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 3.1% to $709
million; net earnings attributable to common shareholders up
3.0% to $661 million, or $0.73 per common share; adjusted net earnings of
$719 million 2.3% higher, generating
adjusted EPS of $0.80
- Cash flows from operating activities of $1,496 million, up 13.9%, delivered free cash
flow growth of 9.8%
- 4.8% revenue growth drove 4.1% higher adjusted EBITDA with
healthy 40.3% margin
- 101,707 total broadband net customer additions in postpaid
wireless, Internet and IPTV, up 39.0% over last year
- Wireless postpaid net additions of 68,487, up 91.4%, drove
10.1% higher revenue
- Wireline revenue up 3.6% on continued strong Fibe customer
growth and improved business markets performance
- Mass-market launch of Bell's all-fibre network in
Toronto delivering the best
residential and business broadband Internet connectivity to
Canada's largest city
MONTRÉAL, May 3, 2018 /CNW Telbec/
- BCE Inc. (TSX: BCE) (NYSE: BCE) today reported results for
the first quarter (Q1) of 2018 in accordance with the newly adopted
International Financial Reporting Standard 15 (IFRS 15), and
applied these new accounting policies retrospectively to our 2017
results to facilitate year-over-year comparability.
FINANCIAL
HIGHLIGHTS
|
($ millions except
per share amounts) (unaudited)
|
Q1
2018
|
Q1
2017
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,590
|
5,336
|
4.8%
|
Net
earnings
|
709
|
688
|
3.1%
|
Net earnings
attributable to common shareholders
|
661
|
642
|
3.0%
|
Adjusted net
earnings(1)
|
719
|
703
|
2.3%
|
Adjusted
EBITDA(2)
|
2,254
|
2,166
|
4.1%
|
EPS
|
0.73
|
0.73
|
-
|
Adjusted
EPS(1)
|
0.80
|
0.80
|
-
|
Cash flows from
operating activities
|
1,496
|
1,313
|
13.9%
|
Free cash
flow(3)
|
537
|
489
|
9.8%
|
"Network leadership continues to drive Bell's progress in
broadband customer additions, service usage and revenue growth as
we welcomed approximately 102,000 net new postpaid wireless,
Internet and IPTV customers in the first quarter of 2018. With
Canada's best national mobile network, we delivered almost double
the number of wireless postpaid subscribers gained in Q1 2017 and
our best Q1 result since 2011; continued strong increases in
revenue and adjusted EBITDA; and growing customer satisfaction
reflected in our fourth consecutive quarter of reduced postpaid
churn. Bell's growing all-fibre network is propelling solid
wireline financial performance with continued increases in Fibe TV
and Internet customer additions, strong performance by Bell
Business Markets, and reduced landline losses as households
increasingly opt for Fibe service bundles. In a transforming media
marketplace, Bell Media continued to build its lead across
specialty, pay and conventional TV and other media while executing
its strategy to deliver the best content across multiple
platforms," said George Cope,
President and CEO of BCE Inc. and Bell
Canada.
"Leadership in network, service and content innovation is core
to Bell's continued growth in broadband services. We are proud to
hold our annual general meeting of shareholders in Toronto today, where Bell recently turned on
our unparalleled pure fibre network and announced our next major
rollout to centres throughout the fast-growing GTA/905 region,
adding to the increasing number of cities and almost 4 million
Canadians across 7 provinces benefitting from Bell's all-fibre
broadband network."
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.
BUSINESS DEVELOPMENTS
Bell pure fibre: It's On in Toronto, rolling out to GTA/905
Bell
launched its all-fibre broadband network in Toronto in April, connecting homes and
businesses throughout Canada's most populous city with the world's
best Internet technology. Built for the future, the Bell fibre to
the premises (FTTP) network delivers symmetrical access speeds up
to a Gigabit per second (Gbps) now and up to 40 Gbps and beyond in
future. Bell also announced plans to expand FTTP to the
fast-growing GTA/905 region surrounding Toronto. Broadband innovations included the
launch of the exclusive Bell Whole Home Wi-Fi service that delivers
smart and fast Wi-Fi to every room in the home, and expanded access
to Bell's Alt TV service with Amazon Fire TV Stick and Android TV
devices including Sony, NVIDIA, Xiaomi and other Google certified
products.
Virgin Mobile #1 in customer
service, Lucky Mobile expands to MB and SK
The J.D. Power
2018 Canada Wireless Customer Care Study ranked Virgin Mobile Canada highest in overall customer care
satisfaction for the second consecutive year. Bell's low-cost
prepaid service Lucky Mobile
expanded to Manitoba and
Saskatchewan in March and now
offers budget-conscious Canadians service plans starting as low as
$10. Wireless network innovation
included the successful completion of Wireless to the Home (WTTH)
trials in the 3.5 GHz and 28 GHz spectrum bands. WTTH will leverage
5G to deliver broadband speeds to small population centres; Bell
plans to roll out initial WTTH services to more than 20 rural
communities in Ontario and Québec
this year.
Bell Media invests in Pinewood; Sony acquires international
rights to The Launch
Bell Media continued to drive its
strategy to develop the best creative content for both Canadian and
international audiences, acquiring a majority stake in Pinewood
Toronto Studios, one of the largest purpose-built production
studios in Canada, and announcing
that Sony Pictures Television had acquired international
distribution rights for CTV's highly successful Canadian music
competition series format The Launch. The inaugural season of The
Launch debuted at #1 in its timeslot on CTV and has delivered a
string of #1 musical hits in Canada.
Innovation in Smart Cities and the Internet of
Things
In addition to Bell's extensive Smart City pilot
project with the City of Kingston,
which employs Internet of Things (IoT) data monitoring solutions to
improve municipal operating efficiencies and enhance services for
residents, we are working with Echologics to deliver a wireless IoT
water management solution for Medicine
Hat, Alberta; providing touch-screen smart kiosks and free
Wi-Fi access for downtown St. Catharine's, Ontario; and partnering with Icicle
Technologies to offer a comprehensive IoT-based production
management system for Canada's food industry.
Recognition for Bell Let's Talk, Bell Media, diversity
leadership
Bell stood out at the Canadian Screen Awards in
March as the Bell Let's Talk mental health initiative received the
2018 Humanitarian Award from the Academy of Canadian Cinema
& Television and Bell Media was honoured with 52 awards,
including best national newscast for the CTV National News with
Lisa LaFlamme; 7 awards, more than
all other sports broadcasters combined, for TSN; and best reality
series for The Amazing Race Canada. For the second year in a row,
Bell has been named one of Canada's Best Diversity Employers by
Mediacorp, recognizing Bell's commitment to providing an inclusive
and accessible workplace that reflects Canada's diversity.
BCE RESULTS
"BCE's results in the first quarter of
2018 mark a solid beginning to the year in a competitive and
fast-changing marketplace. Strong operational and financial
performance in wireless and wireline, including the contribution of
Bell MTS, and ongoing cost discipline are delivering the free cash
flow that enables our lead in broadband network investment while
also driving shareholder value. This includes BCE's increased
common share dividend for 2018 announced on February 8 – our fourteenth such increase since
Q4 2008, representing dividend growth of 107% – and our recently
completed $175 million share buyback
program," said Glen LeBlanc, Chief
Financial Officer for BCE and Bell. "BCE's Q1 results are in line
with 2018 guidance growth targets, which are unchanged with the
move to IFRS 15 reporting as our business outlook and financial
plan remain firmly on track."
BCE operating revenue was up 4.8% in Q1 to $5,590 million. Service revenue grew 3.2% to
$4,964 million, and product revenue
increased 19.2% to $626 million. This
reflects increases at both Bell Wireless and Bell Wireline,
including favourable financial contributions from Bell MTS, partly
offset by a modest year-over-year revenue decline at Bell
Media.
Net earnings increased 3.1% to $709
million and net earnings attributable to common shareholders
grew 3.0% to $661 million. Net
earnings per common share was unchanged compared to Q1 2017 at
$0.73 per share, the result of a
higher average number of BCE common shares outstanding due to the
shares issued for the acquisition of Manitoba Telecom Services
(MTS) on March 17, 2017. Higher net
earnings were the result of operating revenue growth driving higher
adjusted EBITDA as well as lower severance, acquisition and other
costs, partly offset by increased depreciation and amortization
expense and higher other expense attributable mainly to net
mark-to-market losses on equity derivatives used as economic hedges
of share-based compensation plans.
Excluding severance, acquisition and other costs, net gains or
losses on investments, net mark-to-market changes on derivatives
used to economically hedge equity settled share-based compensation
plans, early debt redemption costs and impairment charges, adjusted
net earnings were up 2.3% to $719
million, driven by strong year-over-year growth in adjusted
EBITDA. Adjusted EPS was unchanged compared to Q1 2017 at
$0.80 per common share.
Adjusted EBITDA grew 4.1% to $2,254
million on increases of 6.9% at Bell Wireless and 3.1% at
Bell Wireline, which included an incremental contribution from the
MTS acquisition that lapped during the quarter on March 17. Bell Media adjusted EBITDA was down
3.0% due to the combined impact of lower advertising revenue and
higher programming costs compared to last year. BCE's consolidated
adjusted EBITDA margin(2) decreased to 40.3% from 40.6%
in Q1 2017, due to a $14 million
charge for the period May 2015 to
December 2017 to account for lower
final rates set by the CRTC in its recent wholesale domestic
roaming tariff decision. Excluding this retroactive regulatory
impact, adjusted EBITDA was up 4.7% this quarter.
Consistent with higher planned spending in 2018 on BCE's
broadband wireline and wireless network infrastructure, total
consolidated capital expenditures increased 9.3% to $931 million in Q1 from $852 million last year. This represented a
capital intensity (4) ratio (capital expenditures as a
percentage of total revenue) of 16.7% compared to 16.0% in Q1 2017.
The increase was due to continued expansion of broadband fibre and
mobile LTE, including the deployment of wireless small-cells to
optimize mobile coverage, signal quality and data backhaul, and
ongoing investment in Manitoba to
improve broadband network coverage, capacity and speeds.
BCE cash flows from operating activities were $1,496 million, up 13.9% from $1,313 million in Q1 2017, the result of higher
adjusted EBITDA, lower acquisition and other costs paid, and a
positive change in working capital. Free cash flow was $537 million, 9.8% higher than Q1 2017, driven by
increased cash flows from operating activities excluding
acquisition and other costs paid, partly offset by higher capital
expenditures.
BCE reported 68,487 net new wireless postpaid subscribers and a
decrease of 24,110 net wireless prepaid customers; 19,647 net new
high-speed Internet customers; 13,573 net new IPTV customers and a
decrease of 26,054 net satellite TV customers. Residential NAS line
net losses totalled 57,533.
At the beginning of Q1 2018, the high-speed Internet, IPTV and
NAS subscriber bases were increased by 19,835, 14,599 and 23,441,
respectively, mainly to reflect the acquisition of a small telecom
provider in the quarter. The high-speed Internet subscriber base
was also adjusted to reflect the transfer of 16,116 fixed wireless
Internet customers from Bell Wireless.
BCE customer connections across wireless, Internet, TV and
residential NAS totalled 19,072,421 at March
31, 2018, up 0.9% from last year. The total includes
9,195,048 wireless customers, up 2.8% over last year (including
8,471,021 postpaid customers, an increase of 4.0%); total
high-speed Internet subscribers of 3,845,739, up 3.5%; total TV
subscribers of 2,834,418 (including 1,578,489 IPTV customers, an
increase of 7.7%), down 0.1% overall; and residential NAS lines of
3,197,216, down 6.0%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
A consistent focus on subscriber
profitability and disciplined operational execution drove another
quarter of strong wireless financial results. Total operating
revenue increased 10.1% to $1,946
million, with service revenue growing 6.1% to $1,512 million, and product revenue up 26.9% to
$434 million.
Service revenue growth was driven mainly by a larger postpaid
subscriber base and the financial contribution from Bell MTS.
Service revenue was impacted unfavourably by the retroactive
regulatory charge noted above. Excluding this one-time impact,
wireless service revenue was up 7.1%.
Higher product revenue was the result of more new gross customer
activations and handset upgrades, and a higher sales mix of premium
smartphones.
Wireless adjusted EBITDA increased 6.9% to $822 million on the high flow-through of strong
revenue growth, which yielded a revenue margin of 42.2%. Operating
costs increased 12.6%, driven by the incremental expense
contribution of Bell MTS, increased cost of goods sold reflecting
the higher volumes of handset sales, higher costs to support a
growing customer base and increasing data usage, and increased
advertising. Excluding the retroactive regulatory impact, wireless
adjusted EBITDA increased 8.7% in Q1.
- Postpaid net additions increased 91.4% to 68,487, our best Q1
performance since 2011. This was driven by 17.1% higher gross
additions of 347,319, reflecting Bell's mobile network speed and
technology leadership, effective sales execution across our retail
channels, the continued onboarding of customers from a long-term
mobile services contract win with Shared Services Canada, the
contribution of Bell MTS, and lower customer churn(4)
which improved 0.04 percentage points to 1.13%.
- Lucky Mobile, Bell's new
low-cost prepaid service, is driving an improved prepaid subscriber
trajectory with 57,471 prepaid gross additions in Q1, up 10.9% over
last year, supporting a 31.3% decrease in net prepaid customer
losses to 24,110.
- Bell Wireless postpaid customers totalled 8,471,021 at
March 31, 2018, a 4.0% increase over
Q1 2017. Total wireless customers increased 2.8% to 9,195,048.
- Blended average billing per user (ABPU)(4) increased
1.4% to $66.56, driven by a higher
postpaid subscriber mix, more customers moving to higher-value
monthly plans with larger data allotments, increased roaming
revenue and the flow-through of pricing changes. Blended ABPU in Q1
2018 was adjusted to exclude the $14
million regulatory impact. Blended ABPU is equivalent to
blended ARPU reported prior to the adoption of IFRS 15.
Bell Wireline
Wireline operating revenue increased
3.6% to $3,084 million, service
revenue increased 3.5% to $2,892
million and product revenue rose 4.3% to $192 million. The year-over-year revenue
increases were driven by Internet and IPTV subscriber base growth,
higher household ARPU(4), improved Bell Business Markets
performance including higher Internet Protocol (IP) broadband
connectivity revenue and stronger sales of data product and
business service solutions to large enterprise customers, and the
incremental financial contribution of Bell MTS.
Wireline adjusted EBITDA was up 3.1% to $1,302 million on strong revenue flow-through,
slower NAS erosion and disciplined cost management. Operating costs
increased 4.0% to $1,782 million, due
mainly to the incremental expense contribution of Bell MTS and
higher post-employment benefit plans service costs. Wireline
adjusted EBITDA margin declined 0.2 percentage points to 42.2% as a
result of the year-over-year increase in post-employment benefit
plans service costs.
- High-speed Internet net subscriber additions totalled 19,647,
up 31.1% compared to 14,989 in Q1 2017. The significant growth in
net additions reflects the ongoing expansion of Bell's all-fibre
footprint, which drove subscriber growth and lower residential
customer churn despite aggressive cable bundle promotions, as well
as the pull-through of Internet customer activations from Alt TV,
Bell's app-based live TV streaming service.
- BCE's high-speed Internet customer base totalled 3,845,739 at
the end of Q1, up 3.5% over last year.
- Bell TV added 13,573 net new IPTV subscribers, a decrease from
22,402 gained in Q1 2017 due to a higher rate of penetration in
current Fibe markets and ongoing over-the-top substitution. These
factors were partly offset by customer additions from Bell's new
Alt TV streaming service. BCE's total IPTV customer base grew to
1,578,489 at March 31, 2018, up 7.7%
over last year.
- Satellite TV net customer losses were down 31.6% to 26,054 from
38,065 in Q1 2017, with reduced deactivations and migrations
reflecting a more mature subscriber base geographically
better-suited for satellite TV service.
- At March 31, 2018, Bell had a
total of 2,834,418 TV subscribers, compared to 2,837,353 at the end
of Q1 2017.
- Wireline data service revenue increased 5.9% to $1,820 million, the result of growing Internet
and IPTV subscriber bases, higher ARPU from customer upgrades to
faster Internet speeds and 2017 price changes, increased business
IP broadband connectivity revenue, and the favourable impact of
Bell MTS.
- Wireline product revenue was up 4.3% to $192 million, due mainly to higher sales of
telecommunications equipment to large enterprise customers.
- Other services revenue increased 43.2% to $63 million, driven by the incremental financial
contributions from the acquisitions of MTS and AlarmForce
Industries.
- Residential NAS net losses were down 21.6% to 57,533 from
73,421 in Q1 2017, reflecting improved customer retention in Bell's
fibre footprint. Bell residential NAS access lines totalled
3,197,216 at March 31, 2018, a 6.0%
decline from 3,399,981 last year.
- Total wireline voice revenue decreased 3.2% to $950 million due to NAS access line reductions,
decreased usage of traditional long distance, greater use of
inclusive long-distance residential plans and lower sales of
international long distance minutes to wholesale customers compared
to Q1 2017.
Bell Media
Media operating revenue remained stable in
Q1, declining just 0.3% to $749
million as lower advertising revenue was largely offset by
higher subscriber revenue.
Advertising revenue for conventional and specialty TV decreased
due to a continuing soft advertising market and a shift in spending
by advertisers to the main broadcaster of the PyeongChang 2018
Winter Olympics. Subscriber revenue increased, reflecting continued
steady growth in CraveTV and TV Everywhere GO platforms, while
digital media properties and out-of-home advertising also reported
revenue growth.
Media adjusted EBITDA was down 3.0% in Q1 to $130 million, the result of higher operating
costs driven by sports broadcast rights and CraveTV programming
expansion.
- CTV was the most-watched television network among key
demographics in primetime for the 14th consecutive
winter broadcast season with 9 of the top 20 programs.
- TSN remained Canada's #1 specialty sports channel and the top
specialty network overall. TSN audiences grew 15% over Q1 2017 as a
result of key programming such as the 2018 IIHF World Junior
Championship, the Scotties Tournament of Hearts and the PyeongChang
2018 Olympic Winter Games.
- Bell Media remained Canada's top radio broadcaster in winter
2018, reaching an average audience of 16.8 million listeners that
spent more than 71 million hours tuned in each week.
- Bell Media remained the digital media leader among Canadian
broadcast and video network competitors in terms of views, minutes
watched and videos served with monthly averages of 482 million
total views, 1 billion minutes spent, and 58 million videos served.
We reached 65% of digital audiences in Q1 with 20 million unique
monthly visitors.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.755 per common share, payable on July 15, 2018 to shareholders of record at the
close of business on June 15,
2018.
OUTLOOK FOR 2018
As a result of the adoption of IFRS
15, BCE has updated its adjusted EPS dollar guidance range upwards.
All other financial guidance targets for 2018 remain unchanged.
|
February 8
Guidance
|
May
3
Guidance
|
Revenue
growth
|
2% – 4%
|
2% – 4%
|
Adjusted EBITDA
growth
|
2% – 4%
|
2% – 4%
|
Capital
intensity
|
approx.
17%
|
approx.
17%
|
Adjusted
EPS
|
$3.42 –
$3.52
|
$3.45 –
$3.55
|
Adjusted EPS
growth
|
1% - 4%
|
1% - 4%
|
Free cash flow
growth
|
3% – 7%
|
3% – 7%
|
Annualized common
dividend per share
|
$3.02
|
$3.02
|
Dividend payout
policy(3)
|
65% – 75%
of free cash
flow
|
65% – 75%
of free cash
flow
|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q1 2018 results
on Thursday, May 3 at 8:00 am (Eastern). Media are welcome to
participate on a listen-only basis. Please dial toll-free
1-800-377-0758 or 416-340-2219. A replay will be available for one
week by dialing 1-800-408-3053 or 905-694-9451 and entering pass
code 8461008#.
A live audio webcast of the conference call will be available on
BCE's website at BCE Q1-2018 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 2018, we updated our definition of adjusted net earnings
and adjusted EPS to exclude net mark-to-market losses (gains) on
derivatives used to economically hedge equity settled share-based
compensation plans as they may affect the comparability of our
financial results and could potentially distort the analysis of
trends in business performance. Adjusted net earnings and adjusted
EPS for 2017 have also been updated for comparability purposes.
(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 mark-to-market losses
(gains) on derivatives used to economically hedge equity settled
share-based compensation plans, net losses (gains) on investments,
early debt redemption costs and impairment charges. 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 mark-to-market losses
(gains) on derivatives used to economically hedge equity settled
share-based compensation plans, net losses (gains) on investments,
early debt redemption costs and impairment charges, net of tax and
non-controlling interest (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 2018
|
Q1 2017
|
|
TOTAL
|
PER SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
661
|
0.73
|
642
|
0.73
|
Severance,
acquisition and other costs
|
(1)
|
-
|
65
|
0.07
|
Net mark-to-market
losses (gains) on derivatives used to economically hedge equity
settled share-based compensation plans
|
56
|
0.07
|
(18)
|
(0.02)
|
Net losses on
investments
|
-
|
-
|
14
|
0.02
|
Impairment
charges
|
3
|
-
|
-
|
-
|
Adjusted net
earnings
|
719
|
0.80
|
703
|
0.80
|
(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 5, Segmented
information, in BCE's Q1 2018 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
2018
|
Q1
2017
|
Net
earnings
|
709
|
688
|
Severance,
acquisition and other costs
|
-
|
84
|
Depreciation
|
780
|
724
|
Amortization
|
212
|
185
|
Finance
costs
|
|
|
|
Interest
expense
|
240
|
234
|
|
Interest on
post-employment benefit obligations
|
17
|
18
|
Other expense
(income)
|
61
|
(17)
|
Income
taxes
|
235
|
250
|
Adjusted
EBITDA
|
2,254
|
2,166
|
|
BCE operating
revenues
|
5,590
|
5,336
|
Adjusted EBITDA
margin
|
40.3%
|
40.6%
|
(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
nonrecurring. 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)
|
|
|
|
Q1 2018
|
Q1 2017
|
Cash flows from
operating activities
|
1,496
|
1,313
|
Capital
expenditures
|
(931)
|
(852)
|
Cash dividends paid
on preferred shares
|
(33)
|
(43)
|
Cash dividends paid
by subsidiaries to non-controlling interest
|
(13)
|
(12)
|
Acquisition and costs
paid
|
18
|
83
|
Free cash
flow
|
537
|
489
|
(4) We use ABPU, 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.
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 2018 financial guidance (including
revenues, adjusted EBITDA, capital intensity, adjusted EPS and free
cash flow), BCE's 2018 annualized common share dividend and common
share dividend payout policy, our network deployment plans and
related capital investments, 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
May 3, 2018 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 May 3, 2018.
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 2018 financial results, as
well as our objectives, strategic priorities and business outlook
for 2018, 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
- Lower economic growth, given the Bank of Canada's most recent
estimated growth in Canadian gross domestic product of 2.0% in
2018, representing a slight decrease from the earlier estimate of
2.2%
- Employment gains expected to slow in 2018, as the overall level
of business investment is expected to remain soft
- Interest rates expected to increase modestly in 2018
- Canadian dollar expected to remain at 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
- A soft media advertising market, due to variable demand, and
escalating costs to secure TV programming
- Ongoing linear TV subscriber erosion, due to growing
cord-cutter and cord-never customer segments
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 and LTE-A
devices and new data services
- Higher product cost of goods sold, driven by a higher sales mix
of premium devices, increased new customer activations and more
customer device upgrades, attributable to a higher number of
off-contract subscribers due to earlier expiries under two-year
contracts
- Wireless revenue growth driven by postpaid subscriber base
expansion and a higher volume of handset sales
- Expansion of the LTE-A network coverage to approximately 92% 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
- 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
- Traditional high-margin product categories challenged by large
global cloud and OTT providers of business voice and data solutions
expanding into Canada with on-demand services
- Ongoing deployment of direct fibre and 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
- Accelerating customer adoption of OTT services resulting in
downsizing of TV packages
- 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
- No material financial, operational or competitive consequences
of changes in regulations affecting our wireline business
Assumptions Concerning our Bell Media Segment
- Revenue performance is expected to reflect an improving TV
advertising sales trajectory supported by our broadcast of 2018
FIFA World Cup, further CraveTV subscriber growth and continued
growth in outdoor advertising
- 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 2018:
- total post-employment benefit plans cost to be approximately
$335 million to $355 million, based on an estimated accounting
discount rate of 3.6%, comprised of an estimated above adjusted
EBITDA post-employment benefit plans service cost of approximately
$270 million to $280 million and an estimated below adjusted
EBITDA net post-employment benefit plans financing cost of
approximately $65 million to
$75 million
- depreciation and amortization expense of approximately
$4,000 million to $4,050 million
- interest expense of approximately $975
million to $1,000 million
- an effective tax rate of approximately 25%
- NCI of approximately $50
million
- total pension plan cash funding of approximately $400 million
- cash taxes of approximately $700
million to $750 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
- average BCE common shares outstanding of approximately 900
million
- Common share buybacks totalling $175
million
- an annual common share dividend of $3.02 per share
The foregoing assumptions, although considered reasonable by BCE
on May 3, 2018, 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 2018 financial guidance,
are listed below. The realization of our forward-looking
statements, including our ability to meet our 2018 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:
- 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
- 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, spectrum auctions, approval of acquisitions,
broadcast licensing and foreign ownership requirements
- the inability to protect our physical and non-physical assets,
including networks, IT systems, offices, corporate stores 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 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 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
- online content theft and piracy and the absence of effective
legal recourses to combat them
- events affecting the continuity of supply of products and
services that we need to operate our business and to comply with
various obligations from our third-party suppliers, outsourcers and
consultants
- 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
- 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 2017 Annual
MD&A dated March 8, 2018
(included in BCE's 2017 Annual Report) and BCE's 2018 First Quarter
MD&A dated May 2, 2018, 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
BCE is Canada's largest communications
company, providing advanced Bell broadband wireless, TV, Internet
and business communication services throughout the country. Bell
Media is Canada's premier content creation company with leading
assets in television, radio, out of home, and digital media. To
learn more, please visit Bell.ca or 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 mental health 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
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SOURCE Bell Canada