Net NAS declines improve for fourth consecutive quarter
Atlantic residential revenues return to positive growth
FibreOPTM network coverage reaches 178,000 homes and businesses
HALIFAX, May 5 /CNW/ - Bell Aliant Inc. (TSX: BA) today reported financial results for the first quarter of 2011
for Bell Aliant Inc. (Bell Aliant) and Bell Aliant Regional
Communications Inc. (Bell Aliant GP).
"Our first quarter results show that the focused execution of our
strategic initiatives has us on the right path," said Karen Sheriff,
president and chief executive officer, Bell Aliant. "With our
accelerated expansion of fibre-to-the-home ("FTTH"), our net NAS
declines continue to improve and our Internet and TV revenues are
growing such that our Atlantic residential revenues have returned to
positive growth after a period of decline."
"I am very encouraged by these results, especially considering that we
have much of our FibreOP network expansion still ahead of us," continued Ms. Sheriff. "I am confident
that accelerating our FTTH network coverage in 2011 and 2012, combined
with our recently announced launch of FibreOP 2.0 with an even better TV experience and faster Internet speeds, will give
us the scale and competitive advantage to turn our overall revenue
"The first quarter was a very strong start to what will be a year of
high execution for us. We expect EBITDA to be under pressure for the
balance of this year as we incur start-up costs associated with
increasing the number of customers subscribing to this new technology.
That said, it is short-term pain that we can live with, considering the
long-term benefits of the competitive advantage FibreOP gives us," concluded Ms. Sheriff.
First quarter 2011 highlights1
Bell Aliant Inc.'s net earnings in the first quarter of 2011 were $84
million with earnings per share and adjusted earnings per share in the
quarter of $0.37 and $0.44, respectively.2
First quarter financial highlights of Bell Aliant GP are summarized as
(In millions of dollars)
EBITDA before pension current service costs
Free Cash Flow
* excludes $200 million lump sum pension contribution
Declines in Bell Aliant GP's operating revenues in the first quarter of
2011 were held to 1.0 per cent compared to the same quarter a year
earlier, as growth in Internet and TV revenues largely offset declines
in local and long distance revenues. Net network access services (NAS)
declines continued an improving trend, with lower net declines than the
same quarter a year earlier for the fourth consecutive quarter. Net NAS
declines were 33,000 in the first quarter of 2011, down from 39,000 in
the same quarter in 2010, due to strong bundling performance and
retention programs, bolstered by the expansion of FibreOP Internet and TV service coverage in Atlantic Canada. Atlantic
residential revenues increased approximately 3 per cent in the first
quarter of 2011 from the same quarter in 2010, after experiencing
several quarters of year-over-year decline.
Excluding pension current service costs, operating expenses in the first
quarter of 2011 were flat to the same quarter of 2010. The expense
benefits of staff reductions and continued productivity gains were
offset by a $4 million increase in equity-based incentive costs
following a large reduction adjustment in the first quarter of 2010,
and expense increases associated with the ramp-up of the FibreOP rollout. Pension current service costs in the first quarter of 2011
also increased $2 million from the same quarter in 2010, as a result of
lower interest rates.
EBITDA declined $9 million (2.8 per cent) in the first quarter of 2011
compared to the same quarter in 2010, as a result of lower revenues and
the increase in pension current service costs. EBITDA before pension
current service costs declined $7 million (2.0 per cent) in the first
quarter of 2011 from the same quarter a year ago. Shifts in the revenue
mix to lower margin revenues lowered EBITDA margin in the first quarter
of 2011 to 48.3 per cent, down from 49.2 per cent in the same quarter
of 2010, in line with the annual decline expected for 2011.
Capital expenditures in the first quarter of 2011 increased $25 million
(26.7 per cent) from the same quarter a year earlier, driven by the
planned expansion of FibreOP coverage areas and connecting customers to the FTTH network. Capital
expenditures are expected to continue to increase in the coming
quarters of 2011 as Bell Aliant executes its plan to pass over 600,000
homes and businesses with FibreOP services by the end of 2012.
Free cash flow before a one-time lump sum pension contribution of $200
million was $88 million in the first quarter of 2011, up $31 million
from the same quarter a year earlier. The improvement in free cash flow
was driven by a $48 million improvement in non-cash working capital
which was offset by the increase in capital expenditures. The lump-sum
contribution to the pension plans was funded by a preferred share issue
of Bell Aliant's subsidiary, Bell Aliant Preferred Equity Inc., which
was completed in March 2011.
Local service and long distance revenues declined $13 million (4.0 per
cent) and $3 million (2.7 per cent), respectively, in the first quarter
of 2011 compared to the same quarter in 2010, primarily as a result of
4.7 per cent lower NAS than a year earlier. Selected pricing actions
somewhat offset the revenue effects of NAS declines.
Internet revenue grew by $8 million (7.0 per cent) in the first quarter
of 2011 compared to the same period in 2010. Residential high-speed
average revenue per customer (ARPC) grew 4.8 percent while high-speed
Internet customers grew by 3.8 per cent from the same period a year
earlier. Customer demand for more bandwidth and premium services
continued to move customers to higher value services like FibreOP which, along with selected pricing action, pushed ARPC in the first
quarter of 2011 to its highest level to date.
Bell Aliant passed an incremental 40,000 homes and business with FibreOP services in the first quarter of 2011, bringing homes and businesses
passed with FTTH at the end of March 2011 to 178,000. Growth in the FibreOP coverage area drove substantially all of the IPTV net customer
additions in the first quarter of 2011 as IPTV revenues reached $9
million with a total of 54,000 IPTV customers at the end of March 2011.
Other data revenue declined $3 million (3.8 per cent) in the first
quarter of 2011 from the same quarter a year earlier as a result of
competitive pressures and migration to alternate technologies.
Wireless revenues increased $2 million (11.0 per cent) in the first
quarter of 2011 from the same quarter in 2010, driven by subscriber
growth of 10.8 per cent compared to the end of March 2010.
Other revenues decreased $3 million (6.0 per cent) in the first quarter
of 2011 compared to the same quarter in 2010 driven by lower product
Medium Term Notes Issued
On April 26, 2011 Bell Aliant LP issued $300 million of 7-year medium
term notes (MTN) at a rate of 4.88 per cent, the proceeds of which will
be used on May 6, 2011 to partially redeem 4.72 per cent medium term
notes due September 26, 2011 (the "2011 Notes"). Following the
redemption, $105 million of the 2011 Notes will remain outstanding,
which Bell Aliant LP expects to repay with free cash flow and/or short
term borrowing at maturity.
"We are pleased that we have been able to successfully execute on our
financing plans by completing two attractive financing deals so far
this year," said Glen LeBlanc, executive vice president and chief
financial officer, Bell Aliant. "With our preferred share offering and
recent MTN issue, we are reducing our financial risk profile and
securing attractive financing rates for the future, all while giving
investors alternative ways to invest in Bell Aliant."
Bell Aliant's Board of Directors declared a quarterly dividend of
$0.4750 per common share, payable on June 30, 2011 to shareholders of
record at the close of business on June 15, 2011. The expected annual
dividend of $1.90 per share represents a yield of 7.0 per cent based on
the May 5, 2011 closing price.
Bell Aliant Preferred Equity Inc. also declared the first dividend on
its Series A Preferred Shares of $0.35545 per share to be paid on June
30, 2011 to shareholders of record as of June 15, 2011. This initial
dividend on the preferred shares covers the period from March 15, 2011
to June 30, 2011. Future dividends on the Series A Preferred Shares are
expected to be $0.303125 quarterly or $1.2125 per share paid annually,
for the initial 5 year period, which ends on March 31, 2016.
Unless otherwise stated, dividends paid by Bell Aliant and Bell Aliant
Preferred Equity Inc. to Canadian residents are "eligible dividends" as
defined by the Canadian Income Tax Act and corresponding provincial
Supplementary Financial Information
More information on Bell Aliant's and Bell Aliant GP's first quarter
2011 results can be found in Bell Aliant's first quarter 2011
supplementary information package and Bell Aliant GP's first quarter
2011 Management's Discussion and Analysis (MD&A), available at www.bellaliant.ca/investors.
Analyst conference call
A conference call with the financial community is scheduled for May 6,
2011 at 8:00 a.m. (Eastern). The dial-in numbers are 866-696-5895 and
416-340-8527 for Toronto area participants. Media are invited to attend
in listen-only mode. A replay of the session can be heard until May
16, 2011. To access the replay, dial 800-408-3053 or 905-694-9451 and
enter the passcode 7845361#.
A live audio webcast of the conference call can be accessed on www.bellaliant.ca under the Investor Relations section. A replay of the conference call
will be available on the website for one year.
The information contained in this news release is unaudited.
Bell Aliant derives virtually all of its income from its ownership in
Bell Aliant GP. Bell Aliant GP's results consolidate the results of
Bell Aliant Regional Communications, Limited Partnership (Bell Aliant
LP), Télébec, Limited Partnership (Télébec) and NorthernTel, Limited
Percentage changes quoted in this release related to dollar values are
based on amounts rounded to the nearest hundred-thousand, consistent
with disclosure in Bell Aliant's supplementary information package and
Bell Aliant GP's MD&A for the first quarter of 2011. Dollar values
quoted in this release are rounded to the nearest million unless
Definitions of non-IFRS measures:
Adjusted earnings per share: Bell Aliant defines adjusted earnings per share as fully diluted
earnings per share adjusted for the after-tax per share impact of
amortizing purchase price allocations (PPA) amounts, which represent
the adjustments to historical cost of tangible and intangible assets
acquired in business combinations.
EBITDA: Bell Aliant defines EBITDA as operating revenue less expenses
(earnings) before interest, income taxes, depreciation and amortization
expense, severance and other charges.
EBITDA margin: Bell Aliant defines EBITDA margin as EBITDA as a percentage of
Free Cash Flow: Bell Aliant defines free cash flow as cash generated from operating
activities less capital expenditures. Free cash flow includes the
operations of Bell Aliant and Bell Aliant GP on a combined basis.
For a reconciliation of these non-IFRS measures to the most closely
comparable IFRS measures, please refer to Bell Aliant GP's MD&A for the
first quarter of 2011.
This news release contains forward-looking statements concerning
anticipated future events, results, circumstances or expectations, in
particular as described in the "Medium Terms Notes Issued" and
"Declared Dividends" sections of this news release. Unless otherwise
indicated, such forward-looking statements describe management's
expectations at May 5, 2011. These statements are based on management's
beliefs regarding future events, many of which, by their nature are
inherently uncertain and beyond management's control. These statements
are not guarantees of future performance and are subject to assumptions
which may prove to be inaccurate and numerous risks and uncertainties
which are difficult to predict.
About Bell Aliant
Bell Aliant (TSX: BA) is one of North America's largest regional
communications providers and the first company in Canada to cover an
entire city with fibre-to-the-home (FTTH) technology with its FibreOP services. Through its operating entities it serves customers in six
Canadian provinces with innovative information, communication and
technology services including voice, data, Internet, video and
value-added business solutions. Bell Aliant's employees deliver the
highest quality of customer service, choice and convenience.
1 See Notes section at the end of this release for definitions of the
non-International Financial Reporting Standard (IFRS) financial
2 Bell Aliant converted from an income trust to a corporate structure on
January 1, 2011. Prior year net earnings and earnings per share metrics
of the trust structure are not meaningful or comparable to 2011
SOURCE BELL ALIANT INC.
For further information: