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. More information on BCE's Q4 results can be found in BCE's
Supplementary Financial Information, Fourth Quarter 2007, available at
http://www.bce.ca/en/investors/financialperformance/quarterlyresults/ and
filed with the U.S. Securities and Exchange Commission and with Canadian
Securities commissions.
- Solid Bell EBITDA growth; best performance in operating profitability
since 2004
- Record gross activations for Wireless and higher ARPU
- Strong Free Cash Flow of $891 million, up 30%, and Cash from Operations
of $5,704 million, up 6% in 2007
- Gain on Telesat sale contributes to EPS of $2.93 in Q4; $0.72 before
special itemsMONTREAL, Quebec, Feb. 6 /CNW Telbec/ - Bell Canada's strategy of
focusing on recurring revenues from its growth services combined with cost
containment across all business units led to strong Bell EBITDA(1) as BCE Inc.
(TSX, NYSE: BCE), Canada's largest communications company, today reported
results for the fourth quarter of 2007.
"This was another quarter of real progress capping off a productive
year," said Michael Sabia, Chief Executive Officer of Bell Canada. "We had
good earnings and free cash flow growth and with 5.4% EBITDA growth at Bell we
had our best improvement since 2004 in operating profitability in the quarter
and for the year as a whole."
"Our Wireline segment showed a significant improvement because of across
the board productivity gains and a successful change in trajectory in our
Enterprise business," Mr. Sabia said.
"In addition, we had a strong quarter for wireless gross activations in
Q4. Going forward, we need to improve our high-speed Internet additions and
accelerate the turnaround in wireless through improved churn and mix,"
Mr. Sabia said.
"In the quarter, we were pleased with customer response to our wireless
offers and our hand-set line up. This enabled us to build on our progress in
Q3 and to gain further market traction," said George Cope, President and Chief
Operating Officer of Bell Canada. "We were particularly encouraged by the high
take rate of data capable handsets this quarter, recognizing that the high
level of these activations and upgrades had an impact on our EBITDA growth."
The Bell Wireless segment(2) had 510,000 gross activations this quarter,
a 16.7% increase compared to the same period last year and its best ever
result. Net activations for the quarter were 195,000, or 8.0% lower than last
year due mainly to higher prepaid churn. Wireless network revenues increased
by 6.6% and blended ARPU increased by $2 to $55. Wireless EBITDA increased by
5.4%.
"In our wireline business, EBITDA grew by 5.4% as cost containment across
all units, our strategy to move away from low margin equipment sales, and
lower pension costs, offset the erosion of higher margin legacy services."
Mr. Cope said.
Customer winbacks contributed to a year-over-year improvement in
residential line (NAS) losses for both the quarter and for the full year. For
business NAS, the anticipated decision by a major wholesale customer to start
to move its lines onto its own network contributed to a decrease of 80,000 NAS
this quarter. There will be an opening period adjustment to the business NAS
balance for Q1 2008 to recognize the further migration of this customer's
remaining 273,000 lines. The migration of these wholesale lines does not have
a material revenue impact given the nature of the contract with this customer.
Bell's operating revenues grew to $3,815 million, a 1.7% increase
compared to Q4 of last year as revenue growth in wireless, video and data more
than offset declines in local and access and long distance service revenues.
The service mix continues to improve with revenues from growth services
contributing 59% of Bell's revenue at the end of 2007. For the full year,
Bell's operating revenues grew by 1.4% to $14,743 million. Bell's strategy of
not pursuing low margin equipment sales reduced revenues for the year by an
estimated $200 million.
Bell's EBITDA grew by 5.4% compared to Q4 2006 to $1,333 million due to
cost containment, ARPU growth and lower pension costs, leading to an
improvement in Bell's EBITDA margin of 1.2 percentage points to 34.9% this
quarter. With cost containment of $189 million in the quarter, totalling
$532 million for the year, the company exceeded its productivity targets. For
the full year, Bell's EBITDA grew by 4.1% to $5,496 million. Bell's operating
income was $538 million, or 0.7% higher than last year, as higher EBITDA and
lower amortization expenses were almost entirely offset by higher
restructuring and other charges. For the full year, Bell's operating income
grew 4.7% to $2,609 million.
Bell invested $765 million of capital this quarter and $2,420 million in
2007 with a continued focus on improving the customer experience and expanding
the range of services available to customers through expenditures in areas
such as Bell's high-speed Evolution, Data Optimized (EVDO) wireless network
and Fibre-to-the-node (FTTN). At year end, Bell's high-speed EVDO Rev A
network covered approximately 75% of the Canadian population and Bell had
deployed 4,828 neighbourhood nodes through its FTTN program.
BCE's cash from operating activities increased by 13.2% to $1,720 million
this quarter due to higher EBITDA, interest income and tax refunds. For the
full year, cash from operating activities increased by 6.3% to $5,704 million.
Free cash flow(3) increased significantly to $393 million this quarter
compared to $200 million in the same period last year due to higher cash from
operating activities. For the full year, free cash flow grew by 30% to
$891 million due to the growth experienced in Q4.
On October 31, 2007, the company completed the previously announced sale
of Telesat to a new acquisition company formed by Canada's Public Sector
Pension Investment Board and Loral Space and Communications Inc. The gain on
this sale was $1,893 million, net of $407 million of taxes in the quarter.
With the sale of Telesat, BCE's results for November 2007 and onward no longer
reflect Telesat's contribution to revenue, EBITDA, operating income, cash flow
and earnings while BCE's results for Q4 2006 include Telesat's results for the
full quarter. As such, a comparison of BCE's results for Q4 2007 with Q4 2006
is less meaningful.
As previously disclosed, the closing of the privatization transaction is
subject to customary conditions, including regulatory approvals and court
approval of the plan of arrangement. All approvals from U.S. authorities
required as conditions to the transaction have been received, and the Canadian
Radio-television and Telecommunications Commission has scheduled a public
hearing for the week of February 25, 2008. At the time of the scheduling of
the court proceedings for the approval of the plan of arrangement, the parties
to the Definitive Agreement agreed that the commencement of the 20-day
marketing period for the Purchaser's financing that is contemplated by the
Definitive Agreement may be delayed, at the purchaser's option, for 15 days
after it otherwise would have begun under the agreement. BCE currently expects
the transaction to close in the first part of the second quarter of 2008.Financial Highlights
-------------------------------------------------------------------------
Q4 2007 Q4 2006 % change
($ millions except per share amounts)
(unaudited)
-------------------------------------------------------------------------
Bell(i) Operating Revenues $3,815 $3,750 1.7%
-------------------------------------------------------------------------
BCE(ii) Operating Revenues $4,549 $4,532 0.4%
-------------------------------------------------------------------------
Bell EBITDA(1) $1,333 $1,265 5.4%
-------------------------------------------------------------------------
BCE EBITDA $1,668 $1,639 1.8%
-------------------------------------------------------------------------
Bell Operating Income $538 $534 0.7%
-------------------------------------------------------------------------
BCE Operating Income $727 $752 (3.3%)
-------------------------------------------------------------------------
BCE Cash From Operating Activities $1,720 $1,520 13.2%
-------------------------------------------------------------------------
BCE Free Cash Flow(3) $393 $200 96.5%
-------------------------------------------------------------------------
BCE EPS $2.93 $0.84 n.m.
-------------------------------------------------------------------------
BCE EPS before restructuring and other,
net gains on investments and costs
incurred to form Bell Aliant(4) $0.72 $0.44 63.6%
-------------------------------------------------------------------------
(i) Bell includes the Bell Wireless and Bell Wireline segments.
(ii) BCE includes Bell, Bell Aliant and Telesat up to the time of its
sale on October 31, 2007.
n.m.: not meaningful
BCE's operating revenue grew to $4,549 million this quarter, or 0.4%
higher than last year as revenue growth at Bell and Bell Aliant was offset by
lower revenues from Telesat. For the full year, BCE's operating revenue grew
by 1.2% to $17,866 million.
BCE's EBITDA grew 1.8% to $1,668 million this quarter as Bell's EBITDA
growth was partly offset by lower EBITDA at Bell Aliant and Telesat. For the
full year, BCE's EBITDA increased by 2.8% to $6,974 million. BCE's operating
income decreased by 3.3% to $727 million as Bell's increase in operating
income was more than offset by declines in operating income at Bell Aliant and
Telesat. For the full year, BCE's operating income increased by 4.2% to
$3,439 million.
BCE's net earnings per share (EPS) was $2.93 for the quarter compared to
$0.84 for the same period last year. The increase relates to the gain on the
sale of Telesat, higher EBITDA, lower interest expense, and lower income tax
expense more than offsetting higher restructuring and other items. EPS was
$4.88 for 2007 compared to $2.25 for 2006.
EPS before restructuring costs, net gains on investments and costs
incurred to form Bell Aliant was $0.72 in the quarter compared to $0.44 in Q4
of 2006. EPS this quarter includes $0.26 related to the favourable resolution
of past tax positions with the tax authorities and the impact of statutory tax
rate reductions. Excluding these items, the growth in EPS was driven by higher
EBITDA and lower interest expense. Full year EPS before restructuring costs,
net gains on investments and costs incurred to form Bell Aliant improved to
$2.34 for 2007 from $1.95 for 2006.
Bell Wireline Segment
The Bell Wireline segment continued to reduce revenue erosion and the
number of residential NAS losses this quarter.
- Bell Wireline operating revenues decreased by 0.7% to $2,727 million
this quarter as gains in video and data revenues were offset by
decreases in local and access, long distance and equipment and other
revenues.
- Bell Wireline EBITDA increased by 5.4% to $940 million as cost savings,
lower pension costs and pricing initiatives more than offset the
ongoing erosion of our residential NAS customer base. Bell Wireline
EBITDA margin improved by two percentage points to 34.5%.
- Bell Wireline operating income decreased by 6.7% to $251 million this
quarter due to higher amortization expense and restructuring and other
charges.
- Local and access revenues declined by 5.5% to $874 million which
reflected an improvement over the 6.0% decline experienced in Q4 2006.
- Residential NAS declined by 117,000 this quarter, an improvement over
the decline of 149,000 experienced last year reflecting the continuing
growth in customer winbacks and the positive customer response to our
Home Phone packages and service bundles. For the full year, the decline
in residential NAS levels improved with 511,000 losses in 2007 compared
with 535,000 in 2006.
- Business NAS decreased by 80,000 this quarter compared to a gain of
7,000 in the same period last year. The loss this quarter was driven
largely by a major wholesale customer's decision to move its lines onto
its own network.
- Total NAS declined by 197,000 this quarter compared to the decline of
142,000 in the same period last year. Year-over-year, total NAS
declined by 6.5%.
- Long distance revenues declined by 6.3% to $296 million this quarter
due to ongoing NAS erosion and substitution related impacts. This
quarter's rate of revenue decline is a significant improvement over the
12.0% decline experienced in Q4 2006. This was the eighth consecutive
quarter of improved rates of long distance revenue erosion.
- Data revenues increased 1.6% to $976 million this quarter due to growth
in Internet revenues and higher IP Broadband revenues partly offset by
the further erosion of legacy data services.
- High-speed Internet subscribers grew by 6.8% compared to last year with
29,000 net activations in the quarter.
- Video revenues increased by 17.8% to $351 million this quarter due
largely to an ARPU increase of $9 to $64.
- Video EBITDA more than tripled to $77 million this quarter from
$25 million last year due to higher ARPU and cost containment.
- Total video subscribers increased by 2,000 this quarter to reach
1,822,000, or 0.1% higher than last year.
- Video net activations this quarter were impacted by higher churn of
1.3%, compared to 1.0% in the same period last year.
Bell Wireless Segment
The Bell Wireless segment had its best ever quarter for gross activations.
- Total Bell Wireless operating revenues grew 8.4% to $1,101 million due
to a larger subscriber base, higher ARPU and stronger equipment sales.
Wireless network revenues increased by 6.6% to $973 million.
- Bell Wireless operating income increased by 8.3% to $287 million this
quarter and by 21.4% to $1,212 million for the full year.
- Bell Wireless EBITDA grew by 5.4% to $393 million this quarter
reflecting costs associated with significantly higher levels of gross
activations and customer upgrades. For the full year, Bell Wireless
EBITDA grew by 14.8% to $1,648 million.
- EBITDA margins on network revenues this quarter decreased by
0.5 percentage points to 40.4% this quarter but increased by
2.3 percentage points to 43.9% for the full year.
- Blended ARPU increased by $2 to $55 reflecting a $1 increase in
postpaid ARPU to $67 and a $3 increase in prepaid ARPU to $18.
- Cost of acquisition decreased by 11.9% to $392 per gross activation,
reflecting lower handset subsidies and higher gross activations.
- Total gross activations were 510,000 this quarter, a 16.7% increase
from last year.
- Blended churn of 1.7% was 0.4 percentage points higher than Q4 of 2006
reflecting an increase in postpaid churn of 0.3 percentage points to
1.4% due to the competitive intensity of the marketplace. Prepaid churn
of 2.7% increased by 0.9 percentage points from the unusually low level
of 1.8% experienced in Q4 2006.
- Total net activations were 195,000 this quarter, or 8.0% lower than
last year. Postpaid net additions grew by 18.5% to 77,000 but were more
than offset by a 19.7% decline in prepaid net additions caused by
higher churn.
- The Bell Wireless client base reached 6,216,000, up 4.4% from the
previous year.
Bell Aliant Regional Communications
Bell Aliant's revenues were $858 million this quarter, up 2.4% over the
previous year, due to growth in Internet, data, and long distance services
offsetting declines in local and access services. Operating income was
$180 million, or 7.7% lower than the previous year due to higher pension and
amortization expenses.
Telesat
Revenues and operating income from Telesat this quarter only reflect
results up to the time of its sale on October 31, 2007. Accordingly, revenues
were $45 million this quarter compared to $128 million for Q4 2006 and
operating income for the quarter was $12 million compared to $32 million for
the prior year.
Notes
The information contained in this news release is unaudited.
(1) The term EBITDA does not have any standardized meaning according
to Canadian GAAP. It is therefore unlikely to be comparable to
similar measures presented by other companies. We define EBITDA
(earnings before interest, taxes, depreciation and amortization) as
operating revenues less cost of revenue and selling, general and
administrative expenses, meaning it represents operating income
before amortization expense and restructuring and other.
We use EBITDA, among other measures, to assess the operating
performance of our ongoing businesses without the effects of
amortization expense and restructuring and other. We exclude these
items because they affect the comparability of our financial results
and could potentially distort the analysis of trends in business
performance. We exclude amortization expense because it largely
depends on the accounting methods and assumptions a company uses, as
well as non-operating factors, such as the historical cost of capital
assets. Excluding restructuring and other does not imply they are
non-recurring.
EBITDA allows us to compare our operating performance on a consistent
basis. We believe that certain investors and analysts use EBITDA to
measure a company's ability to service debt and to meet other payment
obligations, or as a common measurement to value companies in the
telecommunications industry.
The most comparable Canadian GAAP financial measure is operating
income. The following table is a reconciliation of operating income
to EBITDA on a consolidated basis.
($ millions)
BCE Q4 2007 Q4 2006 2007 2006
--------------------------------------------------------------------
Operating income 727 752 3,439 3,299
Depreciation and amortization 791 796 3,199 3,128
Restructuring and other 150 91 336 355
--------------------------------------------------------------------
EBITDA 1,668 1,639 6,974 6,782
--------------------------------------------------------------------
--------------------------------------------------------------------
BELL Q4 2007 Q4 2006 2007 2006
--------------------------------------------------------------------
Operating income 538 534 2,609 2,492
Depreciation and amortization 650 640 2,574 2,488
Restructuring and other 145 91 313 300
--------------------------------------------------------------------
EBITDA 1,333 1,265 5,496 5,280
--------------------------------------------------------------------
--------------------------------------------------------------------
BELL WIRELINE Q4 2007 Q4 2006 2007 2006
--------------------------------------------------------------------
--------------------------------------------------------------------
Operating income 251 269 1,397 1,494
--------------------------------------------------------------------
--------------------------------------------------------------------
Depreciation and amortization 547 532 2,142 2,054
--------------------------------------------------------------------
--------------------------------------------------------------------
Restructuring and other 142 91 309 297
--------------------------------------------------------------------
--------------------------------------------------------------------
EBITDA 940 892 3,848 3,845
--------------------------------------------------------------------
--------------------------------------------------------------------
BELL WIRELESS Q4 2007 Q4 2006 2007 2006
--------------------------------------------------------------------
--------------------------------------------------------------------
Operating income 287 265 1,212 998
--------------------------------------------------------------------
--------------------------------------------------------------------
Depreciation and amortization 103 108 432 434
--------------------------------------------------------------------
--------------------------------------------------------------------
Restructuring and other 3 - 4 3
--------------------------------------------------------------------
--------------------------------------------------------------------
EBITDA 393 373 1,648 1,435
--------------------------------------------------------------------
--------------------------------------------------------------------
(2) Consistent with North American industry practices, total wireless
gross activations, net activations and subscribers include 100%
of Virgin Mobile's subscribers. Wireless ARPU, churn, usage per
subscriber and cost of acquisition continue to be computed by
including 50% of Virgin Mobile's results, a level corresponding
to Bell's ownership position.
(3) The term free cash flow does not have any standardized meaning
according to Canadian GAAP. It is therefore unlikely to be
comparable to similar measures presented by other companies. We
define free cash flow as cash from operating activities after
capital expenditures, total dividends and other investing
activities. 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 to 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
free cash flow is also used by certain investors and analysts in
valuing a business and its underlying assets. The most comparable
Canadian GAAP financial measure is cash from operating
activities. The following table is a reconciliation of cash from
operating activities to free cash flow on a consolidated basis.
($ millions)
Q4 2007 Q4 2006 2007 2006
---------------------------------------------------------------------
Cash flows from operating
activities 1,720 1,520 5,704 5,366
Capital expenditures (919) (935) (3,151) (3,133)
Total dividends paid (416) (398) (1,675) (1,546)
Other investing activities 8 13 13 (2)
---------------------------------------------------------------------
Free cash flow 393 200 891 685
---------------------------------------------------------------------
--------------------------------------------------------------------
(4) The term net earnings (or EPS) before restructuring and other, net
gains on investments, and costs incurred to form Bell Aliant does not
have any standardized meaning according to Canadian GAAP. It is
therefore unlikely to be comparable to similar measures presented by
other companies.
We use net earnings before restructuring and other, net gains on
investments, and costs incurred to form Bell Aliant, among other
measures, to assess the operating performance of our ongoing
businesses without the effects of after-tax restructuring and other,
net gains on investments, and costs incurred to form Bell Aliant. 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 necessarily non-recurring.
The most comparable Canadian GAAP financial measure is net earnings
applicable to common shares. The following table is a reconciliation
of net earnings applicable to common shares to net earnings before
restructuring and other, net gains on investments, and costs incurred
to form Bell Aliant on a consolidated basis and per BCE Inc. common
share.
($ millions except per share amounts)
Q4 2007 Q4 2006 2007 2006
---------------------------------------------------------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
---------------------------------------------------------------------
Net ear-
nings app-
licable to
common
shares 2,354 2.93 699 0.84 3,926 4.88 1,937 2.25
Restruc-
turing
and
other(i) 96 0.12 66 0.08 210 0.26 222 0.26
Net (gains)
losses on
investments (1,873) (2.33) (412) (0.48)(2,252) (2.80) (525) (0.61)
Other costs
incurred
to form
Bell
Aliant(ii) - - - - - - 42 0.05
---------------------------------------------------------------------
Net earnings
before res-
tructuring
and other,
net gains on
investments
and costs to
form Bell
Aliant 577 0.72 353 0.44 1,884 2.34 1,676 1.95
---------------------------------------------------------------------
---------------------------------------------------------------------
(i) Includes transactions costs associated with the formation of Bell
Aliant. These costs relate mainly to financial advisory,
professional and consulting fees. In 2006, we incurred
$138 million ($77 million after tax and non-controlling interest).
(ii) Includes premium cost incurred by Bell Aliant on early
redemption of long-term debt as a result of the formation of Bell
Aliant. For 2006, we incurred $122 million ($42 million after tax
and non-controlling interest)
---------------------------------------------------------------------
---------------------------------------------------------------------Caution Concerning Forward-Looking Statements
This news release contains forward-looking statements within the meaning
of applicable Canadian securities legislation and of the United States Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include statements relating to the proposed privatization of BCE, legal
proceedings relating thereto and other statements that are not historical
facts. Such forward-looking statements are subject to important risks,
uncertainties and assumptions including, in particular, the inherent
uncertainty regarding the outcome and timing of any litigation. The results or
events predicted in these forward-looking statements may differ materially
from actual results or events. As a result, we cannot guarantee that any
forward-looking statement will materialize. Forward-looking statements are
provided in this news release for the purpose of allowing investors and others
to get a better understanding of our operating environment. However, readers
are cautioned that it may not be appropriate to use such forward-looking
statements for any other purpose.
The completion of the proposed privatization transaction is subject to a
number of terms and conditions, including: (i) approval of the CRTC and
Industry Canada, (ii) necessary court approval, and (iii) certain termination
rights available to the parties under the definitive agreement dated June 29,
2007 governing the terms of the transaction. These approvals may not be
obtained, the other conditions to the transaction may not be satisfied in
accordance with their terms, and/or the parties to the definitive agreement
may exercise their termination rights, in which case the proposed
privatization transaction could be modified, restructured or terminated, as
applicable. Failure to complete the proposed privatization transaction could
have a material adverse impact on the market price of BCE's shares. In
addition, depending on the circumstances in which the proposed transaction is
not completed, BCE could have to pay significant fees and costs as directed by
the purchaser, in addition to its own costs incurred in connection with the
privatization transaction.
The forward-looking statements contained in this news release are made as
of the date of this release 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. Additionally, we undertake no obligation to comment on
expectations of, or statements made by, third parties in respect of the
proposed privatization transaction. For additional information with respect to
certain of these and other assumptions and risks, please refer to the
definitive agreement dated June 29, 2007, as well as BCE's 2007 Second Quarter
MD&A dated July 31, 2007, BCE's 2007 Third Quarter MD&A dated November 6, 2007
and BCE's management proxy circular dated August 7, 2007, all 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 Inc.
BCE is Canada's largest communications company, providing 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, information and
communications technology services (or value-added services) and
direct-to-home satellite and VDSL television services. BCE also holds an
interest in CTVglobemedia, Canada's premier media company. BCE shares are
listed in Canada and the United States.
For further information: Pierre Leclerc, Bell Canada, Media Relations
BCE, (514) 391-2007, 1-877-391-2007, pierre.leclerc@bell.ca; Thane Fotopoulos,
Investor Relations, (514) 870-4619, thane.fotopoulos@bell.ca
