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BCE rides media, wireless units to profit growth

President and Chief Executive of Bell Canada Enterprises (BCE) Inc George Cope looks on during the annual general shareholders meeting at th
President and Chief Executive of Bell Canada Enterprises (BCE) Inc George Cope looks on during the annual general shareholders meeting at th

By Alastair Sharp

TORONTO (Reuters) - BCE Inc, Canada's biggest telecommunications company, posted a 17 percent rise in adjusted quarterly profit and raised its dividend on Thursday, helped by strong growth in its media wing and ongoing strength in wireless.

The Montreal-based parent of Bell has moved forcefully into a leading position in the media industry in recent years with several large acquisitions, while creeping up on market leader Rogers Communications Inc in wireless and launching an updated Internet-based television product.

BCE Chief Executive Officer George Cope said on a call with investors he was "clearly disappointed in not being a part of the new national NHL contract" which Rogers locked up in a 12-year C$5.2 billion hockey broadcast deal in November.

Analysts described the results as solid, with minor positive surprises in the size of the dividend hike and the relative strength of BCE's lagging landline business.

"The steady results set a tone for a good start to 2014," Desjardins analyst Maher Yaghi wrote in a note.

"As penetration for IPTV increases, BCE should continue to post improving results in wireline, which is important for the long-term sustainability of the dividend."

Bell said it added 119,520 net contract wireless subscribers in the three months to the end of 2013, and the average monthly bill of a Bell wireless customer was C$57.92. That is down from C$58.30 in the prior quarter but above a year earlier.

The gain in customers was less than in the year ago quarter, which Bell said demonstrated the competitive intensity of the holiday period, coupled with slimmer discounts on handsets.

Bell covets such customers, who sign multiyear contracts to use the latest smartphones and typically pay four times more each month than prepaid subscribers.

It said postpaid churn, the rate at which these valued customers leave, dropped to 1.29 percent from 1.35 percent.

The company recently cut roaming fees to the United States, Europe and elsewhere amid increasing pressure from regulators. But it was sideswiped by a cut-throat U.S. roaming offer launched by upstart Wind Mobile this month.

BCE shares gained 1.2 percent to C$45.90 on the Toronto Stock Exchange in morning trade.

INTERNET A LANDLINE LIFELINE

Bell said it also added 15,690 landline Internet customers and 60,301 customers signed up to Fibe TV, which BCE runs over its Internet network.

More customers paying higher bills for those two services enabled the otherwise shrinking legacy landline business to maintain stable revenue and even eke out earnings growth.

Operating revenue at the media unit, including the acquisition of Astral that closed mid-year, jumped 39 percent. Excluding Astral, Bell Media notched 2 percent revenue growth.

BCE said it expects to cut costs by more than C$170 million in 2014, with much of that coming from reduced labor costs as it integrates Astral, once its largest media supplier.

BCE said fourth-quarter net earnings slipped to C$495 million, or 64 Canadian cents a share, from C$666 million, or 86 Canadian cents, a year earlier, due to a windfall on spectrum in late 2012.

On an adjusted basis, which strips out gains made from the spectrum asset, the company earned 70 Canadian cents a share, up from 60 cents a year ago. Operating revenue was C$5.38 billion, compared with C$5.16 billion a year earlier.

Analysts had on average expected BCE to earn 69 Canadian cents a share on revenue of C$5.41 billion, according to Thomson Reuters I/B/E/S.

BCE said it expects Bell's revenue to grow between 2 and 4 percent in 2014, and for the overall company to earn between C$3.10 and C$3.20 a share. It raised its dividend by 6 percent to C$2.47 a share annually.

BCE said that in the event that the discount rate rose by 50 basis points - not impossible given historically low current rates - it could eliminate its pension solvency deficit, raising the possibility of further cash flow growth that would in turn support higher dividend payouts.

(Editing by Chizu Nomiyama and Nick Zieminski)

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