BUSINESS

Bell boosts its Fibe TV subscribers as it takes on cable competitors

11/07/2013 07:40 EST | Updated 01/23/2014 10:53 EST
MONTREAL - The head of Canada's largest telecom said Thursday that he remains "comfortable" with the pricing strategy of Bell's Fibe TV offering despite criticism from cable TV rivals who have been losing customers in the face of aggressive promotions by BCE (TSX:BCE).

Fibe TV, Bell's Internet protocol television service, boosted its customer base by nearly 73,000 subscribers in the third quarter with help from promotions amid intense competition for customers.

CEO George Cope said Thursday that the Fibe TV service also pulled in more high-speed Internet customers for the telecom and media giant, which competes against Rogers (TSX:RCI.B), Videotron and Cogeco (TSX:CCA).

"We are confident that as we roll out the footprint we're starting to see the right subscriber growth that we would expect," Cope told financial analysts.

Cope said he's "comfortable" with Fibe TV's pricing strategy, saying the company is "absolutely aggressively pursuing" customers because it also encourages them to generally sign up for three services from Bell, bringing in more revenue.

Competitor Videotron has taken note of Fibe TV's efforts.

"The question we have to ask ourselves is if Bell can sustain this kind of pricing strategy," said Quebecor (TSX:QBR.B) CEO Robert Depatie, whose Videotron cable division saw a drop in both basic cable and in digital cable subscribers in its third quarter.

"It's unbelievable that they are spending so much money on acquiring customers," Depatie told analysts on Thursday. "It's a question we've been asking ourselves for the last two years."

Cope said Fibe TV's growth was helped by several factors in the quarter, including short-term promotions and a seasonal boost from the back-to-school season, which typically sees an increase in demand for Internet and TV services. He said the average revenue per household for Fibe TV is $60, but he didn't say how much Bell was spending to acquire customers.

In addition, some of the gains at Fibe TV came at the expense of Bell's older satellite TV service.

Bell had 72,843 net new subscribers for Fibe TV in its third quarter, bringing the total subscriber base for the Internet TV service to nearly 420,000 from 200,000 a year earlier. Fibe TV was launched in 2010 and is available in parts of Ontario and Quebec.

Canaccord Genuity analyst Dvai Ghose said Bell's increase in Fibe TV subscribers has been surprisingly strong.

"IPTV driven bundles are clearly taking video and broadband share from cable, as shown by Videotron, Rogers and Cogeco's disappointing subscriber results," Ghose said in a research note.

Rogers also recently noted aggressive pricing from Bell's Fibe TV as a factor that contributed to the loss of TV subscribers, while Cogeco simply referred to an "intense" competitive environment for its quarterly loss of cable customers.

Bell also added 36,638 high-speed Internet customers, an increase of 11 per cent and the biggest quarterly gain since 2007, bringing the company's total subscriber base for that service to 2.15 million.

Its wireless division, which includes Bell Mobility, saw slower subscriber growth with 102,714 net new postpaid customers during the quarter, missing Ghose's estimate of 125,000 for the quarter.

The company's media division, which includes its CTV stations and the acquisition of Astral Media, had year-over-year revenue growth of 21.6 per cent to $664 million from $546 million.

Bell's parent, BCE, said its net income attributable to shareholders dropped to $343 million from $527 million in the same quarter last year, due to a $230-million regulatory charge that Bell had to pay as a result of its $3.8-billion acquisition of Astral Media earlier this year. On a per-share basis, net income was 44 cents, down from 68 cents a year earlier.

Adjusted net earnings per share, which excludes certain items, increased to $584 million or 75 cents per share. That was up from 70 cents a year earlier but two cents below estimates compiled by Thomson Reuters.

Overall revenue for BCE rose 2.3 per cent from a year earlier to just under $5.1 billion, which was slightly below estimates of $5.16 billion.