2013 financial guidance increased
- Wireless postpaid net activations of 96,390 and 2.7% higher
blended ARPU drive wireless service revenue growth of 6.1%;
Wireless service margin increases to 45.9%
- Best-ever Bell Fibe TV net customer activations of 50,555, a
31.4% increase; network access service (NAS) landline losses
improve 12.8%
- Bell EBITDA up 1.5% on Wireless and Media EBITDA growth of
8.9% and 3.3%, respectively, as consolidated Bell EBITDA margin
held steady at 39.4%
- Improving Wireline revenue and EBITDA results as operating
mix increasingly dominated by TV and Internet growth
services
- Net earnings attributable to common shareholders of
$571 million, or $0.74 per common share; Adjusted earnings per
share of $0.77 in line with
plan
- Strong 12% growth in free cash flow to $903 million
- Acquisition of Astral Media Inc. (Astral) completed on
July 5
This news release contains forward-looking statements. For a
description of the related risk factors and assumptions please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
MONTREAL, Aug. 8, 2013 /PRNewswire/ - BCE Inc. (TSX, NYSE:
BCE), Canada's largest communications company, today reported BCE
and Bell results for the second quarter (Q2) of 2013, and increased
financial guidance for 2013 to reflect the acquisition of
Astral.
FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
|
($ millions except per share amounts)
(unaudited) |
|
Q2 2013 |
|
Q2 2012 |
|
% change |
Bell(i) |
|
|
|
|
|
|
Operating revenues |
|
4,424 |
|
4,341 |
|
1.9% |
EBITDA |
|
1,744 |
|
1,718 |
|
1.5% |
BCE |
|
|
|
|
|
|
Operating revenues |
|
5,000 |
|
4,925 |
|
1.5% |
EBITDA |
|
2,066 |
|
2,044 |
|
1.1% |
Net earnings attributable to common
shareholders |
|
571 |
|
732 |
|
(22.0%) |
EPS |
|
0.74 |
|
0.94 |
|
(21.3%) |
Adjusted EPS |
|
0.77 |
|
0.97 |
|
(20.6%) |
Cash flows from operating activities |
|
1,868 |
|
1,904 |
|
(1.9%) |
Free cash flow |
|
903 |
|
806 |
|
12.0% |
(i) |
Bell includes the Bell Wireless, Bell Wireline and Bell Media
segments. |
"At Bell, we're dedicated to bringing the world's most advanced
communications services to Canadians - fast-growing mobile LTE and
fibre networks delivering new choices in wireless, TV, Internet,
media and business communications. Bell's unmatched investment in
Canada's broadband infrastructure, innovative new products, and
strong execution by the almost 60,000 members of the Bell national
team have resulted in robust financial performance and rapid
expansion in our growth services," said George Cope, President and CEO of BCE and
Bell Canada.
"Increasing smartphone adoption and use of data services like
Bell Mobile TV supported strong revenue and EBITDA growth at Bell
Wireless. Our rapidly expanding Fibe footprint drove the highest
number of Fibe TV customer additions since its launch, as well as
growing Internet performance and improvement in our traditional
landline business as more customers bundled Bell services. And with
solid financial performance in Q2 supported by increased
advertising and revenue from sports and other specialty services,
Bell Media remains Canada's top media company - a competitive
position further strengthened with the addition of the Astral team,
especially in the Québec media marketplace," said Mr. Cope.
Bell is committed to 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.
"We delivered a solid set of financial results in Q2, backed by
continued wireless postpaid strength along with good operational
progress in our wireline business and a strong contribution from
our media business," said Siim
Vanaselja, Chief Financial Officer for BCE and Bell. "Our
successful closing of the acquisition of Astral supports the
increased 2013 financial guidance we're announcing today. After
absorbing integration and other acquisition-related costs in the
second half of 2013, we expect to begin realizing the full
financial benefits of this acquisition in 2014 with strong free
cash flow accretion to support our dividend growth objective."
BCE RESULTS
BCE's net earnings attributable to common shareholders were
$571 million in Q2 2013, or
$0.74 per common share, compared to
$732 million, or $0.94 per common share, in Q2 2012. In line with
plan, Adjusted earnings per share (EPS)(1) was
$0.77 per common share, down
$0.20 from last year. The
year-over-year decrease was due to the higher value of uncertain
tax positions favourably resolved in Q2 2012, losses on
equity derivative contracts entered into to economically hedge
future payments under our share-based compensation plans, and
increased interest expense related to the financing of our
acquisition of Astral.
BCE's cash flows from operating activities were $1,868 million in Q2 2013, down $36 million over last year, due largely to the
timing of supplier payments, increased interest payments from a
higher average level of long-term debt, and higher income taxes.
Free cash flow(2) available to BCE's common
shareholders increased $97 million,
or 12%, this quarter to $903 million,
driven mainly by higher EBITDA(3) and lower
capital expenditures.
At the end of Q2, BCE (including Bell
Canada and Bell Aliant) served a total of 7,860,429 wireless
subscribers, up 3.5% from Q2 2012; total TV subscribers of
2,377,021 (which includes 495,038 IPTV customers), a 5.3% increase;
total high-speed Internet subscribers of 3,054,427, up 1.5%; and
total NAS lines of 7,851,441, a decrease of 7.0%.
BELL RESULTS
Bell operating revenues in Q2 2013 grew 1.9% to $4,424 million, driven by a 1.8% increase in
service revenues that reflects growth in wireless, TV, Internet,
media and business IP connectivity and solutions. Product revenues
were also up 2.9% this quarter, due to increased data product sales
to large enterprise customers.
Bell EBITDA increased 1.5% to $1,744
million, with 8.9% EBITDA growth at Bell Wireless and 3.3%
at Bell Media. This was moderated by a 2.9% decrease in Bell
Wireline's EBITDA, which represents an improving trend over Q1 2013
and all previous quarters in 2012. Bell's consolidated EBITDA
margin in Q2 2013 remained relatively unchanged at 39.4% compared
to 39.6% in Q2 2012, reflecting strong wireless revenue
flow-through, controlled spending on wireless subscriber
acquisition and retention, slower wireline voice erosion, the
increasing scale of Bell Fibe TV, and pricing and cost discipline
across the company.
LET'S CLOSE THE LOOPHOLES
Bell is urging the federal government to close the loopholes in new
wireless regulations that favour major US wireless carriers like
Verizon Communications Inc. (Verizon) with a range of advantages
originally intended for competitive wireless startups. Bell is
always ready to compete but the playing field needs to be level.
Special benefits available to companies like Verizon include
preferred access to Canada's wireless spectrum, the right to access
the networks of Canadian carriers, and the ability to acquire
wireless startups in Canada that
Canadian companies like Bell cannot. Yet Canadian carriers have no
such reciprocal rights in the US or any other country. Considering
the cost to Canadians and the impact on investment, innovation and
employment in Canadian wireless, the campaign to close the
loopholes has received strong support from a broad spectrum of
Canadians. Please visit Bell.ca/PlayFair or FairForCanada.ca to
learn more.
ASTRAL ACQUISITION COMPLETED
We welcomed the Astral team to Bell Media following the completion
of the $3.27 billion acquisition of
the Montréal-based Astral by Bell on July 5,
2013. The acquisition means more investment in Canadian
media and choice for consumers, while greatly enhancing Bell
Media's competitive position, especially in the Québec marketplace.
Astral properties acquired include high-quality pay and specialty
TV services (the French-language Super Écran, Cinépop, Canal Vie,
Canal D, VRAK TV, and Ztélé, and English-language services The
Movie Network, including HBO Canada, and TMN Encore), one of
Canada's largest out-of-home advertising businesses, and 77 radio
stations, including top brands like NRJ, Virgin Radio, Rouge fm, EZ
Rock. Ian Greenberg, President and
CEO of Astral, joined BCE's Board of Directors at the close of the
transaction.
BELL OPERATING RESULTS BY SEGMENT
Bell delivered strong execution across all its business segments in
Q2 2013. Bell Wireless maintained strong market momentum with
considerable postpaid customer activations and operating metrics
that improved subscriber profitability. We also saw an acceleration
in Fibe TV net customer activations, fewer NAS landline losses,
better Bell Business Markets performance, and disciplined cost
management across the company, all of which contributed to further
improvement in Bell Wireline's revenue and EBITDA trajectories.
Bell Media's continued significant contribution to consolidated
Bell EBITDA and cash flow growth this quarter supports the
transformation of Bell's growth services mix profile, which will be
further enhanced with the acquisition of Astral.
Bell invested $673 million in new
capital in Q2 2013 to support the continued deployment of
next-generation wireline and wireless broadband platforms. This
represents a 13.3% decrease compared to Q2 2012, due to higher
initial rollout costs last year for the construction of Bell's 4G
LTE mobile network in major urban markets and the rapid retail
store expansion in Western Canada,
as well as the timing of capital spending in 2013 compared to last
year.
Bell Wireless
Bell Wireless operating revenues increased 5.4% to $1,442 million in the quarter compared to
$1,368 million in Q2 2012. Service
revenues were up 6.1% to $1,328
million driven by postpaid subscriber growth and higher
blended ARPU reflecting increased data usage and revenues from
greater smartphone penetration. Wireless data revenue grew 21.1% in
Q2 and now represents more than 40% of total wireless service
revenues.
Bell Wireless EBITDA increased 8.9% to $609 million, reflecting the combined impact of
higher operating revenues and disciplined handset discounting for
new customer acquisitions and upgrades. This contributed to a 1.3
percentage-point improvement in service margin to 45.9% from 44.6%
in Q2 2012, the best performance in 4 years.
- Postpaid net additions of 96,390 reflected a 2.7% increase in
postpaid gross activations compared to Q2 2012 and stable customer
churn. Higher postpaid gross activations were driven by a strong
lineup of smartphones and other mobile devices, attractive
promotions and effective advertising. Prepaid net customer losses
improved 3.7% to 52,824 as a result of fewer customer
deactivations.
- Smartphone users represented 70% of total postpaid subscribers
at the end of the quarter, compared to 55% a year earlier. Bell
Wireless customers totalled 7,715,641 at the end of Q2, an increase
of 3.5%.
- Postpaid customer churn remained low and unchanged at 1.3%,
reflecting continued investments in customer service and retention.
Prepaid churn also remained unchanged at 3.7% this quarter.
- Blended ARPU increased 2.7% to $56.85 in the quarter, representing the
fourteenth consecutive quarter of year-over-year improvement.
Growth was driven by a higher proportion of postpaid customers in
our overall wireless subscriber base, growth in data usage due to
strong smartphone adoption, and postpaid customer growth in
higher-ARPU customer segments and regions such as Western Canada.
- Cost of acquisition increased 5.5% to $402 per gross activation, reflecting higher
handset discounts driven by a higher postpaid smartphone mix and
competitive handset pricing in the market.
- Bell continues to offer customers access to Canada's largest 4G
LTE network reaching approximately 73% of the Canadian population,
complementing the 4G HSPA+ and enhanced 4G HSPA+ DC (Dual Cell)
networks that offer coast-to-coast coverage to more than 97% and
more than 92% of the population, respectively.
- Bell Mobile TV announced expanded live and on-demand
programming with the addition of CBC, Radio-Canada TV, City TV,
Sportsnet and BBC World News. Now with more than 30 channels in
English and French available on smartphones and tablets, Bell
Mobile TV offers access to news, entertainment and children's
programming from brands such as ATN, BNN, BBC, Bloomberg, CTV, City
TV, Juicebox, MTV Canada, Treehouse, TVA and YTV, and sports
content from TSN, RDS, Sportsnet and the NHL, NBA and NFL.
- Royal Bank of Canada (RBC) and Bell Mobility have announced
that customers will be able to pay securely for transactions with
their RBC debit or credit cards using compatible Bell Mobility
smartphones. RBC and Bell expect to make the service broadly
available by the end of the year and are now testing the solution
with consumers and merchant customers.
- Bell Wireless continued to bring customers the latest in
wireless technology with the introduction of several new in-demand
devices, including the BlackBerry Q10, the HTC One, the Samsung
Galaxy S4 and the Sony Xperia ZL. These smartphones are all
equipped with Near Field Communications (NFC) capability, enabling
mobile commerce applications and easy wireless sharing of music,
contacts, files and images.
- Bell renewed its partnership with GLENTEL, Canada's largest
independent multi-carrier mobile phone retailer, to offer Bell
Mobility products and services to customers at GLENTEL retail
outlets across Canada, including Wireless Wave, Telephone Booth,
Wireless Etc. and Target Mobile.
Bell Wireline
The pace of Bell Wireline's revenue decline improved significantly
in the quarter with revenues decreasing by a modest 0.9% to
$2,506 million, as growth in Fibe TV
and Fibe Internet drove stronger overall residential financial
results. This moderated the decline in voice revenues, reflecting
fewer NAS landline losses compared to Q2 2012. Bell Business
Markets generated higher IP connectivity revenues and saw increased
data product sales to large enterprise customers this quarter.
Bell Wireline EBITDA decreased 2.9% to $979 million and we maintained margin on plan at
39.1% (compared to 39.9% in Q2 2012). The decrease in Wireline
EBITDA this quarter was impacted by a $10
million benefit realized in Q2 2012 from an adjustment to TV
broadcast licence fees payable to the CRTC that did not recur this
year. Excluding this impact, Bell Wireline EBITDA decreased 1.9%
this quarter.
- Bell Fibe TV added 50,555 net new customers, a 31.4% increase
over the 38,477 gained in the second quarter of 2012. This
represents our best quarterly performance since launching the
service in Q3 2010, reflecting growth in customer demand for Fibe
TV as we continue to expand our IPTV service footprint. At the end
of Q2, Bell Fibe TV subscribers totalled 346,316, more than double
the 158,324 subscribers reported at the end of Q2 2012.
- In May 2013, Bell Fibe TV
launched Canada's first wireless receiver, a Bell exclusive that
enables customers to connect additional TVs with Fibe TV service
anywhere in the home without the need to run extra cable. A
wireless receiver transmitter connects to a customer's Home
Networking modem and works with their Whole Home personal video
recorder (PVR) to connect one or more Wireless Receivers to deliver
the full Fibe TV experience to as many as 5 additional TVs.
- Combined Bell Satellite TV and Fibe TV net additions in the
quarter increased 52.8% to 25,605. Bell TV's subscriber base
totalled 2,195,559 at the end of Q2 2013, representing a 3.2%
increase since the end of Q2 2012.
- Bell high-speed Internet net subscriber additions were 3,901,
compared to a net loss of 664 in Q2 2012, reflecting the
pull-through of Bell Fibe TV customer activations as well as
improved business and wholesale customer activations. Bell total
high-speed Internet subscribers reached 2,121,075, up 0.8% since
the end of Q2 2012.
- Wireline data revenue was up 4.0% to $1,456 million, driven mainly by higher TV and
Internet service revenues as a result of Fibe customer growth,
higher IP broadband connectivity revenues and increased data
product sales.
- Residential NAS net losses improved 11.8%, or 11,029, over Q2
2012, reflecting lower rates of residential NAS turnover in Bell
Fibe TV service areas and fewer wholesale customer losses to
competitors compared to the second quarter of last year.
- Business NAS losses improved 15.3%, or 5,206, this quarter as
Bell Business Markets reduced access line losses in its mid-sized
customer segment. Wholesale business access line losses also
improved year over year.
- Total Bell NAS at the end of the quarter was 5,425,491, a 7.7%
decline. Bell's local and access revenues declined 7.1% to
$632 million, while long distance
revenue declined 11.2% to $183
million.
- Bell and CGI Group Inc. (CGI) teamed up on a winning bid to
deliver a new email system for the federal government. Based on the
latest email technology, the streamlined system will enhance
security and increase efficiency, ultimately improving Canadians'
access to information and services while saving the government a
projected $50 million per year
starting in 2015. Bell and CGI will implement and manage the
government's new email system for 7 years with an optional 1-year
extension.
Bell Media
Bell Media revenues grew 4.7% to $559
million in the quarter, due to subscriber fee revenue growth
of 7.9% reflecting increases in specialty TV rates paid by
broadcast distributors. Advertising revenues were up 0.8% compared
to Q2 2012, with growth driven by Bell Media's specialty sports TV
properties, TSN and RDS, thanks to the NHL's regular season
schedule being extended into Q2 and intense viewer interest in the
hockey playoffs. Bell Media's conventional TV properties also had
higher advertising sales compared to Q2 2012. This growth was
offset by a year-over-year decline in digital advertising revenues
and softer radio advertising sales.
As a result of higher operating revenues, Bell Media EBITDA
increased 3.3% to $156 million,
despite the non-recurring benefit realized in Q2 2012 totalling
$15 million from accrual adjustments
to CRTC Part II fees and the Local Programming Improvement Fund,
and higher programming and production costs this quarter due to the
NHL's extended schedule.
- CTV wrapped up the 2012/13 broadcast year with more top 10, top
20 and top 30 shows than any other Canadian conventional TV network
according to BBM Canada, making it the most-watched Canadian TV
network for the 12th year in a row.
- Bell Media's sports and non-sports TV specialty services
reached nearly 26 million Canadians in the average week throughout
Q2 2013, over 6 million viewers more than the closest
competitor.
- At the annual Los Angeles
programming screenings in May, Bell Media secured an attractive mix
of returning and new programs for its 2013/2014 primetime schedules
on its CTV and CTV Two networks, featuring more returning hits than
any other Canadian network along with a number of new programs for
the fall and mid-seasons. CTV will also remain the home of TV's
biggest events in 2013/2014, including the Academy Awards, Super
Bowl, the Golden Globe Awards, the Primetime Emmy Awards, the
American Music Awards and the Juno Awards.
BELL ALIANT RESULTS
Bell Aliant (TSX: BA) revenues increased 0.6% to $691 million in Q2 2013 from $687 million in Q2 2012, as growth in data was
largely offset by continued declines in local and access and long
distance revenues, as well as equipment and other revenues. Bell
Aliant's EBITDA was down 1.2% at $322
million this quarter, as slightly higher operating revenues
were offset by a 2.2% increase in operating costs related mostly to
growth of its FibreOP service. For more information, please visit
BellAliant.ca.
COMMON SHARE DIVIDEND
BCE's Board of Directors has declared a quarterly dividend of
$0.5825 per common share, payable on
October 15, 2013 to shareholders of
record at the close of business on September
16, 2013.
OUTLOOK
As a result of the closing of the acquisition of Astral on
July 5, 2013, BCE has updated its
financial guidance for 2013 as follows:
|
|
February 7
Guidance |
|
August 8
Guidance |
Bell (i) |
|
|
|
|
Revenue Growth |
|
0% - 2% |
|
2% - 4% |
EBITDA Growth |
|
1% - 3% |
|
3% - 5% |
Capital Intensity |
|
16% - 17% |
|
No change |
BCE |
|
|
|
|
Adjusted EPS (ii) |
|
$2.97 - $3.03 |
|
No change |
Free Cash Flow growth (iii) |
|
5% - 9% |
|
No change |
Annual common dividend per share |
|
$2.33 |
|
No change |
|
(i) |
Bell's 2013 financial guidance for revenue, EBITDA and capital
intensity is exclusive of Bell Aliant. |
|
(ii) |
We define Adjusted net earnings as net earnings attributable to
common shareholders before severance, acquisition and other costs,
net (gains) losses on investments and premiums on early redemption
of debt. We define Adjusted EPS as Adjusted net earnings per BCE
Inc. common share. |
|
(iii) |
We define free cash flow as cash flows from operating
activities excluding acquisition costs paid and voluntary pension
funding, plus dividends/distributions received from Bell Aliant,
less capital expenditures, preferred share dividends,
dividends/distributions paid by subsidiaries to non-controlling
interest, and Bell Aliant free cash flow. |
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss
Q2 2013 results on Thursday, August 8
at 8:00 a.m. (Eastern). Media are
welcome to participate on a listen-only basis. To participate,
please dial (416) 340-8061 or toll-free 1-866-225-0198 shortly
before the start of the call. A replay will be available for one
week by dialing (905) 694-9451 or 1-800-408-3053 and entering pass
code 3092522#.
There will also be a live audio webcast of the call available on
BCE's website at:
BCE.ca/investors/investorevents/all/show/bce-q2-2013-results-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 companies.
Starting in 2013, our definition of Adjusted net earnings has been
modified to exclude premiums on early redemption of debt to align
with the reporting practices of our peers. We define Adjusted net
earnings as net earnings attributable to common shareholders before
severance, acquisition and other costs, net (gains) losses on
investments, and premiums on early redemption of debt. We define
Adjusted EPS as Adjusted net earnings per BCE common share. We use
Adjusted net earnings and Adjusted EPS, among other measures, to
assess the performance of our businesses without the effects of
severance, acquisition and other costs, net (gains) losses on
investments, and premiums on early redemption of debt, net of tax
and non-controlling interest. 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
2013 |
|
Q2
2012 |
|
TOTAL |
|
PER SHARE |
|
TOTAL |
|
PER SHARE |
Net earnings attributable to
common shareholders |
571 |
|
0.74 |
|
732 |
|
0.94 |
Severance, acquisition and other
costs |
21 |
|
0.02 |
|
15 |
|
0.03 |
Net gains on investments |
(1) |
|
- |
|
- |
|
- |
Premium on early redemption of
debts |
3 |
|
0.01 |
|
- |
|
- |
|
|
|
|
|
|
|
|
Adjusted net earnings |
594 |
|
0.77 |
|
747 |
|
0.97 |
(2) |
The term free cash flow does not have any standardized meaning
under IFRS. Therefore, it is unlikely to be comparable to similar
measures presented by other companies. Starting in 2013, our
definition of free cash flow has been modified to exclude voluntary
pension funding because it is a discretionary use of excess cash.
We define free cash flow as cash flows from operating activities,
excluding acquisition costs paid and voluntary pension funding,
plus dividends/distributions received from Bell Aliant, less
capital expenditures, preferred share dividends,
dividends/distributions paid by subsidiaries to non-controlling
interest, and Bell Aliant free cash flow. We consider free cash
flow to be an important indicator of the financial strength and
performance of our business because it shows how much cash is
available to 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. The most comparable IFRS
financial measure is cash flows from operating activities. The
following table is a reconciliation of cash flows from operating
activities to free cash flow on a consolidated basis. |
($ millions) |
|
|
|
|
|
|
Q2 2013 |
|
Q2 2012 |
Cash flows from operating activities |
|
1,868 |
|
1,904 |
Bell Aliant dividends/distributions to BCE |
|
47 |
|
47 |
Capital expenditures |
|
(830) |
|
(952) |
Cash dividends paid on preferred shares |
|
(32) |
|
(34) |
Cash dividends/ distributions paid by subsidiaries
to non-controlling interest |
|
(74) |
|
(91) |
Acquisition costs paid |
|
8 |
|
32 |
Bell Aliant free cash flow |
|
(84) |
|
(100) |
Free cash flow |
|
903 |
|
806 |
(3) |
The term EBITDA does not have any standardized meaning under
IFRS. Therefore, it is unlikely to be comparable to similar
measures presented by other companies. We define EBITDA as
operating revenues less operating costs, as shown in BCE's
consolidated income statements. We use EBITDA to evaluate the
performance of our businesses as it reflects their ongoing
profitability. We believe that certain investors and analysts use
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. EBITDA also is one
component in the determination of short-term incentive compensation
for all management employees. EBITDA has no directly comparable
IFRS financial measure. Alternatively, the following table provides
a reconciliation of BCE net earnings to EBITDA. |
($ millions) |
|
|
|
|
|
|
Q2 2013 |
|
Q2 2012 |
Net earnings |
|
671 |
|
836 |
Severance, acquisition and other costs |
|
28 |
|
20 |
Depreciation |
|
681 |
|
666 |
Amortization |
|
161 |
|
178 |
Finance costs |
|
|
|
|
|
Interest expense |
|
228 |
|
209 |
|
Interest on post-employment benefit obligations |
|
38 |
|
33 |
Other (income) expense |
|
63 |
|
(55) |
Income taxes |
|
196 |
|
157 |
|
|
|
|
|
EBITDA |
|
2,066 |
|
2,044 |
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this news release, including, but not
limited to, statements relating to our 2013 financial guidance
(including revenues, EBITDA, Capital Intensity, Adjusted EPS and
Free Cash Flow), our business outlook, objectives, plans and
strategic priorities, BCE's 2013 annualized common share dividend,
the strategic and other benefits expected to result from the Astral
acquisition, the expectation that Astral will be accretive to BCE's
free cash flow, and other statements that are not historical facts,
are forward-looking. 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 you are cautioned not to place undue reliance
on these forward-looking statements. The forward-looking statements
contained in this news release describe our expectations as of
August 8, 2013 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 non-recurring
or other 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 8, 2013. The financial impact
of these transactions and non-recurring and other 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 press release for
the purpose of assisting investors and others in understanding
certain key elements of our expected 2013 financial results, as
well as our objectives, strategic priorities and business outlook
for 2013, 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 for
2013 contained in this news release, including, but not limited
to:
Canadian Economic and Market Assumptions
- Growth in the Canadian economy of 1.8% in 2013, based on the
Bank of Canada's most recent estimate, a thirty basis point
increase compared with an earlier estimate of 1.5%;
- a slow pace of employment growth and new business formation
affecting overall business customer demand;
- a sustained level of wireline and wireless competition in both
consumer and business markets;
- higher wireline replacement, due primarily to increasing
wireless and Internet-based technological substitution;
- increasing wireless industry penetration driven, in particular,
by the accelerated adoption of smartphones, tablets and data
applications, the expansion of LTE service in most urban and
suburban markets, the proliferation of 4G devices, as well as
population growth; and
- a soft advertising market for Bell Media.
Operational Assumptions Concerning Bell Wireline
(Excluding Bell Aliant)
- Stabilizing residential NAS line erosion rate as we leverage
our broadband investment in FibeTV to drive three-product household
penetration, increase our multiple-dwelling unit (MDU) market
share, and generate higher pull-through attach rates for our
residential Internet and Home Phone services;
- in particular, targeted retention and service bundle offers,
customer winbacks and better service execution to contribute to the
improvement in residential NAS line losses year over year, subject
to the risk of more aggressive service bundle offers from our cable
TV competitors and increasingly affordable Canada-wide unlimited
wireless plans, which could lead to higher residential NAS line
losses;
- increased subscriber acquisition at Bell TV to be driven by
increased customer adoption of Fibe TV, as we further extend our
IPTV broadband fibre footprint in areas of Ontario and Québec, and our ability to seek
greater penetration within the MDU market, capitalize on our
extensive retail distribution network, which includes The Source,
and leverage our market leadership position in high definition (HD)
programming;
- improved subscriber acquisition at Bell Internet through
increased fibre coverage and speeds as we leverage our significant
network capital investment and the implementation of new
technologies to drive greater Fibe TV expansion and Internet attach
rates;
- gradual improvement in the performance of our Business Markets
unit based on increased business customer spending, new business
formation and higher demand for connectivity and ICT services
driven by a strengthening economy and an improvement in employment
rates, subject to the risk of business customers adopting more
conservative strategies which could result in lower capital
spending requirements and deferral of ICT projects;
- continued customer migration to IP-based systems, increased
competitive intensity in mass and mid-sized business segments as
cable operators and other telecom competitors continue to intensify
their focus on the business segment and ongoing competitive reprice
pressures in our business and wholesale markets; and
- cost savings to be achieved from management workforce attrition
and retirements, call center efficiencies, field service
productivity improvements, further reduction in supplier contract
rates, lower print and mail costs, effective content cost
management and reducing traffic that is not on our own
network.
Operational Assumptions Concerning Bell Wireless
(Excluding Bell Aliant)
- Bell Wireless to benefit from the flow-through of investments
made in 2012 in customer acquisition and retention, along with
continued strength in smartphone activations and data usage;
- continued aggressive competition in 2013 as competitors attempt
to maintain or gain wireless market share;
- wireless revenue growth to be underpinned by continued growth
in our subscriber base and ARPU, driven by a higher mix of
smartphone and higher-value postpaid customers, increased
distribution in western Canada, new services, and continued
disciplined price management;
- Bell Wireless to benefit from ongoing technological
improvements by manufacturers in our handset and device line-up and
from faster data speeds that are allowing our clients to optimize
the use of our services; and
- the proliferation of more expensive and sophisticated wireless
devices, as well as heightened competitive activity, to exert
pressure on EBITDA, due mainly to increased handset discount
resulting in higher subscriber acquisition and customer retention
costs.
Operational Assumptions Concerning Bell Media
- The non-recurrence, in 2013, of significant events that
occurred in 2012, including the London Summer Olympic Games, the
NHL lockout and retroactive rate increases for specialty
programming services;
- the intended launch, in 2013, of our TV Everywhere product, a
strategic initiative aimed at enabling us to deliver the best live
sports, news and other premium content exclusively to broadcasting
distribution undertakings' (BDUs) subscribers;
- growth in subscriber revenues to be driven by contracted
market-based rate increases for our specialty sports services;
- in conventional TV, building and maintaining strategic supply
arrangements for content on four screens, continuing to
successfully acquire high-rated programming and differentiated
content to execute on Bell's multi-screen content strategy,
producing and commissioning high-quality Canadian content, and
producing market-leading news through investments in HD
broadcasting and improvements to our news programming;
- increased costs to secure content in our sports broadcast
operations as we face greater competition from both new entrants
and established competitors, and as market rates for specialty
content generally increase;
- in our non-sports English and French pay and specialty TV
services, investment in quality programming and production,
marketing and ongoing development of key brand partnership
initiatives with respect to our existing services;
- pursuant to the Astral acquisition, the achievement of cost
reductions by maximizing assets, achieving productivity gains and
pursuing operational efficiencies; and
- the continued leverage of our strength in local radio and
television markets to provide listeners and viewers with quality
content, incorporating opportunities for multi-platform
selling.
Financial Assumptions Concerning Bell (Excluding Bell
Aliant)
The following constitute Bell's principal financial assumptions
for 2013. Where indicated below, assumptions have been
updated from Q1 2013 as a result of the acquisition of Astral.
- Bell's total employee benefit plans cost to be approximately
$350 million, instead of $340 million, based on an estimated accounting
discount rate of 4.4% and an expected return on plan assets of
4.4%, comprised of an estimated above EBITDA employee benefit plans
service cost of approximately $230
million, instead of $220
million, and an estimated below EBITDA net employee benefit
plans financing cost of approximately $120
million;
- total pension plan cash funding to be approximately
$350 million;
- cash taxes to be approximately $325
million, instead of $300
million;
- net interest expense of approximately $750 million, instead of $700 million;
- net interest payments of approximately $720 million, instead of $700 million; and
- cash severance and other of approximately $150 million.
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions
for 2013. Where indicated below, assumptions have been updated from
Q1 2013 as a result of the acquisition of Astral.
- BCE's total employee benefit plans cost to be approximately
$430 million, instead of $420 million, including approximately
$80 million for Bell Aliant,
comprised of an estimated above EBITDA employee benefit plans
service cost of approximately $290
million, instead of $280
million, and an estimated below EBITDA net employee benefit
plans financing cost of approximately $140
million;
- depreciation and amortization expense approximately
$50 million higher compared to
2012;
- net interest expense of approximately $925 million, instead of $875 million;
- tax adjustments (per share) of approximately $0.07;
- an effective tax rate of approximately 26%;
- non-controlling interest similar to 2012; and
- an annual common share dividend of $2.33 per share.
The foregoing assumptions, although considered reasonable by BCE
on August 8, 2013, 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 2013 financial guidance,
are listed below. The realization of our forward-looking
statements, including our ability to meet our 2013 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, and the resulting impact
on our ability to retain existing customers and attract new ones,
as well as on our pricing strategies, ARPU and financial
results;
- the level of technological substitution contributing to reduced
utilization of traditional wireline voice services and the
increasing number of households that use only wireless telephone
services;
- the increased adoption by customers of alternative TV
services;
- variability in subscriber acquisition and retention costs based
on subscriber acquisitions, retention volumes, smartphone sales and
handset discount levels;
- regulatory initiatives or proceedings, litigation, changes in
laws or regulations and tax matters;
- our failure to maintain network operating performance including
as a result of the significant increase in broadband demand and in
the volume of wireless data driven traffic;
- events affecting the functionality of, and our ability to
protect, maintain and replace, our networks, equipment, facilities
and other assets;
- our ability to maintain customer service and keep our networks
operational in the event of the occurrence of environmental
disasters or epidemics, pandemics and other health risks;
- our ability to anticipate and respond to technological change,
upgrade our networks and rapidly offer new products and
services;
- our failure to implement, on a timely basis, or maintain
effective IT systems and the complexity and costs of our IT
environment;
- general economic and financial market conditions, the level of
consumer confidence and spending, and the demand for, and prices
of, our products and services;
- our ability to implement our strategies and plans in order to
produce the expected benefits, including our ability to continue to
implement our cost reduction initiatives and contain capital
intensity while seeking to improve customer service;
- increased contributions to post-employment benefit plans;
- ineffective management of changes resulting from restructurings
and other corporate initiatives and from the integration of
business units and business acquisitions;
- the complexity of our product offerings and pricing plans;
- labour disruptions;
- employee retention and performance;
- events affecting the ability of third-party suppliers to
provide to us, and our ability to purchase, essential products and
services;
- the quality of our network and customer equipment and the
extent to which they may be subject to manufacturing defects;
- capital and other expenditure levels, financing and debt
requirements and our ability to raise the capital we need to
implement our business plan, including for BCE's dividend payments
and to fund capital and other expenditures and generally meet our
financial obligations;
- our ability to discontinue certain traditional services as
necessary to improve capital and operating efficiencies;
- launch and in-orbit risks of satellites used by
Bell ExpressVu Limited Partnership;
- the theft of our DTH satellite television services;
- Bell Media's significant dependence on continued demand for
advertising, and the potential adverse effect thereon from economic
conditions, cyclical and seasonal variations and competitive
pressures;
- the adverse effect of new technology and increasing
fragmentation in Bell Media's television and radio markets;
- health concerns about radio frequency emissions from wireless
devices;
- BCE's dependence on the ability of its subsidiaries, joint
ventures and other companies in which it has an interest to pay
dividends and make other distributions;
- there can be no certainty that dividends will be declared by
BCE's board of directors or that BCE's dividend policy will be
maintained;
- stock market volatility;
- our failure to evolve practices and effectively monitor and
control fraudulent activities; and
- our failure to successfully integrate Astral into Bell Media
and to achieve the anticipated strategic and other benefits.
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 2012 Annual
MD&A dated March 7, 2013
(included in the BCE 2012 Annual Report) as updated in BCE's 2013
First and Second Quarter MD&As, dated May 8, 2013 and August 7,
2013 respectively, for additional information with respect
to certain of these and other assumptions and risks, filed by BCE
with the Canadian securities commissions (available at
www.sedar.com) and with the U.S. Securities and Exchange Commission
(available at www.sec.gov). These documents are also available on
BCE's website at www.bce.ca.
ABOUT BCE
BCE is Canada's largest communications company, providing a
comprehensive and innovative suite of broadband communication
services to residential and business customers under the Bell and
Bell Aliant brands. Bell Media is Canada's premier multimedia
company with leading assets in television, radio and digital media,
including CTV, Canada's #1 television network, and the country's
most-watched specialty channels. To learn more, please visit
BCE.ca.
The Bell Let's Talk mental health initiative is a national
charitable and awareness program promoting mental health across
Canada with the Bell Let's Talk Day anti-stigma campaign and
significant Bell funding of community care and access, research,
and workplace initiatives. To learn more, please visit
Bell.ca/LetsTalk.
For BCE corporate information, please visit BCE.ca. For Bell
product and service information, please visit Bell.ca. For Bell
Media, please visit BellMedia.ca.
SOURCE Bell Canada