BCE reports second quarter 2020 results

Canada’s largest 5G wireless network, offering unprecedented mobile data speeds in Montréal, the GTA, Calgary, Edmonton and Vancouver along with Canada’s broadest selection of 5G-capable smartphones. Bell announced that Ericsson will join Nokia as a provider of radio access network equipment for Bell 5G, and we are partnering with Western University to accelerate 5G innovation. Following our accelerated rollout of rural Wireless Home Internet (WHI) service in response to unprecedented demand during COVID-19, Bell announced we will double WHI download speeds for rural Canada with 50/10 Internet access this fall while also expanding WHI service to rural communities throughout the Atlantic provinces.” data-reactid=”37″>Best networks: 5G leadership, rural Wireless Home Internet
Bell turned on Canada’s largest 5G wireless network, offering unprecedented mobile data speeds in Montréal, the GTA, Calgary, Edmonton and Vancouver along with Canada’s broadest selection of 5G-capable smartphones. Bell announced that Ericsson will join Nokia as a provider of radio access network equipment for Bell 5G, and we are partnering with Western University to accelerate 5G innovation. Following our accelerated rollout of rural Wireless Home Internet (WHI) service in response to unprecedented demand during COVID-19, Bell announced we will double WHI download speeds for rural Canada with 50/10 Internet access this fall while also expanding WHI service to rural communities throughout the Atlantic provinces.

Bell Streamer is a compact Android device offering all-in-one access to live TV and on-demand content from Bell Alt TV, support for all major streaming services, and access to thousands of apps in Google Play. Virgin TV is a new app-based television service that works across iOS and Android smartphones, tablets, laptops and streaming devices, offering Virgin Internet Members an all-new way to watch live TV and on-demand programs. Bell Media completed the acquisition of V, our first French-language conventional TV network and its ad-supported streaming service Noovo.ca, and will unveil a new brand for the network later this month. Bell Media announced its extensive slate of new English-language and French-language programming for the fall season, Crave launched HBO Max programming in Canada and CTV was named the most-watched network in primetime for the 19th straight year.” data-reactid=”38″>TV and Media: Bell Streamer, Virgin TV, V acquisition
Our latest television innovation, Bell Streamer is a compact Android device offering all-in-one access to live TV and on-demand content from Bell Alt TV, support for all major streaming services, and access to thousands of apps in Google Play. Virgin TV is a new app-based television service that works across iOS and Android smartphones, tablets, laptops and streaming devices, offering Virgin Internet Members an all-new way to watch live TV and on-demand programs. Bell Media completed the acquisition of V, our first French-language conventional TV network and its ad-supported streaming service Noovo.ca, and will unveil a new brand for the network later this month. Bell Media announced its extensive slate of new English-language and French-language programming for the fall season, Crave launched HBO Max programming in Canada and CTV was named the most-watched network in primetime for the 19th straight year.

sell 25 of our data centres to Equinix in an all-cash transaction valued at $1.04 billion. Retaining 5 data centres across the country, Bell also becomes the first Equinix Platinum Partner in Canada, enabling Bell Business Markets to provide enterprise clients access to the international scale of Equinix’s integrated network and cloud solutions. All regulatory approvals have been obtained and the transaction is expected to close in the second half of 2020 subject to customary closing conditions.” data-reactid=”39″>Bell sells 25 data centres to Equinix
Reinforcing our strategy to focus investment on Canada’s best networks, content and services, Bell agreed to sell 25 of our data centres to Equinix in an all-cash transaction valued at $1.04 billion. Retaining 5 data centres across the country, Bell also becomes the first Equinix Platinum Partner in Canada, enabling Bell Business Markets to provide enterprise clients access to the international scale of Equinix’s integrated network and cloud solutions. All regulatory approvals have been obtained and the transaction is expected to close in the second half of 2020 subject to customary closing conditions.

June 1, 2020 announcement that it had agreed to sell substantially all of its data centre operations, we have reclassified amounts related to the announced sale for the previous periods to discontinued operations in our consolidated income statements and consolidated statements of cash flows to make them consistent with the presentation for the current period.

$1.6 billion, with overall free cash flow growth of more than 30% for the first half of the year,” said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada. “We remain confident in the underlying, long-term fundamentals and performance of BCE, including a healthy balance sheet and substantial, ongoing free cash flow generation that provides us with considerable financial flexibility to navigate the COVID-19 recovery while more than meeting all our cash requirements for the balance of 2020.”

• BCE operating revenue was $5,354 million, down 9.1% compared to Q2 2019, due to reduced consumer and commercial activity as COVID-19 negatively impacted financial results across all Bell operating segments. This was comprised of 7.5% lower service revenue of $4,800 million and 20.7% lower product revenue of $554 million.
• Net earnings declined 64.0% to $294 million and net earnings attributable to common shareholders totalled $237 million, or $0.26 per share, down 68.9% and 69.4% respectively. The decreases were the result of higher other expense, which included $452 million of impairment charges related to certain Bell Media TV and radio properties, and lower adjusted EBITDA, partly offset by lower income taxes.
• Adjusted net earnings were $573 million, or $0.63 per common share, down 31.8% and 32.3% respectively, compared to $840 million, or $0.93 per common share, in Q2 2019.
• Adjusted EBITDA decreased 9.4% to $2,331 million, driven by declines of 9.2% at Bell Wireless, 5.3% at Bell Wireline and 31.9% at Bell Media. BCE’s consolidated adjusted EBITDA margin⁽³⁾ was down 0.2 percentage points to 43.5%.
• Total BCE capital expenditures decreased 6.9% to $900 million, for a capital intensity⁽⁵⁾ ratio of 16.8% compared to 16.4% in Q2 last year. The decline was due to fewer new customer service installations and less network construction as Bell continued to focus on stabilizing operations during COVID-19 and ensuring critical service continuity. Despite the slower spending, we continued to invest in the expansion of our fibre network, launched initial mobile 5G service, and accelerated the rollout of Wireless Home Internet to more rural locations in Québec and Ontario.
• BCE cash flows from operating activities increased 22.4% to $2,562 million from $2,093 million last year, due mainly to higher cash from working capital and a delay in income tax installment payments as a result of government COVID-19 relief measures.
• Free cash flow grew 49.7% to $1,611 million, from $1,076 million last year, due to higher cash flows from operating activities, excluding cash from discontinued operations and acquisition and other costs paid, and lower capital expenditures.

BCE reported 34,702 net new wireless customers (21,632 postpaid and 13,070 prepaid) in Q2, surpassing 10 million total wireless subscribers; 19,023 net new retail Internet customers; a net loss of 3,604 IPTV customers; a net loss of 11,940 retail satellite TV customers; and a net loss of 48,405 retail residential NAS lines. These subscriber results are net of provisions recorded due to COVID-19 for non-paying customers who have not been disconnected.

BCE wireless and retail Internet, TV and residential NAS connections⁽⁵⁾ totalled 18,935,326, up 1.4% over Q2 2019. The total includes 10,012,259 wireless customers, up 4.0% (including 9,205,222 postpaid customers, an increase of 3.3%, and 807,037 prepaid customers, up 12.2%); 3,597,219 retail Internet subscribers, up 3.9%; 2,738,365 retail TV subscribers, down 1.0% (including 1,766,430 IPTV customers, an increase of 3.1%, and 971,935 retail satellite TV customers, down 7.8%); and 2,587,483 retail residential NAS lines, down 8.3%.

Total wireless operating revenue decreased 11.0% to $1,922 million, driven by lower service and product revenues.

Service revenue declined 6.2% to $1,493 million, mainly due to lower roaming revenue from reduced travel and the waiving of roaming charges because of COVID-19; lower data overage from continued adoption of unlimited plans and greater customer offloading to home Wi-Fi; and support for customers during the crisis, including the waiving or reduction of certain fees.

Product revenue was down 24.5% to $429 million as transactions were impacted by retail store closures and reduced consumer activity due to COVID-19.

Consistent with the decline in revenue, wireless adjusted EBITDA decreased 9.2% to $879 million. However, wireless margin increased 0.9 percentage points to 45.7% due to a 12.5% reduction in operating costs as a result of reduced sales activity.

Bell added 34,702 total net new postpaid and prepaid customers, compared to 149,478 in Q2 2019.

Postpaid net additions totalled 21,632, down from 102,980 in Q2 2019. Overall market activity was affected by retail channel closures and fewer promotional offers due to COVID-19, resulting in a 35.2% decline in Q2 postpaid gross additions. This was moderated by an improvement in postpaid customer churn⁽⁵⁾ to 0.82%, our best postpaid churn result ever. This result is net of a provision we took estimating the number of customer deactivations that would have otherwise occurred in the quarter for delayed or non-payment.

Prepaid net additions were 13,070 compared to 46,498 in Q2 last year, reflecting a 9.1% decrease in gross additions, while prepaid churn increased 0.43 percentage points to 4.63%.

Bell’s wireless customer base totalled 10,012,259 at the end of Q2, a 4.0% increase over last year, comprising 9,205,222 postpaid subscribers, up 3.3%, and 807,037 prepaid subscribers, up 12.2%.

Blended average billing per user (ABPU)⁽⁵⁾ decreased 8.8% to $62.77, mainly the result of declines in roaming, data overage and other fee revenue due to COVID-19, as well as the dilutive impact from continued prepaid customer growth.

Total wireline operating revenue decreased 1.0% in Q2 to $3,043 million.

Service revenue was down 0.8% to $2,917 million, due mainly to ongoing declines in legacy voice, data and satellite TV services; lower business service solutions sales; and the impact of customer accommodations during COVID-19, including fee reductions and delays in implementing planned rate increases for certain residential services. This was partly offset by higher combined Internet and IPTV revenue driven mainly by year-over-year retail subscriber growth.

Product revenue was down 5.3% to $126 million due to a decline in data equipment sales to large business enterprise customers and a slowdown in overall customer spending during COVID-19.

Wireline adjusted EBITDA decreased 5.3% in Q2 to $1,279 million. Despite favourable cost impacts from reduced commercial activity and other discretionary cost savings and efficiencies achieved during COVID-19, total operating costs increased 2.4% due to a number of COVID-19 related factors, including the purchase of personal protective equipment, increased cleaning costs and supplies, employee redeployment costs, significant donations of protective masks to healthcare and other frontline workers, and higher bad debt expense as a result of an uncertain economic and employment environment. These factors contributed to a 1.9 percentage point decline in margin to 42.0%.

Bell added 19,023 new retail Internet customers compared to 19,414 in Q2 2019. Higher residential net activations, supported by ongoing expansion of Bell’s all-fibre and Wireless Home Internet footprints as well as fewer customer deactivations during COVID-19, was offset by lower business net activations due to the shutdown of non-essential services during the crisis.

Retail Internet customers totaled 3,597,219 at the end of Q2, an increase of 3.9% over last year.

Bell’s retail IPTV customer base declined by 3,604 net subscribers in Q2, compared to a net gain of 16,775 last year, due to reduced sales activity and fewer customers installing new TV services during COVID-19, increasing market maturity for Fibe TV and Alt TV, and ongoing over-the-top substitution. Bell served 1,766,430 retail IPTV subscribers at the end of Q2, up 3.1% over last year.

Retail satellite TV net customer losses improved 17.2% to 11,940 from 14,425 last year due to fewer customer deactivations.

At the end of Q2, Bell had a combined total of 2,738,365 retail IPTV and satellite TV subscribers, down 1.0% from Q2 2019.

Retail residential NAS net losses improved 33.5% to 48,405, due to decreased customer deactivations during COVID-19 and fewer customers with expired promotional bundle offers. Bell’s retail residential NAS customer base totalled 2,587,483 at the end of Q2, an 8.3% decline from last year.

Our wireline subscriber results are net of provisions estimating the number of customer deactivations that would have otherwise occurred in the quarter for delayed or non-payment.

Total media operating revenue decreased 31.2% to $579 million due to lower year-over-year advertising and subscriber revenues.

Advertising revenue declined materially on reduced advertiser spending across all platforms – TV, radio, out of home and digital, due to the impact of COVID-19 on commercial activity, the suspension of major league sports schedules and the cancellation of other live events.

Subscriber revenue was down due to declines across multiple channels reflecting continued cord shaving and over-the-top substitution. Total subscribers have remained essentially stable during the COVID-19 period, with subscribers for Crave growing to approximately 2.8 million from almost 2.7 million last year.

Adjusted EBITDA decreased 31.9% to $173 million due to the flow-through impact of lower revenue, partly offset by reduced operating costs.

$0.8325 per common share, payable on October 15, 2020 to shareholders of record at the close of business on September 15, 2020.

May 6, 2020 all of its 2020 financial guidance it announced on February 6, 2020.

BCE’s underlying business fundamentals remain strong. Our strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide significant financial flexibility to execute on our planned capital expenditures for 2020 and to sustain BCE’s common share dividend payments for the foreseeable future.

Thursday, August 6 at 8:00 am (Eastern). Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-866-696-5894 or 416-641-6150 and enter passcode 7959145#. A replay will be available until midnight on September 4, 2020 by dialing 1-800-408-3053 or 905-694-9451 and entering passcode 4511636#.

BCE Q2-2020 conference call. The mp3 file will be available for download on this page later in the day.” data-reactid=”93″>A live audio webcast of the conference call will be available on BCE’s website at BCE Q2-2020 conference call. The mp3 file will be available for download on this page later in the day.

(1) In Q2 2020, we updated our definitions of adjusted net earnings, adjusted EPS and free cash flow to exclude the impacts of discontinued operations as they may affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. As a result of this change, prior periods have been restated for comparative purposes.

(2) 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, impairment of assets and discontinued operations, 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 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, impairment of assets and discontinued operations, 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 and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.      

($ millions)
	Q2 2020	Q2 2019
Net earnings	294	817
Severance, acquisition and other costs	22	39
Depreciation	869	879
Amortization	234	220
Finance costs
Interest expense	280	279
Interest on post-employment benefit obligations	11	15
Impairment of assets	449	1
Other expense (income)	80	54
Income taxes	96	275
Net earnings from discontinued operations	(4)	(7)
Adjusted EBITDA	2,331	2,572
BCE operating revenues	5,354	5,889
Adjusted EBITDA margin	43.5%	43.7%