Bell Aliant Q2 earnings slip slightly, but broadband, IPTV results raise outlook

Bell Aliant (Toronto: BA-UN.TO) may have seen a slight 1 percent dip in Q2 2011 revenues to CAD 693 million (USD 734 million), but strong growth in broadband and IPTV drove it to increase its full year revenue guidance.

Based on its Q2 results, Bell Aliant has raised its operating revenue guidance for 2011 to between CAD 2.72 billion (USD 2.86 billion) and CAD 2.78 billion (USD 2.93 billion), while retaining its previously set guidance for EBITDA, free cash flow and adjusted earnings per share.

As seen with other Canadian and U.S.-based telcos much of Bell Aliant's CAD 7 million (USD 7.3 million) losses were the result of declining local and long-distance voice subscribers.

"The growth rates of our Internet and TV revenues have increased while the rates of decline in our traditional voice and data services have slowed," said Karen Sheriff, president and chief executive officer, Bell Aliant in the earnings release. " Our significant investment in a world-class fibre-to-the-home network is contributing to this improvement and gives us confidence that we are on the right path to returning to overall revenue growth."

Here's a breakdown of key company metrics:

  • Access Line Loss: During the quarter, Bell Aliant's local and long distance revenues declined CAD 13 million (USD 13.7 million) (4 percent) and CAD 3 million (USD 3.16 million) (2.7 percent), respectively, in Q2 versus Q2 2010 due to 5 percent lower Network Access Service (NAS) connections.
  • Broadband Access: Similar to other recent quarters, broadband continues to be a big seller for Bell Aliant. As of the end of June, the telco had 855,000 broadband customers. However, Bell Aliant only added 4,000 new broadband subscribers in the quarter versus 8,000 in Q2 2010 due to a result of declining growth in legacy DSL services and cable competitors offering DOCSIS 3.0 services. One of the growth engines that did perform well in Q2 was its FibreOp Fiber to the Home (FTTH) service. During the quarter, Bell Aliant added 8,000 new subscribers, which gave it a total of 22,000 FTTH subscribers as of the end of June. A good number of the new FibreOP subscribers that were migrating from DSL and Fiber to the Node (FTTN) networks.
  • Video Services: Like fiber-based broadband, IPTV continues to be a growth engine in Bell Aliant's consumer wireline portfolio. During the quarter, the service provider reported CAD 10 million (USD 10.5 million) in IPTV revenue. As of the end of June, Bell Aliant added 5,000 new IPTV customers bringing it 59,000 total IPTV customers.

Obviously, the challenge for Bell Aliant going forward will be maintaining its IPTV and FTTH momentum by adding new features and functionality options like its FibreOP 2.0 service for existing customers migrating to the new service and new customers.

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