Bell Aliant to continue on growth path underpinned by its fibre optic network

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The corporate logo of Bell Aliant is shown. THE CANADIAN PRESS/HO

Bell Aliant Inc. expects to stay on a path to growth in 2012 with higher revenues driven by its fibre optic network for digital TV and high-speed Internet services, chief executive Karen Sheriff said Tuesday.

"We expect the year-over-year performance in 2012 to be better than what we achieved in 2011," Sheriff told analysts on a conference call.

"So while I am not ready to say we are back to growth, we are progressively getting there," she said after the Halifax telecom company said it returned to profitability in its fourth quarter.

Bell Aliant (TSX:BA) expects revenues in 2012 to be between $2.7 billion and $2.78 billion, compared with $2.775 billion in 2011, Sheriff said.

In 2012, Bell Aliant expects adjusted earnings per share of between $1.60 and $1.80.

Sheriff said the Bell Aliant's fibre optic network is the key to long-term profitability.

"Fibre-to-the-home is producing very strong results which we believe will support our long-term profitability and help ensure the sustainability of strong cash flow."

Bell Aliant said it will connect about 650,000 homes and businesses to its fibre optic network by the end of 2012, up from its previous estimate of more than 600,000, Sheriff said.

The network, now in Atlantic Canada, will launch this year in Sudbury, Ont., she added.

"Assuming continued success, we are now confident that over one million premises, or an additional 350,000 beyond this year's build, will make economic sense over time."

Bell Aliant's fibre optic network is for high-sped Internet and digital TV services. The network allows faster downloads of data such as music or movies and the ability to share video and photos faster.

In its financial results, Bell Aliant posted a profit of $80 million and earnings of 35 cents per share, a turnaround from a more than $1-billion loss in the year-earlier quarter when it took a big writedown.

In the same quarter last year, the company had a loss of $1.4 billion when it took a $1.7-billion non-cash writedown against intangible assets.

Adjusted for one-time items, net earnings per share came in at 42 cents. Analysts had estimated adjusted earnings per share of 37 cents.

Bell Aliant said that excluding that writedown, operating income would have been relatively flat from the fourth quarter of 2010 to the same quarter of 2011.

The company converted from a trust to a corporate structure on Jan. 1, 2011, and as such cautioned the year-over-year results are not strictly comparable.

Earnings before income tax, depreciation and amortization actually fell six per cent to $324 million from $345 million in the year-earlier period.

Operating revenue fell two per cent to $701 million from $715 million in the same quarter of 2010, largely due to declines in local and access, long-distance and other revenues. Those declines were partially offset by growth in its data and wireless revenue.

UBS analyst Philip Huang said a bigger fibre optic network could require "sacrifices."

"We believe management's fibre strategy makes sense to sustain long-term competitiveness," Huang said in a research note.

"However, with increasing pension funding obligations, cash taxes in '13 and growing competition, we continue to believe a bigger FTTH (fibre-to-the-home) project would increase perceived risk of the dividend," Huang said.

The company provides telephone, Internet, television and other services to customers in Canada's six most eastern provinces and is partly owned by BCE Inc of Montreal (TSX:BCE).

Shares in Bell Aliant were up 10 cents at $28 Tuesday afternoon on the Toronto Stock Exchange.