Mr. George Cope reports

BCE REPORTS FIRST QUARTER 2017 RESULTS, ANNOUNCES UPDATED 2017 FINANCIAL TARGETS

BCE Inc. has released its results for the first quarter of 2017 and provided updated financial guidance targets for 2017 to reflect the acquisition of Manitoba Telecom Services Inc.

Highlights

• Net earnings of $725-million with net earnings attributable to common shareholders of $679-million, or 78 cents per common share; adjusted net earnings of $758-million delivered 2.4-per-cent increase in adjusted earnings per share of 87 cents;
• Cash flow from operating activities of $1,313-million; free cash flow up 17.0 per cent;
• Service revenue growth of 2.9 per cent and disciplined subscriber acquisition delivered 2.4-per-cent increase in BCE adjusted earnings before interest, taxes, depreciation and amortization and higher margin of 41.1 per cent despite regulatory financial impacts in the quarter;
• 73,000 broadband subscriber net additions in postpaid wireless, IPTV and Internet;
• Strong wireless results: 35,782 postpaid net additions, up 38.7 per cent; 8.0-per-cent increase in service revenue on 4.2-per-cent-higher ARPU; adjusted EBITDA growth of 7.5 per cent;
• Wireline adjusted EBITDA growth of 0.4 per cent, positive for an 11th consecutive quarter; industry-leading margin increased to 42.3 per cent on 0.5-per-cent-lower operating costs;
• Rollout of Bell fibre to 1.1 million Montreal homes and businesses announced; by the end of 2017, more than 3.6 million locations in seven provinces expected to have direct fibre connections;
• Acquisition of Manitoba Telecom Services successfully completed March 17; BCE updates 2017 financial targets, Bell MTS integration under way.

  
                           FINANCIAL HIGHLIGHTS                                                   
                     (in millions, except per share) 

                                                    Q1 2017     Q1 2016
BCE
Operating revenues                                   $5,384      $5,270
Net earnings                                            725         758
Net earnings attributable to common shareholders        679         707
Adjusted net earnings                                   758         734
Adjusted EBITDA                                       2,214       2,163
EPS                                                    0.78        0.82
Adjusted EPS                                           0.87        0.85
Cash flows from operating activities                  1,313       1,290
Free cash flow                                          489         418

"Bell's broadband strategy continued to gain momentum in a marketplace marked by intense competition, regulatory impacts and a clear opportunity for Bell's superior network, service and media innovations to stand out. With efficient operation and marketplace discipline, the Bell team's focus on bringing the highest-quality communications to Canadians resulted in service revenue, adjusted EBITDA and free cash flow growth, and a gain of 73,000 new broadband IPTV, Internet and postpaid wireless customers in Q1," said George Cope, president and chief executive officer of BCE and Bell Canada. "Reflecting our mobile network leadership, Bell wireless posted very strong increases in postpaid net subscribers, revenue and adjusted EBITDA. In wireline, ongoing usage growth and competitive discipline in subscriber acquisition for our superior Fibe TV and Internet services delivered residential service revenue growth and our 11th straight quarter of wireline adjusted EBITDA growth. Bell Media's leadership across multimedia segments and ongoing innovation in next-generation platforms like CraveTV resulted in revenue growth despite the impact of unfortunate regulatory decisions and a soft ad market.

"We welcomed Manitoba Telecom Services to Bell in Q1 and launched the new Bell MTS, combining the local talent and expertise of the MTS team with Bell's national scale to expand broadband wireless, TV and Internet services throughout Manitoba. As we announce our Q1 2017 results, BCE is proud to hold our annual general meeting of shareholders here today in Ottawa at the National Gallery, celebrating 150 years of confederation and Bell's own 137th anniversary in three days. Bell has been a partner in Canada's growth and prosperity since 1880, and our team will continue to lead investment in the world-class network infrastructure, service and media innovations that will keep Canada at the forefront of broadband communications worldwide."

Bell is focused on achieving a clear goal -- to be recognized by customers as Canada's leading communications company -- through the execution of six strategic imperatives: invest in broadband networks and services; accelerate wireless; leverage wireline momentum; expand media leadership; improve customer service; and achieve a competitive cost structure. This broadband leadership strategy has delivered world-class fibre and wireless LTE networks; continued strong performance across wireless, TV, Internet and media growth services; 46 consecutive quarters of uninterrupted year-over-year adjusted EBITDA growth; and 13 increases to the BCE common share dividend since the end of 2008 -- a total increase of 97 per cent.

Corporate developments

For full details of BCE's corporate developments in the quarter, please refer to the BCE Q1 2017 shareholder report at the company's website.

Acquisition of MTS completed

BCE launched Bell MTS in Manitoba following the completion of its acquisition of MTS on March 17. Uniting the local and national strengths of MTS and Bell, the new Bell MTS will bring unprecedented expansion in broadband communications to Manitoba cities, traffic corridors, rural communities and remote locations with Bell's five-year, $1-billion capital investment plan for the province.

City of Montreal fibre infrastructure buildout

Bell plans to invest a further $854-million to bring direct fibre links and the fastest Internet speeds available to 1.1 million residences and business locations throughout the city of Montreal. By the end of the year, Bell's direct fibre connections will reach approximately 40 per cent of homes and businesses throughout the province of Quebec and more than 3.6 million total locations across seven provinces.

Bell Mobility LTE network first in North America to be quad band capable

Bell Mobility announced on April 20 that its award-winning LTE network is the first in North America capable of delivering quad band LTE Advanced (LTE-A) speeds; with 256 QAM (quadrature amplitude modulation) enhancements, the network can now deliver mobile data speeds up to 750 megabits per second (Mbps), with expected average speeds of 22 to 174 Mbps. Bell also announced the new Samsung Galaxy S8 and S8+ smart phones will be the first devices able to take advantage of these network speeds with a software update available in coming months.

Common share dividend increase

BCE announced a 5.1-per-cent increase in the annual common share dividend, from $2.73 per share to $2.87 per share, effective with BCE's 2017 first quarter dividend paid on April 15, 2017. It is BCE's 13th such increase since the end of 2008, representing overall growth of 97 per cent in the BCE annual common share dividend.

$1.5-billion public debt offering

On Feb. 27, Bell Canada completed a public offering of $1.5-billion of medium-term notes (MTN) debentures in two series: the $1-billion 2.7 per cent Series M-44 maturing on Feb. 27, 2024, and the $500-million 4.45 per cent Series M-45 maturing on Feb. 27, 2047. The net proceeds were used to partially finance BCE's acquisition of MTS and repay short-term debt.

Karen Sheriff nominated to the BCE board

On March 8, BCE announced the nomination of Ms. Sheriff to the board of directors. One of Canada's most successful communications executives, Ms. Sheriff was most recently chief executive officer of Q9 Networks and earlier CEO of Bell Aliant. Ronald Brenneman retires from the board at BCE's annual general shareholder meeting today after more than 13 years of distinguished service, including as chair of the management resources and compensation committee and a member of the pension fund committee.

BCE results

"Our Q1 financial results demonstrated a very good start to 2017, reflecting our team's consistent execution in an intensely competitive marketplace and focused commitment to deliver profitable subscriber growth, control costs and invest significantly in advanced wireless and wireline broadband fibre networks to well position Bell for future growth," said Glen LeBlanc, chief financial officer of BCE and Bell Canada. "Our successful closing of the MTS acquisition supports the increased 2017 financial guidance targets we announced today. With its immediate free cash flow accretion, upsized operational synergies of $100-million and substantial tax savings, Bell MTS fully supports our broadband leadership strategy and our dividend growth objective."

BCE operating revenue was up 2.2 per cent in Q1 to $5,384-million, reflecting service revenue growth for all three Bell operating segments. Product revenue declined 8.0 per cent to $333-million, reflecting intensely competitive mobile handset promotional discounting and lower wireline product sales to business customers.

Net earnings decreased 4.4 per cent to $725-million in Q1 while net earnings attributable to common shareholders totalled $679-million, or 78 cents per share, down 4.0 per cent and 4.9 per cent respectively, due to higher severance, acquisition and other costs, and an increased average number of BCE common shares outstanding, both due to the acquisition of MTS. Excluding severance, acquisition and other costs, net losses or gains on investments, impairment charges, and early debt redemption costs, adjusted net earnings increased 3.3 per cent to $758-million, or 87 cents per common share.

BCE's adjusted EBITDA grew 2.4 per cent to $2,214-million in Q1, driven by increases of 7.5 per cent at Bell wireless and 0.4 per cent at Bell wireline, which reflected a nominal financial contribution from the acquisition of MTS completed on March 17. This was partly offset by a 7.6-per-cent decline in adjusted EBITDA at Bell Media due primarily to the loss of simultaneous substitution rights for Super Bowl LI.

BCE's consolidated adjusted EBITDA margin increased modestly to 41.1 per cent in Q1 from 41.0 per cent last year as the flow-through of strong wireless service revenue growth and wireline operating cost savings more than offset greater wireless postpaid subscriber acquisition and retention spending, richer wireline customer acquisition and retention discounts offered to match aggressive competitor bundle promotions, higher media content costs, and the margin impact from the continuing decline in traditional voice services.

Consolidated adjusted EBITDA and margin performance in Q1 were also unfavourably impacted by CRTC decisions related to wholesale Internet tariffs, customer cancellation refunds and Super Bowl simultaneous substitution, all of which collectively totalled approximately $35-million.

BCE continued its strategic investment in advanced broadband wireline and wireless infrastructure with capital expenditures of $852-million in Q1, the same total as in Q1 2016. This represented a capital intensity ratio (capital expenditures as a percentage of total revenue) improvement to 15.8 per cent this quarter from 16.2 per cent in Q1 2016. Capital investment focused on expanding broadband fibre directly to more homes and businesses, including the buildout of Gigabit Fibe infrastructure in Toronto and other urban locations; continued investment in Bell's leading LTE and LTE Advanced (LTE-A) networks, including the deployment of small-cell technology to optimize coverage, signal quality and data capacity; and wireless and Internet network capacity to support subscriber growth and accelerating data usage.

BCE cash flows from operating activities were $1,313-million, up 1.8 per cent from $1.29-billion in Q1 2016, the result of higher adjusted EBITDA, lower severance and other costs paid, and a positive change in working capital. This was partly offset by higher acquisition and other costs paid related mainly to the MTS acquisition and higher income taxes. BCE free cash flow generated this quarter was $489-million, 17.0 per cent higher than last year, driven by increased cash flows from operating activities excluding acquisition and other costs paid.

In Q1 2017, BCE gained 35,782 net new wireless postpaid customers and reported a net loss of 35,110 prepaid subscribers; 22,402 net new Fibe TV customers and a net loss of 38,065 satellite TV customers; and 14,989 net new high-speed Internet customers. NAS line net losses totalled 103,274. As a result of the MTS acquisition, Bell's wireless subscriber base increased by 476,932 (including 418,427 postpaid customers), while high-speed internet, TV and NAS subscribers increased by 229,470, 108,107 (including 104,661 IPTV customers) and 419,816, respectively.

Total BCE customer connections across all services, including MTS, totalled 22,075,373 at the end of Q1, up 5.3 per cent from the year before. The total includes 8,946,476 wireless customers, up 8.6 per cent over last year (including 8,144,936 postpaid customers, an increase of 10.0 per cent); total high-speed Internet subscribers of 3,717,270, up 9.0 per cent; total TV subscribers of 2,837,353, up 3.2 per cent (including 1,465,007 Fibe TV customers, an increase of 19.1 per cent); and total NAS lines of 6,574,274, an increase of 0.1 per cent.

BCE operating results by segment

Bell wireless

Wireless revenue growth further accelerated in Q1, increasing 7.1 per cent over Q1 2016 to $1,814-million. Service revenue increased 8.0 per cent to $1,715-million, driven by an expanding postpaid subscriber base, strong growth in blended average revenue per user (ARPU) and a favourable contribution from MTS. Despite a higher number of subscriber gross additions and customer device upgrades year over year, product revenue decreased 5.7 per cent to $99-million due to competitive promotional smart phone pricing.

Wireless adjusted EBITDA grew 7.5 per cent to $818-million, from $761-million in Q1 2016, on the flow-through of strong service revenue growth and price discipline, yielding a service revenue margin of 47.7 per cent. This was achieved even with a $35-million increase in total combined retention spending and subscriber acquisition costs, which increased operating costs 6.9 per cent over Q1 last year. Postpaid gross additions totalled 296,616, up 7.7 per cent over Q1 2016, driving 38.7-per-cent-higher postpaid net additions of 35,782. This strong performance reflects Bell's mobile network leadership, leading lineup of high-demand smart phones and other mobile devices, and effective sales execution across all retail channels.

Postpaid customer churn increased 0.02 percentage point in Q1 to 1.17 per cent due to the remaining deactivation of low-ARPU customers from the loss of a corporate contract in 2016.

At the end of Q1 2017, Bell wireless postpaid customers totalled 8,144,936, a 10.0-per-cent increase over last year. Total wireless customers grew 8.6 per cent to 8,946,476. This included 476,932 subscribers acquired from MTS (418,427 on postpaid service). Subsequent to the end of the quarter on April 1, approximately one-quarter of the acquired MTS postpaid subscribers was sold to Telus.

Blended ARPU grew 4.2 per cent to $65.66 from a more favourable postpaid subscriber mix, increased LTE data usage, reflected in a greater number of subscribers on plans with larger data thresholds, and the flow-through of 2016 industry pricing initiatives to reflect the weaker Canadian dollar and its impact on handset costs.

Bell's mobile LTE network provided coverage to almost 98 per cent of Canadians at the end of Q1, including 74 per cent of the population covered by LTE Advanced service. The percentage of postpaid subscribers with LTE devices reached 83 per cent in Q1, up from 73 per cent at the same last year.

Bell wireline

Wireline service revenue increased 0.7 per cent to $2,743-million, reflecting positive residential services revenue growth from broadband Internet and IPTV customer gains, and higher household ARPU, improved business performance supported by the acquisition of data centre operator Q9, and the incremental financial contribution starting March 17 from the MTS acquisition.

Lower product revenue, together with the financial impact from downward revisions to wholesale Internet tariffs and refunds for cancelled services as mandated by the CRTC, contributed to a 0.1-per-cent decrease in Q1 Bell wireline operating revenue to $2.98-billion.

Wireline adjusted EBITDA increased 0.4 per cent to $1,262-million in Q1, even with approximately $19-million in unfavourable regulatory-related financial impacts in the quarter. Operating costs improved 0.5 per cent to $1,718-million, driving a 0.2-percentage-point increase in the company's industry-leading margin of 42.3 per cent. This reduction in operating costs reflected continuing disciplined cost management, fibre-related savings and further service improvement efficiencies.

Bell TV added 22,402 net new Fibe TV subscribers in Q1, a decrease from 47,740 gained last year due to a higher number of Bell retail customers with expired pricing promotions, reduced new footprint expansion and maturing penetration in current Fibe TV markets, fewer satellite TV migrations, and growing over-the-top substitution. Together with 104,661 IPTV subscribers gained from the MTS acquisition, these new Fibe TV net additions increased BCE's total IPTV customer base to 1,465,007 at the end of Q1, up 19.1 per cent over last year.

Satellite TV net customer losses were relatively stable at 38,065 compared with 37,741 in Q1 last year. At the end of Q1, BCE had a total of 2,837,353 TV subscribers (including a total of 108,107 from the MTS acquisition) compared with 2,748,495 at Q1 2016.

High-speed Internet net additions totalled 14,989 compared with 19,783 in Q1 2016. Despite higher year-over-year growth in residential customer activations driven by an expanding fibre footprint, total Internet net additions decreased due to higher customer churn from exceptionally aggressive bundle promotions by cable competitors.

BCE's high-speed Internet customer base totalled 3,717,270 at the end of Q1, up 9.0 per cent year over year, which also included 229,470 customers gained from the MTS acquisition.

Wireline data service revenue increased 3.0 per cent to $1,707-million, reflecting Internet and TV subscriber, usage and ARPU growth, and higher business service solutions revenue reflecting the incremental financial contribution of Q9.

Wireline product revenue decreased 8.8 per cent to $237-million, due to lower year-over-year equipment sales to large enterprise business and wholesale customers.

Residential NAS net losses increased 8.9 per cent to 73,421 from 67,428 in Q1 2016, the result of aggressive bundle promotions by cable competitors, and continuing wireless and Internet technology substitution.

Business NAS net losses improved 25.7 per cent, to 29,853 from 40,204 in Q1 last year, due to fewer large business customer deactivations and improved small business performance.

Total NAS access lines at the end of Q1 2017 totalled 6,574,274, up 0.1 per cent over Q1 last year, including 419,816 subscribers gained from the MTS acquisition. Local and access revenue decreased 1.8 per cent to $775-million due mainly to continuing NAS erosion and CRTC-mandated customer refunds for cancelled services. Long-distance revenue was down 12.0 per cent to $168-million due to NAS losses, technology substitution by wireless and Internet technology, and lower sales of international long distance to wholesale customers.

Bell Media

Media operating revenue increased 1.3 per cent to $751-million, up from $741-million in Q1 last year. Strong subscriber revenue growth in the quarter reflected the national expansion of The Movie Network (TMN) beginning in March, 2016, contract renewals with several TV distributors, and higher revenues from CraveTV and TV Everywhere GO products.

Advertising revenue was impacted by the CRTC's decision to ban simultaneous substitution for Super Bowl LI, as well as continued soft TV and radio advertising markets. This was partly offset by modestly higher year-over-year revenues from Bell Media's specialty sports and news channels and growth in outdoor advertising at Astral Out of Home (OOH).

Media adjusted EBITDA decreased 7.6 per cent to $134-million, from $145-million in Q1 2016, the result of a 3.5-per-cent increase in operating costs from higher costs for sports broadcast rights and CraveTV programming expansion, TMN's national expansion, and increased costs at Astral OOH from acquisitions and the execution of new contracts. Excluding the Super Bowl financial impact, Bell Media adjusted EBITDA in Q1 was stable compared with last year.

CTV was the top ranked Canadian network for the 13th consecutive winter season among total viewers and in all key adult demographics in primetime, with nine of the top 20 programs among total viewers and 10 of the top 20 in all key adult demographics.

Bell Media English specialty and pay-TV properties reached 81 per cent of Canadian English-language specialty and pay-TV viewers in the average week. Bell Media had nine of the top 20 entertainment programs among overall viewers in Q1 and four of the top 10 specialty and pay channels among viewers aged 25 to 54: TSN, Discovery, Space and TMN.

Bell Media maintained its leadership position in the Quebec market with audiences for specialty and pay-TV reaching 77 per cent of all French-language TV viewers in the average week in Q1. Three of the top five specialty and pay channels among key viewers aged 25 to 54 are Bell Media properties: RDS, Super Ecran and Canal D.

Core primetime viewership for TSN was up 13 per cent over Q1 last year, supported by higher average audiences for the Toronto Raptors, NCAA Football, Australian Open Tennis and NASCAR. In February, TSN and RDS reached a multiyear contract extension with NASCAR, retaining exclusive Canadian media rights to all Monster Energy NASCAR Cup Series and NASCAR Xfinity Series races across all platforms, including exclusive Canadian coverage of the Daytona 500.

Bell Media continued to lead in digital media among Canadian broadcast and video network competitors, reaching a record 62 per cent of the digital audience and 19 million unique monthly visitors in Q1, with average monthly time spent of 851 million minutes and 48 million videos viewed.

Bell Media remained Canada's top radio broadcaster in Q1, reaching 16.7 million listeners who spent more than 75 million hours tuned in each week.

Bell Media and its production partners were honoured with 53 awards by the Academy of Canadian Cinema and Television at the recent annual Canadian Screen Awards. Showcasing its growing commitment to creating and developing exceptional original Canadian content, Bell Media and its partners took home 35 TV awards, with wins in major categories including best news, best dramatic series, best comedy series and best reality/competition, best music and best talk program or series. TSN won four awards, more than all other sports broadcasters, including best direction in a live sporting event for the 2016 Grey Cup. Bell Media-supported film projects won 18 awards, including best motion picture, best direction, best performance by an actress in a leading role and best original screenplay.

Common share dividend

BCE's board of directors has declared a quarterly dividend of 71.75 cents per common share, payable on July 15, 2017, to shareholders of record at the close of business on June 15, 2017.

Outlook for 2017

As a result of the closing of the acquisition of MTS on March 17, 2017, BCE has updated its financial guidance targets for 2017 as shown in the table.

 
                                    FINANCIAL GUIDANCE TARGETS 
 
                                                  Feb. 2 guidance            April 26 guidance

Revenue growth                                              1%-2%                        4%-6%
Adjusted EBITDA growth                                  1.5%-2.5%                        4%-6%
Capital intensity                                     approx. 17%                  approx. 17%
Adjusted EPS                                          $3.42-$3.52                  $3.30-$3.40
Free cash flow growth                               approx. 3%-7%               approx. 5%-10%
Annualized common dividend per share                        $2.87                        $2.87
Dividend payout policy                  65%-75% of free cash flow    65%-75% of free cash flow

Call with financial analysts

BCE will hold a conference call for financial analysts to discuss Q1 2017 results and updated 2017 financial guidance on Wednesday, April 26, at 8 a.m. ET. Media are welcome to participate on a listen-only basis. Please dial toll-free 1-866-223-7781 or 416-340-2216. A replay will be available for one week by dialling 1-800-408-3053 or 905-694-9451 and entering passcode 5361883 followed by the pound key.

A live audio webcast of the conference call will be available on BCE's website. The mp3 file will be available for download on the page later in the day.

About BCE Inc.

Canada's largest communications company, BCE provides the broadest range of broadband wireless, TV, Internet and business communication services to consumer and business customers throughout the country. Bell Media is Canada's premier multimedia company with leading assets in television, radio, out of home and digital media.

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