Slide 1: 2010 Analyst Guidance Call
2010 Analyst Guidance Call February 4, 2010
Slide 2: Safe harbour notice
Safe harbour notice Certain statements made in the attached presentation including, but not limited to, statements relating to our 2010 financial guidance (including revenues, EBITDA, capital intensity, Adjusted EPS and free cash flow), business outlook, objectives, plans, strategic priorities and o
Slide 3: Safe harbour notice (cont'd): Material Assumptions
Safe harbour notice (cont’d) Material Assumptions A number of Canadian economic and market assumptions were made by BCE in preparing its financial guidance and other forward-looking statements for 2010 contained in the attached presentation, including, but not limited to: (i) a gradual economic impr
Slide 4: Safe harbour notice (cont'd): Material Risks
Safe harbour notice (cont’d) Material Risks Factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by our forward-looking statements, including our 2010 financial guidance, are listed below. Our abi
Slide 5: Siim Vanaselja, Chief Financial Officer
Siim Vanaselja Chief Financial Officer
Slide 6: Financial review
Financial review 1. Q4 & FY 2009 results 2. Capital structure 3. 2010 financial outlook
Slide 7: 1. Q4 & FY 2009 results
1. Q4 & FY 2009 results OlOc
Slide 8: 2009 financial review
2009 financial review Bell ($M) Q4 ’09 Y/Y 2009 Y/Y Q4 Revenue 3,982 4.8% 15,020 1.0% • Revenue growth of 4.8% – Driven largely by The Source acquisition EBITDA 1,395 1.0% 5,719 1.4% – Improved wireless revenue trajectory • EBITDA growth of 1% Capex 640 25.1% 2,390 2.8% – Includes Part II broadcast
Slide 9: Wireline highlights Q4'09
Wireline highlights Q4’09 Wireline Voice Key metrics Q4’09 Y/Y Key metrics Q4’09 Y/Y Revenue ($M) 2,840 4.2% Residential NAS erosion (7.9%) 0.4 pts EBITDA ($M) 960 2.5% Business NAS losses (k) 29 3.3% EBITDA margin 33.8% (0.6 pts) Local revenues ($M) 775 (6.1%) LD revenues ($M) 265 (5.0%) • Revenues
Slide 10: Improved wireline performance in 2009
Improved wireline performance in 2009 Bell ($M) 2009 Y/Y • Residential business delivered good results notwithstanding intense competition Revenues 10,666 0.2% Local & access 3,159 (6.0%) – Fewer line losses y/y Long distance 1,078 (7.5%) – Wireline voice revenue decline stabilizing Data – Service 3
Slide 11: Progress on key wireless metrics
Progress on key wireless metrics Metrics* Q4’09 Y/Y 2009 Y/Y Total gross additions 523k 11.3% 1,794k 8.7% Postpaid 300k 19.0% 1,056k 8.9% Prepaid 223k 2.3% 738k 8.4% Total net additions 163k 39.3% 373k 6.3% Postpaid 110k 37.5% 331k (0.3%) Prepaid 53k 43.2% 42k 121.1% Blended ARPU $51.08 (2.8%) $50.8
Slide 12: Wireless financials
Wireless financials • Improving service revenue growth in Q4’09 – Reflects progressively stronger quarterly postpaid subscriber acquisition in 2009 – Full consolidation of Virgin in operating results – Offset by lower voice ARPU y/y due to economy and competitive intensity • Product revenues reflect
Slide 13: 2. Capital structure
2. Capital structure OlOc
Slide 14: Capital markets strategy for 2010 consistent with 2009
Capital markets strategy for 2010 consistent with 2009 • Solid investment grade metrics Maintain strong – Net debt/Adjusted EBITDA of 1.9x at YE’09 1 credit profile – Adjusted EBITDA/Net interest of 8.8x at YE’09 • In line with BBB+ credit rating • $1.4B committed 3-year credit facilities: largely u
Slide 15: Strong balance sheet and liquidity position
Strong balance sheet and liquidity position Bell liquidity position ($M) • Strong liquidity position BOP cash balance (Jan.1, 2009) 3,045 – $660M in cash at end of 2009 Free cash flow(1) 1,956 – Access to $1.4B of credit facilities Voluntary pension contribution (500) Debt issuance 1,000 • Refinance
Slide 16: Capital structure
Capital structure Net debt ($M) • Solid capital structure Bell debentures 6,019 – Investment grade ratings and stable outlook from all rating agencies Capital leases & other 2,065 Preferred shares 2,770 • Favourable debt maturity schedule A/R securitization 1,140 Cash (660) • Debt repayments of $2.5
Slide 17: Increasing total shareholder returns
Increasing total shareholder returns Common share dividend Delivering on dividend growth model (Annualized common dividend per share) • 19% increase in common dividend since Q4’08 • Dividend for 2010 increased by 7% to $1.74 +19% – Maintaining a conservative Adjusted EPS(1) $1.74 payout ratio at low
Slide 18: 3. 2010 financial outlook
3. 2010 financial outlook OlOc
Slide 19: Financial guidance
Financial guidance 2010 outlook (1) Revenues 1%-2% EBITDA 2%-4% Capital intensity < 16% $2.65-$2.75 Adjusted EPS (2) 6%-10% Free cash flow (3) ~$2,000M-$2,200M Annualized common share dividend $1.74 (1) Revenue, EBITDA and capital intensity guidance for Bell excluding Bell Aliant (2) EPS before rest
Slide 20: Revenue outlook
Revenue outlook Bell revenue ($M) Step-up in wireline revenue trajectory 1%-2% • Revenues from acquisition of The Source • Residential NAS losses stabilizing 15,020 • Business NAS erosion abating • Continued strong TV growth • Continued focus on pricing discipline 2009 2010 Improving wireless perfor
Slide 21: EBITDA outlook
EBITDA outlook Bell EBITDA ($M) • Stable EBITDA margin supported by continued focus on cost reduction 38.1% Margin • Pension expense lower y/y 2%-4% • F/X benefit due to better $C/$US exchange rate • Increased investment in wireless subscriber EBITDA 5,719 acquisitions and retention due to HSPA laun
Slide 22: Pension funding and expense estimates
Pension funding and expense estimates Bell 2009 2010 • Pension expense down ~$110M y/y – Favourable impact of voluntary pension Return on plan assets 15% payment made at end of 2009 – Higher than expected asset returns in 2009 Discount rate 7.0% 6.4% – Offset partly by lower discount rate – Expect $
Slide 23: Tax outlook
Tax outlook Bell cash taxes Cash taxes $500M • Reduction of $135M in 2010 driven by $500M voluntary contribution to DB plan • Accelerated utilization of ITC carry-forwards – $440M of unused ITCs available at YE’09 ~$200M – Expected to be fully utilized in 2011 $168M • Step-up in 2011-2012, but manag
Slide 24: EPS growth supports dividend increase
EPS growth supports dividend increase Adjusted EPS(1) • EBITDA (pre-pension) contributing to EPS growth in 2010 – Marginal impact from acquisitions $2.65-$2.75 – F/X upside from U.S. dollar hedges due to stronger Canadian dollar • NCIB accretive to EPS – ~$0.03 per share in 2010 $2.50 • Depreciation
Slide 25: Free cash flow forecast
Free cash flow forecast FCF before common dividends ($M) • Includes ~$210M benefit from voluntary pension contribution in 2009 – Cash tax savings of $135M due to tax ~$2,000-$2,200 deductible nature of contribution – Pension funding reduced by $75M as a result of lower pension deficit $500 • Higher
Slide 26: Free cash flow walkdown
Free cash flow walkdown 2010 $M EBITDA(1) less capex ~3,500-3,700 Preferred share dividends ~(110) Net interest(2) ~(600) Cash pension ~(500) Cash taxes & non-cash ITCs ~(275) Restructuring paid & other(3) ~(300) Bell Aliant distribution (based on 2009 distributable cash) 290 Free cash flow ~2,000-2
Slide 27: Key market & operational assumptions framing 2010 outlook
Appendix Key market & operational assumptions framing 2010 outlook Gradual economic improvement with momentum beginning in 2H’10 • Consensus average GDP growth expectation of six major Canadian banks of 2.6% Wireless industry penetration growth similar to 2009 • HSPA+ network launch driving increase
Slide 28: Key financial assumptions for 2010
Appendix Key financial assumptions for 2010 • Preliminary net benefit plans cost (pension expense) estimate of ~$155M • Total cash funding of pension plan of ~$500M Bell • Bell cash taxes of ~$200M • Depreciation and amortization relatively stable • Restructuring and other expenses of $125M to $175M
Slide 29: Transition to IFRS
Transition to IFRS Changeover from Canadian GAAP to IFRS • Beginning on January 1, 2011, Canadian publicly-accountable enterprises will be required to prepare their financial statements using IFRS • Dual reporting internally during 2010 to permit preparation of comparative results in 2011 • Areas of
Slide 30: George Cope, President & Chief Executive Officer
George Cope President & Chief Executive Officer
Slide 31: Business overview
Business overview OlOc
Slide 32: 5 strategic imperatives
5 strategic imperatives Strategic imperative Rationale • Build future platforms to support growth and 1 Invest in broadband networks and services improve competitive position 2 Accelerate wireless • Capture fair share of market growth profitably • Offset NAS decline with growth businesses 3 Leverage
Slide 33: Strategic imperative: Invest in broadband networks & services
Strategic imperative 1 Invest in broadband networks & services
Slide 34: Growing base of subscribers on broadband platforms
1. Invest in broadband networks & services Growing base of subscribers on broadband platforms Revenue generating units (RGUs) • Continued subscriber momentum with total Net subscriber additions (k) RGU growth of 174% in Q4’09 – Strong direct channel and retail performance TV High-speed Internet – Ef
Slide 35: Investing for the future
1. Invest in broadband networks & services Investing for the future Wireless Video Internet Investments in HSPA Launched Accelerating fibre-to-the-node created the largest, new satellite to deliver 25 Mbps+ to 5 million fastest, and reliable high- to maintain homes by 2012 speed network HD leadershi
Slide 36: Accelerated fibre deployment
1. Invest in broadband networks & services Accelerated fibre deployment FTTx footprint FTTN – Accelerated build Homes passed • Toronto and Montréal completed in Q1’10 100% % of FTTx program completed 72% • VDSL2 deployment substantially advanced – 1.8M homes passed with 25 Mbps capability by Q1’10 5
Slide 37: FTTH implementation in Québec
1. Invest in broadband networks & services FTTH implementation in Québec Québec City build-out • FTTH build-out in Québec City – Leveraging aerial plant (85% of network) – 3-year plan BEAUPORT – Service-ready starting in Q4’10 CHARLESBOURG • Cost effective in highly aerial footprint LORETTEVILLE – C
Slide 38: IPTV launch in 2010
1. Invest in broadband networks & services IPTV launch in 2010 Well positioned to move forward with IPTV • Selected Microsoft MediaRoom, global leader in IPTV • TV feature superiority vs. traditional cable – SVOD, Whole Home PVR, remote PVR management • Leverage core competencies and experience in T
Slide 39: Capital intensity consistent with other North American carriers
1. Invest in broadband networks & services Capital intensity consistent with other North American carriers Capital intensity Source: Company reports. 2010 figures for Verizon and AT&T derived from company guidance and First Call analyst estimates 15.3% x% 15.9% <16% 15.8% 14%-15% ~16% 14.5% 14.1% to
Slide 40: Strategic imperative: Accelerate wireless
Strategic imperative 2 Accelerate wireless
Slide 41: Delivered on wireless priorities in 2009
2. Accelerate wireless Delivered on wireless priorities in 2009 Key Accomplishments • Largest HSPA+ deployment in North America 9 Network • Broadest HSPA+ network in Canada • HSPA+ launched – Over 4,100 cell sites, covering 93% of population – 75% of cell sites with 100 Mbps of fibre • 747 retail st
Slide 42: Improving wireless trends
2. Accelerate wireless Improving wireless trends Wireless gross adds Wireless net adds • Total net adds up 6.3% in ‘09 – Better sales execution and device line-up 1,794k 373k – Effective advertising and promotions 1,651k 351k • HSPA driving increased activations – ~50% of HSPA subs in Q4’09 new to w
Slide 43: Leveraging new capabilities for 2010
2. Accelerate wireless Leveraging new capabilities for 2010 New HSPA+ network • Eliminates handset and roaming disadvantages Market share • Delivers network superiority Share of incumbent postpaid net adds 4x Rogers HSPA+ coverage ~33% 200 countries with roaming 29% AT&T roaming agreement 20% 19% 21
Slide 44: Significant wireless data opportunity
2. Accelerate wireless Significant wireless data opportunity • New HSPA+ network enabling accelerated wireless data growth – Step-up in smartphone offerings – Higher usage • Increasing smartphone penetration – Smartphone ARPU significantly higher than average postpaid ARPU – Exploding number of data
Slide 45: 2010 priorities
2. Accelerate wireless 2010 priorities Distribution & Network Devices Competition brand • Leverage superior • Wireless rollout • Increase • Leverage high performance across The Source Smartphone speed network and stores penetration and footprint advantage • Further groom usage HSPA+ network • Improv
Slide 46: Strategic imperative: Leverage wireline momentum
Strategic imperative 3 Leverage wireline momentum
Slide 47: Effectively managing NAS erosion
3. Leverage wireline momentum Effectively managing NAS erosion Residential Business Continuing to slow Residential NAS erosion Turnaround NAS losses in business markets • 12.6% fewer residential line losses y/y in 2009 • Economy adversely impacted erosion in 2009 – Nine consecutive quarters of impro
Slide 48: Bell TV outperforming on all fronts
3. Leverage wireline momentum Bell TV outperforming on all fronts Net additions Retail ARPU Exceptional results in 2009 • Strong revenue growth of 10% 113k $69.59 • ARPU increased $10 since 2007 $65.37 – Reflects programming upgrades, higher HD penetration and pricing actions $59.69 • EBITDA* up 18%
Slide 49: Business Markets overview
3. Leverage wireline momentum Business Markets overview Business Markets EBITDA margin • Economy impacted revenue performance in 2009 – Reduced equipment sales – Lower demand for basic connectivity service + 3 pts • Improving EBITDA margins and cash flow – 3-point EBITDA margin improvement in 2009 –
Slide 50: Strategic imperative: Improve customer service
Strategic imperative 4 Improve customer service
Slide 51: Real customer service improvement
4. Improve customer service Real customer service improvement Same Day Next Day Fewer calls Increased satisfaction Agent calls handled -- Residential Help desk agent satisfaction -- Residential - 16% + 3 pts [91%] >85% Sept ’08 82% • Launched 79% • >90% completion rate in ’09 on all 3 home products
Slide 52: $140M investment in 2010
4. Improve customer service $140M investment in 2010 Better service in the field Restructuring around the home Team-based support for field Creating Bell Home service centres technicians Continuing to improve Streamlined call routing Internet service Maintain 2-day installation and “No surprise” bil
Slide 53: New service campaign
4. Improve customer service New service campaign 52
Slide 54: Strategic imperative: Achieve a competitive cost structure
Strategic imperative 5 Achieve a competitive cost structure
Slide 55: Labour force reductions
5. Achieve a competitive cost structure Labour force reductions Bell labour force * • Since June’08, total Bell workforce reduced by 5,800 – 13% of total Bell employees 44,100 – 22% of management (3,300) -13% • 830 additional reductions in Q4, bringing total for 2009 to 2,500 (2,500) – Integrated En
Slide 56: Maintaining strong focus on cost control
5. Achieve a competitive cost structure Maintaining strong focus on cost control Wireline support costs Driving down wireline expenses* • Wireline labour costs down 9% in 2009 OPEX for Wireline Field Services, IT, Network • Wireline G&A expenses down 10% in 2009 and Corporate Support ($B) Improved w
Slide 57: Summary
Summary 9 Met all increased financial guidance for 2009 9 Making the appropriate investments for the future to drive RGU growth • Accelerated broadband fibre deployment plan, including FTTH in Quebec City • Leverage HSPA+ wireless network • Launch IPTV 9 Continue to execute on capital markets strate