BCE INC. $56(Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 840.3 million; Market cap: $47.1 billion; Price-to-sales ratio: 2.2; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.bce.ca) is Canada’s largest telephone provider, with 5.0 million customers in Ontario and Quebec. It also has 2.3 million high-speed Internet users and 2.4 million TV subscribers. This business supplies 46% of BCE’s revenue.
The company also sells wireless services (29% of revenue) to 8.1 million customers across Canada, and its Bell Media segment (13%) owns CTV Television, specialty channels and radio stations.
In November 2014, the company paid $3.95 billion in cash and stock for the 56% of Bell Aliant that it didn’t already own. Bell Aliant, which accounts for the remaining 12% of BCE’s revenue, sells telephone and Internet services to 2.2 million clients in Atlantic Canada and rural Ontario and Quebec.
Thanks to this purchase, BCE’s earnings rose 13.0% in the three months ended December 31, 2014, to $610 million from $540 million a year earlier. But per-share earnings gained just 2.9%, to $0.72 from $0.70, due to the extra shares the company issued to Bell Aliant shareholders. Revenue rose 2.7%, to $5.5 billion from $5.4 billion.
BCE added 83,498 wireless subscribers, net of cancellations. That’s down 11.5% from a year earlier, but 76% of subscribers under long-term contracts now use smartphones, up from 73%.
That’s good news, because smartphones generate higher fees for BCE than regular cellphones; average monthly revenue per user rose 5.5% in the latest quarter, to $61.12. As well, BCE is doing a good job of hanging on to its wireless customers. Its churn rate, which measures how many subscribers cancelled their service, fell to 1.57% from 1.59% a year earlier.
Meanwhile, the company is seeing strong demand for its TV offerings. It ended 2014 with 933,547 subscribers (including Bell Aliant) to its Fibe TV service, up 42.0% from a year earlier. As well, BCE’s CraveTV video-on-demand service, which launched in December 2014, is attracting more users than the company expected.
The results prompted BCE to raise its quarterly dividend by 5.3%, to $0.65 a share from $0.6175. The new annual rate of $2.60 yields 4.6%.
The company expects its full-year 2015 earnings to improve to $3.28 to $3.38 a share from $3.18 in 2014. The stock trades at a still-reasonable 16.8 times the midpoint of that range.
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