SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: May 2019 |
Commission File Number: 1-8481 |
BCE Inc.
(Translation of Registrants name into English)
1, Carrefour Alexander-Graham-Bell, Verdun, Quebec, Canada H3E 3B3,
(514) 870-8777
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F _________ | Form 40-F _____X___ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _________ | No _____X___ |
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.
Only the BCE Inc. Managements Discussion and Analysis for the quarter ended March 31, 2019 and the BCE Inc. unaudited consolidated interim financial statements for the quarter ended March 31, 2019, included in the BCE Inc. 2019 First Quarter Shareholder Report furnished with this Form 6-K as Exhibit 99.1, the Bell Canada Unaudited Selected Summary Financial Information for the quarter ended March 31, 2019 furnished with this Form 6-K as Exhibit 99.5, and the Exhibit to 2019 First Quarter Financial Statements Earnings Coverage furnished with this Form 6-K as Exhibit 99.6 are incorporated by reference in the registration statements filed by BCE Inc. with the Securities and Exchange Commission on Form F-3 (Registration Statement No. 333-12130), Form S-8 (Registration Statement No. 333-12780), Form S-8 (Registration Statement No. 333-12802) and Form F-10 (Registration Statement No. 333-223660). Except for the foregoing, no other document or portion of document furnished with this Form 6-K is incorporated by reference in BCE Inc.s registration statements. Notwithstanding any reference to BCE Inc.s Web site on the World Wide Web in the documents attached hereto, the information contained in BCE Inc.s site or any other site on the World Wide Web referred to in BCE Inc.s site is not a part of this Form 6-K and, therefore, is not furnished to the Securities and Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BCE Inc. (signed) Glen LeBlanc |
Glen LeBlanc Executive Vice-President and Chief Financial Officer May 2, 2019 |
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EXHIBIT INDEX
99.1 BCE Inc. 2019 First Quarter Shareholder Report
99.2 Supplementary Financial Information First Quarter 2019
99.3 CEO/CFO Certifications
99.4 News Release
99.5 Bell Canada Unaudited Selected Summary Financial Information
99.6 Exhibit to 2019 First Quarter Financial Statements Earnings Coverage
Page 3
Exhibit 99.1
Table of contents |
BCE Inc. 2019 First Quarter Shareholder Report |
Table of contents |
Management’s discussion and analysis | 1 | |||
1 |
Overview |
2 | ||
1.1 | Financial highlights | 2 | ||
1.2 | Key corporate and business developments | 4 | ||
1.3 | Assumptions | 4 | ||
2 | Consolidated financial analysis | 5 | ||
2.1 | BCE consolidated income statements | 5 | ||
2.2 | Customer connections | 5 | ||
2.3 | Operating revenues | 6 | ||
2.4 | Operating costs | 7 | ||
2.5 | Net earnings | 7 | ||
2.6 | Adjusted EBITDA | 8 | ||
2.7 | Severance, acquisition and other costs | 8 | ||
2.8 | Depreciation and amortization | 8 | ||
2.9 | Finance costs | 8 | ||
2.10 | Other income (expense) | 9 | ||
2.11 | Income taxes | 9 | ||
2.12 | Net earnings attributable to common shareholders and EPS | 9 | ||
3 | Business segment analysis | 10 | ||
3.1 | Bell Wireless | 10 | ||
3.2 | Bell Wireline | 14 | ||
3.3 | Bell Media | 18 | ||
4 | Financial and capital management | 20 | ||
4.1 | Net debt | 20 | ||
4.2 | Outstanding share data | 20 | ||
4.3 | Cash flows | 21 | ||
4.4 | Post-employment benefit plans | 22 | ||
4.5 | Financial risk management | 22 | ||
4.6 | Credit ratings | 24 | ||
4.7 | Liquidity | 24 | ||
5 | Quarterly financial information | 25 | ||
6 | Regulatory environment | 26 | ||
7 | Business risks | 27 | ||
8 | Accounting policies, financial measures and controls | 29 | ||
8.1 | Our accounting policies | 29 | ||
8.2 | Non-GAAP financial measures and key performance indicators (KPIs) | 31 | ||
8.3 | Controls and procedures | 33 | ||
Consolidated financial statements | 34 | |||
Consolidated income statements | 34 | |||
Consolidated statements of comprehensive income | 35 | |||
Consolidated statements of financial position | 36 | |||
Consolidated statements of changes in equity | 37 | |||
Consolidated statements of cash flows | 38 | |||
Notes to consolidated financial statements | 39 | |||
Note 1 | Corporate information | 39 | ||
Note 2 | Basis of presentation and significant accounting policies | 39 | ||
Note 3 | Adoption of IFRS 16 | 40 | ||
Note 4 | Business acquisitions and dispositions | 41 | ||
Note 5 | Segmented information | 41 | ||
Note 6 | Operating costs | 42 | ||
Note 7 | Severance, acquisition and other costs | 43 | ||
Note 8 | Other income (expense) | 43 | ||
Note 9 | Earnings per share | 43 | ||
Note 10 | Post-employment benefit plans | 44 | ||
Note 11 | Financial assets and liabilities | 44 | ||
Note 12 | Share capital | 46 | ||
Note 13 | Share-based payments | 46 |
MD&A |
BCE Inc. 2019 First Quarter Shareholder Report |
Management’s discussion and analysis |
In this management’s discussion and analysis (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.
All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) on pages 31 to 33 for a list of defined non-GAAP financial measures and KPIs.
Please refer to BCE’s unaudited consolidated financial statements for the first quarter of 2019 (Q1 2019 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2018 dated March 7, 2019 (BCE 2018 Annual MD&A). In preparing this MD&A, we have taken into account information available to us up to May 1, 2019, the date of this MD&A, unless otherwise stated.
You will find more information about us, including BCE’s annual information form for the year ended December 31, 2018 dated March 7, 2019 (BCE 2018 AIF) and recent financial reports, including the BCE 2018 Annual MD&A, on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.
This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q1) ended March 31, 2019 and 2018.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This MD&A, and in particular, but without limitation, the section and sub-sections entitled Assumptions, section 1.2, Key corporate and business developments, section 3.2, Bell Wireline - Key business developments, section 3.3, Bell Media - Key business developments and section 4.1, Net debt, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to our network deployment and capital investment plans, BCE’s 2019 annualized common share dividend, the expected improvement in BCE’s net debt leverage ratio, BCE’s business outlook, objectives, plans and strategic priorities, and other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target, and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities laws and of the United States (U.S.) Private Securities Litigation Reform Act of 1995.
Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at May 1, 2019 and, accordingly, are subject to change after that date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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. These statements are not guarantees of future performance or events, and we caution you against relying on any of these forward-looking statements. Forward-looking statements are presented in this MD&A for the purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.
We have made certain economic, market and operational assumptions in preparing the forward-looking statements contained in this MD&A and, in particular, but without limitation, the forward-looking statements contained in the previously mentioned sections of this MD&A. These assumptions include, without limitation, the assumptions described in the section and sub-sections of this MD&A entitled Assumptions, which sections are incorporated by reference in this cautionary statement. We believe that our assumptions were reasonable at May 1, 2019. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect.
Important risk factors including, without limitation, competitive, regulatory, security, technological, operational, economic, financial and other risks that could cause actual results or events to differ materially from those expressed in, or implied by, the previously-mentioned forward looking statements and other forward-looking statements contained in this MD&A, include, but are not limited to, the risks described or referred to in section 7, Business risks, which section is incorporated by reference in this cautionary statement.
We caution readers that the risks described in the previously mentioned section and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after May 1, 2019. The financial impact of these transactions and special items can be complex and depends on facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way, or in the same way we present known risks affecting our business.
1 |
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1 |
MD&A | Overview |
BCE Inc. 2019 First Quarter Shareholder Report |
1 Overview |
As required, we adopted International Financial Reporting Standard (IFRS) 16 – Leases effective January 1, 2019, as described in section 8.1, Our accounting policies. We adopted IFRS 16 using a modified retrospective approach whereby the financial statements of prior periods presented were not restated and continue to be reported under International Accounting Standard (IAS) 17 – Leases, as permitted by the specific transition provisions of IFRS 16. The cumulative effect of the initial adoption of IFRS 16 was reflected as an adjustment to the deficit at January 1, 2019.
Under IFRS 16, most leases are recognized on the statement of financial position as right-of-use assets within property, plant and equipment, with a corresponding lease liability within debt. Under IFRS 16, expenses related to these leases are recorded in depreciation and interest expense, whereas under IAS 17, operating lease expenses were recorded in operating costs. Under IFRS 16, repayments of principal for these leases are recorded in repayment of long-term debt within cash flows from financing activities and the interest component is recorded in interest paid within cash flows from operating activities. Previously, under IAS 17, operating lease payments were recorded within cash flows from operating activities.
To align with changes in how we manage our business and assess performance, the operating results of The Source (Bell) Electronics Inc. (The Source) are now entirely included within our Wireless segment effective January 1, 2019, with prior periods restated for comparative purposes. Previously, The Source’s results were included within our Wireless and Wireline segments.
1.1 Financial highlights |
BCE Q1 2019 SELECTED QUARTERLY INFORMATION
BCE CUSTOMER CONNECTIONS |
(1) | Adjusted EBITDA, adjusted net earnings and free cash flow are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin, Adjusted net earnings and adjusted EPS and Free cash flow and dividend payout ratio in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure. |
(2) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows: (A) 65,798 subscribers (19,195 postpaid and 46,603 prepaid), due to the completion of the shutdown of the code division multiple access (CDMA) network on April 30, 2019, (B) 49,095 prepaid subscribers as a result of a change to our deactivation policy, mainly from 120 days for Bell/Virgin Mobile Canada (Virgin Mobile) and 150 days for Lucky Mobile to 90 days, (C) 43,670 postpaid subscribers relating to Internet of Things (IoT) due to the further refinement of our subscriber definition as a result of technology evolution, and (D) 9,366 postpaid fixed wireless Internet subscribers which were transferred to our retail high-speed Internet subscriber base. |
(3) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
2 | |||
1 |
MD&A | Overview |
BCE Inc. 2019 First Quarter Shareholder Report |
BCE INCOME STATEMENTS – SELECTED INFORMATION
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | |||||
Operating revenues |
||||||||
Service |
5,045 | 4,964 | 81 | 1.6 | % | |||
Product |
689 | 626 | 63 | 10.1 | % | |||
Total operating revenues |
5,734 | 5,590 | 144 | 2.6 | % | |||
Operating costs |
(3,325 | ) | (3,336 | ) | 11 | 0.3 | % | |
Adjusted EBITDA |
2,409 | 2,254 | 155 | 6.9 | % | |||
Adjusted EBITDA margin (1) |
42.0 | % | 40.3 | % | 1.7 | pts | ||
Net earnings attributable to: |
||||||||
Common shareholders |
740 | 661 | 79 | 12.0 | % | |||
Preferred shareholders |
38 | 36 | 2 | 5.6 | % | |||
Non-controlling interest |
13 | 12 | 1 | 8.3 | % | |||
Net earnings |
791 | 709 | 82 | 11.6 | % | |||
Adjusted net earnings |
692 | 719 | (27 | ) | (3.8 | %) | ||
Net earnings per common share (EPS) |
0.82 | 0.73 | 0.09 | 12.3 | % | |||
Adjusted EPS (1) |
0.77 | 0.80 | (0.03 | ) | (3.8 | %) |
(1) | Adjusted EBITDA margin and adjusted EPS are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin and Adjusted net earnings and adjusted EPS in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure. |
BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | |||||
Cash flows from operating activities | 1,516 | 1,496 | 20 | 1.3 | % | |||
Capital expenditures | (850 | ) | (931 | ) | 81 | 8.7 | % | |
Free cash flow | 642 | 537 | 105 | 19.6 | % |
Q1 2019 FINANCIAL HIGHLIGHTS |
BCE revenues grew 2.6% in Q1 2019, compared to last year, resulting from higher service and product revenues of 1.6% and 10.1%, respectively, driven by greater wireless and wireline revenues, offset by a modest decline in our media revenues. The year-over-year increase in service revenues was attributable to continued growth in our wireless, Internet, and Internet protocol television (IPTV) subscribers, as well as growth in our business market resulting from higher Internet protocol (IP) connectivity and business solutions services revenue, including the contribution from the acquisition of Axia NetMedia Corporation (Axia). This more than offset the ongoing erosion in our voice, satellite TV and legacy data revenues. The year-over-year increase in product revenues reflected higher sales of premium wireless devices and greater equipment sales to the government sector.
Net earnings increased by 11.6% in the first quarter of 2019, compared to the same period last year, due to higher adjusted EBITDA and higher other income, mainly as a result of net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans. This was partly offset by higher depreciation expense, finance costs, income taxes and severance, acquisition and other costs. The adoption of IFRS 16 did not have a significant impact on net earnings.
Adjusted EBITDA increased by 6.9% in Q1 2019, compared to last year, reflecting the favourable impact from the adoption of IFRS 16, as well as growth across all three of our segments driven by the flow-through of our revenue growth coupled with continued cost containment driving lower labour and media programming and production costs, moderated by higher cost of goods sold resulting from greater wireless handset sales and higher equipment sales to the government sector.
BCE’s EPS of $0.82 in Q1 2019 increased by $0.09 compared to the same period last year.
Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net (losses) gains on investments, early debt redemption costs and impairment charges, adjusted net earnings in the first quarter of 2019 was $692 million, or $0.77 per common share, compared to $719 million, or $0.80 per common share, for the same period last year.
Cash flows from operating activities in the first quarter of 2019 increased by $20 million, compared to Q1 2018, due mainly to higher adjusted EBITDA, which reflects the favourable impact from the adoption of IFRS 16, partly offset by a decrease in cash from working capital, higher interest paid, which reflects the unfavourable impact from the adoption of IFRS 16, and higher severance and other costs paid.
Free cash flow in Q1 2019 increased by $105 million, compared to the same period last year, mainly due to higher cash flows from operating activities, excluding acquisition and other costs paid, and lower capital expenditures.
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1 |
MD&A | Overview |
BCE Inc. 2019 First Quarter Shareholder Report |
1.2 Key corporate and business developments |
COMMON SHARE DIVIDEND INCREASE |
On February 6, 2019, BCE’s board of directors approved a 5%, or 15 cents per share, increase in the annual common share dividend from $3.02 per share to $3.17 per share, effective with BCE’s 2019 first quarter dividend paid on April 15, 2019 to common shareholders of record on March 15, 2019. This dividend increase represents BCE’s 15th increase to its annual common share dividend since the fourth quarter of 2008, representing a total increase of 117%.
BELL NAMED ONE OF CANADA’S BEST DIVERSITY EMPLOYERS |
For the third year in a row, Bell has been named one of Canada’s Best Diversity Employers in Mediacorp’s 2019 report on workplace diversity and inclusion. The award recognizes Bell’s commitment to providing an inclusive and accessible workplace that reflects Canada’s diversity and highlights our wide range of programs to enable women, persons with disabilities, Indigenous Peoples, visible minorities and other groups in their career development, and also recognizes our workplace mental health leadership.
BELL RECOGNIZED FOR CORPORATE RESPONSIBILITY LEADERSHIP |
Bell continued to strengthen its reputation as a corporate responsibility leader with new recognition for its social sustainability reporting and environmental stewardship.
In February 2019, Finance Montréal’s Finance and Sustainability Initiative awarded Bell with Best Sustainability Report in the Technology and Communications category based on a comprehensive review of publicly traded Canadian companies.
Bell was also ranked on the CDP’s Climate Change A List of the world’s leading businesses for environmental performance. Bell is the only Canadian communications company to make the list.
1.3 Assumptions |
As at the date of this MD&A, our forward-looking statements set out in the BCE 2018 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following economic and market assumptions as well as the various assumptions referred to under the sub-sections entitled Assumptions set out in section 3, Business segment analysis of this MD&A.
ASSUMPTIONS ABOUT THE CANADIAN ECONOMY
MARKET ASSUMPTIONS
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2 |
MD&A | Consolidated financial analysis |
BCE Inc. 2019 First Quarter Shareholder Report |
2 Consolidated financial analysis |
This section provides detailed information and analysis about BCE’s performance in Q1 2019 compared with Q1 2018. It focuses on BCE’s consolidated operating results and provides financial information for our Bell Wireless, Bell Wireline and Bell Media business segments. For further discussion and analysis of our business segments, refer to section 3, Business segment analysis.
2.1 BCE consolidated income statements |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Operating revenues | |||||||||
Service | 5,045 | 4,964 | 81 | 1.6 | % | ||||
Product | 689 | 626 | 63 | 10.1 | % | ||||
Total operating revenues | 5,734 | 5,590 | 144 | 2.6 | % | ||||
Operating costs | (3,325 | ) | (3,336 | ) | 11 | 0.3 | % | ||
Adjusted EBITDA | 2,409 | 2,254 | 155 | 6.9 | % | ||||
Adjusted EBITDA margin | 42.0 | % | 40.3 | % | 1.7 | pts | |||
Severance, acquisition and other costs | (24 | ) | – | (24 | ) | n.m. | |||
Depreciation | (882 | ) | (780 | ) | (102 | ) | (13.1 | %) | |
Amortization | (221 | ) | (212 | ) | (9 | ) | (4.2 | %) | |
Finance costs | |||||||||
Interest expense | (283 | ) | (240 | ) | (43 | ) | (17.9 | %) | |
Interest on post-employment benefit obligations | (16 | ) | (17 | ) | 1 | 5.9 | % | ||
Other income (expense) | 101 | (61 | ) | 162 | n.m. | ||||
Income taxes | (293 | ) | (235 | ) | (58 | ) | (24.7 | %) | |
Net earnings | 791 | 709 | 82 | 11.6 | % | ||||
Net earnings attributable to: |
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Common shareholders | 740 | 661 | 79 | 12.0 | % | ||||
Preferred shareholders | 38 | 36 | 2 | 5.6 | % | ||||
Non-controlling interest |
13 | 12 | 1 | 8.3 | % | ||||
Net earnings | 791 | 709 | 82 | 11.6 | % | ||||
Adjusted net earnings | 692 | 719 | (27 | ) | (3.8 | %) | |||
EPS | 0.82 | 0.73 | 0.09 | 12.3 | % | ||||
Adjusted EPS | 0.77 | 0.80 | (0.03 | ) | (3.8 | %) |
n.m.: not meaningful |
2.2 Customer connections |
Q1 2019 | Q1 2018 | % CHANGE | |||||
Wireless subscribers | 38,282 | 44,377 | (13.7 | %) | |||
Postpaid | 50,204 | 68,487 | (26.7 | %) | |||
Prepaid | (11,922 | ) | (24,110 | ) | 50.6 | % | |
Retail high-speed Internet subscribers (1) | 22,671 | 18,156 | 24.9 | % | |||
Retail TV subscribers (1) | (1,560 | ) | (10,354 | ) | 84.9 | % | |
IPTV | 20,916 | 13,573 | 54.1 | % | |||
Satellite | (22,476 | ) | (23,927 | ) | 6.1 | % | |
Total growth services | 59,393 | 52,179 | 13.8 | % | |||
Wireline retail residential NAS lines (1) | (66,779 | ) | (56,071 | ) | (19.1 | %) | |
Total services | (7,386 | ) | (3,892 | ) | (89.8 | %) |
(1) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
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2 |
MD&A | Consolidated financial analysis |
BCE Inc. 2019 First Quarter Shareholder Report |
TOTAL BCE CUSTOMER CONNECTIONS
Q1 2019 | Q1 2018 | % CHANGE | |||||
Wireless subscribers (1) | 9,480,835 | 9,195,048 | 3.1 | % | |||
Postpaid (1) | 8,808,189 | 8,471,021 | 4.0 | % | |||
Prepaid (1) | 672,646 | 724,027 | (7.1 | %) | |||
Retail high-speed Internet subscribers (1)(2) | 3,442,411 | 3,311,931 | 3.9 | % | |||
Retail TV subscribers (2) | 2,764,851 | 2,734,498 | 1.1 | % | |||
IPTV | 1,696,622 | 1,578,489 | 7.5 | % | |||
Satellite | 1,068,229 | 1,156,009 | (7.6 | %) | |||
Total growth services | 15,688,097 | 15,241,477 | 2.9 | % | |||
Wireline retail residential NAS lines (2) | 2,894,029 | 3,163,618 | (8.5 | %) | |||
Total services | 18,582,126 | 18,405,095 | 1.0 | % |
(1) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows: (A) 65,798 subscribers (19,195 postpaid and 46,603 prepaid), due to the completion of the shutdown of the CDMA network on April 30, 2019, (B) 49,095 prepaid subscribers as a result of a change to our deactivation policy, mainly from 120 days for Bell/Virgin Mobile and 150 days for Lucky Mobile to 90 days, (C) 43,670 postpaid subscribers relating to IoT due to the further refinement of our subscriber definition as a result of technology evolution, and (D) 9,366 postpaid fixed wireless Internet subscribers which were transferred to our retail high-speed Internet subscriber base. |
(2) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
BCE added 59,393 net new customer connections to its growth services in Q1 2019, representing a 13.8% increase over Q1 2018. This consisted of:
Retail residential NAS net losses were 66,779 in Q1 2019, an increase of 19.1% over Q1 2018.
Total BCE customer connections across all services increased by 1.0% in Q1 2019 compared to last year, driven by increases in our growth services customer base, offset in part by the continued erosion in traditional retail residential NAS lines.
At March 31, 2019, BCE customer connections totaled 18,582,126, comprising:
2.3 Operating revenues |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Bell Wireless | 2,112 | 2,021 | 91 | 4.5 | % | ||||
Bell Wireline | 3,064 | 3,009 | 55 | 1.8 | % | ||||
Bell Media | 745 | 749 | (4 | ) | (0.5 | %) | |||
Inter-segment eliminations | (187 | ) | (189 | ) | 2 | 1.1 | % | ||
Total BCE operating revenues | 5,734 | 5,590 | 144 | 2.6 | % |
BCE
Total operating revenues at BCE increased by 2.6% in Q1 2019, compared to Q1 2018, attributable to growth in both our Bell Wireless and Bell Wireline segments, offset in part by a modest decline in our Bell Media segment. Total operating revenues consisted of service revenues of $5,045 million and product revenues of $689 million in Q1 2019, which grew by 1.6% and 10.1%, respectively, year over year. Wireless operating revenues increased by 4.5% in Q1 2019, driven by both service revenue growth of 3.4% and product revenue growth of 7.7%. Wireline operating revenues increased by 1.8% due to service revenue growth of 1.1% from higher data revenues, moderated by lower voice and other services revenue. The growth in wireline operating revenues also reflected a 20.0% year-over-year increase in product revenues. Bell Media operating revenues declined by 0.5% in Q1 2019 due to lower advertising revenue.
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MD&A | Consolidated financial analysis |
BCE Inc. 2019 First Quarter Shareholder Report |
2.4 Operating costs |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Bell Wireless | (1,207 | ) | (1,210 | ) | 3 | 0.2 | % | ||
Bell Wireline | (1,725 | ) | (1,696 | ) | (29 | ) | (1.7 | %) | |
Bell Media | (580 | ) | (619 | ) | 39 | 6.3 | % | ||
Inter-segment eliminations | 187 | 189 | (2 | ) | (1.1 | %) | |||
Total BCE operating costs | (3,325 | ) | (3,336 | ) | 11 | 0.3 | % |
(1) | Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
(2) | Labour costs (net of capitalized costs) include wages, salaries and related taxes and benefits, post-employment benefit plans service cost, and other labour costs, including contractor and outsourcing costs. |
(3) | Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology (IT) costs, professional service fees and rent. |
BCE
Total BCE operating costs decreased by 0.3% in Q1 2019, compared to Q1 2018, resulting from lower costs in media of 6.3% and wireless of 0.2%, offset in part by higher costs in wireline of 1.7%. These results reflected the favourable impact from the adoption of IFRS 16 in 2019.
2.5 Net earnings |
Net earnings increased by 11.6% in the first quarter of 2019, compared to the same period last year, due to higher adjusted EBITDA and higher other income, mainly as a result of net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans. This was partly offset by higher depreciation expense, finance costs, income taxes and severance, acquisition and other costs. The adoption of IFRS 16 did not have a significant impact on net earnings.
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MD&A | Consolidated financial analysis |
BCE Inc. 2019 First Quarter Shareholder Report |
2.6 Adjusted EBITDA |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Bell Wireless | 905 | 811 | 94 | 11.6 | % | ||||
Bell Wireline | 1,339 | 1,313 | 26 | 2.0 | % | ||||
Bell Media | 165 | 130 | 35 | 26.9 | % | ||||
Total BCE adjusted EBITDA | 2,409 | 2,254 | 155 | 6.9 | % |
BCE
BCE’s adjusted EBITDA grew by 6.9% in Q1 2019, compared to Q1 2018, attributable to increases across all three of our segments of 11.6% in wireless, 2.0% in wireline and 26.9% in media. The increase in adjusted EBITDA reflected growth in revenues, as well as lower operating expenses. This resulted in an adjusted EBITDA margin of 42.0% in Q1 2019, compared to 40.3% experienced last year, mainly driven by the favourable impact from the adoption of IFRS 16 in 2019, effective cost management, and the year-over-year favourability related to the 2018 Canadian Radio-television and Telecommunications Commission (CRTC) retroactive decision on wholesale wireless domestic roaming rates, partly offset by greater low-margin product sales in our total revenue base.
2.7 Severance, acquisition and other costs |
2019
Severance, acquisition and other costs of $24 million in the first quarter of 2019 included:
2018
Severance, acquisition and other costs were nil in the first quarter of 2018.
2.8 Depreciation and amortization |
DEPRECIATION
Depreciation in Q1 2019 increased by $102 million compared to Q1 2018, due mainly to the adoption of IFRS 16 and a higher asset base as we continued to invest in our broadband and wireless networks as well as our IPTV service.
AMORTIZATION
Amortization in Q1 2019 increased by $9 million compared to Q1 2018, mainly due to a higher asset base.
2.9 Finance costs |
INTEREST EXPENSE
Interest expense in the first quarter of 2019 increased by $43 million compared to the same period last year, due mainly to the adoption of IFRS 16, higher average debt levels and higher interest rates on notes payable under commercial paper programs and loans securitized by trade receivables.
INTEREST ON POST-EMPLOYMENT BENEFIT OBLIGATIONS
Interest on our post-employment benefit obligations is based on market conditions that existed at the beginning of the year. On January 1, 2019, the discount rate was 3.8% compared to 3.6% on January 1, 2018.
In the first quarter of 2019, interest expense on post-employment benefit obligations decreased by $1 million compared to the same period last year, due to a lower post-employment benefit obligation at the beginning of the year, partly offset by a higher discount rate.
The impacts of changes in market conditions during the year are recognized in other comprehensive income (loss) (OCI).
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MD&A | Consolidated financial analysis |
BCE Inc. 2019 First Quarter Shareholder Report |
2.10 Other income (expense) |
2019
Other income of $101 million in the first quarter of 2019 included net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans.
2018
Other expense of $61 million included net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans, partly offset by income from our equity investments.
2.11 Income taxes |
Income taxes in the first quarter of 2019 increased by $58 million compared to the same period last year, due to higher taxable income in Q1 2019 and uncertain tax positions favourably resolved in Q1 2018.
2.12 Net earnings attributable to common shareholders and EPS |
Net earnings attributable to common shareholders of $740 million in the first quarter of 2019 increased by 12.0%, compared to the same period last year, due to higher adjusted EBITDA and higher other income, mainly as a result of net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans. This was partly offset by higher depreciation expense, finance costs, income taxes and severance, acquisition and other costs. The adoption of IFRS 16 did not have a significant impact on net earnings.
BCE’s EPS of $0.82 in Q1 2019 increased by $0.09 compared to the same period last year.
Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net (losses) gains on investments, early debt redemption costs and impairment charges, adjusted net earnings in the first quarter of 2019 was $692 million, or $0.77 per common share, compared to $719 million, or $0.80 per common share, for the same period last year.
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MD&A |
Business segment analysis Bell Wireless |
BCE Inc. 2019 First Quarter Shareholder Report |
3 Business segment analysis |
3.1 Bell Wireless |
FEDERAL AUCTION OF 600 MHZ SPECTRUM
Bell decided not to acquire any 600 megahertz (MHz) low-band wireless spectrum in the recently concluded spectrum auction by Innovation, Science and Economic Development Canada (ISED). Bell has spectrum assets in the low, mid and high frequency bands in both urban and rural locations. Given the supply of other low-band spectrum that Bell already possesses, spectrum in the 600 MHz band is not required for Bell to deliver broadband Fourth Generation (4G) and Fifth Generation (5G) services. Similar to Bell, the company’s main U.S. peers chose not to own any 600 MHz spectrum in their markets. Bell’s existing low-band spectrum, combined with network enhancements like cell splitting, enables the company to deliver mobile broadband service for significantly less capital than buying 600 MHz spectrum.
SHUTDOWN OF CDMA WIRELESS NETWORK
On April 30, 2019, Bell completed the previously announced shutdown of its legacy CDMA wireless network. Bell began winding down its CDMA network in 2017 as its national Long-term Evolution (LTE) coverage accelerated. Customers in CDMA coverage areas were transitioned to Bell’s 4G LTE network, which now covers more than 99% of the Canadian population. The shutdown of its CDMA network also enables Bell to “re-farm” additional low band spectrum for 5G services.
BELL TOPS MOBILE SPEED RANKINGS
In its Canada: State of Mobile Networks report, network analysis firm Tutela found that Bell LTE delivers the fastest upload and download speeds of any major mobile network in Canada. Based on 13.4 million anonymous measurements for more than 171,000 Canadian mobile devices, Tutela’s report also gave Bell Mobility top scores for consistent connection quality. This result reflects Bell’s industry-leading investments in the latest mobile technology, including LTE Advanced (LTE-A) and Gigabit LTE, as well as the strength of the Bell broadband fibre backbone that interconnects our wireless sites.
LUCKY MOBILE AND VIRGIN MOBILE PREPAID AT DOLLARAMA
Bells Lucky Mobile and Virgin Mobile Canada now offer prepaid wireless service at value retailer Dollarama Inc.s (Dollarama) more than 1,200 locations across Canada. The exclusive partnership enables budget-conscious Canadians to purchase a Lucky or Virgin Mobile prepaid SIM card at Dollarama and activate on their own mobile device with no activation fee. With talk and text plans starting at just $10 per month, Lucky Mobile has proven exceptionally popular with Canadians looking for low-cost wireless access, welcoming the most net new prepaid customers in 2018.
FINANCIAL PERFORMANCE ANALYSIS |
Q1 2019 PERFORMANCE HIGHLIGHTS
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MD&A |
Business segment analysis Bell Wireless |
BCE Inc. 2019 First Quarter Shareholder Report |
(1) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows: (A) 65,798 subscribers (19,195 postpaid and 46,603 prepaid), due to the completion of the shutdown of the CDMA network on April 30, 2019, (B) 49,095 prepaid subscribers as a result of a change to our deactivation policy, mainly from 120 days for Bell/Virgin Mobile and 150 days for Lucky Mobile to 90 days, (C) 43,670 postpaid subscribers relating to IoT due to the further refinement of our subscriber definition as a result of technology evolution, and (D) 9,366 postpaid fixed wireless Internet subscribers which were transferred to our retail high-speed Internet subscriber base. |
(2) | Our Q1 2018 blended ABPU was adjusted to exclude the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million. |
BELL WIRELESS RESULTS
REVENUES
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
External service revenues | 1,554 | 1,502 | 52 | 3.5 | % | ||||
Inter-segment service revenues | 12 | 12 | – | – | |||||
Total operating service revenues | 1,566 | 1,514 | 52 | 3.4 | % | ||||
External product revenues | 545 | 506 | 39 | 7.7 | % | ||||
Inter-segment product revenues | 1 | 1 | – | – | |||||
Total operating product revenues | 546 | 507 | 39 | 7.7 | % | ||||
Total Bell Wireless revenues | 2,112 | 2,021 | 91 | 4.5 | % |
Bell Wireless operating revenues increased by 4.5% in Q1 2019, compared to Q1 2018, due to both higher service and product revenues.
OPERATING COSTS AND ADJUSTED EBITDA
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Operating costs | (1,207 | ) | (1,210 | ) | 3 | 0.2 | % | ||
Adjusted EBITDA | 905 | 811 | 94 | 11.6 | % | ||||
Total adjusted EBITDA margin | 42.9 | % | 40.1 | % | 2.8 | pts |
Bell Wireless operating costs decreased by 0.2% in Q1 2019, compared to Q1 2018, as a result of:
These factors were partly offset by:
Bell Wireless adjusted EBITDA increased by 11.6% in Q1 2019, compared to the same period last year, due to the flow-through of revenue growth and lower operating expenses. Adjusted EBITDA margin, based on wireless operating revenues, of 42.9% improved by 2.8 pts in the current quarter, compared to 40.1% in Q1 2018, driven by the favourable impact from the adoption of IFRS 16 in 2019, the year-over-year favourability related to the 2018 CRTC retroactive decision on wholesale wireless domestic roaming rates, along with higher service revenue flow-through, partly offset by a greater proportion of low-margin product sales in our total revenue base.
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MD&A |
Business segment analysis Bell Wireless |
BCE Inc. 2019 First Quarter Shareholder Report |
BELL WIRELESS OPERATING METRICS
Q1 2019 | Q1 2018 | CHANGE | % CHANGE | ||||||
Blended ABPU ($/month) (1) | 67.35 | 66.56 | 0.79 | 1.2 | % | ||||
Gross activations | 410,301 | 404,790 | 5,511 | 1.4 | % | ||||
Postpaid | 320,558 | 347,319 | (26,761 | ) | (7.7 | %) | |||
Prepaid | 89,743 | 57,471 | 32,272 | 56.2 | % | ||||
Net activations (losses) | 38,282 | 44,377 | (6,095 | ) | (13.7 | %) | |||
Postpaid | 50,204 | 68,487 | (18,283 | ) | (26.7 | %) | |||
Prepaid | (11,922 | ) | (24,110 | ) | 12,188 | 50.6 | % | ||
Blended churn % (average per month) | 1.31 | % | 1.31 | % | – | ||||
Postpaid | 1.07 | % | 1.13 | % | 0.06 | pts | |||
Prepaid | 4.49 | % | 3.40 | % | (1.09 | ) pts | |||
Subscribers (2) | 9,480,835 | 9,195,048 | 285,787 | 3.1 | % | ||||
Postpaid (2) | 8,808,189 | 8,471,021 | 337,168 | 4.0 | % | ||||
Prepaid (2) | 672,646 | 724,027 | (51,381 | ) | (7.1 | %) |
(1) | Our Q1 2018 blended ABPU was adjusted to exclude the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million. |
(2) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows: (A) 65,798 subscribers (19,195 postpaid and 46,603 prepaid), due to the completion of the shutdown of the CDMA network on April 30, 2019, (B) 49,095 prepaid subscribers as a result of a change to our deactivation policy, mainly from 120 days for Bell/Virgin Mobile and 150 days for Lucky Mobile to 90 days, (C) 43,670 postpaid subscribers relating to IoT due to the further refinement of our subscriber definition as a result of technology evolution, and (D) 9,366 postpaid fixed wireless Internet subscribers which were transferred to our retail high-speed Internet subscriber base. |
Blended ABPU of $67.35 increased by 1.2% in Q1 2019, compared to the same period last year, driven by:
These factors were partly offset by:
Total gross wireless activations increased by 1.4% in Q1 2019, compared to the same period in 2018, due to higher prepaid gross activations offset in part by lower postpaid gross activations.
Blended wireless churn of 1.31% remained stable in Q1 2019, compared to Q1 2018.
Net activations decreased by 13.7% in the current quarter, compared to the same period in Q1 2018, due to lower net postpaid activations, partly offset by less prepaid net losses.
Wireless subscribers at March 31, 2019 totaled 9,480,835, an increase of 3.1% from 9,195,048 subscribers reported at the end of Q1 2018. This was comprised of 8,808,189 postpaid subscribers, an increase of 4.0% from Q1 2018, and 672,646 prepaid subscribers, a decline of 7.1% from Q1 2018. The proportion of Bell Wireless customers subscribing to our postpaid service increased by 1 pt year over year to 93% in Q1 2019.
At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows:
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MD&A |
Business segment analysis Bell Wireless |
BCE Inc. 2019 First Quarter Shareholder Report |
ASSUMPTIONS |
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3 |
MD&A |
Business segment analysis Bell Wireline |
BCE Inc. 2019 First Quarter Shareholder Report |
3.2 Bell Wireline |
EXPANSION OF WIRELESS HOME INTERNET SERVICE
Bell announced the continued expansion of its innovative Wireless Home Internet broadband service to more Ontario communities in Muskoka and Haliburton County, Quinte West and Hastings, Lennox and Addington, the Kawartha Lakes region and Northumberland, Prince Edward and Peterborough Counties. Bell Wireless Home Internet is designed to provide affordable broadband access to residents in smaller towns and unserved and underserved rural communities. The 5G-capable technology operates in the 3500 MHz spectrum band on Bell’s advanced LTE wireless network. Now available in more than 60 communities in Ontario and Québec, Bell’s Wireless Home Internet service is expected to reach more than 200,000 additional households in 138 centres this year.
FIBE TV APP AVAILABLE ON CHROMECAST
Bell continued to enhance its TV services with more ways to enjoy Fibe TV and Alt TV. In March 2019, we made the Fibe TV app available on Google Chromecast, which plugs into a TV’s high-definition multimedia interface port. Also available on Amazon Fire TV, Android TV and Apple TV, the Fibe TV app provides multiple options to bring Fibe TV and Alt TV to all screens.
BBM EXPANDS CLOUD SERVICES WITH GOOGLE
Bell Business Markets (BBM) and Google have
introduced new hybrid cloud connectivity for business customers to connect to
the Google Cloud Platform globally via direct fibre connections on Bells
private network. The new service joins the Bell Cloud Connect portfolio of cloud
and data centre solutions with partners including Amazon Web Services, IBM and
Microsoft.
FINANCIAL PERFORMANCE ANALYSIS |
(1) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
(2) | At the beginning of Q1 2019, our retail high-speed Internet subscriber base was increased by 9,366 subscribers due to the transfer of fixed wireless Internet subscribers from our wireless segment. |
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MD&A |
Business segment analysis Bell Wireline |
BCE Inc. 2019 First Quarter Shareholder Report |
REVENUES
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Data | 1,885 | 1,820 | 65 | 3.6 | % | ||||
Voice | 907 | 948 | (41 | ) | (4.3 | %) | |||
Other services | 59 | 63 | (4 | ) | (6.3 | %) | |||
Total external service revenues | 2,851 | 2,831 | 20 | 0.7 | % | ||||
Inter-segment service revenues | 69 | 58 | 11 | 19.0 | % | ||||
Total operating service revenues | 2,920 | 2,889 | 31 | 1.1 | % | ||||
Data | 133 | 104 | 29 | 27.9 | % | ||||
Equipment and other | 11 | 16 | (5 | ) | (31.3 | %) | |||
Total external product revenues | 144 | 120 | 24 | 20.0 | % | ||||
Inter-segment product revenues | – | – | – | – | |||||
Total operating product revenues | 144 | 120 | 24 | 20.0 | % | ||||
Total Bell Wireline revenues | 3,064 | 3,009 | 55 | 1.8 | % |
Bell Wireline operating revenues grew by 1.8% in Q1 2019, compared to last year, driven by both higher data services and product revenues, partly offset by lower voice and other services revenues.
Bell Wireline operating service revenues increased by 1.1% in Q1 2019, compared to prior year.
These factors were partly offset by:
- Increased acquisition, retention and bundle discounts on residential services due to aggressive offers from cable competitors
- The ongoing decline in our satellite TV subscriber base
- Continued legacy data erosion due in part to migrations to IP-based services
These factors were partly offset by:
- The flow-through of 2018 residential pricing changes
- Greater sales of international wholesale long distance minutes
Bell Wireline operating product revenues grew by 20.0% in Q1 2019, compared to Q1 2018, attributable to increased demand for equipment from the government sector.
OPERATING COSTS AND ADJUSTED EBITDA
Q1 2019 |
Q1 2018 | $ CHANGE | % CHANGE | ||||||
Operating costs | (1,725 | ) | (1,696 | ) | (29 | ) | (1.7 | %) | |
Adjusted EBITDA | 1,339 | 1,313 | 26 | 2.0 | % | ||||
Adjusted EBITDA margin | 43.7 | % | 43.6 | % | 0.1 | pts |
Bell Wireline operating costs increased by 1.7% in Q1 2019, compared to Q1 2018, due to:
These factors were partly offset by:
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MD&A |
Business segment analysis Bell Wireline |
BCE Inc. 2019 First Quarter Shareholder Report |
Bell Wireline adjusted EBITDA increased
by 2.0% in Q1 2019, compared to the same period last year, driven by
the flow-through of the revenue growth, moderated by higher operating
expenses. Adjusted EBITDA margin increased to 43.7% in Q1 2019, compared
to 43.6% achieved in Q1 2018 as a result of the favourable impact from
the adoption of IFRS 16 in 2019, partly offset by more low-margin
product sales in the total revenue base.
BELL WIRELINE OPERATING METRICS
DATA
Retail high-speed Internet
Q1 2019 | Q1 2018 | CHANGE | % CHANGE | ||||||
Retail net activations (1) | 22,671 | 18,156 | 4,515 | 24.9 | % | ||||
Retail subscribers (1)(2) | 3,442,411 | 3,311,931 | 130,480 | 3.9 | % |
(1) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet subscriber base reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
(2) | At the beginning of Q1 2019, our retail high-speed Internet subscriber base was increased by 9,366 subscribers due to the transfer of fixed wireless Internet subscribers from our wireless segment. |
Retail high-speed Internet subscriber net activations increased by 24.9% in Q1 2019, compared to last year, resulting from greater activations in our expanding fibre-to-the-premise (FTTP) and fixed wireless-to-the-home (WTTH) footprint, coupled with higher pull-through from our application-based live TV service Alt TV. This was partly offset by greater deactivations attributable to aggressive offers from cable competitors, along with a larger number of residential customers coming off promotional offers.
Retail high-speed Internet subscribers totaled 3,442,411 at March 31, 2019, up 3.9% from the end of Q1 of 2018. At the beginning of Q1 2019, our retail high-speed Internet subscriber base was increased by 9,366 subscribers due to the transfer of fixed wireless Internet subscribers from our wireless segment.
Retail TV
Q1 2019 | Q1 2018 | CHANGE | % CHANGE | ||||||
Retail net subscriber (losses) activations (1) | (1,560 | ) | (10,354 | ) | 8,794 | 84.9 | % | ||
IPTV | 20,916 | 13,573 | 7,343 | 54.1 | % | ||||
Satellite | (22,476 | ) | (23,927 | ) | 1,451 | 6.1 | % | ||
Total retail subscribers (1) | 2,764,851 | 2,734,498 | 30,353 | 1.1 | % | ||||
IPTV | 1,696,622 | 1,578,489 | 118,133 | 7.5 | % | ||||
Satellite | 1,068,229 | 1,156,009 | (87,780 | ) | (7.6 | %) |
(1) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our TV subscriber base reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
Retail IPTV net subscriber activations increased by 54.1% in Q1 2019, compared to last year, resulting from continued growth in activations from Alt TV and the benefit from the ongoing expansion of our FTTP footprint, which is enabling more competitive service bundles.
Retail satellite TV net customer losses improved by 6.1% in Q1 2019, compared to last year, driven by fewer deactivations, attributable to a more mature subscriber base geographically better-suited for satellite TV service, partly offset by lower gross activations due to aggressive cable offers in our non-FTTP footprint.
Total retail TV net subscriber losses (IPTV and satellite TV combined) improved by 84.9% in Q1 2019, compared to Q1 2018, due to higher IPTV net activations and fewer satellite TV net losses.
Retail IPTV subscribers at March 31, 2019 totaled 1,696,622, up 7.5% from 1,578,489 subscribers reported at the end of Q1 2018.
Retail satellite TV subscribers at March 31, 2019 totaled 1,068,229, down 7.6% from 1,156,009 subscribers at the end of the same period last year.
Total retail TV subscribers (IPTV and satellite TV combined) at March 31, 2019 were 2,764,851, representing a 1.1% increase since the end of Q1 2018.
VOICE
Q1 2019 | Q1 2018 | CHANGE | % CHANGE | ||||||
Retail residential NAS lines net losses (1) | (66,779 | ) | (56,071 | ) | (10,708 | ) | (19.1 | %) | |
Retail residential NAS lines (1) | 2,894,029 | 3,163,618 | (269,589 | ) | (8.5 | %) |
(1) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our residential NAS subscriber base reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
Retail residential NAS net losses increased by 19.1% in Q1 2019, compared to prior year, due to lower activations driven by continued wireless and Internet-based technology substitution, combined with fewer new activations as the market shifts its focus increasingly towards two-product Internet and TV service bundles. This was partly offset by lower customer deactivations reflecting a reduced number of customers coming off promotional offers.
Retail residential NAS subscribers at March 31, 2019 totaled 2,894,029, a 8.5% decline compared to the 3,163,618 subscribers reported at the end of Q1 2018. This represents a significant decline over the 5.8% subscriber base erosion experienced in Q1 2018, due to greater wireless and Internet-based technology substitution.
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MD&A |
Business segment analysis Bell Wireline |
BCE Inc. 2019 First Quarter Shareholder Report |
ASSUMPTIONS |
As at the date of this MD&A, our forward-looking statements set out in the BCE 2018 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.
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MD&A |
Business segment analysis Bell Media |
BCE Inc. 2019 First Quarter Shareholder Report |
3.3 Bell Media |
LAUNCH OF STARZ IN CANADA
On March 5, 2019, Bell Media officially launched STARZ in Canada, delivering a slate of the bold, diverse, and genre-bending programming that has already established the channel as one of the leading pay TV services in the United States. STARZ is now the Canadian home of all new STARZ original programming, select library titles, and classic films from all eras. STARZ is available across two linear TV channels (following the rebrand of Pay TV channel Encore as STARZ on March 1), the subscription video-on-demand platforms of participating TV providers, and via the STARZ streaming service which is available directly to all Canadians with access to the Internet as an add-on to Crave. The STARZ streaming service can be accessed via Crave.ca, the Crave app on iOS and Android, and Apple TV Generation 4, with additional platforms rolling out in the coming months.
LAUNCH OF DAY PASS SUBSCRIPTIONS TO TSN DIRECT AND RDS DIRECT
On March 4, 2019, TSN and RDS launched Day Pass subscriptions to their TSN Direct and RDS Direct streaming services. The all-new, single-day subscription option is the first of its kind in Canada, providing full access to TSN and RDS channels for 24 hours with no contract. Through their Month Pass or Day Pass subscriptions, viewers can watch on a multitude of platforms including computers, tablets, mobile devices, and Apple TV, with TSN Direct also available on Samsung SmartTV and Xbox One, and more platforms to be announced soon.
BELL MEDIA RECOGNIZED FOR EXCELLENCE IN PROGRAMMING
Bell Media and its production partners were honoured with 55 awards by the Academy of Canadian Cinema and Television at the recent annual Canadian Screen Awards, which recognizes excellence in Canadian film, TV and digital media productions. Overall, Bell Media was recognized with 34 awards in the TV and digital categories, more than any other private broadcaster, with wins in major categories including Best Limited Series for Cardinal, Best Direction – Comedy for Letterkenny, Best Reality/Competition Program or Series for The Amazing Race Canada and Best National Newscast for CTV National News with Lisa LaFlamme. TSN once again won more awards than all other sports broadcasters combined, scoring seven wins in the eight categories they were nominated in, including Best Sports Host for James Duthie and Best Play-By-Play Announcer for Chris Cuthbert. Bell Media-supported films won 21 awards, including Best Motion Picture and Performance by an Actress in a Leading Role.
FINANCIAL PERFORMANCE ANALYSIS |
REVENUES
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Total external revenues | 640 | 631 | 9 | 1.4 | % | ||||
Inter-segment revenues | 105 | 118 | (13 | ) | (11.0 | %) | |||
Total Bell Media revenues | 745 | 749 | (4 | ) | (0.5 | %) |
These factors were partly offset by:
- Higher specialty TV advertising revenues mainly from entertainment and news specialty
- The recapture of advertising dollars following the shift last year to the principal broadcaster of the PyeongChang 2018 Winter Olympics
These factors were largely offset by a decline in specialty and pay TV subscribers.
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MD&A |
Business segment analysis Bell Media |
BCE Inc. 2019 First Quarter Shareholder Report |
OPERATING COSTS AND ADJUSTED EBITDA
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Operating costs | (580 | ) | (619 | ) | 39 | 6.3 | % | ||
Adjusted EBITDA | 165 | 130 | 35 | 26.9 | % | ||||
Adjusted EBITDA margin | 22.1 | % | 17.4 | % | 4.7 | pts |
Bell Media adjusted EBITDA increased by 26.9% in Q1 2019, compared to Q1 2018, as the lower operating expenses more than offset the decline in operating revenues.
BELL MEDIA OPERATING METRICS
ASSUMPTIONS |
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4 |
MD&A | Financial and capital management |
BCE Inc. 2019 First Quarter Shareholder Report |
4 Financial and capital management |
4.1 Net debt (1) |
MARCH 31, 2019 | DECEMBER 31, 2018 | $ CHANGE | % CHANGE | ||||||
Debt due within one year | 5,485 | 4,645 | 840 | 18.1 | % | ||||
Long-term debt | 22,016 | 19,760 | 2,256 | 11.4 | % | ||||
Preferred shares (2) | 2,002 | 2,002 | – | – | |||||
Cash and cash equivalents | (668 | ) | (425 | ) | (243 | ) | (57.2 | %) | |
Net debt | 28,835 | 25,982 | 2,853 | 11.0 | % |
The increase in cash and cash equivalents of $243 million was due mainly to:
Partly offset by:
On March 31, 2019, our net debt leverage ratio(1) was 2.98 times adjusted EBITDA. The increase reflects a one-time increase due to the adoption of IFRS 16 which increased net debt by $2,304 million on January 1, 2019. The net debt leverage ratio is expected to improve through the end of 2019 as the trailing twelve-month adjusted EBITDA will reflect the full positive impact of higher adjusted EBITDA under IFRS 16.
4.2 Outstanding share data |
COMMON SHARES OUTSTANDING | NUMBER OF SHARES | ||
Outstanding, January 1, 2019 | 898,200,415 | ||
Shares issued under employee stock option plan | 389,543 | ||
Shares issued under employee savings plan (ESP) | 185,139 | ||
Outstanding, March 31, 2019 | 898,775,097 |
STOCK OPTIONS OUTSTANDING | NUMBER OF OPTIONS | WEIGHTED AVERAGE EXERCISE PRICE ($) | |||
Outstanding, January 1, 2019 | 14,072,332 | 56 | |||
Granted | 3,343,317 | 58 | |||
Exercised (3) | (389,543 | ) | 48 | ||
Forfeited | (33,613 | ) | 58 | ||
Outstanding, March 31, 2019 | 16,992,493 | 57 | |||
Exercisable, March 31, 2019 | 6,817,960 | 55 |
(1) | Net debt and net debt leverage ratio are non-GAAP financial measures and do not have a standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Net debt and Net debt leverage ratio in this MD&A for more details including reconciliations to the most comparable IFRS financial measure. |
(2) | 50% of outstanding preferred shares of $4,004 million in 2019 and 2018 are classified as debt consistent with the treatment by some credit rating agencies. |
(3) | The weighted average share price for options exercised during the three months ended March 31, 2019 was $58. |
20 | |||
4 |
MD&A | Financial and capital management |
BCE Inc. 2019 First Quarter Shareholder Report |
4.3 Cash flows |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Cash flows from operating activities | 1,516 | 1,496 | 20 | 1.3 | % | ||||
Capital expenditures | (850 | ) | (931 | ) | 81 | 8.7 | % | ||
Cash dividends paid on preferred shares | (26 | ) | (33 | ) | 7 | 21.2 | % | ||
Cash dividends paid by subsidiaries to non-controlling interest | (27 | ) | (13 | ) | (14 | ) | n.m. | ||
Acquisition and other costs paid | 29 | 18 | 11 | 61.1 | % | ||||
Free cash flow | 642 | 537 | 105 | 19.6 | % | ||||
Business acquisitions | – | (223 | ) | 223 | 100.0 | % | |||
Acquisition and other costs paid | (29 | ) | (18 | ) | (11 | ) | (61.1 | %) | |
Acquisition of spectrum licences | – | (36 | ) | 36 | 100.0 | % | |||
Disposition of intangibles and other assets | – | 68 | (68 | ) | (100.0 | %) | |||
Other investing activities | (24 | ) | (35 | ) | 11 | 31.4 | % | ||
Net issuance of debt instruments | 394 | 1,236 | (842 | ) | (68.1 | %) | |||
Issue of common shares | 20 | 1 | 19 | n.m. | |||||
Repurchase of common shares | – | (175 | ) | 175 | 100.0 | % | |||
Purchase of shares for settlement of share-based payments | (76 | ) | (88 | ) | 12 | 13.6 | % | ||
Cash dividends paid on common shares | (678 | ) | (646 | ) | (32 | ) | (5.0 | %) | |
Return of capital to non-controlling interest | – | (29 | ) | 29 | 100.0 | % | |||
Other financing activities | (6 | ) | (18 | ) | 12 | 66.7 | % | ||
Net increase in cash and cash equivalents | 243 | 574 | (331 | ) | (57.7 | %) |
n.m.: not meaningful |
CASH FLOWS FROM OPERATING ACTIVITIES AND FREE CASH FLOW |
Free cash flow in the first quarter of 2019 increased by $105 million compared to the same period last year, mainly due to higher cash flows from operating activities, excluding acquisition and other costs paid, and lower capital expenditures.
CAPITAL EXPENDITURES |
Q1 2019 | Q1 2018 | $ CHANGE | % CHANGE | ||||||
Bell Wireless | 151 | 167 | 16 | 9.6 | % | ||||
Capital intensity ratio | 7.1 | % | 8.3 | % | 1.2 | pts | |||
Bell Wireline | 674 | 744 | 70 | 9.4 | % | ||||
Capital intensity ratio | 22.0 | % | 24.7 | % | 2.7 | pts | |||
Bell Media | 25 | 20 | (5 | ) | (25.0 | %) | |||
Capital intensity ratio | 3.4 | % | 2.7 | % | (0.7 | ) pts | |||
BCE | 850 | 931 | 81 | 8.7 | % | ||||
Capital intensity ratio | 14.8 | % | 16.7 | % | 1.9 | pts |
21 |
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4 |
MD&A | Financial and capital management |
BCE Inc. 2019 First Quarter Shareholder Report |
BUSINESS ACQUISITIONS |
DISPOSITION OF INTANGIBLE AND OTHER ASSETS |
DEBT INSTRUMENTS |
In the first quarter of 2019, we issued $394 million of debt, net of repayments. This included the issuances (net of repayments) of $567 million of notes payable, partly offset by net payments of leases and other debt of $173 million.
2018
In the first quarter of 2018, we issued
$1,236 million of debt, net of repayments. This included the issuances
of Series M-47 MTN debentures and Series US-1 Notes at Bell Canada with
total principal amounts of $500 million and US $750 million (CAD $967
million), respectively. These issuances were partly offset by the
repayments (net of issuances) of $57 million of notes payable and
payments of finance leases and other debt of $174 million.
REPURCHASE OF COMMON SHARES |
CASH DIVIDENDS PAID ON COMMON SHARES |
4.4 Post-employment benefit plans |
For the three months ended March 31, 2018, we recorded an increase in our post-employment benefit obligations and a loss, before taxes, in OCI of $154 million. This was due to a lower-than-expected return on plan assets. The discount rate at March 31, 2018 was 3.6%, unchanged from December 31, 2017.
4.5 Financial risk management |
FAIR VALUE |
MARCH 31, 2019 | DECEMBER 31, 2018 | ||||||||||
CARRYING | FAIR | CARRYING | FAIR | ||||||||
CLASSIFICATION | FAIR VALUE METHODOLOGY | VALUE | VALUE | VALUE | VALUE | ||||||
CRTC tangible benefits obligation | Trade payables and other liabilities and non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 51 | 51 |
| 61 |
| 61 |
| ||
CRTC deferral account obligation | Trade payables and other liabilities and non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 84 |
| 88 |
| 108 |
| 112 |
| |
Debt securities and other debt | Debt due within one year and long-term debt | Quoted market price of debt | 18,165 | 19,956 | 18,188 | 19,178 | |||||
Finance leases (1) | Debt due within one year and long-term debt | Present value of future cash flows discounted using observable market interest rates | – | – | 2,097 | 2,304 |
(1) | Upon adoption of IFRS 16 on January 1, 2019, fair value disclosures are no longer required for leases. |
22 | |||
4 |
MD&A | Financial and capital management |
BCE Inc. 2019 First Quarter Shareholder Report |
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
CLASSIFICATION |
CARRYING VALUE OF ASSET (LIABILITY) |
FAIR VALUE |
|||||||
QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |
OBSERVABLE MARKET DATA (LEVEL 2)(1) |
NON-OBSERVABLE MARKET INPUTS (LEVEL 3)(2) |
|||||||
March 31, 2019 |
|
||||||||
Publicly-traded and privately-held investments(3) |
Other non-current assets |
111 |
|
2 |
|
– |
|
109 |
|
Derivative financial instruments |
Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
81 |
|
– |
|
81 |
|
– |
|
Maple Leaf Sports & Entertainment Ltd. (MLSE) financial liability(4) |
Trade payables and other liabilities |
(135 |
) |
– |
|
– |
|
(135 |
) |
Other |
Other non-current assets and liabilities |
46 | – | 117 | (71 | ) | |||
December 31, 2018 |
|
||||||||
Publicly-traded and privately-held investments(3) |
Other non-current assets |
110 |
|
1 |
|
– |
|
109 |
|
Derivative financial instruments |
Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
181 |
|
– |
|
181 |
|
– |
|
MLSE financial liability(4) |
Trade payables and other liabilities |
(135 |
) |
– |
|
– |
|
(135 |
) |
Other |
Other non-current assets and liabilities |
43 | – | 114 | (71 | ) |
(1) | Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
(2) | Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 financial instruments. |
(3) | Unrealized gains and losses are recorded in OCI and impairment charges are recorded in Other income (expense) in the income statements. |
(4) | Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust Fund exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recorded in Other income (expense) in the income statements. The option has been exercisable since 2017. |
CURRENCY EXPOSURES |
We use forward contracts, options and cross currency basis swaps to manage foreign currency risk related to anticipated purchases and sales and certain foreign currency debt.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a loss (gain) of $7 million ($2 million) recognized in net earnings at March 31, 2019 and a gain (loss) of $134 million ($126 million) recognized in Other comprehensive loss at March 31, 2019, with all other variables held constant.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the Philippines Peso would result in a gain (loss) of $4 million in Other comprehensive loss at March 31, 2019, with all other variables held constant.
The following table provides further details on our outstanding foreign currency forward contracts and options as at March 31, 2019.
|
AMOUNT |
|
AMOUNT |
|
|
|
TYPE OF HEDGE |
BUY CURRENCY |
TO RECEIVE |
SELL CURRENCY |
TO PAY |
MATURITY |
HEDGED ITEM |
Cash flow |
USD |
2,754 |
CAD |
3,653 |
2019 |
Commercial paper |
Cash flow |
USD |
589 |
CAD |
732 |
2019 |
Anticipated transactions |
Cash flow |
PHP |
1,303 |
CAD |
32 |
2019 |
Anticipated transactions |
Cash flow |
PHP |
932 |
CAD |
23 |
2020 |
Anticipated transactions |
Cash flow |
USD |
362 |
CAD |
462 |
2020-2021 |
Anticipated transactions |
Economic |
USD |
90 |
CAD |
114 |
2019 |
Anticipated transactions |
Economic – put options |
USD |
45 |
CAD |
56 |
2019 |
Anticipated transactions |
Economic – put options | USD | 81 | CAD | 101 | 2020 |
Anticipated transactions |
Economic – call options |
USD |
48 |
CAD |
60 |
2020 |
Anticipated transactions |
23 |
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4 |
MD&A | Financial and capital management |
BCE Inc. 2019 First Quarter Shareholder Report |
INTEREST RATE EXPOSURES |
EQUITY PRICE EXPOSURES |
A 5% increase (decrease) in the market price of BCE’s common shares at March 31, 2019 would result in a gain (loss) of $38 million recognized in net earnings, with all other variables held constant.
4.6 Credit ratings |
4.7 Liquidity |
LITIGATION
RECENT DEVELOPMENTS IN LEGAL PROCEEDINGS
The following is an update to the legal proceedings described in the BCE 2018 AIF under section 8, Legal proceedings.
PURPORTED CLASS ACTION CONCERNING CELLULAR USAGE AND HEALTH RISK
On February 22, 2019, a group of defendants including Bell Mobility Inc. filed an application in the Supreme Court of British Columbia to dismiss the action on the basis that it is an abuse of process, and alternatively for want of prosecution. On March 19, 2019, the plaintiff formally brought an end to the action with the filing of a Notice of Discontinuance in relation to the totality of the claims. Accordingly, this legal proceeding is now concluded.
24 | |||
5 |
MD&A | Quarterly financial information |
BCE Inc. 2019 First Quarter Shareholder Report |
5 Quarterly financial information |
BCE’s Q1 2019 Financial Statements were prepared in accordance with IFRS, as issued by the International Accounting Standards Board (IASB), under IAS 34, Interim Financial Reporting and were approved by BCE’s board of directors on May 1, 2019.
As required, we adopted IFRS 16 – Leases effective January 1, 2019, as described in section 8.1, Our accounting policies. We adopted IFRS 16 using a modified retrospective approach whereby the financial statements of prior periods presented were not restated and continue to be reported under IAS 17 – Leases, as permitted by the specific transition provisions of IFRS 16. The cumulative effect of the initial adoption of IFRS 16 was reflected as an adjustment to the deficit at January 1, 2019.
The following table, which was also prepared in accordance with IFRS, shows selected consolidated financial data of BCE for the eight most recent completed quarters.
2019 |
2018 | 2017 | |||||||||||||||
Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | ||||||||||
Operating revenues | |||||||||||||||||
Service | 5,045 | 5,231 | 5,117 | 5,129 | 4,964 | 5,152 | 5,054 | 5,078 | |||||||||
Product | 689 | 984 | 760 | 657 | 626 | 884 | 643 | 610 | |||||||||
Total operating revenues | 5,734 | 6,215 | 5,877 | 5,786 | 5,590 | 6,036 | 5,697 | 5,688 | |||||||||
Adjusted EBITDA | 2,409 | 2,394 | 2,457 | 2,430 | 2,254 | 2,329 | 2,405 | 2,382 | |||||||||
Severance, acquisition and other costs | (24 | ) | (58 | ) | (54 | ) | (24 | ) | – | (47 | ) | (23 | ) | (36 | ) | ||
Depreciation | (882 | ) | (799 | ) | (779 | ) | (787 | ) | (780 | ) | (783 | ) | (760 | ) | (767 | ) | |
Amortization | (221 | ) | (216 | ) | (220 | ) | (221 | ) | (212 | ) | (208 | ) | (207 | ) | (210 | ) | |
Net earnings | 791 | 642 | 867 | 755 | 709 | 698 | 850 | 814 | |||||||||
Net earnings attributable to common shareholders | 740 | 606 | 814 | 704 | 661 | 656 | 803 | 765 | |||||||||
Net earnings per common share | |||||||||||||||||
Basic and diluted | 0.82 | 0.68 | 0.90 | 0.79 | 0.73 | 0.72 | 0.90 | 0.85 | |||||||||
Weighted average number of common shares outstanding – basic (millions) | 898.4 | 898.1 | 898.0 | 898.0 | 900.2 | 900.6 | 900.4 | 900.1 |
25 |
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6 |
MD&A | Regulatory environment |
BCE Inc. 2019 First Quarter Shareholder Report |
6 Regulatory environment |
RADIOCOMMUNICATION ACT |
Bell decided not to acquire any 600 MHz low-band wireless spectrum in the recently concluded spectrum auction by ISED. Bell has spectrum assets in the low, mid and high frequency bands in both urban and rural locations. Given the supply of other low-band spectrum that Bell already possesses, spectrum in the 600 MHz band is not required for Bell to deliver broadband 4G and 5G services. Similar to Bell, the company’s main U.S. peers chose not to own any 600 MHz spectrum in their markets. Bell’s existing low-band spectrum, combined with network enhancements like cell splitting, enables the company to deliver mobile broadband service for significantly less capital than buying 600 MHz spectrum.
26 | |||
7 |
MD&A | Business risks |
BCE Inc. 2019 First Quarter Shareholder Report |
7 Business risks |
The actual effect of any event could be materially different from what we currently anticipate. The risks described in this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our financial position, financial performance, cash flows, business or reputation.
In the BCE 2018 Annual MD&A, we provided a detailed review of risks that could affect our financial position, financial performance, cash flows, business or reputation and that could cause actual results or events to differ materially from our expectations expressed in or implied by our forward-looking statements. This detailed description of risks is updated in this MD&A. The risks described in the BCE 2018 Annual MD&A, as updated in this MD&A, include, without limitation, risks associated with:
27 |
|||
7 |
MD&A | Business risks |
BCE Inc. 2019 First Quarter Shareholder Report |
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results.
Please see section 9, Business risks of the BCE 2018 Annual MD&A for a more complete description of the above-mentioned and other risks, which section, and the other sections of the BCE 2018 Annual MD&A referred to therein, are incorporated by reference in this section 7.
In addition, please also see section 4.7, Liquidity – Litigation in this MD&A for an update to the legal proceedings described in the BCE 2018 AIF, which section 4.7 is incorporated by reference in this section 7. Please also see section 6, Regulatory environment in this MD&A for an update to the regulatory initiatives and proceedings described in the BCE 2018 Annual MD&A, which section 6 is incorporated by reference in this section 7.
Except for the updates set out in section 4.7, Liquidity – Litigation and in section 6, Regulatory environment in this MD&A, the risks described in the BCE 2018 Annual MD&A remain substantially unchanged.
28 | |||
8 |
MD&A | Accounting policies, financial measures and controls |
BCE Inc. 2019 First Quarter Shareholder Report |
8 Accounting policies, financial measures and controls |
8.1 Our accounting policies |
ADOPTION OF NEW ACCOUNTING STANDARDS |
As required, we adopted IFRS 16 – Leases effective January 1, 2019. We adopted IFRS 16 using a modified retrospective approach whereby the financial statements of prior periods presented were not restated and continue to be reported under IAS 17 – Leases, as permitted by the specific transition provisions of IFRS 16. The cumulative effect of the initial adoption of IFRS 16 was reflected as an adjustment to the deficit at January 1, 2019.
Under IAS 17, leases of property, plant and equipment were recognized as finance leases when we obtained substantially all the risks and rewards of ownership of the underlying assets. All other leases were classified as operating leases. IFRS 16 eliminates the distinction between operating and finance leases for lessees, requiring instead that we recognize a right-of-use asset and a lease liability at lease commencement for all leases, with certain exceptions permitted through elections and practical expedients. Accounting for leases previously classified as finance leases and lessor accounting remains largely unchanged under IFRS 16.
We recognized lease liabilities at January 1, 2019 for leases previously classified as operating leases, measured at the present value of lease payments using our incremental borrowing rate at that date. Property, plant and equipment includes the corresponding right-of-use assets also recognized at January 1, 2019. The right-of-use assets were generally measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as at December 31, 2018. In certain cases, the right-of-use assets were measured as though IFRS 16 had been applied since the lease commencement date. A depreciation charge for right-of-use assets is recorded in Depreciation and an interest expense on lease liabilities is recorded in Finance costs in the income statement.
As permitted by IFRS 16, we elected not to recognize lease liabilities and right-of-use assets for short-term leases and leases of low value assets, which will continue to be expensed on a straight-line basis over the lease term. We have also applied certain practical expedients to facilitate the initial adoption and ongoing application of IFRS 16:
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8 |
MD&A | Accounting policies, financial measures and controls |
BCE Inc. 2019 First Quarter Shareholder Report |
ADOPTION OF IFRS 16 |
Upon adoption of IFRS 16 on January 1, 2019, we recognized right-of-use assets of $2,257 million within property, plant and equipment, and lease liabilities of $2,304 million within debt, with an increase to our deficit of $19 million. These amounts were recognized in addition to assets under finance leases of $1,947 million and the corresponding finance lease liabilities of $2,097 million at December 31, 2018 under IAS 17. As a result, on January 1, 2019, our total right-of-use assets and lease liabilities amounted to $4,204 million and $4,401 million, respectively. The table below shows the impacts of adopting IFRS 16 on our January 1, 2019 consolidated statement of financial position.
DECEMBER 31, 2018 AS REPORTED | IFRS 16 IMPACTS | JANUARY 1, 2019 UPON ADOPTION OF IFRS 16 | |||||
Prepaid expenses | 244 | (55 | ) | 189 | |||
Other current assets | 329 | 9 | 338 | ||||
Property, plant and equipment | 24,844 | 2,257 | 27,101 | ||||
Other non-current assets | 847 | 17 | 864 | ||||
Trade payables and other liabilities | 3,941 | (10 | ) | 3,931 | |||
Debt due within one year | 4,645 | 293 | 4,938 | ||||
Long-term debt | 19,760 | 2,011 | 21,771 | ||||
Deferred tax liabilities | 3,163 | (7 | ) | 3,156 | |||
Other non-current liabilities | 997 | (39 | ) | 958 | |||
Deficit | (4,937 | ) | (19 | ) | (4,956 | ) | |
Non-controlling interest | 326 | (1 | ) | 325 |
SIGNIFICANT ACCOUNTING POLICIES – LEASES
The following accounting policy applies as of January 1, 2019 following the adoption of IFRS 16. Prior to January 1, 2019, we continued to apply IAS 17 as disclosed in our 2018 annual consolidated financial statements, as permitted by the specific transition provisions of IFRS 16.
We enter into leases for network infrastructure and equipment, land and buildings in the normal course of business. Lease contracts are typically made for fixed periods but may include purchase, renewal or termination options. Leases are negotiated on an individual basis and contain a wide range of different terms and conditions.
We assess whether a contract contains a lease at inception of the contract. A lease contract conveys the right to control the use of an identified asset for a period in exchange for consideration. We recognize lease liabilities with corresponding right-of-use assets for all lease agreements, except for short-term leases and leases of low value assets, which are expensed on a straight-line basis over the lease term. Consideration in a contract is allocated to lease and non-lease components on a relative stand-alone value basis. We generally account for lease components and any associated non-lease components as a single lease component.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using our incremental borrowing rate, unless the rate implicit in the lease is readily determinable. We apply a single incremental borrowing rate to a portfolio of leases with similar characteristics. Lease payments included in the measurement of the lease liability comprise:
Lease liabilities are subsequently measured at amortized cost using the effective interest method. Lease liabilities are remeasured, with a corresponding adjustment to the related right-of-use assets, when there is a change in variable lease payments arising from a change in an index or rate, or when we change our assessment of whether purchase, renewal or termination options will be exercised.
Right-of-use assets are measured at cost, comprised of the initial measurement of the corresponding lease liabilities, lease payments made at or before the commencement date and any initial direct costs. They are subsequently depreciated on a straight-line basis and reduced by impairment losses, if any. Right-of-use assets may also be adjusted to reflect the remeasurement of related lease liabilities. If we obtain ownership of the leased asset by the end of the lease term or the cost of the right-of-use asset reflects the exercise of a purchase option, we depreciate the right-of-use asset from the lease commencement date to the end of the useful life of the underlying asset. Otherwise, we depreciate the right-of-use asset from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term.
Variable lease payments that do not depend on an index or rate are not included in the measurement of lease liabilities and right-of-use assets. The related payments are expensed in Operating costs in the period in which the event or condition that triggers those payments occurs.
30 | |||
8 |
MD&A | Accounting policies, financial measures and controls |
BCE Inc. 2019 First Quarter Shareholder Report |
ESTIMATES AND KEY JUDGMENTS |
The application of IFRS 16 requires BCE to make judgments and estimates that affect the measurement of right-of-use assets and liabilities. In determining the lease term, we must consider all facts and circumstances that create an economic incentive to exercise renewal options (or not exercise termination options). Assessing whether a contract includes a lease also requires judgment. Estimates are required to determine the appropriate discount rate used to measure lease liabilities.
8.2 Non-GAAP financial measures and key performance indicators (KPIs) |
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN |
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 5, Segmented information, in BCE’s Q1 2019 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 is also 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.
Q1 2019 | Q1 2018 | ||||
Net earnings | 791 | 709 | |||
Severance, acquisition and other costs | 24 | – | |||
Depreciation | 882 | 780 | |||
Amortization | 221 | 212 | |||
Finance costs | |||||
Interest expense | 283 | 240 | |||
Interest on post-employment benefit obligations | 16 | 17 | |||
Other (income) expense | (101 | ) | 61 | ||
Income taxes | 293 | 235 | |||
Adjusted EBITDA | 2,409 | 2,254 | |||
BCE operating revenues | 5,734 | 5,590 | |||
Adjusted EBITDA margin | 42.0 | % | 40.3 | % |
ADJUSTED NET EARNINGS AND ADJUSTED EPS |
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest (NCI). 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 mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, 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.
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8 |
MD&A | Accounting policies, financial measures and controls |
BCE Inc. 2019 First Quarter Shareholder Report |
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.
Q1 2019 | Q1 2018 | ||||||||
TOTAL | PER SHARE | TOTAL | PER SHARE | ||||||
Net earnings attributable to common shareholders | 740 | 0.82 | 661 | 0.73 | |||||
Severance, acquisition and other costs | 18 | 0.02 | (1 | ) | – | ||||
Net mark-to-market (gains) losses on derivatives used to economically hedge equity settled share-based compensation plans | (73 | ) | (0.07 | ) | 56 | 0.07 | |||
Net losses on investments | 4 | – | – | – | |||||
Impairment charges | 3 | – | 3 | – | |||||
Adjusted net earnings | 692 | 0.77 | 719 | 0.80 |
FREE CASH FLOW AND DIVIDEND PAYOUT RATIO |
We define free cash flow as cash flows from operating activities, excluding acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude acquisition and other costs paid and voluntary pension funding 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.
We consider free cash flow to be an important indicator of the financial strength and performance of our businesses because it shows how much cash is available to pay dividends on common shares, 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 and to evaluate the financial strength and performance of our businesses. The most comparable IFRS financial measure is cash flows from operating activities.
We define dividend payout ratio as dividends paid on common shares divided by free cash flow. We consider dividend payout ratio to be an important indicator of the financial strength and performance of our businesses because it shows the sustainability of the company’s dividend payments.
The following table is a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis.
Q1 2019 | Q1 2018 | ||||
Cash flows from operating activities | 1,516 | 1,496 | |||
Capital expenditures | (850 | ) | (931 | ) | |
Cash dividends paid on preferred shares | (26 | ) | (33 | ) | |
Cash dividends paid by subsidiaries to NCI | (27 | ) | (13 | ) | |
Acquisition and other costs paid | 29 | 18 | |||
Free cash flow | 642 | 537 |
NET DEBT |
We define net debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash and cash equivalents, as shown in BCE’s consolidated statements of financial position. We include 50% of outstanding preferred shares in our net debt as it is consistent with the treatment by certain credit rating agencies.
We consider net debt to be an important indicator of the company’s financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use net debt to determine a company’s financial leverage.
Net debt has no directly comparable IFRS financial measure, but rather is calculated using several asset and liability categories from the statements of financial position, as shown in the following table.
MARCH 31, 2019 | DECEMBER 31, 2018 | ||||
Debt due within one year | 5,485 | 4,645 | |||
Long-term debt | 22,016 | 19,760 | |||
50% of outstanding preferred shares | 2,002 | 2,002 | |||
Cash and cash equivalents | (668 | ) | (425 | ) | |
Net debt | 28,835 | 25,982 |
32 | |||
8 |
MD&A | Accounting policies, financial measures and controls |
BCE Inc. 2019 First Quarter Shareholder Report |
NET DEBT LEVERAGE RATIO |
The net debt leverage ratio represents
net debt divided by adjusted EBITDA. For the purposes of calculating our
net debt leverage ratio, adjusted EBITDA is twelve-month trailing
adjusted EBITDA.
ADJUSTED EBITDA TO NET INTEREST EXPENSE RATIO |
The adjusted EBITDA to net interest expense ratio represents adjusted EBITDA divided by net interest expense. For the purposes of calculating our adjusted EBITDA to net interest expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA. Net interest expense is twelve-month trailing net interest expense as shown in our statements of cash flows, plus 50% of declared preferred share dividends as shown in our income statements.
KPIs |
KPI |
DEFINITION |
ABPU |
Average billing per user (ABPU) or subscriber approximates the average amount billed to customers on a monthly basis, which is used to track our recurring billing streams. Wireless blended ABPU is calculated by dividing certain customer billings by the average subscriber base for the specified period and is expressed as a dollar unit per month. |
Capital intensity |
Capital expenditures divided by operating revenues. |
Churn |
Churn is the rate at which existing subscribers cancel their services. It is a measure of our ability to retain our customers. Wireless churn is calculated by dividing the number of deactivations during a given period by the average number of subscribers in the base for the specified period and is expressed as a percentage per month. |
Subscriber unit |
Wireless subscriber unit is comprised of an active revenue-generating unit (e.g. mobile device, tablet or wireless Internet products), with a unique identifier (typically International Mobile Equipment Identity (IMEI) number), that has access to our wireless networks. We report wireless subscriber units in two categories: postpaid and prepaid. Prepaid subscriber units are considered active for a period of 90 days (previously 120 to 150 days) following the expiry of the subscriber’s prepaid balance.
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet, satellite TV, IPTV, and/or NAS. A subscriber is included in our subscriber base when the service has been installed and is operational at the customer premise and a billing relationship has been established.
|
8.3 Controls and procedures |
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes were made in our internal control over financial reporting during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The adoption of IFRS 16, Leases, effective January 1, 2019, required the implementation of new accounting systems and processes, which changed the company’s internal controls over lease recognition. We continue to review the design of these controls and do not expect significant changes to our internal control over financial reporting due to the adoption of the new standard in 2019.
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Consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Consolidated financial statements |
Consolidated income statements |
FOR THE PERIOD ENDED (IN MILLIONS OF CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS) (UNAUDITED) | NOTE | MARCH 31, 2019 | MARCH 31, 2018 | ||||
Operating revenues | 5 | 5,734 | 5,590 | ||||
Operating costs | 5, 6 | (3,325 | ) | (3,336 | ) | ||
Severance, acquisition and other costs | 7 | (24 | ) | – | |||
Depreciation | (882 | ) | (780 | ) | |||
Amortization | (221 | ) | (212 | ) | |||
Finance costs | |||||||
Interest expense | (283 | ) | (240 | ) | |||
Interest on post-employment benefit obligations | 10 | (16 | ) | (17 | ) | ||
Other income (expense) | 8 | 101 | (61 | ) | |||
Income taxes | (293 | ) | (235 | ) | |||
Net earnings | 791 | 709 | |||||
Net earnings attributable to: | |||||||
Common shareholders | 740 | 661 | |||||
Preferred shareholders | 38 | 36 | |||||
Non-controlling interest | 13 | 12 | |||||
Net earnings | 791 | 709 | |||||
Net earnings per common share – basic and diluted | 9 | 0.82 | 0.73 | ||||
Weighted average number of common shares outstanding – basic (millions) | 898.4 | 900.2 |
34 | |||
Consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Consolidated statements of comprehensive income |
FOR THE PERIOD ENDED (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | MARCH 31, 2019 | MARCH 31, 2018 | |||
Net earnings | 791 | 709 | |||
Other comprehensive loss, net of income taxes | |||||
Items that will be subsequently reclassified to net earnings | |||||
Net change in value of derivatives designated as cash flow hedges, net of income taxes of $20 million and ($3) million for the three months ended March 31, 2019 and 2018, respectively | (54 | ) | 7 | ||
Items that will not be reclassified to net earnings | |||||
Actuarial losses on post-employment benefit plans, net of income taxes of $34 million and $42 million for the three months ended March 31, 2019 and 2018, respectively (1) | (93 | ) | (112 | ) | |
Net change in value of derivatives designated as cash flow hedges, net of income taxes of $4 million and ($7) million for the three months ended March 31, 2019 and 2018, respectively | (12 | ) | 19 | ||
Other comprehensive loss | (159 | ) | (86 | ) | |
Total comprehensive income | 632 | 623 | |||
Total comprehensive income attributable to: | |||||
Common shareholders | 583 | 574 | |||
Preferred shareholders | 38 | 36 | |||
Non-controlling interest |
| 11 | 13 | ||
Total comprehensive income | 632 | 623 |
(1) | The discount rate used to value our post-employment benefit obligations at March 31, 2019 was 3.3% compared to 3.8% at December 31, 2018. The discount rate used to value our post-employment benefit obligations at March 31, 2018 and at December 31, 2017 was 3.6%. |
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Consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Consolidated statements of financial position |
(IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | NOTE | MARCH 31, 2019 | DECEMBER 31, 2018 | ||||
ASSETS | |||||||
Current assets | |||||||
Cash | 546 | 425 | |||||
Cash equivalents | 122 | – | |||||
Trade and other receivables | 2,937 | 3,006 | |||||
Inventory | 472 | 432 | |||||
Contract assets | 978 | 987 | |||||
Contract costs | 383 | 370 | |||||
Prepaid expenses | 350 | 244 | |||||
Other current assets | 246 | 329 | |||||
Total current assets | 6,034 | 5,793 | |||||
Non-current assets | |||||||
Contract assets | 477 | 506 | |||||
Contract costs | 331 | 337 | |||||
Property, plant and equipment | 27,276 | 24,844 | |||||
Intangible assets | 13,269 | 13,205 | |||||
Deferred tax assets | 129 | 112 | |||||
Investments in associates and joint ventures | 803 | 798 | |||||
Other non-current assets | 864 | 847 | |||||
Goodwill | 4 | 10,657 | 10,658 | ||||
Total non-current assets | 53,806 | 51,307 | |||||
Total assets | 59,840 | 57,100 | |||||
LIABILITIES | |||||||
Current liabilities | |||||||
Trade payables and other liabilities | 3,610 | 3,941 | |||||
Contract liabilities | 733 | 703 | |||||
Interest payable | 203 | 196 | |||||
Dividends payable | 735 | 691 | |||||
Current tax liabilities | 218 | 253 | |||||
Debt due within one year | 5,485 | 4,645 | |||||
Total current liabilities | 10,984 | 10,429 | |||||
Non-current liabilities | |||||||
Contract liabilities | 204 | 196 | |||||
Long-term debt | 22,016 | 19,760 | |||||
Deferred tax liabilities | 3,159 | 3,163 | |||||
Post-employment benefit obligations | 10 | 1,998 | 1,866 | ||||
Other non-current liabilities | 941 | 997 | |||||
Total non-current liabilities | 28,318 | 25,982 | |||||
Total liabilities | 39,302 | 36,411 | |||||
EQUITY | |||||||
Equity attributable to BCE shareholders | |||||||
Preferred shares | 4,004 | 4,004 | |||||
Common shares | 12 | 20,067 | 20,036 | ||||
Contributed surplus | 1,153 | 1,170 | |||||
Accumulated other comprehensive income | 20 | 90 | |||||
Deficit | (5,015 | ) | (4,937 | ) | |||
Total equity attributable to BCE shareholders | 20,229 | 20,363 | |||||
Non-controlling interest | 309 | 326 | |||||
Total equity | 20,538 | 20,689 | |||||
Total liabilities and equity | 59,840 | 57,100 |
36 | |||
Consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Consolidated statements of changes in equity |
ATTRIBUTABLE TO BCE SHAREHOLDERS | ||||||||||||||||||
FOR THE PERIOD ENDED MARCH 31, 2019 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | NOTE | PREFERRED SHARES | COMMON SHARES | CONTRI- BUTED SURPLUS | ACCUMU- LATED OTHER COMPRE-HENSIVE INCOME (LOSS) | DEFICIT | TOTAL | NON- CONTROL- LING INTEREST |
TOTAL EQUITY | |||||||||
Balance at December 31, 2018 | 4,004 | 20,036 | 1,170 | 90 | (4,937 | ) | 20,363 | 326 | 20,689 | |||||||||
Adoption of IFRS 16 | 2, 3 | – | – | – | – | (19 | ) | (19 | ) | (1 | ) | (20 | ) | |||||
Balance at January 1, 2019 | 4,004 | 20,036 | 1,170 | 90 | (4,956 | ) | 20,344 | 325 | 20,669 | |||||||||
Net earnings | – | – | – | – | 778 | 778 | 13 | 791 | ||||||||||
Other comprehensive loss | – | – | – | (65 | ) | (92 | ) | (157 | ) | (2 | ) | (159 | ) | |||||
Total comprehensive (loss) income | – | – | – | (65 | ) | 686 | 621 | 11 | 632 | |||||||||
Common shares issued under employee stock option plan |
– |
20 |
(1 | ) |
– |
– |
19 |
– |
19 | |||||||||
Common shares issued under employee savings plan (ESP) | – | 10 | – | – | – | 10 | – | 10 | ||||||||||
Other share-based compensation | – | 1 | (16 | ) | – | 5 | (10 | ) | – | (10 | ) | |||||||
Dividends declared on BCE common and preferred shares | – | – | – | – | (750 | ) | (750 | ) | – | (750 | ) | |||||||
Dividends declared by subsidiaries to non-controlling interest | – | – | – | – | – | – | (27 | ) | (27 | ) | ||||||||
Settlement of cash flow hedges transferred to the cost basis of hedged items | – | – | – | (5 | ) | – | (5 | ) | – | (5 | ) | |||||||
Balance at March 31, 2019 | 4,004 | 20,067 | 1,153 | 20 | (5,015 | ) | 20,229 | 309 | 20,538 |
ATTRIBUTABLE TO BCE SHAREHOLDERS | ||||||||||||||||||
FOR THE PERIOD ENDED MARCH 31, 2018 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | NOTE | PREFERRED SHARES | COMMON SHARES | CONTRI- BUTED SURPLUS | ACCUMU- LATED OTHER COMPRE-HENSIVE (LOSS) INCOME | DEFICIT | TOTAL | NON- CONTROL- LING INTEREST |
TOTAL EQUITY | |||||||||
Balance at December 31, 2017 | 4,004 | 20,091 | 1,162 | (17 | ) | (4,938 | ) | 20,302 | 323 | 20,625 | ||||||||
Adoption of IFRS 9 | – | – | – | – | (4 | ) | (4 | ) | – | (4 | ) | |||||||
Balance at January 1, 2018 | 4,004 | 20,091 | 1,162 | (17 | ) | (4,942 | ) | 20,298 | 323 | 20,621 | ||||||||
Net earnings | – | – | – | – | 697 | 697 | 12 | 709 | ||||||||||
Other comprehensive income (loss) | – | – | – | 25 | (112 | ) | (87 | ) | 1 | (86 | ) | |||||||
Total comprehensive income | – | – | – | 25 | 585 | 610 | 13 | 623 | ||||||||||
Common shares issued under employee stock option plan | – | 3 | – | – | – | 3 | – | 3 | ||||||||||
Other share-based compensation | – | – | (18 | ) | – | (14 | ) | (32 | ) | – | (32 | ) | ||||||
Repurchase of common shares | 12 | – | (69 | ) | (3 | ) | – | (103 | ) | (175 | ) | – | (175 | ) | ||||
Common shares issued for the acquisition of AlarmForce Industries Inc. (AlarmForce) | 4 | – | 1 | – | – | – | 1 | – | 1 | |||||||||
Dividends declared on BCE common and preferred shares | – | – | – | – | (714 | ) | (714 | ) | – | (714 | ) | |||||||
Dividends declared by subsidiaries to non-controlling interest | – | – | – | – | – | – | (3 | ) | (3 | ) | ||||||||
Settlement of cash flow hedges transferred to the cost basis of hedged items | – | – | – | 1 | – | 1 | – | 1 | ||||||||||
Return of capital to non-controlling interest | – | – | – | – | (4 | ) | (4 | ) | (25 | ) | (29 | ) | ||||||
Balance at March 31, 2018 | 4,004 | 20,026 | 1,141 | 9 | (5,192 | ) | 19,988 | 308 | 20,296 |
37 |
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Consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Consolidated statements of cash flows |
FOR THE PERIOD ENDED (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | NOTE | MARCH 31, 2019 | MARCH 31, 2018 | ||||
Cash flows from operating activities | |||||||
Net earnings | 791 | 709 | |||||
Adjustments to reconcile net earnings to cash flows from operating activities | |||||||
Severance, acquisition and other costs | 7 | 24 | – | ||||
Depreciation and amortization | 1,103 | 992 | |||||
Post-employment benefit plans cost | 10 | 85 | 90 | ||||
Net interest expense | 278 | 238 | |||||
Losses on investments | 8 | 4 | – | ||||
Income taxes | 293 | 235 | |||||
Contributions to post-employment benefit plans | (81 | ) | (87 | ) | |||
Payments under other post-employment benefit plans | (18 | ) | (19 | ) | |||
Severance and other costs paid | (66 | ) | (35 | ) | |||
Interest paid | (267 | ) | (236 | ) | |||
Income taxes paid (net of refunds) | (289 | ) | (284 | ) | |||
Acquisition and other costs paid | (29 | ) | (18 | ) | |||
Net change in operating assets and liabilities | (312 | ) | (89 | ) | |||
Cash flows from operating activities |
1,516 | 1,496 | |||||
Cash flows used in investing activities | |||||||
Capital expenditures | (850 | ) | (931 | ) | |||
Business acquisitions | 4 | – | (223 | ) | |||
Disposition of intangibles and other assets | 4 | – | 68 | ||||
Acquisition of spectrum licences | – | (36 | ) | ||||
Other investing activities | (24 | ) | (35 | ) | |||
Cash flows used in investing activities |
(874 | ) | (1,157 | ) | |||
Cash flows used in financing activities | |||||||
Increase (decrease) in notes payable | 567 | (57 | ) | ||||
Increase in securitized trade receivables | 31 | – | |||||
Issue of long-term debt | – | 1,466 | |||||
Repayment of long-term debt | (204 | ) | (173 | ) | |||
Issue of common shares | 20 | 1 | |||||
Purchase of shares for settlement of share-based payments | (76 | ) | (88 | ) | |||
Repurchase of common shares | 12 | – | (175 | ) | |||
Cash dividends paid on common shares | (678 | ) | (646 | ) | |||
Cash dividends paid on preferred shares | (26 | ) | (33 | ) | |||
Cash dividends paid by subsidiaries to non-controlling interest | (27 | ) | (13 | ) | |||
Return of capital to non-controlling interest | – | (29 | ) | ||||
Other financing activities | (6 | ) | (18 | ) | |||
Cash flows (used in) from financing activities | (399 | ) | 235 | ||||
Net increase in cash | 121 | 233 | |||||
Cash at beginning of period | 425 | 442 | |||||
Cash at end of period | 546 | 675 | |||||
Net increase in cash equivalents |
122 | 341 | |||||
Cash equivalents at beginning of period |
– | 183 | |||||
Cash equivalents at end of period | 122 | 524 |
38 | |||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Notes to consolidated financial statements |
These consolidated interim financial statements (financial statements) should be read in conjunction with BCE’s 2018 annual consolidated financial statements, approved by BCE’s board of directors on March 7, 2019.
These notes are unaudited.
We, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates.
Note 1 | Corporate information |
BCE is incorporated and domiciled in Canada. BCE’s head office is located at 1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada. BCE is a telecommunications and media company providing wireless, wireline, Internet and television (TV) services to residential, business and wholesale customers nationally across Canada. Our Bell Media segment provides conventional TV, specialty TV, pay TV, streaming services, digital media services, radio broadcasting services and out-of-home (OOH) advertising services to customers nationally across Canada.
Note 2 | Basis of presentation and significant accounting policies |
These financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), under International Accounting Standard (IAS) 34 – Interim Financial Reporting and were approved by BCE’s board of directors on May 1, 2019. These financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Significant accounting policies in our consolidated financial statements for the year ended December 31, 2018, except as noted below and as described in Note 3, Adoption of IFRS 16.
These financial statements do not include all of the notes required in annual financial statements.
All amounts are in millions of Canadian dollars, except where noted.
ADOPTION OF NEW ACCOUNTING STANDARDS |
As required, we adopted IFRS 16 – Leases effective January 1, 2019. We adopted IFRS 16 using a modified retrospective approach whereby the financial statements of prior periods presented were not restated and continue to be reported under IAS 17 – Leases, as permitted by the specific transition provisions of IFRS 16. The cumulative effect of the initial adoption of IFRS 16 was reflected as an adjustment to the deficit at January 1, 2019.
Under IAS 17, leases of property, plant and equipment were recognized as finance leases when we obtained substantially all the risks and rewards of ownership of the underlying assets. All other leases were classified as operating leases. IFRS 16 eliminates the distinction between operating and finance leases for lessees, requiring instead that we recognize a right-of-use asset and a lease liability at lease commencement for all leases, with certain exceptions permitted through elections and practical expedients. Accounting for leases previously classified as finance leases and lessor accounting remains largely unchanged under IFRS 16.
We recognized lease liabilities at January 1, 2019 for leases previously classified as operating leases, measured at the present value of lease payments using our incremental borrowing rate at that date. Property, plant and equipment includes the corresponding right-of-use assets also recognized at January 1, 2019. The right-of-use assets were generally measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet as at December 31, 2018. In certain cases, the right-of-use assets were measured as though IFRS 16 had been applied since the lease commencement date. A depreciation charge for right-of-use assets is recorded in Depreciation and an interest expense on lease liabilities is recorded in Finance costs in the income statement.
As permitted by IFRS 16, we elected not to recognize lease liabilities and right-of-use assets for short-term leases and leases of low value assets, which will continue to be expensed on a straight-line basis over the lease term. We have also applied certain practical expedients to facilitate the initial adoption and ongoing application of IFRS 16:
39 |
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Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Note 3 | Adoption of IFRS 16 |
Upon adoption of IFRS 16 on January 1, 2019, we recognized right-of-use assets of $2,257 million within property, plant and equipment, and lease liabilities of $2,304 million within debt, with an increase to our deficit of $19 million. These amounts were recognized in addition to assets under finance leases of $1,947 million and the corresponding finance lease liabilities of $2,097 million at December 31, 2018 under IAS 17. As a result, on January 1, 2019, our total right-of-use assets and lease liabilities amounted to $4,204 million and $4,401 million, respectively. The table below shows the impacts of adopting IFRS 16 on our January 1, 2019 consolidated statement of financial position.
DECEMBER 31, 2018 AS REPORTED | IFRS 16 IMPACTS | JANUARY 1, 2019 UPON ADOPTION OF IFRS 16 | |||||
Prepaid expenses | 244 | (55 | ) | 189 | |||
Other current assets | 329 | 9 | 338 | ||||
Property, plant and equipment | 24,844 | 2,257 | 27,101 | ||||
Other non-current assets | 847 | 17 | 864 | ||||
Trade payables and other liabilities | 3,941 | (10 | ) | 3,931 | |||
Debt due within one year | 4,645 | 293 | 4,938 | ||||
Long-term debt | 19,760 | 2,011 | 21,771 | ||||
Deferred tax liabilities | 3,163 | (7 | ) | 3,156 | |||
Other non-current liabilities | 997 | (39 | ) | 958 | |||
Deficit | (4,937 | ) | (19 | ) | (4,956 | ) | |
Non-controlling interest | 326 | (1 | ) | 325 |
BCE’s operating lease commitments at December 31, 2018 were $1,612 million. The difference between operating lease commitments at December 31, 2018 and lease liabilities of $2,304 million upon adoption of IFRS 16 at January 1, 2019, is due mainly to an increase of $1,122 million related to renewal options reasonably certain to be exercised, an increase of $112 million mainly related to non-monetary transactions and a decrease of ($542) million as a result of discounting applied to future lease payments, which was determined using a weighted-average incremental borrowing rate of 3.49% at January 1, 2019.
2018 ACCOUNTING POLICIES UPDATED FOR IFRS 16 |
SIGNIFICANT ACCOUNTING POLICIES – LEASES |
We enter into leases for network infrastructure and equipment, land and buildings in the normal course of business. Lease contracts are typically made for fixed periods but may include purchase, renewal or termination options. Leases are negotiated on an individual basis and contain a wide range of different terms and conditions.
We assess whether a contract contains a lease at inception of the contract. A lease contract conveys the right to control the use of an identified asset for a period in exchange for consideration. We recognize lease liabilities with corresponding right-of-use assets for all lease agreements, except for short-term leases and leases of low value assets, which are expensed on a straight-line basis over the lease term. Consideration in a contract is allocated to lease and non-lease components on a relative stand-alone value basis. We generally account for lease components and any associated non-lease components as a single lease component.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using our incremental borrowing rate, unless the rate implicit in the lease is readily determinable. We apply a single incremental borrowing rate to a portfolio of leases with similar characteristics. Lease payments included in the measurement of the lease liability comprise:
Lease liabilities are subsequently measured at amortized cost using the effective interest method. Lease liabilities are remeasured, with a corresponding adjustment to the related right-of-use assets, when there is a change in variable lease payments arising from a change in an index or rate, or when we change our assessment of whether purchase, renewal or termination options will be exercised.
Right-of-use assets are measured at cost, comprised of the initial measurement of the corresponding lease liabilities, lease payments made at or before the commencement date and any initial direct costs. They are subsequently depreciated on a straight-line basis and reduced by impairment losses, if any. Right-of-use assets may also be adjusted to reflect the remeasurement of related lease liabilities. If we obtain ownership of the leased asset by the end of the lease term or the cost of the right-of-use asset reflects the exercise of a purchase option, we depreciate the right-of-use asset from the lease commencement date to the end of the useful life of the underlying asset. Otherwise, we depreciate the right-of-use asset from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term.
Variable lease payments that do not depend on an index or rate are not included in the measurement of lease liabilities and right-of-use assets. The related payments are expensed in Operating costs in the period in which the event or condition that triggers those payments occurs.
40 | |||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
ESTIMATES AND KEY JUDGMENTS |
The application of IFRS 16 requires BCE to make judgments and estimates that affect the measurement of right-of-use assets and liabilities. In determining the lease term, we must consider all facts and circumstances that create an economic incentive to exercise renewal options (or not exercise termination options). Assessing whether a contract includes a lease also requires judgment. Estimates are required to determine the appropriate discount rate used to measure lease liabilities.
Note 4 | Business acquisitions and dispositions |
2018
ACQUISITION OF ALARMFORCE |
Subsequent to the acquisition of AlarmForce, on January 5, 2018, BCE sold AlarmForce’s approximate 39,000 customer accounts in British Columbia, Alberta and Saskatchewan to Telus Communications Inc. for total proceeds of approximately $68 million.
AlarmForce provides security alarm monitoring, personal emergency response monitoring, video surveillance and related services to residential and commercial subscribers. The acquisition of AlarmForce supports our strategic expansion in the Smart Home marketplace.
AlarmForce is included in our Bell Wireline segment in our consolidated financial statements.
For the three months ended March 31, 2018, operating revenues of $12 million from AlarmForce are included in the consolidated income statements from the date of acquisition. Net earnings for the three months ended March 31, 2018 were not significant. These amounts reflect the amortization of certain elements of the purchase price allocation and related tax adjustments.
Note 5 | Segmented information |
Our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. Our segments reflect how we manage our business and how we classify our operations for planning and measuring performance.
To align with changes in how we manage our business and assess performance, the operating results of The Source (Bell) Electronics Inc. (The Source) are now entirely included within our Wireless segment effective January 1, 2019, with prior periods restated for comparative purposes. Previously, The Source’s results were included within our Wireless and Wireline segments.
The following tables present financial information by segment for the three month periods ended March 31, 2019 and 2018.
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019 | NOTE | BELL WIRELESS | BELL WIRELINE | BELL MEDIA | INTERSEGMENT ELIMINATIONS | BCE | |||||||
Operating revenues | |||||||||||||
External customers | 2,099 | 2,995 | 640 | – | 5,734 | ||||||||
Inter-segment | 13 | 69 | 105 | (187 | ) | – | |||||||
Total operating revenues | 2,112 | 3,064 | 745 | (187 | ) | 5,734 | |||||||
Operating costs | 6 | (1,207 | ) | (1,725 | ) | (580 | ) | 187 | (3,325 | ) | |||
Segment profit (1) | 905 | 1,339 | 165 | – | 2,409 | ||||||||
Severance, acquisition and other costs | 7 | (24 | ) | ||||||||||
Depreciation and amortization | (1,103 | ) | |||||||||||
Finance costs | |||||||||||||
Interest expense | (283 | ) | |||||||||||
Interest on post-employment benefit obligations | 10 | (16 | ) | ||||||||||
Other income | 8 | 101 | |||||||||||
Income taxes | (293 | ) | |||||||||||
Net earnings | 791 |
41 |
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Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2018 | NOTE | BELL WIRELESS | BELL WIRELINE | BELL MEDIA | INTERSEGMENT ELIMINATIONS | BCE | |||||||
Operating revenues | |||||||||||||
External customers | 2,008 | 2,951 | 631 | – | 5,590 | ||||||||
Inter-segment | 13 | 58 | 118 | (189 | ) | – | |||||||
Total operating revenues | 2,021 | 3,009 | 749 | (189 | ) | 5,590 | |||||||
Operating costs | 6 | (1,210 | ) | (1,696 | ) | (619 | ) | 189 | (3,336 | ) | |||
Segment profit (1) | 811 | 1,313 | 130 | – | 2,254 | ||||||||
Severance, acquisition and other costs | 7 | – | |||||||||||
Depreciation and amortization | (992 | ) | |||||||||||
Finance costs | |||||||||||||
Interest expense | (240 | ) | |||||||||||
Interest on post-employment benefit obligations | 10 | (17 | ) | ||||||||||
Other expense | 8 | (61 | ) | ||||||||||
Income taxes | (235 | ) | |||||||||||
Net earnings | 709 |
(1) | The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
REVENUES BY SERVICES AND PRODUCTS |
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
Services (1) | |||||
Wireless | 1,554 | 1,502 | |||
Data | 1,885 | 1,820 | |||
Voice | 907 | 948 | |||
Media | 640 | 631 | |||
Other services | 59 | 63 | |||
Total services |
5,045 | 4,964 | |||
Products (2) | |||||
Wireless | 545 | 506 | |||
Data | 133 | 104 | |||
Equipment and other | 11 | 16 | |||
Total products | 689 | 626 | |||
Total operating revenues | 5,734 | 5,590 |
(1) | Our service revenues are generally recognized over time. |
(2) | Our product revenues are generally recognized at a point in time. |
Note 6 | Operating costs |
FOR THE PERIOD ENDED MARCH 31 | NOTE | 2019 | 2018 | ||||
Labour costs | |||||||
Wages, salaries and related taxes and benefits (1) | (1,059 | ) | (1,060 | ) | |||
Post-employment benefit plans service cost (net of capitalized amounts) | 10 | (69 | ) | (73 | ) | ||
Other labour costs (2) | (229 | ) | (248 | ) | |||
Less: | |||||||
Capitalized labour (1) | 244 | 244 | |||||
Total labour costs | (1,113 | ) | (1,137 | ) | |||
Cost of revenues (1)(3) | (1,745 | ) | (1,707 | ) | |||
Other operating costs (1)(4) | (467 | ) | (492 | ) | |||
Total operating costs | (3,325 | ) | (3,336 | ) |
(1) | We have reclassified amounts from the previous period to make them consistent with the presentation for the current period. |
(2) | Other labour costs include contractor and outsourcing costs. |
(3) | Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
(4) | Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology costs, professional service fees and rent. |
42 | |||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Note 7 | Severance, acquisition and other costs |
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
Severance | (7 | ) | (9 | ) | |
Acquisition and other | (17 | ) | 9 | ||
Total severance, acquisition and other costs | (24 | ) | – |
SEVERANCE COSTS |
ACQUISITION AND OTHER COSTS |
Note 8 | Other income (expense) |
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
Net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans | 100 | (77 | ) | ||
Equity income from investments in associates and joint ventures | 11 | 17 | |||
(Losses) gains on retirements and disposals of property, plant and equipment and intangible assets | (5 | ) | 1 | ||
Impairment of assets | (4 | ) | (4 | ) | |
Losses on investments | (4 | ) | – | ||
Other | 3 | 2 | |||
Total other income (expense) | 101 | (61 | ) |
Note 9 | Earnings per share |
The following table shows the components used in the calculation of basic and diluted earnings per common share for earnings attributable to common shareholders.
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
Net earnings attributable to common shareholders – basic | 740 | 661 | |||
Dividends declared per common share (in dollars) | 0.7925 | 0.7550 | |||
Weighted average number of common shares outstanding (in millions) | |||||
Weighted average number of common shares outstanding – basic | 898.4 | 900.2 | |||
Assumed exercise of stock options (1) | 0.3 | 0.4 | |||
Weighted average number of common shares outstanding – diluted (in millions) | 898.7 | 900.6 |
(1) | The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future compensation cost of dilutive options. It excludes options for which the exercise price is higher than the average market value of a BCE common share. The number of excluded options was 12,703,673 for the first quarter of 2019, compared to 9,472,068 for the first quarter of 2018. |
43 |
|||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
Note 10 | Post-employment benefit plans |
POST-EMPLOYMENT BENEFIT PLANS COST |
We provide pension and other benefits for most of our employees. These include defined benefit (DB) pension plans, defined contribution (DC) pension plans and other post-employment benefits (OPEBs).
COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS SERVICE COST
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
DB pension | (48 | ) | (53 | ) | |
DC pension | (34 | ) | (33 | ) | |
OPEBs | (1 | ) | (1 | ) | |
Less: | |||||
Capitalized benefit plans cost | 14 | 14 | |||
Total post-employment benefit plans service cost included in operating costs | (69 | ) | (73 | ) | |
Other costs recognized in severance, acquisition and other costs | – | (4 | ) | ||
Total post-employment benefit plans service cost | (69 | ) | (77 | ) |
COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS FINANCING COST
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
DB pension | (5 | ) | (6 | ) | |
OPEBs | (11 | ) | (11 | ) | |
Total interest on post-employment benefit obligations | (16 | ) | (17 | ) |
Note 11 | Financial assets and liabilities |
FAIR VALUE |
MARCH 31, 2019 | DECEMBER 31, 2018 | |||||||||
CARRYING | FAIR | CARRYING | FAIR | |||||||
CLASSIFICATION | FAIR VALUE METHODOLOGY | VALUE | VALUE | VALUE | VALUE | |||||
CRTC tangible benefits obligation | Trade payables and other liabilities and non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 51 | 51 |
| 61 |
| 61 |
| |
CRTC deferral account obligation | Trade payables and other liabilities and non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 84 |
| 88 |
| 108 |
| 112 |
|
Debt securities and other debt | Debt due within one year and long-term debt | Quoted market price of debt | 18,165 | 19,956 | 18,188 | 19,178 | ||||
Finance leases (1) | Debt due within one year and long-term debt | Present value of future cash flows discounted using observable market interest rates | – | – | 2,097 | 2,304 |
(1) | Upon adoption of IFRS 16 on January 1, 2019, fair value disclosures are no longer required for leases. |
44 | |||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
CLASSIFICATION |
CARRYING VALUE OF ASSET (LIABILITY) |
FAIR VALUE |
|||||||
QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |
OBSERVABLE MARKET DATA (LEVEL 2)(1) |
NON-OBSERVABLE MARKET INPUTS (LEVEL 3)(2) |
|||||||
March 31, 2019 |
|
||||||||
Publicly-traded and privately-held investments |
Other non-current assets |
111 |
|
2 |
|
– |
|
109 |
|
Derivative financial instruments |
Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
81 |
|
– |
|
81 |
|
– |
|
Maple Leaf Sports & Entertainment Ltd. MLSE financial liability(3) |
Trade payables and other liabilities |
(135 |
) |
– |
|
– |
|
(135 |
) |
Other |
Other non-current assets and liabilities |
46 | – | 117 | (71 | ) | |||
December 31, 2018 |
|
||||||||
Publicly-traded and privately-held investments |
Other non-current assets |
110 |
|
1 |
|
– |
|
109 |
|
Derivative financial instruments |
Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
181 |
|
– |
|
181 |
|
– |
|
MLSE financial liability(3) |
Trade payables and other liabilities |
(135 |
) |
– |
|
– |
|
(135 |
) |
Other |
Other non-current assets and liabilities |
43 |
– | 114 | (71 | ) |
(1) | Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
(2) | Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 financial instruments. |
(3) | Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust Fund exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recorded in Other income (expense) in the income statements. The option has been exercisable since 2017. |
CURRENCY EXPOSURES |
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a loss (gain) of $7 million ($2 million) recognized in net earnings at March 31, 2019 and a gain (loss) of $134 million ($126 million) recognized in Other comprehensive loss at March 31, 2019, with all other variables held constant.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the Philippines Peso would result in a gain (loss) of $4 million in Other comprehensive loss at March 31, 2019, with all other variables held constant.
The following table provides further details on our outstanding foreign currency forward contracts and options as at March 31, 2019.
TYPE OF HEDGE |
BUY CURRENCY |
AMOUNT TO RECEIVE |
SELL CURRENCY |
AMOUNT TO PAY |
MATURITY |
HEDGED ITEM |
||||||
Cash flow |
USD |
2,754 |
CAD |
3,653 |
2019 |
Commercial paper |
||||||
Cash flow |
USD |
589 |
CAD |
732 |
2019 |
Anticipated transactions |
||||||
Cash flow |
PHP |
1,303 |
CAD |
32 |
2019 |
Anticipated transactions |
||||||
Cash flow |
PHP |
932 |
CAD |
23 |
2020 |
Anticipated transactions |
||||||
Cash flow |
USD |
362 |
CAD |
462 |
2020-2021 |
Anticipated transactions |
||||||
Economic |
USD |
90 |
CAD |
114 |
2019 |
Anticipated transactions |
||||||
Economic – put options | USD | 45 | CAD | 56 | 2019 |
Anticipated transactions |
||||||
Economic – put options |
USD |
81 |
CAD |
101 |
2020 |
Anticipated transactions |
||||||
Economic – call options |
USD |
48 |
CAD |
60 |
2020 |
Anticipated transactions |
INTEREST RATE EXPOSURES |
45 |
|||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
EQUITY PRICE EXPOSURES |
We use equity forward contracts on BCE’s common shares to economically hedge the cash flow exposure related to the settlement of equity settled share-based compensation plans and the equity price risk related to a cash-settled share-based payment plan. The fair value of our equity forward contracts at March 31, 2019 was an asset of $27 million.
A 5% increase (decrease) in the market price of BCE’s common shares at March 31, 2019 would result in a gain (loss) of $38 million recognized in net earnings, with all other variables held constant.
Note 12 | Share capital |
NORMAL COURSE ISSUER BID PROGRAM (NCIB) |
In Q1 2018, BCE repurchased and canceled 3,085,697 common shares for a total cost of $175 million through a NCIB. Of the total cost, $69 million represented stated capital and $3 million represented the reduction of the contributed surplus attributable to these common shares. The remaining $103 million was charged to the deficit.
Note 13 | Share-based payments |
The following share-based payment amounts are included in the income statements as operating costs.
FOR THE PERIOD ENDED MARCH 31 | 2019 | 2018 | |||
ESP | (7 | ) | (7 | ) | |
Restricted share units (RSUs) and performance share units (PSUs) | (20 | ) | (19 | ) | |
Other (1) | (4 | ) | (4 | ) | |
Total share-based payments | (31 | ) | (30 | ) |
(1) | Includes deferred share plan (DSP), deferred share units (DSUs) and stock options. |
The following tables summarize the change in outstanding ESP shares, RSUs/PSUs, DSUs and stock options for the period ended March 31, 2019.
ESP
NUMBER OF ESP SHARES | |||
Unvested contributions, January 1, 2019 | 1,120,426 | ||
Contributions (1) | 171,567 | ||
Dividends credited | 14,959 | ||
Vested | (151,899 | ) | |
Forfeited | (38,224 | ) | |
Unvested contributions, March 31, 2019 | 1,116,829 |
(1) | The weighted average fair value of the shares contributed during the three months ended March 31, 2019 was $57. |
RSUs/PSUs
NUMBER OF RSUs/PSUs | |||
Outstanding, January 1, 2019 | 2,812,697 | ||
Granted (1) | 966,426 | ||
Dividends credited | 38,180 | ||
Settled | (906,164 | ) | |
Forfeited | (28,641 | ) | |
Outstanding, March 31, 2019 | 2,882,498 |
(1) | The weighted average fair value of the RSUs/PSUs granted during the three months ended March 31, 2019 was $58. |
46 | |||
Notes to consolidated financial statements |
BCE Inc. 2019 First Quarter Shareholder Report |
NUMBER OF DSUs | |||
Outstanding, January 1, 2019 | 4,391,997 | ||
Issued (1) | 50,349 | ||
Settlement of RSUs/PSUs | 146,960 | ||
Dividends credited | 59,452 | ||
Settled | (67,908 | ) | |
Outstanding, March 31, 2019 | 4,580,850 |
(1) | The weighted average fair value of the DSUs issued during the three months ended March 31, 2019 was $58. |
STOCK OPTIONS
NUMBER OF OPTIONS | WEIGHTED AVERAGE EXERCISE PRICE ($) | ||||
Outstanding, January 1, 2019 | 14,072,332 | 56 | |||
Granted | 3,343,317 | 58 | |||
Exercised (1) | (389,543 | ) | 48 | ||
Forfeited | (33,613 | ) | 58 | ||
Outstanding, March 31, 2019 | 16,992,493 | 57 | |||
Exercisable, March 31, 2019 | 6,817,960 | 55 |
(1) | The weighted average share price for options exercised during the three months ended March 31, 2019 was $58. |
ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
2019 | |||
Weighted average fair value per option granted | $2.34 | ||
Weighted average share price | $58 | ||
Weighted average exercise price | $58 | ||
Expected dividend growth | 5 | % | |
Expected volatility | 14 | % | |
Risk-free interest rate | 2 | % | |
Expected life (years) | 4 |
47 |
This document has been filed by BCE Inc.
with the Canadian provincial securities regulatory authorities and the
U.S. Securities and Exchange Commission. It can be found on BCE Inc.’s
website at BCE.ca, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov,
and is available upon request from:
INVESTOR RELATIONS e-mail: investor.relations@bce.ca BCE.ca
Pour obtenir un exemplaire de la version française de ce document, contactez les Relations avec les investisseurs. |
For further information concerning BCE Inc.’s Dividend Reinvestment and Stock Purchase Plan (DRP), direct deposit of dividend payments, the elimination of multiple mailings or the receipt of quarterly reports, please contact:
AST TRUST COMPANY (CANADA) tel: 416
682-3861 or 1 800 561-0934
|
Exhibit 99.2
BCE (1) (2) (3)
Consolidated Operational Data
(In millions of Canadian dollars, except share amounts) (unaudited) |
Q1 2019 |
Q1 2018 |
$ change | % change | ||||||||
Operating revenues |
||||||||||||
Service |
5,045 | 4,964 | 81 | 1.6 | % | |||||||
Product |
689 | 626 | 63 | 10.1 | % | |||||||
Total operating revenues |
5,734 | 5,590 | 144 | 2.6 | % | |||||||
Operating costs (A) |
(3,256 | ) | (3,263 | ) | 7 | 0.2 | % | |||||
Post-employment benefit plans service cost |
(69 | ) | (73 | ) | 4 | 5.5 | % | |||||
Adjusted EBITDA (4) |
2,409 | 2,254 | 155 | 6.9 | % | |||||||
Adjusted EBITDA margin (4) |
42.0 | % | 40.3 | % | 1.7 | pts | ||||||
Severance, acquisition and other costs |
(24 | ) | - | (24 | ) | n.m. | ||||||
Depreciation |
(882 | ) | (780 | ) | (102 | ) | (13.1 | %) | ||||
Amortization |
(221 | ) | (212 | ) | (9 | ) | (4.2 | %) | ||||
Finance costs |
||||||||||||
Interest expense |
(283 | ) | (240 | ) | (43 | ) | (17.9 | %) | ||||
Interest on post-employment benefit obligations |
(16 | ) | (17 | ) | 1 | 5.9 | % | |||||
Other income (expense) |
101 | (61 | ) | 162 | n.m. | |||||||
Income taxes |
(293 | ) | (235 | ) | (58 | ) | (24.7 | %) | ||||
Net earnings |
791 | 709 | 82 | 11.6 | % | |||||||
Net earnings attributable to: |
||||||||||||
Common shareholders |
740 | 661 | 79 | 12.0 | % | |||||||
Preferred shareholders |
38 | 36 | 2 | 5.6 | % | |||||||
Non-controlling interest |
13 | 12 | 1 | 8.3 | % | |||||||
Net earnings |
791 | 709 | 82 | 11.6 | % | |||||||
Net earnings per common share - basic and diluted |
$ | 0.82 | $ | 0.73 | $ | 0.09 | 12.3 | % | ||||
Dividends per common share |
$ | 0.7925 | $ | 0.7550 | $ | 0.0375 | 5.0 | % | ||||
Weighted average number of common shares outstanding - basic (millions) |
898.4 | 900.2 | ||||||||||
Weighted average number of common shares outstanding - diluted (millions) |
898.7 | 900.6 | ||||||||||
Number of common shares outstanding (millions) |
898.8 | 898.0 | ||||||||||
Adjusted net earnings and EPS |
||||||||||||
Net earnings attributable to common shareholders |
740 | 661 | 79 | 12.0 | % | |||||||
Severance, acquisition and other costs |
18 | (1 | ) | 19 | n.m. | |||||||
Net mark-to-market (gains) losses on derivatives used to economically hedge equity settled share-based compensation plans |
(73 | ) | 56 | (129 | ) | n.m. | ||||||
Net losses on investments |
4 | - | 4 | n.m. | ||||||||
Impairment charges |
3 | 3 | - | - | ||||||||
Adjusted net earnings (4) |
692 | 719 | (27 | ) | (3.8 | %) | ||||||
Impact on net earnings per share |
$ | (0.05 | ) | $ | 0.07 | $ | (0.12 | ) | n.m. | |||
Adjusted EPS (4) |
$ | 0.77 | $ | 0.80 | $ | (0.03 | ) | (3.8 | %) |
n.m. : | not meaningful |
(A) | Excludes post-employment benefit plans service cost |
BCE Supplementary Financial Information - First Quarter 2019 Page 2
BCE
Consolidated Operational Data - Historical Trend
(In millions of Canadian dollars, except share amounts) (unaudited) | Q1 19 |
TOTAL 2018 |
Q4 18 | Q3 18 | Q2 18 | Q1 18 | ||||||||||||||
Operating revenues |
||||||||||||||||||||
Service |
5,045 | 20,441 | 5,231 | 5,117 | 5,129 | 4,964 | ||||||||||||||
Product |
689 | 3,027 | 984 | 760 | 657 | 626 | ||||||||||||||
Total operating revenues |
5,734 | 23,468 | 6,215 | 5,877 | 5,786 | 5,590 | ||||||||||||||
Operating costs (A) |
(3,256 | ) | (13,667 | ) | (3,756 | ) | (3,355 | ) | (3,293 | ) | (3,263 | ) | ||||||||
Post-employment benefit plans service cost |
(69 | ) | (266 | ) | (65 | ) | (65 | ) | (63 | ) | (73 | ) | ||||||||
Adjusted EBITDA |
2,409 | 9,535 | 2,394 | 2,457 | 2,430 | 2,254 | ||||||||||||||
Adjusted EBITDA margin |
42.0 | % | 40.6 | % | 38.5 | % | 41.8 | % | 42.0 | % | 40.3 | % | ||||||||
Severance, acquisition and other costs |
(24 | ) | (136 | ) | (58 | ) | (54 | ) | (24 | ) |
- |
|||||||||
Depreciation |
(882 | ) | (3,145 | ) | (799 | ) | (779 | ) | (787 | ) | (780 | ) | ||||||||
Amortization |
(221 | ) | (869 | ) | (216 | ) | (220 | ) | (221 | ) | (212 | ) | ||||||||
Finance costs |
||||||||||||||||||||
Interest expense |
(283 | ) | (1,000 | ) | (259 | ) | (255 | ) | (246 | ) | (240 | ) | ||||||||
Interest on post-employment benefit obligations |
(16 | ) | (69 | ) | (18 | ) | (17 | ) | (17 | ) | (17 | ) | ||||||||
Other income (expense) |
101 | (348 | ) | (158 | ) | (41 | ) | (88 | ) | (61 | ) | |||||||||
Income taxes |
(293 | ) | (995 | ) | (244 | ) | (224 | ) | (292 | ) | (235 | ) | ||||||||
Net earnings |
791 | 2,973 | 642 | 867 | 755 | 709 | ||||||||||||||
Net earnings attributable to: |
||||||||||||||||||||
Common shareholders |
740 | 2,785 | 606 | 814 | 704 | 661 | ||||||||||||||
Preferred shareholders |
38 | 144 | 37 | 36 | 35 | 36 | ||||||||||||||
Non-controlling interest |
13 | 44 | (1 | ) | 17 | 16 | 12 | |||||||||||||
Net earnings |
791 | 2,973 | 642 | 867 | 755 | 709 | ||||||||||||||
Net earnings per common share - basic and diluted |
$ | 0.82 | $ | 3.10 | $ | 0.68 | $ | 0.90 | $ | 0.79 | $ | 0.73 | ||||||||
Dividends per common share |
$ | 0.7925 | $ | 3.0200 | $ | 0.7550 | $ | 0.7550 | $ | 0.7550 | $ | 0.7550 | ||||||||
Weighted average number of common shares outstanding - basic (millions) |
898.4 | 898.6 | 898.1 | 898.0 | 898.0 | 900.2 | ||||||||||||||
Weighted average number of common shares outstanding - diluted (millions) |
898.7 | 898.9 | 898.4 | 898.3 | 898.3 | 900.6 | ||||||||||||||
Number of common shares outstanding (millions) |
898.8 | 898.2 | 898.2 | 898.0 | 898.0 | 898.0 | ||||||||||||||
Adjusted net earnings and EPS |
||||||||||||||||||||
Net earnings attributable to common shareholders |
740 | 2,785 | 606 | 814 | 704 | 661 | ||||||||||||||
Severance, acquisition and other costs |
18 | 100 | 44 | 39 | 18 | (1 | ) | |||||||||||||
Net mark-to-market (gains) losses on derivatives used to economically hedge equity settled share-based compensation plans |
(73 | ) | 58 | (25 | ) | 5 | 22 | 56 | ||||||||||||
Net losses on investments |
4 | 47 | 27 | - | 20 | - | ||||||||||||||
Early debt redemption costs |
- | 15 | - | 2 | 13 | - | ||||||||||||||
Impairment charges |
3 | 146 | 142 | 1 | - | 3 | ||||||||||||||
Adjusted net earnings |
692 | 3,151 | 794 | 861 | 777 | 719 | ||||||||||||||
Impact on net earnings per share |
$ | (0.05 | ) | $ | 0.41 | $ | 0.21 | $ | 0.06 | $ | 0.07 | $ | 0.07 | |||||||
Adjusted EPS |
$ | 0.77 | $ | 3.51 | $ | 0.89 | $ | 0.96 | $ | 0.86 | $ | 0.80 |
(A) | Excludes post-employment benefit plans service cost |
BCE Supplementary Financial Information - First Quarter 2019 Page 3
BCE (1) (2) (3)
Segmented Data
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
Q1 2018 |
$ change | % change | |||||
|
|||||||||
Operating revenues |
|||||||||
Bell Wireless |
2,112 | 2,021 | 91 | 4.5 | % | ||||
Bell Wireline |
3,064 | 3,009 | 55 | 1.8 | % | ||||
Bell Media |
745 | 749 | (4 | ) | (0.5 | %) | |||
Inter-segment eliminations |
(187 | ) | (189 | ) | 2 | 1.1 | % | ||
Total |
5,734 | 5,590 | 144 | 2.6 | % | ||||
|
|||||||||
Operating costs |
|||||||||
Bell Wireless |
(1,207 | ) | (1,210 | ) | 3 | 0.2 | % | ||
Bell Wireline |
(1,725 | ) | (1,696 | ) | (29 | ) | (1.7 | %) | |
Bell Media |
(580 | ) | (619 | ) | 39 | 6.3 | % | ||
Inter-segment eliminations |
187 | 189 | (2 | ) | (1.1 | %) | |||
Total |
(3,325 | ) | (3,336 | ) | 11 | 0.3 | % | ||
|
|||||||||
Adjusted EBITDA |
|||||||||
Bell Wireless |
905 | 811 | 94 | 11.6 | % | ||||
Margin |
42.9 | % | 40.1 | % | 2.8 | pts | |||
Bell Wireline |
1,339 | 1,313 | 26 | 2.0 | % | ||||
Margin |
43.7 | % | 43.6 | % | 0.1 | pts | |||
Bell Media |
165 | 130 | 35 | 26.9 | % | ||||
Margin |
22.1 | % | 17.4 | % | 4.7 | pts | |||
Total |
2,409 | 2,254 | 155 | 6.9 | % | ||||
Margin |
42.0 | % | 40.3 | % | 1.7 | pts | |||
|
|||||||||
Capital expenditures |
|||||||||
Bell Wireless |
151 | 167 | 16 | 9.6 | % | ||||
Capital intensity (5) |
7.1 | % | 8.3 | % | 1.2 | pts | |||
Bell Wireline |
674 | 744 | 70 | 9.4 | % | ||||
Capital intensity |
22.0 | % | 24.7 | % | 2.7 | pts | |||
Bell Media |
25 | 20 | (5 | ) | (25.0 | %) | |||
Capital intensity |
3.4 | % | 2.7 | % | (0.7 | ) pts | |||
Total |
850 | 931 | 81 | 8.7 | % | ||||
Capital intensity |
14.8 | % | 16.7 | % | 1.9 | pts |
BCE Supplementary Financial Information - First Quarter 2019 Page 4
BCE
Segmented Data - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 19 |
TOTAL 2018 |
Q4 18 | Q3 18 | Q2 18 | Q1 18 | ||||||||
|
||||||||||||||
Operating revenues |
||||||||||||||
Bell Wireless |
2,112 | 8,818 | 2,407 | 2,269 | 2,121 | 2,021 | ||||||||
Bell Wireline |
3,064 | 12,267 | 3,137 | 3,060 | 3,061 | 3,009 | ||||||||
Bell Media |
745 | 3,121 | 850 | 731 | 791 | 749 | ||||||||
Inter-segment eliminations |
(187 | ) | (738 | ) | (179 | ) | (183 | ) | (187 | ) | (189 | ) | ||
Total |
5,734 | 23,468 | 6,215 | 5,877 | 5,786 | 5,590 | ||||||||
|
||||||||||||||
Operating costs |
||||||||||||||
Bell Wireless |
(1,207 | ) | (5,297 | ) | (1,528 | ) | (1,330 | ) | (1,229 | ) | (1,210 | ) | ||
Bell Wireline |
(1,725 | ) | (6,946 | ) | (1,798 | ) | (1,724 | ) | (1,728 | ) | (1,696 | ) | ||
Bell Media |
(580 | ) | (2,428 | ) | (674 | ) | (549 | ) | (586 | ) | (619 | ) | ||
Inter-segment eliminations |
187 | 738 | 179 | 183 | 187 | 189 | ||||||||
Total |
(3,325 | ) | (13,933 | ) | (3,821 | ) | (3,420 | ) | (3,356 | ) | (3,336 | ) | ||
|
||||||||||||||
Adjusted EBITDA |
||||||||||||||
Bell Wireless |
905 | 3,521 | 879 | 939 | 892 | 811 | ||||||||
Margin |
42.9 | % | 39.9 | % | 36.5 | % | 41.4 | % | 42.1 | % | 40.1 | % | ||
Bell Wireline |
1,339 | 5,321 | 1,339 | 1,336 | 1,333 | 1,313 | ||||||||
Margin |
43.7 | % | 43.4 | % | 42.7 | % | 43.7 | % | 43.5 | % | 43.6 | % | ||
Bell Media |
165 | 693 | 176 | 182 | 205 | 130 | ||||||||
Margin |
22.1 | % | 22.2 | % | 20.7 | % | 24.9 | % | 25.9 | % | 17.4 | % | ||
Total |
2,409 | 9,535 | 2,394 | 2,457 | 2,430 | 2,254 | ||||||||
Margin |
42.0 | % | 40.6 | % | 38.5 | % | 41.8 | % | 42.0 | % | 40.3 | % | ||
|
||||||||||||||
Capital expenditures |
||||||||||||||
Bell Wireless |
151 | 664 | 133 | 183 | 181 | 167 | ||||||||
Capital intensity |
7.1 | % | 7.5 | % | 5.5 | % | 8.1 | % | 8.5 | % | 8.3 | % | ||
Bell Wireline |
674 | 3,193 | 809 | 797 | 843 | 744 | ||||||||
Capital intensity |
22.0 | % | 26.0 | % | 25.8 | % | 26.0 | % | 27.5 | % | 24.7 | % | ||
Bell Media |
25 | 114 | 32 | 30 | 32 | 20 | ||||||||
Capital intensity |
3.4 | % | 3.7 | % | 3.8 | % | 4.1 | % | 4.0 | % | 2.7 | % | ||
Total |
850 | 3,971 | 974 | 1,010 | 1,056 | 931 | ||||||||
Capital intensity |
14.8 | % | 16.9 | % | 15.7 | % | 17.2 | % | 18.3 | % | 16.7 | % |
BCE Supplementary Financial Information - First Quarter 2019 Page 5
Bell Wireless (1) (2) (3)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
Q1 2018 |
% change | ||||
Bell Wireless |
|||||||
Operating revenues |
|||||||
External service revenues |
1,554 | 1,502 | 3.5 | % | |||
Inter-segment service revenues |
12 | 12 | - | ||||
Total operating service revenues |
1,566 | 1,514 | 3.4 | % | |||
External product revenues |
545 | 506 | 7.7 | % | |||
Inter-segment product revenues |
1 | 1 | - | ||||
Total operating product revenues |
546 | 507 | 7.7 | % | |||
Total external revenues |
2,099 | 2,008 | 4.5 | % | |||
Total operating revenues |
2,112 | 2,021 | 4.5 | % | |||
Operating costs |
(1,207 | ) | (1,210 | ) | 0.2 | % | |
Adjusted EBITDA |
905 | 811 | 11.6 | % | |||
Adjusted EBITDA margin (Total operating revenues) |
42.9 | % | 40.1 | % | 2.8 | pts | |
Capital expenditures |
151 | 167 | 9.6 | % | |||
Capital intensity |
7.1 | % | 8.3 | % | 1.2 | pts | |
Wireless subscriber gross activations (5) |
410,301 | 404,790 | 1.4 | % | |||
Postpaid |
320,558 | 347,319 | (7.7 | %) | |||
Prepaid |
89,743 | 57,471 | 56.2 | % | |||
Wireless subscriber net activations (losses) |
38,282 | 44,377 | (13.7 | %) | |||
Postpaid |
50,204 | 68,487 | (26.7 | %) | |||
Prepaid |
(11,922 | ) | (24,110 | ) | 50.6 | % | |
Wireless subscribers end of period (EOP)(A) |
9,480,835 | 9,195,048 | 3.1 | % | |||
Postpaid(A) |
8,808,189 | 8,471,021 | 4.0 | % | |||
Prepaid(A) |
672,646 | 724,027 | (7.1 | %) | |||
Blended average billing per user (ABPU)($/month) (5)(B) |
67.35 | 66.56 | 1.2 | % | |||
Churn (%) (average per month) (5) |
1.31 | % | 1.31 | % | - | ||
Postpaid |
1.07 | % | 1.13 | % | 0.06 | pts | |
Prepaid |
4.49 | % | 3.40 | % | (1.09 | ) pts |
(A) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows:
|
(B) | Our Q1 2018 blended ABPU was adjusted to exclude the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million. |
BCE Supplementary Financial Information - First Quarter 2019 Page 6
Bell Wireless - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 19 |
TOTAL 2018 |
Q4 18 | Q3 18 | Q2 18 | Q1 18 | ||||||||
Bell Wireless |
||||||||||||||
Operating revenues |
||||||||||||||
External service revenues |
1,554 | 6,269 | 1,581 | 1,620 | 1,566 | 1,502 | ||||||||
Inter-segment service revenues |
12 | 48 | 12 | 12 | 12 | 12 | ||||||||
Total operating service revenues |
1,566 | 6,317 | 1,593 | 1,632 | 1,578 | 1,514 | ||||||||
External product revenues |
545 | 2,497 | 814 | 636 | 541 | 506 | ||||||||
Inter-segment product revenues |
1 | 4 | - | 1 | 2 | 1 | ||||||||
Total operating product revenues |
546 | 2,501 | 814 | 637 | 543 | 507 | ||||||||
Total external revenues |
2,099 | 8,766 | 2,395 | 2,256 | 2,107 | 2,008 | ||||||||
Total operating revenues |
2,112 | 8,818 | 2,407 | 2,269 | 2,121 | 2,021 | ||||||||
Operating costs |
(1,207 | ) | (5,297 | ) | (1,528 | ) | (1,330 | ) | (1,229 | ) | (1,210 | ) | ||
Adjusted EBITDA |
905 | 3,521 | 879 | 939 | 892 | 811 | ||||||||
Adjusted EBITDA margin (Total operating revenues) |
42.9 | % | 39.9 | % | 36.5 | % | 41.4 | % | 42.1 | % | 40.1 | % | ||
Capital expenditures |
151 | 664 | 133 | 183 | 181 | 167 | ||||||||
Capital intensity |
7.1 | % | 7.5 | % | 5.5 | % | 8.1 | % | 8.5 | % | 8.3 | % | ||
Wireless subscriber gross activations |
410,301 | 1,954,792 | 546,203 | 535,647 | 468,152 | 404,790 | ||||||||
Postpaid |
320,558 | 1,615,764 | 447,590 | 426,719 | 394,136 | 347,319 | ||||||||
Prepaid |
89,743 | 339,028 | 98,613 | 108,928 | 74,016 | 57,471 | ||||||||
Wireless subscriber net activations (losses) |
38,282 | 479,811 | 143,114 | 177,834 | 114,486 | 44,377 | ||||||||
Postpaid |
50,204 | 447,682 | 121,780 | 135,323 | 122,092 | 68,487 | ||||||||
Prepaid |
(11,922 | ) | 32,129 | 21,334 | 42,511 | (7,606 | ) | (24,110 | ) | |||||
Wireless subscribers EOP(A)(B) |
9,480,835 | 9,610,482 | 9,610,482 | 9,487,368 | 9,309,534 | 9,195,048 | ||||||||
Postpaid(A)(B) |
8,808,189 | 8,830,216 | 8,830,216 | 8,728,436 | 8,593,113 | 8,471,021 | ||||||||
Prepaid(A) |
672,646 | 780,266 | 780,266 | 758,932 | 716,421 | 724,027 | ||||||||
Blended ABPU ($/month)(C) |
67.35 | 67.76 | 67.46 | 69.28 | 67.71 | 66.56 | ||||||||
Churn (%)(average per month) |
1.31 | % | 1.32 | % | 1.41 | % | 1.27 | % | 1.28 | % | 1.31 | % | ||
Postpaid |
1.07 | % | 1.16 | % | 1.26 | % | 1.14 | % | 1.10 | % | 1.13 | % | ||
Prepaid |
4.49 | % | 3.17 | % | 3.18 | % | 2.76 | % | 3.34 | % | 3.40 | % |
(A) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows:
|
(B) | At the beginning of Q4 2018, we adjusted our postpaid wireless subscriber base to remove 20,000 subscribers that we divested to Xplornet Communications Inc. as a result of BCE's acquisition of Manitoba Telecom Services Inc. |
(C) | Our Q1 2018 blended ABPU was adjusted to exclude the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million. |
BCE Supplementary Financial Information - First Quarter 2019 Page 7
Bell Wireline (1) (2) (3)
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
Q1 2018 |
% change | ||||
Bell Wireline |
|||||||
Operating revenues |
|||||||
Data |
1,885 | 1,820 | 3.6 | % | |||
Voice |
907 | 948 | (4.3 | %) | |||
Other services |
59 | 63 | (6.3 | %) | |||
Total external service revenues |
2,851 | 2,831 | 0.7 | % | |||
Inter-segment service revenues |
69 | 58 | 19.0 | % | |||
Total operating service revenues |
2,920 | 2,889 | 1.1 | % | |||
Data |
133 | 104 | 27.9 | % | |||
Equipment and other |
11 | 16 | (31.3 | %) | |||
Total external product revenues |
144 | 120 | 20.0 | % | |||
Inter-segment product revenues |
- | - | - | ||||
Total operating product revenues |
144 | 120 | 20.0 | % | |||
Total external revenues |
2,995 | 2,951 | 1.5 | % | |||
Total operating revenues |
3,064 | 3,009 | 1.8 | % | |||
Operating costs |
(1,725 | ) | (1,696 | ) | (1.7 | %) | |
Adjusted EBITDA |
1,339 | 1,313 | 2.0 | % | |||
Adjusted EBITDA margin |
43.7 | % | 43.6 | % | 0.1 | pts | |
Capital expenditures |
674 | 744 | 9.4 | % | |||
Capital intensity |
22.0 | % | 24.7 | % | 2.7 | pts | |
Retail high-speed Internet subscribers (5) |
|||||||
Net activations (A) |
22,671 | 18,156 | 24.9 | % | |||
Subscribers EOP (A) (B) |
3,442,411 | 3,311,931 | 3.9 | % | |||
Retail TV subscribers |
|||||||
Retail net subscriber losses (A) |
(1,560 | ) | (10,354 | ) | 84.9 | % | |
Internet protocol television (IPTV) |
20,916 | 13,573 | 54.1 | % | |||
Satellite |
(22,476 | ) | (23,927 | ) | 6.1 | % | |
Total retail subscribers EOP (A) |
2,764,851 | 2,734,498 | 1.1 | % | |||
IPTV |
1,696,622 | 1,578,489 | 7.5 | % | |||
Satellite |
1,068,229 | 1,156,009 | (7.6 | %) | |||
Retail network access services (NAS) |
|||||||
Residential NAS lines (A) |
2,894,029 | 3,163,618 | (8.5 | %) | |||
Residential NAS lines net losses (A) |
(66,779 | ) | (56,071 | ) | (19.1 | %) |
(A) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV, and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
(B) | At the beginning of Q1 2019, our retail high-speed Internet subscriber base was increased by 9,366 subscribers due to the transfer of fixed wireless Internet subscribers from our wireless segment. |
BCE Supplementary Financial Information - First Quarter 2019 Page 8
Bell Wireline - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 19 |
TOTAL 2018 |
Q4 18 | Q3 18 | Q2 18 | Q1 18 | ||||||||
Bell Wireline |
||||||||||||||
Operating revenues |
||||||||||||||
Data |
1,885 | 7,466 | 1,910 | 1,867 | 1,869 | 1,820 | ||||||||
Voice |
907 | 3,782 | 933 | 948 | 953 | 948 | ||||||||
Other services |
59 | 247 | 60 | 60 | 64 | 63 | ||||||||
Total external service revenues |
2,851 | 11,495 | 2,903 | 2,875 | 2,886 | 2,831 | ||||||||
Inter-segment service revenues |
69 | 242 | 64 | 61 | 59 | 58 | ||||||||
Total operating service revenues |
2,920 | 11,737 | 2,967 | 2,936 | 2,945 | 2,889 | ||||||||
Data |
133 | 466 | 153 | 111 | 98 | 104 | ||||||||
Equipment and other |
11 | 64 | 17 | 13 | 18 | 16 | ||||||||
Total external product revenues |
144 | 530 | 170 | 124 | 116 | 120 | ||||||||
Inter-segment product revenues |
- | - | - | - | - | - | ||||||||
Total operating product revenues |
144 | 530 | 170 | 124 | 116 | 120 | ||||||||
Total external revenues |
2,995 | 12,025 | 3,073 | 2,999 | 3,002 | 2,951 | ||||||||
Total operating revenues |
3,064 | 12,267 | 3,137 | 3,060 | 3,061 | 3,009 | ||||||||
Operating costs |
(1,725 | ) | (6,946 | ) | (1,798 | ) | (1,724 | ) | (1,728 | ) | (1,696 | ) | ||
Adjusted EBITDA |
1,339 | 5,321 | 1,339 | 1,336 | 1,333 | 1,313 | ||||||||
Adjusted EBITDA margin |
43.7 | % | 43.4 | % | 42.7 | % | 43.7 | % | 43.5 | % | 43.6 | % | ||
Capital expenditures |
674 | 3,193 | 809 | 797 | 843 | 744 | ||||||||
Capital intensity |
22.0 | % | 26.0 | % | 25.8 | % | 26.0 | % | 27.5 | % | 24.7 | % | ||
Retail high-speed Internet subscribers |
||||||||||||||
Net activations (A) |
22,671 | 116,599 | 32,518 | 53,122 | 12,803 | 18,156 | ||||||||
Subscribers EOP (A) (B) |
3,442,411 | 3,410,374 | 3,410,374 | 3,377,856 | 3,324,734 | 3,311,931 | ||||||||
Retail TV subscribers |
||||||||||||||
Retail net subscriber (losses) activations(A) |
(1,560 | ) | 21,559 | 13,231 | 13,230 | 5,452 | (10,354 | ) | ||||||
IPTV |
20,916 | 110,790 | 36,473 | 40,091 | 20,653 | 13,573 | ||||||||
Satellite |
(22,476 | ) | (89,231 | ) | (23,242 | ) | (26,861 | ) | (15,201 | ) | (23,927 | ) | ||
Total retail subscribers EOP (A) |
2,764,851 | 2,766,411 | 2,766,411 | 2,753,180 | 2,739,950 | 2,734,498 | ||||||||
IPTV |
1,696,622 | 1,675,706 | 1,675,706 | 1,639,233 | 1,599,142 | 1,578,489 | ||||||||
Satellite |
1,068,229 | 1,090,705 | 1,090,705 | 1,113,947 | 1,140,808 | 1,156,009 | ||||||||
Retail network access services (NAS) |
||||||||||||||
Residential NAS lines (A) |
2,894,029 | 2,960,808 | 2,960,808 | 3,020,819 | 3,094,060 | 3,163,618 | ||||||||
Residential NAS lines net losses (A) |
(66,779 | ) | (258,881 | ) | (60,011 | ) | (73,241 | ) | (69,558 | ) | (56,071 | ) |
(A) | As of January 1, 2019, we are no longer reporting wholesale subscribers in our Internet, TV and residential NAS subscriber bases reflecting our focus on the retail market. Consequently, we restated previously reported 2018 subscribers for comparability. |
(B) | At the beginning of Q1 2019, our retail high-speed Internet subscriber base was increased by 9,366 subscribers due to the transfer of fixed wireless Internet subscribers from our wireless segment. |
BCE Supplementary Financial Information - First Quarter 2019 Page 9
BCE (2)
Net debt and other information
BCE - Net debt and preferred shares |
||||
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
||||
|
March 31 2019 |
December 31 2018 |
||
Debt due within one year |
5,485 | 4,645 | ||
Long-term debt |
22,016 | 19,760 | ||
Preferred shares - BCE (A) |
2,002 | 2,002 | ||
Cash and cash equivalents |
(668 | ) | (425 | ) |
Net debt (4) |
28,835 | 25,982 | ||
Net debt leverage ratio (4)(B) |
2.98 | 2.72 | ||
Adjusted EBITDA /net interest expense ratio (4) |
8.80 | 9.00 | ||
|
(A) | Net debt includes 50% of preferred shares |
(B) | The March 31, 2019 increase in our net debt leverage ratio reflects a one-time increase due to the adoption of IFRS 16 which increased net debt by $2,304 million on January 1, 2019. |
Cash flow information |
||||||||
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
Q1 2018 |
$ change | % change | ||||
Free cash flow (FCF) (4) |
||||||||
Cash flows from operating activities |
1,516 | 1,496 | 20 | 1.3 | % | |||
Capital expenditures |
(850 | ) | (931 | ) | 81 | 8.7 | % | |
Dividends paid on preferred shares |
(26 | ) | (33 | ) | 7 | 21.2 | % | |
Dividends paid by subsidiaries to non-controlling interest |
(27 | ) | (13 | ) | (14 | ) | n.m. | |
Acquisition and other costs paid |
29 | 18 | 11 | 61.1 | % | |||
FCF |
642 | 537 | 105 | 19.6 | % | |||
|
Cash flow information - Historical trend |
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
TOTAL 2018 |
Q4 2018 |
Q3 2018 |
Q2 2018 |
Q1 2018 |
||||||
FCF |
||||||||||||
Cash flows from operating activities |
1,516 | 7,384 | 1,788 | 2,043 | 2,057 | 1,496 | ||||||
Capital expenditures |
(850 | ) | (3,971 | ) | (974 | ) | (1,010 | ) | (1,056 | ) | (931 | ) |
Dividends paid on preferred shares |
(26 | ) | (149 | ) | (46 | ) | (35 | ) | (35 | ) | (33 | ) |
Dividends paid by subsidiaries to non-controlling interest |
(27 | ) | (16 | ) | - | (3 | ) | - | (13 | ) | ||
Acquisition and other costs paid |
29 | 79 | 14 | 19 | 28 | 18 | ||||||
Voluntary defined benefit pension plan contribution |
- | 240 | 240 | - | - | - | ||||||
FCF |
642 | 3,567 | 1,022 | 1,014 | 994 | 537 | ||||||
|
n.m. : | not meaningful |
BCE Supplementary Financial Information - First Quarter 2019 Page 10
BCE (2)
Consolidated Statements of Financial Position
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
March 31 2019 |
December 31 2018 |
|||
ASSETS |
|||||
Current assets |
|||||
Cash |
546 | 425 | |||
Cash equivalents |
122 | - | |||
Trade and other receivables |
2,937 | 3,006 | |||
Inventory |
472 | 432 | |||
Contract assets |
978 | 987 | |||
Contract costs |
383 | 370 | |||
Prepaid expenses |
350 | 244 | |||
Other current assets |
246 | 329 | |||
Total current assets |
6,034 | 5,793 | |||
Non-current assets |
|||||
Contract assets |
477 | 506 | |||
Contract costs |
331 | 337 | |||
Property, plant and equipment |
27,276 | 24,844 | |||
Intangible assets |
13,269 | 13,205 | |||
Deferred tax assets |
129 | 112 | |||
Investments in associates and joint ventures |
803 | 798 | |||
Other non-current assets |
864 | 847 | |||
Goodwill |
10,657 | 10,658 | |||
Total non-current assets |
53,806 | 51,307 | |||
Total assets |
59,840 | 57,100 | |||
LIABILITIES |
|||||
Current liabilities |
|||||
Trade payables and other liabilities |
3,610 | 3,941 | |||
Contract liabilities |
733 | 703 | |||
Interest payable |
203 | 196 | |||
Dividends payable |
735 | 691 | |||
Current tax liabilities |
218 | 253 | |||
Debt due within one year |
5,485 | 4,645 | |||
Total current liabilities |
10,984 | 10,429 | |||
Non-current liabilities |
|||||
Contract liabilities |
204 | 196 | |||
Long-term debt |
22,016 | 19,760 | |||
Deferred tax liabilities |
3,159 | 3,163 | |||
Post-employment benefit obligations |
1,998 | 1,866 | |||
Other non-current liabilities |
941 | 997 | |||
Total non-current liabilities |
28,318 | 25,982 | |||
Total liabilities |
39,302 | 36,411 | |||
EQUITY |
|||||
Equity attributable to BCE shareholders |
|||||
Preferred shares |
4,004 | 4,004 | |||
Common shares |
20,067 | 20,036 | |||
Contributed surplus |
1,153 | 1,170 | |||
Accumulated other comprehensive income (loss) |
20 | 90 | |||
Deficit |
(5,015 | ) | (4,937 | ) | |
Total equity attributable to BCE shareholders |
20,229 | 20,363 | |||
Non-controlling interest |
309 | 326 | |||
Total equity |
20,538 | 20,689 | |||
Total liabilities and equity |
59,840 | 57,100 | |||
Number of common shares outstanding (millions) |
898.8 | 898.2 |
BCE Supplementary Financial Information - First Quarter 2019 Page 11
BCE (2)
Consolidated Cash Flow Data
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) |
Q1 2019 |
Q1 2018 |
$ change | ||||
Net earnings |
791 | 709 | 82 | ||||
Adjustments to reconcile net earnings to cash flows from operating activities |
|||||||
Severance, acquisition and other costs |
24 | - | 24 | ||||
Depreciation and amortization |
1,103 | 992 | 111 | ||||
Post-employment benefit plans cost |
85 | 90 | (5 | ) | |||
Net interest expense |
278 | 238 | 40 | ||||
Losses on investments |
4 | - | 4 | ||||
Income taxes |
293 | 235 | 58 | ||||
Contributions to post-employment benefit plans |
(81 | ) | (87 | ) | 6 | ||
Payments under other post-employment benefit plans |
(18 | ) | (19 | ) | 1 | ||
Severance and other costs paid |
(66 | ) | (35 | ) | (31 | ) | |
Interest paid |
(267 | ) | (236 | ) | (31 | ) | |
Income taxes paid (net of refunds) |
(289 | ) | (284 | ) | (5 | ) | |
Acquisition and other costs paid |
(29 | ) | (18 | ) | (11 | ) | |
Net change in operating assets and liabilities |
(312 | ) | (89 | ) | (223 | ) | |
Cash flows from operating activities |
1,516 | 1,496 | 20 | ||||
Capital expenditures |
(850 | ) | (931 | ) | 81 | ||
Cash dividends paid on preferred shares |
(26 | ) | (33 | ) | 7 | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(27 | ) | (13 | ) | (14 | ) | |
Acquisition and other costs paid |
29 | 18 | 11 | ||||
Free cash flow |
642 | 537 | 105 | ||||
Business acquisitions |
- | (223 | ) | 223 | |||
Acquisition and other costs paid |
(29 | ) | (18 | ) | (11 | ) | |
Acquisition of spectrum licences |
- | (36 | ) | 36 | |||
Disposition of intangibles and other assets |
- | 68 | (68 | ) | |||
Other investing activities |
(24 | ) | (35 | ) | 11 | ||
Increase (decrease) in notes payable |
567 | (57 | ) | 624 | |||
Increase in securitized trade receivables |
31 | - | 31 | ||||
Issue of long-term debt |
- | 1,466 | (1,466 | ) | |||
Repayment of long-term debt |
(204 | ) | (173 | ) | (31 | ) | |
Issue of common shares |
20 | 1 | 19 | ||||
Repurchase of common shares |
- | (175 | ) | 175 | |||
Purchase of shares for settlement of share-based payments |
(76 | ) | (88 | ) | 12 | ||
Cash dividends paid on common shares |
(678 | ) | (646 | ) | (32 | ) | |
Return of capital to non-controlling interest |
- | (29 | ) | 29 | |||
Other financing activities |
(6 | ) | (18 | ) | 12 | ||
|
(399 | ) | 37 | (436 | ) | ||
Net increase in cash and cash equivalents |
243 | 574 | (331 | ) | |||
Cash and cash equivalents at beginning of period |
425 | 625 | (200 | ) | |||
Cash and cash equivalents at end of period |
668 | 1,199 | (531 | ) |
BCE Supplementary Financial Information - First Quarter 2019 Page 12
BCE
Consolidated Cash Flow Data - Historical Trend
(In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 19 |
TOTAL 2018 |
Q4 18 | Q3 18 | Q2 18 | Q1 18 | ||||||||
Net earnings |
791 | 2,973 | 642 | 867 | 755 | 709 | ||||||||
Adjustments to reconcile net earnings to cash flows from operating activities |
||||||||||||||
Severance, acquisition and other costs |
24 | 136 | 58 | 54 | 24 | - | ||||||||
Depreciation and amortization |
1,103 | 4,014 | 1,015 | 999 | 1,008 | 992 | ||||||||
Post-employment benefit plans cost |
85 | 335 | 83 | 82 | 80 | 90 | ||||||||
Net interest expense |
278 | 987 | 255 | 251 | 243 | 238 | ||||||||
Losses on investments |
4 | 34 | 34 | - | - | - | ||||||||
Income taxes |
293 | 995 | 244 | 224 | 292 | 235 | ||||||||
Contributions to post-employment benefit plans |
(81 | ) | (539 | ) | (309 | ) | (69 | ) | (74 | ) | (87 | ) | ||
Payments under other post-employment benefit plans |
(18 | ) | (75 | ) | (17 | ) | (20 | ) | (19 | ) | (19 | ) | ||
Severance and other costs paid |
(66 | ) | (138 | ) | (43 | ) | (27 | ) | (33 | ) | (35 | ) | ||
Interest paid |
(267 | ) | (990 | ) | (295 | ) | (207 | ) | (252 | ) | (236 | ) | ||
Income taxes paid (net of refunds) |
(289 | ) | (650 | ) | (92 | ) | (161 | ) | (113 | ) | (284 | ) | ||
Acquisition and other costs paid |
(29 | ) | (79 | ) | (14 | ) | (19 | ) | (28 | ) | (18 | ) | ||
Net change in operating assets and liabilities |
(312 | ) | 381 | 227 | 69 | 174 | (89 | ) | ||||||
Cash flows from operating activities |
1,516 | 7,384 | 1,788 | 2,043 | 2,057 | 1,496 | ||||||||
Capital expenditures |
(850 | ) | (3,971 | ) | (974 | ) | (1,010 | ) | (1,056 | ) | (931 | ) | ||
Cash dividends paid on preferred shares |
(26 | ) | (149 | ) | (46 | ) | (35 | ) | (35 | ) | (33 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(27 | ) | (16 | ) | - | (3 | ) | - | (13 | ) | ||||
Acquisition and other costs paid |
29 | 79 | 14 | 19 | 28 | 18 | ||||||||
Voluntary defined benefit pension plan contribution |
- | 240 | 240 | - | - | - | ||||||||
Free cash flow |
642 | 3,567 | 1,022 | 1,014 | 994 | 537 | ||||||||
Business acquisitions |
- | (395 | ) | - | (151 | ) | (21 | ) | (223 | ) | ||||
Acquisition and other costs paid |
(29 | ) | (79 | ) | (14 | ) | (19 | ) | (28 | ) | (18 | ) | ||
Voluntary defined benefit pension plan contribution |
- | (240 | ) | (240 | ) | - | - | - | ||||||
Acquisition of spectrum licences |
- | (56 | ) | (1 | ) | (19 | ) | - | (36 | ) | ||||
Disposition of intangibles and other assets |
- | 68 | - | - | - | 68 | ||||||||
Other investing activities |
(24 | ) | (32 | ) | 32 | (9 | ) | (20 | ) | (35 | ) | |||
Increase (decrease) in notes payable |
567 | (123 | ) | (133 | ) | (30 | ) | 97 | (57 | ) | ||||
Increase (decrease) in securitized trade receivables |
31 | (2 | ) | - | - | (2 | ) | - | ||||||
Issue of long-term debt |
- | 2,996 | - | 1,530 | - | 1,466 | ||||||||
Repayment of long-term debt |
(204 | ) | (2,713 | ) | (338 | ) | (1,134 | ) | (1,068 | ) | (173 | ) | ||
Issue of common shares |
20 | 11 | 8 | 1 | 1 | 1 | ||||||||
Repurchase of common shares |
- | (175 | ) | - | - | - | (175 | ) | ||||||
Purchase of shares for settlement of share-based payments |
(76 | ) | (222 | ) | (46 | ) | (39 | ) | (49 | ) | (88 | ) | ||
Cash dividends paid on common shares |
(678 | ) | (2,679 | ) | (677 | ) | (678 | ) | (678 | ) | (646 | ) | ||
Return of capital to non-controlling interest |
- | (51 | ) | - | (10 | ) | (12 | ) | (29 | ) | ||||
Other financing activities |
(6 | ) | (75 | ) | (14 | ) | (20 | ) | (23 | ) | (18 | ) | ||
|
(399 | ) | (3,767 | ) | (1,423 | ) | (578 | ) | (1,803 | ) | 37 | |||
Net increase (decrease) in cash and cash equivalents |
243 | (200 | ) | (401 | ) | 436 | (809 | ) | 574 | |||||
Cash and cash equivalents at beginning of period |
425 | 625 | 826 | 390 | 1,199 | 625 | ||||||||
Cash and cash equivalents at end of period |
668 | 425 | 425 | 826 | 390 | 1,199 |
BCE Supplementary Financial Information - First Quarter 2019 Page 13
Accompanying Notes
(1) | We report our results in three segments: Bell Wireless, Bell Wireline and Bell Media. Our reporting structure reflects how we manage our business and how we classify our results for planning and measuring performance. Throughout this report, we, us, our, the company and BCE mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.
|
(2) |
As required, we adopted International Financial Reporting Standard (IFRS) 16 - Leases effective January 1, 2019. We adopted IFRS 16 using a modified retrospective approach whereby the financial statements of prior periods presented were not restated and continue to be reported under IAS 17 - Leases, as permitted by the specific transition provisions of IFRS 16. The cumulative effect of the initial adoption of IFRS 16 was reflected as an adjustment to the deficit at January 1, 2019. For further details, see Note 2, Basis of presentation and significant accounting policies and Note 3, Adoption of IFRS 16, of the Q1 2019 consolidated interim financial statements. Under IFRS 16, most leases are recognized on the statement of financial position as right-of-use assets within property, plant and equipment, with a corresponding lease liability within debt. Under IFRS 16, expenses related to these leases are recorded in depreciation and interest expense, whereas under IAS 17, operating lease expenses were recorded in operating costs. Under IFRS 16, repayments of principal for these leases are recorded in repayment of long-term debt within cash flows from financing activities and the interest component is recorded in interest paid within cash flows from operating activities. Previously, under IAS 17, operating lease payments were recorded within cash flows from operating activities.
|
(3) | To align with changes in how we manage our business and assess performance, the operating results of The Source (Bell) Electronics Inc. (The Source) are now entirely included within our Wireless segment effective January 1, 2019, with prior periods restated for comparative purposes. Previously, The Sources results were included within our Wireless and Wireline segments. |
(4) |
Non-GAAP Financial Measures Adjusted EBITDA and adjusted EBITDA margin 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 (including post-employment benefit plans service cost) as shown in BCEs consolidated income statements. Adjusted EBITDA for BCEs segments is the same as segment profit as reported in BCEs 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 companys 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.
|
BCE Supplementary Financial Information - First Quarter 2019 Page 14
Adjusted EBITDA and adjusted EBITDA margin have no directly comparable IFRS financial measure. Alternatively, adjusted EBITDA may be reconciled to net earnings as shown in this document. Adjusted net earnings and adjusted earnings per share (EPS) 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 mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest (NCI). 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 mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, 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, as reconciled in this document. Free cash flow The term free cash flow does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. We define free cash flow as cash flows from operating activities, excluding acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude acquisition and other costs paid and voluntary pension funding 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. We consider free cash flow to be an important indicator of the financial strength and performance of our businesses because it shows how much cash is available to pay dividends on common shares, 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 and to evaluate the financial strength and performance of our businesses. The most comparable IFRS financial measure is cash flows from operating activities, as reconciled in this document. Net debt The term net debt does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. We define net debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash and cash equivalents, as shown in BCEs consolidated statements of financial position. We include 50% of outstanding preferred shares in our net debt as it is consistent with the treatment by certain credit rating agencies.
|
BCE Supplementary Financial Information - First Quarter 2019 Page 15
We consider net debt to be an important indicator of the companys financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use net debt to determine a companys financial leverage. Net debt has no directly comparable IFRS financial measure, but rather is calculated using several asset and liability categories from the statements of financial position, as shown in this document. Net debt leverage ratio The net debt leverage ratio does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. We use, and believe that certain investors and analysts use, the net debt leverage ratio as a measure of financial leverage. The net debt leverage ratio represents net debt divided by adjusted EBITDA. For the purposes of calculating our net debt leverage ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA. Adjusted EBITDA to net interest expense ratio The ratio of adjusted EBITDA to net interest expense does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. We use, and believe that certain investors and analysts use, the adjusted EBITDA to net interest expense ratio as a measure of financial health of the company. The adjusted EBITDA to net interest expense ratio represents adjusted EBITDA divided by net interest expense. For the purposes of calculating our adjusted EBITDA to net interest expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA. Net interest expense is twelve-month trailing net interest expense as shown in our statements of cash flows, plus 50% of declared preferred share dividends as shown in our income statements.
|
|
(5) |
Key performance indicators (KPIs) In addition to the non-GAAP financial measures described previously, we use a number of KPIs to measure the success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by other issuers. Average billing per user (ABPU) or subscriber approximates the average amount billed to customers on a monthly basis, which is used to track our recurring billing streams. Wireless blended ABPU is calculated by dividing certain customer billings by the average subscriber base for the specified period and is expressed as a dollar unit per month. Capital intensity is capital expenditures divided by operating revenues. Churn is the rate at which existing subscribers cancel their services. It is a measure of our ability to retain our customers. Wireless churn is calculated by dividing the number of deactivations during a given period by the average number of subscribers in the base for the specified period and is expressed as a percentage per month. Wireless subscriber unit is comprised of an active revenue-generating unit (e.g. mobile device, tablet or wireless Internet products), with a unique identifier (typically International Mobile Equipment Identity (IMEI) number), that has access to our wireless networks. We report wireless subscriber units in two categories: postpaid and prepaid. Prepaid subscriber units are considered active for a period of 90 days (previously 120 to 150 days) following the expiry of the subscribers prepaid balance.
|
BCE Supplementary Financial Information - First Quarter 2019 Page 16
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet, satellite TV, IPTV, and/or NAS. A subscriber is included in our subscriber base when the service has been installed and is operational at the customer premise and a billing relationship has been established.
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BCE Supplementary Financial Information - First Quarter 2019 Page 17
Exhibit 99.3
Form 52-109F2 Certification of Interim Filings - Full Certificate
I, George A. Cope, President and Chief Executive Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of BCE Inc. (the issuer) for the interim period ended March 31, 2019.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
A. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that | |||
I. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | |||
II. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and | |||
B. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: May 2, 2019
(signed) George A. Cope | |
George A. Cope President and Chief Executive Officer |
Form 52-109F2 Certification of Interim Filings - Full Certificate
I, Glen LeBlanc, Executive Vice-President and Chief Financial Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the interim filings) of BCE Inc. (the issuer) for the interim period ended March 31, 2019.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuers other certifying officer(s) and I have, as at the end of the period covered by the interim filings
A. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that | |||
I. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and | |||
II. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and | |||
B. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 Control framework: The control framework the issuers other certifying officer(s) and I used to design the issuers ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuers ICFR that occurred during the period beginning on January 1, 2019 and ended on March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the issuers ICFR.
Date: May 2, 2019
(signed) Glen LeBlanc | |
Glen LeBlanc Executive Vice-President and Chief Financial Officer |
Exhibit 99.4
![]() |
![]() |
For immediate release
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.
BCE reports first quarter 2019 results
MONTRÉAL, May 2, 2019 BCE Inc. (TSX, NYSE: BCE) today reported results for the first quarter (Q1) of 2019 in accordance with the newly adopted International Financial Reporting Standard 16 for leases (IFRS 16). Prior periods were not adjusted.
The strength of Bells industry-leading broadband networks delivered leading customer additions in broadband Internet, TV and postpaid wireless, and higher customer satisfaction reflected in improved churn performance across our operating segments in Q1. A strong start to the year, and the Bell team will continue to lead the way in network, service and content innovation in 2019, including the ongoing expansion of our broadband services into rural Canada and preparation for the introduction of 5G wireless, said George Cope, President and CEO of BCE Inc. and Bell Canada.
Consistent strategic execution across our wireless, wireline and media growth segments delivered growth in revenue, adjusted EBITDA representing our 54th consecutive quarter of year-over-year adjusted EBITDA growth and free cash flow. Canadas best national mobile network attracted 50,000 net new postpaid wireless customers and supported higher data usage and revenue per customer, delivering revenue growth of 4.5%, 11.6% higher adjusted EBITDA and our best churn performance since 2004. In wireline, positive topline growth in business, wholesale and residential including combined retail Internet and IPTV net additions of 44,000 in Q1, up 37.4% over last year increased revenue by 1.8% and adjusted EBITDA by 2.0%. In a challenging media marketplace, Bell Media continued to grow TV advertising revenue, attract new subscribers to next-generation platforms like Crave and achieve substantial cost savings, resulting in a 26.9% increase in adjusted EBITDA for Q1.
1/16
BUSINESS DEVELOPMENTS
Lucky Mobile and Virgin Mobile prepaid at Dollarama
Bells Lucky Mobile and Virgin Mobile Canada now offer prepaid wireless service at value retailer Dollarama Inc.s more than 1,200 locations across Canada. The exclusive partnership enables budget-conscious Canadians to purchase a Lucky or Virgin Mobile prepaid SIM card at Dollarama and activate their own mobile device with no activation fee. With talk and text plans starting at just $10 per month, Lucky Mobile has proven exceptionally popular with Canadians looking for low-cost wireless access, welcoming the most net new prepaid customers in 2018.
Broadband Internet expansion in rural communities
Bringing broadband Internet to smaller towns and rural locations, Bells innovative Wireless Home Internet service has now reached more than 60 communities in Ontario and Quebec. Recent expansions include the cottage country regions of Muskoka and Haliburton County, Kawartha Lakes and Peterborough County, as well as Quinte West and Hastings, Lennox & Addington, Northumberland and Prince Edward Counties. Bell also announced the expansion of fibre to the premises (FTTP) connections to the communities of Louiseville, Quebec and Carman, Manitoba.
Bell spectrum update
With significant spectrum assets in low, mid and high frequency bands, Bell chose not to acquire any low-band 600 MHz spectrum in the recent federal auction. Our existing low-band spectrum, combined with network enhancements like cell splitting as well as re-farming of spectrum made available from the shutdown of Bells CDMA network on April 30, enable Bell to deliver broadband 4G and 5G services for significantly less capital than buying 600 MHz spectrum. Note that Bells main peer companies in the United States also chose not to own any 600 MHz spectrum in their markets. Bell looks forward to participating in the upcoming auctions of 3500 MHz and high band millimetre wave spectrum that will enable the deployment of 5G wireless service.
Bell LTE wireless again recognized as Canadas fastest
Bells 4G LTE wireless network continues to be recognized as the fastest in Canada, most recently by Tutela. The network analysis firm found Bell LTE Advanced delivers the best average upload and download speeds of any mobile network in Canada. Tutelas report, which also gave Bell Mobility and Virgin Mobile top scores for consistent connection quality, follows PCMags Fastest Mobile Networks in Canada study, in which Bell clocked the fastest maximum wireless upload and download speeds in the country.
BBM expands cloud services with Google
Bell Business Markets (BBM) and Google have introduced hybrid cloud connectivity for business customers to connect to the Google Cloud Platform globally via direct fibre connections on Bells private network. The new service joins the Bell Cloud Connect portfolio of cloud and data centre solutions with partners including Amazon Web Services, IBM and Microsoft.
Excellence in Canadian media, record-breaking viewership
The season 8 premiere of HBOs Game of Thrones on Crave was the most-watched episode in Canadian entertainment specialty and pay TV history attracting 3.3 million viewers across Craves linear, on demand and streaming platforms. CTVs original comedy Jann is the most-watched new Canadian series of the year. Premium pay TV channel Starz launched March 5, replacing the former TMN Encore. Day Pass subscriptions to TSN Direct and RDS Direct, the
2/16
first single day all-access streaming option in Canada, launched March 4. Bell Media and its production partners received 55 awards at the Canadian Screen Awards for excellence in Canadian content creation.
BCE RESULTS
FINANCIAL HIGHLIGHTS |
|||
($ millions except per share amounts) (unaudited) | Q1 2019 | Q1 2018 | % change |
BCE |
|||
Operating revenues |
5,734 | 5,590 | 2.6% |
Net earnings |
791 | 709 | 11.6% |
Net earnings attributable to common shareholders |
740 | 661 | 12.0% |
Adjusted net earnings(1) |
692 | 719 | (3.8%) |
Adjusted EBITDA(2) |
2,409 | 2,254 | 6.9% |
EPS |
0.82 | 0.73 | 12.3% |
Adjusted EPS(1) |
0.77 | 0.80 | (3.8%) |
Cash flows from operating activities |
1,516 | 1,496 | 1.3% |
Capital expenditures |
(850) | (931) | 8.7% |
Free cash flow(3) |
642 | 537 | 19.6% |
The first quarter represents a very positive beginning to 2019 as diligent operational execution delivered strong financials well within our guidance targets, even adjusting for the application of IFRS 16, said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada. Excluding IFRS 16, adjusted EBITDA increased in line with our historical rate of 2% to 4%. This positive year-over-year growth across all Bell operating segments, together with a declining capital intensity ratio, propelled a 19.6% increase in free cash flow in Q1. With a favourable profile for all our operating segments as we move forward in 2019, we expect continued free cash flow generation to enable our capital investment plans while fully supporting the increased BCE common share dividend for 2019.
BCE operating revenue was up 2.6% in Q1 to $5,734 million. Service revenue grew 1.6% to $5,045 million and product revenue increased 10.1% to $689 million. This reflects increases at Bell Wireless and Bell Wireline, partly offset by a modest year-over-year revenue decline at Bell Media.
Net earnings increased 11.6% to $791 million and net earnings attributable to common shareholders totalled $740 million, or $0.82 per share, up 12.0% and 12.3% respectively over Q1 2018. Higher net earnings and net earnings per common share were the result of growth in adjusted EBITDA and higher other income, driven mainly by net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans. This was moderated by higher depreciation, finance costs, income taxes, and severance, acquisition and other costs. Overall, the adoption of IFRS 16 did not have a significant impact on net earnings.
Excluding severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net (losses) gains on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest, adjusted net earnings were $692 million, or $0.77 per common share, compared to $719 million, or $0.80 per common share, in Q1 of last year.
3/16
Adjusted EBITDA grew 6.9% to $2,409 million in Q1, driven by year-over-year increases of 11.6% at Bell Wireless, 2.0% at Bell Wireline and 26.9% at Bell Media. Adjusted EBITDA was positively impacted in the quarter by IFRS 16 as most operating lease expenses are now recorded as depreciation and interest expense rather than operating costs within adjusted EBITDA. BCEs consolidated adjusted EBITDA margin(2) increased to 42.0% from 40.3% in Q1 2018, reflecting the high flow-through of wireless and wireline revenue growth, increasing broadband Internet scale, and the favourable year-over-year benefit on adjusted EBITDA from the application of IFRS 16.
BCE capital expenditures totalled $850 million, down from $931 million in Q1 2018, representing a capital intensity(5) ratio (capital expenditures as a percentage of total revenue) of 14.8%, compared to 16.7% last year. The year-over-year decline reflected slower construction activity this winter compared to last year together with lower planned spending in 2019. Capital spending this quarter focused on expanding our FTTP and fixed wireless to the home (WTTH) footprints to more locations; ongoing wireless investment, including the deployment of small cells, to improve network coverage, signal quality, data backhaul and speeds; and higher spending on digital media platforms.
BCE cash flows from operating activities totalled $1,516 million, up 1.3% over Q1 2018. The increase was mainly the result of higher adjusted EBITDA, partly offset by a decrease in cash from working capital, higher interest paid, which reflects the unfavourable impact from the adoption of IFRS 16, and higher severance and other costs paid. Free cash flow generated in the quarter was $642 million, a 19.6% increase from Q1 of last year, driven by higher cash flows from operating activities excluding acquisition and other costs paid, and lower capital expenditures.
Starting this quarter, we no longer report wholesale subscribers in our Internet, TV and residential NAS subscriber bases, due to our focus on the retail market. Previously reported 2018 subscriber figures were restated for comparability. In Q1, BCE reported 50,204 net new wireless postpaid subscribers and a net loss of 11,922 wireless prepaid subscribers; 22,671 net new retail Internet customers; 20,916 net new IPTV customers; and a decrease of 22,476 net retail satellite TV customers. Retail residential NAS line net losses totalled 66,779.
BCE customer connections across wireless and retail Internet, TV and residential NAS totalled 18,582,126 at the end of Q1, up 1.0% over last year. The total included 9,480,835 wireless customers(4), up 3.1% (including 8,808,189 postpaid customers, an increase of 4.0%); 3,442,411 retail Internet subscribers(4), up 3.9%; 2,764,851 retail TV subscribers, up 1.1% (including 1,696,622 IPTV customers, an increase of 7.5%); and 2,894,029 retail residential NAS lines, down 8.5%.
BCE OPERATING RESULTS BY SEGMENT
To align with changes in how we manage our business and assess performance, the operating results of The Source (Bell) Electronics Inc. (The Source) are now included entirely within our Wireless segment effective January 1, 2019, with prior periods restated for comparative purposes. Previously, The Sources results were included within our Wireless and Wireline segments.
4/16
Bell Wireless
Total operating revenue increased 4.5% to $2,112 million, with service revenue up 3.4% to $1,566 million driven mainly by healthy year-over-year subscriber base growth. Service revenue in Q1 2018 was impacted unfavourably by a $14 million regulatory charge related to lower final rates set by the CRTC in its decision regarding wholesale domestic roaming tariffs. Product revenue grew 7.7% to $546 million on a higher sales mix of premium handsets compared to last year.
Wireless adjusted EBITDA grew 11.6% to $905 million, yielding a 2.8 percentage-point increase in margin to 42.9%. This reflected the flow-through of strong revenue growth, and a 0.2% decline in operating costs due to the favourable impact of IFRS 16, lower advertising expense and reduced labour costs driven by cost saving initiatives, largely offset by higher year-over-year handset costs and increased network operating expenses.
Bell Wireline
Wireline operating revenue increased 1.8% to $3,064 million, reflecting positive top-line growth across Bells residential, business and wholesale units. Service revenue was up 1.1% to $2,920 million, driven by Internet and IPTV subscriber base growth; the flow-through of annual price increases for residential services that contributed to higher revenue per household, growth in business IP connectivity and business services revenue, including the contribution of Axia NetMedia; and increased sales of international wholesale long distance minutes. Product revenue grew 20.0% to $144 million, the result of increased data product sales particularly to large enterprise business customers in the public sector.
5/16
Wireline adjusted EBITDA was up 2.0% to $1,339 million due to continued strong broadband customer growth, improved business markets results and the favourable impact of IFRS 16 on operating costs. This drove a 10 basis-point increase in Bell Wirelines North American-leading revenue margin to 43.7%.
Bell Media
Media operating revenue declined 0.5% to $745 million, the result of lower year-over-year advertising revenue, while subscriber revenue was essentially stable compared to Q1 2018. Radio advertising revenue decreased due to continued market softness. This was largely offset
6/16
by higher TV advertising revenue, supported by improved pricing flexibility and stronger advertising demand following the shift in spending last year to the main broadcaster of the 2018 Winter Olympics. This was the third consecutive quarter of year-over-year TV advertising growth for Bell Media.
Media adjusted EBITDA increased 26.9% to $165 million, due to a 6.3% reduction in operating costs to $580 million, driven mainly by the favourable impact of IFRS 16 as well as programming and production cost containment initiatives.
COMMON SHARE DIVIDEND
BCEs Board of Directors has declared a quarterly dividend of $0.7925 per common share, payable on July 15, 2019 to shareholders of record at the close of business on June 14, 2019.
7/16
OUTLOOK FOR 2019
BCE confirmed its financial guidance targets for 2019, as provided on February 7, 2019, as follows:
February 7 Guidance |
May 2 Guidance |
|
Revenue growth |
1% 3% | on track |
Adjusted EBITDA growth |
5% 7% | on track |
Capital intensity |
approx. 16.5% | on track |
Adjusted EPS |
$3.48 $3.58 | on track |
Free cash flow growth |
7% 12% | on track |
Annualized common dividend per share |
$3.17 | $3.17 |
Dividend payout policy(3) |
65% 75% of free cash flow | on track |
Note that excluding the impact of IFRS 16, adjusted EBITDA growth for 2019 is projected to be 2% to 4%, consolidated free cash flow growth 3% to 7%, and adjusted EPS $3.53 to $3.63.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss Q1 2019 results on Thursday, May 2 at 8:00 am (Eastern). Media are welcome to participate on a listen-only basis. Please dial toll-free 1-800-478-9326 or 416-340-2219. A replay will be available until midnight June 6, 2019 by dialing 1-800-408-3053 or 905-694-9451 and entering passcode 7915771#.
A live audio webcast of the conference call will be available on BCEs website at: BCE Q1-2019 conference call. The mp3 file will be available for download on this page later in the day.
NOTES
The information contained in this news release is unaudited.
(1) | The 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 mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest (NCI). 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 mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, 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 |
8/16
and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.
($ millions except per share amounts) |
|||||
|
Q1 2019 | Q1 2018 | |||
|
TOTAL | PER SHARE | TOTAL | PER SHARE | |
Net earnings attributable to common shareholders |
740 | 0.82 | 661 | 0.73 | |
Severance, acquisition and other costs |
18 | 0.02 | (1) | - | |
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans |
(73) | (0.07) | 56 | 0.07 | |
Net losses on investments |
4 | - | - | - | |
|
|||||
Impairment charges |
3 | - | 3 | - | |
Adjusted net earnings |
692 | 0.77 | 719 | 0.80 |
(2) | 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 BCEs consolidated income statements. Adjusted EBITDA for BCEs segments is the same as segment profit as reported in Note 5, Segmented information, in BCEs Q1 2019 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 companys 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 is also 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. |
9/16
($ millions) |
|||
|
Q1 2019 | Q1 2018 | |
Net earnings |
791 | 709 | |
Severance, acquisition and other costs |
24 | - | |
Depreciation |
882 | 780 | |
Amortization |
221 | 212 | |
Finance costs |
|||
Interest expense |
283 | 240 | |
Interest on post-employment benefit obligations |
16 | 17 | |
Other (income) expense |
(101) | 61 | |
Income taxes |
293 | 235 | |
Adjusted EBITDA |
2,409 | 2,254 | |
BCE operating revenues |
5,734 | 5,590 | |
Adjusted EBITDA margin |
42.0% | 40.3% |
(3) | The terms free cash flow and dividend payout ratio 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 and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude acquisition and other costs paid and voluntary pension funding 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. We consider free cash flow to be an important indicator of the financial strength and performance of our businesses because it shows how much cash is available to pay dividends on common shares, 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 and to evaluate the financial strength and performance of our businesses. The most comparable IFRS financial measure is cash flows from operating activities. We define dividend payout ratio as dividends paid on common shares divided by free cash flow. We consider dividend payout ratio to be an important indicator of the financial strength and performance of our businesses because it shows the sustainability of the companys dividend payments. The following table is a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis. |
($ millions) |
|||
Q1 2019 | Q1 2018 | ||
Cash flows from operating activities |
1,516 | 1,496 | |
Capital expenditures |
(850) | (931) | |
Cash dividends paid on preferred shares |
(26) | (33) | |
Cash dividends paid by subsidiaries to NCI |
(27) | (13) | |
Acquisition and other costs paid |
29 | 18 | |
Free cash flow |
642 | 537 |
(4) | At the beginning of Q1 2019, we adjusted our wireless subscriber base to remove 167,929 subscribers (72,231 postpaid and 95,698 prepaid) as follows: 65,798 subscribers (19,195 postpaid and 46,603 prepaid) due to the completion of the shutdown of the CDMA network on |
10/16
April 30, 2019; 49,095 prepaid subscribers as a result of a change to our deactivation policy across all brands to 90 days from 120-150 days previously; 43,670 postpaid subscribers due to a further refinement of our subscriber definition for Internet of Things (IoT) as a result of technology evolution; the transfer of 9,366 postpaid fixed wireless Internet customers to Bell Internet.
(5) We use ABPU, churn and capital intensity 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.
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 financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), BCEs 2019 annualized common share dividend and common share dividend payout policy, our network deployment and capital investment plans, our business outlook, objectives, plans and strategic priorities, and other statements that are not historical facts. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws and of the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. These statements are not guarantees of future performance or events, 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 May 2, 2019 and, accordingly, are subject to change after such date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Except as otherwise indicated by BCE, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after May 2, 2019. The financial impact of these transactions and special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Forward-looking statements are presented in this news release for the purpose of assisting investors and others in understanding certain key elements of our expected 2019 financial results, as well as our objectives, strategic priorities and business outlook for 2019, and in obtaining a better understanding of our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Material Assumptions
A number of economic, market, operational and financial assumptions were made by BCE in preparing its forward-looking statements contained in this news release, including, but not limited to:
11/16
Canadian Economic and Market Assumptions
Assumptions Concerning our Bell Wireless Segment
Assumptions Concerning our Bell Wireline Segment
12/16
Assumptions Concerning our Bell Media Segment
Financial Assumptions Concerning BCE
The following constitute BCEs principal financial assumptions for 2019:
13/16
The foregoing assumptions, although considered reasonable by BCE on May 2, 2019, may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth in this news release.
Material Risks
Important risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in, or implied by, our forward-looking statements, including our 2019 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2019 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:
14/16
15/16
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 BCEs 2018 Annual MD&A dated March 7, 2019 (included in BCEs 2018 Annual Report) and BCEs 2019 First Quarter MD&A dated May 1, 2019 for additional information with respect to certain of these and other assumptions and risks, filed by BCE with the Canadian provincial securities regulatory authorities (available at Sedar.com) and with the U.S. Securities and Exchange Commission (available at SEC.gov). These documents are also available at BCE.ca.
About BCE
BCE is Canadas largest communications company, providing advanced Bell broadband wireless, TV, Internet and business communications services alongside Canadas premier content creation and media assets from Bell Media. To learn more, please visit Bell.ca or BCE.ca.
The Bell Lets Talk initiative promotes Canadian mental health with national awareness and anti-stigma campaigns like Bell Lets Talk Day and significant Bell funding of community care and access, research and workplace leadership initiatives. To learn more, please visit Bell.ca/LetsTalk.
Media inquiries:
Marie-Eve Francoeur
514-391-5263
marie-eve.francoeur@bell.ca
Investor inquiries:
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
16/16
Exhibit 99.5
NOTICE OF RELIANCE
SECTION 13.4 OF NATIONAL INSTRUMENT 51-102
CONTINUOUS DISCLOSURE OBLIGATIONS
To: | Alberta Securities Commission
British Columbia Securities Commission Manitoba Securities Commission Financial and Consumer Services Commission, New Brunswick Office of the Superintendent of Securities, Newfoundland and Labrador Nova Scotia Securities Commission Ontario Securities Commission Office of the Superintendent of Securities, Prince Edward Island Autorité des marchés financiers Financial and Consumer Affairs Authority of Saskatchewan Toronto Stock Exchange |
Notice is hereby given that Bell Canada relies on the continuous disclosure documents filed by BCE Inc. pursuant to the exemption from the requirements of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) provided in Section 13.4 of NI 51-102.
The continuous disclosure documents of BCE Inc. can be found for viewing in electronic format at www.sedar.com.
Attached to this notice and forming part thereof is the consolidating summary financial information for BCE Inc. as required by Section 13.4 of NI 51-102.
Dated: May 2, 2019
BELL CANADA
|
|
By: | (signed) Thierry Chaumont |
Name: | Thierry Chaumont |
Title: | Senior Vice-President and Controller |
BELL CANADA |
UNAUDITED SELECTED SUMMARY FINANCIAL INFORMATION
(1)
For the periods ended March 31, 2019 and 2018
(in millions of Canadian dollars)
BCE Inc. fully and unconditionally guarantees the payment obligations of its 100% owned subsidiary Bell Canada under the public debt issued by Bell Canada. Accordingly, the following summary financial information is provided by Bell Canada in compliance with the requirements of section 13.4 of National Instrument 51-102 (Continuous Disclosure Obligations) providing for an exemption for certain credit support issuers. The tables below contain selected summary financial information for (i) BCE Inc. (as credit supporter), (ii) Bell Canada (as credit support issuer) on a consolidated basis, (iii) BCE Inc.s subsidiaries, other than Bell Canada, on a combined basis, (iv) consolidating adjustments, and (v) BCE Inc. and all of its subsidiaries on a consolidated basis, in each case for the periods indicated. Such summary financial information for BCE Inc. and Bell Canada and all other subsidiaries is intended to provide investors with meaningful and comparable financial information about BCE Inc. and its subsidiaries. This summary financial information should be read in conjunction with BCE Inc.s audited consolidated financial statements for the year ended December 31, 2018 and the unaudited consolidated interim financial report for the three months ended March 31, 2019.
For the periods ended March 31:
|
BCE INC. |
BELL CANADA CONSOLIDATED (CREDIT SUPPORT ISSUER) |
SUBSIDIARIES OF BCE INC. OTHER THAN BELL CANADA(3) |
CONSOLIDATING ADJUSTMENTS(4) |
BCE INC. CONSOLIDATED |
|||||
|
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
Operating revenues |
| | 5,734 | 5,591 | | | | (1) | 5,734 | 5,590 |
Net earnings from continuing operations attributable to owners |
778 | 697 | 773 | 687 | 33 | 35 | (806) | (722) | 778 | 697 |
Net earnings attributable to owners |
778 | 697 | 773 | 687 | 33 | 35 | (806) | (722) | 778 | 697 |
As at March 31, 2019 and December 31, 2018, respectively:
BCE INC. (CREDIT SUPPORTER)(2) |
BELL CANADA CONSOLIDATED (CREDIT SUPPORT ISSUER) |
SUBSIDIARIES OF BCE INC. OTHER THAN BELL CANADA(3) |
CONSOLIDATING ADJUSTMENTS(4) |
BCE INC. CONSOLIDATED |
||||||
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Total Current Assets | 572 | 576 | 7,856 | 7,400 | 317 | 286 | (2,711) | (2,469) | 6,034 | 5,793 |
Total Non-current Assets | 22,526 | 22,429 | 47,105 | 44,616 | 52 | 53 | (15,877) | (15,791) | 53,806 | 51,307 |
Total Current Liabilities | 2,771 | 2,531 | 10,861 | 10,317 | 63 | 50 | (2,711) | (2,469) | 10,984 | 10,429 |
Total Non-current Liabilities | 98 | 113 | 27,608 | 25,231 | 51 | 84 | 561 | 554 | 28,318 | 25,982 |
(1) | The summary financial information is prepared in accordance with International Financial Reporting Standards (IFRS) and is in accordance with generally accepted accounting principles issued by the Canadian Accounting Standards Board for publicly-accountable enterprises. As required, BCE adopted IFRS 16 Leases effective January 1, 2019 using a modified retrospective approach whereby the financial results of prior periods presented were not restated and continue to be reported under IAS 17 Leases, as permitted by IFRS 16. |
(2) | This column accounts for investments in all subsidiaries of BCE Inc. under the equity method. |
(3) | This column accounts for investments in all subsidiaries of BCE Inc. (other than Bell Canada) on a consolidated basis. |
(4) | This column includes the necessary amounts to eliminate the intercompany balances between BCE Inc., Bell Canada and other subsidiaries and other adjustments to arrive at the information for BCE Inc. on a consolidated basis. |
Exhibit 99.6
BCE Inc.
EXHIBIT TO 2019 FIRST QUARTER FINANCIAL STATEMENTS
EARNINGS COVERAGE
The following consolidated financial ratios are calculated for the twelve months ended March 31, 2019 and give effect to the issuance and redemption of all long-term debt since April 1, 2018 as if these transactions occurred on April 1, 2018 and are based on unaudited financial information of BCE Inc.
March 31, 2019 | |
Earnings coverage of interest on debt requirements based on net earnings attributable to owners of BCE Inc. before interest expense and income tax: | 4.4 times |
Earnings coverage of interest on debt requirements based on net earnings attributable to owners of BCE Inc. before interest expense, income tax and non-controlling interest: | 4.4 times |
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