Slide 1: Q2 2014 Results Conference Call
Q2 2014 Results Conference Call August 7, 2014
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in this presentation are forward-looking statements. These statements include, without limitation, statements relating to our 2014 financial guidance (including revenues, Adjusted EBITDA, capital intensity, Adjusted EPS and free cash flow), our business ou
Slide 3: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 4: Q2 overview
Q2 overview Bell Adjusted EBITDA up 4.9% with stable y/y margin of 39.4% Strong 5.7% wireless service revenue growth drives 9.5% higher Adjusted EBITDA Rate of Wireline Adjusted EBITDA decline continuing to improve y/y 3rd consecutive quarter of positive residential services revenue growth
Slide 5: Wireless operating metrics
Wireless operating metrics Metrics Q2’14 Y/Y • Healthy postpaid net adds of 66k – Continued impact on industry growth from transition to Postpaid gross additions 292k (13.1%) 2-year contract pricing and no major handset launches – Postpaid smartphone mix grows 8 pts y/y to 75% Postpaid net additions
Slide 6: Expanding 4G LTE to rural communities across Canada
Expanding 4G LTE to rural communities across Canada 700 MHz • 4G LTE now covers 82% of Canadian population 850 MHz • Deployment in rural communities started in April 1900 MHz • 700 MHz spectrum and other bandwidth assets to 2100 MHz be used in rural 4G LTE deployment 2500 MHz • Next phase of 4G LTE
Slide 7: Wireline Residential RGU net losses continue to improve
Wireline Residential RGU net losses continue to improve Bell Residential RGU net losses • Total residential RGU net losses in Q2’14 improve 12% y/y – Relatively stable y/y combined broadband IPTV and Internet net adds and fewer NAS losses 115.1k +41% • Q2 Internet net adds of 3.6k, up 1.2k y/y +12%
Slide 8: Bell Aliant contributing positively to BCE customer growth
Bell Aliant contributing positively to BCE customer growth Pro forma BCE residential RGU net losses • Pro forma Q2’14 total residential RGU net 65k +29% losses improve 29% or 19k y/y • Combined IPTV net adds of 59k in Q2’14 46k • Total Internet net adds of 18k in Q2’14, more Q2'13 Q2'14 than double
Slide 9: Bell Media
Bell Media • Ongoing softness in overall advertising market • Highest average audiences vs. competitors across conventional and specialty TV – 12 of top 20 programs for CTV in Spring season – 4 of top 5 shows among viewers aged 25-54 • Secured 11 new series and more returning top 20 hits than any ot
Slide 10: Continued strong mix of growth services
Continued strong mix of growth services BCE revenue mix(1) Pro forma BCE revenue mix(2) Q2’14 Q2’14 Wireless Wireless Wireline 31% Wireline Voice 30% Wireless voice Business 20% voice Business 10% 30% 19% 10% 21% Consumer 81% Consumer 79% 9% 11% Wireline Wireline Broadband Broadband Media Media & TV
Slide 11: Siim Vanaselja, EVP & Chief Financial Officer
Siim Vanaselja EVP & Chief Financial Officer
Slide 12: Q2 financial review
Q2 financial review Bell Q2’14 Y/Y YTD’14 Y/Y • Service revenue up 5.8% in Q2’14 – Reflects Astral contribution and accelerated Revenue $4,649M 5.1% $9,187M 4.7% Wireless and Wireline residential revenue growth Service $4,282M 5.8% $8,469M 5.4% Product $367M (2.1%) $718M (2.6%) • Adjusted EBITDA gro
Slide 13: Wireless financials
Wireless financials ($M) Q2’14 Y/Y YTD’14 Y/Y Revenue 1,522 5.5% 2,994 5.0% Service 1,404 5.7% 2,768 5.2% Product 105 6.1% 199 3.6% Operating costs 855 (2.6%) 1,699 (2.5%) Adjusted EBITDA 667 9.5% 1,295 8.5% Margin (service revenue) 47.5% 1.6 pts 46.8% 1.4 pts Capex 164 (22.4%) 281 (9.8%) Capital in
Slide 14: Wireline financials
Wireline financials ($M) Q2’14 Y/Y YTD’14 Y/Y Revenues 2,485 (0.8%) 4,947 (1.3%) Data 1,485 2.0% 2,948 2.0% Voice 765 (6.1%) 1,530 (7.0%) Equipment & other 147 (3.9%) 296 (6.6%) Operating costs 1,532 (0.3%) 3,064 0.4% Adjusted EBITDA 953 (2.7%) 1,883 (2.8%) Margin 38.4% (0.7 pts) 38.1% (0.5 pts) Cap
Slide 15: Media financials
Media financials ($M) Q2’14 Y/Y YTD’14 Y/Y Revenues 761 36.1% 1,483 38.3% Operating costs 551 (36.7%) 1,123 (37.3%) Adjusted EBITDA (reported) 210 34.6% 360 41.7% Margin 27.6% (0.3 pts) 24.3% 0.6 pts PPA (18) (12.5%) (37) (8.8%) Adjusted EBITDA (excl. PPA) 228 32.6% 397 37.8% Margin 30.0% (0.8 pts)
Slide 16: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Higher y/y Adjusted EBITDA contributes 8¢ of EPS growth +6.5% $0.82 • Increased depreciation and amortization from $0.77 higher capital asset base and Astral contribution • Interest expense up y/y reflects higher average Q2'13 Q2'14 long-term debt due to Astral acquisi
Slide 17: Free cash flow
Free cash flow Free cash flow • FCF of $815M in Q2’14 in line with plan • $85M higher y/y Adjusted EBITDA(1) driven by $903M strong wireless growth and Astral contribution $815M • Higher capex reflects timing of spend on fibre broadband expansion and wireless LTE Q2'13 Q2'14 • Net interest paid refl
Slide 18: Outlook
Outlook 2014 guidance(1) February 6 August 7 No change in overall outlook • Continued strong Wireless profitability Revenue growth 2%-4% On track • Wireline revenue and Adjusted EBITDA growth in second half of 2014 Adjusted EBITDA growth 3%-5% On track • Astral fully reflected in Bell Media y/y fina
Slide 19: Key financial assumptions for 2014
Appendix Key financial assumptions for 2014 Bell February 6 August 7 Employee benefit plans service cost (above Adjusted EBITDA) ~$220M No change Net employee benefit plans financing cost (below Adjusted EBITDA) ~$90M No change Cash pension funding ~$350M No change Cash taxes ~$600M No change Net in