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    BCE Sales Top Estimates on Wireless Subscriber Gains  
    Bloomberg News  

Chris Fournier

    August 06, 2008  

Aug. 6 (Bloomberg) -- BCE Inc., the Canadian phone company being taken private in the biggest leveraged buyout, posted second-quarter sales that topped analysts' estimates after winning more wireless subscribers with new phones.

Revenue was little changed at C$4.42 billion ($4.23 billion), beating the C$4.38 billion average estimate in a Bloomberg survey. Montreal-based BCE added 111,000 contract mobile-phone customers, almost triple the gain a year earlier.

The increase topped additions at Rogers Communications Inc., Canada's biggest wireless carrier. BCE's wireless revenue climbed 11 percent as customers bought phones that surf the Web, such as the ACE from Samsung Electronics Co. BCE got about 25 percent of sales from the mobile-phone unit last year, relying on growth there to make up for declines in its land-line operations.

``BCE has pulled a rabbit out of the hat,'' Iain Grant, managing director of Montreal-based research firm Seaboard Group said in an interview. The carrier is benefiting from a surge in demand for more advanced handsets, Grant said, adding that the increase may not be sustainable in the face of new competition.

Last year, BCE accepted a C$42.75-a-share offer from a group led by the Ontario Teachers' Pension Plan. There is now a 95 percent chance the deal will close by Dec. 11, Greg MacDonald, a National Bank Financial analyst in Toronto, said in a report this month. Canada's highest court approved the buyout in June, dispatching a legal challenge by bondholders.

Ownership Change

Chief Executive Officer George Cope, who took over last month, is trying to increase sales and curb spending in preparation for the ownership change, when BCE will begin paying down an estimated C$34 billion in financing costs. Cope said last week he intends to chop 2,500 management jobs.

Second-quarter net income dropped to C$392 million, or 45 cents a share, from a year earlier, when BCE had a gain from selling a directories business. Net income totaled C$700 million, or 83 cents, a year earlier.

BCE rose 52 cents to C$39.68 at 4:10 p.m. in Toronto Stock Exchange trading, the highest close since Dec. 10. The shares are still 7.2 percent below the buyout offer price.

Rogers, based in Toronto, added 92,000 contract subscribers in the second quarter. Wireless sales industrywide in Canada rose 14 percent last year to C$14.4 billion, faster than the total telecommunications market, which grew 5.3 percent, according to a report last month by the country's regulatory agency.

One-Time Expenses

Excluding items such as costs tied to the privatization, profit was 53 cents, BCE said today in a statement. That trailed the average estimate of 56 cents in a Bloomberg survey of analysts.

The company booked costs of C$31 million related to a court decision on broadcast-license fees, and C$14 million to write down the value of assets in its Internet business.

BCE lost 1,000 Web users after adding 25,000 a year ago. The Internet business is ``sluggish'' because of customer-service problems, more competition and lower demand from a saturated market, BCE said.

The company, which dates to 1880, has lost more than 1 million fixed-line customers since 2004. About 132,000 more left in the second quarter, fewer than the 151,000 estimate of Morgan Stanley analyst Simon Flannery in New York.

Cable companies such as Rogers and Videotron Ltee, which compete with BCE for phone, television and Internet customers, expanded their share of the residential-phone market last year by almost half to 17.9 percent, or 2.3 million lines, according to the report by regulators.

In the second quarter last year, BCE recorded a net gain from discontinued operations of C$135 million, which included C$110 million from the sale of the directories business at its Bell Aliant unit, according to today's statement.


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