(Bloomberg) -- BCE Inc. predicts full-year revenue will slip as a price war unfolds in the wireless sector. The Canadian telecom company’s third-quarter earnings fell short of forecasts as product sales were soft.
The company now expects revenue to fall 1.5% this year; previously, BCE anticipated 0% to 4% growth. It earned 75 Canadian cents per share on an adjusted basis, missing the 77 cents per share projected by analysts in a Bloomberg survey.
Operating revenue slipped nearly 2% from last year to C$5.97 billion ($4.3 billion) in the third quarter.
“Results for the third quarter demonstrate that we’re pursuing growth in a financially disciplined and responsible manner in what’s arguably been the most competitively intense market we’ve seen,” Chief Executive Officer Mirko Bibic said a call with investors.
The company is focused on attracting higher-margin subscribers to offset price pressures and sluggish economic growth, he said.
BCE shares were down 4.5% as of 11:07 a.m. Toronto time to C$38.26, the lowest shares have traded since October 2011.
BCE, known to consumers as Bell, struggled to gain traction with new customers in the third quarter, with its wireless subscriber base growing to 10.4 million, short of the 10.5 million analysts were looking for. It’s a problem the company may continue grappling with as growth in newcomers to Canada will taper off after the federal government made significant cuts to immigration targets.
On the investor call, Bibic said immigration levels were still positive, but are expected to slow. “The overall pie is shrinking,” he said. “But for us, it’s not as big an impact because we are increasing our share in that market on a historical basis.”
Price War Casualties
Telecom analysts have criticized the pricing competition among the country’s largest wireless providers, particularly the battle taking place between BCE and Quebecor Inc. in the province of Quebec.
Quebecor and its Freedom Mobile business took more wireless share in the third quarter during the back-to-school season, TD Cowen analyst Vince Valentini wrote in a client note, which “seems to have come largely at the expense of Bell.”
Quebecor also reported third-quarter results Thursday, with its adjusted earnings of 82 Canadian cents per share coming short of estimates. Quebecor suffered in the price war, with Bank of Nova Scotia telecom analyst Maher Yaghi saying the telecom’s strong subscriber performance came at the cost of significant pricing concessions that weighed on growth.
Earlier this week, BCE announced it would use the proceeds from the proposed sale of its Maple Leaf Sports & Entertainment stake to fund a C$5 billion deal for Northwest Fiber LLC, known as Ziply Fiber.
Some telecom analysts were surprised that the proceeds from the MLSE transaction are now earmarked to acquire Ziply rather than pay down BCE’s debt of about C$40 billion.
The S&P/TSX Composite telecommunications subgroup has tumbled nearly 18% so far this year, moving opposite to the broader Canadian market’s 18% gain.
(Updates with context from the conference call beginning in the fourth paragraph.)
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