08/08/2012 07:22 EDT | Updated 10/08/2012 05:12 EDT

Bell Canada Q2 2012 Earnings: Media Giant Increases Dividend, Reports 31% Profit Jump


BCE Inc. (TSX:BCE), Canada's largest telecommunications company and the parent of Bell Canada and CTV, raised both its dividend and 2012 earnings forecast Wednesday after reporting a second-quarter profit of $773 million.

"Bell's strong year-to-date operating and financial performance and the positive outlook for the balance of the year enables the dividend increase and increased 2012 financial guidance, said BCE president and CEO George Cope.

The Montreal-based company said its earnings amounted to $1 per share, up from $590 million or 76 cents per share a year ago. On an adjusted basis, BCE earned $788 million or $1.02 per common share up 31 per cent from $663 million or 86 cents per share in the second quarter of 2011.

Operating revenue was $4.92 billion in the second quarter of 2012, down from $4.95 billion a year ago, due to slightly lower revenues at both Bell and Bell Aliant.

Analysts expected earnings of 81 cents per share, according to estimates compiled by Thomson Reuters. Revenue was targeted at $4.96 billion for the second quarter ended June 12.

In its outlook, the company raised its forecast for 2012 adjusted earnings by two cents per share, to between $3.15 and $3.20 per share.

The dividend increase, which would normally be made at the end of the year, will see the quarterly payout increase to 56.75 cents per share from 54.25 cents, beginning with the October payment to shareholders.

"Providing support for the early dividend increase is our pending acquisition of Astral, which we expect to be accretive to overall earnings and free cash flow in 2013," Cope said.

The $3.4-billion takeover of Astal Media (TSX:ACM.A) still needs approval by the Canadian Radio-television and Telecommunications Commission and the Competition Bureau.

The deal faces opposition from three major Canadian media companies, which said Tuesday an acquisition of Astral would give Bell too much control over the country's broadcasting landscape.

Cogeco Cable Inc. (TSX:CCA), Eastlink and Quebecor Inc. (TSX:QBR.A) raised concerns Bell could force consumers to pay more for popular television channels, or packaging those channels with less-popular ones, or other services, if the Astral deal goes ahead.

Cope called the accusations misleading and wrong, noting that the limit for market share established by the Canadian Radio-television and Telecommunications Commission is 35 per cent.

"With the acquisition of Astral, combined with Bell, we will be at 24 per cent of French language in Quebec," he said.

"In fact, that will be less than Quebecor, the company that yesterday was claiming that we were going to be too large in Quebec."

From an English perspective, the company would be at 33.5 per cent, also under the threshold.

"We find it ironic that one of our competitors, which has the largest market share in Quebec, is somehow concerned now they're going to have competition — which is always good, of course, for the consumer," Cope said.

Siim Vanaselja, chief financial officer of BCE and Bell Canada, said the company enjoyed a "robust quarter" boosted by its wireless and media business.

"We accelerated strategic capital investment to extend our broadband wireless and wireline footprint in support of Bell's future operating performance while remaining committed to a strong balance sheet position to underpin our dividend growth objective."

Desjardins anyalyst Maher Yaghi described the earnings report as "positive."

"Our thesis on BCE remains unchanged and we continue to like the prospects for the company, given trends in wireless and improving operational results in wireline," he wrote in a note.

"The next catalyst for the stock is the closing of the Astral transaction, which should be slightly accretive to cash flows.

BCE's proposed acquisition of Astral Media aims to create a media powerhouse that provides digital content to consumers online, on their personal computers and tablets, mobile devices like smartphones, as well as traditional TV.

The company has been expanding its media business by leaps and bounds, including repurchasing broadcaster CTV Inc. and buying a large stake in Maple Leaf Sports and Entertainment — owner of Toronto's major league hockey, basketball and soccer teams, among other things.

On the Toronto Stock Exchange, BCE shares were up $1.07 or 2.47 per cent at $44.32 in early trading Wednesday.

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