BCE takes $8.2 billion writedown in second quarter
Toronto, - BCE Inc. managed a small profit for the second quarter despite $8.2 billion in writedowns at its Teleglobe and Bell Globemedia units and other special charges announced Wednesday by the telecommunications giant.
The Montreal-based company earned $11 million, or one cent a share, for the three months ended June 30, compared with a $6 million profit, or one cent a share, in the same 2001 period.
Total revenues rose to $4.94 billion from $4.77 billion.
Wednesday's writedowns clear the company's balance sheet and position BCE for growth in its key telecom-related businesses, chief executive Michael Sabia told analysts in a conference call after the results were released.
"We've tried to use the quarter to re-assess the values of all these businesses and make the appropriate adjustments," Sabia said.
BCE took $8.2 billion in goodwill writedowns to reflect the reduction in the book value of its investments, most acquired in past two years under the leadership former BCE chairman and CEO Jean Monty.
The bulk of the writedown was $7.5 billion related to Teleglobe -- an insolvent global long-distance phone and data carrier that BCE is divesting, 18 months after Monty oversaw its takeover.
BCE also took a $545-million writedown on its Bell Globemedia unit, which owns majority stakes in the CTV television network and Globe and Mail newspaper, and $119 million on BCE Emergis, its e-commerce subsidiary.
In a related move, BCE said Wednesday it has filed with regulators its plans to raise up to $5 billion in Canadian and U.S. financial markets to help finance the repurchase of a 20 per cent stake in Bell Canada that BCE sold to a U.S. phone company in 1999.
Sabia told analysts he regards the regulatory filing as "house keeping" linked to the $6.2-billion plan to buy back the 20 per cent of Bell owned by SBC Communications of San Antonio, Texas.
"There's really nothing imminent here," he said. "And no one should be reading any sense of urgency into the filing . . ."
BCE will proceed with financing the SBC transaction in "a very orderly way when we belief the timing is right," Sabia said.
He said BCE's repurchase of SBC's stake in Bell Canada, the decision to walk away from Teleglobe and the balance sheet adjustments complete a transitional phase, he said.
"With those done now, we really are completing a chapter and are very much turning our minds to taking the company forward," said Sabia, who was promoted to CEO after Monty abruptly resigned in April.
In breaking down second-quarter operations, BCE reported:
- Revenues at Bell Canada, by far BCE's largest operating unit, rose to $4.37 billion from $4.2 billion, with strong growth in wireless and data business; Bell had a $359 million profit, up from $330 million a year earlier;
- Bell Globemedia saw revenues rise to $326 million from $297 million, mainly from acquisitions and growth in ad revenues; Globemedia had an $11 million profit in the quarter, an improvement over the $40-million loss it had a year earlier.
- BCE Emergis revenues fell to $142 million from $159 million; its loss fell to $62 million from $75 million
- BCE Ventures, which includes investments in CGI Group and the Telesat satellite company, reported flat revenues of $261 million; however its profits more than doubled to $59 million from $24 million a year earlier.
Because of recent changes to Canadian rules on goodwill accounting, the second-quarter writeoffs won't lead to a huge net loss, but will come off the company's opening retained earnings statement.
However, other charges and gains BCE took in the quarter affected the company's bottom line. These include:
- A loss from discontinued operations of $295 million from BCE's investments in Teleglobe and BCI, an international cellphone company that will be wound down after selling its assets.
- $153 million in restructuring and other charges at Bell Canada, related to writeoffs of accounts receivables as part of the modernization of billing systems;
- $63 million in restructuring charges at BCE Emergis;
- Investment gains of $122 million from the sale by Bell Canada of an minority stakes in Telebec and Northern Telephone to the Bell Nordiq income trust.
While Sabia said BCE continues to "drive forward on its productivity agenda," he said no large-scale job reductions -- similar to a 6,000-job downsizing announced by rival Telus Corp. this month -- are being contemplated.
"That productivity agenda is really not primarily or principally focused on job reductions. It's focused on doing work better," Sabia said.
For instance, he said, the company is using the time of its call-centre representatives better, improving maintenance practices and engaging in "better, sharper" purchasing.
"It really touches all aspect of the business. And therefore we are not relying in any particularly substantial way on job reductions as a driver of productivity," Sabia said in a conference call with reporters.
However, he said, BCE's approach has been to periodically adjust its labour force to bring in new skills, while keeping its overall employee level stable.
If further adjustments are needed, they will be announced later but "as we speak today we feel very good about our productivity performance," Sabia said.
BCE shares (TSX: BCE) traded Wednesday at $24.15 on the Toronto Stock Exchange, up 15 cents from the previous close.
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