Bell Aliant's FTTH growth helps drive Q1 operating revenue to $679 million

Bell Aliant's growing FibreOP fiber to the home (FTTH) service was a factor in the telco's Q1 revenue mix, contributing 0.3 percent, or CAD 2 million (USD 1.98 million) to its total of CAD 684 million (USD 679 million) in operating revenues.

The growth in TV, Internet, wireless, and other revenues offset declines in Bell Aliant's local and long distance revenues. 

Net earnings rose CAD 1 million (USD 1 million) year-over-year to CAD 84 million (USD 83.4 million), while earnings per share and adjusted earnings per share were CAD 0.36 (USD 0.36) and CAD 0.43 (USD 0.43).

The telco reported that Q1 EBITDA included a $4 million charge, largely retroactive, arising from a CRTC decision affecting wholesale Internet rates. EBITDA also declined by 0.5 percent in the first quarter of 2013 compared to the same quarter in 2012.

"Our year-over-year EBITDA rate of change was the best we achieved in over three years," said Karen Sheriff, president and CEO of Bell Aliant, during the earnings call. "And this was done after the absorption of an unfavorable $4 million charge arising from a regulatory decision affecting our wholesale Internet business which was mostly a retroactive adjustment related to 2012."

Here's a breakdown of its key metrics:

  • Internet Services: Internet service revenue increased 6.4 percent, or CAD 8 million (USD 7.94 million) with residential high-speed average revenue per customer (ARPC) up 6 percent from Q1 2012. Bell Aliant attributes the rise in ARPC to selected pricing action and customer demand for higher bandwidth bundles and other services. The 2.8 percent growth in high-speed Internet customers over 2012 also contributed to Internet revenue growth. A key point of growth in the Internet Services revenue mix was FibreOP. During the quarter, the telco added 17,900 FibreOP customers, bringing total FibreOP Internet customers to 130,100 at the end of March 2013. FibreOP Internet additions include existing Bell Aliant customers migrating from DSL and fiber to the node (FTTN) networks to the new FTTH service. Although the customer migrations do not contribute to overall high-speed customer growth, they do increasingly contribute to improved customer retention and growth in overall customer ARPC. The telco added a total of 8,700 new broadband customers in Q1 2013, up from 6,400 in the same quarter of 2012, bringing total high-speed Internet customers to 927,100 at the end of March 2013.

    Bell Aliant continued to expand the reach of FibreOP. It passed an additional 23,000 premises with FTTH in the first quarter of 2013, reaching more than 679,000 premises at the end of March 2013. Sheriff said during the earnings call that they "expect to reach approximately 800,000 premises by the end of the year and we are now entering the better weather and bigger construction periods of the year."  

    Besides the ongoing network buildout, Bell Aliant is also making FibreOP more competitive with area cable operators such as Eastlink and Rogers by upping all of its existing speed tiers for free. Offering this new speed boost will help help it battle what Sheriff said are "very aggressive triple play promotional offerings in some of our markets, particularly in New Brunswick and Newfoundland."

    Sheriff added that they "have chosen not to match the deepest discounts, but rather "focus on using our FibreOP services to compete on product superiority."
  • IPTV: In tandem with the growth of FibreOP broadband data, IPTV revenue grew CAD 11 million (USD 10.9 million) in Q1 2013 year-over-year, reaching a total 137,300 customers at the end of March. It added 15,600 FibreOP TV customers in the quarter to reach 112,500, a portion of which were migrations from Bell Aliant's FTTN TV service. Overall, Bell Aliant added 14,300 new IPTV customers, up from 7,900 in the same period last year.

    Similar to AT&T (NYSE: T) and Verizon (NYSE: VZ), Sheriff said that a key contributor of IPTV growth is coming from users purchasing triple play bundles. 

    "With over 90 percent of new FibreOP subscribers taking the triple-play bundle, TV continues to be our largest contributor to revenue growth while helping to grow our customer base and increased customer retention rates," she said.

  • Local and long distance service: As expected, local and long distance voice revenues declined by CAD 14 million (USD 13.9 million) or 4.9 percent and CAD 9 million (USD 8.94 million), or 10 percent, respectively, in the first quarter of 2013 compared to the same quarter in 2012, due to a 5.2 percent decline in Network Access Services (NAS). Residential net NAS declines of 26,200 in the first quarter of 2013 were on par with the same quarter in 2012. However, the telco was able to mitigate some of the losses it is facing from aggressive cable operators offering triple bundles through improved residential customer activations, winbacks and retention in FibreOP markets, and expansion into new markets. The expansion into new markets also helped to narrow Business net NAS declines to 5,900 from the same quarter a year earlier.

Shares of Bell Aliant on Wednesday were listed at CAD 27.04 (USD 26.85), up CAD 0.10 (USD 0.10), or 0.37 percent, on the Toronto stock exchange.

For more:
- see the earnings release
- here's the earnings transcript (sub req.)

Earnings roundup: Wireline telecom earnings in the first quarter of 2013

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