Bell Aliant reports third quarter 2010 results
- Consistent financial results with improving NAS trends
- FibreOP(TM) coverage reaches 106,000 homes with strong bundle adoption
- 2010 Guidance revised for xwave sale
HALIFAX,
"Our third quarter results are consistent with our experience in the first half of 2010, with improving NAS trends," said Karen Sheriff, president and chief executive officer.
"I am very pleased with our expanding FibreOP service and the strong bundle adoption we are experiencing as we work toward our goal of providing all communications services to our customers' homes and businesses," continued Sheriff. "Our rollout of this best-in-class technology as we face the challenges of an increasingly competitive marketplace, along with our cost management progress, improvements in NAS declines, and our continued focus on strong customer service, all give me confidence that we are pursuing the right strategy to ensure a solid, sustainable business for our customers, investors and employees."
Third quarter 2010 results
Highlights
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Bell Aliant announced on October 26, 2010 that it had reached an agreement with Bell whereby Bell has agreed to purchase Bell Aliant's IT services division xwave in its entirety. As a result, Bell Aliant has reclassified the operations of xwave to discontinued operations. Accordingly the financial results below reflect Bell Aliant's telecom performance, excepting distributable cash which includes the effects of discontinued operations.
Operating revenues were down $27 million (3.7 per cent) in the third quarter of 2010 compared to the third quarter of 2009. The decline was driven by declines in local and long distance revenues associated with lower network access services (NAS) and lower data revenues. These decreases were partially offset by increases in Internet revenues.
The cable telephony competitive footprint increased marginally during the third quarter to reach 69 per cent of homes in Bell Aliant's territory. This slowdown in competitive expansion and improved bundling and retention programs resulted in lower NAS declines in both the residential and business markets than occurred in the same quarter in 2009.
Operating expense reductions continued, with a $16 million (4.6 per cent) decline from the third quarter of 2009 driven by labour-related cost reductions and other cost containment initiatives. These expense reductions mitigated the effects on EBITDA of lower revenues, with EBITDA decreasing by $10 million (2.7 per cent) in the third quarter of 2010 compared to the same period in 2009. Because of the larger percentage improvement in operating expenses relative to the decline in operating revenues, EBITDA margin improved to 51.9 per cent in the third quarter of 2010, up from 51.4 percent in the same quarter of 2009.
Expansion of Bell Aliant's fibre-to-the-home coverage continued in the third quarter of 2010, with FibreOP service now available in the cities of Fredericton, Saint John, and Moncton, New Brunswick and Sydney, Nova Scotia. Bell Aliant now passes over 106,000 homes with this advanced technology and is on track to pass over 140,000 homes and business by the end of 2010.
Bell Aliant Holdings LP's third quarter financial highlights are summarized as follows:
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(In millions of Q3 Q3 Percentage YTD YTD Percentage
dollars) 2010 2009 Change 2010 2009 Change
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Operating Revenue $698 $725 (3.7%) $2,076 $2,151 (3.5%)
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EBITDA 363 373 (2.7%) 1,071 1,093 (2.0%)
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Capital Expenditures 113 114 (0.8%) 332 342 (3.0%)
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Distributable Cash 194 208 (6.8%) 570 591 (3.5%)
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Results
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Local service revenue declined $17 million (4.8 per cent) in the third quarter of 2010 compared to the same quarter in 2009 as a result of NAS declines and a $5 million decrease in competitor contribution subsidies. Residential and business NAS were 6.0 per cent and 2.3 per cent lower, respectively, than a year earlier primarily as a result of increased competitive activity. Total NAS declines in the quarter improved by approximately 7,000 over the third quarter of 2009 with improvements in both residential and business NAS declines.
Long distance revenue declined $9 million (7.9 per cent), in the third quarter of 2010 compared to the same quarter in 2009 as a result of NAS declines and migration to bundled and flat rate long distance plans.
Internet revenue grew by $7 million (6.0 per cent) in the third quarter of 2010 compared to the same period in 2009, with the number of high-speed Internet customers 5.2 per cent higher than a year ago and growth in Bell Aliant TV subscribers. Residential High Speed average revenue per customer (ARPC) reached its highest point to date, increasing 5.1 per cent over the same quarter in 2009 as a result of pricing action and customer migration to higher value services.
Other data revenues declined $6 million (6.0 per cent) compared to the same quarter in 2009 as a result of competitive pressure and migration to alternate technologies.
Other revenues declined $2 million (4.6 per cent) compared to the same quarter in 2009 mainly as a result of lower outsourcing and rental revenues.
Capital expenditures of $113 million in the third quarter of 2010 were on par with the third quarter of 2009. Distributable cash decreased $14 million (6.8 per cent) in the third quarter of 2010 from the same period in 2009, largely driven by lower EBITDA and lower cash from discontinued operations.
Update to 2010 Guidance
As a result of the reclassification of the operations of xwave to discontinued operations, Bell Aliant's 2010 reported revenues and capital intensity are affected. In July, Bell Aliant also announced a planned pole purchase in the Province of Newfoundland that, should it occur in 2010, will affect reported capital expenditures, thereby affecting its capital intensity ratio and distributable cash.
Bell Aliant's Guidance for 2010 is as follows:
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Before xwave Updated for xwave
reclassification reclassification
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2010 no pole with pole no pole with pole
Guidance purchase purchase purchase purchase
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Operating $3,050 $3,050 $2,750 $2,750
Revenues million - million - million - million -
$3,150 $3,150 $2,800 $2,800
million million million million
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Capital
Intensity 14% - 15% 16% - 17% 15.5% - 16.0% 17.5% - 18.0%
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Distri- $750 million - $690 million - $750 million - $690 million -
butable $790 million $730 million $790 million $730 million
Cash
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International Financial Reporting Standards (IFRS)
The Canadian Accounting Standards Board has set January 1, 2011 as the date that IFRS will replace Canadian generally accepted accounting principles (GAAP) for publicly accountable enterprises, including Canadian reporting issuers. Bell Aliant will prepare its financial statements in accordance with IFRS commencing January 1, 2011. Financial reporting under IFRS differs from Canadian GAAP in a number of respects, some of which are significant. IFRS on the date of adoption is also expected to differ from current IFRS due to new standards that are expected to be issued before the changeover date.
Preliminary draft reconciliations between Canadian GAAP and IFRS for our opening balance sheet at January 1, 2010 and consolidated statement of operations for the nine month period ended September 30, 2010 are provided in our Third Quarter MD&A dated November 3, 2010. The adoption of IFRS led to an overall reduction of $545 million in our asset base, mainly related to capital asset and defined benefit plans adjustments. In addition, the adoption of IFRS has had only minimal impacts on our consolidated statement of operations as net earnings before minority interest for the nine month period ended September 30, 2010 improved by $9.1 million.
Supplementary financial information
More information on the Fund's and Bell Aliant Holdings LP's third quarter 2010 results can be found in Bell Aliant's third quarter 2010 supplementary information package and the Fund's and Bell Aliant Holdings LP's third quarter 2010 financial statements and 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 Wednesday, November 3, 2010 at 3:00 p.m. (Eastern). The dial-in numbers are (866) 226-1792 or (416) 340-2216 for Toronto area participants. Media are invited to attend in a listen-only mode. The title of the call is "Bell Aliant Third Quarter 2010 Financial Results." A replay of the session can be heard until November 14, 2010. To access the replay, dial (800) 408-3053 or (416) 695-5800 and enter the passcode 4105257#.
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) 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 MD&A for the third quarter of 2010. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated.
(3) 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 MD&A for the third quarter of 2010.
(4) Bell Aliant defines EBITDA margin as EBITDA as a percentage of operating revenue.
(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 MD&A for the third quarter of 2010.
Forward-looking Information
This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, including, but not limited to statements concerning the capital expenditures in late 2010 or early 2011 in connection with the purchase of an interest in utility poles in Newfoundland, the sale of xwave, and Bell Aliant's updated financial guidance for 2010, as more particularly described in the "Third Quarter 2010 Results - Highlights" and "Update to 2010 Guidance" sections of this news release. Unless otherwise indicated, such forward-looking statements describe management's expectations at November 3, 2010. 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. Therefore, actual results may differ materially from what is predicted.
Assumptions made and risk factors considered in preparing our forward-looking statements are discussed in detail in Bell Aliant's 2009 earnings results and 2010 guidance news release dated February 3, 2010, as updated in Bell Aliant's second quarter 2010 news release dated July 28, 2010, as well as in the Fund's and Bell Aliant Holdings LP's 2009 annual MD&As and annual information forms, and first, second and third quarter 2010 MD&As. These documents are available at www.bellaliant.ca or at www.sedar.com.
All forward-looking statements in this news release are qualified by these cautionary statements, and there can be no assurance that the results or events predicted will be realized. 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.
About Bell Aliant
Bell Aliant (TSX: BA.UN) 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(TM) 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. Through its xwave offices, Bell Aliant also provides IT professional services and advanced technology solutions. Bell Aliant's employees deliver the highest quality of customer service, choice and convenience.
%SEDAR: 00023938EF
For further information: Media Relations: Alyson Queen, (866) 696-6700, alyson.queen@bellaliant.ca; Investor Relations: Zeda Redden, (877) 487-5726, zeda.redden@bellaliant.ca
SOURCE Bell Aliant