This news release contains forward-looking statements. For a
description of the related risk factors and assumptions please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
- Net earnings attributable to common shareholders grow to
$739 million, yielding 13.0% increase
in net earnings per share (EPS); Adjusted EPS of $0.93, up 12.0%
- Cash flow from operating activities of $1,878 million drives Free Cash Flow increase of
10.4%
- Adjusted EBITDA grows 3.4% on 2.9% increase in total
revenues
- Wireless Adjusted EBITDA growth of 8.3% driven by 9.3%
higher revenue; strong 6.1% increase in blended ARPU; total Q3
postpaid net additions of 78,000
- Wireline Adjusted EBITDA up 1.1%, positive for a fifth
consecutive quarter; industry-leading margin increased to
41.1%
- Fastest growing broadband TV and Internet provider in
Canada in Q3 with 126,000 total
net customer additions – 68,000 IPTV and 58,000 high-speed
Internet
- Bell has now become Canada's largest TV provider with over
2.7 million subscribers, up 3.9% over last year
- Canada's largest Gigabit Internet footprint with
availability to 2 million homes in Québec, Ontario and the Atlantic region
- Bell Media revenue up 4.1%; Adjusted EBITDA grows
0.5%
MONTRÉAL, Nov. 5, 2015 /CNW
Telbec/ - BCE Inc. (TSX: BCE) (NYSE: BCE), Canada's largest
communications company, today reported results for the third
quarter (Q3) of 2015.
FINANCIAL
HIGHLIGHTS
|
($ millions except
per share amounts) (unaudited)
|
Q3 2015
|
Q3 2014
|
% change
|
BCE
|
|
|
|
Operating
revenues
|
5,345
|
5,195
|
2.9%
|
Adjusted
EBITDA(1)
|
2,187
|
2,115
|
3.4%
|
Net
earnings
|
791
|
703
|
12.5%
|
Net earnings
attributable to common shareholders
|
739
|
600
|
23.2%
|
EPS
|
0.87
|
0.77
|
13.0%
|
Adjusted
EPS(2)
|
0.93
|
0.83
|
12.0%
|
Cash flows from
operating activities
|
1,878
|
1,882
|
(0.2%)
|
Free Cash
Flow(3)
|
921
|
834
|
10.4%
|
Free Cash Flow per
share(3)
|
$1.09
|
$1.06
|
2.8%
|
"Bell's strong momentum in the growth services of communications
delivered positive Adjusted EBITDA across our Wireless, Wireline
and Media segments and significant increases in earnings per share
and cash flow. Our strategy of leading investment in Canada's
broadband networks and service innovation, combined with strong
execution by the national Bell team, continues to deliver
exceptional financial and operating results," said George Cope, President and Chief Executive
Officer of BCE and Bell. "The next-generation capabilities of the
Fibe network attracted approximately 126,000 net new broadband TV
and Internet customers in Q3 – and have now also made Bell the
largest TV provider in the country. Canada's largest and fastest
LTE network is accelerating smartphone usage and wireless revenue.
CraveTV and TV Everywhere GO digital services continue to attract
new viewers to Bell Media's premier content. We've launched a
massive Gigabit Internet footprint that rivals any in North America and in Q3 were the first company
on the continent to roll out the fastest mobile LTE data service
available. As we build out the new generation of Bell networks, our
team is focused on innovation that delivers for the customer,
drives our competitiveness and growth, and ensures Canada's
continued leadership in global communications."
Bell is focused on achieving a clear goal – to be recognized by
customers as Canada's leading communications company – through the
execution of 6 Strategic Imperatives: Invest in Broadband Networks
& Services, Accelerate Wireless, Leverage Wireline Momentum,
Expand Media Leadership, Improve Customer Service, and Achieve a
Competitive Cost Structure. Consistent execution of our strategy
has resulted in strong performance across Wireless, TV, Internet
and Media growth services, 40 consecutive quarters of uninterrupted
Adjusted EBITDA growth, and 11 increases to the BCE common share
dividend in the last 6 years, for a total dividend increase of
78%.
"Robust wireless, Internet and IPTV customer activations,
combined with higher average household revenue and a disciplined
cost focus, delivered strong growth in Adjusted EBITDA, Adjusted
EPS and free cash flow growth in Q3, providing the foundation for
sustained financial performance going forward," said Glen LeBlanc, Chief Financial Officer of BCE and
Bell. "Competitively well positioned across our Wireless, Wireline
and Media segments, Bell's operating momentum remains strong as we
enter the fourth quarter. We are comfortably on track with our 2015
financial plan, and well positioned to continue executing our
dividend growth model in 2016."
BCE RESULTS
BCE operating revenue increased 2.9% in Q3
to $5,345 million on service revenue
growth of 2.6% and a 6.2% increase in product revenue, driven by
strong organic wireless, wireline residential and media revenue
growth.
BCE's Q3 Adjusted EBITDA(1) was up 3.4% to
$2,187 million on positive
year-over-year growth across all Bell operating segments,
reflecting increases of 8.3% at Bell Wireless, 1.1% at Bell
Wireline, and 0.5% at Bell Media. BCE's consolidated Adjusted
EBITDA margin(1) increased to 40.9%, from 40.7%
in Q3 2014, as stronger revenue growth and operating cost savings
at Bell Wireline more than offset higher upfront wireless postpaid,
Internet and IPTV subscriber acquisition costs, greater wireless
retention spending, higher content costs at Bell Media, and the
margin impact from ongoing decline in traditional voice
services.
BCE's net earnings attributable to common shareholders were
$739 million, or $0.87 per share, up 23.2% and 13.0%,
respectively, from $600 million and
$0.77 per share in Q3 2014. The
increase was due to higher Adjusted EBITDA, higher other income
driven by gains from BCE's minority interest equity investments and
mark-to-market gains on equity derivative contracts entered into to
economically hedge future payments under our share-based
compensation plans, lower severance, acquisition and other costs,
as well as a decrease in non-controlling interest as a result of
the privatization of Bell Aliant. Excluding the impact of
severance, acquisition and other costs, net losses on investments,
and early debt redemption costs, Adjusted net
earnings(2) were $790
million, or $0.93 per share,
up 21.9% and 12.0%, respectively, from $648
million and $0.83 per share
last year.
BCE continued its strategic investments in broadband wireless
and fibre infrastructure, with capital expenditures of $927 million in Q3. Capital spending was focused
on connecting more homes and businesses directly to our broadband
fibre network, including the buildout of Gigabit Fibe
infrastructure in the City of
Toronto and other urban locations, the continued expansion
of our nationwide 4G LTE wireless network, the rollout of LTE
Advanced network service, and increases in wireless and Internet
network capacity to support higher speeds and growing data
usage.
BCE's cash flows from operating activities were essentially
stable at $1,878 million, compared to
$1,882 million in Q3 2014. Free
Cash Flow(3) generated this quarter increased
10.4% to $921 million, compared to
$834 million last year, reflecting
higher Adjusted EBITDA and the favourable impact of the
privatization of Bell Aliant. Free Cash Flow per
share(3) was $1.09,
up 2.8% from $1.06 last year.
BCE added 77,655 net new wireless postpaid customers and
reported a net loss of 19,112 prepaid subscribers; 67,908 net new
IPTV (Fibe TV and FibreOP TV) customers and a net loss of 41,994
satellite TV customers; and the addition of 57,888 new high-speed
Internet customers. Total net NAS line losses were essentially
unchanged compared to last year at 108,076. At September 30, 2015, BCE served a total of
8,183,367 wireless customers, up 1.8% from Q3 2014; total TV
subscribers of 2,700,710, up 3.9% (including 1,108,699 IPTV
customers, an increase of 29.3%); 3,374,239 Internet subscribers,
up 4.0%; and total NAS lines of 6,795,576, a decrease of 5.9%.
CORPORATE DEVELOPMENTS
Bell now Canada's #1 television provider
Bell became
Canada's largest provider of TV services in Q3 with 2,700,710
subscribers, an increase of 3.9% in our total customer base over
last year, thanks to the fast growth of Fibe TV and, in
Atlantic Canada, FibreOP TV. In
its most recent Customer Interaction Metric report released in
October, Nielsen Consumer Insights* found that Bell Fibe TV and
FibreOP TV were the top 2 TV services most recommended by customers
in a Canada-wide study conducted September
10 to 30, 2015.
Bell's TV success has been driven by ongoing innovation in Fibe
and FibreOP TV services, including new and exclusive features like
Restart, which allows customers to start live TV shows already in
progress from the beginning. Restart has now been further enhanced
to let viewers go back in time to watch and Restart shows that
aired in the previous 30 hours. Other new Restart options include
Trending, which highlights in real time the 5 most-watched shows in
the country in both English and French and lets you switch to watch
them live or Restart from the beginning; Resume, which allows you
to change channels while replaying a show and then switch back and
pick up where you left off; and Suggestions, which offers
customized viewing recommendations for video on demand. Bell has
also announced the exclusive November
19 availability of the new Samsung Galaxy View, launching a
new era in moveable streaming television. A highly portable 18.4"
(46.7 cm) Full HD touchscreen that is WiFi enabled for video
streaming and web browsing, and preloaded with the powerful Fibe TV
app, the innovative Samsung View turns every room into a TV
room.
--------------------------
* Findings based on data collected by Nielsen through
Bell Customer Interaction Metric research between September 10 and 30, 2015 for the
Canadian residential market using custom online panel
research.
Largest Gigabit Internet footprint in Canada
Bell is leading the way in
gigabit Internet service in Canada. We've launched Gigabit Fibe service to
more than 1.3 million homes across Québec and Ontario in August and added 650,000 more
locations in Atlantic Canada in
September. It's the fastest Internet service available to Canadian
consumers, and Bell plans to reach 2.2 million homes with gigabit
Internet service by the end of the year. Bell's fibre architecture
has significant structural and operating cost advantages over cable
and will enable Bell to achieve significantly higher speeds more
quickly.
Bell LTE ranked as the fastest wireless network in
Canada
PCMag ranked Bell
LTE #1 nationally and in more provinces than any other competitor
in its third annual review of Canadian wireless networks released
in September. According to PCMag's tests, Bell's LTE technology
"resulted in speeds that simply blow US carriers away" when used
with the latest smartphones from Bell such as the Samsung Galaxy
S6+ and the S6 edge+.
In August, Bell announced North
America's first rollout of Tri-band LTE Advanced wireless
service, delivering mobile data speeds of up to 335 megabits per
second (expected average download speeds of 25 to 100 Mbps) in
Halifax, Fredericton, Moncton, Toronto, Hamilton and Oakville. Bell's existing Dual-band LTE
Advanced service, launched in February, offers data speeds up to
260 Mbps (average 18 to 74 Mbps) with coverage in Atlantic Canada, Ontario, Alberta and BC for approximately 44% of the
Canadian population. This is complemented by a national LTE network
that offers data speeds ranging from 75 Mbps to 150 Mbps (average
12 to 40 Mbps) to over 94% of the population, with plans to cover
98% by the end of the year.
Taking the lead in mobile commerce
In July, Bell
launched Suretap, an open mobile wallet payment system based on NFC
SIM cards and backed by Bell, Telus and Rogers and available to
other carriers. There have been a total of approximately 500,000
downloads of Suretap for Android and Blackberry in the last 3
months. With support for 40 payment cards and more than 30 gift
card brands, the Suretap app is now available for more than 90% of
Android and BlackBerry devices sold. Enstream, a joint venture of
Bell, Telus and Rogers, offers secure card management services to
VISA, MasterCard and debit card issuers using SIM secure elements
on Bell Mobility phones, including CIBC, Desjardins, TD Canada
Trust, and most recently Scotiabank in Q3.
R&D: Bell #1 in communications research &
development
Bell's leadership in service innovation stems
directly from our longstanding position as the #1 investor in
Canadian communications research and development. As detailed in
the annual R&D rankings released this week by Research
Infosource Inc., Bell invested $546
million in Canadian R&D in 2014 to develop the country's
premier broadband networks and new mobile, TV and Internet
services, placing us first in the communications sector and fourth
overall for R&D by all Canadian private sector
corporations.
Bell Let's Talk mental health initiative extended for 5
years
In September, the fifth anniversary of Bell Let's
Talk, Bell announced the extension of its national mental health
initiative for a further 5 years, and an increase in its total
funding commitment for Canadian mental health to at least
$100 million. With a focus on the
pillars of anti-stigma, care and access, new research, and
workplace leadership, Bell Let's Talk has funded more than 600
partner organizations in every region of Canada since 2010.
According to a 2015 Neilsen study, more than 1 in 4 Canadians (and
9 of 10 young Canadians) say they're more aware of mental health
issues than 5 years ago, and 70% believe attitudes about mental
illness have changed for the better. To learn more, please visit
Bell.ca/LetsTalkProgressReport.
$1 billion Bell Canada public debt offering
In
October, Bell Canada completed a
public offering of $1 billion of
medium term notes (MTN) debentures which will mature on
October 3, 2022 and carry an annual
interest rate of 3%. This latest debt offering represents the
lowest coupon ever achieved by Bell
Canada on any MTN debenture issuance. With this new
issuance, Bell Canada's annual
after-tax cost of outstanding public debentures has declined to
3.38% with an average term to maturity of approximately 9
years.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Bell Wireless delivered another strong
quarter of financial results with Q3 operating revenues up 9.3% to
$1,772 million from $1,621 million in Q3 2014. Service revenues
increased 8.3% to $1,619 million,
reflecting a higher postpaid mix and strong growth in blended
ARPU(4). As a result of increased smartphone penetration
and accelerating usage on our leading 4G LTE mobile network, data
revenue grew 23.5% this quarter. Product revenues were up 22.2% to
$143 million, as a result of more sales of higher-priced
mobile devices and customer upgrades.
Wireless Adjusted EBITDA increased 8.3% to $758 million on the high flow-through of service
revenue. Wireless service revenue margin remained stable, year over
year, at 46.8%, despite $44 million
in higher combined retention spending and subscriber acquisition
costs, which contributed to operating cost growth of 10.1% in the
quarter.
- Postpaid gross additions totalled 353,652 in Q3, up 6.6% over
last year, reflecting increased activity in the Canadian wireless
market attributable to the double cohort.
- Postpaid net additions were 77,655, down from 91,779 last year,
as a result of increased customer churn(4) reflecting
the seasonally high level of promotional activity combined with the
double cohort impact. Postpaid customer churn in Q3 increased 0.11
percentage points over last year to 1.31%.
- Bell Wireless postpaid customers totalled 7,284,108 at the end
of Q3 2015, a 4.2% increase over last year. Total Bell Wireless
customers grew 1.8% to 8,183,367.
- The percentage of postpaid subscribers with smartphones
increased to 78%, compared to 75% at the end of Q3 2014. The
proportion of postpaid subscribers on the LTE network reached 63%
at the end of the third quarter.
- Blended ARPU increased 6.1% to $65.34, driven by a higher percentage of
customers on 2-year contracts, increased data usage on the LTE
network, and a greater mix of postpaid customers in the total
subscriber base.
- Cost of acquisition (COA)(4) was up 6.2% to
$446 per subscriber, due mainly to a
higher postpaid customer mix.
- With more customer upgrades driven by an increased number of
customer contract expirations attributable to the double cohort,
retention spending increased to 11.7% of wireless service revenues,
up from 10.2% last year.
Bell Wireline
Wireline revenue decreased 0.6% in Q3 to
$3,028 million, reflecting a
year-over-year decline at Bell Business Markets due to ongoing
competitive pricing pressures and reduced customer spending on core
connectivity services, business service solutions and data product
equipment resulting from continued slow economic growth. This was
offset by the performance of Residential Services, which delivered
revenue growth of 1.9% on continued strong Internet and TV
subscriber net additions and higher household ARPU.
With an increasing mix of growth services and a 1.7% reduction
in operating costs driven by integration synergies with Bell
Aliant, ongoing customer service improvement and fibre-related
savings, Wireline Adjusted EBITDA increased 1.1% over last year to
$1,246 million, yielding a 0.6
percentage-point improvement to Bell's industry-leading wireline
margin of 41.1%. With solid year-to-date financial performance,
Bell Wireline remains on track to deliver its first full-year of
positive Adjusted EBITDA.
- Bell TV added 67,908 net new Fibe TV and FibreOP TV customers
this quarter, compared to the 74,450 achieved during an
exceptionally strong back-to-school period in Q3 of last year. Less
new IPTV footprint expansion in 2015 also impacted the magnitude of
new IPTV subscriber activations this quarter. BCE served 1,108,699
IPTV subscribers at the end of Q3, up 29.3% compared to Q3
2014.
- Satellite TV net customer losses increased to 41,994 in Q3 from
36,872 last year, due to aggressive cable conversion offers in
areas where BCE does not offer IPTV service and the net loss of
wholesale subscribers attributable to the rollout of IPTV service
by a competing TV provider in Western
Canada.
- BCE became the largest TV provider in Canada in Q3 with a combined total of
2,700,710 subscribers, up 3.9% from 2,600,418 at the end of Q3
2014.
- High-speed Internet net additions totalled 57,888 in Q3,
compared to 64,254 last year. BCE built on its position as the
leading Internet service provider in Canada with a high-speed Internet subscriber
base that reached 3,374,239 at the end of Q3, up 4.0% compared to
Q3 2014.
- Wireline data revenues were up 2.8% to $1,770 million, driven by combined Internet and
TV service revenue growth of 6.3%. This was moderated by reduced
spending on core connectivity, business service solutions, and data
products by our large enterprise customers.
- Residential NAS net losses increased to 78,354, compared to
70,782 in Q3 2014, as a result of more aggressive competitor
promotions and service bundle discounts as well as steady wireless
and Internet-based technology substitution for local services.
- Business NAS net losses improved by 20.3% to 29,722 from 37,270
last year, reflecting fewer customer deactivations in both our
small and mid-sized markets and increased demand for connectivity
service as a result of the recent 2015 federal election.
- Total NAS access lines at the end of Q3 totalled 6,795,576, a
5.9% decline compared to Q3 2014. As a result, BCE's local and
access revenues decreased 4.3% to $818
million, while long distance revenue fell 9.6% to
$207 million.
Bell Media
Media revenues grew 4.1% to $692 million and Adjusted EBITDA was up 0.5% to
$183 million on higher advertising
and subscriber revenues in Q3.
Conventional TV advertising growth was supported by Bell Media's
new fall season programming, the live broadcast of the Emmy Awards,
and the recent federal election. Specialty TV advertising revenues
increased over last year, reflecting record audiences for our
broadcast of the 2015 FIFA Women's World Cup Soccer, the recapture
of advertising dollars that moved to the broadcaster of FIFA Men's
World Cup Soccer last year, growth in non-sports specialty TV
services Space and Discovery, and increased Astral Out of Home
revenues resulting from new contract wins and acquisitions over the
past year.
Subscriber revenues increased modestly compared to Q3 2014 with
higher revenues from CraveTV and our growing suite of TV Everywhere
GO products.
Bell Media operating costs, which increased 5.4% to $509 million due to higher costs for sports
broadcast rights, Canadian programming and content investments for
CraveTV, moderated growth in Adjusted EBITDA in Q3.
- Bell Media had the largest average audiences across
conventional and specialty TV in Q3. CTV led the Summer season with
9 of the top 20 programs, more than any other network, while
Discovery and Space were the top 2 entertainment specialty TV
services in prime time for viewers aged 25 to 54.
- CTV delivered 3 of the top 4 new shows in the first two weeks
of the new Fall TV season: Quantico, Blindspot and Code Black.
- Bell Media expanded its extensive portfolio of sports content
on TSN and RDS, including UEFA Champions League Soccer and the
International Basketball Federation (FIBA).
- Bell Media confirmed TSN and RDS will act as the primary
broadcast partners for CBC's broadcast of the Beijing 2022 Olympic Winter Games and the 2024
Olympic Games, extending its existing partnership with CBC to Rio
2016, Pyeongchang 2018 and Tokyo
2020.
- Bell Media maintained a leading position in Québec's
French-language specialty market, reaching 81% of the
French-speaking population in the average week. Three out of the
Top 5 Specialty channels among the key viewers age 25 to 54 were
Bell Media properties: Canal D, Super Écran and Canal Vie.
- Bell Media digital properties led all Canadian broadcast
competitors with total monthly averages of 17.2 million visitors,
2.8 million viewers, 326 million page views, 122 million visits,
and 63 million videos served.
- Bell Media remained Canada's top radio broadcaster in Q3
reaching 17.4 million listeners who spent a total of 85 million
hours tuned in each week.
- Astral Out of Home was awarded an 8-year contract by the Ottawa
Macdonald-Cartier International Airport, the sixth busiest in
Canada. Astral Out of Home will
replace all of the existing advertising infrastructure at the
airport with a complete line of digital products, making it the
first in Canada with permanent
100% digital advertising structures.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.65 per common share, payable on January 15, 2016 to shareholders of record at the
close of business on December 15,
2015.
OUTLOOK
BCE confirmed its financial guidance targets
for 2015, as provided on February 5,
2015, as follows:
|
February
5
Guidance
|
November
5
Guidance
|
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(4) 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 Q3 2015 results
on Thursday, November 5 at
8:00 a.m. (Eastern). Media are
welcome to participate on a listen-only basis. To participate,
please dial toll-free 1-866-225-6564 or (416) 340-2220. A replay
will be available for one week by dialing 1-800-408-3053 or (905)
694-9451 and entering pass code 6872408#.
A live audio webcast of the conference call will be available on
BCE's website at:
BCE Q3-2015 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 Q3 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)
|
|
|
|
Q3 2015
|
Q3 2014
|
Net
earnings
|
791
|
703
|
Severance,
acquisition and other costs
|
46
|
66
|
Depreciation
|
727
|
739
|
Amortization
|
133
|
116
|
Finance
costs
|
|
|
|
Interest
expense
|
227
|
227
|
|
Interest on
post-employment benefit obligations
|
27
|
25
|
Other
income
|
(35)
|
(2)
|
Income
taxes
|
271
|
241
|
Adjusted
EBITDA
|
2,187
|
2,115
|
|
BCE Operating
Revenues
|
5,345
|
5,195
|
Adjusted EBITDA
Margin
|
40.9%
|
40.7%
|
(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)
|
|
Q3 2015
|
Q3 2014
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
739
|
0.87
|
600
|
077
|
Severance,
acquisition and other costs
|
35
|
0.05
|
45
|
0.06
|
Net losses on
investments
|
16
|
0.01
|
-
|
-
|
Early debt redemption
costs
|
-
|
-
|
3
|
-
|
Adjusted net
earnings
|
790
|
0.93
|
648
|
0.83
|
(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)
|
|
|
|
Q3 2015
|
Q3 2014
|
Cash flows from
operating activities
|
1,878
|
1,882
|
Bell Aliant dividends
paid to BCE
|
-
|
47
|
Capital
expenditures
|
(927)
|
(975)
|
Cash dividends paid
on preferred shares
|
(37)
|
(31)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
(26)
|
(69)
|
Acquisition costs
paid
|
33
|
33
|
Bell Aliant free cash
flow
|
-
|
(53)
|
Free cash
flow
|
921
|
834
|
|
Average number of
common shares outstanding
|
848.9
|
782.1
|
Free cash flow per
share
|
1.09
|
1.06
|
(4)
|
We use ARPU, churn,
COA, capital intensity and dividend payout 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
Q3 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, our network deployment plans including,
without limitation, our Gigabit Fibe infrastructure buildout, 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
November 5, 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 November 5,
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.
Material Assumptions
A number of economic, market,
operational and financial assumptions were made by BCE in preparing
its forward-looking statements contained in this news release,
including, but not limited to:
Canadian Economic and Market Assumptions
- slow economic growth, given the Bank of Canada's most recent
estimated growth in Canadian gross domestic product of 1.1% in
2015
- weaker employment growth compared to 2014, as the overall level
of business investment is expected to remain soft
- interest rates to remain stable through the remainder of 2015,
following the decrease of twenty-five basis points by the Bank of
Canada in July 2015
- 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 mandatory
code of conduct for providers of retail mobile wireless voice and
data services in Canada (the
Wireless Code) 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 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 Adjusted EBITDA growth
- IPTV contributing to TV and broadband Internet market share
growth, as well as fewer year-over-year residential NAS net losses,
resulting in higher penetration of three-product households
- increasing wireless and Internet-based technological
substitution
- residential services household 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
- stable year-over-year rate of decline in Bell Business Markets
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
- 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
$390 million, instead of $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
$280 million, instead of $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 $920 million, instead of $940 million
- tax adjustments (per share) of approximately $0.05, instead of $0.04
- 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 November 5, 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, including, in particular, those relating to mandated
reseller access to fibre-to-the-home deployments
- 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 direct-to-home (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
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,
Second and Third Quarter MD&As dated April 29, 2015, August 5,
2015 and November 4, 2015,
respectively, for additional information with respect to certain of
these and other assumptions and risks, filed by BCE with the
Canadian provincial securities regulatory authorities (available at
Sedar.com) and with the U.S. Securities and Exchange Commission
(available at SEC.gov). These documents are also available at
BCE.ca.
ABOUT BCE
Canada's largest communications company, BCE
provides 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.