SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule
13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: November 2005 | Commission
File Number: 1-8481 |
BCE
Inc.
(Translation of Registrants name into English)
1000,
rue de La Gauchetière Ouest, Bureau 3700, Montréal, Québec
H3B 4Y7, (514) 870-8777
(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F | Form 40-F | X
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Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes | No | X
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Only the BCE Inc. Management's Discussion and Analysis dated November 1, 2005 and the BCE Inc. 2005 Third Quarter unaudited interim consolidated financial statements for the period ended September 30, 2005, included on pages 6 to 36 and 37 to 47, respectively, of the BCE Inc. 2005 Third Quarter Shareholder Report filed with this Form 6-K are incorporated by reference in the registration statements filed by BCE Inc. with the Securities and Exchange Commission on Form F-3 (Registration No. 333-12130), Form S-8 (Registration No. 333-12780), Form S-8 (Registration No. 333-12802) and Form S-8 (Registration No. 333-12804). Except for the foregoing, no other document or portion of document filed with this Form 6-K is incorporated by reference in BCE Inc.s registration statements. Notwithstanding any reference to BCEs Web site on the World Wide Web in the documents attached hereto, the information contained in BCEs site or any other site on the World Wide Web referred to in BCEs site is not a part of this Form 6-K and, therefore, is not filed with the Securities and Exchange Commission.
The
Quarter at a Glance
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The
Quarter at a Glance
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In the third quarter, we achieved solid revenue performance, driven
by strong video, wireless and high-speed Internet subscriber acquisitions
and improved organic growth in our Business segment, while continuing
to make steady progress on our key strategic priorities. Revenues from
our growth services (comprised mainly of wireless, video and data-related
products such as high-speed Internet) accounted for 44% of total revenues
at Bell Canada at the end of Q3 2005, which keeps us on track to
achieve our target of 45% by the end of 2005. Revenue declines in our
legacy voice and data businesses were brought about by the more competitive
telecommunications landscape. Legacy declines, together with increased
investment in customer service and customer acquisitions, put pressure
on operating margins.
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Customer Connections |
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Q3 2005 | 30-SEPT-05 | |||||
CONNECTIONS |
NET | CONNEC- | ||||
(IN THOUSANDS) |
ACTIVATIONS | TIONS | ||||
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Wireless |
123 | 5,231 | ||||
High-Speed Internet |
106 | 2,134 | ||||
Video |
82 | 1,677 | ||||
NAS |
(60 | ) | 12,640 | |||
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(1) |
EBITDA,
operating income before restructuring and other items, net earnings before
restructuring and other items and net gains on investments, and free cash
flow do not have any standardized meaning prescribed by Canadian generally
accepted accounting principles (GAAP) and are therefore unlikely to be comparable
to similar measures presented by other companies. For more details on these
measures, including a reconciliation to the most comparable GAAP measure,
please refer to the section entitled Non-GAAP Financial Measures contained
in BCE Inc.s 2005 Third Quarter MD&A dated November 1, 2005. |
2 Bell Canada Enterprises 2005 Quarterly Report
Operating Revenues Our revenues increased by 3.6% year-over-year to reach $4,951 million in the quarter. The growth reflected improved revenue performance across all of our segments. At Bell Canada, revenues grew by 2.9%, driven primarily by the Business segment where continued wireless strength, organic growth of ICT (or VAS) solutions sales and the contribution from recent acquisitions in driving our Virtual Chief Information Officer (VCIO) strategy in SMB, led to improved top-line results. Furthermore, our Consumer segment delivered a solid quarter of revenue growth as a result of the performance of its video, Internet and wireless services, despite continued decreases in legacy wireline services, while Aliant revenues also increased notably due in part to its recovery from a labour disruption in 2004. Overall revenue growth was further enhanced by the performance in the Other BCE segment, where strong double-digit growth of 10.9% at Bell Globemedia and 23% at Telesat more than offset a decline of 1.5% at CGI Group Inc. Operating Income and EBITDA(1) Operating income at BCE for the quarter was $957 million, compared with $25 million for Q3 2004, which included the recognition of $985 million of restructuring |
(1) |
EBITDA,
operating income before restructuring and other items, net earnings before
restructuring and other items and net gains on investments, and free cash
flow do not have any standardized meaning prescribed by Canadian generally
accepted accounting principles (GAAP) and are therefore unlikely to be comparable
to similar measures presented by other companies. For more details on these
measures, including a reconciliation to the most comparable GAAP measure,
please refer to the section entitled Non-GAAP Financial Measures contained
in BCE Inc.s 2005 Third Quarter MD&A dated November 1, 2005. |
3 Bell Canada Enterprises 2005 Quarterly Report
The Quarter at a Glance
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charges related to last years employee departure program. Operating
income before restructuring and other items(1) for Q3 2005
decreased by 10.7% or $118 million, compared with the previous year.
Despite higher revenues, cost savings from Galileo and recovery from the
2004 labour disruption at Aliant, we experienced higher operating expenses
resulting from service recovery efforts following settlement of the Entourage
labour dispute in July, the expected increase in the cost of acquiring
a substantially higher number of wireless subscribers, the Canadian Radio-television
and Telecommunications Commissions (CRTC) decision with respect
to Competitor Digital Network Services (CDN), and continued margin pressure
from the ongoing transformation of our product mix towards growth services.
Higher net benefit plans cost and amortization expense also contributed
to the decline. Similarly at Bell Canada, operating income for Q3
2005 showed a marked improvement year-over-year, increasing to $908 million
from a loss of $13 million as a result of the charges recognized
in 2004 in consideration of the employee departure program. Operating
income before restructuring and other items(1) declined by
$129 million in the quarter, or 12.1%, to $938 million from
$1,067 million in Q3 2004 for the reasons referred to previously. Net Earnings / Earnings per Share Net earnings applicable to common shares for Q3 2005 were $441 million, or $0.48 per common share, compared with net earnings of $82 million, or $0.09 per common share, for the same period last year. Included in Q3 earnings this year was a net charge of $21 million for restructuring and other items, compared with a net charge of $402 million for restructuring and other items and net gains on investments in Q3 2004. Net earnings before restructuring and other items and net gains on investments(1) for Q3 2005 were $462 million, or $0.50 per common share, down $22 million, or $0.02 per share, representing a decrease of 3.8% per share over last year. This decline can be attributed to lower operating income, offset partly by net income tax savings, which included the impact from a loss monetization program based on an agreement entered into between Bell Canada and Bell Canada International Inc. (BCI) in August 2004. Capital Expenditures |
(1) |
EBITDA,
operating income before restructuring and other items, net earnings before
restructuring and other items and net gains on investments, and free cash
flow do not have any standardized meaning prescribed by Canadian generally
accepted accounting principles (GAAP) and are therefore unlikely to be comparable
to similar measures presented by other companies. For more details on these
measures, including a reconciliation to the most comparable GAAP measure,
please refer to the section entitled Non-GAAP Financial Measures contained
in BCE Inc.s 2005 Third Quarter MD&A dated November 1, 2005. |
4 Bell Canada Enterprises 2005 Quarterly Report
Capital expenditures were $968 million this quarter, or 19.4% higher than the same period last year. As a percentage of revenues, capital expenditures increased this quarter to 19.6% from 17.0% last year, reflecting acceleration in our spending program. This year-over-year increase related to an expansion of our fibre-to-the-node (FTTN) footprint to deliver higher-speed broadband access, the initial deployment of an Evolution, Data Optimized (EVDO) wireless data network in certain of our markets, information technology (IT) efficiency projects to deliver cost savings, investment in our IP television (IPTV) platform, Digital Subscriber Line (DSL) footprint expansion, as well as a return to more normal spending levels at Aliant after its labour disruption in 2004. Cash from operating activities and free cash flow(1) Cash from operating
activities in Q3 2005 increased for a second consecutive quarter to $1,686 million,
reflecting the continued positive contribution from operations and the
negative impact from certain items earlier this year. Cash from operating
activities in Q3 2005 was 7.8% or $142 million lower than last year.
The result for Q3 2004 was impacted favourably by a payment received from
the settlement of lawsuits against Manitoba Telecom Services Inc.
(MTS) and Allstream Inc. and cash received from a higher accounts
receivable securitization level, which was partially offset by a decrease
in taxes paid resulting from a refund (net of instalments) in Q3 2005.
Our free cash flow in Q3 2005 improved for the second consecutive quarter to $344 million, reflecting increased cash flow from operations and the timing of certain items, including income tax instalment payments, voluntary pension plan contributions and employee severance, which unfavourably affected free cash flow in the first two quarters of 2005. On a year-over-year basis, free cash flow decreased from $673 million generated in the third quarter of 2004, attributable mainly to lower cash from operating activities, an increase in capital expenditures related to our investment in next-generation service platforms and higher dividends paid as a result of a $0.03 quarterly increase in the dividend per common share. Similarly, for the first nine months of 2005, free cash flow was $320 million compared with $993 million for the same period last year, due to a decrease in cash from operating activities in addition to Telesat insurance proceeds that were received in the first half of 2004. |
(1) |
EBITDA,
operating income before restructuring and other items, net earnings before
restructuring and other items and net gains on investments, and free cash
flow do not have any standardized meaning prescribed by Canadian generally
accepted accounting principles (GAAP) and are therefore unlikely to be comparable
to similar measures presented by other companies. For more details on these
measures, including a reconciliation to the most comparable GAAP measure,
please refer to the section entitled Non-GAAP Financial Measures contained
in BCE Inc.s 2005 Third Quarter MD&A dated November 1, 2005. |
5 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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In this MD&A, we, us, our and BCE mean BCE Inc.,
its subsidiaries and joint ventures. |
This managements discussion and analysis of financial condition and results of operations (MD&A) comments on BCEs operations, performance and financial condition for the three months (Q3) and nine months (YTD) ended September 30, 2005 and 2004. About Forward-Looking Statements Securities laws
encourage companies to disclose forward-looking information so that investors
can get a better understanding of the companys future prospects
and make informed investment decisions.
Risks that could cause our actual results to materially differ from our current expectations are discussed throughout this MD&A and, in particular, in Risks That Could Affect Our Business. EBITDA The term EBITDA
does not have any standardized meaning prescribed by Canadian generally
accepted accounting principles (GAAP). It is therefore unlikely to be
comparable to similar measures presented by other companies. EBITDA is
presented on a consistent basis from period to period. |
6 Bell Canada Enterprises 2005 Quarterly Report
The most comparable
Canadian GAAP financial measure is operating income. The tables below are
reconciliations of EBITDA to operating income on a consolidated basis for
BCE and Bell Canada. |
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YTD | YTD | |||||||||
BCE |
Q3 2005 | Q3 2004 | 2005 | 2004 | ||||||
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EBITDA |
1,899 | 1,936 | 5,838 | 5,733 | ||||||
Amortization expense |
(803 | ) | (769 | ) | (2,368 | ) | (2,305 | ) | ||
Net benefit plans cost |
(108 | ) | (61 | ) | (315 | ) | (189 | ) | ||
Restructuring and other items |
(31 | ) | (1,081 | ) | (32 | ) | (1,098 | ) | ||
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Operating income |
957 | 25 | 3,123 | 2,141 | ||||||
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YTD | YTD | ||||||||
BELL CANADA |
Q3 2005 | Q3 2004 | 2005 | 2004 | ||||||
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EBITDA |
1,804 | 1,856 | 5,458 | 5,432 | ||||||
Amortization expense |
(756 | ) | (734 | ) | (2,234 | ) | (2,199 | ) | ||
Net benefit plans cost |
(110 | ) | (55 | ) | (323 | ) | (173 | ) | ||
Restructuring and other items |
(30 | ) | (1,080 | ) | (30 | ) | (1,096 | ) | ||
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Operating income |
908 | (13 | ) | 2,871 | 1,964 | |||||
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The term operating income before
restructuring and other items does not have any standardized meaning prescribed
by Canadian GAAP. It is therefore unlikely to be comparable to similar
measures presented by other companies. |
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YTD | YTD | ||||||||
BCE |
Q3 2005 | Q3 2004 | 2005 | 2004 | ||||||
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Operating income |
957 | 25 | 3,123 | 2,141 | ||||||
Restructuring and other items |
31 | 1,081 | 32 | 1,098 | ||||||
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Operating income before restructuring and other items |
988 | 1,106 | 3,155 | 3,239 | ||||||
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YTD | YTD | ||||||||
BELL CANADA |
Q3 2005 | Q3 2004 | 2005 | 2004 | ||||||
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Operating income |
908 | (13 | ) | 2,871 | 1,964 | |||||
Restructuring and other items |
30 | 1,080 | 30 | 1,096 | ||||||
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Operating income before restructuring and other items |
938 | 1,067 | 2,901 | 3,060 | ||||||
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Net Earnings Before Restructuring and Other Items and Net Gains on Investments The term net
earnings before restructuring and other items and net gains on investments
does not have any standardized meaning prescribed by Canadian GAAP. It
is therefore unlikely to be comparable to similar measures presented by
other companies. |
7 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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Free
Cash Flow We define free cash flow as cash from operating activities after capital expenditures, total dividends and other investing activities. |
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Q3 2005 | Q3 2004 | YTD 2005 | YTD 2004 | |||||||||||||
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TOTAL |
PER SHARE |
TOTAL |
PER SHARE |
TOTAL |
PER SHARE |
TOTAL |
PER SHARE |
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Net earnings applicable to common shares |
441 | 0.48 | 82 | 0.09 | 1,478 | 1.60 | 1,106 | 1.20 | ||||||||||
Restructuring and other items |
21 | 0.02 | 725 | 0.78 | 22 | 0.02 | 710 | 0.76 | ||||||||||
Net gains on investments |
| | (323 | ) | (0.35 | ) | (28 | ) | (0.03 | ) | (361 | ) | (0.39 | ) | ||||
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Net earnings before restructuring and other items and net gains on investments |
462 | 0.50 | 484 | 0.52 | 1,472 | 1.59 | 1,455 | 1.57 | ||||||||||
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Free Cash Flow The term free cash flow does
not have any standardized meaning prescribed by Canadian GAAP. It is therefore
unlikely to be comparable to similar measures presented by other companies.
Free cash flow is presented on a consistent basis from period to period. |
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YTD | YTD | ||||||||
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Q3 2005 | Q3 2004 | 2005 | 2004 | ||||||
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Cash from operating activities |
1,686 | 1,828 | 4,075 | 4,212 | ||||||
Capital expenditures |
(968 | ) | (811 | ) | (2,619 | ) | (2,318 | ) | ||
Total dividends paid |
(374 | ) | (342 | ) | (1,110 | ) | (1,034 | ) | ||
Other investing activities |
| (2 | ) | (26 | ) | 133 | ||||
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Free cash flow |
344 | 673 | 320 | 993 | ||||||
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About Our Business
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A detailed description of our products and services and our objectives and strategy is provided in the BCE 2004 MD&A. Strategic PrioritiesOur strategy is to deliver unrivalled integrated communication services to customers and to take a leadership position in setting the standard in Internet Protocol (IP). During the quarter, we made significant progress on each of our three key strategic priorities. 1) Enhancing customer experience while targeting lower costs (our Galileo program) In our Consumer segment:
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8 Bell Canada Enterprises 2005 Quarterly Report
In our Business segment:
Overall, our
various Galileo initiatives led to cost reductions this quarter of $111 million,
bringing total savings for the first nine months of 2005 to $353 million.
This keeps us on track to achieve our target run-rate savings of $500-$600
million for 2005 as certain initiatives such as our new One Bill and Bell.ca
website roll-outs gain further traction during Q4. 2) Deliver abundant bandwidth to enable next-generation services We continued
our fibre-to-the-node (FTTN) rollout by deploying another 499 neighbourhood
nodes, raising the total number of nodes served to 1,854. Our objective
is to deploy 2,000 nodes by the end of 2005. |
9 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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3) Create next-generation services to drive future growth Our Consumer segment:
Other Corporate Developments George Cope, formerly President and Chief Executive Officer of TELUS Mobility, was appointed as President and Chief Operating Officer of Bell Canada. He will be responsible for Bell Canadas Residential Services unit, which includes the wireline, Internet and video businesses, but not the wireless business, as well as for Bell Canadas Enterprise, SMB and wholesale units. Mr. Cope will begin working for Bell Canada in January 2006. In addition, we announced the appointment of Stephen Wetmore as Group President, Corporate Performance and National Markets for Bell Canada. In this new broader capacity, Mr. Wetmore will have overall responsibility for improving Bell Canadas cost structure. |
10 Bell Canada Enterprises 2005 Quarterly Report
On September 16, 2005, we announced an alliance with Rogers Communications Inc. (Rogers) to jointly build and manage a nationwide wireless broadband network through a joint venture, which holds approximately 98 MHz of wireless broadband spectrum in the 2.5 GHz frequency range across much of Canada. The development and commercialization of services, as well as sales, marketing and end-user customer care and billing functions will be provided directly by Bell Canada and Rogers to their respective customers. The services will allow subscribers to have wireless access to the Internet and use a host of voice, video streaming and data applications from wherever the service is available. The network footprint is expected to reach more than two-thirds of Canadians in less than three years, covering over 40 cities and approximately 50 unserved rural and remote communities. Separately, in conjunction with this transaction, we reached an agreement to acquire the remaining 50 per cent of NR Communications not already owned by Bell Canada. Quarterly Financial Information
The table below shows selected consolidated financial data for the eight
most recently completed quarters. This information has been prepared on
the same basis as the annual consolidated financial statements, but is
unaudited. |
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2005 |
2004 |
2003 |
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Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||||
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Operating revenues |
4,951 | 4,980 | 4,859 | 4,986 | 4,778 | 4,779 | 4,638 | 4,815 | ||||||||||
EBITDA |
1,899 | 2,001 | 1,938 | 1,831 | 1,936 | 1,953 | 1,844 | 1,847 | ||||||||||
Amortization expense |
(803 | ) | (792 | ) | (773 | ) | (803 | ) | (769 | ) | (769 | ) | (767 | ) | (775 | ) | ||
Net benefit plans cost |
(108 | ) | (104 | ) | (103 | ) | (67 | ) | (61 | ) | (65 | ) | (63 | ) | (46 | ) | ||
Restructuring and other items |
(31 | ) | (5 | ) | 4 | (126 | ) | (1,081 | ) | (14 | ) | (3 | ) | (13 | ) | |||
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Operating income |
957 | 1,100 | 1,066 | 835 | 25 | 1,105 | 1,011 | 1,013 | ||||||||||
Earnings from continuing operations |
459 | 581 | 492 | 367 | 102 | 544 | 485 | 486 | ||||||||||
Discontinued operations |
| | (1 | ) | (2 | ) | (2 | ) | 27 | 3 | (86 | ) | ||||||
Extraordinary gain |
| | | 69 | | | | | ||||||||||
Net earnings |
459 | 581 | 491 | 434 | 100 | 571 | 488 | 400 | ||||||||||
Net earnings applicable to common shares |
441 | 563 | 474 | 417 | 82 | 554 | 470 | 386 | ||||||||||
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Included in net earnings: |
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Net gains on investments |
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Continuing operations |
| 28 | 1 | 64 | 325 | | | 84 | ||||||||||
Discontinued operations |
| | (1 | ) | (2 | ) | (2 | ) | 31 | 7 | (94 | ) | ||||||
Restructuring and other items |
(21 | ) | (3 | ) | 2 | (62 | ) | (725 | ) | 16 | (1 | ) | (9 | ) | ||||
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Net earnings per common share |
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Continuing operations basic |
0.48 | 0.61 | 0.51 | 0.38 | 0.09 | 0.57 | 0.51 | 0.50 | ||||||||||
Continuing operations diluted |
0.48 | 0.61 | 0.51 | 0.38 | 0.09 | 0.57 | 0.51 | 0.50 | ||||||||||
Net earnings basic |
0.48 | 0.61 | 0.51 | 0.45 | 0.09 | 0.60 | 0.51 | 0.41 | ||||||||||
Net earnings diluted |
0.48 | 0.61 | 0.51 | 0.45 | 0.09 | 0.60 | 0.51 | 0.41 | ||||||||||
Average number of common shares outstanding (millions) |
927.0 | 926.6 | 926.2 | 925.3 | 924.6 | 924.3 | 924.1 | 923.4 | ||||||||||
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11 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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Financial Results Analysis |
Consolidated
Analysis |
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Q3 2005 | Q3 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
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Operating revenues |
4,951 | 4,778 | 3.6% | 14,790 | 14,195 | 4.2% | ||||||||
Operating expenses |
(3,052 | ) | (2,842 | ) | (7.4% | ) | (8,952 | ) | (8,462 | ) | (5.8% | ) | ||
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EBITDA |
1,899 | 1,936 | (1.9% | ) | 5,838 | 5,733 | 1.8% | |||||||
Amortization expense |
(803 | ) | (769 | ) | (4.4% | ) | (2,368 | ) | (2,305 | ) | (2.7% | ) | ||
Net benefit plans cost |
(108 | ) | (61 | ) | (77.0% | ) | (315 | ) | (189 | ) | (66.7% | ) | ||
Restructuring and other items |
(31 | ) | (1,081 | ) | n.m. | (32 | ) | (1,098 | ) | n.m. | ||||
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Operating income |
957 | 25 | n.m. | 3,123 | 2,141 | 45.9% | ||||||||
Other income (expense) |
(1 | ) | 333 | n.m. | 30 | 393 | n.m. | |||||||
Interest expense |
(247 | ) | (253 | ) | 2.4% | (741 | ) | (758 | ) | 2.2% | ||||
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Pre-tax earnings from continuing operations |
709 | 105 | n.m. | 2,412 | 1,776 | 35.8% | ||||||||
Income taxes |
(193 | ) | 44 | n.m. | (687 | ) | (511 | ) | (34.4% | ) | ||||
Non-controlling interest |
(57 | ) | (47 | ) | (21.3% | ) | (193 | ) | (134 | ) | (44.0% | ) | ||
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Earnings from continuing operations |
459 | 102 | n.m. | 1,532 | 1,131 | 35.5% | ||||||||
Discontinued operations |
0 | (2 | ) | 100.0% | (1 | ) | 28 | n.m. | ||||||
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Net earnings |
459 | 100 | n.m. | 1,531 | 1,159 | 32.1% | ||||||||
Dividends on preferred shares |
(18 | ) | (18 | ) | 0.0% | (53 | ) | (53 | ) | 0.0% | ||||
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Net earnings applicable to common shares |
441 | 82 | n.m. | 1,478 | 1,106 | 33.6% | ||||||||
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EPS |
0.48 | 0.09 | n.m. | 1.60 | 1.20 | 33.3% | ||||||||
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n.m.: not meaningful |
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Our revenues increased by 3.6% in the third quarter to $4,951 million and by 4.2% to $14,790 million year-to-date, reflecting improved revenue performance across all of our segments. At Bell Canada, growth was fuelled primarily by the Business segment where continued strength in wireless, driven by competitively attractive devices and price plans, organic growth of Information and Communications Technology (ICT or value-added services (VAS)) solutions and the contribution from recent acquisitions in further developing our Virtual Chief Information Officer (VCIO) strategy, delivered improved top-line results. Our Consumer segment also contributed to the year-over-year improvements with strong wireless, video and high-speed Internet subscriber growth driving revenue growth, while Aliant segment revenues were supported by the continued solid performance of its wireless and Internet businesses and recovery from its 2004 labour disruption that negatively affected results in Q2 and Q3 of last year. Revenue growth at Bell Canada was moderated by the continued decline in our legacy voice and data business, as competitive pressures and the ongoing transformation of our business towards growth services (comprised mainly of wireless, video and data-related products such as high-speed Internet) further eroded local and access services and long distance revenues this year. The Other BCE segment contributed significantly to higher revenues in the quarter and year-to-date, with strong growth delivered by Telesat Canada (Telesat) and Bell Globemedia Inc. (Bell Globemedia). However, while CGI Group Inc. (CGI) posted double-digit growth on a year-to-date basis, it reported a decrease in Q3 2005 as it was no longer benefiting from a year-over-year increase |
12 Bell Canada Enterprises 2005 Quarterly Report
in revenues from its purchase of American Management Systems Inc. (AMS) in Q2 2004 and as the appreciation of the Canadian dollar negatively impacted its U.S. dollar revenues. Operating income Operating
income was $957 million and $3,123 million for the third quarter
and first nine months of 2005, respectively, compared with $25 million
and $2,141 million for the same periods in 2004, which included the
recognition of restructuring charges in the amount of $985 million
related to last years employee departure program. Operating income
before restructuring and other items decreased by 10.7%, or $118 million,
to $988 million this quarter and by 2.6%, or $84 million, to
$3,155 million year-to-date. Despite higher revenues, cost savings
from Galileo and recovery from Aliants 2004 labour disruption, this
decline was due mainly to higher operating expenses resulting from service
recovery efforts following settlement of the Entourage labour dispute
in July, an expected increase in the cost of acquiring a substantially
higher number of wireless subscribers, and continued margin pressure from
the ongoing transformation of our product mix towards growth services.
Higher net benefit plans cost and amortization expense also contributed
to the decrease.
Our EBITDA for
the quarter was down $37 million, or 1.9%, to $1,899 million,
compared with last year, reflecting a decrease at Bell Canada, offset
partly by an increase in our Other BCE segment. |
13 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
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0.8 percentage points compared with last year. Although we are targeting
a stable EBITDA margin for Bell Canada in 2005, we may not achieve
this objective due primarily to the accelerated erosion of our legacy
voice and data businesses and the timing of Galileo cost savings that
will ramp up further in 2006. Amortization expense of $803 million in Q3 2005 and $2,368 million on a year-to-date basis in 2005 represent increases of 4.4% and 2.7%, respectively, compared to the same periods last year. This was a result of an increase in our capital asset base from capital spending that continues to be higher than asset retirements. Net benefit plans costThe net benefit plans cost of $108 million in Q3 2005 and $315 million on a year-to-date basis in 2005 represents increases of 77% and 67%, respectively, compared to the same periods last year. The increases resulted mainly from:
|
14 Bell Canada Enterprises 2005 Quarterly Report
Restructuring and other items We recorded restructuring and other items of $31 million in Q3 2005 and $32 million on a year-to-date basis in 2005, which consisted mainly of:
The year-to-date
charges were partly offset by a $25 million credit in Q1 2005 for
the reversal of restructuring provisions that were no longer necessary,
since the actual payments made to employees were lower than estimated.
Net earnings / Earnings per Share (EPS) Net earnings
applicable to common shares for Q3 2005 were $441 million, or $0.48
per common share, significantly higher than net earnings of $82 million,
or $0.09 per common share, for the same period last year. Included in
the third quarter earnings this year was a net charge of $21 million
for restructuring and other items, compared to a net charge of $402 million
from restructuring and other items and net gains on investments in Q3
2004. Net earnings before restructuring and other items and net gains
on investments of $462 million, or $0.50 per common share, were down
$22 million, or $0.02 per share, representing a decrease of 3.8%
over last year. |
15 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
||||||||||||||
Segmented Analysis |
||||||||||||||
|
Q3 2005 | Q3 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
Operating revenues |
||||||||||||||
Consumer |
1,929 | 1,908 | 1.1% | 5,675 | 5,591 | 1.5% | ||||||||
Business |
1,516 | 1,440 | 5.3% | 4,493 | 4,316 | 4.1% | ||||||||
Aliant |
520 | 497 | 4.6% | 1,562 | 1,527 | 2.3% | ||||||||
Other Bell Canada |
500 | 486 | 2.9% | 1,464 | 1,428 | 2.5% | ||||||||
Inter-segment eliminations |
(139 | ) | (125 | ) | (11.2% | ) | (401 | ) | (378 | ) | (6.1% | ) | ||
|
||||||||||||||
Total Bell Canada |
4,326 | 4,206 | 2.9% | 12,793 | 12,484 | 2.5% | ||||||||
Other BCE |
732 | 679 | 7.8% | 2,315 | 2,052 | 12.8% | ||||||||
Inter-segment eliminations |
(107 | ) | (107 | ) | 0.0% | (318 | ) | (341 | ) | 6.7% | ||||
|
||||||||||||||
Total operating revenues |
4,951 | 4,778 | 3.6% | 14,790 | 14,195 | 4.2% | ||||||||
|
||||||||||||||
Operating income |
||||||||||||||
Consumer |
479 | 569 | (15.8% | ) | 1,557 | 1,655 | (5.9% | ) | ||||||
Business |
213 | 245 | (13.1% | ) | 674 | 713 | (5.5% | ) | ||||||
Aliant |
105 | 71 | 47.9% | 291 | 245 | 18.8% | ||||||||
Other Bell Canada |
111 | (898 | ) | n.m. | 349 | (649 | ) | n.m. | ||||||
|
||||||||||||||
Total Bell Canada |
908 | (13 | ) | n.m. | 2,871 | 1,964 | 46.2% | |||||||
Other BCE |
49 | 38 | 28.9% | 252 | 177 | 42.4% | ||||||||
|
||||||||||||||
Total operating income |
957 | 25 | n.m. | 3,123 | 2,141 | 45.9% | ||||||||
|
||||||||||||||
|
||||||||||||||
n.m.: not meaningful | ||||||||||||||
Consumer revenues increased by 1.1% in the third quarter of 2005 and by 1.5% for the first nine months of 2005 to $1,929 million and $5,675 million, respectively. Video, data, wireless, and terminal sales and other revenues contributed 2.0%, 1.1%, 1.0%, and 0.6%, respectively, to overall consumer revenue growth in Q3 2005, offset partly by a negative contribution of 2.4% from long distance and 1.2% from local and access services. In the first nine months of the year, wireless, video, data and terminal sales and other revenues contributed 1.5%, 1.4%, 1.2%, and 0.3% to the overall growth, offset partly by a negative contribution from long distance and local and access services of 1.0% and 1.9%, respectively. Both the quarterly and year-to-date results for 2005 were driven by the continued expansion of our wireless, video and high-speed Internet subscriber bases and an increase in video ARPU, offset partly by lower long distance revenues due to ongoing price competition, as well as a decline in local and access revenues brought about by an acceleration in NAS losses and continued wireless long distance prepaid and VoIP substitution. Although overall consumer revenue growth slowed somewhat compared with previous quarters, this result was anticipated given increased competition from cable telephony offerings and other alternative VoIP providers, which adversely affected long distance and local and access service revenues. WirelessConsumer wireless revenues increased year-over-year both this quarter and year-to-date, mainly as a result of a higher average number of customers compared with last year and price increases for certain services and features. Although subscriber momentum continued during the third quarter of 2005, fuelled by attractive new handsets, applications such as our 10-4 service and seasonal back-to-school promotions, overall revenue growth was dampened by a higher proportion of customers choosing prepaid service or postpaid monthly rate plans that included up to six months of free unlimited local airtime. In addition, on a year-to-date basis, revenue growth was impacted negatively by the billing and retention credits issued in Q1 2005 to |
16 Bell Canada Enterprises 2005 Quarterly Report
compensate
customers for billing errors and delays that occurred following implementation
of our new billing platform last year. The issuance of customer credits
returned to normal levels in Q2 2005. Video
Our video revenues
grew by 17.8% this quarter to $251 million from $213 million
last year, as a result of a higher average number of subscribers and higher
ARPU. Similarly, on a year-to-date basis, our video revenues grew by 12.2%
to $708 million. Data Consumer data revenues grew this quarter and year-to-date, fuelled by growth of 24% in our high-speed Internet subscriber base and an increase in revenues from our Sympatico.MSN.ca web portal and Bell Sympatico value-added services. Our Sympatico.MSN.ca portal revenues increased by 58% over the third quarter of 2004. The portal currently averages 16.3 million unique visitors per month, or 85% of online Canadians. |
17 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
Consumer high-speed Internet net additions
were stronger this quarter and year-to-date compared with last year. This
was driven by the introduction of our Basic Lite service in the Ontario
market, as well as by footprint expansion, focused selling efforts and
improved retention strategies. The introduction of lower priced high-speed
services, such as Basic Lite, that are geared towards the very price sensitive
segments of the market has expanded the overall high-speed market, stimulating
high-speed service growth and accelerating the rate of erosion of dial-up
Internet service. In Q3 2005, 58% of Internet gross activations subscribed
to high-speed products. Local and access
revenues, which represents the largest proportion of our Consumer segment
revenues, declined this quarter and year-to-date compared with the same
periods last year, due mainly to NAS declines which resulted in lower
NAS and related SmartTouch feature revenues, offset partly by an increase
in wireline maintenance plans. NAS decreased both this quarter and year-to-date
as a result of losses to competitive local exchange carriers (CLECs),
cable telephony offerings, VoIP providers, continued pressure from growth
in high-speed Internet access which reduces the need for second telephone
lines, and customers substituting wireline with wireless telephone service.
The rate of year-over-year NAS losses increased this quarter as a competitor
expanded the footprint of its low-priced cable telephony offering in Québec,
while several other cable operators launched new telephony offerings in
certain Ontario and Québec markets.
Our Consumer segment reported operating income of $479 million this quarter, down 15.8% compared with the third quarter of 2004. This decrease was due primarily to a higher rate of decline in our high-margin residential NAS wireline customer base, higher expected acquisition costs from stronger wireless subscriber growth, higher marketing costs related to an increased level of advertising, higher contact centre costs driven by increased customer call volume and handle time, as well as to higher amortization expense and increased net benefit plans cost. This was partially offset by higher revenues and savings associated with our Galileo cost-reduction initiatives. For the first nine months of the year, despite revenue growth of 1.5%, operating income decreased by 5.9%, year-over-year, to $1,557 million as a result of higher wireless bad debt expense in Q1 2005 and the expense pressures discussed previously. Business revenues Business segment revenues for the three and nine months ended September 30, 2005 were $1,516 million and $4,493 million, respectively, representing increases of 5.3% and 4.1% compared with the same periods one year |
18 Bell Canada Enterprises 2005 Quarterly Report
earlier. Our SMB and Enterprise units contributed 2.8% and 1.7%, respectively, of the total growth in business revenues for Q3 2005, while our other business units (comprised of Bell West and Group Telecom) contributed 0.8%. On a year-to-date basis, our SMB and Enterprise units accounted for the entire improvement, contributing 2.7% and 1.4%, respectively. For both the quarter and year-to-date, the increases in data and wireless revenues from our Enterprise and SMB units were partially offset by declines in long distance and local and access revenues, due to further erosion of our legacy wireline business as competitive pressures intensified and as our customers continued migrating their voice and data traffic to IP-based systems. The results for 2005 include the positive contribution to revenues from the acquisition of Group Telecom in November 2004. Enterprise Revenues for
our Enterprise unit were positively impacted this quarter by strong wireless
growth, which was fuelled by customers subscribing to higher-priced plans
and greater long distance and roaming usage, and by higher data revenues,
which included proceeds from the sale of customer contracts related to
legacy point-of-sales systems. Data revenue growth was more organic in
Q3 2005 as we have now realized the full benefit of the Infostream Technologies Inc.
and Elix Inc. acquisitions made in Q2 2004. In addition, lower long
distance and local and access revenues, stemming from the ongoing erosion
of legacy voice and data services and the re-price of some existing wireline
business in response to competition within the large enterprise market
segment, negatively impacted revenue growth this year.
The SMB unit delivered its best quarter since the launch of its VCIO strategy in 2003, contributing significantly to the solid financial performance of our Business segment. Revenues generated from SMB customers increased this quarter and on a year-to-date basis as increases in data, wireless and terminal sales and other revenues more than compensated for the decreases in long distance and local and access revenues. Despite a highly competitive market environment, data revenue growth was driven by the continued strong traction of our VCIO strategy and cross-selling opportunities with companies acquired in the last year (including Nexxlink Technologies Inc. and CSB Systems, which are a part of Bell Business Solutions Inc.), which resulted in higher terminal equipment and VAS sales. The growth in data revenues in Q3 2005 was tempered somewhat by a reduction in the number of new DSL high-speed Internet access service connections, due mainly to service issues associated with the Entourage labour dispute. Long distance revenues decreased, due mainly to the combined impact of lower volumes and competitive pricing pressures, and a weakening pay-phone business that is directly attributable to wireless and Internet substitution. Similarly, local and access revenues were also lower due to pressure from our declining pay-phone business, NAS losses to alternative telephony providers, and lower wireline access installation fees resulting from reduced order activity. |
19 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
Bell West
Bell West continued to grow its Enterprise and SMB customer bases leading to increases in local and access and long distance revenues both this quarter and on a year-to-date basis. However, data revenues decreased, reflecting lower construction revenue in 2005 compared with last year from a contract to build a next-generation network for the Government of Alberta (GOA) (Alberta SuperNet). At the end of Q3 2005, we completed construction of the Alberta SuperNet and currently are awaiting completion of service acceptance by the GOA. Continued strong fibre and customer premise equipment (CPE) sales, particularly from wholesale customers, contributed to higher terminal sales and other revenue for both the third quarter and first nine months of 2005. Group TelecomIn November 2004, we acquired the Canadian operations of 360networks Corporation, including GT Group Telecom Inc., (collectively 360networks) as well as certain U.S. network assets. This acquisition increased our customer base and gave us an extensive fibre network across major cities in Western Canada. The Business segment now reflects the retail portion of this acquisition, operating in Western Canada as the Group Telecom unit within Bell Canada. Business operating income
Business segment
operating income for the third quarter and first nine months of 2005 decreased
by 13.1% and 5.5%, respectively, to $213 million and $674 million,
due mainly to higher net benefits plans cost and amortization expense,
as well as to margin pressure from the loss of higher-margin legacy voice
and data business brought to the competition and the continuing shift
of voice and data traffic to lower-margin IP-based growth services. These
negative impacts were partially offset by a year-over-year increase in
revenues. Aliant revenues Aliant segment revenues were $520 million in the third quarter and $1,562 million year-to-date, reflecting increases of $23 million, or 4.6%, and $35 million, or 2.3%, respectively, compared with the same periods last year. Continued strong growth in wireless and Internet services, as well as |
20 Bell Canada Enterprises 2005 Quarterly Report
a recovery from the 2004 labour disruption offset declines in other areas
due to impacts of competition, wireless and Internet substitution, and
regulatory restrictions. Aliants operating income was $105 million in the third quarter and $291 million year-to-date, reflecting an increase of $34 million, or 47.9%, and $46 million, or 18.8%, respectively, compared with the same periods last year. The full impact of growth and recovery from the 2004 labour disruption was partially offset by the impact of the CDN decision and an increase in pension and other post-employment benefits costs. Operating expense increases required to drive revenue growth were contained by sound expense management and reflected the cost savings from Aliants 2004 voluntary early retirement program. Other Bell Canada revenuesOther Bell Canada segment revenues of $500 million for the quarter and $1,464 million for the first nine months of 2005, reflected increases of $14 million, or 2.9%, and $36 million, or 2.5%, respectively, compared with the same periods last year. These improvements were due mainly to higher revenues at our wholesale unit, resulting from the acquisition of the wholesale portion of 360networks in the fourth quarter of last year, fibre and access capacity sales in Q3 2005, the early termination of a cross-border facilities contract in Q2 2005 and a favourable ruling by the CRTC with respect to subsidies for serving |
21 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
high cost areas at Télébec Limited Partnership (Télébec) in Q1 2005. This was partly offset by the impact of the CDN decision, which reduced revenues by $15 million in Q3 2005 and $41 million year-to-date, and by continued pressure on long distance and data revenues due to competitive pricing and customers migrating services onto their own network facilities. Other Bell Canada operating income Operating income for the Other Bell Canada segment was $111 million this quarter, up from a loss of $898 million in Q3 2004, while on a year-to-date basis operating income was $349 million compared with a loss of $649 million in the same period last year. The year-over-year increases resulted mainly from restructuring and other items recorded in Q3 2004 related mostly to the employee departure program, various Galileo-related cost saving initiatives and an improvement in year-to-date bad debt expense. These impacts were partially offset by incremental salaries and higher cost of goods sold associated with the wholesale operations of 360networks acquired in Q4 2004, the impact of the CDN decision and higher costs associated with a larger volume of termination minutes stemming from a greater southbound U.S. traffic. Other BCE Revenues Bell Globemedias
revenues for the quarter were $335 million, up 10.9% from Q3 of last
year. On a year-to-date basis, Bell Globemedias revenues grew
7.4% to $1,090 million. Total advertising revenues grew by 11.5%
this quarter and by 8.0% year-to-date, reflecting strong television ratings
as CTV Television held 10 of the top 10 and 15 of the top 20 regularly
scheduled programs during the summer season among all viewers and increased
classified and national advertising sales at The Globe and Mail. On a
year-to-date basis strong growth in advertising revenues in conventional
and specialty television helped to offset the loss of advertising from
hockey broadcasts on our sports specialty channels TSN and RDS. Bell Globemedias
subscriber revenues grew by 8.2% this quarter and by 5.9% year-to-date,
reflecting strong specialty channel growth and increased online subscription
at The Globe and Mail, as well as an increase in the home delivery rate
for The Globe and Mail implemented at the beginning of 2005. |
Q3 2005 | Q3 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | |||||||||
|
||||||||||||||
Bell Globemedia |
335 | 302 | 10.9% | 1,090 | 1,015 | 7.4% | ||||||||
Telesat |
112 | 91 | 23.1% | 357 | 260 | 37.3% | ||||||||
CGI |
270 | 274 | (1.5% | ) | 818 | 736 | 11.1% | |||||||
Other |
15 | 12 | 25.0% | 50 | 41 | 22.0% | ||||||||
|
||||||||||||||
Other BCE revenues |
732 | 679 | 7.8% | 2,315 | 2,052 | 12.8% | ||||||||
|
||||||||||||||
|
22 Bell Canada Enterprises 2005 Quarterly Report
Our share of CGI revenues decreased this quarter by 1.5% to $270 million as it was no longer benefiting from a year-over-year uplift in revenues from its purchase of AMS last year. However, on a year-to-date basis revenues increased by 11.1% to $818 million, reflecting the contribution from the AMS acquisition. Other BCE operating income Operating income
for the Other BCE segment grew by 29% this quarter to $49 million
and by 42% to $252 million on a year-to-date basis, reflecting growth
in operating income at Bell Globemedia, Telesat and CGI. |
Product Line Analysis |
||||||||||||||
REVENUES | Q3 2005 | Q3 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
Local and access | 1,367 | 1,395 | (2.0% | ) | 4,103 | 4,175 | (1.7% | ) | ||||||
Long distance | 510 | 589 | (13.4% | ) | 1,566 | 1,767 | (11.4% | ) | ||||||
Wireless | 801 | 727 | 10.2% | 2,285 | 2,076 | 10.1% | ||||||||
Data | 1,001 | 915 | 9.4% | 2,918 | 2,677 | 9.0% | ||||||||
Video | 251 | 213 | 17.8% | 708 | 631 | 12.2% | ||||||||
Terminal sales and other | 396 | 367 | 7.9% | 1,213 | 1,158 | 4.7% | ||||||||
|
||||||||||||||
Total Bell Canada | 4,326 | 4,206 | 2.9% | 12,793 | 12,484 | 2.5% | ||||||||
|
||||||||||||||
|
Local
and access revenues of $1,367 million for the quarter and $4,103 million
year-to-date decreased by 2.0% and 1.7%, respectively, compared with the
same periods in 2004, mainly as a result of lower NAS and lower Smart-Touch
feature revenues, partly offset by gains from wireline insurance and maintenance
plans. |
23 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
Long distance
Long distance revenues were $510 million for the quarter and $1,566 million for the first nine months of 2005, reflecting year-over-year decreases of 13.4% and 11.4%, respectively, compared with the same periods in 2004. Lower long distance revenues affected all Bell Canada segments, particularly our Consumer and Business segments. Overall minute volumes increased slightly both this quarter and year-to-date by 1.1% and 1.7%, respectively, to 4,484 million and 13,739 million conversation minutes, compared with the same periods in 2004. However, ARPM decreased by $0.015 in both the third quarter and first nine months in 2005 to reach $0.105 and $0.104, respectively, reflecting competitive pricing pressures in our consumer, business and wholesale markets, the impact of our $5 Long Distance Bundle (which we stopped offering at the beginning of Q3 2005), and a higher volume of minutes from international prepaid calling cards. Wireless
Gross wireless activations increased by 27% this quarter to 358,000, up from 281,000 for the same period last year. Postpaid gross activations accounted for 68%, or 243,000, of the total number of gross activations this quarter, representing a 14.1% increase compared with Q3 2004, while prepaid gross activations improved by 69% to make up the other 115,000 gross activations. Postpaid growth was |
|
Q3 2005 | Q3 2004 | % CHANGE | YTD 2005 | YTD 2004 | % CHANGE | ||||||||
|
||||||||||||||
ARPU ($ / month) |
51 | 50 | 2.0% | 49 | 49 | | ||||||||
Postpaid |
63 | 63 | | 60 | 61 | (1.6% | ) | |||||||
Prepaid |
14 | 12 | 16.7% | 13 | 12 | 8.3% | ||||||||
Cellular & PCA Gross |
||||||||||||||
Activations (k) |
358 | 281 | 27.4% | 1,016 | 811 | 25.3% | ||||||||
Postpaid |
243 | 213 | 14.1% | 717 | 622 | 15.3% | ||||||||
Prepaid |
115 | 68 | 69.1% | 299 | 189 | 58.2% | ||||||||
Churn (average per month) |
1.5% | 1.2% | (0.3 | ) pts |
1.6% | 1.3% | (0.3 | ) pts | ||||||
Postpaid |
1.5% | 1.0% | (0.5 | ) pts |
1.5% | 1.1% | (0.4 | ) pts | ||||||
Prepaid |
1.6% | 1.9% | 0.3 | pts | 1.8% | 1.9% | 0.1 | pts | ||||||
Cellular & PCS Net |
||||||||||||||
Activations (k)(1) |
123 | 109 | 12.8% | 306 | 296 | 3.4% | ||||||||
Postpaid(1) |
50 | 95 | (47.4% |
) | 162 | 242 | (33.1% | ) | ||||||
Prepaid |
73 | 14 | n.m. | 144 | 54 | n.m. | ||||||||
Cellular & PCS |
||||||||||||||
Subscribers (k) |
5,231 | 4,708 | 11.1% | 5,231 | 4,708 | 11.1% | ||||||||
Postpaid |
3,886 | 3,595 | 8.1% | 3,886 | 3,595 | 8.1% | ||||||||
Prepaid |
1,345 | 1,113 | 20.8 % | 1,345 | 1,113 | 20.8% | ||||||||
|
||||||||||||||
|
(1) | In Q1 2005, we cancelled 45,000 non-paying postpaid customer accounts due to some residual issues stemming from our 2004 billing system migration. | ||
n.m.: not meaningful |
24 Bell Canada Enterprises 2005 Quarterly Report
fuelled by the launch of several new handsets, innovative applications
such as our 10-4 service, competitive rate-plan promotions,
as well as our increased presence in western Canada. The significantly
higher number of prepaid gross activations was driven mainly by the successful
launch of Solo Mobile and the contribution of subscribers from Virgin
Mobile. These results were achieved despite aggressive wireless offers
in the market from our competitors that featured zero-dollar handsets
and the longer-than-expected extension of certain seasonal promotions.
Similarly, on a year-to-date basis, we had 1,016,000 gross activations,
representing a 25.3% increase over the same period last year, comprising
717,000 postpaid gross activations and 299,000 prepaid gross activations. |
25 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||
with the first nine months of 2004. The decrease can be attributed mainly
to both the higher take-up rate of lower-priced plans and the application
of customer billing and retention credits in Q1 2005. Data
Our data revenues
increased by 9.4% this quarter and by 9.0% on a year-to-date basis to
$1,001 million and $2,918 million, respectively, compared with
the same periods last year. In the third quarter, we continued to benefit
from growth in our high-speed Internet customer base and our ICT (or VAS)
and VCIO strategies in our Enterprise and SMB business units. Data revenues
also were impacted favourably by the sales of certain customer contracts
and fibre and access capacity in our Enterprise and wholesale units. The
year-to-date improvement was driven primarily by growth in high-speed
Internet, ICT (or VAS) and IP-based services, as well as to business acquisitions
completed over the last twelve months. In addition, the year-to-date results
also reflected a one-time benefit from the early termination of a cross-border
facilities contract in Q2 2005. For 2005, the year-over-year increases
in both the quarter and year-to-date were partially offset by lower construction
revenues from the GOA contract, a decline in legacy data revenues, price
competition and the CDN decision which adversely affected revenues by
$16 million in Q3 and $47 million year-to-date. Video See discussion under Consumer Segment. Terminal sales and other Terminal sales and other revenues were $397 million this quarter, or 8.2% higher than Q3 2004, and $1,214 million year-to-date, or 4.8% higher than the same period last year. In each case, the increase was due mainly to the favourable impact from several acquisitions (including those of Group Telecom and Entourage), growth in |
26 Bell Canada Enterprises 2005 Quarterly Report
hardware sales primarily at Aliant and recovery from the Aliant labour disruption in 2004. This was offset partially by the impact of consumer promotions on wireless handset revenues despite an increase in the volume of devices sold. On a year-to-date basis, the increase was also due to higher equipment sales to business customers. Other ItemsOther income (expense) Other expense of $1 million in Q3 2005 represents a decrease of $334 million over Q3 2004. The difference resulted mainly from:
partly offset by:
On a year-to-date basis, other income decreased by $363 million to $30 million, which was further impacted by a $20 million charge in Q2 2005 relating to the tax loss monetization program between Bell Canada and BCI. Interest expenseInterest expense of $247 million in Q3 2005 and $741 million on a year-to-date basis in 2005 represents declines of 2.4% and 2.2%, respectively, compared to the same periods last year. This was mainly from lower average interest rates from the refinancing of debt at lower rates. Income taxesIncome taxes of $193 million in Q3 2005 reflected a significant increase compared to an income tax credit of $44 million for the same period last year. On a year-to-date basis, income taxes increased by $176 million to $687 million compared to the first nine months of 2004. The increases were primarily from:
Non-controlling interest of $57 million in Q3 2005 represents an
increase of 21%, compared to the same period last year, which is mainly
due to higher net earnings at Aliant and Bell Globemedia. Discontinued operations of $28 million on a year-to-date basis in 2004 consist mainly of a $26 million net gain on the sale of our 64% interest in Emergis Inc. (Emergis). |
27 Bell Canada Enterprises 2005 Quarterly Report
Managements
Discussion and Analysis
|
||||||
Financial
and Capital Management
|
Financial and Capital Management Capital Structure |
|||||
|
Q3 2005 | Q4 2004 | ||||
|
||||||
Debt due within one year |
1,263 | 1,276 | ||||
Long-term debt |
12,630 | 11,809 | ||||
Less: Cash and cash equivalents |
(475 | ) | (380 | ) | ||
|
||||||
Total net debt |
13,418 | 12,705 | ||||
Non-controlling interest |
2,892 | 2,908 | ||||
Total shareholders equity |
14,610 | 14,024 | ||||
|
||||||
Total capitalization |
30,920 | 29,637 | ||||
|
||||||
Net debt to capitalization |
43.4% | 42.9% | ||||
|
||||||
Outstanding share data (in millions) |
||||||
Common shares |
927.3 | 925.9 | ||||
Stock options |
26.9 | 28.5 | ||||
|
||||||
|
||||||
|
Cash Flows The table
below is a summary of the flow of cash in to and out of BCE. |
||||||||||
YTD | YTD | |||||||||
Q3 2005 | Q3 2004 | 2005 | 2004 | |||||||
|
||||||||||
Cash flows from operating activities |
1,686 | 1,828 | 4,075 | 4,212 | ||||||
Capital expenditures |
(968 | ) | (811 | ) |
(2,619 | ) |
(2,318 | ) | ||
Other investing activities |
| (2 | ) | (26 | ) | 133 | ||||
Cash dividends paid on common shares |
(306 | ) | (277 | ) | (889 | ) | (831 | ) | ||
Cash dividends paid on preferred shares |
(21 | ) | (21 | ) | (64 | ) | (64 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(47 | ) | (44 | ) | (157 | ) | (139 | ) | ||
|
||||||||||
Free cash flow |
344 | 673 | 320 | 993 | ||||||
|
||||||||||
Business acquisitions |
(62 | ) | (646 | ) | (180 | ) | (952 | ) | ||
Business dispositions |
| 4 | | 20 | ||||||
Increase in investments |
(75 | ) | (12 | ) | (216 | ) | (20 | ) | ||
Decrease in investments |
| 707 | 7 | 713 | ||||||
Net issuance of equity instruments |
12 | 8 | 25 | 16 | ||||||
Net issuance (repayment) of debt instruments |
(76 | ) | 85 | 270 | (217 | ) | ||||
Financing activities of subsidiaries with third parties |
(21 | ) | (4 | ) | (59 | ) | (51 | ) | ||
Other financing activities |
(27 | ) | (18 | ) | (82 | ) | (34 | ) | ||
Cash provided by discontinued operations |
| 12 | 10 | 196 | ||||||
|
||||||||||
Net increase in cash and cash equivalents |
95 | 809 | 95 | 664 | ||||||
|
||||||||||
|
28 Bell Canada Enterprises 2005 Quarterly Report
Cash from operating activities Cash from operating activities decreased 7.8%, or $142 million, to $1,686 million in Q3 2005, compared to Q3 2004. This was mainly a result of:
Cash from operating activities decreased 3.3%, or $137 million, to $4,075 million in the first nine months of 2005. Year-to-date cash from operating activities was further impacted by:
which were substantially offset by:
Our free cash flow this quarter was $344 million, down from free cash flow of $673 million in the third quarter of last year. The decrease is due mainly to:
Year-to-date free cash flow of $320 million, down from free cash flow of $993 million, was impacted further by Telesat insurance proceeds of $179 million received in the first nine months of 2004. Capital expendituresCapital expenditures were $968 million in Q3 2005, or 20.0% of revenues. This was 19.4% higher than the capital expenditures of $811 million, or 17.0% of revenues, in Q3 2004. On a year-to-date basis, capital expenditures were $2,619 million in the first nine months of 2005, or 17.7% of revenues. This was 13.0% higher than the capital expenditures of $2,318 million, or 16.3% of revenues, in the same period last year. The increases reflect the strategic investments in the Consumer segment, which include the FTTN expansion, the initial deployment of EVDO in certain of our markets, information technology (IT) efficiency projects to deliver cost savings, growth-related spending to support higher customer demand, as well as a return to more normal spending levels at Aliant after its labour disruption in 2004. Other investing activitiesCash from other investing activities increased by $2 million in Q3 2005, compared to Q3 2004, and decreased by $159 million in the first nine months of 2005, compared to the same period last year. In 2004, cash from other investing activities included insurance proceeds that Telesat received for a malfunction on the Anik F1 satellite, amounting to $136 million in Q2 2004 and $179 million in the first nine months of 2004. Cash dividends paid on common shares We paid a dividend
of $0.33 per common share in Q3 2005, which is $0.03 more than the dividend
we paid in Q3 2004. On a year-to-date basis, we paid $0.99 per common
share in the first nine months of 2005, compared to $0.90 per common share
in the same period in 2004. |
29 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
||
April 15, 2005, we expect to pay quarterly dividends on BCE Inc.s common shares of approximately $306 million, based on the revised dividend policy. This assumes that there are no significant changes in the number of outstanding common shares. The total quarterly dividends equal $0.33 per common share, based on approximately 927 million common shares outstanding at September 30, 2005. Business acquisitions We invested $62 million
in business acquisitions in Q3 2005 and $180 million in the first
nine months of 2005. This consisted mainly of Bell Canadas
acquisition of Nexxlink in the first half of the year for $68 million
and a number of other businesses.
Cash flows used
for investments increased by $63 million to $75 million in Q3
2005, compared to the same period last year, due to an increase in highly
liquid short-term investments. We repaid $76 million
of debt, net of issues, in Q3 2005. The repayments included $150 million
in debentures at Bell Canada, decreased borrowings in notes payable
and bank advances of $65 million, and a $25 million reduction
in Bell Globemedias borrowings under its credit facilities.
The issuances consisted of $200 million in debentures at Bell Canada. |
30 Bell Canada Enterprises 2005 Quarterly Report
Cash relating to discontinued operations Cash provided by discontinued operations was $196 million in the first nine months of 2004. This consisted mainly of net cash proceeds of $315 million from the sale of Emergis and $285 million from the sale of Emergis U.S. health operations and $96 million of cash generated from Emergis operations. This was partly offset by the deconsolidation of Emergis cash on hand of $512 million at December 31, 2003. Credit RatingsThe table below lists our key credit ratings at November 1, 2005. On May 4, 2005, S&P(1) and DBRS(2) confirmed their ratings for BCE Inc. and Bell Canada, but revised their outlooks from stable to negative. On May 16, 2005, Moodys(3) confirmed its ratings for BCE Inc. and Bell Canada, but revised its outlook from stable to negative. Related Party Transaction BCI loss utilization transaction On April 15, 2005,
3787915 Canada Inc., a wholly-owned subsidiary of Bell Canada,
acquired $17 billion in preferred shares from 3787923 Canada Inc.,
a wholly-owned subsidiary of BCI. 3787923 Canada Inc. used the proceeds
to advance $17 billion to BCI through a subordinated interest-free
loan. BCI then advanced $17 billion to 3787915 Canada Inc. by
way of a subordinated interest-bearing demand loan, the funds being used
to repay a daylight loan granted to 3787915 Canada Inc. to make the
initial preferred share investment. The dividend rate on the preferred
shares was equal to 5.1%, which was essentially the same as the interest
rate on the loan.
|
|
BCE INC. | BELL CANADA | ||||||||||||
|
S&P | DBRS | MOODYS | S&P | DBRS | MOODYS | ||||||||
|
||||||||||||||
Commercial paper |
A-1 (mid) | R-1 (low) / stable | P-2 / stable | A-1 (mid) | R-1 (mid) / negative | P-2 / stable | ||||||||
Extendable commercial notes |
A-1 (mid) | R-1 (low) / stable | | A-1 (mid) | R-1 (mid) / negative | | ||||||||
Long-term debt |
A- / negative | A / negative | Baa1 / negative | A / negative | A (high) / negative | A3 / negative | ||||||||
Preferred shares |
P-2 (high) | Pfd-2 / negative | | P-2 (high) | Pfd-2 (high) / negative | | ||||||||
|
||||||||||||||
|
(1) |
Standard & Poors, a division of The McGraw Hill Companies, Inc. |
||
(2) |
Dominion Bond Rating Services Limited |
||
(3) |
Moodys Investors Service Inc. |
31 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
||
Recent
Developments in Legal Proceedings |
Liquidity Our sources of liquidity and cash requirements remain substantially unchanged from those described in the BCE 2004 MD&A. Commitment under the deferral account The deferral account resulted from the CRTCs second price cap decision of May 2002, which requires us to fund initiatives such as service improvements, reduced customer rates and/or customer rebates. We estimate our commitment under the deferral account to be approximately $148 million at September 30, 2005 and anticipate that it will be reduced to approximately $130 million by December 31, 2005, primarily due to the impact of the CDN decision. We expect to clear most of this amount in 2006 by implementing the initiatives that are approved by the CRTC for this purpose. Recent Developments in Legal Proceedings Lawsuits related to Bell Canada International Inc. (BCI) 6.75% and 6.50% Debenture holders lawsuit On September 1, 2005,
BCE and BCI announced that the Ontario Superior Court of Justice
(Court) had approved the agreement reached on August 18, 2005
dismissing a class action lawsuit by former holders of BCIs $250 million
6.75% convertible unsecured subordinated debentures against BCI, BCE and
certain current and former directors of BCI. The Court approval provided
for the dismissal of the action as against all defendants and completely
disposed of the litigation without any payment by any such defendants
in respect of damages. |
|
A risk is the
possibility that an event might happen in the future that could have a
negative effect on the financial condition, results of operations or business
of one or more BCE group companies. Part of managing our business
is to understand what these potential risks could be and to minimize them
where we can.
|
32 Bell Canada Enterprises 2005 Quarterly Report
Risks
That Could Affect Our Business
Please
see Recent Developments in Legal Proceedings, at pages 22 and 23
of the BCE 2005 First Quarter MD&A, at page 30 of the BCE 2005
Second Quarter MD&A and in this MD&A, for a description of recent
developments, since the BCE 2004 AIF, in the principal legal proceedings
involving us. |
Updates to the Description of Risks The following are updates to the description of risks contained in the section entitled Risks That Could Affect Our Business set out on pages 32 to 41 of the BCE 2004 AIF as updated at pages 23 to 26 in the BCE 2005 First Quarter MD&A and at pages 30 to 34 of the BCE 2005 Second Quarter MD&A. For ease of reference, the updates to the description of risks below have been presented under the same headings and in the same order contained in the section entitled Risks That Could Affect Our Business set out in the BCE 2004 AIF. Risks that could affect certain BCE group companies Bell Canada companiesChanges to Wireline Regulation Competitor Digital Network
Service
|
33 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
||
amounts before September 23, 2005. In a letter dated September 1, 2005, the CRTC postponed the due date for the filing of updated estimates until certain outstanding issues related to CDN services currently before the CRTC are resolved. The CRTC also stated that it will provide direction to the incumbent telephone companies regarding the deadline to provide the updated deferral account estimates when it releases its decision regarding the issues being examined in Public Notice 2004-1: Review and disposition of deferral accounts for the second price cap period, which is expected before the end of the year. Application
Seeking Consistent Regulation and Regulatory Framework for VoIP Wireless Number
Portability Application
to Change Bundling Rates Bell Canada
Proposals to Telecom Policy Review Panel |
34 Bell Canada Enterprises 2005 Quarterly Report
proposal included detailed suggestions for significant changes to the
Telecommunications Act and related statutes, and for the realignment
of responsibilities for the CRTC, Industry Canada and the Competition
Bureau. The proposal also recommended that the Minister of Industry issue
a policy direction to the CRTC which would result in significant regulatory
reform. Licences for
Broadcasting Licences and
Changes to Wireless Regulation Access to Bell Canada
Loops for CLECs Customers Served Via Remotes During the third quarter of 2005, Telesat confirmed the insurance renewal on Nimiq 1. Nimiq 1 is now insured until the second quarter of 2006 for approximately its book value. |
35 Bell Canada Enterprises 2005 Quarterly Report
Managements Discussion and Analysis
|
||
As indicated in the BCE 2004 AIF, in August 2001, the manufacturer of the Anik F1 satellite advised Telesat of a gradual decline in power on the satellite. This power decline required Telesat to construct and launch another satellite to maintain continuity of service to its customers. Anik F1R was successfully launched in September 2005 in time to ensure that service to Anik F1’s customers was not interrupted. Anik F1R is insured until the third quarter of 2006 for approximately its book value. |
We have prepared
our consolidated financial statements according to Canadian GAAP. See
Note 1 to the consolidated financial statements for more information
about the accounting principles we used to prepare our financial statements. |
36 Bell Canada Enterprises 2005 Quarterly Report
Consolidated Statements of Operations
|
||||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
THREE MONTHS |
NINE MONTHS |
||||||||
(in $ millions, except share amounts) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Operating revenues |
4,951 | 4,778 | 14,790 | 14,195 | ||||||
|
||||||||||
Operating expenses |
(3,052 | ) | (2,842 | ) | (8,952 | ) | (8,462 | ) | ||
Amortization expense |
(803 | ) | (769 | ) | (2,368 | ) | (2,305 | ) | ||
Net benefit plans cost (Note 4) |
(108 | ) | (61 | ) | (315 | ) | (189 | ) | ||
Restructuring and other items (Note 5) |
(31 | ) | (1,081 | ) | (32 | ) | (1,098 | ) | ||
|
||||||||||
Total operating expenses |
(3,994 | ) | (4,753 | ) | (11,667 | ) | (12,054 | ) | ||
|
||||||||||
Operating income |
957 | 25 | 3,123 | 2,141 | ||||||
Other income (expense) |
(1 | ) | 333 | 30 | 393 | |||||
Interest expense |
(247 | ) | (253 | ) | (741 | ) | (758 | ) | ||
|
||||||||||
Pre-tax earnings from continuing operations |
709 | 105 | 2,412 | 1,776 | ||||||
Income taxes (Note 6) |
(193 | ) | 44 | (687 | ) | (511 | ) | |||
Non-controlling interest |
(57 | ) | (47 | ) | (193 | ) | (134 | ) | ||
|
||||||||||
Earnings from continuing operations |
459 | 102 | 1,532 | 1,131 | ||||||
Discontinued operations |
| (2 | ) | (1 | ) | 28 | ||||
|
||||||||||
Net earnings |
459 | 100 | 1,531 | 1,159 | ||||||
Dividends on preferred shares |
(18 | ) | (18 | ) | (53 | ) | (53 | ) | ||
|
||||||||||
Net earnings applicable to common shares |
441 | 82 | 1,478 | 1,106 | ||||||
|
||||||||||
Net earnings per common share basic |
||||||||||
Continuing operations |
0.48 | 0.09 | 1.60 | 1.17 | ||||||
Discontinued operations |
| | | 0.03 | ||||||
Net earnings |
0.48 | 0.09 | 1.60 | 1.20 | ||||||
Net earnings per common share diluted |
||||||||||
Continuing operations |
0.48 | 0.09 | 1.60 | 1.16 | ||||||
Discontinued operations |
| | | 0.03 | ||||||
Net earnings |
0.48 | 0.09 | 1.60 | 1.19 | ||||||
Dividends per common share |
0.33 | 0.30 | 0.99 | 0.90 | ||||||
Average number of common shares outstanding basic (millions) |
927.0 | 924.6 | 926.6 | 924.4 | ||||||
|
||||||||||
|
Consolidated Statements of Deficit
|
||||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
THREE MONTHS |
NINE MONTHS |
||||||||
(in $ millions) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Balance at beginning of period, as previously reported |
(5,005 | ) | (5,368 | ) | (5,424 | ) | (5,837 | ) | ||
Accounting policy change (Note 1) |
| (8 | ) | (8 | ) | (8 | ) | |||
|
||||||||||
Balance at beginning of period, as restated |
(5,005 | ) | (5,376 | ) | (5,432 | ) | (5,845 | ) | ||
Net earnings |
459 | 100 | 1,531 | 1,159 | ||||||
Dividends declared on preferred shares |
(18 | ) | (18 | ) | (53 | ) | (53 | ) | ||
Dividends declared on common shares |
(306 | ) | (277 | ) | (918 | ) | (832 | ) | ||
Other |
(1 | ) | | 1 | | |||||
|
||||||||||
Balance at end of period |
(4,871 | ) | (5,571 | ) | (4,871 | ) | (5,571 | ) | ||
|
||||||||||
|
37 Bell Canada Enterprises 2005 Quarterly Report
Consolidated Balance Sheets
|
||||||
SEPTEMBER 30, | DECEMBER 31, | |||||
(in $ millions) (unaudited) |
2005 | 2004 | ||||
|
||||||
|
||||||
Assets |
||||||
Current assets |
||||||
Cash and cash equivalents |
475 | 380 | ||||
Accounts receivable |
1,951 | 2,096 | ||||
Other current assets |
1,501 | 1,212 | ||||
|
||||||
Total current assets |
3,927 | 3,688 | ||||
Capital assets |
22,217 | 21,398 | ||||
Other long-term assets |
2,682 | 2,656 | ||||
Indefinite-life intangible assets |
2,973 | 2,916 | ||||
Goodwill |
8,577 | 8,413 | ||||
Non-current assets of discontinued operations |
104 | 50 | ||||
|
||||||
Total assets |
40,480 | 39,121 | ||||
|
||||||
|
||||||
Liabilities |
||||||
Current liabilities |
||||||
Accounts payable and accrued liabilities |
3,557 | 3,692 | ||||
Interest payable |
266 | 183 | ||||
Dividends payable |
325 | 297 | ||||
Debt due within one year |
1,263 | 1,276 | ||||
|
||||||
Total current liabilities |
5,411 | 5,448 | ||||
Long-term debt |
12,630 | 11,809 | ||||
Other long-term liabilities |
4,850 | 4,932 | ||||
Non-current liabilities of discontinued operations |
87 | | ||||
|
||||||
Total liabilities |
22,978 | 22,189 | ||||
|
||||||
Non-controlling interest |
2,892 | 2,908 | ||||
|
||||||
|
||||||
Shareholders equity |
||||||
Preferred shares |
1,670 | 1,670 | ||||
|
||||||
Common shareholders equity |
||||||
Common shares |
16,806 | 16,781 | ||||
Contributed surplus |
1,076 | 1,061 | ||||
Deficit |
(4,871 | ) | (5,432 | ) | ||
Currency translation adjustment |
(71 | ) | (56 | ) | ||
|
||||||
Total common shareholders equity |
12,940 | 12,354 | ||||
|
||||||
Total shareholders equity |
14,610 | 14,024 | ||||
|
||||||
Total liabilities and shareholders equity |
40,480 | 39,121 | ||||
|
||||||
|
38 Bell Canada Enterprises 2005 Quarterly Report
Consolidated Statements of Cash Flows
|
||||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
THREE MONTHS |
NINE MONTHS |
||||||||
(in $ millions) (unaudited) |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Cash flows from operating activities |
||||||||||
Earnings from continuing operations |
459 | 102 | 1,532 | 1,131 | ||||||
Adjustments to reconcile earnings from continuing operations to cash flows from operating activities: |
||||||||||
Amortization expense |
803 | 769 | 2,368 | 2,305 | ||||||
Net benefit plans cost |
108 | 61 | 315 | 189 | ||||||
Restructuring and other items |
31 | 1,081 | 32 | 1,098 | ||||||
Net gains on investments |
| (325 | ) | (34 | ) | (331 | ) | |||
Future income taxes |
111 | (183 | ) | 285 | (96 | ) | ||||
Non-controlling interest |
57 | 47 | 193 | 134 | ||||||
Contributions to employee pension plans |
(33 | ) | (32 | ) | (161 | ) | (88 | ) | ||
Other employee future benefit plan payments |
(24 | ) | (13 | ) | (69 | ) | (59 | ) | ||
Payments of restructuring and other items |
(24 | ) | (12 | ) | (153 | ) | (39 | ) | ||
Operating assets and liabilities |
198 | 333 | (233 | ) | (32 | ) | ||||
|
||||||||||
Cash flows from operating activities |
1,686 | 1,828 | 4,075 | 4,212 | ||||||
|
||||||||||
Cash flows from investing activities |
||||||||||
Capital expenditures |
(968 | ) | (811 | ) | (2,619 | ) | (2,318 | ) | ||
Business acquisitions |
(62 | ) | (646 | ) | (180 | ) | (952 | ) | ||
Business dispositions |
| 4 | | 20 | ||||||
Increase in investments |
(75 | ) | (12 | ) | (216 | ) | (20 | ) | ||
Decrease in investments |
| 707 | 7 | 713 | ||||||
Other investing activities |
| (2 | ) | (26 | ) | 133 | ||||
|
||||||||||
Cash flows used in investing activities |
(1,105 | ) | (760 | ) | (3,034 | ) | (2,424 | ) | ||
|
||||||||||
Cash flows from financing activities |
||||||||||
Increase (decrease) in notes payable and bank advances |
(65 | ) | 173 | 121 | 123 | |||||
Issue of long-term debt |
200 | 10 | 1,191 | 1,410 | ||||||
Repayment of long-term debt |
(211 | ) | (98 | ) | (1,042 | ) | (1,750 | ) | ||
Issue of common shares |
12 | 8 | 25 | 16 | ||||||
Issue of equity securities by subsidiaries to non-controlling interest |
1 | | 1 | 7 | ||||||
Redemption of equity securities by subsidiaries from non-controlling interest |
(22 | ) | (4 | ) | (60 | ) | (58 | ) | ||
Cash dividends paid on common shares |
(306 | ) | (277 | ) | (889 | ) | (831 | ) | ||
Cash dividends paid on preferred shares |
(21 | ) | (21 | ) | (64 | ) | (64 | ) | ||
Cash dividends paid by subsidiaries to non-controlling interest |
(47 | ) | (44 | ) | (157 | ) | (139 | ) | ||
Other financing activities |
(27 | ) | (18 | ) | (82 | ) | (34 | ) | ||
|
||||||||||
Cash flows used in financing activities |
(486 | ) | (271 | ) | (956 | ) | (1,320 | ) | ||
|
||||||||||
Cash provided by continuing operations |
95 | 797 | 85 | 468 | ||||||
Cash provided by discontinued operations |
| 12 | 10 | 196 | ||||||
|
||||||||||
Net increase in cash and cash equivalents |
95 | 809 | 95 | 664 | ||||||
Cash and cash equivalents at beginning of period |
380 | 577 | 380 | 722 | ||||||
|
||||||||||
Cash and cash equivalents at end of period |
475 | 1,386 | 475 | 1,386 | ||||||
|
||||||||||
|
39 Bell Canada Enterprises 2005 Quarterly Report
Notes to Consolidated Financial Statements
|
||
The interim consolidated financial statements should be read in conjunction
with BCE Inc.s annual consolidated financial statements for
the year ended December 31, 2004, on pages 82 to 121 of BCE Inc.s
2004 annual report. |
Note 1: Significant accounting policies We have prepared the consolidated financial statements in accordance with Canadian generally accepted accounting principles (GAAP) using the same basis of presentation and accounting policies as outlined in Note 1 to the annual consolidated financial statements for the year ended December 31, 2004, except as noted below. Comparative figuresWe have reclassified some of the figures for the comparative periods in the consolidated financial statements to make them consistent with the presentation for the current period. We have restated financial information for previous periods to reflect:
Change in accounting policy Effective January 1, 2005, we defer and amortize revenues and expenses from Aliants directory business over the period of circulation, which is usually 12 months. Prior to January 1, 2005, we recognized revenues and expenses from Aliants directory business on the publication date. The impact on our consolidated statements of operations for the three months and nine months ended September 30, 2005 and the comparative periods was negligible. We did not restate the statements of operations for prior periods. At December 31, 2004, the restatement of the balance sheet resulted in:
|
40 Bell Canada Enterprises 2005 Quarterly Report
Note 2: Segmented information The table
below is a summary of financial information by segment. |
|||||||||||
|
|
THREE MONTHS |
NINE MONTHS |
||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
2005 | 2004 | 2005 | 2004 | |||||||
|
|||||||||||
Operating revenues |
|
||||||||||
Consumer |
External |
1,902 | 1,893 | 5,620 | 5,552 | ||||||
|
Inter-segment |
27 | 15 | 55 | 39 | ||||||
|
|||||||||||
|
|
1,929 | 1,908 | 5,675 | 5,591 | ||||||
|
|||||||||||
Business |
External |
1,471 | 1,400 | 4,361 | 4,139 | ||||||
|
Inter-segment |
45 | 40 | 132 | 177 | ||||||
|
|||||||||||
|
|
1,516 | 1,440 | 4,493 | 4,316 | ||||||
|
|||||||||||
Aliant |
External |
482 | 467 | 1,454 | 1,421 | ||||||
|
Inter-segment |
38 | 30 | 108 | 106 | ||||||
|
|||||||||||
|
|
520 | 497 | 1,562 | 1,527 | ||||||
|
|||||||||||
Other Bell Canada |
External |
459 | 435 | 1,317 | 1,294 | ||||||
|
Inter-segment |
41 | 51 | 147 | 134 | ||||||
|
|||||||||||
|
|
500 | 486 | 1,464 | 1,428 | ||||||
|
|||||||||||
Inter-segment eliminations Bell Canada |
(139 | ) | (125 | ) | (401 | ) | (378 | ) | |||
|
|||||||||||
Bell Canada |
|
4,326 | 4,206 | 12,793 | 12,484 | ||||||
|
|||||||||||
Other BCE |
External |
638 | 583 | 2,039 | 1,789 | ||||||
|
Inter-segment |
94 | 96 | 276 | 263 | ||||||
|
|||||||||||
|
|
732 | 679 | 2,315 | 2,052 | ||||||
|
|||||||||||
Inter-segment eliminations Other |
(107 | ) | (107 | ) | (318 | ) | (341 | ) | |||
|
|||||||||||
Total operating revenues |
|
4,951 | 4,778 | 14,790 | 14,195 | ||||||
|
|||||||||||
Operating income (loss) |
|||||||||||
Consumer |
|
479 | 569 | 1,557 | 1,655 | ||||||
Business |
|
213 | 245 | 674 | 713 | ||||||
Aliant |
|
105 | 71 | 291 | 245 | ||||||
Other Bell Canada |
|
111 | (898 | ) | 349 | (649 | ) | ||||
|
|||||||||||
Bell Canada |
|
908 | (13 | ) | 2,871 | 1,964 | |||||
Other BCE |
|
49 | 38 | 252 | 177 | ||||||
|
|||||||||||
Total operating income |
|
957 | 25 | 3,123 | 2,141 | ||||||
Other income (expense) |
|
(1 | ) | 333 | 30 | 393 | |||||
Interest expense |
|
(247 | ) | (253 | ) | (741 | ) | (758 | ) | ||
Income taxes |
|
(193 | ) | 44 | (687 | ) | (511 | ) | |||
Non-controlling interest |
|
(57 | ) | (47 | ) | (193 | ) | (134 | ) | ||
|
|||||||||||
Earnings from continuing operations |
459 | 102 | 1,532 | 1,131 | |||||||
|
|||||||||||
|
41 Bell Canada Enterprises 2005 Quarterly Report
Notes to Consolidated Financial Statements
|
||||
The consolidated financial statements include the results of acquired businesses
from the date they were acquired. |
Note 3: Business acquisitions During the first
nine months of 2005, we made a number of business acquisitions which included
100% of the outstanding common shares of Nexxlink Technologies Inc.,
provider of integrated IT solutions, and several other providers of value-added
and security services.
|
|||
|
||||
Consideration received: |
||||
Non-cash working capital |
(14 | ) | ||
Capital assets |
104 | |||
Other long-term assets |
3 | |||
Indefinite-life intangible assets |
20 | |||
Goodwill |
156 | |||
Long-term debt |
(61 | ) | ||
Other long-term liabilities |
(16 | ) | ||
|
||||
|
192 | |||
Cash and cash equivalents at acquisition |
19 | |||
|
||||
Net assets acquired |
211 | |||
|
||||
Consideration given(1): |
||||
Cash |
194 | |||
Acquisition costs |
5 | |||
Non-cash |
12 | |||
|
||||
|
211 | |||
|
||||
|
(1) | Contingent payments of $11 million that may be paid out should certain criteria specified in the agreements be met are not included in the consideration given. If the contingencies are realized, the amounts will be allocated to goodwill. |
42 Bell Canada Enterprises 2005 Quarterly Report
Note 4: Employee benefit plans The table below
shows the components of the net benefit plans cost. |
||||||||||||||||||
|
THREE MONTHS | NINE MONTHS | ||||||||||||||||
|
PENSION BENEFITS | OTHER BENEFITS | PENSION BENEFITS | OTHER BENEFITS | ||||||||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||
|
||||||||||||||||||
Current service cost |
64 | 58 | 9 | 7 | 185 | 182 | 26 | 23 | ||||||||||
Interest cost on accrued benefit obligation |
219 | 201 | 27 | 26 | 657 | 604 | 82 | 78 | ||||||||||
Expected return on plan assets |
(235 | ) | (237 | ) | (3 | ) | (2 | ) | (709 | ) | (714 | ) | (8 | ) | (7 | ) | ||
Amortization of past service costs |
2 | 2 | | | 7 | 7 | 1 | | ||||||||||
Amortization of net actuarial losses |
26 | 8 | | 1 | 77 | 24 | | 1 | ||||||||||
Amortization of transitional |
||||||||||||||||||
(asset) obligation |
(2 | ) | (11 | ) | 6 | 7 | (5 | ) | (33 | ) | 19 | 22 | ||||||
Increase (decrease) in valuation allowance |
(6 | ) | 1 | | | (18 | ) | 2 | | | ||||||||
Other |
1 | | | | 1 | | | | ||||||||||
|
||||||||||||||||||
Net benefit plans cost |
69 | 22 | 39 | 39 | 195 | 72 | 120 | 117 | ||||||||||
|
||||||||||||||||||
Comprised of: |
||||||||||||||||||
Defined benefit plans cost |
62 | 16 | 39 | 39 | 176 | 58 | 120 | 117 | ||||||||||
Defined contribution plans cost |
7 | 6 | | | 19 | 14 | | | ||||||||||
|
||||||||||||||||||
|
The table below shows the amounts we contributed to the defined benefit
and defined contribution plans and the payments made to beneficiaries under
other employee future benefit plans. |
||||||||||||||||||
|
THREE MONTHS | NINE MONTHS | ||||||||||||||||
|
PENSION BENEFITS | OTHER BENEFITS | PENSION BENEFITS | OTHER BENEFITS | ||||||||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||
|
||||||||||||||||||
Aliant |
20 | 16 | 1 | 1 | 121 | 54 | 4 | 3 | ||||||||||
Bell Canada |
6 | 5 | 23 | 12 | 20 | 14 | 65 | 56 | ||||||||||
Bell Globemedia |
5 | 8 | | | 14 | 13 | | | ||||||||||
BCE Inc. |
2 | 3 | | | 6 | 7 | | | ||||||||||
|
||||||||||||||||||
Total |
33 | 32 | 24 | 13 | 161 | 88 | 69 | 59 | ||||||||||
|
||||||||||||||||||
Comprised of: |
||||||||||||||||||
Contributions to defined benefit plans |
31 | 26 | 24 | 13 | 152 | 74 | 69 | 59 | ||||||||||
Contributions to defined contribution plans |
2 | 6 | | | 9 | 14 | | | ||||||||||
|
||||||||||||||||||
|
43 Bell Canada Enterprises 2005 Quarterly Report
Notes to Consolidated Financial Statements
|
||||||||||
Note 5: Restructuring and other items
|
||||||||||
|
THREE MONTHS |
NINE MONTHS |
||||||||
|
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Employee departure programs |
(31 | ) | (985 | ) | (30 | ) | (985 | ) | ||
Provision for contract loss |
| | | (110 | ) | |||||
Settlement with Manitoba Telecom Services Inc. |
| | | 75 | ||||||
Other charges |
| (96 | ) | (2 | ) | (78 | ) | |||
|
||||||||||
Restructuring and other items |
(31 | ) | (1,081 | ) | (32 | ) | (1,098 | ) | ||
|
||||||||||
|
Employee departure programs The table
below provides an update on the liability relating to the employee departure
programs which were implemented in 2004. |
||||||||
|
BELL CANADA | ALIANT |
CONSO- LIDATED |
|||||
|
||||||||
Balance in accounts payable and accrued liabilities at December 31, 2004 |
120 | 67 | 187 | |||||
Less: |
||||||||
Cash payments |
(53 | ) | (53 | ) | (106 | ) | ||
Reversal of excess provision |
(25 | ) | | (25 | ) | |||
|
||||||||
Balance in accounts payable and accrued liabilities at September 30, 2005 |
42 | 14 | 56 | |||||
|
||||||||
|
||||||||
These charges were partly offset by a $25 million reversal of restructuring provisions in the first quarter of 2005 that were no longer necessary since the actual payments made to employees were lower than estimated. |
44 Bell Canada Enterprises 2005 Quarterly Report
Note 6: Income taxes Bell Canada International Inc. (BCI) loss utilization transaction On April 15, 2005,
3787915 Canada Inc., a wholly-owned subsidiary of Bell Canada,
acquired $17 billion in preferred shares from 3787923 Canada Inc.,
a wholly-owned subsidiary of BCI. 3787923 Canada Inc. used the proceeds
to advance $17 billion to BCI through a subordinated interest-free
loan. BCI then advanced $17 billion to 3787915 Canada Inc. by
way of a subordinated interest-bearing demand loan, the funds being used
to repay a daylight loan granted to 3787915 Canada Inc. to make the
initial preferred share investment. The dividend rate on the preferred
shares was equal to 5.1%, which was essentially the same as the interest
rate on the loan.
|
45 Bell Canada Enterprises 2005 Quarterly Report
Notes to Consolidated Financial Statements
|
||
Note 7: Stock-based compensation plans Restricted share units (RSUs) The table below is a summary of the status of RSUs. |
NUMBER OF | ||||
RSUs | ||||
|
||||
Outstanding, January 1, 2005 |
1,996,522 | |||
Granted |
490,927 | |||
Dividends credited |
73,927 | |||
Expired/forfeited |
(79,472 | ) | ||
|
||||
Outstanding, September 30, 2005 |
2,481,904 | |||
|
||||
|
For the three months and nine months ended September 30, 2005, we recorded compensation expense for RSUs of $19 million and $31 million, respectively. For the three months and nine months ended September 30, 2004, we recorded compensation expense for RSUs of $7 million and $17 million, respectively. BCE Inc. stock options The table below
is a summary of the status of BCE Inc.s stock option programs. |
||||||
WEIGHTED | ||||||
AVERAGE | ||||||
NUMBER | EXERCISE | |||||
OF SHARES | PRICE | |||||
|
||||||
Outstanding, January 1, 2005 |
28,481,679 | $32 | ||||
Granted |
773,824 | $29 | ||||
Exercised |
(1,348,062 | ) | $18 | |||
Expired/forfeited |
(990,769 | ) | $34 | |||
|
||||||
Outstanding, September 30, 2005 |
26,916,672 | $33 | ||||
|
||||||
Exercisable, September 30, 2005 |
16,561,534 | $34 | ||||
|
||||||
|
Assumptions used in stock option pricing model The table below shows the assumptions
used to determine the stock-based compensation expense using the Black-Scholes
option pricing model. |
||||||||||
|
THREE MONTHS |
NINE MONTHS |
||||||||
FOR THE PERIOD ENDED SEPTEMBER 30 |
2005 | 2004 | 2005 | 2004 | ||||||
|
||||||||||
Compensation expense ($ millions) |
6 | 9 | 17 | 23 | ||||||
Number of stock options granted |
60,600 | 139,700 | 773,824 | 5,589,476 | ||||||
Weighted average fair value per option granted ($) |
2 | 3 | 3 | 3 | ||||||
Weighted average assumptions |
||||||||||
Dividend yield |
4.3% | 4.3% | 4.5% | 4.0% | ||||||
Expected volatility |
16% | 26% | 22% | 27% | ||||||
Risk-free interest rate |
3.4% | 3.7% | 3.4% | 3.1% | ||||||
Expected life (years) |
3.7 | 3.5 | 3.5 | 3.5 | ||||||
|
||||||||||
|
46 Bell Canada Enterprises 2005 Quarterly Report
Note 8: Commitments and contingencies Teleglobe lending syndicate lawsuit As described in Note 24 to BCEs audited Consolidated Financial Statements for the year ended December 31, 2004, a lawsuit was filed in the Ontario Superior Court of Justice (Court) on July 12, 2002 against BCE Inc. by certain of the members of the Teleglobe and Teleglobe Holdings (U.S.) Corporation lending syndicate. BNP Paribas (Canada), which had advanced approximately US$50 million to Teleglobe, filed a notice of discontinuance with the Court on May 3, 2005 and is therefore no longer a plaintiff in this action. Following such discontinuance, the damages sought by the remaining plaintiffs amount to approximately US$1.04 billion (down from approximately US$1.09 billion), plus interest and costs, representing approximately 83% (down from approximately 87%) of the US$1.25 billion that the members of the lending syndicate advanced to Teleglobe and Teleglobe Holdings (U.S.) Corporation. |
47 Bell Canada Enterprises 2005 Quarterly Report
|
|
BCE Inc. 1000, rue de La
Gauchetière Ouest e-mail: bcecomms@bce.ca tel: 1 888 932-6666 fax: (514) 870-4385 This document
has been filed by BCE Inc. with Investor Relations For further information
concerning the Dividend Computershare Trust PRINTED IN CANADA |
BCE Investor Relations | ||
Thane Fotopoulos | 514-870-4619 | thane.fotopoulos@bell.ca |
Victoria Neal | 514-870-8366 | victoria.neal@bell.ca |
Vincent Surette | 514-870-4613 | vincent.surette@bell.ca |
BCE
Consolidated(1)
Consolidated
Operational Data
($
millions, except per share amounts) |
Q3 2005 |
|
Q3 2004 |
|
$
change |
|
%
change |
|
|
YTD September 2005 |
|
YTD September 2004 |
|
|
$
change |
|
%change |
|
||||||
Operating revenues | 4,951 |
|
4,778 |
|
173 |
|
3.6% |
|
14,790 |
|
14,195 |
|
|
595 |
|
4.2% |
||||||||
Operating expenses | (3,052 |
) |
(2,842 |
) |
(210 |
) |
(7.4% |
) |
|
(8,952 |
) |
(8,462 |
) |
|
(490 |
) |
(5.8% |
)
|
||||||
EBITDA(2) | 1,899 |
|
1,936 |
|
(37 |
) |
(1.9% |
) |
|
5,838 |
|
5,733 |
|
|
105 |
|
1.8% |
|
||||||
EBITDA margin(3) | 38.4% |
|
40.5% |
(2.1)
pts |
39.5% |
40.4% |
(0.9)
pts |
|
||||||||||||||||
Amortization expense | (803 |
) |
(769 |
) |
(34 |
) |
(4.4% |
) |
|
(2,368 |
) |
(2,305 |
) |
|
(63 |
) |
(2.7% |
)
|
||||||
Net benefit plans cost | (108 |
) |
|
(61 |
)
|
|
(47 |
) |
(77.0% |
)
|
|
(315 |
) |
(189 |
) |
|
(126 |
) |
(66.7% |
) |
||||
Restructuring and other items |
(31 |
) |
|
(1,081 |
) |
|
1,050 |
97.1% |
|
|
(32 |
) |
(1,098 |
) |
|
1,066 |
97.1% |
|
||||||
Operating income | 957 |
|
25 |
|
932 |
|
n.m. |
|
3,123 |
|
2,141 |
|
|
982 |
|
45.9%
|
|
|||||||
Other income |
(1 |
) |
|
333 |
|
(334 |
) |
n.m. |
|
|
30 |
|
393 |
|
|
(363 |
) |
(92.4% |
) |
|||||
Interest expense | (247 |
) |
|
(253 |
) |
|
6 |
|
2.4%
|
|
|
(741 |
) |
(758 |
) |
|
17 |
|
2.2% |
|
||||
Pre-tax earnings from continuing operations | 709 |
|
105 |
|
604 |
|
n.m. |
|
|
2,412 |
|
1,776 |
|
|
636 |
|
35.8% |
|
||||||
Income taxes |
(193 |
)
|
|
44 |
|
(237 |
)
|
n.m. |
|
(687 |
)
|
(511 |
)
|
|
(176 |
)
|
(34.4% |
) |
||||||
Non-controlling interest | (57 |
) |
|
(47 |
)
|
|
(10 |
) |
(21.3% |
) |
|
(193 |
) |
(134 |
) |
|
(59 |
) |
(44.0% |
) |
||||
Earnings from continuing operations | 459 |
|
102 |
|
357 |
|
n.m. |
|
|
1,532 |
|
1,131 |
|
|
401 |
|
35.5%
|
|
||||||
Discontinued operations | - |
|
|
(2 |
) |
|
2 |
|
100% |
|
(1 |
) |
28 |
|
|
(29 |
) |
n.m. |
|
|||||
Net earnings | 459 |
|
100 |
|
359 |
|
n.m. |
|
|
1,531 |
|
1,159 |
|
|
372 |
|
32.1%
|
|
||||||
Dividends on preferred shares | (18 |
) |
|
(18 |
) |
|
- |
|
0.0% |
|
|
(53 |
) |
(53 |
) |
|
-
|
0.0% |
||||||
Net earnings applicable to common shares | 441 |
|
82 |
|
359 |
|
n.m. |
|
|
1,478 |
|
1,106 |
|
|
372 |
|
33.6% |
|
||||||
|
|
|
|
|||||||||||||||||||||
Net earnings per common share - basic | |
|||||||||||||||||||||||
Continuing operations | $
|
0.48 |
$
|
0.09 |
$ |
0.39 |
n.m. |
$ |
1.60 |
$ |
1.17 |
$
|
0.43 |
36.8%
|
||||||||||
Discontinued operations | $
|
- |
$ |
- |
$
|
- |
-.
|
$ |
- |
$ |
0.03 |
$ |
(0.03 |
) |
n.m. |
|||||||||
Net earnings | $ |
0.48 |
$
|
0.09 |
$ |
0.39 |
n.m. |
$ |
1.60 |
$ |
1.20 |
$ |
0.40 |
33.3%
|
||||||||||
Net earnings per common share - diluted | |
|||||||||||||||||||||||
Continuing operations |
$ |
0.48 |
$
|
0.09 |
$ |
0.39 |
n.m. |
$ |
1.60 |
$ |
1.16 |
$ |
0.44 |
37.9% |
||||||||||
Discontinued operations | $ |
- |
$ |
- |
$
|
- |
- |
$ |
- |
$ |
0.03 |
$
|
(0.03 |
) |
n.m. |
|||||||||
Net earnings | $ |
0.48 |
$ |
0.09 |
$ |
0.39 |
n.m. |
$ |
1.60 |
$
|
1.19 |
$ |
0.41 |
34.5%
|
||||||||||
Dividends per common share | $ |
0.33 |
$ |
0.30
|
$ |
0.03 |
10.0% |
$ |
0.99 |
$ |
0.90 |
$ |
0.09 |
10.0%
|
||||||||||
Average number of common shares outstanding - basic (millions) | 927.0 |
924.6 |
926.6 |
924.4 |
||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
The following items are included in net earnings: | ||||||||||||||||||||||||
Net gains (losses) on investments | ||||||||||||||||||||||||
Continuing operations | - |
325 |
29 |
325 |
||||||||||||||||||||
Discontinued operations | - |
(2 |
) |
(1 |
) |
36 |
||||||||||||||||||
Restructuring and other items | (21 |
) |
(725 |
) |
(22 |
) |
(710 |
) |
||||||||||||||||
Total | (21 |
) |
(402 |
) |
6 |
(349 |
) |
|||||||||||||||||
Impact on net earnings per share | $ |
(0.02 |
) |
$
|
(0.43 |
) |
$
|
0.01 |
$ |
(0.37 |
) |
|||||||||||||
|
|
|||||||||||||||||||||||
EPS before net gains (losses) on investments and restructuring and other items(2) | $ |
0.50 |
|
$
|
0.52 |
|
$ |
(0.02 |
) |
(3.8% |
) |
$
|
1.59 |
$ |
1.57 |
|
$ |
0.02 |
|
1.3% |
|
|||
|
|
n.m. : not meaningful
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 2
BCE Consolidated(1)
Consolidated Operational
Data Historical Trend
YTD |
Total |
||||||||||||||||||||||||||
($ millions, except per share amounts) | 2005 |
Q3
05 |
Q2
05 |
Q1
05 |
2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Operating revenues | 14,790 |
4,951 |
4,980 |
4,859 |
19,181 |
4,986 |
4,778 |
4,779 |
4,638 |
||||||||||||||||||
Operating expenses | (8,952 |
) | (3,052 |
) | (2,979 |
) | (2,921 |
) | (11,617 |
) | (3,155 |
) | (2,842 |
) | (2,826 |
) | (2,794 |
) | |||||||||
|
|
|
|
||||||||||||||||||||||||
EBITDA(2) | 5,838 |
1,899 |
2,001 |
1,938 |
7,564 |
1,831 |
1,936 |
1,953 |
1,844 |
||||||||||||||||||
EBITDA margin(3) | 39.5% |
38.4% |
40.2% |
39.9% |
39.4% |
36.7% |
40.5% |
40.9% |
39.8% |
||||||||||||||||||
Amortization expense | (2,368 |
) | (803 |
) | (792 |
) | (773 |
) | (3,108 |
) | (803 |
) | (769 |
) | (769 |
) | (767 |
) | |||||||||
Net benefit plans cost | (315 |
) | (108 |
) | (104 |
) | (103 |
) | (256 |
) | (67 |
) | (61 |
) | (65 |
) | (63 |
) | |||||||||
Restructuring and other items | (32 |
) | (31 |
) | (5 |
) | 4 |
(1,224 |
) | (126 |
) | (1,081 |
) | (14 |
) | (3 |
) | ||||||||||
|
|
|
|
||||||||||||||||||||||||
Operating income | 3,123 |
957 |
1,100 |
1,066 |
2,976 |
835 |
25 |
1,105 |
1,011 |
||||||||||||||||||
Other income | 30 |
(1 |
) | 24 |
7 |
411 |
18 |
333 |
24 |
36 |
|||||||||||||||||
Interest expense | (741 |
) | (247 |
) | (247 |
) | (247 |
) | (1,005 |
) | (247 |
) | (253 |
) | (253 |
) | (252 |
) | |||||||||
|
|
|
|
||||||||||||||||||||||||
Pre-tax earnings from continuing operations | 2,412 |
709 |
877 |
816 |
2,382 |
606 |
105 |
876 |
795 |
||||||||||||||||||
Income taxes |
(687 |
) |
(193 |
) |
(2293 |
) | (271 |
) |
(710 |
) | (199 |
) |
44 |
(293 |
) | (262 |
) | ||||||||||
Non-controlling interest | (193 |
) |
(57 |
) | (73 |
) | (63 |
) | (174 |
) | (40 |
) | (47 |
) |
(39 |
) | (48 |
) | |||||||||
Earnings from continuing operations | 1,532 |
459 |
581 |
492 |
1,498 |
367 |
102 |
544 |
485 |
||||||||||||||||||
Discontinued operations | (1 |
) | - |
-
|
(1 |
) | 26 |
(2 |
) | (2 |
) | 27 |
3 |
||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Net earnings before extraordinary gain | 1,531 |
459 |
581 |
491 |
1,524 |
365 |
100 |
571
|
488 |
||||||||||||||||||
Extraordinary gain | - |
- |
- |
- |
69 |
69 |
- |
- |
- |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Net earnings | 1,531 |
459 |
581 |
491 |
1,593 |
434 |
100 |
571
|
488 |
||||||||||||||||||
Dividends on preferred shares | (53 |
) | (18
|
) | (18 |
) | (17 |
) |
(70 |
) | (17 |
) | (18 |
) | (17 |
) |
(18 |
) | |||||||||
|
|
|
|
||||||||||||||||||||||||
Net earnings applicable to common shares |
1,478 |
441 |
563 |
474 |
1,523 |
417 |
82 |
554 |
470 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Net earnings per common share - basic | |||||||||||||||||||||||||||
Continuing operations |
$ |
1.60 |
$
|
0.48 |
$ |
0.61 |
$ |
0.51 |
$
|
1.55 |
$ |
0.38 |
$
|
0.09 |
$ |
0.57 |
$ |
0.51 |
|||||||||
Discontinued operations | $ |
- |
$ |
-
|
$ |
-
|
$
|
-
|
$ |
0.03 |
$
|
- |
$ |
-
|
$
|
0.03 |
$ |
- |
|||||||||
Extraordinary gain | $ |
-
|
$ |
-
|
$ |
-
|
$ |
- |
$ |
0.07 |
$
|
0.07 |
$ |
-
|
$ |
- |
$
|
- |
|||||||||
Net earnings | $ |
1.60 |
$ |
0.48 |
$ |
0.61 |
$ |
0.51 |
$ |
1.65 |
$
|
0.45 |
$ |
0.09 |
$ |
0.60 |
$
|
0.51 |
|||||||||
Net earnings per common share - diluted | |||||||||||||||||||||||||||
Continuing operations | $
|
1.60 |
$
|
0.48 |
$
|
0.61 |
$ |
0.51 |
$ |
1.55
|
$
|
0.38 |
$
|
0.09 |
$ |
0.57 |
$
|
0.51 |
|||||||||
Discontinued operations |
$ |
- |
$
|
-
|
$
|
- |
$ |
- |
$ |
0.03 |
$ |
-
|
$ |
- |
$ |
0.03 |
$ |
- |
|||||||||
Extraordinary gain | $ |
-
|
$ |
-
|
$ |
-
|
$ |
- |
$ |
0.07 |
$
|
0.07 |
$ |
-
|
$ |
- |
$
|
- |
|||||||||
Net earnings |
$ |
1.60 |
$ |
0.48 |
$
|
0.61 |
$
|
0.51 |
$ |
1.65 |
$ |
0.45 |
$ |
0.09 |
$ |
0.60 |
$
|
0.51 |
|||||||||
Dividends per common share |
$ |
0.99 |
$ |
0.33 |
$
|
0.33 |
$ |
0.33 |
$
|
1.20
|
$
|
0.30
|
$ |
0.30 |
$ |
0.30
|
$ |
0.30 |
|||||||||
Average number of common shares outstanding - basic (millions) |
926.6 |
927.0 |
926.6 |
926.2 |
924.6 |
925.3 |
924.6 |
924.3 |
924.1 |
||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
The following items are included in net earnings: | |||||||||||||||||||||||||||
Net
gains (losses) on investments |
|||||||||||||||||||||||||||
Continuing operations |
29 |
-
|
28 |
1 |
389 |
64 |
325 |
-
|
-
|
||||||||||||||||||
Discontinued operations |
(1 |
) |
-
|
- |
(1 |
) |
34 |
(2 |
) |
(2 |
) |
31 |
7 |
||||||||||||||
Restructuring and other items | (22 |
) |
(21 |
)
|
(3 |
) |
2 |
(772 |
) |
(62 |
) |
(725 |
) |
16 |
(1 |
) |
|||||||||||
|
|
|
|
||||||||||||||||||||||||
Total |
6 |
(21 |
) |
25 |
2 |
(349 |
) |
- |
(402 |
) |
47 |
6 |
|||||||||||||||
Impact on net earnings per share | $ |
0.01 |
|
$ |
(0.02 |
)
|
$
|
0.03 |
$ |
- |
$ |
(0.37 |
) |
$ |
- |
$ |
(0.43 |
) |
$ |
0.05 |
$ |
0.01 |
|||||
|
|
|
|
||||||||||||||||||||||||
EPS before net gains (losses) on investments and restructuring and other items(2) | $ |
1.59 |
|
$ |
0.50 |
|
$
|
0.58 |
$ |
0.51 |
$ |
2.02 |
|
$ |
0.45 |
$ |
0.52 |
|
$ |
0.55 |
$ |
0.50 |
|||||
|
|
|
|
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 3
BCE
Consolidated(1)
Segmented Data
($ millions, except where otherwise indicated) |
Q3 2005 |
Q3 2004 |
$ change |
% change |
YTD 2005 |
YTD |
$ change |
%change |
|||||||||
|
|
|
|
||||||||||||||
Revenues | |||||||||||||||||
Consumer | 1,929 |
1,908
|
21 |
1.1% |
5,675 |
5,591 |
84 |
1.5% |
|||||||||
Business |
1,516 |
1,440 |
76 |
5.3% |
4,493 |
4,316 |
177 |
4.1% |
|||||||||
Aliant | 520 |
497 |
23 |
4.6% |
1,562 |
1,527 |
35 |
2.3% |
|||||||||
Other Bell Canada | 500 |
486 |
14 |
2.9% |
1,464 |
1,428 |
36 |
2.5%
|
|||||||||
Inter-segment eliminations | (139 |
) |
(125 |
) |
(14 |
) |
(11.2% |
)
|
(401 |
) |
(378 |
) |
(23 |
) |
(6.1%
|
) |
|
|
|
|
|
||||||||||||||
Total Bell Canada | 4,326 |
4,206 |
120 |
2.9% |
12,793 |
12,484 |
309 |
2.5% |
|||||||||
Other BCE | |||||||||||||||||
Bell Globemedia | 335 |
302 |
33 |
10.9% |
1,090 |
1,015 |
75 |
7.4% |
|||||||||
Advertising | 233 |
209 |
24 |
11.5% |
794 |
735 |
59 |
8.0% |
|||||||||
Subscriber | 79 |
73 |
6 |
8.2% |
234 |
221 |
13 |
5.9% |
|||||||||
Production and Sundry | 23 |
20 |
3 |
15.0% |
62 |
59 |
3 |
5.1% |
|||||||||
Telesat | 112 |
91 |
21 |
23.1% |
357 |
260 |
97 |
37.3% |
|||||||||
CGI | 270 |
274 |
(4 |
) |
(1.5% |
) |
818 |
736 |
82 |
11.1% |
|||||||
Other | 15 |
12 |
3 |
25.0% |
50 |
41 |
9 |
22.0% |
|||||||||
|
|
|
|
||||||||||||||
Total Other BCE | 732 |
679 |
53 |
7.8% |
2,315 |
2,052 |
263 |
12.8%
|
|||||||||
Inter-segment eliminations |
(107 |
)
|
(107 |
) |
- |
0.0%
|
(318 |
) |
(341 |
) |
23 |
6.7% |
|||||
|
|
|
|
||||||||||||||
Total revenues |
4,951 |
4,778 |
173 |
3.6% |
14,790 |
14,195 |
595 |
4.2% |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Operating income | |||||||||||||||||
Consumer | 479 |
569 |
(90 |
) |
(15.8% |
) |
1,557 |
1,655 |
(98 |
) |
(5.9% |
) |
|||||
Business | 213 |
245 |
(32 |
) |
(13.1% |
) |
674 |
713 |
(39 |
) |
(5.5% |
) |
|||||
Aliant | 105 |
71 |
34 |
47.9% |
291 |
245 |
46 |
18.8% |
|||||||||
Other Bell Canada | 111 |
(898 |
) |
1,009 |
n.m. |
349 |
(649 |
) |
998 |
n.m. |
|||||||
|
|
|
|
||||||||||||||
Total Bell Canada | 908 |
(13 |
) |
921 |
n.m. |
2,871 |
1,964 |
907 |
46.2% |
||||||||
Other BCE | |||||||||||||||||
Bell Globemedia | 29 |
23 |
6 |
26.1% |
188 |
137 |
51 |
37.2% |
|||||||||
Telesat | 43 |
39 |
4 |
10.3% |
123 |
104 |
19 |
18.3% |
|||||||||
CGI | 28 |
24 |
4 |
16.7% |
73 |
70 |
3 |
4.3% |
|||||||||
Other | (51 |
) |
(48 |
) |
(3 |
) |
(6.3% |
) |
(132 |
) |
(134 |
) |
2 |
1.5% |
|||
|
|
|
|
||||||||||||||
Total Other BCE | 49 |
38 |
11 |
28.9% |
252 |
177 |
75 |
42.4% |
|||||||||
|
|
|
|
||||||||||||||
Total operating income | 957 |
25 |
932 |
n.m. |
3,123 |
2,141 |
982 |
45.9% |
|||||||||
|
|
|
|
||||||||||||||
|
|
|
|
||||||||||||||
Capital expenditures(4) | |||||||||||||||||
Consumer | 434 |
377 |
(57 |
) |
(15.1% |
) |
1,169 |
953 |
(216 |
)
|
(22.7% |
) |
|||||
Business | 249 |
183 |
(66 |
) |
(36.1% |
) |
691 |
678 |
(13 |
) |
(1.9% |
) |
|||||
Aliant | 100 |
51 |
(49 |
) |
(96.1% |
) |
286 |
181 |
(105 |
) |
(58.0% |
) |
|||||
Other Bell Canada | 90 |
125 |
35 |
28.0% |
240 |
229 |
(11 |
) |
(4.8% |
) |
|||||||
|
|
|
|
||||||||||||||
Total Bell Canada | 873 |
736 |
(137 |
) |
(18.6% |
) |
2,386 |
2,041 |
(345 |
)
|
(16.9% |
) |
|||||
Other BCE | |||||||||||||||||
Telesat | 91 |
64 |
(27 |
) |
(42.2% |
) |
198 |
217 |
19 |
8.8% |
|||||||
Other |
4 |
11 |
7 |
63.6% |
35 |
60 |
25 |
41.7% |
|||||||||
|
|
|
|
||||||||||||||
Total capital expenditures | 968 |
811 |
(157 |
) |
(19.4% |
) |
2,619 |
2,318 |
(301 |
) |
(13.0% |
) |
|||||
|
|
|
|
||||||||||||||
|
|
|
|
BCE
Consolidated(1)
Segmented
Data Historical Trend
YTD |
Total |
||||||||||||||||||||||||||
($ millions, except where otherwise indicated) | 2005 |
Q3
05 |
Q2
05 |
Q1
05 |
2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||
Consumer | 5,675 |
1,929 |
1,890 |
1,856 |
7,502 |
1,911 |
1,908 |
1,858 |
1,825 |
||||||||||||||||||
Business | 4,493 |
1,516 |
1,499 |
1,478 |
5,851 |
1,535 |
1,440 |
1,441 |
1,435 |
||||||||||||||||||
Aliant | 1,562 |
520 |
518 |
524 |
2,033 |
506 |
497 |
526 |
504 |
||||||||||||||||||
Other Bell Canada |
1,464 |
500 |
485 |
479 |
1,939 |
511 |
486 |
468 |
474 |
||||||||||||||||||
Inter-segment eliminations |
(401) |
(139)
|
(134) |
(128) |
(538) |
(160) |
(125)
|
(121)
|
(132) |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Bell Canada | 12,793 |
4,326
|
4,258 |
4,209 |
16,787 |
4,303 |
4,206 |
4,172 |
4,106 |
||||||||||||||||||
Other BCE | |||||||||||||||||||||||||||
Bell Globemedia |
1,090 |
335 |
399 |
356 |
1,420 |
405 |
302 |
371 |
342 |
||||||||||||||||||
Advertising |
794 |
233 |
300 |
261 |
1,041 |
306 |
209 |
277 |
249 |
||||||||||||||||||
Subscriber |
234 |
79 |
78 |
77 |
298 |
77 |
73
|
74 |
74 |
||||||||||||||||||
Production and Sundry |
62 |
23 |
21 |
18 |
81 |
22 |
20 |
20 |
19 |
||||||||||||||||||
Telesat |
357 |
112 |
137 |
108 |
362 |
102 |
91 |
85 |
84 |
||||||||||||||||||
CGI | 818 |
270 |
275 |
273 |
1,007 |
271 |
274 |
248 |
214 |
||||||||||||||||||
Other | 50 |
15 |
24 |
11 |
60 |
19 |
12 |
18 |
11 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Other BCE | 2,315 |
732 |
835 |
748 |
2,849 |
797 |
679 |
722 |
651 |
||||||||||||||||||
Inter-segment eliminations | (318)
|
(107) |
(113) |
(98)
|
(455)
|
(114)
|
(107) |
(115) |
(119) |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total revenues |
14,790 |
4,951 |
4,980 |
4,859 |
19,181 |
4,986 |
4,778 |
4,779 |
4,638 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Operating income | |||||||||||||||||||||||||||
Consumer |
1,557 |
479 |
552 |
526 |
2,119
|
464 |
569 |
560 |
526 |
||||||||||||||||||
Business |
674 |
213 |
221 |
240 |
896 |
183 |
245 |
227 |
241 |
||||||||||||||||||
Aliant |
291 |
105 |
99 |
87 |
268 |
23 |
71 |
92 |
82 |
||||||||||||||||||
Other Bell Canada |
349 |
111 |
109 |
129 |
(588) |
61 |
(898) |
138 |
111 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Bell Canada |
2,871 |
908 |
981 |
982 |
2,695 |
731 |
(13) |
1,017 |
960 |
||||||||||||||||||
Other BCE | |||||||||||||||||||||||||||
Bell Globemedia | 188 |
29 |
95 |
64 |
240 |
103 |
23 |
74 |
40 |
||||||||||||||||||
Telesat |
123 |
43 |
43 |
37 |
141 |
37 |
39 |
34 |
31 |
||||||||||||||||||
CGI | 73 |
28 |
20 |
25 |
94 |
24 |
24 |
25 |
21 |
||||||||||||||||||
Other | (132)
|
(51) |
(39) |
(42) |
(194) |
(60)
|
(48) |
(45) |
(41) |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Other BCE |
252 |
49 |
119 |
84 |
281 |
104 |
38 |
88 |
51 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Operating Income |
3,123 |
957 |
1,100 |
1,066 |
2,976 |
835 |
25 |
1,105 |
1,011 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Capital expenditures(4) | |||||||||||||||||||||||||||
Consumer |
1,169 |
434 |
394 |
341 |
1,371 |
418 |
377 |
331 |
245 |
||||||||||||||||||
Business |
691 |
249 |
246 |
196 |
1,008 |
330 |
183 |
281 |
214 |
||||||||||||||||||
Aliant | 286 |
100 |
104 |
82 |
295 |
114 |
51 |
45 |
85 |
||||||||||||||||||
Other Bell Canada | 240 |
90 |
103 |
47 |
352 |
123 |
125 |
58 |
46 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total Bell Canada |
2,386 |
873 |
847 |
666 |
3,026 |
985 |
736 |
715 |
590 |
||||||||||||||||||
Other BCE | |||||||||||||||||||||||||||
Telesat |
198 |
91 |
53 |
54 |
257 |
40 |
64
|
88 |
65 |
||||||||||||||||||
Other | 35 |
4 |
14 |
17 |
81 |
21 |
11 |
23 |
26 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total capital expenditures | 2,619 |
968 |
914 |
737 |
3,364 |
1,046 |
811 |
826 |
681 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
|
|
|
|
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 5
BCE
Consolidated(1)
Consolidated Balance Sheet Data
September
30 |
June
30 |
March 31 |
December 31 |
|||||
($ millions, except where otherwise indicated) | 2005 |
2005 |
2005 |
2004 |
||||
|
|
|
|
|||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 475 |
380 |
526 |
380 |
||||
Accounts receivable | 1,951 |
1,874 |
2,074 |
2,096 |
||||
Other current assets | 1,501 |
1,228 |
1,364 |
1,212 |
||||
|
|
|
|
|||||
Total current assets | 3,927 |
3,482 |
3,964 |
3,688 |
||||
Capital assets | 22,217 |
22,050 |
21,376 |
21,398 |
||||
Other long-term assets | 2,682 |
2,690 |
2,747 |
2,656 |
||||
Indefinite-life intangible assets | 2,973 |
2,973 |
2,951 |
2,916 |
||||
Goodwill | 8,577 |
8,528 |
8,482 |
8,413 |
||||
Non-current assets of discontinued operations | 104 |
82 |
50 |
50 |
||||
|
|
|
|
|||||
Total assets | 40,480 |
39,805 |
39,570 |
39,121 |
||||
|
||||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | 3,557
|
3,328 |
3,313
|
3,692 |
||||
Interest payable | 266 |
189 |
283 |
183 |
||||
Dividends payable | 325 |
325 |
325 |
297 |
||||
Debt due within one year |
1,263 |
1,497 |
1,428 |
1,276 |
||||
|
|
|
|
|||||
Total current liabilities | 5,411 |
5,339 |
5,349 |
5,448 |
||||
Long-term debt | 12,630 |
12,480 |
12,280 |
11,809 |
||||
Other long-term liabilities | 4,850 |
4,603 |
4,819 |
4,932 |
||||
Non-current liabilities of discontinued operations |
87 |
- |
- |
- |
||||
|
|
|
|
|||||
Total liabilities | 22,978 |
22,422 |
22,448 |
22,189 |
||||
|
|
|
|
|||||
Non-controlling interest |
2,892 |
2,905 |
2,914 |
2,908 |
||||
|
|
|
|
|||||
SHAREHOLDERS' EQUITY | ||||||||
Preferred shares | 1,670
|
1,670
|
1,670
|
1,670 |
||||
|
|
|
|
|||||
Common shareholders' equity | ||||||||
Common shares | 16,806 |
16,794 |
16,790 |
16,781 |
||||
Contributed surplus |
1,076 |
1,071 |
1,065
|
1,061 |
||||
Deficit |
(4,871) |
(5,005) |
(5,264) |
(5,432)
|
||||
Currency translation adjustment |
(71) |
(52) |
(53)
|
(56)
|
||||
Total common shareholders' equity |
12,940 |
12,808 |
12,538 |
12,354 |
||||
Total shareholders' equity | 14,610 |
14,478 |
14,208 |
14,024 |
||||
Total liabilities and shareholders' equity | 40,480 |
39,805 |
39,570 |
39,121 |
||||
Number of common shares outstanding | 927.3 |
926.7 |
926.4 |
925.9 |
||||
Total Net Debt | 13,418 |
13,597 |
13,182 |
12,705 |
||||
Total Capitalization | 30,920 |
30,980 |
30,304 |
29,637 |
Key ratios | ||||||||
Net debt : Total Capitalization | 43.4% |
43.9%
|
43.5% |
42.9% |
||||
Net debt : Trailing 12 month EBITDA | 1.75 |
1.76 |
1.72 |
1.68 |
||||
EBITDA : Interest (trailing 12 month) | 7.76 |
7.75 |
7.66 |
7.53 |
||||
|
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 6
BCE
Consolidated
Consolidated Cash Flow Data
YTD |
YTD |
||||||||||||||||||
Q3 |
Q3
|
September |
September |
||||||||||||||||
($ millions, except where otherwise indicated) | 2005 |
2004 |
$
change |
2005 |
2004 |
$
change |
|||||||||||||
|
|
|
|
||||||||||||||||
Cash flows from operating activities | |||||||||||||||||||
Earnings from continuing operations | 459 |
102 |
357 |
1,532 |
1,131 |
401 |
|||||||||||||
Adjustments to reconcile earnings from continuing | |||||||||||||||||||
operations to cash flows from operating activities: | |||||||||||||||||||
Amortization expense | 803 |
769 |
34 |
2,368 |
2,305 |
63 |
|||||||||||||
Net benefit plans cost |
108 |
61 |
47 |
315 |
189
|
126 |
|||||||||||||
Restructuring and other items |
31 |
1,081 |
(1,050 |
) |
32 |
1,098 |
(1,066 |
) |
|||||||||||
Net gains on investments | -
|
(325 |
) |
325 |
(34 |
) |
(331 |
) |
297 |
||||||||||
Future income taxes |
111 |
(183 |
) |
294 |
285 |
(96 |
) |
381 |
|||||||||||
Non-controlling interest |
57 |
47 |
10 |
193 |
134 |
59 |
|||||||||||||
Contributions to employee pension plans |
(33 |
) |
(32 |
)
|
(1 |
) |
(161 |
) |
(88 |
)
|
(73 |
) |
|||||||
Other employee future benefit plan payments |
(24 |
) |
(13 |
) |
(11 |
) |
(69 |
) |
(59 |
) |
(10 |
) |
|||||||
Payments on restructuring and other items |
(24 |
)
|
(12 |
) |
(12 |
) |
(153 |
)
|
(39 |
) |
(114 |
) |
|||||||
Operating assets and liabilities | 198 |
333 |
(135 |
)
|
(233 |
) |
(32 |
) |
(201 |
) |
|||||||||
|
|
|
|
||||||||||||||||
1,686 |
1,828 |
(142 |
) |
4,075 |
4,212 |
(137 |
) |
||||||||||||
|
|
|
|
||||||||||||||||
Capital expenditures |
(968 |
) |
(811 |
) |
(157 |
) |
(2,619 |
) |
(2,318 |
) |
(301 |
) |
|||||||
Other investing activities | -
|
(2 |
) |
2 |
(26 |
) |
133 |
(159 |
) |
||||||||||
Cash dividends paid on preferred shares |
(21 |
) |
(21 |
) |
-
|
(64 |
) |
(64 |
)
|
- |
|||||||||
Cash dividends paid by subsidiaries to non-controlling interest |
(47 |
)
|
(44 |
) |
(3 |
) |
(157 |
) |
(139 |
)
|
(18 |
) |
|||||||
|
|
|
|
||||||||||||||||
Free Cash Flow from operations, before common dividends(2) | 650 |
950
|
(300 |
)
|
1,209 |
1,824 |
(615 |
) |
|||||||||||
Cash dividends paid on common shares |
(306 |
)
|
(277 |
) |
(29 |
) |
(889 |
)
|
(831 |
) |
(58 |
) |
|||||||
|
|
|
|
||||||||||||||||
Free Cash Flow from operations, after common dividends(2) | 344 |
673 |
(329 |
) |
320 |
993 |
(673 |
) |
|||||||||||
Business acquisitions |
(62 |
) |
(646 |
) |
584 |
(180 |
) |
(952 |
) |
772 |
|||||||||
Business dispositions | - |
4 |
(4 |
) |
-
|
20 |
(20 |
) |
|||||||||||
Increase in investments |
(75 |
) |
(12 |
) |
(63 |
) |
(216 |
) |
(20 |
) |
(196 |
) |
|||||||
Decrease in investments | -
|
707 |
(707 |
) |
7 |
713
|
(706 |
) |
|||||||||||
|
|
|
|
||||||||||||||||
Free Cash Flow after investments and divestitures |
207 |
726 |
(519 |
) |
(69 |
) |
754
|
(823 |
) |
||||||||||
|
|
|
|
||||||||||||||||
Other financing activities | |||||||||||||||||||
Increase (decrease) in notes payable and bank advances |
(65 |
) |
173 |
(238 |
) |
121 |
123 |
(2 |
) |
||||||||||
Issue of long-term debt |
200 |
10 |
190 |
1,191 |
1,410 |
(219 |
) |
||||||||||||
Repayment of long-term debt | (211 |
)
|
(98 |
) |
(113 |
) |
(1,042 |
)
|
(1,750 |
) |
708
|
||||||||
Issue of common shares |
12 |
8 |
4 |
25 |
16 |
9 |
|||||||||||||
Issue
of equity securities by subsidiaries to non-controlling interest |
1 |
-
|
1 |
1 |
7 |
(6 |
) |
||||||||||||
Redemption
of equity securities by subsidiaries from non-controlling interest |
(22 |
)
|
(4 |
)
|
(18 |
) |
(60 |
)
|
(58 |
)
|
(2 |
) |
|||||||
Other financing activities | (27 |
) |
(18 |
) |
(9 |
) |
(82 |
)
|
(34 |
) |
(48 |
) |
|||||||
|
|
|
|
||||||||||||||||
(112 |
) |
71 |
(183 |
) |
154 |
(286 |
)
|
440 |
|||||||||||
|
|
|
|
||||||||||||||||
Cash used in continuing operations |
95 |
797 |
(702 |
) |
85 |
468 |
(383 |
) |
|||||||||||
Cash provided by (used in) discontinued operations | -
|
12 |
(12 |
) |
10 |
196 |
(186 |
) |
|||||||||||
|
|
|
|
||||||||||||||||
Net increase (decrease) in cash and cash equivalents |
95 |
809 |
(714 |
)
|
95 |
664 |
(569 |
) |
|||||||||||
Cash and cash equivalents at beginning of period |
380 |
577 |
(197 |
) |
380 |
722 |
(342 |
) |
|||||||||||
|
|
|
|
||||||||||||||||
Cash and cash equivalents at end of period | 475 |
1,386 |
(911 |
)
|
475 |
1,386 |
(911 |
) |
|||||||||||
|
|
|
|
|
|||||||||||||||||||
Other information | |||||||||||||||||||
Capital expenditures as a percentage of revenues | 19.6%
|
17.0% |
(2.6) pts |
17.7% |
16.3%
|
(1.4)
pts |
|||||||||||||
Cash flow per share(5) |
$ |
0.77 |
$ |
1.10 |
$ |
(0.33) |
$
|
1.57 |
$ |
2.05 |
$ |
(0.48) |
|||||||
Annualized cash flow yield(6) | 8.8%
|
15.1% |
(6.3) pts |
5.5% |
9.9%
|
(4.4)
pts |
|||||||||||||
Common dividend payout | 69.4%
|
337.8% |
n.m. |
60.1% |
75.1%
|
(15.0)
pts |
|||||||||||||
|
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 7
BCE
Consolidated
Consolidated
Cash Flow Data Historical Trend
($ millions, except where otherwise indicated) | YTD 2005 |
Q3
05 |
Q2
05 |
Q1
05 |
Total 2004 |
Q4
04 |
Q3
04 |
Q2
04 |
Q1
04 |
||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
Cash flows from operating activities | |
||||||||||||||||||||||||||
Earnings from continuing operations | 1,532 |
459 |
581 |
492 |
1,498 |
367 |
102 |
544 |
485 |
||||||||||||||||||
Adjustments to reconcile earnings from continuing operations to cash flows from operating activities: |
|||||||||||||||||||||||||||
Amortization expense | 2,368 |
803 |
792 |
773 |
3,108 |
803 |
769 |
769 |
767 |
||||||||||||||||||
Net benefit plans cost | 315 |
108 |
104 |
103 |
256 |
67 |
61 |
65 |
63 |
||||||||||||||||||
Restructuring and other items | 32 |
31 |
5 |
(4 |
) |
1,224 |
126 |
1,081 |
14 |
3 |
|||||||||||||||||
Net (gains) losses on investments | (34 |
) |
- |
(32 |
) |
(2 |
) |
(319 |
) |
12 |
(325 |
) |
(1 |
) |
(5 |
) |
|||||||||||
Future income taxes | 285 |
111 |
65 |
109 |
(34 |
) |
62 |
(183 |
) |
33 |
54 |
||||||||||||||||
Non-controlling interest | 193 |
57 |
73 |
63 |
174 |
40 |
47 |
39 |
48 |
||||||||||||||||||
Contributions
to employee pension plans
|
(161 |
)
|
(33 |
) |
(34 |
) |
(94 |
) |
(112 |
)
|
(24 |
) |
(32 |
) |
(27 |
) |
(29 |
) |
|||||||||
Other employee future benefit plan payments | (69 |
)
|
(24 |
) |
(22 |
) |
(23 |
) |
(81 |
)
|
(22 |
) |
(13 |
) |
(22 |
) |
(24 |
) |
|||||||||
Payments of restructuring and other items | (153 |
) |
(27 |
)
|
(28 |
)
|
(101 |
) |
(253 |
) |
(214 |
)
|
(12 |
) |
(8 |
)
|
(19 |
) |
|||||||||
Operating assets and liabilities | (233 |
) |
198 |
(54 |
)
|
(377 |
)
|
58 |
90 |
333 |
(282 |
) |
(83 |
) |
|||||||||||||
|
|
|
|
||||||||||||||||||||||||
4,075 |
1,686 |
1,450 |
939 |
5,519 |
1,307 |
1,828 |
1,124 |
1,260 |
|||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Capital expenditures | (2,619 |
)
|
(968 |
)
|
(914 |
) |
(737 |
) |
(3,364 |
) |
(1,046 |
)
|
(811 |
)
|
(826 |
)
|
(681 |
) |
|||||||||
Other investing activities | (26 |
) |
- |
(11 |
) |
(15 |
) |
124 |
(9 |
) |
(2 |
) |
116 |
19 |
|||||||||||||
Cash dividends paid on preferred shares | (64 |
)
|
(21 |
) |
(22 |
)
|
(21 |
)
|
(85 |
)
|
(21 |
) |
(21 |
)
|
(21 |
) |
(22 |
) |
|||||||||
Cash dividends paid by subsidiaries to non-controlling interest | (157 |
)
|
(47 |
) |
(60 |
)
|
(50 |
)
|
(188 |
)
|
(49 |
) |
(44 |
)
|
(52 |
) |
(43 |
) |
|||||||||
|
|
|
|
||||||||||||||||||||||||
Free Cash Flow from operations, before common dividends(2) | 1,209 |
650 |
443 |
116 |
2,006 |
182 |
950 |
341 |
533 |
||||||||||||||||||
Cash dividends paid on common shares | (889 |
)
|
(306 |
) |
(305 |
)
|
(278 |
)
|
(1,108 |
)
|
(277 |
)
|
(277 |
) |
(277 |
)
|
(277 |
) |
|||||||||
|
|
|
|
||||||||||||||||||||||||
Free Cash Flow from operations, after common dividends(2) | 320 |
344 |
138 |
(162 |
) |
898 |
(95 |
) |
673 |
64
|
256 |
||||||||||||||||
Business acquisitions | (180 |
) |
(62 |
)
|
(35 |
)
|
(83 |
)
|
(1,299 |
)
|
(347 |
) |
(646 |
)
|
(247 |
) |
(59 |
) |
|||||||||
Business dispositions | - |
- |
-
|
- |
20 |
- |
4 |
- |
16 |
||||||||||||||||||
Increase in investments | (216 |
) |
(75 |
) |
(13 |
) |
(128 |
) |
(58 |
) |
(38 |
) |
(12 |
) |
(8 |
)
|
|||||||||||
Decrease in investments | 7 |
- |
5 |
2 |
713 |
-
|
707 |
-
|
6 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Free Cash Flow after investments and divestitures | (69 |
) |
207 |
95 |
(371 |
) |
274 |
(480 |
) |
726 |
(191 |
) |
219 |
||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Other financing activities | |||||||||||||||||||||||||||
Increase (decrease) in notes payable and bank advances | 121 |
(65 |
) |
341 |
(155 |
) |
130 |
7 |
173 |
(69 |
)
|
19 |
|||||||||||||||
Issue of long-term debt | 1,191 |
200 |
206 |
785 |
1,521 |
111 |
10 |
74 |
1,326 |
||||||||||||||||||
Repayment of long-term debt | (1,042 |
)
|
(211 |
) |
(747 |
)
|
(84 |
)
|
(2,391 |
)
|
(641 |
) |
(98 |
)
|
(718 |
) |
(934 |
) |
|||||||||
Issue of common shares | 25 |
12 |
4 |
9 |
32 |
16 |
8 |
4
|
4 |
||||||||||||||||||
Issue
of equity securities and convertible debentures
by subsidiaries to non- controlling interest |
1 |
1 |
-
|
- |
8 |
1 |
- |
- |
7 |
||||||||||||||||||
Redemption of equity securities by subsidiaries from non-controlling interest | (60 |
) |
(22 |
) |
(21 |
) |
(17 |
) |
(58 |
) |
- |
(4 |
) |
(12 |
)
|
(42 |
)
|
||||||||||
Other financing activities | (82 |
) |
(27 |
) |
(25 |
) |
(30 |
) |
(51 |
) |
(17 |
)
|
(18 |
) |
32 |
(48 |
) |
||||||||||
|
|
|
|
||||||||||||||||||||||||
154 |
(112 |
) |
(242 |
) |
508 |
(809 |
)
|
(523 |
) |
71 |
(689 |
)
|
332 |
||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Cash provided by (used in) continuing operations | 85 |
95 |
(147 |
) |
137 |
(535 |
) |
(1,003 |
)
|
797 |
(880 |
)
|
551 |
||||||||||||||
Cash provided by (used in) discontinued operations | 10 |
- |
1 |
9 |
193 |
(3 |
) |
12 |
(54 |
) |
238 |
||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 95 |
95 |
(146 |
) |
146 |
(342 |
) |
(1,006 |
) |
809 |
(934 |
) |
789 |
||||||||||||||
Cash and cash equivalents at beginning of period | 380 |
380 |
526 |
380 |
722 |
1,386 |
577 |
1,511 |
722 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Cash and cash equivalents at end of period | 475 |
475 |
380 |
526 |
380 |
380 |
1,386
|
577 |
1,511 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Consists of: | |||||||||||||||||||||||||||
Cash and cash equivalents of continuing operations | 475 |
475 |
380 |
526 |
380 |
380 |
1,386
|
577 |
1,135 |
||||||||||||||||||
Cash and cash equivalents of discontinued operations | - |
- |
-
|
- |
- |
- |
- |
- |
376 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Total | 475 |
475 |
380 |
526 |
380 |
380 |
1,386 |
577 |
1,511 |
||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||
Other information | |||||||||||||||||||||||||||
Capital expenditures as a percentage of revenues | 17.7%
|
19.6%
|
18.4%
|
15.2% |
17.5%
|
21.0%
|
17.0%
|
17.3%
|
14.7% |
||||||||||||||||||
Cash flow per share(5) | $ |
1.57 |
$ |
0.77 |
$
|
0.58 |
$ |
0.22 |
$ |
2.33 |
$ |
0.28 |
$ |
1.10 |
$ |
0.32 |
$ |
0.63
|
|||||||||
Annualized cash flow yield(6) | 5.5% |
8.8% |
6.6%
|
1.7%
|
7.5%
|
2.7%
|
15.1%
|
5.5%
|
8.4% |
||||||||||||||||||
Common dividend payout | 60.1%
|
69.4%
|
54.2%
|
58.6%
|
72.8%
|
66.4%
|
337.8%
|
50.0%
|
58.9% |
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 8
Proportionate Net Debt, Preferreds and EBITDA
BCE Corporate and Bell Canada Net debt and preferreds |
At
September 30, 2005 ($ millions, except where otherwise indicated) |
Bell
Canada (excl. Aliant) |
Aliant |
Bell
Canada Statutory |
Inter-company eliminations |
Total Bell Canada |
BCE
Inc. Corporate |
||||||||
Cash and cash equivalents | 73 |
(371 |
) |
(298 |
)
|
|
(299 |
) |
(3 |
) |
||||
Long-term debt | 9,277 |
894 |
10,171 |
(350 |
)
|
9,821 |
2,000 |
|||||||
Debt due within one year |
1,207 |
158 |
1,365 |
(297 |
)
|
1,068 |
- |
|||||||
Long-term note receivable from BCH | (498 |
) |
- |
(498 |
)
|
498 |
- |
- |
||||||
PPA fair value increment (7) | |
|
|
103 |
- |
|||||||||
Net debt | 10,058 |
681 |
10,739 |
(149 |
)
|
10,693 |
1,997 |
|||||||
Preferred shares - Bell Canada (8) | 1,100 |
1,100
|
1,100
|
-
|
||||||||||
Preferred shares - Aliant (8) | 172
|
172 |
|
172 |
-
|
|||||||||
Perpetual Preferred shares - BCE |
- |
- |
- |
- |
1,670 |
|||||||||
Nortel common shares at market |
- |
- |
- |
|
- |
(56 |
)
|
|||||||
|
|
|||||||||||||
Net debt and preferreds | 11,158 |
853 |
12,011 |
(149 |
) |
11,965 |
3,611 |
|||||||
|
|
Proportionate net debt and preferreds, Trailing EBITDA |
For the quarter ended September 30, 2005 ($ millions, except where otherwise indicated) |
% owned by BCE |
Propor- tionate net debt and preferreds |
TOTAL
EBITDA |
PROPORTIONATE
EBITDA
|
|||||||||||||||||||||||||
Q3 05 | Q2 05 | Q1 05 | Q4 04 | Trailing | Q3 05 | Q2 05 | Q1 05 | Q4 04 | Trailing | ||||||||||||||||||||
|
|||||||||||||||||||||||||||||
Bell Canada (excluding Aliant) | 100%
|
11,112 |
A |
1,578 |
1,618 |
1,605 |
1,469 |
6,270 |
1,578 |
1,618 |
1,605 |
1,469 |
6,270 |
||||||||||||||||
Aliant | 53.2% |
454 |
226 |
221 |
210 |
210 |
867 |
120 |
117 |
112 |
112 |
461 |
|||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
Total
Bell Canada Consolidated |
11,566 |
1,804 |
1,839 |
1,815 |
1,679 |
7,137 |
1,698 |
1,735 |
1,717 |
1,581 |
6,731 |
||||||||||||||||||
Other BCE | |||||||||||||||||||||||||||||
Bell Globemedia | 68.5% |
254 |
46 |
114 |
83 |
124 |
367 |
23 |
68 |
49 |
73 |
213 |
|||||||||||||||||
Telesat | 100% |
315 |
70 |
71 |
63 |
60 |
264 |
70 |
71 |
63 |
60 |
264 |
|||||||||||||||||
CGI | 29.8% |
16 |
B
|
44 |
37 |
37 |
40 |
158 |
44 |
37 |
37 |
40 |
158 |
||||||||||||||||
Corporate and other | 100% |
3,611 |
(36 |
)
|
(39 |
) |
(37 |
) |
(47 |
) |
(159 |
) |
(36 |
) |
(39 |
)
|
(37 |
)
|
(47 |
) |
(159 |
) |
|||||||
|
|
|
|
|
|||||||||||||||||||||||||
Total Other BCE |
4,196 |
124 |
183
|
146 |
177 |
630 |
101 |
137 |
112 |
126 |
476 |
||||||||||||||||||
Inter-segment eliminations | (29 |
)
|
(21 |
) |
(23 |
) |
(25 |
) |
(98 |
) |
(29 |
)
|
(21 |
)
|
(23 |
)
|
(25 |
)
|
(98 |
) |
|||||||||
|
|
|
|||||||||||||||||||||||||||
Total | 15,762 |
1,899 |
2,001 |
1,938 |
1,831 |
7,669 |
1,770 |
1,851 |
1,806 |
1,682 |
7,109 |
||||||||||||||||||
|
|
|
A | Bell
Canada (excl. Aliant) net debt and preferred of $11,158 million less $149
million of inter-company eliminations plus $103 million upon consolidation
(PPA fair value increment). |
B | CGI is proportionately consolidated. |
BCE inc. Supplementary Financial Information - Third Quarter 2005 Page 9
($
millions, except where otherwise indicated) |
Q3 2005 |
Q3 2004 |
$ change |
%
change |
YTD September 2005 |
YTD September 2004 |
$ change |
%
change |
||||||||||||
|
|
|
||||||||||||||||||
Revenues | ||||||||||||||||||||
Local and access | 1,367 |
1,395 |
(28 |
) |
(2.0 |
%) |
4,103 |
4,175 |
(72 |
)
|
(1.7 |
%) |
||||||||
Long distance | 510 |
589 |
(79 |
)
|
(13.4 |
%)
|
1,566 |
1,767 |
(201 |
)
|
(11.4 |
%)
|
||||||||
Wireless |
801 |
727 |
74 |
10.2 |
%
|
2,285 |
2,076 |
209 |
10.1 |
% |
||||||||||
Data | 1,001 |
915 |
86 |
9.4 |
% |
2,918 |
2,677 |
241 |
9.0 |
% |
||||||||||
Video | 251 |
213 |
38 |
17.8 |
% |
708 |
631 |
77 |
12.2 |
% |
||||||||||
Terminal sales and other | 396 |
367 |
29 |
7.9 |
%
|
1,213 |
1,158 |
55 |
4.7 |
% |
||||||||||
|
|
|
|
|
||||||||||||||||
Total operating revenues | 4,326 |
4,206 |
120 |
2.9 |
% |
12,793 |
12,484 |
309 |
2.5 |
%
|
||||||||||
Operating expenses | (2,522 |
)
|
(2,350 |
) |
(172 |
) |
(7.3 |
%) |
(7,335 |
) |
(7,052 |
)
|
(283 |
) |
(4.0 |
%) |
||||
|
|
|
|
|||||||||||||||||
EBITDA |
1,804 |
1,856 |
(52 |
) |
(2.8 |
%) |
5,458 |
5,432 |
26 |
0.5 |
% |
|||||||||
|
|
|
|
|||||||||||||||||
EBITDA margin (%) | 41.7 |
% |
44.1 |
% |
(2.4)
pts |
42.7 |
% |
43.5 |
%
|
|
(0.8)
pts |
|||||||||
|
|
|
||||||||||||||||||
Amortization expense | (756 |
) |
(734 |
) |
(22 |
) |
(3.0 |
%) |
(2,234 |
)
|
(2,199 |
) |
(35 |
) |
(1.6 |
%) |
||||
Net benefit plans cost | (110 |
) |
(55 |
) |
(55 |
)
|
(100.0 |
%) |
(323 |
)
|
(173 |
)
|
(150 |
)
|
(86.7 |
%) |
||||
Restructuring and other items | (30 |
)
|
(1,080 |
)
|
1,050 |
97.2. |
% |
(30 |
) |
(1,096 |
)
|
1,066 |
97.3 |
% |
||||||
|
|
|
|
|||||||||||||||||
Operating income | 908 |
|
(13 |
) |
921 |
n.m.
|
2,871 |
1,964 |
907 |
46.2 |
% |
|||||||||
Other income | 15 |
114 |
(99 |
) |
(86.8 |
%) |
39 |
163 |
(124 |
) |
(76.1 |
%) |
||||||||
Interest expense |
(207 |
) |
(215 |
)
|
8 |
3.7 |
% |
(619 |
)
|
(651 |
) |
32 |
4.9 |
% |
||||||
|
|
|
||||||||||||||||||
Pre-tax earnings | 716 |
|
(114 |
) |
830 |
n.m. |
2,291 |
1,476 |
815 |
55.2 |
% |
|||||||||
Income taxes |
(198 |
) |
75 |
(273 |
) |
n.m. |
(605 |
) |
(366 |
)
|
(239 |
) |
(65.3 |
%) |
||||||
Non-controlling interest |
(16 |
) |
2 |
(18 |
) |
n.m. |
(49 |
) |
1 |
(50 |
) |
n.m. |
||||||||
|
|
|
|
|||||||||||||||||
Net Earnings | 502 |
|
(37 |
) |
539 |
n.m. |
1,637 |
1,111 |
526 |
47.3 |
% |
|||||||||
Dividends on preferred shares |
(14 |
) |
(16 |
) |
2 |
12.5 |
% |
(41 |
) |
(49 |
) |
8 |
16.3 |
% |
||||||
|
|
|
|
|||||||||||||||||
Net earnings applicable to common shares | 488 |
|
(53 |
) |
541 |
n.m. |
1,596 |
1,062 |
534 |
50.3 |
% |
|||||||||
|
|
|||||||||||||||||||
Other information | ||||||||||||||||||||
Cash flow information | ||||||||||||||||||||
Free Cash Flow (FCF) | ||||||||||||||||||||
Cash from operating activities | 1,551 |
1,756 |
(205 |
) |
(11.7 |
%) |
3,878 |
4,040 |
(162 |
) |
(4.0 |
%) |
||||||||
Capital expenditures |
(873 |
) |
(736 |
) |
(137 |
) |
(18.6 |
%) |
(2,386 |
) | (2,041 |
) | (345 |
) |
(16.9 |
%) |
||||
Dividends and distributions |
(468 |
) |
(445 |
) |
(23 |
) |
(5.2 |
%) |
(1,343 |
) |
(1,385 |
) | 42 |
3.0 |
% |
|||||
Other investing items |
4 |
1 |
3 |
n.m. |
4 |
(7 |
) |
11 |
n.m. |
|||||||||||
|
||||||||||||||||||||
Total | 214 |
576 |
(362 |
) |
(62.8 |
%) |
153 |
607 |
(454 |
) |
(74.8 |
%) |
||||||||
Capital expenditures as a percentage of revenues (%) | 20.2 |
% | 17.5 |
% | (2.7)
|
pts
|
18.7 |
% | 16.3 |
% | (2.4)
|
pts |
||||||||
Balance Sheet Information | Sept.
30 |
Dec.
31 |
||||||||||||||||||
2005 |
2004 |
|||||||||||||||||||
|
|
|||||||||||||||||||
Net Debt |
||||||||||||||||||||
Long-term debt | 10,171 |
9,166 |
||||||||||||||||||
Debt due within one year |
1,365 |
1,352 |
||||||||||||||||||
Less: Cash and cash equivalents |
(298 |
) |
(32 |
) | ||||||||||||||||
Total Net Debt | 11,238 |
10,486 |
||||||||||||||||||
Non-controlling interest | 1,125 |
1,229 |
||||||||||||||||||
Total shareholders' equity | 10,067 |
9,670
|
||||||||||||||||||
Total Capitalization | 22,430 |
21,385 |
||||||||||||||||||
Net Debt: Total Capitalization | 50.1 |
% | 49.0 |
% | ||||||||||||||||
Net Debt: Trailing 12 month EBITDA | 1.57 |
1.47 |
||||||||||||||||||
EBITDA : Interest (trailing 12 month) |
8.59 |
8.24 |
||||||||||||||||||
Bell
Canada Consolidated (1)
Operational Data - Historical Trend
($ millions, except where otherwise indicated) | YTD
2005 |
Q3
05
|
Q2
05
|
Q1
05
|
Total
2004 |
Q4
04
|
Q3
04
|
Q2
04
|
Q1
04
|
|||||||||||||
Revenues | ||||||||||||||||||||||
Local and access | 4,103 |
1,367 |
1,368 |
1,368 |
5,572 |
1,397 |
1,395 |
1,401
|
1,379 |
|||||||||||||
Long distance | 1,566 |
510 |
518 |
538 |
2,327 |
560 |
589 |
572
|
606
|
|||||||||||||
Wireless |
2,285 |
801 |
771 |
713 |
2,818 |
742 |
727 |
698 |
651 |
|||||||||||||
Data |
2,918 |
1,001 |
966 |
951 |
3,640 |
963 |
915 |
870 |
892 |
|||||||||||||
Video |
708 |
251 |
236 |
221 |
850 |
219 |
213 |
211 |
207
|
|||||||||||||
Terminal sales and other |
1,213 |
396 |
399 |
418 |
1,580 |
422 |
367 |
420 |
371 |
|||||||||||||
|
|
|
|
|||||||||||||||||||
Total operating revenues |
12,793 |
4,326 |
4,258 |
4,209 |
16,787 |
4,303 |
4,206 |
4,172 |
4,106 |
|||||||||||||
Operating expenses |
(7,335 |
)
|
(2,522 |
)
|
(2,419 |
)
|
(2,394 |
) |
(9,676 |
) |
(2,624 |
) |
(2,350 |
) |
(2,351 |
) |
(2,351 |
)
|
||||
|
|
|
|
|||||||||||||||||||
EBITDA |
5,458 |
1,804 |
1,839 |
1,815 |
7,111
|
1,679 |
1,856 |
1,821 |
1,755 |
|||||||||||||
EBITDA margin (%) | 42.7 |
% |
41.7 |
% |
43.2 |
% |
43.1 |
% |
42.4 |
% |
39.0 |
% |
44.1 |
% |
43.6 |
%
|
42.7 |
% |
||||
Amortization expense | (2,234 |
) |
(756 |
) |
(746 |
)
|
(732 |
) |
(2,962 |
) |
(763 |
) |
(734 |
)
|
(733 |
)
|
(732 |
) |
||||
Net benefit plans cost | (323 |
) |
(110 |
) |
(107 |
)
|
(106 |
) |
(235 |
)
|
(62 |
) |
(55 |
)
|
(58 |
) |
(60 |
) |
||||
Restructuring and other items | (30 |
)
|
(30 |
)
|
(5 |
) |
5 |
(1,219 |
) |
(123 |
) |
(1,080 |
)
|
(13 |
) |
(3 |
) |
|||||
|
|
|
|
|||||||||||||||||||
Operating income (loss) | 2,871 |
908 |
|
981 |
982 |
2,695 |
731 |
(13 |
) |
1,017 |
960 |
|||||||||||
Other income | 39 |
15 |
13 |
11 |
183 |
20 |
114 |
19
|
30 |
|||||||||||||
Interest expense |
(619 |
) |
(207 |
)
|
(206 |
) |
(206 |
) |
(863 |
)
|
(212 |
) |
(215 |
) |
(216 |
) |
(220 |
) |
||||
|
|
|
|
|||||||||||||||||||
Pre-tax earnings (loss) | 2,291 |
716 |
|
788 |
787 |
2,015 |
539 |
(114 |
) |
820
|
770 |
|||||||||||
Income taxes | (605 |
) |
(198 |
) |
(178 |
) |
(229 |
)
|
(506 |
)
|
(140 |
) |
75 |
(245 |
) |
(196 |
) |
|||||
Non-controlling interest |
(49 |
) |
(16 |
) |
(17 |
) |
(16 |
) |
9 |
8 |
2 |
9 |
(10 |
)
|
||||||||
|
|
|
|
|||||||||||||||||||
Net earnings (loss) before extraordinary gain | 1,637 |
502 |
|
593
|
542 |
1,518 |
407 |
(37 |
) |
584 |
564 |
|||||||||||
Extraordinary gain | -
|
-
|
- |
- |
69 |
69 |
- |
- |
-
|
|||||||||||||
|
|
|
|
|||||||||||||||||||
Net earnings | 1,637 |
502 |
|
593
|
542 |
1,587 |
476 |
(37 |
) |
584 |
564 |
|||||||||||
Dividends on preferred shares |
(41 |
) |
(14 |
) |
(13 |
) |
(14 |
) |
(60 |
) |
(11 |
) |
(16 |
) |
(17 |
) |
(16 |
) |
||||
|
|
|
|
|||||||||||||||||||
Net earnings applicable to common shares |
1,596 |
488 |
|
580 |
528 |
1,527 |
465 |
(53 |
) |
567 |
548 |
|||||||||||
|
|
|
|
|||||||||||||||||||
Other information | ||||||||||||||||||||||
Cash flow information | ||||||||||||||||||||||
Free Cash Flow (FCF) | ||||||||||||||||||||||
Cash from operating activities |
3,878 |
1,551 |
1,467 |
860 |
5,333 |
1,293 |
1,756 |
1,089 |
1,195 |
|||||||||||||
Capital expenditures |
(2,386 |
) |
(873 |
) |
(847 |
) |
(666 |
) |
(3,026 |
) |
(985 |
) |
(736 |
) |
(715 |
) |
(590 |
) |
||||
Dividends and distributions | (1,343 |
) |
(468 |
) |
(453 |
) |
(422 |
) |
(1,736 |
) |
(351 |
) |
(445 |
) |
(437 |
) |
(503 |
) |
||||
Other investing items |
4 |
|
4 |
|
4 |
(4 |
) |
(15 |
) |
(8 |
) |
1 |
(1 |
) |
(7 |
) |
||||||
|
|
|
|
|||||||||||||||||||
Total | 153 |
214 |
171 |
(232 |
) |
556 |
(51 |
) |
576 |
(64 |
) |
95 |
||||||||||
|
|
|
|
|||||||||||||||||||
Capital expenditures as a percentage of revenues (%) | 18.7 |
% |
20.2 |
% |
19.9 |
%
|
15.8 |
% |
18.0 |
% |
22.9 |
% |
17.5 |
% |
17.1 |
% |
14.4 |
% |
||||
Balance Sheet Information |
Sept.
30 |
June
30 |
March
31 |
Dec. 31 |
||||||||||||||||||
2005 |
2005
|
2005
|
2004
|
|||||||||||||||||||
|
|
|||||||||||||||||||||
Net Debt | ||||||||||||||||||||||
Long-term debt | 10,171 |
10,023 |
9,657 |
9,166 |
||||||||||||||||||
Debt due within one year | 1,365
|
1,500 |
1,634 |
1,352 |
||||||||||||||||||
Less: Cash and cash equivalents |
(298 |
)
|
(169 |
) |
(308 |
) |
(32 |
) |
||||||||||||||
|
||||||||||||||||||||||
Total Net Debt | 11,238 |
11,354 |
10,983 |
10,486 |
||||||||||||||||||
Non-controlling interest | 1,125 |
1,162 |
1,202 |
1,229 |
||||||||||||||||||
Total shareholders' equity | 10,067 |
9,957 |
9,796 |
9,670 |
||||||||||||||||||
|
|
|||||||||||||||||||||
Total Capitalization | 22,430 |
22,473 |
21,981
|
21,385 |
||||||||||||||||||
|
|
|||||||||||||||||||||
Net Debt: Total Capitalization | 50.1 |
% |
50.5 |
% |
50.0 |
% |
49.0 |
% |
||||||||||||||
Net Debt : Trailing 12 month EBITDA | 1.57 |
1.58 |
1.53 |
1.47 |
||||||||||||||||||
EBITDA : Interest (trailing 12 month) | 8.59 |
8.57 |
8.45 |
8.24 |
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 11
Bell
Canada Consolidated
(1)
Statistical Data
Q3 2005
|
Q3
2004
|
%
change
|
YTD
September 2005 |
YTD
September 2004 |
%
change |
||||||||
|
|
|
|
||||||||||
Wireline | |||||||||||||
Local | |||||||||||||
Network access services (k) | |||||||||||||
Residential | 8,133 |
8,427 |
(3.5 |
%) | 8,133 |
8,427 |
(3.5 |
%) | |||||
Business | 4,507 |
4,535 |
(0.6 |
%) |
4,507 |
4,535 |
(0.6 |
%) | |||||
|
|
|
|
|
|
||||||||
Total | 12,640 |
12,962 |
(2.5 |
%) | 12,640 |
12,962 |
(2.5 |
%) | |||||
SmartTouch feature revenues ($M) | 221 |
234 |
(5.6 |
%) |
673 |
706 |
(4.7 |
%) | |||||
Long Distance (LD) | |||||||||||||
Conversation minutes (M) | 4,484 |
4,435 |
1.1 |
% |
13,739 |
13,511 |
1.7 |
% | |||||
Average revenue per minute ($) | 0.105 |
0.120 |
(12.5 |
%) |
0.104 |
0.119 |
(12.6 |
%) | |||||
|
|||||||||||||
Data | |||||||||||||
Equivalent access lines (9) (k) - Ontario and Quebec | |||||||||||||
Digital equivalent access lines (k) | 4,847 |
4,197 |
15.5 |
% | 4,847 |
4,197 |
15.5 |
% | |||||
Internet subscribers (10) (k) | |||||||||||||
High Speed Internet net activations (k) | 106 |
84 |
26.2 |
% |
326 |
259 |
25.9 |
% |
|||||
High Speed Internet subscribers (k) | 2,134 |
1,717 |
24.3 |
% | 2,134 |
1,717 |
24.3 |
% |
|||||
Dial-up Internet subscribers (k) | 621 |
775 |
(19.9 |
%) |
621 |
775 |
(19.9 |
%)
|
|||||
|
|
|
|
|
|
||||||||
2,755 |
2,492 |
10.6 |
% | 2,755 |
2,492 |
10.6 |
% |
||||||
|
|||||||||||||
Wireless | |
||||||||||||
Cellular & PCS Net activations (k) | |||||||||||||
Pre-paid | 73 |
14 |
n.m |
144 |
54 |
n.m. |
|||||||
Post-paid | 50 |
95 |
(47.4 |
%)
|
162 |
242 |
(33.1 |
%) |
|||||
|
|
|
|
||||||||||
123 |
109 |
12.8 |
% |
306 |
296 |
3.4 |
% | ||||||
Cellular & PCS subscribers (k) | |||||||||||||
Pre-paid | 1,345 |
1,113 |
20.8 |
% | 1,345 |
1,113 |
20.8 |
% | |||||
Post-paid | 3,886 |
3,595 |
8.1 |
% | 3,886 |
3,595 |
8.1 |
% | |||||
|
|
|
|
|
|
||||||||
5,231 |
4,708 |
11.1 |
% | 5,231 |
4,708 |
11.1 |
% | ||||||
Average revenue per unit (ARPU) ($/month) | 51 |
50 |
2.0 |
% |
49 |
49 |
0.0 |
% |
|||||
Pre-paid |
14 |
12 |
16.7 |
% |
13 |
12 |
8.3 |
% |
|||||
Post-paid | 63 |
63 |
0.0 |
% |
60 |
61 |
(1.6 |
%) |
|||||
Churn (%) (average per month) |
1.5 |
% |
1.2 |
% | (0.3) |
pts |
1.6 |
% | 1.3 |
% | (0.3) |
pts |
|
Pre-paid | 1.6 |
% |
1.9 |
% |
0.3 |
pts |
1.8 |
% |
1.9 |
% |
0.1 |
pts |
|
Post-paid | 1.5 |
%
|
1.0 |
% | (0.5) |
pts |
1.5 |
% | 1.1 |
% | (0.4) |
pts |
|
Usage per subscriber (min/month) | 265 |
|
258 |
|
2.7 |
% |
253 |
246 |
|
2.8
|
% | ||
Cost of acquisition (COA) (11) ($/sub) | 432 |
|
381 |
|
(13.4 |
%) |
405 |
415 |
|
2.4 |
% |
||
Wireless EBITDA ($ millions) |
363 |
|
334 |
|
8.7 |
% |
996 |
913 |
|
9.1 |
% |
||
Wireless EBITDA margin (12) | 44.0 |
% |
45.4 |
% |
(1.4) |
pts |
42.7 |
% | 43.3 |
% |
(0.6) |
pts |
|
Wireless capital expenditures ($ millions) | 103 |
|
95 |
|
(8.4 |
%)
|
285 |
237 |
|
(20.3 |
%) |
||
Wireless capital expenditures as a percentage of revenue | 12.9% |
|
13.1% |
|
0.2 |
pts |
12.5 |
% | 11.4 |
% |
(1.1) |
pts | |
Paging subscribers (k) | 364 |
|
449 |
|
(18.9 |
%) | 364 |
449 |
|
(18.9 |
%) |
||
Paging average revenue per unit ($/month) | 10 |
|
10 |
|
0.0 |
% |
12 |
10 |
|
20.0 |
% |
||
|
|||||||||||||
Video (DTH and VDSL) | |||||||||||||
Total subscribers (k) | 1,677 |
1,460 |
14.9 |
% | 1,677 |
|
1,460 |
|
14.9 |
% | |||
Net subscriber activations (k) | 82 |
|
33 |
|
n.m. |
174 |
|
73 |
|
n.m. |
|||
ARPU ($/month) | 51 |
|
48 |
|
6.3 |
% |
49 |
|
48 |
|
2.1 |
% | |
COA ($/sub) | 360 |
|
548 |
|
34.3 |
% |
388 |
|
586 |
|
33.8 |
% | |
Video EBITDA ($ millions) | 12 |
|
(16 |
) |
n.m. |
|
22 |
|
(15 |
) |
n.m. |
|
|
Churn (%) (average per month) | 1.0 |
% |
1.1 |
% |
0.1 |
pts |
0.9 |
% |
1.0 |
% |
0.1 |
pts |
|
|
BCE Inc Supplementary Financial Information - Third Quarter 2005 Page 12
Bell
Canada Consolidated
(1)
Statistical Data Historical Trend
YTD
2005 |
Q3
05
|
Q2
05
|
Q1
05
|
Total
2004
|
Q4
04
|
Q3
04
|
Q2
04
|
Q1
04
|
|||||||||||
|
|
|
|
||||||||||||||||
Wireline | |||||||||||||||||||
Local | |||||||||||||||||||
Network access services (k) | |||||||||||||||||||
Residential | 8,133 |
8,189 |
8,332 |
8,392 |
8,427 |
8,390 |
8,476
|
||||||||||||
Business | 4,507 |
4,511 |
4,513 |
4,513 |
4,535 |
4,548 |
4,541 |
||||||||||||
|
|
||||||||||||||||||
Total | 12,640 |
12,700 |
12,845 |
12,905 |
12,962 |
12,938
|
13,017
|
||||||||||||
SmartTouch feature revenues ($M) | 673 |
221 |
225 |
227 |
939 |
233 |
234 |
235 |
237 |
||||||||||
Long Distance (LD) | |||||||||||||||||||
Conversation minutes (M) | 13,739 |
4,484 |
4,667 |
4,588 |
18,070 |
4,559 |
4,435 |
4,498 |
4,578 |
||||||||||
Average revenue per minute ($) | 0.104
|
0.105 |
0.101 |
0.107 |
0.117
|
0.109 |
0.120 |
0.118 |
0.120 |
||||||||||
|
|||||||||||||||||||
Data | |||||||||||||||||||
Equivalent access lines (9) (k) - Ontario and Quebec | |||||||||||||||||||
Digital equivalent access lines (k) | 4,847 |
4,634 |
4,469 |
4,335 |
4,197 |
4,083 |
3,983 |
||||||||||||
Internet subscribers (10) (k) | |||||||||||||||||||
High Speed Internet net activations (k) | 326 |
106 |
92 |
128
|
350 |
91
|
84 |
65 |
110 |
||||||||||
High Speed Internet subscribers (k) | 2,134 |
2,028 |
1,936 |
1,808 |
1,717 |
1,633 |
1,568 |
||||||||||||
Dial-up Internet subscribers (k) | 621 |
666 |
696 |
743 |
775 |
807 |
836 |
||||||||||||
|
|
||||||||||||||||||
2,755 |
2,694 |
2,632 |
2,551
|
2,492 |
2,440 |
2,404 |
|||||||||||||
|
|||||||||||||||||||
Wireless | |||||||||||||||||||
Cellular & PCS net activations (k) | |||||||||||||||||||
Pre-paid | 144 |
73 |
29 |
42 |
142 |
88 |
14 |
17 |
23 |
||||||||||
Post-paid | 162 |
50 |
117 |
(5 |
) |
371 |
129 |
95 |
78 |
69 |
|||||||||
|
|
|
|
||||||||||||||||
306 |
123 |
146 |
37 |
513 |
217 |
109 |
95 |
92 |
|||||||||||
Cellular & PCS subscribers (k) | |||||||||||||||||||
Pre-paid | 1,345 |
1,272 |
1,243 |
1,201 |
1,113 |
1,099 |
1,082 |
||||||||||||
Post-paid | 3,886 |
3,836 |
3,719 |
3,724 |
3,595 |
3,500 |
3,422 |
||||||||||||
|
|
||||||||||||||||||
5,231 |
5,108
|
4,962 |
4,925 |
4,708 |
4,599 |
4,504 |
|||||||||||||
Average revenue per unit (ARPU) ($/month) | 49 |
51 |
50 |
46 |
49 |
50
|
50
|
50 |
47 |
||||||||||
Pre-paid | 13 |
14 |
16 |
11 |
12 |
13 |
12 |
11 |
11
|
||||||||||
Post-paid | 60 |
63 |
61 |
57 |
61 |
61 |
63 |
62 |
59 |
||||||||||
Churn (%) (average per month) | 1.6 |
% |
1.5 |
% |
1.6 |
%
|
1.6 |
% |
1.3 |
% |
1.4 |
% |
1.2 |
% |
1.3 |
%
|
1.3 |
% |
|
Pre-paid | 1.8 |
% |
1.6 |
%
|
2.1 |
% |
1.8 |
% |
1.9 |
%
|
1.9 |
% |
1.9 |
% |
1.9 |
% |
1.7 |
% |
|
Post-paid | 1.5 |
% |
1.5 |
% |
1.4 |
%
|
1.6 |
% |
1.1 |
% |
1.2 |
% |
1.0 |
% |
1.1 |
% |
1.1 |
% |
|
Usage per subscriber (min/month) | 253 |
265 |
262 |
232 |
248 |
252 |
258 |
257 |
224 |
||||||||||
Cost of acquisition (COA) (11) ($/sub) | 405 |
432 |
401 |
373 |
411 |
402 |
381 |
413 |
455 |
||||||||||
Wireless EBITDA ($ millions) | 996 |
363 |
333 |
300 |
1,187 |
274 |
334 |
317
|
262 |
||||||||||
Wireless EBITDA margin (12) | 42.7 |
% |
44.0 |
% |
42.4 |
% |
41.4 |
% |
41.5 |
% |
36.2 |
% |
45.4 |
% |
44.9 |
%
|
39.6 |
% |
|
Wireless capital expenditures ($ millions) | 285 |
103 |
118 |
64 |
362 |
125 |
95 |
77 |
65 |
||||||||||
Wireless capital expenditures as a percentage of revenue | 12.5 |
% |
12.9 |
% |
15.3 |
% |
9.0 |
% |
12.8
|
% |
16.8 |
% |
13.1 |
% |
11.0 |
% |
10.0 |
% |
|
Paging subscribers (k) | 364 |
385 |
404 |
427 |
449
|
469 |
493 |
||||||||||||
Paging average revenue per unit ($/month) | 12 |
10 |
10
|
15 |
10 |
9
|
10
|
10
|
10 |
||||||||||
|
|||||||||||||||||||
Video (DTH and VDSL) | |||||||||||||||||||
Total subscribers (k) | 1,677 |
1,595 |
1,532 |
1,503 |
1,460 |
1,427 |
1,403 |
||||||||||||
Net subscriber activations (k) | 174 |
82 |
63 |
29 |
116 |
43 |
33 |
24 |
16 |
||||||||||
ARPU ($/month) | 49 |
51 |
50 |
48
|
49 |
49 |
48 |
49 |
48 |
||||||||||
COA ($/sub) | 388 |
360 |
462 |
473 |
571
|
537 |
548 |
570 |
661 |
||||||||||
Video EBITDA ($ millions) | 22 |
12 |
6 |
4 |
(19 |
)
|
(4 |
)
|
(16 |
)
|
1 |
||||||||
Churn (%) (average per month) | 0.9 |
% |
1.0 |
%
|
0.9 |
% |
0.8 |
%
|
1.0 |
%
|
0.8 |
%
|
1.1 |
% |
1.0 |
% |
0.9 |
%
|
|
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 13
Accompanying
Notes |
(1) |
We have reclassified some of the figures for the comparative period to
make them consistent with the current period's presentation. |
(2) | Non-GAAP Financial Measures |
EBITDA |
|
We
define EBITDA as operating revenues less operating expenses, which means
it represents operating income before amortization expense, net benefit
plans cost, and restructuring and other items. |
|
We
use EBITDA, among other measures, to assess the operating performance
of our ongoing businesses without the effects of amortization expense,
net benefit plans cost, and restructuring and other items. We exclude
amortization expense and net benefit plans cost because they largely depend
on the accounting methods and assumptions a company uses, as well as non-operating
factors, such as the historical cost of capital assets and the fund performance
of a companys pension plans. We exclude restructuring and other
items because they are transitional in nature. |
|
EBITDA
allows us to compare our operating performance on a consistent basis.
We believe that certain investors and analysts use EBITDA to measure a
companys ability to service debt and to meet other payment obligations,
or as a common valuation measurement in the telecommunications industry. |
|
EBITDA
should not be confused with net cash flows from operating activities.
The most comparable Canadian GAAP financial measure is operating income. |
|
EPS
before net gains (losses) on investments and restructuring and other items The term, EPS (earnings per share) before net gains (losses) on investments and restructuring and other items, does not have any standardized meaning prescribed by GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. |
|
We
use EPS before net gains (losses) on investments and restructuring and
other items, among other measures, to assess the operating performance
of our ongoing businesses without the effects of after-tax restructuring
and other items and net gains on investments. We exclude these items because
they affect the comparability of our financial results and could potentially
distort the analysis of trends in business performance. The exclusion
of these items does not imply they are necessarily non-recurring. |
|
The most comparable Canadian GAAP financial measure is EPS. | |
FREE
CASH FLOW The term, free cash flow, does not have any standardized meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. Free cash flow is presented on a consistent basis from period to period. |
|
We
define free cash flow as cash from operating activities after capital
expenditures, total dividends and other investing activities. |
|
We
consider free cash flow to be an important indicator of the financial
strength and performance of our business because it shows how much cash
is available to repay debt and to reinvest in our company. We believe
that certain investors and analysts use free cash flow when valuing a
business and its underlying assets. |
|
The most comparable Canadian GAAP financial measure is cash from operating activities. |
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 14
Accompanying
Notes (continued) |
(3) | EBITDA margin is calculated as follows: |
EBITDA |
|
Operating revenues | |
(4) | Effective
Q2 2005 the total Wireless capital expenditures are segregated between
the Consumer and Business segments. Prior quarters have been restated
accordingly. |
(5) | Cash flow per share is calculated as follows: |
Cash flow from operations less capital expenditures | |
Average number of common shares outstanding during the period | |
(6) | Annualized cash flow yield is calculated as follows: |
Free cash flow from operations before common dividends | |
Number of common shares outstanding at end of period multiplied by share price at end of period |
|
Note: to annualize, multiply the most recent quarter's resultant by 4. | |
(7) | Reflects an increase in the total Bell Canada debt as a result of the completion of the purchase price allocation (PPA) relating to the repurchase of SBCs 20% interest in Bell Canada, which resulted in an increase in long-term debt of $165 million. This increase in long-term debt will be applied against interest expense ($4 million in Q3 2005) over the remaining terms of the related long-term debt. |
(8) |
At the BCE Consolidated level, Third Party Preferred Shares reflected
in the financial statements of subsidiaries are included in non-controlling
interest on the balance sheet. |
(9) |
Digital equivalent access lines are derived by converting low capacity
data lines (DS-3 and lower) to the equivalent number of voice grade access
lines. Broadband equivalent access lines are derived by converting high
capacity data lines (higher than DS-3) to the equivalent number of voice
grade access lines. |
Conversion
factors |
|
DS-0
|
1 |
Basic
ISDN |
2 |
Primary
ISDN |
23 |
DS-1,
DEA |
24 |
DS-3
|
672 |
OC-3
|
2,016 |
OC-12
|
8,064 |
OC-48
|
32,256 |
OC-192
|
129,024 |
10
Base T |
155 |
100
Base T |
1,554 |
Gigabit E | 15,554 |
(10) |
High Speed Internet subscribers include Consumer, Business and Wholesale.
Dial-up Internet subscribers include Consumer and Business. |
(11) | Includes
allocation of selling costs from Bell Canada and excludes costs of migrating
from analog to digital. Cost of Acquisition (COA) per subscriber is
reflected on a consolidated basis. |
(12) |
Wireless EBITDA margins are calculated based on total Wireless operating
revenues (i.e. external revenues as shown on pages 10 and 11 plus inter-company
revenues). |
BCE Inc. Supplementary Financial Information - Third Quarter 2005 Page 15
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP | |
We
have prepared the interim consolidated financial statements according
to Canadian GAAP. The tables below are a reconciliation of significant
differences relating to the statement of operations and total shareholders
equity reported according to Canadian GAAP and United States GAAP. |
RECONCILATION OF NET EARNINGS
|
||||||||||||
Three months |
Nine
months |
|||||||||||
For the period ended September 30 |
|
|
||||||||||
($ million, except share amounts) (unaudited) | 2005 |
2004 |
2005
|
2004
|
||||||||
|
||||||||||||
Canadian GAAP - Earnings from continuing operations | 459 |
102 |
1,532 |
1,131 |
||||||||
Adjustments | ||||||||||||
Deferred costs (a) | - |
5 |
3 |
11 |
||||||||
Employee future benefits (b) | (12 |
) | (20 |
) | (36 |
) | (61 |
) | ||||
|
|
|
|
|||||||||
United States GAAP - Earnings from continuing operations | 447 |
87 |
1,499 |
1,081 |
||||||||
Discontinued operations - United States GAAP (h) | - |
(2 |
) | (1 |
) | 86 |
||||||
|
|
|
|
|||||||||
United States GAAP - Net earnings | 447 |
85 |
1,498 |
1,167 |
||||||||
Dividends on preferred shares (i) | (22 |
) | (24 |
) | (64 |
) | (70 |
) | ||||
|
|
|
|
|||||||||
United States GAAP - Net earnings applicable to common shares | 425 |
61
|
1,434 |
1,097 |
||||||||
|
||||||||||||
Other comprehensive earnings items | ||||||||||||
Change in currency translation adjustment | (19 |
) | (14 |
) | (15 |
) | 1 |
|||||
Change in unrealized gain (loss) on investments (g) | 5 |
(224 |
) | 86
|
(11 |
) | ||||||
|
|
|
|
|||||||||
Comprehensive earnings |
411 |
(177 |
) | 1,505 |
1,087
|
|||||||
|
||||||||||||
Net earnings per common share - basic | ||||||||||||
Continuing operations | 0.46 |
0.07 |
1.55 |
1.09 |
||||||||
Discontinued operations | -
|
(0.01 |
) | - |
0.10 |
|||||||
Net earnings | 0.46 |
0.06 |
1.55 |
1.19 |
||||||||
Net earnings per common share - diluted | ||||||||||||
Continuing operations | 0.46 |
0.07 |
1.55 |
1.09 |
||||||||
Discontinued operations | - |
- |
-
|
0.09 |
||||||||
Net earnings | 0.46 |
0.07 |
1.55 |
1.18 |
||||||||
Dividends per common share |
0.33 |
0.30 |
0.99 |
0.90
|
||||||||
Average number of common shares | ||||||||||||
outstanding (millions) | 927.0 |
924.6 |
926.6 |
924.4 |
||||||||
|
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
|
||||||
September
30 |
December
31 |
|||||
($ millions) (unaudited) | 2005
|
2004
|
||||
|
||||||
Currency translation adjustment | (71 |
) | (56 |
) | ||
Unrealized gain (loss) on investments (g) | 90 |
4 |
||||
Additional minimum liability for pensions (b) | (193 |
) | (193 |
) | ||
|
||||||
Accumulated Other Comprehensive loss | (174 |
) |
(245 |
) | ||
|
RECONCILIATION OF TOTAL SHAREHOLDERS EQUITY
|
||||||
($ millions) (unaudited) | September
30 |
December
31 |
||||
2005 |
2004 |
|||||
|
||||||
Canadian GAAP | 14,610 |
14,024 |
||||
Adjustments | ||||||
Deferred costs (a) | (61 |
) | (67 |
) | ||
Employee future benefits (b) | (617 |
) | (543 |
) | ||
Gain on disposal of investments and on reduction | ||||||
of ownership in subsidiary companies (c) | 163 |
163 |
||||
Other | 97 |
114 |
||||
Tax effect of the above adjustments (e) | 114 |
81 |
||||
Non-controlling interest effect of the above adjustments (f) |
103 |
95
|
||||
Unrealized gain (loss) on investments (g) |
90 |
4
|
||||
|
||||||
United States GAAP | 14,499 |
13,871
|
||||
|
DESCRIPTION OF UNITED STATES GAAP ADJUSTMENTS
(a) Deferred
costs
Under Canadian
GAAP, certain expenses can be deferred and amortized if they meet certain criteria.
Under United States GAAP, these costs are expensed as incurred.
(b) Employee
future benefits
The accounting
for future benefits for employees under Canadian GAAP and United States GAAP
is essentially the same, except for the recognition of certain unrealized gains
and losses.
Canadian GAAP requires companies to recognize a pension valuation allowance for any excess of the accrued benefit asset over the expected future benefit. Changes in the pension valuation allowance are recognized in the consolidated statement of operations. United States GAAP does not specifically address pension valuation allowances. United States regulators have interpreted this to be a difference between Canadian and United States GAAP.
2
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
(c) Gains
or losses on investments
Under Canadian GAAP and United
States GAAP, gains or losses on investments are calculated in a similar manner.
Differences in Canadian GAAP and United States GAAP, however, may cause the
underlying carrying value of the investment to be different. This will cause
the resulting gain or loss to be different.
(d) Equity
income
Under Canadian
GAAP, we account for our joint venture investments, which are mainly comprised
of CGI Group Inc., using the proportionate consolidation method. Under United
States GAAP, we account for our joint venture investments using the equity method.
There is no impact on net earnings.
Our proportionate share of our joint ventures operating results was as follows:
|
||||||||||||
Three
months |
Nine
months |
|||||||||||
For the period ended September 30 | |
|
||||||||||
($ millions) (unaudited) | 2005 |
2004 |
2005 |
2004 |
||||||||
|
||||||||||||
Operating revenues | ||||||||||||
External | 230 |
227 |
702 |
615 |
||||||||
Inter-segment | 44 |
47 |
123 |
121 |
||||||||
|
|
|
|
|||||||||
Total revenues | 274 |
274 |
825 |
736 |
||||||||
Operating expenses | (236 |
) | (236 |
) | (724 |
) | (630 |
) | ||||
Amortization expense | (17 |
) |
(14 |
) | (48 |
) |
(36 |
) | ||||
|
|
|
|
|||||||||
Total operating expenses | (253 |
) | (250 |
) |
(772 |
) | (666 |
) | ||||
|
|
|
|
|||||||||
Operating income | 21 |
24 |
53 |
70 |
||||||||
Other income | -
|
1
|
5
|
3 |
||||||||
Interest expense | (2 |
) | (1 |
) | (6 |
) | (3
|
) | ||||
|
|
|
|
|||||||||
Pre-tax earnings from continuing operations |
19 |
24 |
52 |
70 |
||||||||
Income taxes |
(7 |
) | (9 |
) |
(20 |
) |
(26 |
) | ||||
|
|
|
|
|||||||||
Earnings from continuing operations | 12 |
15 |
32 |
44 |
||||||||
Discontinued operations | -
|
-
|
(1 |
) | 3 |
|||||||
|
|
|
|
|||||||||
Net earnings |
12 |
15 |
31 |
47 |
||||||||
|
(e) Income taxes
The income tax adjustment
represents the impact the United States GAAP adjustments that we describe above
have on income taxes. The accounting for income taxes under Canadian GAAP and
United States GAAP is essentially the same, except that:
| income
tax rates of enacted or substantively enacted tax law are used to calculate
future income tax assets and
liabilities under Canadian GAAP |
| only enacted income tax rates are used under United States GAAP. |
(f) Non-controlling
interest
The non-controlling
interest adjustment represents the impact the United States GAAP adjustments
that we describe above have on non-controlling interest.
(g) Change
in unrealized gain (loss) on investments
Our portfolio
investments are recorded at cost under Canadian GAAP. They would be classified
as available-forsale under United States GAAP and would be carried
at fair value, with any unrealized gains or losses included in other comprehensive
loss, net of tax.
(h) Discontinued
operations
Differences between
Canadian GAAP and United States GAAP will cause the historical carrying values
of the net assets of discontinued operations to be different.
3
Appendix A Reconciliation of Canadian Generally Accepted Accounting Principles | |
(GAAP) to United States GAAP |
(i) Accounting
for stock-based compensation
In December 2002,
the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation
Transition and Disclosure. It applies to fiscal years ending after
December 15, 2002. It amends the transitional provisions of SFAS No. 123 for
companies that choose to recognize stock-based compensation under the fair value-based
method of SFAS No. 123, instead of choosing to continue following the intrinsic
value method of Accounting Principles Board Opinion (APB) No. 25.
We adopted the fair value-based method of accounting on a prospective basis, effective January 1, 2002.
The table below shows the stock-based compensation expense and pro forma net earnings using the Black-Scholes pricing model.
Three
months |
Nine
months |
|||||||||||
|
|
|||||||||||
For the period ended September 30 (unaudited) | 2005 |
2004 |
2005 |
2004 |
||||||||
|
||||||||||||
Net earnings, as reported | 447 |
85 |
1,498 |
1,167 |
||||||||
Compensation cost included in net earnings | 18 |
16 |
37 |
40 |
||||||||
Total compensation cost | (18 |
) | (18 |
) |
(38 |
) | (47 |
) | ||||
|
|
|
|
|||||||||
Pro forma net earnings | 447 |
83 |
1,497 |
1,160 |
||||||||
Pro forma net earnings per common share - basic | 0.46 |
0.07 |
1.55 |
1.18 |
||||||||
Pro forma net earnings per common share - diluted | 0.46 |
0.07 |
1.55 |
1.18 |
||||||||
|
(j) Accounting for derivative
instruments and hedging activities (SFAS No. 133)
On January 1,
2001, we adopted SFAS No. 133, Accounting for Derivatives Instruments and
Hedging Activities, as amended by SFAS No. 138. Under this standard, all
derivatives must be recorded on the balance sheet at fair value under United
States GAAP. In addition, certain economic hedging strategies, such as using
dividend rate swaps to hedge preferred share dividends and hedging SCPs, no
longer qualify for hedge accounting under United States GAAP.
The change in the fair value of derivative contracts that no longer qualify for hedge accounting under United States GAAP is reported in net earnings.
Under Canadian GAAP, the proceeds are being deferred and amortized against the dividends on these preferred shares over the remaining original terms of the swaps. Under United States GAAP, these dividend rate swaps did not qualify for hedge accounting and were recorded on the balance sheet at fair value. As a result, the amortization of the deferred gain under Canadian GAAP is reversed for purposes of United States GAAP.
4
Certification
of Interim Filings
during Transition Period
I, Michael J. Sabia, President and Chief Executive Officer of BCE Inc., certify that:
1. | I
have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of BCE Inc. (the issuer) for the interim period ending September
30, 2005; |
2. | Based
on my knowledge, the interim filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered
by the interim filings; and |
3. | Based
on my knowledge, the interim financial statements together with the other
financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations and
cash flows of the issuer, as of the date and for the periods presented
in the interim filings. |
Dated: November 2, 2005 | By: |
(signed) Michael J. Sabia |
Michael J. Sabia President and Chief Executive Officer BCE Inc. |
Certification
of Interim Filings
during Transition Period
I, Siim A. Vanaselja, Chief Financial Officer of BCE Inc., certify that:
1. |
I have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of BCE Inc. (the issuer) for the interim period ending September
30, 2005; |
2. |
Based on my knowledge, the interim filings do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered
by the interim filings; and |
3. |
Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date and for the periods presented
in the interim filings. |
Dated: November 2, 2005 | By: |
(signed) Siim A. Vanaselja |
Siim A. Vanaselja Chief Financial Officer BCE Inc. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BCE Inc. | |
(signed) Siim A. Vanaselja | |
|
|
Siim A. Vanaselja | |
Chief Financial Officer | |
Date: November 2, 2005 |