•BCE Q2 net earnings attributable to common shareholders of
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.
|($ millions except per share amounts) (unaudited)||Q2 2014||Q2 2013||% change|
|Net earnings attributable to common shareholders||606||571||6.1%|
|Cash flows from operating activities||1,850||1,868||(1.0%)|
|Free cash flow(3)||815||903||(9.7%)|
|(i) Bell includes the |
"Bell's commitment to deliver the best communications networks, service and content to Canadians everywhere is driving positive momentum across our wireless, wireline and media operations," said
The Bell team is focused on achieving a clear goal - to be recognized by customers as
"Continued disciplined execution of our strategic imperatives in Q2 delivered excellent wireless Adjusted EBITDA growth, improved results in our wireline operations, and a strong contribution to free cash flow from Bell Media," said
BCE revenue grew 4.4% to
BCE reported Q2 2014 net earnings attributable to common shareholders of
BCE's cash flows from operating activities were
In Q2 2014, BCE (Bell Canada and Bell Aliant) added 93,811 net new customers from its growth services (wireless, TV, Internet), up 3.7% over last year: 67,951 postpaid wireless customers, partly offset by the loss of 25,053 prepaid customers; 33,369 TV subscribers, reflecting the addition of 59,132 net new IPTV customers; and 17,544 high-speed Internet customers. Total net NAS line losses improved 9.3% to 130,920. At
Bell operating revenues increased 5.1% to
Bell Adjusted EBITDA grew 4.9% to
In conjunction with the announcement of the Bell Aliant privatization, BCE launched several new investment initiatives to support ongoing growth and competiveness in
BELL OPERATING RESULTS BY SEGMENT
Bell Wireless Adjusted EBITDA increased 9.5% to
• Postpaid net additions totalled 66,186 compared to 96,390 last year. This reflected a 13.3% decrease in gross activations attributable mainly to slower overall market growth resulting from the elimination of lower-priced 3-year contracts as mandated by the new federal Wireless Code of Conduct.
• The percentage of postpaid subscribers with smartphones increased to 75%, compared to 67% at the end of Q2 2013.
• Industry-leading Bell Mobile TV reached 1,472,000 subscribers in Q2 2014, up from more than 875,000 at the same time last year.
• Postpaid customer churn(4) improved 0.11 percentage point to 1.16%, reflecting Bell's network quality and reach and focused investments in customer service and retention.
• Prepaid net subscriber losses improved 53.1% to 24,755 due to higher gross activations and fewer customer deactivations.
• Blended ARPU increased 4.6% to
• Cost of acquisition (COA)(4) was essentially stable at
• With a greater number of customer upgrades to high-end devices, retention spending increased to 10.1% of wireless service revenues from 9.3% last year.
• Bell continued to cut the cost of mobile roaming in countries Canadians travel to the most, with reductions in voice and data roaming prices for
• In April, Bell was first in
• Bell already offers customers access to
Bell Wireline continued to see year-over-year improvement in the rate of revenue and Adjusted EBITDA decline, benefitting from higher ARPU across all residential services, disciplined TV and Internet growth, fewer losses in traditional home phone, and well-controlled operating costs.
Wireline revenue declined 0.8% to
Bell Wireline Adjusted EBITDA decreased 2.7% to
• Bell Fibe TV added 46,533 net new customers in Q2 compared to 50,555 last year. The decrease reflects aggressive offers and service bundle promotions from cable competitors and less footprint expansion compared to the same quarter last year. Bell Fibe TV subscribers totalled 580,643 at the end of Q2, up 67.7% from last year.
• Bell's Fibe TV footprint reached more than 4.6 million households at the end of Q2, up from 3.8 million last year.
• Satellite TV net customer losses increased 2.5% to 25,573 in the second quarter of 2014, the result of higher wholesale customer deactivations attributable to IPTV service rollouts by competing service providers in Western and
• Bell TV's subscriber base (Bell Satellite TV and Fibe TV) totalled 2,327,954 at the end of Q2, a 6.0% increase over last year.
• High-speed Internet net subscriber additions totalled 3,638, compared to 2,446 last year, benefitting from lower residential customer churn attributable to a high Fibe TV attach rate and higher speeds enabled by Bell's broadband fibre network. Bell's high-speed Internet subscriber base increased 3.3% over last year to 2,203,808.
• Bell's fibre network ranks #1 in
• Bell's new Home Hub Internet modem and Wi-Fi router delivers Wi-Fi speeds up to 3 times faster than most residential Wi-Fi routers and offers a range of integrated tools to enable customers to easily manage access and usage by multiple users and devices.
• Wireline data revenues were up 2.0% to
• Residential NAS net losses improved 17.2% in Q2 to 67,969 from 82,090 last year, reflecting lower rates of residential NAS turnover where Bell Fibe TV is available and improved retention in our non-Fibe TV service areas.
• Business NAS losses increased 31.7%, or 9,167, to 38,079, due to competitive losses, ongoing business customer conversion of voice lines to IP-based services, and the ongoing deactivation of excess dial-up ports with customer shifts to high-speed fibre Internet access from older technologies.
• Total Bell NAS at the end of the quarter was 5,034,968, a 7.2% decline from last year. As a result, Bell's local and access revenues decreased 5.9% to
Bell Media operating revenue was up 36.1% to
These increases reflect higher advertising and subscriber fee revenues from the Astral acquisition, as well as the flow-through of market-based rate increases for specialty TV services and higher revenues generated by Bell Media's expanding array of TV Everywhere products and mobile TV subscription growth.
Advertising revenue growth in Q2 was moderated by general softness in the TV advertising market, a shift in customer spending to online services, and other factors including fewer
Higher content costs for TV programming and sports broadcast rights partly offset the growth in Bell Media Adjusted EBITDA in Q2.
• Bell Media maintained its leadership position with strong audience levels across its conventional and specialty TV properties. CTV broadcast 12 of the top 20 programs nationally among all viewers in the spring season and 4 of the top 5 shows among the key 25 to 54 age demographic. In the key primetime hours of 7 pm to 11 pm, CTV's average audience was 33% higher than its closest conventional TV competitor's, while Bell Media's specialty TV average minute audience was 38% higher.
• In May, Bell Media secured 11 new series for CTV's and CTV Two's 2014/2015 primetime schedules, which will join more returning Top 20 hit programs than any other Canadian network. CTV will remain the home of TV's biggest event programming with broadcasts of the Academy Awards, the Super Bowl, the Golden Globe Awards, the Primetime Emmy Awards, and the JUNO Awards.
• Online, Bell Media continued to rank first among Canadian broadcasters and seventh among all digital properties in
• Bell Media Radio,
• Bell Media division Astral Out-of-Home announced its acquisition of
BELL ALIANT RESULTS
Bell Aliant operating revenues decreased 1.3% to
COMMON SHARE DIVIDEND
BCE's Board of Directors has declared a quarterly dividend of
BCE confirmed its financial guidance targets for 2014, as provided on
|Revenue Growth||2% - 4%||On track|
|Adjusted EBITDA Growth||3% - 5%||On track|
|Capital Intensity(4)||16% - 17%||On track|
|Adjusted EPS||On track|
Free ||3% - 7%||On track|
|Annual common dividend per share|
|Dividend payout(4) policy||
65% - 75%|
of free cash flow
|(i)||Bell's 2014 financial guidance for revenue, Adjusted EBITDA and capital intensity is exclusive of Bell Aliant.|
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss Q2 2014 results on
A live audio webcast of the call will be available on BCE's website at: BCE Q2-2014 conference call. The mp3 file will be available for download on the web page later in the day.
The information contained in this news release is unaudited.
|(1)||Beginning with Q2 2014, we reference Adjusted EBITDA and Adjusted EBITDA margin as non-GAAP financial measures. These terms replace the previously referenced non-GAAP financial measures EBITDA and EBITDA margin. Our definition of Adjusted EBITDA and Adjusted EBITDA margin are unchanged from our former definition of EBITDA and EBITDA margin respectively. Accordingly, this change in terminology has no impact on our reported financial results for prior periods. 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 3 to BCE's Q2 2014 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 also is 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.|
|Q2 2014||Q2 2013|
|Severance, acquisition and other costs||54||28|
|Interest on post-employment benefit obligations||13||63|
|BCE Operating Revenues||5,220||5,000|
|Adjusted EBITDA Margin||41.1%||41.3%|
|(2)||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 (gains) losses on investments, and premiums on early redemption of debt. 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 (gains) losses on investments, and premiums on early redemption of debt, 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)|
|Q2 2014||Q2 2013|
|TOTAL||PER SHARE||TOTAL||PER SHARE|
|Net earnings attributable to common shareholders||606||0.78||571||0.74|
|Severance, acquisition and other costs||38||0.05||21||0.02|
|Net gains on investments||(4)||(0.01)||(1)||-|
|Premium on early redemption of debt||-||-||3||0.01|
|Adjusted net earnings||640||0.82||594||0.77|
The terms free cash flow and free cash flow per share 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 costs paid and voluntary pension funding, plus dividends
received from Bell Aliant, less capital expenditures, preferred share
dividends, dividends paid by subsidiaries to NCI and Bell Aliant free
cash flow. We define free cash flow per share as free cash flow divided
by the average number of common shares outstanding.|
We consider free cash flow and free cash flow per share to be important indicators of the financial strength and performance of our businesses because they show how much cash is available to pay dividends, repay debt and reinvest in our company. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets. We believe that certain investors and analysts also use free cash flow and free cash flow per share to evaluate the financial strength and performance of our businesses. 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.
|($ millions except per share amounts)|
|Q2 2014||Q2 2013|
|Cash flows from operating activities||1,850||1,868|
|Bell Aliant dividends to BCE||48||47|
|Cash dividends paid on preferred shares||(31)||(32)|
|Cash dividends paid by subsidiaries to non-controlling interest||(68)||(74)|
|Acquisition costs paid||16||8|
|Bell Aliant free cash flow||(63)||(84)|
|Free cash flow||815||903|
|Average number of common shares outstanding||777.7||775.9|
|Free cash flow per share||1.05||1.16|
|(4)||We use ARPU, churn, COA, capital intensity and dividend payout ratio 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. See section 8.2, Non-GAAP Financial Measures and Key Performance Indicators (KPIs) in BCE's Q2 2014 MD&A for a definition of such KPIs.|
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 2014 financial guidance (including revenues, Adjusted EBITDA, capital intensity, Adjusted EPS and free cash flow), our business outlook, objectives, plans and strategic priorities, BCE's 2014 annualized common share dividend and common share dividend policy, our network deployment plans, the expected timing and completion of the proposed acquisition by BCE of all of the issued and outstanding common shares of Bell Aliant that it does not currently own (Privatization) through a common share tender offer (Common Share Offer), certain strategic and financial benefits (including expected synergies and free cash flow accretion) and operational, competitive and cost efficiencies expected to result from the Privatization, the nature and value of investments expected to be made in
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. The forward-looking statements contained in this news release describe our expectations as of
A number of economic, market, operational and financial assumptions were made by BCE in preparing its forward-looking statements for 2014 contained in this news release, including, but not limited to:
Canadian Economic and Market Assumptions
• growth in the Canadian GDP of 2.2% in 2014, based on the Bank of
Assumptions Concerning our Bell Wireless Segment
• higher, but slowing, wireless industry penetration in
Assumptions Concerning our Bell Wireline Segment
• increasing wireless and Internet-based technological substitution • aggressive residential service bundle offers from cable TV competitors in our local wireline areas • stabilizing residential NAS line erosion rate as we leverage our broadband investment in Fibe TV 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 • higher revenue per household and flow-through of market-based price increases across residential products from increasing penetration of three-product households • faster pace of employment and economic growth compared to 2013 • continued business customer migration to IP-based systems • ongoing competitive price pressures in our residential, business and wholesale markets • ability to realize cost savings from management workforce attrition and retirements, call centre efficiencies, field service productivity improvements, reduction in supplier contract rates, lower print and mail costs, content cost management and reducing traffic that is not on our own network • growing consumption of OTT TV services and streaming video, projected growth in TV Everywhere as well as the proliferation of devices, such as tablets, that consume vast quantities of bandwidth, will require considerable ongoing capital investment
Assumptions Concerning our Bell Media Segment
• softer advertising market for Bell Media • escalating costs to secure TV programming and sports content • ability to successfully acquire highly-rated programming and differentiated content • market rates for specialty content generally increasing • building and maintaining strategic supply arrangements for content on all four screens • full realization of cost synergies from the integration of Astral into Bell Media • no material financial, operational or competitive consequences of adverse changes in media regulation
Assumptions Concerning our Bell Aliant Segment
• economy continues to rebound • competitive activity in both consumer and business will continue to be intense • wireless substitution for wireline services will increase in Bell Aliant markets, but is expected to lag behind other regions of
Financial Assumptions Concerning Bell (Excluding Bell Aliant)
The following constitute Bell's principal financial assumptions for 2014:
• the maintenance of a relatively stable consolidated Adjusted EBITDA margin; • increasing wireless Adjusted EBITDA contribution and margin expansion; • an improving year-over-year rate of decline in wireline revenue and Adjusted EBITDA; • Bell's total post-employment benefit plans cost to be approximately
Financial Assumptions Concerning BCE
The following constitute BCE's principal financial assumptions for 2014:
• BCE's total post-employment benefit plans cost to be approximately
The foregoing assumptions, although considered reasonable by BCE on
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 2014 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2014 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, and the resulting impact on our ability to retain existing customers and attract new ones, as well as on our pricing strategies, financial results and operating metrics such as ARPU • the level of technological substitution and the presence of alternative service providers, contributing to reduced utilization of traditional wireline voice services • the adverse effect of new technology and increasing fragmentation in Bell TV's TV distribution market and Bell Media's TV and radio markets • variability in subscriber acquisition and retention costs based on subscriber acquisitions, retention volumes, smartphone sales and handset discount levels • regulatory initiatives and proceedings, government consultations and government positions that affect us and influence our business • economic and financial market conditions, the level of consumer confidence and spending, and the demand for, and prices of, our products and services • Bell Media's significant dependence on continued demand for advertising, and the potential adverse effect thereon from economic conditions, cyclical and seasonal variations and ratings/audience levels • the complexity of our product offerings, pricing plans, promotions, technology platforms and billing systems • our failure to satisfy customer expectations and build a low cost operational delivery model • our failure to carry out wireline network evolution activities, and to meet network upgrade or deployment timelines within our capital intensity target • our failure to maintain network operating performance in the context of significant increases in broadband demand and in the volume of wireless data-driven traffic • our failure to anticipate and respond to technological change, upgrade our networks and rapidly offer new products and services • our failure to implement or maintain, on a timely basis, effective information technology (IT) systems, and the complexity and costs of our IT environment • our inability to protect our data centres, electronic and physical records and the information stored therein • employee retention and performance, and labour disruptions • our failure to execute our strategic imperatives and business development plans in order to produce the expected benefits, including to continue to implement our targeted cost reduction initiatives • ineffective change management resulting from restructurings and other corporate initiatives, and the failure to successfully integrate business acquisitions and existing business units • pension obligation volatility and increased contributions to post-employment benefit plans • events affecting the ability of third-party suppliers to provide to us, and our ability to purchase, critical products and services • the quality of our network and customer equipment and the extent to which they may be subject to manufacturing defects • events affecting the functionality of, and our ability to protect, test, maintain and replace, our networks, equipment and other facilities • in-orbit risks of satellites used by Bell TV • unfavourable resolution of legal proceedings and, in particular, class actions • unfavourable changes in applicable laws • our capital and other expenditure levels, financing and debt requirements and inability to access adequate sources of capital and generate sufficient cash flows from operations to meet our cash requirements and implement our business plan, as well as our inability to manage various credit, liquidity and market risks • our inability to discontinue certain services as necessary to improve capital and operating efficiencies • our failure to evolve practices and effectively monitor and control fraudulent activities • the theft of our direct-to-home (DTH) satellite TV services • copyright theft and other unauthorized use of our content • higher taxes due to new taxes, higher tax rates or changes to tax laws, and our inability to predict the outcome of government audits • health concerns about radio frequency emissions from wireless devices and equipment • our inability to maintain customer service and our networks operational in the event of the occurrence of epidemics, pandemics and other health risks • BCE's dependence on the ability of its subsidiaries, joint arrangements and other entities in which it has an interest to pay dividends or otherwise make distributions to it • uncertainty as to whether dividends will be declared by BCE's board of directors or BCE's dividend policy will be maintained • stock market volatility • the expected timing and completion of the Common Share Offer and the Privatization are subject to closing conditions and other risks and uncertainties and there can be no certainty that anticipated benefits will be realized • the benefits expected to result from the Privatization are subject to the successful and timely integration and consolidation of Bell Aliant's operations, procedures and personnel • the expectation that the Privatization will be accretive to BCE's free cash flow is subject to the risks faced by Bell Aliant's business following completion of the Privatization, certain of which risks are described in BCE, Bell Aliant and
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 2013 Annual MD&A dated
The Bell Let's Talk initiative promotes Canadian mental health with national awareness and anti-stigma campaigns, like Clara's Big Ride for Bell Let's Talk and Bell Let's Talk Day, and significant Bell funding of community care and access, research, and workplace initiatives. To learn more, please visit Bell.ca/LetsTalk.