BCE’s Third Quarter Results Solid as Expected Driven By Better Subscriber Show

On Thursday, during market hours, BCE Inc. posted stronger third quarter results as consolidated adjusted EPS remained $0.825, above the Street’s estimates of $0.767. Revenue of $5.194 billion was stable with our $5.11 billion and consensus $5.16 billion. EBITDA of $2.13 billion was also mostly stable with our and consensus expectations of $2.06 billion and $2.11 billion, correspondingly, led mainly by strong wireless margins and Fibe impetus. Subscriber performance remained better, balanced with healthy financial results. In general, financials were in-line with expectations, driven by solid wireless and steady wireline performance. Subscriber results remained impressive, specifically in wireless postpaid and broadband additions.

Healthy wireline results indicate increasing Fibe scale, steady growth in 3-product households, and the flow through of current price surges. Wireline revenue of $2.46 billion was in line with our $2.47 billion and consensus $2.47 billion. EBITDA was $931.9 million versus our and consensus $921 million, showing continued signs of Fibe impetus. With respect to subscriber results, the highlight was very impressive broadband net adds of increased by 50,000 (vs. our increased by 20,000 estimate). The strong performance is coming at the expense of Rogers and not QBR, as QBR reported steady broadband subscriber results in third quarter. Residential NAS and Video additions were also healthy at -43,000 and increased by 24,000 versus our -60,000 and increased by 24,000, respectively.
Wireless results indicate persevered signs of market share gain against Rogers. Postpaid net adds of increased by 91,000 were better than our increased by 75,000 and consensus increased by 78,000. Postpaid churn was 1.197% versus our 1.19% and the Street’s 1.16%. Service revenue was $1.467 billion (up 7% year-over-year) versus our $1.44 billion (up 5.29% year-over-year), due to robust blended ARPU growth of 5.87%, Bell’s best result in over 7 years. We were expecting blended ARPU growth of 3.76%. EBITDA of $684 million was solid than our $664.8 million and consensus $674.9 million , mainly as a result of better than expected service margins of 46.5% (vs. our 46.2% expectation).

In Media, revenue was $664.8 million versus our $643 million and the Street’s $658.6 million . The results indicate TV ad sales (down 3.7% year-over-year) that are facing secular and competitive threat from online media alternatives, counterbalanced by specialty subscriber revenue growth (up 4.5% year-over-year). EBITDA was $181.7 million , down 8.5% year-over-year, better than expected but impacted by drastically higher content costs (e.g. renewal of the CFL contract, regional hockey rights, additional TSN feeds, expanding TV Everywhere library, etc.) versus third quarter of 2013.

We maintain “Sector Perform” rating with target price of C$50.