Canada's BCE hurt by cable competition; wireless 'saves the day'

TORONTO (Reuters) - BCE Inc, Canada’s largest telecom company, reported strong wireless growth on Thursday but signaled major cable rivals and smaller resellers were hurting its fixed-line business.

FILE PHOTO: A Bell Canada office is pictured in downtown Ottawa November 26, 2008. REUTERS/Chris Wattie/File Photo

The company, popularly known as Bell, added 88,611 net postpaid wireless subscribers in the second quarter, and the average monthly bill for its wireless customers rose 4.6 percent to C$67.28. Both results helped the unit deliver double-digit profit and revenue growth.

But investors and analysts focused on lower-than-expected customer growth for the internet and Fibe TV services, which the company blamed on tough competition in areas where it has yet to build out a more advanced fixed-line network. Montreal-based BCE’s shares were down 0.7 percent at midday.

RBC Capital Markets analyst Drew McReynolds said internet subscriber growth of 1,000 accounts missed his estimate of 10,000 additions. Barclays’ analyst Phillip Huang said Fibe growth of some 16,000 accounts came in below his forecast of 21,000.

“Wireless saves the day again,” Desjardins analyst Maher Yaghi wrote in a note.

However, Yaghi said BCE’s fixed-line results should improve next year, once a network upgrade is largely completed in the Toronto area.

While wireless powers BCE’s overall growth, the company still gets more revenue from selling fixed-line internet, television and telephone services, and it is investing heavily in network upgrades to compete with cable rivals Rogers Communications Inc and Quebecor Inc’s Videotron.

“We’re just working as fast as the team can go to get this program executed on,” said Chief Executive Officer George Cope.

BCE’s landline unit posted a 4.8 percent increase in operating revenue, boosted by the acquisition of regional operator Manitoba Telecom Services.

Excluding special items, the unit’s earnings before interest, taxes, depreciation and amortization only rose by 2.6 percent due to higher costs and a C$22 million hit from a regulatory ruling that lowered rates BCE can charge internet resellers for wholesale access to its network.

Net income attributable to BCE shareholders fell to C$762 million, or 84 Canadian cents per share, from C$778 million, or 89 Canadian cents per share, a year earlier, in part because of amortization of the Manitoba Telecom purchase price.

Earnings excluding special items came to 88 Canadian cents a share, 1 cent above expectations.

Operating revenue rose 6.7 percent to C$5.70 billion, above expectations for C$5.65 billion.

Reporting by Alastair Sharp; Editing by Bernadette Baum and Lisa Von Ahn