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.
- 3.2% growth in consolidated revenue; 2.2% higher adjusted
EBITDA
- 266,000 total broadband wireless, Internet and IPTV net
additions, up 41.5%
- Record Q3 total wireless net additions of 178,000, including
a 15.5% increase in postpaid net additions to 135,000,
delivered growth in wireless revenue of 5.9% and 4.5% in
adjusted EBITDA
- Grew broadband Internet and IPTV market share with 88,000
net additions, up 8.7%
- Wireline revenue growth accelerates to 1.9% on improved
organic residential and business top-line results, yielding 1.2%
higher adjusted EBITDA
- Net earnings grew 2.0% to $867
million; net earnings attributable to common shareholders
increased 1.4% to $814 million, or
$0.90 per common share; adjusted net
earnings of $861 million up 4.5%,
driving a 5.5% increase in adjusted EPS to $0.96
MONTRÉAL, Nov. 1, 2018 /CNW
Telbec/ - BCE Inc. (TSX: BCE) (NYSE: BCE) today reported
results for the third quarter (Q3) of 2018.
"Powered by Canada's most advanced fibre and wireless networks,
Bell led the industry in Q3 broadband growth as we welcomed 266,000
wireless, Internet and IPTV customers, 41.5% more than in Q3 2017.
Bell's strategy of broadband network investment, ongoing service
improvement and efficient operation is delivering leading results
in the marketplace, stronger organic financial performance and
service innovation across all of our business segments," said
George Cope, President and CEO of
BCE and Bell Canada. "Canada's best
national mobile network delivered Bell's highest number of wireless
net additions ever in a third quarter, including accelerating
growth in our Lucky Mobile prepaid brand and our highest number of
postpaid net additions since 2012. Market-leading wireline
broadband growth of 88,000 Internet and IPTV net subscriber
additions and a strong performance by Bell Business Markets reflect
the unsurpassed speed and quality of our growing high-speed fibre
network for both consumers and business customers. And with
continued leadership in conventional, pay and specialty TV,
including #1 sports channel TSN, Bell Media delivered positive
revenue in a traditionally slow quarter while leading the way in
content creation and innovation across new media platforms."
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
Executive leadership appointments
In October, Bell
announced the executive appointments of Mirko Bibic as Chief Operating Officer,
responsible for leading Bell Mobility, Bell Residential & Small
Business and Bell Business Markets, as well as all BCE and Bell
legal and regulatory affairs; and of Wade
Oosterman as Vice Chair, a senior advisory and executive
oversight role in addition to his leadership of Bell Media as Group
President and his role as Bell's Chief Brand Officer.
Reduction in management positions
BCE completed a net
reduction in its management workforce of 4%, or approximately
700 positions, in the past 120 days that is expected to
deliver annualized cash savings of approximately $75 million. These changes reflect the further
integration of Bell MTS, Bell Aliant and other acquisitions,
productivity improvements and cost efficiencies resulting from the
expansion of Bell's all-fibre network footprint and service
innovations enabled by new broadband technologies.
Rural and North broadband expansion
Following
successful trials in the 3.5 and 28 GHz spectrum bands, Bell's
Wireless to the Home (WTTH) footprint has rolled out to 19 rural
locations in Ontario and Québec
with plans to deliver fixed wireless broadband Internet to more
than 30 communities by the end of year. WTTH complements Bell's
wireline fibre to the premises (FTTP) network that now encompasses
4.4 million homes and business locations in 7 provinces.
Bell's 1.5 Gigabit service, Canada's fastest, was launched in
Ontario this summer and has now
rolled out in Québec and Atlantic
Canada. Bell company Northwestel launched its new high-speed
broadband satellite network serving Nunavut in Iqaluit, the first of 25 communities in the
territory that will access the network; Bell Mobility announced it
is trialling LTE wireless in Iqaluit and Rankin
Inlet with plans to connect 13 more Nunavut communities this year. Bell MTS is
extending LTE Advanced (LTE-A) wireless coverage in rural
Southeastern Manitoba, increasing
access to the latest wireless technology to 90% of Manitobans.
Canada's first combined vehicle and asset tracking solution is now
available on Bell's IoT-dedicated LTE-M network from Canadian
innovation partners BeWhere and Trak-iT.
Bell Media's all-new Crave streaming service
Bell
Media today announced the all-new Crave content platform that
combines HBO Canada, The Movie Network (TMN) and other premium
programming, available now through participating TV providers and
as a breakthrough streaming service available to all Canadians with
Internet access beginning this Monday
November 5. In Q3, Bell Media introduced CraveTV's first
kids programming through a strategic partnership with WOW!
Unlimited Media, announced a new long-term programming agreement
with VICE Media and made iHeartRadio Canada's 11,000 podcasts
available on Spotify. In October, the new United States-Mexico-Canada Agreement (USMCA)
effectively rescinded a 2015 CRTC ban on simultaneous substitution
of U.S. signals during Bell Media's broadcast of the Super
Bowl.
Bell Mobility leadership in smartphones, connected
cars
Bell's leading mobile device lineup continued to expand
in Q3 with the addition of Apple iPhone Xs, Xs Max, XR and Apple
Watch Series 4 (GPS + Cellular) and new Android smartphones from
leading manufacturers including the Samsung Galaxy Note 9, Google
Pixel 3 and Pixel 3 XL, LG Q Stylo+ and Huawei P20 Pro. Bell
Mobility and Ford announced that Bell is the first Canadian
wireless service provider enabling built-in Wi-Fi hotspots in Ford
and Lincoln vehicles with Bell's
Connected Car – Built In service.
Bell Business Markets network, service innovation
Bell Business Markets (BBM) welcomed the Axia NetMedia team
following the August 31 closing of
Bell's acquisition of the Calgary-based operator of Alberta's provincial SuperNet broadband
network. BBM also launched Canada's first cloud-based Virtual
Network Services (VNS) platform, offering enterprise business
customers a catalogue of on-demand network functions that reside
securely in Bell's private cloud, including the country's first
managed SD-WAN (software-defined wide area network) solution
powered by Cisco Viptela.
Bell Let's Talk in the community
Bell Let's Talk
marked Mental Health Week / World Mental Health Day in October by
presenting the annual Faces of Mental Illness, a national
anti-stigma campaign highlighting Canadians living in recovery from
mental illness. Expanded to $2
million annually starting this year, the Bell Let's Talk
Community Fund provides grants to grassroots mental health programs
in every region of the country, a total of 120 groups this year
starting with donations to community programs in Greater Montréal
and the Québec City region, suicide prevention programs at
20 remote First Nations across Ontario, and trauma therapy for recently
arrived refugees through YMCA of Greater
Saint John.
BCE RESULTS
FINANCIAL
HIGHLIGHTS
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
Q3
2018
|
Q3
2017
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,877
|
5,697
|
3.2%
|
Net
earnings
|
867
|
850
|
2.0%
|
Net earnings
attributable to common shareholders
|
814
|
803
|
1.4%
|
Adjusted net
earnings(1)
|
861
|
824
|
4.5%
|
Adjusted
EBITDA(2)
|
2,457
|
2,405
|
2.2%
|
EPS
|
0.90
|
0.90
|
-
|
Adjusted
EPS(1)
|
0.96
|
0.91
|
5.5%
|
Cash flows from
operating activities
|
2,043
|
2,233
|
(8.5%)
|
Free cash
flow(3)
|
1,014
|
1,183
|
(14.3%)
|
"We performed well across all Bell operating segments in Q3,
posting another solid quarter of financial and operating results
with record wireless subscriber results, a stronger wireline
revenue growth trajectory, improved media top-line performance and
cost discipline driving higher adjusted EBITDA in line with
guidance for the year," said Glen
LeBlanc, Chief Financial Officer for BCE and Bell. "We
remain competitively well positioned as we move forward in Q4, with
strong momentum across our wireless and residential wireline
operations and market-leading media assets generating strong and
reliable cash flow. Growth opportunities ahead from business
performance, continued capital and cost efficiency gains,
additional MTS-related tax benefits and a stronger pension solvency
position provide a solid foundation for continued execution of our
dividend growth objective. With no fundamental changes in outlook,
I am pleased to reconfirm all our financial guidance targets for
2018."
BCE operating revenue growth in Q3 accelerated, increasing 3.2%
to $5,877 million, driven by a 1.2%
increase in service revenue to $5,117
million that reflected year-over-year increases for all Bell
operating segments. Product revenue grew 18.2% to $760 million, the result of increased sales of
premium smartphones and a greater number of wireless customer
transactions, as well as stronger data equipment sales to large
business customers.
Net earnings grew 2.0% to $867
million and net earnings attributable to common shareholders
increased 1.4% to $814 million. Net
earnings per common share was unchanged compared to Q3 2017 at
$0.90 per share. Higher net earnings
were the result of operating revenue growth driving higher adjusted
EBITDA as well as lower income taxes and lower other expense,
partly offset by higher severance, acquisition and other costs,
increased depreciation and amortization expense and higher finance
costs.
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 4.5% to $861
million, driving a 5.5% increase in adjusted EPS to
$0.96 per common share.
Adjusted EBITDA was up 2.2% to $2,457
million on increases of 4.5% at Bell Wireless and 1.2% at
Bell Wireline. Bell Media adjusted EBITDA decreased 2.7% due to
higher programming costs compared to last year, which included
broadcast rights for the 2018 FIFA World Cup. BCE's consolidated
adjusted EBITDA margin(2) decreased to 41.8% from 42.2%
in Q3 2017, due to growth in lower-margin wireline and wireless
product revenue, higher media content costs, and the margin impact
from the decline in wireline voice services.
BCE capital expenditures totalled $1,010
million, compared to $1,040
million in Q3 last year, representing a capital intensity
(4) ratio (capital expenditures as a percentage of total
revenue) of 17.2%, down from 18.3% last year. Capital investment
continued to focus on expanding our fibre to the premises (FTTP)
footprint to more homes and businesses; 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 $2,043 million, down 8.5% from last year, as
higher adjusted EBITDA was more than offset by a decrease in cash
from working capital and the timing of income taxes paid. Free cash
flow generated in the quarter was $1,014
million, 14.3% lower than Q3 last year, reflecting a
decrease in cash flows from operating activities excluding
acquisition and other costs paid, which was partly offset by lower
capital expenditures.
In Q3, BCE added 177,834 net new wireless subscribers (including
135,323 postpaid and 42,511 prepaid); 47,749 net new high-speed
Internet customers; 40,091 net new IPTV customers; a decrease of
31,490 net satellite TV customers; and a net loss of 74,921
residential NAS lines.
BCE customer connections across wireless, Internet, TV and
residential NAS totalled 19,287,130 at the end of Q3, up 2.2% from
last year. The total included 9,487,368 wireless customers, up 5.3%
(including 8,728,436 postpaid customers, an increase of 5.9%);
3,904,304 high-speed Internet subscribers, up 3.8%; 2,843,828
TV subscribers, up 0.6% (including 1,639,233 IPTV customers, an
increase of 8.0%); and 3,051,630 residential NAS lines, down
6.8%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
Total wireless revenue grew 5.9% to
$2,182 million. Service revenue
increased 2.5% over Q3 2017 to $1,630
million, due to continued strong growth in subscribers and a
higher proportion of postpaid customers choosing plans with larger
data allotments. Product revenue was up 17.2% to $552 million on increased sales of higher-value
smartphones reflected in higher gross subscriber additions and more
customer upgrades compared to last year.
Wireless adjusted EBITDA increased 4.5% to $951 million on the flow-through of high margin
service revenue and strong product sales, partly offset by a 7.0%
increase in operating costs due to higher handset sales volumes,
increased network operating expenses, and higher customer support
costs driven by rapid growth in our wireless subscriber base. With
a higher proportion of lower-margin product revenue in our wireless
revenue mix compared to last year, together with greater device
discounting, revenue margin decreased 0.6 percentage points to
43.6%.
- Total postpaid and prepaid net additions grew 66.2% to 177,834,
a record Q3 performance.
- Postpaid net additions increased 15.5% to 135,323, our best Q3
result since 2012. This was driven by 9.1% higher gross additions
of 426,719, reflecting Bell's mobile network leadership, the
success of our sales promotions and retail channel execution,
Canadian population growth, the ongoing onboarding of customers
from our long-term mobile services contract with Shared Services
Canada (SSC) and lower customer churn(4) – which
improved 0.02 percentage points to 1.14% in the quarter.
- Prepaid subscribers increased by 42,511 customers, compared to
a net loss of 10,200 in Q3 2017, due to strong market traction for
our low-cost Lucky Mobile prepaid service. This contributed to both
a 57.7% year-over-year increase in gross additions of 108,928 and
lower customer churn. This represented Bell's first quarter of
positive prepaid net additions since Q4 2009.
- Bell postpaid wireless customers totalled 8,728,436 at the end
of Q3, a 5.9% increase over Q3 2017. Total wireless customers
increased 5.3% to 9,487,368.
- Bell's industry-leading blended average billing per user
(ABPU)(4) decreased 0.7% to $69.28. This was due largely to the dilutive
impacts of customer activations from the federal SSC contract, as
well as a higher proportion of prepaid subscribers and reductions
in data overage revenue resulting from larger data allotments in
monthly rate plans. Excluding the impact of the SSC contract, ABPU
increased 0.6% over last year.
Bell Wireline
Wireline operating revenue increased
1.9% on improved year-over-year organic residential, business and
wholesale top-line growth, resulting in 0.8% higher service revenue
of $2,938 million and a 20.1%
increase in product revenue to $209
million. These increases were driven by industry-leading
Internet and IPTV net subscriber gains, higher household
ARPU(4), and improved Bell Business Markets performance
from IP broadband connectivity revenue growth, stronger sales of
data product and business service solutions to large enterprise
customers, and increased sales of international wholesale long
distance minutes.
Wireline adjusted EBITDA increased 1.2% to $1,324 million, reflecting the flow-through of
strong revenue growth as operating costs increased 2.4% to
$1,823 million due to increased sales
of business wireline data products and wholesale international long
distance. Wireline adjusted EBITDA margin declined 0.3 percentage
points to 42.1% due to increased NAS erosion, growth in
lower-margin product revenue, and the impact of residential service
bundle discounts to match competitor promotions.
- Bell added 53,124 new retail high-speed Internet customers in
Q3, an increase of 27.4% over last year, reflecting the ongoing
expansion of Bell's FTTP footprint (which reached approximately 4.4
million locations at the end of Q3, up from 3.6 million last year)
and the pull-through of Internet customer activations from Bell's
Alt TV service. Including wholesale net customer losses, total
high-speed Internet net additions were 47,749, up 7.5% compared to
Q3 last year.
- BCE's high-speed Internet customer base totalled 3,904,304 at
the end of the quarter, an increase of 3.8% over Q3 last year.
- Bell TV gained 40,091 net new IPTV subscribers in Q3, up 10.1%
from last year, despite aggressive cable service bundle promotions
and ongoing over-the-top substitution. The improved performance
reflected sustained customer demand for Alt TV and more competitive
household service bundles supported by Bell's expanded FTTP
footprint. BCE served 1,639,233 IPTV subscribers at the end of Q3,
up 8.0% from the same time last year.
- Satellite TV net losses improved 9.1% to 31,490 in Q3, the
result of lower customer churn and fewer year-over-year migrations
to Bell Fibe TV. Excluding wholesale net losses, the Bell Satellite
TV subscriber base declined by 26,861 this quarter, compared to a
net customer loss of 31,868 in Q3 last year.
- BCE's total TV customer base reached 2,843,828 subscribers, up
0.6% from 2,825,754 at the end of Q3 2017.
- Wireline data service revenue was up 2.8% to $1,867 million, the result of strong Internet and
IPTV subscriber growth, higher ARPU from customer upgrades to
faster Internet speeds with larger data usage buckets, the
flow-through of rate changes, and higher Bell Business Markets IP
connectivity and solutions sales to enterprise customers.
- Other services revenue increased 15.4% to $60 million, due to the incremental financial
contribution from the acquisition of AlarmForce Industries.
- Wireline product revenue increased 20.1% to $209 million, driven mainly by higher equipment
sales to business customers.
- Residential NAS net losses increased to 74,921 from 57,387 in
Q3 last year, due to continued wireless and IP substitution and
more aggressive cable service bundle promotions. Bell residential
NAS access lines totalled 3,051,630 at the end of Q3, representing
a 6.8% decline from the same time last year.
- Wireline voice revenue decreased 4.4% to $950 million due to ongoing NAS erosion,
increases in all-inclusive long distance plans, and reduced usage
of traditional long distance services by both residential and
business customers.
Bell Media
Media operating revenue increased 1.1% in
Q3 to $731 million, the result of
higher revenues from both advertising and subscriber fees.
Advertising sales increased over Q3 last year due to revenue
generated from the 2018 FIFA World Cup, stronger year-over-year
specialty entertainment performance and increases at specialty TV
news service CP24. Increased subscriber revenue reflected continued
growth in CraveTV and direct-to-consumer sports streaming services
TSN Direct and RDS Direct.
Bell Media adjusted EBITDA decreased 2.7% to $182 million, due to higher operating costs that
included sports broadcast rights, primarily for the 2018 FIFA World
Cup; the ramp-up in HBO and Showtime content for CraveTV; and deal
renewals for specialty TV programming.
- CTV continued to be the most-watched television network in
Canada with 12 of the top 20
programs of the summer, including #1 show The Amazing Race Canada.
CTV was also the top network overall during Premiere Week with the
5 most-watched broadcasts.
- TSN remained Canada's sports leader and #1 specialty TV channel
overall in Q3, as well as over the last year, as viewership in the
quarter increased 29% for the key adults 25-54 demographic on the
strength of high-demand programming such as the 2018 FIFA World
Cup, MLS soccer, PGA golf, and CFL and NFL football.
French-language sports network RDS also grew viewership among
adults 25-54 by 29% compared to Q3 last year.
- Bell Media's English entertainment specialty TV properties grew
audiences by 14% among adults 25-54, with core specialty brands
Bravo, Comedy, Discovery, E!, Gusto, Much, MTV and Space all
maintaining or growing audiences across key demos.
- Bell Media was the top French-language specialty and pay TV
broadcaster for the 2017/2018 broadcast year with the most top 10
channels among adults 25-54, including Canal D, Canal Vie, RDS and
Super Écran.
- As Canada's top radio broadcaster, Bell Media reached an
average audience of 17 million radio listeners who spent over 72
million hours tuned in each week.
- Bell Media remains the digital media leader among Canadian
broadcast and video network competitors with monthly averages of
406 million total views and 944 million minutes spent watching. We
reached 68% of digital audiences with approximately 21 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 January 15, 2019 to shareholders of record at the
close of business on December 14,
2018.
OUTLOOK FOR 2018
BCE confirmed its financial guidance
targets for 2018, which were updated on May
3, 2018 to reflect the adoption of International Financial
Reporting Standard 15 (IFRS 15):
|
|
|
|
May
3
Guidance
|
November
1
Guidance
|
Revenue
growth
|
2% - 4%
|
On track
|
Adjusted EBITDA
growth
|
2% - 4%
|
On track
|
Capital
intensity
|
approx.
17%
|
On track
|
Adjusted
EPS
|
$3.45 -
$3.55
|
On track
|
Adjusted EPS
growth
|
1% - 4%
|
On track
|
Free cash flow
growth
|
3% - 7%
|
On track
|
Annualized common
dividend per share
|
$3.02
|
$3.02
|
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 2018 results
on Thursday, November 1 at
8:00 am (Eastern). Media are welcome
to participate on a listen-only basis. Please dial toll-free
1-800-377-0758 or 416-340-2216. A replay will be available until
midnight December 6, 2018 by dialing
1-800-408-3053 or 905-694-9451 and entering pass code 7771836#.
A live audio webcast of the conference call will be available on
BCE's website at BCE Q3-2018 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)
|
|
Q3 2018
|
Q3 2017
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
814
|
0.90
|
803
|
0.90
|
Severance,
acquisition and other costs
|
39
|
0.04
|
17
|
0.01
|
Net mark-to-market
losses (gains) on derivatives used to economically hedge equity
settled share-based compensation plans
|
5
|
0.01
|
(8)
|
(0.01)
|
|
|
|
|
|
Early debt redemption
costs
|
2
|
0.01
|
12
|
0.01
|
Impairment
charges
|
1
|
-
|
-
|
-
|
Adjusted net
earnings
|
861
|
0.96
|
824
|
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 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)
|
|
|
|
Q3 2018
|
Q3 2017
|
Net
earnings
|
867
|
850
|
Severance,
acquisition and other costs
|
54
|
23
|
Depreciation
|
779
|
760
|
Amortization
|
220
|
207
|
Finance
costs
|
|
|
|
Interest
expense
|
255
|
242
|
|
Interest on
post-employment benefit obligations
|
17
|
18
|
Other
expense
|
41
|
56
|
Income
taxes
|
224
|
249
|
Adjusted
EBITDA
|
2,457
|
2,405
|
|
BCE operating
revenues
|
5,877
|
5,697
|
Adjusted EBITDA
margin
|
41.8%
|
42.2%
|
(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)
|
|
|
|
Q3 2018
|
Q3 2017
|
Cash flows from
operating activities
|
2,043
|
2,233
|
Capital
expenditures
|
(1,010)
|
(1,040)
|
Cash dividends paid
on preferred shares
|
(35)
|
(21)
|
Cash dividends paid
by subsidiaries to NCI
|
(3)
|
(13)
|
Acquisition and costs
paid
|
19
|
24
|
Free cash
flow
|
1,014
|
1,183
|
(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 financial guidance (including revenues,
adjusted EBITDA, capital intensity, adjusted EPS and free cash
flow), BCE's common share dividend payout policy, our network
deployment plans and related capital investments, annualized cash
savings expected to result from management workforce reductions,
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 1, 2018 and, accordingly,
are subject to change after such date. Except as may be required by
applicable 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 1,
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
- A gradual improvement in economic growth, given the Bank of
Canada's most recent estimated growth in Canadian gross domestic
product of 2.1% in 2018, representing a slight increase from the
earlier estimate of 2.0%
- 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
continued escalation of 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 handset cost, 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
- Accelerating customer adoption of OTT services resulting in
downsizing of TV packages
- 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
- Realization of cost savings related to management workforce
reductions including 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 the 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 November 1, 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 upgrade
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, Second
and Third Quarter MD&As dated May 2,
2018, August 1, 2018 and
October 31, 2018, 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
BCE is Canada's largest communications
company, providing advanced Bell broadband wireless, TV, Internet
and business communications services alongside Canada's premier
content creation and media assets from Bell 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 leadership initiatives. To learn more,
please visit Bell.ca/LetsTalk.
Media inquiries:
Marie-Eve Francoeur
514 391-5263
marie-eve.francoeur@bell.ca
Investor inquiries
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
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SOURCE Bell Canada