- Bell EBITDA(1) increases 5.2%, reflecting strong
contributions from Bell Wireless and Bell Media
- Wireless postpaid net activations of 148,502, up 17.1%;
Wireless EBITDA growth of 15.2% is best Q3 performance in 5 years;
smartphone users now represent 60% of postpaid subscribers, driving
4.2% higher wireless ARPU and data revenue growth of 29.5%
- Bell Fibe TV net activations of 42,973 as service footprint
expands to more than 2.8 million households; high-speed
Internet net activations of 13,416; 11.3% year-over-year
improvement in residential local access line losses
- Bell Media revenue up 25.5%, EBITDA increased 92.6%
- Wireline EBITDA margin of 39.0% supported by $40 million year-over-year reduction in operating
costs
- BCE net earnings attributable to common shareholders of
$569 million or $0.74 per share; adjusted net earnings per
share(2) of $0.76 in line
with plan
- Reconfirming all 2012 BCE and Bell
Canada financial guidance targets
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.
MONTREAL, Nov. 1, 2012 /PRNewswire/ - BCE Inc. (TSX: BCE)
(NYSE: BCE), Canada's largest communications company, today
reported BCE and Bell results for the third quarter (Q3) of
2012.
BCE reported net earnings attributable to common shareholders of
$569 million, compared to
$642 million in Q3 2011, and adjusted
net earnings attributable to common shareholders of $588 million, compared to $724 million last year. In line with plan,
earnings per share (EPS) of $0.74 and
Adjusted EPS of $0.76 decreased in
the third quarter of 2012 from $0.83
and $0.93 per share in Q3 2011. The
year-over-year decrease was mainly due to lower income tax expense
in Q3 2011 from the favourable resolution of tax matters.
Bell total revenue increased 1.8% in the third quarter of 2012
as Bell Wireless and Bell Media revenue growth of 7.1% and 25.5%,
respectively, was moderated by a 4.0% decrease at Bell Wireline.
Bell EBITDA was up 5.2% in Q3 on growth of 15.2% at Bell Wireless
and 92.6% at Bell Media, partly offset by a 6.2% decline at Bell
Wireline. Bell's operating performance in the quarter generated
$1,589 million of cash flow from
operating activities and significant free cash flow(3)
of $684 million. Year to date, total
cash flow from operating activities increased to $4,689 million, or 16.3%, and total free
cash flow increased to $1,815
million, up 7.0% compared to last year.
"Bell is making unparalleled investments in the best new
networks, products and content, and we're seeing the results in
strong growth across our wireless, TV, Internet and media
businesses. Bell's robust 5.2% EBITDA growth was driven in large
part by outstanding performance at Bell Wireless and Bell Media,
both of which posted exceptionally strong revenue and EBITDA
growth," said George Cope, President
and CEO of BCE and Bell Canada.
"Bell is bringing new competition and choice to consumers with
our next-generation Fibe network, now serving 200,000 Fibe TV
customers and supporting both strong Bell Internet subscriber
growth and our traditional Home Phone business as more customers
choose multiple Bell services in our Fibe TV coverage area, which
has expanded to over 2.8 million households. Bell's new mobile LTE
network, combined with world-leading smartphones and content
services like Bell Mobile TV, helped bring us 148,502 net new
postpaid subscribers - 17.1% more than last year - reduced churn,
and great growth in Wireless data and overall revenue."
"We're executing a strategy of investment in network leadership,
product innovation and improved customer service, and I'm proud to
say the Bell team has made us a serious contender in every market
in which Bell competes," said Mr. Cope. Bell is committed to
achieving a clear goal - to be recognized by customers as Canada's
leading communications company - through the execution of 6
Strategic Imperatives: Invest in Broadband Networks and Services,
Accelerate Wireless, Leverage Wireline Momentum, Expand Media
Leadership, Improve Customer Service, and Achieve a Competitive
Cost Structure.
"We performed well across the business in Q3, posting another
sound quarter of EBITDA growth and margin expansion, driven by
exceptional wireless and media results as well as substantial net
earnings and free cash flow consistent with our plan. Our 2012
financial plan remains on track as we reconfirm today all our Bell
and BCE guidance targets for the year," said Siim Vanaselja, Chief Financial Officer for Bell
and BCE. "Our continued strong free cash flow generation, which
year to date has grown 7% over last year, has not only enabled
significant strategic investment in Bell's broadband wireline and
wireless platforms, but also amply supports the recent 10-cent
annualized increase in BCE's common share dividend, effective with
the dividend payment of October
15."
Bell Q3 operational performance
Bell's operating revenues were $4,392
million in Q3 2012, up 1.8% from $4,313 million in Q3 2011. This was driven by
total service revenue growth of 2.1% as Wireless and Media revenues
increased significantly compared to last year. Total product
revenues declined 1.1%, reflecting softer wireline data equipment
sales to business customers. Bell's EBITDA grew 5.2% this quarter
to $1,688 million on the strong
performance of the Bell Wireless and Bell Media segments.
Bell Wireless EBITDA in Q3 2012 grew 15.2% to $554 million and service margin expanded to 42.4%
from 39.2% last year, reflecting stronger wireless revenue growth
of 7.1% to $1,434 million as we
continued to gain high-value postpaid customers and upgrade
existing customers to smartphones, while exercising discipline in
postpaid customer acquisition and retention spending. Postpaid net
activations increased 17.1% to 148,502, while the postpaid customer
churn rate improved to 1.2% from 1.5% in Q3 2011, reflecting the
benefits of investment in customer service and retention.
Smartphone users represented 60% of postpaid subscribers at the end
of Q3, up from 43% a year earlier, which contributed to strong data
revenue growth of 29.5% and blended ARPU growth of 4.2%. Blended
ARPU was $57.30 per month in Q3 2012,
up from $55.01 in Q3 2011, driven by
a greater number of customers in western Canada, higher roaming
revenues, and more smartphone customers taking advantage of mobile
data services such as Bell Mobile TV.
Bell Wireline revenue totalled $2,505
million in the quarter, down 4.0% from Q3 2011, as
competitive and wireless substitution pressures continued to impact
traditional voice services. Reduced spending by business customers
on wireline data products and ICT solutions reflected continuing
sluggish economic growth, which also contributed to the
year-over-year decrease in overall wireline revenue this
quarter.
Continued steady growth in Fibe TV and Fibe Internet drove
residential data revenue growth of 3.5% in Q3 2012. Bell Fibe TV
experienced its best quarter ever, adding 42,973 net new
subscribers, up from 20,297 in Q3 2011. At the end of the third
quarter, Bell Fibe TV had more than 200,000 subscribers with a
footprint reaching over 2.8 million households, up from
approximately 1.5 million households at the end of Q3 2011. The
activation of new Fibe customers also led to 13,416 net new
high-speed Internet activations in the quarter. Although Bell
Wireline EBITDA decreased 6.2% this quarter to $978 million, margins were maintained on plan at
39.0%, reflecting a $40 million, or
2.6%, improvement in operating costs over last year.
Bell Media reported revenue of $546
million in Q3 2012, up 25.5% from last year, the result of
increased advertising revenues generated by Bell Media's broadcast
of the London 2012 Games and
higher subscriber fee revenue driven by market-based rates charged
to broadcast distributors through renegotiated agreements for
certain Bell Media specialty sports and non-sports TV services.
Bell Media EBITDA increased 92.6% in Q3 2012 to $156 million, reflecting the flow-through of
higher subscriber fee revenue and lower non-Olympics-related
operating expenses. Despite the positive impact on revenues from
the Olympics during Q3, advertising sales across Bell Media's
properties continued to be impacted adversely by a soft advertising
market.
Bell invested $688 million in new
capital this quarter, a $36 million
increase compared to Q3 2011. These investments support the
continued deployment of broadband fibre to residential homes,
neighbourhoods and businesses in Ontario and Québec and expansion of the Fibe
TV service footprint, enhancement of customer service systems, the
ongoing rollout of the 4G LTE network in markets across Canada, and
the addition of new Bell and The Source stores, particularly in
western Canada.
BCE results
BCE's operating revenue was $4,982
million in the third quarter of 2012, up 1.5% from
$4,910 million in the third
quarter of 2011, due to 1.8% higher revenues at Bell and slightly
lower revenues at Bell Aliant. EBITDA grew 4.0% this quarter to
$2,019 million, reflecting higher
EBITDA at Bell driven by the strong contributions of Bell Wireless
and Bell Media, moderated by a year-over-year decrease at Bell
Aliant.
BCE's cash flows from operating activities were $1,589 million in Q3 2012, compared to
$1,916 million in the same
period last year. Free cash flow available to BCE's common
shareholders was $684 million in Q3
2012 compared to $1,005 million in Q3
2011. The year-over-year reductions were attributable primarily to
the catch-up in accounts receivable cash collection in Q3 2011
following the settlement of the Canada Post strike.
BCE's net earnings attributable to common shareholders decreased
11.4% in Q3 2012 to $569 million, or $0.74 per share, compared to $642 million, or $0.83 per share, last year. The year-over-year
decrease in earnings was due to the favourable resolution of tax
matters in Q3 2011, higher depreciation expense, and increased
interest expense, partly offset by higher EBITDA and lower
severance, acquisition and other costs.
BCE's Adjusted EPS was $0.76 in Q3
2012, compared to $0.93 last year.
Despite solid EBITDA growth this quarter, the decrease is
attributable to the favourable resolution of tax matters in Q3 2011
that did not recur this year.
Financial Highlights |
|
|
|
|
|
|
($ millions except per share amounts)
(unaudited) |
|
Q3 2012 |
|
Q3 2011 |
|
% change |
Bell (i) |
|
|
|
|
|
|
Operating Revenues |
|
4,392 |
|
4,313 |
|
1.8% |
EBITDA |
|
1,688 |
|
1,605 |
|
5.2% |
BCE |
|
|
|
|
|
|
Operating Revenues |
|
4,982 |
|
4,910 |
|
1.5% |
EBITDA |
|
2,019 |
|
1,941 |
|
4.0% |
Net Earnings Attributable to Common
Shareholders |
|
569 |
|
642 |
|
(11.4%) |
EPS |
|
0.74 |
|
0.83 |
|
(10.8%) |
Adjusted EPS |
|
0.76 |
|
0.93 |
|
(18.3%) |
Cash flows from operating activities |
|
1,589 |
|
1,916 |
|
(17.1%) |
Free Cash Flow |
|
684 |
|
1,005 |
|
(31.9%) |
(i) Bell
includes the Bell Wireless, Bell Wireline and Bell Media
segments. |
Bell Wireless
Bell Wireless continued to accelerate its operating momentum in Q3
2012, posting another strong quarter of EBITDA growth, margin
expansion and cash flow growth, as well as substantial postpaid
subscriber activations, increased smartphone penetration, and
higher blended ARPU driven by strong growth in mobile data
usage.
- Bell Wireless operating revenues increased 7.1% in the third
quarter of 2012 to $1,434 million. Service revenue was up 6.4%
to $1,307 million due to the larger
postpaid subscriber base and growth in wireless data usage. Product
revenue increased 10.8% in the quarter to $113 million as a result of a higher percentage
of smartphones in the sales mix.
- Blended ARPU was $57.30 per month
in Q3 2012, up 4.2% from $55.01 per
month in Q3 2011, due to an increased postpaid mix, a higher
proportion of postpaid customers using smartphones, which drove
mobile data revenue growth of 29.5%, and a greater number of
higher-ARPU postpaid customers from western Canada.
- Smartphone subscribers represented 60% of the total postpaid
base at the end of Q3, compared to 43% last year.
- Bell Wireless EBITDA reached $554
million in the third quarter, up 15.2%, the highest Q3 rate
of growth in 5 years. The increase is mainly attributable to 7.1%
higher wireless operating revenues and operating cost growth of
2.6%, reflecting disciplined spending on postpaid customer
acquisition and retention.
- EBITDA margin as a percentage of wireless service revenue
increased 3.2 percentage points to 42.4% in Q3 on significant
service revenue flow-through and cost control.
- Cost of acquisition per gross activation increased to
$397, up just 1.3% from Q3 2011, due
to increased spending on advertising and higher sales-related
costs.
- Postpaid gross activations increased slightly to 372,574 this
quarter compared to 372,346 in Q3 2011. Activations in western
Canada increased due to more points of distribution and increased
advertising, even as some customers delayed purchases in
anticipation of the Apple iPhone 5 launch on September 21.
- Prepaid gross activations decreased 23.0% to 118,122 due
primarily to aggressive acquisition offers from competitors
targeted at lower-ARPU subscribers and Bell's continued focus on
acquiring postpaid customers.
- Blended churn rate improved to 1.6% in the quarter from 2.0% in
Q3 2011. Postpaid churn decreased to 1.2% from 1.5%, reflecting the
positive impact of retention spending and lower customer
deactivation rates on smartphones compared to other devices.
Prepaid churn declined to 3.3% from 3.9% as a result of fewer
customer deactivations.
- Postpaid net activations increased 17.1% this quarter to
148,502 from 126,854 in Q3 2011, while prepaid net customer losses
decreased to 18,738 in Q3 2012 from 41,105 last year.
- The Bell Wireless client base reached 7,576,027 at the end of
Q3 2012, a 2.8% increase over last year.
- Bell continues to offer customers access to Canada's largest 4G
LTE network, now reaching more than 61% of the Canadian population
in more than 40 markets across 7 provinces and territories. LTE
complements Bell's 4G HSPA+ and enhanced 4G HSPA+ DC (Dual Cell)
networks, offering coast-to-coast coverage to more than 97% and
more than 83% of the Canadian population, respectively.
- Bell introduced several new smartphones, including Apple's
iPhone 5, Motorola's ATRIX HD LTE and RAZR V, and the Sierra
Wireless 763 4G LTE Turbo Hotspot.
Bell Wireline
Bell Fibe TV activations continued to accelerate this quarter,
driving growth in Fibe Internet and Home Phone services as well as
strong residential data revenue growth. This helped moderate the
ongoing decline in traditional voice revenues and the operating
performance of Bell Business Markets, which continued to be
adversely impacted by competitive re-pricing pressures and reduced
customer spending due to a soft economy. Although wireline EBITDA
decreased year over year, margins were maintained in line with plan
at 39.0%, reflecting lower wireline operating expenses as a result
of rigorous cost control and productivity improvements.
- Bell Wireline revenues totalled $2,505
million, down 4.0% from Q3 2011. The decline reflects a
decrease in local and access, long distance and equipment and other
revenues, offset by slightly higher year-over-year data
revenues.
- Data revenues increased 0.1% to $1,386
million due mainly to higher TV revenue driven by strong
subscriber growth in Fibe TV.
- Local and access revenues declined 7.9% to $654 million. Total NAS at the end of the quarter
was 5,768,609, a 7.0% decline year over year, attributable to
increased competition and a reduction in access lines and digital
circuits as customers continue to adopt wireless and IP-based
technologies.
- Long distance revenues declined 13.9% to $192 million. The year-over-year decline
reflected fewer minutes of use by residential and business
customers resulting from NAS line losses and technology
substitution, ongoing rate pressures, and decreased sales of global
long distance minutes.
- Equipment and other revenue decreased 8.0% to $195 million due mainly to lower year-over-year
legacy wireline telecommunications equipment sales, promotional
offers on TV set-top boxes, and lower consumer electronic equipment
sales at The Source.
- Bell Wireline EBITDA was $978
million, down 6.2% year over year on lower operating
revenues, partly offset by a 2.6% improvement in operating costs.
EBITDA margin was 39.0% this quarter compared to 40.0% in Q3
2011.
- TV net activations totalled 15,846 compared to 26,169 in Q3
2011. Bell Fibe TV added 42,973 net new customers compared to
20,297 in the third quarter of 2011. Bell Fibe TV subscribers
passed 200,000 this quarter as the Fibe TV footprint reached over
2.8 million households at the end of Q3. This was moderated by
lower satellite TV net activations, due to the rollout of IPTV by
competing service providers, aggressive customer conversion offers
from cable competitors, and Bell customer migrations to Fibe
TV.
- The Bell TV subscriber base totalled 2,136,765 at the end of
Q3, a year-over-year increase of 2.9%.
- Bell added 13,416 new net high-speed Internet customers in Q3,
compared to a net loss of 101 last year. The improvement reflects
the pull-through effect of service bundle offers that include Fibe
TV, enhanced competitive offers, and continued broadband fibre
network expansion, all of which contributed to lower customer churn
year over year.
- NAS net losses in the third quarter of 2012 decreased to
109,280 from net losses of 110,629 in the third quarter of 2011,
reflecting residential NAS line losses of 84,540, 11.3% fewer than
last year, as Bell continued to reduce residential NAS turnover in
Fibe TV service areas. Business access losses increased to 24,740
from 15,362 in Q3 2011.
Bell Media
Bell Media delivered strong financial and operational performance
this quarter, with higher subscriber fee revenues driven by
market-based rates charged to broadcast distributors for certain
Bell Media specialty sports and non-sports services, and higher
revenues from broadcasting the 2012 London Games.
- Bell Media's operating revenue increased 25.5% this quarter to
$546 million from $435 million last year.
- Not including the Olympics, advertising sales in Q3 across Bell
Media's television, radio and digital media properties continued to
be impacted by a soft advertising market as a result of a
slow-growing economy.
- Bell Media EBITDA increased 92.6% to $156 million, from $81
million in Q3 2011, due to higher operating revenues and
lower overall operating costs.
- The financial impact from the NHL lockout was not material this
quarter.
- CTV closed the season with more Top 20 rated programs in
Canada than its competitors in key
demos for the summer measurement period.
- In Q3, Bell Media websites streamed more than 177 million
videos, welcomed an average of more than 3.5 million unique
visitors each month, and served a total of 121 billion page
views.
Astral Update
Following extensive public hearings held during the week of
September 10, 2012, the CRTC on
October 18 denied BCE's application
to acquire Montréal-based Astral Media. On October 22, BCE requested that the federal
Cabinet issue a policy direction to the CRTC requiring the
commission adhere to its existing policies when considering
broadcast acquisitions. BCE announced its proposed $3.38-billion acquisition of Astral on
March 16, 2012, and the transaction
was approved by over 99% of Astral shareholders and by the Québec
Superior Court. Should the CRTC's decision stand, one of the
closing conditions for BCE's acquisition of Astral will not be met
and the transaction will not proceed. The transaction also requires
approval by the Competition Bureau. On October 25, Astral announced an extension of the
Outside Date to December 16, 2012;
BCE and Astral both have the right to further postpone the Outside
Date to January 15, 2013.
Maple Leaf Sports & Entertainment (MLSE) transaction
completed
On August 22, 2012, the sale by
Ontario Teachers' Pension Plan Board of its ownership interest in
MLSE to BCE, the BCE Master Trust Fund and Rogers Communications
was completed. The combined financial commitments of BCE
($398 million) and the BCE Master
Trust Fund ($135 million)
represent an aggregate 37.5% interest in MLSE, equal to Rogers'
interest. The acquisition secures Bell's access to TV, mobile,
digital online and radio broadcast rights to the premier
professional sports teams in Canada's largest marketplace,
including the Toronto Raptors, Maple Leafs, Marlies and Toronto FC.
MLSE also has major real estate and entertainment assets including
the Air Canada Centre and the Maple Leaf Square condominium and
commercial complex, operates sports specialty TV channels, and is
the exclusive partner of the NBA in Canada.
Acquisition of Q9 Networks completed
On October 17, 2012, an investor
group comprising BCE, Ontario Teachers' Pension Plan Board,
Providence Equity Partners LLC and Madison
Dearborn Partners LLC announced the completion of its
$1.1-billion acquisition of Canadian
data centre leader Q9 Networks Inc. Concurrent with the acquisition
closing, BCE and its partners have settled the reverse break-fee
proceedings initiated in 2008 after the termination of the proposed
privatization of BCE. Under the settlement, BCE received certain
consideration, including increased equity ownership in Q9 and a
path to full ownership with an option at a favourable valuation to
acquire the partners' entire equity interest in Q9 in the
future.
Bell partners with Cirque du Soleil in new Québec-based
content development company
On August 28, 2012, Bell and Cirque
du Soleil announced the formation of a new joint venture to develop
Québec-based media content for television, film, digital, and
gaming platforms. Focused on the development of entertainment
projects for sale and licensing around the world, the venture is
another extension of Bell's strategy of investment in the
development and distribution of Québec content. Cirque du Soleil
will contribute its library of existing content and current
projects to the partnership.
Bell Let's Talk mental health update
Now in its second year, the Bell Let's Talk Community Fund
announced more than $1 million in
grants to 60 community-based organizations, charities and hospitals
across the country. The fund provides grants from $5,000 to $50,000 to support local initiatives
improving access to mental health care. Bell also inaugurated the
largest-ever fund raiser for mental health in Québec, the Bal des
Lumières, to be held March 20, 2013,
at the Bell Centre in Montréal. A partnership between Bell, CGI,
the Montréal Canadiens and National Bank, the event will raise
funds for Québec's Mental Illness Foundation, the Fondation de
l'Hôpital Louis-H. Lafontaine, and
the Douglas Mental Health University Institute Foundation. On
October 11, the annual Bell Event in
support of the Centre for Addiction and Mental Health (CAMH)
resulted in a $1.5 million
contribution to this world-class research and treatment centre in
Toronto. Bell continues its
support for the Canadian Forces as Presenting Sponsor of the True
Patriot Love Dinner in Toronto
tonight. Its third year presenting True Patriot Love, Bell's
support for the event goes directly to programs aimed at addressing
the mental health challenges faced by Canadian Forces members and
their families.
Bell Aliant Regional Communications
Bell Aliant's revenues decreased 0.3% to $698 million in the third quarter of 2012,
reflecting the continued erosion of its legacy voice business
offset partly by higher revenues from growth in Internet, data, TV,
wireless, and higher equipment and other sales. Bell Aliant's
EBITDA decreased by 1.5% to $331
million, due to lower operating revenues and slightly higher
operating costs.
Common Share Dividend
BCE's Board of Directors declared a quarterly dividend of
$0.5675 per common share, payable on
January 15, 2013 to shareholders of
record at the close of business on December
14, 2012.
Outlook
BCE's guidance for 2012, as provided on February 9, 2012, which was updated on
August 8, 2012 and reconfirmed on
November 1, 2012, is as follows:
|
|
|
|
|
|
|
2012
Guidance |
|
February 9
Guidance |
|
August 8
Guidance |
|
Current Guidance
Expectation |
Bell (i) |
|
|
|
|
|
|
Revenue Growth |
|
3% - 5% |
|
Lower end |
|
On track |
EBITDA Growth |
|
2% - 4% |
|
Higher end |
|
On track |
Capital Intensity |
|
≤16% |
|
~16% |
|
On track |
BCE |
|
|
|
|
|
|
Adjusted EPS (ii) |
|
$3.13 - $3.18 |
|
$3.15 - $3.20 |
|
On track |
Free Cash Flow (iii) |
|
$2.35B - $2.5B |
|
No change |
|
On track |
Annual common dividend per share |
|
$2.17 |
|
$2.27 |
|
On track |
Dividend payout ratio (iv) |
|
|
|
|
|
|
|
- Adjusted EPS |
|
approx. 69% |
|
No change |
|
On track |
|
- Free cash flow |
|
approx. 69% |
|
No change |
|
On track |
(i) |
Bell's 2012 financial guidance for revenue, EBITDA and capital
intensity is exclusive of Bell Aliant. |
(ii) |
EPS before severance, acquisition and other costs and net
gains/losses on investments. |
(iii) |
Free cash flow before common share dividends and including
dividends from Bell Aliant. |
(iv) |
Calculated using the mid-point of BCE's 2012 Adjusted EPS and
free cash flow guidance ranges. |
Call with Financial Analysts
BCE will hold a conference call for financial analysts to discuss
its third quarter results on Thursday,
November 1 at 8:00 am
(Eastern). Media are welcome to participate on a listen-only basis.
To participate, please dial toll-free 1-800-952-6845 or
416-695-7848. A replay will be available for one week by dialing
1-800-408-3053 or 905-694-9451 and entering pass code 1375865#.
There will also be a live audio webcast of the call available on
BCE's website at:
http://bce.ca/investors/investorevents/all/show/bce-q3-2012-results-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 term EBITDA does not have any standardized meaning under
IFRS. Therefore, it is unlikely to be comparable to similar
measures presented by other companies. We define EBITDA as
operating revenues less operating costs, as shown in BCE's
consolidated income statements.
EBITDA for BCE's segments is the same as segment profit as reported
in Note 3 to BCE's Q3 2012 consolidated financial statements.
We use EBITDA to evaluate the performance of our businesses as it
reflects their ongoing profitability. We believe that certain
investors and analysts use 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.
EBITDA also is one component in the determination of short-term
incentive compensation for all management employees. EBITDA has no
directly comparable IFRS financial measure. Alternatively, the
following table provides a reconciliation of net earnings to
EBITDA. |
(In millions of Canadian dollars) |
|
|
|
|
|
|
Q3 2012 |
|
Q3 2011 |
Net earnings |
|
689 |
|
736 |
Severance, acquisition and other costs |
|
24 |
|
130 |
Depreciation |
|
674 |
|
628 |
Amortization |
|
180 |
|
180 |
Finance costs |
|
|
|
|
|
Interest expense |
|
223 |
|
210 |
|
Interest on employee benefits
obligations |
|
243 |
|
247 |
Expected return on pension plan assets |
|
(267) |
|
(259) |
Other expense (income) |
|
5 |
|
(11) |
Income taxes |
|
248 |
|
80 |
EBITDA |
|
2,019 |
|
1,941 |
(2)
|
The terms Adjusted net earnings and Adjusted EPS do not have
any standardized meaning according to IFRS. They are therefore
unlikely to be comparable to similar measures presented by other
companies.
We define Adjusted net earnings as net earnings attributable to
common shareholders before severance, acquisition and other costs,
and net (gains) losses on investments. We define Adjusted EPS as
Adjusted net earnings per BCE common share.
We use Adjusted net earnings and Adjusted EPS, among other
measures, to assess the performance of our businesses without the
effects of severance, acquisition and other costs, and net (gains)
losses on investments, net of tax and non-controlling interest. 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. |
(In millions of
Canadian dollars, except per share amounts) |
|
|
Q3 2012 |
|
Q3 2011 |
|
|
TOTAL |
|
PER
SHARE |
|
TOTAL |
|
PER
SHARE |
Net earnings attributable to common
shareholders |
|
569 |
|
0.74 |
|
642 |
|
0.83 |
Severance, acquisition and other costs |
|
19 |
|
0.02 |
|
82 |
|
0.10 |
Adjusted net earnings |
|
588 |
|
0.76 |
|
724 |
|
0.93 |
(3)
|
The term free cash flow does not have any standardized meaning
according to IFRS. It is therefore unlikely to be comparable to
similar measures presented by other companies.
We define free cash flow as cash flows from operating activities,
excluding acquisition costs paid, and dividends/distributions
received from Bell Aliant less capital expenditures, preferred
share dividends, dividends/distributions paid by subsidiaries to
non-controlling interest and Bell Aliant free cash flow.
We consider free cash flow to be an important indicator of the
financial strength and performance of our business because it shows
how much cash is available to repay debt and reinvest in our
company. We present free cash flow consistently from period to
period, which allows us to compare our financial performance on a
consistent basis.
We believe that certain investors and analysts use free cash flow
to value a business and its underlying assets.
The most comparable IFRS financial measure is cash flows from
operating activities. The following table is a reconciliation of
cash flows from operating activities to free cash flow on a
consolidated basis. |
(In millions of Canadian dollars) |
|
|
|
|
|
|
Q3 2012 |
|
Q3 2011 |
Cash flows from operating activities |
|
1,589 |
|
1,916 |
Bell Aliant dividends/distributions to BCE |
|
48 |
|
48 |
Capital expenditures |
|
(832) |
|
(814) |
Cash dividends paid on preferred shares |
|
(27) |
|
(31) |
Cash dividends/distributions paid by subsidiaries
to non-controlling interest |
|
(85) |
|
(75) |
Acquisition costs paid |
|
39 |
|
7 |
Bell Aliant free cash flow |
|
(48) |
|
(46) |
Free cash flow |
|
684 |
|
1,005 |
Caution Concerning Forward-Looking Statements
Certain statements made in this news release, including, but not
limited to, statements relating to our 2012 financial guidance
(including revenues, EBITDA, capital intensity, Adjusted EPS, free
cash flow and dividend payout ratios), our business outlook,
objectives, plans and strategic priorities, BCE's annual common
dividend per share, the completion of BCE's proposed acquisition of
Astral Media Inc. (Astral), our 4G LTE wireless and Fibe TV network
and broadband fibre deployment plans, and other statements that are
not historical facts, are forward-looking. Forward-looking
statements may include words such as aim, anticipate,
assumption, believe, could, expect, goal, guidance, intend, may,
objective, outlook, plan, project, seek, should, strategy, strive,
target 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. As a result, we cannot guarantee that
any forward-looking statement will materialize and you are
cautioned not to place undue reliance on these forward-looking
statements. The forward-looking statements contained in this news
release describe our expectations at November 1, 2012 and, accordingly, are subject to
change after such date. Except as may be required by Canadian
securities laws, we do not undertake any obligation to update or
revise any forward-looking statements contained in this news
release, whether as a result of new information, future events or
otherwise. Except as otherwise indicated by BCE, forward-looking
statements do not reflect the potential impact of any nonrecurring
or other special items or of any dispositions, monetizations,
mergers, acquisitions, other business combinations or other
transactions that may be announced or that may occur after
November 1, 2012. The financial
impact of these transactions and non-recurring and other 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 for the
purpose of providing information about management's current
expectations and plans relating, in particular, to 2012, and
allowing investors and others to obtain 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 for
2012 contained in this news release, including, but not limited
to:
Canadian Economic and Market Assumptions
- Growth in the Canadian economy of 2.2% in 2012 based on the
Bank of Canada's most recent estimate, a 10 basis point increase
compared with an earlier estimate of 2.1%;
- continued weak product sales, reflecting deferred business
customer spending given the slow pace of economic growth;
- a continued soft advertising market for Bell Media;
- an ongoing intense level of wireline competition in both
consumer and business markets;
- higher wireline replacement, due primarily to increasing
wireless and Internet-based technological substitution; and
- wireless industry penetration gain of 4 to 5 basis points in
2012 driven, in particular, by increased competition, the
accelerating adoption of smartphones, tablets and data
applications, as well as by the introduction of more LTE
devices.
Operational Assumptions Concerning Bell Wireline
(excluding Bell Aliant)
- Stabilizing residential NAS line erosion rate as we leverage
our broadband investment in IPTV to drive three-product household
penetration, increase our MDU market share, and generate higher
pull-through attach rates for our residential Internet and home
phone services;
- in particular, targeted retention and service bundle offers,
customer win backs and better service execution to contribute to
the improvement in residential NAS line losses year over year,
subject to the risk of more aggressive service bundle offers from
our cable TV competitors and marketing actions from the newer
wireless entrants which could lead to higher residential NAS line
losses;
- increased subscriber acquisition at Bell TV to be driven by
increased customer adoption of Fibe TV, and our ability to seek
greater penetration within the MDU market, capitalize on our
extensive retail distribution network, which includes The Source,
and capitalize on our market leadership position in high definition
(HD) programming;
- improved subscriber acquisition at Bell Internet to be driven
by pull-through from Fibe TV and increased adoption of Fibe
Internet packages as we leverage our expanding broadband fibre
network to offer higher-speed service to customers in more
areas;
- gradual business improvement in the performance of our Business
Markets unit in 2012, based on increased business customer spending
on ICT technology driven by an improving economy, subject to the
risk of business customers adopting more conservative strategies
which could result in lower capital spending requirements, deferral
of ICT projects and increased NAS erosion;
- cost savings and labour efficiency gains to be achieved from a
reduced management workforce, lower corporate support group costs,
renegotiated contracts with our vendors and outsource suppliers,
client care and field service productivity improvements, managing
content costs and reducing traffic that is not on our own
network;
- continued customer migration to IP-based systems and
competitive re-price pressures in our business and wholesale
markets;
- increasing EBITDA contribution from growth services; and
- approximately 3.3 million Bell Fibe TV-ready households by the
end of 2012.
Operational Assumptions Concerning Bell Wireless
(excluding Bell Aliant)
- Bell Wireless to benefit from the flow-through of significant
investments made in 2011 in customer acquisition and retention,
along with continued acceleration in smartphone activations and
data usage;
- incumbents and newer wireless entrants to continue aggressive
competition in 2012 and newer wireless entrants to continue
enhancing the breadth and reach of their networks, improving their
distribution reach and expanding their device portfolios;
- wireless revenue growth to be underpinned by ARPU driven by a
higher mix of smartphone and higher-value postpaid customers,
increased distribution in western Canada, new services, and
continued disciplined price management;
- Bell Wireless to benefit from ongoing technological
improvements by manufacturers in our handset and device lineup and
from faster data speeds that are allowing our clients to optimize
the use of our services;
- Bell Wireless to maintain a reasonable market share of the
incumbent wireless postpaid market; and
- higher subscriber acquisition and customer retention costs, as
well as the continued deployment of our wireless LTE network in
urban markets while continuing to leverage our wireless high-speed
packet access plus (HSPA+) network.
Operational Assumptions Concerning Bell Media
- Building and maintaining strategic supply arrangements for
content on four screens, successfully acquiring high-rated
programming and differentiated content to execute on Bell's
multi-screen content strategy, producing and commissioning
high-quality Canadian content, and producing market-leading
news;
- revenue growth in our specialty service operations to be driven
by market-based rates charged to broadcast distributors;
- increased costs to secure content in our sports broadcast
operations as we face greater competition from both new and
established entrants, and as market rates for specialty content
generally increase;
- investment in programming and marketing in combination with
ongoing investment in high definition services;
- maintaining our favourable market position in our radio
operations by leveraging strategic investments made in 2011;
and
- the achievement of productivity gains and other operating
efficiencies related to Bell Media integration synergies.
Financial Assumptions Concerning Bell (excluding Bell
Aliant) and BCE
- Bell's total employee benefit plans cost to be approximately
$90 million, based on an estimated
accounting discount rate of 5.1% and an expected return on plan
assets of 6.75%, comprised of an estimated above EBITDA employee
benefit plans service cost of approximately $170 million and an estimated below EBITDA net
employee benefit finance return of approximately $100 million;
- Bell's total pension plan cash funding to be approximately
$375 million;
- Bell's cash taxes to be approximately $300 million;
- net interest paid to be approximately $675 million;
- BCE's total employee benefit plans cost to be approximately
$150 million, including approximately
$60 million for Bell Aliant,
comprised of an estimated above EBITDA employee benefit plans
service cost of approximately $250
million and an estimated below EBITDA net employee benefit
finance return of approximately $100
million;
- depreciation and amortization expense approximately
$125 million higher compared
to 2011;
- severance, acquisition costs and other of approximately
$100 million;
- an effective tax rate of approximately 22%;
- tax adjustments (per share) of $0.18; and
- an annual common share dividend of $2.27 per share.
The foregoing assumptions, although considered reasonable by BCE
on November 1, 2012, 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 2012 financial guidance, are
listed below. The realization of our forward-looking statements,
including our ability to meet our 2012 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 the increase
in wireless competitive activity resulting from new wireless
entrants and their ability to expand services, and the resulting
impact on our ability to retain existing customers and attract new
ones, as well as on our pricing strategies, ARPU and financial
results;
- the level of technological substitution contributing to reduced
utilization of traditional wireline voice services and the
increasing number of households that use only wireless telephone
services;
- the increased adoption by customers of alternative TV
services;
- variability in subscriber acquisition and retention costs based
on subscriber acquisitions, retention volumes, smartphone sales and
subsidy levels;
- regulatory initiatives or proceedings, litigation,
changes in laws or regulations and tax matters;
- general economic and financial market conditions, the level of
consumer confidence and spending, and the demand for, and prices
of, our products and services;
- our ability to implement our strategies and plans in order to
produce the expected benefits, including our ability to continue to
implement our cost reduction initiatives and contain capital
intensity while seeking to improve customer service;
- our ability to anticipate and respond to technological change,
upgrade our networks and rapidly offer new products and
services;
- our failure to maintain network operating performance including
as a result of the significant increase in broadband demand and in
the volume of wireless data driven traffic;
- events affecting the functionality of, and our ability to
protect, maintain and replace, our networks, equipment, facilities,
IT systems, software and other assets;
- our failure to implement, on a timely basis, or maintain
effective IT systems and the complexity and costs of our IT
environment;
- the complexity of our product offerings and pricing plans;
- events affecting the ability of third-party suppliers to
provide to us, and our ability to purchase, essential products and
services;
- the quality of our network and customer equipment and the
extent to which they may be subject to manufacturing defects;
- ineffective management of changes resulting from restructurings
and other corporate initiatives and from the integration of
business units and business acquisitions;
- increased contributions to employee benefit plans;
- labour disruptions;
- capital and other expenditure levels, financing and debt
requirements and our ability to raise the capital we need to
implement our business plan, including for BCE's dividend payments
and to fund capital and other expenditures and generally meet our
financial obligations;
- our ability to discontinue certain traditional services as
necessary to improve capital and operating efficiencies;
- launch and in-orbit risks of satellites used by Bell ExpressVu
Limited Partnership;
- the theft of our satellite television services;
- Bell Media's significant dependence on continued demand for
advertising, and the potential adverse effect thereon from
challenging economic conditions, cyclical and seasonal variations
and competitive pressures;
- the adverse effect of new technology and increasing
fragmentation in Bell Media's television and radio markets;
- potential increases in royalties payable by Bell Media under
licences pursuant to the Copyright Act;
- health concerns about radio frequency emissions from wireless
devices;
- our ability to maintain customer service and our networks
operational in the event of the occurrence of environmental
disasters or epidemics, pandemics and other health risks;
- employee retention and performance;
- BCE's dependence on the ability of its subsidiaries, joint
ventures and other companies in which it has an interest to pay
dividends and make other distributions;
- there can be no certainty that dividends will be declared by
BCE's board of directors or that BCE's dividend policy will be
maintained;
- stock market volatility; and
- the completion of our proposed acquisition of Astral is subject
to closing conditions, termination rights and other risks and
uncertainties, including, without limitation, regulatory approvals,
including from the CRTC and Competition Bureau; consequently, there
can be no certainty that the transaction will occur or that it will
occur on the terms and conditions currently contemplated and,
should the transaction proceed, that anticipated benefits will be
realized.
We caution that the foregoing list of risk factors is not
exhaustive and other factors could also adversely affect our
results.
We encourage investors to also read BCE's 2011 Annual MD&A
dated March 8, 2012 (included in the
BCE 2011 Annual Report), BCE's 2012 First Quarter MD&A dated
May 2, 2012, BCE's 2012 Second
Quarter MD&A dated August 7, 2012
and BCE's 2012 Third Quarter MD&A dated October 31, 2012, for additional information with
respect to certain of these and other assumptions and risks, filed
by BCE with the Canadian securities commissions (available at
www.sedar.com) and with the U.S. Securities and Exchange Commission
(available at www.sec.gov). These documents are also available on
BCE's website at www.bce.ca.
About BCE
BCE is Canada's largest communications company, providing a
comprehensive and innovative suite of broadband communication
services to residential and business customers under the Bell and
Bell Aliant brands. Bell Media is Canada's premier multimedia
company with leading assets in television, radio and digital media,
including CTV, Canada's leading television network, and the
country's most-watched specialty channels.
The Bell Mental Health Initiative is a multi-year charitable
program that promotes mental health across Canada via the Bell
Let's Talk anti-stigma campaign and support for community care,
research and workplace best practices. To learn more, please visit
Bell.ca/LetsTalk. For BCE corporate information, please visit
BCE.ca. For Bell product and service information, please visit
Bell.ca. For Bell Media, please visit BellMedia.ca.
SOURCE BELL CANADA