This news release contains forward-looking statements. For a
description of the related risk factors and assumptions, please see
the section entitled "Caution Concerning Forward-Looking
Statements" later in this release.
- Net earnings attributable to common shareholders of
$707 million, up 32.9%; adjusted net
earnings of $734 million, up 4.1%,
drive adjusted EPS of $0.85
- Service revenue growth of 1.3% and disciplined cost
management deliver 3.3% higher adjusted EBITDA; consolidated margin
grows to 41%
- Canada's broadband leader: 93,000 net new postpaid wireless,
IPTV and high-speed Internet subscribers
- Strong wireless financial results: service revenue up 5.3%
on 3.6% higher ARPU; 6.9% increase in adjusted EBITDA yields higher
48.2% margin
- Wireline adjusted EBITDA up 1.3% on 3.4% lower operating
costs, delivering a 1.1 percentage-point increase in
industry-leading margin to 42.1%
- Bell's broadband fibre network delivers Canada's best
Internet experience directly to more than 2.5 million locations;
$1 billion investment in broadband
fibre to extend Gigabit Fibe capability to 3 million homes and
businesses by end of 2016
- Media adjusted EBITDA up 2.8% on 2.1% higher total revenue
and tight cost control; TSN and RDS confirmed as Canada's sports
and specialty TV leaders
- The Movie Network (TMN) launched as a national pay TV
service on March 1; CraveTV
direct-to-consumer subscriber base surpasses 100,000 in first 90
days
- Continued service progress lowers customer churn and
operating costs
MONTRÉAL, April 28, 2016
/PRNewswire/ - BCE Inc. (TSX: BCE) (NYSE: BCE), Canada's
largest communications company, today reported results for the
first quarter (Q1) of 2016.
FINANCIAL
HIGHLIGHTS
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
Q1
2016
|
Q1
2015
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,270
|
5,240
|
0.6%
|
Adjusted
EBITDA(1)
|
2,163
|
2,094
|
3.3%
|
Net earnings
attributable to common shareholders
|
707
|
532
|
32.9%
|
EPS
|
0.82
|
0.63
|
30.2%
|
Adjusted
EPS(2)
|
0.85
|
0.84
|
1.2%
|
Cash flows from
operating activities
|
1,290
|
1,045
|
23.4%
|
Free cash
flow(3)
|
418
|
231
|
81.0%
|
Free cash flow per
share(3)
|
0.48
|
0.27
|
77.8%
|
"With 93,000 new postpaid wireless, TV and Internet customers in
Q1, Bell moves forward in 2016 as Canada's broadband growth leader.
The Bell strategy of investment in the most advanced networks and
product innovations, combined with a focus on operational
efficiency at every level, is clearly delivering the better
broadband customer experience," said George
Cope, President and CEO of BCE and Bell Canada. "The Bell team's strong operational
execution, focus on growing broadband usage and effective cost
management across our wireless, wireline and media segments has now
delivered 42 consecutive quarters of uninterrupted year-over-year
adjusted EBITDA growth."
"As Bell celebrates our 136th anniversary tomorrow,
we continue to lead Canadian communications innovation with the
fastest networks, exclusive new TV features and Internet services,
and the most popular television, radio and digital programming in
Canada. The Bell team remains
dedicated to delivering superior communications services to
consumers and business customers – and Canadians are responding
with growing usage and increased satisfaction with our leading
broadband networks and services," said Mr. Cope.
Bell is focused on achieving a clear goal – to be recognized by
customers as Canada's leading communications company – through the
execution of 6 Strategic Imperatives: Invest in Broadband Networks
& Services, Accelerate Wireless, Leverage Wireline Momentum,
Expand Media Leadership, Improve Customer Service, and Achieve a
Competitive Cost Structure. This broadband leadership strategy has
delivered unparalleled investments in advanced fibre and wireless
network infrastructure; continued strong marketplace performance
across wireless, TV, Internet and media growth services; and 12
increases to the BCE common share dividend since the fourth quarter
of 2008 – a total increase of 87%.
"Highlighted by continued excellent wireless performance,
disciplined and steady wireline growth and leading media results
that collectively delivered a strong contribution to consolidated
adjusted EBITDA, net earnings and free cash flow growth, our
first-quarter results represent a solid start to the year," said
Glen LeBlanc, Chief Financial
Officer of BCE and Bell Canada.
"BCE's focus on subscriber profitability and cost control, together
with dependable free cash flow generation and an investment-grade
balance sheet, enables us to make significant capital investments
to sustain future growth, while also supporting BCE's increased
common share dividend for 2016 announced on February 4. With strong first-quarter results in
line with plan, no fundamental changes in our overall outlook, and
a business that is competitively well-positioned across all
services and in all markets, BCE today reconfirms our financial
guidance for 2016."
BCE RESULTS
BCE operating revenue was up 0.6% in Q1 to
$5,270 million, reflecting a 1.3%
year-over-year increase in total service revenues driven by solid
wireless, wireline residential and media growth. Product revenue
declined 8.0%, or $31 million, in Q1,
the result of aggressive competitor promotional handset offers and
reduced spending by business customers on wireline data
products.
BCE's adjusted EBITDA grew 3.3% to $2,163
million on positive year-over-year growth across all Bell
operating segments: 6.9% at Bell Wireless, 1.3% at Bell Wireline
and 2.8% at Bell Media. BCE's consolidated adjusted EBITDA
margin(1) increased to 41.0%, from 40.0% in Q1 2015,
reflecting strong wireless average revenue per user(4)
(ARPU) flow-through, increasing IPTV and Internet scale that is
driving growth in three-product households and residential revenue,
and disciplined cost management.
Net earnings attributable to common shareholders were
$707 million or $0.82 per share in Q1, up 32.9% and 30.2%
respectively from $532 million or
$0.63 per share last year. The
year-over-year increase was due to lower severance, acquisition and
other costs (BCE recorded a $137 million charge in Q1 2015 for
litigation related to satellite TV signal piracy), higher adjusted
EBITDA, and higher other income. The increase was partly offset by
higher income taxes and increased depreciation and amortization
expense attributable to a higher capital asset base in service.
Excluding the impact of severance, acquisition and other costs,
net gains or losses on investments, and early debt redemption
costs, adjusted net earnings(2) increased 4.1% to
$734 million or $0.85 per common
share, compared to $705 million or
$0.84 per common share in Q1
2015.
As the industry leader in broadband networks and service
innovation, BCE capital expenditures of $852
million in Q1 increased 3.0% over last year. This
represented a capital intensity(4) ratio (capital
expenditures as a percentage of total revenue) of 16.2% compared to
15.8% in Q1 2015. Capital spending focused on expanding broadband
fibre directly to more homes and businesses, including the
build-out of Gigabit Fibe infrastructure in Toronto and other urban locations; continued
investment to enhance wireless quality, speed and coverage of
Bell's award-winning 4G LTE and LTE Advanced (LTE-A) services; and
increasing wireless and Internet network capacity overall to
support accelerating video and other data usage.
BCE's cash flows from operating activities were $1,290 million, compared to $1,045 million in Q1 2015. Seasonally low
first-quarter free cash flow was $418
million, up 81.0% from $231 million last year. The
increase was driven by higher adjusted EBITDA, lower cash taxes,
and a positive change in working capital, partly offset by a
planned increase in capital expenditures and higher severance
payments related to Q4 2015 workforce restructuring initiatives.
Free cash flow per share was $0.48 in
Q1, an increase of 77.8% from $0.27
last year.
Overall in Q1 2016, BCE gained 25,805 net new wireless postpaid
customers and reported a net loss of 35,673 prepaid subscribers;
47,740 net new Fibe TV customers and a net loss of 37,741 Satellite
TV customers; and the addition of 19,783 new high-speed Internet
customers. NAS line net losses totalled 107,632.
At March 31, 2016, BCE served a
total of 8,235,963 wireless customers, up 1.6% year over year
(including 7,401,221 postpaid customers, an increase of 3.6%);
total TV subscribers of 2,748,495, up 3.4% (including 1,230,531
Fibe TV customers, an increase of 24.3%); total high-speed Internet
subscribers of 3,411,246, up 3.4%; and total NAS lines of
6,565,508, a decrease of 6.4%. The high-speed Internet and business
NAS subscriber bases this quarter included beginning-of-year
adjustments that reduced the number of subscribers by 21,684 and
15,526 respectively, to align Bell Aliant's reporting practices
with Bell's.
CORPORATE DEVELOPMENTS
TSN and RDS confirmed as #1 sports networks and specialty
channels in Q1
According to broadcast measurement data from
Numeris, TSN was Canada's top specialty channel and the nation's #1
sports network in Q1 with an average audience 19% higher than its
closest competitor. RDS was the #1 French-language sports network
and top specialty channel in Québec with overall viewership almost
3 times that of its closest competitor in Q1.
With more sought-after sports championships than any other
broadcaster in Canada, TSN's
strong ratings were powered by the NFL Playoffs, Season of
Champions Curling, the Australian Open, NCAA® March Madness®, and
the enduringly popular World Juniors hockey. At RDS, Super Bowl 50
was the most-watched football game in the network's history, the
start of the new F1 season recorded a 36% year-over-year audience
increase, and unique in-house programming such as Challenge hockey
RDS EA Sports continues to attract new viewers.
FTTH leads in Internet speed: Bell investing $1 billion in new fibre in 2016
An
Internet performance report commissioned by the CRTC and released
in March 2016 found that
fibre-to-the-home (FTTH) connections like Bell's provide the best
Internet service available in Canada today. Bell plans to invest
approximately $1 billion in broadband
fibre deployment in 2016, extending service capability for the
groundbreaking Bell Gigabit Fibe Internet service to approximately
3 million homes and businesses in Ontario, Québec and Atlantic Canada by the end of the year. The
CRTC report was based on testing of broadband services available
from Canada's 10 major wireline Internet service providers in late
2015. Results consistently show that FTTH networks outperform all
other wireline technologies, including connections used by cable
companies.
National expansion of The Movie Network
Bell Media
announced the national expansion of premium pay TV services The
Movie Network (TMN) and TMN Encore on March
1, following Corus Entertainment's waiver of HBO content
rights and the wind down of its Movie Central and Encore Avenue pay
TV services in Western and Northern
Canada. Comprised of 4 high definition multiplex channels,
TMN offers the biggest movies from the most Hollywood studios, exclusive programming from
HBO and SHOWTIME, and acclaimed Canadian feature film and other
programming. TMN Encore offers 2 HD channels with classic films
from every era. TMN subscribers also have access to TMN OnDemand
and the TMN GO mobile video streaming service.
Continued customer service progress
With significant
investments in IT support systems, team training, simplified
billing and increasingly popular online and mobile customer
self-serve apps, Bell continues to improve customer satisfaction,
with decreases in both Bell Mobility and Bell Residential customer
churn and continued reductions in call centre volumes in Q1 even as
Bell grew faster than its competitors. The federal Commissioner of
Complaints for Telecommunications Services (CCTS) received 17%
fewer complaints about Bell and Virgin Mobile between August 1, 2015 and January
31, 2016 than in the same period the year before.
Bell Business Markets partners with IBM to expand cloud
computing ecosystem
Bell announced a new partnership with
IBM Canada Limited (IBM) on February
8 to further expand cloud computing services available
through the Bell Business Cloud service. The partnership will give
businesses across Canada access to the IBM Cloud and its wide range
of on-demand computing and storage options via a secure, high-speed
private connection from Bell, simplifying the way customers adopt
and build out their hybrid cloud operations.
New $750 million public debt
offering
Bell Canada
completed a public offering on February
29 of $750 million of medium
term notes (MTN) debentures pursuant to its MTN program. The
$750 million Series M-41 debentures
will mature on March 2, 2026 and
carry an annual interest rate of 3.55%. The net proceeds of this
offering were used primarily to fund the redemption prior to
maturity on March 31, 2016 of
Bell Canada's $500 million principal amount of 5.41% Series
M-32 debentures due September 26,
2016. The balance of the net proceeds was used for general
corporate purposes, including the repayment of Bell Canada's $150
million principal amount of Floating Rate Series M-38
debentures due April 22, 2016. With
this debt issuance, Bell Canada's
2016 re-financing requirements have been effectively completed.
Monique Leroux, Calin
Rovinescu to join Board, Gordon
Nixon to be appointed Chair
Further underscoring the
high calibre and governance depth of the BCE Board of Directors,
BCE announced on March 9 the
nomination of Monique F. Leroux and
Calin Rovinescu for election to the Board at BCE's Annual General
Shareholder Meeting today in Montréal. This follows the
February 4 announcement of the
Board's intention to appoint Gordon M.
Nixon as Chair of the Board following the retirement of
Thomas C. O'Neill today.
Ms. Leroux served as Chair, President and CEO of Desjardins
Group, the leading cooperative financial group in Canada, until April
9, and is currently a Director of Alimentation Couche-Tard,
Crédit Industriel et Commercial and Michelin Group. Before joining
Desjardins Group in 2001, Ms. Leroux held senior executive
positions at Québecor, RBC and Ernst & Young. Mr. Rovinescu has
served as President and CEO of Air Canada since April 2009 and is Chair of Acasta Enterprises.
Mr. Rovinescu was Air Canada's Executive VP, Corporate Development
and Strategy from 2000 to 2004 and also held the position of Chief
Restructuring Officer. He was a Co-founder and Principal of Genuity
Capital Markets, and was previously a partner with law firm
Stikeman Elliott LLP.
A Director of BCE since November
2014, Gordon Nixon was
President and CEO of the Royal Bank of Canada from 2001 to 2014,
and CEO of RBC Dominion Securities from 1999 to 2001. Mr. Nixon is
a Director of George Weston Limited and BlackRock and is Chair of
Toronto-based innovation centre
MaRS. Retiring as Chair of the Board today, Thomas O'Neill has served as a BCE Director
since 2003 and as Chair since February
2009. Mr. O'Neill departs with BCE's sincere gratitude for
his leadership in Bell's successful transformation into Canada's
broadband leader and his stellar service to our customers,
shareholders, team members and the community.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Bell Wireless service revenues increased
5.3% to $1,579 million, from
$1,500 million in Q1 2015, reflecting
a higher postpaid subscriber mix and industry-leading blended ARPU
growth due to increased usage of Bell's 4G LTE and LTE-A mobile
networks.
Product revenues decreased 18.1% to $104
million due to intensely competitive promotional handset
pricing as well as fewer customer upgrades and postpaid gross
additions compared to Q1 2015. Total Bell Wireless operating
revenue increased 3.4% to $1,693
million, up from $1,637
million last year.
Wireless adjusted EBITDA grew 6.9% to $761 million with a 0.7 percentage-point increase
in service margin to 48.2%, underscoring our focus on postpaid
subscriber profitability and cost discipline. Despite a
$23 million increase in total
retention spending and cost of acquisition (COA)(4),
operating costs remained essentially stable compared to last year,
increasing only 0.8%.
Bell Wireless also continued to contribute strongly to overall
BCE free cash flow generation in Q1 with 6.8% growth in adjusted
EBITDA less capital expenditures of $599
million.
- Postpaid net additions were 25,805 compared to 35,373 in Q1 of
last year due to a 1.3% decrease in gross additions to 275,415, the
result of reduced market activity particularly in the first half of
the quarter.
- Postpaid customer churn(4) in Q1 decreased 0.03
percentage points over last year to 1.15%, reflecting improved
customer service metrics.
- Bell Wireless postpaid customers totalled 7,401,221 at the end
of Q1 2016, a 3.6% increase over last year. Total Bell Wireless
customers grew 1.6% to 8,235,963.
- The percentage of postpaid subscribers with smartphones
increased to 82% from 77% at the end of Q1 2015. The proportion of
postpaid subscribers on LTE reached 73%, up from 52% a year
earlier.
- Blended ARPU increased 3.6% to $63.02, driven by a higher percentage of
customers on 2-year contracts, increased data usage on our leading
4G LTE networks, and a greater mix of smartphone postpaid customers
in the total subscriber base.
- COA increased 9.3% to $494 per
subscriber, reflecting an increased postpaid customer mix and
higher handset prices due to a weak Canadian dollar.
- Retention spending increased to 11.8% of wireless service
revenues from 11.5% in Q1 2015 despite fewer year-over-year
customer upgrades. This was due mainly to a higher sales mix of
premium smartphones and a higher level of promotional sales
activity.
- Bell continued the rollout of its Dual-band LTE-A wireless
network, now providing service to 49% of the Canadian population at
data speeds up to 260 megabits per second (Mbps) (expected average
download speeds of 18 to 74 Mbps), with plans to cover 75% by the
end of 2016. In addition, a Tri-band LTE-A service delivers data
speeds of up to 335 Mbps (expected average 25 to 100 Mbps) in
Halifax, Fredericton, Moncton, Toronto, Hamilton and Oakville. This is complemented by a national
4G LTE mobile network that reached 96% of Canadians at the end of
Q1 2016 with data speeds ranging from 75 Mbps to 150 Mbps (expected
average 12 to 40 Mbps).
- Bell launched an initial voice and video over LTE (VoLTE)
service in February in parts of the Greater Toronto Area for customers with
Samsung Galaxy S6 smartphones running Android 5.1.1 or higher.
VoLTE enables faster call set up times, improved voice quality, and
the ability to switch seamlessly between voice and video during
calls.
- Roam Better International launched in March, offering Bell
Mobility customers great rates while traveling: unlimited voice and
text messages and an additional dedicated 100 MB of data usage for
$10 a day in over 110 destinations
across Europe, the Americas,
Asia and the Middle East, Australia and South
Africa, more international coverage than any other
competitor. Roam Better US, introduced in November 2015, offers the same talk, text and
data usage in the United States
for $5 a day.
Bell Wireline
Wireline operating revenue decreased
1.5% to $2,983 million, reflecting
the impact on business markets of competitive pricing pressures and
slow economic growth, which reduced customer demand for core
connectivity services, business service solutions and data
products. The Residential Services wireline unit delivered a tenth
consecutive quarter of year-over-year revenue growth, with 1.0%
higher revenue driven by a 6.6% increase in total combined TV and
Internet revenues.
Bell Wireline generated positive adjusted EBITDA growth for a
seventh consecutive quarter, increasing 1.3% to $1,257 million. This yielded a 1.1
percentage-point improvement in margin to an industry-best 42.1%,
and reflected a 3.4% decrease in operating costs due to
organizational restructuring initiatives undertaken in Q4 2015 as
well as continued service improvement, Bell Aliant integration
savings and ongoing spending controls.
Bell Wireline generated adjusted EBITDA less capital
expenditures of $588 million, up
0.5%, even with higher year-over-year investment in broadband fibre
to support future TV and Internet growth.
- Bell TV added 47,740 net new Fibe TV customers compared to
60,863 in Q1 2015, reflecting less new footprint expansion. At the
end of Q1 2016, BCE served 1,230,531 Fibe TV subscribers, up 24.3%
compared to Q1 2015.
- Satellite TV net customer losses increased from 33,873 in Q1
last year to 37,741, due to aggressive cable conversion offers in
areas where BCE does not offer IPTV and higher wholesale customer
deactivations.
- Total TV subscribers for all BCE TV services increased 3.4% to
2,748,495 at the end of Q1.
- High-speed Internet net additions totalled 19,783, compared to
39,650 in Q1 2015. Despite the positive impact of Bell Fibe
Internet's speed and reliability on customer churn, total Internet
net additions decreased due primarily to fewer wholesale net
customer additions.
- BCE's high-speed Internet customer base reached 3,411,246 at
the end of Q1, up 3.4% compared to Q1 2015.
- Wireline data revenue was up 2.1% to $1,794 million on strong growth in TV and
Internet revenue. This was moderated by reduced customer spending
on IP broadband connectivity services, business service solutions
and data products by large enterprise customers.
- Residential NAS net losses increased 2.4% to 67,428 from 65,870
last year, the result of ongoing wireless and IP technology
substitution and aggressive bundle promotions by cable
competitors.
- Business NAS net losses were down 8.8% to 40,204 from 44,069 in
Q1 2015. Reduced small business and large enterprise customer
deactivations resulted from improved customer retention, fewer
competitive losses and decreased business voice line conversion to
IP-based services.
- Total NAS access lines at the end of Q1 2016 totalled
6,565,508, a 6.4% decline.
- As a result of the year-over-year reduction in NAS access
lines, BCE's local and access revenue decreased 4.2% to
$789 million, while long distance
revenue fell 10.3% to $191
million.
Bell Media
Media revenue grew 2.1% to $741 million, up from $726
million in Q1 last year. Strong subscriber revenue growth
reflected the national expansion of The Movie Network (TMN),
favourable sports specialty TV rate adjustments with a broadcast
distributor, and higher revenues from CraveTV and TV Everywhere GO
products.
Advertising revenue for conventional and specialty TV was
impacted by reduced year-over-year spending by some key customer
segments and higher viewership of the World Juniors in Q1 2015 when
the event was held in Canada.
Radio advertising also declined due mainly to a weaker economy in
western Canada. Growth at Astral Out of Home moderated the decline
in total advertising revenue in Q1.
Media adjusted EBITDA increased 2.8% to $145 million from $141
million in Q1 last year on higher year-over-year revenue and
workforce restructuring savings that moderated operating cost
growth this quarter.
Media operating costs increased 1.9% to $596 million due to higher sports broadcast
rights costs and CraveTV content investments.
Bell Media supported BCE's consolidated free cash flow growth
with adjusted EBITDA less capital expenditures of $124 million, up 2.5% over Q1 2015.
- CTV led the winter TV season with 14 of the top 20 programs,
more than all other Canadian networks combined. CTV also claimed 8
of the top 10 spots in the new spring season.
- TSN was the #1 specialty network in Canada among all viewers, benefitting from
strong audience levels for the World Juniors, Toronto Raptors,
Tim Hortons Brier and NASCAR Xfinity
races.
- Bell Media's specialty and pay TV properties reached 83% of all
Canadian English specialty and pay TV viewers in the average week
during Q1 2016. Bell Media led in primetime with the top
entertainment specialty station (Discovery) with viewers aged 25 to
54. Space, Comedy and Bravo all ranked in the Top 10.
- Bell Media maintained its leadership position in Québec's
French-language market with audiences for specialty TV reaching 81%
of all TV viewers in the average week. Three out of the top 5
specialty channels among viewers aged 25 to 54 were Bell Media
properties: RDS, Super Écran and Canal D.
- Bell Media continues to lead the Canadian digital landscape in
unique visitors (18.2 million unique visitors), time spent (842
million minutes), and videos served (34 million).
- Bell Media remained Canada's top radio broadcaster in Q1
reaching 16.6 million listeners, who spent in excess of 78 million
hours tuned in each week.
- Bell Media and its production partners were honoured with 56
awards by the Academy of Canadian Cinema and Television at the
recent annual Canadian Screen Awards. Demonstrating continued
leadership in creating and developing original Canadian content,
Bell Media and its partners took home 37 television awards, with
wins in major categories including Best Dramatic Series, Best
Reality/Competition Series, Best National Newscast, Best Talk
Program or Series and Best Entertainment Special. TSN garnered a
total of 7 awards, more than all other sports broadcasters
combined, including Best Live Sports Event for FIFA Women's World
Cup Canada 2015. Bell Media supported film projects won 19 awards,
including Best Motion Picture, Performance by an Actor in a Leading
Role, and Performance by an Actress in a Leading Role.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.6825 per common share, payable on July 15, 2016 to shareholders of record at the
close of business on June 15,
2016.
OUTLOOK FOR 2016
BCE confirmed its financial guidance
targets for 2016, as provided on February 4,
2016, as follows:
|
February
4
Guidance
|
April
28
Guidance
|
Revenue
growth
|
1% – 3%
|
On track
|
Adjusted EBITDA
growth
|
2% – 4%
|
On track
|
Capital
intensity
|
approx.
17%
|
On track
|
Adjusted
EPS
|
$3.45 –
$3.55
|
On track
|
Free cash flow
growth
|
approx. 4% –
12%
|
On track
|
Annualized common
dividend per share
|
$2.73
|
$2.73
|
Dividend
payout(4) policy
|
65% – 75%
of free cash
flow
|
On track
|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q1 2016 results
on Thursday, April 28 at 8:00 am (Eastern). Media are welcome to
participate on a listen-only basis. Please dial toll-free
1-866-225-0198 or (416) 340-2218. A replay will be available for
one week by dialing 1-800-408-3053 or (905) 694-9451 and entering
pass code 7097861#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q1-2016 conference call. The mp3 file will be
available for download on this page later in the day.
NOTES
The information contained in this news release
is unaudited.
(1)
|
The terms adjusted
EBITDA and adjusted EBITDA margin do not have any standardized
meaning under IFRS. Therefore, they are unlikely to be comparable
to similar measures presented by other issuers. We define adjusted
EBITDA as operating revenues less operating costs, as shown in
BCE's consolidated income statements. Adjusted EBITDA for BCE's
segments is the same as segment profit as reported in Note 4 to
BCE's Q1 2016 consolidated financial statements. We define
adjusted EBITDA margin as adjusted EBITDA divided by operating
revenues. We use adjusted EBITDA and adjusted EBITDA margin to
evaluate the performance of our businesses as they reflect their
ongoing profitability. We believe that certain investors and
analysts use adjusted EBITDA to measure a company's ability to
service debt and to meet other payment obligations or as a common
measurement to value companies in the telecommunications industry.
We believe that certain investors and analysts also use adjusted
EBITDA and adjusted EBITDA margin to evaluate the performance of
our businesses. Adjusted EBITDA is also one component in the
determination of short-term incentive compensation for all
management employees. Adjusted EBITDA and adjusted EBITDA margin
have no directly comparable IFRS financial measure. Alternatively,
the following table provides a reconciliation of net earnings to
adjusted EBITDA.
|
($
millions)
|
|
|
|
Q1
2016
|
Q1
2015
|
Net
earnings
|
758
|
583
|
Severance,
acquisition and other costs
|
42
|
224
|
Depreciation
|
739
|
712
|
Amortization
|
149
|
127
|
Finance
costs
|
|
|
|
Interest
expense
|
219
|
226
|
|
Interest on
post-employment benefit obligations
|
20
|
27
|
Other (income)
expense
|
(23)
|
20
|
Income
taxes
|
259
|
175
|
Adjusted
EBITDA
|
2,163
|
2,094
|
|
BCE operating
revenues
|
5,270
|
5,240
|
Adjusted EBITDA
margin
|
41.0%
|
40.0%
|
(2)
|
The terms adjusted
net earnings and adjusted EPS do not have any standardized meaning
under IFRS. Therefore, they are unlikely to be comparable to
similar measures presented by other issuers. We define adjusted net
earnings as net earnings attributable to common shareholders before
severance, acquisition and other costs, net (gains) losses on
investments, and early debt redemption costs. We define adjusted
EPS as adjusted net earnings per BCE common share. We use
adjusted net earnings and adjusted EPS, and we believe that certain
investors and analysts use these measures, among other ones, to
assess the performance of our businesses without the effects of
severance, acquisition and other costs, net (gains) losses on
investments, and early debt redemption costs, net of tax and NCI.
We exclude these items because they affect the comparability of our
financial results and could potentially distort the analysis of
trends in business performance. Excluding these items does not
imply they are non-recurring. The most comparable IFRS financial
measures are net earnings attributable to common shareholders and
EPS. The following table is a reconciliation of net earnings
attributable to common shareholders and EPS to adjusted net
earnings on a consolidated basis and per BCE common share
(adjusted EPS), respectively.
|
($ millions except
per share amounts)
|
|
Q1 2016
|
Q1 2015
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
707
|
0.82
|
532
|
0.63
|
Severance,
acquisition and other costs
|
31
|
0.03
|
164
|
0.20
|
Net (gains) losses on
investments
|
(12)
|
(0.01)
|
2
|
-
|
Early debt redemption
costs
|
8
|
0.01
|
7
|
0.01
|
Adjusted net
earnings
|
734
|
0.85
|
705
|
0.84
|
(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. We define free cash
flow as cash flows from operating activities, excluding acquisition
and other costs paid (which include significant litigation costs)
and voluntary pension funding, less capital expenditures, preferred
share dividends and dividends paid by subsidiaries to NCI. We
define free cash flow per share as free cash flow divided by the
average number of common shares outstanding. We consider free cash
flow and free cash flow per share to be important indicators of the
financial strength and performance of our businesses because they
show how much cash is available to pay dividends, repay debt and
reinvest in our company. We believe that certain investors and
analysts use free cash flow to value a business and its underlying
assets. We believe that certain investors and analysts also use
free cash flow and free cash flow per share to evaluate the
financial strength and performance of our businesses. The most
comparable IFRS financial measure is cash flows from operating
activities. The following table is a reconciliation of cash flows
from operating activities to free cash flow on a consolidated
basis.
|
($ millions except
per share amounts)
|
|
|
|
Q1 2016
|
Q1 2015
|
Cash flows from
operating activities
|
1,290
|
1,045
|
Capital
expenditures
|
(852)
|
(827)
|
Cash dividends paid
on preferred shares
|
(36)
|
(39)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
(12)
|
-
|
Acquisition and costs
paid
|
28
|
52
|
Free cash
flow
|
418
|
231
|
|
|
|
|
Average number of
common shares outstanding (millions)
|
867.1
|
841.0
|
Free cash flow per
share
|
0.48
|
0.27
|
(4)
|
We use ARPU, churn,
COA, capital intensity and dividend payout to measure the success
of our strategic imperatives. These key performance indicators are
not accounting measures and may not be comparable to similar
measures presented by other issuers. See section 8.2, Non-GAAP
financial measures and key performance indicators (KPIs) in
BCE's Q1 2016 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 2016 financial guidance (including
revenues, adjusted EBITDA, capital intensity, adjusted EPS and free
cash flow), BCE's 2016 annualized common share dividend and common
share dividend policy, our network deployment plans including,
without limitation, the capital expenditures expected to be
incurred in connection with the anticipated expansion of our
Gigabit Fibe Internet service in Ontario, Québec and Atlantic Canada, our business outlook,
objectives, plans and strategic priorities, and other statements
that are not historical facts. Forward-looking statements are
typically identified by the words assumption, goal, guidance,
objective, outlook, project, strategy, target and other similar
expressions or future or conditional verbs such as aim,
anticipate, believe, could, expect, intend, may, plan, seek,
should, strive and will. All such forward-looking
statements are made pursuant to the 'safe harbour' provisions of
applicable Canadian securities laws and of the United States Private Securities
Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements and that our business outlook,
objectives, plans and strategic priorities may not be achieved. As
a result, we cannot guarantee that any forward-looking statement
will materialize and we caution you against relying on any of these
forward-looking statements. The forward-looking statements
contained in this news release describe our expectations as of
April 28, 2016 and, accordingly, are
subject to change after such date. Except as may be required by
Canadian securities laws, we do not undertake any obligation to
update or revise any forward-looking statements contained in this
news release, whether as a result of new information, future events
or otherwise. Except as otherwise indicated by BCE, forward-looking
statements do not reflect the potential impact of any special items
or of any dispositions, monetizations, mergers, acquisitions, other
business combinations or other transactions that may be announced
or that may occur after April 28,
2016. 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 2016 financial
results, as well as our objectives, strategic priorities and
business outlook for 2016, 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
- Gradual strengthening of the economy driven by activity in the
non-resource sector, given the Bank of Canada's most recent
estimated growth in Canadian gross domestic product of 1.7% in
2016, representing a thirty basis point increase from an earlier
estimate of 1.4%
- Sustained weak employment growth, as the overall level of
business investment is expected to remain soft
- Interest rates to remain relatively stable through 2016
- Strengthened Canadian dollar since the beginning of the year to
remain at or around near current levels. Further movements may be
impacted by the degree of strength of the U.S. dollar, interest
rates and changes in commodity prices.
- A sustained level of wireline and wireless competition in both
consumer and business markets
- Higher but slowing wireless industry penetration and smartphone
adoption
- Wireless industry pricing discipline maintained on a higher
expected number of customers with expired contracts 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)
- Soft advertising market expected due to variable demand, and
escalating costs to secure TV programming
Assumptions Concerning our Bell Wireless
Segment
- 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
- Earlier expiries under two-year contracts compared to
three-year contracts, leading to an increase in the number of
subscribers who are eligible for upgrades
- Higher subscriber acquisition and retention spending, driven by
higher handset costs and more customer device upgrades, reflecting
a higher number of off-contract subscribers due to earlier expiries
under two-year contracts
- Higher blended ARPU, driven by a higher postpaid smartphone
mix, increased data consumption on 4G LTE and LTE-A networks, and
higher access rates from price increases
- Completion of the LTE network buildout to 98% of the Canadian
population and expansion of the LTE-A network coverage to
approximately 75% of the Canadian population
- Ability to monetize increasing data usage and customer
subscriptions to new data services
- Ongoing technological improvements by handset manufacturers and
from faster data network speeds that allow customers to optimize
the use of our services
- 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
- Positive full-year residential net customer additions within
our wireline footprint, driven by continued IPTV growth and an
expanded fibre-to-the-premise (FTTP) network that support the
pull-through of fibre-based Internet service and residential NAS,
resulting in higher penetration of multi-product households
- Increasing wireless and Internet-based technological
substitution
- Residential services household ARPU growth from increased
penetration of multi-product households, promotion expiries and
price increases
- Aggressive residential service bundle offers from cable TV
competitors in our local wireline areas
- Continued large business customer migration to IP-based
systems
- Ongoing competitive repricing pressures in our business and
wholesale markets
- Continued competitive intensity in our small and mid-sized
business units as cable operators and other telecom competitors
continue to intensify their focus on business customers
- Growing consumption of OTT TV services and on-demand streaming
video, projected growth in TV Everywhere services, as well as the
proliferation of devices, such as tablets, that consume vast
quantities of bandwidth, will require considerable ongoing capital
investment
- Limited downsizing of current TV packages by customers as a
result of the implementation of TV unbundling
- Realization of cost savings related to management workforce
attrition and retirements, lower contracted rates from our
suppliers and reduction of traffic that is not on our network
- No material financial, operational or competitive consequences
of changes in regulations affecting our wireline business
Assumptions Concerning our Bell Media Segment
- Positive full-year adjusted EBITDA growth driven by CraveTV
growth, national expansion of our TMN pay TV service, and labour
savings from workforce reductions in 2015, more than offsetting
higher TV programming and sports rights costs, continued CraveTV
investment and the financial impact of TV unbundling
- Continued scaling of CraveTV, including a successful
direct-to-consumer launch
- Ability to successfully acquire highly rated programming and
differentiated content
- Building and maintaining strategic supply arrangements for
content on all four screens
- TV unbundling and growth in OTT viewing expected to result in
moderately lower subscriber levels for many Bell Media TV
properties
- No material financial, operational or competitive consequences
of changes in regulations affecting our media business
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions
for 2016:
- total post-employment benefit plans cost to be approximately
$300 million to $350 million, based
on an estimated accounting discount rate of 4.2%, comprised of an
estimated above adjusted EBITDA post-employment benefit plans
service cost of approximately $230 million
to $270 million and an estimated below adjusted EBITDA net
post-employment benefit plans financing cost of approximately
$70 million to $80 million
- depreciation and amortization expense of approximately
$3,525 million to $3,575 million
- net interest expense of approximately $875 million to $925 million
- tax adjustments (per share) of approximately $0.05
- an effective tax rate of approximately 26%
- non-controlling interest (NCI) of approximately $40 million to $60 million
- total pension plan cash funding of approximately $400 million to $450 million
- cash taxes of approximately $675 million
to $725 million
- net interest payments of approximately $875 million to $925 million
- other free cash flow items, which include working capital
changes, severance and other costs paid, preferred share dividends
and NCI paid, of approximately ($50)
million to $25 million
- average BCE common shares outstanding of approximately 870
million
- an annual common share dividend of $2.73 per share
The foregoing assumptions, although considered reasonable by BCE
on April 28, 2016, 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 2016 financial
guidance, are listed below. The realization of our forward-looking
statements, including our ability to meet our 2016 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, proceedings and decisions, government
consultations and government positions that affect us and influence
our business, including, in particular, those relating to mandatory
access to networks, net neutrality, spectrum auctions, approval of
acquisitions, broadcast licensing and foreign ownership
requirements
- the intensity of competitive activity, including from new and
emerging competitors, and the resulting impact on our ability to
retain existing customers and attract new ones, as well as on our
market shares, service volumes and pricing strategies
- the level of technological substitution and the presence of
alternative service providers contributing to reduced utilization
of our traditional wireline services
- the adverse effect of the emerging fundamental separation of
content and connectivity, which is changing our TV and media
ecosystems and may accelerate the disconnection of TV services and
the reduction of TV spending, as well as the fragmentation of the
advertising market
- competition with global competitors, in addition to traditional
Canadian competitors, for programming content could drive
significant increases in content acquisition costs and challenge
our ability to secure key content
- adverse economic and financial market conditions, a declining
level of retail and commercial activity, and the resulting negative
impact on the demand for, and prices of, our products and services
and the level of bad debts
- the inability to protect our assets, including networks, IT
systems, offices and sensitive information, from events and attacks
such as cyber threats, and damage from fire and natural
disasters
- security and data leakage exposure if security control
protocols applicable to our cloud-based solutions are bypassed
- the inability to drive a positive customer experience
resulting, in particular, from the failure to embrace new
approaches and challenge operational limitations
- the complexity in our operations resulting from multiple
technology platforms, billing systems, marketing databases and a
myriad of rate plans, promotions and product offerings
- the failure to optimize network and IT deployment and upgrading
timelines, accurately assess the potential of new technologies, and
invest and evolve in the appropriate direction
- the failure to continue investment in a disciplined and
strategic manner in next-generation capabilities, including
real-time information based customer service strategies
- the failure to maintain optimal network operating performance
in the context of significant increases in capacity demands on our
Internet and wireless networks
- the risk that we may need to incur significant capital
expenditures beyond our capital intensity target in order to
provide additional capacity and reduce network congestion
- the failure to implement or maintain highly effective IT
systems supported by an effective governance and operating
framework
- the failure to generate anticipated benefits from our corporate
restructurings, system replacements and upgrades, process redesigns
and the integration of business acquisitions
- events affecting the functionality of, and our ability to
protect, test, maintain and replace, our networks, IT systems,
equipment and other facilities
- in-orbit and other operational risks to which the satellites
used by our Bell TV business unit are subject
- events affecting the continuity of supply of products and
services that we need to operate our business from our third-party
suppliers and outsourcers
- the failure of our procurement and vendor management practices
to address risk exposures associated with existing and new supplier
models
- the quality of our products and services and the extent to
which they may be subject to manufacturing defects or fail to
comply with applicable government regulations and standards
- the failure to attract and retain employees with the
appropriate skill sets and to drive their performance in a safe and
secure environment
- labour disruptions
- the inability to access adequate sources of capital and
generate sufficient cash flows from operations to meet our cash
requirements and provide for planned growth
- uncertainty as to whether dividends will be declared by BCE's
board of directors or whether BCE's dividend policy will be
maintained
- the inability to manage various credit, liquidity and market
risks
- pension obligation volatility and increased contributions to
post-employment benefit plans
- higher taxes due to new tax laws or changes thereto or in the
interpretation thereof, and the inability to predict the outcome of
government audits
- the failure to reduce costs as well as unexpected increases in
costs
- the failure to evolve practices to effectively monitor and
control fraudulent activities, including unauthorized use of our
content and the theft of our TV services
- unfavourable resolution of legal proceedings and, in
particular, class actions
- unfavourable changes in applicable laws and the failure to
proactively address our legal and regulatory obligations
- health concerns about radiofrequency emissions from wireless
communications devices
- the inability to maintain customer service and our networks
operational in the event of the occurrence of epidemics, pandemics
and other health risks
- the failure to recognize and adequately respond to climate
change concerns or public and governmental expectations on
environmental matters
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. We encourage investors to also read BCE's 2015 Annual
MD&A dated March 3, 2016
(included in the BCE 2015 Annual Report) and BCE's 2016 First
Quarter MD&A dated April 27, 2016
for additional information with respect to certain of these and
other assumptions and risks, filed by BCE with the Canadian
provincial securities regulatory authorities (available at
Sedar.com) and with the U.S. Securities and Exchange Commission
(available at SEC.gov). These documents are also available at
BCE.ca.
ABOUT BCE
Canada's largest communications company, BCE
provides a comprehensive and innovative suite of broadband
wireless, TV, Internet and business communication services
from Bell Canada and Bell Aliant. Bell Media is Canada's
premier multimedia company with leading assets in television,
radio, out of home and digital media. To learn more, please
visit BCE.ca.
The Bell Let's Talk initiative promotes Canadian mental health
with national awareness and anti-stigma campaigns like Bell Let's
Talk Day and significant Bell funding of community care and access,
research, and workplace initiatives. To learn more, please visit
Bell.ca/LetsTalk.
Media inquiries:
Jean Charles Robillard
(514) 870-4739
jean_charles.robillard@bell.ca
Investor inquiries:
Thane Fotopoulos
(514) 870-4619
thane.fotopoulos@bell.ca
SOURCE Bell Canada