May 12, 2011 / 12:51 PM / in 6 years

UPDATE 3-Bell Canada parent gains ground in smartphones

* Adjusted EPS C$0.72 vs analyst forecast C$0.69

* Dividend increase impresses analysts

* Postpaid net subscriber additions 80,648

* Will launch LTE service in some markets in 2011

* Shares rise 1.5 percent in early trade

(Adds conference call, analyst comment)

By Alastair Sharp

TORONTO, May 12 (Reuters) - BCE Inc (BCE.TO), Canada’s biggest communications company, reported a 16 percent rise in profit on Thursday after stripping out special items, as it grabbed an oversized share of the lucrative smartphone market.

In the most coveted end of wireless market, the Montreal-based parent of Bell Canada outperformed the two other carriers that dominate in Canada.

BCE, whose shares rose on Thursday, added a net 80,648 post-paid customers, who sign long-term contracts and typically tap data services over their smartphones. That compares with a net 45,000 for Rogers Communications (RCIb.TO) and 52,000 for Telus T.TO>. [ID:nN25226138] [ID:nN0524973]

Bell and Telus share an upgraded national wireless network that has helped them eat into Rogers’ dominant position.

BCE also boosted its dividend by 5 percent to C$2.07 a share and raised its 2011 profit outlook as it incorporates earnings from its recent acquisition of CTV, Canada’s biggest private broadcaster.

“The dividend increase is the big surprise,” RBC Capital Markets analyst Jonathan Allen said. Rising payouts since 2008 are “very, very impressive in the industry, especially for what is perceived as being a slower growth phone company,” he said.

MORE REVENUE PER CUSTOMER

The rising use of mobile data means Bell is wringing more revenue out of each customer, with the average monthly bill jumping by C$1.61 to C$51.68.

BCE’s net income fell to C$503 million in the quarter, down from a profit of C$706 million a year earlier, when asset sales flattered the bottom line.

Excluding one-time items, first-quarter earnings rose to C$543 million, or 72 Canadian cents a share, from C$467 million, or 61 Canadian cents.

On that basis, analysts had on average expected BCE to earn 69 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue edged higher to C$4.5 billion from C$4.4 billion, in line with what analysts had forecast.

LOW-END COMPETITION

While fighting for the top end of the market, all three carriers are losing lower-value customers drawn to no-contract and unlimited talk and text plans from newcomers including Globalive’s Wind Mobile, Mobilicity and Public Mobile.

Bell lost 75,356 pre-paying users in the quarter, much more than analysts had expected but not seen as a major concern.

“One postpaid customer is the equivalent of 10 prepaid customers, or even more,” RBC’s Allen said.

Bell and Rogers are also threatened by Quebecor’s (QBRb.TO) Videotron unit, which launched a wireless service in Quebec last year to complement existing cable television and Internet offerings and content, particularly in the French language.

Bell added 7,663 net new television subscribers, aided by around 12,000 customers signing up for its Internet-protocol Fibe TV service in Ontario and Quebec, and 13,161 Internet customers. It said business Internet growth was weak.

The company was expected to add 21,500 TV users and 10,600 Internet subscribers, the average of a Reuters poll of nine analysts.

Bell said it will launch a higher-speed network using Long Term Evolution (LTE) technology in some markets in 2011. Telus and Rogers have made similar announcements.

CTV AIDS FORECAST

Bell, which quickly offered CTV-based mobile video packages in sports, news and entertainment for its own smartphone and tablet computer customers, said it would make the content available to other operators as well.

The move opens up an additional source of revenue for the newly minted Bell Media unit and could lessen pressure from the telecom and broadcast regulator, which will next month study rules governing an increasingly converged industry.

“CTV is benefiting from a strengthening TV and digital advertising market this year and higher subscription revenues,” BCE’s chief financial officer, Siim Vanaselja, said on a conference call for analysts.

BCE added 5 Canadian cents to its forecast for adjusted 2011 earnings, to be between C$2.95 and C$3.05 a share. It said revenue would grow between 9 and 11 percent, up from an earlier forecast for 1 to 2 percent growth.

Shares OF BCE gained 1.5 percent to C$37.50 in morning trade on the Toronto Stock Exchange. (Additional reporting by Euan Rocha; Editing by Frank McGurty)

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