Mr. Mirko Bibic reports

BCE REPORTS THIRD QUARTER 2023 RESULTS

BCE Inc. has released results for the third quarter (Q3) of 2023.

"The Bell team has demonstrated continued operational excellence, delivering results that place us in a solid position as we look ahead to the end of the year," said Mirko Bibic, president and chief executive officer of BCE and Bell Canada.

"Bell's Q3 results reflect the positive outcome of our significant investments in broadband networks and services, a clear preference by our customers for fibre, continued momentum in our core operations, and cost containment and discipline.

"Our continued investments in building high-quality networks and delivering the services that our customers want continues to pay off with a record quarter for fibre Internet net activations of 104,159, up 7.9 per cent over last year. We are continuing to grow in wireless with 231,212 total mobile phone and connected device net subscriber activations, 142,886 of which are postpaid net subscriber activations, representing our second-highest Q3 result since 2010.

"I'm pleased with our overall progress this quarter. With healthy subscriber growth across the board, consistent results and disciplined execution, I'm confident in the Bell team's ability to continue delivering on our strategic priorities in the months ahead."

Key business developments

New BCE director; BCE executive team update

BCE welcomes Johan Wibergh to the board of directors. Mr. Wibergh is the former chief technology and information officer of Vodafone, a global telecommunications provider, and former executive vice-president and head of business unit networks for Ericsson. Sean Cohan joined BCE as president, Bell Media, following the retirement of Wade Oosterman. Mr. Cohan will join BCE's executive leadership team.

Building the best networks and providing greater access

PCMag recognized Bell as the best major and best all-around Internet service provider in Canada in PCMag's Best ISPs 2023 Canada report. This achievement is based on Internet speed as well as price, coverage and customer satisfaction. Bell expanded availability of its three-gigabit-per-second symmetrical Internet service, Giga Hub and Wi-Fi 6E pods to Manitoba. This achievement is based on Internet speed as well as price, coverage and customer satisfaction. As part of the Dibaajimowin project, administered by the Grand Council Treaty No. 3, Bell will provide broadband fibre-optic Internet access to 23 indigenous and 13 non-indigenous communities in Northwestern Ontario. Bell, Virgin Plus and Lucky Mobile customers now have mobile service in Toronto's TTC subway tunnels and stations with network access, with more coverage areas to come.

5G leadership and technology innovation

As a member of the 5G Future Forum, Bell partnered with Verizon, Vodafone and independent software vendor Matsuko to successfully conduct the first live transatlantic holographic collaborative meeting in Canada, the United States and the United Kingdom using 5G and multiaccess edge computing (MEC) technology.

Delivering the most compelling content

Bell Media entered into a definitive agreement to purchase the Canadian business of Outfront Media to bolster its out-of-home presence across the country. Bell Media and Fox Entertainment Global forged a new licensing and distribution pact to support Canadian original productions for all Bell Media platforms, including CTV and Crave, and in the U.S. for Fox.

Bell Media launched addressable audio and addressable TV, delivering tailored ads to radio and TV audiences across linear programming and on-demand content. TSN+ announced subscription options with a full slate of content, including NFL RedZone and PGA Tour Live. The 2023 NFL season is now available across TSN, TSN+, RDS and CTV. RDS, the official French-language broadcaster of the Montreal Canadiens, Ottawa Senators and Laval Rocket, announced 17 brand partners for the 2023/2024 hockey season. Bell Media discontinued operations of specialty channel VRAK after 23 years on the air.

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

To underscore Bell's continued focus on environmental, social and governance (ESG) priorities, it has amended its existing $2.3-billion securitization program to add sustainability-linked pricing. Seventy-five electric vehicle chargers were added to workplaces across Quebec, advancing Bell's plans to electrify its fleet. Bell was recognized with a 2024 Clean50 Top Project Award for its halocarbon-free, energy-efficient computer room cooling project. To mark Mental Illness Awareness Week, Bell Let's Talk announced the 115 recipients of the 2023 Bell Let's Talk Community Fund with a focus on organizations providing housing supports, including Street Haven, an emergency shelter for women in Toronto. The Bell Let's Talk fund also gifted $1-million to IWK Health in Halifax for a dedicated mental health space in the children's hospital's emergency department. Bell welcomed more than 120 new grads as part of its 2023 graduate leadership program.

"Our Q3 consolidated financial performance again highlights the Bell team's consistent execution and disciplined focus on profitable subscriber growth and cost management. We delivered adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth of 3.1 per cent -- our highest growth since Q2 2022 -- reflecting a well-rounded performance across our core business with strong 6.1-per-cent residential Internet revenue growth, 4.7-per-cent-higher consumer wireless service revenue, digital media revenue up 26 per cent over last year and a close to 1-per-cent improvement in total operating costs," said Curtis Millen, chief financial officer of BCE and Bell Canada.

"With year-to-date consolidated financial results in line with budget, we're in a great position heading into the end of the year. We remain firmly on strategy, disciplined in our execution and focused on driving costs out of the business as required to align with the revenue profiles of each of our operating segments. I'm pleased to reconfirm all our 2023 financial guidance targets."

• BCE operating revenue increased 0.9 per cent over Q3 2022 to $6,080-million. This was the result of 1.7-per-cent-higher service revenue of $5,281-million, driven by wireless and residential Internet subscriber growth and the financial contribution from acquisitions made over the past year, including Distributel and FX Innovation, partly offset by a 3.9-per-cent decline in product revenue, driven mainly by timing-related reductions in sales to large business customers and lower consumer electronics sales at The Source, as well as lower media revenue due to the continuing advertising recession.
• Net earnings decreased 8.3 per cent to $707-million and net earnings attributable to common shareholders totalled $640-million, or 70 cents per share, down 10.5 per cent and 10.3 per cent, respectively. The declines were due to higher interest expense, increased depreciation and amortization expense, and higher income taxes, due mainly to the favourable resolution of uncertain tax positions in Q3 2022 related to BCE's acquisition of MTS. These factors were partly offset by higher adjusted EBITDA, lower impairment of assets as BCE recorded a $21-million charge in Q3 2022 related to office spaces it ceased using as part of its real estate optimization strategy due to Bell's hybrid work policy, a higher net return on postemployment benefit plans, and lower severance, acquisition and other costs. Adjusted net earnings were down 7.5 per cent to $741-million, resulting in an 8-per-cent decrease in adjusted EPS (earnings per share) to 81 cents.
• Adjusted EBITDA grew 3.1 per cent to $2,667-million, reflecting increases of 2.4 per cent at Bell Communication and Technology Services (Bell CTS) and 11.5 per cent at Bell Media. Due mainly to the flow-through of high-margin service revenue at Bell CTS, the favourable impact of various cost reduction initiatives and other operating efficiencies across the organization, and a year-over-year decrease in low-margin business wireline product sales, BCE's consolidated adjusted EBITDA margin increased 0.9 percentage point to 43.9 per cent from 43 per cent in Q3 2022.
• BCE capital expenditures were $1,159-million, down 12 per cent from $1,317-million last year, corresponding to a capital intensity of 19.1 per cent, compared with 21.9 per cent in Q3 2022. The year-over-year decrease in capital spending was due mainly to the timing of planned investment to further expand Bell's pure fibre network and the realization of buildout efficiencies as it deploys broadband fibre and mobile stand-alone 5G network infrastructure more deeply.
• BCE cash flows from operating activities were $1,961-million, down 1.8 per cent from Q3 2022, due mainly to higher interest paid and lower cash from working capital attributable partly to the timing of supplier payments, partly offset by higher adjusted EBITDA.
• Free cash flow increased 17.4 per cent to $754-million from $642-million in Q3 2022, despite decreased cash flows from operating activities excluding acquisition and other costs paid, driven by lower capital expenditures as described above.

Operating results by segment

Bell Communication and Technology Services (Bell CTS):

• Total Bell CTS operating revenue increased 1.1 per cent to $5,461-million.
• Service revenue was up 2 per cent to $4,662-million, driven mainly by continued strong mobile phone, mobile connected device and retail Internet subscriber base growth, higher wireless roaming revenue, higher sales of security and cloud-focused managed and professional services to large enterprise customers, as well as the financial contribution from acquisitions made over the past year, including Distributel and FX Innovation. This was partly offset by continuing declines in legacy voice, data and satellite TV services, greater acquisition, retention and bundle discounts on residential home services compared with Q3 last year, and lower overage revenue as a result of more mobile phone customers subscribing to unlimited and larger capacity data rate plans.
• Product revenue decreased 3.9 per cent to $799-million, due mainly to the timing of mobile device and land mobile radio systems sales to large enterprise customers in the government sector, the lapping of business wireline data equipment supply chain shortages that began to alleviate in Q3 2022, and lower consumer electronics sales at The Source.
• Bell CTS adjusted EBITDA grew 2.4 per cent to $2,464-million, yielding a 0.6-percentage-point margin increase to 45.1 per cent from 44.5 per cent in Q3 2022. This was driven by the flow-through of higher year-over-year service revenue and a lower revenue mix of low-margin product sales as operating costs were essentially stable compared with last year, increasing by 0.1 per cent.
• Postpaid mobile phone net subscriber activations totalled 142,886, representing BCE's second-best Q3 result since 2010. This was down 14.8 per cent from a record Q3 result in 2022 of 167,798, reflecting an increase in mobile phone postpaid customer churn to 1.1 per cent from 0.9 per cent in Q3 2022 as a result of greater overall competitive market activity and promotional offer intensity compared with last year. This was partly offset by 8.2-per-cent-higher gross subscriber activations, driven by immigration growth, continued 5G and multiproduct bundling momentum, effective promotions, and stronger Virgin Plus performance following a repositioning of that brand which included a fresh new look and new value proposition, centred around the pillars of affordability, member rewards, inclusiveness and network quality.
• Bell's prepaid mobile phone customer net subscriber activations decreased to 24,044 from 56,545 in Q3 2022. This result was due to 6.3-per-cent-lower gross activations and higher customer churn, which increased to 5.1 per cent from 4.58 per cent last year, reflecting attractive promotional offers and availability of mobile 5G service on postpaid discount brands.
• Bell's mobile phone customer base totalled 10,194,961 at the end of Q3 2023, a 3.8-per-cent increase over last year, comprising 9,294,115 postpaid subscribers, up 4.2 per cent, and 900,846 prepaid customers, down 1.1 per cent.
• Mobile phone blended ARPU (average revenue per user) was down 0.2 per cent to $60.28 from $60.39 in Q3 2022, reflecting lower overage revenue from customers subscribing to unlimited and larger capacity data rate plans and competitive pressures on base rate plan pricing.
• Mobile connected device net activations totalled 64,282, up 31.1 per cent from 49,044 in Q3 2022, driven by stronger customer demand for Bell Internet of Things services, including business solutions and connected car subscriptions, and fewer data device deactivations. At the end of Q3 2023, mobile connected device subscribers totalled 2,653,802, a 13.1-per-cent increase over last year.
• Bell added 79,327 net new retail Internet subscribers, compared with 89,652 in Q3 last year. The year-over-year decrease partly reflects higher customer deactivations in its copper service areas attributable to aggressive promotional offers by competitors offering cable, fixed wireless and satellite Internet services. Within Bell's all-fibre footprint, retail Internet net activations were a quarterly record 104,159, up 7.9 per cent over Q3 2022, driven by the continuing expansion of Bell's fibre footprint, increased customer penetration of tenured fibre footprint and a focus on bundled offerings with mobile service. Retail Internet subscribers totalled 4,417,838 at the end of Q3, an 8.6-per-cent increase from last year.
• Bell TV added 35,976 net new retail IPTV (internet protocol television) subscribers, down from 38,093 in Q3 2022. Despite higher gross activations, the year-over-year decrease was due mainly to higher customer deactivations, primarily on the company's app streaming service, attributable to more customers with expired promotional offers. At the end of Q3, Bell served 2,046,805 retail IPTV subscribers, a 5.2-per-cent increase over last year.
• Retail satellite TV net subscriber losses were 31,754, up from 27,240 in Q3 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 680,805 at the end of Q3, down 13.8 per cent from last year.
• Retail residential NAS (network-attached storage) net losses improved by 2.5 per cent to 41,776, reflecting BCE's success in driving higher gross activations through bundled service offerings. Bell's retail residential NAS customer base totalled 2,059,964 at the end of Q3, down 4.8 per cent from last year.

Bell Media:

• Media operating revenue decreased 1.3 per cent to $710-million as a result of lower year-over-year advertising revenue, partly offset by higher subscriber revenue.
• Advertising revenue was down 5.2 per cent, as advertiser demand and spending, particularly for TV, continued to be impacted by continuing unfavourable economic conditions as well as the Hollywood actors' and writers' strikes. This was moderated by growth in digital advertising as BCE further leverages its content and digital platforms together with targeted advertising capabilities and technology to grow digital market share.
• Total digital revenues grew 26 per cent, the result of continuing Crave and sports streaming direct-to-consumer growth and increased advertising bookings from Bell Media's strategic audience management (SAM) TV media sales tool. Crave subscriptions totalled approximately 3.1 million customers, including direct-to-consumer streaming subscriber growth of 13 per cent over last year.
• Subscriber revenue increased 2.9 per cent on continued strong Crave and sports direct-to-consumer streaming growth.
• Adjusted EBITDA was up 11.5 per cent to $203-million, delivering a 3.3-percentage-point increase in margin to 28.6 per cent. Notwithstanding lower year-over-year revenue, this result was driven by a 5.6-per-cent decline in operating costs, reflecting lower TV programming costs despite contractual increases for premium content, due to the Hollywood actors' and writers' strikes, restructuring initiatives undertaken in Q2 2023 in light of the unfavourable economic and broadcasting regulatory environments, and the cessation of Canadian Radio-television and Telecommunications Commission Part II fees in April, 2023.
• TSN was Canada's No. 1 sports network and was the top specialty channel over all in Q3 among adults aged 25 to 54.
• Bell Media was ranked No. 1 in full-day viewership in the French-language entertainment and pay specialty market among adults aged 25 to 54 for the 2022/2023 broadcast year. RDS remained the top-ranked French-language non-news specialty channel.

Common share dividend

BCE's board of directors has declared a quarterly dividend of 96.75 cents per common share, payable on Jan. 15, 2024, to shareholders of record at the close of business on Dec. 15, 2023.

Outlook for 2023

BCE confirmed its financial guidance targets for 2023, as provided on Feb. 2, 2023, as noted herein.

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 with the financial community to discuss Q3 2023 results on Thursday, Nov. 2, at 8 a.m. Eastern Time. Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-844-933-2401 or 647-724-5455. A replay will be available until midnight on Nov. 30, 2023, by dialling 1-844-933-2401 or 647-724-5455 and entering passcode 9522322 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.

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