Slide 1: Q1 2017 Results Conference Call
Q1 2017 Results Conference Call April 26, 2017
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 2017 financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), our expected 20
Slide 3: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 4: Q1 overview
Q1 overview 2.9% service revenue growth drove 2.4% increase in BCE adjusted EBITDA and higher y/y margin of 41.1% even while absorbing $35M in regulatory impacts Continued industry-leading financial performance and strong wireless postpaid growth – 8.0% increase in service revenue on 4.2% higher
Slide 5: MTS extends BCE's wireline ILEC footprint to 73% of Canada's households
MTS extends BCE’s wireline ILEC footprint to 73% of Canada’s total households Bell wireline footprint (~24M pops or 10.7M households) MTS wireline footprint (1.28M pops or 540K households) • With MTS, Bell will cover 11.2M of Canada’s 15.4M total households(1) • High-speed Internet and IPTV availabl
Slide 6: MTS provides increased broadband scale and efficiencies
MTS provides increased broadband scale and efficiencies Customer connections (March 31, 2017) • MTS adds ~700k wireless(2), Internet and IPTV subscribers in Manitoba, a 5% increase in (in thousands) Bell MTS(1) Combined Bell’s total broadband service customers • Bell becomes #1 wireless provider in
Slide 7: Wireless operating metrics
Wireless operating metrics Blended ARPU • Best-ever service revenue dollar growth driven by strong ARPU and postpaid subscriber growth $65.66 – Service revenue up $127M y/y, or 8.0%, in Q1 $63.02 +4.2% • Strong 4.2% ARPU growth reflects increased LTE data usage, a greater mix of postpaid customers s
Slide 8: Wireless network investments maintain Bell's leadership
Wireless network investments maintain Bell’s leadership LTE Advanced (LTE-A) coverage • 4G LTE network coverage at 98% of total pops – 83% of Bell postpaid subscribers now on LTE % of Canadian population – ~40% more data usage than HSPA ~87% • LTE-A service now available to 74% of Canadians 74% and
Slide 9: Wireline subscriber metrics
Wireline subscriber metrics Internet and IPTV subscribers (EOP) • Steady broadband customer gains in Q1 with 37.4k total Internet and IPTV net adds IPTV Internet 5,182k • 15.0k total Internet net adds; 24.3k net adds in 4,642k +11.6%* IPTV footprint 3,717k – Total Internet service revenue up 5.9% y/
Slide 10: Broadband fibre laying future foundation for growth
Broadband fibre laying future foundation for growth Bell fibre footprint* FTTP FTTN • Announced ~$850M investment to deploy FTTP Locations passed to 1.1M homes and businesses in Montréal (incl. DSL and dial-up) 11.2M 12.0M – 13% of Montréal and 54% of non-Montréal locations 9.0M already completed 8.
Slide 11: Bell Media
Bell Media • Positive revenue growth in Q1 despite advertising leakage from no simultaneous substitution allowed for Super Bowl LI • Continued leading TV ratings performance – 9 of top 20 programs in winter season for CTV – 9 of top 20 English specialty/pay TV programs, led by TSN, Discovery, Space
Slide 12: Glen LeBlanc, EVP & Chief Financial Officer
Glen LeBlanc EVP & Chief Financial Officer
Slide 13: Q1 financial review
Q1 financial review ($M) except per share data Q1’17 Y/Y • Service revenue grew 2.9% in Q1 – Product revenue down 8.0% on competitive wireless Revenue 5,384 2.2% handset pricing and lower business wireline data Service 5,051 2.9% equipment sales Product 333 (8.0%) • Adjusted EBITDA up 2.4% with high
Slide 14: Wireless financials
Wireless financials ($M) Q1’17 Y/Y • Acceleration in service revenue growth to 8.0% Revenue driven by higher ARPU and postpaid mix 1,814 7.1% Service 1,715 8.0% Product 99 (5.7%) • Adjusted EBITDA up 7.5% on high service revenue flow-through and spending discipline Operating costs 996 (6.9%) • Servi
Slide 15: Wireline financials
Wireline financials ($M) Q1’17 Y/Y • Service revenue growth of 0.7% in Q1 despite financial impact of CRTC decisions related to Revenue 2,980 (0.1%) wholesale Internet tariff revisions and customer Service 2,743 0.7% refunds for cancelled services Product 237 (8.8%) – Higher y/y ARPUs across all res
Slide 16: Media financials
Media financials ($M) Q1’17 Y/Y • Total Q1 revenue 1.3% higher y/y • Subscriber revenues up 10.1% y/y, driven by Revenue 751 1.3% TMN’s expansion in western Canada, BDU contract renewals and CraveTV growth Operating costs 617 (3.5%) • Advertising revenues down 4.7% y/y – Results impacted by loss of
Slide 17: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Higher y/y adjusted EBITDA contributed 4¢ to adjusted EPS growth in Q1 +2.4% $0.87 $0.85 • Increased net depreciation and amortization expense due to a higher capital asset base • Lower y/y tax adjustments Q1'16 Q1'17 – 1¢ per share expected in FY2017 vs. 5¢ in FY2016
Slide 18: Free cash flow
Free cash flow FCF • FCF of $489M up 17.0% y/y in seasonally low Q1 on higher adjusted EBITDA, lower severance ($M) $489 payments and improved working capital position +17.0% $418 • Cash taxes up y/y, reflecting higher instalment payments in line with plan for 2017 – Q1 result does not reflect any b
Slide 19: Updated financial targets for 2017
Updated financial targets for 2017 BCE February 2 April 26 • Increased revenue and adjusted EBITDA guidance reflects MTS acquisition Revenue growth 1% to 2% 4% to 6% – Approximate 9-month contribution in 2017 – MTS integration underway: ~$30M of operating cost synergies expected in 2017 Adjusted EBI
Slide 20: Key financial assumptions for 2017
Appendix Key financial assumptions for 2017 BCE (including MTS) Employee benefit plans service cost (above adjusted EBITDA) approx. $250M to $260M Net employee benefit plans financing cost (below adjusted EBITDA) approx. $70M to $80M Depreciation & amortization approx. $3,850M to $3,900M Interest ex
Slide 21: Free cash flow walk-down
Appendix Free cash flow walk-down 2017E ($M) Adjusted EBITDA(1) less capex(2) ~5,525-5,700 Net cash interest ~(950)-(975) Cash pension ~(400)-(450) Cash taxes ~(650)-(700) Other(3) ~(25)-(150) Free cash flow 3,375-3,550 (1) Adjusted EBITDA before employee benefit plans service cost (2) Calculated us