BCE Inc. sees profit rise despite revenue dip, attributing gains to job cuts and cost reductions
BCE Inc. increased its profits last quarter despite a decline in revenue, reflecting the financial impact of thousands of job cuts earlier this year, according to BNN Bloomberg.
For the quarter ending June 30, revenues fell one percent from the previous year, totalling $6.01bn.
Chief executive Mirko Bibic attributed the decline to aggressive pricing by rival mobile and internet providers, which attracted customers away, and the closure of 107 outlets of The Source, representing 39 percent of the electronics retailer’s locations.
The company's increased profits resulted from reduced expenses, including lower purchasing obligations and severance and acquisition costs. Bibic noted, “On wireless and on pricing, we are facing the most intense competitive pressure in the history of our industry in Canada.”
He added that while overall growth was impacted by competitive pricing pressures and revenue loss from The Source closures, the company remains focused on profitable subscriber growth and cost reductions.
In February, BCE announced a reduction of 4,800 jobs, about nine percent of its workforce, affecting all levels of the company. This restructuring led to the cancellation of multiple television newscasts, including at CTV and BNN Bloomberg, and the sale of 45 Bell Media-owned regional radio stations across the country.
The layoffs and restructuring drew significant backlash, including criticism from Prime Minister Justin Trudeau, who called the elimination of 440 media positions a “garbage decision.”
At the company's annual general meeting in May, investors and employees expressed frustration over executive compensation during a period of staff reductions.
Despite the controversy, the restructuring showed financial benefits. Desjardins analyst Jerome Dubreuil described BCE’s financial results as “slightly positive,” with better margins offsetting lower revenues.
Dubreuil stated, “BCE’s restructuring plan is becoming more apparent. We believe telecom value creation will have to come from tight cost control in the future given the challenged top line, and we are encouraged by BCE’s progress in this regard.”
BCE added 78,500 net postpaid mobile subscribers in the quarter, a 30 percent decline compared to the previous year. The company’s monthly churn rate, which measures the percentage of subscribers who cancelled their service, rose to 1.18 percent from 0.94 percent a year earlier.
Bibic attributed the higher churn rate to increased competitive market activity and numerous wireless deals from rivals. He remarked, “The churn does remain elevated and it’s clearly not at a level that I’m satisfied with, but it’s down sequentially from Q1.”
Average revenue per wireless phone user dropped 1.9 percent year-over-year to $58.04 in the second quarter. However, BCE added nearly 24,000 net new retail internet subscribers, its second-best result for the second quarter since 2007.
Bibic highlighted that 41 percent of new internet customers subscribed to a service bundle with wireless, which should help improve retention.
Bibic also emphasized Bell Media’s shift from a traditional broadcaster to a “digital media and content leader.”
The subsidiary achieved a 35 percent year-over-year increase in digital advertising revenue last quarter, bolstered by its streaming service Crave, which introduced ad-supported subscriptions last summer, and a new advertising partnership with TikTok.
Overall, adjusted earnings fell to 78 cents per share from 79 cents per share the previous year, matching analysts’ expectations, according to financial markets firm LSEG Data & Analytics.
BCE confirmed its financial forecast for the year but warned of a “significant reduction” in capital expenditures on its fibre-optic broadband network and highly regulated businesses due to federal policies.
