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BCE optimistic government will change wireless rules

The chief executive of BCE Inc. says he’s optimistic the Canadian government will rethink a set of rules that he believes give foreign entrants like Verizon Communications Inc. an unfair advantage in the wireless communications sector.

“The final decision won’t rest with BCE, it’ll rest with our government, and I’m hopeful they’ll see the unfairness to our shareholders, customers and Canadians in this policy,” George Cope told analysts Thursday.

“We will use every avenue we can in a professional way to pursue this.”

Earlier Thursday, BCE reported slightly higher operating revenue but a decline in profits compared with the second quarter of last year, when the Montreal-based media and telecom company’s bottom line was helped by a favourable tax item.

BCE has already joined with Rogers and Telus in objecting to the current rules that prevent Canada’s biggest wireless carriers from buying up smaller rivals that emerged a few years ago, notably Wind Mobile and Mobilicity.

The domestic carriers object to a policy that allows foreign entrants to buy small Canadian wireless carriers with less than 10 per cent of the market share — part of the the Harper government’s effort to increase competition in the sector.

So far, Industry Minister James Moore has stuck by the government’s policy, despite the lobbying.

The complaints come amid reports that U.S.-based Verizon Communications is exploring a move into the Canadian market by purchasing Mobilicity or Wind Mobile, two of the new wireless carriers that launched their services a few years ago.

The Canadian carriers are also disputing rules that would allow Verizon to use their wireless networks and to bid for wireless spectrum than they’ll won’t be allowed to buy at a January auction.

Spectrum refers to the radio waves used by mobile communications devices.

BCE has said the policy may have been intended to help small startup companies but not foreign entrants like deep-pocketed Verizon — a U.S.-based carrier that has more subscribers than any of the Canadian companies.

The Montreal-based owner of Bell, CTV Inc. and other major Canadian media and telecom operations, says it had $571 million of net income attributable to common shareholders, or 74 cents per common share in the second quarter.

That was down from $732 million or 94 cents per common share a year earlier.

BCE’s adjusted earnings also fell, dropping to $594 million or 77 cents per common share — down from $747 million or 97 cents per share in the second quarter of 2012.

Last year’s second-quarter profit was boosted by a tax issue in the company’s favour.

The second-quarter report issued on Thursday included fresh guidance about how BCE expects to perform financially, including impacts from its acquisition of Astral Media, which the company said will be accretive to earnings starting in 2014.

The company now expects Bell’s revenue growth over 2012 will be between two and four per cent, up from between zero and two per cent.

However, BCE expects no change to its adjusted earnings per share, which is anticipated to be between $2.97 and $3.03 per share this year.

The company said that despite a challenging advertising environment, its media business was helped by a condensed NHL playoff schedule, which extended later into the spring because of an earlier strike, and greater playoff viewership.

BCE boosted its wireless subscribers by 3.5 per cent from a year ago to 7.9 million, while TV subscribers grew by 5.3 per cent to 2.4 million. High-speed internet subscribers grew by 1.5 per cent to 3.1 million.

“As we migrate our revenue mix in the quarter, now eight per cent of our revenue is coming from consumer wireline voice,” said Cope.

“Of course that decline, we anticipate, will continue, but overall, our mix of revenue growth continues to improve.”

Operating revenue at BCE’s main subsidiary, Bell, rose 1.9 per cent to $4.42 billion for the three months ended June 30 from $4.34 billion a year earlier.

Last month, BCE closed its $3.4-billion purchase of Astral Media.

The broadcast regulator signed off a revised version of the deal on the condition Bell sell a number of Astral’s English and French specialty TV channels, including the Cartoon Network, Disney DX and Teletoon, along with some of its English-language radio stations.

BCE is Canada’s largest communications company, and a longtime staple in investment portfolios that are designed to benefit from steady-growth companies with a solidly dependable dividend.

The telecom giant has been expanding its media business by leaps and bounds, including repurchasing broadcaster CTV Inc. and buying a large stake in Maple Leaf Sports and Entertainment — owner of Toronto’s major league hockey, basketball and soccer teams, among other things.