Slide 1: Q4 2015 Results and 2016 Financial Guidance Call
Q4 2015 Results and 2016 Financial Guidance Call February 4, 2016
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 BCE’s financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), our expected 2016
Slide 3: George Cope
George Cope President & Chief Executive Officer
Slide 4: Q4 overview
Q4 overview 204k total wireless and wireline broadband net customer additions — 91k wireless postpaid, 74k IPTV and 39k Internet — drove consolidated adjusted EBITDA growth of 2.5% Delivered 41 consecutive quarter of y/y adjusted EBITDA growth st Positive and growing cash contributions from al
Slide 5: Wireless operating metrics
Wireless operating metrics Metrics Q4’15 Y/Y 2015 Y/Y • Postpaid gross additions up 1.4% y/y – Higher volume driven by seasonally high level Postpaid gross additions 388k 1.4% 1,338k 3.6% of promotional activity and double cohort Postpaid net additions 91k (22.7%) 265k (14.9%) • 91k postpaid net add
Slide 6: Continuing to raise the wireless network leadership bar
Continuing to raise the wireless network leadership bar LTE Advanced (LTE-A) coverage • 4G LTE national network coverage to 98% of Canadians to be completed in 2016 % of Canadian population – Deployment of 700MHz spectrum in rural markets will match LTE coverage to current HSPA+ footprint ~75% • LTE
Slide 7: Wireline subscriber metrics
Wireline subscriber metrics IPTV and Internet net additions • 74k total IPTV net adds – Product leadership continues to drive growth IPTV Internet 436k 408k • 39k total Internet net adds – Retail residential net adds up 12% y/y on stronger 160k 155k growth in Québec and Ontario 128k 113k – Residenti
Slide 8: Broadband Internet and IPTV leadership
Broadband Internet and IPTV leadership High-speed fibre footprint • 8.2M total fibre locations passed by YE2016 Locations passed • FTTP overlay underway in Toronto FTTN 8.2M – Upgrading current FTTN network to FTTP FTTP 8.0M 7.6M – Majority of build-out to 1.1M homes and businesses completed by end
Slide 9: Bell Media
Bell Media • Positive revenue and cash flow growth in Q4 • Strong TV audience levels and ratings maintained – 12 of top 20 TV programs nationally in Q4 Fall season for CTV, more than any other network – 4 of top 10 entertainment specialty TV services in primetime for viewers A25-54, including #1 ran
Slide 10: Focus on Strategic Imperatives paying off with consistent and steady growth
Focus on 6 Strategic Imperatives paying off with consistent and steady growth over past 8 years BCE revenue mix $21.5B • $8.6B of EBITDA generated in 2015, up $1.6B D since 2008 $17.7B – 41 consecutive quarters of uninterrupted y/y Wireless EBITDA growth 25% 32% 81% • BCE growth services driving hea
Slide 11: Raising common dividend 5% to $2.73 per share
Raising common dividend 5% to $2.73 per share Annualized common dividend per share • Supported by strong organic FCF 87% growth in 2016 increase $2.73 • FCF dividend payout ratio within 65% to 75% target range for 9th $2.60 consecutive year, while maintaining steady capital intensity ratio $1.46 • 1
Slide 12: Glen LeBlanc
Glen LeBlanc EVP & Chief Financial Officer
Slide 13: Q4 financial review
Q4 financial review ($M) except per share data Q4’15 Y/Y 2015 Y/Y Revenue 5,603 1.4% 21,514 2.2% Service 5,053 1.6% 19,758 2.2% Product 550 (1.0%) 1,756 2.9% Adjusted EBITDA 2,073 2.5% 8,551 3.0% Margin 37.0% 0.4 pts 39.7% 0.2 pts Statutory EPS 0.58 (9.4%) 2.98 0.0% Adjusted EPS(1) 0.72 0.0% 3.36 5.
Slide 14: Wireless financials
Wireless financials ($M) Q4’15 Y/Y 2015 Y/Y Revenue 1,770 5.9% 6,876 8.7% Service 1,588 6.3% 6,246 7.6% Product 171 2.4% 590 22.2% Operating costs 1,129 (5.4%) 4,048 (9.3%) Adjusted EBITDA 641 6.8% 2,828 7.8% Margin (service revenue) 40.4% 0.2 pts 45.3% 0.1 pts Capex 193 11.5% 716 (4.2%) Capital int
Slide 15: Wireline financials
Wireline financials ($M) Q4’15 Y/Y 2015 Y/Y Revenue 3,161 (1.5%) 12,258 (0.5%) Service 2,778 (1.5%) 11,080 (0.1%) Product 383 (1.8%) 1,178 (4.5%) Operating costs 1,913 3.4% 7,258 1.6% Adjusted EBITDA 1,248 1.5% 5,000 1.1% Margin 39.5% 1.2 pts 40.8% 0.7 pts Capex 741 7.8% 2,809 2.9% Capital intensity
Slide 16: Media financials
Media financials ($M) Q4’15 Y/Y 2015 Y/Y Revenue 816 3.4% 2,974 1.3% Operating costs 632 (5.9%) 2,251 (2.2%) Adjusted EBITDA 184 (4.2%) 723 (1.5%) Margin 22.5% (1.8 pts) 24.3% (0.7 pts) Capex 24 55.6% 101 26.3% Capital intensity 2.9% 3.9 pts 3.4% 1.3 pts Adjusted EBITDA-capex 160 15.9% 622 4.2% • To
Slide 17: 2015 financial wrap-up
2015 financial wrap-up ($M) 2015 Target Met • Revenue and adjusted EBITDA except per share data performance in line with plan at mid-point Revenue 21,514 of financial guidance targets Growth y/y 2.2% 1%-3% • Higher EBITDA margin of 39.7% reflects Adjusted EBITDA 8,551 strong wireless profitabili
Slide 18: Financial targets for 2016
Financial targets for 2016 BCE Revenue growth 1% to 3% Adjusted EBITDA growth 2% to 4% Capital intensity approx. 17% Adjusted EPS(1) $3.45 to $3.55 Growth y/y approx. 3% to 6% Free cash flow(2) $3,125M to $3,350M Growth y/y approx. 4% to 12% Annualized common dividend per share(3) $2.73 Dividend pay
Slide 19: Revenue & adjusted EBITDA outlook
Revenue & adjusted EBITDA outlook BCE revenue • Continued strong wireless contribution to overall consolidated EBITDA growth ($M) 1%-3% – Focus on profitable postpaid subscriber growth growth – Solid, but moderating blended ARPU growth – Double cohort expected to continue impacting retention spendin
Slide 20: Pension funding and expense estimates
Pension funding and expense estimates BCE cash pension funding ($M) Pension funding Special contribution • $250M special contribution in Dec. 2015 Regular funding – Improves solvency position to over 90% 1,566 – Removes the use of letters of credit to fund Bell 1,413 1,265 Canada deficit contributio
Slide 21: Tax outlook
Tax outlook BCE cash income taxes paid Income tax expense ($M) • Statutory rate of 27.0% for 2016, up slightly from 26.9% in 2015 ~675-725 • Effective tax rate of ~26% for 2016 743 – Expected tax adjustments similar to 2015 672 Cash income taxes 470 • Slight increase in cash taxes for 2016 280 – Hig
Slide 22: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Higher adjusted EBITDA reflects positive contributions from all operating segments $3.45 – $3.55 • Pension expense lower y/y ~3%-6% • Depreciation & amortization higher y/y $3.36 growth – Reflects higher total capex spend with continued investment in FTTP and wireless
Slide 23: Strong capital structure foundation
Strong capital structure foundation Credit profile* Target 12/31/2015 • Capital structure well-balanced between equity and debt Net debt leverage ratio 1.75x-2.25x 2.53x Adj. EBITDA/Net Interest >7.5x 8.76x • Investment grade credit ratings with stable outlooks * Net debt includes capital leases, 50
Slide 24: FCF growth comfortably supports 2016 dividend increase
FCF growth comfortably supports 2016 dividend increase FCF(1) Common dividends paid Excess FCF • FCF growth of ~4% to 12% for 2016 ~4%-12% – Driven mainly by organic growth in EBITDA growth – Steady y/y capital intensity ratio of ~17% 9.3% growth – Cash pension funding, cash taxes and interest 6.7%
Slide 25: Key economic, market & operational assumptions for 2016
Appendix Key economic, market & operational assumptions for 2016 Canadian economic and market assumptions • Gradual strengthening of the economy: Bank of Canada estimates GDP growth to average 1.4% in 2016, compared to 1.2% in 2015 • Sustained weak employment growth, as the overall level of business
Slide 26: Key financial assumptions for 2016
Appendix Key financial assumptions for 2016 BCE February 4 Employee benefit plans service cost (above adjusted EBITDA) approx. $230M to $270M Net employee benefit plans financing cost (below adjusted EBITDA) approx. $70M to $80M Depreciation & amortization approx. $3,525M to $3,575M Interest expense
Slide 27: Free cash flow walk-down
Appendix Free cash flow walk-down 2016E ($M) Adjusted EBITDA(1) less capex(2) ~5,200-5,350 Net cash interest ~(875)-(925) Cash pension ~(400)-(450) Cash taxes ~(675)-(725) Other(3) ~(50)-25 Free cash flow 3,125-3,350 (1) Adjusted EBITDA before employee benefit plans service cost (2) Calculated using