BCE says it's ready for price competition, reports Q4 profits down

The Bell Canada logo is seen June 21, 2016 in Montreal. THE CANADIAN PRESS/Paul Chiasson

MONTREAL — Telecom giant BCE Inc. is starting to wind down a surge of infrastructure spending as it readies to flex both its improved network and increased capital room to attract more customers.

"We have the room to compete on price if anyone wants to take us there," said chief executive Mirko Bibic on an analyst call Thursday, after reporting earnings were down for the fourth quarter compared with a year earlier.

The company has spent the past few years spending heavily to expand its fibre optic network and to install higher speeds generally, with more than 80 per cent of its target broadband expansion complete.

Spending is set to decline through to 2025 to more historic norms as it winds down the fibre build, with about $300 million shaved off its spending plans for 2023. The improved speeds, plus the lower operating costs, puts the company in a strong position, said Bibic.

"We've invested billions and billions to build North American leading networks. We are going to load those networks."

The company is gaining market share on the fibre side despite "promotional intensity," while maintaining margins thanks to the lower cost structure of the networks, he said.

Competition on pricing, including highly competitive Black Friday offers, did however weigh on results from last quarter, as did inflation, weather costs and media advertising softness.

Net earnings linked to common shareholders amounted to $528 million or 58 cents per diluted share in its fourth quarter, down from $625 million or 69 cents per diluted share a year earlier.

On an adjusted basis, BCE said it earned 71 cents per share in its latest quarter, down from 76 cents per share a year earlier.

The adjustments exclude $26 million in inflation and weather costs for the fourth quarter, while for the year those costs rang in at $87 million.

Chief financial officer Glen LeBlanc said that weather-related costs used to run around $5 million a year, while closer to $10 million in recent history before last year's jump.

"$43 million is extraordinary, and I knock on wood, something we don't repeat."

Total operating revenue for the quarter was $6.44 billion, up from $6.21 billion in the fourth quarter of 2021.

For the year ahead, the company expects higher interest expenses, along with lower tax adjustments and higher depreciation, to lead to lower adjusted earnings per share compared with 2022, down between three and seven per cent.

The company however expects adjusted earnings before various deductions to see between two and five per cent growth, despite economic concerns.

"We expect there to be a recession, albeit I personally believe it will be short and shallow," said LeBlanc.

"The guidance we provided here takes into consideration that recession. We haven't seen any changes at this time to consumer demand."

Revenue for the year ahead is expected to grow between one and five per cent.

The company also expects to pay out $3.87 per share in dividends, up from $3.68 last year, after it raised its quarterly dividend to 96.75 cents per share from 92 cents per share.

Results were largely in line with expectations as slightly lower-than-forecast pre-deduction earnings were offset by strong additions to the network, said RBC Capital Markets analyst Drew McReynolds in a note. The forecast for the year ahead, and the dividend increase, also came as no surprise, he said.

CTV News is a division of Bell Media, which is part of BCE Inc.

This report by The Canadian Press was first published Feb. 2, 2023.