May 7, 2008 / 12:18 PM / 10 years ago

Charges slash BCE profit, but wireless gains

TORONTO (Reuters) - Profit at BCE Inc (BCE.TO), the Canadian telecom giant that is being taken private in a C$34.8 billion buyout, was hit by one-time charges in the first quarter and fell sharply, even though the company had a substantial increase in wireless subscribers.

Canada’s biggest telecom company said on Wednesday it earned C$258 million, or 32 Canadian cents a share, in the latest quarter. That was down from a profit of C$499 million, or 62 Canadian cents a share, in the same quarter a year earlier.

BCE’s operating revenue was C$4.39 billion, slightly higher than the C$4.38 billion of a year earlier. However, the year-before quarter included C$122 million in revenue from Telesat, which was BCE’s satellite subsidiary. BCE sold Telesat in late October 2007.

Operating revenue at Bell Canada, BCE’s core phone company unit, rose 2.3 percent to C$3.66 billion, while net wireless phone subscriber additions nearly tripled to 34,000 in the quarter from 13,000 in the same quarter of 2007.

“We were pleased that the momentum we built in the second half of 2007 in acquiring wireless subscribers continued this quarter and that 82 percent of our net activations were on postpaid rate plans,” Bell Canada President George Cope said in a statement.

Postpaid customers are those who pay monthly bills, as opposed to prepaid subscribers who pay in advance for set amount of service.

Monthly wireless customer turnover, or churn, was steady at 1.6 percent, the Montreal-based company said.

It also added 10,000 net high-speed Internet subscribers in the quarter, which increased its overall total to 2.014 million subscribers.

“What is important to conclude from these largely in-line results is that the company is positioning for more profitable growth as well as a wireless turnaround, and this is what the purchasers want to see,” National Bank Financial analyst Greg MacDonald wrote in a note to clients.

BCE said its profit was crimped by a C$236-million charge related to the Canadian Radio-Television and Telecommunications Commission’s approval of “the use of deferral account funds for the uneconomic expansion of broadband service to an additional 86 communities, and higher depreciation and amortization expense.”

BCE is being taken private in the world’s largest leveraged buyout by a consortium of investors led by the Ontario Teachers’ Pension Plan. Even though the investor group is paying C$42.75 per share, the company’s stock has languished over concerns that the deal could be delayed, repriced or scrapped altogether.

Some skeptics have said reluctant banks could refuse to fund the deal given the tight credit markets, and that the buyers could abandon the bid. However, both Teachers’ and at least one of its banks have said the deal is going ahead.

“We have previously signaled a view that this deal has a greater than 70 percent chance of closing though (we) recognize that these risks are real,” MacDonald wrote.

BCE has also said the deal is expected to close by the end of the second quarter and it reiterated this view on Wednesday.

The company’s shares were up 15 Canadian cents at C$36.71, on the Toronto Stock Exchange on Wednesday morning.

($1=$1.00 Canadian)

Reporting by Wojtek Dabrowski and Frank Pingue; Editing by Peter Galloway

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