BCE’s free cash flow falls as it boosts spending on AI data centres, U.S. fibre networks

Bell Canada parent BCE Inc. BCE-T posted meagre top-line revenue growth, a decline in mobile subscriber growth and a nearly 50-per-cent increase in capital expenditures during its third quarter, as it funneled cash toward the construction of its artificial intelligence data centres and its U.S.-based fibre networks.

Bell’s capital expenditures were up by 49.3 per cent, driven by costs related to its Saskatchewan data centre and its Ziply Fiber business, which serves four northwestern U.S. states.

These expenditures were partly offset by lower spending on its fibre expansion in Canada, the company said in a release Thursday. As a result of the increased spending, the company’s free cash flow declined by nearly 15 per cent in the quarter compared with last year.

The company has been investing in these businesses as Canadian telecom companies have felt the effects of flat immigration and more competition on their bottom lines. In September, the company shared plans to quadruple the AI data-centre business, through a series of investments that could top $5-billion.

BCE’s operating revenue was up 2.2 per cent during the quarter, while service revenue was up 1.6 per cent. This was in part because of the inclusion of three months’ results from Ziply, as opposed to just two months last year.

While its overall telecom-business revenues were up, its Canadian segment saw a small year-over-year drop. This was partly the result of ongoing declines in legacy voice, data and television services, and lower average revenue per mobile phone customer, the company said.

Bell added about 53,700 net prepaid and postpaid mobile phone customers in the quarter, down from about 69,100 last year and meeting analyst expectations. However, more of these new customers were on its postpaid plans, which tend to be more expensive than prepaid.

The company’s digital media and AI strategies paid off during the quarter.

Revenue from media was up nearly 10 per cent, driven by strong advertising results helped by the FIFA World Cup earlier this year, and higher subscriber and program sales, the company said. Subscribers to its streaming platform, Crave, were up 20 per cent.

Meanwhile, the company’s business-to-business segment, Bell Business Markets, saw revenue jump 9 per cent, in part owing to the growth of its technology consulting and cybersecurity offerings.

The company’s net earnings were down 86 per cent, reflecting last year’s sale of its stake in Maple Leaf Sports and Entertainment. Its adjusted net earnings were down 5.2 per cent.

The company’s quarterly dividend remained unchanged, at about 43 cents per common share.

The company had $35.3-billion in long-term debt at the end of the quarter. In late October, Bell said it will sell a minority stake in its cellphone towers to the Caisse de dépôt et placement du Québec for $2.45-billion, the proceeds of which it will use to pay down debt and expand its data-centre business.