Mr. Mirko Bibic reports

BCE REPORTS THIRD QUARTER 2022 RESULTS

BCE Inc. has released results for the third quarter (Q3) of 2022.

"The Bell team's continued excellence in executing on our strategy and customer-centric approach, combined with our leading networks, has delivered strong results this quarter, firmly placing Bell in a solid competitive position as we head into the end of the year," said Mirko Bibic, president and chief executive officer of BCE and Bell Canada.

"We're seeing clear demand from Canadians for differentiated fibre Internet services and fast, reliable wireless networks. We experienced over 400,000 net activations across our wireline and wireless networks, with our highest-ever number of total mobile phone net additions, and we also gained a significant share of Internet subscriber growth with over 95,000 new net fibre-to-the-home customers this past quarter, up 33 per cent over last year and our best-ever result.

"The devastation of Hurricane Fiona underscored the role that our networks play in the daily lives of Canadians. The Bell team worked tirelessly in difficult conditions to restore service for those impacted -- work that is still ongoing -- and I want to recognize the Bell team members who were part of the recovery efforts. While the damage to our infrastructure was unprecedented, it reinforced that our accelerated capital investment program to build and expand reliable fibre and wireless networks across our footprint continues to be the right approach for our customers."

Key business developments

Building the best networks

Bell expanded pure fibre Internet access to approximately 10,000 homes and businesses in Owen Sound, Ont., approximately 40,000 in Barrie, Ont., and over 6,500 across seven communities in rural Manitoba. Bell will work closely with governments on projects to support remote areas, including building high-speed Internet connectivity and wireless capacity in three Northern Manitoba communities with the CRTC Broadband Fund, and improving mobile connectivity for the Atikamekw First Nation of Wemotaci with the Universal Broadband Fund.

Offering customers the fastest speeds and increased service options

Bell was awarded fastest mobile network in Canada for the third consecutive year by PCMag in its 2022 Fastest Mobile Networks Canada report. PCMag also ranks Bell's 5G network as fastest in the country. Bell Fibe Gigabit 8.0, with the fastest Internet speeds available in North America among major service providers, is now available in Toronto. The Bell Giga Hub with Wi-Fi 6E, the most advanced Wi-Fi technology, is now available for fibre-to-the-home customers throughout Ontario and Quebec. Bell announced its intent to acquire Distributel to support the expansion of Internet services for consumers and businesses. The transaction is expected to close by the end of the year, subject to closing conditions, including regulatory approvals.

5G leadership and technology innovation

Bell launched its corporate venture capital initiative, Bell Ventures, to invest in early-stage and growth companies that harness the power of Bell's networks to drive growth and adoption of advanced technological solutions. Bell expanded its 5G+ service in Southern Ontario; 5G+ is also now available in Halifax, N.S., Moncton, N.B., and St. John's, Nfld. Bell is on track to cover approximately 40 per cent of the Canadian population by the end of 2022. Bell also continues to expand its 5G service, with availability in all 10 Canadian provinces.

Bell for Better: better world, better communities

Bell was named the inaugural Greenhouse Gas (GHG) Reductions Champion by Clean50, a national sustainability organization, and also received a Top Project 2023 award from Clean50 for its solar-powered remote communication towers initiative. To mark Mental Illness Awareness Week, Bell Let's Talk announced the 114 recipients of the 2022 Bell Let's Talk Community Fund, including Blue Door in East Gwillimbury, Ont. Over $2-million was raised for mental health in Quebec during the fourth Bal des Lumieres event, co-chaired by Mr. Bibic. Bell donated $50,000 to the Canadian Red Cross to support humanitarian relief efforts in Pakistan and an additional $50,000 to the Canadian Red Cross to support recovery in Eastern Canada after Hurricane Fiona.

Delivering the most compelling content

Astral acquired Imagine Outdoor's entire digital out-of-home advertising network in Alberta, bringing Astral's total digital inventory in Alberta to 39 faces. TSN and RDS continue to deliver major league sports action, including 41 regular season games of the Toronto Raptors on TSN and TSN1050 radio in Toronto and 23 on RDS, and remain the exclusive television broadcast partner of the NFL in Canada. HBO's House of the Dragon, the prequel to Game of Thrones, based on George R.R. Martin's Fire and Ice series, aired exclusively on Crave for Canadian audiences, and saw the biggest season finale audience since Game of Thrones. Three original French language Bell Media dramas, La Confrerie, ... Moi non Plus and Une Affaire Criminelle, have been sold in seven international territories. Noovo continues to gain momentum with market share of primetime viewership up 4 per cent over Q3 2021, while the Noovo website saw an increase in views of 23 per cent for the fall season compared with last year.

"Bell's Q3 financial results highlight our consistent execution excellence and leading asset mix across all Bell operating segments, which delivered strong consolidated revenue growth of 3.2 per cent. Despite sizable costs related to storms and inflationary pressures absorbed in the quarter, our disciplined approach in balancing market share growth and financial performance resulted in a respectable adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] increase of 1.2 per cent," said Glen LeBlanc, chief financial officer for BCE and Bell Canada.

"Our strong overall performance was led by wireless, which grew service revenue and adjusted EBITDA by 7 per cent and 7.8 per cent, respectively, reflecting our steadfast focus on higher-value subscriber acquisition, and continued robust residential Internet revenue growth of 8 per cent. Although the advertising market was weaker this quarter due to the macroeconomic environment, total media revenue was stable year-over-year. This is a testament to Bell Media's diversified asset mix, including a growing contribution from digital platforms, our breadth of programming and consistently high ratings for all our television properties.

"BCE's balance sheet remains very healthy with $3.5-billion of available liquidity, which includes $583-million in cash, a high proportion of fixed-rate debt, a substantial pension solvency surplus across our major defined benefit plans, and relatively low cyclicality for the majority of our revenues that helps to mitigate the financial impact of rising interest rates and macroeconomic uncertainty. With three quarters of favourable consolidated results already reported, and a competitive position that's better than ever, we are on track to deliver on our 2022 financial guidance targets."

• BCE operating revenue increased 3.2 per cent over Q3 2021 to $6,024-million, comprising 1.8-per-cent-higher service revenue of $5,193-million and a 12.8-per-cent increase in product revenue to $831-million. This result was driven by strong wireless and residential Internet growth as well as higher year-over-year business wireline data equipment sales. Media revenue was unchanged compared with last year.
• Net earnings declined 5.2 per cent to $771-million and net earnings attributable to common shareholders totalled $715-million, or 78 cents per share, down 5.5 per cent and 6 per cent, respectively. The year-over-year decreases were driven mainly by higher other expense, reflecting net mark-to-market losses on derivatives used to economically hedge equity-settled share-based compensation, higher depreciation and amortization expense, increased interest expense, and higher year-over-year asset impairment charges. These factors were partly offset by lower income taxes due to the favourable resolution of uncertain tax positions, higher adjusted EBITDA, lower severance, acquisition and other costs, and a higher net return on postemployment benefit plans. Adjusted net earnings were up 7.1 per cent to $801-million, delivering a 7.3-per-cent increase in adjusted EPS (earnings per share) to 88 cents.
• Adjusted EBITDA grew 1.2 per cent to $2,588-million, reflecting a 7.8-per-cent year-over-year increase at Bell Wireless, partly offset by decreases of 1.2 per cent and 15.3 per cent at Bell Wireline and Bell Media, respectively. This result included an increase in operating costs from the impact of storm-related costs due mainly to Hurricane Fiona, as well as continued inflationary pressures on fuel, utility and labour costs, which, in aggregate, totalled $38-million in Q3. BCE's consolidated adjusted EBITDA margin decreased 0.8 percentage point to 43 per cent from 43.8 per cent in Q3 2021, due to the aforementioned cost pressures, financing of very strong subscriber acquisition and a year-over-year increase in low-margin product sales.
• BCE capital expenditures were $1,317-million, up 13.1 per cent from $1,164-million in Q3 2021, corresponding to a capital intensity of 21.9 per cent, compared with 19.9 per cent last year. Capital expenditures this quarter were focused mainly on the continued accelerated rollout of Bell's wireline fibre and wireless 5G+ networks.
• BCE cash flows from operating activities increased 12.5 per cent to $1,996-million compared with Q3 2021, reflecting lower cash taxes paid, reduced contributions to postemployment benefit plans due to a partial contribution holiday in 2022 and higher adjusted EBITDA, partly offset by lower cash from working capital and higher interest paid.
• Free cash flow was $642-million, up 13.4 per cent from $566-million in Q3 2021, as higher cash flows from operating activities, excluding acquisition and other costs paid, was partly offset by increased capital expenditures.

Q3 operating results by segment

Bell Wireless:

• Total wireless operating revenue grew 7.4 per cent to $2,466-million, driven by both higher service and product revenue.
• Service revenue increased 7 per cent to $1,769-million, the result of strong mobile phone and connected device subscriber base growth, and higher mobile phone blended ARPU (average revenue per user).
• Product revenue was up 8.6 per cent to $697-million, mainly reflecting a greater sales mix of premium mobile phones.
• Wireless adjusted EBITDA increased 7.8 per cent to $1,089-million with a margin increase to 44.2 per cent from 44 per cent in Q3 2021, driven by the flow-through of strong service revenue growth as operating costs grew 7.1 per cent, due to higher cost of goods sold driven by increased product sales in the quarter, higher network operating costs from the continued deployment of the company's mobile 5G network and higher payments to other carriers driven by increased roaming volumes.
• Bell added a record quarterly 224,343 net postpaid and prepaid mobile phone subscribers, 64.4 per cent higher than 136,464 in Q3 2021.
• Postpaid mobile phone net subscriber activations totalled 167,798, the company's best-ever Q3 result, compared with 114,821 in Q3 2021. The significant 46.1-per-cent increase was the result of a 16.3-per-cent increase in gross subscriber activations, driven by greater retail store traffic compared with last year, continued 5G momentum, immigration growth, stronger business customer demand and an increased focus on bundling wireless service with Internet, as well as a three-basis-point improvement in mobile phone customer churn to 0.90 per cent.
• Bell's prepaid mobile phone net subscriber activations were 56,545, up 161.3 per cent from 21,643 in Q3 2021. The year-over-year increase was the result of 43.9-per-cent-higher gross activations, reflecting greater market activity as retail stores were at full operation compared with last year, as well as increased immigration and travel to Canada, which also contributed to a higher customer churn rate of 4.58 per cent, up from 4.15 per cent in Q3 2021.
• Bell's mobile phone customer base totalled 9,826,465 at the end of Q3 2022, a 5.1-per-cent increase over last year, comprising 8,915,270 postpaid subscribers, up 4.6 per cent, and 911,195 prepaid customers, up 9.9 per cent from last year.
• Mobile phone blended ARPU was up 2.2 per cent to $60.76. The increase was attributable to higher year-over-year roaming revenue, driven by significantly greater international travel volumes with the lifting of COVID-related restrictions and higher roaming rates, as well as the company's continuing focus on higher-value subscriber acquisition across all its postpaid and prepaid brands.
• Mobile connected device net activations grew 48.5 per cent to 49,044 from 33,035 in Q3 2021, driven by increased demand for Bell Internet of Things solutions, including connected car subscriptions, and fewer data device deactivations. Mobile connected device subscribers totalled 2,347,371 at the end of Q3, an increase of 6.2 per cent over last year.

Bell Wireline:

• Total wireline operating revenue increased 1 per cent to $3,046-million, compared with Q3 2021.
• Wireline service revenue was down 0.4 per cent to $2,907-million, due to continuing declines in legacy voice, data and satellite TV services, higher customer acquisition and retention discounts, reduced sales of Internet protocol connectivity, and business service solutions revenue attributable to delayed project spending by large enterprise customers because of continuing data equipment supply chain disruptions, and the sale of Createch on March 1, 2022. These impacts were largely offset by continued strong residential Internet revenue growth.
• Product revenue increased 46.3 per cent to $139-million, driven by higher sales of data equipment to enterprise business customers, due mainly to timing of deals and an easier year-over-year comparison as data equipment shortages began to intensify in Q3 2021.
• Wireline adjusted EBITDA was down 1.2 per cent to $1,317-million, due to 2.8-per-cent-higher operating costs, which together with a year-over-year increase in low-margin product sales contributed to a one-percentage-point margin decline to 43.2 per cent. The increase in operating costs this quarter was the result of unusually high storm-related costs, due primarily to Hurricane Fiona, and continuing inflationary pressures on fuel, utility and labour costs.
• Bell added 89,652 net new retail Internet subscribers, up 36.3 per cent from 65,779 in Q3 2021. This represents its best quarterly result since Q3 2005, driven by the accelerated expansion of Bell's fibre footprint, bundled service offerings and a more active back-to-school period compared with last year. Within Bell's all-fibre footprint, retail Internet net subscriber activations were a record 95,036, up 33.2 per cent over Q3 2021. Retail Internet subscribers totalled 4,067,039 at the end of Q3, up 6.6 per cent from last year.
• Bell TV added 38,093 net new retail IPTV subscribers, up 20.4 per cent from 31,641 in Q3 2021. This represents its highest quarterly result in four years, reflecting the success of its multibrand customer segmentation approach, including stand-alone Fibe TV subscriptions and Fibe TV app streaming services, as well as more typical back-to-school market activity. At the end of Q3, Bell served 1,945,657 retail IPTV subscribers, a 5-per-cent increase compared with Q3 2021.
• Retail satellite TV net subscriber losses were 27,240, up from 21,120 in Q3 2021, reflecting fewer gross activations and increased churn compared with last year when it experienced fewer customer deactivations due to less promotional offer intensity during COVID. Bell's retail satellite TV customer base totalled 789,343 at the end of Q3, down 9.9 per cent from last year.
• Retail residential NAS net losses totalled 42,853, compared with 42,755 in Q3 2021. Bell's retail residential NAS customer base totalled 2,164,151 at the end of Q3, a 7.5-per-cent decline compared with last year.

Bell Media:

• Media operating revenue of $719-million was unchanged compared with Q3 2021 as higher subscriber revenue was offset by lower year-over-year advertising revenue.
• Advertising revenue was down 2.3 per cent, reflecting softer TV advertiser demand and a slow radio recovery from COVID due to the current macroeconomic backdrop. This was partly offset by improved year-over-year out-of-home performance as well as continued strong digital growth. Additionally, advertising revenue generated in Q3 2021 from the federal election, UEFA Euro Cup and Tokyo Summer Olympics did not recur this year.
• Subscriber revenue increased 2.2 per cent, due mainly to Crave streaming direct-to-consumer growth.
• Digital revenues were up 40 per cent, the result of continued strong Crave direct-to-consumer growth and increased bookings from Bell Media's strategic audience management (SAM) TV media sales tool. Total Crave subscriptions increased 7 per cent from last year to approximately 3.1 million subscribers.
• CTV remained Canada's most-watched English-language conventional network, benefiting from a strong primetime summer season to expand its lead with a 29-per-cent gain in audience market share in Q3 among ages 25 to 54. Bell Media's English-language entertainment specialty channels also had a strong showing, finishing the 2021/2022 broadcast year with five of the top 10 channels among ages 25 to 54, including the top three spots for CTV Comedy, Discovery and CTV Drama. CTV Comedy ranked as the most-watched entertainment specialty channel in ages 25 to 54 for the fourth consecutive year.
• Noovo continued to gain viewership, outpacing its French-language conventional TV competitors with market share of primetime audiences up 4 per cent among ages 25 to 54, while RDS remained Canada's top-ranked French-language sports network in Q3.
• Adjusted EBITDA was down 15.3 per cent to $182-million, resulting in a 4.6-percentage-point margin decline to 25.3 per cent, due to the year-over-year decline in advertising revenue and a 6.5-per-cent increase in operating costs driven by the return this year to regular sports broadcast schedules and normalization of entertainment programming content deliveries.

Common share dividend

BCE's board of directors has declared a quarterly dividend of 92 cents per common share, payable on Jan. 16, 2023, to shareholders of record at the close of business on Dec. 15, 2022.

Outlook for 2022

BCE confirmed its financial guidance targets for 2022, as provided on Feb. 3, 2022, as noted herein.

For the full year 2022, BCE expects growth in adjusted EBITDA, a reduction in contributions to postemployment benefit plans and payments under other postemployment benefit plans, and lower cash income taxes will drive higher free cash flow.

Call with financial analysts

BCE will hold a conference call for financial analysts to discuss Q3 2022 results on Thursday, Nov. 3, at 8 a.m. Eastern Time. 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 1128694 followed by the pound key. A replay will be available until midnight on Dec. 1, 2022, by dialling 1-800-408-3053 or 905-694-9451 and entering passcode 6266597 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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