BCE will expand Fibe TV and is looking for more Internet customers

BCE Inc. hasn't given up on buying Astral Media and expects that its new $3.38-billion proposal will address the federal regulator's concern about the telecom giant dominating the television market.

MONTREAL – Telecom giant BCE Inc. will expand its Fibe TV service this year to more than 10 cities, confident that it can take away customers from its cable competitors.

Cities such as Ottawa, Markham, Ont., and Laval, Que., will get Bell’s Internet protocol TV service this year, chief executive George Cope said Thursday.

“We expect to move the needle for market share for us and away from our competitors in the TV business,” Cope said at an investors’ conference.

Cope made the remarks after Bell (TSX:BCE) announced that its dividend to shareholders is going up for the second time in a year and the company reported a higher fourth-quarter profit.

Bell is betting the expansion of its Fibe TV service will also boost its Internet customers. He said “100 per cent” of its Fibe TV customers also take the company’s Internet service.

“That’s fundamental to what we need to do going forward to grow our Internet market share,” said Cope.

He said Fibe TV had 250,000 subscribers at the end of 2012 and 85 per cent came from cable TV operators or were brand new customers, while 15 per cent migrated from Bell’s satellite TV service. Fibe TV is available in specific areas in Toronto and Montreal.

Fibe TV delivers digital and high-definition channels and comes 3-D ready through a fibre optic network. It allows viewers to pause a show in one room and then watch it in another, among other things.

For 2013, BCE will see more than 80 per cent of its growth come from its wireless, TV, Internet and media services, Cope said. The remainder will come from its voice services to consumers and businesses as Bell continues to move away from its roots as a telephone company.

In its financial results, BCE said its new dividend rate will be $2.33 per common share annually, up six cents from the previous rate set last August.

BCE’s net earnings were up 45.7 per cent from a year earlier in the three months ended Dec. 31, rising to $708 million or 91 cents per share.

However, BCE’s adjusted earnings rose at a more moderate 4.8 per cent to 65 cents per share — a penny short of analyst estimates.

Revenue was virtually unchanged year-to-year at just under $5.161 billion, also just short of analyst estimates compiled by Thomson Reuters.

Analysts had projected BCE’s revenue for the fourth quarter at $5.167 billion and adjusted earnings per share at 66 cents.

In its wireless division, Bell added 143,834 postpaid net customers in the fourth quarter, up nine per cent from the same period in 2011. These customers are usually on lucrative three-year smartphone contracts and are measured against those of competitors Rogers (TSX:RCI.B) and Telus (TSX:T).

Bell Fibe TV added 48,234 net new customers compared to 27,967 in the fourth quarter of 2011.

The company added 7,143 high-speed Internet customers compared with 1,091 in the same quarter in 2011. Bell said it had more than 2.1 million Internet customers at the end of 2012.

For fiscal 2013, BCE expects revenue growth of up to two per cent, free cash flow of five per cent to nine per, cent and adjusted earnings per share for the year to be $2.97 to $3.03.

BMO Capital Markets analyst Tim Casey called the dividend raise encouraging and said 2013’s free cash flow guidance is higher than street expectations of -6 per cent.

“We did not expect a 2.5 per cent dividend increase following a $0.10 raise last August,” Casey said in a research note. “All other guidance metrics were relatively in line.”

Cope also told investors that BCE Inc. hasn’t given up on buying Astral Media (TSX:ACM.A) and expects that its new $3.38-billion proposal will address the federal regulator’s concern about the telecom giant dominating the television market.

“Our application will meet the requirements that the CRTC wants to see,” Cope said during his presentation.

Specifics of the new application haven’t been made public by the Canadian Radio-television and Telecommunications Commission.

Astral has 25 specialty TV services, including The Movie Network, Family Channel and Disney XD, and 84 radio stations.

Bell, owner of the CTV TV network, has said it wants to put Astral’s content on smartphones, tablets, computers and TVs, and compete with foreign online competitors such as Netflix.

The CRTC killed the deal last fall, saying it wasn’t in the best interests of Canadians and would have resulted in an unprecedented level of concentration in the Canadian marketplace.

Shares in BCE were up down four cents to $44.48 in early afternoon trading on the Toronto Stock Exchange.