Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BCE Inc (BCE, Financial) reported a 2% growth in EBITDA for Q2, with a 1.3 point increase in margin to 44.9%, demonstrating effective cost management.
- Free cash flow increased by 8% year-over-year to $1.1 billion, aligning with the company's expectations.
- The company saw a 4.4% increase in total postpaid and prepaid mobile phone net additions, driven by disciplined promotional offers and higher quality main brand loading.
- Bell Media's digital advertising revenues grew by 35%, supported by new partnerships and advanced advertising solutions.
- BCE Inc (BCE) achieved strong business solutions services revenue growth of 22%, bolstered by acquisitions and expanded capabilities in cloudification, security, and managed automation.
Negative Points
- Consolidated top-line growth was impacted by sustained competitive pricing pressures and expected revenue loss from store closures.
- Wireless RPU was down 1.9% year-over-year, reflecting the lowest pricing environment in the history of wireless in Canada.
- Gross activations on Bell's Fibe TV app streaming service were down considerably due to a $5 rate increase for new subscribers.
- The company continues to face elevated churn rates in the wireless segment, although there was a sequential improvement from Q1.
- Total revenue was down 1%, primarily due to an 8.7% decrease in low-margin wireless and wireline product sales, including the loss of revenue from store closures.
Q & A Highlights
Q: We are seeing significant promotional and retention activities in the market with some like lifetime price locks guarantees by Videotron. Are we still being positive NPVs on fiber to the home?
A: Fiber continues to be the growth engine of Bell on the wireline side. The investments were critical and will serve us well for years to come. We are seeing very good bundling success, adding to the lifetime value of customers. There is room for RPU growth in some markets, and we will continue to adjust to circumstances as they arise.
Q: Can you provide more details around the opportunities with ServiceNow and AI and automation? Are these initiatives included in your original cost savings initiatives?
A: We are embedding ServiceNow into our environment to increase efficiency and drive costs out of the business. This partnership also allows us to serve our enterprise customers in their digital transformation journeys. We are using AI to improve customer experience and drive costs out of the business, contributing to $20 million in labor cost savings this quarter.
Q: Can you provide an update on the $150 to $200 million of cost savings?
A: We expect to reach our run rate benefit by the end of Q4. We are confident in capturing those savings in-year and will continue to ramp up through the year to hit our annual target.
Q: How should we think about the prepaid versus postpaid mix given the emphasis on premium loadings on the Bell brand?
A: The strong growth in prepaid is well aligned with our premium loading strategy. We are better aligning pricing across various brands, attracting newcomers to Canada into prepaid rather than postpaid. This segmentation strategy has led to strong growth in premium postpaid loadings and prepaid.
Q: Can you map out the good base and bad case scenarios for wireless RPU growth in the second half of the year?
A: We are facing intense competitive pressure in the industry. We took steps in early July to reset pricing to a more sustainable level while continuing to deliver exceptional value to our customers. It is too early to call the impact for the balance of the year, but we are focused on our strategy to capitalize on fiber momentum and premium loadings in wireless.
Q: Can you clarify the 70% BYOD figure? Is it on total activations or just postpaid?
A: The 70% BYOD figure is on postpaid activations.
Q: How are you addressing areas where you don't have fiber with either fixed wireless or resale bundling?
A: Our primary focus is on generating growth through our fiber superiority. In other areas, we combine our TV product with wireless. In 75% of the country where we have network overlap, the emphasis is on fiber.
Q: What is the margin profile on prepaid versus postpaid?
A: We manage EBITDA margins on a consolidated basis and do not provide prepaid-only reporting. We manage costs diligently across both prepaid and postpaid, aiming to lower our cost to serve while providing great service to customers.
Q: What are some drivers to get back to revenue growth in the second half of the year?
A: The majority of revenue declines have been driven by a decrease in low-margin product sales, consistent with our strategy of not chasing low-value subscriber loadings. We are reconfirming all of our guidance targets for 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
