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.
- Record Q3 wireless net additions of 204,067, up 14.8%,
combined with ABPU growth of approximately 1% and a reduction in
postpaid churn to 1.12%, delivered stronger wireless revenue growth
of 3.5% and 7.9% higher adjusted EBITDA
- 293,950 total wireless, retail Internet and IPTV net
customer additions, up 8.4%
- 89,883 total retail Internet and IPTV net additions; 50
basis-point improvement in Bell's leading wireline margin to
44.2%
- Continued strong Bell Media financial performance with
revenue up 2.7% and 24.2% increase in adjusted EBITDA
- BCE adjusted EBITDA up 5.6% on strong year-over-year growth
at all Bell operating segments, driven by 1.8% higher revenue and
IFRS 16 impact
- Net earnings grew 6.3% to $922
million; net earnings attributable to common shareholders
increased 6.5% to $867 million, or
$0.96 per common share, up 6.7%;
adjusted net earnings of $820 million
generated adjusted EPS of $0.91, down
5.2%
- Cash flows from operating activities increased 10.5% to
$2,258 million; free cash flow up
17.3% to $1,189 million
MONTRÉAL, Oct. 31, 2019 /PRNewswire/ - BCE Inc. (TSX:
BCE) (NYSE: BCE) today reported results for the third quarter
(Q3) of 2019.
"Bell's commitment to build the advanced fibre and mobile
networks that will take Canadian communications into the future
continues to deliver strong results for our shareholders, customers
and communities today. With exceptional execution by the Bell team
in Q3, we achieved industry-leading subscriber growth – including
record Q3 net wireless customer additions – improved customer
satisfaction and a strong financial performance," said George Cope, President and Chief Executive
Officer of BCE Inc. and Bell
Canada. "This includes our 56th consecutive quarter of
increased year-over-year adjusted EBITDA and continued strong
growth in the free cash flow that fuels our network investment and
shareholder value objectives."
"The unmatched reach, capacity and speed of Bell's networks, and
the service and media innovations they enable, are keeping Bell at
the forefront of the dynamic Canadian communications industry. I
look forward to working with the next CEO of Bell, our Chief
Operating Officer Mirko Bibic, and
the national team to build on this momentum and close 2019 with a
strong Q4 performance."
KEY BUSINESS DEVELOPMENTS
Cross-border IoT for Bell business customers
A new
LTE-M network roaming agreement with AT&T now enables Bell
business customers to access their Internet of Things (IoT)
applications throughout the United
States. Bell established itself as Canada's IoT leader with
the launch of the country's first 5G-ready LTE-M network supporting
a broad range of enterprise IoT functions, including asset
tracking, fleet management, smart sensors and Smart City
applications.
Bell Media brings HBO Max to Canada
Bell Media has
partnered with Warner Bros. International Television Distribution
to bring HBO Max programming to Crave and CTV, the first agreement
to distribute the highly anticipated new content outside of
the United States. CTV's The
Amazing Race Canada was the most watched series of the summer and
top Canadian TV series of the 2019/2020 broadcast year. A record
3.4 million viewers tuned into TSN and RDS to watch Bianca Andreescu's historic win at the US Open,
the highest-rated tennis broadcast ever for the sports
networks.
TV and Wi-Fi innovation
Bell's next generation Whole
Home Wi-Fi pods now offer customers speeds up to 500 Mbps and
larger indoor and outdoor coverage areas with fewer pods. Bell Fibe
TV, Satellite TV and Alt TV customers can now pause and rewind live
TV on any screen with the latest version of the Fibe app in
addition to set-top boxes.
Broadband leadership in Canada's North
Bell and
subsidiary Northwestel have launched high-speed Internet and mobile
broadband services in all 25 Nunavut communities. Delivered using
the new Tamarmik Nunaliit network and Telesat ka-Band satellite
technology that provides up to 20 times more Internet capacity,
wireline and fixed wireless data speeds are now up to 6 times
faster while mobile broadband data speeds reach up to 100 Mbps.
Martine Turcotte to
retire
Martine Turcotte,
Bell's Vice Chair, Québec, will retire in January 2020 after a distinguished 31- year
career with the company. Ms. Turcotte was named Chief Legal Officer
in 1999, the first woman named to the role and youngest person
appointed to the Bell executive team, and has led the company's
business and community presence in Québec since 2011.
Bell will appoint a new Vice Chair, Québec in the near future.
George Cope named top
CEO
George Cope has been
named Corporate Citizen of the Year in the Globe and Mail's
Report on Business CEO of the Year awards while BCE Board
member and Air Canada CEO Calin Rovinescu was recognized as
Strategist of the Year. The Harvard Business Review named Mr. Cope
among the top 100 best-performing CEOs in the world, one of just 6
Canadians on the Harvard list.
Bell Let's Talk Community Fund 2019
To mark World
Mental Health Day on October 10, the
Bell Let's Talk Community Fund announced the 123 recipients of
this year's grants. The $2-million
annual fund supports organizations delivering frontline mental
health support in communities large and small in every region. Bell
presented the annual Faces of Mental Illness multimedia campaign,
helping to end stigma by featuring the personal stories of 5
Canadians living with mental illness.
BCE RESULTS
FINANCIAL
HIGHLIGHTS
|
|
|
|
($ millions except
per share amounts)
(unaudited)
|
Q3
2019
|
Q3
2018
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,984
|
5,877
|
1.8%
|
Net
earnings
|
922
|
867
|
6.3%
|
Net earnings
attributable to common shareholders
|
867
|
814
|
6.5%
|
Adjusted net
earnings(1)
|
820
|
861
|
(4.8%)
|
Adjusted
EBITDA(2)
|
2,594
|
2,457
|
5.6%
|
EPS
|
0.96
|
0.90
|
6.7%
|
Adjusted
EPS(1)
|
0.91
|
0.96
|
(5.2%)
|
Cash flows from
operating activities
|
2,258
|
2,043
|
10.5%
|
Capital
expenditures
|
(1,013)
|
(1,010)
|
(0.3%)
|
Free cash
flow(3)
|
1,189
|
1,014
|
17.3%
|
"BCE delivered another positive financial performance in Q3 in
line with our guidance targets, enabled by operating profitability
growth across our wireless, wireline and media segments. The 1.8%
increase in consolidated BCE revenue, together with the favourable
impact of IFRS 16 and ongoing operating cost efficiency, delivered
strong 5.6% growth in adjusted EBITDA. Net earnings increased 6.3%
while free cash flow grew 17.3% to approximately $1.2 billion," said Chief Financial Officer
Glen LeBlanc. "With 3 quarters of
strong financial growth in 2019, continued competitive momentum and
a solid financial and pension solvency position, BCE is well
positioned to deliver ongoing expansion in our world-leading
broadband networks and continued dividend growth in 2020."
BCE operating revenue increased 1.8% in Q3 to $5,984 million, reflecting year-over-year growth
at all Bell operating segments. Service revenue grew 1.3% to
$5,185 million on strong wireless,
Internet and IPTV subscriber base growth. Product revenue was up
5.1% to $799 million, mainly the
result of greater volumes of higher-value smartphones and wireless
rate plans in the sales mix.
Net earnings were up 6.3% to $922
million and net earnings attributable to common shareholders
totalled $867 million, or
$0.96 per share, up 6.5% and 6.7%,
respectively. Higher net earnings and net earnings per common share
were driven by strong growth in adjusted EBITDA, higher other
income, and lower severance, acquisition and other costs. This was
partly offset by higher income taxes, increased depreciation and
amortization expense, and higher finance costs. The adoption of
IFRS 16 did not have a significant impact on net earnings.
Adjusted net earnings were $820
million, or $0.91 per common
share, compared to $861 million, or
$0.96 per common share, in Q3 of last
year. The decrease was attributable to uncertain tax positions that
were favourably resolved in Q3 2018 resulting in lower income taxes
last year.
Adjusted EBITDA grew 5.6% to $2,594
million, reflecting year-over-year increases of 7.9% at Bell
Wireless, 1.4% at Bell Wireline and 24.2% at Bell Media. Adjusted
EBITDA was impacted positively by IFRS 16 as most operating lease
expenses are now recorded as depreciation and interest expense
rather than operating costs within adjusted EBITDA.
BCE's consolidated adjusted EBITDA margin (2)
increased 1.5 percentage points to 43.3%, from 41.8% in Q3 last
year, due to the high flow-through of service revenue growth,
increasing broadband Internet scale, disciplined spending on
wireless postpaid subscriber acquisitions and a 0.9% reduction in
total operating costs, which included the favourable impact of IFRS
16.
BCE capital expenditures totalled $1,013
million, up slightly from $1,010
million in Q3 2018, representing a capital
intensity(5) ratio (capital expenditures as a
percentage of total revenue) of 16.9%, compared to 17.2% in Q3 last
year. Capital spending focused on further expansion of Bell's fibre
to the premises (FTTP) and fixed wireless to the home (WTTH)
footprints, the connection of fibre Internet and TV services to
more homes and businesses, and ongoing wireless network investment,
including the deployment of small cells to increase network speeds,
coverage and signal quality, as well as to expand fibre backhaul in
preparation for the launch of 5G service.
BCE cash flows from operating activities were $2,258 million, up 10.5% over last year. The
increase was due mainly to adjusted EBITDA growth and lower income
taxes paid, partly offset by increased interest paid reflecting the
unfavourable impact of IFRS 16. Free cash flow generated in the
quarter was $1,189 million, a 17.3%
increase from Q3 2018, driven by higher cash flows from operating
activities, excluding acquisition and other costs paid.
For Q3, BCE reported 204,067 net new wireless customers (127,172
postpaid and 76,895 prepaid); 58,137 net new retail Internet
customers; 31,746 net new IPTV customers; a net loss of 26,904
retail satellite TV customers; and a net loss of 65,656 retail
residential NAS lines.(5)
BCE wireless and retail Internet, TV and residential NAS
connections totalled 18,881,978 at the end of Q3, up 1.3% over last
year. The total includes 9,834,380 wireless
customers(4), up 3.7% (including 9,038,341 postpaid
customers, an increase of 3.6%, and 796,039 prepaid customers, up
4.9%); 3,519,962 retail Internet subscribers(4), up
4.2%; 2,772,043 retail TV subscribers, up 0.7% (including 1,745,143
IPTV customers, an increase of 6.5%, and 1,026,900 retail satellite
TV customers, down 7.8%); and 2,755,593 retail residential NAS
lines, down 8.8%.
BCE OPERATING RESULTS BY SEGMENT
"All Bell operating
segments delivered subscriber, revenue and adjusted EBITDA growth
in Q3 as we grew wireless, retail Internet and IPTV subscribers by
8.4% to 293,950, led by another outstanding performance at Bell
Mobility," said Mirko Bibic, Bell's
Chief Operating Officer. "Wireless subscriber net additions were up
14.8% to 204,067, our best-ever Q3 performance and highest
quarterly result in 13 years, reflecting continued reduction in
postpaid churn and an 80.9% year-over-year increase in prepaid net
additions as our low-cost Lucky Mobile brand continues to re-define
the prepaid segment."
"In wireline, service innovations like 1.5 Gbps Internet and Alt
TV helped attract 89,883 net new broadband Internet and IPTV
customers, including a record number of gross Internet additions,
in a highly competitive residential marketplace. Our continued lead
in conventional and specialty TV combined with year-over-year
growth at Astral out of home and Crave subscribers delivered
increased media revenue, operating profitability and cash flow,"
said Mr. Bibic.
Bell Wireless
Wireless operating revenue increased
3.5% to $2,348 million in Q3. Service
revenue was up 2.5% to $1,673
million, driven by continued strong subscriber base growth
and a higher year-over-year revenue contribution from prepaid
services. Product revenue grew 6.0% to $675
million, due to a higher sales mix of premium smartphones
and higher-value rate plans.
Wireless adjusted EBITDA grew 7.9% in Q3 to $1,013 million, yielding a 1.7 percentage-point
increase in margin to 43.1%, as total operating costs increased
0.4% to $1,335 million. The
improvement in adjusted EBITDA and margin reflected a high service
revenue flow-through, promotional spending discipline and the
favourable impact of IFRS 16.
- Total postpaid and prepaid net additions grew 14.8% to 204,067,
a Q3 record and our best overall subscriber performance since Q4
2006.
- Postpaid net additions totalled 127,172, down from 135,323 in
Q3 2018 as gross additions decreased 2.1%, reflecting fewer
year-over-year customer additions from our long-term mobile
services contract with Shared Services Canada (SSC). Excluding the
SSC contract, postpaid net additions were higher than last year,
reflecting Bell's mobile network quality, strong retail channel
sales execution and continued focus on subscriber base management,
as evidenced by a 0.02 percentage point improvement in postpaid
customer churn(5) to 1.12%.
- Prepaid net additions grew 80.9% to 76,895 from 42,511 in Q3
last year. This was driven by a 61.2% increase in gross additions,
reflecting continued strong demand for our low-cost Lucky Mobile
prepaid service and exclusive national retail distribution
agreement with Dollarama. Prepaid customer churn increased 1.13
percentage points to 3.89% due to increased competitive intensity
for lower-cost mobile services and a change in our prepaid
deactivation policy at the beginning of 2019 from 120-150 days to
90 days.
- Bell's total wireless customer base at the end of Q3 increased
3.7% to 9,834,380, including 9,038,341 postpaid subscribers, up
3.6% over last year, and 796,039 prepaid customers, up 4.9%.
- Blended average billing per user (ABPU)(5) increased
0.9% to $69.93, despite the impact of
unlimited data plans on data overage revenue.
Bell Wireline
Wireline operating revenue was up 0.2%
in Q3 to $3,066 million. Service
revenue increased 0.2% to $2,941
million while product revenue remained relatively stable at
$125 million, compared to
$124 million last year. This increase
was the result of higher Internet and IPTV revenue and growth in
business IP broadband connectivity and service solutions.
Wireline revenue growth was moderated by an increased decline in
legacy voice revenue; the impact of acquisition and retention
discounts on residential service bundles to match aggressive
competitor promotions; a decline in low-margin data equipment sales
to large business enterprise customers; and the lapping of the Axia
NetMedia acquisition during the quarter.
Rapidly growing broadband Internet subscriber scale, improved
business markets operating profitability, and a 0.8% reduction in
operating costs that reflected the favourable impact of IFRS 16 as
well as ongoing spending controls, fibre-related savings and
continued service improvement, enabled a 1.4% increase in wireline
adjusted EBITDA to $1,355 million.
This drove a 50 basis-point improvement in Bell's industry-leading
wireline margin to 44.2%.
- Bell added 58,137 new retail Internet customers, 9.4% more than
in Q3 2018. The increase was driven by the ongoing expansion of
Bell's FTTP and WTTH footprints, which also contributed to improved
residential customer churn. Retail Internet customers totalled
3,519,962 at the end of Q3, an increase of 4.2% over last
year.
- Bell TV added 31,746 net new retail IPTV subscribers, down from
40,091 in Q3 2018. The decrease is due to the high rate of customer
penetration in current Fibe markets and slower new service
footprint growth, increasing maturity of our Alt TV service, and
ongoing over-the-top substitution. At the end of Q3, Bell served
1,745,143 retail IPTV subscribers, up 6.5% over last year.
- Retail satellite TV net customer losses remained stable at
26,904, compared to 26,861 in Q3 2018. A decrease in year-over year
gross activations was offset by fewer customer deactivations.
- At the end of Q3, Bell served 2,772,043 retail IPTV and
satellite TV subscribers, up 0.7% from Q3 2018.
- Wireline data service revenue increased 3.3% to $1,929 million, due to Internet and IPTV
subscriber growth, residential rate increases, and increased
business IP broadband connectivity revenue and service solutions
sales.
- Retail residential NAS net losses improved 10.4% to 65,656,
reflecting improved customer retention in Bell's fibre footprint
and lapping of the industry's shift from 3-product to 2-product
Internet and TV service bundles that began in mid-2018, which had
an unfavourable impact on new activations over the past year. At
the end of Q3, Bell's retail residential NAS customer base totalled
2,755,593, an 8.8% decline from Q3 last year.
- Wireline voice revenue decreased 7.1% to $881 million, due to NAS line reductions,
business customer conversions to IP-based data services, and
reduced usage of traditional long distance by residential and
business customers.
Bell Media
Media operating revenue increased 2.7% in
Q3 to $751 million, driven by higher
revenue from Crave subscriber base growth over the past year.
Advertising revenue was down year over year due to the
non-recurrence of revenues generated in Q3 2018 from the FIFA World
Cup Soccer broadcast. Excluding the World Cup, advertising revenue
was up over Q3 2018, driven by stronger conventional TV
performance, including benefits from federal election coverage, and
increases at specialty TV news service CP24 and Astral out of home.
Media adjusted EBITDA increased 24.2% to $226 million, due to higher revenue and a 4.4%
reduction in operating costs.
- CTV was Canada's most-watched television network in primetime
among total viewers for a 15th consecutive summer season with 8 of
the top 20 shows nationally, including The Amazing Race Canada, the
#1 program of the summer and top Canadian series of the 2018/2019
broadcast year.
- Bell Media's English-language entertainment specialty channels
achieved unprecedented success in the 2018/2019 broadcast year with
a 21% increase in viewership among adults 18-49. In September, Bell
Media leveraged #1 entertainment brand CTV by renaming the Comedy,
Bravo, Space and Gusto specialty channels CTV Comedy Channel, CTV
Drama Channel, CTV Sci-Fi Channel and CTV Life Channel.
- Bell Media again led specialty and pay TV in Q3 with 6 of the
top 10 English-language channels (TSN, CTV Comedy, CTV Sci-Fi, CTV
Drama, Discovery and CP24) and 4 of the top 10 French-language
channels (RDS, Super Écran, Canal D and Z) among adults 25-54.
- TSN remained Canada's leading specialty sports channel and the
top specialty channel overall in Q3, while RDS increased viewership
16%. The US Open Women's Final on TSN and RDS was the most-watched
tennis broadcast ever on the networks, with a combined average
audience of more than 3.4 million viewers.
- Bell Media was again Canada's top radio broadcaster, reaching
an average audience of 16.2 million listeners who spent
approximately 70 million hours tuned in each week.
- The digital leader among Canadian media competitors, Bell Media
reached 22.2 million unique online visitors monthly and achieved
averages of 445 million page views and 827 million minutes spent
online each month.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.7925 per common share, payable on January 15, 2020 to shareholders of record at the
close of business on December 16,
2019.
OUTLOOK FOR 2019
BCE confirmed its financial guidance
targets for 2019, as provided on February 7,
2019, as follows:
|
February 7
Guidance
|
October
31
Guidance
|
Revenue
growth
|
1% – 3%
|
on track
|
Adjusted EBITDA
growth
|
5% – 7%
|
on track
|
Capital
intensity
|
approx.
16.5%
|
on track
|
Adjusted
EPS
|
$3.48 –
$3.58
|
on track
|
Free cash flow
growth
|
7% – 12%
|
on track
|
Annualized common
dividend per share
|
$3.17
|
$3.17
|
Dividend
payout policy(3)
|
65% – 75%
of free cash
flow
|
on track
|
Note that excluding the impact of IFRS 16, adjusted EBITDA
growth for 2019 is projected to be 2% to 4%, consolidated free cash
flow growth 3% to 7%, and adjusted EPS $3.53 to $3.63.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q3 2019 results
on Thursday, October 31 at
8:00 am (Eastern). Media are welcome
to participate on a listen-only basis. Please dial toll-free
1-800-377-0758 or 416-340-2216. A replay will be available until
midnight November 30, 2019 by dialing
1-800-408-3053 or 905-694-9451 and entering passcode 7732370#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q3-2019 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.
(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
mark-to-market losses (gains) on derivatives used to economically
hedge equity settled share-based compensation plans, net losses
(gains) on investments, early debt redemption costs and impairment
charges, net of tax and non-controlling interest (NCI). 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 mark-to-market losses
(gains) on derivatives used to economically hedge equity settled
share-based compensation plans, net losses (gains) on investments,
early debt redemption costs and impairment charges, 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)
|
|
Q3 2019
|
Q3 2018
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
867
|
0.96
|
814
|
0.90
|
Severance,
acquisition and other costs
|
17
|
0.02
|
39
|
0.04
|
Net mark-to-market
(gains) losses on derivatives used to economically hedge
equity settled share-based compensation plans
|
(64)
|
(0.07)
|
5
|
0.01
|
Net losses on
investments
|
-
|
-
|
-
|
-
|
Early debt redemption
costs
|
-
|
-
|
2
|
0.01
|
Impairment
charges
|
-
|
-
|
1
|
-
|
Adjusted net
earnings
|
820
|
0.91
|
861
|
0.96
|
(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 Q3 2019
consolidated 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 EBITDA.
($
millions)
|
|
|
|
Q3 2019
|
Q3 2018
|
Net
earnings
|
922
|
867
|
Severance,
acquisition and other costs
|
23
|
54
|
Depreciation
|
861
|
779
|
Amortization
|
230
|
220
|
Finance
costs
|
|
|
Interest
expense
|
282
|
255
|
Interest on
post-employment benefit obligations
|
16
|
17
|
Other (income)
expense
|
(61)
|
41
|
Income
taxes
|
321
|
224
|
Adjusted
EBITDA
|
2,594
|
2,457
|
BCE operating
revenues
|
5,984
|
5,877
|
Adjusted EBITDA
margin
|
43.3%
|
41.8%
|
(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 on common shares, 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)
|
|
|
|
Q3 2019
|
Q3 2018
|
Cash flows from
operating activities
|
2,258
|
2,043
|
Capital expenditures
|
(1,013)
|
(1,010)
|
Cash dividends paid
on preferred shares
|
(47)
|
(35)
|
Cash dividends paid
by subsidiaries to NCI
|
(12)
|
(3)
|
Acquisition and other
costs paid
|
3
|
19
|
Free cash
flow
|
1,189
|
1,014
|
(4) At the beginning of Q1 2019, we adjusted our wireless
subscriber base to remove 167,929 subscribers (72,231 postpaid and
95,698 prepaid) as follows: 65,798 subscribers (19,195 postpaid and
46,603 prepaid) due to the completion of the shutdown of the CDMA
network on April 30, 2019; 49,095
prepaid subscribers as a result of a change to our deactivation
policy mainly from 120 days for Bell and Virgin Mobile and 150 days
for Lucky Mobile to 90 days; 43,670 postpaid subscribers relating
to Internet of Things (IoT) due to a further refinement of our
subscriber definition as a result of technology evolution and 9,366
postpaid fixed wireless Internet customers transferred to Bell
Internet.
(5) We use ABPU, churn, capital intensity and subscriber units
as key performance indicators 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 REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to our financial guidance (including revenues,
adjusted EBITDA, capital intensity, adjusted EPS and free cash
flow), BCE's 2019 annualized common share dividend and common share
dividend payout policy, BCE's expected dividend growth in 2020, our
network deployment and capital investment plans, 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.
These statements are not guarantees of future performance or
events, 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
October 31, 2019 and, accordingly,
are subject to change after such date. Except as may be required by
applicable 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 October 31,
2019. 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 financial
results, as well as our objectives, strategic priorities and
business outlook, 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
- Higher economic growth, given the Bank of Canada's most recent
estimated growth in Canadian gross domestic product of 1.5% in
2019, representing an increase from the earlier estimate of
1.3%
- Employment gains expected to continue in 2019, as the overall
level of business investment is expected to grow but remain
variable
- Interest rates expected to remain at or near current
levels
- Canadian dollar expected to remain at 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 consistently high level of wireline and wireless competition
in consumer, business and wholesale markets
- Higher, but slowing, wireless industry penetration and
smartphone adoption
- Increased adoption of unlimited data plans and installment
payment plans
- A shrinking data and voice connectivity market as business
customers migrate to lower-priced traditional telecommunications
solutions or alternative over-the-top (OTT) competitors
- Advertising market expected to be impacted by audience declines
and variable demand
- Continued escalation of media content costs to secure TV
programming
- Ongoing linear TV subscriber erosion, due to growing
cord-cutter and cord-never customer segments
Assumptions Concerning our Bell Wireless
Segment
- Maintain our market share of incumbent wireless postpaid net
additions
- Higher prepaid customer net additions
- Continued adoption of smartphone devices, tablets and data
applications, as well as the introduction of more Fourth Generation
(4G) LTE and LTE-A devices and new data services
- Higher subscriber acquisition and retention spending, driven by
higher handset costs
- Improving blended ABPU, driven by a higher postpaid smartphone
mix, increased data consumption on 4G LTE and LTE-A networks, and
higher access rates partly offset by the impact of a higher prepaid
mix in our overall subscriber base and the impact from Bell
Mobility's SSC contract
- Increased adoption of unlimited data plans and installment
payment plans
- Expansion of the LTE-A network coverage to approximately 94% of
the Canadian population, and continued Fifth Generation (5G)
preparations with network technology trials, as well as the
deployment of small cells and equipping all new sites with
fibre
- 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 retail residential IPTV and Internet
subscribers
- Increasing wireless and Internet-based technological
substitution
- Residential services household average revenue per user growth
from increased penetration of multi-product households and price
increases
- Continued 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 telecommunications
competitors continue to intensify their focus on business
customers
- Traditional high-margin product categories challenged by large
global cloud and OTT providers of business voice and data solutions
expanding into Canada with on-demand services
- Accelerating customer adoption of OTT services resulting in
downsizing of TV packages
- Further deployment of direct fibre to more homes and businesses
within our wireline footprint and an acceleration in our fixed WTTH
rural buildout
- Growing consumption of OTT TV services and on-demand streaming
video, as well as the proliferation of devices, such as tablets,
that consume large quantities of bandwidth, will require
considerable ongoing capital investment
- Realization of cost savings related to management workforce
reductions including attrition and retirements, lower contracted
rates from our suppliers, operating efficiencies enabled by a
growing direct fibre footprint, changes in consumer behaviour and
product innovation, as well as the realization of additional
synergies from the next phases of integration of Manitoba Telecom
Services Inc.
- No material financial, operational or competitive consequences
of changes in regulations affecting our wireline business
Assumptions Concerning our Bell Media Segment
- Revenue performance expected to reflect further Crave
subscriber growth, flow-through of broadcasting distribution
undertaking rate increases, and strategic pricing on advertising
sales
- Operating cost growth driven by higher programming costs,
excluding IFRS 16, mainly due to continued investment in Crave
content
- Continued scaling of Crave and sports direct-to-consumer
products
- 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
- Monetization of content rights and Bell Media properties across
all platforms
- TV unbundling and growth in OTT viewing expected to result in
lower subscriber levels for many Bell Media video 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
2019:
- Total post-employment benefit plans cost to be approximately
$310 million to $330 million, based on an estimated accounting
discount rate of 3.8%, 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 $60 million to
$70 million
- Depreciation and amortization expense of approximately
$4,375 million to $4,475 million
- Interest expense of approximately $1,125
million to $1,150 million
- An effective tax rate of approximately 25%
- NCI of approximately $50
million
- Total cash pension plan funding of approximately $375 million
- Cash taxes of approximately $650
million to $700 million
- Net interest payments of approximately $1,125 million to $1,150
million
- Average BCE common shares outstanding of approximately 900
million
- An annual common share dividend of $3.17 per share
The foregoing assumptions, although considered reasonable by BCE
on October 31, 2019, 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 2019 financial
guidance, are listed below. The realization of our forward-looking
statements, including our ability to meet our 2019 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:
- the intensity of competitive activity, including from new and
emerging competitors, coupled with new product launches, 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 TV competitors, for programming content, which could drive
significant increases in content acquisition costs and challenge
our ability to secure key content
- the proliferation of content piracy impacting subscriber growth
and our ability to monetize products and services, as well as
creating bandwidth pressure
- 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
- 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, spectrum auctions, consumer-related codes of
conduct, approval of acquisitions, broadcast licensing and foreign
ownership requirements
- the inability to protect our physical and non-physical assets,
including networks, IT systems, offices, corporate stores and
sensitive information, from events such as information security
attacks, unauthorized access or entry, fire and natural
disasters
- the failure to optimize network and IT deployment and upgrade
timelines, accurately assess the potential of new technologies, or
invest and evolve in the appropriate direction
- the failure to continue investment in next-generation
capabilities in a disciplined and strategic manner
- the inability to drive a positive customer experience in all
aspects of our engagement with customers
- the complexity in our operations resulting from multiple
technology platforms, billing systems, sales channels, 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, staff reductions,
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
- our dependence on third-party suppliers, outsourcers and
consultants to provide an uninterrupted supply of the products and
services we need to operate our business, deploy new network and
other technologies and offer new products and services, as well as
to comply with various obligations
- changes to our base of suppliers or outsourcers that we may
decide or be required to implement
- the failure of our vendor selection, governance and oversight
processes established to seek to ensure full risk transparency
associated with existing and new suppliers
- security and data leakage exposure if security control
protocols affecting our suppliers are bypassed
- 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
- the failure to attract and retain employees with the
appropriate skill sets and to drive their performance in a safe
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, whether the dividend on common shares will be
increased, 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
- new or 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
- unfavourable resolution of legal proceedings and, in
particular, class actions
- new or 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 and equipment
- the inability to maintain customer service and our networks
operational in the event of epidemics, pandemics or 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 2018 Annual
MD&A dated March 7, 2019
(included in BCE's 2018 Annual Report) and BCE's 2019 First, Second
and Third Quarter MD&As dated May 1,
2019, July 31, 2019 and
October 30, 2019, 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
BCE is Canada's largest communications
company, providing advanced Bell broadband wireless, TV, Internet
and business communications services alongside Canada's premier
content creation and media assets from Bell Media. To learn more,
please visit Bell.ca or 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 leadership initiatives. To learn more,
please visit Bell.ca/LetsTalk.
Media inquiries:
Marie-Eve Francoeur
514-391-5263
marie-eve.francoeur@bell.ca
Investor inquiries:
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
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SOURCE Bell Canada