Slide 1: Q3 2010 Results Conference Call
Q3 2010 Results Conference Call November 4, 2010
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in this presentation including, but not limited to, statements relating to our 2010 financial guidance (including revenue, EBITDA, Adjusted earnings per share, free cash flow and capital intensity) and to our strategic objectives and priorities, and other
Slide 3: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 4: Bell's strategic agenda substantially advanced in Q3
Bell’s strategic agenda substantially advanced in Q3 9 Strong wireless performance continues • Best-ever quarterly postpaid gross adds • Record Q3 postpaid net adds 9 IPTV launched 9 Secured mobile NFL content deal 9 Acquisition of CTV 9 Enhanced business ICT leadership with acquisitions of Hypertec
Slide 5: Strong wireless results
Strong wireless results Metrics Q3’10 Y/Y • Record Q3 for postpaid net adds Postpaid gross additions 368k 22.0% – Postpaid net adds 31% higher y/y Total gross additions 537k 7.3% • Accelerated smartphone penetration Postpaid net additions 159k 31.0% – Smartphone subscriber base up 74% y/y Total net
Slide 6: Device leadership
Device leadership NEW Samsung iPhone 4 HTC Desire Z BlackBerry Torch Samsung Galaxy S Galaxy Tab Customers line up for Bell’s exclusive Galaxy S smartphone 6
Slide 7: Slowing voice revenue decline
Slowing voice revenue decline Residential NAS Business NAS • 10.3% fewer residential NAS losses y/y Net line losses Net line losses – 12th consecutive quarter of reduced y/y retail 76k residential NAS losses 27k 68k 24k – Strong quarter for winbacks and bundle sales • Business NAS losses reduced 11.
Slide 8: Bell TV delivers strong financial performance
Bell TV delivers strong financial performance Retail TV ARPU Bell TV revenues • Revenue growth of 9.3% +5.8% $73.34 +9.3% $437M • ARPU up 5.8% y/y to $73.34 $69.35 $400M • Net adds of 19k in Q3’10 – Higher churn reflects aggressive competition in Ontario Q3'09 Q3'10 Q3'09 Q3'10 • Bell Fibe TV launch
Slide 9: Wireline Data
Wireline Data Total data revenues Internet ARPU Residential Services $M Residential +0.9% $900 +4.5% • Data revenue growth of 5.0% in Q3’10 $892 – Internet ARPU up 4.5% – Bandwidth usage revenues increased 83% y/y • Internet net adds of 22k unchanged y/y – Reflects improved performance in Québec Q3'
Slide 10: Q3 summary
Q3 summary • Continued progress on all 5 Strategic Imperatives • Maintaining strong wireless operating momentum • Positive wireline operating trends – Reduced NAS landline losses – Slowing voice revenue erosion – Solid growth in TV, Internet and Home Phone ARPUs • Continued cost discipline driving E
Slide 11: Siim Vanaselja, Chief Financial Officer
Siim Vanaselja Chief Financial Officer
Slide 12: Q3 financial review
Q3 financial review Bell Q3’10 Y/Y • Revenue growth of 1.8% y/y Revenues $3,858M 1.8% – Continued strong wireless and TV revenue growth Service $3,477 2.2% – The Source and Virgin acquisitions now fully reflected Product $381 (1.3%) – Slow speed of economic recovery affecting Business Markets result
Slide 13: Wireless financials
Wireless financials • Wireless service revenue up 9.8% y/y on strong postpaid subscriber and ARPU growth – Accelerated smartphone adoption and usage drives data revenue growth of 39% in Q3’10 • Product revenues down 2.8% y/y, despite higher volumes – Discounted handset pricing in response to competi
Slide 14: Positive operating trends in wireline
Positive operating trends in wireline ($M) Q3’10 Y/Y • Residential performing well on all fronts Revenues 2,636 (0.9%) – Growing TV and broadband revenues Local & access 759 (3.1%) – Best y/y local voice revenue decline in over 5 years Long distance 227 (14.0%) – LD revenue erosion stabilizing Data
Slide 15: Strong Adjusted EPS
Strong Adjusted EPS Adjusted EPS(1) • Strong Adjusted EPS performance in Q3’10 from higher EBITDA and accretion from lower $0.84 $0.82 share count y/y – Higher EBITDA driven by opex savings, solid revenue growth and lower pension $0.29 – 2010 NCIB program now 75% complete $0.16 • 12.6M shares purcha
Slide 16: Strong free cash flow
Strong free cash flow Free cash flow • FCF of $812M in Q3’10 up 25% y/y +$163M $812M • EBITDA growth offset by higher capex $649M – Wireline CI of 19.5% reflects accelerated spending on fibre build-out and IPTV network grooming • Reduced net interest payments due to lower Q3'09 Q3'10 average level o
Slide 17: Outlook
Outlook • Continued wireless momentum with improved y/y wireline performance • Good visibility on further cost reduction opportunities • Broadband investments positioning us well for future growth • Substantial FCF supports strong balance sheet, liquidity position and dividend growth model February
Slide 18: IFRS Changeover
IFRS Changeover Preliminary Analysis
Slide 19: Transition to IFRS
Transition to IFRS Changeover from Canadian GAAP to IFRS on January 1, 2011 • Comprehensive disclosure in Q3 2010 MD&A, including Opening Balance Sheet and Income Statement for Nine Months Ended September 30, 2010 • Q4 & FY2010 results to be presented on GAAP basis with IFRS comparatives • 2011 fina
Slide 20: Capital assets
Capital assets Fair value write-down Change in depreciation method • Transition election under IFRS reduces • Mandatory change from Equal Life Group carrying value of those assets which have (ELG) to Straight-Line Method for wireline a fair value less than cost assets under IFRS – ELG method pools l
Slide 21: Pension
Pension 2010E • Under IFRS, pension expense elements presented both above and below EBITDA Bell GAAP IFRS – Current service cost shown above EBITDA Above EBITDA – Associated interest cost and ROA shown below EBITDA as financing Current service cost ~($190M) ~($190M) – Under CDN GAAP, all elements of
Slide 22: Restated 2010 BCE opening balance sheet
Restated 2010 BCE opening balance sheet ($M) GAAP IFRS Capital assets Current assets 3,284 4,462 • Adjustments of ~$1.9B due to net reduction in carrying amount of assets (Bell & Bell Aliant) Capital assets 25,785 23,736 • Further reduction of $0.1B relating to Other long-term assets 3,207 1,488 dec
Slide 23: IFRS earnings walkdown
IFRS earnings walkdown Adjusted EPS walkdown • Revenue and EBITDA impact minimal YTD Q3’10 FY 2010E – $20M higher pension expense in 2010 for Bell’s defined benefit pension plans Canadian GAAP $2.24 $2.75-$2.80 – Minor impact from deconsolidation of EBITDA ~($0.01) ~($0.02) joint ventures and revenu
Slide 24: IFRS summary
IFRS summary • No impact on business operations • No material change in revenues or EBITDA • No impact on 2010 Adjusted EPS – Higher pension expense for 2010 under IFRS versus Canadian GAAP – Offset by lower depreciation expense • 2010 free cash flow positively impacted – Reclassification of spectru