BCE readying for more intense competition in its wireless business

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MONTREAL - Bell's wireless division is ready for "straight on" competition in the changing cellphone business, says BCE Inc. CEO George Cope, after the big telecom company turned a $350-million profit in the fourth quarter.
Bell is reworking its brand in anticipation of new competitors just entering the mobile phone market and has launched an advanced wireless network and strengthened product distribution, Cope told analysts on Thursday.
Cope said retail outlets the Source and Virgin Mobile Canada, both owned by BCE (TSX:BCE), will also play a role in Bell's strategy to sell more phones as it competes against established rivals Rogers (TSX:RCI.B) and Telus (TSX:T) and the new entrants.
Globalive's Wind Mobile wireless business has been operating since December, and Mobilicity (formerly DAVE Wireless) plans to launch this spring in Toronto. Public Mobile and Quebec-based Videotron have also announced launch plans for this year.
"It's going to be straight-on competition and we're ready compete at every level," Cope said.
"We're just going to have to monitor it. At this point it's literally having no impact at all," he said of the new competition.
In its financial results, BCE Inc. reported that its recent purchase of The Source electronics stores and its completed acquisition of Virgin Mobile Canada helped to boost fourth-quarter revenues to $4.65 billion.
Net earnings for the final three months of last year amounted to 46 cents per common share. A year earlier, BCE lost $48 million or six cents per share.
New wireless subscribers were at 163,000 for the quarter, up 39 per cent year-over-year, which included Bell's new network launch in November.
Cope has already said that wireless is still the fastest growing area of telecom and will remain so for the next 10 years and, he added Thursday, he is optimistic about wireless growth this year.
Bell, Telus, Rogers, Wind Mobile all have advanced HSPA (High Speed Packet Access) networks that allow faster Internet downloads of music, video and software applications. Mobilicity and Quebecor's Videotron (TSX:QBR.B) have also announced they will have this type of network.
Cope said Bell is quickly installing its mobile devices at The Source, adding the products in about 20 to 30 stores each night, with a total of about 400 stores with full installations of Bell and Virgin phones.
The Source, a national Canadian retailer acquired last year by BCE after Circuit City went bankrupt and closed its U.S. stores, helped Bell increase equipment and other revenue to $324 million in the quarter from $143 million a year before.
"We would anticipate momentum on The Source building into March and start to see some of the sales that used to go to our competitor going our way," he said. "We're already seeing some early positive results."
Bell Wireless operating revenue increased by 5.7 per cent in the quarter to $1.198 billion, including about $1 billion from services, in part because of the purchase of the remaining 50 per cent of Virgin Mobile Canada.
However, BCE's average revenue per wireless user - also known as ARPU - fell by $1.48 to $51.08 due to more postpaid customers moving to lower rate plans, lower usage and lower roaming revenue from calls made outside customers' home territory.
Cope also announced that BCE will rollout Internet-based TV in Montreal and Toronto later this year and it will increase its advanced broadband network in parts of Ontario and Quebec for digital TV and Internet services.
As usual, telephone division Bell Canada provided the biggest share of the Montreal company's overall revenue.
Bell's sales rose by nearly $200 million to $3.98 billion. Bell also accounted for the bulk of BCE's overall operating income, which rose to $751 million from $666 million.
BCE is a Montreal-based conglomerate that also owns a controlling stake in Bell Aliant (TSX:BA.UN), Atlantic Canada's largest phone company, and a minority stake in CTVglobemedia, the television, newspaper and web content company.
Through Bell, BCE owns one of Canada's largest wireless communications networks as well as one of the country's two direct-to-home satellite TV services, formerly called ExpressVu and rebranded Bell TV.
Looking ahead, BCE announced its guidance for 2010, including adjusted earnings per share of between $2.65 and $2.75 for BCE. It's also calling for Bell Canada's revenue to grow by one to two per cent over 2009.
UBS analyst Phillip Huang said given BCE's earnings per share guidance of $2.65 to $2.75, a dividend increase in the second half of 2010 may be possible.
Huang also noted BCE's plans to deploy an advanced broadband network later this year and its efforts to launch IPTV.
"We believe these initiatives will strengthen its wireless business in the long term and should also help mitigate access line erosion," Huang wrote in a research note.
Bell Wireline operating revenues increased by 4.2 per cent to $2.84 billion, as revenue from The Source and growth at from TV services were partly offset by a decline in revenue from local and long-distance phone service, data services and access services.
Shares in BCE rose 85 cents to $28.47 Thursday on the Toronto Stock Exchange.

Organizations: BCE Inc., TSX, The Source Rogers Telus Videotron Quebecor Bell Canada Bell Aliant CTVglobemedia UBS Toronto Stock Exchange

Geographic location: MONTREAL, Toronto, Atlantic Canada Circuit U.S. Ontario Quebec

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