SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: November 2015 |
Commission File Number: 1-8481 |
BCE Inc.
(Translation of Registrants name into English)
1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada H3E 3B3,
(514) 870-8777
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F __________ |
Form 40-F ____X____ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes __________ |
No ____X____ |
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.
Only the BCE Inc. Managements Discussion and Analysis of Financial Condition and Results of Operations for the quarter ended September 30, 2015 and the BCE Inc. unaudited consolidated interim financial statements for the quarter ended September 30, 2015, included in the BCE Inc. 2015 Third Quarter Shareholder Report furnished with this Form 6-K as Exhibit 99.1, the Bell Canada Unaudited Selected Summary Financial Information for the quarter ended September 30, 2015 furnished with this Form 6-K as Exhibit 99.5, and the Exhibit to 2015 Third Quarter Financial Statements Earnings Coverage furnished with this Form 6-K as Exhibit 99.6 are incorporated by reference in the registration statements filed by BCE Inc. with the Securities and Exchange Commission on Form F-3 (Registration Statement No. 333-12130), Form S-8 (Registration Statement No. 333-12780), Form S-8 (Registration Statement No. 333-12802) and Form F-10 (Registration Statement No. 333-199993). Except for the foregoing, no other document or portion of document furnished with this Form 6-K is incorporated by reference in BCE Inc.s registration statements. Notwithstanding any reference to BCE Inc.s Web site on the World Wide Web in the documents attached hereto, the information contained in BCE Inc.s site or any other site on the World Wide Web referred to in BCE Inc.s site is not a part of this Form 6-K and, therefore, is not furnished to the Securities and Exchange Commission.
Page 1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BCE Inc.
(signed) Glen LeBlanc
|
Glen LeBlanc
Executive Vice-President and Chief Financial
Officer
November 5, 2015
|
Page 2
EXHIBIT INDEX
99.1 BCE Inc. 2015 Third Quarter Shareholder Report
99.2 Supplementary Financial Information Third Quarter 2015
99.3 CEO/CFO Certifications
99.4 News Release
99.5 Bell Canada Unaudited Selected Summary Financial Information
99.6 Exhibit to 2015 Third Quarter Financial Statements Earnings Coverage
Page 3
Exhibit 99.1
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/bce_cover.jpg)
TABLE OF CONTENTS
MANAGEMENTS DISCUSSION AND ANALYSIS |
1 |
|
1 |
OVERVIEW |
2 |
|
1.1 |
Financial highlights |
2 |
|
1.2 |
Key corporate and business developments |
3 |
|
1.3 |
Assumptions |
4 |
|
2 |
CONSOLIDATED FINANCIAL ANALYSIS |
5 |
|
2.1 |
BCE consolidated income statements |
5 |
|
2.2 |
Customer connections |
5 |
|
2.3 |
Operating revenues |
6 |
|
2.4 |
Operating costs |
7 |
|
2.5 |
Adjusted EBITDA |
8 |
|
2.6 |
Severance, acquisition and other costs |
9 |
|
2.7 |
Depreciation and amortization |
10 |
|
2.8 |
Finance costs |
10 |
|
2.9 |
Other income |
10 |
|
2.10 |
Income taxes |
10 |
|
2.11 |
Net earnings and EPS |
11 |
|
3 |
BUSINESS SEGMENT ANALYSIS |
12 |
|
3.1 |
Bell Wireless |
12 |
|
3.2 |
Bell Wireline |
17 |
|
3.3 |
Bell Media |
22 |
|
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
25 |
|
4.1 |
Net debt |
25 |
|
4.2 |
Outstanding share data |
25 |
|
4.3 |
Cash flows |
26 |
|
4.4 |
Post-employment benefit plans |
28 |
|
4.5 |
Financial risk management |
28 |
|
4.6 |
Credit ratings |
30 |
|
4.7 |
Liquidity |
30 |
|
5 |
QUARTERLY FINANCIAL INFORMATION |
31 |
|
6 |
REGULATORY ENVIRONMENT |
32 |
|
7 |
BUSINESS RISKS |
34 |
|
8 |
ACCOUNTING POLICIES, FINANCIAL MEASURES AND CONTROLS |
36 |
CONSOLIDATED FINANCIAL STATEMENTS |
|
39 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
44 |
|
Note 1 |
Corporate information |
44 |
|
Note 2 |
Basis of presentation and significant
accounting policies |
44 |
|
Note 3 |
Segmented information |
44 |
|
Note 4 |
Operating costs |
47 |
|
Note 5 |
Severance, acquisition and other costs |
47 |
|
Note 6 |
Other income |
48 |
|
Note 7 |
Acquisition of Glentel |
48 |
|
Note 8 |
Earnings per share |
48 |
|
Note 9 |
Acquisition of spectrum licences |
49 |
|
Note 10 |
Debt |
49 |
|
Note 11 |
Post-employment benefit plans |
49 |
|
Note 12 |
Financial assets and liabilities |
50 |
|
Note 13 |
Share-based payments |
51 |
|
Note 14 |
Commitments |
53 |
|
|
|
|
MANAGEMENTS DISCUSSION
AND ANALYSIS |
In this managements discussion and analysis of financial condition and results of operations (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., its subsidiaries, joint arrangements and associates. Bell Aliant means, as the context may require, until December 31, 2014, either Bell Aliant Inc. or, collectively, Bell Aliant Inc. and its subsidiaries and associates, or, after December 31, 2014 and up to, and including, June 30, 2015, either Bell Aliant Regional Communications Inc. or, collectively, Bell Aliant Regional Communications Inc. and its subsidiaries and associates.
Due to the privatization of Bell Aliant in 2014 as outlined in Note 3, Privatization of Bell Aliant in our consolidated financial statements for the year ended December 31, 2014, beginning January 1, 2015, the results of operation of our former Bell Aliant segment are included within our Bell Wireless and Bell Wireline segments, with prior periods restated for comparative purposes. Consequently, beginning in 2015, our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media.
All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) on pages
36 to 38 for a list of defined non-GAAP financial measures and key performance indicators.
Please refer to our unaudited consolidated financial statements for the third quarter of 2015 when reading this MD&A. We also encourage you to read BCEs MD&A for the year ended December 31, 2014 dated March 5, 2015 (BCE 2014 Annual MD&A) as updated in BCEs MD&A for the first quarter of 2015 dated April 29, 2015 (BCE 2015 First Quarter MD&A) and second quarter of 2015 dated August 5, 2015 (BCE 2015 Second Quarter MD&A). In preparing this MD&A, we have taken into account information available to us up to November 4, 2015, the date of this MD&A, unless otherwise stated.
You will find more information about us, including BCEs annual information form for the year ended December 31, 2014 dated March 5, 2015 (BCE 2014 AIF) and recent financial reports, including the BCE 2014 Annual MD&A, the BCE 2015 First Quarter MD&A and the BCE 2015 Second Quarter MD&A, on BCEs website at
BCE.ca, on SEDAR at
sedar.com and on EDGAR at
sec.gov.
This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q3) and nine months (YTD) ended September 30, 2015 and 2014.
|
CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This MD&A including, in particular, but without limitation, the section and sub-sections entitled Assumptions, sub-section 3.2, Bell Wireline Key business developments and section 6, Regulatory environment, contain forward-looking statements. These forward-looking statements include, but are not limited to, statements relating to our network deployment plans including, without limitation, the Gigabit Fibe infrastructure buildout across Québec, Ontario and Atlantic Canada, and our business outlook, objectives, plans and strategies. Forward-looking statements also include any other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. 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.
Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at November 4, 2015 and, accordingly, are subject to change after this date. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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. Forward-looking statements are presented in this MD&A for the purpose of assisting investors and others in understanding our business outlook, objectives, plans and strategic priorities as well as our anticipated operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.
We have made certain economic, market and operational assumptions in preparing forward-looking statements contained in this MD&A. These assumptions include, without limitation, the assumptions described in the section and various sub-sections of this MD&A entitled Assumptions, which section and sub-sections are incorporated by reference in this cautionary statement. We believe that these assumptions were reasonable at November 4, 2015. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect. Unless otherwise indicated in this MD&A, in the BCE 2015 First Quarter MD&A or in the BCE 2015 Second Quarter MD&A, the strategic priorities, business outlook and assumptions described in the BCE 2014 Annual MD&A remain substantially unchanged.
Important risk factors including, without limitation, regulatory, competitive, economic, financial, operational, technological and transactional risks that could cause actual results or events to differ materially from those expressed in, or implied by, the above-mentioned forward-looking statements and other forward-looking statements in this MD&A, include, but are not limited to, the risks described in section 6, Regulatory environment and section 7, Business risks, which sections are incorporated by reference in this cautionary statement.
We caution readers that the risks described in the above-mentioned sections and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated by us, 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 4, 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.
|
BCE Inc. 2015
Third Quarter Shareholder Report 1 |
1 |
OVERVIEW |
MD&A |
|
|
|
|
|
1.1 Financial highlights
BCE Q3 2015 selected quarterly information
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg2-1.jpg)
BCE customer connections
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg2-2.jpg)
|
BCE income statements selected information |
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Operating revenues |
5,345 |
|
5,195 |
|
150 |
|
2.9 |
% |
15,911 |
|
15,514 |
|
397 |
|
2.6 |
% |
Operating costs |
(3,158 |
) |
(3,080 |
) |
(78 |
) |
(2.5 |
%) |
(9,433 |
) |
(9,233 |
) |
(200 |
) |
(2.2 |
%) |
Adjusted EBITDA(1) |
2,187 |
|
2,115 |
|
72 |
|
3.4 |
% |
6,478 |
|
6,281 |
|
197 |
|
3.1 |
% |
Adjusted EBITDA margin(1) |
40.9 |
% |
40.7 |
% |
|
|
0.2 |
% |
40.7 |
% |
40.5 |
% |
|
|
0.2 |
% |
Net earnings attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders |
739 |
|
600 |
|
139 |
|
23.2 |
% |
2,030 |
|
1,821 |
|
209 |
|
11.5 |
% |
Preferred shareholders |
38 |
|
31 |
|
7 |
|
22.6 |
% |
115 |
|
97 |
|
18 |
|
18.6 |
% |
Non-controlling interest |
14 |
|
72 |
|
(58 |
) |
(80.6 |
%) |
43 |
|
206 |
|
(163 |
) |
(79.1 |
%) |
Net earnings |
791 |
|
703 |
|
88 |
|
12.5 |
% |
2,188 |
|
2,124 |
|
64 |
|
3.0 |
% |
Adjusted net earnings(1) |
790 |
|
648 |
|
142 |
|
21.9 |
% |
2,230 |
|
1,914 |
|
316 |
|
16.5 |
% |
Net earnings per common share (EPS) |
0.87 |
|
0.77 |
|
0.10 |
|
13.0 |
% |
2.40 |
|
2.34 |
|
0.06 |
|
2.6 |
% |
Adjusted EPS(1) |
0.93 |
|
0.83 |
|
0.10 |
|
12.0 |
% |
2.64 |
|
2.46 |
|
0.18 |
|
7.3 |
% |
(1) |
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net earnings and Adjusted EPS are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) Adjusted EBITDA and Adjusted EBITDA Margin and Adjusted Net Earnings and Adjusted EPS in this MD&A for more details, including, for Adjusted net earnings and Adjusted EPS, reconciliations to the most comparable IFRS financial measures. |
|
2
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
1 |
OVERVIEW |
MD&A |
|
|
|
|
|
BCE statements of cash flows selected information |
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Cash flows from operating activities |
1,878 |
|
1,882 |
|
(4 |
) |
(0.2 |
%) |
4,764 |
|
4,714 |
|
50 |
|
1.1 |
% |
Capital expenditures |
(927 |
) |
(975 |
) |
48 |
|
4.9 |
% |
(2,668 |
) |
(2,641 |
) |
(27 |
) |
(1.0 |
%) |
Free cash flow(1) |
921 |
|
834 |
|
87 |
|
10.4 |
% |
2,083 |
|
1,911 |
|
172 |
|
9.0 |
% |
(1) |
Free cash flow is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) Free Cash Flow and Free Cash Flow per share in this MD&A for more details, including a reconciliation to the most comparable IFRS financial measure. |
Q3 2015 financial highlights |
BCE continued to build on the momentum achieved in the first half of the year and delivered another strong set of financial results with revenues and Adjusted EBITDA growth of 2.9% and 3.4%, respectively, in the third quarter of 2015 compared to the same period last year, driving Adjusted EBITDA margin to 40.9%, up 0.2% over the same period last year. Growth across all three of our segments contributed to the overall year-over-year increase in Adjusted EBITDA.
BCEs Adjusted EBITDA growth in Q3 2015 was led by continued strong performance from our Bell Wireless segment which was up 8.3% year over year, driven by the flow-through of higher wireless revenues. This was moderated by increased spending on customer retention and acquisition due to greater activity in the marketplace as a result of the convergence of three-year and two-year contract expiries (referred to as the double cohort in the wireless industry) following the final application of the mandatory code of conduct on June 3, 2015 for providers of retail mobile wireless voice and data services in Canada (Wireless Code). Our Bell Wireline segment achieved Adjusted EBITDA growth of 1.1%, despite a marginal decline in revenues, reflecting ongoing operating cost efficiencies, primarily driven by synergy savings due to the privatization of Bell Aliant, as well as continued strength in our Internet and Internet protocol television (IPTV) businesses. This helped to mitigate ongoing, but slowing, pressures in our legacy voice revenues and from our Bell Business Markets unit. Bell Medias Adjusted EBITDA was up 0.5%, compared to last year, mainly attributable to higher advertising revenues coupled with increased subscriber revenues from CraveTV, our streaming service launched in December 2014, and TV Everywhere products, which more than offset escalating content and programming costs.
BCE net earnings of $791 million in the third quarter of 2015 grew 12.5% over last year, driven by higher Adjusted EBITDA, higher other income and lower severance, acquisition and other costs, partly offset by higher income taxes as a result of higher taxable income.
Cash flows from operating activities in the third quarter of 2015 decreased $4 million compared to Q3 2014 due mainly to a decrease in working capital, partly offset by higher Adjusted EBITDA and lower income taxes paid. Despite this modest decline, free cash flow in Q3 2015 increased $87 million compared to Q3 2014 due mainly to the favourable impact of the privatization of Bell Aliant.
In the third quarter of 2015, BCE paid $551 million in dividends to its common shareholders, which represented a 14.8% increase in comparison to last year.
|
1.2
Key corporate and business developments |
$1 billion public debt offering
On October 1, 2015, Bell Canada completed a public offering of $1 billion of medium term notes (MTN) debentures. The $1 billion Series M-40 MTN debentures will mature on October 3, 2022 and carry an annual interest rate of 3.00%. These MTN debentures are fully and unconditionally guaranteed by BCE. This latest debt offering represents the lowest coupon ever achieved by Bell Canada on any MTN debenture issuance. With this new issuance, Bell Canadas annual after-tax cost of outstanding public debenture debt has declined by three basis points to 3.38%, and the average term to maturity has increased to 9.2 years. The net proceeds of this offering were used to fund the repayment of Bell Canadas $1 billion principal amount of 3.60% Series M-21 MTN debentures due December 2, 2015, redeemed prior to maturity on November 2, 2015.
BCE divests equity stake in the Globe and Mail
On August 14, 2015, BCE announced the sale of its 15% equity stake in the Globe and Mail Inc. to The Woodbridge Company Limited.
Bell lets talk initiative extended a further 5 years
On September 22, 2015, 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. On September 21, 2010, Bell announced the launch of Bell Lets Talk which began a new conversation about mental illness, a pressing national health concern beset by a unique stigma and far underfunded and underserved relative to its impact on every Canadian.
|
BCE Inc. 2015
Third Quarter Shareholder Report
3 |
1 |
OVERVIEW |
MD&A |
|
|
|
|
|
As at the date of this MD&A, our forward-looking statements set out in the BCE 2014 Annual MD&A, as updated or supplemented in the BCE 2015 First Quarter MD&A, in the BCE 2015 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following economic and market assumptions as well as the various assumptions referred to under the sub-sections entitled Assumptions set out in section 3, Business segment analysis of this MD&A.
|
Assumptions about the Canadian economy |
-
Slow economic growth, given the Bank of Canadas 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
two or three 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
|
4
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
2
CONSOLIDATED FINANCIAL ANALYSIS |
This section provides detailed information and analysis about BCEs performance in Q3 and YTD 2015 compared to Q3 and YTD 2014. It focuses on BCEs consolidated operating results and provides financial information for each of our businesses. For further discussion and analysis of our Bell Wireless, Bell Wireline and Bell Media business segments, refer to section 3, Business segment analysis.
|
2.1
BCE consolidated income statements |
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Operating revenues |
5,345 |
|
5,195 |
|
150 |
|
2.9 |
% |
15,911 |
|
15,514 |
|
397 |
|
2.6 |
% |
Operating costs |
(3,158 |
) |
(3,080 |
) |
(78 |
) |
(2.5 |
%) |
(9,433 |
) |
(9,233 |
) |
(200 |
) |
(2.2 |
%) |
Adjusted EBITDA |
2,187 |
|
2,115 |
|
72 |
|
3.4 |
% |
6,478 |
|
6,281 |
|
197 |
|
3.1 |
% |
Severance, acquisition and other costs |
(46 |
) |
(66 |
) |
20 |
|
30.3 |
% |
(294 |
) |
(158 |
) |
(136 |
) |
(86.1 |
%) |
Depreciation |
(727 |
) |
(739 |
) |
12 |
|
1.6 |
% |
(2,159 |
) |
(2,146 |
) |
(13 |
) |
(0.6 |
%) |
Amortization |
(133 |
) |
(116 |
) |
(17 |
) |
(14.7 |
%) |
(394 |
) |
(454 |
) |
60 |
|
13.2 |
% |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
(227 |
) |
(227 |
) |
|
|
0.0 |
% |
(683 |
) |
(691 |
) |
8 |
|
1.2 |
% |
Interest on post-employment benefit obligations |
(27 |
) |
(25 |
) |
(2 |
) |
(8.0 |
%) |
(82 |
) |
(76 |
) |
(6 |
) |
(7.9 |
%) |
Other income |
35 |
|
2 |
|
33 |
|
n.m. |
|
58 |
|
76 |
|
(18 |
) |
(23.7 |
%) |
Income taxes |
(271 |
) |
(241 |
) |
(30 |
) |
(12.4 |
%) |
(736 |
) |
(708 |
) |
(28 |
) |
(4.0 |
%) |
Net earnings |
791 |
|
703 |
|
88 |
|
12.5 |
% |
2,188 |
|
2,124 |
|
64 |
|
3.0 |
% |
Net earnings attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders |
739 |
|
600 |
|
139 |
|
23.2 |
% |
2,030 |
|
1,821 |
|
209 |
|
11.5 |
% |
Preferred shareholders |
38 |
|
31 |
|
7 |
|
22.6 |
% |
115 |
|
97 |
|
18 |
|
18.6 |
% |
Non-controlling interest |
14 |
|
72 |
|
(58 |
) |
(80.6 |
%) |
43 |
|
206 |
|
(163 |
) |
(79.1 |
%) |
Net earnings |
791 |
|
703 |
|
88 |
|
12.5 |
% |
2,188 |
|
2,124 |
|
64 |
|
3.0 |
% |
Adjusted net earnings |
790 |
|
648 |
|
142 |
|
21.9 |
% |
2,230 |
|
1,914 |
|
316 |
|
16.5 |
% |
EPS |
0.87 |
|
0.77 |
|
0.10 |
|
13.0 |
% |
2.40 |
|
2.34 |
|
0.06 |
|
2.6 |
% |
Adjusted EPS |
0.93 |
|
0.83 |
|
0.10 |
|
12.0 |
% |
2.64 |
|
2.46 |
|
0.18 |
|
7.3 |
% |
n.m.: not meaningful
TOTAL BCE CONNECTIONS
|
Q3 2015 |
|
Q3 2014 |
|
% CHANGE |
|
Wireless Subscribers |
8,183,367 |
|
8,035,130 |
|
1.8 |
% |
Postpaid |
7,284,108 |
|
6,991,927 |
|
4.2 |
% |
High-speed Internet Subscribers(1) (2) |
3,374,239 |
|
3,245,016 |
|
4.0 |
% |
TV (Satellite and IPTV Subscribers)(1) (2) |
2,700,710 |
|
2,600,418 |
|
3.9 |
% |
IPTV(1) (2) |
1,108,699 |
|
857,473 |
|
29.3 |
% |
Total Growth Services |
14,258,316 |
|
13,880,564 |
|
2.7 |
% |
Wireline NAS lines(1) (2) |
6,795,576 |
|
7,223,857 |
|
(5.9 |
%) |
Total Services |
21,053,892 |
|
21,104,421 |
|
(0.2 |
%) |
(1) |
Our Q1 2015 Internet, IPTV, total TV, and NAS subscriber base included a beginning of period adjustment to reduce the number of subscribers by 7,505, 2,236, 7,702, and 4,409, respectively, for deactivations as a result of the Canadian Radio-television and Telecommunications Commissions (CRTC) decision to eliminate the 30-day notice period required to cancel services. |
(2) |
Subsequent to a review of our subscriber metrics, our Q1 2015 beginning of period Internet, IPTV and total TV subscriber base was reduced by 31,426, 1,849 and 3,790 subscribers, respectively, while our NAS base was increased by 657 subscribers. These adjustments primarily consisted of older balances. |
|
BCE Inc. 2015
Third Quarter Shareholder Report
5 |
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
|
BCE NET ACTIVATIONS
|
Q3 2015 |
|
Q3 2014 |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
% CHANGE |
|
Wireless Subscribers |
58,543 |
|
83,636 |
|
(30.0 |
%) |
64,739 |
|
110,098 |
|
(41.2 |
%) |
Postpaid |
77,655 |
|
91,779 |
|
(15.4 |
%) |
174,061 |
|
193,834 |
|
(10.2 |
%) |
High-speed Internet Subscribers |
57,888 |
|
64,254 |
|
(9.9 |
%) |
116,144 |
|
108,380 |
|
7.2 |
% |
TV (Satellite and IPTV Subscribers) |
25,914 |
|
37,578 |
|
(31.0 |
%) |
69,594 |
|
111,170 |
|
(37.4 |
%) |
IPTV |
67,908 |
|
74,450 |
|
(8.8 |
%) |
179,237 |
|
199,960 |
|
(10.4 |
%) |
Total Growth Services |
142,345 |
|
185,468 |
|
(23.3 |
%) |
250,477 |
|
329,648 |
|
(24.0 |
%) |
Wireline NAS lines |
(108,076 |
) |
(108,052 |
) |
(0.0 |
%) |
(331,524 |
) |
(371,712 |
) |
10.8 |
% |
Total Services |
34,269 |
|
77,416 |
|
(55.7 |
%) |
(81,047 |
) |
(42,064 |
) |
(92.7 |
%) |
BCE added 142,345 net new customer connections related to growth services in Q3 2015, down 23.3% compared to Q3 2014. This consisted of:
-
77,655 postpaid wireless customers, which was partly offset by the loss of 19,112 prepaid wireless customers
-
57,888 high-speed Internet customers
-
25,914 TV subscribers, reflecting the addition of 67,908 new IPTV customers
In the first nine months of 2015, BCE added 250,477 net new growth service customers, representing a 24.0% decline over the same period of last year. This consisted of:
-
174,061 postpaid wireless customers, which was offset in part by the loss of 109,322 prepaid wireless customers
-
116,144 high-speed Internet customers
-
69,594 TV subscribers, reflecting the addition of 179,237 new IPTV customers
NAS net losses of 108,076 in Q3 2015 were essentially unchanged compared to the third quarter of 2014, while in the first nine months of 2015, net losses of 331,524, represented an improvement of 10.8% over the same period in 2014.
Total BCE customer connections at the end of Q3 2015 across all our services remained essentially unchanged, with a decrease of 0.2% compared with the same period in 2014, as ongoing, but slowing, decline in legacy wireline NAS lines were largely offset by increases in our growth services.
At September 30, 2015, BCE served a total of:
-
8,183,367 wireless customers, up 1.8%, which included 7,284,108 postpaid customers, an increase of 4.2% since the end of Q3 2014
-
3,374,239 high-speed Internet customers, an increase of 4.0% from Q3 2014
-
2,700,710 total TV customers, up 3.9% year over year, which included 1,108,699 IPTV customers, an increase of 29.3% compared to Q3 2014
-
6,795,576 total wireline NAS lines, a decline of 5.9% from Q3 2014
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg6.jpg)
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Bell Wireless |
1,772 |
|
1,621 |
|
151 |
|
9.3 |
% |
5,106 |
|
4,656 |
|
450 |
|
9.7 |
% |
Bell Wireline |
3,028 |
|
3,046 |
|
(18 |
) |
(0.6 |
%) |
9,097 |
|
9,114 |
|
(17 |
) |
(0.2 |
%) |
Bell Media |
692 |
|
665 |
|
27 |
|
4.1 |
% |
2,158 |
|
2,148 |
|
10 |
|
0.5 |
% |
Inter-segment eliminations |
(147 |
) |
(137 |
) |
(10 |
) |
(7.3 |
%) |
(450 |
) |
(404 |
) |
(46 |
) |
(11.4 |
%) |
Total BCE operating revenues |
5,345 |
|
5,195 |
|
150 |
|
2.9 |
% |
15,911 |
|
15,514 |
|
397 |
|
2.6 |
% |
|
6
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
BCE
Total operating revenues for BCE increased by 2.9% in the third quarter of 2015 compared to the same period in 2014, resulting from strong growth at Bell Wireless and Bell Media, and a modest decline at Bell Wireline. This consisted of service revenues of $4,933 million, which grew 2.6% compared to Q3 2014, and product revenues of $412 million, which increased by 6.2% year over year.
Similarly, in the first nine months of 2015, operating revenues grew by 2.6% and consisted of service revenues of $14,705 million, representing a 2.4% improvement over the same period last year, along with product revenues of $1,206 million which improved by 4.7% over the first nine months of 2014.
BELL WIRELESS
In the third quarter and first nine months of 2015, our Bell Wireless segment revenues grew by 9.3% and 9.7% respectively, compared to the same periods in 2014. The growth was driven by higher service revenues generated by a larger postpaid subscriber base coupled with increased blended average revenue per unit (ARPU) reflecting higher average rate plan pricing, as customers continue to shift from three-year contracts to two-year contracts, as well as increased data usage driven by higher smartphone penetration, greater usage of data applications and improved collections of termination charges, offset in part by lower voice usage. Product revenues also contributed to the growth in operating revenues due to increased pricing on certain handsets and greater sales activity following the commencement of the double cohort with the final application of the Wireless Code on June 3, 2015.
Wireless service revenues in the third quarter of 2015 and the first nine months of 2015 grew by 8.3% and 8.0%, respectively, while product revenues increased by 22.2% and 32.6%, respectively, compared to the same periods in 2014.
BELL WIRELINE
Bell Wireline revenues declined modestly in both the third quarter and the first nine months of the year by 0.6% and 0.2%, respectively, compared to the same periods last year. This was driven by the ongoing erosion in legacy voice and data revenues, competitive pricing pressures in our business markets along with decreased business product sales attributable to overall market softness, as well as the negative impact of legislation enacted in December 2014 which eliminated charges for paper bills in our residential market. Higher subscriber growth in Internet and TV, combined with the favourable impact of changes in residential service pricing, moderated the year-over-year decline.
BELL MEDIA
Bell Media revenues increased by 4.1% in Q3 2015, and by 0.5% in the first nine months of 2015, compared to 2014, due to higher advertising revenues, reflecting growth in both conventional TV and out-of-home advertising, along with in-quarter growth in specialty TV, as well as higher subscriber revenues generated from CraveTV, our streaming service launched in December 2014 and from our suite of TV Everywhere GO products. This was offset in part by the discontinuance of Viewers Choice, which ceased operations in 2014, along with reduced pay service subscribers.
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg7.jpg)
(1) |
Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
(2) |
Labour costs include wages, salaries, and related taxes and benefits, post-employment benefit plans service cost (net of capitalized costs), and other labour costs, including contractor and outsourcing costs. |
(3) |
Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology (IT) costs, professional service fees and rent. |
|
BCE Inc. 2015
Third Quarter Shareholder Report
7 |
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
|
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Bell Wireless |
(1,014 |
) |
(921 |
) |
(93 |
) |
(10.1 |
%) |
(2,919 |
) |
(2,632 |
) |
(287 |
) |
(10.9 |
%) |
Bell Wireline |
(1,782 |
) |
(1,813 |
) |
31 |
|
1.7 |
% |
(5,345 |
) |
(5,399 |
) |
54 |
|
1.0 |
% |
Bell Media |
(509 |
) |
(483 |
) |
(26 |
) |
(5.4 |
%) |
(1,619 |
) |
(1,606 |
) |
(13 |
) |
(0.8 |
%) |
Inter-segment eliminations |
147 |
|
137 |
|
10 |
|
7.3 |
% |
450 |
|
404 |
|
46 |
|
11.4 |
% |
Total BCE operating costs |
(3,158 |
) |
(3,080 |
) |
(78 |
) |
(2.5 |
%) |
(9,433 |
) |
(9,233 |
) |
(200 |
) |
(2.2 |
%) |
BCE
Total BCE operating costs increased by 2.5% this quarter and by 2.2% in the first nine months of 2015, compared to the same periods last year, primarily driven by the growth in revenues. This resulted in higher operating costs in our Bell Wireless and Bell Media segments, partly offset by cost savings in our Bell Wireline segment.
BELL WIRELESS
The 10.1%, or $93 million, year-over-year increase in operating costs in Q3 2015 and the 10.9%, or $287 million, increase in the first nine months of 2015 reflected:
-
Greater investment in customer retention resulting from higher activity in the market as a result of the double cohort
-
Increased subscriber acquisition costs due to higher postpaid activations
-
Higher bad debt write-offs associated with increased revenues
-
Greater labour costs to support the increased market activity
-
Higher payments to other carriers corresponding to increased data usage volumes
BELL WIRELINE
Operating costs declined by 1.7%, or $31 million, in the third quarter of 2015, and by 1.0%, or $54 million, in the first nine months of 2015, compared to the same periods in 2014. This resulted from:
-
Cost savings generated by synergies from the privatization of Bell Aliant
-
Decreased labour costs from headcount reductions, vendor contract savings and lower call volumes
-
Reduced general and administration costs driven by lower bad debt, professional fees, fleet costs, and operating taxes
-
Marketing and sales savings from disciplined spending as well as increased costs incurred during the Sochi 2014 Winter Olympics in the first quarter of 2014
This was partly offset by higher TV programming costs resulting from a larger IPTV subscriber base, programming rate increases and the launch of CraveTV in December 2014.
Additionally, year-to-date results were favourably impacted by lower cost of goods sold associated with reduced equipment sales.
BELL MEDIA
Operating costs increased by 5.4%, or $26 million, this quarter and 0.8%, or $13 million, in the first nine months of the year, compared to the same periods last year, primarily from higher content and programming costs associated with CraveTV and sports broadcast rights along with the expiry of certain CRTC benefits, including the completion of the Local Programming Improvement Fund. This was partly offset by lower costs from the discontinuance of the Viewers Choice channel and disciplined expense management. On a year-to-date basis, operating costs were also favourably impacted by the loss of broadcast rights for the 2015 National Hockey League (NHL) playoffs, as well as the lower amortization of the fair value of certain programming rights.
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg8.jpg)
|
8
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Bell Wireless |
758 |
|
700 |
|
58 |
|
8.3 |
% |
2,187 |
|
2,024 |
|
163 |
|
8.1 |
% |
Bell Wireline |
1,246 |
|
1,233 |
|
13 |
|
1.1 |
% |
3,752 |
|
3,715 |
|
37 |
|
1.0 |
% |
Bell Media |
183 |
|
182 |
|
1 |
|
0.5 |
% |
539 |
|
542 |
|
(3 |
) |
(0.6 |
%) |
Total BCE Adjusted EBITDA |
2,187 |
|
2,115 |
|
72 |
|
3.4 |
% |
6,478 |
|
6,281 |
|
197 |
|
3.1 |
% |
BCE Adjusted EBITDA margin |
40.9 |
% |
40.7 |
% |
|
|
0.2 |
% |
40.7 |
% |
40.5 |
% |
|
|
0.2 |
% |
BCE
BCEs Adjusted EBITDA was 3.4% higher in the third quarter of 2015, compared to the same period last year, due to growth across all three of our segments. Adjusted EBITDA in the first nine months of 2015 increased by 3.1% compared to last year, driven by year-over-year growth at Bell Wireless and Bell Wireline, offset in part by a marginal decrease at Bell Media.
BCEs Adjusted EBITDA margin increased to 40.9% this quarter and 40.7% year to date, which represented a 0.2% improvement over the same periods of 2014. This resulted from higher year-over-year wireless, Internet and TV revenues, diminished wireline voice erosion, synergies generated by the privatization of Bell Aliant, and overall cost containment. The growth was offset in part by higher wireless customer retention and acquisition spending as well as competitive pressures and market softness in our Bell Business Markets unit.
BELL WIRELESS
Bell Wireless Adjusted EBITDA increased by 8.3% in the third quarter of 2015 and 8.1% in the first nine months of 2015, resulting from higher service revenues associated with a larger postpaid customer base and increased blended ARPU, partly offset by greater spending on customer retention and acquisition as a result of the double cohort.
BELL WIRELINE
Bell Wireline Adjusted EBITDA increased 1.1% this quarter and 1.0% year to date, in comparison to the same periods in 2014, driven by:
-
Continued growth in our Internet and IPTV revenues
-
Synergy savings generated by the privatization of Bell Aliant
-
Ongoing effective cost management
This was offset in part by:
-
Ongoing loss of higher-margin legacy voice and data service revenues
-
Continued competitive pricing pressures and market softness in our Bell Business Markets unit
BELL MEDIA
Bell Media Adjusted EBITDA increased a modest 0.5% in the third quarter of 2015, primarily as a result of the growth in revenues, partly offset by higher content and programming costs. Conversely, in the first nine months of the year, Adjusted EBITDA decreased by 0.6%, driven by higher content and programming costs, moderated in part by higher revenues and lower amortization of the fair value of certain programming rights.
|
2.6
Severance, acquisition and other costs |
2015
Severance, acquisition and other costs of $46 million in the third quarter of 2015 and $294 million on a year-to-date basis included:
-
Severance costs related to voluntary and involuntary workforce reduction initiatives of $27 million in Q3 2015 and $77 million on a year-to-date basis
-
Acquisition and other costs of $19 million in Q3 2015 and $217 million on a year-to-date basis, related mainly to severance and integration costs due to the privatization of Bell Aliant, and transaction costs, such as legal and financial advisory fees, related to acquisitions. Year to date, a charge of $137 million was also incurred for the litigation claim for satellite TV signal piracy referred to under section 4.7, Liquidity Litigation Recent Developments in Legal Proceedings Signal Piracy Litigation.
2014
Severance, acquisition and other costs of $66 million in the third quarter of 2014 and $158 million on a year-to-date basis included:
-
Severance costs related to voluntary and involuntary workforce reduction initiatives of $20 million in Q3 2014 and $61 million on a year-to-date basis
-
Acquisition and other charges of $46 million in Q3 2014 and $97 million on a year-to-date basis, which included $15 million relating to an additional CRTC tangible benefits obligation as part of our acquisition of Astral Media Inc. (Astral), as well as employee severance costs, transaction costs, such as legal and financial advisory fees, related to acquisitions
|
BCE Inc. 2015
Third Quarter Shareholder Report
9 |
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
|
|
2.7
Depreciation and amortization |
DEPRECIATION
Depreciation in the third quarter of 2015 decreased $12 million compared to Q3 2014 due to a reduction in useful lives of certain network assets starting July 1, 2014, which increased depreciation expense in 2014, partly offset by a higher depreciable asset base. On a year-to-date basis, depreciation increased $13 million compared to the same period in 2014, due to a higher depreciable asset base as we continued to invest in our broadband and wireless networks, as well as our IPTV service.
AMORTIZATION
Amortization in the third quarter of 2015 increased by $17 million as a result of a higher net asset base. Year to date, amortization expenses decreased $60 million compared to the same period in 2014 due to an increase in 2014 of the useful lives of certain IT software assets from five to seven years, which was applied prospectively effective July 1, 2014, partly offset by a higher asset base.
INTEREST EXPENSE
Interest expense in the third quarter of 2015 remained unchanged as higher average debt levels were offset by higher capitalized interest and lower average interest rates. Year to date, interest expense decreased by $8 million compared to 2014, mainly as a result of higher capitalized interest and lower average interest rates, partly offset by higher average debt levels.
INTEREST ON POST-EMPLOYMENT BENEFIT OBLIGATIONS
Interest on our post-employment benefit obligations is based on market conditions that existed at the beginning of the year.
In the third quarter and on a year-to-date basis in 2015, interest expense increased by $2 million and $6 million, respectively, compared to the same periods last year due to a higher post-employment benefit obligation and a lower discount rate, which decreased from 4.9% on January 1, 2014 to 4.0% on January 1, 2015.
The impacts of changes in market conditions during the year are recognized in other comprehensive income (OCI).
2015
Other income of $35 million in the third quarter of 2015 included net mark-to-market gains of $47 million on derivatives used as economic hedges of share based compensation and U.S. dollar purchases, and $22 million gains from our equity investments. These were partly offset by losses on investments of $19 million and losses on disposal of software, plant and equipment of $11 million.
Other income of $58 million in the first nine months of 2015 include a gain on investments of $73 million mainly due to the gain on investments of $94 million related to the sale of our 50% ownership interest in Glentel Inc. (Glentel) to Rogers Communications Inc. (Rogers) and net mark-to-market gains of $56 million on derivatives used as economic hedges of share based compensation and U.S. dollar purchases. These were partly offset by losses on disposal of software, plant and equipment of $42 million and, losses from our equity investments of $48 million, which includes a loss on investment of $54 million representing our share of an obligation to repurchase at fair value the minority interest in one of BCEs joint ventures.
2014
Other income of $2 million in the third quarter of 2014 included net mark-to-market gains of $20 million on derivatives used as economic hedges of share-based compensation and U.S. dollar purchases, offset by losses on disposal of software, plant and equipment of $13 million and $8 million of losses from our equity investments.
Other income of $76 million in the first nine months of 2014 included dividend income of $42 million from earnings generated in trust prior to the divestiture of Bell Media assets held for sale, net mark-to-market gains of $36 million on derivatives used as economic hedges of share-based compensation and U.S. dollar purchases and $16 million from gains on investments. These were partially offset by losses on disposal of software, plant and equipment of $30 million.
Income taxes in the third quarter and on a year-to-date basis in 2015 represented an increase of $30 million and $28 million, respectively, compared to the same periods last year, due to higher taxable income.
|
10
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
2 |
CONSOLIDATED FINANCIAL
ANALYSIS |
MD&A |
|
|
|
|
|
2.11
Net earnings and EPS |
Net earnings attributable to common shareholders in the third quarter of 2015 increased $139 million compared to the same period last year. The increase in Q3 2015 was due to higher Adjusted EBITDA, higher other income, lower severance, acquisition and other costs, and lower non-controlling interest as a result of the privatization of Bell Aliant, partly offset by higher income taxes as a result of higher taxable income.
Year to date, net earnings attributable to common shareholders increased $209 million compared to the same period last year due mainly to higher Adjusted EBITDA, lower non-controlling interest as a result of the privatization of Bell Aliant, gains on investments of $73 million mainly due to the gain on investments of $94 million related to the sale of our 50% ownership interest in Glentel to Rogers and lower net depreciation and amortization, partly offset by the $137 million charge for the litigation claim for satellite TV signal piracy, $48 million of losses from our equity investments, which includes a loss on investment of $54 million representing our share of an obligation to repurchase at fair value the minority interest in one of BCEs joint ventures, earnings generated in trust prior to the divestiture of Bell Media assets held for sale of $42 million in 2014, and higher income taxes.
BCEs EPS increased by $0.10 and by $0.06 per common share in Q3 2015 and year to date, respectively. The average number of BCE common shares outstanding increased as a result of the privatization of Bell Aliant and our investment in Glentel which partly offset the increase in EPS.
Excluding the impact of severance, acquisition and other costs, net losses (gains) on investments, and early debt redemption costs, Adjusted net earnings in the third quarter of 2015 was $790 million, or $0.93 per common share, compared to $648 million, or $0.83 per common share for the same period last year. Adjusted net earnings in the first nine months of 2015 was $2,230 million, or $2.64 per common share, compared to $1,914 million, or $2.46 per common share for the first nine months of 2014.
|
BCE Inc. 2015
Third Quarter Shareholder Report
11 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELESS |
MD&A |
|
|
|
|
|
3
BUSINESS SEGMENT ANALYSIS |
3.1
Bell Wireless
Key business developments
ROLLOUT OF LTE ADVANCED NETWORK SERVICE
On August 13, 2015, Bell announced North Americas
first rollout of Tri-band long-term evolution Advanced (LTE-A) network service,
delivering mobile data speeds of up to 335 Megabits per second (Mbps) (expected
average download speeds of 25 Mbps to 100 Mbps). Bell has launched Tri-band
LTE-A in parts of southern Ontario (including Toronto, Oakville and Hamilton),
and select cities in Atlantic Canada (including Halifax, Fredericton and
Moncton). Dual-band LTE-A technology was launched earlier this year
delivering speeds of up to 260 Mbps (expected average download speeds of 18 to
74 Mbps). Dual-band LTE-A service today covers approximately 44% of the Canadian
population in parts of British Columbia, Alberta, Ontario and Atlantic Canada.
This is complemented by access to Bells Fourth generation (4G) LTE network that
covered over 94% of the national population as at the end of Q3 2015, providing
data speeds ranging from 75 Mbps to 150 Mbps (expected average download speeds
of 12 Mbps to 40 Mbps).
BELL RANKED AS THE FASTEST MOBILE NETWORK
IN CANADA
In its third annual ranking of Canadas fastest
wireless networks, PCMag ranked Bell #1 nationally and in more provinces than
any other competitor. The survey points to two key advantages that put
Bell ahead of the pack: our 2600 Megahertz (MHz) spectrum assets in Canadas
major urban centres and our Tri-band LTE-A network.
NEW LTE SMARTPHONES AND TABLETS ADDED TO BELLS DEVICE LINEUP
Bell Mobility Inc.s (Bell Mobility) and Virgin Mobile Canadas (Virgin Mobile) extensive device lineup continued to expand in the quarter with the addition of a number of new 4G LTE smartphones and tablets for every budget from leading handset manufacturers, including the Samsung Galaxy S6 Edge+ and Galaxy Note 5 smartphones, Samsungs Galaxy Tab S2 and Galaxy Tab A tablets, the iPhone 6s and iPhone 6s Plus from Apple, Motorolas Moto G and Moto XPlay smartphones, the HTC Desire 626s and ZTEs Grand X2 superphone.
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
Corporation 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.
|
12
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELESS |
MD&A |
|
|
|
|
|
Financial performance analysis |
2015 PERFORMANCE HIGHLIGHTS
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg13-1.jpg)
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg13-2.jpg)
|
BCE Inc. 2015
Third Quarter Shareholder Report
13 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELESS |
MD&A |
|
|
|
|
|
BELL WIRELESS RESULTS
REVENUES
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Service |
1,619 |
|
1,495 |
|
124 |
|
8.3 |
% |
4,658 |
|
4,312 |
|
346 |
|
8.0 |
% |
Product |
143 |
|
117 |
|
26 |
|
22.2 |
% |
419 |
|
316 |
|
103 |
|
32.6 |
% |
Total external revenues |
1,762 |
|
1,612 |
|
150 |
|
9.3 |
% |
5,077 |
|
4,628 |
|
449 |
|
9.7 |
% |
Inter-segment revenues |
10 |
|
9 |
|
1 |
|
11.1 |
% |
29 |
|
28 |
|
1 |
|
3.6 |
% |
Total Bell Wireless revenues |
1,772 |
|
1,621 |
|
151 |
|
9.3 |
% |
5,106 |
|
4,656 |
|
450 |
|
9.7 |
% |
Bell Wireless operating revenues grew 9.3% in the third quarter of 2015 and 9.7% in the first nine months of 2015, as a result of both higher service and product revenues compared to the same periods in 2014.
-
Service revenues grew 8.3% in Q3 2015, and 8.0% year to date, compared to the same periods last year, reflecting a greater number of postpaid subscribers in our customer base coupled with blended ARPU growth that was driven by higher average monthly rates as customers continue to shift from three-year plans to two-year plans, increased data usage from greater smartphone penetration, improved collections of termination charges and higher usage of data applications, combined with broader 4G LTE network coverage and speeds. Lower wireless voice revenues, due mainly to greater adoption of unlimited nationwide talk plans and the ongoing substitution for data applications, moderated the year-over-year growth in service revenues.
-
Wireless data revenues were up 23.5% this quarter and 24.0% year to date, while wireless voice revenues declined 6.1% and 5.7% respectively, compared to the same periods last year.
-
Product revenues were up 22.2% and 32.6% in the third quarter and first nine months of 2015, respectively, mainly due to increased pricing on certain handsets, and a greater proportion of higher-end smartphone devices in our sales mix along with higher sales volumes including a greater number of device upgrades. The increase in sales activity in the marketplace was stimulated by the start of the double cohort at the beginning of June 2015.
OPERATING COSTS AND ADJUSTED EBITDA
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Operating Costs |
(1,014 |
) |
(921 |
) |
(93 |
) |
(10.1 |
%) |
(2,919 |
) |
(2,632 |
) |
(287 |
) |
(10.9 |
%) |
Adjusted EBITDA |
758 |
|
700 |
|
58 |
|
8.3 |
% |
2,187 |
|
2,024 |
|
163 |
|
8.1 |
% |
Total Adjusted EBITDA margin |
42.8 |
% |
43.2 |
% |
|
|
(0.4 |
%) |
42.8 |
% |
43.5 |
% |
|
|
(0.7 |
%) |
Service Adjusted EBITDA margin |
46.8 |
% |
46.8 |
% |
|
|
0.0 |
% |
47.0 |
% |
46.9 |
% |
|
|
0.1 |
% |
Bell Wireless operating costs increased 10.1% in the third quarter of 2015, and 10.9% year to date, compared to the same periods last year as a result of:
-
Higher investment in customer retention that reflected a greater number of subsidized upgrades primarily due to the impact of the double cohort combined with a greater proportion of smartphone upgrades
-
Increased subscriber acquisition costs driven mainly by higher postpaid gross activations
-
Higher bad debt expense driven primarily by increased revenues
-
Greater payments to other carriers from higher data usage volume
Bell Wireless Adjusted EBITDA growth of 8.3% in the third quarter of 2015, and 8.1% in the first nine months of 2015, was led by higher year-over-year operating revenues as described above, moderated in part by greater customer retention spending and subscriber acquisition costs, along with higher bad debt expense, increased labour costs and greater payments to other carriers. This resulted in relatively stable year-over-year Adjusted EBITDA margin based on service revenues of 46.8% in Q3 2015 and 47.0% in the first nine months of the year, compared to 46.8% and 46.9% achieved during the same periods of 2014.
|
14
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELESS |
MD&A |
|
|
|
|
BELL WIRELESS OPERATING METRICS
|
Q3 2015 |
|
Q3 2014 |
|
CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
CHANGE |
|
% CHANGE |
|
Blended ARPU ($/month) |
65.34 |
|
61.59 |
|
3.75 |
|
6.1 |
% |
62.89 |
|
59.57 |
|
3.32 |
|
5.6 |
% |
Gross activations |
424,164 |
|
431,460 |
|
(7,296 |
) |
(1.7 |
%) |
1,150,497 |
|
1,181,166 |
|
(30,669 |
) |
(2.6 |
%) |
Postpaid |
353,652 |
|
331,851 |
|
21,801 |
|
6.6 |
% |
950,445 |
|
908,752 |
|
41,693 |
|
4.6 |
% |
Prepaid |
70,512 |
|
99,609 |
|
(29,097 |
) |
(29.2 |
%) |
200,052 |
|
272,414 |
|
(72,362 |
) |
(26.6 |
%) |
Net activations |
58,543 |
|
83,636 |
|
(25,093 |
) |
(30.0 |
%) |
64,739 |
|
110,098 |
|
(45,359 |
) |
(41.2 |
%) |
Postpaid |
77,655 |
|
91,779 |
|
(14,124 |
) |
(15.4 |
%) |
174,061 |
|
193,834 |
|
(19,773 |
) |
(10.2 |
%) |
Prepaid |
(19,112 |
) |
(8,143 |
) |
(10,969 |
) |
n.m. |
|
(109,322 |
) |
(83,736 |
) |
(25,586 |
) |
(30.6 |
%) |
Blended churn % (average per month) |
1.49 |
% |
1.45 |
% |
|
|
(0.04 |
%) |
1.49 |
% |
1.50 |
% |
|
|
0.01 |
% |
Postpaid |
1.31 |
% |
1.20 |
% |
|
|
(0.11 |
%) |
1.24 |
% |
1.20 |
% |
|
|
(0.04 |
%) |
Prepaid |
2.98 |
% |
3.14 |
% |
|
|
0.16 |
% |
3.36 |
% |
3.44 |
% |
|
|
0.08 |
% |
Subscribers |
8,183,367 |
|
8,035,130 |
|
148,237 |
|
1.8 |
% |
8,183,367 |
|
8,035,130 |
|
148,237 |
|
1.8 |
% |
Postpaid |
7,284,108 |
|
6,991,927 |
|
292,181 |
|
4.2 |
% |
7,284,108 |
|
6,991,927 |
|
292,181 |
|
4.2 |
% |
Prepaid |
899,259 |
|
1,043,203 |
|
(143,944 |
) |
(13.8 |
%) |
899,259 |
|
1,043,203 |
|
(143,944 |
) |
(13.8 |
%) |
Cost of acquisition (COA) ($/subscriber) |
446 |
|
420 |
|
(26 |
) |
(6.2 |
%) |
444 |
|
420 |
|
(24 |
) |
(5.7 |
%) |
n.m.: not meaningful
Blended ARPU grew by 6.1% and 5.6% in the third quarter and first nine months of 2015, respectively, compared to the same periods last year. The increases reflected strong growth in postpaid ARPU due to an increased mix of customers on higher-rate two year plans, disciplined pricing, greater data usage, improved collections of termination charges and a higher percentage of postpaid customers in our total subscriber base. This was partly offset by lower voice ARPU compared to last year as customers continue to substitute voice with data services.
-
Data ARPU was up 21.1% in Q3 2015, and 21.3% year to date, compared to the same periods last year, driven by greater penetration of smartphones and other data devices such as tablets that are driving greater data consumption from e-mail, web browsing, social networking, text messaging, mobile TV, picture and video messaging, as well as entertainment services such as video streaming, music downloads and gaming. The expansion of our LTE network coverage, together with the rollout of increased 4G LTE network speeds in August 2014, also contributed to the growth in data ARPU.
-
Voice ARPU declined 7.7% in both Q3 2015 and the first nine months of this year, compared to the same periods last year, primarily as a result of greater adoption of all inclusive rate plans for both local and long distance calling, competitive pricing pressures and lower overall voice usage due to ongoing substitution of voice services with data services
Total gross wireless activations decreased 1.7% and 2.6% in the third quarter and first nine months of 2015, respectively, reflecting lower prepaid gross activations as postpaid gross activations were up year over year in Q3 2015 and in the first nine months of 2015, compared to last year.
-
Postpaid gross activations increased 6.6% this quarter and 4.6% year to date, compared to the same periods last year, driven by greater activity from the impact of the double cohort that began in June 2015
-
Prepaid gross activations declined 29.2% in the third quarter of 2015 and 26.6% in the first nine months of 2015, due to our continued focus on postpaid customer acquisitions
Smartphone adoption represented 78% and 74% of total postpaid gross activations in Q3 2015 and the first nine months of 2015, respectively, compared to 72% in the same periods of last year. The percentage of postpaid subscribers with smartphones increased to 78% at September 30, 2015, compared to 75% at the end of Q3 2014.
Blended wireless churn was 1.49% in both Q3 2015 and in the first nine months of 2015. This represented a marginal increase of 0.04% over Q3 2014 but remained relatively stable on a year-to-date basis. The increase in our blended churn rate in Q3 2015 was mainly attributable to a greater number of postpaid deactivations. The greater percentage of postpaid subscribers in our total subscriber base compared to last year moderated the increase in Q3 2015 churn as postpaid customers typically have a lower churn rate than prepaid customers.
-
Postpaid churn of 1.31% increased by 0.11% in Q3 2015 and year to date churn of 1.24% increased 0.04% compared to last year, due to increased activity in the market as a result of the double cohort
-
Prepaid churn improved 0.16% in the third quarter and 0.08% year to date to 2.98% and 3.36%, respectively, from fewer customer deactivations compared to the same periods in 2014
Postpaid net activations decreased 15.4% in the third quarter of 2015 and 10.2% in the first nine months of 2015 compared to last year, due to higher customer deactivations, mitigated in part by higher gross activations.
Prepaid net customer losses increased by 10,969 in Q3 2015 and 25,586 year to date, due to lower gross activations, offset in part by fewer year-over-year customer deactivations.
Wireless subscribers totalled 8,183,367 at September 30, 2015, representing an increase of 1.8% since the end of the third quarter of 2014. The proportion of Bell Wireless customers subscribing to postpaid service increased to 89% in Q3 2015, from 87% at the end of the same period in 2014.
|
BCE Inc. 2015
Third Quarter Shareholder Report
15 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELESS |
MD&A |
|
|
|
|
|
COA per gross activation increased by $26 to $446 in Q3 2015, and by $24 to $444 in the first nine months of 2015, due to a higher proportion of postpaid customers in our activation mix.
Retention costs as a percentage of service revenue increased to 11.7% and 12.0% in Q3 2015 and the first nine months of the year, respectively, compared to 10.2% in both corresponding periods of last year. The increase is mainly attributable to a greater number of subsidized customer upgrades resulting from increased activity in the marketplace due to the double cohort
and the ongoing shift to more expensive smartphone models in our upgrade mix.
As at the date of this MD&A, our forward-looking statements set out in the BCE 2014 Annual MD&A, as updated or supplemented in the BCE 2015 First Quarter MD&A, in the BCE 2015 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.
-
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
|
16
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELINE |
MD&A |
|
|
|
|
Key business developments
GIGABIT FIBE INTERNET SERVICE NOW AVAILABLE TO 2 MILLION HOMES
On August 10, 2015, Bell launched its new Gigabit Fibe Internet service to more than 1.3 million homes across Ontario and Québec. Service was also launched to another 650,000 homes in communities across Atlantic Canada on September 23, 2015, bringing the total number of homes with Gigabit Fibe service availability to approximately 2 million at the end of Q3 2015. With our ongoing fibre network build, Gigabit Fibe is expected to be available to more than 2.2 million homes across Québec, Ontario and Atlantic Canada by the end of the year. Bell Gigabit Fibe will offer speeds of up to 940 Mbps at launch, rising to a full 1 Gigabit per second (Gbps) or faster in 2016 as equipment evolves to support these speeds.
NEW INNOVATIVE FIBE TV FEATURES
Bell continues to lead IPTV innovation in Canada with the roll out of a new Fibe TV interface and three new features available only on Fibe TV. With our new Trending feature, customers can see the five most popular shows among Fibe TV customers in real time and quickly change to those channels by clicking the up arrow on their Fibe TV remote. The new Resume option extends the capability of Fibe TVs exclusive Restart feature. If customers change to another channel after using Restart, they can now pick up right where they left off when they tune back in while Fibe TVs new Lookback feature allows them to go back in time 30 hours to view missed programming.
DATA CENTRE ENHANCEMENTS
Bells data hosting facility in Montréal was expanded to offer a total IT load capacity of 6.8 megawatts in a 60,000 square foot (5,574 m²) location. The expansion of the data centre, which provides secure and reliable data hosting solutions to a broad range of business customers, supports business technology growth in Québec and reinforces Bells leadership in hosting, connectivity and cloud computing. With partner Q9 Networks Inc., Bell offers business customers access to 27 centres across Canada with more data capacity than any other data centre operator.
|
BCE Inc. 2015
Third Quarter Shareholder Report
17 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELINE |
MD&A |
|
|
|
|
|
|
Financial performance analysis |
2015 PERFORMANCE HIGHLIGHTS
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg18-1.jpg)
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg18-2.jpg)
|
18
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELINE |
MD&A |
|
|
|
|
BELL WIRELINE RESULTS
REVENUES
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Data |
1,770 |
|
1,722 |
|
48 |
|
2.8 |
% |
5,301 |
|
5,145 |
|
156 |
|
3.0 |
% |
Local and access |
818 |
|
855 |
|
(37 |
) |
(4.3 |
%) |
2,469 |
|
2,582 |
|
(113 |
) |
(4.4 |
%) |
Long distance |
207 |
|
229 |
|
(22 |
) |
(9.6 |
%) |
627 |
|
688 |
|
(61 |
) |
(8.9 |
%) |
Equipment and other |
181 |
|
186 |
|
(5 |
) |
(2.7 |
%) |
528 |
|
543 |
|
(15 |
) |
(2.8 |
%) |
Total external revenues |
2,976 |
|
2,992 |
|
(16 |
) |
(0.5 |
%) |
8,925 |
|
8,958 |
|
(33 |
) |
(0.4 |
%) |
Inter-segment revenues |
52 |
|
54 |
|
(2 |
) |
(3.7 |
%) |
172 |
|
156 |
|
16 |
|
10.3 |
% |
Total Bell Wireline revenues |
3,028 |
|
3,046 |
|
(18 |
) |
(0.6 |
%) |
9,097 |
|
9,114 |
|
(17 |
) |
(0.2 |
%) |
Bell Wireline operating revenues declined by 0.6% in Q3 2015, and by 0.2% in the first nine months of 2015 compared to the same periods last year, due to lower local and access, long distance and equipment and other revenues as well as the negative impact of legislation enacted in December 2014 which eliminated charges for paper bills. This decline was moderated by growth in data revenues.
As a result of growth in our Fibe TV and Fibe Internet subscriber base, the slowing erosion of voice revenue and the favourable impact of rate increases, our Bell Residential Services unit continued to deliver positive revenue growth in Q3 2015. This helped to mitigate the year-over-year revenue decline in our Bell Business Markets unit which was due to competitive repricing pressures and volume declines driven in part by overall market softness. However, the overall rate of revenue erosion in our Bell Business Markets unit has stabilized this quarter in comparison to Q2 2015.
-
Data revenues increased 2.8% in Q3 2015 and 3.0% in the first nine months of 2015, compared to the same periods last year, driven by increased Internet and TV services revenues resulting from growth in Fibe subscribers, price increases on our residential services and greater bandwidth Internet service usage. This was partly offset by declines in our Bell Business Markets unit from pricing pressures and overall market softness resulting in reduced IP-based data services and data product sales. Additionally, continued declines in basic legacy data revenues in our business and wholesale markets unfavourably impacted data revenue growth.
-
Local and access revenues decreased by 4.3% in the third quarter and 4.4% in the first nine months of 2015, compared to the same periods in 2014, reflecting the continued erosion of NAS lines due to technological substitution to wireless and Internet-based services, large business customer conversions to IP-based data services, as well as pricing pressures in our business market. This was moderated in part by rate increases on our residential services.
-
Long distance revenues decreased by 9.6% this quarter and 8.9% in the first nine months of the year, compared to the same periods last year, resulting from fewer minutes of use by residential and business customers due to NAS line losses, technology substitution to wireless and over-the-top (OTT) Internet-based services, as well as ongoing rate pressures in our residential market due to the unfavourable impact of premium rate plans. This was mitigated in part by higher sales of international long distance minutes in our wholesale market.
-
Equipment and other revenues declined by 2.7% in Q3 2015 and 2.8% in the first nine months of 2015, compared to the same periods in 2014, mainly driven by reduced business equipment sales.
OPERATING COSTS AND ADJUSTED EBITDA
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Operating Costs |
(1,782 |
) |
(1,813 |
) |
31 |
|
1.7 |
% |
(5,345 |
) |
(5,399 |
) |
54 |
|
1.0 |
% |
Adjusted EBITDA |
1,246 |
|
1,233 |
|
13 |
|
1.1 |
% |
3,752 |
|
3,715 |
|
37 |
|
1.0 |
% |
Adjusted EBITDA margin |
41.1 |
% |
40.5 |
% |
|
|
0.6 |
% |
41.2 |
% |
40.8 |
% |
|
|
0.4 |
% |
Bell Wireline operating costs decreased by $31 million, or 1.7%, in the third quarter of 2015 and by $54 million, or 1.0% in the first nine months of 2015, compared to the same periods in 2014. The year-over-year decline was attributed mainly to:
-
Operational cost savings generated by synergies from the privatization of Bell Aliant
-
Lower labour costs driven by headcount reductions, lower call volumes and vendor contract savings
-
Reduced general and administration costs reflecting lower bad debt, professional fees, fleet costs and operating taxes
-
Decreased marketing and sales expense due in part to disciplined advertising spend and higher advertising costs during the Sochi 2014 Winter Olympics in Q1 2014
These factors were partly offset by:
-
Higher programming costs relating to our IPTV service resulting from an increased number of subscribers, programming rate increases and the launch of CraveTV in December 2014
Additionally, year-to-date results were favourably impacted by lower cost of goods sold corresponding to reduced equipment sales.
|
BCE Inc. 2015
Third Quarter Shareholder Report
19 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELINE |
MD&A |
|
|
|
|
|
Bell Wireline Adjusted EBITDA grew by 1.1% in the third quarter of 2015 and by 1.0% during the first nine months of 2015, with corresponding Adjusted EBITDA margin increases to 41.1% and 41.2% from 40.5% and 40.8% in the same periods in 2014. The year-over-year growth in Adjusted EBITDA was driven by:
-
Ongoing growth in our Internet and IPTV revenues
-
Synergy savings resulting from the privatization of Bell Aliant
-
Effective overall cost containment
This was partly offset by:
-
The continued but moderating loss of higher-margin legacy voice and data service revenues
-
Competitive pricing pressures and general market softness in our Bell Business Markets unit
The Q3 2015 growth in Adjusted EBITDA of 1.1% represented an improvement over the 0.2% growth experienced in Q3 2014.
BELL WIRELINE OPERATING METRICS
Data
High-Speed Internet
|
Q3 2015 |
|
Q3 2014 |
|
CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
CHANGE |
|
% CHANGE |
|
High-Speed Internet net activations |
57,888 |
|
64,254 |
|
(6,366 |
) |
(9.9 |
%) |
116,144 |
|
108,380 |
|
7,764 |
|
7.2 |
% |
High-Speed Internet subscribers(1) (2) |
3,374,239 |
|
3,245,016 |
|
129,223 |
|
4.0 |
% |
3,374,239 |
|
3,245,016 |
|
129,223 |
|
4.0 |
% |
(1) |
Our Q1 2015 subscriber base included a beginning of period adjustment to reduce the number of subscribers by 7,505 for deactivations as a result of the CRTCs decision to eliminate the 30-day notice period required to cancel services. |
(2) |
Subsequent to a review of our subscriber metrics, our Q1 2015 beginning of period subscriber base was reduced by 31,426 subscribers. This adjustment primarily consisted of older balances. |
High-Speed Internet subscriber net activations decreased by 9.9% in the third quarter of 2015 due to more aggressive bundle offers during the quarter from cable competitors, which also negatively impacted churn. Additionally,
a strong Q3 2014 performance, reflecting higher back to school activations, contributed to the lower year-over-year activations. This was offset in part by the favourable pull-through impact of IPTV activations and higher small business customer gains in our business market, which also led to the year-to-date growth of 7.2%.
High-Speed Internet subscribers at September 30, 2015 totalled 3,374,239 up 4.0% from the end of the third quarter of 2014.
TV
|
Q3 2015 |
|
Q3 2014 |
|
CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
CHANGE |
|
% CHANGE |
|
Net subscriber activations |
25,914 |
|
37,578 |
|
(11,664 |
) |
(31.0 |
%) |
69,594 |
|
111,170 |
|
(41,576 |
) |
(37.4 |
%) |
IPTV |
67,908 |
|
74,450 |
|
(6,542 |
) |
(8.8 |
%) |
179,237 |
|
199,960 |
|
(20,723 |
) |
(10.4 |
%) |
Total subscribers(1) (2) |
2,700,710 |
|
2,600,418 |
|
100,292 |
|
3.9 |
% |
2,700,710 |
|
2,600,418 |
|
100,292 |
|
3.9 |
% |
IPTV(1) (2) |
1,108,699 |
|
857,473 |
|
251,226 |
|
29.3 |
% |
1,108,699 |
|
857,473 |
|
251,226 |
|
29.3 |
% |
(1) |
Our Q1 2015
IPTV and total TV subscriber base included a beginning of period
adjustment to reduce the number of subscribers by 2,236 and 7,702,
respectively, for deactivations as a result of the CRTCs decision to
eliminate the 30-day notice period required to cancel services. |
(2) |
Subsequent to a review of our subscriber
metrics, our Q1 2015 beginning of period IPTV and total TV subscriber base was
reduced by 1,849 and 3,790 subscribers, respectively. These adjustments
primarily consisted of older balances. |
IPTV net subscriber activations declined by 6,542 or 8.8% to 67,908 in Q3 2015 and by 20,723 or 10.4% to 179,237 in the first nine months of 2015 compared to the same periods in 2014. The decline was driven by more aggressive offers for service bundles from cable competitors, which impacted both gross activations and deactivations. Additionally, the slower pace of our IPTV footprint expansion also unfavourably impacted IPTV net activations. This was mitigated by lower residential customer churn driven by a growing and more mature subscriber base.
Satellite TV net customer losses increased by 13.9% to 41,994 in the third quarter of 2015 and by 23.5% to 109,643 in the first nine months of the year, compared to last year, due to a lower number of retail activations and higher retail churn driven by aggressive offers from cable TV competitors, in particular, in our service areas where Fibe TV is not available. Lower wholesale net activations attributable to the roll-out of IPTV service by other competing providers in Western Canada also unfavourably impacted
Satellite TV net customer losses.
Total TV net subscriber activations (IPTV and Satellite TV combined) were down 31.0% to 25,914 this quarter and 37.4% to 69,594 in the first nine months of 2015, resulting from both lower IPTV and Satellite TV net activations compared to last year as described above.
IPTV subscribers at September 30, 2015 totalled 1,108,699 up 29.3% from 857,473 subscribers reported at the end of Q3 2014.
Satellite TV subscribers at September 30, 2015 amounted to 1,592,011 which represented an 8.7% decline from the 1,742,945 subscribers at the end of Q3 2014.
Total TV subscribers (IPTV and Satellite TV combined) at September 30, 2015 totalled 2,700,710, representing a 3.9% increase since the end of the third quarter of 2014.
|
20
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL WIRELINE |
MD&A |
|
|
|
|
Local and Access
|
Q3 2015 |
|
Q3 2014 |
|
CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
CHANGE |
|
% CHANGE |
|
NAS LINES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential(1) (2) |
3,591,813 |
|
3,872,840 |
|
(281,027 |
) |
(7.3 |
%) |
3,591,813 |
|
3,872,840 |
|
(281,027 |
) |
(7.3 |
%) |
Business |
3,203,763 |
|
3,351,017 |
|
(147,254 |
) |
(4.4 |
%) |
3,203,763 |
|
3,351,017 |
|
(147,254 |
) |
(4.4 |
%) |
Total |
6,795,576 |
|
7,223,857 |
|
(428,281 |
) |
(5.9 |
%) |
6,795,576 |
|
7,223,857 |
|
(428,281 |
) |
(5.9 |
%) |
NAS NET LOSSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
(78,354 |
) |
(70,782 |
) |
(7,572 |
) |
(10.7 |
%) |
(220,043 |
) |
(248,497 |
) |
28,454 |
|
11.5 |
% |
Business |
(29,722 |
) |
(37,270 |
) |
7,548 |
|
20.3 |
% |
(111,481 |
) |
(123,215 |
) |
11,734 |
|
9.5 |
% |
Total |
(108,076 |
) |
(108,052 |
) |
(24 |
) |
(0.0 |
%) |
(331,524 |
) |
(371,712 |
) |
40,188 |
|
10.8 |
% |
(1) |
Our Q1 2015 subscriber base included a beginning of period adjustment to reduce the number of subscribers by 4,409 for deactivations as a result of the CRTCs decision to eliminate the 30-day notice period required to cancel services. |
(2) |
Subsequent to a review of our subscriber metrics, our Q1 2015 beginning of period subscriber base was increased by 657 subscribers. This adjustment primarily consisted of older balances. |
NAS net losses were essentially unchanged compared to the third quarter of last year, as the lower year-over-year business net losses offset the higher residential net losses. In the first nine months of the year NAS net losses improved by 10.8%, or 40,188 lines, compared to the same period in 2014, due to fewer residential and business NAS net losses.
Residential NAS net losses were 10.7%, or 7,572 lines, higher this quarter, compared to the same period last year, due to more aggressive promotions and service bundle discounts offered by the cable TV operators, as well as from the ongoing wireless and Internet-based technology substitution for local services. The losses were moderated by the favourable pull-through impact of IPTV activations and greater NAS customer retention through the acquisition of three-product households. These factors also drove the improvement in net losses of 11.5%, or 28,454 lines, in the first nine months of the year, compared to the same period in 2014.
Business NAS net losses improved by 20.3%, or by 7,548 lines, in the third quarter of 2015 and 9.5%, or by 11,734 lines, in the first nine months of 2015, compared to the same periods in 2014. The year-over-year improvements were due to reduced customer losses in both our small and mid business markets, along with the benefit provided by the Federal election. This was offset by higher deactivations amongst large business market customers due to competitive losses and the ongoing conversion of voice lines to wireless and IP-based services. Additionally, the relatively low level of new business formation and employment growth in the economy has resulted in continued soft demand for new access line installations.
The annualized rate of NAS erosion in our customer base was 5.9% in the third quarter of 2015, which has remained stable compared to the 5.8% erosion experienced in the second quarter of 2015. At September 30, 2015, we had 6,795,576 NAS lines, compared to 7,223,857 at the end of Q3 2014.
As at the date of this MD&A, our forward-looking statements set out in the BCE 2014 Annual MD&A, as updated or supplemented in the BCE 2015 First Quarter MD&A, in the BCE 2015 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.
-
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
|
BCE Inc. 2015
Third Quarter Shareholder Report
21 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL MEDIA |
MD&A |
|
|
|
|
|
Key business developments
ASTRAL OUT OF HOME PARTNERS WITH OTTAWA INTERNATIONAL AIRPORT
Bell Medias out-of-home advertising division has been awarded an 8-year contract by the Ottawa Macdonald-Cartier International Airport, the sixth busiest in Canada and the latest to join the Astral Out of Home portfolio. Starting next month, 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.
|
Financial performance analysis |
2015 PERFORMANCE HIGHLIGHTS
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/pg22.jpg)
|
22
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
3 |
BUSINESS SEGMENT ANALYSIS
BELL MEDIA |
MD&A |
|
|
|
|
BELL MEDIA RESULTS
REVENUES
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Total external revenues |
607 |
|
591 |
|
16 |
|
2.7 |
% |
1,909 |
|
1,928 |
|
(19 |
) |
(1.0 |
%) |
Inter-segment revenues |
85 |
|
74 |
|
11 |
|
14.9 |
% |
249 |
|
220 |
|
29 |
|
13.2 |
% |
Total Bell Media revenues |
692 |
|
665 |
|
27 |
|
4.1 |
% |
2,158 |
|
2,148 |
|
10 |
|
0.5 |
% |
Bell Media operating revenues increased by 4.1% in Q3 2015 and by 0.5% in the first nine months of 2015, compared to last year, primarily driven by higher advertising and subscriber revenues.
Advertising revenues were up year over year for both the third quarter and the first nine months of 2015, compared to the same periods in 2014, as a result of:
-
Conventional TV advertising growth in Q3 which was supported by Bell Medias new fall season primetime line-up, this years live broadcast of the Emmy Awards, and the recent Federal election. The first nine months of 2015 also benefitted from a recapture of advertising dollars following the prior year shift to the principal broadcaster of the Sochi 2014 Winter Olympics.
-
Increased specialty TV advertising revenues in Q3 2015 primarily driven by the broadcast of the Fédération Internationale de Football Association (FIFA) Womens World Cup tournament coupled with the recapture of advertising dollars following the shift last year to the main broadcaster of the 2014 FIFA Mens World Cup Soccer. Additionally, we benefitted from the continued growth in audience levels from our English non-sports specialty services at Space and Discovery TV. Conversely, specialty TV revenues declined in the first nine months of 2015, mainly due to the loss of the broadcast of NHL playoff hockey.
-
Higher out-of-home advertising revenues primarily from new contract wins in the current year, as well as strategic acquisitions in 2014
Subscriber fee revenues increased in the third quarter and for the first nine months of 2015, compared to the same periods in 2014, due to revenues generated from CraveTV, our streaming service launched in December 2014, and from our TV Everywhere products. This was offset in part by the discontinuance of Viewers Choice, which ceased operations in 2014, along with reduced pay service subscribers.
OPERATING COSTS AND ADJUSTED EBITDA
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Operating Costs |
(509 |
) |
(483 |
) |
(26 |
) |
(5.4 |
%) |
(1,619 |
) |
(1,606 |
) |
(13 |
) |
(0.8 |
%) |
Adjusted EBITDA |
183 |
|
182 |
|
1 |
|
0.5 |
% |
539 |
|
542 |
|
(3 |
) |
(0.6 |
%) |
Adjusted EBITDA margin |
26.4 |
% |
27.4 |
% |
|
|
(1.0 |
%) |
25.0 |
% |
25.2 |
% |
|
|
(0.2 |
%) |
Bell Media operating costs were up 5.4% in Q3 2015 and 0.8% in the first nine months of the year, compared to the same periods in 2014, due to escalating programming and content costs related to CraveTV and sports broadcasting rights, combined with the expiry of certain CRTC benefits, including the completion of the Local Programming Improvement Fund. This was mitigated in part by reduced costs associated with the discontinuance of the Viewers Choice channel and disciplined management of other operating expenses. In the first nine months of 2015, higher content costs were moderated by the loss of the broadcast rights for the 2015 NHL playoffs and the lower amortization of the fair value of certain programming rights.
Bell Media Adjusted EBITDA grew by 0.5% in the third quarter of 2015, compared to the same period last year, primarily due to higher advertising and subscriber revenues partly offset by higher year-over-year operating costs. Conversely, in the first nine months of 2015, Adjusted EBITDA declined 0.6%, as escalating content and programming costs more than offset the year-over-year growth in operating revenues and lower amortization of the fair value of certain programming rights.
BELL MEDIA OPERATING METRICS
-
CTV finished the Summer season as Canadas leading network during full day and primetime among total viewers and across all key demographics
-
CTV led the Summer season with 9 of the top 20 programs
-
Bell Medias specialty and pay TV properties reached 83% of all Canadian English specialty and pay TV viewers in the average week during Q3 2015. Bell Media led in primetime with the top 2 entertainment specialty stations (Discovery and Space) among the key viewers aged 25 to 54.
-
In Québec, Bell Media continued its leadership position with specialty TV audiences reaching 81% of all French TV viewers in the average week. Bell Media accounted for 22.5% of viewership among viewers aged 25 to 54. Three of the top 5 specialty channels are Bell Media properties (Canal D, Super Écran and Canal Vie).
-
Bell Media led among its Canadian broadcast competitors in unique visitors and video viewers, total page views, visits and videos served (monthly averages are, respectively,
17.2 million visitors, 2.8 million viewers, 326 million page views, 122 million visits, and 63 million videos)
-
Bell Media is Canadas top radio broadcaster reaching 17.4 million listeners who spend in excess of 85 million hours tuned in each week
-
Astral Out of Home maintains its leadership in Québec and Ontario and pursues its growth Canada wide with the latest contract win of the Ottawa Macdonald-Cartier International Airport
|
BCE Inc. 2015
Third Quarter Shareholder Report
23 |
3 |
BUSINESS SEGMENT ANALYSIS
BELL MEDIA |
MD&A |
|
|
|
|
|
As at the date of this MD&A, our forward-looking statements set out in the BCE 2014 Annual MD&A, as updated or supplemented in the BCE 2015 First Quarter MD&A, in the BCE 2015 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.
-
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
|
24
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
4
FINANCIAL AND CAPITAL MANAGEMENT |
This section describes how we manage our cash and capital resources to carry out our strategy and deliver financial results. It provides an analysis of our financial condition, cash flows and liquidity on a consolidated basis.
|
SEPTEMBER 30, 2015 |
|
DECEMBER 31, 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Debt due within one year(2) |
6,416 |
|
3,743 |
|
2,673 |
|
71.4 |
% |
Long-term debt |
14,444 |
|
16,355 |
|
(1,911 |
) |
(11.7 |
%) |
Preferred shares(3) |
2,002 |
|
2,002 |
|
|
|
0.0 |
% |
Cash and cash equivalents |
(622 |
) |
(566 |
) |
(56 |
) |
(9.9 |
%) |
Net debt |
22,240 |
|
21,534 |
|
706 |
|
3.3 |
% |
(1) |
Net Debt is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) Net Debt in this MD&A for more details. |
(2) |
Includes the current portion of long-term debt, bank advances, notes payable and loans secured by trade receivables. |
(3) |
50% of outstanding preferred shares of $4,004 million in 2015 and 2014 are classified as debt consistent with the treatment by some credit rating agencies. |
The increase of $762 million in debt due within one year and long-term debt was due to:
-
an increase in our notes payable (net of repayments) of $672 million
-
the issuance of MTN debentures at Bell Canada with a total principal amount of $500 million
-
a net increase of $90 million in our finance lease obligations and other debt
partly offset by:
-
the partial repayment of approximately $500 million of our unsecured committed term credit facility that was used to fund part of the acquisition of Astral
The increase in cash and cash equivalents of $56 million was due mainly to Free Cash Flow of $2,083 million, the disposition of 50% of Glentel to Rogers for a total cash consideration of approximately $473 million ($407 million, net of divested cash and transaction costs) and $207 million debt issuance (net of repayments), partly offset by dividends paid on common shares of $1,617 million, the acquisition of wireless spectrum licences of $534 million, $296 million ($284 million, net of cash on hand) cash consideration paid for the acquisition of Glentel and $133 million of acquisition costs paid.
|
4.2
Outstanding share data |
COMMON SHARES OUTSTANDING |
|
|
NUMBER OF SHARES |
|
Outstanding, January 1, 2015 |
|
|
840,330,353 |
|
Shares issued under employee stock option plan |
|
|
1,765,964 |
|
Shares issued under employee savings plan (ESP) |
|
|
1,727,418 |
|
Shares issued for the Glentel acquisition |
|
|
5,548,908 |
|
Outstanding, September 30, 2015 |
|
|
849,372,643 |
|
STOCK OPTIONS OUTSTANDING |
NUMBER OF OPTIONS |
|
WEIGHTED AVERAGE
EXERCISE PRICE
($) |
|
Outstanding, January 1, 2015 |
9,278,190 |
|
43 |
|
Granted |
2,817,471 |
|
56 |
|
Exercised(1) |
(1,765,964 |
) |
39 |
|
Forfeited |
(116,147 |
) |
49 |
|
Outstanding, September 30, 2015 |
10,213,550 |
|
48 |
|
Exercisable, September 30, 2015 |
1,697,904 |
|
38 |
|
(1) |
The weighted average share price for options exercised during the nine months ended September 30, 2015 was $55 per unit. |
|
BCE Inc. 2015
Third Quarter Shareholder Report
25 |
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
|
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Cash flows from operating activities |
1,878 |
|
1,882 |
|
(4 |
) |
(0.2 |
%) |
4,764 |
|
4,714 |
|
50 |
|
1.1 |
% |
Bell Aliant dividends paid to BCE |
|
|
47 |
|
(47 |
) |
(100.0 |
%) |
|
|
95 |
|
(95 |
) |
(100.0 |
%) |
Capital expenditures |
(927 |
) |
(975 |
) |
48 |
|
4.9 |
% |
(2,668 |
) |
(2,641 |
) |
(27 |
) |
(1.0 |
%) |
Cash dividends paid on preferred shares |
(37 |
) |
(31 |
) |
(6 |
) |
(19.4 |
%) |
(113 |
) |
(94 |
) |
(19 |
) |
(20.2 |
%) |
Cash dividends paid by subsidiaries
to non-controlling interest |
(26 |
) |
(69 |
) |
43 |
|
62.3 |
% |
(33 |
) |
(144 |
) |
111 |
|
77.1 |
% |
Acquisition costs paid |
33 |
|
33 |
|
|
|
0.0 |
% |
133 |
|
63 |
|
70 |
|
n.m. |
|
Bell Aliant free cash flow |
|
|
(53 |
) |
53 |
|
100.0 |
% |
|
|
(82 |
) |
82 |
|
100.0 |
% |
Free cash flow |
921 |
|
834 |
|
87 |
|
10.4 |
% |
2,083 |
|
1,911 |
|
172 |
|
9.0 |
% |
Bell Aliant free cash flow, excluding dividends paid |
|
|
6 |
|
(6 |
) |
(100.0 |
%) |
|
|
(13 |
) |
13 |
|
100.0 |
% |
Business acquisitions |
(2 |
) |
(10 |
) |
8 |
|
80.0 |
% |
(286 |
) |
(10 |
) |
(276 |
) |
n.m. |
|
Acquisition costs paid |
(33 |
) |
(33 |
) |
|
|
0.0 |
% |
(133 |
) |
(63 |
) |
(70 |
) |
n.m. |
|
Business dispositions |
2 |
|
186 |
|
(184 |
) |
(98.9 |
%) |
409 |
|
724 |
|
(315 |
) |
(43.5 |
%) |
Acquisition of spectrum licences |
(5 |
) |
|
|
(5 |
) |
n.m. |
|
(534 |
) |
(566 |
) |
32 |
|
5.7 |
% |
Other investing activities |
(13 |
) |
1 |
|
(14 |
) |
n.m. |
|
(15 |
) |
(2 |
) |
(13 |
) |
n.m. |
|
Net issuance of debt instruments |
142 |
|
1,569 |
|
(1,427 |
) |
(90.9 |
%) |
207 |
|
1,359 |
|
(1,152 |
) |
(84.8 |
%) |
Privatization of Bell Aliant |
|
|
(804 |
) |
804 |
|
100.0 |
% |
|
|
(804 |
) |
804 |
|
100.0 |
% |
Issue of common shares |
7 |
|
2 |
|
5 |
|
n.m. |
|
64 |
|
43 |
|
21 |
|
48.8 |
% |
Cash dividends paid on common shares |
(551 |
) |
(480 |
) |
(71 |
) |
(14.8 |
%) |
(1,617 |
) |
(1,412 |
) |
(205 |
) |
(14.5 |
%) |
Other financing activities |
(15 |
) |
(15 |
) |
|
|
0.0 |
% |
(122 |
) |
(96 |
) |
(26 |
) |
(27.1 |
%) |
Net increase in cash and cash equivalents |
453 |
|
1,256 |
|
(803 |
) |
(63.9 |
%) |
56 |
|
1,071 |
|
(1,015 |
) |
(94.8 |
%) |
Free cash flow per share(1) |
$1.09 |
|
$1.06 |
|
$0.03 |
|
2.8 |
% |
$2.47 |
|
$2.45 |
|
0.02 |
|
0.8 |
% |
(1) |
Free cash flow per share is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) Free Cash Flow and Free Cash Flow per share in this MD&A for more details. |
n.m.: not meaningful |
|
Cash Flows from operating activities and Free Cash Flow |
Cash flows from operating activities in the third quarter of 2015 decreased by $4 million compared to Q3 2014 due mainly to a decrease in working capital, partly offset by higher Adjusted EBITDA and lower income taxes paid. The increase in cash flows from operating activities of $50 million for the first nine months of 2015 reflects higher Adjusted EBITDA and lower income taxes paid, partly offset by higher acquisition costs paid and a decrease in working capital.
Free cash flow in Q3 2015 increased by $87 million compared to Q3 2014 due mainly to the favourable impact of the privatization of Bell Aliant and higher Adjusted EBITDA, partly offset by a decrease in working capital. Free cash flow increased by $172 million in the first nine months of 2015 compared to the same period last year due mainly to the favourable impact of the privatization of Bell Aliant and an increase in cash from operating activities, partly offset by higher capital expenditures.
Free cash flow per share in the third quarter of 2015 was $1.09 per common share, compared to $1.06 per common share for the same period last year. On a year-to-date basis, free cash flow per share was $2.47 per common share, compared to $2.45 per common share for the same period last year.
|
Q3 2015 |
|
Q3 2014 |
|
$ CHANGE |
|
% CHANGE |
|
YTD 2015 |
|
YTD 2014 |
|
$ CHANGE |
|
% CHANGE |
|
Bell Wireless |
184 |
|
182 |
|
(2 |
) |
(1.1 |
%) |
523 |
|
469 |
|
(54 |
) |
(11.5 |
%) |
Capital intensity ratio |
10.4 |
% |
11.2 |
% |
|
|
0.8 |
% |
10.2 |
% |
10.1 |
% |
|
|
(0.1 |
%) |
Bell Wireline |
716 |
|
756 |
|
40 |
|
5.3 |
% |
2,068 |
|
2,089 |
|
21 |
|
1.0 |
% |
Capital intensity ratio |
23.6 |
% |
24.8 |
% |
|
|
1.2 |
% |
22.7 |
% |
22.9 |
% |
|
|
0.2 |
% |
Bell Media |
27 |
|
37 |
|
10 |
|
27.0 |
% |
77 |
|
83 |
|
6 |
|
7.2 |
% |
Capital intensity ratio |
3.9 |
% |
5.6 |
% |
|
|
1.7 |
% |
3.6 |
% |
3.9 |
% |
|
|
0.3 |
% |
BCE |
927 |
|
975 |
|
48 |
|
4.9 |
% |
2,668 |
|
2,641 |
|
(27 |
) |
(1.0 |
%) |
Capital intensity ratio |
17.3 |
% |
18.8 |
% |
|
|
1.5 |
% |
16.8 |
% |
17.0 |
% |
|
|
0.2 |
% |
|
26
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
BCE capital expenditures were $48 million, or 4.9%, lower this quarter compared to Q3 2014. Conversely, year-to-date capital expenditures increased by $27 million, or 1.0%, compared to the same period last year. Capital expenditures as a percentage of revenue (capital intensity ratio) was 17.3% and 16.8% in Q3 2015 and year to date, respectively, compared to 18.8% and 17.0% in the same respective periods last year. The year-over-year variances reflect:
-
Essentially comparable year-over-year wireless
capital spending in Q3 2015, whereas wireless capital spending in the first nine
months of 2015 increased by $54 million, primarily attributable to the continued
rollout of our 4G LTE mobile services which reached approximately 94% of the
Canadian population at September 30, 2015, along with our deployment of LTE
Advanced network service. The rollout of 700 MHz spectrum and ongoing
investments to increase network capacity in order to support greater data
consumption and higher LTE speeds also contributed to the increase in capital
spending.
-
Lower wireline capital expenditures of $40 million
in the third quarter and $21 million in the first nine months of 2015 compared
to the previous year, mainly driven by the substantial completion of our FibreOP
deployment in Atlantic Canada and a slowdown in our IPTV service footprint
expansion in Québec and Ontario. This decline in capital expenditures was partly
offset by increased spending on our continued rollout of broadband fibre and
further expansion of our fibre-to-the-home (FTTH) footprint including the Gigabit Fibe
infrastructure buildout in the city of Toronto and other locations along with
our investment to increase capacity on our fibre to the node (FTTN) network.
Additionally, the decline in capital expenditures was also partly offset by
increased spending to support our customer service improvement initiatives and
our growing IPTV and high-speed Internet subscriber bases, as well as the
execution of business customer contracts.
-
Lower capital expenditures at Bell Media of $10 million in the third quarter and $6 million in the first nine months of 2015, compared to the same periods in 2014, as a result of greater capital spending last year for increasing broadcasting capacity and TV production equipment related to the expansion of TSN from two to five national feeds
On May 20, 2015, BCE completed the previously announced acquisition of all of Glentels issued and outstanding common shares for a total consideration of $592 million, of which $296 million ($284 million, net of cash on hand) was paid in cash and the balance through the issuance of 5,548,908 BCE common shares.
Business dispositions of $409 million year to date in 2015 reflects BCEs divestiture of 50% of its ownership interest in Glentel to Rogers in Q2 2015 for a total cash consideration of approximately $473 million ($407 million, net of divested cash and transaction costs).
In Q1 2014, we completed the sale of certain TV services and radio stations for total cash proceeds of $538 million. We also completed the sale of the remaining five Astral TV services for total cash proceeds of $186 million in Q3 2014.
|
Acquisition of spectrum licences |
On April 21, 2015, Bell Mobility acquired advanced wireless service
3 (AWS-3) wireless spectrum in key urban and rural markets as part of Industry Canadas AWS-3 spectrum auction. Bell Mobility acquired 13 licences for 169 million MHz-POP of AWS-3 spectrum for $500 million, which was paid in the first half of 2015.
On May 12, 2015, Bell Mobility acquired an additional 243 million MHz-POP of 2500 MHz wireless spectrum for $29 million, which was paid in Q2 2015. This acquisition increased Bell Mobilitys 2500 MHz spectrum holdings in a number of urban and rural markets.
In the first half of 2014, Bell Mobility acquired 700 MHz spectrum assets in every province and territorial market comprised of 31 licences for $566 million.
2015:
In the third quarter of 2015, we issued $142 million of debt, net of repayments. This included a $555 million issuance (net of repayments) of notes payable and bank advances, partly offset by a reduction in our loans secured by trade receivables of $305 million and a $108 million repayment of finance leases and other debt.
In the first nine months of 2015, we issued $207 million of debt, net of repayments. This included the issuance of Series M-39 MTN debentures at Bell Canada with a principal amount of $500 million and the issuance (net of repayments) of $672 million of notes payable and bank advances. These issuances were partly offset by a partial repayment of approximately $500 million of our unsecured committed term credit facility, a $353 million repayment of finance leases and other debt, and a $112 million repayment of Glentels outstanding debt.
Subsequent to the end of the third quarter, on October 1, 2015, Bell Canada issued 3.00% Series M-40 MTN debentures under its 1997 trust indenture, with a principal amount of $1 billion, which mature on October 3, 2022.
On November 2, 2015, Bell Canada redeemed early its 3.60% Series M-21 MTN debentures, issued under its 1997 trust indenture, having an outstanding principal amount of $1 billion which were due on December 2, 2015.
|
BCE Inc. 2015
Third Quarter Shareholder Report
27 |
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
|
2014:
In the third quarter of 2014, we issued $1,569 million of debt, net of repayments. This included the issuance of Series M-30 and Series M-31 MTN debentures at Bell Canada with an aggregate principal amount of $1.25 billion and $443 million of notes payable and bank advances, net of repayments, partly offset by payments of finance leases and other debt of $124 million.
In the first nine months of 2014, we issued $1,359 million of debt, net of repayments. This included the issuance of MTN debentures at Bell Canada with a principal amount of $1.25 billion and MTNs at Bell Aliant with a principal amount of $150 million, as well as notes payable and bank advances, net of repayments, of $601 million, partly offset by repayments of $342 million of finance leases and other debt and $300 million of CTV Specialty notes on February 18, 2014.
|
Privatization of Bell Aliant |
In Q3 2014, we paid $804 million in connection with the privatization of Bell Aliant, representing 25% of the consideration for the acquisition of a portion of the outstanding publicly held common shares of Bell Aliant at September 30, 2014 that we did not already own.
|
Cash dividends paid on common shares |
In the third quarter of 2015, cash dividends paid on common shares increased by $71 million compared to Q3 2014, due to a higher number of outstanding common shares as a result of the privatization of Bell Aliant, our investment in Glentel, and a higher dividend paid in Q3 2015 of $0.65 per common share compared to $0.6175 per common share in Q3 2014.
In the first nine months of 2015, cash dividends paid on common shares increased by $205 million compared to 2014, due to a higher number of outstanding common shares as a result of the privatization of Bell Aliant, our investment in Glentel, and a higher dividend paid in the first nine months of 2015 of $1.9175 per common share compared to $1.8175 per common share for the same period last year.
|
4.4
Post-employment benefit plans |
For the three months ended September 30, 2015, we recorded an increase in our post-employment benefit obligations and a loss, before taxes, in OCI of $197 million. This was due to a lower-than-expected return on plan assets, partly offset by a higher actual discount rate of 4.2% at September 30, 2015, as compared to 4.1% at June 30, 2015.
For the nine months ended September 30, 2015, we recorded a decrease in our post-employment benefit obligations and a gain, before taxes, in OCI of $551 million. This was due to a higher actual discount rate of 4.2% at September 30, 2015, as compared to 4.0% at December 31, 2014 and a higher-than-expected return on plan assets.
For the three and nine months ended September 30, 2014, we recorded an increase in our post-employment benefit obligations and a loss, before taxes and non-controlling interest (NCI), in OCI of $195 million and $1,328 million, respectively. This was due to a lower actual discount rate of 4.1% at September 30, 2014, as compared to 4.2% at June 30, 2014 and 4.9% at December 31, 2013, partly offset by a higher-than-expected return on plan assets.
|
4.5
Financial risk management |
Fair value
The following table provides the fair value details of financial instruments measured at amortized cost in the statements of financial position.
|
|
|
SEPTEMBER 30, 2015 |
|
DECEMBER 31, 2014 |
|
CLASSIFICATION |
FAIR VALUE METHODOLOGY |
CARRYING
VALUE |
|
FAIR
VALUE |
|
CARRYING
VALUE |
|
FAIR
VALUE |
|
CRTC tangible benefits
obligation |
Trade payables and other liabilities
and non-current liabilities |
Present value of estimated future cash
flows discounted using observable
market interest rates |
229 |
|
236 |
|
285 |
|
289 |
|
CRTC deferral account
obligation |
Trade payables and other liabilities
and non-current liabilities |
Present value of estimated future cash
flows discounted using observable
market interest rates |
158 |
|
174 |
|
174 |
|
191 |
|
Debentures, finance
leases and other debt |
Debt due within one year and
long-term debt |
Quoted market price of debt or present
value of future cash flows discounted
using observable market interest
rates |
17,709 |
|
19,764 |
|
17,723 |
|
20,059 |
|
|
28
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
|
|
|
|
|
|
|
FAIR VALUE |
|
|
|
|
|
|
|
|
QUOTED PRICES |
|
|
|
|
|
|
|
|
|
|
IN ACTIVE MARKETS |
|
|
|
NON-OBSERVABLE |
|
|
|
|
CARRYING VALUE |
|
FOR IDENTICAL |
|
OBSERVABLE MARKET |
|
MARKET INPUTS |
|
|
|
CLASSIFICATION |
OF ASSET (LIABILITY) |
|
ASSETS (LEVEL 1) |
|
DATA (LEVEL 2) (1) |
|
(LEVEL 3) (2) |
|
September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
Available-for-sale (AFS) publicly-traded
and privately-held investments |
|
Other non-current assets |
102 |
|
15 |
|
|
|
87 |
|
Derivative financial instruments |
|
Other current assets, Trade payables and other liabilities, Other non-current assets and liabilities |
248 |
|
|
|
248 |
|
|
|
MLSE financial liability(3) |
|
Other non-current liabilities |
(135 |
) |
|
|
|
|
(135 |
) |
Other |
|
Other non-current assets and liabilities |
21 |
|
|
|
44 |
|
(23 |
) |
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
AFS publicly-traded and privately-held investments |
|
Other non-current assets |
107 |
|
17 |
|
|
|
90 |
|
Derivative financial instruments |
|
Other current assets, Trade payables and other liabilities, Other non-current assets and liabilities |
276 |
|
|
|
276 |
|
|
|
MLSE financial liability(3) |
|
Other non-current liabilities |
(135 |
) |
|
|
|
|
(135 |
) |
Other |
|
Other non-current assets and liabilities |
12 |
|
|
|
22 |
|
(10 |
) |
(1) |
Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
(2) |
Non-observable market inputs such as discounted cash flows. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 finan-cial instruments. |
(3) |
Represents BCEs obligation to repurchase the BCE Master Trust Funds (Master Trust) 9% interest in Maple Leaf Sports & Entertainment Ltd. (MLSE) at a price not less than an agreed minimum price should the Master Trust exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recorded in Other income. |
We use forward contracts, options and cross currency basis swaps to manage foreign currency risk related to anticipated transactions and certain foreign currency debt.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a gain of $18 million (loss of $31 million) recognized in net earnings at September 30, 2015 and a gain (loss) of $48 million recognized in other comprehensive income at September 30, 2015, with all other variables held constant.
The following table provides further details on our outstanding foreign currency forward contracts, options and cross currency basis swaps as at September 30, 2015.
|
|
|
AMOUNTS |
|
|
|
|
|
|
|
|
|
|
|
TO RECEIVE |
|
|
|
AMOUNTS TO PAY |
|
|
|
|
TYPE OF HEDGE |
BUY CURRENCY |
|
IN USD |
|
SELL CURRENCY |
|
IN CAD |
|
MATURITY |
|
HEDGED ITEM |
Cash flow |
USD |
|
120 |
|
CAD |
|
137 |
|
2015 |
|
Purchase commitments |
Cash flow |
USD |
|
1,147 |
|
CAD |
|
1,515 |
|
2015 |
|
Commercial paper |
Cash flow |
USD |
|
367 |
|
CAD |
|
414 |
|
2016-2018 |
|
Purchase commitments |
Cash flow |
USD |
|
380 |
|
CAD |
|
506 |
|
2015 |
|
Credit facility |
Economic |
USD |
|
123 |
|
CAD |
|
152 |
|
2015 |
|
Purchase commitments |
Economic |
USD |
|
126 |
|
CAD |
|
165 |
|
2016 |
|
Purchase commitments |
Economic call options |
USD |
|
71 |
|
CAD |
|
88 |
|
2015 |
|
Purchase commitments |
Economic put options |
USD |
|
141 |
|
CAD |
|
175 |
|
2015 |
|
Purchase commitments |
We use interest rate swaps to manage the mix of fixed and floating interest rates of our debt. We also use interest rate locks to hedge the interest rate on future debt issuances. As at September 30, 2015, we had an interest rate lock with a notional amount of $500 million which matures in 2016 and an interest rate swap with a notional amount of $700 million which matures in 2017.
A 1% increase (decrease) in interest rates would result in a decrease of $23 million (increase of $18 million) in net earnings at September 30, 2015 and a gain of $31 million (loss of $36 million) recognized in other comprehensive income as at September 30, 2015.
|
BCE Inc. 2015
Third Quarter Shareholder Report
29 |
4 |
FINANCIAL AND CAPITAL MANAGEMENT |
MD&A |
|
|
|
|
|
Our key credit ratings remain unchanged from those described in the BCE 2014 Annual MD&A.
In Q1 2015, the committed amount under Bell Canadas unsecured revolving facility was increased from $2.5 billion to $3 billion, providing the company with additional financing flexibility.
All other cash requirements remain substantially unchanged from those described in the BCE 2014 Annual MD&A.
COMMITMENTS (OFF-BALANCE SHEET)
The following table is a summary of our commitments at September 30, 2015 that are due in each of the next five years and thereafter.
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
THEREAFTER |
|
TOTAL |
|
Operating leases |
72 |
|
259 |
|
231 |
|
177 |
|
149 |
|
858 |
|
1,746 |
|
Commitments for property, plant and equipment and intangible assets |
343 |
|
796 |
|
589 |
|
526 |
|
395 |
|
1,770 |
|
4,419 |
|
Purchase obligations |
586 |
|
629 |
|
576 |
|
546 |
|
538 |
|
2,098 |
|
4,973 |
|
Total |
1,001 |
|
1,684 |
|
1,396 |
|
1,249 |
|
1,082 |
|
4,726 |
|
11,138 |
|
BCEs significant operating leases are for office premises, cellular tower sites and retail outlets. These leases are non-cancellable and are renewable at the end of the lease period.
Our commitments for property, plant and equipment and intangible assets include program and feature film rights and investments to expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service and product contracts for operating expenditures.
RECENT DEVELOPMENTS IN LEGAL PROCEEDINGS
The following are updates to the legal proceedings described in the BCE 2014 AIF under section 8, Legal Proceedings, as subsequently updated in the BCE 2015 First Quarter MD&A and the BCE 2015 Second Quarter MD&A.
CLASS ACTION CONCERNING WIRELESS SYSTEM ACCESS FEES
On September 3, 2015, the plaintiff applied for leave to appeal to the Supreme Court of Canada of the decision of the Court of Appeal of British Columbia in respect of the dismissal of the certification application filed in the Supreme Court of British Columbia.
SIGNAL PIRACY LITIGATION
On March 6, 2015, the Québec Court of Appeal
reversed the judgment of the lower court regarding the quantum of damages,
granting plaintiffs damages of $82 million, plus interest and costs. On
October 15, 2015, the Supreme Court of Canada dismissed Bell ExpressVu Limited
Partnerships (Bell ExpressVu) application for leave to appeal the Québec Court of Appeals judgment. Accordingly, the aggregate amount of $141.6 million, including interest and costs, was paid by Bell ExpressVu on October 19, 2015 in full satisfaction of the judgment as rendered by the Québec Court of Appeal.
|
30
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
5 |
QUARTERLY FINANCIAL INFORMATION |
MD&A |
|
|
|
|
5 QUARTERLY FINANCIAL INFORMATION |
BCEs 2015 third quarter interim condensed financial report was prepared in accordance with IFRS, as issued by the International Accounting Standards Board (IASB), under International Accounting Standard (IAS) 34, Interim Financial Reporting.
The following table, which was also prepared in accordance with IFRS, shows selected consolidated financial data of BCE for the eight most recent completed quarters.
|
2015 |
2014 |
2013 |
|
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Q3 |
|
Q2 |
|
Q1 |
|
Q4 |
|
Operating revenues |
5,345 |
|
5,326 |
|
5,240 |
|
5,528 |
|
5,195 |
|
5,220 |
|
5,099 |
|
5,382 |
|
Adjusted EBITDA |
2,187 |
|
2,197 |
|
2,094 |
|
2,022 |
|
2,115 |
|
2,144 |
|
2,022 |
|
1,998 |
|
Severance, acquisition and other costs |
(46 |
) |
(24 |
) |
(224 |
) |
(58 |
) |
(66 |
) |
(54 |
) |
(38 |
) |
(48 |
) |
Depreciation |
(727 |
) |
(720 |
) |
(712 |
) |
(734 |
) |
(739 |
) |
(708 |
) |
(699 |
) |
(695 |
) |
Amortization |
(133 |
) |
(134 |
) |
(127 |
) |
(118 |
) |
(116 |
) |
(171 |
) |
(167 |
) |
(160 |
) |
Net earnings |
791 |
|
814 |
|
583 |
|
594 |
|
703 |
|
707 |
|
714 |
|
593 |
|
Net earnings attributable to common shareholders |
739 |
|
759 |
|
532 |
|
542 |
|
600 |
|
606 |
|
615 |
|
495 |
|
Net earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
0.87 |
|
0.90 |
|
0.63 |
|
0.64 |
|
0.77 |
|
0.78 |
|
0.79 |
|
0.64 |
|
Diluted |
0.87 |
|
0.90 |
|
0.63 |
|
0.63 |
|
0.77 |
|
0.78 |
|
0.79 |
|
0.63 |
|
Included in net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance, acquisition and other costs |
(35 |
) |
(16 |
) |
(164 |
) |
(42 |
) |
(45 |
) |
(38 |
) |
(23 |
) |
(33 |
) |
Net (losses) gains on investments |
(16 |
) |
40 |
|
(2 |
) |
(8 |
) |
|
|
4 |
|
12 |
|
(12 |
) |
Early debt redemption costs |
|
|
|
|
(7 |
) |
(18 |
) |
(3 |
) |
|
|
|
|
|
|
Adjusted net earnings |
790 |
|
735 |
|
705 |
|
610 |
|
648 |
|
640 |
|
626 |
|
540 |
|
Adjusted EPS |
0.93 |
|
0.87 |
|
0.84 |
|
0.72 |
|
0.83 |
|
0.82 |
|
0.81 |
|
0.70 |
|
Average number of common shares outstanding basic
(millions) |
848.9 |
|
844.9 |
|
841.0 |
|
837.7 |
|
782.1 |
|
777.7 |
|
776.5 |
|
775.9 |
|
|
BCE Inc. 2015
Third Quarter Shareholder Report
31 |
6 |
REGULATORY ENVIRONMENT |
MD&A |
|
|
|
|
|
The following are updates to the regulatory initiatives and proceedings described in the BCE 2014 Annual MD&A under section 3.3, Principal business risks and section 8, Regulatory environment, as subsequently updated in the BCE 2015 First Quarter MD&A and the BCE 2015 Second Quarter MD&A.
COMPLAINT REGARDING PRICING OF
BROADCASTING CONTENT ACCESSED VIA MOBILE DEVICES
On April 2, 2015, the Federal Court of Appeal
granted Bell Canadas motion seeking leave to appeal the CRTCs decision
concerning a complaint against Bell Mobility about the pricing of our Bell
Mobile TV service compared with what we charge consumers to access programming
content received via mobile devices over the Internet. The hearing of the appeal
is now expected to take place in early 2016 with a decision expected later in
the year.
PROCEEDINGS REGARDING WHOLESALE DOMESTIC WIRELESS SERVICES
On August 3, 2015, the Canadian Network Operators Consortium (CNOC) applied to the CRTC to review and vary Telecom Regulatory Policy CRTC 2015-177, Regulatory Framework for Wholesale Mobile Wireless Services. CNOCs application seeks: (1) an order from the CRTC mandating
full Mobile Virtual Network Operator (MVNO) services on the networks of Bell Mobility, Rogers Communications Partnership (Rogers Partnership) and Telus Communications Company (Telus) at regulated rates; and (2) the commencement of a follow-up regulatory proceeding in which the CRTC would determine whether wholesale tower and site sharing services should be mandated, and if so, on what terms and conditions. For CNOCs application to be successful, it must demonstrate that there is substantial doubt as to the correctness of the CRTCs original decision, for example due to: a legal or factual error, a fundamental change in the circumstances or facts since the decision was issued on May 5, 2015, or a failure to consider a basic principle raised in the original proceeding or new principle that has arisen as a result of the CRTCs decision. If CNOCs request is granted by the CRTC then: a) Bell Mobility, Rogers Partnership and Telus could be mandated to provide full MVNOs with access to their networks at regulated rates, thereby facilitating MVNO entry into the Canadian market; and/or b) the CRTC could initiate a regulatory review to consider the need for changes to the tower and site sharing regulations. A CRTC decision on the matter is expected in late 2015 or early 2016.
WHOLESALE WIRELINE SERVICES FRAMEWORK REVIEW
On October 20, 2015, we requested that the
Governor in Council vary Telecom Decision 2015-326, which concluded a review of
the CRTCs wholesale wireline telecommunications policies, so that it does not
implement legacy wholesale regulation for fibre-to-the-premise (FTTP) or
next-generation DOCSIS 3.1 cable networks. The decision would continue to apply
to legacy broadband technology, like digital subscriber line (DSL), FTTN, and
cable broadband based on DOCSIS 3.0 providing speeds up to 100 Mbps, where it
exists today. On the same day, we also filed an application with the CRTC
requesting the addition of conditions regarding competitor eligibility for the
new disaggregated wholesale high-speed access service. The introduction of
mandated wholesale services over FTTP by the CRTC will undermine the incentives
of facilities-based digital infrastructure providers to invest in
next-generation wireline networks, particularly in smaller communities and rural
areas.
CRTC PROCEEDINGS ON THE FUTURE OF CANADAS TV SYSTEM
On March 2, 2015, Bell Canada filed an application with the Federal Court of Appeal for leave to appeal the CRTCs decision relating to simultaneous substitution in so far as it: (i) prohibits simultaneous substitution for the Super Bowl starting in 2017; (ii) prohibits simultaneous substitution for specialty channels; and (iii) purports to grant the CRTC authority to impose penalties on broadcasters and requires broadcasting distribution undertakings (BDUs) to pay rebates for errors in the performance of simultaneous substitution. The Federal Court of Appeal granted our application for leave to appeal on May 5, 2015.
In its March 19, 2015 decision dealing primarily with issues related to the distribution of TV services, the CRTC also indicated that it would introduce an expanded Wholesale Code. The CRTC released its final decision related to the expanded Wholesale Code on September 24, 2015. The new Wholesale Code purports to govern the commercial arrangements between BDUs, programming services, and digital media services including imposing additional restrictions on the sale of TV channels at wholesale and the carriage of television channels by BDUs. On October 23, 2015, Bell Canada and Bell Media filed in the Federal Court of Appeal an application for leave to appeal the CRTCs decision purporting to implement the Wholesale Code. The application for leave to appeal indicates that the CRTCs decision conflicts with the Copyright Act and is outside the CRTCs jurisdiction under the Broadcasting Act. A decision on the application for leave to appeal is expected in the first quarter of 2016.
|
32
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
6 |
REGULATORY ENVIRONMENT |
MD&A |
|
|
|
|
600 MHZ SPECTRUM CONSULTATION
Industry Canada held a consultation in December 2014 seeking comments on various questions related to repurposing the 600 MHz broadcasting band for mobile use. This spectrum is currently used primarily by over-the-air (OTA) TV broadcasters for local TV transmissions. This was the first step of a multistep process on the matter. The two key questions related to whether Industry Canada should repurpose the band to include commercial mobile broadband and whether to participate in a joint spectrum repacking process with the United States. In addition, Industry Canada also sought comments as to the anticipated future spectrum requirements for OTA TV broadcasting taking into consideration the overall changes to the broadcasting industry.
On August 14, 2015, Industry Canada announced its decision on the results of the consultation. Industry Canada has determined it will proceed with the repacking initiative of the 600 MHz band to include commercial mobile use and that it will jointly establish a new digital TV (DTV) allotment plan in collaboration with the United States. Industry Canada also decided that the amount of spectrum and band plan to be repurposed will be the same as the band plan option adopted in the United States. Industry Canada will work with the Federal Communications Commission to develop a process to transition to the new DTV allotment plan. The decision will have an impact for existing Bell Media TV broadcasting stations, which will need to transition to alternate spectrum. The extent of such impact is not yet known.
|
BCE Inc. 2015
Third Quarter Shareholder Report
33 |
7 |
BUSINESS RISKS |
MD&A |
|
|
|
|
|
A risk is the possibility that an event might happen in the future that could have a negative effect on our financial position, financial performance, cash flows, business or reputation. Part of managing our business is to understand what these potential risks could be and to mitigate them where we can.
The actual effect of any event could be materially different from what we currently anticipate. The risks described in this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our financial position, financial performance, cash flows, business or reputation.
In the BCE 2014 Annual MD&A we provided a detailed
review of risks that could affect our financial position, financial performance,
cash flows, business or reputation and that could cause actual results or events
to differ materially from our expectations expressed in or implied by our
forward-looking statements. This detailed description of risks is updated in the
BCE 2015 First Quarter MD&A, the BCE 2015 Second Quarter MD&A and this MD&A. The
risks described in the BCE 2014 Annual MD&A, as updated in the BCE 2015 First
Quarter MD&A, the BCE 2015 Second Quarter MD&A and this MD&A include, without
limitation, risks associated with:
-
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
FTTH 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 TVs TV distribution market and Bell Medias markets
-
rising programming costs and Bell Medias 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 Medias 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
|
34
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
7 |
BUSINESS RISKS |
MD&A |
|
|
|
|
-
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
-
BCEs 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 BCEs board of directors or BCEs dividend policy will be maintained
-
stock market volatility
Please see section 9, Business risks of the BCE 2014 Annual MD&A for a more complete description of the above-mentioned and other risks, which section, and the other sections of the BCE 2014 Annual MD&A referred to therein, are incorporated by reference in this section 7.
In addition, please see section 4.7, Liquidity Litigation in this MD&A, in the BCE 2015 First Quarter MD&A and in the BCE 2015 Second Quarter MD&A for an update to the legal proceedings described in the BCE 2014 AIF, which sections 4.7 are incorporated by reference in this section 7. Please see also section 6, Regulatory environment in this MD&A, in the BCE 2015 First Quarter MD&A and in the BCE 2015 Second Quarter MD&A for an update to the regulatory initiatives and proceedings described in the BCE 2014 Annual MD&A, which sections 6 are incorporated by reference in this section 7.
Except for the updates set out in section 4.7, Liquidity Litigation and in section 6, Regulatory environment in this MD&A; in section 4.7, Liquidity Litigation, in section 6, Regulatory environment and in section 7, Business risks in the BCE 2015 Second Quarter MD&A; and in section 4.7, Liquidity Litigation and in section 6, Regulatory environment in the BCE 2015 First Quarter MD&A, the risks described in the BCE 2014 Annual MD&A remain substantially unchanged.
|
BCE Inc. 2015
Third Quarter Shareholder Report
35 |
8 |
ACCOUNTING POLICIES, FINANCIAL MEASURES AND CONTROLS |
MD&A |
|
|
|
|
|
8 ACCOUNTING POLICIES, FINANCIAL MEASURES AND CONTROLS |
|
8.1 Our accounting policies |
BCEs 2015 third quarter consolidated interim financial statements (financial statements) were prepared in accordance with IFRS, as issued by the IASB, under IAS 34 Interim Financial Reporting and were approved by BCEs board of directors on November 4, 2015. BCEs financial statements were prepared using the same basis of presentation, accounting policies and methods of computations as outlined in Note 2, Significant Accounting Policies in BCEs consolidated financial statements for the year ended December 31, 2014. The financial statements do not include all of the notes required in the annual financial statements.
|
Future changes to accounting standards |
In September 2015, the IASB issued an amendment to IFRS 15 Revenue from Contracts with Customers, deferring its effective date from annual periods beginning on or after January 1, 2017 to annual periods beginning on or after January 1, 2018, using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach.
IFRS 15 will affect how we account for revenues and contract costs for Bell Wireless and our other segments. We are currently evaluating the impact of IFRS 15 on our financial statements.
|
8.2 Non-GAAP financial measures and key performance indicators (KPIs) |
This section describes the non-GAAP financial measures and KPIs we use in this MD&A to explain our financial results. It also provides reconciliations of the non-GAAP financial measures to the most comparable IFRS financial measures.
|
Adjusted EBITDA and Adjusted EBITDA margin |
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 BCEs consolidated income statements. Adjusted EBITDA for BCEs segments is the same as segment profit as reported in Note 3 to BCEs 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 companys 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.
|
Q3 2015 |
|
Q3 2014 |
|
YTD 2015 |
|
YTD 2014 |
|
Net earnings |
791 |
|
703 |
|
2,188 |
|
2,124 |
|
Severance, acquisition and other costs |
46 |
|
66 |
|
294 |
|
158 |
|
Depreciation |
727 |
|
739 |
|
2,159 |
|
2,146 |
|
Amortization |
133 |
|
116 |
|
394 |
|
454 |
|
Finance costs |
|
|
|
|
|
|
|
|
Interest expense |
227 |
|
227 |
|
683 |
|
691 |
|
Interest on post-employment benefit obligations |
27 |
|
25 |
|
82 |
|
76 |
|
Other income |
(35 |
) |
(2 |
) |
(58 |
) |
(76 |
) |
Income taxes |
271 |
|
241 |
|
736 |
|
708 |
|
Adjusted EBITDA |
2,187 |
|
2,115 |
|
6,478 |
|
6,281 |
|
BCE Operating Revenues |
5,345 |
|
5,195 |
|
15,911 |
|
15,514 |
|
Adjusted EBITDA Margin |
40.9 |
% |
40.7 |
% |
40.7 |
% |
40.5 |
% |
|
36
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
8 |
ACCOUNTING POLICIES, FINANCIAL MEASURES AND CONTROLS |
MD&A |
|
|
|
|
|
Adjusted net earnings and Adjusted EPS |
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.
|
Q3 2015 |
Q3 2014 |
YTD 2015 |
YTD 2014 |
|
TOTAL |
|
PER SHARE |
|
TOTAL |
|
PER SHARE |
|
TOTAL |
|
PER SHARE |
|
TOTAL |
|
PER SHARE |
|
Net earnings attributable to common shareholders |
739 |
|
0.87 |
|
600 |
|
0.77 |
|
2,030 |
|
2.40 |
|
1,821 |
|
2.34 |
|
Severance, acquisition and other costs |
35 |
|
0.05 |
|
45 |
|
0.06 |
|
215 |
|
0.26 |
|
106 |
|
0.14 |
|
Net losses (gains) on investments |
16 |
|
0.01 |
|
|
|
|
|
(22 |
) |
(0.03 |
) |
(16 |
) |
(0.02 |
) |
Early debt redemption costs |
|
|
|
|
3 |
|
|
|
7 |
|
0.01 |
|
3 |
|
|
|
Adjusted net earnings |
790 |
|
0.93 |
|
648 |
|
0.83 |
|
2,230 |
|
2.64 |
|
1,914 |
|
2.46 |
|
|
Free Cash Flow and Free Cash Flow per share |
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, BCEs Free Cash Flow includes 100% of Bell Aliants 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.
|
Q3 2015 |
|
Q3 2014 |
|
YTD 2015 |
|
YTD 2014 |
|
Cash flows from operating activities |
1,878 |
|
1,882 |
|
4,764 |
|
4,714 |
|
Bell Aliant dividends paid to BCE |
|
|
47 |
|
|
|
95 |
|
Capital expenditures |
(927 |
) |
(975 |
) |
(2,668 |
) |
(2,641 |
) |
Cash dividends paid on preferred shares |
(37 |
) |
(31 |
) |
(113 |
) |
(94 |
) |
Cash dividends paid by subsidiaries to non-controlling interest |
(26 |
) |
(69 |
) |
(33 |
) |
(144 |
) |
Acquisition costs paid |
33 |
|
33 |
|
133 |
|
63 |
|
Bell Aliant free cash flow |
|
|
(53 |
) |
|
|
(82 |
) |
Free cash flow |
921 |
|
834 |
|
2,083 |
|
1,911 |
|
Average number of common shares outstanding (millions) |
848.9 |
|
782.1 |
|
845.0 |
|
778.8 |
|
Free cash flow per share |
$1.09 |
|
$1.06 |
|
$2.47 |
|
$2.45 |
|
|
BCE Inc. 2015
Third Quarter Shareholder Report
37 |
8 |
ACCOUNTING POLICIES, FINANCIAL MEASURES AND CONTROLS |
MD&A |
|
|
|
|
|
The term Net Debt does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define Net Debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash and cash equivalents, as shown in BCEs consolidated statement of financial position. We include 50% of outstanding preferred shares in our Net Debt as it is consistent with the treatment by certain credit rating agencies.
We consider Net Debt to be an important indicator of the companys financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use Net Debt to determine a companys financial leverage.
Net Debt has no directly comparable IFRS financial measure, but rather is calculated using several asset and liability categories from the statements of financial position, as shown in the following table.
|
SEPTEMBER 30, 2015 |
|
DECEMBER 31, 2014 |
|
Debt due within one year |
6,416 |
|
3,743 |
|
Long-term debt |
14,444 |
|
16,355 |
|
50% of outstanding preferred shares |
2,002 |
|
2,002 |
|
Cash and cash equivalents |
(622 |
) |
(566 |
) |
Net debt |
22,240 |
|
21,534 |
|
We use a number of KPIs to measure the success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by other issuers.
KPI |
DEFINITION |
Capital Intensity |
Capital expenditures divided by operating revenues. |
ARPU |
Average revenue per user or subscriber is certain
service revenues divided by the average subscriber base for the specified period. |
Churn |
Churn is the rate at which existing subscribers
cancel their services, expressed as a percentage. Churn is calculated as the
number of subscribers disconnected divided by the average subscriber base. It is
a measure of monthly customer turnover. |
COA |
COA is also referred to as subscriber acquisition
costs. COA represents the total cost associated with acquiring a customer and
includes costs such as hardware discounts, marketing and distribution costs.
This measure is expressed per gross activation during the period. |
Dividend Payout Ratio |
Dividends paid on common shares divided by Free Cash
Flow. |
Net Debt to Adjusted EBITDA |
Net Debt to Adjusted EBITDA is BCE Net Debt divided
by Adjusted EBITDA. Net Debt is debt due within one year plus long-term debt and
50% of preferred shares less cash and cash equivalents. For the purposes of
calculating our Net Debt to Adjusted EBITDA ratio, Adjusted EBITDA is defined as
twelve-month trailing BCE Adjusted EBITDA. |
Adjusted EBITDA to Net Interest Expense |
Adjusted EBITDA to net interest expense is Adjusted EBITDA divided by net interest expense. For the purposes of calculating our Adjusted EBITDA to net interest expense ratio, Adjusted EBITDA is defined as twelve-month trailing BCE Adjusted EBITDA. Net interest expense is twelve-month trailing BCE interest expense excluding interest on post-employment benefit obligations and including 50% of preferred dividends. |
|
8.3 Controls and procedures |
Changes in internal control over financial reporting
No changes were made in our internal control over financial reporting during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|
38
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
CONSOLIDATED FINANCIAL STATEMENTS |
Consolidated income statements
FOR THE PERIOD ENDED SEPTEMBER 30 |
|
|
|
|
(IN MILLIONS OF CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS) |
|
|
THREE MONTHS |
NINE MONTHS |
(UNAUDITED) |
NOTE |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Operating revenues |
3 |
|
5,345 |
|
5,195 |
|
15,911 |
|
15,514 |
|
Operating costs |
4 |
|
(3,158 |
) |
(3,080 |
) |
(9,433 |
) |
(9,233 |
) |
Severance, acquisition and other costs |
5 |
|
(46 |
) |
(66 |
) |
(294 |
) |
(158 |
) |
Depreciation |
|
|
(727 |
) |
(739 |
) |
(2,159 |
) |
(2,146 |
) |
Amortization |
|
|
(133 |
) |
(116 |
) |
(394 |
) |
(454 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(227 |
) |
(227 |
) |
(683 |
) |
(691 |
) |
Interest on post-employment benefit obligations |
11 |
|
(27 |
) |
(25 |
) |
(82 |
) |
(76 |
) |
Other income |
6 |
|
35 |
|
2 |
|
58 |
|
76 |
|
Income taxes |
|
|
(271 |
) |
(241 |
) |
(736 |
) |
(708 |
) |
Net earnings |
|
|
791 |
|
703 |
|
2,188 |
|
2,124 |
|
Net earnings attributable to: |
|
|
|
|
|
|
|
|
|
|
Common shareholders |
|
|
739 |
|
600 |
|
2,030 |
|
1,821 |
|
Preferred shareholders |
|
|
38 |
|
31 |
|
115 |
|
97 |
|
Non-controlling interest |
|
|
14 |
|
72 |
|
43 |
|
206 |
|
Net earnings |
|
|
791 |
|
703 |
|
2,188 |
|
2,124 |
|
Net earnings per common share basic and diluted |
8 |
|
0.87 |
|
0.77 |
|
2.40 |
|
2.34 |
|
Average number of common shares outstanding basic (millions) |
|
|
848.9 |
|
782.1 |
|
845.0 |
|
778.8 |
|
|
BCE Inc. 2015
Third Quarter Shareholder
Report 39 |
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
Consolidated statements of comprehensive income |
FOR THE PERIOD ENDED SEPTEMBER 30 |
THREE MONTHS |
NINE MONTHS |
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Net earnings |
791 |
|
703 |
|
2,188 |
|
2,124 |
|
Other comprehensive (loss) income, net of income taxes |
|
|
|
|
|
|
|
|
Items that will be reclassified subsequently to net earnings |
|
|
|
|
|
|
|
|
Net change in value of available-for-sale (AFS) financial assets, net of income taxes of nil for the three months and nine months ended September 30, 2015 and 2014, respectively |
(3 |
) |
54 |
|
(2 |
) |
55 |
|
Net change in value of derivatives designated as cash flow hedges, net of income taxes of ($7) million and ($11) million for the three months ended September 30, 2015 and 2014, respectively, and ($7) million and ($5) million for the nine months ended September 30, 2015 and 2014, respectively |
23 |
|
31 |
|
13 |
|
14 |
|
Items that will not be reclassified to net earnings |
|
|
|
|
|
|
|
|
Actuarial (losses) gains on post-employment benefit plans, net of income taxes of $51 million and $53 million for the three months ended September 30, 2015 and 2014, respectively, and ($151) million and $358 million for the nine months ended September 30, 2015 and 2014, respectively(1) |
(146 |
) |
(142 |
) |
400 |
|
(970 |
) |
Other comprehensive (loss) income |
(126 |
) |
(57 |
) |
411 |
|
(901 |
) |
Total comprehensive income |
665 |
|
646 |
|
2,599 |
|
1,223 |
|
Total comprehensive income attributable to: |
|
|
|
|
|
|
|
|
Common shareholders |
611 |
|
558 |
|
2,438 |
|
1,013 |
|
Preferred shareholders |
38 |
|
31 |
|
115 |
|
97 |
|
Non-controlling interest |
16 |
|
57 |
|
46 |
|
113 |
|
Total comprehensive income |
665 |
|
646 |
|
2,599 |
|
1,223 |
|
(1) |
The discount rate used to value our post-employment benefit obligations at September 30, 2015 was 4.2% compared to 4.1% at June 30, 2015 and 4.0% at December 31, 2014. The discount rate used to value our post-employment benefit obligations at September 30, 2014 was 4.1% compared to 4.2% at June 30, 2014 and 4.9% at December 31, 2013. |
|
40
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
Consolidated statements of financial position |
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
NOTE |
|
SEPTEMBER 30, 2015 |
|
DECEMBER 31, 2014 |
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
|
84 |
|
142 |
|
Cash equivalents |
|
|
538 |
|
424 |
|
Trade and other receivables |
|
|
2,766 |
|
3,069 |
|
Inventory |
|
|
450 |
|
333 |
|
Prepaid expenses |
|
|
452 |
|
379 |
|
Other current assets |
|
|
287 |
|
201 |
|
Total current assets |
|
|
4,577 |
|
4,548 |
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment |
|
|
21,709 |
|
21,327 |
|
Intangible assets |
9 |
|
10,977 |
|
10,224 |
|
Deferred tax assets |
|
|
93 |
|
162 |
|
Investments in associates and joint ventures |
7 |
|
1,125 |
|
776 |
|
Other non-current assets |
|
|
810 |
|
875 |
|
Goodwill |
|
|
8,377 |
|
8,385 |
|
Total non-current assets |
|
|
43,091 |
|
41,749 |
|
Total assets |
|
|
47,668 |
|
46,297 |
|
LIABILITIES |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade payables and other liabilities |
|
|
4,015 |
|
4,398 |
|
Interest payable |
|
|
148 |
|
145 |
|
Dividends payable |
|
|
566 |
|
534 |
|
Current tax liabilities |
|
|
158 |
|
269 |
|
Debt due within one year |
10 |
|
6,416 |
|
3,743 |
|
Total current liabilities |
|
|
11,303 |
|
9,089 |
|
Non-current liabilities |
|
|
|
|
|
|
Long-term debt |
10 |
|
14,444 |
|
16,355 |
|
Deferred tax liabilities |
|
|
1,717 |
|
1,321 |
|
Post-employment benefit obligations |
|
|
2,296 |
|
2,772 |
|
Other non-current liabilities |
|
|
1,423 |
|
1,521 |
|
Total non-current liabilities |
|
|
19,880 |
|
21,969 |
|
Total liabilities |
|
|
31,183 |
|
31,058 |
|
Commitments |
14 |
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
Equity attributable to BCE shareholders |
|
|
|
|
|
|
Preferred shares |
|
|
4,004 |
|
4,004 |
|
Common shares |
7 |
|
17,181 |
|
16,717 |
|
Contributed surplus |
|
|
1,153 |
|
1,141 |
|
Accumulated other comprehensive income |
|
|
105 |
|
97 |
|
Deficit |
|
|
(6,264 |
) |
(7,013 |
) |
Total equity attributable to BCE shareholders |
|
|
16,179 |
|
14,946 |
|
Non-controlling interest |
|
|
306 |
|
293 |
|
Total equity |
|
|
16,485 |
|
15,239 |
|
Total liabilities and equity |
|
|
47,668 |
|
46,297 |
|
|
BCE Inc. 2015
Third Quarter Shareholder
Report 41 |
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
Consolidated statements of changes in equity |
FOR THE PERIOD ENDED SEPTEMBER 30, 2015
(IN MILLIONS OF CANADIAN DOLLARS)
(UNAUDITED) |
NOTE |
|
ATTRIBUTABLE TO BCE SHAREHOLDERS |
NON-
CONTROLLING
INTEREST |
|
TOTAL EQUITY |
|
PREFERRED
SHARES |
|
COMMON
SHARES |
|
CONTRIBUTED
SURPLUS |
|
ACCUMULATED
OTHER
COMPREHEN-
SIVE INCOME |
|
DEFICIT |
|
TOTAL |
|
Balance at January 1, 2015 |
|
|
4,004 |
|
16,717 |
|
1,141 |
|
97 |
|
(7,013 |
) |
14,946 |
|
293 |
|
15,239 |
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
2,145 |
|
2,145 |
|
43 |
|
2,188 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
8 |
|
400 |
|
408 |
|
3 |
|
411 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
8 |
|
2,545 |
|
2,553 |
|
46 |
|
2,599 |
|
Common shares issued under stock option plan |
|
|
|
|
74 |
|
(5 |
) |
|
|
|
|
69 |
|
|
|
69 |
|
Common shares issued under employee savings plan |
|
|
|
|
94 |
|
|
|
|
|
|
|
94 |
|
|
|
94 |
|
Other share-based compensation |
|
|
|
|
|
|
17 |
|
|
|
(31 |
) |
(14 |
) |
|
|
(14 |
) |
Dividends declared on BCE common and preferred shares |
|
|
|
|
|
|
|
|
|
|
(1,765 |
) |
(1,765 |
) |
|
|
(1,765 |
) |
Dividends declared by subsidiaries to non-controllong interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
(33 |
) |
Common shares issued for the acquisition of Glentel Inc |
7 |
|
|
|
296 |
|
|
|
|
|
|
|
296 |
|
|
|
296 |
|
Balance at September 30, 2015 |
|
|
4,004 |
|
17,181 |
|
1,153 |
|
105 |
|
(6,264 |
) |
16,179 |
|
306 |
|
16,485 |
|
FOR THE PERIOD ENDED SEPTEMBER 30, 2014
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
ATTRIBUTABLE TO BCE SHAREHOLDERS |
NON-
CONTROLLING
INTEREST |
|
TOTAL EQUITY |
|
PREFERRED
SHARES |
|
COMMON
SHARES |
|
CONTRIBUTED
SURPLUS |
|
ACCUMULATED
OTHER
COMPREHEN-
SIVE
INCOME |
|
DEFICIT |
|
TOTAL |
|
Balance at January 1, 2014 |
3,395 |
|
13,629 |
|
2,615 |
|
14 |
|
(4,642 |
) |
15,011 |
|
1,239 |
|
16,250 |
|
Net earnings |
|
|
|
|
|
|
|
|
1,918 |
|
1,918 |
|
206 |
|
2,124 |
|
Other comprehensive loss |
|
|
|
|
|
|
69 |
|
(877 |
) |
(808 |
) |
(93 |
) |
(901 |
) |
Total comprehensive income |
|
|
|
|
|
|
69 |
|
1,041 |
|
1,110 |
|
113 |
|
1,223 |
|
Common shares issued under stock option plan |
|
|
47 |
|
(4 |
) |
|
|
|
|
43 |
|
|
|
43 |
|
Common shares issued under employee savings plan |
|
|
78 |
|
|
|
|
|
|
|
78 |
|
|
|
78 |
|
Other share-based compensation |
|
|
|
|
17 |
|
|
|
(16 |
) |
1 |
|
6 |
|
7 |
|
Dividends declared on BCE common and preferred shares |
|
|
|
|
|
|
|
|
(1,539 |
) |
(1,539 |
) |
|
|
(1,539 |
) |
Dividends declared by subsidiaries to non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
(143 |
) |
(143 |
) |
Privatization of Bell Aliant |
441 |
|
2,371 |
|
(1,220 |
) |
|
|
(1,779 |
) |
(187 |
) |
(617 |
) |
(804 |
) |
Other |
|
|
|
|
|
|
|
|
(27 |
) |
(27 |
) |
(57 |
) |
(84 |
) |
Balance at September 30, 2014 |
3,836 |
|
16,125 |
|
1,408 |
|
83 |
|
(6,962 |
) |
14,490 |
|
541 |
|
15,031 |
|
|
42
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
Consolidated statements of cash flows |
FOR THE PERIOD ENDED SEPTEMBER 30 |
|
|
THREE MONTHS |
NINE MONTHS |
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
NOTE |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
791 |
|
703 |
|
2,188 |
|
2,124 |
|
Adjustments to reconcile net earnings to cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
Severance, acquisition and other costs |
5 |
|
46 |
|
66 |
|
294 |
|
158 |
|
Depreciation and amortization |
|
|
860 |
|
855 |
|
2,553 |
|
2,600 |
|
Post-employment benefit plans cost |
11 |
|
96 |
|
91 |
|
295 |
|
284 |
|
Net interest expense |
|
|
225 |
|
225 |
|
677 |
|
685 |
|
Losses (gains) on investments |
6 |
|
19 |
|
|
|
(73 |
) |
(16 |
) |
Income taxes |
|
|
271 |
|
241 |
|
736 |
|
708 |
|
Contributions to post-employment benefit plans |
|
|
(76 |
) |
(82 |
) |
(249 |
) |
(255 |
) |
Payments under other post-employment benefit plans |
|
|
(18 |
) |
(18 |
) |
(56 |
) |
(54 |
) |
Severance and other costs paid |
|
|
(45 |
) |
(40 |
) |
(146 |
) |
(146 |
) |
Acquisition costs paid |
|
|
(33 |
) |
(33 |
) |
(133 |
) |
(63 |
) |
Interest paid |
|
|
(225 |
) |
(214 |
) |
(682 |
) |
(674 |
) |
Income taxes paid (net of refunds) |
|
|
(66 |
) |
(92 |
) |
(518 |
) |
(563 |
) |
Net change in operating assets and liabilities |
|
|
33 |
|
180 |
|
(122 |
) |
(74 |
) |
Cash flows from operating activities |
|
|
1,878 |
|
1,882 |
|
4,764 |
|
4,714 |
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(927 |
) |
(975 |
) |
(2,668 |
) |
(2,641 |
) |
Business acquisition |
7 |
|
(2 |
) |
(10 |
) |
(286 |
) |
(10 |
) |
Business dispositions |
7 |
|
2 |
|
186 |
|
409 |
|
724 |
|
Acquisition of spectrum licences |
9 |
|
(5 |
) |
|
|
(534 |
) |
(566 |
) |
Other investing activities |
|
|
(13 |
) |
1 |
|
(15 |
) |
(2 |
) |
Cash flows used in investing activities |
|
|
(945 |
) |
(798 |
) |
(3,094 |
) |
(2,495 |
) |
Cash flows (used in) from financing activities |
|
|
|
|
|
|
|
|
|
|
Increase in notes payable and bank advances |
|
|
555 |
|
443 |
|
672 |
|
601 |
|
(Reduction) increase in securitized trade receivables |
|
|
(305 |
) |
|
|
10 |
|
|
|
Issue of long-term debt |
10 |
|
|
|
1,243 |
|
502 |
|
1,426 |
|
Repayment of long-term debt |
7, 10 |
|
(108 |
) |
(117 |
) |
(977 |
) |
(668 |
) |
Privatization of Bell Aliant |
|
|
|
|
(804 |
) |
|
|
(804 |
) |
Issue of common shares |
|
|
7 |
|
2 |
|
64 |
|
43 |
|
Cash dividends paid on common shares |
|
|
(551 |
) |
(480 |
) |
(1,617 |
) |
(1,412 |
) |
Cash dividends paid on preferred shares |
|
|
(37 |
) |
(31 |
) |
(113 |
) |
(94 |
) |
Cash dividends paid by subsidiaries to non-controlling interest |
|
|
(26 |
) |
(69 |
) |
(33 |
) |
(144 |
) |
Other financing activities |
|
|
(15 |
) |
(15 |
) |
(122 |
) |
(96 |
) |
Cash flows (used in) from financing activities |
|
|
(480 |
) |
172 |
|
(1,614 |
) |
(1,148 |
) |
Net (decrease) increase in cash |
|
|
(47 |
) |
16 |
|
(58 |
) |
(79 |
) |
Cash at beginning of period |
|
|
131 |
|
125 |
|
142 |
|
220 |
|
Cash at end of period |
|
|
84 |
|
141 |
|
84 |
|
141 |
|
Net increase in cash equivalents |
|
|
500 |
|
1,240 |
|
114 |
|
1,150 |
|
Cash equivalents at beginning of period |
|
|
38 |
|
25 |
|
424 |
|
115 |
|
Cash equivalents at end of period |
|
|
538 |
|
1,265 |
|
538 |
|
1,265 |
|
|
BCE Inc. 2015
Third Quarter Shareholder
Report 43 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
These consolidated interim financial statements (financial statements) should be read in conjunction with BCEs 2014 annual consolidated financial statements, approved by BCEs board of directors on March 5, 2015.
These notes are unaudited.
We, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., its subsidiaries, joint arrangements and associates.
|
Note 1 Corporate information |
BCE is incorporated and domiciled in Canada. BCEs head office is located at 1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada. BCE is a telecommunications and media company providing wireless, wireline, Internet and television (TV) services to residential, business and wholesale customers in Canada. Our Bell Media segment provides conventional, specialty and pay TV, digital media, and radio broadcasting services to customers across Canada and out-of-home advertising services.
|
Note 2 Basis of presentation and significant accounting policies |
The financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), under International Accounting Standard (IAS) 34 Interim Financial Reporting and were approved by BCEs board of directors on November 4, 2015. The financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Significant accounting policies in our consolidated financial statements for the year ended December 31, 2014. The financial statements do not include all of the notes required in annual financial statements.
All amounts are in millions of Canadian dollars, except where noted.
|
Future changes to accounting standards |
In September 2015, the IASB issued an amendment to IFRS 15 Revenue from Contracts with Customers, deferring its effective date from annual periods beginning on or after January 1, 2017 to annual periods beginning on or after January 1, 2018, using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach.
IFRS 15 will affect how we account for revenues and contract costs for Bell Wireless and our other segments. We are currently evaluating the impact of IFRS 15 on our financial statements.
|
Note 3 Segmented information |
Due to the privatization of Bell Aliant Inc. in 2014 as outlined in Note 3, Privatization of Bell Aliant in our consolidated financial statements for the year ended December 31, 2014, beginning January 1, 2015, the results of operation of our former Bell Aliant segment are included within our Bell Wireless and Bell Wireline segments, with prior periods restated for comparative purposes. Goodwill and Indefinite life intangible assets of our former Bell Aliant segment are now included in the Bell Wireline segment. Consequently, beginning in 2015, our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. Our segments reflect how we manage our business and how we classify our operations for planning and measuring performance.
|
44
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
The following tables present financial information by segment for the three month periods ended September 30, 2015 and 2014.
|
|
|
|
|
|
|
|
|
INTER- |
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT |
|
|
|
|
|
|
BELL |
|
BELL |
|
BELL |
|
ELIMINA- |
|
|
|
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2015 |
NOTE |
|
WIRELESS |
|
WIRELINE |
|
MEDIA |
|
TIONS |
|
BCE |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
|
|
1,762 |
|
2,976 |
|
607 |
|
|
|
5,345 |
|
Inter-segment |
|
|
10 |
|
52 |
|
85 |
|
(147 |
) |
|
|
Total operating revenues |
|
|
1,772 |
|
3,028 |
|
692 |
|
(147 |
) |
5,345 |
|
Operating costs |
4 |
|
(1,014 |
) |
(1,782 |
) |
(509 |
) |
147 |
|
(3,158 |
) |
Segment profit(1) |
|
|
758 |
|
1,246 |
|
183 |
|
|
|
2,187 |
|
Severance, acquisition and other costs |
5 |
|
(2 |
) |
(25 |
) |
(19 |
) |
|
|
(46 |
) |
Depreciation and amortization |
|
|
(123 |
) |
(705 |
) |
(32 |
) |
|
|
(860 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(227 |
) |
Interest on post-employment benefit obligations |
11 |
|
|
|
|
|
|
|
|
|
(27 |
) |
Other income |
6 |
|
|
|
|
|
|
|
|
|
35 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
(271 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
791 |
|
(1) |
The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
|
|
|
|
|
|
|
|
|
INTER- |
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT |
|
|
|
|
|
|
BELL |
|
BELL |
|
BELL |
|
ELIMINA- |
|
|
|
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2014 |
NOTE |
|
WIRELESS |
|
WIRELINE |
|
MEDIA |
|
TIONS |
|
BCE |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
|
|
1,612 |
|
2,992 |
|
591 |
|
|
|
5,195 |
|
Inter-segment |
|
|
9 |
|
54 |
|
74 |
|
(137 |
) |
|
|
Total operating revenues |
|
|
1,621 |
|
3,046 |
|
665 |
|
(137 |
) |
5,195 |
|
Operating costs |
4 |
|
(921 |
) |
(1,813 |
) |
(483 |
) |
137 |
|
(3,080 |
) |
Segment profit(1) |
|
|
700 |
|
1,233 |
|
182 |
|
|
|
2,115 |
|
Severance, acquisition and other costs |
5 |
|
(2 |
) |
(60 |
) |
(4 |
) |
|
|
(66 |
) |
Depreciation and amortization |
|
|
(146 |
) |
(676 |
) |
(33 |
) |
|
|
(855 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(227 |
) |
Interest on post-employment benefit obligations |
11 |
|
|
|
|
|
|
|
|
|
(25 |
) |
Other income |
6 |
|
|
|
|
|
|
|
|
|
2 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
(241 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
703 |
|
(1) |
The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
|
BCE Inc. 2015
Third Quarter Shareholder
Report 45 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
The following tables present financial information by segment for the
nine month periods ended September 30, 2015 and 2014.
|
|
|
|
|
|
|
|
|
INTER- |
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT |
|
|
|
|
|
|
BELL |
|
BELL |
|
BELL |
|
ELIMINA- |
|
|
|
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2015 |
NOTE |
|
WIRELESS |
|
WIRELINE |
|
MEDIA |
|
TIONS |
|
BCE |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
|
|
5,077 |
|
8,925 |
|
1,909 |
|
|
|
15,911 |
|
Inter-segment |
|
|
29 |
|
172 |
|
249 |
|
(450 |
) |
|
|
Total operating revenues |
|
|
5,106 |
|
9,097 |
|
2,158 |
|
(450 |
) |
15,911 |
|
Operating costs |
4 |
|
(2,919 |
) |
(5,345 |
) |
(1,619 |
) |
450 |
|
(9,433 |
) |
Segment profit(1) |
|
|
2,187 |
|
3,752 |
|
539 |
|
|
|
6,478 |
|
Severance, acquisition and other costs |
5 |
|
(9 |
) |
(255 |
) |
(30 |
) |
|
|
(294 |
) |
Depreciation and amortization |
|
|
(375 |
) |
(2,078 |
) |
(100 |
) |
|
|
(2,553 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(683 |
) |
Interest on post-employment benefit obligations |
11 |
|
|
|
|
|
|
|
|
|
(82 |
) |
Other income |
6 |
|
|
|
|
|
|
|
|
|
58 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
(736 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
2,188 |
|
(1) |
The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
|
|
|
|
|
|
|
|
|
INTER- |
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT |
|
|
|
|
|
|
BELL |
|
BELL |
|
BELL |
|
ELIMINA- |
|
|
|
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2014 |
NOTE |
|
WIRELESS |
|
WIRELINE |
|
MEDIA |
|
TIONS |
|
BCE |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
External customers |
|
|
4,628 |
|
8,958 |
|
1,928 |
|
|
|
15,514 |
|
Inter-segment |
|
|
28 |
|
156 |
|
220 |
|
(404 |
) |
|
|
Total operating revenues |
|
|
4,656 |
|
9,114 |
|
2,148 |
|
(404 |
) |
15,514 |
|
Operating costs |
4 |
|
(2,632 |
) |
(5,399 |
) |
(1,606 |
) |
404 |
|
(9,233 |
) |
Segment profit(1) |
|
|
2,024 |
|
3,715 |
|
542 |
|
|
|
6,281 |
|
Severance, acquisition and other costs |
5 |
|
(6 |
) |
(115 |
) |
(37 |
) |
|
|
(158 |
) |
Depreciation and amortization |
|
|
(405 |
) |
(2,094 |
) |
(101 |
) |
|
|
(2,600 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(691 |
) |
Interest on post-employment benefit obligations |
11 |
|
|
|
|
|
|
|
|
|
(76 |
) |
Other income |
6 |
|
|
|
|
|
|
|
|
|
76 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
(708 |
) |
Net earnings |
|
|
|
|
|
|
|
|
|
|
2,124 |
|
(1) |
The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
|
46
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
NOTE |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Labour costs |
|
|
|
|
|
|
|
|
|
|
Wages, salaries and related taxes and benefits |
|
|
(1,061 |
) |
(1,096 |
) |
(3,214 |
) |
(3,253 |
) |
Post-employment benefit plans service cost (net of capitalized amounts) |
11 |
|
(69 |
) |
(66 |
) |
(213 |
) |
(208 |
) |
Other labour costs(1) |
|
|
(235 |
) |
(235 |
) |
(681 |
) |
(711 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
Capitalized labour |
|
|
247 |
|
259 |
|
716 |
|
745 |
|
Total labour costs |
|
|
(1,118 |
) |
(1,138 |
) |
(3,392 |
) |
(3,427 |
) |
Cost of revenues(2) |
|
|
(1,582 |
) |
(1,463 |
) |
(4,685 |
) |
(4,446 |
) |
Other operating costs(3) |
|
|
(458 |
) |
(479 |
) |
(1,356 |
) |
(1,360 |
) |
Total operating costs |
|
|
(3,158 |
) |
(3,080 |
) |
(9,433 |
) |
(9,233 |
) |
(1) |
Other labour costs include contractor and outsourcing costs. |
(2) |
Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
(3) |
Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology costs, professional service fees and rent. |
|
Note 5 Severance, acquisition and other costs |
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Severance |
(27 |
) |
(20 |
) |
(77 |
) |
(61 |
) |
Acquisition and other |
(19 |
) |
(46 |
) |
(217 |
) |
(97 |
) |
Total severance, acquisition and other costs |
(46 |
) |
(66 |
) |
(294 |
) |
(158 |
) |
|
Acquisition and other costs |
Acquisition and other costs consist of transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions, employee severance costs related to the purchase of a business, the costs to integrate acquired companies into our operations and litigation costs, when they are significant. Acquisition costs also include severance and integration costs relating to the privatization of Bell Aliant Inc.
Acquisition and other costs for the nine-month period ended September 30, 2014 includes $15 million relating to an additional Canadian Radio-television and Telecommunications Commission (CRTC) tangible benefits obligation as part of our acquisition of Astral Media Inc. (Astral).
SIGNAL PIRACY LITIGATION
On August 31, 2005, a motion to institute legal proceedings was filed in the Québec Superior Court against Bell ExpressVu Limited Partnership (Bell ExpressVu) by Vidéotron ltée, Vidéotron (Régional) ltée and CF Cable TV Inc. (a subsidiary of Vidéotron ltée). The claim was for an initial amount of $374 million in damages, plus interest and costs. In the statement of claim, the plaintiffs alleged that Bell ExpressVu had failed to adequately protect its system against satellite signal piracy, thereby depriving the plaintiffs of subscribers who, but for their alleged ability to pirate Bell ExpressVus signal, would have subscribed to the plaintiffs services. On July 23, 2012, the Superior Court issued a judgment pursuant to which it did not find Bell ExpressVu at fault in its overall efforts to fight signal piracy but concluded that the complete smart card swap it undertook should have been completed earlier. In this regard, the court granted the plaintiffs damages of $339,000, plus interest and costs. The plaintiffs appealed to the Québec Court of Appeal the quantum of damages awarded by the trial judge and sought revised damages in the amount of $164.5 million, plus costs, interest and an additional indemnity. Bell ExpressVu also filed an appeal of the lower court decision on its finding of liability.
On March 6, 2015, the Québec Court of Appeal reversed the judgment of the lower court regarding the quantum of damages, granting plaintiffs damages of $82 million, plus interest and costs. A charge of $137 million was recorded in Q1 2015 and was included in acquisition and other costs.
On October 15, 2015, the Supreme Court of Canada dismissed Bell ExpressVus application for leave to appeal the Québec Court of Appeals judgment. Accordingly, the aggregate amount of $141.6 million, including interest and costs, was paid by Bell ExpressVu on October 19, 2015 in full satisfaction of the judgment as rendered by the Québec Court of Appeal.
|
BCE Inc. 2015
Third Quarter Shareholder
Report 47 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
|
|
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
NOTE |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
(Loss) gains on investments |
7 |
|
(19 |
) |
|
|
73 |
|
16 |
|
Net mark-to-market gains on derivatives used as economic hedges |
|
|
47 |
|
20 |
|
56 |
|
36 |
|
Dividend income from assets held for sale |
|
|
|
|
5 |
|
|
|
42 |
|
Equity income (losses) from investments in associates and joint ventures |
|
|
|
|
|
|
|
|
|
|
Loss on investment(1) |
|
|
|
|
|
|
(54 |
) |
|
|
Operations |
|
|
22 |
|
(8 |
) |
6 |
|
(10 |
) |
Losses on disposal/retirement of software, plant and equipment |
|
|
(11 |
) |
(13 |
) |
(42 |
) |
(30 |
) |
Early debt redemption costs |
|
|
|
|
(5 |
) |
(10 |
) |
(5 |
) |
Other |
|
|
(4 |
) |
3 |
|
29 |
|
27 |
|
Total other income |
|
|
35 |
|
2 |
|
58 |
|
76 |
|
(1) |
Represents BCEs share of an obligation to repurchase at fair value the minority interest in one of BCEs joint ventures. The obligation is marked to market each reporting period and the gain or loss on investment is recorded as equity gains or losses from investments in associates and joint ventures. |
In Q3 2015, BCE recognized a $19 million loss on investments which includes a loss on the sale of a call center subsidiary, as well as a write down of the fair value of a financial asset related to one of our equity investments. Additionally, for the nine months ended September 30, 2015, BCE recognized a gain of $94 million as a result of its divestiture of its 50% ownership in Glentel Inc. (Glentel) to Rogers Communications Inc. Refer to Note 7, Acquisition of Glentel.
|
Note 7 Acquisition of Glentel |
On May 20, 2015, BCE completed the previously announced acquisition of all of Glentels issued and outstanding common shares for a total consideration of $592 million, of which $296 million ($284 million, net of cash on hand) was paid in cash and the balance through the issuance of 5,548,908 BCE common shares. Immediately following the closing of the acquisition, BCE repaid Glentels outstanding debt in the amount of approximately $112 million and contributed $53 million in exchange for additional Glentel common shares.
Subsequently, also on May 20, 2015 and further to an agreement dated December 24, 2014, BCE divested 50% of its ownership interest in Glentel to Rogers Communications Inc. for a total cash consideration of approximately $473 million ($407 million, net of divested cash and transaction costs). The resulting gain of $94 million is recorded in Other income. Our remaining investment of $379 million in Glentel is recorded in Investments in associates and joint ventures.
Glentel is a Canadian-based dual-carrier, multi-brand mobile products distributor. The transaction is part of our strategy to accelerate wireless and improve customer service. BCE accounts for its investment in Glentel as a joint venture using the equity method.
|
Note 8 Earnings per share |
The following table shows the components used in the calculation of basic and diluted earnings per common share for earnings attributable to common shareholders.
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Net earnings attributable to common shareholders basic |
739 |
|
600 |
|
2,030 |
|
1,821 |
|
Dividends declared per common share (in dollars) |
0.6500 |
|
0.6175 |
|
1.9500 |
|
1.8525 |
|
Weighted average number of common shares outstanding (in millions) |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding basic |
848.9 |
|
782.1 |
|
845.0 |
|
778.8 |
|
Assumed exercise of stock options(1) |
1.2 |
|
0.9 |
|
1.3 |
|
0.8 |
|
Weighted average number of common shares outstanding diluted |
850.1 |
|
783.0 |
|
846.3 |
|
779.6 |
|
(1) |
The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future compensation cost of dilutive options. It excludes options for which the exercise price is higher than the average market value of a BCE common share. The number of excluded options was 2,779,830 for both the third quarter and for the first nine months of 2015, compared to 2,893,545 for the third quarter of 2014 and 2,909,503 for the first nine months of 2014. |
|
48
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
Note 9 Acquisition of spectrum licences |
On April 21, 2015, Bell Mobility Inc. (Bell Mobility) acquired advanced wireless services 3 (AWS-3) wireless spectrum in key urban and rural markets as part of Industry Canadas AWS-3 spectrum auction. Bell Mobility acquired 13 licences for 169 million Megahertz per Population (MHz-POP) of AWS-3 spectrum for $500 million, which was paid in the first half of 2015.
On May 12, 2015, Bell Mobility acquired an additional 243 million MHz-POP of 2500 Megahertz (MHz) wireless spectrum for $29 million, which was paid in Q2 2015.
In Q2 2015, Bell Canada repaid approximately $500 million ($395 million U.S. dollars) of the borrowings under its unsecured committed term credit facility that was used to fund part of the acquisition of Astral.
In Q2 2015, Bell Canada increased its loans secured by trade receivables by $315 million, thereby increasing its outstanding balance at June 30, 2015 to $1,236 million. In Q3 2015, $305 million was repaid thereby decreasing the outstanding balance at September 30, 2015 to $931 million.
On March 30, 2015, Bell Canada issued 4.35% Series M-39 medium term notes (MTN) debentures under its 1997 trust indenture, with a principal amount of $500 million, which mature on December 18, 2045.
In 2015, Bell Canada reclassified $1,850 million of its MTN debentures and credit facility from long-term debt to short-term debt, as follows:
-
$500 million of its 5.41% Series M-32 MTN debentures, which mature on September 26, 2016
-
Approximately $500 million ($369 million U.S. dollars) of the borrowings under its unsecured committed term credit facility, which expires on July 4, 2016
-
$500 million of its 3.65% Series M-23 MTN debentures, which mature on May 19, 2016
-
$200 million of its 4.64% Series M-19 MTN debentures, which mature on February 22, 2016
-
$150 million of its floating rate Series M-38 MTN debentures, which mature on April 22, 2016
Subsequent to the end of the third quarter, on October 1, 2015, Bell Canada issued 3.00% Series M-40 MTN debentures under its 1997 trust indenture, with a principal amount of $1 billion, which mature on October 3, 2022.
On November 2, 2015, Bell Canada redeemed early its 3.60% Series M-21 MTN debentures, issued under its 1997 trust indenture, having an outstanding principal amount of $1 billion which were due on December 2, 2015.
|
Note 11 Post-employment benefit plans |
Post-employment benefit plans cost
We provide pension and other benefits for most of our employees. These include defined benefit (DB) pension plans, defined contribution (DC) pension plans and other post-employment benefits (OPEBs). The cost of these plans are tabled below.
COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS SERVICE COST
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
DB pension |
(58 |
) |
(53 |
) |
(175 |
) |
(161 |
) |
DC pension |
(23 |
) |
(21 |
) |
(74 |
) |
(72 |
) |
OPEBs |
(2 |
) |
(2 |
) |
(6 |
) |
(6 |
) |
Less: |
|
|
|
|
|
|
|
|
Capitalized benefit plans cost |
14 |
|
10 |
|
42 |
|
31 |
|
Total post-employment benefit plans service cost included in operating costs |
(69 |
) |
(66 |
) |
(213 |
) |
(208 |
) |
Other costs recognized in Severance, acquisition and other costs |
|
|
|
|
(8 |
) |
|
|
Total post-employment benefit plans service cost |
(69 |
) |
(66 |
) |
(221 |
) |
(208 |
) |
|
BCE Inc. 2015
Third Quarter Shareholder
Report 49 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS FINANCING COST
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
DB pension |
(13 |
) |
(8 |
) |
(40 |
) |
(26 |
) |
OPEBs |
(14 |
) |
(17 |
) |
(42 |
) |
(50 |
) |
Total interest on post-employment benefit obligations |
(27 |
) |
(25 |
) |
(82 |
) |
(76 |
) |
|
Note 12 Financial assets and liabilities |
Fair value
The following table provides the fair value details of financial instruments measured at amortized cost in the statements of financial position.
|
|
|
SEPTEMBER 30, 2015 |
DECEMBER 31, 2014 |
|
|
|
CARRYING |
|
FAIR |
|
CARRYING |
|
FAIR |
|
|
CLASSIFICATION |
FAIR VALUE METHODOLOGY |
VALUE |
|
VALUE |
|
VALUE |
|
VALUE |
|
CRTC tangible benefits obligation |
Trade payables and other liabilities and non-current liabilities |
Present value of estimated future cash flows discounted using observable market interest rates |
229 |
|
236 |
|
285 |
|
289 |
|
CRTC deferral account obligation |
Trade payables and other liabilities and non-current liabilities |
Present value of estimated future cash flows discounted using observable market interest rates |
158 |
|
174 |
|
174 |
|
191 |
|
Debentures, finance leases and other debt |
Debt due within one year and long-term debt |
Quoted market price of debt or present value of future cash flows discounted using observable market interest rates |
17,709 |
|
19,764 |
|
17,723 |
|
20,059 |
|
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
|
CLASSIFICATION |
CARRYING VALUE
OF ASSET (LIABILITY) |
|
FAIR VALUE |
|
QUOTED PRICES
IN ACTIVE MARKETS
FOR IDENTICAL
ASSETS (LEVEL 1) |
|
OBSERVABLE
MARKET DATA
(LEVEL 2)(1) |
|
NON-OBSERVABLE
MARKET INPUTS
(LEVEL 3)(2) |
|
September 30, 2015 |
|
|
|
|
|
|
|
|
|
AFS publicly-traded and privately-held investments |
Other non-current assets |
102 |
|
15 |
|
|
|
87 |
|
Derivative financial instruments |
Other current assets, Trade payables and other liabilities, Other non-current assets and liabilities |
248 |
|
|
|
248 |
|
|
|
MLSE financial liability(3) |
Other non-current liabilities |
(135 |
) |
|
|
|
|
(135 |
) |
Other |
Other non-current assets and liabilities |
21 |
|
|
|
44 |
|
(23 |
) |
December 31, 2014 |
|
|
|
|
|
|
|
|
|
AFS publicly-traded and privately-held investments |
Other non-current assets |
107 |
|
17 |
|
|
|
90 |
|
Derivative financial instruments |
Other current assets, Trade payables and other liabilities, Other non-current assets and liabilities |
276 |
|
|
|
276 |
|
|
|
MLSE financial liability(3) |
Other non-current liabilities |
(135 |
) |
|
|
|
|
(135 |
) |
Other |
Other non-current assets and liabilities |
12 |
|
|
|
22 |
|
(10 |
) |
(1) |
Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
(2) |
Non-observable market inputs such as discounted cash flows. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 financial instruments. |
(3) |
Represents BCEs obligation to repurchase the BCE Master Trust Funds (Master Trust) 9% interest in Maple Leaf Sports & Entertainment Ltd. (MLSE) at a price not less than an agreed minimum price should the Master Trust exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recorded in Other income. |
|
50
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
We use forward contracts, options and cross currency basis swaps to manage foreign currency risk related to anticipated transactions and certain foreign currency debt.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a gain of $18 million (loss of $31 million) recognized in net earnings at September 30, 2015 and a gain (loss) of $48 million recognized in other comprehensive income at September 30, 2015, with all other variables held constant.
The following table provides further details on our outstanding foreign currency forward contracts, options and cross currency basis swaps as at September 30, 2015.
|
|
|
AMOUNTS |
|
|
|
|
|
|
|
|
|
|
|
TO RECEIVE |
|
|
|
AMOUNTS TO PAY |
|
|
|
|
TYPE OF HEDGE |
BUY CURRENCY |
|
IN USD |
|
SELL CURRENCY |
|
IN CAD |
|
MATURITY |
|
HEDGED ITEM |
Cash flow |
USD |
|
120 |
|
CAD |
|
137 |
|
2015 |
|
Purchase commitments |
Cash flow |
USD |
|
1,147 |
|
CAD |
|
1,515 |
|
2015 |
|
Commercial paper |
Cash flow |
USD |
|
367 |
|
CAD |
|
414 |
|
2016-2018 |
|
Purchase commitments |
Cash flow |
USD |
|
380 |
|
CAD |
|
506 |
|
2015 |
|
Credit facility |
Economic |
USD |
|
123 |
|
CAD |
|
152 |
|
2015 |
|
Purchase commitments |
Economic |
USD |
|
126 |
|
CAD |
|
165 |
|
2016 |
|
Purchase commitments |
Economic call options |
USD |
|
71 |
|
CAD |
|
88 |
|
2015 |
|
Purchase commitments |
Economic put options |
USD |
|
141 |
|
CAD |
|
175 |
|
2015 |
|
Purchase commitments |
We use interest rate swaps to manage the mix of fixed and floating interest rates of our debt. We also use interest rate locks to hedge the interest rate on future debt issuances. As at September 30, 2015, we had an interest rate lock with a notional amount of $500 million which matures in 2016 and an interest rate swap with a notional amount of $700 million which matures in 2017.
A 1% increase (decrease) in interest rates would result in a decrease of $23 million (increase of $18 million) in net earnings at September 30, 2015 and a gain of $31 million (loss of $36 million) recognized in other comprehensive income as at September 30, 2015.
|
Note 13 Share-based payments |
The following share-based payment amounts are included in the consolidated income statements as operating costs.
|
THREE MONTHS |
NINE MONTHS |
FOR THE PERIOD ENDED SEPTEMBER 30 |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
Employee savings plans (ESPs) |
(7 |
) |
(8 |
) |
(21 |
) |
(23 |
) |
Restricted share units (RSUs) and performance share units (PSUs) |
(12 |
) |
(12 |
) |
(39 |
) |
(38 |
) |
Other(1) |
(3 |
) |
(6 |
) |
(10 |
) |
(16 |
) |
Total share-based payments |
(22 |
) |
(26 |
) |
(70 |
) |
(77 |
) |
(1) |
Includes deferred share units (DSUs) and stock options. |
The following tables summarize the change in outstanding ESPs, RSUs/PSUs, DSUs and stock options for the nine months ended September 30, 2015.
ESPs
|
NUMBER OF ESPs |
|
Unvested contributions, January 1, 2015 |
1,153,653 |
|
Contributions(1) |
501,056 |
|
Dividends credited |
40,514 |
|
Vested |
(470,295 |
) |
Forfeited |
(77,888 |
) |
Unvested contributions, September 30, 2015 |
1,147,040 |
|
(1) |
The weighted average fair value of the ESPs contributed during the nine months ended September 30, 2015 was $54 per unit. |
|
BCE Inc. 2015
Third Quarter Shareholder
Report 51 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
|
RSUs/PSUs
|
NUMBER |
|
|
OF RSUs /PSUs |
|
Oustanding, January 1, 2015 |
3,616,967 |
|
Granted(1) |
1,000,785 |
|
Dividends credited |
119,165 |
|
Settled |
(1,335,826 |
) |
Forfeited |
(79,632 |
) |
Outstanding, September 30, 2015 |
3,321,459 |
|
(1) |
The weighted average fair value of the RSUs/PSUs granted during the nine months ended September 30, 2015 was $55 per unit. |
DSUs
|
NUMBER OF DSUs |
|
Outstanding, January 1 , 2015 |
4,116,527 |
|
Issued(1) |
163,706 |
|
Issued on settlement of RSUs/PSUs |
216,500 |
|
Dividends credited |
150,699 |
|
Settled |
(227,401 |
) |
Outstanding, September 30, 2015 |
4,420,031 |
|
(1) |
The weighted average fair value of the DSUs issued during the nine months ended September 30, 2015 was $56 per unit. |
STOCK OPTIONS
|
|
|
WEIGHTED AVERAGE |
|
|
NUMBER |
|
EXERCISE PRICE |
|
|
OF OPTIONS |
|
($) |
|
Outstanding, January 1, 2015 |
9,278,190 |
|
43 |
|
Granted |
2,817,471 |
|
56 |
|
Exercised(1) |
(1,765,964 |
) |
39 |
|
Forfeited |
(116,147 |
) |
49 |
|
Outstanding, September 30, 2015 |
10,213,550 |
|
48 |
|
Exercisable, September 30, 2015 |
1,697,904 |
|
38 |
|
(1) |
The weighted average share price for options exercised during the nine months ended September 30, 2015 was $55. |
ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
|
2015 |
|
Weighted average fair value per option granted |
$2.25 |
|
Weighted average share price |
$55 |
|
Weighted average exercise price |
$56 |
|
Dividend yield |
4.6 |
% |
Expected volatility |
15 |
% |
Risk-free interest rate |
0.7 |
% |
Expected life (years) |
4.5 |
|
Expected volatilities are based on the historical volatility of BCEs share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options.
|
52
BCE Inc. 2015 Third Quarter Shareholder
Report |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
|
The following table is a summary of our commitments at September 30, 2015 that are due in each of the next five years and thereafter.
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
THEREAFTER |
|
TOTAL |
|
Operating leases |
72 |
|
259 |
|
231 |
|
177 |
|
149 |
|
858 |
|
1,746 |
|
Commitments for property, plant and equipment and intangible assets |
343 |
|
796 |
|
589 |
|
526 |
|
395 |
|
1,770 |
|
4,419 |
|
Purchase obligations |
586 |
|
629 |
|
576 |
|
546 |
|
538 |
|
2,098 |
|
4,973 |
|
Total |
1,001 |
|
1,684 |
|
1,396 |
|
1,249 |
|
1,082 |
|
4,726 |
|
11,138 |
|
BCEs significant operating leases are for office premises, cellular tower sites and retail outlets. These leases are non-cancellable and are renewable at the end of the lease period.
Our commitments for property, plant and equipment and intangible assets include program and feature film rights and investments to expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service and product contracts for operating expenditures.
|
BCE Inc. 2015
Third Quarter Shareholder
Report 53 |
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/back_logo.jpg) |
This document has been filed by BCE Inc. with Canadian securities
regulatory authorities and the U.S. Securities and Exchange Commission.
It can be found on BCE Inc.s website at BCE.ca, on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov or is available upon
request from:
Investor Relations
Building A, 8th floor
1 Carrefour Alexander-Graham-Bell
Verdun, Québec H3E 3B3
e-mail: investor.relations@bce.ca
tel: 1-800-339-6353
fax: 514-786-3970
BCE.ca
For additional copies of this document,
please contact investor relations.
Pour obtenir un exemplaire de la version française de ce document,
contactez les Relations avec les investisseurs.
For further information concerning BCE Inc.s Dividend Reinvestment
and Stock Purchase Plan (DRP), direct deposit of dividend payments,
the elimination of multiple mailings or the receipt of quarterly reports,
please contact:
Canadian Stock Transfer Company Inc.
320 Bay Street, 3rd floor
Toronto, Ontario M5H 4A6
tel: 416-360-7725 or 1-800-561-0934
fax: 416-643-5501 or 1-888-249-6189
e-mail: bce@canstockta.com
BCE.ca
PRINTED IN CANADA / 15-11 BCE-3E
|
Exhibit 99.2
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/supp-cover.jpg)
BCE (1)
Consolidated Operational Data (2)
(In millions of Canadian dollars, except share amounts) (unaudited) |
|
Q3
2015 |
|
|
Q3
2014 |
|
|
|
$
change |
|
% change |
|
|
|
YTD
2015 |
|
|
YTD
2014 |
|
|
|
$
change |
|
% change |
|
Operating revenues |
|
5,345 |
|
|
5,195 |
|
|
|
150 |
|
2.9 |
% |
|
|
15,911 |
|
|
15,514 |
|
|
|
397 |
|
2.6 |
% |
Operating costs
(A) |
|
(3,089 |
) |
|
(3,014 |
) |
|
|
(75 |
) |
(2.5 |
%) |
|
|
(9,220 |
) |
|
(9,025 |
) |
|
|
(195 |
) |
(2.2 |
%) |
Post-employment benefit plans service cost |
|
(69 |
) |
|
(66 |
) |
|
|
(3 |
) |
(4.5 |
%) |
|
|
(213 |
) |
|
(208 |
) |
|
|
(5 |
) |
(2.4 |
%) |
Adjusted EBITDA (3) |
|
2,187 |
|
|
2,115 |
|
|
|
72 |
|
3.4 |
% |
|
|
6,478 |
|
|
6,281 |
|
|
|
197 |
|
3.1 |
% |
Adjusted EBITDA margin (3) |
|
40.9 |
% |
|
40.7 |
% |
|
|
|
|
0.2 |
pts |
|
|
40.7 |
% |
|
40.5 |
% |
|
|
|
|
0.2 |
pts |
Severance, acquisition and other costs |
|
(46 |
) |
|
(66 |
) |
|
|
20 |
|
30.3 |
% |
|
|
(294 |
) |
|
(158 |
) |
|
|
(136 |
) |
(86.1 |
%) |
Depreciation |
|
(727 |
) |
|
(739 |
) |
|
|
12 |
|
1.6 |
% |
|
|
(2,159 |
) |
|
(2,146 |
) |
|
|
(13 |
) |
(0.6 |
%) |
Amortization |
|
(133 |
) |
|
(116 |
) |
|
|
(17 |
) |
(14.7 |
%) |
|
|
(394 |
) |
|
(454 |
) |
|
|
60 |
|
13.2 |
% |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(227 |
) |
|
(227 |
) |
|
|
- |
|
0.0 |
% |
|
|
(683 |
) |
|
(691 |
) |
|
|
8 |
|
1.2 |
% |
Interest on post-employment benefit obligations |
|
(27 |
) |
|
(25 |
) |
|
|
(2 |
) |
(8.0 |
%) |
|
|
(82 |
) |
|
(76 |
) |
|
|
(6 |
) |
(7.9 |
%) |
Other income |
|
35 |
|
|
2 |
|
|
|
33 |
|
n.m. |
|
|
|
58 |
|
|
76 |
|
|
|
(18 |
) |
(23.7 |
%) |
Income taxes |
|
(271 |
) |
|
(241 |
) |
|
|
(30 |
) |
(12.4 |
%) |
|
|
(736 |
) |
|
(708 |
) |
|
|
(28 |
) |
(4.0 |
%) |
Net earnings |
|
791 |
|
|
703 |
|
|
|
88 |
|
12.5 |
% |
|
|
2,188 |
|
|
2,124 |
|
|
|
64 |
|
3.0 |
% |
Net earnings attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders |
|
739 |
|
|
600 |
|
|
|
139 |
|
23.2 |
% |
|
|
2,030 |
|
|
1,821 |
|
|
|
209 |
|
11.5 |
% |
Preferred shareholders |
|
38 |
|
|
31 |
|
|
|
7 |
|
22.6 |
% |
|
|
115 |
|
|
97 |
|
|
|
18 |
|
18.6 |
% |
Non-controlling interest |
|
14 |
|
|
72 |
|
|
|
(58 |
) |
(80.6 |
%) |
|
|
43 |
|
|
206 |
|
|
|
(163 |
) |
(79.1 |
%) |
Net earnings |
|
791 |
|
|
703 |
|
|
|
88 |
|
12.5 |
% |
|
|
2,188 |
|
|
2,124 |
|
|
|
64 |
|
3.0 |
% |
Net earnings per common share - basic |
$ |
0.87 |
|
$ |
0.77 |
|
|
$ |
0.10 |
|
13.0 |
% |
|
$ |
2.40 |
|
$ |
2.34 |
|
|
$ |
0.06 |
|
2.6 |
% |
Net earnings per common share - diluted |
$ |
0.87 |
|
$ |
0.77 |
|
|
$ |
0.10 |
|
13.0 |
% |
|
$ |
2.40 |
|
$ |
2.34 |
|
|
$ |
0.06 |
|
2.6 |
% |
Dividends per common share |
$ |
0.6500 |
|
$ |
0.6175 |
|
|
$ |
0.0325 |
|
5.3 |
% |
|
$ |
1.9500 |
|
$ |
1.8525 |
|
|
$ |
0.0975 |
|
5.3 |
% |
Average number of common shares outstanding - basic (millions) |
|
848.9 |
|
|
782.1 |
|
|
|
|
|
|
|
|
|
845.0 |
|
|
778.8 |
|
|
|
|
|
|
|
Average number of common shares outstanding - diluted (millions) |
|
850.1 |
|
|
783.0 |
|
|
|
|
|
|
|
|
|
846.3 |
|
|
779.6 |
|
|
|
|
|
|
|
Number of common shares outstanding (millions) |
|
849.4 |
|
|
828.3 |
|
|
|
|
|
|
|
|
|
849.4 |
|
|
828.3 |
|
|
|
|
|
|
|
Adjusted Net Earnings and EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to common shareholders |
|
739 |
|
|
600 |
|
|
|
139 |
|
23.2 |
% |
|
|
2,030 |
|
|
1,821 |
|
|
|
209 |
|
11.5 |
% |
Severance, acquisition and other costs |
|
35 |
|
|
45 |
|
|
|
(10 |
) |
(22.2 |
%) |
|
|
215 |
|
|
106 |
|
|
|
109 |
|
n.m. |
|
Net losses (gains) on investments |
|
16 |
|
|
- |
|
|
|
16 |
|
n.m. |
|
|
|
(22 |
) |
|
(16 |
) |
|
|
(6 |
) |
(37.5 |
%) |
Early debt redemption costs |
|
- |
|
|
3 |
|
|
|
(3 |
) |
(100.0 |
%) |
|
|
7 |
|
|
3 |
|
|
|
4 |
|
n.m. |
|
Adjusted net earnings (3) |
|
790 |
|
|
648 |
|
|
|
142 |
|
21.9 |
% |
|
|
2,230 |
|
|
1,914 |
|
|
|
316 |
|
16.5 |
% |
Impact on net earnings per share |
$ |
0.06 |
|
$ |
0.06 |
|
|
|
- |
|
0.0 |
% |
|
$ |
0.24 |
|
$ |
0.12 |
|
|
$ |
0.12 |
|
100.0 |
% |
Adjusted EPS (3) |
$ |
0.93 |
|
$ |
0.83 |
|
|
$ |
0.10 |
|
12.0 |
% |
|
$ |
2.64 |
|
$ |
2.46 |
|
|
$ |
0.18 |
|
7.3 |
% |
(A) |
Excludes post-employment
benefit plans service cost |
n.m. : not
meaningful |
BCE Supplementary Financial Information - Third Quarter 2015 Page 2
BCE
Consolidated Operational Data - Historical Trend
(In millions of Canadian dollars, except share amounts) (unaudited) |
|
YTD
2015 |
|
|
|
Q3 15 |
|
|
Q2 15 |
|
|
Q1 15 |
|
|
|
TOTAL
2014 |
|
|
|
Q4 14 |
|
|
Q3 14 |
|
|
Q2 14 |
|
|
Q1 14 |
|
Operating revenues |
|
15,911 |
|
|
|
5,345 |
|
|
5,326 |
|
|
5,240 |
|
|
|
21,042 |
|
|
|
5,528 |
|
|
5,195 |
|
|
5,220 |
|
|
5,099 |
|
Operating costs
(A) |
|
(9,220 |
) |
|
|
(3,089 |
) |
|
(3,061 |
) |
|
(3,070 |
) |
|
|
(12,463 |
) |
|
|
(3,438 |
) |
|
(3,014 |
) |
|
(3,008 |
) |
|
(3,003 |
) |
Post-employment benefit plans service cost |
|
(213 |
) |
|
|
(69 |
) |
|
(68 |
) |
|
(76 |
) |
|
|
(276 |
) |
|
|
(68 |
) |
|
(66 |
) |
|
(68 |
) |
|
(74 |
) |
Adjusted EBITDA |
|
6,478 |
|
|
|
2,187 |
|
|
2,197 |
|
|
2,094 |
|
|
|
8,303 |
|
|
|
2,022 |
|
|
2,115 |
|
|
2,144 |
|
|
2,022 |
|
Adjusted EBITDA margin |
|
40.7 |
% |
|
|
40.9 |
% |
|
41.3 |
% |
|
40.0 |
% |
|
|
39.5 |
% |
|
|
36.6 |
% |
|
40.7 |
% |
|
41.1 |
% |
|
39.7 |
% |
Severance, acquisition and other costs |
|
(294 |
) |
|
|
(46 |
) |
|
(24 |
) |
|
(224 |
) |
|
|
(216 |
) |
|
|
(58 |
) |
|
(66 |
) |
|
(54 |
) |
|
(38 |
) |
Depreciation |
|
(2,159 |
) |
|
|
(727 |
) |
|
(720 |
) |
|
(712 |
) |
|
|
(2,880 |
) |
|
|
(734 |
) |
|
(739 |
) |
|
(708 |
) |
|
(699 |
) |
Amortization |
|
(394 |
) |
|
|
(133 |
) |
|
(134 |
) |
|
(127 |
) |
|
|
(572 |
) |
|
|
(118 |
) |
|
(116 |
) |
|
(171 |
) |
|
(167 |
) |
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(683 |
) |
|
|
(227 |
) |
|
(230 |
) |
|
(226 |
) |
|
|
(929 |
) |
|
|
(238 |
) |
|
(227 |
) |
|
(229 |
) |
|
(235 |
) |
Interest on post-employment benefit obligations |
|
(82 |
) |
|
|
(27 |
) |
|
(28 |
) |
|
(27 |
) |
|
|
(101 |
) |
|
|
(25 |
) |
|
(25 |
) |
|
(26 |
) |
|
(25 |
) |
Other income (expense) |
|
58 |
|
|
|
35 |
|
|
43 |
|
|
(20 |
) |
|
|
42 |
|
|
|
(34 |
) |
|
2 |
|
|
(13 |
) |
|
87 |
|
Income taxes |
|
(736 |
) |
|
|
(271 |
) |
|
(290 |
) |
|
(175 |
) |
|
|
(929 |
) |
|
|
(221 |
) |
|
(241 |
) |
|
(236 |
) |
|
(231 |
) |
Net earnings |
|
2,188 |
|
|
|
791 |
|
|
814 |
|
|
583 |
|
|
|
2,718 |
|
|
|
594 |
|
|
703 |
|
|
707 |
|
|
714 |
|
Net earnings attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders |
|
2,030 |
|
|
|
739 |
|
|
759 |
|
|
532 |
|
|
|
2,363 |
|
|
|
542 |
|
|
600 |
|
|
606 |
|
|
615 |
|
Preferred shareholders |
|
115 |
|
|
|
38 |
|
|
39 |
|
|
38 |
|
|
|
137 |
|
|
|
40 |
|
|
31 |
|
|
33 |
|
|
33 |
|
Non-controlling interest |
|
43 |
|
|
|
14 |
|
|
16 |
|
|
13 |
|
|
|
218 |
|
|
|
12 |
|
|
72 |
|
|
68 |
|
|
66 |
|
Net earnings |
|
2,188 |
|
|
|
791 |
|
|
814 |
|
|
583 |
|
|
|
2,718 |
|
|
|
594 |
|
|
703 |
|
|
707 |
|
|
714 |
|
Net earnings per common share - basic |
$ |
2.40 |
|
|
$ |
0.87 |
|
$ |
0.90 |
|
$ |
0.63 |
|
|
$ |
2.98 |
|
|
$ |
0.64 |
|
$ |
0.77 |
|
$ |
0.78 |
|
$ |
0.79 |
|
Net earnings per common share - diluted |
$ |
2.40 |
|
|
$ |
0.87 |
|
$ |
0.90 |
|
$ |
0.63 |
|
|
$ |
2.97 |
|
|
$ |
0.63 |
|
$ |
0.77 |
|
$ |
0.78 |
|
$ |
0.79 |
|
Dividends per common share |
$ |
1.9500 |
|
|
$ |
0.6500 |
|
$ |
0.6500 |
|
$ |
0.6500 |
|
|
$ |
2.4700 |
|
|
$ |
0.6175 |
|
$ |
0.6175 |
|
$ |
0.6175 |
|
$ |
0.6175 |
|
Average number of common shares outstanding - basic (millions) |
|
845.0 |
|
|
|
848.9 |
|
|
844.9 |
|
|
841.0 |
|
|
|
793.7 |
|
|
|
837.7 |
|
|
782.1 |
|
|
777.7 |
|
|
776.5 |
|
Average number of common shares outstanding - diluted (millions) |
|
846.3 |
|
|
|
850.1 |
|
|
846.2 |
|
|
842.6 |
|
|
|
794.6 |
|
|
|
838.9 |
|
|
783.0 |
|
|
778.6 |
|
|
777.2 |
|
Number of common shares outstanding (millions) |
|
849.4 |
|
|
|
849.4 |
|
|
848.6 |
|
|
841.9 |
|
|
|
840.3 |
|
|
|
840.3 |
|
|
828.3 |
|
|
778.1 |
|
|
777.3 |
|
Adjusted Net Earnings and EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to common shareholders |
|
2,030 |
|
|
|
739 |
|
|
759 |
|
|
532 |
|
|
|
2,363 |
|
|
|
542 |
|
|
600 |
|
|
606 |
|
|
615 |
|
Severance, acquisition and other costs |
|
215 |
|
|
|
35 |
|
|
16 |
|
|
164 |
|
|
|
148 |
|
|
|
42 |
|
|
45 |
|
|
38 |
|
|
23 |
|
Net (gains) losses on investments |
|
(22 |
) |
|
|
16 |
|
|
(40 |
) |
|
2 |
|
|
|
(8 |
) |
|
|
8 |
|
|
- |
|
|
(4 |
) |
|
(12 |
) |
Early debt redemption costs |
|
7 |
|
|
|
- |
|
|
- |
|
|
7 |
|
|
|
21 |
|
|
|
18 |
|
|
3 |
|
|
- |
|
|
- |
|
Adjusted net earnings |
|
2,230 |
|
|
|
790 |
|
|
735 |
|
|
705 |
|
|
|
2,524 |
|
|
|
610 |
|
|
648 |
|
|
640 |
|
|
626 |
|
Impact on net earnings per share |
$ |
0.24 |
|
|
$ |
0.06 |
|
$ |
(0.03 |
) |
$ |
0.21 |
|
|
$ |
0.20 |
|
|
$ |
0.08 |
|
$ |
0.06 |
|
$ |
0.04 |
|
$ |
0.02 |
|
Adjusted EPS |
$ |
2.64 |
|
|
$ |
0.93 |
|
$ |
0.87 |
|
$ |
0.84 |
|
|
$ |
3.18 |
|
|
$ |
0.72 |
|
$ |
0.83 |
|
$ |
0.82 |
|
$ |
0.81 |
|
(A) |
Excludes post-employment benefit plans service cost |
BCE Supplementary Financial Information - Third Quarter 2015 Page
3
BCE (1)
Segmented Data (2)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q3
2015 |
|
Q3
2014 |
|
|
$ change |
|
% change |
|
|
YTD
2015 |
|
YTD
2014 |
|
|
$ change |
|
% change |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
1,772 |
|
1,621 |
|
|
151 |
|
9.3 |
% |
|
5,106 |
|
4,656 |
|
|
450 |
|
9.7 |
% |
Bell Wireline |
3,028 |
|
3,046 |
|
|
(18 |
) |
(0.6 |
%) |
|
9,097 |
|
9,114 |
|
|
(17 |
) |
(0.2 |
%) |
Bell Media |
692 |
|
665 |
|
|
27 |
|
4.1 |
% |
|
2,158 |
|
2,148 |
|
|
10 |
|
0.5 |
% |
Inter-segment eliminations |
(147 |
) |
(137 |
) |
|
(10 |
) |
(7.3 |
%) |
|
(450 |
) |
(404 |
) |
|
(46 |
) |
(11.4 |
%) |
Total |
5,345 |
|
5,195 |
|
|
150 |
|
2.9 |
% |
|
15,911 |
|
15,514 |
|
|
397 |
|
2.6 |
% |
Operating costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
(1,014 |
) |
(921 |
) |
|
(93 |
) |
(10.1 |
%) |
|
(2,919 |
) |
(2,632 |
) |
|
(287 |
) |
(10.9 |
%) |
Bell Wireline |
(1,782 |
) |
(1,813 |
) |
|
31 |
|
1.7 |
% |
|
(5,345 |
) |
(5,399 |
) |
|
54 |
|
1.0 |
% |
Bell Media |
(509 |
) |
(483 |
) |
|
(26 |
) |
(5.4 |
%) |
|
(1,619 |
) |
(1,606 |
) |
|
(13 |
) |
(0.8 |
%) |
Inter-segment eliminations |
147 |
|
137 |
|
|
10 |
|
7.3 |
% |
|
450 |
|
404 |
|
|
46 |
|
11.4 |
% |
Total |
(3,158 |
) |
(3,080 |
) |
|
(78 |
) |
(2.5 |
%) |
|
(9,433 |
) |
(9,233 |
) |
|
(200 |
) |
(2.2 |
%) |
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
758 |
|
700 |
|
|
58 |
|
8.3 |
% |
|
2,187 |
|
2,024 |
|
|
163 |
|
8.1 |
% |
Margin |
42.8 |
% |
43.2 |
% |
|
|
|
(0.4 |
) pts |
|
42.8 |
% |
43.5 |
% |
|
|
|
(0.7 |
) pts |
Bell Wireline |
1,246 |
|
1,233 |
|
|
13 |
|
1.1 |
% |
|
3,752 |
|
3,715 |
|
|
37 |
|
1.0 |
% |
Margin |
41.1 |
% |
40.5 |
% |
|
|
|
0.6 |
pts |
|
41.2 |
% |
40.8 |
% |
|
|
|
0.4 |
pts |
Bell Media |
183 |
|
182 |
|
|
1 |
|
0.5 |
% |
|
539 |
|
542 |
|
|
(3 |
) |
(0.6 |
%) |
Margin |
26.4 |
% |
27.4 |
% |
|
|
|
(1.0 |
) pts |
|
25.0 |
% |
25.2 |
% |
|
|
|
(0.2 |
) pts |
Total |
2,187 |
|
2,115 |
|
|
72 |
|
3.4 |
% |
|
6,478 |
|
6,281 |
|
|
197 |
|
3.1 |
% |
Margin |
40.9 |
% |
40.7 |
% |
|
|
|
0.2 |
pts |
|
40.7 |
% |
40.5 |
% |
|
|
|
0.2 |
pts |
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
184 |
|
182 |
|
|
(2 |
) |
(1.1 |
%) |
|
523 |
|
469 |
|
|
(54 |
) |
(11.5 |
%) |
Capital Intensity (4) |
10.4 |
% |
11.2 |
% |
|
|
|
0.8 |
pts |
|
10.2 |
% |
10.1 |
% |
|
|
|
(0.1 |
) pts |
Bell Wireline |
716 |
|
756 |
|
|
40 |
|
5.3 |
% |
|
2,068 |
|
2,089 |
|
|
21 |
|
1.0 |
% |
Capital Intensity |
23.6 |
% |
24.8 |
% |
|
|
|
1.2 |
pts |
|
22.7 |
% |
22.9 |
% |
|
|
|
0.2 |
pts |
Bell Media |
27 |
|
37 |
|
|
10 |
|
27.0 |
% |
|
77 |
|
83 |
|
|
6 |
|
7.2 |
% |
Capital Intensity |
3.9 |
% |
5.6 |
% |
|
|
|
1.7 |
pts |
|
3.6 |
% |
3.9 |
% |
|
|
|
0.3 |
pts |
Total |
927 |
|
975 |
|
|
48 |
|
4.9 |
% |
|
2,668 |
|
2,641 |
|
|
(27 |
) |
(1.0 |
%) |
Capital Intensity |
17.3 |
% |
18.8 |
% |
|
|
|
1.5 |
pts |
|
16.8 |
% |
17.0 |
% |
|
|
|
0.2 |
pts |
BCE Supplementary Financial Information - Third Quarter 2015 Page
4
BCE
Segmented Data - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
YTD
2015 |
|
|
Q3 15 |
|
Q2 15 |
|
Q1 15 |
|
|
Total
2014 |
|
|
Q4 14 |
|
Q3 14 |
|
Q2 14 |
|
Q1 14 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
5,106 |
|
|
1,772 |
|
1,697 |
|
1,637 |
|
|
6,327 |
|
|
1,671 |
|
1,621 |
|
1,543 |
|
1,492 |
|
Bell Wireline |
9,097 |
|
|
3,028 |
|
3,042 |
|
3,027 |
|
|
12,324 |
|
|
3,210 |
|
3,046 |
|
3,049 |
|
3,019 |
|
Bell Media |
2,158 |
|
|
692 |
|
740 |
|
726 |
|
|
2,937 |
|
|
789 |
|
665 |
|
761 |
|
722 |
|
Inter-segment eliminations |
(450 |
) |
|
(147 |
) |
(153 |
) |
(150 |
) |
|
(546 |
) |
|
(142 |
) |
(137 |
) |
(133 |
) |
(134 |
) |
Total |
15,911 |
|
|
5,345 |
|
5,326 |
|
5,240 |
|
|
21,042 |
|
|
5,528 |
|
5,195 |
|
5,220 |
|
5,099 |
|
Operating costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
(2,919 |
) |
|
(1,014 |
) |
(980 |
) |
(925 |
) |
|
(3,703 |
) |
|
(1,071 |
) |
(921 |
) |
(862 |
) |
(849 |
) |
Bell Wireline |
(5,345 |
) |
|
(1,782 |
) |
(1,777 |
) |
(1,786 |
) |
|
(7,379 |
) |
|
(1,980 |
) |
(1,813 |
) |
(1,796 |
) |
(1,790 |
) |
Bell Media |
(1,619 |
) |
|
(509 |
) |
(525 |
) |
(585 |
) |
|
(2,203 |
) |
|
(597 |
) |
(483 |
) |
(551 |
) |
(572 |
) |
Inter-segment eliminations |
450 |
|
|
147 |
|
153 |
|
150 |
|
|
546 |
|
|
142 |
|
137 |
|
133 |
|
134 |
|
Total |
(9,433 |
) |
|
(3,158 |
) |
(3,129 |
) |
(3,146 |
) |
|
(12,739 |
) |
|
(3,506 |
) |
(3,080 |
) |
(3,076 |
) |
(3,077 |
) |
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
2,187 |
|
|
758 |
|
717 |
|
712 |
|
|
2,624 |
|
|
600 |
|
700 |
|
681 |
|
643 |
|
Margin |
42.8 |
% |
|
42.8 |
% |
42.3 |
% |
43.5 |
% |
|
41.5 |
% |
|
35.9 |
% |
43.2 |
% |
44.1 |
% |
43.1 |
% |
Bell Wireline |
3,752 |
|
|
1,246 |
|
1,265 |
|
1,241 |
|
|
4,945 |
|
|
1,230 |
|
1,233 |
|
1,253 |
|
1,229 |
|
Margin |
41.2 |
% |
|
41.1 |
% |
41.6 |
% |
41.0 |
% |
|
40.1 |
% |
|
38.3 |
% |
40.5 |
% |
41.1 |
% |
40.7 |
% |
Bell Media |
539 |
|
|
183 |
|
215 |
|
141 |
|
|
734 |
|
|
192 |
|
182 |
|
210 |
|
150 |
|
Margin |
25.0 |
% |
|
26.4 |
% |
29.1 |
% |
19.4 |
% |
|
25.0 |
% |
|
24.3 |
% |
27.4 |
% |
27.6 |
% |
20.8 |
% |
Total |
6,478 |
|
|
2,187 |
|
2,197 |
|
2,094 |
|
|
8,303 |
|
|
2,022 |
|
2,115 |
|
2,144 |
|
2,022 |
|
Margin |
40.7 |
% |
|
40.9 |
% |
41.3 |
% |
40.0 |
% |
|
39.5 |
% |
|
36.6 |
% |
40.7 |
% |
41.1 |
% |
39.7 |
% |
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bell Wireless |
523 |
|
|
184 |
|
188 |
|
151 |
|
|
687 |
|
|
218 |
|
182 |
|
168 |
|
119 |
|
Capital Intensity |
10.2 |
% |
|
10.4 |
% |
11.1 |
% |
9.2 |
% |
|
10.9 |
% |
|
13.0 |
% |
11.2 |
% |
10.9 |
% |
8.0 |
% |
Bell Wireline |
2,068 |
|
|
716 |
|
696 |
|
656 |
|
|
2,893 |
|
|
804 |
|
756 |
|
737 |
|
596 |
|
Capital Intensity |
22.7 |
% |
|
23.6 |
% |
22.9 |
% |
21.7 |
% |
|
23.5 |
% |
|
25.0 |
% |
24.8 |
% |
24.2 |
% |
19.7 |
% |
Bell Media |
77 |
|
|
27 |
|
30 |
|
20 |
|
|
137 |
|
|
54 |
|
37 |
|
32 |
|
14 |
|
Capital Intensity |
3.6 |
% |
|
3.9 |
% |
4.1 |
% |
2.8 |
% |
|
4.7 |
% |
|
6.8 |
% |
5.6 |
% |
4.2 |
% |
1.9 |
% |
Total |
2,668 |
|
|
927 |
|
914 |
|
827 |
|
|
3,717 |
|
|
1,076 |
|
975 |
|
937 |
|
729 |
|
Capital Intensity |
16.8 |
% |
|
17.3 |
% |
17.2 |
% |
15.8 |
% |
|
17.7 |
% |
|
19.5 |
% |
18.8 |
% |
18.0 |
% |
14.3 |
% |
BCE Supplementary Financial Information - Third Quarter 2015 Page
5
Bell Wireless (1) (2)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q3
2015 |
|
Q3
2014 |
|
|
% change |
|
|
YTD
2015 |
|
YTD
2014 |
|
|
% change |
|
Bell Wireless |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
1,619 |
|
1,495 |
|
|
8.3 |
% |
|
4,658 |
|
4,312 |
|
|
8.0 |
% |
Product |
143 |
|
117 |
|
|
22.2 |
% |
|
419 |
|
316 |
|
|
32.6 |
% |
Total external Bell Wireless revenues |
1,762 |
|
1,612 |
|
|
9.3 |
% |
|
5,077 |
|
4,628 |
|
|
9.7 |
% |
Inter-segment |
10 |
|
9 |
|
|
11.1 |
% |
|
29 |
|
28 |
|
|
3.6 |
% |
Total Bell Wireless operating revenues |
1,772 |
|
1,621 |
|
|
9.3 |
% |
|
5,106 |
|
4,656 |
|
|
9.7 |
% |
Operating costs |
(1,014 |
) |
(921 |
) |
|
(10.1 |
%) |
|
(2,919 |
) |
(2,632 |
) |
|
(10.9 |
%) |
Adjusted EBITDA |
758 |
|
700 |
|
|
8.3 |
% |
|
2,187 |
|
2,024 |
|
|
8.1 |
% |
Adjusted EBITDA margin (Total revenues) |
42.8 |
% |
43.2 |
% |
|
(0.4 |
) pts |
|
42.8 |
% |
43.5 |
% |
|
(0.7 |
) pts |
Adjusted EBITDA margin (Service revenues) |
46.8 |
% |
46.8 |
% |
|
0.0 |
pts |
|
47.0 |
% |
46.9 |
% |
|
0.1 |
pts |
Capital expenditures |
184 |
|
182 |
|
|
(1.1 |
%) |
|
523 |
|
469 |
|
|
(11.5 |
%) |
Capital intensity |
10.4 |
% |
11.2 |
% |
|
0.8 |
pts |
|
10.2 |
% |
10.1 |
% |
|
(0.1 |
) pts |
Wireless gross activations |
424,164 |
|
431,460 |
|
|
(1.7 |
%) |
|
1,150,497 |
|
1,181,166 |
|
|
(2.6 |
%) |
Postpaid |
353,652 |
|
331,851 |
|
|
6.6 |
% |
|
950,445 |
|
908,752 |
|
|
4.6 |
% |
Wireless net activations |
58,543 |
|
83,636 |
|
|
(30.0 |
%) |
|
64,739 |
|
110,098 |
|
|
(41.2 |
%) |
Postpaid |
77,655 |
|
91,779 |
|
|
(15.4 |
%) |
|
174,061 |
|
193,834 |
|
|
(10.2 |
%) |
Wireless subscribers end of period (EOP) |
8,183,367 |
|
8,035,130 |
|
|
1.8 |
% |
|
8,183,367 |
|
8,035,130 |
|
|
1.8 |
% |
Postpaid |
7,284,108 |
|
6,991,927 |
|
|
4.2 |
% |
|
7,284,108 |
|
6,991,927 |
|
|
4.2 |
% |
Average revenue per user
(4)
(ARPU)($/month) |
65.34 |
|
61.59 |
|
|
6.1 |
% |
|
62.89 |
|
59.57 |
|
|
5.6 |
% |
Churn (%)
(4) (average per month) |
1.49 |
% |
1.45 |
% |
|
(0.04 |
) pts |
|
1.49 |
% |
1.50 |
% |
|
0.01 |
pts |
Prepaid |
2.98 |
% |
3.14 |
% |
|
0.16 |
pts |
|
3.36 |
% |
3.44 |
% |
|
0.08 |
pts |
Postpaid |
1.31 |
% |
1.20 |
% |
|
(0.11 |
) pts |
|
1.24 |
% |
1.20 |
% |
|
(0.04 |
) pts |
Cost of acquisition (COA)
(4)
($/subscriber) |
446 |
|
420 |
|
|
(6.2 |
%) |
|
444 |
|
420 |
|
|
(5.7 |
%) |
BCE Supplementary Financial Information - Third Quarter 2015 Page
6
Bell Wireless - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
YTD
2015 |
|
|
Q3 15 |
|
Q2 15 |
|
Q1 15 |
|
|
TOTAL
2014 |
|
|
Q4 14 |
|
Q3 14 |
|
Q2 14 |
|
Q1 14 |
|
Bell Wireless |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service |
4,658 |
|
|
1,619 |
|
1,539 |
|
1,500 |
|
|
5,806 |
|
|
1,494 |
|
1,495 |
|
1,429 |
|
1,388 |
|
Product |
419 |
|
|
143 |
|
149 |
|
127 |
|
|
483 |
|
|
167 |
|
117 |
|
105 |
|
94 |
|
Total external Bell Wireless revenues |
5,077 |
|
|
1,762 |
|
1,688 |
|
1,627 |
|
|
6,289 |
|
|
1,661 |
|
1,612 |
|
1,534 |
|
1,482 |
|
Inter-segment |
29 |
|
|
10 |
|
9 |
|
10 |
|
|
38 |
|
|
10 |
|
9 |
|
9 |
|
10 |
|
Total Bell Wireless operating revenues |
5,106 |
|
|
1,772 |
|
1,697 |
|
1,637 |
|
|
6,327 |
|
|
1,671 |
|
1,621 |
|
1,543 |
|
1,492 |
|
Operating costs |
(2,919 |
) |
|
(1,014 |
) |
(980 |
) |
(925 |
) |
|
(3,703 |
) |
|
(1,071 |
) |
(921 |
) |
(862 |
) |
(849 |
) |
Adjusted EBITDA |
2,187 |
|
|
758 |
|
717 |
|
712 |
|
|
2,624 |
|
|
600 |
|
700 |
|
681 |
|
643 |
|
Adjusted EBITDA margin (Total revenues) |
42.8 |
% |
|
42.8 |
% |
42.3 |
% |
43.5 |
% |
|
41.5 |
% |
|
35.9 |
% |
43.2 |
% |
44.1 |
% |
43.1 |
% |
Adjusted EBITDA margin (Service revenues) |
47.0 |
% |
|
46.8 |
% |
46.6 |
% |
47.5 |
% |
|
45.2 |
% |
|
40.2 |
% |
46.8 |
% |
47.7 |
% |
46.3 |
% |
Capital expenditures |
523 |
|
|
184 |
|
188 |
|
151 |
|
|
687 |
|
|
218 |
|
182 |
|
168 |
|
119 |
|
Capital intensity |
10.2 |
% |
|
10.4 |
% |
11.1 |
% |
9.2 |
% |
|
10.9 |
% |
|
13.0 |
% |
11.2 |
% |
10.9 |
% |
8.0 |
% |
Wireless gross activations |
1,150,497 |
|
|
424,164 |
|
384,973 |
|
341,360 |
|
|
1,643,451 |
|
|
462,285 |
|
431,460 |
|
391,382 |
|
358,324 |
|
Postpaid |
950,445 |
|
|
353,652 |
|
317,809 |
|
278,984 |
|
|
1,291,207 |
|
|
382,455 |
|
331,851 |
|
297,374 |
|
279,527 |
|
Wireless net activations |
64,739 |
|
|
58,543 |
|
22,110 |
|
(15,914 |
) |
|
193,596 |
|
|
83,498 |
|
83,636 |
|
42,898 |
|
(16,436 |
) |
Postpaid |
174,061 |
|
|
77,655 |
|
61,033 |
|
35,373 |
|
|
311,954 |
|
|
118,120 |
|
91,779 |
|
67,951 |
|
34,104 |
|
Wireless subscribers EOP |
8,183,367 |
|
|
8,183,367 |
|
8,124,824 |
|
8,102,714 |
|
|
8,118,628 |
|
|
8,118,628 |
|
8,035,130 |
|
7,951,494 |
|
7,908,596 |
|
Postpaid |
7,284,108 |
|
|
7,284,108 |
|
7,206,453 |
|
7,145,420 |
|
|
7,110,047 |
|
|
7,110,047 |
|
6,991,927 |
|
6,900,148 |
|
6,832,197 |
|
ARPU ($/month) |
62.89 |
|
|
65.34 |
|
62.48 |
|
60.83 |
|
|
59.92 |
|
|
60.97 |
|
61.59 |
|
59.35 |
|
57.75 |
|
Churn (%)(average per month) |
1.49 |
% |
|
1.49 |
% |
1.49 |
% |
1.47 |
% |
|
1.52 |
% |
|
1.57 |
% |
1.45 |
% |
1.47 |
% |
1.58 |
% |
Prepaid |
3.36 |
% |
|
2.98 |
% |
3.48 |
% |
3.60 |
% |
|
3.44 |
% |
|
3.43 |
% |
3.14 |
% |
3.49 |
% |
3.68 |
% |
Postpaid |
1.24 |
% |
|
1.31 |
% |
1.23 |
% |
1.18 |
% |
|
1.22 |
% |
|
1.29 |
% |
1.20 |
% |
1.15 |
% |
1.24 |
% |
COA ($/subscriber) |
444 |
|
|
446 |
|
434 |
|
452 |
|
|
441 |
|
|
495 |
|
420 |
|
403 |
|
439 |
|
BCE Supplementary Financial Information - Third Quarter 2015 Page
7
Bell Wireline (1) (2)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q3
2015 |
|
Q3
2014 |
|
|
% change |
|
|
YTD
2015 |
|
YTD
2014 |
|
|
% change |
|
Bell Wireline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data |
1,770 |
|
1,722 |
|
|
2.8 |
% |
|
5,301 |
|
5,145 |
|
|
3.0 |
% |
Local & access |
818 |
|
855 |
|
|
(4.3 |
%) |
|
2,469 |
|
2,582 |
|
|
(4.4 |
%) |
Long distance |
207 |
|
229 |
|
|
(9.6 |
%) |
|
627 |
|
688 |
|
|
(8.9 |
%) |
Equipment & other |
181 |
|
186 |
|
|
(2.7 |
%) |
|
528 |
|
543 |
|
|
(2.8 |
%) |
Total external revenues |
2,976 |
|
2,992 |
|
|
(0.5 |
%) |
|
8,925 |
|
8,958 |
|
|
(0.4 |
%) |
Inter-segment revenues |
52 |
|
54 |
|
|
(3.7 |
%) |
|
172 |
|
156 |
|
|
10.3 |
% |
Total Bell Wireline operating revenues |
3,028 |
|
3,046 |
|
|
(0.6 |
%) |
|
9,097 |
|
9,114 |
|
|
(0.2 |
%) |
Operating costs |
(1,782 |
) |
(1,813 |
) |
|
1.7 |
% |
|
(5,345 |
) |
(5,399 |
) |
|
1.0 |
% |
Adjusted EBITDA |
1,246 |
|
1,233 |
|
|
1.1 |
% |
|
3,752 |
|
3,715 |
|
|
1.0 |
% |
Adjusted EBITDA Margin |
41.1 |
% |
40.5 |
% |
|
0.6 |
pts |
|
41.2 |
% |
40.8 |
% |
|
0.4 |
pts |
Capital expenditures |
716 |
|
756 |
|
|
5.3 |
% |
|
2,068 |
|
2,089 |
|
|
1.0 |
% |
Capital intensity |
23.6 |
% |
24.8 |
% |
|
1.2 |
pts |
|
22.7 |
% |
22.9 |
% |
|
0.2 |
pts |
High-speed Internet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High-speed Internet net activations |
57,888 |
|
64,254 |
|
|
(9.9 |
%) |
|
116,144 |
|
108,380 |
|
|
7.2 |
% |
High-speed Internet subscribers EOP
(A) (B) |
3,374,239 |
|
3,245,016 |
|
|
4.0 |
% |
|
3,374,239 |
|
3,245,016 |
|
|
4.0 |
% |
TV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net subscriber activations |
25,914 |
|
37,578 |
|
|
(31.0 |
%) |
|
69,594 |
|
111,170 |
|
|
(37.4 |
%) |
Internet Protocol Television (IPTV) |
67,908 |
|
74,450 |
|
|
(8.8 |
%) |
|
179,237 |
|
199,960 |
|
|
(10.4 |
%) |
Total subscribers EOP
(A) (B) |
2,700,710 |
|
2,600,418 |
|
|
3.9 |
% |
|
2,700,710 |
|
2,600,418 |
|
|
3.9 |
% |
IPTV
(A) (B) |
1,108,699 |
|
857,473 |
|
|
29.3 |
% |
|
1,108,699 |
|
857,473 |
|
|
29.3 |
% |
Local |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network Access Services (NAS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
(A) (B) |
3,591,813 |
|
3,872,840 |
|
|
(7.3 |
%) |
|
3,591,813 |
|
3,872,840 |
|
|
(7.3 |
%) |
Business |
3,203,763 |
|
3,351,017 |
|
|
(4.4 |
%) |
|
3,203,763 |
|
3,351,017 |
|
|
(4.4 |
%) |
Total
(A) (B) |
6,795,576 |
|
7,223,857 |
|
|
(5.9 |
%) |
|
6,795,576 |
|
7,223,857 |
|
|
(5.9 |
%) |
NAS net losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
(78,354 |
) |
(70,782 |
) |
|
(10.7 |
%) |
|
(220,043 |
) |
(248,497 |
) |
|
11.5 |
% |
Business |
(29,722 |
) |
(37,270 |
) |
|
20.3 |
% |
|
(111,481 |
) |
(123,215 |
) |
|
9.5 |
% |
Total |
(108,076 |
) |
(108,052 |
) |
|
0.0 |
% |
|
(331,524 |
) |
(371,712 |
) |
|
10.8 |
% |
(A) |
Our Q1 2015 Internet, IPTV, total TV, and NAS subscriber base included a beginning of period adjustment to reduce the number of subscribers by 7,505, 2,236, 7,702, and 4,409, respectively, for deactivations as a result of the CRTCs decision to eliminate the 30-day notice period required to cancel services. |
(B) |
Subsequent to a review of our subscriber metrics, our Q1 2015 beginning of period Internet, IPTV and total TV subscriber base was reduced by 31,426, 1,849 and 3,790, respectively, while our NAS base was increased by 657 subscribers. These adjustments primarily consisted of older balances. |
BCE Supplementary Financial Information - Third Quarter 2015 Page
8
Bell Wireline - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
YTD
2015 |
|
|
Q3 15 |
|
Q2 15 |
|
Q1 15 |
|
|
TOTAL
2014 |
|
|
Q4 14 |
|
Q3 14 |
|
Q2 14 |
|
Q1 14 |
|
Bell Wireline |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data |
5,301 |
|
|
1,770 |
|
1,774 |
|
1,757 |
|
|
6,978 |
|
|
1,833 |
|
1,722 |
|
1,725 |
|
1,698 |
|
Local & access |
2,469 |
|
|
818 |
|
827 |
|
824 |
|
|
3,420 |
|
|
838 |
|
855 |
|
860 |
|
867 |
|
Long distance |
627 |
|
|
207 |
|
207 |
|
213 |
|
|
922 |
|
|
234 |
|
229 |
|
233 |
|
226 |
|
Equipment & other |
528 |
|
|
181 |
|
174 |
|
173 |
|
|
791 |
|
|
248 |
|
186 |
|
179 |
|
178 |
|
Total external revenues |
8,925 |
|
|
2,976 |
|
2,982 |
|
2,967 |
|
|
12,111 |
|
|
3,153 |
|
2,992 |
|
2,997 |
|
2,969 |
|
Inter-segment revenues |
172 |
|
|
52 |
|
60 |
|
60 |
|
|
213 |
|
|
57 |
|
54 |
|
52 |
|
50 |
|
Total Bell Wireline operating revenues |
9,097 |
|
|
3,028 |
|
3,042 |
|
3,027 |
|
|
12,324 |
|
|
3,210 |
|
3,046 |
|
3,049 |
|
3,019 |
|
Operating costs |
(5,345 |
) |
|
(1,782 |
) |
(1,777 |
) |
(1,786 |
) |
|
(7,379 |
) |
|
(1,980 |
) |
(1,813 |
) |
(1,796 |
) |
(1,790 |
) |
Adjusted EBITDA |
3,752 |
|
|
1,246 |
|
1,265 |
|
1,241 |
|
|
4,945 |
|
|
1,230 |
|
1,233 |
|
1,253 |
|
1,229 |
|
Adjusted EBITDA Margin |
41.2 |
% |
|
41.1 |
% |
41.6 |
% |
41.0 |
% |
|
40.1 |
% |
|
38.3 |
% |
40.5 |
% |
41.1 |
% |
40.7 |
% |
Capital expenditures |
2,068 |
|
|
716 |
|
696 |
|
656 |
|
|
2,893 |
|
|
804 |
|
756 |
|
737 |
|
596 |
|
Capital intensity |
22.7 |
% |
|
23.6 |
% |
22.9 |
% |
21.7 |
% |
|
23.5 |
% |
|
25.0 |
% |
24.8 |
% |
24.2 |
% |
19.7 |
% |
High-speed Internet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High-speed Internet net activations |
116,144 |
|
|
57,888 |
|
18,606 |
|
39,650 |
|
|
160,390 |
|
|
52,010 |
|
64,254 |
|
17,544 |
|
26,582 |
|
High-speed Internet subscribers EOP
(A) (B) |
3,374,239 |
|
|
3,374,239 |
|
3,316,351 |
|
3,297,745 |
|
|
3,297,026 |
|
|
3,297,026 |
|
3,245,016 |
|
3,180,762 |
|
3,163,218 |
|
TV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net subscriber activations |
69,594 |
|
|
25,914 |
|
16,690 |
|
26,990 |
|
|
153,360 |
|
|
42,190 |
|
37,578 |
|
33,369 |
|
40,223 |
|
IPTV |
179,237 |
|
|
67,908 |
|
50,466 |
|
60,863 |
|
|
276,034 |
|
|
76,074 |
|
74,450 |
|
59,132 |
|
66,378 |
|
Total subscribers EOP
(A) (B) |
2,700,710 |
|
|
2,700,710 |
|
2,674,796 |
|
2,658,106 |
|
|
2,642,608 |
|
|
2,642,608 |
|
2,600,418 |
|
2,562,840 |
|
2,529,471 |
|
IPTV
(A) (B) |
1,108,699 |
|
|
1,108,699 |
|
1,040,791 |
|
990,325 |
|
|
933,547 |
|
|
933,547 |
|
857,473 |
|
783,023 |
|
723,891 |
|
Local |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
(A) (B) |
3,591,813 |
|
|
3,591,813 |
|
3,670,167 |
|
3,745,986 |
|
|
3,815,608 |
|
|
3,815,608 |
|
3,872,840 |
|
3,943,622 |
|
4,031,682 |
|
Business |
3,203,763 |
|
|
3,203,763 |
|
3,233,485 |
|
3,271,175 |
|
|
3,315,244 |
|
|
3,315,244 |
|
3,351,017 |
|
3,388,287 |
|
3,431,147 |
|
Total
(A) (B) |
6,795,576 |
|
|
6,795,576 |
|
6,903,652 |
|
7,017,161 |
|
|
7,130,852 |
|
|
7,130,852 |
|
7,223,857 |
|
7,331,909 |
|
7,462,829 |
|
NAS net losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
(220,043 |
) |
|
(78,354 |
) |
(75,819 |
) |
(65,870 |
) |
|
(305,729 |
) |
|
(57,232 |
) |
(70,782 |
) |
(88,060 |
) |
(89,655 |
) |
Business |
(111,481 |
) |
|
(29,722 |
) |
(37,690 |
) |
(44,069 |
) |
|
(158,988 |
) |
|
(35,773 |
) |
(37,270 |
) |
(42,860 |
) |
(43,085 |
) |
Total |
(331,524 |
) |
|
(108,076 |
) |
(113,509 |
) |
(109,939 |
) |
|
(464,717 |
) |
|
(93,005 |
) |
(108,052 |
) |
(130,920 |
) |
(132,740 |
) |
(A) |
Our Q1 2015 Internet, IPTV,
total TV, and NAS subscriber base included a beginning of period
adjustment to reduce the number of subscribers by 7,505, 2,236, 7,702,
and 4,409, respectively, for deactivations as a result of the CRTCs
decision to eliminate the 30-day notice period required to cancel
services. |
(B) |
Subsequent to a review of our subscriber metrics, our Q1 2015 beginning of period Internet, IPTV and total TV subscriber base was reduced by 31,426, 1,849 and 3,790, respectively, while our NAS base was increased by 657 subscribers. These adjustments primarily consisted of older balances. |
BCE Supplementary Financial Information - Third Quarter 2015 Page
9
BCE (1)
Net debt and other information (2)
BCE - Net debt and preferred shares |
|
|
|
|
|
|
|
|
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
|
|
|
|
|
|
|
|
|
September 30 |
|
June 30 |
|
March 31 |
|
December 31 |
|
|
2015 |
|
2015 |
|
2015 |
|
2014 |
|
Debt due within one year |
6,416 |
|
5,058 |
|
4,712 |
|
3,743 |
|
Long-term debt |
14,444 |
|
15,443 |
|
16,612 |
|
16,355 |
|
Preferred shares - BCE
(A) |
2,002 |
|
2,002 |
|
2,002 |
|
2,002 |
|
Cash and cash equivalents |
(622 |
) |
(169 |
) |
(1,125 |
) |
(566 |
) |
Net Debt (3) |
22,240 |
|
22,334 |
|
22,201 |
|
21,534 |
|
Net Debt / Adjusted EBITDA (4) |
2.62 |
|
2.65 |
|
2.65 |
|
2.59 |
|
Adjusted EBITDA /Net interest expense, excluding interest on post-employment benefit obligations and including 50% of preferred dividends
(4) |
8.58 |
|
8.53 |
|
8.52 |
|
8.38 |
|
|
|
|
|
|
|
|
|
|
Bell Media Inc. - Proportionate Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
YTD
2015 |
|
Q3
2015 |
|
Q2
2015 |
|
Q1
2015 |
|
Total
2014 |
|
Q4
2014 |
|
Q3
2014 |
|
Q2
2014 |
|
Q1
2014 |
|
Proportionate Net Debt |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
14 |
|
30 |
|
Proportionate Adjusted EBITDA |
473 |
|
161 |
|
191 |
|
121 |
|
657 |
|
181 |
|
158 |
|
189 |
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Canadian dollars, except where otherwise indicated) (unaudited)
|
Q3
2015 |
|
Q3
2014 |
|
$ change |
|
|
% change |
|
|
YTD
2015 |
|
YTD
2014 |
|
$ change |
|
% change |
|
Free Cash Flow (FCF) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from operating activities, excluding acquisition costs paid |
1,911 |
|
1,644 |
|
267 |
|
|
16.2 |
% |
|
4,897 |
|
4,121 |
|
776 |
|
18.8 |
% |
Capital expenditures |
(927 |
) |
(825 |
) |
(102 |
) |
|
(12.4 |
%) |
|
(2,668 |
) |
(2,210 |
) |
(458 |
) |
(20.7 |
%) |
Dividends paid on preferred shares |
(37 |
) |
(31 |
) |
(6 |
) |
|
(19.4 |
%) |
|
(113 |
) |
(94 |
) |
(19 |
) |
(20.2 |
%) |
Dividends paid by subsidiaries to non-controlling interest |
(26 |
) |
(1 |
) |
(25 |
) |
|
n.m. |
|
|
(33 |
) |
(1 |
) |
(32 |
) |
n.m. |
|
Bell Aliant dividends to BCE |
- |
|
47 |
|
(47 |
) |
|
(100.0 |
%) |
|
- |
|
95 |
|
(95 |
) |
(100.0 |
%) |
FCF |
921 |
|
834 |
|
87 |
|
|
10.4 |
% |
|
2,083 |
|
1,911 |
|
172 |
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Information - Historical Trend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
YTD
2015 |
|
|
Q3
2015 |
|
Q2
2015 |
|
Q1
2015 |
|
|
Total
2014 |
|
|
Q4
2014 |
|
Q3
2014 |
|
Q2
2014 |
|
Q1
2014 |
|
FCF |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from operating activities, excluding acquisition costs paid |
4,897 |
|
|
1,911 |
|
1,889 |
|
1,097 |
|
|
5,680 |
|
|
1,559 |
|
1,644 |
|
1,589 |
|
888 |
|
Capital expenditures |
(2,668 |
) |
|
(927 |
) |
(914 |
) |
(827 |
) |
|
(3,245 |
) |
|
(1,035 |
) |
(825 |
) |
(791 |
) |
(594 |
) |
Dividends paid on preferred shares |
(113 |
) |
|
(37 |
) |
(37 |
) |
(39 |
) |
|
(134 |
) |
|
(40 |
) |
(31 |
) |
(31 |
) |
(32 |
) |
Dividends paid by subsidiaries to non-controlling interest |
(33 |
) |
|
(26 |
) |
(7 |
) |
- |
|
|
(2 |
) |
|
(1 |
) |
(1 |
) |
- |
|
- |
|
Voluntary defined benefit pension plan contribution |
- |
|
|
- |
|
- |
|
- |
|
|
350 |
|
|
350 |
|
- |
|
- |
|
- |
|
Bell Aliant dividends to BCE |
- |
|
|
- |
|
- |
|
- |
|
|
95 |
|
|
- |
|
47 |
|
48 |
|
- |
|
FCF |
2,083 |
|
|
921 |
|
931 |
|
231 |
|
|
2,744 |
|
|
833 |
|
834 |
|
815 |
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
Net debt includes 50% of preferred shares
|
n.m. : not
meaningful |
BCE Supplementary Financial Information - Third Quarter 2015 Page
10
BCE (1)
Consolidated Statements of Financial Position
(2)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
|
September 30
2015 |
|
|
June 30
2015 |
|
|
March 31
2015 |
|
|
December 31
2014 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
84 |
|
|
131 |
|
|
127 |
|
|
142 |
|
Cash equivalents |
|
538 |
|
|
38 |
|
|
998 |
|
|
424 |
|
Trade and other receivables |
|
2,766 |
|
|
2,758 |
|
|
2,781 |
|
|
3,069 |
|
Inventory |
|
450 |
|
|
405 |
|
|
403 |
|
|
333 |
|
Prepaid expenses |
|
452 |
|
|
528 |
|
|
522 |
|
|
379 |
|
Other current assets |
|
287 |
|
|
232 |
|
|
249 |
|
|
201 |
|
Total current assets |
|
4,577 |
|
|
4,092 |
|
|
5,080 |
|
|
4,548 |
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
21,709 |
|
|
21,513 |
|
|
21,347 |
|
|
21,327 |
|
Intangible assets |
|
10,977 |
|
|
10,886 |
|
|
10,332 |
|
|
10,224 |
|
Deferred tax assets |
|
93 |
|
|
131 |
|
|
162 |
|
|
162 |
|
Investments in associates and joint ventures |
|
1,125 |
|
|
1,088 |
|
|
790 |
|
|
776 |
|
Other non-current assets |
|
810 |
|
|
833 |
|
|
989 |
|
|
875 |
|
Goodwill |
|
8,377 |
|
|
8,376 |
|
|
8,376 |
|
|
8,385 |
|
Total non-current assets |
|
43,091 |
|
|
42,827 |
|
|
41,996 |
|
|
41,749 |
|
Total assets |
|
47,668 |
|
|
46,919 |
|
|
47,076 |
|
|
46,297 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables and other liabilities |
|
4,015 |
|
|
4,053 |
|
|
4,007 |
|
|
4,398 |
|
Interest payable |
|
148 |
|
|
141 |
|
|
143 |
|
|
145 |
|
Dividends payable |
|
566 |
|
|
565 |
|
|
561 |
|
|
534 |
|
Current tax liabilities |
|
158 |
|
|
157 |
|
|
74 |
|
|
269 |
|
Debt due within one year |
|
6,416 |
|
|
5,058 |
|
|
4,712 |
|
|
3,743 |
|
Total current liabilities |
|
11,303 |
|
|
9,974 |
|
|
9,497 |
|
|
9,089 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
14,444 |
|
|
15,443 |
|
|
16,612 |
|
|
16,355 |
|
Deferred tax liabilities |
|
1,717 |
|
|
1,559 |
|
|
1,352 |
|
|
1,321 |
|
Post-employment benefit obligation |
|
2,296 |
|
|
2,101 |
|
|
2,803 |
|
|
2,772 |
|
Other non-current liabilities |
|
1,423 |
|
|
1,462 |
|
|
1,493 |
|
|
1,521 |
|
Total non-current liabilities |
|
19,880 |
|
|
20,565 |
|
|
22,260 |
|
|
21,969 |
|
Total liabilities |
|
31,183 |
|
|
30,539 |
|
|
31,757 |
|
|
31,058 |
|
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to BCE shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares |
|
4,004 |
|
|
4,004 |
|
|
4,004 |
|
|
4,004 |
|
Common shares |
|
17,181 |
|
|
17,142 |
|
|
16,790 |
|
|
16,717 |
|
Contributed surplus |
|
1,153 |
|
|
1,137 |
|
|
1,121 |
|
|
1,141 |
|
Accumulated other comprehensive income |
|
105 |
|
|
87 |
|
|
124 |
|
|
97 |
|
Deficit |
|
(6,264 |
) |
|
(6,306 |
) |
|
(7,027 |
) |
|
(7,013 |
) |
Total Equity attributable to BCE shareholders |
|
16,179 |
|
|
16,064 |
|
|
15,012 |
|
|
14,946 |
|
Non-controlling interest |
|
306 |
|
|
316 |
|
|
307 |
|
|
293 |
|
Total equity |
|
16,485 |
|
|
16,380 |
|
|
15,319 |
|
|
15,239 |
|
Total liabilities and equity |
|
47,668 |
|
|
46,919 |
|
|
47,076 |
|
|
46,297 |
|
Number of common shares outstanding |
|
849.4 |
|
|
848.6 |
|
|
841.9 |
|
|
840.3 |
|
BCE Supplementary Financial Information - Third Quarter 2015 Page
11
BCE (1)
Consolidated Cash Flow Data (2)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
|
Q3
2015 |
|
|
Q3
2014 |
|
|
|
$ change |
|
|
|
YTD
2015 |
|
|
YTD
2014 |
|
|
|
$ change |
|
Net earnings |
|
791 |
|
|
703 |
|
|
|
88 |
|
|
|
2,188 |
|
|
2,124 |
|
|
|
64 |
|
Adjustments to reconcile net earnings to cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance, acquisition and other costs |
|
46 |
|
|
66 |
|
|
|
(20 |
) |
|
|
294 |
|
|
158 |
|
|
|
136 |
|
Depreciation and amortization |
|
860 |
|
|
855 |
|
|
|
5 |
|
|
|
2,553 |
|
|
2,600 |
|
|
|
(47 |
) |
Post-employment benefit plans cost |
|
96 |
|
|
91 |
|
|
|
5 |
|
|
|
295 |
|
|
284 |
|
|
|
11 |
|
Net interest expense |
|
225 |
|
|
225 |
|
|
|
- |
|
|
|
677 |
|
|
685 |
|
|
|
(8 |
) |
Loss (gains) on investments |
|
19 |
|
|
- |
|
|
|
19 |
|
|
|
(73 |
) |
|
(16 |
) |
|
|
(57 |
) |
Income taxes |
|
271 |
|
|
241 |
|
|
|
30 |
|
|
|
736 |
|
|
708 |
|
|
|
28 |
|
Contributions to post-employment benefit plans |
|
(76 |
) |
|
(82 |
) |
|
|
6 |
|
|
|
(249 |
) |
|
(255 |
) |
|
|
6 |
|
Payments under other post-employment benefit plans |
|
(18 |
) |
|
(18 |
) |
|
|
- |
|
|
|
(56 |
) |
|
(54 |
) |
|
|
(2 |
) |
Severance and other costs paid |
|
(45 |
) |
|
(40 |
) |
|
|
(5 |
) |
|
|
(146 |
) |
|
(146 |
) |
|
|
- |
|
Acquisition costs paid |
|
(33 |
) |
|
(33 |
) |
|
|
- |
|
|
|
(133 |
) |
|
(63 |
) |
|
|
(70 |
) |
Interest paid |
|
(225 |
) |
|
(214 |
) |
|
|
(11 |
) |
|
|
(682 |
) |
|
(674 |
) |
|
|
(8 |
) |
Income taxes paid (net of refunds) |
|
(66 |
) |
|
(92 |
) |
|
|
26 |
|
|
|
(518 |
) |
|
(563 |
) |
|
|
45 |
|
Net change in operating assets and liabilities |
|
33 |
|
|
180 |
|
|
|
(147 |
) |
|
|
(122 |
) |
|
(74 |
) |
|
|
(48 |
) |
Cash flows from operating activities |
|
1,878 |
|
|
1,882 |
|
|
|
(4 |
) |
|
|
4,764 |
|
|
4,714 |
|
|
|
50 |
|
Bell Aliant dividends paid to BCE |
|
- |
|
|
47 |
|
|
|
(47 |
) |
|
|
- |
|
|
95 |
|
|
|
(95 |
) |
Capital expenditures |
|
(927 |
) |
|
(975 |
) |
|
|
48 |
|
|
|
(2,668 |
) |
|
(2,641 |
) |
|
|
(27 |
) |
Cash dividends paid on preferred shares |
|
(37 |
) |
|
(31 |
) |
|
|
(6 |
) |
|
|
(113 |
) |
|
(94 |
) |
|
|
(19 |
) |
Cash dividends paid by subsidiaries to non-controlling interest |
|
(26 |
) |
|
(69 |
) |
|
|
43 |
|
|
|
(33 |
) |
|
(144 |
) |
|
|
111 |
|
Acquisition costs paid |
|
33 |
|
|
33 |
|
|
|
- |
|
|
|
133 |
|
|
63 |
|
|
|
70 |
|
Bell Aliant Free Cash Flow |
|
- |
|
|
(53 |
) |
|
|
53 |
|
|
|
- |
|
|
(82 |
) |
|
|
82 |
|
Free Cash Flow |
|
921 |
|
|
834 |
|
|
|
87 |
|
|
|
2,083 |
|
|
1,911 |
|
|
|
172 |
|
Bell Aliant free cash flow, excluding dividends paid |
|
- |
|
|
6 |
|
|
|
(6 |
) |
|
|
- |
|
|
(13 |
) |
|
|
13 |
|
Business acquisitions |
|
(2 |
) |
|
(10 |
) |
|
|
8 |
|
|
|
(286 |
) |
|
(10 |
) |
|
|
(276 |
) |
Acquisition costs paid |
|
(33 |
) |
|
(33 |
) |
|
|
- |
|
|
|
(133 |
) |
|
(63 |
) |
|
|
(70 |
) |
Business dispositions |
|
2 |
|
|
186 |
|
|
|
(184 |
) |
|
|
409 |
|
|
724 |
|
|
|
(315 |
) |
Acquisition of spectrum licences |
|
(5 |
) |
|
- |
|
|
|
(5 |
) |
|
|
(534 |
) |
|
(566 |
) |
|
|
32 |
|
Other investing activities |
|
(13 |
) |
|
1 |
|
|
|
(14 |
) |
|
|
(15 |
) |
|
(2 |
) |
|
|
(13 |
) |
Increase in notes payable and bank advances |
|
555 |
|
|
443 |
|
|
|
112 |
|
|
|
672 |
|
|
601 |
|
|
|
71 |
|
(Reduction) increase in securitized trade receivables |
|
(305 |
) |
|
- |
|
|
|
(305 |
) |
|
|
10 |
|
|
- |
|
|
|
10 |
|
Issue of long-term debt |
|
- |
|
|
1,243 |
|
|
|
(1,243 |
) |
|
|
502 |
|
|
1,426 |
|
|
|
(924 |
) |
Repayment of long-term debt |
|
(108 |
) |
|
(117 |
) |
|
|
9 |
|
|
|
(977 |
) |
|
(668 |
) |
|
|
(309 |
) |
Cash dividends paid on common shares |
|
(551 |
) |
|
(480 |
) |
|
|
(71 |
) |
|
|
(1,617 |
) |
|
(1,412 |
) |
|
|
(205 |
) |
Privatization of Bell Aliant |
|
- |
|
|
(804 |
) |
|
|
804 |
|
|
|
- |
|
|
(804 |
) |
|
|
804 |
|
Issue of common shares |
|
7 |
|
|
2 |
|
|
|
5 |
|
|
|
64 |
|
|
43 |
|
|
|
21 |
|
Other financing activities |
|
(15 |
) |
|
(15 |
) |
|
|
- |
|
|
|
(122 |
) |
|
(96 |
) |
|
|
(26 |
) |
|
|
(468 |
) |
|
422 |
|
|
|
(890 |
) |
|
|
(2,027 |
) |
|
(840 |
) |
|
|
(1,187 |
) |
Net increase in cash and cash equivalents |
|
453 |
|
|
1,256 |
|
|
|
(803 |
) |
|
|
56 |
|
|
1,071 |
|
|
|
(1,015 |
) |
Cash and cash equivalents at beginning of period |
|
169 |
|
|
150 |
|
|
|
19 |
|
|
|
566 |
|
|
335 |
|
|
|
231 |
|
Cash and cash equivalents at end of period |
|
622 |
|
|
1,406 |
|
|
|
(784 |
) |
|
|
622 |
|
|
1,406 |
|
|
|
(784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow per share
(3) |
$ |
1.09 |
|
$ |
1.06 |
|
|
$ |
0.03 |
|
|
$ |
2.47 |
|
$ |
2.45 |
|
|
$ |
0.02 |
|
Annualized cash flow yield
(5) |
|
6.3 |
% |
|
6.5 |
% |
|
|
(0.2 |
) pts |
|
|
6.3 |
% |
|
6.5 |
% |
|
|
(0.2 |
) pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BCE Supplementary Financial Information - Third Quarter 2015 Page
12
BCE
Consolidated Cash Flow Data - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
|
YTD
2015 |
|
|
|
Q3 15 |
|
|
Q2 15 |
|
|
Q1 15 |
|
|
|
TOTAL
2014 |
|
|
|
Q4 14 |
|
|
Q3 14 |
|
|
Q2 14 |
|
|
Q1 14 |
|
Net earnings |
|
2,188 |
|
|
|
791 |
|
|
814 |
|
|
583 |
|
|
|
2,718 |
|
|
|
594 |
|
|
703 |
|
|
707 |
|
|
714 |
|
Adjustments to reconcile net earnings to cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance, acquisition and other costs |
|
294 |
|
|
|
46 |
|
|
24 |
|
|
224 |
|
|
|
216 |
|
|
|
58 |
|
|
66 |
|
|
54 |
|
|
38 |
|
Depreciation and amortization |
|
2,553 |
|
|
|
860 |
|
|
854 |
|
|
839 |
|
|
|
3,452 |
|
|
|
852 |
|
|
855 |
|
|
879 |
|
|
866 |
|
Post-employment benefit plans cost |
|
295 |
|
|
|
96 |
|
|
96 |
|
|
103 |
|
|
|
377 |
|
|
|
93 |
|
|
91 |
|
|
94 |
|
|
99 |
|
Net interest expense |
|
677 |
|
|
|
225 |
|
|
229 |
|
|
223 |
|
|
|
921 |
|
|
|
236 |
|
|
225 |
|
|
226 |
|
|
234 |
|
(Gains) losses on investments |
|
(73 |
) |
|
|
19 |
|
|
(94 |
) |
|
2 |
|
|
|
(10 |
) |
|
|
6 |
|
|
- |
|
|
(4 |
) |
|
(12 |
) |
Income taxes |
|
736 |
|
|
|
271 |
|
|
290 |
|
|
175 |
|
|
|
929 |
|
|
|
221 |
|
|
241 |
|
|
236 |
|
|
231 |
|
Contributions to post-employment benefit plans |
|
(249 |
) |
|
|
(76 |
) |
|
(92 |
) |
|
(81 |
) |
|
|
(683 |
) |
|
|
(428 |
) |
|
(82 |
) |
|
(85 |
) |
|
(88 |
) |
Payments under other post-employment benefit plans |
|
(56 |
) |
|
|
(18 |
) |
|
(18 |
) |
|
(20 |
) |
|
|
(73 |
) |
|
|
(19 |
) |
|
(18 |
) |
|
(18 |
) |
|
(18 |
) |
Severance and other costs paid |
|
(146 |
) |
|
|
(45 |
) |
|
(52 |
) |
|
(49 |
) |
|
|
(190 |
) |
|
|
(44 |
) |
|
(40 |
) |
|
(38 |
) |
|
(68 |
) |
Acquisition costs paid |
|
(133 |
) |
|
|
(33 |
) |
|
(48 |
) |
|
(52 |
) |
|
|
(131 |
) |
|
|
(68 |
) |
|
(33 |
) |
|
(16 |
) |
|
(14 |
) |
Interest paid |
|
(682 |
) |
|
|
(225 |
) |
|
(230 |
) |
|
(227 |
) |
|
|
(907 |
) |
|
|
(233 |
) |
|
(214 |
) |
|
(231 |
) |
|
(229 |
) |
Income taxes paid (net of refunds) |
|
(518 |
) |
|
|
(66 |
) |
|
(119 |
) |
|
(333 |
) |
|
|
(743 |
) |
|
|
(180 |
) |
|
(92 |
) |
|
(110 |
) |
|
(361 |
) |
Net change in operating assets and liabilities |
|
(122 |
) |
|
|
33 |
|
|
187 |
|
|
(342 |
) |
|
|
365 |
|
|
|
439 |
|
|
180 |
|
|
156 |
|
|
(410 |
) |
Cash flows from operating activities |
|
4,764 |
|
|
|
1,878 |
|
|
1,841 |
|
|
1,045 |
|
|
|
6,241 |
|
|
|
1,527 |
|
|
1,882 |
|
|
1,850 |
|
|
982 |
|
Bell Aliant dividends paid to BCE |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
95 |
|
|
|
- |
|
|
47 |
|
|
48 |
|
|
- |
|
Capital expenditures |
|
(2,668 |
) |
|
|
(927 |
) |
|
(914 |
) |
|
(827 |
) |
|
|
(3,717 |
) |
|
|
(1,076 |
) |
|
(975 |
) |
|
(937 |
) |
|
(729 |
) |
Cash dividends paid on preferred shares |
|
(113 |
) |
|
|
(37 |
) |
|
(37 |
) |
|
(39 |
) |
|
|
(134 |
) |
|
|
(40 |
) |
|
(31 |
) |
|
(31 |
) |
|
(32 |
) |
Cash dividends paid by subsidiaries to non-controlling interest |
|
(33 |
) |
|
|
(26 |
) |
|
(7 |
) |
|
- |
|
|
|
(145 |
) |
|
|
(1 |
) |
|
(69 |
) |
|
(68 |
) |
|
(7 |
) |
Acquisition costs paid |
|
133 |
|
|
|
33 |
|
|
48 |
|
|
52 |
|
|
|
131 |
|
|
|
68 |
|
|
33 |
|
|
16 |
|
|
14 |
|
Voluntary defined benefit pension plan contribution |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
350 |
|
|
|
350 |
|
|
- |
|
|
- |
|
|
- |
|
Bell Aliant Free Cash Flow |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
(77 |
) |
|
|
5 |
|
|
(53 |
) |
|
(63 |
) |
|
34 |
|
Free Cash Flow |
|
2,083 |
|
|
|
921 |
|
|
931 |
|
|
231 |
|
|
|
2,744 |
|
|
|
833 |
|
|
834 |
|
|
815 |
|
|
262 |
|
Bell Aliant free cash flow, excluding dividends paid |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
(18 |
) |
|
|
(5 |
) |
|
6 |
|
|
15 |
|
|
(34 |
) |
Business acquisitions |
|
(286 |
) |
|
|
(2 |
) |
|
(284 |
) |
|
- |
|
|
|
(18 |
) |
|
|
(8 |
) |
|
(10 |
) |
|
- |
|
|
- |
|
Acquisition costs paid |
|
(133 |
) |
|
|
(33 |
) |
|
(48 |
) |
|
(52 |
) |
|
|
(131 |
) |
|
|
(68 |
) |
|
(33 |
) |
|
(16 |
) |
|
(14 |
) |
Voluntary defined benefit pension plan contribution |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
(350 |
) |
|
|
(350 |
) |
|
- |
|
|
- |
|
|
- |
|
Business dispositions |
|
409 |
|
|
|
2 |
|
|
407 |
|
|
- |
|
|
|
720 |
|
|
|
(4 |
) |
|
186 |
|
|
- |
|
|
538 |
|
Acquisition of spectrum licences |
|
(534 |
) |
|
|
(5 |
) |
|
(429 |
) |
|
(100 |
) |
|
|
(566 |
) |
|
|
- |
|
|
- |
|
|
(453 |
) |
|
(113 |
) |
Other investing activities |
|
(15 |
) |
|
|
(13 |
) |
|
(7 |
) |
|
5 |
|
|
|
11 |
|
|
|
13 |
|
|
1 |
|
|
2 |
|
|
(5 |
) |
Increase (decrease) in notes payable and bank advances |
|
672 |
|
|
|
555 |
|
|
(574 |
) |
|
691 |
|
|
|
469 |
|
|
|
(132 |
) |
|
443 |
|
|
(443 |
) |
|
601 |
|
Increase (reduction) in securitized trade receivables |
|
10 |
|
|
|
(305 |
) |
|
315 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Issue of long-term debt |
|
502 |
|
|
|
- |
|
|
- |
|
|
502 |
|
|
|
1,428 |
|
|
|
2 |
|
|
1,243 |
|
|
150 |
|
|
33 |
|
Repayment of long-term debt |
|
(977 |
) |
|
|
(108 |
) |
|
(723 |
) |
|
(146 |
) |
|
|
(1,113 |
) |
|
|
(445 |
) |
|
(117 |
) |
|
(136 |
) |
|
(415 |
) |
Early debt redemption costs |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
- |
|
|
- |
|
|
- |
|
Cash dividends paid on common shares |
|
(1,617 |
) |
|
|
(551 |
) |
|
(547 |
) |
|
(519 |
) |
|
|
(1,893 |
) |
|
|
(481 |
) |
|
(480 |
) |
|
(480 |
) |
|
(452 |
) |
Privatization of Bell Aliant |
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
(989 |
) |
|
|
(185 |
) |
|
(804 |
) |
|
- |
|
|
- |
|
Issue of common shares |
|
64 |
|
|
|
7 |
|
|
19 |
|
|
38 |
|
|
|
49 |
|
|
|
6 |
|
|
2 |
|
|
9 |
|
|
32 |
|
Other financing activities |
|
(122 |
) |
|
|
(15 |
) |
|
(16 |
) |
|
(91 |
) |
|
|
(108 |
) |
|
|
(12 |
) |
|
(15 |
) |
|
(33 |
) |
|
(48 |
) |
|
|
(2,027 |
) |
|
|
(468 |
) |
|
(1,887 |
) |
|
328 |
|
|
|
(2,513 |
) |
|
|
(1,673 |
) |
|
422 |
|
|
(1,385 |
) |
|
123 |
|
Net increase (decrease) in cash and cash equivalents |
|
56 |
|
|
|
453 |
|
|
(956 |
) |
|
559 |
|
|
|
231 |
|
|
|
(840 |
) |
|
1,256 |
|
|
(570 |
) |
|
385 |
|
Cash and cash equivalents at beginning of period |
|
566 |
|
|
|
169 |
|
|
1,125 |
|
|
566 |
|
|
|
335 |
|
|
|
1,406 |
|
|
150 |
|
|
720 |
|
|
335 |
|
Cash and cash equivalents at end of period |
|
622 |
|
|
|
622 |
|
|
169 |
|
|
1,125 |
|
|
|
566 |
|
|
|
566 |
|
|
1,406 |
|
|
150 |
|
|
720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow per share |
$ |
2.47 |
|
|
$ |
1.09 |
|
$ |
1.11 |
|
$ |
0.27 |
|
|
$ |
3.46 |
|
|
$ |
1.01 |
|
$ |
1.06 |
|
$ |
1.05 |
|
$ |
0.34 |
|
Annualized cash flow yield |
|
6.3 |
% |
|
|
6.3 |
% |
|
6.3 |
% |
|
6.0 |
% |
|
|
6.1 |
% |
|
|
6.1 |
% |
|
6.5 |
% |
|
6.6 |
% |
|
7.0 |
% |
BCE Supplementary Financial Information - Third Quarter 2015 Page
13
Accompanying Notes
|
Beginning January 1, 2015, we report our results of operations in three segments: Bell Wireless, Bell Wireline and Bell Media. Our reporting structure reflects how we manage our business and how we classify our operations for planning and measuring performance.
|
(1) |
Throughout this report, we, us, our, the company and BCE mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., its subsidiaries, joint arrangements and associates; and Bell Aliant means, as the context may require, until December 31, 2014, either Bell Aliant Inc. or, collectively, Bell Aliant Inc. and its subsidiaries and associates, or, after December 31, 2014 and up to, and including, June 30, 2015, either Bell Aliant Regional Communications Inc. or, collectively, Bell Aliant Regional Communications Inc. and its subsidiaries and associates.
|
(2) |
On October 31, 2014, BCE completed the acquisition of all the issued and outstanding shares of Bell Aliant that it did not already own, therefore eliminating the 55.9% ownership interest held by non-controlling interest. Beginning January 1, 2015, the results of operation of our former Bell Aliant segment are included within our Bell Wireless and Bell Wireline segments, with prior periods restated for comparative purposes.
|
(3) |
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA margin
The terms Adjusted EBITDA and Adjusted EBITDA margin do not have any standardized meaning under International Financial Reporting Standards (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 (including post-employment benefit plans service cost). 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 companys 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 also is 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, Adjusted EBITDA may be reconciled to net earnings as shown in this document.
Adjusted net earnings and Adjusted earnings per share (EPS)
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. |
BCE Supplementary Financial Information - Third Quarter 2015 Page
14
Accompanying Notes
|
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 non-controlling interest. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
The most comparable IFRS financial measures are net earnings attributable to common shareholders and EPS.
Free Cash Flow and Free Cash Flow per share
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, BCEs Free Cash Flow includes 100% of Bell Aliants 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 non-controlling interest.
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 non-controlling interest and Bell Aliant Free Cash Flow.
We define Free Cash Flow per share as follows:
Free Cash Flow
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.
For Free Cash Flow, the most comparable IFRS financial measure is cash flows from operating activities.
Net debt
The term Net Debt does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define Net Debt as debt due within one year plus long-term debt and 50% of preferred shares less cash and cash equivalents. We include 50% of outstanding preferred shares in our Net Debt as it is consistent with the treatment by certain credit rating agencies. |
BCE Supplementary Financial Information - Third Quarter 2015 Page
15
Accompanying Notes
|
We consider Net Debt to be an important indicator of the companys financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use Net Debt to determine a companys financial leverage.
Net Debt has no directly comparable IFRS financial measure, but rather is calculated using several asset and liability categories from the statements of financial position, as shown in this document.
|
(4) |
Key Performance Indicators (KPIs)
We use a number of KPIs to measure the success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by other issuers.
Capital Intensity is capital expenditures divided by operating revenues.
Average revenue per user or subscriber (ARPU)
represents the measurement of certain service revenues divided by the average subscriber base for the specified period.
Churn is the rate at which existing subscribers cancel their services, expressed as a percentage. Churn is calculated as the number of subscribers disconnected divided by the average subscriber base. It is a measure of monthly customer turnover.
Cost of acquisition (COA)
is also referred to as subscriber acquisition costs. COA represents the total cost associated with acquiring a customer and includes costs such as hardware discounts, marketing and distribution costs. This measure is expressed per gross activation during the period.
Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA is BCE Net Debt divided by Adjusted EBITDA. Net Debt is debt due within one year plus long-term debt and 50% of preferred shares less cash and cash equivalents. For the purposes of calculating our Net Debt to Adjusted EBITDA ratio, Adjusted EBITDA is defined as twelve-month trailing BCE Adjusted EBITDA.
Adjusted EBITDA to net interest expense
Adjusted EBITDA to net interest expense is Adjusted EBITDA divided by net interest expense. For the purposes of calculating our Adjusted EBITDA to net interest expense ratio, Adjusted EBITDA is defined as twelve-month trailing BCE Adjusted EBITDA. Net interest expense is twelve-month trailing BCE interest expense excluding interest on post-employment benefit obligations and including 50% of preferred dividends.
|
(5) |
Annualized cash flow yield is calculated as follows:
Trailing 12 month Free Cash Flow
Number of common shares outstanding at end of period multiplied by share price at end of period
|
BCE Supplementary Financial Information - Third Quarter 2015 Page
16
Exhibit 99.3
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/bce_colourlogo.jpg)
Form 52-109F2 Certification of Interim Filings - Full Certificate
I, George A. Cope, President and Chief Executive Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of BCE Inc. (the issuer) for the interim period ended September 30, 2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
|
A. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
|
|
|
I. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
|
|
|
II. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
|
B. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO Framework).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers
ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: November 5, 2015
|
(signed) George A. Cope |
|
George A. Cope
President and Chief Executive Officer |
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/bce_colourlogo.jpg)
Form 52-109F2 Certification of Interim Filings - Full Certificate
I, Glen LeBlanc, Executive Vice-President and Chief Financial Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of
BCE Inc. (the issuer) for the interim period ended September 30, 2015.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
|
A. |
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
|
|
|
I. |
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
|
|
|
II. |
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
|
B. |
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO Framework).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers
ICFR that occurred during the period beginning on July 1, 2015 and ended on September 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: November 5, 2015
|
(signed) Glen LeBlanc |
|
Glen LeBlanc
Executive Vice-President and Chief
Financial Officer |
Exhibit 99.4
For Immediate Release
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.
BCE reports third quarter 2015 results
-
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 $1,878 million drives Free Cash Flow increase of 10.4%
-
Adjusted EBITDA grows 3.4% on 2.9% increase in total revenues
-
Wireless Adjusted EBITDA growth of 8.3% driven by 9.3% higher revenue; strong 6.1% increase in blended ARPU; total Q3 postpaid net additions of 78,000
-
Wireline Adjusted EBITDA up 1.1%, positive for a fifth consecutive quarter; industry- leading margin increased to 41.1%
-
Fastest growing broadband TV and Internet provider in Canada in Q3 with 126,000 total net customer additions 68,000 IPTV and 58,000 high-speed Internet
-
Bell has now become Canadas largest TV provider with over 2.7 million subscribers, up 3.9% over last year
-
Canadas largest Gigabit Internet footprint with availability to 2 million homes in Québec, Ontario and the Atlantic region
-
Bell Media revenue up 4.1%; Adjusted EBITDA grows 0.5%
MONTRÉAL, November 5, 2015 BCE Inc. (TSX, NYSE: BCE), Canadas largest communications company, today reported results for the third quarter (Q3) of 2015.
FINANCIAL HIGHLIGHTS |
|
|
|
($ 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% |
Bells 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 Canadas 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
1/15
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. Canadas 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 Medias premier content. Weve 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 Canadas continued leadership in global communications.
Bell is focused on achieving a clear goal to be recognized by customers as Canadas 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, Bells 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.
BCEs 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. BCEs 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.
BCEs 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 BCEs 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.
2/15
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.
BCEs 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 Canadas #1 television provider
Bell became Canadas 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.
Bells 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.
3/15
Largest Gigabit Internet footprint in Canada
Bell is leading the way in gigabit Internet service in Canada. Weve 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. Its 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. Bells 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 PCMags tests, Bells 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 Americas 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. Bells 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
Bells 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 countrys 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 Lets Talk mental health initiative extended for 5 years
In September, the fifth anniversary of Bell Lets 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 Lets 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 theyre 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.
4/15
$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 Canadas 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
5/15
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 Bells 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, BCEs 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.
6/15
Conventional TV advertising growth was supported by Bell Medias 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 Womens World Cup Soccer, the recapture of advertising dollars that moved to the broadcaster of FIFA Mens 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 CBCs 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 Québecs 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 Canadas 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.
7/15
COMMON SHARE DIVIDEND
BCEs 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, BCEs Free Cash Flow includes 100% of Bell Aliants 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 BCEs 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 BCEs consolidated income statements. Adjusted EBITDA for BCEs segments is the same as segment profit as reported in Note 3 to BCEs 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 companys 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 |
8/15
|
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 |
9/15
(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, BCEs Free Cash Flow includes 100% of Bell Aliants 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 BCEs 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, BCEs 2015 annualized common share dividend and common share dividend policy, our network deployment plans including,
10/15
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 Canadas 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
11/15
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,
12/15
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 BCEs 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
13/15
-
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 TVs TV distribution market and Bell Medias markets
-
rising programming costs and Bell Medias 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 Medias 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
14/15
-
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
-
BCEs 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 BCEs board of directors or BCEs 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 BCEs 2014 Annual MD&A dated March 5, 2015 (included in the BCE 2014 Annual Report) and BCEs 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
Canadas 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 Canadas premier multimedia company with leading assets in television, radio, out of home and digital media, including CTV, Canadas #1 television network, and the countrys most-watched specialty channels. To learn more, please visit BCE.ca.
The Bell Lets Talk initiative promotes Canadian mental health with national awareness and anti-stigma campaigns, like Claras Big Ride for Bell Lets Talk and Bell Lets 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
Exhibit 99.5
NOTICE OF RELIANCE
SECTION 13.4 OF NATIONAL INSTRUMENT 51-102
CONTINUOUS DISCLOSURE OBLIGATIONS
To: |
Alberta Securities Commission
British Columbia Securities Commission
Manitoba Securities Commission
Financial and Consumer Services Commission, New Brunswick
Office of the Superintendent of Securities, Newfoundland and Labrador
Nova Scotia Securities Commission
Ontario Securities Commission
Office of the Superintendent of Securities, Prince Edward Island
Autorité des marchés financiers
Financial and Consumer Affairs Authority of Saskatchewan
Toronto Stock Exchange |
Notice is hereby given that Bell Canada relies on the continuous disclosure documents filed by BCE Inc. pursuant to the exemption from the requirements of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) provided in Section 13.4 of NI 51-102.
The continuous disclosure documents of BCE Inc. can be found for viewing in electronic format at www.sedar.com.
Attached to this notice and forming part thereof is the consolidating summary financial information for BCE Inc. as required by Section 13.4 of NI 51-102.
Dated: November 5, 2015
BELL CANADA |
By: |
(signed) Thierry Chaumont |
Name: |
Thierry Chaumont |
Title: |
Senior Vice-President and Controller |
![](http://www.sec.gov/Archives/edgar/data/718940/000071894015000034/bell_logo.jpg)
UNAUDITED SELECTED SUMMARY FINANCIAL INFORMATION(1)
For the periods ended September 30, 2015 and 2014
(in millions of Canadian dollars)
BCE Inc. fully and unconditionally guarantees the payment obligations of its 100% owned subsidiary Bell Canada under the public debt issued by Bell Canada. Accordingly, the following summary financial information is provided by Bell Canada in compliance with the requirements of section 13.4 of National Instrument 51-102 (Continuous Disclosure Obligations) providing for an exemption for certain credit support issuers. The tables below contain selected summary financial information for (i) BCE Inc. (as credit supporter), (ii) Bell Canada (as credit support issuer) on a consolidated basis, (iii) BCE Inc.s subsidiaries, other than Bell Canada, on a combined basis, (iv) consolidating adjustments, and (v) BCE Inc. and all of its subsidiaries on a consolidated basis, in each case for the periods indicated. Such summary financial information for BCE Inc. and Bell Canada and all other subsidiaries is intended to provide investors with meaningful and comparable financial information about BCE Inc. and its subsidiaries. This summary financial information should be read in conjunction with BCE Inc.s audited consolidated financial statements for the year ended December 31, 2014 and the unaudited consolidated interim financial report for the nine months ended September 30, 2015.
For the periods ended September 30:
|
BCE INC.
(CREDIT SUPPORTER)(2) |
BELL CANADA CONSOLIDATED
(CREDIT SUPPORT ISSUER) |
SUBSIDIARIES OF BCE INC.
OTHER THAN BELL CANADA(3) |
CONSOLIDATING
ADJUSTMENTS(4) |
BCE
CONSOLIDATED |
|
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
|
Three |
Three |
Nine |
Nine |
Three |
Three |
Nine |
Nine |
Three |
Three |
Nine |
Nine |
Three |
Three |
Nine |
Nine |
Three |
Three |
Nine |
Nine |
|
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
months |
Operating revenues |
|
|
|
|
5,346 |
5,196 |
15,913 |
15,515 |
|
|
|
|
(1) |
(1) |
(2) |
(1) |
5,345 |
5,195 |
15,911 |
15,514 |
Net earnings from continuing
operations attributable
to owners |
777 |
631 |
2,145 |
1,918 |
783 |
513 |
2,134 |
1,544 |
|
|
|
|
(783) |
(513) |
(2,134) |
(1,544) |
777 |
631 |
2,145 |
1,918 |
Net earnings attributable
to owners |
777 |
631 |
2,145 |
1,918 |
783 |
513 |
2,134 |
1,544 |
|
|
|
|
(783) |
(513) |
(2,134) |
(1,544) |
777 |
631 |
2,145 |
1,918 |
As at September 30, 2015 and December 31, 2014 respectively:
|
BCE INC.
(CREDIT SUPPORTER)(2) |
BELL CANADA CONSOLIDATED
(CREDIT SUPPORT ISSUER) |
SUBSIDIARIES OF BCE INC.
OTHER THAN BELL CANADA(3) |
CONSOLIDATING
ADJUSTMENTS(4) |
BCE
CONSOLIDATED |
|
Sept. 30, |
Dec. 31, |
Sept. 30, |
Dec. 31, |
Sept. 30, |
Dec. 31, |
Sept. 30, |
Dec. 31, |
Sept. 30, |
Dec. 31, |
|
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
Total Current Assets |
2,051 |
1,850 |
5,684 |
5,370 |
53 |
53 |
(3,211) |
(2,725) |
4,577 |
4,548 |
Total Non-current Assets |
16,226 |
15,018 |
35,968 |
35,236 |
21 |
21 |
(9,124) |
(8,526) |
43,091 |
41,749 |
Total Current Liabilities |
1,822 |
1,640 |
12,690 |
10,172 |
|
|
(3,209) |
(2,723) |
11,303 |
9,089 |
Total Non-current Liabilities |
276 |
281 |
18,958 |
21,043 |
|
|
646 |
645 |
19,880 |
21,969 |
(1) |
The summary
financial information is prepared in accordance with International
Financial Reporting Standards and is in accordance with generally
accepted accounting principles issued by the Canadian Accounting
Standards Board for publicly-accountable enterprises. |
(2) |
This column
accounts for investments in all subsidiaries of BCE Inc. under the
equity method. |
(3) |
This column accounts for investments in all subsidiaries of BCE Inc. (other than Bell Canada) on a consolidated basis. |
(4) |
This column includes the necessary amounts to eliminate the intercompany balances between BCE Inc., Bell Canada and other subsidiaries and other adjustments to arrive at the information for BCE Inc. on a consolidated basis. |
Exhibit 99.6
BCE Inc.
EXHIBIT TO 2015 THIRD QUARTER FINANCIAL STATEMENTS
EARNINGS COVERAGE
The following consolidated financial ratios are
calculated for the twelve months ended September 30, 2015 and give effect to the
issuance and redemption of all long-term debt since October 1, 2014 as if these
transactions occurred on October 1, 2014 and are based on unaudited financial
information of BCE Inc.
|
September 30, 2015 |
|
|
Earnings coverage of interest on debt requirements
based on net earnings attributable to owners of BCE Inc. before interest expense
and income tax: |
4.8 times |
|
Earnings coverage of interest on debt requirements
based on net earnings attributable to owners of BCE Inc. before interest
expense, income tax and non-controlling interest: |
4.8 times |
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