Bell Aliant reports fourth quarter 2009 results and announces expanded fibre
to the home service coverage with 2010 financial guidance
- Cost reductions improve 2009 EBITDA margin 1.5 percentage points over 2008 - Distributable cash reaches $773 million in 2009; expected to remain strong at $750 million - $790 million in 2010 - FibreOP(TM) Internet and HDTV services on 100 per cent fibre optic network to pass 140,000 homes by year end 2010 - 2010 Distributions expected to continue at $2.90 per unit - Unitholder vote regarding January 2011 conversion to corporate structure planned for June 2010
"Our 2009 results demonstrate that our strategy is working. Our EBITDA margins improved over 2008 performance despite growing competitive activity, because of action we took to reset our cost structure and grow our broadband business," said
Bell Aliant Holdings LP's fourth quarter financial highlights
------------------------------------------------------------------------- (In millions Q4 Q4 Percentage YTD YTD Percentage of dollars) 2009 2008 Change 2009 2008 Change ------------------------------------------------------------------------- Operating Revenue $786 $803 (2.2%) $3,174 $3,246 (2.2%) ------------------------------------------------------------------------- EBITDA 366 366 0.0% 1,466 1,450 1.1% ------------------------------------------------------------------------- Capital Expenditures 121 167 (27.5%) 465 527 (11.8%) ------------------------------------------------------------------------- Distributable Cash 183 146 24.8% 773 716 8.1% -------------------------------------------------------------------------
Operating revenues were down 2.2 per cent in the fourth quarter of 2009 compared to the fourth quarter of 2008, primarily as a result of declines in local and long distance revenues associated with lower network access services (NAS), offset by increases in Internet and Information Technology (IT) revenues.
Despite the revenue declines, restructuring programs and ongoing cost containment initiatives reduced operating expenses by
Local service and long distance revenue declined
NAS declines in total were relatively stable in the fourth quarter of 2009 compared to the third quarter. Residential NAS declines were approximately 6,000 higher than the same quarter in 2008 with more residential customers having a competitive telephony offering than a year earlier. Business NAS declines were approximately 4,000 lower than those incurred in the fourth quarter of 2008 when business shutdowns and the completion of the federal election reduced NAS for that period.
Internet revenue grew by
IT revenue increased
Capital expenditures in the fourth quarter of 2009 were
Distributable cash increased
The Fund reported distributions to unitholders of
2010 Guidance
"I am thrilled to announce that in 2010 we will more than double our 2009 spending on fibre technology to pass 140,000 homes with fibre to the home by the end of this year," said Sheriff. "With this investment we are accelerating and leveraging our natural assets of aerial footprint and low density geography to invest for the future. We expect to continue to gain efficiencies in our capital program, and this, in combination with the completion of a significant capital project in 2009, will allow us to advance our fibre network this year without increasing our overall capital spending from 2009 levels."
Specific communities scheduled to receive the fibre to the home services in 2010 are expected to be announced by mid year.
Bell Aliant's financial guidance for 2010 is as follows:
----------------------------------------------------- 2010 Guidance ----------------------------------------------------- Operating Revenues $3,050 million - $3,150 million ----------------------------------------------------- Capital Intensity 14 per cent - 15 per cent ----------------------------------------------------- Distributable Cash $750 million - $790 million -----------------------------------------------------
Operating Revenues
Consolidated operating revenues are expected to be between
Capital Intensity
Capital expenditures are expected to be between 14 per cent and 15 per cent of operating revenues in 2010 with strategic priority given to growing broadband. Increased spending in fibre to the home technology is expected to be offset by reductions resulting from a number of factors including: the completion of the Bell Mobility HSPA Backhaul project in 2009, productivity and cost containment initiatives, and a continued focus on prioritizing spending according to strategic objectives.
Distributable Cash and Distributions
Distributable cash is expected to remain between
Conversion to a Corporate Structure
Bell Aliant expects to recommend to Fund unitholders a tax-deferred transaction to convert from an income trust structure to a corporate structure effective on or by
"Our objective is to deliver a sustainable high payout dividend to shareholders following
Although a reduction to the current distribution is expected, as Bell Aliant has said in the past, it is important to note that for taxable retail investors, dividends paid by a corporation are taxed at lower rates than the distributions paid by Bell Aliant as an income trust. As such, under a corporate structure, the dividend tax credit mechanism can be expected to mitigate, to a large part, the after-tax effect of a lower dividend for those investors.
Supplementary Financial Information
More information on the Fund's and Bell Aliant Holdings LP's fourth quarter 2009 results can be found in Bell Aliant's fourth quarter 2009 supplementary information package and Bell Aliant Holdings LP's fourth quarter 2009 management's discussion and analysis, available at www.bellaliant.ca/investors.
Analyst conference call
A conference call with the financial community is scheduled for
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.
Notes
The information contained in this news release is unaudited.
(1) Bell Aliant derives virtually all of its income from its indirect ownership in Bell Aliant Holdings LP. Bell Aliant Holdings LP's results combine the results of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP), Télébec, Limited Partnership (Télébec) and NorthernTel, Limited Partnership (NorthernTel).
(2) On
(3) Percentage changes quoted in this release related to dollar values are based on amounts rounded to the nearest hundred-thousand, consistent with disclosure in the Fund's supplementary information package and Bell Aliant Holdings LP's management's discussion and analysis for the fourth quarter of 2009. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated.
(4) Bell Aliant Holdings LP defines EBITDA, a non-GAAP measure, as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, net benefit plans cost, and restructuring and other charges. For a reconciliation of EBITDA to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's management's discussion and analysis for the fourth quarter of 2009.
(5) Bell Aliant defines capital intensity as capital expenditures as a percentage of operating revenue.
(6) Bell Aliant defines distributable cash, a non-GAAP measure, as cash from operating activities of continuing and discontinued operations of Bell Aliant Holdings LP and of the Fund, plus operating items funded through cash reserves or borrowings, such as working capital, pension deficit funding, restructuring and other charges and cash capital taxes in excess of normalized levels, plus amounts for current income tax provisions plus other elements of working capital changes that do not affect cash flow, less capital expenditures. For a reconciliation of distributable cash to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's management's discussion and analysis for the fourth quarter of 2009.
Forward-looking Information
This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, in particular as described in the "2010 Guidance" and "Conversion to a Corporate Structure" sections of this news release. Unless otherwise indicated, such forward-looking statements describe management's expectations at
Assumptions
Several assumptions were made in the preparation of Bell Aliant's 2010 financial guidance and in making forward-looking statements in this news release, such as economic assumptions, market assumptions, and financial assumptions. The material factors and assumptions used to develop this forward-looking information include:
a) Economic Assumptions
- The Canadian economy will gradually return to a period of growth after contracting in 2009, with real GDP growth expected to be in the range of 2 to 3 per cent after declining by an estimated 2 per cent in 2009, consistent with recent estimates from the Conference Board of Canada and the Bank of Canada; - Inflation rates will increase modestly as the consumer price index is expected to rise in the range of 1.7 to 2.2 per cent for 2010; and - Interest rates will also increase modestly, as represented by: - Banker's acceptances and other short-term borrowing rates increasing from current levels of less than 0.5 per cent to a level of approximately 1.5 to 2.0 per cent; - Government of Canada 2 to 10-year bond yields increasing from current levels of approximately 1.3 to 3.4 per cent to rates of approximately 2.3 to 4.1 per cent; and - Credit spreads on bonds for corporate issuers like Bell Aliant LP remaining approximately the same as current levels.
b) Market Assumptions
- Households passed with a competitive cable telephony offering will increase at approximately the same pace as Bell Aliant has experienced in recent quarters; - Bell Aliant will increase the number of households passed in its territory with Internet service and increase the penetration rate for its high-speed Internet and TV services; - Competitive and service substitution losses in local and long-distance services will increase slightly from those experienced in 2009; - Internet revenue growth will be lower than 2009 given slowing growth in high-speed penetration rates and accelerating losses of dial-up Internet revenues, offset by higher average revenues per customer and strong growth in revenue from TV services; - Data revenue will decline at a similar rate as 2009 due to price pressures, competitive losses and settlement rate declines; and - IT revenue will grow modestly from 2009 levels as the economy returns to positive growth.
c) Financial Assumptions
- Operating revenue will decline from the 2009 level of $3,174 million to be in the range of $3,050 million to $3,150 million; - Capital intensity will be in the range of 14.0 to 15.0 per cent of operating revenue, compared to 14.6 per cent in 2009; - Distributable cash will also be in approximately the same range as 2009 at $750 million to $790 million, compared to $773 million in 2009; - Pension deficit funding for 2010 will be in the range of $80 to $110 million, compared to $74 million in 2009. This range is based on potential discount rates for plan obligations at December 31, 2009, and applies existing legislated federal pension funding rules. These estimates may be significantly impacted by contemplated new solvency funding rules as announced by the federal Finance Minister on October 27, 2009, however Bell Aliant currently has no clarity on how the new rules, if implemented, could affect 2010 deficit funding requirements. Current service cost funding, which was $69 million in 2009, is expected to be approximately the same in 2010. - Taxable income is expected to be subject to blended federal and provincial corporate income tax rates of 29 per cent in 2011, dropping to 27 per cent by 2013; and - Dividends paid by Bell Aliant are expected to qualify as eligible dividends entitling Canadian resident individuals who receive them to the enhanced dividend gross-up and tax credit mechanism that ensures that corporate income distributed as interest or dividends is subject to the same combined corporate and individual tax burden.
Bell Aliant encourages investors to review the risk factors section below, and related disclosures, for a discussion of the various factors that could cause actual results to differ from what is currently expected.
Risk Factors
There are many factors that could cause results or events to differ materially from current expectations. The most significant factors that Bell Aliant has identified that may affect Bell Aliant's results or events in 2010 include but are not limited to: increasing competition; management's ability to achieve strategies and plans, including management of our cost structure; general economic conditions; reliance on systems; changing technology; required operating and capital expenditures, including asset life cycle management; demand for our services; the relationship with BCE and
Should any factor impact Bell Aliant in an unexpected manner, or should assumptions underlying the forward-looking statements prove incorrect, the actual results or events may differ materially from the results or events predicted. All of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by Bell Aliant will be realized or, even if substantially realized, that they will have the expected consequences for Bell Aliant.
Except as may be required by Canadian securities laws, Bell Aliant disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason. Readers should not place undue reliance on any forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to fiscal 2010. Readers are cautioned that such information may not be appropriate for other purposes.
About Bell Aliant
Bell Aliant (TSX: BA.UN) is one of North America's largest regional communications providers and an Official Supporter of the
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For further information: For further information: Media Relations: Alyson Queen, (866) 696-6700, [email protected]; Investor Relations: Zeda Redden, (877) 487-5726, [email protected]
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