Bell Aliant reports third quarter 2012 results

• Year-over-year financial trends continue to improve from prior year
• IPTV customer base exceeds 100,000
• Total data revenues grow $21 million, up 9.6 per cent
• IPTV revenues up $10 million
• Internet revenues up $10 million
• Net NAS declines improve 14 per cent over prior year

This news release contains forward-looking statements. For a description of the related risk factors and assumptions, please see the section entitled "Forward-looking information" later in this release.

HALIFAX, Oct. 30, 2012 /CNW/ - Bell Aliant Inc. (TSX: BA) today reported financial results for the third quarter of 2012 for Bell Aliant Inc. (Bell Aliant) and Bell Aliant Regional Communications Inc. (Bell Aliant GP).

"We had another productive quarter in Q3 as we further expanded our fibre-to-the-home (FTTH) coverage area and had our best quarter yet for new FibreOP^TM customer additions," said Karen Sheriff, president and chief executive officer, Bell Aliant. "I am very pleased that more and more customers are coming on board and experiencing our great FibreOP TV and Internet services.

"We now have over 100,000 IPTV customers and IPTV was our largest area of revenue growth in the quarter. We also had strong Internet revenue growth and our NAS declines again were better than the same quarter last year, following the trends we have experienced in prior quarters of 2012.

"We have been adding more FibreOP customers with each passing quarter, and with more than half of the homes in Atlantic Canada now having access to these services, we are beginning to have sufficient FibreOP scale to make a difference in our overall results. This kind of steady progress is what we envisioned when we launched our FTTH rollout in 2009. While we expect 650,000 premises to have access to our FibreOP services by the end of this year, we will still have more to do. I expect to announce our plan for further expansion in early 2013."

Third quarter 2012 highlights¹

Bell Aliant Inc. reported net earnings of $92 million for the third quarter of 2012, up $16 million (21.6 per cent) compared to the same quarter of 2011. Earnings per share and adjusted earnings per share in the quarter were $0.40 and $0.47 respectively, compared to $0.33 and $0.41 in the same quarter of 2011. The earnings increase was primarily attributable to lower restructuring charges in the third quarter of 2012 compared to the same quarter of 2011.

Third quarter financial highlights of Bell Aliant GP are summarized as follows:

* Year to date 2011 free cash flow excludes a $200 million lump sum contribution to defined benefit plans made in Q1 2011.

Operating revenues in the third quarter of 2012 were $697 million, down $3 million (0.4 per cent) from the same quarter in 2011. Growth in data revenues, including Internet and TV, wireless and other revenues largely offset declines in local and long distance revenues. Operating expenses in the third quarter of 2012 were up $2 million from the same quarter in 2011, reflecting growth in TV content costs from higher FibreOP TV customers and other costs of revenues, which were largely offset by productivity savings. As a result, EBITDA declined $5 million (1.5 per cent) in the third quarter of 2012 compared to the same quarter in 2011.

Capital expenditures in the third quarter of 2012 were $144 million, down $18 million (11.0 per cent) from the same quarter a year earlier, mainly due to lower FTTH footprint expansion in the third quarter of 2012 compared to the same quarter in 2011. In the third quarter of 2012, Bell Aliant passed an additional 47,000 homes and businesses with FTTH compared to 104,000 incremental premises in the third quarter of 2011. Total FTTH coverage reached 621,000 premises at the end of September 2012 and Bell Aliant continues to expect to reach 650,000 premises with FTTH by the end of the year.

Free cash flow was $113 million in the third quarter of 2012, up $3 million from the same quarter a year earlier. The increase was primarily a result of lower capital expenditures offset by lower EBITDA and lower cash from changes in working capital in the third quarter of 2012 compared to the third quarter of 2011.

Revenue details
Total data revenue including Internet and TV increased $21 million (9.6 per cent) in the third quarter of 2012 compared to the same period in 2011.

Internet revenue increased $10 million (7.9 per cent) with residential high-speed average revenue per customer (ARPC) in the third quarter of 2012 up 7.1 per cent from the same quarter a year earlier. Selected pricing action, lower promotional discount effects and customer movement to premium services, including FibreOP, drove the increase. FibreOP Internet customers grew by 16,500, bringing total FibreOP Internet customers to 92,000 at the end of September 2012. FibreOP Internet additions include existing Bell Aliant customers migrating from DSL and fibre-to-the-node (FTTN) networks to the upgraded service. These migrations do not contribute to overall high-speed customer growth, but increasingly contribute to improved customer retention and growth in overall customer ARPC. Overall net high-speed Internet customer additions were 7,500 in the third quarter of 2012, bringing total high-speed Internet customers to 913,600 at the end of September 2012, up 2.4 per cent from a year earlier.

IPTV revenue grew $10 million in the third quarter of 2012 compared to the third quarter of 2011 with total IPTV customers of 107,400 at the end of September 2012. FibreOP TV customers grew by 14,200 in the quarter to reach 79,500, a portion of which were migrations from Bell Aliant's FTTN TV service. Overall net IPTV customer additions were 12,300 in the third quarter of 2012, compared to 9,000 a year earlier.

Other data revenue grew $2 million (1.7 per cent) in the third quarter of 2012 from the same quarter a year earlier, continuing the improved trends of recent quarters as a result of data demand growth.

Local service and long distance revenues declined $16 million (5.0 per cent) and $12 million (12.0 per cent), respectively, in the third quarter of 2012 compared to the same quarter in 2011, driven by NAS declines of 5.1 per cent. Net NAS declines of 32,400 in the third quarter of 2012 improved 14 per cent from the same quarter in 2011 with improved residential customer activations, winbacks and retention in FibreOP markets.

Wireless revenues were up $3 million (9.7 per cent) in the third quarter of 2012 compared to the same quarter in 2011, driven by 6.8 per cent customer growth and 2.5 per cent wireless ARPC growth compared to a year ago. Other revenues also increased $1 million (2.3 per cent) in the third quarter compared to a year ago, driven largely by higher product sales.

Declared dividends
Bell Aliant's Board of Directors today declared a quarterly dividend of $0.4750 per common share, payable on December 31, 2012 to shareholders of record at the close of business on December 14, 2012.

Bell Aliant Preferred Equity Inc. today declared a dividend on its Series A Preferred Shares of $0.303125 per share and a dividend on its Series C Preferred Shares of $0.284375 per share to be paid on December 31, 2012 to shareholders of record at the close of business on December 14, 2012.

Unless otherwise stated, dividends paid by Bell Aliant and Bell Aliant Preferred Equity Inc. to Canadian residents are "eligible dividends" as defined by the Canadian Income Tax Act and corresponding provincial legislation.

Additional information
More information on Bell Aliant's and Bell Aliant GP's third quarter 2012 results can be found in Bell Aliant's third quarter 2012 supplementary financial information package and MD&A and Bell Aliant GP's third quarter 2012 MD&A available at www.bellaliant.ca/investors .

Analyst conference call
A conference call with the financial community is scheduled for October 30, 2012 at noon (EDT). The dial-in numbers are 866-226-1792 and 416-340-2216 for Toronto area participants. Media are invited to attend in listen-only mode. A replay of the session can be heard until November 27, 2012. To access the replay, dial 800-408-3053 or 905-694-9451 and enter the passcode 3266319.

A live audio webcast of the conference call can be accessed at www.bellaliant.ca/investors . A replay of the conference call will be available on the website for one year.

¹See Notes section at the end of this release for definitions of the non-International Financial Reporting Standard (IFRS) financial measures including EBITDA, free cash flow and adjusted earnings per share.

Notes
The information contained in this news release is unaudited.

(1) Bell Aliant derives virtually all of its income from its ownership in Bell Aliant GP. Bell Aliant GP's results consolidate the results of Bell Aliant Regional Communications, Limited Partnership; Télébec, Limited Partnership; NorthernTel, Limited Partnership; and Bell Aliant Preferred Equity Inc.

(2) Percentage changes quoted in this release related to dollar values are based on amounts rounded to the nearest hundred-thousand, consistent with disclosure in Bell Aliant's supplementary financial information package and Bell Aliant Inc.'s and Bell Aliant GP's MD&As for the third quarter of 2012. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated. Customer metrics are rounded to the nearest hundred unless otherwise stated.

(3) Definitions of non-IFRS measures:

a. EBITDA: Bell Aliant defines EBITDA as operating revenue less operating expenses (operating income) before interest, income taxes, depreciation and amortization expense, severance and other charges.

b. Free cash flow: Bell Aliant defines free cash flow as cash generated from operating activities less capital expenditures. Free cash flow includes the operations of Bell Aliant and Bell Aliant GP on a combined basis.

c. Adjusted earnings per share: Bell Aliant defines adjusted earnings per share as fully diluted earnings per share adjusted for the per share effect of purchase price allocation amortization, net of income taxes.

For a reconciliation of these non-IFRS measures to the most closely comparable IFRS measures, please refer to Bell Aliant GP's MD&A for the third quarter of 2012 available at www.bellaliant.ca/investors and www.sedar.com .

Forward-looking information
This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, in particular statements concerning FTTH expansion plans. Unless otherwise indicated, such forward-looking statements describe management's expectations at October 30, 2012. These statements are based on management's beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond management's control. These statements are not guarantees of future performance and are subject to assumptions which may prove to be inaccurate and numerous risks and uncertainties which are difficult to predict.

Bell Aliant encourages investors to review the risk factors section below, and related disclosures, for a discussion of the various factors that could cause actual results to differ from what is currently expected.

Risk factors
There are many factors that could cause results or events to differ materially from current expectations. The most significant factors that Bell Aliant has identified that may affect Bell Aliant's results or events in 2012 include but are not limited to: increasing competition; management's ability to achieve strategies and plans, including expansion of its FTTH network and managing the cost structure; general economic conditions; pension valuation and investment risk; reliance on systems; changing technology; demand for products and services; the business relationship with BCE Inc. (BCE) and Bell Canada; changing regulations; dependence on key suppliers; maintenance of credit ratings; leverage and restrictive covenants; BCE's governance rights; reliance on key personnel and labour relations; legal contingencies and changes in laws; and tax-related risks. Some of these risk factors are largely beyond Bell Aliant's control. For additional information on material factors and assumptions used to develop forward-looking information, and risk factors that could cause actual results to differ materially from forward-looking information, see also the "Risks that could affect our business and results" section of Bell Aliant Inc.'s MD&A for the year ended December 31, 2011, and the "Assumptions made in the preparation of forward-looking information" and "Risks that could affect our business and results" sections of Bell Aliant GP's MD&A for the year ended December 31, 2011, as updated by the first, second and third quarter 2012 MD&As, as well as the "Risk Factors" sections of Bell Aliant Inc.'s and Bell Aliant GP's 2011 Annual Information Forms. These documents are available at www.bellaliant.ca and www.sedar.com .

Should any risk factor affect Bell Aliant in an unexpected manner, or should assumptions underlying the forward-looking statements prove incorrect, the actual results or events may differ materially from the results or events predicted. Unless otherwise indicated, forward-looking information does not take into account the effect that transactions or non-recurring or other special items, announced or occurring after this information is provided, may have on the business. All forward-looking information reflected in this news release and the documents referred to within it are qualified by these cautionary statements. There can be no assurance that the results or developments anticipated by Bell Aliant will be realized or, even if substantially realized, that they will have the expected consequences for Bell Aliant.

Except as may be required by Canadian securities laws, Bell Aliant disclaims any intention and assumes no obligation to update or revise any forward-looking information, even if new information becomes available, as a result of future events or for any other reason. Readers should not place undue reliance on any forward-looking information. Forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to fiscal 2012 or other future periods. Readers are cautioned that such information may not be appropriate for other purposes.

About Bell Aliant
Bell Aliant (TSX: BA) is one of North America's largest regional communications providers and the first company in Canada to cover an entire city with FTTH technology with its FibreOP services. Through its operating entities, it serves customers in six Canadian provinces with innovative information, communication and technology services including voice, data, Internet, video and value-added business solutions. Bell Aliant's employees deliver the highest quality customer service, choice and convenience.

SOURCE: BELL ALIANT INC.