote in a note.

Shares of BCE, which have risen almost 11 percent so far this year, nudged a couple of cents higher to C$39.69 by mid-morning.

Net profit rose to C$642 million, or 83 Canadian cents a share, from C$454 million, or 60 Canadian cents a share, last year.

On an adjusted basis, earnings came in at 93 Canadian cents a share, while revenue rose almost 9 percent to C$4.91 billion.

Analysts, on average, had expected Bell to post adjusted earnings of 73 Canadian cents a share, according to Thomson Reuters I/B/E/S.

The increase in part reflected favorable tax adjustments and other accounting changes from a year ago. Excluding the adjustment, earnings per share were 72 cents.

Its media division, created after last year’s acquisition of CTV, generated sales of $435 million in the quarter, the second three-month period the division contributed to BCE’s results.

Bell, which has been cutting costs to cushion a drop in its landline phone business in Eastern Canada, said the lost jobs involved vacancies and attrition in that unit as it focuses on investment in broadband networks, including an upgraded LTE wireless rollout.

The company, which has around 60,000 employees, took a C$94 million severance charge and said the reduction will result in around C$100 million in annual savings.

In another move to counter the decline in the landline business, it’s rolling out an Internet-protocol television product called Fibe in Montreal and Toronto.

Bell hopes Fibe will help it win over viewers from rival cable-based offerings from Rogers Communications (RCIb.TO) and Quebecor’s (QBRa.TO) Videotron, but the strategy is not proving as successful as a similar move from Telus (T.TO) in the west.

It is also caught in a nationwide wireless race against other established carriers to sign up lucrative smartphone customers, while upstart new entrants move in on more value-conscious pre-paid users.

The company said it added 126,854 customers on contract and lost 41,105 lower-value pre-paid customers in the quarter. It added 94,000 post-paid contract customers last quarter and lost nearly 58,000 pre-paid users.

Rogers, which leads the national wireless market, said it added 74,000 post-paid subscribers and 87,000 pre-paid users when it reported results last week. Telus, the third major national wireless competitor, reports on Friday.

Each Bell wireless customer on average paid less for their monthly bill - a dip of 6 cents to C$64.98 for those on long-term agreements and more than C$1 lower at C$17.81 for pay-as-you-go users. But the growing portion of post-paid users in the mix meant the blended average bill rose.

Bell added a net 26,000 TV subscribers driven by Fibe, as it markets the product heavily in Toronto and Montreal. The company said it is now earning more from television than from its landline phone business.

The company upped its forecast for full-year adjusted earnings to between C$3.10 and C$3.15 a share.

Additional reporting by Aftab Ahmed in Bangalore; Editing by Frank McGurty

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