BCE Inc.
Q1/24 Results Slightly Better than Forecast (and Likely Better than Feared)
TSX: BCE | CAD 45.72 | Sector Perform | Price Target CAD 54.00
Sentiment: Neutral
Our view
Q1/24 results were slightly better than forecast with 2024 guidance reiterated as expected. At current levels, we view the results
as neutral to a modest positive for the shares.
First impression
• Q1/24 results slightly better than forecast. Consolidated revenues and EBITDA were $6,011MM (-0.7% YoY) and $2,565MM
(+1.1%), respectively, versus our estimates of $6,068MM and $2,535MM (consensus is $6,044MM and $2,541MM).
Consolidated EBITDA margins were 42.7% (+75bps YoY) versus our 41.8% estimate (-15bps). Adjusted EPS was $0.72 versus our
estimate of $0.69 (consensus is $0.70). Please see Exhibit 1 for a detailed summary of Q1/24 results.
• Balancing growth and profitability within Bell CTS with YoY growth to accelerate as 2024 progresses. Bell CTS revenues and
EBITDA were $5,375MM (+0.1% YoY) and $2,448MM (+1.7%), respectively, versus our estimates of $5,416MM and $2,439MM
(consensus is $5,394MM and $2,432MM). Bell CTS revenues comprised wireless and wireline revenues of $2,458MM (+4.6%)
and $2,911MM (-3.3%), respectively, versus our estimates of $2,459MM and $2,950MM. EBITDA margins were 45.5% (+71bps
YoY) versus our 45.0% estimate. Key wireless metrics: (i) network revenue growth was +3.0% YoY versus our estimate of +3.7%;
(ii) postpaid and prepaid net additions were +45k and -20k, respectively, versus our estimates of +43k and -21k (consensus is +38k
and -17k); (iii) ARPU growth was flat YoY versus our estimate of -0.5% (consensus is -0.4%), which benefited from the removal of
106k low to non-revenue generating business market postpaid subscribers; and (iv) postpaid churn was 1.21% (+31bps), versus
our 1.18% estimate (with the YoY increase consistent with Rogers at +31bps). Wireline RGUs were largely in line: (i) Internet
net additions were +31k, versus our estimate of +30k (consensus is +29k); (ii) retail IPTV net additions were +14k (versus our
-5k estimate for total television net additions) with the company no longer reporting retail satellite TV subscribers; and (iii)
telephony net losses were -44k versus our -46k estimate (consensus is -45k).
• Renewed advertising growth at Bell Media. Bell Media revenues and EBITDA were $725MM (-7.1% YoY) and $117MM (-11.4%),
respectively, versus our estimates of $747MM and $96MM (consensus is $735MM and $108MM). EBITDA margins were 16.1%
(-79bps YoY) versus our estimate of 12.8% and 16.9% in Q1/23. Advertising revenues were up +1.6% YoY due to continued growth
in digital advertising moderated by lower demand for traditional broadcast TV and radio advertising while subscriber revenues
were down -13.8% reflecting a tough YoY comp due to a $37MM one-time retroactive revenue benefit realized in Q1/23 (with
100% flow-through to EBITDA).
• Other notables. (i) 2024 guidance was reiterated; (ii) FCF was stable YoY at $85MM, the quarterly cadence of which is consistent
with management expectations and prior commentary; (iii) on April 25, 2024, Bell Media launched 10 ad-supported streaming
television (FAST) channels with additional channels and platform partners expected to be announced later this year; and (iv)
the company entered into a retail partnership with Loblaw Companies to launch no name mobile, available in all 278 No Frills
locations across Canada.
• What to look for on the 8:00am call (#1-844-933-2401). (i) an update on the wireless and Internet competitive environments;
(ii) progress on lowering the cost to serve, including the cadence in realizing targeted cost savings; and (iii) the extent to which
renewed advertising growth is sustainable at Bell Media.