- BCE net earnings attributable to common shareholders of
$343 million; Adjusted net earnings
of $584 million, up 7%; Adjusted
earnings per share of $0.75, up
7.1%
- Strong free cash flow of $747
million, up 8.9%
- Bell EBITDA up 3.0% with 26.8% EBITDA growth at Bell Media,
supported by the inclusion of Astral, and wireless EBITDA growth of
11.6%; consolidated EBITDA margin steady at 38.4%
- Wireless postpaid net activations of 102,714 reflect
continued strong adoption of smartphones, now representing 73% of
postpaid base
- Total quarterly Residential Wireline net activations (TV,
Internet and local access lines) positive for the first time since
2005
- Bell Fibe TV net customer activations of 72,813, 69.4%
higher year over year, as service footprint expands to more than 4
million households; high-speed Internet net activations of 36,638,
best quarterly performance in over 6 years; residential local
access line losses improve 30.3%
- Reconfirming all 2013 BCE and Bell
Canada financial targets
This news release contains forward-looking statements. For a
description of the related risk factors and assumptions please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
MONTREAL, Nov. 7, 2013 /PRNewswire/ - BCE Inc. (TSX, NYSE:
BCE), Canada's largest communications company, today reported BCE
and Bell results for the third quarter (Q3) of 2013.
FINANCIAL HIGHLIGHTS |
|
|
|
|
|
($ millions except per share amounts)
(unaudited) |
Q3 2013 |
|
Q3 2012 |
|
% change |
Bell(i) |
|
|
|
|
|
Operating revenues |
4,524 |
|
4,393 |
|
3.0% |
EBITDA |
1,739 |
|
1,688 |
|
3.0% |
BCE |
|
|
|
|
|
Operating revenues |
5,099 |
|
4,982 |
|
2.3% |
EBITDA |
2,063 |
|
2,019 |
|
2.2% |
Net earnings attributable to common
shareholders |
343 |
|
527 |
|
(34.9%) |
EPS |
0.44 |
|
0.68 |
|
(35.3%) |
Adjusted EPS |
0.75 |
|
0.70 |
|
7.1% |
Cash flows from operating activities |
1,730 |
|
1,591 |
|
8.7% |
Free cash flow |
747 |
|
686 |
|
8.9% |
(i) Bell includes the Bell
Wireless, Bell Wireline and Bell Media segments. |
"Bell's industry-leading investments in new broadband network
infrastructure are driving our TV, wireless, Internet and media
growth services, fuelling a $183
million, or 5.3%, year-over-year revenue increase in Q3
growth services. Key to Bell's transformation as a competitive
force in Canadian communications, these growth services now make up
82% of Bell's revenue base, while traditional home phone service
accounts for just 8%," said George
Cope, President and CEO of Bell
Canada and BCE. "We've seen exceptional growth in smartphone
adoption and data growth even as we implemented the new federal
wireless code, market-leading results at Bell Media enhanced by the
addition of the Astral team, and our best performance in
residential wireline services since 2005 as the popularity of Bell
Fibe TV and Internet continues to accelerate. Our strategy to
deliver the best communications services the world has to offer to
Canadian consumers and business customers is supporting both Bell's
growing success in a competitive communications marketplace and
solid financial performance."
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.
"Our third-quarter financial results were very solid across all
Bell operating segments with excellent double-digit wireless and
media EBITDA growth driving strong growth in adjusted earnings and
free cash flow. We also continued to leverage our advanced
broadband networks and services to deliver healthy wireless and
residential wireline net customer activations, which provides the
foundation for sustained financial performance going forward," said
Siim Vanaselja, Chief Financial
Officer for Bell and BCE. "With an outlook for continued strong
wireless profitability, an improving wireline financial profile and
a significant contribution from Astral to our Bell Media results,
we are on track with our 2013 financial plan and reconfirm today
all our Bell and BCE guidance targets for the year."
Additionally, the funded status of Bell
Canada's defined benefit pension plan has improved
significantly since the beginning of the year, reflecting higher
interest rates in 2013. At the end of Q3 2013, Bell's defined
benefit pension plan solvency ratio was over 90%. The improved
solvency position of Bell Canada's
pension plan improves Bell's longer term financial flexibility
through reduced future pension funding requirements.
BCE RESULTS
BCE's net earnings attributable to common shareholders were
$343 million in Q3 2013, or
$0.44 per common share, compared
to $527 million, or $0.68 per common share, in Q3 2012. The
year-over-year decrease was due to the CRTC tangible benefits
obligation of $230 million that
Bell was ordered to pay as part of the acquisition of Astral Media
Inc. (Astral). Adjusted earnings per share
(EPS)(1) were $0.75
per common share, up 7.1% from last year, reflecting the
flow-through of higher EBITDA from strong year-over-year growth at
Bell Wireless and Bell Media.
BCE's cash flows from operating activities were $1,730 million in Q3, up $139 million over last year. Free cash
flow(2) available to BCE's common shareholders
increased $61 million, or 8.9%, to
$747 million, driven mainly by higher
EBITDA(3) and an increase in working capital.
At the end of Q3, BCE (including Bell and Bell Aliant) served a
total of 7,951,182 wireless subscribers, up 3.0% from Q3 2012;
total TV subscribers of 2,438,100 (including 582,393 IPTV
customers, reflecting the addition of 87,355 net new IPTV customers
in Q3 2013), a 7.1% increase; total high-speed Internet subscribers
of 3,102,627, up 2.7%; and total NAS lines of 7,730,283, a decrease
of 6.9%.
BELL RESULTS
Bell operating revenues in Q3 2013 grew 3.0% to $4,524 million, with the inclusion of Astral
contributing to Bell Media revenue growth of 21.6%. Wireless
revenue growth of 4.1%, higher TV and Internet service revenues,
growth in IP connectivity and business service solutions revenue,
and greater business data product sales also contributed to
consolidated Bell revenue growth this quarter.
Bell EBITDA increased 3.0% in Q3, driven by 26.8% growth at Bell
Media and 11.6% growth in Wireless EBITDA. This was moderated by a
5.6% decline in Wireline EBITDA that reflected recognition in Q3
2012 of a non-recurring gain on the phase-out of post-employment
benefits for certain employees and a reduction in amounts payable
to the CRTC related to the Local Programming Improvement Fund
(LPIF), which collectively totalled $29
million. Excluding these two items, Bell Wireline EBITDA
decreased 2.7% this quarter. Bell consolidated EBITDA margin
remained unchanged at 38.4% due to the flow-through of higher
wireless ARPU (average revenue per unit), a lower volume of
wireless postpaid activations and customer upgrades compared to
last year, diminishing wireline voice erosion, and stabilizing
business markets performance.
BELL OPERATING RESULTS BY SEGMENT
Bell operating performance in the third quarter of 2013 was
highlighted by healthy revenue and EBITDA growth with a steady
margin year over year. We continued to successfully leverage our
advanced broadband networks and services to gain considerable new
postpaid wireless customers, a record number of new Fibe TV
subscribers, significantly more high-speed Internet customers, as
well as lower churn and higher ARPU across all our residential
wireline and wireless services. With the contribution of Astral and
healthy organic growth in advertising revenue, Bell Media delivered
a significant contribution to consolidated Bell EBITDA growth this
quarter.
Bell invested $742 million in new
capital in Q3 2013, a 7.8% year-over-year increase, supporting the
continued expansion of Fibe TV, rapid deployment of broadband fibre
to more homes and businesses, and expansion of wireless network
capacity to accommodate increasing data usage.
BELL WIRELESS
Bell Wireless operating revenues increased 4.1% to $1,493 million in Q3 2013, compared to
$1,434 million in Q3 2012. Service
revenues were up 5.0% to $1,372
million, driven by postpaid subscriber growth and higher
blended ARPU. Wireless data revenue increased 18.4% on increased
adoption of smartphones and use of wireless Internet and data
services such as Mobile TV.
Bell Wireless EBITDA increased 11.6% in Q3 2013, driven by
higher ARPU, fewer postpaid gross activations and customer upgrades
year over year, and overall cost discipline. This contributed to a
strong 2.7 percentage-point improvement in service margin to 45.0%
from 42.3% in Q3 2012, our best third-quarter performance in 4
years:
- Postpaid net additions in Q3 were 102,714. This reflected a
10.6% decrease in postpaid gross activations attributable to fewer
promotional offers, reduced handset discounts, new 2-year rate plan
pricing resulting from the federal Wireless Code of Conduct, and
reduced availability of some new smartphone models. Prepaid net
customer losses improved 29.3% to 13,255 this quarter, due to fewer
customer deactivations.
- Smartphone users represented 73% of total postpaid subscribers
at the end of the quarter, compared to 60% a year earlier. Bell
Wireless postpaid customers totalled 6,683,646 at the end of Q3, an
increase of 6.4% over last year, while total Bell Wireless
customers grew 3.0% to 7,805,100.
- Postpaid and prepaid customer churn remained unchanged at 1.2%
and 3.3%, respectively. Blended wireless churn improved 10 basis
points in Q3 2013 to 1.5%, reflecting a higher proportion of
postpaid subscribers in the customer base.
- Blended ARPU increased 1.7% to $58.30 in the quarter, representing the fifteenth
consecutive quarter of year-over-year improvement. The increase is
due to growing data usage by the increasing proportion of
smartphone users.
- Cost of acquisition increased 1.5% to $403 per gross activation, reflecting higher
sales commissions paid due to a greater postpaid smartphone
mix.
- Retention costs as a percentage of service revenue were 9.3%,
compared to 10.1% in Q3 2012, reflecting fewer customer upgrades
compared to last year.
- Bell continues to offer customers access to Canada's largest 4G
LTE network reaching approximately 77% of the Canadian population,
complemented by 4G HSPA+ coverage to more than 98% of the
population.
- Bell Mobile TV welcomed its one millionth subscriber during the
quarter. Mobile TV offers on-the-go access to live and on-demand
sports, news, entertainment and children's TV programming.
Additionally, the Bell TV app enables customers to access 70 more
live and on-demand channels on their smartphones and tablets.
- Bell continued to bring Canadians the latest mobile technology
with the introduction of new devices including Apple iPhone 5c and
iPhone 5s, BlackBerry Q5, LG G2, Samsung Galaxy Mega and Galaxy
Note 8.0, Sony Xperia SP and Sony Xperia Z, and the ultra rugged,
push to talk Sonim 5560 IS. In addition, the Apple iPad and iPad
mini are now available directly from Bell.
- In September, Bell reduced the prices of its most popular
consumer wireless rate plans for United
States mobile data, voice and text roaming by 50%, and in
October announced significant reductions in mobile data, voice and
text roaming rates for Bermuda and
most Caribbean islands. Bell is
committed to working with its global telecom partners to reduce
consumer roaming costs further by renegotiating its agreements with
international telecom suppliers that enable Bell mobile customers
to use their phones in more than 200 countries.
- The Société de transport de Montréal (STM), Bell and 3 other
Canadian wireless providers announced in September that they are
working together to launch a new underground network in the
Montréal metro. The project design phase is now under way and
installation is expected to begin this year. The estimated
$50 million cost of deployment will
be shared equally by the 4 participating wireless companies.
BELL WIRELINE
The pace of Bell Wireline's revenue decline remained stable
compared to the previous quarter, decreasing a modest 0.9% to
$2,482 million, as higher TV and
Internet service revenues, stronger business IP connectivity and
service solutions growth, and increased data product sales to large
enterprise customers, largely offset the decline in voice revenues.
The rate of decline in voice revenues improved for a fourth
consecutive quarter. The slower pace of voice erosion was due to
fewer NAS line losses compared to Q3 2012 and an improved rate of
long distance revenue decline from increased sales of global
long-distance minutes.
Bell Wireline EBITDA decreased 5.6% this quarter, yielding a
margin of 37.2% compared to 39.0% in Q3 2012. The decrease in
Wireline EBITDA and margin this quarter was impacted by recognition
in Q3 2012 of a non-recurring gain on the phase-out of
post-employment benefits at a Bell Wireline subsidiary and a
reduction in amounts payable to the CRTC related to the LPIF, which
collectively totalled $29 million.
Excluding these two items, Bell Wireline EBITDA decreased 2.7% in
Q3 2013, reflecting approximately $14
million in higher acquisition costs absorbed from a
significantly higher number of new Fibe TV and Internet customer
activations in Q3 2013 compared to last year.
- Total Bell Residential customer net additions, including
residential NAS, were positive for the first time since 2005, the
year cable telephony service was introduced. Total residential net
additions of approximately 28,000 in Q3 were up 74,000 year over
year, supported by record Fibe TV activations and strong Internet
performance that in turn drove higher residential NAS activations
and retention.
- Bell Fibe TV customer acquisition accelerated this quarter with
the addition of 72,813 net new subscribers, up 69.4% compared to Q3
2012. The ongoing expansion of our Fibe TV service footprint and
the introduction in May of exclusive wireless receivers contributed
to stronger customer demand for Fibe TV this quarter. At the end of
Q3 2013, Bell Fibe TV subscribers totalled 419,129, more than
double the 200,064 subscribers at the end of Q3 2012.
- With the continued expansion of our Fibe TV footprint in
communities across Ontario and
Québec (including expansion to Ottawa in the quarter), Bell's IPTV footprint
reached approximately 4.1 million households, up from 2.9 million
households at the end of Q3 2012.
- Total Bell Satellite TV net customer losses improved 3.7% this
quarter to 26,128, reflecting fewer customer deactivations.
- Combined Bell Fibe TV and Satellite TV net additions almost
tripled in the quarter compared to last year, increasing to 46,685
from 15,846. Bell TV's subscriber base totalled 2,242,244 at the
end of Q3 2013, representing a 4.9% increase over the past
year.
- Bell high-speed Internet net subscriber additions were 36,638,
compared to 13,416 in Q3 2012, the best quarterly performance in
more than 6 years. This reflects the pull-through of Bell Fibe TV
customer activations, a higher number of student activations during
the back-to-school period, as well as increased business customer
activations. Bell total high-speed Internet subscribers reached
2,157,713, up 2.4% since the end of Q3 2012.
- Wireline data revenue was up 2.5% to $1,426 million, due mainly to higher TV and
Internet service revenues driven by Fibe customer growth, higher IP
connectivity revenues, increased spending on professional business
services by our mid-sized and large enterprise customers, and
increased data product sales.
- Residential NAS net losses improved 30.3%, or 25,583, over Q3
2012 to 58,957, reflecting reduced rates of residential NAS
turnover in our Fibe service areas and the success of promotional
offers during the July residential move season in Québec.
- Business NAS losses in Q3 2013 increased 15.3%, up 3,786 over
last year to 28,526. This was due to a greater number of
deactivations in our large business segment resulting from ongoing
customer conversion of voice lines to IP-based services and
competitive losses. This was offset by fewer customer losses in our
wholesale and mass and mid-sized business markets compared to Q3
2012.
- Total Bell NAS lines at the end of the quarter were 5,338,008,
a 7.5% decline. Consistent with these customer losses, Bell's local
and access revenues declined 8.0% to $613
million, while long distance revenue declined 4.2% to
$184 million.
- Bell launched its new M2M Management Centre, a secure online
portal offering Canadian businesses a comprehensive suite of tools
to manage connected devices across their operations. Developed in
partnership with Ericsson, it enables Bell M2M customers to
remotely view, administer and control network-connected devices
such as parking and hydro meters, vending machines, and billboards
through a cloud-based self-serve platform.
BELL MEDIA
Bell Media delivered strong financial and operational performance
this quarter. Higher advertising and subscriber fee revenues
reflect the acquisition of Astral, now part of the Bell Media
segment, driving year-over-year revenue growth of 21.6% to
$664 million and EBITDA growth of
26.8% to $199 million. This
contributed to a higher Media EBITDA margin of 30% (compared to
28.8% in Q3 2012) due to Bell Media's enhanced mix of specialty and
pay TV properties.
- CTV was Canada's leading network during the summer season in
all key demographics, holding 11 of the top 20 programs nationally
among total viewers. In the key primetime hours, CTV's average
audience was 57% higher than its closest conventional TV
competitor.
- Bell Media produced The Amazing Race Canada, which debuted with
record results. The program averaged 3.5 million viewers as the
summer's overall #1 program and is the highest-rated Canadian
series on record, highest-rated series premiere ever, and the
highest rated debut season for any show.
- Bell Media's specialty TV properties reached 84% of all English
specialty and pay TV viewers in the average week during the third
quarter, led by TSN, with higher average audience levels driven by
CFL and NFL football; Discovery, Canada's leading entertainment
specialty channel; Bravo, the fastest-growing specialty network
among younger viewers; The Comedy Network; and TMN, Canada's
leading primetime pay TV station.
- Bell Media now ranks eighth among all online properties in
Canada, up one rank from the
previous quarter, and first among all Canadian broadcast and video
network competitors with a monthly average of 3.3 million unique
visitors, 385 million page views, and 94 million videos served.
- On August 26, 2013, Bell
announced the sale of two radio stations in Toronto (CHBM-FM and CFXJ-FM) and three radio
stations in Vancouver (CKZZ-FM,
CHHR-FM and CISL-AM) to Newfoundland Capital Corporation's wholly
owned subsidiary Newcap Inc. for $112
million plus the assumption of certain liabilities. Bell is
divesting these radio stations acquired as part of the Astral
transaction in order to comply with the CRTC's Common Ownership
Policy. The transaction is subject to approval by the CRTC and the
Competition Bureau.
CORPORATE DEVELOPMENTS
Bell was honoured with a Canada Award for Excellence in recognition
of our workplace mental health program. The Silver Award for Mental
Health at Work - the highest ever awarded by Excellence Canada -
recognizes Bell's exemplary commitment to workplace mental health
as part of the Bell Let's Talk initiative, Over the past 3 years,
Bell has implemented programs to help foster a mentally healthy
work environment, building awareness about the stigma of mental
illness and equipping team leaders with the tools and resources to
support employees.
BCE Chair Thomas O'Neill, FCA
received the Award of Outstanding Merit from Chartered Professional
Accountants of Ontario in
September. Under Mr. O'Neill's leadership, BCE's Board of Directors
has also been recognized twice this year for excellence in
corporate governance. BCE was named the winner of the first-ever
award for best overall corporate governance by the Canadian Society
of Corporate Secretaries, while the Canadian Coalition for Good
Governance honoured BCE with its Gavel Award for exceptional
communication with shareholders.
George Cope was named the 2013
Ivey Business Leader for his outstanding business leadership and
his contributions to the community, including the launch of the
Bell Let's Talk mental health initiative and his role as Chair of
United Way Toronto's 2013 campaign. A 1984 graduate of the HBA
program at Western University's
Ivey School of Business, Mr. Cope
joins an esteemed roster of past Ivey Business Leader Award
recipients from across corporate Canada who have demonstrated
exceptional leadership in both business and their communities.
BELL ALIANT RESULTS
Bell Aliant (TSX: BA) revenues of $696
million in Q3 2013 were 0.3% lower than in Q3 2012, as
growth in its Internet and TV services were offset by the continued
declines in local and access and long distance revenues. Bell
Aliant's EBITDA was down 2.1% to $324
million this quarter, as a result of a 1.4% increase in
operating costs related to growth of its FibreOP services. 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
January 15, 2014 to shareholders of
record at the close of business on December
16, 2013.
OUTLOOK
BCE's guidance for 2013, as provided on February 7, 2013, which was updated on
August 8, 2013 to reflect the
acquisition of Astral, and reconfirmed on November 7, 2013, is as follows:
|
February 7
Guidance |
August 8
Guidance |
Current Guidance
Expectation |
Bell (i) |
|
|
|
Revenue Growth |
0% - 2% |
2% - 4% |
On track |
EBITDA Growth |
1% - 3% |
3% - 5% |
On track |
Capital Intensity |
16% - 17% |
No change |
On track |
BCE |
|
|
|
Adjusted EPS
(ii) |
$2.97 - $3.03 |
No change |
On track |
Free Cash Flow growth
(iii) |
5% - 9% |
No change |
On track |
Annual common dividend per
share |
$2.33 |
No change |
On track |
(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
Q3 2013 results on Thursday, November
7 at 8:00 a.m. (Eastern).
Media are welcome to participate on a listen-only basis. To
participate, please dial toll-free 1-866-226-1792 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
3092522#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q3-2013 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) |
|
|
|
|
Q3 2013 |
|
Q3 2012 |
|
TOTAL |
|
PER SHARE |
|
TOTAL |
|
PER SHARE |
Net earnings attributable to
common shareholders |
343 |
|
0.44 |
|
527 |
|
0.68 |
Severance, acquisition and other
costs |
222 |
|
0.29 |
|
19 |
|
0.02 |
Net gains on investments |
(2) |
|
(0.01) |
|
- |
|
- |
Premiums on early redemption of
debts |
21 |
|
0.03 |
|
- |
|
- |
Adjusted net earnings |
584 |
|
0.75 |
|
546 |
|
0.70
|
(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) |
|
|
|
|
Q3 2013 |
|
Q3 2012 |
Cash flows from operating
activities |
1,730 |
|
1,591 |
Bell Aliant
dividends/distributions to BCE |
48 |
|
48 |
Capital expenditures |
(880) |
|
(832) |
Cash dividends paid on preferred
shares |
(38) |
|
(27) |
Cash dividends/distributions paid
by subsidiaries to non-controlling interest |
(68) |
|
(85) |
Acquisition costs paid |
32 |
|
39 |
Bell Aliant free cash flow |
(77) |
|
(48) |
Free cash flow |
747 |
|
686
|
(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) |
|
|
|
|
Q3 2013 |
|
Q3 2012 |
Net earnings |
452 |
|
644 |
Severance, acquisition
and other costs |
297 |
|
25 |
Depreciation |
683 |
|
673 |
Amortization |
162 |
|
180 |
Finance costs |
|
|
|
|
Interest expense |
242 |
|
225 |
|
Interest on post-employment
benefit obligations |
38 |
|
33 |
Other expense
(income) |
24 |
|
8 |
Income taxes |
165 |
|
231 |
EBITDA |
2,063 |
|
2,019 |
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,
our broadband fibre, IPTV and wireless networks investment and
deployment plans, the proposed divestiture of certain of Astral's
and Bell Media's radio stations, 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
November 7, 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
November 7, 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 news
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 1.6% in 2013, based on the
Bank of Canada's most recent estimate, a twenty basis point
decrease compared with an earlier estimate of 1.8%;
- 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 our broadband
investments in Fibe TV drive three-product household penetration,
increase our multiple-dwelling units (MDUs) market share, and
generate higher pull-through attach rates for our residential
Internet and Home Phone services, subject to the risk of more
aggressive promotional 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 utilize our ability to
seek greater penetration within the MDU market, and capitalize on
our extensive retail distribution network (which includes The
Source), and leadership position in high-definition (HD)
programming;
- improved subscriber acquisition at Bell Internet through
increased fibre coverage and speeds due to 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 information and
communications technology (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
re-price 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;
- 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,
producing market-leading news and investments in HD
broadcasting;
- increased costs to secure sports content 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, achievement of cost
reductions by maximizing assets, achieving productivity gains and
pursuing operational efficiencies; and
- executing in local radio and TV 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.
- Bell's total employee benefit plans cost to be approximately
$350 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, 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 $350
million, instead of $325
million;
- net interest expense of approximately $750 million;
- net interest payments of approximately $720 million; and
- cash severance and other of approximately $150 million.
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions
for 2013.
- BCE's total employee benefit plans cost to be approximately
$430 million, including approximately
$80 million for Bell Aliant,
comprised of an estimated above EBITDA employee benefit plans
service cost of approximately $290
million, and an estimated below EBITDA net employee benefit
plans financing cost of approximately $140
million;
- depreciation and amortization expense of up to approximately
$25 million higher compared to 2012,
instead of $50 million higher due to
an increase in the estimate of useful life of certain assets;
- net interest expense of approximately $925 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 November 7, 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 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 information technology (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 direct-to-home (DTH) satellite TV
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 TV 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;
- uncertainty as to whether dividends will be declared by BCE's
board of directors or BCE's dividend policy will be
maintained;
- stock market volatility;
- our failure to evolve practices and effectively monitor and
control fraudulent activities; and
- the failure to successfully integrate Astral into Bell Media
and to successfully complete the divestitures required by the
Competition Bureau and the CRTC.
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, Second and Third Quarter MD&As, dated May 8, 2013, August 7,
2013 and November 6, 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