Slide 1: Q4 2011 Results and 2012 Analyst Guidance Call
Q4 2011 Results and 2012 Analyst Guidance Call February 9, 2012
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in the attached presentation, including, but not limited to, statements relating to our 2012 financial guidance (including revenues, EBITDA, capital intensity, Adjusted EPS, and free cash flow), BCE Inc.’s business outlook, objectives, plans and strategic
Slide 3: Safe harbour notice (cont'd): Operational and Financial Assumptions
Safe harbour notice (cont’d) Operational Assumptions Our forward-looking statements for 2012 are also based on certain internal operational assumptions concerning Bell (excluding Bell Aliant), including, but not limited to: (i) continued NAS losses from increasing wireline substitution and continuin
Slide 4: Safe harbour notice (cont'd): Material Risks
Safe harbour notice (cont’d) Material Risks Important risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by our forward-looking statements, including our 2012 financial guidance, are listed
Slide 5: Siim Vanaselja, Chief Financial Officer
Siim Vanaselja Chief Financial Officer
Slide 6: Financial review
Financial review Q4 & FY2011 results Capital structure 2012 financial outlook
Slide 7: 2011 financial review
2011 financial review Bell Q4’11 Y/Y 2011 Y/Y Q4’11 Revenue $4,576M 12.6% $17,133M 9.3% • Revenue and EBITDA growth of 12.6% and 10.3% Service (incl. media) $4,063M 15.7% $15,469M 11.4% includes Bell Media Product $513M (7.5%) $1,664M (6.9%) • Product revenues down 7.5% on lower y/y data equipment a
Slide 8: Wireless operating metrics
Wireless operating metrics Bell Q4’11 Y/Y 2011 Y/Y Postpaid gross additions 389k (2.4%) 1,403k 5.3% Total gross additions 512k (7.4%) 1,936k (3.2%) Postpaid net additions 132k (15.8%) 434k (13.3%) Total net additions 58k (50.4%) 185k (54.6%) Blended ARPU $54.50 4.1% $53.55 2.9% Data (% of ARPU) 30.4
Slide 9: Wireless financials
Wireless financials • Improving service revenue growth trajectory driven by subscriber mix and higher ARPU – Accelerated smartphone adoption and usage contributed to data revenue growth of 32% in Q4’11 • Product revenues down 3.7% in Q4’11, despite higher y/y smartphone sales – Lower average handset
Slide 10: Wireline operating metrics highlights
Wireline operating metrics highlights Key metrics Q4’11 Y/Y 2011 Y/Y Residential NAS losses 90k (53k) 333k (55k) Voice Business NAS losses 14k 14k 41k 66k Total NAS net losses 104k (39k) 374k 11k Net additions 28k 5k 67k (4k) TV Retail ARPU $73.68 (1.5%) $74.56 1.5% Internet Net additions 1k (11k) 1
Slide 11: Wireline financials
Wireline financials ($M) Q4’11 Y/Y 2011 Y/Y • Residential growth services deliver solid results – Internet and TV revenues up 10% and 1.6%, Revenues 2,709 (4.0%) 10,621 (3.0%) respectively, in Q4’11 Voice 906 (6.1%) 3,755 (4.6%) Data -- service 823 (1.7%) 3,227 (2.0%) • Voice revenue decline higher
Slide 12: Media results in line with plan
Media results in line with plan (1) Bell Media Q4’11 2011 • Strong subscriber revenue growth of ~35% in Q4 ($M) – Reflects impact of rate increases for TSN and RDS from new deals reached with a number of major BDUs Revenues 578 1,542 – Digital growth driven by mobile TV and online video EBITDA (repo
Slide 13: Financial review
Financial review Q4 & FY2011 results Capital structure 2012 financial outlook
Slide 14: Strong financial position going into 2012
Strong financial position going into 2012 Bell liquidity position ($M) • Substantial liquidity maintains financial flexibility BOP cash balance (Jan. 1, 2011) 749 – $420M opening cash balance in Jan’12 Free cash flow(1) 2,261 – Upsized credit facilities capacity to $2B in 2011 and Dividends (common
Slide 15: Solid capital structure
Solid capital structure Net debt(1) ($M) • Capital structure remains aligned to strong Bell debentures 8,375 investment grade ratings, optimizing financial flexibility Bell Media roll-over debt 298 Capital leases & other 2,321 • Accessed capital markets at attractive rates – $3B of low-cost debt rai
Slide 16: Increasing returns to shareholders
Increasing returns to shareholders • Seven dividend increases since Q4’08 totalling 49% ~130% • 2012 dividend increased by 5% to $2.17 – Supported and enabled by 2012 planned earnings and free cash flow growth – Maintaining payout ratio(1) below mid-point of 65%-75% policy range Total return to – Fr
Slide 17: Financial review
Financial review Q4 & FY2011 results Capital structure 2012 financial outlook
Slide 18: Financial targets for 2012
Financial targets for 2012 2012 guidance(1) Revenue growth 3%-5% EBITDA growth 2%-4% Capital intensity ≤16% Adjusted EPS(2) $3.13-$3.18 Free cash flow(3) $2,350M-$2,500M Common dividend per share $2.17 Dividend payout ratio(4) – Adjusted EPS(2) ~69% Dividend payout ratio(4) – Free cash flow(3) ~69%
Slide 19: Revenue outlook
Revenue outlook Bell revenue ($M) Continued solid wireless revenue growth • Flow-through of strong postpaid net additions and 3%-5% accelerated smartphone penetration in 2011 • Targeting one-third incumbent postpaid market share • Blended ARPU growth driven by postpaid mix and 17,133 continued adopt
Slide 20: EBITDA outlook
EBITDA outlook Bell EBITDA ($M) • Improved wireless EBITDA growth in 2012 – Flow-through of 2011 postpaid subscriber growth, while 36.8% increasing customer retention spending Margin • Bell Media providing additional quarter of 2%-4% EBITDA contribution in Q1’12 – Growth also reflects benefit of TSN
Slide 21: Pension expense and funding estimates
Pension expense and funding estimates Pension expense 2011 2012 • Bell pension expense down slightly y/y Return on plan assets 4.95% 6.75% – Reflects benefit of lower discount rate on below EBITDA net pension finance cost and $750M Accounting discount rate 5.5% 5.1% special contribution Above EBITDA
Slide 22: Tax outlook
Tax outlook Bell cash taxes Cash taxes • ~$170M benefit in 2012 due to $750M voluntary contribution to Bell’s DB pension plan in Dec’11 ~$300M • Monetizing most of Bell Media’s ~$450M of tax $128M losses over 3 years • Utilization of ITC carry-forwards – ~$200M of unused ITCs available at YE’11 Tax
Slide 23: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Higher EBITDA from growth services and cost savings driving underlying improvement in EPS $3.13-$3.18 $3.13 • Depreciation expense ~$125M higher y/y – Reflects LTE/HSPA+ investment, fibre build in Quebec City, IPTV footprint expansion and new hosting centres – Addition
Slide 24: Free cash flow
Free cash flow FCF before common dividends ($M) 2,350-2,500 2,261 $750M Special pension contribution 1,511 2011 Cash pension EBITDA(1) growth Net interest paid, Deferral 2012 Cash taxes funding net of capex severance & other(2) account (1) EBITDA growth before current service pension cost (2) Other
Slide 25: Free cash flow walk-down
Free cash flow walk-down 2012 $M EBITDA(1) less capex 3,750-3,900 Preferred share dividends ~(200) Net interest ~(675) Cash pension ~(375) Cash taxes ~(300) Severance paid & other ~(200) Working capital & other ~150 Bell Aliant dividend ~190 Free cash flow 2,350-2,500 (1) EBITDA before current servi
Slide 26: Key market & operational assumptions framing 2012 outlook
Appendix Key market & operational assumptions framing 2012 outlook Economic growth outlook • Bank of Canada estimates Canadian GDP growth of 2.0% for 2012, compared to growth of 2.4% in 2011 • Continued weak product sales, reflecting deferred business customer spending given slow pace of economic gr
Slide 27: Key financial assumptions for 2012
Appendix Key financial assumptions for 2012 Bell February 9 Current service pension cost (above EBITDA) ~$190M Net pension finance costs (below EBITDA) ~($100M) Cash pension funding ~$375M Cash taxes ~$300M Net interest paid ~$675M BCE Current service pension cost (above EBITDA) ~$250M Net pension f
Slide 28: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 29: Continued disciplined focus on our strategic imperatives
Continued disciplined focus on our strategic imperatives 1 2 3 4 5 6 Invest in Accelerate Leverage Expand Achieve a Improve broadband wireless wireline media competitive customer networks & momentum leadership cost service services structure $ Addition of strategic imperative to Expand Media Leaders
Slide 30: Wireless network leadership
Wireless network leadership Bell operates Canada’s largest 4G network • LTE deployment accelerating – Expansion to 7 more urban centres on Feb.10 • Montréal, Québec City, Ottawa, London, Calgary, Edmonton and Vancouver – Internet and wireless data access speeds of up to 75 Mbps now available in 14 C
Slide 31: Key 2012 priorities
Key 2012 priorities Maintain wireless competitiveness and postpaid market share performance • Continue to deploy LTE in urban markets in 2012, while continuing to enhance HSPA+ network • Drive expansion in the west through more distribution points and increasing direct sales/dealer presence • Contin
Slide 32: Key 2012 priorities (cont'd)
Key 2012 priorities (cont’d) Expand media leadership • Leverage Bell Media content to accelerate 4-screen strategy • Conclude TSN/RDS rate re-negotiations with remaining BDUs • Complete MLSE acquisition Continue to drive customer service improvement, while taking costs out of the business • Investin