From Globe and Mail

BCE boosts dividend as profit climbs

RITA TRICHUR - TELECOM REPORTER - Feb. 07 2013

George Cope cannot understand what all the fuss is about.

The chief executive officer of BCE Inc. says there are misguided fears about the state of wireless competition even though Canadians benefit from having an industry that is brimming with carrier rivalries.

Mr. Cope offered that assessment of his industry at an investor conference on Thursday after BCE posted a $708-million fourth-quarter profit that increased by nearly 46 per cent from a year ago. Much of that gain was driven by its wireless division, which executives predict is on track to generate fatter margins and higher average revenue per user in 2013.

"Canada has a really unique situation. We're one of the only countries in the world with three strong competitors," Mr. Cope said when asked by an analyst whether he worries about a potential regulatory backlash.

Stressing Canada's big three incumbents offer world-leading wireless technology, he added: "I think we're sometimes trying to find a problem that doesn't exist. Actually, most other countries would probably give their right arm to have our industry structure with three strong players."

Mr. Cope's remarks come one day after the Competition Bureau issued a submission to the federal telecom regulator, arguing certain industry practices, including long-term contracts, the locking of smartphones and termination fees, were impeding competition and hindering new entrants from attracting new customers.

John Pecman, interim commissioner of competition, reiterated those concerns on Thursday. He told an audience of business people and lawyers: "This is our first recent intervention but it will most certainly not be our last." The competition watchdog is highlighting its concerns because the Canadian Radio-television and Telecommunications Commission is scheduled to hold hearings next week on a new code of conduct for the wireless industry.

For his part, Mr. Cope stressed wireless is "competitive," noting there were "29 price reductions" of products and plans during the fourth quarter - a time when carriers traditionally engage in aggressive holiday promotions.

"I don't know if there is another industry in the fourth quarter that had 29 price changes. And so, I don't know what competition issue we're looking for, actually."

Even so, Mr. Cope cast doubt on whether the new wireless entrants had sustainable business models given their average revenue per user, which reflects the average monthly bill for customers, remains under $30. (BCE's blended average revenue per user increased by 4.1 per cent to $56.72 during the fourth quarter.)

"The company that came from outside of Canada said they were going to destroy us, let's see what happens," Mr. Cope said in what appeared to be a reference to upstart Wind Mobile, which receives financial backing from VimpelCom Ltd., an Amsterdam-based carrier.

"They got access to capital and we'll just compete in the market. I think the government's view should be through wide open competition - let's see who is standing when that's all finished."

Although new entrants are poised to benefit from rules that will limit the amount of prime spectrum incumbents can purchase in the upcoming 700 megahertz auction, Mr. Cope said Ottawa should modify that policy if it becomes clear no upstarts are prepared to bid.

BCE's fourth-quarter results, meanwhile, were fuelled by higher wireless revenue and improved margins as Canada's No. 2 carrier added 143,834 top-end mobile subscribers during the period, bringing its total subscriber base to 7.68 million for 2012.

"Over all, the results show Bell is performing well in the current competitive environment," wrote Maher Yaghi, an analyst with Desjardins Securities Inc., in a research note.

Wade Oosterman, president of Bell Mobility, said more ARPU growth is expected in 2013 due better smartphones and increasing data use. He predicted BCE will have one million mobile TV customers by the end of 2013.

Over all, BCE's fourth-quarter profit amounted to 91 cents per share versus a year-ago $486 million or 62 cents per share. BCE also boosted its annual common share dividend by six cents to $2.33.

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