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.
- Strong growth across Bell operating segments in Q4 delivers
3.0% increase in consolidated BCE revenue and 2.8% higher adjusted
EBITDA
- Expanded broadband Internet and IPTV market share in Q4 with
66,000 total net additions in Q4, up 11.0%
- Wireline revenue growth accelerated to 2.4% – best organic
quarterly result in more than 10 years – driving 1.3% higher
adjusted EBITDA
- Wireless postpaid and prepaid net additions totalled 143,000
in Q4, generating 4.6% revenue growth and 5.1% higher adjusted
EBITDA in an intensely competitive quarter
- Improved media financials with revenue up 1.9% and adjusted
EBITDA up 2.9% in Q4 on stronger TV advertising demand and cost
management
- Rural broadband fixed wireless buildout increasing by 50% to
1.2 million locations as a result of the federal government's new
Accelerated Investment Incentive program
- Q4 net earnings of $642
million with net earnings attributable to common
shareholders of $606 million, or
$0.68 per common share; adjusted net
earnings of $794 million generated
adjusted EPS of $0.89
- 2018 financial guidance targets achieved; 2019 guidance
reflects accelerated growth in adjusted EBITDA of 5% to 7% and free
cash flow of 7% to 12% under IFRS 16
MONTRÉAL, Feb. 7, 2019 /CNW Telbec/ - BCE Inc. (TSX:
BCE) (NYSE: BCE) today reported results for the fourth quarter (Q4)
and full-year 2018, provided financial guidance for 2019 in
accordance with the newly adopted International Financial Reporting
Standard 16 for leases (IFRS 16) and announced a 5%, or
$0.15 per share, increase in the BCE
annual common share dividend to $3.17.
"Bell achieved strong Q4 gains in broadband wireless, Internet,
TV and streaming customers, driving growth in revenue and adjusted
EBITDA across our wireline, wireless and media operating segments.
Bell's broadband leadership strategy continues to deliver
unparalleled network performance and service innovation to our
customers and ongoing value enhancement to our shareholders –
including the latest increase to the BCE common share dividend
announced today," said George Cope,
President and CEO of BCE and Bell
Canada.
"Canada's leading fibre network powered Bell market share growth
in broadband Internet and IPTV, with 66,000 total net customer
additions in Q4, and outstanding performance in Bell Business
Markets enterprise services. In an intensely competitive wireless
marketplace, we welcomed more than 143,000 total net subscriber
additions, including over 21,000 net new prepaid customers that
reflect the fast-growing demand for our low-cost Lucky Mobile
service. Bell Media's innovation leadership across conventional and
digital media, including strong growth in specialty channels and an
increase in Crave subscribers to 2.3 million, delivered our best
quarterly media financial performance in 2 years."
"Bell's competitive success is built on our unmatched broadband
network and service innovation, enabled in Q4 by $974 million in highly efficient capital
investment. Offering the fastest Internet access in Canada, our historic all-fibre network
buildout is now 50% complete as we reached 4.6 million homes and
business locations in Q4. Bell LTE Advanced (LTE-A) service, the
fastest wireless technology available in North America, now covers 91% of the national
population. We are also deploying full broadband Internet service
into smaller towns and rural locations with leading-edge Wireless
to the Home (WTTH) technology that is fully upgradeable to 5G
wireless service in future. Today, Bell announces that we are
expanding our Wireless Home Internet rollout plan in rural Canada
by a full 50%, from 800,000 to 1.2 million households, a major
infrastructure expansion due directly to the federal government's
Accelerated Investment Incentive program."
BUSINESS DEVELOPMENTS
BCE common share dividend increase
The BCE annualized
common share dividend will increase 5%, or 15 cents per share, from $3.02 to $3.17 per
year effective with BCE's Q1 2019 dividend payable on April 15, 2019 to shareholders of record at the
close of business on March 15, 2019.
This is BCE's 15th increase to its annual common share
dividend since Q4 2008, representing a total increase of 117%, and
the 11th consecutive year that BCE has delivered 5% or
better dividend growth while maintaining the dividend payout
ratio(3) within the target policy range of 65% to 75% of
free cash flow. The higher dividend for 2019 is fully supported by
projected growth in free cash flow.
Wireless Home Internet to reach 1.2 million
households
Bell's Wireless Home Internet service uses
5G-capable, fibre-enabled Wireless to the Home (WTTH) technology
and 3.5 GHz spectrum to deliver high-speed broadband Internet
service to smaller towns and rural communities. Now available in 28
towns in Ontario and Québec,
Wireless Home Internet is expected to reach more than 200,000
additional households in 138 communities in 2019. Bell today
upgraded its overall Wireless Home Internet rollout plan from
800,000 to 1.2 million rural households following the introduction
of the federal government's Accelerated Investment Incentive.
Voluntary pension plan contribution
In December 2018, BCE made a $240 million voluntary pension plan contribution
that further reinforced the strong solvency position of BCE's
defined benefit (DB) pension plans and reduced the amount of our
future pension obligations. It also better aligns the funded status
of subsidiary BCE DB plans with Bell
Canada's, while also substantially reducing the use of
letters of credit for funding deficits.
Bell Media welcomes Starz to Crave
Bell Media and
Lionsgate today announced the availability of premium TV content
brand Starz as a Bell Media pay TV channel, replacing the
former TMN Encore, and as part of the expanded Crave streaming
service beginning in March. With exclusive Starz, HBO, Showtime and
other premium programming, Crave has grown to serve 2.3 million
Canadians nationwide. #1 sports network TSN and top French-language
sports network RDS announced unique $4.99 Day Passes for their highly successful TSN
Direct and RDS Direct streaming services that will be
available in advance of the March Madness college basketball
tournament.
IoT innovation and Smart City platform expansion
Bell
is partnering with the Greater Toronto
Area city of Markham in the
latest deployment of the Bell Smart City platform, which enables
municipalities to leverage Internet of Things (IoT) applications
and Bell broadband connectivity to enhance operational efficiency
and service delivery to residents, businesses and visitors. Bell
Mobility's Managed IoT Security service is a first of its kind
in Canada, offering businesses,
Smart Cities and other organizations employing IoT solutions an
advanced layer of comprehensive system security.
Bell Let's Talk Day passes 1B
total messages, $100M in Bell mental
health funding
Bell Let's Talk Day on January 30 set new records with 145,442,699
million calls, texts and social media messages of support for
mental health, taking total interactions since the first Bell Let's
Talk Day in 2011 to 1,013,915,275. Canadians everywhere, including
leaders like Prime Minister Justin
Trudeau, and people worldwide, including influencers like
Anderson Cooper and Ellen DeGeneres, helped spread the mental health
message across social media. With a donation of 5 cents for each interaction, Bell's funding
commitment grew by $7,272,134.95 to a
total of $100,695,763.75 for
anti-stigma and mental health care, research and workplace
initiatives throughout Canada.
BCE
RESULTS
|
|
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
($ millions except
per share amounts)
(unaudited)
|
Q4
2018
|
Q4
2017
|
%
change
|
2018
|
2017
|
%
change
|
BCE
|
|
|
|
|
|
|
Operating
revenues
|
6,215
|
6,036
|
3.0%
|
23,468
|
22,757
|
3.1%
|
Net
earnings
|
642
|
698
|
(8.0%)
|
2,973
|
3,050
|
(2.5%)
|
Net earnings
attributable to common shareholders
|
606
|
656
|
(7.6%)
|
2,785
|
2,866
|
(2.8%)
|
Adjusted net
earnings(1)
|
794
|
736
|
7.9%
|
3,151
|
3,058
|
3.0%
|
Adjusted
EBITDA(2)
|
2,394
|
2,329
|
2.8%
|
9,535
|
9,282
|
2.7%
|
Net earnings per
common share (EPS)
|
0.68
|
0.72
|
(5.6%)
|
3.10
|
3.20
|
(3.1%)
|
Adjusted
EPS(1)
|
0.89
|
0.82
|
8.5%
|
3.51
|
3.42
|
2.6%
|
Cash flows from
operating activities
|
1,788
|
1,658
|
7.8%
|
7,384
|
7,358
|
0.4%
|
Capital
expenditures
|
(974)
|
(1,100)
|
11.5%
|
(3,971)
|
(4,034)
|
1.6%
|
Free cash
flow(3)
|
1,022
|
652
|
56.7%
|
3,567
|
3,418
|
4.4%
|
"The fourth quarter capped off a successful year of robust
subscriber growth together with strong increases in revenue,
adjusted EBITDA and free cash flow in line with our guidance
targets, all of which reflected the Bell team's consistently strong
operational execution and financial discipline in a highly
competitive marketplace," said Glen
LeBlanc, Chief Financial Officer for BCE and Bell Canada. "Going into 2019, BCE's operations
and financial position are strong with a balance sheet that is
underpinned by substantial liquidity to execute our business plan
and a defined benefit pension plan that is very well funded. Our
2019 guidance targets are supported by a favourable financial
profile for all Bell operating segments, with higher free cash flow
generation enabling substantial ongoing capital investment in
advanced broadband networks and services to support future growth,
and a higher common share dividend for 2019."
BCE operating revenue was up 3.0% in Q4 to $6,215 million, driven by a 1.5% increase in
service revenue to $5,231 million
that reflected year-over-year growth for all Bell operating
segments. Product revenue increased 11.3% to $984 million, the result of a higher sales mix of
premium smartphones and stronger data equipment sales to large
business customers. For full-year 2018, BCE operating revenue
increased in line with our guidance target of 2% to 4% growth to
$23,468 million, up 3.1% over 2017 on
1.7% higher service revenue and a 13.7% increase in total product
revenue.
Net earnings in Q4 decreased 8.0% to $642
million, and net earnings attributable to common
shareholders totalled $606 million,
or $0.68 per share, down 7.6% and
5.6% respectively over the previous year. Despite higher adjusted
EBITDA, net earnings were down due to increased depreciation and
amortization expense, greater interest expense, higher severance,
acquisition and other costs, and higher other expense attributable
to $190 million in non-cash asset
impairment charges at Bell Media mainly related to its
French-language TV properties.
Excluding severance, acquisition and other costs, net 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 7.9% to $794
million, driving an 8.5% increase in adjusted EPS to
$0.89 per common share.
For full-year 2018, net earnings decreased 2.5% to $2,973 million, while net earnings attributable
to common shareholders were $2,785
million, or $3.10 per share,
down 2.8% and 3.1% respectively. Adjusted net earnings increased
3.0% to $3,151 million, yielding 2.6%
higher adjusted EPS of $3.51.
Adjusted EBITDA grew 2.8% to $2,394
million in Q4, driven by year-over-year increases of 5.1% at
Bell Wireless, 1.3% at Bell Wireline and 2.9% at Bell Media. BCE's
consolidated adjusted EBITDA margin (2) decreased
slightly to 38.5% from 38.6% in Q4 2017, the result of strong
year-over-year growth in lower-margin wireline and wireless product
revenue. Consistent with our 2018 guidance target range of 2% to 4%
growth for the year, adjusted EBITDA increased 2.7% to $9,535 million. BCE's consolidated margin
declined to 40.6% from 40.8% in 2017, due to a higher proportion of
product revenue in BCE's overall revenue mix, higher media content
costs, and the margin impact from the ongoing decline in
traditional wireline voice services.
BCE invested $974 million in new
capital in Q4, compared to $1,100
million the year before. This brought total capital invested
for full-year 2018 to $3,971 million,
down 1.6% from $4,034 million in
2017, and represented a capital
intensity (4) ratio (capital expenditures as a
percentage of total revenue) of 16.9% compared to 17.7% last year.
Capital spending in 2018 focused on expanding our fibre to the
premises (FTTP) footprint to more homes and businesses; ongoing
deployment of the latest wireless technologies, including the
expansion of our LTE Advanced (LTE-A) network and spectrum carrier
aggregation, the deployment of wireless small cells to optimize
coverage, signal quality and data backhaul; the initial rollout of
fixed WTTH using 3.5 GHz spectrum to rural locations in
Ontario and Québec; and ongoing
investment in Manitoba to improve
broadband network coverage, capacity and speeds.
BCE cash flows from operating activities totalled $1,788 million, up 7.8% over Q4 2017. The
increase was the result of higher adjusted EBITDA, an increase in
cash from working capital and lower income taxes paid, partly
offset by a voluntary contribution of $240
million made to post-employment benefit plans at the end of
2018, compared to $100 million in
2017, and higher interest paid. Free cash flow generated in the
quarter was $1,022 million, a 56.7%
increase from Q4 last year, driven by higher cash flows from
operating activities excluding acquisition and other costs paid and
voluntary pension contributions, as well as lower capital
expenditures. For full-year 2018, BCE cash flows from operating
activities were $7,384 million, up
0.4% compared to 2017, while free cash flow grew in line with our
guidance growth target of 3% to 7%, increasing 4.4% to $3,567 million.
In Q4, BCE added 143,114 net new wireless subscribers
(comprising 121,780 postpaid and 21,334 prepaid), 29,627 net new
high-speed Internet customers and 36,473 net new IPTV customers,
and had a net loss of 27,220 satellite TV customers and 61,442
residential NAS lines.
At the beginning of Q4 2018, the postpaid wireless subscriber
base was adjusted to reflect the transfer of 20,000 customers to
Xplornet Communications Inc., the result of a consent agreement
with the Competition Bureau to divest a portion of the postpaid
wireless subscribers gained with the acquisition of Manitoba
Telecom Services Inc. (MTS).
BCE customer connections across wireless, Internet, TV and
residential NAS totalled 19,387,682 at the end of Q4, up 1.9% from
last year. The total included 9,610,482 wireless customers, up 4.8%
(including 8,830,216 postpaid customers, an increase of 4.9%);
3,933,931 high-speed Internet subscribers, up 3.8%; 2,853,081 TV
subscribers, up 0.7% (including 1,675,706 IPTV customers, an
increase of 8.1%); and 2,990,188 residential NAS lines, down
7.5%.
BCE OPERATING RESULTS BY SEGMENT
Bell Wireless
A consistent focus on operating
profitability and cash flow together with disciplined subscriber
growth drove strong overall wireless financial results in Q4 and
full-year 2018.
Total operating revenue increased 4.6% in Q4 to $2,248 million, with service revenue growing 2.2%
to $1,590 million due to continued
healthy subscriber base expansion. Product revenue was up 11.0% to
$658 million on increased sales of
higher-value smartphones compared to last year. For full-year 2018,
total wireless operating revenue was up 6.3% to $8,422 million on service revenue growth of 3.5%
to $6,306 million and 15.3% higher
product revenue of $2,116
million.
Wireless adjusted EBITDA grew 5.1% to $889 million in Q4, driven by high service
revenue flow-through and strong product sales, which yielded a
slightly higher year-over-year revenue margin of 39.5%. Operating
costs rose 4.3% over Q4 2017, the result of higher handset costs,
increased network operating expenses and higher costs to support a
growing customer base. For full-year 2018, adjusted EBITDA
increased 5.6% to $3,566 million as
operating costs grew 6.7%. With a higher proportion of lower-margin
product revenue in our wireless revenue mix compared to 2017,
revenue margin in 2018 decreased 0.3 percentage points to
42.3%.
- 143,114 net new postpaid and prepaid customers were added in
the quarter, compared to 158,514 in Q4 2017. For full-year 2018,
total postpaid and prepaid net additions increased 44.1% to
479,811.
- Postpaid net additions totalled 121,780 in Q4, down from
175,204 the year before. The decline can be attributed to an 11.4%
decrease in gross additions, reflecting our selective matching of
aggressive competitor holiday promotions compared to 2017, and the
lapping of customer migrations from our long-term mobile services
contract with Shared Services Canada (SSC) which began in Q4 2017.
For full-year 2018, postpaid net additions were up 7.4% to 447,682,
driven by 5.4% higher postpaid gross additions.
- Despite the seasonally high level of competitive intensity in
the quarter, postpaid customer churn(4) improved 0.09
percentage points to 1.26%, the result of investment in customer
retention and increasing mobile network speeds.
- Our prepaid subscriber base increased by 21,334 net new
customers, compared to a net loss of 16,690 in Q4 2017. This
reflected a 56.2% year-over-year increase in gross additions and
lower customer churn of 3.18%, both driven by continued strong
demand for our low-cost Lucky Mobile prepaid service. For full-year
2018, prepaid net additions totalled 32,129, up from a net loss of
83,695 the year before, due to 36.7% higher gross additions and
stable customer churn.
- Bell postpaid wireless customers totalled 8,830,216 at the end
of 2018, a 4.9% increase over 2017. Total wireless customers
increased 4.8% to 9,610,482.
- Bell maintained the highest reported blended average billing
per user (ABPU)(4) in Q4 at $67.46, down 1.2% compared to the previous year.
The decrease was due mainly to reductions in data and voice overage
revenue resulting from larger data allotments and talk minutes in
monthly rate plans, as well as the dilutive impact of customer
activations from the federal SSC contract and Lucky Mobile prepaid
customer growth. Excluding the impact of the SSC contract, ABPU
increased 0.3% over last year. For full-year 2018, blended ABPU was
essentially stable at $67.76, but up
0.8% when excluding the impact of the SSC contract.
Bell Wireline
Wireline operating revenue growth
accelerated in Q4, increasing 2.4% to $3,296
million, reflecting positive top-line growth across Bell's
residential, business and wholesale units. Service revenue
increased 1.5% to $2,970 million,
driven by Internet and IPTV subscriber base growth; higher
household ARPU(4); improved Bell Business Markets
performance from IP broadband connectivity and business services
revenue growth, including the financial contribution of Axia
NetMedia (Axia); and increased sales of international wholesale
long distance minutes. Product revenue grew 12.0% to $326 million, the result of stronger data product
sales to large enterprise business customers and higher sales of
consumer electronics at The Source. For full-year 2018, total
wireline operating revenue increased 2.1% to $12,662 million on service revenue growth of 1.5%
to $11,747 million and 10.2% higher
product revenue of $915 million.
Wireline adjusted EBITDA was up 1.3% in Q4 to $1,329 million, reflecting the flow-through of
strong revenue growth as operating costs increased 3.2% to
$1,967 million due to increased sales
of business wireline data products and wholesale international long
distance, and the incremental expense contribution from
acquisitions over the past year. Wireline adjusted EBITDA margin at
40.3% was down 0.5 percentage points over Q4 2017, reflecting
increased NAS erosion, growth in lower-margin product revenue and
the impact of residential service bundle discounts to match
competitor promotions. For a fourth consecutive year, Bell Wireline
delivered positive adjusted EBITDA growth in 2018, increasing 1.7%
to $5,276 million and yielding a
North American-leading revenue margin of 41.7%.
- Bell added 32,558 new retail high-speed Internet customers in
Q4, an increase of 15.5% over the year before, reflecting the
ongoing expansion of Bell's FTTP footprint (which reached
approximately 4.6 million locations at the end of 2018, up from 3.7
million in 2017) 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
29,627, up 9.6% compared to Q4 2017.
- We enhanced our position as Canada's leading Internet service
provider with total 2018 Internet net additions of 107,839, 22.7%
higher than the year before, bringing BCE's high-speed Internet
customer base to 3,933,931 at the end of 2018, an increase of 3.8%
over 2017.
- Bell TV added 36,473 net new IPTV subscribers in Q4, an
increase of 12.3% compared to the same period last year, driven by
the success of Alt TV and the ongoing expansion of our Fibe FTTP
footprint that is enabling more competitive residential service
bundles versus cable rivals. For full-year 2018, despite aggressive
cable service bundle promotions and growing over-the-top
substitution, IPTV net additions increased 2.9% to 110,790. At the
end of 2018, BCE served 1,675,706 IPTV subscribers, up 8.1% over
2017.
- Satellite TV net customer losses in the quarter were 27,220, up
from 25,938 in Q4 2017, due in part to fewer wholesale customer net
activations. Excluding wholesale, the Bell Satellite TV subscriber
base declined by 23,242, an improvement of 2.7% from Q4 2017. For
full-year 2018, satellite TV net losses improved 18.5% to 104,608,
reflecting lower customer churn and fewer year-over-year migrations
to Bell Fibe TV.
- At the end of 2018, BCE remained Canada's #1 TV provider with a
combined total of 2,853,081 IPTV and satellite TV subscribers, up
0.7% from 2017.
- Wireline data service revenue was up 3.6% to $1,910 million on continued strong Internet and
IPTV subscriber base 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
broadband connectivity and business service sales to enterprise
customers including Axia. Full-year 2018 wireline data service
revenue increased 3.8% to $7,466
million.
- Other services revenue in Q4 was stable at $60 million, but increased 17.1% to $247 million for full-year 2018 due to the
contribution from the acquisition of AlarmForce Industries.
- Wireline product revenue in Q4 and full-year 2018 increased
12.0% and 10.2% over the previous year to $326 million and $915
million respectively, driven mainly by higher data equipment
sales to business customers and increased sales of consumer
electronic products at The Source.
- Residential NAS net losses increased to 61,442 from 44,281 in
Q4 last year, due to continued wireless and IP substitution and
ongoing aggressive cable service bundle promotions. Residential NAS
net losses were 264,561 in 2018, up 9.3% over 2017, resulting in a
7.5% year-over-year decline in Bell's total residential NAS access
line customer base to 2,990,188 at the end of 2018.
- Wireline voice revenue decreased 3.8% to $936 million in Q4 and 4.4% to $3,793 million for full-year 2018, the result of
ongoing NAS erosion; increased customer adoption of all-inclusive
long distance plans; and reduced usage of traditional long distance
services by both residential and business customers, partly offset
by higher sales of international wholesale long distance
minutes.
Bell Media
Media operating revenue grew 1.9% in Q4 to
$850 million, due to advertising
revenue growth in entertainment and sports specialty TV,
conventional TV, outdoor advertising and digital media. Subscriber
revenue was essentially flat compared to Q4 2017.
Media adjusted EBITDA increased 2.9% to $176 million as higher revenue more than offset
operating cost growth of 1.7%, which was driven mainly by the
higher cost for sports broadcast rights and ongoing Crave
programming expansion.
For full-year 2018, operating revenue was up 0.5% to
$3,121 million as operating costs
increased 1.7%, resulting in an adjusted EBITDA decline of 3.2% to
$693 million.
- CTV was the #1 network for the 15th consecutive fall
season with 8 of the top 10 programs across all key adult
demographics, including the top 3 programs: The Big Bang Theory,
The Good Doctor and Young
Sheldon.
- TSN remained Canada's sports leader in Q4 and the most-watched
specialty TV channel overall in 2018. Average audiences grew 17%
over the past year, driven by a multitude of marquee properties
including the 2018 FIFA World Cup, MLS soccer, PGA golf, CFL and
NFL football, regional NHL coverage, and broadcasts of Toronto
Raptors basketball. RDS also remained the top French-language
sports network and specialty TV channel.
- Bell Media's English entertainment specialty TV properties grew
viewership among adults 25-54 by 15% in the fall season. Bell Media
had 5 of the top 10 specialty and pay TV channels with TSN, Space,
Comedy, Discovery and CP24.
- Crave served approximately 2.3 million linear video and
direct-to-consumer subscribers at the end of 2018, and is now
carried by all major Canadian broadcast TV distributors.
- Bell Media remained the top French-language specialty and pay
TV broadcaster during Q4 with 5 of the top 10 channels (RDS, Super
Écran, Canal D, Canal Vie and Z), and 9 of the 20 most-watched
shows among adults 25-54.
- Canada's top radio broadcaster in Q4, Bell Media reached an
average audience of 16.6 million listeners who spent approximately
72 million hours tuned in each week.
- Bell Media remained the digital media leader among Canadian
broadcast and video network competitors with monthly averages of
533 million total online views and 888 million minutes spent
watching. Reaching 69% of digital audiences, Bell Media was the
6th largest online property in Canada in Q4 with approximately 21 million
unique monthly visitors.
COMMON SHARE DIVIDEND
BCE's Board of Directors has
declared a quarterly dividend of $0.7925 per common share, payable on April 15, 2019 to shareholders of record at the
close of business on March 15,
2019.
OUTLOOK FOR 2019
The table below summarizes our 2019
financial guidance targets, which have been prepared in accordance
with IFRS 16 accounting standards. These ranges take into
consideration our current outlook as well as our 2018 consolidated
financial results, which have not been restated to reflect the
application of IFRS 16.
|
|
|
|
|
2018
Guidance
|
2018
Results
|
2019
Guidance
|
Revenue
growth
|
2% – 4%
|
3.1%
|
1% – 3%
|
Adjusted EBITDA
growth
|
2% – 4%
|
2.7%
|
5% – 7%
|
Capital
intensity
|
approx.
17%
|
16.9%
|
approx.
16.5%
|
Adjusted
EPS
|
$3.45 –
$3.55
|
$3.51
|
$3.48 –
$3.58
|
Free cash flow
growth
|
3% – 7%
|
4.4%
|
7% – 12%
|
Annualized common
dividend per share
|
$3.02
|
$3.02
|
$3.17
|
Dividend
payout policy(3)
|
65% – 75%
of free cash
flow
|
75%
|
65% – 75%
of free cash
flow
|
Note that excluding the impact of IFRS 16, adjusted EBITDA
growth for 2019 is projected to be 2% to 4%, consolidated free cash
flow growth 3% to 7%, and adjusted EPS $3.53 to $3.63.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a
conference call for financial analysts to discuss Q4 2018 results
and 2019 financial guidance on Thursday,
February 7 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 March 14, 2019 by dialing
1-800-408-3053 or 905-694-9451 and entering passcode 9524178#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q4-2018 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.
(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, net of tax and non-controlling interest (NCI). 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
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)
|
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
|
Total
|
Per
share
|
Total
|
Per
share
|
Total
|
Per
share
|
Total
|
Per
share
|
Net earnings
attributable to common shareholders
|
606
|
0.68
|
656
|
0.72
|
2,785
|
3.10
|
2,866
|
3.20
|
Severance,
acquisition and other costs
|
44
|
0.05
|
34
|
0.04
|
100
|
0.11
|
143
|
0.16
|
Net mark-to-market
gains (losses) on derivatives used to economically hedge equity
settled share-based compensation plans
|
(25)
|
(0.03)
|
(29)
|
(0.03)
|
58
|
0.07
|
(55)
|
(0.05)
|
Net losses on
investments
|
27
|
0.03
|
15
|
0.02
|
47
|
0.05
|
29
|
0.03
|
Early debt redemption
costs
|
-
|
-
|
-
|
-
|
15
|
0.02
|
15
|
0.02
|
Impairment
charges
|
142
|
0.16
|
60
|
0.07
|
146
|
0.16
|
60
|
0.06
|
Adjusted net
earnings
|
794
|
0.89
|
736
|
0.82
|
3,151
|
3.51
|
3,058
|
3.42
|
(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
consolidated financial statements. We define adjusted EBITDA margin
as adjusted EBITDA divided by operating revenues. We use adjusted
EBITDA and adjusted EBITDA margin to evaluate the performance of
our businesses as they reflect their ongoing profitability. We
believe that certain investors and analysts use adjusted EBITDA to
measure a company's ability to service debt and to meet other
payment obligations or as a common measurement to value companies
in the telecommunications industry. We believe that certain
investors and analysts also use adjusted EBITDA and adjusted EBITDA
margin to evaluate the performance of our businesses. Adjusted
EBITDA is also one component in the determination of short-term
incentive compensation for all management employees. Adjusted
EBITDA and adjusted EBITDA margin have no directly comparable IFRS
financial measure. Alternatively, the following table provides a
reconciliation of net earnings to adjusted EBITDA.
($
millions)
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
Net
earnings
|
642
|
698
|
2,973
|
3,050
|
Severance,
acquisition and other costs
|
58
|
47
|
136
|
190
|
Depreciation
|
799
|
783
|
3,145
|
3,034
|
Amortization
|
216
|
208
|
869
|
810
|
Finance
costs
|
|
|
|
|
Interest
expense
|
259
|
241
|
1,000
|
955
|
Interest on
post-employment benefits obligations
|
18
|
18
|
69
|
72
|
Other expense
(income)
|
158
|
62
|
348
|
102
|
Income
taxes
|
244
|
272
|
995
|
1,069
|
Adjusted
EBITDA
|
2,394
|
2,329
|
9,535
|
9,282
|
BCE operating
revenues
|
6,215
|
6,036
|
23,468
|
22,757
|
Adjusted EBITDA
margin
|
38.5%
|
38.6%
|
40.6%
|
40.8%
|
(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 on common shares, 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 except
per share amounts)
|
|
Q4 2018
|
Q4 2017
|
2018
|
2017
|
Cash flows from
operating activities
|
1,788
|
1,658
|
7,384
|
7,358
|
Capital
expenditures
|
(974)
|
(1,100)
|
(3,971)
|
(4,034)
|
Cash dividends paid
on preferred shares
|
(46)
|
(33)
|
(149)
|
(127)
|
Cash dividends paid
by subsidiaries to NCI
|
-
|
-
|
(16)
|
(34)
|
Acquisition and other
costs paid
|
14
|
27
|
79
|
155
|
Voluntary defined
benefit pension plan
contribution
|
240
|
100
|
240
|
100
|
Free cash
flow
|
1,022
|
652
|
3,567
|
3,418
|
(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 2019 annualized common share dividend and common share
dividend payout policy, our network deployment and related
capital investment plans, 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
February 7, 2019 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 February 7,
2019. 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 2019 financial
results, as well as our objectives, strategic priorities and
business outlook for 2019, 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 slightly slower rate of economic growth, given the Bank of
Canada's most recent estimated growth in Canadian gross domestic
product of 1.7% in 2019, down from 2.0% in 2018
- Employment gains expected to continue in 2019, as the overall
level of business investment is expected to grow but remain
variable
- Interest rates expected to increase modestly in 2019
- 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 consistently high level of wireline and wireless competition
in consumer, business and wholesale markets
- Higher, but slowing, wireless industry penetration and
smartphone adoption
- A shrinking data and voice connectivity market as business
customers migrate to lower-priced traditional telecommunications
solutions or alternative over-the-top (OTT) competitors
- Advertising market expected to be impacted by audience declines
and variable demand
- Continued escalation of media content 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
- Higher prepaid customer 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 subscriber acquisition and retention spending, driven by
higher handset costs and more customer device upgrades
- Improving blended ABPU, driven by a higher postpaid smartphone
mix, increased data consumption on 4G LTE and LTE-A networks, and
higher access rates partly offset by the impact of a higher prepaid
mix in our overall subscriber base and more customer migrations
from Bell Mobility's SSC contract
- Expansion of the LTE-A network coverage to approximately 94% of
the Canadian population, and continued fifth generation (5G)
preparations with network technology trials, the deployment of
small cells and equipping all new sites with fibre
- Ability to monetize increasing data usage and customer
subscriptions to new data 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
- Continued aggressive residential service bundle offers from
cable TV competitors in our local wireline areas
- Continued large business customer migration to Internet
protocol (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 telecommunications
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
- Further deployment of direct fibre to more homes and businesses
within our wireline footprint and an acceleration in our fixed
wireless to the premise (WTTP) rural buildout
- Growing consumption of OTT TV services and on-demand streaming
video, as well as the proliferation of devices, such as tablets,
that consume large 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, operating efficiencies enabled by a
growing direct fibre footprint, changes in consumer behavior and
product innovation, as well as the realization of additional
synergies from the next phases of integration of Manitoba Telecom
Services Inc.
- No material financial, operational or competitive consequences
of changes in regulations affecting our wireline business
Assumptions Concerning our Bell Media Segment
- Revenue performance expected to reflect further Crave
subscriber growth, flow-through of broadcast distribution
undertaking (BDU) rate increases, and strategic pricing on
advertising sales
- Operating cost growth driven by higher programming costs,
mainly due to continued investment in Crave content
- Continued scaling of Crave and sports direct-to-consumer
products
- 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
- 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 video 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
2019:
- Total post-employment benefit plans cost to be approximately
$310 million to $330 million, based on an estimated accounting
discount rate of 3.8%, comprised of an estimated above adjusted
EBITDA post-employment benefit plans service cost of approximately
$250 million to $260 million and an estimated below adjusted
EBITDA net post-employment benefit plans financing cost of
approximately $60 million to
$70 million
- Depreciation and amortization expense of approximately
$4,375 million to $4,475 million
- Interest expense of approximately $1,125
million to $1,150 million
- An effective tax rate of approximately 25%
- NCI of approximately $50
million
- Total cash pension plan funding of approximately $375 million
- Cash taxes of approximately $650
million to $700 million
- Net interest payments of approximately $1,125 million to $1,150
million
- Average BCE common shares outstanding of approximately 900
million
- An annual common share dividend of $3.17 per share
The foregoing assumptions, although considered reasonable by BCE
on February 7, 2019, 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 2019 financial
guidance, are listed below. The realization of our forward-looking
statements, including our ability to meet our 2019 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, coupled with new product launches and the
resulting impact on the cost of retaining existing customers and
attracting new ones, as well as on our market shares, service
volumes and pricing strategies
- the level of technological substitution and the presence of
alternative service providers contributing to reduced utilization
of our traditional wireline services
- the adverse effect of the fundamental separation of content and
connectivity, which is changing our TV and media ecosystems and may
accelerate the disconnection of TV services and the reduction of TV
spending, as well as the fragmentation of, and changes in, the
advertising market
- competition with global competitors, in addition to traditional
Canadian TV competitors, for programming content could drive
significant increases in content acquisition costs and challenge
our ability to secure key content
- the proliferation of content piracy impacting subscriber growth
and our ability to monetize products and services, while creating
bandwidth pressure
- 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
- 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, consumer-related codes of
conduct, 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 such as information security
attacks, unauthorized access or entry, fire and natural
disasters
- 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 next-generation
capabilities in a disciplined and strategic manner, including
real-time information-based customer service strategies
- the inability to drive a positive customer experience in all
aspects of our engagement with customers
- the complexity in our operations resulting from multiple
technology platforms, billing systems, sales channels, 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, staff reductions,
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
- our dependence on third-party suppliers, outsourcers and
consultants to provide an uninterrupted supply of the products and
services we need to operate our business, to deploy new network and
other technologies and offer new products and services, and to
comply with various obligations
- changes to our base of suppliers or outsourcers that we may
determine or be required to implement
- the failure of our vendor selection, governance and oversight
processes established to seek to ensure full risk transparency
associated with existing and new suppliers
- security and data leakage exposure if security control
protocols affecting our suppliers are bypassed
- the quality of our products and services and the extent to
which they may be subject to manufacturing defects or fail to
comply with applicable government regulations and standards
- the failure to attract and retain employees with the
appropriate skill sets and to drive their performance in a safe
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, whether the dividend on common shares will be
increased, 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
- new or 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
- unfavourable resolution of legal proceedings and, in
particular, class actions
- new or 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 and equipment
- 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 Safe Harbour
Notice Concerning Forward-Looking Statements dated February 7, 2019 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.
BCE's Safe Harbour Notice Concerning Forward-Looking Statements
dated February 7, 2019 is
incorporated by reference in this news release.
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