This news release contains forward-looking statements. For a
description of the related risk factors and assumptions please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
- Net earnings of $811 million
with net earnings attributable to common shareholders of
$762 million, or $0.84 per common share; adjusted net earnings of
$792 million generated adjusted EPS
of $0.88
- Cash flows from operating activities of $2,154 million, up 14.0%, delivering 17.1%
increase in free cash flow to $1,094
million
- 7.0% higher service revenue drove 5.0% increase in adjusted
EBITDA on year-over-year growth across all Bell segments with
favourable financial contribution from Bell MTS
- 106,000 broadband subscriber net additions in postpaid
wireless, IPTV and Internet
- Excellent wireless results: 88,611 postpaid net additions,
up 26.9%; 12.8% increase in service revenue on 4.6% higher blended
ARPU; double-digit adjusted EBITDA growth of 10.2%
- Strong wireline service revenue growth of 5.3% delivering
2.6% higher adjusted EBITDA and industry-best margin of
41.8%
- 40% of long-term broadband fibre program to be completed by
end of 2017 with direct fibre connections now increasing to more
than 3.7 million locations in 7 provinces, including most homes and
businesses in the City of
Toronto
- Ongoing innovation in broadband television includes the
launch of Alt TV, Bell's new app-based live TV streaming
service
- Positive Bell Media contribution to BCE consolidated Q2
results with 2.2% revenue growth driving 0.4% higher adjusted
EBITDA
MONTRÉAL, Aug. 3, 2017 /CNW
Telbec/ - BCE Inc. (TSX: BCE) (NYSE: BCE), Canada's largest
communications company, today reported results for the second
quarter (Q2) of 2017.
FINANCIAL
HIGHLIGHTS
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
Q2
2017
|
Q2
2016
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,699
|
5,340
|
6.7%
|
Net
earnings
|
811
|
830
|
(2.3%)
|
Net earnings
attributable to common shareholders
|
762
|
778
|
(2.1%)
|
Adjusted net
earnings(1)
|
792
|
824
|
(3.9%)
|
Adjusted
EBITDA(2)
|
2,381
|
2,268
|
5.0%
|
EPS
|
0.84
|
0.89
|
(5.6%)
|
Adjusted
EPS(1)
|
0.88
|
0.94
|
(6.4%)
|
Cash flows from
operating activities
|
2,154
|
1,890
|
14.0%
|
Free cash
flow(3)
|
1,094
|
934
|
17.1%
|
"Bell's strategy to lead Canadian investment and innovation in
broadband networks and services continues to drive solid customer
additions and financial performance across every communications
business segment. We achieved exceptional growth in wireless as
more Canadians take advantage of the best smartphones on the
fastest national wireless network, our rapidly expanding all-fibre
network delivered further gains in Fibe Internet and TV additions,
and Bell Media continues to set the pace in Canadian multimedia as
home of the best in entertainment, news, sports and music
programming," said George Cope,
President and CEO of BCE Inc. and Bell
Canada. "We're keeping the momentum going with continued
leadership in mobile LTE network speed and capability, ongoing
television advancements including the groundbreaking Alt TV, and a
growing leadership position in the Internet of Things and business
data centre services."
"In Q2, the Bell team's focus on leading the way in breakthrough
network and service innovations delivered strong growth in service
revenue, positive adjusted EBITDA across our wireless, wireline and
media segments, and a 17% increase in the free cash flow that fuels
our unparalleled investments in broadband infrastructure, product
development and new media. We were proud to welcome MTS to the
national Bell team and very pleased with the strong contribution of
Manitoba's #1 communications
provider to our results as the new Bell MTS quickly integrated
operations in Q2 and began the rollout of our billion-dollar
broadband investment plan for the province."
Bell is focused on achieving a clear goal – to be recognized by
customers as Canada's leading communications company – through the
execution of 6 Strategic Imperatives: Invest in Broadband Networks
& Services, Accelerate Wireless, Leverage Wireline Momentum,
Expand Media Leadership, Improve Customer Service, and Achieve a
Competitive Cost Structure. This broadband leadership strategy has
delivered world-class fibre and wireless LTE networks; continued
strong performance across wireless, TV, Internet and media growth
services; 47 consecutive quarters of uninterrupted year-over-year
adjusted EBITDA growth; and 13 increases to the BCE common share
dividend since the end of 2008 – a total increase of 97%.
CORPORATE DEVELOPMENTS
For full details of BCE's
corporate developments in the quarter, please refer to the BCE Q2
2017 Shareholder Report at BCE.ca.
Bell Mobility first in North
America to offer Quad Band LTE-A network speeds
On
April 20, Bell Mobility announced its
network was the first in North
America capable of delivering Quad Band LTE Advanced (LTE-A)
service, offering customers the fastest mobile data speeds
available. Combined with enhanced 256 QAM (quadrature amplitude
modulation) technology, Bell Quad Band delivers mobile data speeds
of up to 750 Mbps, with expected average speeds of 25 to 220 Mbps
in select areas. Bell's Quad Band service has now expanded to 47
markets in 8 provinces, with Corner
Brook, Glace Bay,
Kingston Village, Bedford, St.
Catharines, Hamilton,
Oakville, Waterloo and Sudbury recently joining the 38 Quad Band
centres announced in July. The Samsung Galaxy S8 and S8+ are the
first devices able to take advantage of these network speeds with
more Quad Band capable smartphones coming soon.
Wireless network innovation in the quarter also included a
unique partnership between Bell Mobility and Bell Media's Astral
Out of Home (AOOH) to further enhance LTE network capacity in
high-traffic Greater Toronto Area
locations with the addition of mini wireless sites, known as
microcells, on Astral advertising signage in 10 GTA locations. In
its deployment of Bell Quad Band network capability at Toronto's BMO Field, home of the Toronto
Argonauts and Toronto FC, Bell Mobility also became the first
Canadian wireless provider to employ aerial drones to optimize
network speed and capacity in large venues.
Virgin Mobile Canada ranked
#1 in customer care
Virgin Mobile
Canada was ranked highest in overall customer care
satisfaction in the J.D. Power 2017 Canadian Wireless Customer Care
Study, announced in May. More than 5,500 Canadian wireless
customers responded to the online survey, with Virgin coming out on
top in the comparison of 9 Canadian wireless brands. Virgin scored
801 points on the 1,000-point J.D. Power scale, with standout
performance in the store, call centre and online service
categories.
Alt TV from Bell, an all-new way to watch live TV
On
May 15, Bell launched Alt TV, a new
way to watch live and on-demand television that does not require a
traditional TV set-top box. Like Bell's Fibe TV service, Alt TV
operates as a licensed broadcast distribution service on the
privately managed Bell Fibe broadband network for in-home viewing,
and on mobile or Wi-Fi networks outside the home. With a select
Fibe Internet package and the powerful Fibe TV app, Alt TV
customers in Ontario and Québec
can access up to 500 live and on-demand channels on laptops,
smartphones, tablets and Apple TV 4th Generation. In another Bell
television advancement, Fibe TV customers in Ontario and Québec can now watch their
Personal Video Recorder (PVR) recordings on smartphones, tablets
and laptops with the Fibe TV app.
In June, the Fiber Broadband Association named Bell the 2017
winner of its Star Award alongside Verizon and Google Fiber for
"going above and beyond" in taking fibre connections directly to
Canadian homes and businesses. Already the largest in Canada, Bell's fibre to the home (FTTH)
network is expected to reach more than 3.7 million residential and
business locations by the end of 2017.
Internet of Things leadership
Bell continues to make
significant strides in the burgeoning Internet of Things (IoT)
sector. In June, Bell and Hyundai AutoEver Telematics America
(HATA), a subsidiary of Hyundai Motor Group, announced a range of
connected telematics services for select 2018 Hyundai and Kia
vehicles including security, safety, diagnostics and infotainment
options.
Bell also announced in June plans to deploy LTE-M network
capability enabling IoT devices on wide-area networks. LTE-M
improves the operating efficiency of IoT devices with very low
power consumption and offers enhanced coverage in underground and
other hard to reach locations. Bell successfully demonstrated its
first LTE-M application with Canadian development partner BeWhere
Inc., an asset tracking and monitoring application that provides
paramedics and other EMS personnel with real-time location of
emergency equipment. LTE-M will support a broad range of
large-scale IoT solutions, including smart city services, smart
metering, asset tracking, supply chain management, security and
alarm monitoring, transportation and logistics, and personal
wearables for healthcare, accessibility and other applications.
In May, Bell MTS contributed $500,000 to the University
of Manitoba to launch the Bell MTS Innovations in
Agriculture program, providing students with opportunities to
develop new IoT technologies for application in agriculture and
food science.
CTV is Canada's most-watched network for 16th year in a
row
CTV ended the 2016/2017 television season as the
most-watched Canadian TV network in primetime for the 16th year in
a row, according to Numeris. In June at the CTV Upfront event, Bell
Media presented the network's 2017/2018 schedule featuring 17 new
primetime series and 11 returning top 20 series. Other highlights
include a major expansion of local news programming with weekday
newscasts at 5 pm across CTV local
stations nationwide; expanded exclusive National Football League
television rights, including the addition of Thursday night games,
together with associated digital rights for all Bell Media NFL
broadcasts, and television's biggest slate of live event
programming, including Super Bowl LII, the 2018 FIFA World Cup, the
90th Academy Awards, the 75th Golden Globe Awards, the 69th
Primetime Emmy Awards, the 2017 American Music Awards, the 2018
Billboard Music Awards and the 2018 iHeartRadio Much Music Video
Awards.
Bell Media also announced a strategic partnership in June with
Wow Unlimited Media to produce original children and youth
programming for use across Bell Media platforms including CraveTV
and Bell Media's new SnackableTV, a free mobile app featuring short
clips from pay and specialty channels and popular Bell Media
programs.
Bell Let's Talk expands in Manitoba
Bell Let's Talk and Unifor
announced in May a donation totalling $200,000 to Ma Mawi Wi Chi Itata Centre and the
Canadian Mental Health Association to launch Strengthening Wellness
Education to Love Life (SWELL).
Delivering culturally relevant mental health programs to Indigenous
youth and their families throughout Manitoba, SWELL will also engage youth in an
annual Indigenous Youth Summit to increase their voice in mental
health services.
BCE RESULTS
"Continued focus on our strategic
imperatives in Q2, together with the contribution of Bell MTS,
delivered strong financial performance this quarter, supporting
significant ongoing capital investment in broadband fibre and
advanced wireless network infrastructure to drive greater future
subscriber growth," said Glen
LeBlanc, Chief Financial Officer for BCE and Bell.
"Consistent and disciplined execution across all Bell operating
segments has delivered strong wireless profitability, positive
wireline adjusted EBITDA growth and a solid media financial profile
through the first half of the year, keeping us right on track to
meet our 2017 guidance targets."
BCE operating revenue was up 6.7% in Q2 to $5,699 million. This was driven mainly by 7.0%
growth in service revenue, reflecting increases at both Bell
Wireless and Bell Wireline, which included contributions from our
acquisition of Manitoba Telecom Services Inc. (MTS) completed on
March 17, as well as higher
year-over-year revenue at Bell Media. Product revenue grew 3.4% to
$364 million, the result of increased
sales of premium mobile devices and a greater number of wireless
customer transactions.
Net earnings decreased 2.3% to $811
million in Q2 while net earnings attributable to common
shareholders totalled $762 million,
or $0.84 per share, down 2.1% and
5.6% respectively, due to increased net depreciation and
amortization expense, higher interest expense and lower other
income. The increase in BCE's average number of common shares
outstanding, due to the shares issued for the equity component of
the MTS acquisition, further contributed to earnings per share
dilution this quarter. Excluding severance, acquisition and other
costs, net losses or gains on investments, impairment charges and
early debt redemption costs, adjusted net earnings decreased 3.9%
in Q2 to $792 million, or
$0.88 per common share.
BCE's adjusted EBITDA grew 5.0% to $2,381
million in Q2, driven by increases of 10.2% at Bell Wireless
and 2.6% at Bell Wireline, which reflected Bell MTS's financial
contribution in the quarter. Bell Media adjusted EBITDA remained
essentially stable, year over year, increasing 0.4% to $224 million.
BCE's consolidated adjusted EBITDA margin(2)
decreased to 41.8% in Q2 from 42.5% last year as the flow-through
of strong wireless service revenue growth was more than offset by
higher wireless postpaid subscriber acquisition and retention
spending, ongoing aggressive competitive service bundle promotions
in residential wireline, increased media content costs, and the
margin impact from the continuing decline in legacy voice services.
Consolidated adjusted EBITDA and margin performance in Q2 also
reflected the unfavourable year-over-year impact of CRTC decisions
related to wholesale Internet tariffs and customer cancellation
refunds, which, in aggregate, totalled approximately $25 million in the quarter.
BCE's total consolidated capital expenditures increased to
$1,042 million, up 9.7% from Q2 last
year, representing a higher capital intensity(4) ratio
(capital expenditures as a percentage of total revenue) of 18.3%
compared to 17.8% in Q2 2016. The increase was due mainly to
continued investment in deploying broadband fibre directly to more
homes and businesses, including the build-out of Gigabit Fibe
infrastructure in Toronto and
other urban locations; expansion of Bell's industry-leading LTE-A
network; increased wireless network speeds through carrier
aggregation; deployment of small-cell technology to optimize mobile
coverage, signal quality and data capacity; and enhanced wireless
and Internet network capacity to support subscriber growth and
rapid growth in video and other data usage. Higher capital
expenditures in the quarter also reflect investment in Manitoba to improve network coverage, capacity
and speeds, and the integration of MTS accounting and billing
systems with Bell's.
BCE cash flows from operating activities were $2,154 million, up 14.0% from $1,890 million in Q2 2016, the result of higher
adjusted EBITDA and a positive change in working capital. BCE free
cash flow generated this quarter was $1,094
million, 17.1% higher than Q2 of last year, driven by
increased cash flows from operating activities excluding
acquisition and other costs paid, partly offset by higher capital
expenditures.
In Q2, BCE reported 88,611 net new wireless postpaid customers,
a net loss of 21,695 wireless prepaid subscribers; 16,427 net new
Fibe TV customers, and a net loss of 29,764 satellite TV customers;
and 1,407 net new high-speed Internet customers. NAS line net
losses totalled 94,959. At the end of Q2, total BCE customer
connections across all services totalled 21,923,299, up 4.8% from
the year before. The total includes 8,901,291 wireless customers,
up 7.5% over last year (including 8,126,264 postpaid customers, an
increase of 8.8%); total high-speed Internet subscribers of
3,718,677, up 8.8%; total TV subscribers of 2,824,016, up 2.7%
(including 1,481,434 Fibe TV customers, an increase of 17.0%); and
total NAS lines of 6,479,315, an increase of 0.04%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Bell Wireless delivered another
excellent quarter of financial performance, highlighted by revenue
growth of 12.9% to $1,959 million, up
from $1,735 million in Q2 2016.
Service revenue increased 12.8% to $1,828
million, the result of strong postpaid subscriber base
growth, higher blended average revenue per user
(ARPU)(4) and a full quarter of contribution from Bell
MTS. Product revenue was up 13.9% to $131
million, as a result of higher sales of premium mobile
devices and more customer transactions.
Wireless adjusted EBITDA in Q2 grew 10.2% to $851 million, on strong double-digit service
revenue growth from an increased mix of higher-value postpaid
subscribers in our overall customer base and price discipline.
Service revenue margin decreased to 46.6% from 47.7% in Q2 2016,
due to a $75 million year-over-year
increase in total combined retention spending and subscriber
acquisition costs which, together with the incremental expense
contribution of Bell MTS, drove operating cost growth of 15.1% in
the quarter.
- Postpaid net additions grew 26.9% to 88,611 in Q2. This was
driven by 7.1% higher gross additions of 339,392, reflecting
increased overall market activity, Bell's mobile network leadership
and strong execution of targeted sales promotions across all retail
channels, as well as by lower customer churn(4).
- Postpaid customer churn decreased 0.07 percentage points in Q2
to 1.08%, reflecting our focus on continued investments in network
speed and quality, customer retention and service improvement.
- Bell Wireless postpaid customers totalled 8,126,264 at
June 30, 2017, an 8.8% increase over
Q2 last year. Total wireless customers grew 7.5% to 8,901,291,
which included a reduction of 104,833 postpaid customers in this
quarter to reflect the divestiture of subscribers to Telus as part
of BCE's MTS acquisition.
- Blended ARPU increased 4.6% to $67.28, driven by an increased postpaid
subscriber mix, LTE data usage growth, a larger proportion of
subscribers on higher-rate plans with larger data thresholds in the
overall revenue mix, and the flow-through of pricing changes from
2016.
- Bell's mobile LTE network provided coverage to almost 98% of
Canadians at the end of Q2, including 81% of the population covered
by LTE-A. The percentage of postpaid subscribers on LTE reached 85%
in Q2, up from 76% in Q2 2016.
Bell Wireline
Wireline operating revenue growth
accelerated this quarter, increasing 4.8% over Q2 2016 to
$3,121 million on a 5.3% increase in
service revenue to $2,883 million
driven by broadband Internet and IPTV subscriber base growth
together with higher household ARPU, improved business service
revenue performance supported by the acquisition of data centre
operator Q9 Networks (Q9), and a full quarter of financial
contribution from the MTS acquisition. This was moderated by
approximately $22 million in
unfavourable year-over-year regulatory-related financial impacts
this quarter from downward revisions to wholesale Internet tariffs
and refunds for cancelled services mandated by the CRTC, as well as
a 0.8% decrease in product revenue to $238
million.
Wireline adjusted EBITDA increased 2.6% to $1,306 million in Q2, reflecting the flow-through
of strong service revenue growth as operating costs increased 6.4%
to $1,815 million, mainly reflecting
the acquisitions of MTS and Q9, higher marketing expenses to
support residential subscriber acquisition and retention, and
higher customer service support costs. Wireline adjusted EBITDA
margin decreased 0.9 percentage points in Q2 to 41.8%, due largely
to CRTC-related regulatory impacts and higher year-over-year
operating costs. Excluding regulatory impacts, wireline adjusted
EBITDA was up 4.3% in the quarter.
- Bell TV added 16,427 net new Fibe TV subscribers in Q2, a
decrease from 35,255 gained last year due to a higher number of
Bell retail customers with expired pricing promotions combined with
more aggressive cable service bundle offers, minimal new footprint
expansion, increasing maturity of current Fibe TV markets, and
accelerating over-the-top substitution. At the end of Q2, BCE
served 1,481,434 IPTV subscribers, up 17.0% over Q2 2016. Satellite
TV net customer losses improved 10.2% to 29,764 compared to last
year.
- At the end of Q2, BCE had a total of 2,824,016 TV subscribers,
up 2.7% compared to 2,750,596 at Q2 2016.
- 17,426 new net fibre-to-the-home (FTTH) Internet customers were
added in Q2, driven by a rapidly-expanding broadband fibre
footprint that grew to 3.4 million locations at the end of the
quarter, up from 3.2 million at the end of Q1 2017. This was
moderated by higher customer churn in areas where Bell FTTH service
is not available and higher year-over-year student deactivations,
resulting in total high-speed Internet net additions of 1,407 in
the seasonally-low second quarter, down from 7,539 in Q2 2016.
- BCE's high-speed Internet customer base totalled 3,718,677 at
the end of Q2, up 8.8% compared to Q2 2016.
- Wireline data service revenue increased 6.7% to $1,798 million, driven by the favourable impact
of Bell MTS, Internet and TV subscriber, usage and ARPU growth, and
higher business service solutions revenue reflecting the
incremental financial contribution of Q9.
- Wireline product revenue decreased 0.8% to $238 million, due to lower demand for
telecommunications equipment by our large enterprise business and
wholesale customers as a result of market softness and competitive
pricing pressures.
- Residential NAS net losses improved 2.3% to 67,005 from 68,593
in Q2 2016, despite aggressive bundle promotions by cable
competitors and ongoing wireless and Internet technology
substitution, due to the strong pull-through of Fibe TV service
bundle activations.
- Business NAS net losses increased to 27,954 from 20,232 in Q2
last year, due to a higher number of large business customer
deactivations attributable to increased voice line conversions to
IP-based services and higher demand for new installations in Q2
2016 as a result of a new contract win.
- NAS access lines at the end of Q2 totalled 6,479,315, up
slightly from 6,476,683 last year. Local and access revenue
increased 4.1% to $813 million due to
the incremental financial contribution of Bell MTS and residential
rate increases. Long distance revenue decreased 8.7% to
$167 million as a result of NAS
access line losses, technology substitution by wireless and
Internet technology, and rate pressures from customer adoption of
premium rate plans.
Bell Media
Media operating revenue totalled
$796 million, up 2.2% from
$779 million in Q2 2016, on higher
advertising and subscriber revenues.
Advertising revenue increased, despite continued soft TV and
radio advertising markets, as a result of growth in outdoor
advertising at AOOH and higher year-over-year revenues from Bell
Media's English specialty entertainment channels and digital
properties. Subscriber revenue increased modestly on higher
revenues from CraveTV and TV Everywhere GO products.
Media adjusted EBITDA was up 0.4% to $224
million, from $223 million in
Q2 2016, due to higher year-over-year revenue that more than offset
a 2.9% increase in operating costs attributable to CraveTV
programming expansion, HBO and SHOWTIME content growth, and
increased costs at AOOH due to both acquisitions and new outdoor
advertising contract wins over the past year.
- CTV was the top ranked Canadian network for the 13th
consecutive spring season among total viewers and in all key adult
demographics in primetime, with 11 of the top 20 programs among
total viewers.
- Bell Media English specialty and pay TV properties reached 80%
of Canadian English-language specialty and pay TV viewers in the
average week. Bell Media had at least half of the top 20
Entertainment programs among total viewers in Q2, and 5 of the top
10 English specialty and pay channels among viewers aged 25 to 54:
TSN, Space, TMN, Discovery and CP24.
- Bell Media maintained its leadership position in the Québec
market with audiences for specialty and pay TV reaching 72% of all
French-language TV viewers in the average week in Q2. Five of the
top 10 specialty and pay channels among key viewers aged 25 to 54
are Bell Media properties: RDS, Super Écran, Canal D, Canal Vie and
Z.
- Bell Media reached a comprehensive new multi-year regional
broadcast rights agreement with the Montreal Canadiens making TSN
the official English-language regional broadcaster of the team
beginning with the 2017/2018 season. The new agreement will see TSN
air a slate of games in the Montreal Canadiens' designated
broadcast region, which spans Eastern and Northern Ontario, Québec, and Atlantic Canada. RDS continues to be the
French-language home for regional Montreal Canadiens games.
- A multi-year rights agreement extension was concluded with the
NFL that makes Bell Media the exclusive TV broadcast partner of the
NFL in Canada. The partnership
also features expanded digital opportunities which include
syndication rights for NFL highlights in Canada, as well as expanded footage and
programming rights to further bolster Bell Media's non-game
NFL-focused content. The expanded agreement also includes the NFL's
Thursday Night Football package, which will air on TSN and CTV Two
for the first time and return to RDS, beginning with the 2017
season.
- iHeartRadio Canada, the country's #1 radio streaming service,
surpassed 1 million app downloads in June. Launched in October 2016, iHeartRadio Canada is consistently
a Top 10 free music app in the Apple and Google Play app
stores.
- Bell Media remained Canada's top radio broadcaster in Q2,
reaching over 17.4 million listeners who spent more than 77 million
hours tuned in each week.
- Bell Media continued to lead in digital media among Canadian
broadcast and video network competitors, reaching a record 68% of
the digital audience in Q2 with 21 million unique monthly visitors,
average monthly time of 1.3 billion minutes spent on the sites and
195 million videos viewed.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.7175 per common share, payable on October 15, 2017 to shareholders of record at the
close of business on September 15,
2017.
OUTLOOK FOR 2017
BCE confirmed its financial guidance
targets for 2017, as updated on April 26,
2017 to reflect the acquisition of MTS, as follows:
|
April 26
Guidance
|
August 3
Guidance
|
Revenue
growth
|
4% – 6%
|
On track
|
Adjusted EBITDA
growth
|
4% – 6%
|
On track
|
Capital
intensity
|
approx.
17%
|
On track
|
Adjusted
EPS
|
$3.30 –
$3.40
|
On track
|
Free cash flow
growth
|
approx. 5% –
10%
|
On track
|
Annualized common
dividend per share
|
$2.87
|
$2.87
|
Dividend payout
policy(3)
|
65% – 75%
of free cash
flow
|
On track
|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q2 2017 results
on Thursday, August 3 at 8:00 am (Eastern). Media are welcome to
participate on a listen-only basis. Please dial toll-free
1-866-223-7781 or 416-340-2216. A replay will be available for one
week by dialing 1-800-408-3053 or 905-694-9451 and entering pass
code 3318870#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q2-2017 conference call. The mp3 file will be
available for download on this page later in the day.
NOTES
The information contained in this news release
is unaudited.
In Q1 2017, we updated our definition of adjusted net earnings
and adjusted EPS to also exclude impairment charges as they may
affect the comparability of our financial results and could
potentially distort the analysis of trends in business
performance.
(1) The terms adjusted net earnings and adjusted EPS do not
have any standardized meaning under IFRS. Therefore, they are
unlikely to be comparable to similar measures presented by other
issuers. We define adjusted net earnings as net earnings
attributable to common shareholders before severance, acquisition
and other costs, net losses (gains) on investments, impairment
charges, and early debt redemption costs. We define adjusted EPS as
adjusted net earnings per BCE common share. We use
adjusted net earnings and adjusted EPS, and we believe that certain
investors and analysts use these measures, among other ones, to
assess the performance of our businesses without the effects of
severance, acquisition and other costs, net losses (gains) on
investments, impairment charges, and early debt redemption costs,
net of tax and NCI. We exclude these items because they affect the
comparability of our financial results and could potentially
distort the analysis of trends in business performance. Excluding
these items does not imply they are non-recurring. The most
comparable IFRS financial measures are net earnings attributable to
common shareholders and EPS. The following table is a
reconciliation of net earnings attributable to common shareholders
and EPS to adjusted net earnings on a consolidated basis and per
BCE common share (adjusted EPS), respectively.
($ millions except
per share amounts)
|
|
Q2 2017
|
Q2 2016
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER
SHARE
|
Net earnings
attributable to common shareholders
|
762
|
0.84
|
778
|
0.89
|
Severance,
acquisition and other costs
|
27
|
0.04
|
44
|
0.05
|
Net losses (gains) on
investments
|
-
|
-
|
2
|
-
|
Early debt redemption
costs
|
3
|
-
|
-
|
-
|
Adjusted net
earnings
|
792
|
0.88
|
824
|
0.94
|
(2) The terms adjusted EBITDA and adjusted EBITDA margin
do not have any standardized meaning under IFRS. Therefore, they
are unlikely to be comparable to similar measures presented by
other issuers. We define adjusted EBITDA as operating revenues less
operating costs, as shown in BCE's consolidated income statements.
Adjusted EBITDA for BCE's segments is the same as segment profit as
reported in Note 4, Segmented Information, in BCE's Q2 2017
Financial Statements. We define adjusted EBITDA margin as adjusted
EBITDA divided by operating revenues. We use adjusted EBITDA and
adjusted EBITDA margin to evaluate the performance of our
businesses as they reflect their ongoing profitability. We believe
that certain investors and analysts use adjusted EBITDA to measure
a company's ability to service debt and to meet other payment
obligations or as a common measurement to value companies in the
telecommunications industry. We believe that certain investors and
analysts also use adjusted EBITDA and adjusted EBITDA margin to
evaluate the performance of our businesses. Adjusted EBITDA is also
one component in the determination of short-term incentive
compensation for all management employees.
Adjusted EBITDA and adjusted EBITDA margin have no directly
comparable IFRS financial measure. Alternatively, the following
table provides a reconciliation of net earnings to adjusted
EDITDA.
($
millions)
|
|
|
|
Q2 2017
|
Q2 2016
|
Net
earnings
|
811
|
830
|
Severance,
acquisition and other costs
|
36
|
57
|
Depreciation
|
769
|
713
|
Amortization
|
211
|
156
|
Finance
costs
|
|
|
|
Interest
expense
|
238
|
217
|
|
Interest on
post-employment benefit obligations
|
18
|
21
|
Other
income
|
(1)
|
(41)
|
Income
taxes
|
297
|
315
|
Adjusted
EBITDA
|
2,381
|
2,268
|
BCE operating
revenues
|
5,699
|
5,340
|
Adjusted EBITDA
margin
|
41.8%
|
42.5%
|
(3) The terms free cash flow and dividend payout ratio do
not have any standardized meaning under IFRS. Therefore, they are
unlikely to be comparable to similar measures presented by other
issuers. We define free cash flow as cash flows from operating
activities, excluding acquisition and other costs paid (which
include significant litigation costs) and voluntary pension
funding, less capital expenditures, preferred share dividends and
dividends paid by subsidiaries to NCI. We exclude acquisition and
other costs paid and voluntary pension funding because they affect
the comparability of our financial results and could potentially
distort the analysis of trends in business performance. Excluding
these items does not imply they are non-recurring. We consider free
cash flow to be an important indicator of the financial strength
and performance of our businesses because it shows how much cash is
available to pay dividends, repay debt and reinvest in our company.
We believe that certain investors and analysts use free cash flow
to value a business and its underlying assets and to evaluate the
financial strength and performance of our businesses. The most
comparable IFRS financial measure is cash flows from operating
activities. We define dividend payout ratio as dividends paid on
common shares divided by free cash flow. We consider dividend
payout ratio to be an important indicator of the financial strength
and performance of our businesses because it shows the
sustainability of the company's dividend payments. The following
table is a reconciliation of cash flows from operating activities
to free cash flow on a consolidated basis.
($
millions)
|
|
|
|
Q2 2017
|
Q2 2016
|
Cash flows from
operating activities
|
2,154
|
1,890
|
Capital
expenditures
|
(1,042)
|
(950)
|
Cash dividends paid
on preferred shares
|
(30)
|
(35)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
(9)
|
(10)
|
Acquisition and other
costs paid
|
21
|
39
|
Free cash
flow
|
1,094
|
934
|
(4) We use ARPU, churn and capital intensity to measure
the success of our strategic imperatives. These key performance
indicators are not accounting measures and may not be comparable to
similar measures presented by other issuers.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain
statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to our 2017 financial guidance (including
revenues, adjusted EBITDA, capital intensity, adjusted EPS and free
cash flow), BCE's 2017 annualized common share dividend and common
share dividend payout policy, our network deployment plans and
related capital investments, our business outlook, objectives,
plans and strategic priorities, and other statements that are not
historical facts. Forward-looking statements are typically
identified by the words assumption, goal, guidance, objective,
outlook, project, strategy, target and other similar
expressions or future or conditional verbs such as aim,
anticipate, believe, could, expect, intend, may, plan, seek,
should, strive and will. All such forward-looking
statements are made pursuant to the 'safe harbour' provisions of
applicable Canadian securities laws and of the United States Private Securities
Litigation Reform Act of 1995.
Forward-looking statements,
by their very nature, are subject to inherent risks and
uncertainties and are based on several assumptions, both general
and specific, which give rise to the possibility that actual
results or events could differ materially from our expectations
expressed in or implied by such forward-looking statements and that
our business outlook, objectives, plans and strategic priorities
may not be achieved. As a result, we cannot guarantee that any
forward-looking statement will materialize and we caution you
against relying on any of these forward-looking statements. The
forward-looking statements contained in this news release describe
our expectations as of August 3, 2017
and, accordingly, are subject to change after such date. Except as
may be required by Canadian securities laws, we do not undertake
any obligation to update or revise any forward-looking statements
contained in this news release, whether as a result of new
information, future events or otherwise. Except as otherwise
indicated by BCE, forward-looking statements do not reflect the
potential impact of any special items or of any dispositions,
monetizations, mergers, acquisitions, other business combinations
or other transactions that may be announced or that may occur after
August 3, 2017. The financial impact
of these transactions and special items can be complex and depends
on the facts particular to each of them. We therefore cannot
describe the expected impact in a meaningful way or in the same way
we present known risks affecting our business. Forward-looking
statements are presented in this news release for the purpose of
assisting investors and others in understanding certain key
elements of our expected 2017 financial results, as well as our
objectives, strategic priorities and business outlook for 2017, and
in obtaining a better understanding of our anticipated operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes.
Material Assumptions
A number of economic, market,
operational and financial assumptions were made by BCE in preparing
its forward-looking statements contained in this news release,
including, but not limited to:
Canadian Economic and Market Assumptions
- Gradual improvement in economic growth, given the Bank of
Canada's most recent estimated growth in Canadian gross domestic
product of 2.8% in 2017, a slight increase from the earlier
estimate of 2.6%
- Modest employment growth, as the overall level of business
investment is expected to remain soft
- Canadian dollar expected to remain at or around near current
levels. Further movements may be impacted by the degree of strength
of the U.S. dollar, interest rates and changes in commodity
prices.
- A higher level of wireline and wireless competition in
consumer, business and wholesale markets
- Higher, but slowing, wireless industry penetration and
smartphone adoption
- Soft media advertising market expected, due to variable demand,
and escalating costs to secure TV programming
Assumptions Concerning our Bell Wireless
Segment
- Maintain our market share of incumbent wireless postpaid net
additions
- Continued adoption of smartphone devices, tablets and data
applications, as well as the introduction of more 4G LTE devices
and new data services
- Higher subscriber acquisition and retention spending, driven by
higher handset costs and more customer device upgrades, reflecting
a higher number of off-contract subscribers due to earlier expiries
under two-year contracts
- Higher blended ARPU, driven by a higher postpaid smartphone
mix, increased data consumption on 4G LTE and LTE-A networks, and
higher access rates from 2016 pricing changes
- Completion of the LTE network buildout to 99% of the Canadian
population and expansion of the LTE-A network coverage to
approximately 87% of the Canadian population, including
Manitoba
- Ability to monetize increasing data usage and customer
subscriptions to new data services
- Ongoing technological improvements by handset manufacturers and
from faster data network speeds that allow customers to optimize
the use of our services
- No material financial, operational or competitive consequences
of changes in regulations affecting our wireless business
Assumptions Concerning our Bell Wireline
Segment
- Positive full-year adjusted EBITDA growth
- Continued growth in residential IPTV and Internet
subscribers
- Increasing wireless and Internet-based technological
substitution
- Residential services household ARPU growth from increased
penetration of multi-product households and price increases
- Aggressive residential service bundle offers from cable TV
competitors in our local wireline areas
- Continued large business customer migration to IP-based
systems
- Ongoing competitive repricing pressures in our business and
wholesale markets
- Continued competitive intensity in our small and mid-sized
business markets as cable operators and other telecom competitors
continue to intensify their focus on business customers
- Growing consumption of OTT TV services and on-demand streaming
video, as well as the proliferation of devices, such as tablets,
that consume vast quantities of bandwidth, will require
considerable ongoing capital investment
- TV unbundling will not materially accelerate the downsizing of
TV packages by customers
- Realization of cost savings related to management workforce
attrition and retirements, lower contracted rates from our
suppliers, reduction of traffic that is not on our network and
operating synergies from the integration of MTS
- Softer wholesale financial performance due to a CRTC decision
in October 2016 that significantly
lowered capacity-based billing rates for aggregated wholesale
high-speed Internet access services
- No other changes in regulations affecting our wireline business
having material financial, operational or competitive
consequences
Assumptions Concerning our Bell Media Segment
- Higher year-over-year revenue, reflecting further CraveTV
subscriber growth, The Movie Network's national expansion that
began in March 2016, and growth in
outdoor advertising supported by acquisitions and new contract
wins
- Operating cost growth driven by higher TV programming and
sports broadcast rights costs, as well as continued investment in
CraveTV content
- Continued scaling of CraveTV
- Ability to successfully acquire and produce highly rated
programming and differentiated content
- Building and maintaining strategic supply arrangements for
content across all screens and platforms
- Increased revenue generation from monetization of content
rights and Bell Media properties across all platforms
- TV unbundling and growth in OTT viewing expected to result in
moderately lower subscriber levels for many Bell Media TV
properties
- No material financial, operational or competitive consequences
of changes in regulations affecting our media business
Financial Assumptions Concerning BCE
The
following constitute BCE's principal financial assumptions for
2017:
- total post-employment benefit plans cost to be approximately
$320 million to $340 million, based
on an estimated accounting discount rate of 4.0%, comprised of an
estimated above adjusted EBITDA post-employment benefit plans
service cost of approximately $250 million
to $260 million and an estimated below adjusted EBITDA net
post-employment benefit plans financing cost of approximately
$70 million to $80 million
- depreciation and amortization expense of approximately
$3,850 million to $3,900 million
- net interest expense of approximately $950 million to $975 million
- tax adjustments (per share) of approximately $0.01
- an effective tax rate of approximately 27%
- non-controlling interest (NCI) of approximately $50 million
- total pension plan cash funding of approximately $400 million to $450 million
- cash taxes of approximately $650 million
to $700 million
- net interest payments of approximately $950 million to $975 million
- other free cash flow items, which include working capital
changes, severance and other costs paid, preferred share dividends
and NCI paid, of approximately ($25)
million to ($150) million
- average BCE common shares outstanding of approximately 895
million
- an annual common share dividend of $2.87 per share
The foregoing assumptions, although considered reasonable by BCE
on August 3, 2017, may prove to be
inaccurate. Accordingly, our actual results could differ materially
from our expectations as set forth in this news release.
Material Risks
Important risk factors that could cause
our assumptions and estimates to be inaccurate and actual results
or events to differ materially from those expressed in, or implied
by, our forward-looking statements, including our 2017 financial
guidance, are listed below. The realization of our forward-looking
statements, including our ability to meet our 2017 financial
guidance, essentially depends on our business performance which, in
turn, is subject to many risks. Accordingly, readers are cautioned
that any of the following risks could have a material adverse
effect on our forward-looking statements. These risks include, but
are not limited to:
- regulatory initiatives, proceedings and decisions, government
consultations and government positions that affect us and influence
our business, including, in particular, those relating to mandatory
access to networks, net neutrality, spectrum auctions, approval of
acquisitions, broadcast licensing and foreign ownership
requirements
- the intensity of competitive activity, including from new and
emerging competitors, and the resulting impact on the cost of
retaining existing customers and attracting new ones, as well as on
our market shares, service volumes and pricing strategies
- the level of technological substitution and the presence of
alternative service providers contributing to reduced utilization
of our traditional wireline services
- the adverse effect of the fundamental separation of content and
connectivity, which is changing our TV and media ecosystems and may
accelerate the disconnection of TV services and the reduction of TV
spending, as well as the fragmentation of, and changes in, the
advertising market
- competition with global competitors, in addition to traditional
Canadian competitors, for programming content could drive
significant increases in content acquisition costs and challenge
our ability to secure key content
- adverse economic and financial market conditions, a declining
level of retail and commercial activity, and the resulting negative
impact on the demand for, and prices of, our products and services
and the level of bad debts
- the inability to protect our assets, including networks, IT
systems, offices and sensitive information, from events and attacks
such as cyber threats, and damage from fire and natural
disasters
- the failure to optimize network and IT deployment and upgrading
timelines, accurately assess the potential of new technologies, and
invest and evolve in the appropriate direction
- the failure to continue investment in a disciplined and
strategic manner in next-generation capabilities, including
real-time information-based customer service strategies
- the inability to drive a positive customer experience
resulting, in particular, from the failure to embrace new
approaches and challenge operational limitations
- the complexity in our operations resulting from multiple
technology platforms, billing systems, marketing databases and a
myriad of rate plans, promotions and product offerings
- the failure to maintain optimal network operating performance
in the context of significant increases in capacity demands on our
Internet and wireless networks
- the failure to implement or maintain highly effective IT
systems supported by an effective governance and operating
framework
- the risk that we may need to incur significant capital
expenditures beyond our capital intensity target in order to
provide additional capacity and reduce network congestion
- the failure to generate anticipated benefits from our corporate
restructurings, system replacements and upgrades, process redesigns
and the integration of business acquisitions
- events affecting the functionality of, and our ability to
protect, test, maintain and replace, our networks, IT systems,
equipment and other facilities
- in-orbit and other operational risks to which the satellites
used to provide our satellite TV services are subject
- the failure to attract and retain employees with the
appropriate skill sets and to drive their performance in a safe and
secure environment
- labour disruptions
- the inability to access adequate sources of capital and
generate sufficient cash flows from operations to meet our cash
requirements, fund capital expenditures and provide for planned
growth
- uncertainty as to whether dividends will be declared by BCE's
board of directors or whether BCE's dividend payout policy will be
maintained
- the inability to manage various credit, liquidity and market
risks
- pension obligation volatility and increased contributions to
post-employment benefit plans
- higher taxes due to new tax laws or changes thereto or in the
interpretation thereof, and the inability to predict the outcome of
government audits
- the failure to reduce costs as well as unexpected increases in
costs
- the failure to evolve practices to effectively monitor and
control fraudulent activities, including unauthorized use of our
content and the theft of our TV services
- events affecting the continuity of supply of products and
services that we need to operate our business from our third-party
suppliers and outsourcers
- the failure of our procurement and vendor management practices
to address risk exposures associated with existing and new supplier
models
- the quality of our products and services and the extent to
which they may be subject to manufacturing defects or fail to
comply with applicable government regulations and standards
- security and data leakage exposure if security control
protocols applicable to our cloud-based solutions are bypassed
- unfavourable resolution of legal proceedings and, in
particular, class actions
- unfavourable changes in applicable laws and the failure to
proactively address our legal and regulatory obligations
- health concerns about radiofrequency emissions from wireless
communications devices
- the inability to maintain customer service and our networks
operational in the event of the occurrence of epidemics, pandemics
and other health risks
- the failure to recognize and adequately respond to climate
change concerns or public and governmental expectations on
environmental matters
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. We encourage investors to also read BCE's 2016 Annual
MD&A dated March 2, 2017
(included in the BCE 2016 Annual Report) and BCE's 2017 First and
Second Quarter MD&As dated April 25,
2017 and August 2, 2017,
respectively, for additional information with respect to certain of
these and other assumptions and risks, filed by BCE with the
Canadian provincial securities regulatory authorities (available at
Sedar.com) and with the U.S. Securities and Exchange Commission
(available at SEC.gov). These documents are also available at
BCE.ca.
About BCE
Canada's largest communications company, BCE
provides the broadest range of broadband wireless, TV, Internet and
business communication services to consumer and business customers
throughout the country. Bell Media is Canada's premier multimedia
company with leading assets in television, radio, out of home and
digital media. To learn more, please visit BCE.ca.
The Bell Let's Talk initiative promotes Canadian mental health
with national awareness and anti-stigma campaigns like Bell Let's
Talk Day and significant Bell funding of community care and access,
research, and workplace initiatives. To learn more, please visit
Bell.ca/LetsTalk.
Media inquiries:
Jean Charles Robillard
514-870-4739
jean_charles.robillard@bell.ca
Investor inquiries:
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
SOURCE Bell Canada