Bell needs to do more with ad tech, CEO says

BCE Inc. CEO George Cope said the company needs to do a better job of finding opportunities in emerging advertising technology, as the company seeks additional revenue growth for its media division. “We have to play in that space,” Cope said on a conference call with analysts following the company’s third-quarter earnings report Thursday, adding that though the company does “fairly well there,” it still needs to improve. “There’s better targeting opportunities for us. If you look at so many of our different products out there, how we can monetize more advertising dollars through placement with those that are generous enough to buy the advertising through our organization. It’s some work for us to do and lends itself to an opportunity.” The topic of targeted advertising technology has been picking up steam in recent months. Last month, the CRTC heard witnesses testify about the progress of a set-top-box measurement system, one of its intended effects being to help the industry gauge what Canadians are watching to better tailor ads. Bell is part of the working group that has been tasked with creating the system, which it was in favour of when the idea of the system was still fostering. Following Corus Entertainment Inc.’s fourth-quarter earnings release last month, RBC Capital Markets analyst Drew McReynolds said in a note that Corus is expected to increasingly lean on ad tech to help drive revenue. Corus has gone so far as to sell cookie data to better help advertisers target audiences. This wouldn’t be Bell’s first kick at the targeted-ad can. Back in 2013, it said it would begin tracking its subscribers’ Internet and TV-viewing habits, as well as their mobile calling patterns and app use, to help advertisers better target consumers. That led to complaints in front of the CRTC and the Privacy Commissioner’s Office, and a class-action lawsuit, while the company defended the program in front of a Senate committee. It also met with the Privacy Commissioner’s Office, who had threatened to take the company to court unless it changed the program from an “opt-out” model to an “opt-in” model. Bell shut down that program in April 2015 and promised to re-launch. Earlier this year, the CRTC reported a fifth consecutive year in which “conventional television services have reported revenue declines due to continued decreases in advertising dollars.” It found broadcasting distribution undertaking (BDU) revenues fell 2.1 per cent in 2016. Despite this, Corus’ president and CEO Doug Murphy said earlier this year that advertisers were moving money from digital back to traditional television, following a controversy surrounding ad placements next to offensive material on Alphabet Inc. websites. Revenues in Bell’s media division increased one per cent to $723 million in the third quarter, which encompassed the three months ended Sept. 30. Cope’s comments come as the company continues to push fibre-to-the-home (FTTH), its internet and TV products to more of its footprint. Cope said the company plans to accelerate broadband investments beyond Montreal and into suburban communities. “Our creative approach to the TV market, having a product that’s Alt TV and our IPTV product is clearly helping us from an internet perspective and a TV perspective, as it allows us to focus specifically in the condo marketplace where there may have been cordcutters,” Cope said. On Thursday, analysts reflected on the company’s strong wireline growth in the quarter. Barclays Capital analyst Phillip Huang pointed to the company’s expanding fibre-to-the-premises (FTTP) networks, especially in Toronto, in a note and asked Cope on the call whether that growth is now the “new normal.” “All the metrics we produced were consistent with it being extremely strong where we have fibre deployed,” Cope said in response. “But the Toronto footprint is starting to have an impact on our results.” Canaccord Genuity analyst Aravinda Galappatthige noted new subscribers to its IPTV Fibe TV were “way ahead” of expectations in the quarter. Meanwhile, Desjardins Capital Markets analyst Maher Yaghi also said that the overall TV segment was better than expected, helped by lower churn on satellite TV. Indeed, Bell gained a total of 1,738 new TV subscribers in the quarter, compared to a loss of 4,723 in the same period last year. IPTV subscriber growth edged up only slightly by 0.4 per cent to 36,399 in the quarter — beating Canaccord’s estimate of 23,000. The total IPTV subscriber base increased 16.6 per cent to 1.5 million by quarter-end. In combination, the satellite and IPTV subscriber base, however, grew only 2.9 per cent to 2.8 million compared to the same period last year. The company added 44,424 new internet subscribers in the quarter, a 12.8 per cent increase compared to this time last year. That helped bump up the total subscriber base 8.8 per cent to about 3.8 million. Total wireline revenues increased 2.9 per cent to $3.1 billion compared to the equivalent period in 2016. That growth was lifted partly by its MTS and Q9 acquisitions and growth in those subscriber bases. Galappatthige acknowledged the “noticeable improvement” in wireline in the quarter after “much steeper declines” in previous quarters. He said this may be partly due to a “relative step-down in promotional activity by Bell’s primary cable competitors, and the ongoing Fibre rollout.” Moving over to wireless, the company added 117,182 postpaid subscribers, an increase of 9.2 per cent. That was partly offset by a loss of 10,200 prepaid wireless subscribers, which brought total new wireless subscribers in the quarter to 106,982 — still 6.7 per cent more than the same period last year. The total postpaid wireless subscriber base increased 8.8 per cent to 8.2 million over the year. Coupled with prepaid, the total base in the segment increased 7.5 per cent to roughly 9 million compared to the same period last year. Average revenue per user (ARPU) increased three per cent to $69.78 compared to last year, due to a larger postpaid subscriber base, more smartphone uptake and greater demand for data. Churn was also down 0.10 points to 1.16 per cent. Cope was adamant on the call that consistent ARPU growth is due not to pricing, but to usage, including increases of 26 per cent year-over-year. “It just proves when you build out speeds like this...people use it for video, and as the explosion of video takes place, that’s what’s creating the financials that you’re seeing.” Revenues in that segment, which continues to be a force in the industry, jumped 10.4 per cent to roughly $2 billion in the quarter. That helped propel total company revenues and net earnings by five per cent to $5.6 billion and 2.1 per cent to $817 million, respectively, compared to the same period last year. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Bell needs to do more with ad tech, CEO says

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