BCE reports 2008 second quarter results



    
    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. This
release should be read in conjunction with BCE Inc.'s 2008 Second Quarter MD&A
dated August 5, 2008 (available at
http://www.bce.ca/en/investors/financialperformance/quarterlyresults/ ) which
is incorporated by reference in this release, filed by BCE Inc. with the U.S.
Securities and Exchange Commission under Form 6-K and with Canadian securities
commissions.

    - Accelerated wireless performance - net adds up 32% with best postpaid
      gain since Q4 2005 of 111,000
    - Third consecutive quarter of fewer year-over-year residential line
      losses
    - Bell revenues up 1.7% to $3,700 million
    - Solid Bell EBITDA growth of 3.6% before unusual items
    - Free Cash Flow of $410 million, up 73%; Cash from Operations of
      $1,534 million, up 9%
    

    MONTREAL, Aug. 6 /CNW Telbec/ - BCE Inc. (TSX, NYSE:   BCE), Canada's
largest communications company, today reported results for the second quarter
of 2008.
    "This was a quarter of strong progress against our strategic imperatives,
especially the significant acceleration of our wireless business," said George
Cope, President and Chief Executive Officer of BCE and Bell Canada. "Wireless
saw improvements in financial and operating metrics in the quarter, including
the highest level of postpaid net activations since the fourth quarter of
2005, significant growth in total net activations, improvements in churn, COA
and postpaid ARPU, and double-digit growth in operating revenue and EBITDA."
    The Bell Wireless segment(1) achieved 111,000 postpaid net activations
compared to 43,000 in Q2 2007. Total net activations this quarter grew to
83,000, or by 31.7%. Postpaid churn improved to 1.1% and blended churn
improved to 1.6% from 1.4% and 1.8% respectively last year. Cost of
acquisition decreased by 5.7% to $417 per gross activation. Total Bell
Wireless operating revenues increased by 10.7% and Bell Wireless EBITDA(2)
grew by 10.8%. Postpaid ARPU increased $1 to $66.
    "Wireline momentum continued with improvements in residential local lines
losses for a third consecutive quarter - 34,000 fewer NAS losses than in the
same quarter last year - continued solid financial results, and an ongoing
acceleration of our turnaround in the business market. We were disappointed
with our high-speed Internet business this quarter, but we are taking action
to improve performance in the second half of the year," Mr. Cope said.
    Growth in customer winbacks and the success of The Bell Better Home
marketing program led to year-over-year improvement in the rate of residential
local line (NAS) losses. Total NAS declined by 10.7% over the last twelve
months. However, normalized for the previously announced contract termination
with a major wholesale customer and a beginning-of-year adjustment to our
residential NAS base following a review of historical records, total NAS
declined by 6.2%.
    Overall, Bell delivered solid revenue growth and generated significant
growth in free cash flow. Bell EBITDA growth before the impact of unusual
items also showed underlying strength this quarter.
    Bell's operating revenues grew by 1.7% to $3,700 million this quarter as
growth in wireless, video, and data revenues more than offset declines in
local and access, long distance, and equipment and other revenues. Revenues
from Bell's growth services portfolio of wireless, video, high-speed Internet
and other services, such as ICT solutions, grew by 8.3%.
    Bell's EBITDA growth of 0.4% was adversely affected by two unusual items:
a Federal Court of Appeal decision related to CRTC broadcast licence fees in
the amount of $31 million for periods dating back to September 2006, and a
write down of assets in the amount of $14 million associated with the
termination of Sympatico's PC equipment sales program.
    Excluding these items, Bell's EBITDA grew by 3.6% reflecting higher
wireless revenues and lower subscriber acquisition costs and the solid
financial performance of the Video and Enterprise units. Bell's operating
income was $682 million, or 0.6% lower than last year as higher operating
revenues and lower net benefit plans cost were more than offset by the
two unusual charges and higher depreciation and amortization expense. Adjusted
for the two unusual charges that affected EBITDA, Bell's operating income grew
by 6.0%.
    Bell invested $583 million of capital this quarter, or 8.6% more than
Q2 2007. Underscoring Bell's commitment to its strategic imperatives including
to accelerate wireless and to invest in broadband networks and services,
capital expenditures focused on enhancing the wireless network and the
continuing expansion of the Fibre-to-the-node (FTTN) program.
    BCE's cash from operating activities increased to $1,534 million this
quarter, or by 8.6%, due to improvement in working capital, lower pension plan
payments and lower interest payments. BCE's free cash flow(3) increased by 73%
to $410 million this quarter due mainly to the higher cash from operating
activities and lower capital expenditures as a result of the sale of Telesat.
    On July 28, 2008, the company announced a reduction in the size of the
management team by approximately 2,500, representing approximately 6% of the
total workforce or about 15% of management, including a 30% reduction in
executive positions, as part of an organizational realignment focused on the
strategic imperative to achieve a competitive cost structure. The estimated
cost related to the workforce reductions is approximately $230 million.
Combined with other reductions so far this year, this streamlining is expected
to provide annualized savings of approximately $300 million.

    
    Financial Highlights
    -------------------------------------------------------------------------
                                              Q2 2008    Q2 2007   % change
    ($ millions except per share amounts)
    (unaudited)
    -------------------------------------------------------------------------
    Bell(i) Operating Revenues                 $3,700     $3,637        1.7%
    -------------------------------------------------------------------------
    BCE(ii) Operating Revenues                 $4,422     $4,427       (0.1%)
    -------------------------------------------------------------------------
    Bell EBITDA                                $1,405     $1,399        0.4%
    -------------------------------------------------------------------------
    BCE EBITDA                                 $1,741     $1,779       (2.1%)
    -------------------------------------------------------------------------
    Bell Operating Income                        $682       $686       (0.6%)
    -------------------------------------------------------------------------
    BCE Operating Income                         $882       $903       (2.3%)
    -------------------------------------------------------------------------
    BCE Cash From Operating Activities         $1,534     $1,413        8.6%
    -------------------------------------------------------------------------
    BCE Free Cash Flow                           $410       $237       73.0%
    -------------------------------------------------------------------------
    BCE EPS                                     $0.45      $0.83      (45.8%)
    -------------------------------------------------------------------------
    BCE EPS before restructuring and other
     and net gains on investments(4)            $0.53      $0.56       (5.4%)
    -------------------------------------------------------------------------
    (i)  Bell includes the Bell Wireless and Bell Wireline segments.
    (ii) BCE's results for Q2 2007 include Bell, Bell Aliant and Telesat
         while BCE's results for Q2 2008 include only Bell and Bell Aliant.

    On October 31, 2007, BCE completed the sale of Telesat. Accordingly, BCE's
results for Q2 2008 no longer reflect Telesat's financial results while BCE's
results for Q2 2007 include Telesat's results for the full quarter.
    BCE's operating revenue declined by 0.1% to $4,422 million this quarter as
revenue growth at Bell and Bell Aliant was offset by the loss of Telesat's
contribution to revenue. Similarly, BCE's EBITDA declined 2.1% to
$1,741 million this quarter as Bell's and Bell Aliant's EBITDA growth was
offset by the loss of Telesat's contribution to EBITDA. BCE's operating income
decreased by 2.3% to $882 million due to the loss of Telesat's contribution to
operating income and slightly lower Bell operating income.
    BCE's net earnings per share (EPS) was $0.45 for the quarter compared to
$0.83 for the same period last year. EPS in Q2 2007 included a gain from Bell
Aliant's sale of Aliant Directory Services and a favourable tax settlement
totalling $0.36, while EPS this quarter included a net loss on investment from
discontinued operations of $0.02 and the adverse effect of the two previously
mentioned unusual items which totalled $0.04.
    EPS before restructuring and other and net gains on investments was
$0.53 in the quarter, or $0.03 lower than Q2 of 2007 due to the adverse effect
of the two previously mentioned unusual items, totalling $0.04.

    Privatization Transaction Update

    On August 1, 2008, the U.S. Department of Justice and the U.S. Federal
Trade Commission again granted early termination of the Hart-Scott-Rodino
waiting period for the privatization transaction. As such, all regulatory
approvals required for the transaction have been obtained. The transaction is
expected to close on or before December 11, 2008.

    Bell Wireless Segment

    The Bell Wireless segment delivered solid financial performance in Q2,
significant improvements in postpaid net activations and churn, and higher
postpaid ARPU.

    - Total Bell Wireless operating revenues grew 10.7% to $1,121 million due
      to a larger subscriber base, higher postpaid ARPU and stronger
      equipment sales. Wireless network revenues increased by 9.0% to
      $1,006 million and wireless equipment revenues grew by 36.0% to
      $102 million due to higher smartphone sales and customer upgrades.
    - Bell Wireless EBITDA grew by 10.8% to $442 million and Bell Wireless
      operating income grew by 9.7% to $316 million this quarter due to
      higher revenues and lower subscriber acquisition costs.
    - EBITDA margins on network revenues this quarter increased by
      0.7 percentage points to 43.9% this quarter, with the year-over-year
      improvement in network revenues generating a flow through to EBITDA of
      52%.
    - Total gross activations were 391,000 this quarter, slightly higher than
      last year.
    - Postpaid net activations reached 111,000 this quarter, the highest
      level since Q4 2005 and significantly higher than the 43,000 net
      activations in Q2 2007. The prepaid customer base decreased by 28,000.
      Total net activations were 83,000 this quarter, 31.7% more than Q2 last
      year.
    - The Bell Wireless client base reached 6,332,000, up 7.6% over last
      year.
    - Blended churn of 1.6% improved by 0.2 percentage points from Q2 2007
      with postpaid churn improving by 0.3 percentage points to 1.1% and
      prepaid churn improving by 0.1 percentage points to 3.0%.
    - Postpaid ARPU increased $1 to $66 while blended and prepaid ARPU
      remained relatively stable at $54 and $17 respectively.
    - Cost of acquisition decreased by 5.7% to $417 per gross activation,
      reflecting lower handset subsidies and marketing expenses.

    Bell Wireline Segment

    The Bell Wireline segment continued to reduce the number of residential
NAS losses this quarter.

    - Bell Wireline operating revenues decreased by 1.6% to $2,600 million
      this quarter as gains in video and data revenues were more than offset
      by decreases in local and access, long distance and equipment and other
      revenues.
    - Bell Wireline EBITDA decreased by 3.7% to $963 million and Bell
      Wireline operating income decreased by 8.0% to $366 million due to the
      ongoing erosion of our NAS customer base, the adverse effect from the
      judicial decision related to CRTC video broadcast licence fees and the
      write down of assets associated with the termination of Sympatico's PC
      equipment sales program.
    - Local and access revenues declined by 8.0% to $845 million due to
      ongoing NAS erosion.
    - Residential NAS declined by 125,000 this quarter, an improvement of
      34,000 over the decline of 159,000 experienced last year reflecting the
      continued growth in customer winbacks and the effectiveness of The Bell
      Better Home marketing campaign. Business NAS declined by 7,000 this
      quarter.
    - Total NAS declined by 10.7% compared to the end of Q2 2007. However,
      when normalized for the contract termination with a major wholesale
      customer and a beginning-of-year adjustment to residential NAS
      following a review of historical records, total NAS declined by 6.2%.
    - Long distance revenues declined by 2.9% to $298 million this quarter
      due mainly to ongoing NAS erosion partly offset by pricing initiatives.
      This is the tenth consecutive quarter that long distance revenue
      erosion rates have improved.
    - Data revenues increased 3.8% to $900 million this quarter due to growth
      in Internet, IP Broadband and ICT revenues partly offset by the further
      erosion of legacy data services.
    - High-speed Internet customer connections decreased by 1,000 this
      quarter due to weaker sales in our retail channels and lower overall
      market demand due to the relatively high broadband Internet penetration
      rate in Canada. At the end of Q2 2008, Bell had 2,013,000 high-speed
      Internet customer connections, an increase of 3.4% compared to the end
      of Q2 2007.
    - Video revenues increased by 10.6% to $356 million this quarter due
      largely to an ARPU increase of $6 to $64.
    - Video EBITDA was $47 million this quarter, or 30.9% lower than last
      year, reflecting the adverse effect from the judicial decision related
      to CRTC video broadcast licence fees.
    - Total video subscribers increased by 8,000, an increase of 15,000 net
      additions compared to the same quarter last year, to reach 1,831,000.
    - Video subscriber churn improved by 0.2 percentage points to 1.1%.
    - Equipment and other revenues decreased by 16.8% to $153 million due to
      lower customer premise equipment sales consistent with our continued
      focus on not pursuing low-margin business.

    Bell Aliant Regional Communications

    Bell Aliant's revenues increased 2.4% this quarter to $846 million due to
growth in Internet, data and IT service revenues more than offsetting declines
in local and access and long distance service revenues. Operating income
increased 9.3% to $200 million due to higher revenues, cost reductions and
lower net benefit plans cost and depreciation and amortization expenses.

    Notes

    The information contained in this news release is unaudited.

    (1) 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 Canada's ownership position.

    (2) 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 of intangible
        assets) as operating revenues less cost of revenue and selling,
        general and administrative expenses, meaning it represents operating
        income before depreciation and amortization of intangible assets and
        restructuring and other.

        We use EBITDA, among other measures, to assess the operating
        performance of our ongoing businesses without the effects of
        depreciation and amortization of intangible assets 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
        depreciation and amortization of intangible assets 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.

    ($ millions)
    -------------------------------------------------------------------------
    BCE                                                  Q2 2008    Q2 2007
    -------------------------------------------------------------------------
    Operating income                                         882        903
    Depreciation and amortization of intangible assets       788        805
    Restructuring and other                                   71         71
    -------------------------------------------------------------------------
    EBITDA                                                 1,741      1,779
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BELL                                                 Q2 2008    Q2 2007
    -------------------------------------------------------------------------
    Operating income                                         682        686
    Depreciation and amortization of intangible assets       652        643
    Restructuring and other                                   71         70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA                                                 1,405      1,399
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BELL WIRELINE                                        Q2 2008    Q2 2007
    -------------------------------------------------------------------------
    Operating income                                         366        398
    Depreciation and amortization of intangible assets       534        532
    Restructuring and other                                   63         70
    -------------------------------------------------------------------------
    EBITDA                                                   963      1,000
    -------------------------------------------------------------------------

    BELL WIRELESS                                        Q2 2008    Q2 2007
    -------------------------------------------------------------------------
    Operating income                                         316        288
    Depreciation and amortization of intangible assets       118        111
    Restructuring and other                                    8          -
    -------------------------------------------------------------------------
    EBITDA                                                   442        399
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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)
    -------------------------------------------------------------------------
                                                         Q2 2008    Q2 2007
    -------------------------------------------------------------------------
    Cash from operating activities                         1,534      1,413
    Capital expenditures                                    (710)      (744)
    Total dividends paid                                    (417)      (432)
    Other investing activities                                 3          -
    -------------------------------------------------------------------------
    Free cash flow                                           410        237
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (4) The term net earnings (or EPS) before restructuring and other and net
        gains on investments 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 and net gains on
        investments, among other measures, to assess the operating
        performance of our ongoing businesses without the effects of after-
        tax restructuring and other and net gains on investments. 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 and net gains on investments on a
        consolidated basis and per BCE Inc. common share.

    ($ millions except per share amounts)
    -------------------------------------------------------------------------
                                         Q2 2008               Q2 2007
    -------------------------------------------------------------------------
                                                  PER                   PER
                                     TOTAL      SHARE      TOTAL      SHARE
    -------------------------------------------------------------------------
    Net earnings applicable to
     common shares                     361       0.45        667       0.83
    Restructuring and other             48       0.06         45       0.06
    Net (gains) losses on investments   16       0.02       (267)     (0.33)
    -------------------------------------------------------------------------
    Net earnings before restructuring
     and other and net gains on
     investments                       425       0.53        445       0.56
    -------------------------------------------------------------------------

    Caution Concerning Forward-Looking Statements

    This news release contains forward-looking statements relating to the
proposed privatization of BCE, certain expected annualized cost savings and
other statements that are not historical facts. Such forward-looking
statements 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. As a result, we cannot guarantee
that any forward-looking statement will materialize.
    The timing and completion of the proposed privatization transaction is
subject to each of the parties fulfilling their commitments under the
transaction documents and to a number of terms and conditions, including,
without limitation, the provisions of, and certain termination rights
available to the parties under, the definitive agreement dated June 29, 2007,
as amended by the final amending agreement dated July 4, 2008, governing the
terms of the transaction. The 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.
    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 BCE's 2007
annual management's discussion and analysis ("MD&A") dated March 5, 2008
included in the Bell Canada Enterprises 2007 Annual Report, BCE's 2008 First
Quarter MD&A dated May 6, 2008, BCE's 2008 Second Quarter MD&A dated August 5,
2008, the definitive agreement dated June 29, 2007, as amended by the final
amending agreement dated July 4, 2008, 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:

For further information: Pierre Leclerc, Bell Canada, Media Relations,
(514) 391-2007, 1-877-391-2007, pierre.leclerc@bell.ca; Thane Fotopoulos, BCE,
Investor Relations, (514) 870-4619, thane.fotopoulos@bell.ca

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