BCE or Rogers? In wireless, at least, one analyst says there is a clear winner.
BCE (BCE Stock Quote, Chart, News TSX:BCE) saw strong wireless subscriber growth in it latest quarter while revenue was also a surprise beat, both evidence that the company may be winning the battle of unlimited wireless providers in Canada’s telco market.
That’s according to Maher Yaghi, vice president and director of telecom at Desjardins Securities, who thinks that, so far at least, BCE is coming out ahead of Rogers Communications.
Telecommunications and media company BCE reported its third quarter financials on Thursday, reporting adjusted EBITDA growth of 5.6 per cent year-over-year to $2.59 billion on revenue that rose 1.8 per cent to $5.98 billion. Earnings were in line with analysts’ expectations but the top line was a slight beat of the consensus $5.97 billion.
The company achieved wireless net additions of 204,000, up 14.8 per cent year-over-year and a record for its Q3, according to management.
“With exceptional execution by the Bell team in Q3, we achieved industry-leading subscriber growth – including record Q3 net wireless customer additions – improved customer satisfaction and a strong financial performance,” said George Cope, President and CEO, in a press release. “This includes our 56th consecutive quarter of increased year-over-year adjusted EBITDA and continued strong growth in the free cash flow that fuels our network investment and shareholder value objectives.”
BCE recorded 293,950 total wireless, retail internet and IPTV net customer adds, up 8.4 per cent, while it Bell Media division also saw revenue grow by 2.7 per cent and adjusted EBITDA growth of 24.2 per cent.
But the big takeaway seems to be the comparative one between BCE’s strong numbers and the relatively weaker results from Rogers last week. Rogers saw its share price drop after its third quarter earnings missed analysts’ estimates on revenue and EBITDA, with the disappointing numbers having been attributed at least in part to the rollout of unlimited data plans to wireless customers, which started early this summer. Although Rogers saw widespread adoption by customers, one of the effects was a drop in revenue related to lucrative overage fees. As a result, Rogers management dropped their full-year revenue and earnings guidance.
Yaghi says it’s hard not to see BCE’s approach to unlimited data plans as so far coming out the winner.
“It was a pretty good quarter [for BCE] considering a lot of the fear that investors had going into reporting season about the consequence of the launch of unlimited plans in wireless in Canada,” said Yaghi, who spoke to BNN Bloomberg on Thursday.
“In our view, BCE’s results were going to be affected a lot less than what we had seen with Rogers. It was actually slightly better than what we had expected in terms of negative impact on pricing for their wireless business. So far, it seems that BCE has managed this transition smoother Rogers,” he says. “There are medium-term and longer-term questions that are still unanswered but for now we think that investors are now seeing BCE with a better eye.”
Yaghi thinks the difference may stem from Rogers’ more aggressive approach to switching customers over to the unlimited plans versus BCE’s more gradual one.
“[BCE] continued to offer subsidized plans and data bucket plans that they used to have before the launch of unlimited data, so they kept the old plans and the new plans in order to smooth out the transition phase. There are still questions about which strategy is the best, long-term, but for now I think that investors are probably liking more the less volatile way that BCE is approaching it,” he says.
“It’s a testament to the power that BCE has in their wholesaling and distribution network with new distribution partners that they signed recently for Lucky Mobile. It was a good quarter,” says Yaghi.