File photo of George Cope, president and chief executive officer of BCE.FRED THORNHILL/Reuters
BCE Inc. reported fourth-quarter earnings in line with analyst expectations Thursday, announcing plans to raise its dividend and delivering solid results at its key wireless division despite a tough period of competition.
However, the Montreal-based communications and media company said profit dipped 8.5 per cent to $496-million or 58 cents a share due to higher severance and acquisition costs in the last three months of 2015. BCE said it incurred $120-million in costs related mainly to "work-force restructuring initiatives."
The company's Bell Media division told the federal government in early November that it planned to cut 380 jobs in Toronto and Montreal and also made further cuts in other offices and bureaus from Ottawa to Vancouver.
Chief executive officer George Cope said cutting jobs at the media division "was a very painful process to go through and impacted a lot of people, unfortunately."
But he said it was necessary to bring the division's costs in line with higher content costs and the effect of new rules from the Canadian Radio-television and Telecommunications Commission. The so-called pick-and-pay regime will force television providers to offer $25 "skinny basic" packages by March 1 and eventually allow customers to pay for only the individual channels they want to add to that basic bundle.
In 2016, Mr. Cope said he expects Bell Media to see positive growth in EBITDA (earnings before interest, taxes, depreciation and amortization), boosted by the expansion of both its CraveTV online-streaming video service and its pay-TV channels HBO Canada and The Movie Network.
Bell Media began offering CraveTV to anyone with an Internet connection in January and is able to extend its pay-TV portfolio after acquiring the rights for the western provinces from Corus Entertainment Inc. in November.
Excluding the impact of the severance costs, BCE said profit grew almost 1 per cent to $615-million or 72 cents a share in the quarter, in line with Bay Street's projections.
Revenue across all of the company's divisions was up 1.4 per cent to $5.6-billion, also in line with estimates.
BCE also said Thursday that it is increasing its annual dividend by 5 per cent, or 13 cents, to $2.73 a common share. That was welcome news for investors after Rogers Communications Inc. declined to boost its own dividend last week, citing a desire to improve its debt leverage, and saw its stock drop sharply.
Macquarie Capital Markets analyst Greg MacDonald called BCE's dividend increase "the most important announcement" from the company's fourth-quarter results. BCE's shares were up 1.4 per cent or 77 cents, closing at $57.51 on Thursday.
BCE chief financial officer Glen LeBlanc said the company's balance sheet is in good shape, thanks in part to a public-equity offering in the fall that raised $863-million.
The company added 91,000 net new contract wireless subscribers in the quarter, just below the 96,000 projected by eight analysts surveyed by Bloomberg, and well ahead of the 31,000 rival Rogers picked up in the period. Telus Corp., Canada's other national carrier, will report its results next Thursday.
Like Rogers, BCE said the wireless market was very competitive in the quarter, pointing to the ongoing effects of the "double cohort," which saw more customers shopping for wireless services after regulatory changes ended cancellation fees for three-year contracts and two-year agreements expired at the same time.
Mr. Cope said that led to an increase in costs as it paid more to win new customers and that the rate of wireless customer turnover, or churn, was also up.
On the residential side of its business, BCE added 74,000 new IPTV (Internet protocol television) subscribers and gained 39,000 new Internet customers. But revenue for its fixed-line services division was down in part due to weakness in the business market.
Desjardins Securities analyst Maher Yaghi wrote Thursday that BCE "does not rock the boat," delivering quarterly results and financial guidance for 2016 in line with expectations.
BCE also said Thursday that Thomas O'Neill will retire as chairman of the company's board at its annual meeting in April. BCE plans to nominate current board member Gordon Nixon, the former CEO of Royal Bank of Canada, to replace Mr. O'Neill.