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.
- 6.9% adjusted EBITDA growth and 1.7 percentage-point
increase in margin to 42.0% driven by 2.6% higher total revenue and
IFRS 16 impact
- Strong wireless execution with 50,000 postpaid net
additions, lowest postpaid customer churn in 15 years and 1.2% ABPU
growth, delivered 4.5% increase in revenue and 11.6% higher
adjusted EBITDA
- Grew broadband Internet and IPTV market share with 44,000
total retail net additions, up 37.4%
- Wireline adjusted EBITDA up 2.0% on 1.8% higher revenue
driven by positive top-line growth across all Bell Wireline
units
- Media adjusted EBITDA up 26.9% on higher TV advertising
revenue and lower costs
- Net earnings grew 11.6% to $791
million; net earnings attributable to common shareholders
increased 12.0% to $740 million, or
$0.82 per common share; adjusted net
earnings of $692 million generated
adjusted EPS of $0.77, down
3.8%
- Cash flows from operating activities of $1,516 million, up 1.3%, delivered free cash flow
growth of 19.6% to $642
million
MONTRÉAL, May 2, 2019 /PRNewswire/ - BCE Inc. (TSX: BCE)
(NYSE: BCE) today reported results for the first quarter (Q1) of
2019 in accordance with the newly adopted International Financial
Reporting Standard 16 for leases (IFRS 16). Prior periods were not
adjusted.
"The strength of Bell's industry-leading broadband networks
delivered leading customer additions in broadband Internet, TV and
postpaid wireless, and higher customer satisfaction reflected in
improved churn performance across our operating segments in Q1. A
strong start to the year, and the Bell team will continue to lead
the way in network, service and content innovation in 2019,
including the ongoing expansion of our broadband services into
rural Canada and preparation for the introduction of 5G wireless,"
said George Cope, President and CEO
of BCE Inc. and Bell Canada.
"Consistent strategic execution across our wireless, wireline
and media growth segments delivered growth in revenue, adjusted
EBITDA – representing our 54th consecutive quarter of
year-over-year adjusted EBITDA growth – and free cash flow.
Canada's best national mobile network attracted 50,000 net new
postpaid wireless customers and supported higher data usage and
revenue per customer, delivering revenue growth of 4.5%, 11.6%
higher adjusted EBITDA and our best churn performance since 2004.
In wireline, positive topline growth in business, wholesale and
residential – including combined retail Internet and IPTV net
additions of 44,000 in Q1, up 37.4% over last year – increased
revenue by 1.8% and adjusted EBITDA by 2.0%. In a challenging media
marketplace, Bell Media continued to grow TV advertising revenue,
attract new subscribers to next-generation platforms like Crave and
achieve substantial cost savings, resulting in a 26.9% increase in
adjusted EBITDA for Q1."
BUSINESS DEVELOPMENTS
Lucky Mobile and Virgin
Mobile prepaid at Dollarama
Bell's Lucky Mobile and Virgin Mobile Canada now offer prepaid wireless
service at value retailer Dollarama Inc.'s more than 1,200
locations across Canada. The exclusive partnership enables
budget-conscious Canadians to purchase a Lucky or Virgin Mobile
prepaid SIM card at Dollarama and activate their own mobile device
with no activation fee. With talk and text plans starting at just
$10 per month, Lucky Mobile has
proven exceptionally popular with Canadians looking for low-cost
wireless access, welcoming the most net new prepaid customers in
2018.
Broadband Internet expansion in rural
communities
Bringing broadband Internet to smaller towns and
rural locations, Bell's innovative Wireless Home Internet service
has now reached more than 60 communities in Ontario and Québec. Recent expansions include
the cottage country regions of Muskoka and Haliburton County,
Kawartha Lakes and Peterborough County, as well as Quinte West and Hastings, Lennox &
Addington, Northumberland and Prince Edward Counties. Bell also
announced the expansion of fibre to the premises (FTTP) connections
to the communities of Louiseville,
Québec and Carman, Manitoba.
Bell spectrum update
With significant spectrum assets
in low, mid and high frequency bands, Bell chose not to acquire any
low-band 600 MHz spectrum in the recent federal auction. Our
existing low-band spectrum, combined with network enhancements like
cell splitting as well as re-farming of spectrum made available
from the shutdown of Bell's CDMA network on April 30, enable Bell to deliver broadband 4G and
5G services for significantly less capital than buying 600 MHz
spectrum. Note that Bell's main peer companies in the United States also chose not to own any
600 MHz spectrum in their markets. Bell looks forward to
participating in the upcoming auctions of 3500 MHz and high band
millimetre wave spectrum that will enable the deployment of 5G
wireless service.
Bell LTE wireless again recognized as Canada's
fastest
Bell's 4G LTE wireless network continues to be
recognized as the fastest in Canada, most recently by Tutela. The network
analysis firm found Bell LTE Advanced delivers the best average
upload and download speeds of any mobile network in Canada. Tutela's report, which also gave Bell
Mobility and Virgin Mobile top scores for consistent connection
quality, follows PCMag's Fastest Mobile Networks in Canada study, in which Bell clocked the
fastest maximum wireless upload and download speeds in the
country.
BBM expands cloud services with Google
Bell Business
Markets (BBM) and Google have introduced hybrid cloud
connectivity for business customers to connect to the Google
Cloud Platform globally via direct fibre connections on Bell's
private network. The new service joins the Bell Cloud Connect
portfolio of cloud and data centre solutions with partners
including Amazon Web Services, IBM and Microsoft.
Excellence in Canadian media, record-breaking
viewership
The season 8 premiere of HBO's Game of Thrones on
Crave was the most-watched episode in Canadian entertainment
specialty and pay TV history attracting 3.3 million viewers across
Crave's linear, on demand and streaming platforms. CTV's original
comedy Jann is the most-watched new Canadian series of the
year. Premium pay TV channel Starz launched March 5, replacing the former TMN Encore. Day
Pass subscriptions to TSN Direct and RDS Direct, the first single
day all-access streaming option in Canada, launched March
4. Bell Media and its production partners received 55 awards
at the Canadian Screen Awards for excellence in Canadian content
creation.
BCE RESULTS
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
($ millions except
per share amounts) (unaudited)
|
Q1
2019
|
Q1
2018
|
%
change
|
BCE
|
|
|
|
Operating
revenues
|
5,734
|
5,590
|
2.6%
|
Net
earnings
|
791
|
709
|
11.6%
|
Net earnings
attributable to common shareholders
|
740
|
661
|
12.0%
|
Adjusted net
earnings(1)
|
692
|
719
|
(3.8%)
|
Adjusted
EBITDA(2)
|
2,409
|
2,254
|
6.9%
|
EPS
|
0.82
|
0.73
|
12.3%
|
Adjusted
EPS(1)
|
0.77
|
0.80
|
(3.8%)
|
Cash flows from
operating activities
|
1,516
|
1,496
|
1.3%
|
Capital
expenditures
|
(850)
|
(931)
|
8.7%
|
Free cash
flow(3)
|
642
|
537
|
19.6%
|
"The first quarter represents a very positive beginning to 2019
as diligent operational execution delivered strong financials well
within our guidance targets, even adjusting for the application of
IFRS 16," said Glen LeBlanc, Chief
Financial Officer for BCE and Bell
Canada. "Excluding IFRS 16, adjusted EBITDA increased in
line with our historical rate of 2% to 4%. This positive
year-over-year growth across all Bell operating segments, together
with a declining capital intensity ratio, propelled a 19.6%
increase in free cash flow in Q1. With a favourable profile for all
our operating segments as we move forward in 2019, we expect
continued free cash flow generation to enable our capital
investment plans while fully supporting the increased BCE common
share dividend for 2019."
BCE operating revenue was up 2.6% in Q1 to $5,734 million. Service revenue grew 1.6% to
$5,045 million and product revenue
increased 10.1% to $689 million. This
reflects increases at Bell Wireless and Bell Wireline, partly
offset by a modest year-over-year revenue decline at Bell
Media.
Net earnings increased 11.6% to $791
million and net earnings attributable to common shareholders
totalled $740 million, or
$0.82 per share, up 12.0% and 12.3%
respectively over Q1 2018. Higher net earnings and net earnings per
common share were the result of growth in adjusted EBITDA and
higher other income, driven mainly by net mark-to-market gains on
derivatives used to economically hedge equity settled share-based
compensation plans. This was moderated by higher depreciation,
finance costs, income taxes, and severance, acquisition and other
costs. Overall, the adoption of IFRS 16 did not have a significant
impact on net earnings.
Excluding 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, adjusted net
earnings were $692 million, or
$0.77 per common share, compared to
$719 million, or $0.80 per common share, in Q1 of last year.
Adjusted EBITDA grew 6.9% to $2,409
million in Q1, driven by year-over-year increases of 11.6%
at Bell Wireless, 2.0% at Bell Wireline and 26.9% at Bell Media.
Adjusted EBITDA was positively impacted in the quarter by IFRS 16
as most operating lease expenses are now recorded as depreciation
and interest expense rather than operating costs within adjusted
EBITDA. BCE's consolidated adjusted EBITDA
margin (2) increased to 42.0% from 40.3% in Q1
2018, reflecting the high flow-through of wireless and wireline
revenue growth, increasing broadband Internet scale, and the
favourable year-over-year benefit on adjusted EBITDA from the
application of IFRS 16.
BCE capital expenditures totalled $850
million, down from $931
million in Q1 2018, representing a capital
intensity (5) ratio (capital expenditures as a
percentage of total revenue) of 14.8%, compared to 16.7% last year.
The year-over-year decline reflected slower construction activity
this winter compared to last year together with lower planned
spending in 2019. Capital spending this quarter focused on
expanding our FTTP and fixed wireless to the home (WTTH) footprints
to more locations; ongoing wireless investment, including the
deployment of small cells, to improve network coverage, signal
quality, data backhaul and speeds; and higher spending on digital
media platforms.
BCE cash flows from operating activities totalled $1,516 million, up 1.3% over Q1 2018. The
increase was mainly the result of higher adjusted EBITDA, partly
offset by a decrease in cash from working capital, higher interest
paid, which reflects the unfavourable impact from the adoption of
IFRS 16, and higher severance and other costs paid. Free cash flow
generated in the quarter was $642
million, a 19.6% increase from Q1 of last year, driven by
higher cash flows from operating activities excluding acquisition
and other costs paid, and lower capital expenditures.
Starting this quarter, we no longer report wholesale subscribers
in our Internet, TV and residential NAS subscriber bases, due to
our focus on the retail market. Previously reported 2018 subscriber
figures were restated for comparability. In Q1, BCE reported 50,204
net new wireless postpaid subscribers and a net loss of 11,922
wireless prepaid subscribers; 22,671 net new retail Internet
customers; 20,916 net new IPTV customers; and a decrease of 22,476
net retail satellite TV customers. Retail residential NAS line net
losses totalled 66,779.
BCE customer connections across wireless and retail Internet, TV
and residential NAS totalled 18,582,126 at the end of Q1, up 1.0%
over last year. The total included 9,480,835 wireless
customers(4), up 3.1% (including 8,808,189 postpaid
customers, an increase of 4.0%); 3,442,411 retail Internet
subscribers(4), up 3.9%; 2,764,851 retail TV
subscribers, up 1.1% (including 1,696,622 IPTV customers, an
increase of 7.5%); and 2,894,029 retail residential NAS lines, down
8.5%.
BCE OPERATING RESULTS BY SEGMENT
To align with changes in how we manage our business and assess
performance, the operating results of The Source (Bell) Electronics
Inc. (The Source) are now included entirely within our Wireless
segment effective January 1, 2019,
with prior periods restated for comparative purposes. Previously,
The Source's results were included within our Wireless and Wireline
segments.
Bell Wireless
Total operating revenue increased 4.5%
to $2,112 million, with service
revenue up 3.4% to $1,566 million
driven mainly by healthy year-over-year subscriber base growth.
Service revenue in Q1 2018 was impacted unfavourably by a
$14 million regulatory charge related
to lower final rates set by the CRTC in its decision regarding
wholesale domestic roaming tariffs. Product revenue grew 7.7% to
$546 million on a higher sales mix of
premium handsets compared to last year.
Wireless adjusted EBITDA grew 11.6% to $905 million, yielding a 2.8 percentage-point
increase in margin to 42.9%. This reflected the flow-through of
strong revenue growth, and a 0.2% decline in operating costs due to
the favourable impact of IFRS 16, lower advertising expense and
reduced labour costs driven by cost saving initiatives, largely
offset by higher year-over-year handset costs and increased network
operating expenses.
- Bell added 38,282 total net new postpaid and prepaid customers
in Q1, compared to 44,377 in Q1 last year.
- Postpaid net additions totalled 50,204, down from 68,487 in Q1
2018. This reflects a 7.7% decrease in gross additions, due mainly
to fewer customer additions from our long-term mobile services
contract with Shared Services Canada (SSC) as the migration process
nears completion. Last year, postpaid net and gross additions also
benefitted from aggressive holiday promotions that carried over
into Q1 2018.
- Postpaid customer churn(5) improved 0.06 percentage
points to 1.07% – our best performance since Q3 2004 – reflecting
our focus on retention, ongoing investment in our leading mobile
network, and better promotional pricing discipline in the
marketplace.
- Prepaid subscriber net losses improved 50.6% to 11,922 from
24,110 in Q1 2018, reflecting a 56.2% increase in gross additions
driven by continued strong demand for our low-cost Lucky Mobile
prepaid service. Prepaid customer churn increased 1.09 percentage
points over last year to 4.49%, due to higher customer
deactivations from increased competitive intensity and
harmonization of our prepaid deactivation policy across all Bell
wireless brands from 120-150 days to 90 days.
- Bell postpaid wireless customers totalled 8,808,189 at
March 31, a 4.0% increase over Q1
2018. Total wireless customers increased 3.1% to 9,480,835.
- Blended average billing per user (ABPU)(5) increased
1.2% to $67.35, driven by more
customers moving to higher-value monthly plans with larger data
allotments, the flow-through of price changes and subscriber
adjustments made at the beginning of the quarter.
Bell Wireline
Wireline operating revenue increased
1.8% to $3,064 million, reflecting
positive top-line growth across Bell's residential, business and
wholesale units. Service revenue was up 1.1% to $2,920 million, driven by Internet and IPTV
subscriber base growth; the flow-through of annual price increases
for residential services that contributed to higher revenue per
household, growth in business IP connectivity and business services
revenue, including the contribution of Axia NetMedia; and increased
sales of international wholesale long distance minutes. Product
revenue grew 20.0% to $144 million,
the result of increased data product sales particularly to large
enterprise business customers in the public sector.
Wireline adjusted EBITDA was up 2.0% to $1,339 million due to continued strong broadband
customer growth, improved business markets results and the
favourable impact of IFRS 16 on operating costs. This drove a
10 basis-point increase in Bell Wireline's North American-leading
revenue margin to 43.7%.
- Bell added 22,671 new retail Internet customers, an increase of
24.9% over Q1 last year, reflecting further expansion of Bell's
direct broadband FTTP and WTTH footprints (which together reached
approximately 4.8 million locations at the end of Q1 2019, up from
4.0 million in Q1 2018) and the pull-through of Internet customer
activations from Bell's Alt TV service.
- BCE's retail Internet customer base totalled 3,442,411 at the
end of Q1, an increase of 3.9% over last year.
- Bell TV added 20,916 net new IPTV subscribers in Q1, up 54.1%
from last year, due to continued strong Alt TV customer growth and
the ongoing expansion of our Fibe direct fibre footprint that is
enabling more competitive residential service bundles versus our
cable rivals. BCE served 1,696,622 IPTV subscribers at March 31, 2019, up 7.5% over Q1 2018.
- Retail satellite TV net customer losses improved 6.1% to 22,476
from 23,927 in Q1 2018, due mainly to lower customer churn.
- At March 31, 2019, Bell had a
combined total of 2,764,851 retail IPTV and satellite TV
subscribers, up 1.1% from Q1 2018.
- Wireline data service revenue increased 3.6% to $1,885 million, the result of Internet and IPTV
subscriber base growth, higher average revenue per user from rate
increases and customer upgrades to faster Internet speeds with
larger data usage buckets, and increased business IP broadband
connectivity and business service solutions revenue.
- Wireline product revenue was up 20.0% to $144 million, driven mainly by higher sales of
telecommunications equipment primarily to public sector business
customers.
- Retail residential NAS net losses increased to 66,779 from
56,071 in Q1 2018, the result of continued wireless and IP
substitution together with fewer new activations as the market
shifts its focus increasingly to two-product Internet and TV
service bundles. Bell's retail residential NAS access line customer
base totalled 2,894,029 at March 31,
2019, an 8.5% decline from 3,163,618 last year.
- Wireline voice revenue decreased 4.3% to $907 million, due to NAS access line reductions,
large business customer conversions to IP-based data services, 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 and flow-through
of annual residential rate increases.
Bell Media
Media operating revenue declined 0.5% to
$745 million, the result of lower
year-over-year advertising revenue, while subscriber revenue was
essentially stable compared to Q1 2018. Radio advertising revenue
decreased due to continued market softness. This was largely offset
by higher TV advertising revenue, supported by improved pricing
flexibility and stronger advertising demand following the shift in
spending last year to the main broadcaster of the 2018 Winter
Olympics. This was the third consecutive quarter of year-over-year
TV advertising growth for Bell Media.
Media adjusted EBITDA increased 26.9% to $165 million, due to a 6.3% reduction in
operating costs to $580 million,
driven mainly by the favourable impact of IFRS 16 as well as
programming and production cost containment initiatives.
- CTV was the #1 primetime network for the 15th
consecutive winter season with 11 of the top 20 programs nationally
among total viewers. For the first time since 2015, CTV delivered
its second consecutive quarter of year-over-year advertising growth
in Q1. The top 20 advertisers spent 14% more in Q1 compared to last
year.
- TSN remained Canada's leading specialty sports channel and the
top specialty channel overall in Q1. Bell Media's English
entertainment specialty TV properties grew viewership among adults
25-54 by 27% in the winter season. Bell Media maintained its
leadership position with 5 of the top 10 specialty and pay TV
channels with TSN, Comedy, Space, Discovery and CP24.
- Bell Media remained the top French-language specialty and pay
TV broadcaster during Q1 with 5 of the top 10 channels: RDS, Super
Écran, Canal D, Canal Vie and Z.
- Bell Media continued as Canada's top radio broadcaster in Q1,
reaching an average audience of more than 15.9 million listeners,
who spent approximately 71 million hours tuned in each week.
- Bell Media remained the leader in digital media among Canadian
broadcast and video network competitors with monthly averages of
464 million total online page views and 1 billion minutes spent
watching. Reaching 69% of digital audiences, Bell Media was the
6th largest online property in Canada in Q1 with 21.4 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 July 15, 2019 to shareholders of record at the
close of business on June 14,
2019.
OUTLOOK FOR 2019
BCE confirmed its financial guidance
targets for 2019, as provided on February 7,
2019, as follows:
|
|
|
|
February 7
Guidance
|
May 2
Guidance
|
Revenue
growth
|
1% – 3%
|
on track
|
Adjusted EBITDA
growth
|
5% – 7%
|
on track
|
Capital
intensity
|
approx.
16.5%
|
on track
|
Adjusted
EPS
|
$3.48 –
$3.58
|
on track
|
Free cash flow
growth
|
7% – 12%
|
on track
|
Annualized common
dividend per share
|
$3.17
|
$3.17
|
Dividend
payout policy(3)
|
65% – 75%
of free cash
flow
|
on track
|
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 Q1 2019 results
on Thursday, May 2 at 8:00 am (Eastern). Media are welcome to
participate on a listen-only basis. Please dial toll-free
1-800-478-9326 or 416-340-2219. A replay will be available until
midnight June 6, 2019 by dialing 1-800-408-3053 or
905-694-9451 and entering passcode 7915771#.
A live audio webcast of the conference call will be available on
BCE's website at: BCE Q1-2019 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)
|
|
|
|
|
Q1 2019
|
Q1 2018
|
|
TOTAL
|
PER
SHARE
|
TOTAL
|
PER SHARE
|
Net earnings
attributable to common shareholders
|
740
|
0.82
|
661
|
0.73
|
Severance,
acquisition and other costs
|
18
|
0.02
|
(1)
|
-
|
Net mark-to-market
losses (gains) on derivatives used to economically hedge
equity settled share-based compensation plans
|
(73)
|
(0.07)
|
56
|
0.07
|
Net losses on
investments
|
4
|
-
|
-
|
-
|
Impairment
charges
|
3
|
-
|
3
|
-
|
Adjusted net
earnings
|
692
|
0.77
|
719
|
0.80
|
|
|
|
|
|
(2) The terms adjusted EBITDA and adjusted EBITDA margin do not
have any standardized meaning under IFRS. Therefore, they are
unlikely to be comparable to similar measures presented by other
issuers. We define adjusted EBITDA as operating revenues less
operating costs, as shown in BCE's consolidated income statements.
Adjusted EBITDA for BCE's segments is the same as segment profit as
reported in Note 5, Segmented information, in BCE's Q1 2019
consolidated Financial Statements. We define adjusted EBITDA margin
as adjusted EBITDA divided by operating revenues. We use adjusted
EBITDA and adjusted EBITDA margin to evaluate the performance of
our businesses as they reflect their ongoing profitability. We
believe that certain investors and analysts use adjusted EBITDA to
measure a company's ability to service debt and to meet other
payment obligations or as a common measurement to value companies
in the telecommunications industry. We believe that certain
investors and analysts also use adjusted EBITDA and adjusted EBITDA
margin to evaluate the performance of our businesses. Adjusted
EBITDA is also one component in the determination of short-term
incentive compensation for all management employees. Adjusted
EBITDA and adjusted EBITDA margin have no directly comparable IFRS
financial measure. Alternatively, the following table provides a
reconciliation of net earnings to adjusted EBITDA.
($
millions)
|
|
Q1
2019
|
Q1
2018
|
Net
earnings
|
791
|
709
|
Severance,
acquisition and other costs
|
24
|
-
|
Depreciation
|
882
|
780
|
Amortization
|
221
|
212
|
Finance
costs
|
|
|
Interest
expense
|
283
|
240
|
Interest on
post-employment benefit obligations
|
16
|
17
|
Other (income)
expense
|
(101)
|
61
|
Income
taxes
|
293
|
235
|
Adjusted
EBITDA
|
2,409
|
2,254
|
BCE operating
revenues
|
5,734
|
5,590
|
Adjusted EBITDA
margin
|
42.0%
|
40.3%
|
(3) The terms free cash flow and dividend payout ratio do not
have any standardized meaning under IFRS. Therefore, they are
unlikely to be comparable to similar measures presented by other
issuers. We define free cash flow as cash flows from operating
activities, excluding acquisition and other costs paid (which
include significant litigation costs) and voluntary pension
funding, less capital expenditures, preferred share dividends and
dividends paid by subsidiaries to NCI. We exclude acquisition and
other costs paid and voluntary pension funding because they affect
the comparability of our financial results and could potentially
distort the analysis of trends in business performance. Excluding
these items does not imply they are non-recurring. We consider free
cash flow to be an important indicator of the financial strength
and performance of our businesses because it shows how much cash is
available to pay dividends 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)
|
|
Q1 2019
|
Q1 2018
|
Cash flows from
operating activities
|
1,516
|
1,496
|
Capital expenditures
|
(850)
|
(931)
|
Cash dividends paid
on preferred shares
|
(26)
|
(33)
|
Cash dividends paid
by subsidiaries to NCI
|
(27)
|
(13)
|
Acquisition and other
costs paid
|
29
|
18
|
Free cash
flow
|
642
|
537
|
(4) At the beginning of Q1 2019, we adjusted our wireless
subscriber base to remove 167,929 subscribers (72,231 postpaid and
95,698 prepaid) as follows: 65,798 subscribers (19,195 postpaid and
46,603 prepaid) due to the completion of the shutdown of the CDMA
network on April 30, 2019; 49,095
prepaid subscribers as a result of a change to our deactivation
policy across all brands to 90 days from 120-150 days previously;
43,670 postpaid subscribers due to a further refinement of our
subscriber definition for Internet of Things (IoT) as a result of
technology evolution; the transfer of 9,366 postpaid fixed wireless
Internet customers to Bell Internet.
(5) We use ABPU, 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 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.
These statements are not guarantees of future performance or
events, and we caution you against relying on any of these
forward-looking statements. The forward-looking statements
contained in this news release describe our expectations as of
May 2, 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 May 2, 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 slower rate of economic growth, given the Bank of Canada's
most recent estimated growth in Canadian gross domestic product of
1.2% in 2019, representing a decrease from the earlier estimate of
1.7%
- 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 remain at or near current
levels
- 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 the impact from Bell
Mobility's SSC contract
- Expansion of the LTE-A network coverage to approximately 94% of
the Canadian population, and continued 5G preparations with network
technology trials, as well as 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 retail residential IPTV and Internet
subscribers
- Increasing wireless and Internet-based technological
substitution
- Residential services household average revenue per user 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 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-home (WTTH) 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 behaviour 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 broadcasting distribution
undertaking rate increases, and strategic pricing on advertising
sales
- Operating cost growth driven by higher programming costs,
excluding IFRS 16, 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 May 2, 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, which 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, as well as
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, or
invest and evolve in the appropriate direction
- the failure to continue investment in next-generation
capabilities in a disciplined and strategic manner
- 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, deploy new network and
other technologies and offer new products and services, as well as
to comply with various obligations
- changes to our base of suppliers or outsourcers that we may
decide 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 epidemics, pandemics or 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 2018 Annual
MD&A dated March 7, 2019
(included in BCE's 2018 Annual Report) and BCE's 2019 First Quarter
MD&A dated May 1, 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.
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