MONTRÉAL - BCE Inc. (TSX: BCE) (NYSE: BCE) today reported results for the third quarter (Q3) of 2020.
Sequential quarterly improvement at all Bell operating segments as COVID recovery continues; BCE revenue down 2.6% and adjusted EBITDA down 4.4% year over year
Strong financial position maintained with $5.2 billion of available liquidity at end of Q3
Cash flows from operating activities of $2,110 million and free cash flow of $1,034 million contributed to 4.4% growth in YTD cash flows from operating activities and 13.7% higher free cash flow
128,168 total wireless postpaid and prepaid net customer additions
Leading wireline broadband subscriber results with 81,696 net retail Internet and IPTV customer additions; 10% Internet revenue growth
Building the best networks: fibre program 56% complete; rural Wireless Home Internet buildout approaching half of planned footprint; Canada's fastest national 5G network continues to expand to new centres
Net earnings of $740 million with net earnings attributable to common shareholders of $692 million, or $0.77 per common share; adjusted net earnings of $712 million generated adjusted EPS of $0.79
Common share dividend of $0.8325 declared for Q4, up 5% over last year
"With a steadfast focus on our long-term strategy throughout the challenges of 2020, the Bell team continues to deliver the benefits of next-generation network and service investment to our shareholders, customers and communities. In Q3, Bell's innovation leadership drove operational and financial momentum across our business segments, while our infrastructure, technology and community investments supported Canada's COVID response and ongoing recovery," said Mirko Bibic, President and Chief Executive Officer of BCE and Bell Canada.
"Diligent execution by the Bell team in an improving economy, which included the re-opening of retail sales and service for wireless, Internet and TV and the return of live sports programming supporting advertising growth, resulted in significantly improved financial performance and broadband customer additions compared to Q2, with Bell welcoming 210,000 net new retail Internet, IPTV and wireless customers."
"Enabled by the enduring strength of BCE's financial position and continued free cash flow generation, Bell is keeping Canadians connected and informed while also building a solid foundation for the long term," said Mr. Bibic. "Our industry-leading investments in network quality and capacity continue to reinforce Canada's COVID response, and we're expanding the country's fastest mobile 5G network and advanced broadband Internet services for rural and urban Canadians alike. Throughout the challenges of the year, Bell continued to champion customer experience, introducing the dedicated Move Valet service, full residential self-install options and Bell Virtual Office solutions for business customers refining their remote work operations, while also enhancing digital customer service and online sales options."
KEY BUSINESS DEVELOPMENTS
New BCE Director; Bell executive team update
BCE welcomes Louis P. Pagnutti to the Board of Directors. Formerly Chair and CEO of EY Canada, Mr. Pagnutti also served as Global Managing Partner responsible for EY's international business strategy, including technology, finance, risk management, legal, shared services and procurement. Bell Group President Wade Oosterman will assume operational leadership of Bell Media in addition to his media strategy role following the departure of Bell Media President Randy Lennox on January 4, 2021. As Mr. Oosterman focuses fully on Bell Media, his position as Bell's Chief Brand Officer will transition to Devorah Lithwick, Senior Vice President, Brand.
Advancing opportunities for racialized Canadians
Building on the launch of the $5 million Bell Let's Talk Diversity Fund, Bell announced further action to accelerate diversity and inclusion on our team, in our industry and across corporate Canada, including the new Onyx Initiative that brings together major companies and academic institutions to support professional development and recruiting opportunities for Black post-secondary students and new grads. Bell has also partnered with the Black Professionals in Tech Network to drive progress in Canadian telecom and tech, and with BIPOC TV & Film to launch the new HireBIPOC online portal connecting racialized creators and crew with production and employment opportunities in Canadian media.
Best networks: fastest 5G, broadband WHI for rural Atlantic Canada
Bell has delivered Canada's fastest national 5G network and the largest selection of 5G smartphones, including Samsung's exclusive full 5G lineup, the Apple iPhone 12 series and Google Pixel 5. We continue to lead the way in bringing broadband connections to rural Canada with Bell Wireless Home Internet (WHI), expanding service to small communities in all Atlantic provinces, delivering 50/10 Internet access speeds to most customers, and approaching 50% of our overall WHI build plan across 7 provinces.
Move Valet, BBM's Virtual Office enhance customer experience
Bell introduced new programs to champion customer experience for both consumer and business customers. Featuring dedicated customer care specialists available 7 days a week, Move Valet makes it even easier for customers in Ontario and Québec to transfer their residential Internet, TV and Home Phone services when they move. In response to challenges faced by major business customers building remote work environments during COVID-19, Bell Business Markets (BBM) introduced Virtual Office, a new suite of integrated remote work solutions enabling businesses to optimize costs, enhance productivity and grow employee engagement. Alongside the closing of Bell's sale of data centre facilities to global data infrastructure leader Equinix, BBM becomes the first Equinix Platinum Partner in Canada, offering enterprise customers advanced solutions to further their digital transformation goals in Canada and worldwide.
Québec content investment, new CTV digital platform
Bell Media launched Noovo, the singular Québec media brand combining the French-language V television network and Noovo.ca digital service. Bell Media also unveiled a new ad-supported CTV digital video platform offering access to live and on-demand programming from CTV and CTV2, CTV specialty channels and MTV across smartphones, smart TVs and other connected devices.
Bell Let's Talk Community Fund 2020
Bell Let's Talk announced this year's 118 Bell Let's Talk Community Fund recipients to mark World Mental Health Day on October 10. The $2 million annual fund supports grassroots groups delivering innovative and localized mental health programs, and has distributed more than 750 grants in every region of the country since launching in 2011. To learn more about our Community Fund partners, including East Hants Family Resource Centre in Elmsdale, Nova Scotia, Maison RadoActif in Montréal, Compass Boussole Akii-Izhinoogan in Sudbury and Winnipeg's Rainbow Resource Centre, please visit Bell Let's Talk.
BCE Q3 RESULTS
Following BCE's June 1, 2020 announcement that it had agreed to sell substantially all of its data centre operations, we have reclassified amounts related to the announced sale for the previous periods to discontinued operations in our consolidated income statements and consolidated statements of cash flows to make them consistent with the presentation for the current period.
"Despite the ongoing effects of the COVID crisis, all Bell operating segments delivered better performance trajectories and improved revenue and adjusted EBITDA results compared to Q2, contributing to Q3 free cash flow of over $1 billion and bringing total cash generation this year to more than $3.25 billion, 14% higher than in 2019," said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada. "BCE's outstanding liquidity position and well-structured balance sheet, including a fully funded pension plan, provides the financial strength and flexibility to support our substantial capital investments in network, service and content innovation while enabling ongoing dividend returns for BCE shareholders."
BCE operating revenue decreased 2.6% to $5,787 million, compared to $5,940 million in Q3 2019, due to the ongoing impacts of COVID-19, particularly on media advertising demand, wireless roaming volumes, and reduced or delayed spending by business customers. This was comprised of 4.2% lower service revenue of $4,924 million, partly offset by an 8.0% increase in product revenue to $863 million. Representing a significant improvement in performance over Q2 2020, these results reflected the resumption in consumer and commercial activity with a gradual easing of COVID restrictions.
Net earnings declined 19.7% to $740 million and net earnings attributable to common shareholders totalled $692 million, or $0.77 per share, down 20.2% and 19.8% respectively. The decreases were the result of lower adjusted EBITDA, higher other expense due mainly to net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation and higher depreciation and amortization.
Adjusted net earnings were $712 million, or $0.79 per common share, down 12.3% and 13.2% respectively, compared to $812 million, or $0.91 per common share, in Q3 2019.
Adjusted EBITDA decreased 4.4% to $2,454 million, reflecting declines of 4.4% at Bell Wireless, 1.6% at Bell Wireline and 21.2% at Bell Media.
Total BCE capital expenditures increased 2.2% to $1,031 million for a capital intensity(5) ratio of 17.8%, compared to 17.0% in Q3 last year. Capital spending in the quarter focused on continued expansion of our broadband fibre network, accelerated rollout of Wireless Home Internet to more rural locations, the ongoing deployment of our mobile 5G network, and increased investment in online fulfillment, customer self-serve and automation tools as well as improved app functionality.
BCE cash flows from operating activities decreased 6.6% to $2,110 million, from $2,258 million last year, reflecting lower adjusted EBITDA and higher income taxes paid (due to the deferral of corporate income tax installment payments from the first half of this year as a result of government COVID relief measures), partly offset by higher cash from working capital due to the timing of supplier payments.
Free cash flow was down 11.5% to $1,034 million in Q3, from $1,169 million last year, due to lower cash flows from operating activities, excluding cash from discontinued operations and acquisition and other costs paid, as well as higher capital expenditures.
Q3 Subscriber Highlights
BCE reported 128,168 net new wireless customers (87,529 postpaid and 40,639 prepaid); 62,859 net new retail Internet customers; 18,837 net new IPTV customers; a net loss of 19,133 retail satellite TV customers; and a net loss of 49,792 retail residential NAS lines.
Total BCE wireless and retail Internet, TV and residential NAS connections(5) were 19,076,265 at the end of Q3, up 1.0% since Q3 2019. The total includes 10,140,427 wireless customers, up 3.1% (including 9,292,751 postpaid customers, an increase of 2.8%, and 847,676 prepaid customers, up 6.5%); 3,660,078 retail Internet subscribers, up 4.0%; 2,738,069 retail TV subscribers, down 1.2% (including 1,785,267 IPTV customers, an increase of 2.3%, and 952,802 retail satellite TV customers, down 7.2%); and 2,537,691 retail residential NAS lines, down 7.9%.
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