- Net earnings attributable to common shareholders of
$532 million; Adjusted net
earnings up 12.6% to $705 million;
Adjusted net earnings per share of $0.84, up 3.7%
- 3.6% higher Adjusted EBITDA driven by 2.8% increase in total
revenues as all Bell operating segments generated positive revenue
growth
- Strong wireless financial results with 9.7% revenue growth
and 10.7% higher Adjusted EBITDA; postpaid net additions up 3.7% to
35,373
- Wireline Adjusted EBITDA up 1.0%, positive for the third
consecutive quarter
- IPTV adds 60,863 net new customers; total subscribers now
surpass 1 million
- High-speed Internet net activations up 49.2% to 39,650;
broadband market share leader with 3.3 million subscribers, up
4.3%
- Improved customer service drives lower churn across
residential and wireless services and reduced wireline operating
costs
This news release contains forward-looking statements. For a
description of the related risk factors and assumptions please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
MONTRÉAL, April 30, 2015 /CNW
Telbec/ - BCE Inc. (TSX, NYSE: BCE), Canada's largest
communications company, today reported financial and operating
results for the first quarter (Q1) of 2015.
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
|
Q1
2015
|
Q1
2014
|
%
change
|
BCE
|
|
|
|
|
Operating
revenues
|
|
5,240
|
5,099
|
2.8%
|
Adjusted
EBITDA(1)
|
|
2,094
|
2,022
|
3.6%
|
Net earnings
attributable to common shareholders
|
|
532
|
615
|
(13.5%)
|
EPS
|
|
0.63
|
0.79
|
(20.3%)
|
Adjusted
EPS(2)
|
|
0.84
|
0.81
|
3.7%
|
Cash flows from
operating activities
|
|
1,045
|
982
|
6.4%
|
Free Cash
Flow(3)
|
|
231
|
262
|
(11.8%)
|
Free Cash Flow per
share(3)
|
|
0.27
|
0.34
|
(20.6%)
|
"The Bell team's steadfast execution of our strategy to invest
in Canada's leading networks, content and service delivered strong
operating and financial results across the business in Q1 2015.
Fibe's ongoing positive momentum, the exceptional growth at
Mobility, and Bell Media's programming and ratings leadership
supported significant increases in BCE revenue, EBITDA, margins and
customer satisfaction," said George
Cope, President and Chief Executive Officer of BCE and
Bell Canada. "With our commitment to
bring the best technology, programming and service innovations to
our customers everywhere, Bell continues to lead the way in
Canadian communications 135 years after our founding."
Bell is dedicated 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 and Services, Accelerate Wireless, Leverage Wireline
Momentum, Expand Media Leadership, Improve Customer Service, and
Achieve a Competitive Cost Structure.
"A strong start to the year as operating momentum across our
growth services drove robust organic revenue and Adjusted EBITDA
growth in line with our financial guidance targets for the year,"
said Siim Vanaselja, Chief Financial
Officer of BCE and Bell. "Bell Wireless delivered another excellent
quarter of leading financial results, and Bell Wireline posted its
third consecutive quarter of positive year-over-year EBITDA growth.
We also saw sequential improvement in Bell Media's EBITDA this
quarter with positive revenue growth from our strong programming
line-up and TV ratings. Our reliable cash flow profile, underpinned
by a strong investment-grade balance sheet, supports our ongoing
strategic capital programs, as well as BCE's increased common share
dividend for 2015 announced on February
5."
Bell celebrates 135 years as Canada's communications
leader
Bell was "incorporated by Special Act of Parliament,
April 29th, 1880, for the purpose of
working the entire Telephone system of Canada," building on
Alexander Graham Bell's invention of
"the speaking telegraph" in 1874 in Brantford, Ontario. Now with more than 57,000
team members working in every province and territory, Bell in 2015
is Canada's broadband leader and an energized competitor in all
segments of communications services. Bell also remains Canada's top
communications brand 135 years after its founding, according to the
annual ranking of the nation's best brands. Rated Canada's third
most valuable in February 2015 by
global brand valuation firm Brand Finance, in partnership with
The Globe and Mail's Report on Business magazine,
Bell's brand was the only one in the Top 5 from outside the
Canadian financial services sector.
$20 billion in capital
investment through 2020
Bell today announced it will keep
its momentum rolling forward with plans to invest $20 billion in capital from 2015 to the end of
2020. "Canadian consumers and businesses continue to have access to
world-leading broadband technology, and Bell continues to lead with
the advanced fibre and mobile networks that are driving growth in
Wireless, Internet, TV and Media," said George Cope. "BCE expects to invest $20 billion in the nation's communications
capabilities by the end of 2020, ensuring Canada remains
competitive at a global level in next-generation broadband
communications."
Bell IPTV now serves more than 1 million Canadians
On
April 17, 2015, Bell announced it had
reached 1 million IPTV customers, making Fibe TV and FibreOP TV
among the fastest growing product lines in Bell's history. With
both next-generation IPTV and national Satellite TV, Bell has
become the second-largest television provider in Canada, ending Q1 2015 with a total of
2,658,106 subscribers. Fibe's success has been propelled by
innovative features like Whole Home PVR, Wireless TV, CraveTV and
the unique new Restart function, which Bell introduced in February.
Now available to all Fibe customers, Restart lets customers rewind
and watch TV shows already in progress from the beginning on more
than 170 channels, including CBC, CTV, Global, HBO Canada, Super
Channel and TSN. To learn more, please visit Bell.ca/Fibe.
Bell Media governance update
On March 25, 2015, Bell Media President Kevin Crull publicly apologized for interfering
in CTV News coverage of CRTC developments. On April 9, BCE announced the departure of Mr. Crull
from Bell Media. "The independence of Bell Media's news operations
is of paramount importance to our company and to all Canadians.
There can be no doubt that Bell will always uphold the journalistic
standards that have made CTV the most trusted brand in Canadian
news," CEO George Cope said in BCE's
April 9 statement.
At the request of Mr. Cope, a committee of the BCE Board of
Directors was formed to review journalistic independence at CTV
News. Comprised of committee Chair Paul
Weiss (also Chair of the BCE Audit Committee), Ian Greenberg, Robert
Simmonds, Carole Taylor and
BCE Chair Thomas O'Neill, and
working independently of Bell management, the committee delivered
its report to the Board this week. The committee recommended and
the Board agreed to implement a policy enhancing the independence
of the President of CTV News, and to enhance protection of
journalistic independence in the Bell Code of Conduct, which is
applicable to all BCE employees.
Bell executive appointments
BCE also announced the
following executive promotions effective April 9: Mary Ann
Turcke has been appointed President of Bell Media. Formerly
Group President, Media Sales, Ms. Turcke has previously served as
Bell's Executive Vice President of Field Operations, and was named
Woman of the Year last week by Women in Technology and
Communications. Blaik Kirby was
promoted to President of Bell Mobility from his role as Chief
Marketing Officer for Mobility, while Rizwan Jamal was promoted to President of Bell
Residential Services from his CMO position at BRS. The Presidents
of Bell Media, Mobility and BRS will report to Wade Oosterman, who has been promoted to the new
role of Group President, BCE and Bell
Canada. Mr. Oosterman continues to serve as Bell's Chief
Brand Officer.
Siim Vanaselja retiring as CFO
at end of Q2 2015, to be succeeded by Glen
LeBlanc
As announced on October 14, 2014, Chief Financial Officer
Siim Vanaselja will retire from BCE
on June 30, 2015. Glen LeBlanc, formerly CFO of Bell Aliant and
now BCE's Senior Vice President, Finance, will assume the role of
CFO of BCE and Bell Canada at that
time. "Siim Vanaselja has been a key
leader in Bell's all-encompassing transformation and departs the
company with our sincere gratitude for his immense contributions to
our shareholders, customers and team," said George Cope. "A seasoned financial executive and
leader at our affiliate Bell Aliant, Glen
LeBlanc is Siim's ideal successor as CFO, ensuring a smooth
transition and underlining the depth of senior leadership talent
within the BCE group of companies."
New $500 million public debt
offering adds to strong liquidity position
BCE ended the
first quarter of 2015 with more than $1.1
billion in cash and cash equivalents. This included proceeds
received from a new $500 million
public debt offering of 30-year debentures, which was completed by
Bell Canada on March 30, 2015, carrying an annual interest rate
of 4.35%. With this debt issuance, Bell
Canada's investment-grade ratings were confirmed by the
credit rating agencies, all with stable outlooks.
Bell Let's Talk Day sets all-new records
Bell Let's
Talk Day 2015 set new records for engagement and action on
January 28, growing the conversation
about mental health – not just in Canada but around the world as Bell Let's Talk
became the #1 global trend on Twitter. With Bell donating
5 cents for each of the record
122,150,772 tweets, texts, calls and Facebook shares on
January 28, the company's total
commitment to Canadian mental health grew by $6,107,538.60 to a total of $73,623,413.80. To learn more about Bell Let's
Talk and the 5 simple ways you can help fight the stigma around
mental illness, please visit Bell.ca/LetsTalk.
BCE RESULTS
Significant growth at Bell Wireless and
improved year-over-year performance at Bell Wireline and Bell Media
delivered healthy revenue and Adjusted EBITDA(1)
growth of 2.8% and 3.6% for BCE, respectively, in Q1 2015 with an
Adjusted EBITDA margin(1) of 40.0%, up 0.3%.
BCE reported Q1 2015 net earnings attributable to common
shareholders of $532 million, down
from $615 million in Q1 last year,
due to higher severance, acquisition and other costs related
largely to a one-time charge of $137
million for a litigation related to satellite TV signal
piracy. Adjusted net earnings(2) were
$705 million, up from $626 million last year, reflecting a 3.6%
Adjusted EBITDA increase to $2,094
million, reduced non-controlling interest as a result of the
Bell Aliant privatization, and lower income taxes. Net earnings per
share (EPS) were $0.63 compared to
$0.79. Adjusted EPS was $0.84 compared to $0.81, up 3.7%.
BCE's Adjusted EBITDA margin expanded 0.3% to 40.0% over last
year on the high flow-through from increased wireless
ARPU(4), strong revenue growth in Internet and TV,
slower wireline voice erosion and synergies achieved by the
privatization of Bell Aliant.
BCE continued its strategic investments in industry-leading
networks and services, with capital expenditures of $827 million in Q1, up $98
million, or 13.4%, over last year. This reflected continued
deployment of broadband fibre, including expansion of our fibre to
the home (FTTH) footprint; the ongoing roll-out of 4G LTE mobile
service to more Canadians, especially in smaller towns and remote
locations; and increases in network capacity to support higher data
usage and increased network speeds.
BCE's cash flows from operating activities were $1,045 million in Q1 2015, up 6.4% compared to
$982 million in Q1 2014, due mainly
to higher Adjusted EBITDA and an increase in working capital.
Seasonally low first-quarter Free Cash Flow(3)
was $231 million, down from
$262 million last year, reflecting
higher capital expenditures. Free Cash Flow per
share(3) in Q1 2015 was $0.27 per common share, compared to $0.34 per common share last year.
At March 31, 2015, BCE had a total
of 8,102,714 wireless subscribers, up 2.5% from the end of Q1 2014;
total TV subscribers of 2,658,106, up 5.1% (including 990,325 IPTV
customers, an increase of 36.8% compared to Q1 2014; BCE announced
on April 17 that total IPTV
subscribers had surpassed 1 million); 3,297,745 total Internet
subscribers, up 4.3%, and total NAS lines of 7,017,161, a decrease
of 6.0%.
The implementation of the Canadian Radio-television and
Telecommunications Commission (CRTC) decision to eliminate the
30-day notice period required for customers to cancel services
resulted in a one-time additional month of customer deactivations
this quarter, which were reflected as beginning-of-period
adjustments to our TV, Internet and NAS subscriber bases to better
reflect net customer activations reported. Accordingly, BCE's Q1
2015 beginning-of-period TV, Internet and NAS customer bases were
reduced, in aggregate, by a total of 19,616 subscribers (2,236 for
IPTV, 5,466 for Satellite TV, 7,505 for Internet, and 4,409 for
NAS) to adjust for customer deactivations resulting from
implementation of the CRTC's mandated policy change.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Bell Wireless had a strong start to the
year with Q1 operating revenues up 9.7% to $1,637 million from $1,492
million last year. Service revenues grew 8.1% to
$1,500 million, driven by a higher
postpaid subscriber mix and growth in blended ARPU attributable to
more customers on 2-year plans and greater data usage. Wireless
data revenues grew 24.4% in the quarter and now represent more than
half of total Bell Wireless service revenues. Product revenues
increased 35.1% to $127 million,
reflecting higher sales volumes of premium smartphones and more
handset upgrades compared to last year.
Bell Wireless Adjusted EBITDA increased 10.7% to $712 million, reflecting a service-revenue
flow-through to Adjusted EBITDA of 62% and yielding a 1.2
percentage-point increase in service margin to 47.5%. This was
achieved while incurring $31 million
in incremental retention costs, which contributed to operating cost
growth of 9.0% in Q1 2015.
- Postpaid net additions totalled 35,373, up 3.7% compared to
34,104 last year, as higher investment in retention and service
improvement resulted in fewer customer deactivations. Postpaid
gross activations were essentially unchanged compared to Q1
2014.
- Postpaid customer churn(4) improved 0.06% to 1.18%,
reflecting Bell's network quality and reach and a focus on customer
service and retention.
- Bell Wireless postpaid customers totalled 7,145,420 at
March 31 2015, a 4.6% increase from a
year earlier. Total Bell Wireless customers grew 2.5% to
8,102,714.
- The percentage of postpaid subscribers with smartphones
increased to 77% at March 31, 2015,
up from 74% at the end of Q1 2014.
- Blended ARPU increased 5.3% to $60.83, driven by a higher percentage of
customers on 2-year contracts, increased data usage on Bell's
leading 4G LTE network as the proportion of smartphone users
continued to increase, and a greater mix of postpaid customers in
the total subscriber base.
- Cost of acquisition (COA)(4) increased to
$452 per subscriber compared to
$439 last year, reflecting the impact
of a higher proportion of postpaid customers and the sale of more
expensive smartphones.
- Retention spending as a percentage of wireless service revenues
increased to 11.5% in Q1 2015 to $173
million, up from $141 million,
or 10.2%, in the same quarter last year, driven by a higher volume
of early customer handset upgrades to more expensive
smartphones.
- Bell offers customers access to Canada's largest 4G LTE mobile
network, reaching 91% of the Canadian population at March 31, 2015, and complemented by 4G HSPA+
coverage of more than 98% of the population. At the end of Q1 2015,
52% of Bell's postpaid subscribers were using LTE-compatible
devices.
- On April 21, 2015, Bell Mobility
acquired 13 licences for 169 million Megahertz per Population
(MHz-POP) of AWS-3 spectrum in key urban and rural markets for
$500 million. This spectrum is
strategically valuable in providing Bell with future incremental
broadband capacity to meet growing consumer and business demand for
mobile data services as well as for carrier aggregation.
Bell Wireline
Bell Wireline posted positive revenue
and Adjusted EBITDA growth for a second quarter in a row, with
operating revenues increasing 0.3% to $3,027
million in Q1 2015 on strong subscriber and ARPU growth in
Internet and TV services. With an increasing mix of growth
services, slowing voice revenue erosion, improved Business Markets
results, and lower operating costs reflecting Bell Aliant
integration savings and continued service improvement, Bell
Wireline Adjusted EBITDA grew 1.0% to $1,241
million, driving a 30-basis-point expansion in margin to
41%.
- Total residential customer net additions within BCE's wireline
ILEC footprint increased 28,000 to 7,000 in Q1 from a net loss of
21,000 last year, reflecting strong Internet subscriber growth and
steady Fibe TV adoption, which also supported a reduction in
residential NAS net losses compared to last year.
- High-speed Internet net additions increased 49.2% to 39,650 in
Q1 2015, as higher Fibe and FibreOP service speeds and the
pull-through of IPTV customer activations drove stronger subscriber
growth and lower residential customer churn.
- BCE high-speed Internet subscribers reached 3,297,745 at the
end of Q1 2015, up 4.3% compared to the end of Q1 2014. This
included a beginning-of-period adjustment to reduce subscribers by
7,505 to adjust for deactivations as a result of the CRTC's
decision to eliminate the 30-day notice period required to cancel
services.
- IPTV added 60,863 net new customers this quarter, compared to
66,378 last year. The decrease was due mainly to less new IPTV
footprint expansion compared to last year.
- At the end of March 31, 2015, BCE
served 990,325 IPTV subscribers, up 36.8%. This included a
beginning-of-period adjustment to reduce subscribers by 2,236 to
adjust for deactivations as a result of the CRTC's decision to
eliminate the 30-day notice period required to cancel
services.
- BCE's IPTV subscribers surpassed the 1 million mark on
April 17.
- Satellite TV net customer losses increased to 33,873 in Q1 2015
from 26,155 last year. This can be attributed largely to fewer new
retail and wholesale activations as the roll-out of IPTV services
by TV providers across Canada continues to expand.
- Total TV subscribers for all BCE TV services increased 5.1% to
2,658,106 at the end of Q1 2015. This included a
beginning-of-period adjustment to reduce subscribers by 7,702
(2,236 for IPTV and 5,466 for Satellite TV) to adjust for
deactivations as a result of the CRTC's decision to eliminate the
30-day notice period required to cancel services.
- Wireline data revenues were up 3.5% to $1,757 million, the result of combined Internet
and TV service revenue growth of approximately 6%, and higher
year-over-year IP broadband connectivity and business service
solutions revenues.
- Residential NAS net losses in Q1 2015 improved 26.5% to 65,870
from 89,655 last year, driven by improved customer retention
reflecting the pull-through impact of our IPTV service bundle
offers and greater penetration of 3-product households.
- Business NAS net losses remained relatively stable at 44,069 in
Q1 2015 compared to 43,085 last year. The modest increase was due
mainly to higher deactivations in the large business market
segment.
- Total BCE NAS access lines at the end of Q1 2015 were
7,017,161, a 6.0% decline compared to the previous year. This
included a beginning-of-year adjustment to reduce subscribers by
4,409 for deactivations as a result of the CRTC's decision to
eliminate the 30-day notice period required to cancel
services.
- Local and access revenues declined 5.0% to $824 million in the quarter, an improvement over
the 6.2% erosion in Q1 2014 that reflects the year-over-year
improvement in NAS net losses.
- Long distance revenues were down 5.8% to $213 million in Q1 2015, a significant
improvement over the 12.1% year-over-year decline experienced in Q1
2014, reflecting increased sales of international long distance
minutes.
Bell Media
Bell Media posted positive revenue growth
of 0.6% in Q1 to $726 million, up
from $722 million last year. This
reflected higher conventional TV advertising revenue generated from
this year's live broadcasts of the Super Bowl and Academy Awards,
as well as the recapture of advertising dollars following the shift
in Q1 last year to the main broadcaster of the Sochi 2014 Winter
Olympics. Specialty TV advertising revenues were relatively stable
this quarter compared to Q1 2014, reflecting the programming
strength of Bell Media's leading specialty sports service, TSN, and
increased audience levels at Space and Discovery, which offset
softer performance at Bell Media's French-language specialty TV
services.
Subscriber revenues decreased compared to Q1 2014 due to the
loss of revenue from the wind-down of TSN regional hockey channels
for the Winnipeg Jets and Montréal Canadiens as well as Viewers
Choice. This was moderated by higher revenues generated by CraveTV,
Bell Media's new on-demand video streaming service launched in
December 2014, and by an expanded
suite of TV Everywhere GO products.
Bell Media Adjusted EBITDA was down 6.0% in Q1 2015, to
$141 million from $150 million last year, due to higher costs for
sports broadcast rights and significant content investments for
CraveTV.
- CTV remained Canada's leading network during the winter season
in all key demographics with 14 of the top 20 programs nationally
among key viewers. The winter season achieved an increase of 16% in
full-day audience levels and 19% in core-prime audiences.
- Bell Media's specialty and pay TV properties reached 84% of all
English-Canadian specialty and pay TV viewers on an average weekly
basis during Q1 2015. Bell Media also led in primetime with the #1
sports specialty channel, TSN, and the #1 pay TV channel, The Movie
Network.
- Bell Media maintained a leading position in the Québec
French-language specialty and pay TV market, reaching 83% of the
population on an average weekly basis. 4 of the Top 5 specialty
channels were Bell Media properties -- RDS, Canal D, Canal Vie and
Z.
- Bell Media remained Canada's top radio broadcaster reaching
17.2 million listeners weekly, who spend 83 million hours tuned in
each week.
- Bell Media continued to rank first in digital media among all
Canadian broadcast and video network competitors and seventh among
all online properties in Canada,
with monthly averages of 16.3 million visitors, 357 million page
views and 79 million video viewed.
- CraveTV continued to grow as Bell Media reached distribution
agreements with more Canadian TV providers. In addition to
Eastlink, TELUS Optik TV, Fibe TV, Bell Satellite TV and Bell
Aliant FibreOP TV, Canada's premier on-demand TV streaming service
is now also available from Access Communications, Cable Cable, Hay
Communications, Mitchell Seaforth Cable TV, Nexicom, Northwestel,
Tuckersmith Communications, and Wightman Telecom. Bell Media and
Twentieth Century Fox Television Distribution announced a
multi-year content agreement that will deliver past seasons of some
of TV's most acclaimed dramas and comedies to CraveTV. The deal
also includes one of television's most-acclaimed dramas, Homeland,
to CraveTV as part of its Showtime Collection.
- TSN and RDS secured a long-term media rights agreement for
French Open tennis through to 2024. With the extension, TSN and RDS
continue to deliver exclusive coverage of all 4 Grand Slam tennis
events.
- Bell Media and its production partners were honoured with 53
awards by the Academy of Canadian Cinema and Television at the
recent Canadian Screen Awards – including Lisa LaFlamme as Best News Anchor, National for
the second year in a row – while films supported by Bell Media's
Pay TV services and the Harold Greenberg Fund earned 15 awards.
Underscoring its leadership in the development of Canadian original
television content, Bell Media received a total of 140 television
and 47 film nominations, more than any other broadcaster.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.6500 per common share, payable on July 15, 2015 to shareholders of record at the
close of business on June 15,
2015.
OUTLOOK
BCE confirmed its financial guidance targets
for 2015, as provided on February 5,
2015, as follows:
|
February
5
Guidance
|
April
30th
Guidance
|
BCE
|
|
|
Revenue
growth
|
1% – 3%
|
On track
|
Adjusted EBITDA
growth
|
2% – 4%
|
On track
|
Capital
Intensity(4)
|
approx.
17%
|
On track
|
Adjusted
EPS
|
$3.28 –
$3.38
|
On track
|
Free cash flow
growth(i)
|
approx. 8% –
15%
|
On track
|
Annualized common
dividend per share
|
$2.60
|
$2.60
|
Dividend payout
policy
|
65% – 75%
of free cash
flow
|
On track
|
(i)
|
As of November 1,
2014, BCE's free cash flow includes 100% of Bell Aliant's free cash
flow rather than cash dividends received from Bell
Aliant.
|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q1 2015 results
on Thursday, April 30th at
8:00 a.m. (Eastern). Media are
welcome to participate on a listen-only basis. To participate,
please dial (416) 340-2218 or toll-free 1-800-355-4959 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 6089546#.
A live audio webcast of the conference call will be available on
BCE's website at:
http://www.bce.ca/investors/investorevents/all/show/BCE-Q1-2015-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
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 3 to
BCE's Q1 2015 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)
|
|
|
|
Q1 2015
|
Q1 2014
|
Net
earnings
|
583
|
714
|
Severance,
acquisition and other costs
|
224
|
38
|
Depreciation
|
712
|
699
|
Amortization
|
127
|
167
|
Finance
costs
|
|
|
|
|
Interest
expense
|
226
|
235
|
|
|
Interest on
post-employment benefit obligations
|
27
|
25
|
Other expense
(income)
|
20
|
(87)
|
Income
taxes
|
175
|
231
|
Adjusted
EBITDA
|
2,094
|
2,022
|
|
BCE Operating
Revenues
|
5,240
|
5,099
|
Adjusted EBITDA
Margin
|
40.0%
|
39.7%
|
(2)
|
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 (gains) losses on
investments, and early debt redemption costs. We define Adjusted
EPS as Adjusted net earnings per BCE common share. We use
Adjusted net earnings and Adjusted EPS, and we believe that certain
investors and analysts use these measures, among other ones, to
assess the performance of our businesses without the effects of
severance, acquisition and other costs, net (gains) losses on
investments, and early debt redemption costs, net of tax and NCI.
We exclude these items because they affect the comparability of our
financial results and could potentially distort the analysis of
trends in business performance. Excluding these items does not
imply they are non-recurring. The most comparable IFRS financial
measures are net earnings attributable to common shareholders and
EPS. The following table is a reconciliation of net earnings
attributable to common shareholders and EPS to Adjusted net
earnings on a consolidated basis and per BCE common share
(Adjusted EPS), respectively.
|
($ millions except
per share amounts)
|
|
|
|
Q1 2015
|
Q1 2014
|
|
TOTAL
|
PER SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
532
|
0.63
|
615
|
0.79
|
Severance,
acquisition and other costs
|
164
|
0.20
|
23
|
0.03
|
Net losses (gains) on
investments
|
2
|
-
|
(12)
|
(0.01)
|
Early debt redemption
costs
|
7
|
0.01
|
-
|
-
|
Adjusted net
earnings
|
705
|
0.84
|
626
|
0.81
|
(3)
|
The terms Free Cash
Flow and Free Cash Flow per share do not have any standardized
meaning under IFRS. Therefore, they are unlikely to be comparable
to similar measures presented by other issuers. As of
November 1, 2014, BCE's Free Cash Flow includes 100% of
Bell Aliant's Free Cash Flow rather than cash dividends
received from Bell Aliant. We define Free Cash Flow as cash
flows from operating activities, excluding acquisition costs paid
and voluntary pension funding, less capital expenditures, preferred
share dividends and dividends paid by subsidiaries to NCI. Prior to
November 1, 2014, Free Cash Flow was defined as cash
flows from operating activities, excluding acquisition costs paid
and voluntary pension funding, plus dividends received from
Bell Aliant, less capital expenditures, preferred share
dividends, dividends paid by subsidiaries to NCI and
Bell Aliant Free Cash Flow. We define Free Cash Flow per share
as Free Cash Flow divided by the average number of common shares
outstanding. We consider Free Cash Flow and Free Cash Flow per
share to be important indicators of the financial strength and
performance of our businesses because they show how much cash is
available to pay dividends, repay debt and reinvest in our company.
We believe that certain investors and analysts use Free Cash Flow
to value a business and its underlying assets. We believe that
certain investors and analysts also use Free Cash Flow and Free
Cash Flow per share to evaluate the financial strength and
performance of our businesses. 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 except
per share amounts)
|
|
|
|
Q1 2015
|
Q1 2014
|
Cash flows from
operating activities
|
1,045
|
982
|
Capital
expenditures
|
(827)
|
(729)
|
Cash dividends paid
on preferred shares
|
(39)
|
(32)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
-
|
(7)
|
Acquisition costs
paid
|
52
|
14
|
Bell Aliant free cash
flow
|
-
|
34
|
Free cash
flow
|
231
|
262
|
|
Average number of
common shares outstanding
|
841.0
|
776.5
|
Free cash flow per
share
|
0.27
|
0.34
|
(4)
|
We use ARPU, churn,
COA, capital intensity and dividend payout ratio 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. See section 8.2,
Non-GAAP financial measures and key performance indicators (KPIs)
in BCE's Q1 2015 MD&A for a definition of such KPIs.
|
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
Certain
statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to our 2015 financial guidance (including
revenues, Adjusted EBITDA, capital intensity, Adjusted EPS and free
cash flow), our business outlook, objectives, plans and strategic
priorities, BCE's 2015 annualized common share dividend and common
share dividend policy, the value of capital investments expected to
be made by Bell Canada from 2015 to
the end of 2020, our network deployment plans, and other statements
that are not historical facts. Forward-looking statements are
typically identified by the words assumption, goal, guidance,
objective, outlook, project, strategy, target and other similar
expressions or future or conditional verbs such as aim,
anticipate, believe, could, expect, intend, may, plan, seek,
should, strive and will. All such forward-looking
statements are made pursuant to the 'safe harbour' provisions of
applicable Canadian securities laws and of the United States Private Securities
Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements and that our business outlook,
objectives, plans and strategic priorities may not be achieved. As
a result, we cannot guarantee that any forward-looking statement
will materialize and we caution you against relying on any of these
forward-looking statements. The forward-looking statements
contained in this news release describe our expectations as of
April 30, 2015 and, accordingly, are
subject to change after such date. Except as may be required by
Canadian securities laws, we do not undertake any obligation to
update or revise any forward-looking statements contained in this
news release, whether as a result of new information, future events
or otherwise. Except as otherwise indicated by BCE, forward-looking
statements do not reflect the potential impact of any special items
or of any dispositions, monetizations, mergers, acquisitions, other
business combinations or other transactions that may be announced
or that may occur after April 30,
2015. 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 2015 financial
results, as well as our objectives, strategic priorities and
business outlook for 2015, and in obtaining a better understanding
of our anticipated operating environment. Readers are cautioned
that such information may not be appropriate for other purposes.
The value of capital investments expected to be made by
Bell Canada from 2015 to the end of
2020 assumes that capital investments will continue at current
levels. However, there can be no assurance that such investment
levels will be maintained with the result that the value of actual
capital investments made by Bell
Canada during such period could materially differ from
current expectations.
Material Assumptions
A number of economic, market,
operational and financial assumptions were made by BCE in preparing
its forward-looking statements for 2015 contained in this news
release, including, but not limited to:
Canadian Economic and Market Assumptions
- slow economic growth, given the Bank of Canada's most recent
estimated growth in Canadian gross domestic product of 1.9% in
2015, representing a twenty basis point decrease from an earlier
estimate of 2.1%
- weaker employment growth compared to 2014, as the overall level
of business investment is expected to remain soft
- interest rates to remain largely unchanged in 2015 or to
slightly decrease year over year
- a sustained level of wireline and wireless competition in both
consumer and business markets
- higher, but slowing, wireless industry penetration and
smartphone adoption
- a relatively stable media advertising market and escalating
costs to secure TV programming
- a higher expected number of subscriber renewals resulting from
the expiry of 2 or 3 year service contracts due to the Wireless
Code of Conduct implemented in 2013
Assumptions Concerning our Bell Wireless
Segment
- higher, but slowing, Canadian wireless industry penetration and
smartphone adoption
- sustained level of competition in both consumer and business
markets
- maintain our market share momentum of incumbent wireless
postpaid subscriber activations
- continued adoption of smartphone devices, tablets and data
applications, as well as the introduction of more 4G LTE devices
and new data services
- our ability to monetize increasing data usage and customer
subscription to new data services
- higher subscriber acquisition and retention spending, driven by
a greater number of year-over-year gross additions and customer
device upgrades
- higher than industry-average blended ARPU and Adjusted EBITDA
growth, driven by a greater mix of postpaid smartphone customers
and accelerating data consumption on the 4G LTE network, and higher
access rates on new two-year contracts
- completion of the LTE network expected to cover 98% of the
Canadian population
- ongoing technological improvements by handset manufacturers and
from faster data network speeds that allow customers to optimize
the use of our services
- a higher expected number of subscriber renewals resulting from
the expiry of 2 or 3 year service contracts due to the Wireless
Code of Conduct implemented in 2013
- no material financial, operational or competitive consequences
of changes in regulations affecting our wireless business
Assumptions Concerning our Bell Wireline
Segment
- positive full-year revenue and Adjusted EBITDA growth
- IPTV contributing to TV and broadband Internet market share
growth, as well as fewer residential NAS losses, resulting in fewer
year-over-year total wireline residential net customer losses and
higher penetration of three-product households
- increasing wireless and Internet-based technological
substitution
- residential services ARPU growth from increased penetration of
three-product households, promotion expiries and price
increases
- aggressive residential service bundle offers from cable TV
competitors in our local wireline areas
- improving year-over-year rate of decline in Bell Business
Markets service revenue and Adjusted EBITDA
- continued large business customer migration to IP-based
systems
- ongoing competitive reprice pressures in our business and
wholesale markets
- continued competitive intensity in our small and mid-sized
business segments as cable operators and other telecom competitors
continue to intensify their focus on the business segment
- new broadband fibre deployment expected to be largely
FTTH/FTTP
- growing consumption of OTT TV services and on-demand streaming
video, projected growth in TV Everywhere as well as the
proliferation of devices, such as tablets, that consume vast
quantities of bandwidth, will require considerable ongoing capital
investment
- no material financial, operational or competitive consequences
of changes in regulations affecting our wireline business
Assumptions Concerning our Bell Media Segment
- lower year-over-year Adjusted EBITDA and margin, due to
escalating costs to secure TV programming, including rising
sports-rights costs and market rates for specialty content, CraveTV
investment, higher regulatory Canadian content spending, the expiry
of certain CRTC benefits as well as the completion of the Local
Programming Improvement Fund
- ability to successfully acquire highly rated programming and
differentiated content
- building and maintaining strategic supply arrangements for
content on all four screens
- successful scaling of CraveTV
- TV unbundling and growth in OTT viewing expected to result in
moderately lower subscriber levels for many Bell Media TV
properties
- no material financial, operational or competitive consequences
of changes in regulations affecting our media business
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions
for 2015:
- total post-employment benefit plans cost to be approximately
$370 million, based on an estimated
accounting discount rate of 4%, comprised of an estimated above
Adjusted EBITDA post-employment benefit plans service cost of
approximately $260 million and an
estimated below Adjusted EBITDA net post-employment benefit plans
financing cost of approximately $110
million
- depreciation and amortization expense of approximately
$3,425 million
- net interest expense of approximately $940 million, instead of $970 million
- tax adjustments (per share) of approximately $0.03, instead of $0.02
- an effective tax rate of approximately 26%
- non-controlling interest of approximately $50 million
- total pension plan cash funding of approximately $400 million
- cash taxes of approximately $750
million
- net interest payments of approximately $925 million
- working capital changes, severance and other costs of
approximately $125 million to $225
million
- average BCE common shares outstanding of approximately 845
million
- an annualized common share dividend rate of $2.60 per share
The foregoing assumptions, although considered reasonable by BCE
on April 30, 2015, 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 2015
financial guidance, are listed below. The realization of our
forward-looking statements, including our ability to meet our 2015
financial guidance, essentially depends on our business performance
which, in turn, is subject to many risks. Accordingly, readers are
cautioned that any of the following risks could have a material
adverse effect on our forward-looking statements. These risks
include, but are not limited to:
- regulatory initiatives and proceedings, government
consultations and government positions that affect us and influence
our business
- 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, financial results and
operating metrics
- the level of technological substitution and the presence of
alternative service providers contributing to reduced utilization
of traditional wireline services
- the adverse effect of new technology and increasing
fragmentation in Bell TV's TV distribution market and Bell Media's
markets
- rising programming costs and Bell Media's inability to secure
key content
- variability in subscriber acquisition and retention costs based
on subscriber acquisitions, retention volumes, smartphone sales and
handset discount levels
- economic and financial market conditions, the level of consumer
confidence and spending, and the demand for, and prices of, our
products and services
- Bell Media's significant dependence on continued demand for
advertising, and the potential adverse effect thereon of economic
conditions and ratings/audience levels
- our inability to protect our networks, systems, applications,
data centres, electronic and physical records and the information
stored therein against cyber attacks, unauthorized access or entry,
and damage from fire, natural disasters and other events
- the complexity of our product offerings, pricing plans,
promotions, technology platforms and billing systems
- our failure to satisfy customer expectations and build a simple
and expeditious operational delivery model
- our failure to carry out network evolution activities or to
meet network upgrade or deployment timelines within our capital
intensity target
- our inability to discontinue certain services as necessary to
improve capital and operating efficiencies
- our failure to anticipate and respond to technological change,
upgrade our networks and rapidly offer new products and
services
- our failure to implement or maintain, on a timely basis,
effective IT systems, and the complexity and costs of our IT
environment
- our failure to maintain optimal network operating performance
in the context of significant increases in broadband demand and in
the volume of wireless data-driven traffic
- employee retention and performance, and labour disruptions
- pension obligation volatility and increased contributions to
post-employment benefit plans
- events affecting the functionality of, and our ability to
protect, test, maintain and replace, our networks, equipment and
other facilities
- in-orbit risks to satellites used by Bell TV
- events affecting the ability of third-party suppliers to
provide to us, and our ability to purchase, critical products and
services
- the quality of our network and customer equipment and the
extent to which they may be subject to manufacturing defects
- unfavourable resolution of legal proceedings and, in
particular, class actions
- unfavourable changes in applicable laws
- our capital and other expenditure levels, financing and debt
requirements, and inability to access adequate sources of capital
and generate sufficient cash flows from operations to meet our cash
requirements and implement our business plan, as well as our
inability to manage various credit, liquidity and market risks
- ineffective change management resulting from restructurings and
other corporate initiatives, and the failure to successfully
integrate business acquisitions and existing business units
- our failure to evolve practices to effectively monitor and
control fraudulent activities
- copyright theft and other unauthorized use of our content
- the theft of our DTH satellite TV services
- our failure to execute our strategic imperatives and business
development plans in order to produce the expected benefits,
including continuing to implement our targeted cost reduction
initiatives, and our failure to develop a successful business
strategy
- higher taxes due to new taxes, higher tax rates or changes to
tax laws, and our inability to predict the outcome of government
audits
- health concerns about radiofrequency emissions from wireless
communications devices
- our inability to maintain customer service and our networks
operational in the event of the occurrence of epidemics, pandemics
and other health risks
- our failure to recognize and adequately respond to climate
change concerns or public and governmental expectations on
environmental matters
- BCE's dependence on the ability of its subsidiaries, joint
arrangements and other entities in which it has an interest to pay
dividends or otherwise make distributions to it
- 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
- the expected timing and completion of the proposed acquisition
of Glentel Inc. and of the subsequent divestiture of a 50%
ownership interest to Rogers Communications Inc. are subject to
closing conditions and other risks and uncertainties, and there can
be no certainty that the anticipated benefits will be realized
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 2014 Annual
MD&A dated March 5, 2015
(included in the BCE 2014 Annual Report) and BCE's 2015 First
Quarter MD&A dated April 29, 2015
for additional information with respect to certain of these and
other assumptions and risks, filed by BCE with the Canadian
provincial securities regulatory authorities (available at
Sedar.com) and with the U.S. Securities and Exchange Commission
(available at SEC.gov). These documents are also available at
BCE.ca.
ABOUT BCE
Canada's largest communications company, BCE
provides a comprehensive and innovative suite of broadband
communication services to residential and business customers from
Bell Canada and Bell Aliant. Bell
Media is Canada's premier multimedia company with leading assets in
television, radio, out of home 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 initiative promotes Canadian mental health
with national awareness and anti-stigma campaigns, like Clara's Big
Ride for Bell Let's Talk and Bell Let's Talk Day, and significant
Bell funding of community care and access, research, and workplace
initiatives. To learn more, please visit Bell.ca/LetsTalk.
Media inquiries:
Jean Charles Robillard
Bell Communications
(514) 870-4739
jean_charles.robillard@bell.ca
Investor inquiries:
Thane Fotopoulos
BCE Investor Relations
(514) 870-4619
thane.fotopoulos@bell.ca
SOURCE BCE Inc.