February 6, 2008 / 1:37 PM / 10 years ago

UPDATE 3-Wireless gains help lift BCE earnings

(Adds analyst comment, updates stock price)

TORONTO, Feb 6 (Reuters) - BCE Inc (BCE.TO), Canada’s biggest telecom company, reported a higher fourth-quarter profit on Wednesday amid gains at its wireless business, as it prepares to be taken private in a C$34.8 billion buyout.

Net earnings were C$2.35 billion ($2.35 billion), or C$2.93 per share, up from C$699 million, or 84 Canadian cents a share, lifted by gains from the sale of its Telesat satellite subsidiary and lower interest and income tax expenses.

Before restructuring and other items, BCE earned C$577 million, or 72 Canadian cents a share, up from C$353 million, or 44 Canadian cents a share, a year earlier.

National Bank Financial analyst Greg MacDonald wrote in a note to clients that the company’s net wireless subscriber additions, at 195,000 during the quarter, were slightly better than his estimate of 184,000.

He also noted that average revenue per user rose 3.8 percent and was higher than expected, “signaling that the company is not relying on pre-paid growth to make their numbers.”

Operating revenue for the quarter was C$4.55 billion, up from C$4.53 billion for the same quarter a year earlier.

BCE, parent of Bell Canada, is being bought by a group of private-equity firms that includes the Ontario Teachers’ Pension Plan, Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.

The buyers have offered C$42.75 a share for BCE, but the stock is currently well below that, as investors weigh the possibility that the buyout may be delayed, repriced or abandoned altogether. The shares were up 93 Canadian cents at C$35.48 on the Toronto Stock Exchange on Wednesday morning.

BCE, which is also being sued by bondholders who say the takeover hurts them in its present form, said it currently expects the deal to close early in the second quarter of 2008.

“This stock clearly remains a victim of concerns over the bondholder lawsuit and funding risk,” MacDonald wrote.

He said that, if the buyout collapses, the stock would ultimately retreat to between C$30 and $32, though it could fall as low as C$26 immediately after such an announcement.

Montreal-based BCE said operating revenue from its wireline segment dipped 0.7 percent to C$2.7 billion. Gains in video and data revenue were offset by falling revenue from local and access service, long distance service and equipment sales.

Unit earnings before interest, taxes, depreciation and amortization rose 5.4 percent to C$940 million on cost savings, lower pension costs and pricing initiatives.

Local and access phone sales fell 5.5 percent to C$874 million and long distance revenue dropped 6.3 percent to C$296 million.

In contrast, data revenue increased 1.6 percent to C$976 million as the company added 29,000 high-speed Internet customers in the quarter. Video revenue rose nearly 18 percent to C$351 million as the subscriber base grew by 2,000 customers to total 1.8 million.

For its fast-growth wireless unit, operating revenue increased 8.4 percent to C$1.1 billion. That reflects a 4.4 gain in its subscriber base to 6.2 million customers, higher revenue per customer and stronger equipment sales, the company said.

In dollar terms, the average revenue per wireless user rose C$2 to C$55 and the cost of acquisition fell nearly 12 percent to C$392 per gross activation.

Total gross activations in the quarter rose 16.7 percent to 510,000, but net activations dipped 8 percent to 195,000 on a high customer churn rate. The blended churn rate rose to 1.7 percent reflecting intense competition, the company said.

BCE said it needs to improve its high-speed Internet customer growth and speed up improvements in its wireless unit.

Revenue at the company’s Bell Aliant business rose 2.4 percent to C$858 million.

$1=$1.00 Canadian Reporting by Jonathan Spicer and Susan Taylor; Editing by Rob Wilson

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