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 increased 2.1% to $817
million; net earnings attributable to common shareholders up
2.4% to $770 million, or $0.86 per common share; adjusted net earnings of
$799 million 1.9% higher, generating
adjusted EPS of $0.88
- Cash flows from operating activities of $2,233 million, up 14.9%, drove free cash flow
growth of 24.4%, supporting capital spending and common share
dividend
- Service revenue and adjusted EBITDA up 5.9% and 5.8%
respectively, yielding higher margin of 41.7%, on continued strong
wireless growth, improved wireline subscriber results, and Bell MTS
synergies
- 198,005 total wireless postpaid, Internet, and IPTV net
additions, up 8.3%
- Strong wireless operating performance with 9.2% higher
postpaid net additions of 117,182, 11.2% increase in service
revenue, and adjusted EBITDA growth of 9.4%
- 80,823 new Internet and IPTV customer additions, up 6.9%
year over year, on rapidly expanding broadband fibre footprint and
IPTV product innovation
- Wireline service revenue growth of 4.1% drove 4.4% higher
adjusted EBITDA and 0.6-point increase in industry-leading margin
of 42.3%, fully supporting continuing significant broadband fibre
investments going forward
- Media revenue up 1.0% with stable year-over-year adjusted
EBITDA; proposed acquisition of French-language specialty channels
Séries+ and Historia enhances Bell Media's competitive positioning
in Québec marketplace
MONTRÉAL, Nov. 2, 2017 /CNW
Telbec/ - BCE Inc. (TSX: BCE) (NYSE: BCE),
Canada's largest communications
company, today reported results for the third quarter (Q3) of
2017.
FINANCIAL
HIGHLIGHTS
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
Q3 2017
|
Q3 2016
|
% change
|
BCE
|
|
|
|
Operating
revenues
|
5,678
|
5,407
|
5.0%
|
Net
earnings
|
817
|
800
|
2.1%
|
Net earnings
attributable to common shareholders
|
770
|
752
|
2.4%
|
Adjusted net
earnings(1)
|
799
|
784
|
1.9%
|
Adjusted
EBITDA(2)
|
2,366
|
2,236
|
5.8%
|
EPS
|
0.86
|
0.87
|
(1.1%)
|
Adjusted
EPS(1)
|
0.88
|
0.91
|
(3.3%)
|
Cash flows from
operating activities
|
2,233
|
1,943
|
14.9%
|
Free cash
flow(3)
|
1,183
|
951
|
24.4%
|
"The competitive advantages enabled by Bell's advanced fibre and
wireless networks, coupled with strong execution of our broadband
innovation strategy by the Bell team throughout Canada, delivered almost 200,000 net new
broadband postpaid wireless, Internet, and IPTV customers in Q3 –
up more than 8% compared to last year – and significant increases
in network usage, revenue, and customer satisfaction," said
George Cope, President and Chief
Executive Officer of BCE Inc. and Bell Canada. "The rapid pace of
Bell's broadband Fibe and mobile LTE-A network deployments and
service innovation supported a record number of Q3 postpaid
wireless gross activations and our best Q3 postpaid net additions
since 2012, as well as our first quarter of year-over-year combined
Internet and IPTV customer increases since Q1 2015 – including net
positive growth in our overall national TV business."
"With Bell LTE coverage reaching 99% of Canadians in Q3, and 86%
of our mobile customers now using Canada's best national network, strong growth
in mobile data usage continued to support industry-leading wireless
revenue and adjusted EBITDA growth. Strong Fibe TV and Internet
customer increases drove wireline adjusted EBITDA growth of 4.4%
and enhanced customer satisfaction as the Fibe footprint continues
to grow, while also improving our results in home phone and
business NAS. Bell Media continued to build on its leadership in
multimedia, including the most-watched programs in both
conventional, specialty and pay TV, resulting in revenue growth and
steady adjusted EBITDA performance in a fast-changing media
marketplace."
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
world-class fibre and wireless LTE networks; continued strong
performance across wireless, TV, Internet, and media growth
services; 48 consecutive quarters of uninterrupted year-over-year
adjusted EBITDA growth; and 13 increases to the BCE common share
dividend since the end of 2008 – a total increase of 97%.
CORPORATE DEVELOPMENTS
For full details of BCE
corporate developments in the quarter, please refer to the BCE Q3
2017 Shareholder Report at BCE.ca.
Bell LTE mobile network reaches 99% Canadian coverage
milestone
- Bell's LTE network now reaches 99% of Canadians, the first time
a wireless technology has provided near-ubiquitous broadband
coverage across the national population.
- Bell continues to expand coverage to keep pace with population
growth in centres large and small – including a plan announced
September 18 to expand broadband
wireless service to all 25 communities in Nunavut. At the same time, Bell subsidiary
Northwestel announced 15 Megabits per second (Mbps) Internet
service for these same communities in partnership with the federal
government's Connect to Innovate program.
- As the nation's wireless innovation leader, Bell also continues
to drive mobile data speeds in Canada to world-leading levels. LTE offers
theoretical data download speeds up to 150 Mbps to 99% of the
national population, and 82% are now covered by Bell LTE Advanced
(LTE-A) with speeds up to 260 Mbps. Bell now reaches 33% of
Canadians with Tri-band LTE-A service offering theoretical speeds
up to 335 Mbps, and up to 750 Mbps with the leading-edge Bell Quad
Band LTE-A service available to 21% of the population.
- Bell is now conducting further trials of Fifth Generation (5G)
mobile technology in the 28 GHz and 3.5 GHz ranges with technology
partner Huawei. Bell previously successfully demonstrated 5G
capability in the 73 GHz range in collaboration with Nokia in 2016.
5G technology will enable significantly faster data speeds, lower
latency, and increased capacity to meet demands for mobile video,
virtual reality, and Internet of Things (IoT) applications. Bell is
a member of the Next Generation Mobile Networks consortium, the
global body defining requirements for the international 5G
ecosystem.
Bell MTS moving forward in Manitoba
- Bell MTS continues to roll out new broadband fibre and wireless
service in Manitoba as part of
Bell's 5-year, $1-billion capital
investment plan for the province.
- Bell Fibe Internet, offering download speeds up to 940 Mbps, is
now available in parts of Beausejour, Blumenort, Brandon, Carberry, Dauphin, Dugald, Gimli, Killarney, La
Salle, Lorette,
Minnedosa, Mitchell, Morden, Neepawa, Niverville, Oakbank, Oakbluff, Selkirk, Steinbach, Stonewall, The
Pas, Thompson, and
Winkler, in addition to Fibe
service already available in some Winnipeg locations.
- Approximately 85% of the Bell MTS wireless network has been
upgraded to LTE-A capability, including in Winnipeg, Brandon, Portage La
Prairie, Selkirk,
Steinbach, Gimli, Morden, Winkler, Churchill, Thompson, Flin
Flon, Falcon Lake,
East St. Paul, and Grand Beach. Next week, Bell will also
complete continuous wireless coverage along the critical Highway 75
corridor linking Winnipeg to the
US border at Emerson.
- Bell will become the only carrier to offer cellular service for
Apple Watch Series 3 in Manitoba
beginning in early December.
- This month, Bell MTS will introduce Fibe TV service in selected
areas of the province, including exclusive television innovations
like Restart, which lets you watch a show already in progress, or
up to 30 hours after it started, from the beginning.
Federal wireless and WAN contracts
- On October 3, Shared Services
Canada (SSC) announced Bell Mobility as the primary supplier of the
Government of Canada's mobile
network services and devices for the next 6 years, with options to
renew. Bell Mobility will supply voice, text, and data services and
approximately 230,000 mobile devices to federal employees in more
than 100 departments and agencies.
- On October 20, SSC awarded Bell
Business Markets a 7-year contract for GCNet WAN International
Services - Stream 3, providing international WAN services for
federal departments, including Global Affairs, National Defence,
and Veterans Affairs, in more than 140 countries. Enabled by Bell's
MPLS and IP-based network capabilities, GCNet Stream 3 will support
new video, data and voice applications.
Only Bell offers all of Apple's newest mobile products in
Canada
- Bell announced the availability of the new generation iPhone 8,
iPhone 8 Plus, and Apple TV 4K on September
22, and became the only carrier in Canada (and 1 of just 13 worldwide) to offer
cellular service for Apple Watch Series 3.
- In addition to enhancing network capability with Voice over LTE
(VoLTE) technology to enable the GPS and cellular functions of the
Apple Watch, Bell also introduced NumberShare, a service that
enables customers to pair the Apple Watch with their iPhone using
the same phone number.
- With the availability of the iPhone X in Bell and The Source
stores tomorrow, Bell becomes the only carrier in Canada to offer the complete line-up of the
latest generation of Apple products.
- Bell further expanded its leading mobile device lineup in Q3
with Google's Pixel 2 smartphone, with the larger-screen Pixel 2 XL
scheduled to arrive in stores November
15.
Bell Business Markets service and innovation centre in
New Brunswick
- On October 6, Bell and the
Government of New Brunswick
announced a National Service Centre in Fredericton that will create up to 150
full-time jobs over the next 5 years, including technical, business
and security analysts, quality assurance, developers, and project
management positions. The centre will provide enhanced delivery of
technology solutions to large business customers in the Atlantic
region and across Canada while
supporting the development of new cybersecurity solutions.
- Bell also announced a $100,000
investment in the Canadian Institute for Cybersecurity at the
University of New Brunswick to support
collaboration in one of the fastest-growing technology sectors in
the world.
Bell Media grows French-language channel offering, enhances
NHL coverage
- Bell Media announced on October
17 that it had entered into an agreement with Corus
Entertainment Inc. to acquire French-language specialty channels
Séries+ and Historia. The addition of these premier channels will
further strengthen Bell Media's French-language TV offerings in the
Québec marketplace. Valued at approximately $200 million, the transaction is subject to
federal regulatory approvals and expected to close in 2018.
- Bell Media's English and French-language sports networks TSN
and RDS have significantly expanded regional NHL coverage this
hockey season, with TSN set to deliver more than 190 regular-season
games in 4 markets, and RDS to broadcast 119 Montréal Canadiens and
Ottawa Senators games. TSN will
also bring a total of 60 Winnipeg Jets regular season games to
viewers in Manitoba.
Bell Let's Talk the most-used Twitter hashtag ever in
Canada
- With August 23 marking the
10th anniversary of the Twitter #hashtag, the social
media network announced the all-time Top 5 most-used hashtags in
Canada– and #BellLetsTalk was #1. Twitter support has been part of
Bell Let's Talk Day since 2013, and since then almost 27 million
tweets have used #BellLetsTalk and the French-language #BellCause
to share the mental health message.
- The Bell Let's Talk Community Fund is supporting 70 more local
and grassroots mental health organizations throughout Canada this year. Since 2011, 414 front-line
community groups in every region of the country have received
grants from annual Community Fund. Applications for the 2018 fund
open in January at Bell.ca/LetsTalk.
- Bell Let's Talk continues to be recognized for its
ground-breaking work to eliminate the stigma of mental illness and
drive action in mental health care, research, and workplace
leadership. In October, the 2017 Global Carrier Awards recognized
Bell Let's Talk with its Best Workplace Initiative Award, and the
Academy of Canadian Cinema & Television announced Bell Let's
Talk as the recipient of its 2018 Humanitarian Award.
BCE RESULTS
"We performed well across the business in
Q3, posting a very solid quarter of service revenue, adjusted
EBITDA and margin growth, driven by continued excellent wireless
postpaid subscriber and financial metrics, stronger residential
Internet and IPTV net customer additions, another quarter of stable
media financial performance, and the favourable impact of Bell
MTS," said Glen LeBlanc, Chief
Financial Officer for BCE and Bell. "Our year-to-date free cash
flow growth of 20.1% and balance sheet strength fully support
higher planned spending on the advanced broadband networks and
services that are essential to driving the long-term growth of our
business as well as the successful execution of our capital markets
objectives. As well, with the recent rise in interest rates and our
robust asset returns, the solvency ratio of the Bell Canada defined
benefit pension plan now exceeds 97%, its strongest position in
more than a decade."
BCE operating revenue grew 5.0% in Q3 to $5,678 million. This was driven by 5.9% higher
service revenue, reflecting increases at both Bell Wireless and
Bell Wireline, which included a favourable financial contribution
from the acquisition of Manitoba Telecom Services Inc. (MTS),
completed on March 17, as well as
top-line growth at Bell Media. Product revenue decreased 6.8% to
$356 million due to lower wireline
data product sales to business customers.
Net earnings increased 2.1% to $817
million while net earnings attributable to common
shareholders grew 2.4% to $770
million, or $0.86 per share,
compared to $0.87 per share in Q3
2016. Higher net earnings were due to growth in operating revenue
that drove higher adjusted EBITDA as well as lower income taxes,
partly offset by increased net depreciation and amortization
expense and higher interest and other expense. Excluding severance,
acquisition and other costs, net losses or gains on investments,
impairment charges and early debt redemption costs, adjusted net
earnings were up 1.9% in Q3 to $799
million, or $0.88 per common
share, down from $0.91 per share last
year. The increase in BCE's average number of common shares
outstanding, due to the shares issued for the equity component of
the MTS acquisition, resulted in earnings per share dilution this
quarter.
BCE's adjusted EBITDA increased 5.8% to $2,366 million on year-over-year growth of 9.4%
at Bell Wireless and 4.4% at Bell Wireline, supported by the
financial contribution of Bell MTS. Bell Media adjusted EBITDA of
$187 million was stable compared to
last year.
BCE's consolidated adjusted EBITDA margin(2) expanded
to 41.7% from 41.4% last year as the flow-through of strong
wireless service revenue growth, increasing broadband Internet
scale, Bell MTS integration synergies, and greater fibre-related
cost savings more than offset higher year-over-year wireless
postpaid subscriber retention and acquisition spending, higher
residential wireline acquisition and retention costs required to
match aggressive competitor bundle promotions, higher media content
costs, and the margin impact from the steady decline in traditional
legacy voice services. Consolidated adjusted EBITDA and margin
performance in Q3 was also moderated by the adverse impact of CRTC
decisions related to wholesale Internet tariffs and customer
cancellation refunds, which in aggregate totalled approximately
$26 million in the quarter.
BCE continued its industry-leading investment in advanced
broadband wireline and wireless infrastructure with total
consolidated capital expenditures of $1,040
million, up 6.6% from Q3 2016, representing an increased
capital intensity(4) ratio (capital expenditures as a
percentage of total revenue) of 18.3% compared to 18.1% last year.
Higher spending mainly reflected ongoing broadband fibre deployment
to more homes and businesses, including the build-out of Gigabit
Fibe infrastructure in Toronto and
other urban centres; increasing wireless LTE-A network speeds
through carrier aggregation; deployment of small-cell technology to
optimize mobile coverage, signal quality and data backhaul;
augmenting wireless and Internet network capacity to support
subscriber growth and rapid increases in video and other data
usage; the impact of acquisitions and new contract wins at Astral
Out of Home (AOOH); and upgrades to Bell Media broadcast studios
and TV production equipment. The increase in the quarter also
reflected investment in Manitoba
to improve network coverage, capacity and speeds, and the ongoing
integration of MTS billing and other systems with Bell's.
BCE cash flows from operating activities were up 14.9% to
$2,233 million in Q3. The increase
was the result of higher adjusted EBITDA, a positive change in
working capital and lower income taxes paid, partly offset by
higher interest payments, all of which reflected the incremental
financial contribution of Bell MTS in the quarter. BCE generated
$1,183 million of free cash flow this
quarter, 24.4% higher than Q3 of last year, driven by an increase
in cash flows from operating activities and partly offset by higher
capital expenditures.
BCE reported 117,182 net new wireless postpaid customers in Q3,
a net loss of 10,200 wireless prepaid subscribers; 44,424 net new
high-speed Internet customers; 36,399 net new IPTV customers, and a
net loss of 34,661 satellite TV customers. Residential and business
NAS line net losses totalled 84,762. At the end of Q3, BCE customer
connections across all services totalled 21,991,681, up 5.0% from
last year. The total includes 9,008,273 wireless customers, up 7.5%
over last year (including 8,243,446 postpaid customers, an increase
of 8.8%); total high-speed Internet subscribers of 3,763,101, up
8.8%; total TV subscribers of 2,825,754, up 2.9% (including
1,517,833 IPTV customers, an increase of 16.6%); and total NAS
lines of 6,394,553, an increase of 0.6%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Continued sharp operational execution
and focus on subscriber profitability drove another quarter of
strong financial performance for Bell Wireless. Service revenue
increased 11.2% to $1,913 million,
reflecting continued postpaid subscriber base growth, higher
blended average revenue per user (ARPU)(4) as customers
move to higher-rate plans with accelerating data usage, and the
financial contribution from Bell MTS. Product revenue remained
unchanged compared to Q3 of 2016 at $127
million despite more customer transactions, due to
competitive promotional smartphone pricing. Total operating revenue
grew 10.4% to $2,040 million.
Wireless adjusted EBITDA was up 9.4% to $871 million in Q3, driven by the high
flow-through of service revenue from a greater mix of higher-value
postpaid subscribers in our overall customer base and overall price
discipline. Bell Wireless also contributed significantly to
consolidated free cash flow generation in Q3 with growth in
adjusted EBITDA less capital expenditures of 14.0% to $685 million. However, service revenue margin
declined to 45.5% from 46.3% in Q3 2016, due to $74 million in higher year-over-year total
combined retention spending and subscriber acquisition costs that
reflected more handset upgrades attributable to a higher number of
customers with expired contracts and a higher sales mix of premium
smartphones. This, together with the incremental expense
contribution of Bell MTS, drove operating cost growth of 11.1% in
the quarter.
- Postpaid net additions in Q3 increased 9.2% to 117,182. This
strong performance was the result of lower customer
churn(4) and record Q3 postpaid gross additions of
390,985, up 2.5% over last year, driven by Bell's mobile network
speed and technology leadership, effective sales execution of
targeted promotions across all our retail channels, and the
contribution of Bell MTS.
- Postpaid customer churn improved 0.10 percentage points to
1.16%, reflecting the operational benefits of our investments in
network speed, customer retention, and service quality.
- Bell Wireless postpaid customers totalled 8,243,446 at
September 30, 2017, up 8.8% from Q3
2016, which drove a 7.5% increase in total wireless customers to
9,008,273.
- Blended ARPU grew 3.0% to $69.78,
the result of a higher year-over-year postpaid subscriber mix,
increased LTE data usage and growth in subscribers on higher-value
rate plans with larger data thresholds in the overall revenue mix.
On average, Bell's wireless LTE customers consumed 26% more data
per month in Q3 compared to last year.
- The percentage of postpaid subscribers on LTE reached 86% in
Q3, up from 78% in Q3 2016.
Bell Wireline
Wireline operating revenue increased
2.9% in Q3 to $3,092 million, the
result of 4.1% higher service revenue of $2,860 million driven by stronger Internet and
IPTV net subscriber gains, 4.5% growth in household ARPU, improved
year-over-year business performance reflecting financial
contributions from data centre operator Q9 Networks (Q9) acquired
in October 2016, and Bell MTS. This
was partly offset by approximately $21
million in unfavourable regulatory-related financial
impacts, compared to last year, from downward revisions to
wholesale Internet tariffs and refunds for cancelled services
mandated by the CRTC, as well as a $25
million, or 9.7%, decrease in low-margin product revenue to
$232 million.
Wireline adjusted EBITDA growth accelerated this quarter,
increasing 4.4% over Q3 2016 to $1,308
million, which yielded a 0.6-point expansion in margin to
42.3%. This was driven by higher year-over-year service revenue,
customer service operating efficiencies, fibre-related savings, and
Bell MTS integration synergies, despite the adverse financial
impact of CRTC-related regulatory decisions and higher operating
costs compared to last year. Operating costs were up 1.8% to
$1,784 million, due mainly to the
acquisitions of MTS and Q9. Excluding regulatory impacts, wireline
adjusted EBITDA was up 6.1% in the quarter.
- High-speed Internet net subscriber additions totalled 44,424,
up 12.8% compared to 39,375 last year. The increase reflected
effective marketing of student promotions during the back-to-school
period; the pull-through of IPTV customer activations, including
from Bell's new app-based live TV streaming service Alt TV; as well
as lower customer churn driven both by the ongoing expansion of
Bell's FTTP footprint and enhanced competitive speeds in areas
where Bell direct fibre service is not available. Bell's direct
fibre footprint grew to approximately 3.6 million homes and
commercial locations this quarter, up from 2.8 million at the end
of Q3 2016.
- At September 30, 2017, BCE's
high-speed Internet customer base totalled 3,763,101, up 8.8%
compared to Q3 last year.
- Bell TV gained 36,399 net new IPTV subscribers in Q3, up
slightly from the 36,253 added last year, despite sustained
aggressive cable service bundle offers, increasing maturity of
current Fibe TV markets, and over-the-top substitution. Stronger
year-over-year performance reflected the positive operational
benefits from a first full quarter of Alt TV marketing, an expanded
FTTP footprint, and fewer Bell retail customers with expired
pricing promotions in the quarter. At the end of Q3, BCE served
1,517,833 IPTV subscribers, up 16.6% over Q3 2016.
- Satellite TV net customer losses improved 15.4% over last year
to 34,661 due to fewer customer deactivations.
- At the end of Q3, BCE had a total of 2,825,754 TV subscribers,
up 2.9% compared to 2,745,873 at the end of Q3 2016.
- Wireline data service revenue increased 6.0% to $1,806 million, due to the favourable impact of
Bell MTS, Internet and TV subscriber base growth, higher ARPU from
customer upgrades to faster Internet speeds, larger data usage
Internet rate plans and flow-through of price changes in 2017, as
well as higher business service solutions revenue driven by the
incremental financial contribution of Q9.
- Wireline product revenue decreased 9.7% to $232 million, reflecting lower demand for
telecommunications equipment by large enterprise business and
wholesale customers due to competitive pricing and technology
substitution, and higher sales in Q3 2016 from a large customer
contract in the healthcare sector.
- Residential NAS net losses improved 28.8% to 57,387 from 80,587
in Q3 2016, due to the strong pull-through of Fibe TV service
bundle activations in the quarter, despite aggressive cable
promotional offers and ongoing wireless and Internet technology
substitution.
- Business NAS net losses were down 27.5% to 27,375 from 37,734
in Q3 last year, due to fewer large business and wholesale customer
deactivations, and improved small business performance.
- NAS access lines at the end of Q3 totalled 6,394,553, up 0.6%
from 6,358,362 last year. Local and access revenue increased 3.9%
to $796 million due to the
incremental financial contribution of Bell MTS and residential rate
increases. Long distance revenue decreased 17.5% to $156 million as a result of ongoing NAS access
line erosion, technology substitution by wireless and Internet
technologies, and lower sales of international long distance
minutes to wholesale customers.
Bell Media
In a seasonally low quarter for the media
sector, Bell Media operating revenue increased 1.0% in Q3 to
$723 million, the result of higher
advertising and subscriber revenues.
Advertising revenue was up over Q3 2016 due to continued growth
in outdoor advertising at Astral Out of Home (AOOH). Although
results this quarter reflected the recapture of advertising dollars
following the shift in Q3 last year to the main broadcaster of the
Rio Summer Olympics, conventional and overall specialty TV revenues
decreased due to continued market softness and a steady decline in
audience levels. Subscriber revenue also increased over last year
on higher revenues from CraveTV and TV Everywhere GO products.
Media adjusted EBITDA of $187
million in Q3 was unchanged, compared to last year, as
higher revenue was offset by a 1.3% increase in operating costs due
to higher programming and content costs driven by the ongoing
ramp-up of content for our CraveTV and pay TV services, deal
renewals for specialty TV programming, and increased costs at AOOH
as a result of acquisitions and new outdoor advertising contract
wins over the past year.
- CTV was the most-watched television network with 10 of the top
20 programs, and 7 of the top 10 programs during fall premiere week
with viewers aged 25 to 54, including the top 2 new fall series:
Young Sheldon and The Good
Doctor.
- Bell Media reached 82% of Canadian English-language specialty
and pay TV viewers in the average week in Q3, with 5 of the top 10
Canadian English entertainment specialty and pay channels among
viewers aged 25 to 54: Space, Discovery, TMN, Comedy, and
CP24.
- Game of Thrones Season 7 was the most-watched series ever on
Canadian specialty and pay TV and the #1 summer show overall, while
the Handmaid's Tale was the most-watched new program on Canadian
entertainment specialty TV during the 2016/2017 broadcast year.
Star Trek: Discovery, airing on Space and also available on
streaming service CraveTV, broke records with the 3 highest-rated
series episodes in Canadian specialty TV history.
- Overall viewership for NFL games is up 10% over last year on
TSN and CTV, with average audiences up 53% for Sunday night games,
up 18% on Mondays and up 12% on Thursdays.
- Bell Media maintained its position in the Québec market with
Bell Media French specialty and pay TV reaching 70% of all
French-language TV viewers in the average week in Q3.
- Canada's top radio broadcaster
again in summer 2017, Bell Media on average reached 17.8 million
listeners. On August 9, Bell Media
agreed to acquire 4 Ontario FM radio stations from Larche
Communications Inc. Pending CRTC approval, the addition of these
stations to Bell Media's 105 iHeartRadio Canada properties will broaden the network's
industry-leading reach across the country.
- Bell Media continued to lead in digital media among Canadian
broadcast and video network competitors, reaching 67% of the
digital audience in Q3 with 21 million unique monthly visitors,
average monthly time of 1.1 billion minutes spent on the sites, and
358 million videos viewed.
- The exclusive outdoor advertising provider for Toronto Pearson
International, AOOH introduced 2 new large-format digital
superboards close to Canada's
largest airport in August, providing airport information and
advertising opportunities reaching a daily circulation of close to
800,000 commuters and passengers. AOOH now has more than 40 large
digital faces in the Toronto
market.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.7175 per common share, payable on January 15, 2018 to shareholders of record at the
close of business on December 15,
2017.
OUTLOOK FOR 2017
BCE confirmed its financial guidance
targets for 2017, as updated on April 26,
2017 to reflect the acquisition of MTS, as follows:
|
April 26
Guidance
|
November 2
Guidance
|
Revenue
growth
|
4% – 6%
|
On track
|
Adjusted EBITDA
growth
|
4% – 6%
|
On track
|
Capital
intensity
|
approx.
17%
|
On track
|
Adjusted
EPS
|
$3.30 –
$3.40
|
On track
|
Free cash flow
growth
|
approx. 5% –
10%
|
On track
|
Annualized common
dividend per share
|
$2.87
|
$2.87
|
Dividend payout
policy(3)
|
65% – 75%
of free cash
flow
|
On track
|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q3 2017 results
on Thursday, November 2 at
8:00 am (Eastern). Media are welcome
to participate on a listen-only basis. Please dial toll-free
1-866-223-7781 or 416-340-2216. A replay will be available for one
week by dialing 1-800-408-3053 or 905-694-9451 and entering pass
code 1946321#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q3-2017 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.
In Q1 2017, we updated our definition of adjusted net earnings
and adjusted EPS to also exclude impairment charges as they may
affect the comparability of our financial results and could
potentially distort the analysis of trends in business
performance.
(1) The terms adjusted net earnings and adjusted EPS do
not have any standardized meaning under IFRS. Therefore, they are
unlikely to be comparable to similar measures presented by other
issuers. We define adjusted net earnings as net earnings
attributable to common shareholders before severance, acquisition
and other costs, net losses (gains) on investments, impairment
charges, 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 losses (gains) on
investments, impairment charges, 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 2017
|
Q3 2016
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
770
|
0.86
|
752
|
0.87
|
Severance,
acquisition and other costs
|
17
|
0.01
|
20
|
0.03
|
Net losses on
investments
|
-
|
-
|
12
|
0.01
|
Early debt redemption
costs
|
12
|
0.01
|
-
|
-
|
Adjusted net
earnings
|
799
|
0.88
|
784
|
0.91
|
(2) 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, Segmented Information, in BCE's Q3 2017
Financial Statements. We define adjusted EBITDA margin as adjusted
EBITDA divided by operating revenues. We use adjusted EBITDA and
adjusted EBITDA margin to evaluate the performance of our
businesses as they reflect their ongoing profitability. We believe
that certain investors and analysts use adjusted EBITDA to measure
a company's ability to service debt and to meet other payment
obligations or as a common measurement to value companies in the
telecommunications industry. We believe that certain investors and
analysts also use adjusted EBITDA and adjusted EBITDA margin to
evaluate the performance of our businesses. Adjusted EBITDA is also
one component in the determination of short-term incentive
compensation for all management employees.
Adjusted EBITDA and adjusted EBITDA margin have no directly
comparable IFRS financial measure. Alternatively, the following
table provides a reconciliation of net earnings to adjusted
EBITDA.
($
millions)
|
|
|
|
Q3 2017
|
Q3 2016
|
Net
earnings
|
817
|
800
|
Severance,
acquisition and other costs
|
23
|
25
|
Depreciation
|
765
|
706
|
Amortization
|
208
|
161
|
Finance
costs
|
|
|
|
Interest
expense
|
242
|
227
|
|
Interest on
post-employment benefit obligations
|
18
|
20
|
Other expense
(income)
|
56
|
13
|
Income
taxes
|
237
|
284
|
Adjusted
EBITDA
|
2,366
|
2,236
|
|
BCE operating
revenues
|
5,678
|
5,407
|
Adjusted EBITDA
margin
|
41.7%
|
41.4%
|
(3) The terms free cash flow and dividend payout ratio 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 exclude acquisition and
other costs paid and voluntary pension funding 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. We consider free
cash flow to be an important indicator of the financial strength
and performance of our businesses because it shows 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 and to evaluate the
financial strength and performance of our businesses. The most
comparable IFRS financial measure is cash flows from operating
activities. We define dividend payout ratio as dividends paid on
common shares divided by free cash flow. We consider dividend
payout ratio to be an important indicator of the financial strength
and performance of our businesses because it shows the
sustainability of the company's dividend payments. The following
table is a reconciliation of cash flows from operating activities
to free cash flow on a consolidated basis.
($
millions)
|
|
|
|
Q3 2017
|
Q3 2016
|
Cash flows from
operating activities
|
2,233
|
1,943
|
Capital
expenditures
|
(1,040)
|
(976)
|
Cash dividends paid
on preferred shares
|
(21)
|
(34)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
(13)
|
(13)
|
Acquisition and other
costs paid
|
24
|
31
|
Free cash
flow
|
1,183
|
951
|
(4) We use ARPU, churn, and capital intensity to measure
the success of our strategic imperatives. These key performance
indicators are not accounting measures and may not be comparable to
similar measures presented by other issuers. See section 8.2,
Non-GAAP financial measures and key performance
indicators (KPIs) in BCE's Q3 2017 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 2017 financial guidance (including
revenues, adjusted EBITDA, capital intensity, adjusted EPS and free
cash flow), BCE's annualized common share dividend and common share
dividend payout policy, our network deployment plans and related
capital investments, the expected timing and completion of the
proposed acquisition of the Séries+ and Historia French-language specialty channels from
Corus Entertainment Inc. (Corus) and certain benefits expected to
result from such proposed transaction, 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
November 2, 2017 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 2,
2017. 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 2017 financial
results, as well as our objectives, strategic priorities and
business outlook for 2017, 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 improvement in economic growth, given the Bank of
Canada's most recent estimated
growth in Canadian gross domestic product of 3.1% in 2017,
representing a 30 basis point increase from an earlier estimate of
2.8%
- Modest employment growth, as the overall level of business
investment is expected to remain soft
- Canadian dollar expected 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 higher level of wireline and wireless competition in
consumer, business and wholesale markets
- Higher, but slowing, wireless industry penetration and
smartphone adoption
- Soft media advertising market expected, due to variable demand,
and escalating costs to secure TV programming
Assumptions Concerning our Bell Wireless
Segment
- Maintain our market share of incumbent wireless postpaid net
additions
- Continued adoption of smartphone devices, tablets and data
applications, as well as the introduction of more 4G LTE devices
and new data services
- 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 2016 pricing changes
- Completion of the LTE network buildout to 99% of the Canadian
population and expansion of the LTE-A network coverage to
approximately 87% of the Canadian population, including
Manitoba
- 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
- Continued growth in residential IPTV and Internet
subscribers
- Increasing wireless and Internet-based technological
substitution
- Residential services household ARPU growth from increased
penetration of multi-product households 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 markets 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, as well as the proliferation of devices, such as tablets,
that consume vast quantities of bandwidth, will require
considerable ongoing capital investment
- TV unbundling will not materially accelerate the downsizing of
TV packages by customers
- Realization of cost savings related to management workforce
attrition and retirements, lower contracted rates from our
suppliers, reduction of traffic that is not on our network and
operating synergies from the integration of MTS
- Softer wholesale financial performance due to a CRTC decision
in October 2016 that significantly
lowered capacity-based billing rates for aggregated wholesale
high-speed Internet access services
- No other changes in regulations affecting our wireline business
having material financial, operational or competitive
consequences
Assumptions Concerning our Bell Media Segment
- Higher year-over-year revenue, reflecting further CraveTV
subscriber growth, The Movie Network's national expansion that
began in March 2016, and growth in
outdoor advertising supported by acquisitions and new contract
wins
- Operating cost growth driven by higher TV programming and
sports broadcast rights costs, as well as continued investment in
CraveTV content
- Continued scaling of CraveTV
- Ability to successfully acquire and produce highly rated
programming and differentiated content
- Building and maintaining strategic supply arrangements for
content across all screens and platforms
- Increased revenue generation from monetization of content
rights and Bell Media properties across all platforms
- TV unbundling and growth in OTT viewing expected to result in
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
2017:
- total post-employment benefit plans cost to be approximately
$320 million to $340 million, based
on an estimated accounting discount rate of 4.0%, comprised of an
estimated above adjusted EBITDA post-employment benefit plans
service cost of approximately $250 million
to $260 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
$3,850 million to $3,900 million
- net interest expense of approximately $950 million to $975 million
- tax adjustments (per share) of approximately $0.08, instead of $0.01
- an effective tax rate of approximately 26%, instead of 27%
- non-controlling interest (NCI) of approximately $50 million
- total pension plan cash funding of approximately $400 million to $450 million
- cash taxes of approximately $650 million to $700 million
- net interest payments of approximately $950 million to $975 million
- other free cash flow items, which include working capital
changes, severance and other costs paid, preferred share dividends
and NCI paid, of approximately ($25)
million to ($150) million
- average BCE common shares outstanding of approximately 895
million
- an annual common share dividend of $2.87 per share
The foregoing assumptions, although considered reasonable by BCE
on November 2, 2017, 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 2017 financial
guidance, are listed below. The realization of our forward-looking
statements, including our ability to meet our 2017 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 the cost of
retaining existing customers and attracting 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 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, and changes in, 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
- 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 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 maintain optimal network operating performance
in the context of significant increases in capacity demands on our
Internet and wireless networks
- the failure to implement or maintain highly effective IT
systems supported by an effective governance and operating
framework
- 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 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 to provide our satellite TV services are subject
- 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, fund capital expenditures and provide for planned
growth
- uncertainty as to whether dividends will be declared by BCE's
board of directors or whether BCE's dividend payout 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
- 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
- security and data leakage exposure if security control
protocols applicable to our cloud-based solutions are bypassed
- 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
- the expected timing and completion of the proposed acquisition
of the Séries+ and Historia
French-language specialty channels from Corus are subject to
closing conditions, termination rights and other risks and
uncertainties, including approval by the CRTC and the Competition
Bureau, and there can be no certainty that the anticipated benefits
will be realized.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results. We encourage investors to also read BCE's 2016 Annual
MD&A dated March 2, 2017
(included in the BCE 2016 Annual Report) and BCE's 2017 First,
Second and Third Quarter MD&As dated April 25, 2017, August 2,
2017 and November 1, 2017,
respectively, for additional information with respect to certain of
these and other assumptions and risks, filed by BCE with the
Canadian provincial securities regulatory authorities (available at
Sedar.com) and with the U.S. Securities and Exchange Commission
(available at SEC.gov). These documents are also available at
BCE.ca.
About BCE
Canada's
largest communications company, BCE provides the broadest range of
broadband wireless, TV, Internet and business communication
services to consumer and business customers throughout the country.
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