May 5, 2011 (Canada NewsWire Group) --
- 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 trajectory around."
"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)
|Q1 2011||Q1 2010||
|EBITDA before pension current service costs||345||352||(2.0%)|
|Free Cash Flow||88*||57||55.4%|
* 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 sales.
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 legislation.
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.
|(1)||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 Partnership (NorthernTel).|
|(2)||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 otherwise stated.|
|(3)||Definitions of non-IFRS measures:|
|a.||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.|
|b.||EBITDA: Bell Aliant defines EBITDA as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, severance and other charges.|
|c.||EBITDA margin: Bell Aliant defines EBITDA margin as EBITDA as a percentage of operating revenue.|
|d.||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 metrics.
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 results.