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Bell Canada reports revenues of $5B, up 3.6% from the same period last year, and earnings per share of $0.48 cents, up from $0.09
November 2, 2005
MONTREAL -- (All figures are in Cdn$, unless otherwise indicated) For the third quarter of 2005, BCE Inc. (TSX, NYSE: BCE - News News) reported revenues of $5.0 billion, up 3.6% from the same period last year. Operating income for the quarter increased to $957 million, from $25 million in the third quarter of 2004(1), due primarily to restructuring charges recognized in 2004 for the company's employee departure program. Earnings per share (EPS) were $0.48 cents, up from $0.09 the previous year. EBITDA(2) was $1.9 billion, down 1.9% from the same period last year. EPS before restructuring and other items and net gains on investments(3) were $0.50 as compared to $0.52 the previous year. Cash from operating activities was $1.7 billion in the quarter, down 7.8% from the third quarter of 2004, while free cash flow(4) was $344 million, compared to $673 million for the same period last year.
Bell Canada achieved solid revenue performance in the quarter with video, wireless, Internet and the Business segment all contributing to revenue growth that more than offset the declines from the company's legacy business. Operating costs were impacted by decisions taken by the company to invest the necessary resources to clear up the backlog from the Entourage strike quickly and to invest in customer service. In addition, to maintain a clear focus on these priorities certain planned cost savings initiatives were temporarily delayed. Taken together, these factors had a significant effect on EBITDA in the quarter. EPS and Operating income were also affected by these factors, and by expected higher pension and amortization costs.
"We continued to have solid revenue increases in our key growth services in the quarter. We also made progress on our multi-product household strategy," said Michael Sabia, President and Chief Executive Officer of BCE. "However, our financial performance suffered as a result of decisions we took to invest in service and to clear up the lingering consequences of the Entourage strike. With significant progress on these issues, we are ramping up our cost-saving initiatives in the fourth quarter and as we enter 2006."
In terms of its overall cost reduction program (Galileo), on a year-to- date basis the company has generated $353 million in savings. This includes $111 million in the third quarter. The latter was affected by the company's decision to defer some Galileo initiatives.
Going into the fourth quarter, a number of initiatives will come on-line and others will be accelerated. They include: the continued migration of customers to Bell Canada's new and simple One Bill; the deployment of a new bell.ca web site that transforms this online destination into a simple and cost-effective sales channel; and the convergence of consumer call centres to provide customers with a single point of contact for their multiple Bell services.
Bell has also launched a significant procurement review effort that targets the company's $8.5 billion external operating and capital expenditures. Its objective is to drive down the cost base through price improvements, consumption controls, supply-chain re-designs, inventory controls as well as a review of the overall real estate spend. The full impact of this and other measures will contribute to the company achieving its target run rate of savings of $500-$600 million for 2005 and of $1-1.5 billion by the end of 2006.
Bell recently announced two appointments that further strengthened the executive leadership of the company to bring an ever-sharper focus to the day- to-day execution of its business plans. George Cope will join Bell Canada as President and Chief Operating Officer in January 2006 to lead the company's various customer-facing groups (Residential, Enterprise, SMB and wholesale), excluding wireless. He will focus on driving revenue growth, delivering new products to the marketplace and enhancing our customer service. In addition, Stephen Wetmore was given expanded responsibilities as Group President - Corporate Performance and National Markets of Bell Canada. In this new capacity, Mr. Wetmore has overall responsibility for driving the improvement of the company's cost structure and thus contributing to profitable growth.
"Strengthening the executive leadership of the company is about a renewed focus on driving our future growth, re-setting our cost structure and improving our customer service to meet the competitive realities of the market," said Mr. Sabia. "It's also about relentless execution of the plan we have put in place to deliver value to our customers and shareholders."
BCE Inc. (Bell Canada)
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