From RBC
EQUITY RESEARCH QUICK TAKE
RBC Dominion Securities Inc.
Drew McReynolds, CFA, CA, CPA (Analyst)
Ryland Conrad (Analyst)
November 7, 2024
BCE Inc.
Mixed Q3/24 Results with Lowered 2024 Revenue Guidance in Line with Our Forecast
TSX: BCE | CAD 40.06 | Sector Perform | Price Target CAD 47.00
Sentiment: Negative
Our view
Q3/24 results were mixed with in-line financials offset by lower KPIs. 2024 revenue growth guidance was revised lower (as
anticipated) with updated guidance in line with our forecast and slightly below consensus (all other guidance targets were
reiterated). At current levels, we view the results and updated guidance as a modest negative for the shares.
First impression
• Q3/24 financial results largely in line with our forecast. Consolidated revenues and EBITDA were $5,971MM (-1.8% YoY) and
$2,722MM (+2.1%), respectively, versus our estimates of $5,952MM and $2,700MM (consensus is $6,036MM and $2,697MM).
Consolidated EBITDA margins were 45.6% (+172bps YoY) versus our 45.4% estimate (+149bps). Adjusted EPS was $0.75 versus
our estimate of $0.75 (consensus is $0.77). Please see Exhibit 1 for a detailed summary of Q3/24 results.
• Downward revision to 2024 revenue growth guidance with other guidance targets maintained. Management provided
updated 2024 revenue growth guidance of approximately -1.5% YoY versus flat to +4.0% previously, our estimate of -1.6% and
consensus of -0.8% with the downward revision due to: (i) lower-than-expected wireless product revenue attributable to reduced
mobile device sales volume; (ii) the timing of mobile equipment sales to certain large enterprise customers; (iii) the delayed
transition of The Source stores to Best Buy Express; and (iv) the cumulative impact of wireless pricing pressures over the past
year on mobile phone blended ARPU. EBITDA and FCF growth guidance were unchanged.
• Top-line pressures and lower KPIs at Bell CTS mitigated by cost efficiencies. Bell CTS revenues and EBITDA were $5,280MM
(-3.3% YoY) and $2,468MM (+0.2%), respectively, versus our estimates of $5,269MM and $2,469MM (consensus is $5,315MM
and $2,471MM). Bell CTS revenues comprised wireless and wireline revenues of $2,380MM (-4.8%) and $2,893MM (-2.1%),
respectively, versus our estimates of $2,338MM and $2,924MM. EBITDA margins were 46.7% (+162bps YoY) versus our 46.9%
estimate. Key wireless metrics were lower: (i) network revenue growth was -0.9% YoY versus our estimate of -0.2%; (ii) postpaid
and prepaid net additions were +33k and +69k, respectively, versus our estimates of +82k and +43k (consensus is +76k and
+46k); (iii) ARPU growth was -3.4% YoY versus our estimate of -3.0% (consensus is -2.7%); and (iv) postpaid churn was 1.28%
(+18bps), versus our 1.25% estimate. Wireline RGUs were also lower: (i) Internet net additions were +42k, versus our estimate
of +67k (consensus is +66k); (ii) retail IPTV net additions were +9k, versus our estimate of +18k (consensus is +19k); and (iii)
telephony net losses were -48k versus our -42k estimate (consensus is -44k).
• A good quarter for Bell Media boosted in part by retroactive adjustments. Bell Media revenues and EBITDA were $782MM
(+10.1% YoY) and $254MM (+25.1%), respectively, versus our estimates of $773MM and $231MM (consensus is $762MM and
$225MM). EBITDA margins were 32.5% (+389bps YoY) versus our 29.8% estimate. Advertising revenues were up +7.9% YoY due to
continued growth in digital advertising (+23% YoY), higher OOH revenues and sports speciality TV, moderated by continued lower
demand for traditional broadcast TV and radio advertising. Subscriber revenues were up +13.5% due to retroactive adjustments
and growth in Crave and sports streaming, partly offset by lower BDU subscribers.
• Other notables. (i) Within Bell CTS, product revenue declined -$114MM YoY (representing 63% of the -3.3% YoY decline in total
Bell CTS revenue) with a -$61M revenue decline from The Source store closures and transition to Best Buy Express, a -25%
decline in mobile phone contracted sales and lower business wireline data product sales; and (ii) management reiterated in-
year labour cost savings of up to $200MM in 2024.
RBC Capital Markets is acting as financial advisor to BCE Inc. in connection with the partnership with Sixty North Unity and
Northwestel Inc as press released June 11th