Mr. Mirko Bibic reports

BCE REPORTS FIRST QUARTER 2023 RESULTS

BCE Inc. has released results for the first quarter (Q1) of 2023.

"Bell has delivered a solid start to the year with results that were on plan and that reflect our consistently strong execution," said Mirko Bibic, president and chief executive officer of BCE and Bell Canada.

"Our strategy to build the best networks, and our compelling products and services are clearly resonating with customers, as is our customer-first approach. I'm particularly proud of the gains we've made to champion customer experience, as evidenced in the 2022 to 2023 CCTS [Commission for Complaints for Telecom-television Services] midyear report. Bell was the only national service provider to experience a decrease in complaints during a period when complaints were up 12 per cent year-over-year across the industry.

"Over all, our performance in wireless and Internet helped to drive strong 3.5-per-cent consolidated revenue growth, offsetting the impacts of an advertising slowdown within our Bell Media segment. Our mobile phone postpaid net subscriber activations were up 26.5 per cent, with 5.4 per cent higher wireless service revenue. We also added nearly 48,000 new FTTH [fibre to the home] customers in Q1, up 24 per cent over last year, with consumer Internet revenue up 10 per cent.

"In line with our broadband network build-out plan, we invested close to $1.1-billion in capital expenditures in Q1, and remain on pace to expand our fibre footprint by 650,000 locations and cover 85 per cent of the population with our 5G service by the end of 2023. While we're currently experiencing an uncertain economic environment amid headwinds, inflationary cost pressures and regulatory uncertainty, we remain committed to our corporate purpose to advance how Canadians connect with each other and the world. As we look ahead to the remainder of 2023, we are confident in our ability to continue delivering results with consistent, strong execution."

Key business developments

Champion customer experience

In the Commission for Complaints for Telecom-television Services (CCTS) 2022 to 2023 midyear report, Bell was the only national service provider to experience a decrease in complaints during a period when complaints were up 12 per cent year-over-year across the industry. Bell experienced a 6-per-cent reduction in complaints, reducing its overall share of complaints to less than 15 per cent. Over all, Bell's share of complaints have decreased by 16 per cent year-over-year, and an impressive 55 per cent since the 2017 to 2018 midyear report was published. Bell won a Webby award for its MyBell app, recognized by both a panel of expert judges and the voting public. The app was judged among 14,000 applicants across criteria including user experience, design, innovation and overall usability. Bell additionally introduced a new Wi-Fi checkup feature for the app, which is now available for customers in Ontario and Quebec.

Building the best networks

Bell, in partnership with the province of Newfoundland and Labrador, is expanding the province's public safety radio network, improving communications for first responders throughout the region and enabling interoperable communications throughout the Atlantic provinces, the first such interprovincial public safety network in North America. In Manitoba, Bell is expanding fibre Internet to six rural communities, reaching an additional 7,500 locations starting this summer, and is expanding its 5G+ wireless service in Winnipeg. Bell is also expanding fibre Internet access to homes and businesses in the Ontario communities of Leamington, Lincoln and Essex Centre, and Harrow. Bell continued to work closely with governments on projects to bring broadband access to remote and other hard-to-serve areas, including in Northern Ontario, and in Newfoundland and Labrador with the Universal Broadband Fund.

Accelerate cloud strategy for Canadian businesses

Bell has completed the sale of its 63-per-cent majority stake in Pinewood Toronto Studios to focus on its core services for residential and business customers. The cash proceeds from the sale will help accelerate Bell's core growth strategy, including the acquisition of FX Innovation, a Montreal-based IT (information technology) services and consulting company providing business clients with cloud-focused managed and professional services, and workflow automation solutions. The acquisition is the latest building block in positioning Bell as a tech services leader for its enterprise customers, and is expected to close in late Q2 to early Q3 2023, subject to closing conditions and regulatory approvals.

In addition, Bell introduced two new cloud-native application protection platform (CNAPP) cybersecurity solutions with Palo Alto Networks, cloud security posture assessment (CSPA) and cloud security posture protection (CSPP), to help businesses identify threats to enterprise data in the cloud and provide managed services to protect data across multicloud environments.

Drive growth with innovative services

Bell has entered a multiyear strategic agreement with Air Canada, which includes premier sponsorship of its in-flight Wi-Fi, free in-flight messaging for Aeroplan members, and the distribution of complementary SIM cards on board to enable newcomers and visitors arriving in Canada to activate a wireless SIM while still in the air.

Delivering the most compelling content

Bell Media announced a long-term, exclusive licensing agreement with Warner Bros. Discovery. The agreement includes content from Warner Bros. Discovery's vast portfolio, including HBO Originals, Max Originals, Warner Bros. films, the DC universe, the Wizarding World of Harry Potter, new cable and library television series, and pay and postpay window rights for Warner Bros. films and library films. French-language rights secured include HBO and Max Originals, Pay 1 films, Friends and the Harry Potter collection of films, among other content.

In Q1, TSN and RDS were the No. 1 English and French non-news specialty channels, respectively, in the 25 to 54 age group, according to Numeris. Super Bowl LVII was the most-watched broadcast in Canada this past quarter, with an average audience of 8.67 million viewers on CTV, TSN and RDS, up 6 per cent compared with last year, and reaching over 17.5 million Canadians. Other sports highlights included the 2023 NCAA March Madness tournament and the 2023 IIHF Women's World Championship, both on TSN, and the 2023 Masters Tournament on CTV, TSN and RDS. Season one of The Last of Us is the No. 1 show in Crave history for the first seven-day streams season average. The premiere of Survivor Quebec on Noovo was the top-watched show of the day (April 2) on French Quebec television among the 25 to 54 age group.

Bell for better: better world, better communities, better workplace

Bell has been named one of Canada's greenest employers for the seventh consecutive year by Mediacorp. Bell was also named a top employer for young people for the sixth consecutive year, a top family-friendly employer for the fourth consecutive year, and a Montreal top employer for the 11th year in a row by the organization. Bell ranked third among telecom companies and 42nd over all in the Corporate Knights' Global 100 most sustainable corporations for 2023, and ranked 65th in the 2023 Clean200 list of global companies that put sustainability at the core of their business. Bell received an A-minus score (leadership band) for its 2022 CDP disclosure over all, and ranked A for the supplier engagement portion of the disclosure -- the only Canadian telecom company to be ranked A, and in the top 8 per cent of all reporting companies. Bell announced a $15-million commitment to the Kids Help Phone Feel Out Loud campaign to expand access to its e-mental health services.

BCE results

"A positive start to the year, with Q1 operating metrics and financial results that were delivered on budget and, in fact, slightly ahead of plan in some instances. BCE revenue grew a strong 3.5 per cent, despite an economic environment that continues to impact media advertising and our business markets sector. However, adjusted EBITDA declined 1.8 per cent. This result was expected given the favourable one-time retroactive revenue adjustment at Bell Media last year, ongoing inflationary impacts and other near-term cost pressures, all of which were built into our 2023 financial plan," said Glen LeBlanc, chief financial officer of BCE and Bell Canada.

"BCE's fundamentals and competitive position remain as strong as ever. With financial results that were right on our internal plan for Q1, together with continued operating momentum across the business, our consistent proven execution in a competitive marketplace, as well as substantial annual free cash flow generation that is reliable and well protected from economic uncertainty, I am reconfirming all our financial guidance targets for 2023":

• BCE operating revenue increased 3.5 per cent over Q1 2022 to $6,054-million. This was the result of 0.9 per cent higher service revenue of $5,222-million and a 23.6-per-cent increase in product revenue to $832-million, driven by growth at Bell Communication and Technology Services (Bell CTS), partly offset by a year-over-year decline at Bell Media.
• Net earnings decreased 15.6 per cent to $788-million and net earnings attributable to common shareholders totalled $725-million, or 79 cents per share, down 17.3 per cent and 17.7 per cent, respectively. The year-over-year declines were due to increased interest expense, higher depreciation and amortization expense, lower adjusted EBITDA, higher severance, acquisition and other costs, and higher asset impairment charges related to office spaces BCE ceased using as part of its real estate optimization strategy due to Bell's hybrid work policy. These factors were partly offset by lower income taxes and higher other income, which included gains from the sale of land related to the company's real estate optimization strategy. Adjusted net earnings were down 4.8 per cent to $772-million, resulting in a 4.5-per-cent decrease in adjusted EPS (earnings per share) to 85 cents.
• Adjusted EBITDA was down 1.8 per cent to $2,538-million, reflecting a 36.5-per-cent decrease at Bell Media, partly offset by a 1.3-per-cent increase at Bell CTS. BCE's consolidated adjusted EBITDA margin declined 2.3 percentage points to 41.9 per cent, from 44.2 per cent in Q1 2022, due to lower year-over-year media revenue, attributable mainly to a favourable one-time retroactive adjustment to subscriber revenue in Q1 2022 related to a contract with a Canadian TV distributor, higher low-margin product sales, as well as operating cost pressures related to inflation, strategic initiatives, higher TV content costs and the normalization of BCE's cost structure to pre-COVID levels.
• BCE capital expenditures were $1,086-million, up 13.2 per cent from $959-million last year, corresponding to a capital intensity of 17.9 per cent, compared with 16.4 per cent in Q1 2022. The year-over-year increase in capital spending was due mainly to significant continuing investment in expanding Bell's pure fibre network, including connecting more homes and businesses to Bell Internet services.
• BCE cash flows from operating activities were $1,247-million, down 27.3 per cent from Q1 2022, reflecting lower cash from working capital attributable to the timing of supplier payments, higher interest paid, increased cash taxes due mainly to the timing of instalment payments and lower adjusted EBITDA, partly offset by lower contributions to postemployment benefit plans.
• Free cash flow decreased 88.1 per cent to $85-million from $716-million in Q1 2022, due to lower cash flows from operating activities, excluding acquisition and other costs paid, and higher capital expenditures.

Operating results by segment

Bell Communication and Technology Services (Bell CTS):

• Total Bell CTS operating revenue increased 4.9 per cent to $5,367-million, driven by both higher service and product revenue.
• Service revenue grew 2.1 per cent to $4,535-million, mainly the result of strong mobile phone, mobile connected device and retail Internet subscriber base growth, higher mobile phone blended ARPU (average revenue per user), as well as the financial contribution from the acquisitions of Distributel and EBOX in 2022. This was partly offset by continuing declines in legacy voice, data and satellite TV services, lower sales of international long distance minutes to wholesale customers, and the sale of Createch on March 1, 2022.
• Product revenue was up 23.6 per cent to $832-million, driven by higher telecom data equipment sales to large enterprise customers, reflecting the timing of sales and improved availability compared with significant global supply chain disruptions experienced last year, as well as a greater sales mix of higher-value mobile phones and more mobile device transactions.
• Bell CTS adjusted EBITDA was up 1.3 per cent to $2,406-million. This was driven by the flow-through of higher year-over-year service revenue, despite 8.1 per cent higher operating costs that contributed to a 1.6-percentage-point margin decline to 44.8 per cent from 46.4 per cent last year. The increase in operating costs this quarter was mainly the result of higher cost of goods sold from increased product sales, higher TV content costs, increased labour costs, as well as the acquisitions of EBOX and Distributel.
• Postpaid mobile phone net subscriber activations totalled 43,289, up 26.5 per cent from 34,230 in Q1 2022. The increase reflected 18.2 per cent higher gross subscriber activations attributable to higher retail traffic as pandemic-related restrictions were still in place intermittently last year, immigration growth, continued 5G momentum, higher business customer demand and effective promotions. This was moderated by an 11-basis-point increase in mobile phone postpaid customer churn to 0.90 per cent, reflecting greater overall market activity compared with Q1 2022.
• Bell's prepaid mobile phone customer base declined by 16,654 net subscribers, compared with a net loss of 2,054 in Q1 2022. The year-over-year decrease was driven by higher customer churn, which increased to 5.28 per cent from 4.61 per cent last year, reflecting more customer deactivations due in part to attractive promotional offers on postpaid discount brands.
• Bell's mobile phone customer base totalled 9,902,492 at the end of Q1 2023, a 4.3-per-cent increase over last year, composed of 9,039,947 postpaid subscribers, up 4.3 per cent, and 862,545 prepaid customers, up 4.3 per cent. In Q1 2023, Bell adjusted its mobile phone subscriber base by 73,229 to remove older non-revenue-generating postpaid business subscribers.
• Mobile phone blended ARPU was up 0.9 per cent to $58.15, reflecting higher outbound roaming revenue. This was moderated by lower overage revenue from customers subscribing to unlimited and larger capacity data rate plans, competitive pressures on base rate plan pricing in the current and prior periods, as well as the financial impact from the continuing shift by customers to equipment instalment plans.
• Mobile connected device net activations increased 44.7 per cent to 70,742, from 48,877 in Q1 2022, driven by continued strong customer demand for Bell IoT (Internet of things) services, including connected car subscriptions, and fewer data device deactivations. At the end of Q1, mobile connected device subscribers totalled 2,509,983, a 9.2-per-cent increase over last year. In Q1 2023, Bell adjusted its mobile connected device subscriber base by 12,577 to remove older non-revenue-generating business subscribers.
• Bell added 27,274 net new retail Internet subscribers, up 4.8 per cent from 26,024 in Q1 2022, driven by the rapid expansion of Bell's fibre footprint and increased customer penetration of bundled service offerings. These factors were partly offset by higher customer deactivations, particularly in the company's copper service areas, attributable to aggressive promotional offers by cable competitors and lower deactivations last year due to the pandemic. Within Bell's all-fibre footprint, retail Internet net activations were 47,757, 24.2 per cent higher than Q1 2022.
• Retail Internet subscribers totalled 4,278,497 at the end of Q1, an 8.2-per-cent increase from last year. In Q1 2023, subsequent to a review of customer account records, Bell's retail high-speed Internet subscriber base was reduced by 7,347 subscribers.
• Bell TV added 10,899 net new retail IPTV (Internet protocol television) subscribers, down 11.1 per cent from 12,260 in Q1 2022. The year-over-year decrease was due mainly to higher customer deactivations attributable to more customers with expired promotional offers and higher churn on the company's app streaming service following the end of the FIFA World Cup Qatar 2022. At the end of Q1, Bell served 1,999,080 retail IPTV subscribers, a 5-per-cent increase over last year.
• Retail satellite TV net subscriber losses were 24,848, up 20.5 per cent from 20,621 in Q1 2022, due to fewer gross activations and higher customer churn, driven by increased competitor promotional offer intensity. Bell's retail satellite TV customer base totalled 738,469 at the end of Q1, down 11.2 per cent from last year.
• Retail residential NAS net losses were 46,881 compared with 42,345 in Q1 2022. The higher year-over-year net losses reflect higher customer deactivations due mainly to the substitution to mobile and Internet-based services, as well as lower customer deactivations during the pandemic. Bell's retail residential NAS customer base totalled 2,143,890 at the end of Q1, down 5.1 per cent from last year.

Bell Media:

• Media operating revenue decreased 5.5 per cent to $780-million, due mainly to lower year-over-year advertising and subscriber revenues. The result in Q1 2022 included a one-time retroactive adjustment to subscriber revenue related to a contract with a Canadian TV distributor.
• Advertising revenue was down 4.7 per cent, reflecting softer overall TV and radio advertiser demand due to the impact of unfavourable macroeconomic conditions. This was partly offset by the continued recovery in out-of-home as well as continued digital growth.
• Subscriber revenue decreased 4.1 per cent, due to the one-time retroactive adjustment from Q1 2022 referenced above.
• Digital revenues grew 2 per cent, the result of continued Crave and TSN streaming direct-to-consumer growth, and increased bookings from Bell Media's strategic audience management (SAM) TV media sales tool. Total Crave subscriptions increased 6 per cent from last year to more than 3.2 million customers.
• Adjusted EBITDA was down 36.5 per cent to $132-million, resulting in an 8.3-percentage-point margin decline to 16.9 per cent. This was driven by the year-over-year decline in revenue and a 5-per-cent increase in operating costs, driven by contractual increases for sports programming and other premium content, as well as the normalization of hockey schedules in 2023.
• TSN remained Canada's No. 1 sports network and was the top specialty channel overall in Q1; RDS remained the top-ranked French-language sports network.
• Bell Media was ranked No. 1 over all and in prime-time viewership in the French-language specialty market among adults aged 25 to 54 in Q1.

Common share dividend

BCE's board of directors has declared a quarterly dividend of 96.75 cents per common share, payable on July 17, 2023, to shareholders of record at the close of business on June 15, 2023.

Outlook for 2023

BCE confirmed its financial guidance targets for 2023, as provided on Feb. 2, 2023, as shown in the associated table.

For 2023, BCE expects lower tax adjustments, higher depreciation and amortization expense, and increased interest expense to drive lower adjusted EPS compared with 2022. For 2023, BCE expects growth in adjusted EBITDA, a reduction in contributions to postemployment benefit plans and payments under other postemployment benefit plans, and lower capital expenditures will drive higher free cash flow.

Call with financial analysts

BCE will hold a conference call for financial analysts to discuss Q1 2023 results on Thursday, May 4, at 8 a.m. ET. Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-800-806-5484 or 416-340-2217 and enter passcode 1142910 followed by the pound key. A replay will be available until midnight on June 1, 2023, by dialling 1-800-408-3053 or 905-694-9451 and entering passcode 3970985 followed by the pound key. A live audio webcast of the conference call will be available on BCE's website.

About BCE Inc.

BCE is Canada's largest communications company, providing advanced Bell broadband wireless, Internet, TV, media and business communications services.

Through Bell for Better, the company is investing to create a better today and a better tomorrow by supporting the social and economic prosperity of its communities. This includes the Bell Let's Talk initiative, which promotes Canadian mental health with national awareness and anti-stigma campaigns like Bell Let's Talk Day and significant Bell financing of community care and access, research, and workplace initiatives throughout the country.

We seek Safe Harbor.