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BCE profit jumps, says mobile phones help growth

12/11/09

By Wojtek Dabrowski

TORONTO (Reuters) - BCE Inc , Canada's biggest phone company, said third-quarter profit more than doubled, topping expectations, as subscribers flocked to new mobile phones despite a weak economy.

BCE -- which began selling Apple Inc's popular iPhone this month -- added 122,000 postpaid, or longer-term, wireless subscribers in the quarter. That was up 8 percent from a year earlier and a third-quarter record for the company, owner of Bell Canada.

Aside from the newly acquired iPhone, Bell also offers popular handsets like Research In Motion's BlackBerry and Palm Inc's Pre.

"I think one of the reasons why Bell did very well in terms of subscriber growth ... is because the Palm Pre sold quite well and better than we expected," said Genuity Capital Markets analyst Dvai Ghose.

He added he expects a strong holiday season for BCE's wireless business, given the company's impressive device lineup.

However, while subscriber growth was strong, Montreal-based BCE said average monthly revenue per postpaid wireless user fell by C$3.98 to C$64.09 in the quarter.

The drop was due to subscriber "migration to lower-rate plans, lower usage and lower roaming revenues as customers reacted to a weaker economy," BCE said.

The company has aggressively cut costs and eliminated thousands of jobs to cope with the economic downturn. It said on Thursday that about 1,100 jobs were cut at Bell in the third quarter. That brings total cuts since June 2008 to about 5,000, or 11 percent of Bell's workforce.

BCE earned C$584 million ($556.2 million), or 72 Canadian cents a share, in the third quarter. That was up from a profit of C$280 million, or 30 Canadian cents a share, a year earlier.

The company said the results were helped by favorable tax adjustments and lower restructuring charges.

Revenue rose to C$4.46 billion from C$4.44 billion a year earlier.

Analysts were expecting the company to earn 70 Canadian cents a share on revenue of C$4.5 billion, according to Thomson Reuters I/B/E/S.

Ghose said despite the strong wireless subscriber additions, there was some weakness in BCE's wireline business, including residential and business line deactivations and lower long-distance calling revenue.

"I think given the environment they're in, which is a tough one, management did a very good job," he said.

BCE shares were up 7 Canadian cents at C$27.16 in morning trade on the Toronto Stock Exchange.

NEW NETWORK, NEW COMPETITION

BCE had partnered with rival Telus Corp to build a network upgrade that would let both companies sell next-generation devices like the iPhone. The network launched this month.

Until now, Rogers Communications Inc -- owner of the country's biggest wireless carrier -- was the only service provider to sell the iPhone in Canada.

Aside from battling one another, BCE, Rogers and Telus have been getting ready for new entrants into the Canadian mobile phone market in the wake of last year's government auction of wireless spectrum.

Globalive Communications, one of the startups, was blocked from launching service by regulators late last month after officials determined the company was effectively under the control of its Egypt-based financial backer, Orascom Telecom .

Still, BCE Chief Executive George Cope told analysts on Thursday there are a number of other companies planning to launch service, including Quebecor Inc's Videotron unit.

"We think Globalive was only one of those new entrants," Cope said. "There still is new competition coming and that's what we're preparing for."

($1=$1.05 Canadian)

(Reporting by Wojtek Dabrowski; editing by John Wallace)

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