Slide 1: Q4 2014 Results and 2015 Analyst Guidance Call
Q4 2014 Results and 2015 Analyst Guidance Call February 5, 2015
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 2015 financial guidance (including revenues, Adjusted EBITDA, capital intensity, Adjusted EPS and free cash flow), our business ou
Slide 3: Q4 Operating Results Review
Q4 Operating Results Review George Cope President & Chief Executive Officer
Slide 4: Q4 overview
Q4 overview Bell organic revenue growth of 2.6% drove 2.2% higher y/y Adjusted EBITDA Exceptional Wireless results with 117k Bell postpaid net adds and 9.6% higher revenues yielding Adjusted EBITDA growth of 10.6% and 0.9-point service margin gain Achieved positive Wireline revenue and Adjuste
Slide 5: Wireless operating metrics
Wireless operating metrics • Postpaid gross adds higher y/y for the first Bell Q4’14 Y/Y quarter since Wireless Code implemented Postpaid gross additions 378k 2.6% • 117k postpaid net adds relatively stable y/y – 118k total postpaid net adds with Bell Aliant Postpaid net additions 117k (1.8%) – Stro
Slide 6: BCE Wireline residential RGU growth accelerates in Q4
BCE Wireline residential RGU growth accelerates in Q4 BCE IPTV and Internet net additions • 52k total BCE Internet net adds, up 29k y/y – Q4 net adds more than double y/y on strength of IPTV 436k IPTV pull-through and higher speeds Internet 377k – Market share leader with 3.3M Internet customers 160
Slide 7: Bell Media
Bell Media • Maintaining strong audience levels and ratings across all Bell Media TV and radio properties – 14 of top 20 TV programs nationally in Q4 fall season for CTV, including the top 4 – Radio market share held stable or higher in key markets of Toronto, Montréal and Vancouver • TSN maintains
Slide 8: Successful execution of strategic imperatives driving higher mix of growth services
Successful execution of strategic imperatives driving higher mix of growth services BCE revenue mix(1) Q4’14 • Total BCE growth services revenue in Q4’14 up $188M, or 4.4%, y/y Wireless • Bell Aliant contributing to Wireline Wireline Voice turnaround in 2015, while 30% Wireless 20% voice Consumer 30
Slide 9: Raising common dividend 5.3% to $2.60 per share
Raising common dividend 5.3% to $2.60 per share Annualized common dividend per share • Fully supported by strong financial outlook for 2015 78% • Maintaining FCF dividend payout increase ratio within policy range of 65% to $2.60 75% for 8th consecutive year $2.47 • Effective with Q1 2015 dividend pa
Slide 10: Q4 & 2014 Financial Results Review
Q4 & 2014 Financial Results Review Siim Vanaselja EVP & Chief Financial Officer
Slide 11: Q4 financial review
Q4 financial review Bell Q4’14 Y/Y FY2014 Y/Y • Revenue up 2.6% in Q4 on strong y/y Wireless and Wireline growth Revenue $4,940M 2.6% $18,734M 3.5% – 6.8% product revenue growth reflects higher y/y Service $4,418M 2.2% $17,133M 3.8% wireless upgrades and business data product sales Product $522M 6.8
Slide 12: Bell Wireless financials
Bell Wireless financials ($M) Q4’14 Y/Y FY2014 Y/Y Revenue 1,649 9.6% 6,241 6.7% Service 1,469 8.1% 5,705 6.4% Product 167 24.6% 483 11.8% Operating costs 1,064 (9.0%) 3,677 (4.8%) Adjusted EBITDA 585 10.6% 2,564 9.6% Margin (service revenue) 39.8% 0.9 pts 44.9% 1.3 pts Capex 211 6.6% 671 (5.0%) Cap
Slide 13: Bell Wireline financials
Bell Wireline financials ($M) Q4’14 Y/Y FY2014 Y/Y Revenues 2,628 1.0% 10,040 (0.6%) Data 1,573 4.0% 5,991 2.8% Voice 751 (3.3%) 3,032 (5.8%) Equipment & other 213 (4.1%) 664 (6.1%) Operating costs 1,675 (0.5%) 6,272 0.5% Adjusted EBITDA 953 2.0% 3,768 (0.7%) Margin 36.3% 0.4 pts 37.5% (0.1 pts) Cap
Slide 14: Bell Media financials
Bell Media financials ($M) Q4’14 Y/Y FY2014 Y/Y Revenues 789 (3.9%) 2,937 14.9% Operating costs 597 (1.0%) 2,203 (17.6%) Adjusted EBITDA 192 (16.5%) 734 7.5% Margin 24.3% (3.7 pts) 25.0% (1.7 pts) Capex 54 15.6% 137 (19.1%) Adjusted EBITDA-Capex 138 (16.9%) 597 5.1% Adjusted EBITDA-Capex margin 17.5
Slide 15: 2014 financial performance vs. guidance
2014 financial performance vs. guidance Bell FY2014 Target Met • Revenue and Adjusted EBITDA performance in line with plan Revenue $18,734M Growth y/y 3.5% 2%-4% • Stable y/y Adjusted EBITDA margin of 37.7% supported by strong Wireless Adjusted EBITDA $7,066M profitability and strengthening Wire
Slide 16: GLENTEL transaction
GLENTEL transaction Transaction financials • Total transaction value of $670M (including debt and minority interest) Total acquisition equity value $594M – $594M equity value for 100% of GLENTEL Proceeds from 50% divestiture ($392M) • 50% of GLENTEL shares to be sold to Rogers Net cost to BCE for 50
Slide 17: 2015 Financial Outlook
2015 Financial Outlook Siim Vanaselja EVP & Chief Financial Officer
Slide 18: Financial targets for 2015
Financial targets for 2015 BCE Revenue growth 1% to 3% Adjusted EBITDA growth 2% to 4% Capital intensity approx. 17% Adjusted EPS(1) $3.28 to $3.38 Growth y/y approx. 3% to 6% Free cash flow(2) $2,950M to $3,150M Growth y/y approx. 8% to 15% Annualized common dividend per share(3) $2.60 Dividend pay
Slide 19: Revenue & Adjusted EBITDA outlook
Revenue & Adjusted EBITDA outlook BCE revenue • Continued strong contribution to overall Adjusted EBITDA growth expected from Wireless in 2015 ($M) 1% to 3% – Flow-through of solid, but moderating, ARPU growth delivering modest y/y increase in service margin – Higher retention spending and COA due t
Slide 20: Pension funding and expense estimates
Pension funding and expense estimates BCE cash pension funding ($M) Pension funding Special contribution • $350M special contribution made in Regular funding Dec’14 mainly to align funded status of 1,566 Bell Aliant plans with Bell plans 1,413 1,265 1,164 750 750 750 • Maintaining a strong ~90% solv
Slide 21: Tax outlook
Tax outlook Tax adjustments (per share) Income tax expense $0.30 • Statutory rate for 2015 unchanged at 26.6% • Effective tax rate of ~26% for 2015 • Minimal tax adjustments expected in 2015 $0.05 ~$0.02 – Favourable tax adjustments of ~$0.02 per share projected for 2015 vs. $0.30 in 2009 – Less sig
Slide 22: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Higher Adjusted EBITDA from growth services Tax adjustments • Depreciation & amortization ~$30M lower y/y – Higher expense in 2014 due to start of CDMA network decommissioning $3.28–$3.38 – Full year impact in 2015 from change in useful life of certain assets $3.18 ~3%
Slide 23: Strong capital structure foundation
Strong capital structure foundation Credit profile* Target 12/31/2014 • Strong investment grade credit profile Net debt/Adj. EBITDA 1.75x-2.25x 2.59x • No debt maturities until December 2015 Adj. EBITDA/Net Interest >7.5x 8.38x − Weighted average debt term of ~9 years, including exchanged Bell Alian
Slide 24: Continued significant investment in the business
Continued significant investment in the business BCE capital spending(1) • Complete LTE wireless network deployment to cover 98% of Canadian population by YE2015 17.6% 17.5% 17.7% Capital 16.6% 16.7% – LTE national footprint coverage 86% currently ~17% Intensity 3,515 3,571 3,717 • Carrier aggregati
Slide 25: Growing free cash flow
Growing free cash flow Free cash flow(1) • 2015 free cash flow growth of ~8% to 15% – Steady growth in EBITDA driven by wireless and Common dividends paid improved wireline performance Y/Y growth – ~17% capital intensity (excluding spectrum cost) ~8%-15% – Regular cash pension funding stable y/y – N
Slide 26: Key economic, market & operational assumptions for 2015
Appendix Key economic, market & operational assumptions for 2015 Canadian economic and market assumptions • Slower economic growth: Bank of Canada estimates GDP growth to average 2.1% in 2015, compared to 2.3% in 2014 • Weaker employment growth, compared to 2014, as overall level of business investm
Slide 27: Key financial assumptions for 2015
Appendix Key financial assumptions for 2015 BCE February 5 Employee benefit plans service cost (above Adjusted EBITDA) approx. $260M Net employee benefit plans financing cost (below Adjusted EBITDA) approx. $110M Depreciation & amortization approx. $3,425M Interest expense approx. $970M Tax adjustme
Slide 28: Free cash flow walk-down
Appendix Free cash flow walk-down 2015E $M Adjusted EBITDA(1) less capex(2) 5,100-5,200 Net cash interest ~(925) Cash pension ~(400) Cash taxes ~(750) Working capital changes, severance paid and other ~125-225 Preferred share dividends and NCI paid ~(200) Free cash flow 2,950-3,150 Common dividends