BCE Beacon Energy Plc

Bell Canada Enterprises Reports First Quarter Results - Solid revenue and EBITDA growth - Continuing operational improvements - Project Galileo delivers on service and savings MONTREAL,(Quebec) May 4 /PRNewswire-FirstCall/ - For the first quarter of 2005, BCE Inc. (TSX, NYSE: BCE) reported revenues of $4.9 billion, up 4.8% and EBITDA(1) of $1.9 billion, up 5.1% when compared to the same period last year. Operating income increased by 5.4% year over year to reach $1.1 billion. Earnings per share (EPS) were $0.51, an increase of one cent over EPS before gains reported in the first quarter of 2004.(2) "This is a solid start to the year. Our revenue and EBITDA performance continued to improve reflecting progress on many fronts across the business," said Michael Sabia, President and CEO of Bell Canada Enterprises. "Contributing to our financial results were cost savings of $120 million realized from initiatives under Project Galileo and the benefits of last year's employee departure program. In addition, top line growth was driven by a 6.6% increase in our data revenues reflecting in part the good performance of our DSL service this quarter." In December 2004, Bell Canada outlined three key priorities driving its strategy to deliver unrivaled communications to its customers while setting the standard in Internet Protocol (IP). During the first quarter the Company made progress in all three areas, for example: - Delivering an enhanced customer experience while significantly lowering our costs. We substantially reduced provisioning time for large Enterprise customers with the launch of a new standardized IP-Virtual Private Network (IP-VPN) solution. In the consumer segment, we made progress on initiatives to improve first call resolution - resolving a customer issue on the first contact. At the same time, we took initiatives to improve order resolution - ensuring that products and services are delivered as specified by the customer. - Delivering abundant, reliable and secure bandwidth that can provide all the services of the future. Fibre-to-the-node (FTTN) roll-out accelerated with the provisioning of 386 additional neighbourhood nodes, more than all of 2004, for a total of 762. - Providing next generation services that customers want. Bell Canada introduced several next generation services, including Bell Digital Voice, our feature-rich Voice over Internet Protocol (VoIP) product and Bell 10-4, a combined "walkie talkie" and cell phone service. "We continue to deliver on our plan to redefine Bell Canada," added Mr. Sabia. "Despite some temporary softness in our Mobility unit during the first part of the quarter, the operational transformation of our business is very much on track." Key operational achievements High-speed Internet Sympatico high-speed Internet additions of 128,000 in the first three months of the year represented the strongest quarterly increase in the last three years. The high-speed subscriber base increased to over 1.9 million by the end of the quarter, up by approximately 24% over the first quarter of last year. This increase was largely driven by our footprint expansion and focused marketing activities. Subscriptions to Value-Added Services (VAS) such as MSN Premium, Security Services and Home Networking grew by 142,000 - more than double the number a year ago. Sympatico.MSN continued to be the country's most popular online destination with 84% of all online Canadians visiting the site. Portal revenues increased by over 185% and VAS revenues by 121%, year over year. Bell introduced services providing enhanced customer care, both online and in our call centres. The virtual Emily(TM) service, a user-friendly self- help tool, allows customers to resolve technical issues themselves, resulting in fewer calls to our customer care centres. First call resolution rates continued to improve thanks to advanced applications that allow customer service representatives to remotely assess and resolve customer technical issues. New subscribers, especially those new to the Internet, appreciate this as Internet access installation, by its nature, prompts more customer queries than other services. Video ExpressVu net additions for the quarter were 29,000, representing an 81% increase, year over year. Total subscribers grew to reach more than 1.5 million, or a 9% increase over the first quarter of 2004. Our lower churn rate of 0.8% compared to 0.9% in the first quarter of last year was also a contributing factor to this solid growth. Revenues increased by 7% year-over-year despite the absence of National Hockey League (NHL) programming. This impact was mitigated at the end of the quarter by a pricing increase which was communicated to customers in January and began to flow through in March. Disciplined cost containment, including the negotiation of a favourable supply contract for set-top boxes, resulted in a lower cost of acquisition in the quarter and positive EBITDA for ExpressVu. Wireless Wireless added 82,000 new subscribers to our customer base during the quarter compared to 92,000 in first quarter of last year. Prepaid net activations were strong particularly in January and February with approximately 42,000 subscribers added during the quarter. Christmas promotions led to a high level of activations of new prepaid subscribers in January and the March launch of Virgin Mobile further contributed to the strong prepaid total for the quarter. Postpaid net activations for the quarter totaled almost 40,000 with the majority of these coming in the second half of the quarter, as a result of promotions initiated in March. The launch of Bell's 10-4 walkie-talkie service in March contributed to the increasing momentum in postpaid activations, a trend which continued into April. In the quarter, approximately 45,000 non-paying postpaid accounts were cancelled resulting in net additions of 37,000. Blended churn was 1.6% per month, up from 1.3% in the first quarter of last year, largely as a function of the cancellation of these non-paying postpaid accounts. Absent our decision to cancel these accounts, the underlying rate of churn would have continued at 1.2%. Revenues grew by 9.5% year-over-year and were in line with subscriber growth of 10%. ARPU declined to approximately $46 from $47 in the first quarter of the previous year. EBITDA margin was again above 40% reflecting effective cost containment and lower cost of acquisition during the quarter. Consumer segment highlights Consumer segment revenues grew by 1.7%, year over year, to $1.9 billion, with our strategy of simplification and cost management driving an increase in EBITDA for the quarter. Bell introduced Bell Digital Voice, our feature-rich consumer VoIP service, in Quebec City, Sherbrooke and Trois-Rivieres. Customer reaction has been positive and we are satisfied with the early acquisition numbers and the insights gathered through our initial offering in this next generation services market. In the first quarter, more than 107,000 customers signed on to the Digital Bundle. Furthermore, 46% of our customers added at least one new service, deepening their relationship with Bell. We now have over 554,000 bundle customers who have taken advantage of the offer since the launch of the program. Also, by the end of the quarter, over 820,000 customers had chosen Bell's One Bill for their wireline, Internet and video services. Business segment highlights Revenue growth during the first quarter in the business segment was the strongest since the creation in 2003 of two distinct business units to serve this market. Business segment revenues were $1,478 million this quarter or 3% higher compared to the first quarter of 2004. But most importantly, increases in data, wireless and terminal sales and other revenues more than offset declines in long distance and local and access revenues. In our small and medium-sized business unit (SMB), performance was driven by our Virtual Chief Information Officer (VCIO) strategy and in Enterprise, by Internet Protocol (IP) and other advanced solutions. Small and Medium Business Sales of bundled services were ahead of expectations while Value Added Services (VAS) revenues grew at 38% for the quarter and showed continuing signs of acceleration. Bell completed the acquisition of Nexxlink Technologies Inc. and announced that we would combine it with Charon Systems Inc., which was acquired in 2004, into a new wholly-owned subsidiary to be named Bell Business Solutions. With 1,100 IT professionals and offices in major centres across the country, we have bolstered our ability to act as a technology advisor to small and medium businesses. Bell completed customer trials and in April launched PC Care and Network Care which provide technical support for critical needs including connectivity, software and hardware, as well as for networking. This unique service offers live telephone or online assistance as well as onsite support from a technical expert, 24 hours a day, 7 days a week, further strengthening our position as the VCIO for the SMB market. Enterprise Enterprise added 13,000 IP-enabled voice lines on customer premises equipment during the quarter for a total of 158,000. Sales of Value Added Solutions (VAS), including security, contact centre management and other solutions, increased by 47% year over year. The migration of Bell customers to IP continued throughout the quarter with close to 100 customers, including leading organizations such as the Jean Coutu Group, adopting our technology. An innovation centre affiliated with the University of Toronto which connects scientists with the business community, also adopted our IP solution during the quarter. The VAS growth strategy is showing strong momentum. Enterprise announced a four-year, $17.3 million contract with the National Bank of Canada to provide integrated call centre solutions and telephony. In addition, The Institutional Trade Management Solution (ITMS) which enables near real-time trading was implemented for Desjardins Securities and several other leading financial institutions. In February, Bell Canada launched Bell Security Solutions Inc. (BSSI), which provides network and information security solutions to government and the private sector. Enterprise customers can now benefit from end-to-end IP security solutions with access to more than 200 security professionals coast- to-coast through a single point of contact. Telesat Canada Telesat's revenues grew by approximately 29% to $108 million. This growth was due in part to its acquisition of The SpaceConnection, Inc., a provider of satellite transmission services to major television networks and cable programmers in the U.S. It also stemmed from revenues from Anik F2, the world's first satellite to commercialize the Ka-band, and from ExpressVu's use of the Nimiq 3 satellite. The Anik F3 satellite program is proceeding well, with launch scheduled for the second half of 2006. The Anik F1R satellite is now in the final stages of system testing, with launch scheduled for mid-summer. Anik F1R should be ready for service in the fourth quarter of 2005. Bell Globemedia Bell Globemedia's revenues for the first quarter increased by 4.1% over the same period last year to reach $356 million. Improved profitability both at CTV and The Globe and Mail delivered an impressive 60% increase in operating income over the same period last year. CTV's strong schedule continued to lead the way in Canada with 18 of the top 20 regularly scheduled programs among all viewers in the September 2004 to March 2005 time period. This was a major factor driving an increase of 5.7% in television advertising revenues compared to the first quarter of last year. Strong growth in advertising revenues in conventional and specialty television helped offset the loss of advertising on hockey broadcasts on the sports specialty channels TSN and RDS. Bell Globemedia subscriber revenues grew by 4.1% this quarter reflecting specialty channel growth and online subscription growth at The Globe and Mail. According to the latest NADBank and PMB statistics, The Globe and Mail continues to lead its national competitor in readership by 60% on weekdays and 78% on Saturdays. BCE Financial Performance Revenues for the quarter were $4,859 million compared to $4,638 million for the first quarter of last year, representing a 4.8% increase. Operating income for this quarter was $1,066 million, up 5.4% from last year's $1,011 million first quarter result. EBITDA was $1,938 million, an increase of 5.1% from $1,844 million last year while EBITDA margin increased to 39.9% from 39.8% last year. Net earnings applicable to common shares for the first quarter were $474 million ($0.51 per common share), slightly above net earnings of $470 million (also $0.51 per common share) last year. Net earnings in the first quarter of 2004 included a gain of $7 million related to the disposition of the e-health operations of BCE Emergis. Cash from operating activities was $939 million during the quarter. Free cash flow(3) was negative $162 million, down from $256 million in the first quarter of 2004. This was due to a number of anticipated impacts including cash taxes paid and higher pension and other benefit plan payments which more than offset EBITDA growth and lower interest payments. With first quarter free cash flow results in-line with our plan, BCE expects to achieve its free cash flow target of $700 to $900 million for 2005. Bell Canada Statutory Results Bell Canada "statutory" includes Bell Canada, and Bell Canada's interests in Aliant, Bell ExpressVu (at 52%), and other Canadian telcos. In the first quarter of 2005, Bell Canada's reported statutory revenue was $4.2 billion, up 2.5% compared to the same period last year. Net earnings applicable to common shares were $528 million in the first quarter of 2005, compared to net earnings applicable to common shares of $548 million for the same period last year, a decrease of 3.6%. Outlook BCE Inc. confirmed its annual full year 2005 guidance, as previously issued: ------------------------------------------------------------------------- Guidance 2005E ------------------------------------------------------------------------- Revenue Growth greater or equal to GDP ------------------------------------------------------------------------- Galileo Savings $500-600M ------------------------------------------------------------------------- EPS(a) Single digit growth ------------------------------------------------------------------------- Free Cash Flow(b) $700 - $900M ------------------------------------------------------------------------- Bell Canada Capital Intensity(c) 18% - 19% ------------------------------------------------------------------------- Cellular and PCS Subscriber Growth 10%-15% ------------------------------------------------------------------------- High Speed Internet Subscriber Growth 15%-20% ------------------------------------------------------------------------- Video Subscriber Growth 10%-15% ------------------------------------------------------------------------- (a) Before net investment gains/losses, or impairment or restructuring charges. (b) Cash from operating activities less capital expenditures, total dividends and other investing activities (please see note 2 for additional details). (c) Capital expenditures as a percentage of revenues. About BCE BCE is Canada's largest communications company. Through its 27 million customer connections, BCE provides the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Under the Bell brand, the company's services include local, long distance and wireless phone services, high-speed and wireless Internet access, IP-broadband services, value-added business solutions and direct-to-home satellite and VDSL television services. Other BCE businesses include Canada's premier media company, Bell Globemedia, and Telesat Canada, a pioneer and world leader in satellite operations and systems management. BCE shares are listed in Canada, the United States and Europe. Notes (1) The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have any standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP). Please refer to the section of BCE Inc.'s 2005 First Quarter MD&A, dated May 3, 2005, entitled "Non-GAAP Financial Measures" included in this news release for more details on EBITDA including a reconciliation of EBITDA to operating income. (2) Net earnings and EPS before restructuring and other items and net gains on investments do not have any standardized meaning prescribed by GAAP. Please refer to the section of BCE Inc.'s 2005 First Quarter MD&A, dated May 3, 2005, entitled "Non-GAAP Financial Measures" included in this news release for more details on net earnings and EPS before restructuring and other items and net gains on investments including a reconciliation to net earnings applicable to common shares on a total and per share basis. (3) We define free cash flow as cash from operating activities after capital expenditures, total dividends and other investing activities. Free cash flow does not have any standardized meaning prescribed by GAAP. Please refer to the section of BCE Inc.'s 2005 First Quarter MD&A, dated May 3, 2005, entitled "Non-GAAP Financial Measures" included in this news release for more details on free cash flow including a reconciliation of free cash flow to cash from operating activities. For 2005, we expect to generate approximately $700 million to $900 million in free cash flow. This amount reflects expected cash from operating activities of approximately $5.9 billion to $6.1 billion less capital expenditures, total dividends and other investing activities. BCE 2005 First Quarter Financial Information BCE's 2005 First Quarter Shareholder Report (which contains BCE's 2005 first quarter MD&A and unaudited consolidated financial statements) and other relevant financial materials are available at http://www.bce.ca/en/investors, under "Investor Briefcase". BCE's 2005 First Quarter Shareholder Report is also available on the Web site maintained by the Canadian securities regulators at http://www.sedar.com/. It is also available upon request from BCE's Investor Relations Department (e-mail: , tel.: 1 800 339-6353; fax: (514) 786-3970. BCE's 2005 First Quarter Shareholder Report will be sent to BCE's shareholders who have requested to receive it, on or about May 11, 2005. Call with Financial Analysts BCE will hold a teleconference for financial analysts to discuss its first quarter results on Wednesday, May 4, 2005 at 8:00 a.m. (Eastern). Media are welcome to participate on a listen only basis. Michael Sabia, President and Chief Executive Officer, and Siim Vanaselja, Chief Financial Officer, will be present for this teleconference. To participate, please dial (416) 405-9328 or 1-800-387-6216 shortly before the start of the call. This teleconference will also be Webcast live (audio only) on our Web site at http://www.bce.ca/ . An archive will be available for 90 days. Call with the Media BCE will hold a teleconference for media to discuss its first quarter results on Wednesday, May 4, 2005 at 1:30 p.m. (Eastern). Michael Sabia, President and Chief Executive Officer, will be present for this teleconference. To participate, please dial (416) 405-9310 or 1-877-211-7911 shortly before 1:30 p.m. This teleconference will also be Webcast live (audio only) on our Web site at http://www.bce.ca/ . An archive will be available for 90 days. Caution Concerning Forward-Looking Statements Certain statements made in this news release, including, but not limited to, the statements appearing under the "Outlook" section, and other statements that are not historical facts, are forward-looking and are subject to important risks, uncertainties and assumptions. The results or events predicted in these forward- looking statements may differ materially from actual results or events. These statements do not reflect the potential impact of any non-recurring 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 the date hereof. For a description of risks that could cause actual results or events to differ materially from current expectations please refer to the section entitled "Risks That Could Affect Our Business" contained in BCE Inc.'s Annual Information Form for the year ended December 31, 2004 filed by BCE Inc. with the Canadian securities commissions (available at http://www.bce.ca/ or on SEDAR at http://www.sedar.com/) and with the U.S. Securities and Exchange Commission under Form 40-F (available on EDGAR at http://www.sec.gov/) as updated in BCE Inc.'s 2005 First Quarter MD&A dated May 3, 2005, included in this news release, under the section entitled "Risks That Could Affect Our Business". The forward-looking statements contained in this news release represent our expectations as of May 4, 2005 and, accordingly, are subject to change after such date. However, we disclaim any intention or obligation to update any forward-looking statements, whether as a result of new information or otherwise. THE QUARTER AT A GLANCE The Quarter at a Glance(1) This section reviews the key measures we use to assess our performance and how our results in Q1 2005 compare to our results in Q1 2004. This quarter, we continued to make significant progress on our strategic initiatives and on growing our business profitably. Our revenues grew by 4.8% at BCE and by 2.5% at Bell Canada. Driven by revenue growth and our focus on cost reduction, our operating income grew 5.4% at BCE and by 2.3% at Bell Canada. Our Consumer segment continued to grow revenues, but at a slower pace, as strong growth in Internet access was tempered by a slower rate of growth in wireless. Our Business segment continued to grow revenues at a faster pace, driven by our Virtual Chief Information Officer (VCIO) strategy in our small and medium-sized businesses (SMB) unit and by focusing on value-added services (VAS) and Internet Protocol (IP) based connectivity in our Enterprise unit. Bell Globemedia continued to demonstrate strong financial performance, driven by higher advertising revenue reflecting strong television ratings as CTV Television held 18 of the top 20 regularly scheduled programs from September 2004 to March 2005. Telesat also had a strong quarter, reflecting revenue gains from Ka-band revenues on its Anik F2 satellite, growth in Interactive Distance Learning services and its investment in a provider of programming-related satellite transmission services to major U.S. television networks and cable programmers. (1) Certain statements made in this Quarter at a Glance including, but not limited to, our 2005 free cash flow target, and other statements that are not historical facts, are forward-looking statements and are subject to important risks, uncertainties and assumptions. Forward- looking statements may include words such as anticipate, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, seek, should, strive, target and will. Forward-looking statements in this Quarter at a Glance describe our expectations at May 3, 2005. The results or events predicted in the forward-looking statements contained in this Quarter at a Glance may differ materially from actual results or events. For additional information on forward- looking statements and on factors that could cause actual results or events to differ materially from our current expectations, please refer to the sections entitled About Forward-Looking Statements and Risks That Could Affect Our Business contained in BCE Inc.'s 2005 First Quarter MD&A dated May 3, 2005. > FIRST AND FINAL ADD TO FOLLOW DATASOURCE: BCE INC. CONTACT: Nathalie Moreau, Communications, (514) 391-2007, 1 877 391-2007, ; George Walker, Investor relations, (514) 870-2488, To request a free copy of this organization's annual report, please go to http://www.newswire.ca/ and click on reports@cnw.

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