As the Canadian wireless industry soared to unexpected highs in 2017, BCE Inc. came out on top of the national carriers.Brent Lewin/Bloomberg
As the Canadian wireless industry soared to unexpected highs in 2017 – adding almost double the number of contract customers as it did two years ago – BCE Inc. came out on top of the national carriers, riding the strength of its network and its broad retail presence.
Telus Corp. came in a close second, fourth-quarter numbers reported on Thursday revealed, as it, too, pointed to its network quality and reliability as well as its industry-leading low rate of customer turnover.
Just two years ago, the Canadian wireless market appeared to be hitting a saturation point as subscriber growth slowed and BCE, Telus and Rogers Communications Inc. picked up a combined total of 615,000 new postpaid customers. But it found new life in 2016 and even more momentum last year as the trio of national carriers added 1.15 million contract subscribers between them.
Executives from all of the companies have pointed to similar factors driving the wireless trend: the strong Canadian economy, population growth due to progressive immigration policies, people carrying both work and personal devices and an influx of customers on both ends of the age spectrum, as seniors and youth increasingly sign up for wireless service on family plans.
Canadians are also hanging on to their expensive devices for longer and, after paying off the handset subsidy common with two-year contracts, they are free to shop around for better deals, which they did in droves over a five-day period in December when the Big Three all offered deep discounts on big data plans in Ontario, British Columbia and Alberta.
Rogers was responsible for kicking off that frenzied period, but it faced a computer glitch that left it unable to sign up certain customers for the deals and the company estimates it lost about 35,000 subscribers as a result. It added a total of 72,000 contract customers in the fourth quarter, a respectable number but well short of expectations in what was a solid year overall for the company on wireless.
BCE and Telus, meanwhile, capitalized on Rogers's stumble, snapping up 175,000 and 121,000 postpaid subscribers, respectively, in the past three months of the year.
Rogers's rivals, who have a network-sharing agreement, both pointed to their network quality on Thursday as a factor in their eye-popping numbers to close the year. Recent third-party tests have shown BCE and Telus – which has been the leader in most categories – outperform Rogers on download speeds. Rogers has been investing heavily in network improvements in recent months to catch up. "Last year exceeded everybody's expectations. I don't think you'll find one analyst, or any of us, who was calling for that kind of growth," BCE chief executive George Cope said in an interview.
For BCE specifically, he noted that the company has the largest retail presence of its competitors – in addition to its own corporate stores and distribution in the Wireless Wave chain (which BCE and Rogers own jointly through Glentel), it owns the Source, which sells only BCE wireless brands in about 530 locations across Canada.
"The distribution footprint we have built up over the past decade is larger than our peers and we think it really pays off year round, but particularly in the fourth quarter [with the holiday shopping season]," Mr. Cope said, adding online shopping has not displaced the in-person retail experience for smartphones. "With these products there's a touch, a feel, a look. 'Do I like that handset? Do I like that colour?' I think people like to physically shop for our products."
BCE also said on Thursday it will increase its annual dividend by 5.2 per cent, up to $3.02 from $2.87, starting with its payment in April.
For the fourth quarter, BCE said total revenue increased 4.5 per cent to $5.96-billion, just short of average estimates. It reported adjusted EBITDA of $2.217-billion, also up 4.5 per cent and just below forecasts (EBITDA means earnings before interest, taxes, depreciation and amortization).
Profit was down 12.5 per cent to $575-million, or 64 cents per common share. That was partly due to a non-cash charge of $82-million as the company's Bell Media division wrote down the value of its specialty music television stations as well as certain radio properties.
Chief financial officer Glen LeBlanc said the media writedown reflects "revenue pressures from ongoing audience declines and a soft advertising market."
On the residential side of its business, BCE also added more subscribers than expected in the fourth quarter, with 27,040 new internet customers and 32,484 IPTV (internet protocol television) subscribers (although it lost 25,938 satellite TV customers).
BCE also said on Thursday it will increase its annual dividend by 5.2 per cent, up to $3.02 from $2.87, starting with its payment in April.
For its part, Telus's fourth-quarter profit increased to $281-million, or 47 cents per share, up significantly from $81-million the same period a year earlier due to lower restructuring costs. In the fourth quarter of 2016, Telus spent $305-million on one-time payments to employees in exchange for wage freezes and lower overtime costs. Telus reported total revenue of $3.467-billion, up 4.9 per cent from last year and roughly in line with analyst estimates. It recorded adjusted EBITDA of $1.164-billion, up 4.7 per cent and also in line with forecasts.
The company – which offers residential TV and broadband service in B.C., Alberta and parts of Quebec – added 21,000 new internet subscribers and 14,000 television customers in the fourth quarter, both down slightly from the same period in 2016.
After years of investing heavily in connecting customers' homes with fibre-optic cables to provide better internet and TV service, Telus said its spending on that program peaked last year and forecast free cash flow of up to $1.4-billion this year, up from $966-million in 2017.
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2017 by the numbers for Canada's wireless market
Total new contract (postpaid) customers added
Bell: 416,779
Rogers: 354,000
Telus: 379,000
Total wireless customers (postpaid and prepaid)
Bell: 9.167 million
Rogers: 10.482 million
Telus: 8.911 million
Average revenue per user (ARPU) for the full year
Bell: $67.77 a month
Rogers: $62.31
Telus: $67.05
Source: Company reports