Canadian telecom company BCE, Inc. (BCE,BCE.TO), the parent company of Bell Canada, reported Thursday that profit for the third quarter surged from last year, driven by financial discipline and efficiency initiatives across its business as well as a marginal revenue growth. The company also posted record wireless postpaid net activations and industry-leading TV net activations. The company also said it currently anticipates fiscal 2009 adjusted earnings at the high end of its prior guidance range, and full year revenue growth at low end of earlier range.
The company noted that the results demonstrate the continued progress in the execution of Bell's 5 strategic imperatives, such as improve customer service, accelerate wireless, leverage wireline momentum, invest in broadband networks and services, and achieve a competitive cost structure.
In a statement, chief financial officer, Siim Vanaselja said, "Our results this quarter showed good financial discipline throughout the business. In a challenging economic cycle, we have continued to focus on improving the cost structure of our operations by implementing efficiency initiatives to deliver sustained improvement in the profitability of our business. Our work to drive out costs has enabled us to sustain margins, even with incremental pension costs and ongoing pressures from the current economic climate."
Third Quarter Results
The Montreal, Canada-based company reported net earnings of C$558 million or C$0.72 per share for the third quarter, sharply higher than C$248 million or C$0.31 per share in the prior-year quarter.
The results for the latest quarter include restructuring and other costs of C$123 million or C$0.16 per share, and net gain on investments of C$32 million or C$0.04 per share. The year-ago quarter results included C$210 million or C$0.25 per share of restructuring and other costs, and a net loss on investments of C$30 million or C$0.04 per share.
Excluding special items, adjusted net earnings for the quarter rose to C$649 million or C$0.84 per share from C$488 million or C$0.60 per share in the year-ago quarter. On average, three analysts polled by Thomson Reuters expected the company to earn US$0.68 per share for the third quarter. Analysts' estimates typically exclude one-time items.
BCE's operating revenues for the quarter edged up 0.5% to C$4.46 billion from C$4.44 billion in the same quarter last year, as higher revenues at Bell Canada were partly offset by lower revenues at Bell Aliant. Wall Street analysts had a consensus revenue estimate of US$4.54 billion for the quarter.
Among BCE's peers, Canadian communications and media company Rogers Communications, Inc. (RCI,RCI-A.TO, RCI-B.TO) reported last month a decline profit for the third quarter to C$485 million or C$0.79 per share from C$495 million or C$0.78 per share, reflecting various one-time items. However, adjusted net income rose to C$505 million or C$0.82 per share from C$465 million or C$0.73 per share last year, driven by a 2% revenue growth to C$3.04 billion, mainly in its Wireless Network and Cable operations.
Segmental Details
Operating revenues for Bell Canada, including the Bell Wireless and Bell Wireline segments, for the third quarter grew 1.2% to C$3.79 billion from C$3.74 billion in the year-ago quarter, helped by higher product revenues from the acquisitions and growth in video revenues, partially offset by declines in local and access, long distance, as well as wireline data revenues. Bell reported operating income of C$583 million, up 25.9% from C$463 million in the year-ago quarter, driven by lower restructuring charges and EBITDA growth of 1.5%.
Within Bell Canada, Bell Wireless operating revenues edged up 0.3% to C$1.18 billion from last year, with service revenues declining by 0.6% and product revenues increasing by 1.9%. Blended Average Revenue Per User or ARPU, decreased C$2.50 to C$52.13 year-over-year. Segment operating income grew to C$354 million from C$338 million in the year-ago quarter.
While the weaker economy and ongoing competitive actions impacted revenue growth and ARPU, Bell Wireless delivered record third-quarter gross activations and postpaid net activations. Gross activations rose 14.1% to 501 thousand new subscribers, and total net activations grew 15.4% to 135 thousand from last year. Postpaid net activations grew 8.0% to a record 122 thousand. The Bell Wireless client base grew by 4.0% year-over-year to reach 6.71 million at the end of the third quarter.
Bell Wireline operating revenues grew 1.0% to C$2.66 billion from a year ago, with equipment and other revenues increasing 78.5%, due to the acquisition of The Source at the start of the quarter. Segment operating income climbed to C$229 million from C$125 million in the year-ago quarter.
Bell Aliant's revenues for the quarter decreased 3.2% to C$786 million from last year, due to lower local and access, long distance and equipment and other revenues. Operating income also declined 2.5% to C$199 million, due to lower revenues and higher restructuring and other costs, partly offset by cost containment initiatives.
Other Metrics
BCE's operating income for the third quarter increased 17.2% to C$782 million from C$667 million in the prior-year quarter, as higher operating income at Bell was partly offset by lower operating income at Bell Aliant.
BCE also declared a quarterly dividend of C$0.405 per common share, payable on January 15, 2010, to shareholders of record at the close of business on December 15, 2009.
BCE noted that it has real momentum in both wireless and wireline businesses, with Bell TV leading the industry in net TV activations and Bell Wireless achieving a record number of third-quarter postpaid net activations.
Meanwhile, the company improved residential local line losses 3% and doubled the number of Bell Bundle customers year-over-year on effective operational management, including increased customer winbacks and better service execution during the busy move season.
Bell Canada's momentum is accelerating with the launch of the fastest and largest wireless network in Canada on November 4, which was completed on budget and ahead of schedule. The ongoing investment in service operations and in its leading-edge IP networks for business and residential customers would also add to the momentum. Bell would also continuing to earnestly focus on driving out costs across the business. Bell also announced last week the availability of iPhone 3GS on Bell Mobility's new state-of-the-art HSPA network.
Outlook
Looking ahead to fiscal 2009, BCE now anticipates adjusted earnings at the high end of its prior guidance range of C$2.40 to C$2.50 per share. Full-year 2009 revenue growth is now expected at low end of earlier range of 1%to 2%. The Street is currently looking for earnings of C$2.42 per share for fiscal 2009, on annual revenues of C$17.88 billion.
Stock Quote
In Thursday's regular trading session, BCE is currently trading at $25.94, up $0.06 or 0.23% on a volume of 24,200 shares. In the past 52-week period, the stock has been trading in a range of US$16.85 to US$31.71.
BCE.TO is trading on the Toronto Stock Exchange at C$27.19, up C$0.10 on a volume of 0.41 million shares. In the past 52-week period, the stock has been trading in a range of C$20.94 to C$38.65.
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