BCE Q3 wireline revenue declines 4% despite focus on FTTx, IPTV service sets

Sees customers switch to cable, OTT voice players like Vonage
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Bell Canada Enterprises (BCE) (NYSE: BCE) on Friday reported Q3 2012 revenues rose 1.5 percent to CAD 4.98 billion (USD 5 billion) due to a 7 percent rise in wireless and a 25 percent jump in media revenue.

However, net income of CAD 569 million (USD 569 million) was down by 11 percent from CAD 642 million (USD 644 million) a year earlier, a factor the company attributes to lower tax expenses in the same period a year ago.

One of the big letdowns Bell faced in the third quarter was its failed attempt to acquire Astral Media.

George Cope, BCE's CEO, told analysts during the earnings call that it was "premature" to write off its proposed CAD 3.4 billion (USD 3.41 billion) purchase of Astral Media, even though the Canadian Radio and Telecommunications Commission (CRTC) rejected the telco's proposal last month. It is now awaiting a response from the federal government on the proposed deal.

In the wireline segment, revenue declined 4 percent to CAD 2.2 million (USD 2.2 million), a factor it attributes to declining traditional voice revenues as some consumers switch to over the top (OTT) voice players like Vonage, cable operators and wireless substitution. Lower spending by enterprises on wireline data products and ICT solutions also contributed to the year-over-year decrease in overall Q3 wireline revenue.

As expected, BCE reported that local and access voice revenues declined 7.9 percent to CAD 654 million (USD 656 million), with total Network Access Service (NAS) declining 7 percent year-over-year to $5.76 million year over year.

One segment in wireline that saw continued growth in Q3 was broadband data. During the quarter, data revenues increased 0.1 percent to CAD 1.4 million (USD 1.4 million) due mainly to higher TV revenue driven by strong subscriber growth in its Fibe TV offering.

While it saw continued growth of Fibe TV during the quarter, it only added 15,846 net new subscribers, down from the 26,169 it added in Q3 2011. Bell Fibe TV added 42,973 net new customers, up from 20,297 in Q3 2011. Bell's Fibe Fiber to the X (FTTX) network footprint passed 200,000 homes as the Fibe TV footprint reached over 2.8 million households at the end of Q3. However, the telco reported lower satellite TV net activations, due to the rollout of IPTV by competing service providers, aggressive customer conversion offers from cable competitors and ongoing migrations to Fibe TV.

The ongoing growth of its fiber-based Fibe network and Fibe TV bundles had the interesting effect of driving more customers to the company's broadband offering. Bell added 13,416 new net high-speed Internet customers in Q3, compared to a net loss of 101 last year.

BCE said it is on track to meet its 2012 guidance for revenue growth to be on the lower end between 3 to 5 percent.

BCE was trading $43.07, down 0.05 percent, in late morning trading on the NASDAQ stock exchange.

For more:
- see the release

Special report: Wireline telecom earnings in the third quarter

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