Slide 1: Q4 2017 Results & 2018 Financial Guidance Call
Q4 2017 Results & 2018 Financial Guidance Call February 8, 2018
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in this presentation are forward-looking statements. These forward-looking statements include, but are not limited to, statements relating to BCE’s financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow)
Slide 3: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 4: Q4 overview
Q4 overview • 235k total broadband net customer additions — 175k wireless postpaid, 32k IPTV and 27k Internet — up 68k or 40.8% y/y • Strong 5.1% service revenue growth drove 4.5% higher adjusted EBITDA with stable margin • Outstanding wireless subscriber metrics and financial results – Best postpai
Slide 5: Significant broadband scale added in 2017
Significant broadband scale added in 2017 Broadband services customer additions • 1.26M new broadband customers added to Bell growth services customer base in 2017 Wireless postpaid Internet 1.26M – 612k new wireless postpaid, Internet and IPTV net IPTV additions, up 10.2% y/y MTS acquisition 648k –
Slide 6: Wireless operating metrics
Wireless operating metrics Operating metrics Q4’17 Y/Y 2017 Y/Y • 175k postpaid net additions – best quarterly performance since Q4 2002 Postpaid gross additions 505k 16.5% 1,532k 8.8% – Record industry postpaid gross additions of 505k, up 16.5% y/y, on seasonally high promotional Postpaid net addit
Slide 7: New wireless prepaid service
New wireless prepaid service • Why a new prepaid service? – Fast-growing demand for low-cost mobile options that are simple and straightforward with cost certainty – Targeting students, young adults just entering workforce, seniors, new Canadians and budget-conscious consumers – Postpaid migration o
Slide 8: Maintaining wireless network leadership in 2018
Maintaining wireless network leadership in 2018 LTE Advanced (LTE-A) coverage • Expanding LTE-A network footprint to ~92% of Canadians in 2018 % of Canadian population – 4G LTE service available in both urban and rural areas ~92% covering 99% of population with speeds up to 150 Mbps 87% 73% • Indust
Slide 9: Strong wireline subscriber growth
Strong wireline subscriber growth Internet and IPTV net additions • 27.0k total Internet net additions, up 46.9% y/y – 7% higher residential gross additions and lowest churn IPTV since Q1’16 reflect expanding direct fibre footprint and Internet 59.5k enhanced competitive speeds in non-FTTP areas 54.
Slide 10: Broadband fibre laying foundation for future growth
Broadband fibre laying foundation for future growth Bell fibre footprint • FTTP footprint expanding by ~800k homes and businesses to 4.5M locations by YE2018 FTTP FTTN Locations • ~60% of Toronto fibre build now completed passed 11.2M 11.9M 12.0M (incl. DSL and – 80% pre-connection consent rate from
Slide 11: Bell Media
Bell Media • Continued leading TV viewership and ratings – 7 of top 10 programs for CTV in fall season – Top 3 new programs among total viewers: Young Sheldon, The Good Doctor and The Indian Detective • TSN #1 Canadian specialty network in fall season – Audiences up 9% over fall 2016, driven by CFL
Slide 12: Raising common dividend 5.2% to $3.02 per share
Raising common dividend 5.2% to $3.02 per share Annualized common dividend per share 107% • Enabled by strong 2017 results and increase positive financial outlook for 2018 $3.02 • 5%+ dividend growth with FCF dividend $2.87 payout within 65% to 75% target range, for 10th consecutive year, as capital
Slide 13: Glen LeBlanc, EVP & Chief Financial Officer
Glen LeBlanc EVP & Chief Financial Officer
Slide 14: Q4 financial review
Q4 financial review ($M) except per share data Q4’17 Y/Y 2017 Y/Y Revenue 5,958 4.5% 22,719 4.6% Service 5,435 5.1% 21,143 5.2% Product 523 (1.9%) 1,576 (3.3%) Adjusted EBITDA 2,217 4.5% 9,178 4.4% Margin 37.2% 0.0 pts 40.4% (0.1 pts) Net earnings 617 (11.7%) 2,970 (3.8%) Statutory EPS 0.64 (14.7%)
Slide 15: Wireless financials
Wireless financials ($M) Q4’17 Y/Y 2017 Y/Y Revenue 2,070 9.9% 7,883 10.1% Service 1,894 10.6% 7,350 10.7% Product 176 3.5% 533 3.1% Operating costs 1,334 (10.3%) 4,607 (10.9%) Adjusted EBITDA 736 9.2% 3,276 9.1% Margin (service revenue) 38.9% (0.4 pts) 44.6% (0.6 pts) Capex 218 (13.0%) 731 0.3% Cap
Slide 16: Wireline financials
Wireline financials ($M) Q4’17 Y/Y 2017 Y/Y Revenue 3,222 2.7% 12,415 2.6% Service 2,871 3.6% 11,357 3.4% Product 351 (4.4%) 1,058 (5.9%) Operating costs 1,912 (1.8%) 7,229 (2.4%) Adjusted EBITDA 1,310 4.1% 5,186 2.9% Margin 40.7% 0.6 pts 41.8% 0.1 pts Capex 845 (8.6%) 3,174 (8.1%) Capital intensity
Slide 17: Media financials
Media financials ($M) Q4’17 Y/Y 2017 Y/Y Revenue 834 (1.3%) 3,104 0.7% Operating costs 663 (0.9%) 2,388 (2.1%) Adjusted EBITDA 171 (9.0%) 716 (3.6%) Margin 20.5% (1.7 pts) 23.1% (1.0 pts) Capex 37 (68.2%) 129 (26.5%) Capital intensity 4.4% (1.8 pts) 4.2% (0.9 pts) Adjusted EBITDA-capex 134 (19.3%) 5
Slide 18: 2017 financial wrap-up
2017 financial wrap-up ($M) 2017 Target except per share data Revenue • Top-line growth driven by strong 5.2% y/y Growth y/y 4.6% 4%-6% increase in total service revenue Adjusted EBITDA • Adjusted EBITDA growth in line with plan Growth y/y 4.4% 4%-6% • Relatively stable y/y adjusted EBITDA margin Ca
Slide 19: Financial targets for 2018
Financial targets for 2018 BCE(1) Revenue growth 2% to 4% Adjusted EBITDA growth 2% to 4% Capital intensity ~17% Adjusted EPS(2) $3.42 to $3.52 Growth y/y 1% to 4% Free cash flow(3) $3,525M to $3,650M Growth y/y 3% to 7% Annualized common dividend per share(4) $3.02 Dividend payout policy 65% to 75%
Slide 20: Revenue & adjusted EBITDA outlook
Revenue & adjusted EBITDA outlook BCE revenue(1) • ~3 months incremental contribution from Bell MTS in 2018 vs. ~9 months in 2017 ($M) 2%-4% growth • Continued strong wireless contribution to overall consolidated financial results in 2018 – Flow-through of solid, but moderating ARPU growth 22,719 –
Slide 21: Pension funding and expense estimates
Pension funding and expense estimates BCE cash pension funding ($M) Pension funding Voluntary contribution • $100M voluntary contribution in Dec’17 to Regular funding take advantage of new Ontario legislation – Eliminates solvency funding requirements for 490 provincially-regulated plans over 85% so
Slide 22: Tax outlook
Tax outlook BCE cash income taxes paid Income tax expense ($M) • Statutory tax rate of 27.0% for 2018 vs. 27.1% in 2017 ~700-750 • Effective tax rate of ~25% in 2018 reflects 675 similar level of y/y tax adjustments – $0.07 per share realized in 2017 Cash income taxes • Modest increase in cash taxes
Slide 23: Adjusted EPS outlook
Adjusted EPS outlook Adjusted EPS(1), (2) • Adjusted EBITDA key driver of earnings growth – ~$30M-$40M in higher y/y non-cash pension current ($) service cost moderating overall growth in 2018 3.42–3.52 • Higher y/y depreciation & amortization expense 3.39 1%–4% growth driven by accelerated capital
Slide 24: Free cash flow growth outlook
Free cash flow growth outlook Free cash flow(1) • FCF growth of 3% to 7% for 2018 driven by higher y/y adjusted EBITDA and lower ($M) severance, acquisition and other costs paid Common dividends paid Excess FCF – Capital intensity ratio maintained at ~17% ~3,525–3,650 – Stable y/y cash pension fundi
Slide 25: Strong capital structure
Strong capital structure Credit profile(1) Target 12/31/2017 • Investment grade ratings with stable outlook – Financial policies aligned with strong BBB+ rating Net debt leverage ratio 1.75x-2.25x 2.70x – Leverage ratio improving modestly in 2018 Adj. EBITDA/Net Interest >7.5x 00 9.12x – Further del