Slide 1: Q2 2013 Results Conference Call
Q2 2013 Results Conference Call August 8, 2013
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in the attached presentation, including, but not limited to, statements relating to our 2013 financial guidance (including revenues, EBITDA, capital intensity, Adjusted EPS and free cash flow), our business outlook, objectives, plans and strategic prioriti
Slide 3: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 4: Q2 overview
Q2 overview Strong wireless service revenue and EBITDA growth backed by healthy postpaid operating metrics Accelerating Fibe TV net additions and pull-through driving improvement in residential RGU performance in IPTV footprint Positive wireline operating trends with improving profitability
Slide 5: Solid wireless postpaid metrics
Solid wireless postpaid metrics Metrics Q2’13 Y/Y • Strong postpaid subscriber net gain on higher y/y gross adds and stable churn Postpaid gross additions 336k 2.7% – Continued focus on increasing market share in higher- value Western Canada and SMB customer segments Postpaid net additions 96k (5.6%
Slide 6: Improving wireline data revenue growth
Improving wireline data revenue growth Fibe TV net additions TV • Fibe TV net adds of 50.6k, up 12.1k y/y – Best quarterly net adds since launch +31.4% 50.6k • Fibe TV sub base at Q2’13 more than double 38.5k y/y at 346k • Total TV net adds up 52.8% y/y to 26k – Retail Satellite TV net customer loss
Slide 7: Wireline voice
Wireline voice NAS line losses (k) • Residential NAS losses improve 11.8% y/y Residential Business – Lower rate of churn in IPTV areas as Fibe TV pull-through supporting retention and winbacks 93.1 – But, wireless substitution steadily increasing 82.1 • Business NAS losses improve 15.3% y/y 34.1 28.
Slide 8: Bell Media
Bell Media Attractive media assets acquired from Astral Q2 Bell Media performance • Subscriber revenue growth reflects step-up in Pay TV : specialty TV rates as per BDU agreements • Advertising revenue up y/y in soft market – Driven by growth at TSN/RDS, due to extended NHL French regular season sch
Slide 9: Astral improving Bell's mix of growth services
Astral improving Bell’s mix of growth services Bell’s improving revenue mix(1) Wireline Product • Growth services revenue in Q2’13 up $148M or 4.3% y/y Internet / 7% Wireline Data Service • Media acquisitions changing Bell’s 18% TV revenue mix profile Wireline Business 11% 83% Voice 9% from Growth •
Slide 10: Siim Vanaselja, EVP & Chief Financial Officer
Siim Vanaselja EVP & Chief Financial Officer
Slide 11: Q2 financial review
Q2 financial review Bell Q2’13 Y/Y YTD’13 Y/Y • Revenue up 1.9% in Q2’13 – Solid y/y increases at Bell Wireless and Bell Media Revenue $4,424M 1.9% $8,772M 1.1% – Improving Wireline performance trend Service $4,049M 1.8% $8,036M 1.5% Product $375M 2.9% $736M (3.3%) • EBITDA growth of 1.5% with stabl
Slide 12: Wireless financials
Wireless financials ($M) Q2’13 Y/Y YTD’13 Y/Y Revenue 1,442 5.4% 2,851 5.8% Service 1,328 6.1% 2,631 6.6% Product 99 0.0% 192 (0.5%) Operating costs 833 (3.0%) 1,657 (2.9%) EBITDA 609 8.9% 1,194 10.2% Margin (service revenue) 45.9% 1.3 pts 45.4% 1.5 pts Capex 134 22.1% 256 16.9% Capital intensity 9.
Slide 13: Wireline financials
Wireline financials ($M) Q2’13 Y/Y YTD’13 Y/Y Revenues 2,506 (0.9%) 5,014 (1.8%) Data 1,456 4.0% 2,889 2.4% Voice 815 (8.0%) 1,645 (8.2%) Equipment & other 153 (6.1%) 317 (5.4%) Operating costs 1,527 (0.5%) 3,077 0.6% EBITDA 979 (2.9%) 1,937 (3.7%) Margin 39.1% (0.8 pts) 38.6% (0.8 pts) Capex 523 10
Slide 14: Bell Media financials
Bell Media financials ($M) Q2’13 Y/Y YTD’13 Y/Y Revenues 559 4.7% 1,072 2.5% Operating costs 403 (5.2%) 818 (0.5%) EBITDA (reported) 156 3.3% 254 9.5% Margin 27.9% (0.4 pts) 23.7% 1.5 pts PPA (16) 23.8% (34) 22.7% EBITDA (excl. PPA) 172 0.0% 288 4.3% Margin 30.8% (1.4 pts) 26.9% 0.5 pts Capex 16 11.
Slide 15: Adjusted EPS
Adjusted EPS Adjusted EPS(1) • Stable y/y Adjusted EPS before tax adjustments and equity derivatives $0.97 $0.77 • Lower y/y tax adjustments – Effective tax rate of 22.6% in Q2’13 reflects favourable adjustments of $0.05 per share vs. $0.15 in Q2’12 – No change to FY2013 expectation for favourable t
Slide 16: Free cash flow
Free cash flow Free cash flow • FCF of $903M up 12% y/y on higher EBITDA and lower capex +$97M $903M • Decreased working capital reflects timing of $806M supplier payments and higher inventory levels due to new wireless handset launches Q2'12 Q2'13 • Preferred share & NCI dividends reflect lower pay
Slide 17: Increased 2013 financial guidance
Increased 2013 financial guidance(1) 2013 guidance February 7 August 8 • No fundamental change in outlook for Wireline, Wireless and Media segments Revenue growth 0%-2% 2%-4% • Increased revenue and EBITDA guidance reflects Astral acquisition EBITDA growth 1%-3% 3%-5% – Retaining assets representing
Slide 18: Key financial assumptions for 2013
Appendix Key financial assumptions for 2013 Bell February 7 August 8 (no Astral) (incl. Astral) Employee benefit plans service cost (above EBITDA) ~$220M ~$230M Net employee benefit plans financing cost (below EBITDA) ~$120M No change Cash pension funding ~$350M No change Cash taxes ~$300M ~$325M Ne
Slide 19: Wireless policy loopholes
Wireless policy loopholes Bell
Slide 20: Situation overview
Situation overview • Bell welcomes wireless competition on a level playing field • Wireless prices are lower in Canada than in the United States • Government rules designed to support small wireless start-ups are appropriate… but the unintended consequence is that U.S. giants like Verizon can exploi
Slide 21: Solution: Close loopholes before Sept. 17th auction deposit deadline
Solution: Close loopholes before Sept. 17th auction deposit deadline 1. All wireless carriers should be able to bid for same amount of spectrum If Verizon can bid for 2 prime blocks, we should be able to bid for the same 2. Require major international entrants like Verizon to build out their own n
Slide 22: To learn more about this situation
To learn more about this situation: FairforCanada.ca Bell.ca/PlayFair