Bce Inc 6-K, filed May 5, 2022
Bce Inc (BCE)
About this 6-K
Bce Inc filed this 6-K on May 5, 2022.
| For the month of: | May 2022 | Commission File Number: | 1-8481 | ||||||||
BCE Inc. | |||||
| By: | (signed) Glen LeBlanc | ||||
| Glen LeBlanc Executive Vice-President and Chief Financial Officer | |||||
| Date: | May 5, 2022 | ||||
Exhibit 99.1
MD&A
Management’s discussion and analysis
In this management’s discussion and analysis (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.
All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 9, Non-GAAP financial measures, other financial measures and key performance indicators (KPIs) on pages 32 to 36 for a list of defined non-GAAP financial measures, other financial measures and KPIs.
Please refer to BCE’s unaudited consolidated financial statements for the first quarter of 2022 (Q1 2022 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2021 dated March 3, 2022 (BCE 2021 Annual MD&A). In preparing this MD&A, we have taken into account information available to us up to May 4, 2022, the date of this MD&A, unless otherwise stated.
You will find additional information relating to BCE, including BCE’s annual information form for the year ended December 31, 2021 dated March 3, 2022 (BCE 2021 AIF) and recent financial reports, including the BCE 2021 Annual MD&A, on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.
Documents and other information contained in BCE’s website or in any other site referred to in BCE’s website or in this MD&A are not part of this MD&A and are not incorporated by reference herein.
This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q1) ended March 31, 2022 and 2021.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This MD&A and, in particular, but without limitation, section 1.2, Key corporate and business developments, the section and sub-sections entitled Assumptions, section 3.2, Bell Wireline – Key business developments, and section 4.7, Liquidity, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to BCE’s 2022 annualized common share dividend, BCE’s anticipated capital expenditures, network deployment plans and the benefits expected to result therefrom, including our two-year increased capital expenditure acceleration program for the accelerated expansion of our broadband fibre, Fifth Generation (5G) and rural networks, the expectation that our available liquidity (as defined in section 4.7, Liquidity) will be sufficient to meet our anticipated cash requirements for the remainder of 2022, BCE’s business outlook, objectives, plans and strategic priorities, and other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target, and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities laws and of the United States (U.S.) Private Securities Litigation Reform Act of 1995.
Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at May 4, 2022 and, accordingly, are subject to change after that date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in, or implied by, such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. These statements are not guarantees of future performance or events, and we caution you against relying on any of these forward-looking statements. Forward-looking statements are presented in this MD&A for the purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.
We have made certain economic, market, operational and other assumptions in preparing the forward-looking statements contained in this MD&A and, in particular, but without limitation, the forward-looking statements contained in the previously mentioned sections of this MD&A. These assumptions include, without limitation, the assumptions described in the section and sub-sections of this MD&A entitled Assumptions, which section and sub-sections are incorporated by reference in this cautionary statement. Subject to various factors including, without limitation, the future impacts of the COVID-19 pandemic and of the conflict between Russia and Ukraine, which are difficult to predict, we believe that our assumptions were reasonable at May 4, 2022. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect.
Important risk factors that could cause actual results or events to differ materially from those expressed in, or implied by, the previously-mentioned forward-looking statements and other forward-looking statements contained in this MD&A, include, but are not limited to: the adverse effects of the COVID-19 pandemic, including from the restrictive measures implemented or to be implemented as a result thereof, and the adverse effects of the conflict between Russia and Ukraine, including from the economic sanctions imposed or to be imposed as a result thereof, and supply chain disruptions resulting therefrom; adverse economic and financial market conditions, including from the COVID-19 pandemic and the conflict between Russia and Ukraine; a declining level of retail and commercial activity, and the resulting negative impact on the demand for, and prices of, our products and services; the intensity of competitive activity including from new and emerging competitors; the level of technological substitution and the presence of alternative service providers contributing to disruptions and disintermediation in each of our business segments; changing customer behaviour and the expansion of over-the-top (OTT) television (TV) and other alternative service providers, as well as the fragmentation of, and changes in, the advertising market; rising content costs and challenges in our ability to acquire or develop key content; the proliferation of content piracy; higher Canadian smartphone penetration and reduced or slower immigration flow; regulatory initiatives, proceedings and decisions, government consultations and government positions that affect us and influence our business including, without limitation, concerning the conditions and prices at which access to our networks may be mandated and spectrum may be acquired in auctions; the inability to protect our physical and non-physical assets from events such as information security attacks, which risk may be exacerbated by the conflict between Russia and Ukraine, unauthorized access or entry, fire and natural disasters; the failure to implement effective data governance; the failure to evolve and transform our networks, systems and operations using next-generation technologies while lowering our cost structure; the inability to drive a positive customer experience; the failure to attract, develop and retain a diverse and talented team capable of furthering our strategic imperatives; labour disruptions and shortages; the failure to maintain operational networks;
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 1
MD&A
the risk that we may need to incur significant unplanned capital expenditures to provide additional capacity and reduce network congestion; the complexity of our operations; the failure to implement or maintain highly effective processes and information technology (IT) systems; events affecting the functionality of, and our ability to protect, test, maintain, replace and upgrade, our networks, IT systems, equipment and other facilities; in-orbit and other operational risks to which the satellites used to provide our satellite TV services are subject; our dependence on third-party suppliers, outsourcers, and consultants to provide an uninterrupted supply of the products and services we need; the failure of our vendor selection, governance and oversight processes, including our management of supplier risk in the areas of security, data governance and responsible procurement; the quality of our products and services and the extent to which they may be subject to defects or fail to comply with applicable government regulations and standards; the inability to access adequate sources of capital and generate sufficient cash flows from operating activities to meet our cash requirements, fund capital expenditures and provide for planned growth; uncertainty as to whether dividends will be declared by BCE’s board of directors or whether the dividend on common shares will be increased; the inability to manage various credit, liquidity and market risks; new or higher taxes due to new tax laws or changes thereto or in the interpretation thereof, and the inability to predict the outcome of government audits; the failure to reduce costs, as well as unexpected increases in costs, and the inability to generate anticipated benefits from acquisitions and corporate restructurings; the failure to evolve practices to effectively monitor and control fraudulent activities; pension obligation volatility and increased contributions to post-employment benefit plans; unfavourable resolution of legal proceedings and, in particular, class actions; the failure to develop and implement strong corporate governance practices and compliance frameworks and to comply with legal and regulatory obligations; the failure to recognize and adequately respond to climate change and other environmental concerns and expectations; pandemics, epidemics and other health risks, including health concerns about radio frequency emissions from wireless communications devices and equipment; the inability to adequately manage social issues; and internal factors, such as the failure to implement sufficient corporate and business initiatives, as well as various external factors which could challenge our ability to achieve our environmental, social and governance (ESG) targets including, without limitation, those related to greenhouse gas (GHG) emissions reduction and diversity, equity and inclusion.
We caution that the foregoing list of risk factors is not exhaustive and other factors could also materially adversely affect us. Please see section 9, Business risks of the BCE 2021 Annual MD&A for a more complete description of the above-mentioned and other risks, which section, and the other sections of the BCE 2021 Annual MD&A referred to therein, are incorporated by reference in this cautionary statement. In addition, please see section 4.8, Litigation in this MD&A for an update to the legal proceedings described in the BCE 2021 AIF, which section 4.8 is incorporated by reference in this cautionary statement. Please also see section 6, Regulatory environment in this MD&A for an update to the regulatory initiatives and proceedings described in the BCE 2021 Annual MD&A, which section 6 is incorporated by reference in this cautionary statement. Please also see section 7, Business risks in this MD&A for an update to the description of the risk factors relating to the COVID-19 pandemic described in the BCE 2021 Annual MD&A and for a description of the risk factors relating to the conflict between Russia and Ukraine, which section 7 is incorporated by reference in this cautionary statement. Any of those risks could cause actual results or events to differ materially from our expectations expressed in, or implied by, the forward-looking statements set out in this MD&A. Except for the updates set out in section 4.8, Litigation, in section 6, Regulatory environment and in section 7, Business risks of this MD&A, the risks described in the BCE 2021 Annual MD&A remain substantially unchanged.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, liquidity, financial results or reputation. From time to time, we consider potential acquisitions, dispositions, mergers, business combinations, investments, monetizations, joint ventures and other transactions, some of which may be significant. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any such transactions or of special items that may be announced or that may occur after May 4, 2022. The financial impact of these transactions and special items can be complex and depends on facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way, or in the same way we present known risks affecting our business.
2 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
1 MD&A Overview
| 1 | Overview |
| 1.1 | Financial Highlights |
BCE Q1 2022 SELECTED QUARTERLY INFORMATION
| Operating revenues | Net earnings | Adjusted EBITDA (1) | ||
| $5,850 | $934 | $2,584 | ||
| million | million | million | ||
| +2.5% vs. Q1 2021 | +36.0% vs. Q1 2021 | +6.4% vs. Q1 2021 | ||
| Net earnings attributable | Adjusted net earnings (1) | Cash flows from | Free cash flow (1) | |||
| to common shareholders | operating activities | |||||
| $877 | $811 | $1,716 | $723 | |||
| million | million | million | million | |||
| +36.6% vs. Q1 2021 | +15.2% vs. Q1 2021 | (13.9%) vs. Q1 2021 | (23.1%) vs. Q1 2021 | |||
| BCE CUSTOMER CONNECTIONS | ||||||
| Wireless | Retail high-speed | Retail TV (2) | Retail residential network | |||
| Total mobile phones | Internet (2) | access services (NAS) lines (2) | ||||
| +3.5% | +6.0% | +0.5% | (7.1%) | |||
| 9.5 million subscribers | 4 million subscribers | 2.7 million subscribers | 2.3 million subscribers | |||
| at March 31, 2022 | at March 31, 2022 | at March 31, 2022 | at March 31, 2022 | |||
| (1) | Adjusted EBITDA is a total of segments measure, and adjusted net earnings and free cash flow are non-GAAP financial measures. See section 9.3, Total of segments measures and section 9.1, Non-GAAP financial measures in this MD&A for more information on these measures. |
| (2) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail Internet protocol television (IPTV) and retail residential NAS lines subscriber bases increased by 67,090, 9,025 and 3,456 subscribers, respectively. |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 3
1 MD&A Overview
BCE INCOME STATEMENTS – SELECTED INFORMATION
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Operating revenues |
||||||||||||||||
| Service |
5,177 | 4,968 | 209 | 4.2% | ||||||||||||
| Product |
673 | 738 | (65 | ) | (8.8% | ) | ||||||||||
| Total operating revenues |
5,850 | 5,706 | 144 | 2.5% | ||||||||||||
| Operating costs |
(3,266 | ) | (3,277 | ) | 11 | 0.3% | ||||||||||
| Adjusted EBITDA |
2,584 | 2,429 | 155 | 6.4% | ||||||||||||
| Adjusted EBITDA margin (1) |
44.2 | % | 42.6 | % | 1.6 p | ts | ||||||||||
| Net earnings attributable to: |
||||||||||||||||
| Common shareholders |
877 | 642 | 235 | 36.6% | ||||||||||||
| Preferred shareholders |
34 | 32 | 2 | 6.3% | ||||||||||||
|
Non-controlling interest |
23 | 13 | 10 | 76.9% | ||||||||||||
| Net earnings |
934 | 687 | 247 | 36.0% | ||||||||||||
| Adjusted net earnings |
811 | 704 | 107 | 15.2% | ||||||||||||
| Net earnings per common share (EPS) |
0.96 | 0.71 | 0.25 | 35.2% | ||||||||||||
| Adjusted EPS (2) |
0.89 | 0.78 | 0.11 | 14.1% | ||||||||||||
| (1) | Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues. |
| (2) | Adjusted EPS is a non-GAAP ratio. Refer to section 9.2, Non-GAAP ratios in this MD&A for more information on this measure. |
BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Cash flows from operating activities |
1,716 | 1,992 | (276 | ) | (13.9% | ) | ||||||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | 60 | 5.9% | ||||||||||
| Free cash flow |
723 | 940 | (217 | ) | (23.1% | ) | ||||||||||
Q1 2022 FINANCIAL HIGHLIGHTS
BCE operating revenues grew by 2.5%, in Q1 2022, compared to the same period last year, reflecting our ongoing recovery from the unfavourable effects of the COVID-19 pandemic, which have moderated. The increase in operating revenues was driven by higher year-over-year service revenues of 4.2%, mainly due to strong wireless and internet performance along with higher media subscriber revenues, including a one-time retroactive adjustment related to a contract with a Canadian TV distributor, and greater advertising revenues, moderated by continued erosion in voice, and satellite TV revenues. Product revenues declined by 8.8% year over year, primarily due to lower mobile phone postpaid upgrades and gross subscriber activations in Bell Wireless, as well as lower equipment sales in our large business market due to strong sales to the government sector in Q1 2021 and delayed customer spending attributable to global supply chain challenges driven by the COVID-19 pandemic.
Net earnings increased by $247 million in the first quarter of 2022, compared to the same period last year, mainly due to higher adjusted EBITDA, higher other income and lower severance, acquisition and other costs, partly offset by higher income taxes from higher earnings.
BCE’s adjusted EBITDA increased by 6.4% in Q1 2022, compared to Q1 2021, driven by growth across all three segments. The higher year-over-year adjusted EBITDA was due to increased revenues along with lower operating costs. This drove an adjusted EBITDA margin of 44.2% in Q1 2022, which represented a 1.6 pts increase over the same period last year, resulting from greater service revenue flow-through and a decreased proportion of low-margin product sales in our total revenue base.
BCE’s EPS of $0.96 in Q1 2022 increased by $0.25, compared to the same period last year.
In the first quarter of 2022, adjusted net earnings, which excludes the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net equity gains (losses) on investments in associates and joint ventures, net gains (losses) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI, was $811 million, or $0.89 per common share, compared to $704 million, or $0.78 per common share, for the same period last year.
Cash flows from operating activities in the first quarter of 2022 decreased by $276 million, compared to the same period last year, mainly due to lower cash from working capital reflecting the timing of supplier payments, and higher interest paid, partly offset by higher adjusted EBITDA.
Free cash flow in Q1 2022 decreased by $217 million, compared to the same period last year, mainly due to lower cash flows from operating activities, excluding cash from acquisition and other costs paid, partly offset by lower capital expenditures.
4 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
1 MD&A Overview
| 1.2 | Key corporate and business developments |
This section contains forward-looking statements, including relating to BCE’s 2022 annualized common share dividend and our objectives and plans. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
COMMON SHARE DIVIDEND INCREASE
On February 2, 2022, BCE’s board of directors approved a 5.1%, or 18 cents per share, increase in the annualized common share dividend from $3.50 per share to $3.68 per share, effective with BCE’s 2022 first quarter dividend paid on April 18, 2022 to common shareholders of record on March 15, 2022. This is BCE’s 14th consecutive year of 5% or better dividend growth.
PUBLIC DEBT OFFERING AND REDEMPTION
On February 11, 2022, Bell Canada completed a public offering in the United States of US $750 million (Cdn $954 million) of notes in one series (the Notes). The US $750 million Series US-7 Notes will mature on August 15, 2052 and carry an annual interest rate of 3.65%. The Notes are fully and unconditionally guaranteed by BCE Inc. The net proceeds of the offering were used towards the cost of funding the early redemption in March 2022 of Bell Canada’s Cdn $1 billion principal amount of 3.35% Series M-26 medium-term note (MTN) debentures due March 22, 2023.
REDEMPTION OF SERIES AO PREFERRED SHARES
On March 31, 2022, BCE redeemed all of its outstanding Cumulative Redeemable First Preferred Shares, Series AO (Series AO Preferred Shares) at a redemption price of $25.00 per Series AO Preferred Share, for a total amount of $115 million.
BELL NAMED ONE OF CANADA’S BEST DIVERSITY EMPLOYERS, A TOP
FAMILY-FRIENDLY EMPLOYER AND A MONTRÉAL TOP EMPLOYER
For the sixth year in a row, Bell has been named one of Canada’s Best Diversity Employers in Mediacorp’s 2022 report on workplace diversity and inclusion. The award recognizes Bell’s commitment to fostering an inclusive, equitable and accessible workplace where all team members can make an impact, immerse themselves in opportunities, and feel like they belong.
In addition, Bell has once again been named a Top Family-Friendly Employer and a Montréal Top Employer, reflecting our continued efforts to engage and invest in our people with unmatched job opportunities, career development programs, employee benefits, commitment to mental health and more.
Our employee initiatives since the beginning of 2022 include:
| • | Rolling out unlimited mental health benefit coverage for team members and their eligible family members to support their mental health and well-being |
| • | Introducing a flexible holiday policy, including the ability to substitute days, reflecting our support for flexibility and diversity in the workplace |
| • | Launched an Employee Value Proposition, capturing Bell’s promise to current and future employees as well as the values and experiences that make Bell unique |
| • | Welcoming our employees back to most office locations in April with Bell’s flexible, hybrid work model, Bell Workways |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 5
1 MD&A Overview
| 1.3 | Assumptions |
As at the date of this MD&A, our forward-looking statements set out in the BCE 2021 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following assumptions as well as the various assumptions referred to under the sub-sections entitled Assumptions set out in section 3, Business segment analysis of this MD&A.
ASSUMPTIONS ABOUT THE CANADIAN ECONOMY
We have made certain assumptions concerning the Canadian economy. As most public health restrictions in Canada have been lifted, pandemic-related effects on demand – notably consumer caution and reluctance to travel – are assumed to fade over 2022 and 2023. In particular, we have assumed:
| • | Strong economic growth, given the Bank of Canada’s most recent estimated growth in Canadian gross domestic product of around 4.25% on average in 2022 |
| • | Elevated consumer price index (CPI) inflation driven by sharp increases in energy and food prices as well as supply disruptions and strong demand for goods |
| • | Tight labour market leading to rising wage growth |
| • | Strong household consumption growth supported by job gains, the spending of some of the savings accumulated during the pandemic, and the lifting of public health restrictions |
| • | Solid business investment outside the oil and gas sector supported by robust demand, the gradual easing of supply constraints and improved business confidence |
| • | Higher interest rates |
| • | Higher immigration levels |
| • | The conflict between Russia and Ukraine affecting the Canadian economy predominantly through higher commodity prices |
| • | Canadian dollar expected to remain at or near current levels. Further movements may be impacted by the degree of strength of the U.S. dollar, interest rates and changes in commodity prices. |
MARKET ASSUMPTIONS
| • | A consistently high level of wireline and wireless competition in consumer, business and wholesale markets |
| • | Higher, but slowing, wireless industry penetration |
| • | A shrinking data and voice connectivity market as business customers migrate to lower-priced telecommunications solutions or alternative OTT competitors |
| • | While the advertising market continues to be adversely impacted by cancelled or delayed advertising campaigns from many sectors due to the economic downturn during the COVID-19 pandemic, we do expect gradual recovery in 2022 |
| • | Declines in broadcasting distribution undertaking (BDU) subscribers driven by increasing competition from the continued rollout of subscription video-on-demand (SVOD) streaming services together with further scaling of OTT aggregators |
ASSUMPTIONS UNDERLYING EXPECTED REDUCTIONS IN CONTRIBUTIONS TO OUR DB PENSION PLANS
| • | At the relevant time, our defined benefit (DB) pension plans will remain in funded positions with going concern surpluses and maintain solvency ratios that exceed the minimum legal requirements for a contribution holiday to be taken |
| • | No significant declines in our DB pension plans’ financial position due to declines in investment returns or interest rates |
| • | No material experience losses from other unforeseen events such as through litigation or changes in laws, regulations or actuarial standards |
6 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
2 MD&A Consolidated financial analysis
| 2 | Consolidated financial analysis |
This section provides detailed information and analysis about BCE’s performance in Q1 2022 compared with Q1 2021. It focuses on BCE’s consolidated operating results and provides financial information for our Bell Wireless, Bell Wireline and Bell Media business segments. For further discussion and analysis of our business segments, refer to section 3, Business segment analysis.
| 2.1 | BCE consolidated income statements |
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Operating revenues |
||||||||||||||||
| Service |
5,177 | 4,968 | 209 | 4.2% | ||||||||||||
| Product |
673 | 738 | (65 | ) | (8.8% | ) | ||||||||||
| Total operating revenues |
5,850 | 5,706 | 144 | 2.5% | ||||||||||||
| Operating costs |
(3,266 | ) | (3,277 | ) | 11 | 0.3% | ||||||||||
| Adjusted EBITDA |
2,584 | 2,429 | 155 | 6.4% | ||||||||||||
| Adjusted EBITDA margin |
44.2 | % | 42.6 | % | 1.6 p | ts | ||||||||||
| Severance, acquisition and other costs |
(13 | ) | (89 | ) | 76 | 85.4% | ||||||||||
| Depreciation |
(891 | ) | (895 | ) | 4 | 0.4% | ||||||||||
| Amortization |
(260 | ) | (238 | ) | (22 | ) | (9.2% | ) | ||||||||
| Finance costs |
||||||||||||||||
| Interest expense |
(260 | ) | (267 | ) | 7 | 2.6% | ||||||||||
| Net return (interest) on post-employment benefit plans |
18 | (5 | ) | 23 | n.m. | |||||||||||
| Impairment of assets |
(2 | ) | (3 | ) | 1 | 33.3% | ||||||||||
| Other income |
93 | 8 | 85 | n.m. | ||||||||||||
| Income taxes |
(335 | ) | (253 | ) | (82 | ) | (32.4% | ) | ||||||||
| Net earnings |
934 | 687 | 247 | 36.0% | ||||||||||||
| Net earnings attributable to: |
||||||||||||||||
| Common shareholders |
877 | 642 | 235 | 36.6% | ||||||||||||
| Preferred shareholders |
34 | 32 | 2 | 6.3% | ||||||||||||
|
Non-controlling interest |
23 | 13 | 10 | 76.9% | ||||||||||||
| Net earnings |
934 | 687 | 247 | 36.0% | ||||||||||||
| Adjusted net earnings |
811 | 704 | 107 | 15.2% | ||||||||||||
| EPS |
0.96 | 0.71 | 0.25 | 35.2% | ||||||||||||
| Adjusted EPS |
0.89 | 0.78 | 0.11 | 14.1% | ||||||||||||
n.m.: not meaningful
| 2.2 | Customer connections |
BCE NET ACTIVATIONS (LOSSES)
| Q1 2022 | Q1 2021 | % CHANGE | ||||||||||
| Wireless mobile phone net subscriber activations (losses) |
32,176 | 2,405 | n.m. | |||||||||
| Postpaid |
34,230 | 32,925 | 4.0% | |||||||||
| Prepaid |
(2,054 | ) | (30,520 | ) | 93.3% | |||||||
| Wireless mobile connected devices net subscriber activations |
48,877 | 74,159 | (34.1% | ) | ||||||||
| Wireline retail high-speed Internet net subscriber activations |
26,024 | 21,208 | 22.7% | |||||||||
| Wireline retail TV net subscriber (losses) activations |
(8,361 | ) | (9,112 | ) | 8.2% | |||||||
| IPTV |
12,260 | 10,696 | 14.6% | |||||||||
| Satellite |
(20,621 | ) | (19,808 | ) | (4.1% | ) | ||||||
| Wireline retail residential NAS lines net losses |
(42,345 | ) | (51,069 | ) | 17.1% | |||||||
| Total services net activations |
56,371 | 37,591 | 50.0% | |||||||||
n.m.: not meaningful
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 7
2 MD&A Consolidated financial analysis
TOTAL BCE CUSTOMER CONNECTIONS
| Q1 2022 | Q1 2021 | % CHANGE | ||||||||||
| Wireless mobile phone subscribers |
9,491,361 | 9,166,748 | 3.5% | |||||||||
| Postpaid |
8,664,275 | 8,361,264 | 3.6% | |||||||||
| Prepaid |
827,086 | 805,484 | 2.7% | |||||||||
| Wireless mobile connected devices subscribers |
2,298,671 | 2,130,312 | 7.9% | |||||||||
| Wireline retail high-speed Internet subscribers (1) |
3,954,767 | 3,730,576 | 6.0% | |||||||||
| Wireline retail TV subscribers (1) |
2,735,674 | 2,723,368 | 0.5% | |||||||||
| IPTV (1) |
1,903,726 | 1,817,069 | 4.8% | |||||||||
| Satellite |
831,948 | 906,299 | (8.2% | ) | ||||||||
| Wireline retail residential NAS lines (1) |
2,259,716 | 2,432,863 | (7.1% | ) | ||||||||
| Total services subscribers |
20,740,189 | 20,183,867 | 2.8% | |||||||||
| (1) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 67,090, 9,025 and 3,456 subscribers, respectively. |
BCE added 56,371 net retail subscriber activations in Q1 2022, increasing by 50.0% compared to the same period last year. The net retail subscriber activations in Q1 2022 consisted of:
| • | 32,176 wireless mobile phone net subscriber activations, along with 48,877 wireless mobile connected devices net subscriber activations |
| • | 26,024 retail high-speed Internet net subscriber activations |
| • | 8,361 retail TV net subscriber losses comprised of 20,621 retail satellite TV net subscriber losses, offset in part by 12,260 retail IPTV net subscriber activations |
| • | 42,345 retail residential NAS lines net losses |
At March 31, 2022, BCE’s retail subscriber connections totaled 20,740,189, up 2.8% year over year, and consisted of:
| • | 9,491,361 wireless mobile phone subscribers, up 3.5% year over year, and 2,298,671 wireless mobile connected devices subscribers, up 7.9% year over year |
| • | 3,954,767 retail high-speed Internet subscribers, 6.0% higher than the same period last year |
| • | 2,735,674 total retail TV subscribers, up 0.5% over the same period last year, comprised of 1,903,726 retail IPTV subscribers, up 4.8% year over year, and 831,948 retail satellite TV subscribers, down 8.2% year over year |
| • | 2,259,716 retail residential NAS lines, down 7.1% over Q1 2021 |
| 2.3 | Operating revenues |
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
2,210 | 2,100 | 110 | 5.2% | ||||||||||||
| Bell Wireline |
3,013 | 3,081 | (68 | ) | (2.2% | ) | ||||||||||
| Bell Media |
825 | 713 | 112 | 15.7% | ||||||||||||
| Inter-segment eliminations |
(198 | ) | (188 | ) | (10 | ) | (5.3% | ) | ||||||||
| Total BCE operating revenues |
5,850 | 5,706 | 144 | 2.5% | ||||||||||||
BCE
Total BCE operating revenues increased by 2.5% in Q1 2022, compared to the same period last year, reflecting our continued recovery from the unfavourable effects of the COVID-19 pandemic. BCE service revenues of $5,177 million in Q1 2022 increased by 4.2% year-over-year, whereas product revenues of $673 million in Q1 2022, declined by 8.8% over the same period last year.
The year-over-year increase in Q1 2022 operating revenues was driven by growth in our Bell Media and Bell Wireless segments, offset in part by a decline in our Bell Wireline segment. Bell Media operating revenues grew by 15.7% in Q1 2022, over the same period last year, from higher subscriber revenues, including a one-time retroactive adjustment related to a contract with a Canadian TV distributor, and greater advertising revenues. Bell Wireless operating revenues increased by 5.2% in Q1 2022, compared to the same period last year, due to higher service revenues of 8.7%, offset in part by lower product revenues of 3.8%. Bell Wireline operating revenues declined by 2.2% in Q1 2022, over Q1 2021, due to lower product revenues of 28.6%, as well as lower service revenue of 0.8%, from ongoing voice erosion and lower data revenues.
8 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
2 MD&A Consolidated financial analysis
| 2.4 | Operating costs |
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
(1,201 | ) | (1,177 | ) | (24 | ) | (2.0% | ) | ||||||||
| Bell Wireline |
(1,646 | ) | (1,718 | ) | 72 | 4.2% | ||||||||||
| Bell Media |
(617 | ) | (570 | ) | (47 | ) | (8.2% | ) | ||||||||
| Inter-segment eliminations |
198 | 188 | 10 | 5.3% | ||||||||||||
| Total BCE operating costs |
(3,266 | ) | (3,277 | ) | 11 | 0.3% | ||||||||||
| (1) | Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
| (2) | Labour costs (net of capitalized costs) include wages, salaries and related taxes and benefits, post-employment benefit plans service cost, and other labour costs, including contractor and outsourcing costs. |
| (3) | Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, IT costs, professional service fees and rent. |
BCE
BCE operating costs decreased by 0.3% in Q1 2022, compared to Q1 2021, due to reduced expenses in Bell Wireline of 4.2%, partly offset by higher expenses in Bell Media of 8.2% and in Bell Wireless of 2.0%.
| 2.5 | Net earnings |
|
|
Net earnings in the first quarter of 2022 increased by $247 million, compared to the same period last year, mainly due to higher adjusted EBITDA, higher other income and lower severance, acquisition and other costs, partly offset by higher income taxes from higher earnings.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 9
2 MD&A Consolidated financial analysis
| 2.6 | Adjusted EBITDA |
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
1,009 | 923 | 86 | 9.3% | ||||||||||||
| Bell Wireline |
1,367 | 1,363 | 4 | 0.3% | ||||||||||||
| Bell Media |
208 | 143 | 65 | 45.5% | ||||||||||||
| Total BCE adjusted EBITDA |
2,584 | 2,429 | 155 | 6.4% | ||||||||||||
BCE
BCE’s adjusted EBITDA was up by 6.4% in Q1 2022, compared to the same period last year, attributable to growth across all three of our segments. The adjusted EBITDA growth was driven by greater operating revenues combined with lower operating costs. Adjusted EBITDA margin of 44.2% in Q1 2022, increased by 1.6 pts over the same period last year, mainly driven by greater service revenue flow-through and a decreased proportion of low-margin product sales in our total revenue base.
| 2.7 | Severance, acquisition and other costs |
2022
Severance, acquisition and other costs of $13 million in the first quarter of 2022 included:
| • | Severance costs of $18 million related to involuntary and voluntary employee terminations |
| • | Acquisition and other costs recovery of $5 million in Q1 2022 |
2021
Severance, acquisition and other costs of $89 million in the first quarter of 2021 included:
| • | Severance costs of $97 million related to involuntary and voluntary employee terminations |
| • | Acquisition and other costs recovery of $8 million |
| 2.8 | Depreciation and amortization |
DEPRECIATION
Depreciation in Q1 2022 decreased by $4 million, compared to Q1 2021, in part due to lower accelerated depreciation of Fourth Generation (4G) network elements as we transition to 5G, partly offset by a higher asset base as we continued to invest in our broadband and wireless networks as well as our IPTV services.
AMORTIZATION
Amortization in Q1 2022 increased by $22 million, compared to Q1 2021, mainly due to a higher asset base.
| 2.9 | Finance costs |
INTEREST EXPENSE
Interest expense in the first quarter of 2022 decreased by $7 million, compared to the same period last year, mainly due to higher capitalized interest, partly offset by higher average debt levels.
NET RETURN (INTEREST) ON POST-EMPLOYMENT BENEFIT PLANS
Net return (interest) on our post-employment benefit plans is based on market conditions that existed at the beginning of the year as well as the net post-employment benefit plan asset (liability). On January 1, 2022, the discount rate was 3.2% compared to 2.6% on January 1, 2021.
In the first quarter of 2022, net return on post-employment benefit plans was $18 million compared to net interest of $5 million in the first quarter of 2021, as a result of a net asset position in our post-employment benefits plans at the beginning of 2022 compared to a net obligation position at the beginning of 2021, and due to a higher discount rate in 2022.
The impacts of changes in market conditions during the year are recognized in other comprehensive income (OCI).
10 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
2 MD&A Consolidated financial analysis
| 2.10 | Other income |
2022
Other income of $93 million in the first quarter of 2022, included net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans and gains on investments which mainly related to the sale of our wholly-owned subsidiary, 6362222 Canada Inc. (Createch), partly offset by early debt redemption costs.
2021
Other income of $8 million in the first quarter of 2021 included net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans, partly offset by early debt redemption costs.
| 2.11 | Income taxes |
Income taxes in the first quarter of 2022 increased by $82 million, compared to the same period last year, mainly due to higher taxable income.
| 2.12 | Net earnings attributable to common shareholders and EPS |
Net earnings attributable to common shareholders in the first quarter of 2022 of $877 million, increased by $235 million, compared to the same period last year, mainly due to higher adjusted EBITDA, higher other income and lower severance, acquisition and other costs, partly offset by higher income taxes from higher earnings.
BCE’s EPS of $0.96 in Q1 2022 increased by $0.25, compared to the same period last year.
In the first quarter of 2022, adjusted net earnings, which excludes the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net equity gains (losses) on investments in associates and joint ventures, net gains (losses) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI, was $811 million, or $0.89 per common share, compared to $704 million, or $0.78 per common share, for the same period last year.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 11
3 MD&A Business segment analysis – Bell Wireless
| 3 | Business segment analysis |
| 3.1 | Bell Wireless |
KEY BUSINESS DEVELOPMENTS
LAUNCH OF NEW UNLIMITED ULTIMATE PLANS
Bell launched a new tier of mobile unlimited share plans that provide more data at max speeds, international messaging, HD video quality plus sharable data and calling within Canada and the United States. The new unlimited Ultimate 40 and Ultimate 50 plans (offering 40 gigabyte (GB) and 50GB of data respectively) are available for both new and existing customers. Customers who subscribe to Ultimate plans enjoy a bonus 24 month subscription to Crave Mobile. Customers who don’t consume as much content can choose the Essential unlimited share plan with 20GB at max data speeds up to 250 megabits per second (Mbps), SD video quality and hotspot capability. The new Ultimate plans are available on Bell 5G, which is consistently rated Canada’s fastest.
LAUNCH OF 5G EDGE COMPUTE
On April 27, 2022, Bell announced the launch of the first public multi-access edge computing (MEC) with Amazon Web Services (AWS) Wavelength in Canada. Building on Bell’s agreement with AWS, announced last year, together the two companies are deploying AWS Wavelength Zones throughout the country at the edge of Bell’s 5G network starting in Toronto. Bell Public MEC with AWS Wavelength embeds AWS compute and storage services at the edge of the Bell 5G network, closer to mobile and connected devices where data is generated and consumed. This enables software developers and businesses to take full advantage of the high speed and low latency of Bell’s 5G network and the cloud with AWS to build innovative, low-latency solutions that leverage real-time visual data processing, augmented/virtual reality (AR/VR), artificial intelligence and machine learning (AI/ML), advanced robotics, and much more.
DEPLOYMENT OF GOOGLE DISTRIBUTED CLOUD EDGE
On February 28, 2022, Bell Canada and Google Cloud announced a significant milestone in their strategic partnership with Bell’s deployment of Google Distributed Cloud Edge in its network, enabling more efficiency, reliability and scale while also driving new business opportunities. This is the world’s first implementation of core network functions on Google Distributed Cloud Edge, a fully managed product that brings Google Cloud’s infrastructure and services closer to where the data is being generated and consumed. This advancement builds on Bell and Google Cloud’s strategic partnership, announced in 2021, to combine Bell’s 5G network leadership with Google Cloud’s expertise in multi-cloud, data analytics and Artificial Intelligence (AI), and to enable Bell to drive operational efficiencies, and deliver richer customer experiences.
LUCKY MOBILE AVAILABLE AT BEST BUY
Bell is partnering with Best Buy to make Lucky Mobile available in more than 160 Best Buy locations across Canada, further increasing the reach of Bell’s prepaid wireless offering. With Lucky Mobile, customers get all the calling, texting and data they need with no activation fee, data overage charges or long-term commitment. Bell continues to make our prepaid brands more accessible to customers across Canada. Lucky is currently available in more than 1,700 Circle K and Couche-Tard convenience stores and 250 Giant Tiger retail stores across the country. Lucky Mobile and Virgin Plus prepaid are also available at more than 1,200 Dollarama Inc. (Dollarama) locations nationwide.
FINANCIAL PERFORMANCE ANALYSIS
Q1 2022 PERFORMANCE HIGHLIGHTS
12 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
3 MD&A Business segment analysis – Bell Wireless
| Total mobile phone subscriber growth |
Mobile phone postpaid net subscriber activations |
Mobile phone prepaid net subscriber losses |
Mobile phone postpaid churn in Q1 2022 |
Mobile phone blended average revenue per user (ARPU) (1) per month | ||||
| +3.5% | 34,230 | (2,054) | 0.79% | +5.1% | ||||
| Q1 2022 vs. Q1 2021 | in Q1 2022 | in Q1 2022 | improved 0.10 pts | Q1 2022: $57.98 | ||||
| vs. Q1 2021 | Q1 2021: $55.17 |
| (1) | Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a dollar unit per month. |
BELL WIRELESS RESULTS
REVENUES
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| External service revenues |
1,635 | 1,503 | 132 | 8.8% | ||||||||||||
| Inter-segment service revenues |
11 | 11 | – | – | ||||||||||||
| Operating service revenues |
1,646 | 1,514 | 132 | 8.7% | ||||||||||||
| External product revenues |
563 | 584 | (21 | ) | (3.6% | ) | ||||||||||
| Inter-segment product revenues |
1 | 2 | (1 | ) | (50.0% | ) | ||||||||||
| Operating product revenues |
564 | 586 | (22 | ) | (3.8% | ) | ||||||||||
| Bell Wireless operating revenues |
2,210 | 2,100 | 110 | 5.2% | ||||||||||||
Bell Wireless operating revenues increased by 5.2% in Q1 2022, compared to Q1 2021, due to higher service revenues, partly offset by lower product revenues.
Service revenues increased by 8.7% in the current quarter, compared to the same period last year, driven by:
| • | Continued growth in our postpaid and prepaid mobile phone and connected device subscriber bases |
| • | Higher roaming revenues due to increased customer travel resulting from the easing of COVID-19 restrictions, however below pre-pandemic levels |
| • | Flow-through of rate increases |
Product revenues decreased by 3.8% in Q1 2022, compared to Q1 2021, due to lower mobile phone postpaid upgrades and gross subscriber activations.
OPERATING COSTS AND ADJUSTED EBITDA
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(1,201 | ) | (1,177 | ) | (24 | ) | (2.0% | ) | ||||||||
| Adjusted EBITDA |
1,009 | 923 | 86 | 9.3% | ||||||||||||
| Total adjusted EBITDA margin |
45.7 | % | 44.0 | % | 1.7 p | ts | ||||||||||
Bell Wireless operating costs increased by 2.0% in Q1 2022, compared to Q1 2021, driven by:
| • | Higher network operating costs from the continued deployment of our mobile 5G network |
| • | Greater payments to other carriers corresponding to the higher roaming revenues |
These factors were partly offset by:
| • | Lower cost of goods sold associated with the lower year-over-year product sales |
Bell Wireless adjusted EBITDA increased by 9.3% in Q1 2022, compared to Q1 2021, due to greater operating revenues, moderated by higher operating costs. Adjusted EBITDA margin of 45.7% in Q1 2022, increased by 1.7 pts, compared to the same period last year, primarily driven by the flow-through of the service revenue growth and a lower proportion of low-margin product sales in our total revenue base.
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3 MD&A Business segment analysis – Bell Wireless
BELL WIRELESS OPERATING METRICS
| Q1 2022 | Q1 2021 | CHANGE | % CHANGE | |||||||||||||
| Mobile phones |
||||||||||||||||
| Blended ARPU ($/month) |
57.98 | 55.17 | 2.81 | 5.1% | ||||||||||||
| Gross subscriber activations |
349,908 | 340,127 | 9,781 | 2.9% | ||||||||||||
| Postpaid |
230,713 | 248,990 | (18,277 | ) | (7.3% | ) | ||||||||||
| Prepaid |
119,195 | 91,137 | 28,058 | 30.8% | ||||||||||||
| Net subscriber activations (losses) |
32,176 | 2,405 | 29,771 | n.m. | ||||||||||||
| Postpaid |
34,230 | 32,925 | 1,305 | 4.0% | ||||||||||||
| Prepaid |
(2,054 | ) | (30,520 | ) | 28,466 | 93.3% | ||||||||||
| Blended churn % (average per month) |
1.12 | % | 1.23 | % | 0.11 p | ts | ||||||||||
| Postpaid |
0.79 | % | 0.89 | % | 0.10 p | ts | ||||||||||
| Prepaid |
4.61 | % | 4.68 | % | 0.07 p | ts | ||||||||||
| Subscribers |
9,491,361 | 9,166,748 | 324,613 | 3.5% | ||||||||||||
| Postpaid |
8,664,275 | 8,361,264 | 303,011 | 3.6% | ||||||||||||
| Prepaid |
827,086 | 805,484 | 21,602 | 2.7% | ||||||||||||
| Mobile connected devices |
||||||||||||||||
| Net subscriber activations |
48,877 | 74,159 | (25,282 | ) | (34.1% | ) | ||||||||||
| Subscribers |
2,298,671 | 2,130,312 | 168,359 | 7.9% | ||||||||||||
n.m.: not meaningful
Mobile phone blended ARPU of $57.98 increased by 5.1% in Q1 2022, compared to the same period last year, driven by:
| • | Higher roaming revenues due to increased customer travel resulting from the easing of COVID-19 restrictions, however below pre-pandemic levels |
| • | Flow-through of rate increases |
Mobile phone gross subscriber activations increased by 2.9% in Q1 2022, compared to Q1 2021, due to higher prepaid gross activations, offset in part by lower postpaid gross activations.
| • | Mobile phone postpaid gross subscriber activations decreased by 7.3% in Q1 2022, compared to the same period last year, due to more targeted promotional offers and mobile device discounting as our focus remains on higher-value subscriber loadings |
| • | Mobile phone prepaid gross subscriber activations increased by 30.8% in Q1 2022, compared to the same period last year, due to greater market activity |
Mobile phone net subscriber activations increased by 29,771 in Q1 2022, compared to Q1 2021, due to lower prepaid net losses and greater postpaid net activations.
| • | Mobile phone postpaid net subscriber activations increased by 4.0% in Q1 2022, compared to the same period last year, driven by lower subscriber deactivations, offset in part by reduced gross activations |
| • | Mobile phone prepaid net subscriber losses in Q1 2022 were 28,466 favourable, compared to the same period last year, due to greater gross activations and lower subscriber deactivations |
Mobile phone blended churn of 1.12% in Q1 2022 improved by 0.11 pts, compared to Q1 2021.
| • | Mobile phone postpaid churn of 0.79% in Q1 2022 declined by 0.10 pts, compared to the same period last year, reflecting our continued investment in customer experience, retention and mobile networks |
| • | Mobile phone prepaid churn of 4.61% in Q1 2022 improved by 0.07 pts, compared to the same period last year, due to fewer year-over-year customer deactivations |
Mobile phone subscribers at March 31, 2022 totaled 9,491,361 an increase of 3.5%, from 9,166,748 subscribers at the end of Q1 2021. This consisted of 8,664,275 postpaid subscribers, an increase of 3.6% from 8,361,264 subscribers at the end of Q1 2021, and 827,086 prepaid subscribers, an increase of 2.7% from 805,484 subscribers at the end of Q1 2021.
Mobile connected device net subscriber activations decreased by 34.1% in Q1 2022, compared to the same period last year, due to greater net losses from data devices, primarily lower tablet net activations, offset in part by greater business Internet of Things (IoT) net activations.
Mobile connected device subscribers at March 31, 2022 totaled 2,298,671, an increase of 7.9% from 2,130,312 subscribers at the end of Q1 2021.
14 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
3 MD&A Business segment analysis – Bell Wireless
ASSUMPTIONS
As at the date of this MD&A, our forward-looking statements set out in the BCE 2021 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic, market and other assumptions referred to in section 1.3, Assumptions, of this MD&A.
| • | Maintain our market share of national operators’ wireless postpaid mobile phone net additions and growth of our prepaid subscriber base |
| • | Continued strong competitive intensity and promotional activity across all regions and market segments |
| • | Ongoing expansion and deployment of 5G wireless networks, offering competitive coverage and quality |
| • | Continued diversification of our distribution strategy with a focus on expanding direct-to-consumer (DTC) and online transactions |
| • | Growth in mobile phone blended ARPU, driven by growth in 5G subscriptions, and increased roaming revenue from the easing of travel restrictions implemented as a result of the COVID-19 pandemic, partly offset by reduced data overage revenue due to the continued adoption of unlimited plans |
| • | Accelerating business customer adoption of advanced 5G and IoT solutions |
| • | Improving wireless handset device availability in addition to stable device pricing and margins |
| • | Realization of cost savings related to operational efficiencies enabled by changes in consumer behaviour, digital adoption, product and service enhancements, new call centre and digital investments and other improvements to the customer service experience |
| • | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our wireless business |
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3 MD&A Business segment analysis – Bell Wireline
| 3.2 | Bell Wireline |
This section contains forward-looking statements, including relating to BCE’s anticipated capital expenditures, network deployment plans and the benefits expected to result therefrom. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
KEY BUSINESS DEVELOPMENTS
BELL INTRODUCES FASTEST INTERNET SPEEDS OF ANY MAJOR PROVIDER IN CANADA
Bell introduced the fastest Internet speeds of any major provider in Canada, with total speeds three times faster than cable. Bell pure fibre Internet service now offers download speeds of 3 gigabits per second (Gbps) as well as upload speeds of 3 Gbps, providing that faster experience while working or learning from home, playing games or sharing videos with the upload speeds that cable cannot deliver. Unlimited pure fibre 3 Gbps is now available in eligible areas of Toronto and will soon roll out in more regions across the country.
EXPANSION OF ALL-FIBRE INTERNET SERVICE
Bell announced the expansion of pure fibre Internet service to homes and businesses in the Ontario communities of Amherstberg, Georgina, Guelph and Pickering. The projects are part of Bell’s capital expenditure acceleration program to expand our next-generation broadband network infrastructure to additional locations across the country. Fully funded by Bell, this broadband expansion program will provide fast and high-capacity 100% fibre connections with Internet download speeds of up to 3 Gbps and access to leading Bell services such as Fibe TV. Last year, Bell announced an investment of $9.7 billion in capital expenditures over two years to accelerate the rollout of its broadband fibre, 5G and rural networks and help drive Canada’s recovery from the COVID-19 crisis. This will significantly increase the connections in localities across Canada while creating additional employment as network construction activity speeds up.
ACQUISITION OF EBOX AND OTHER RELATED COMPANIES
In February 2022, Bell acquired EBOX and other related companies, which provide Internet, telephone and television services to consumers and businesses in Québec and parts of Ontario. Bell will maintain the EBOX brand and operations, and EBOX will continue providing telecommunications options for consumers and businesses in these areas. As part of its commitment to provide Québec residents with fast and reliable telecommunications services now and in the future, Bell invests heavily in network infrastructure and expansion throughout urban and rural Québec. Under Bell, EBOX will benefit from the resources, scale and access to the technology needed to support the growth of the business and continue delivering improvements to the great services at competitive prices that have earned EBOX loyal customers over the past 25 years.
FINANCIAL PERFORMANCE ANALYSIS
Q1 2022 PERFORMANCE HIGHLIGHTS
| Retail high-speed | Retail high-speed | Retail TV (1) | Retail IPTV | Retail residential | ||||
| Internet (1) | Internet | NAS lines (1) | ||||||
| +6.0% | 26,024 | +0.5% | 12,260 | (7.1%) | ||||
| Subscriber growth Q1 2022 vs. Q1 2021 |
Total net subscriber activations in Q1 2022 |
Subscriber growth Q1 2022 vs. Q1 2021 |
Total net subscriber activations in Q1 2022 |
Subscriber decline Q1 2022 vs. Q1 2021 | ||||
| (1) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 67,090, 9,025 and 3,456 subscribers, respectively. |
16 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
3 MD&A Business segment analysis – Bell Wireline
BELL WIRELINE RESULTS
REVENUES
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Data |
1,953 | 1,965 | (12 | ) | (0.6% | ) | ||||||||||
| Voice |
771 | 803 | (32 | ) | (4.0% | ) | ||||||||||
| Other services |
77 | 74 | 3 | 4.1% | ||||||||||||
| External service revenues |
2,801 | 2,842 | (41 | ) | (1.4% | ) | ||||||||||
| Inter-segment service revenues |
102 | 85 | 17 | 20.0% | ||||||||||||
| Operating service revenues |
2,903 | 2,927 | (24 | ) | (0.8% | ) | ||||||||||
| Data |
99 | 144 | (45 | ) | (31.3% | ) | ||||||||||
| Equipment and other |
11 | 10 | 1 | 10.0% | ||||||||||||
| External product revenues |
110 | 154 | (44 | ) | (28.6% | ) | ||||||||||
| Inter-segment product revenues |
– | – | – | – | ||||||||||||
| Operating product revenues |
110 | 154 | (44 | ) | (28.6% | ) | ||||||||||
| Bell Wireline operating revenues |
3,013 | 3,081 | (68 | ) | (2.2% | ) | ||||||||||
Bell Wireline operating revenues declined by 2.2% in Q1 2022, compared to the same period last year, mainly driven by lower product sales, ongoing voice revenue erosion, and reduced data revenue, partly offset by higher other services revenue.
Bell Wireline operating service revenues declined by 0.8%, in Q1 2022, compared to Q1 2021.
| • | Data revenues decreased by 0.6% in Q1 2022, compared to the same period last year, driven by: |
| • | Higher acquisition, retention and bundle discounts on residential services |
| • | Continued decline in our satellite TV subscriber base |
| • | Reduced Internet protocol (IP) based data services revenue and the unfavourable impact from the sale of our wholly-owned subsidiary Createch on March 1, 2022, in our business market |
| • | Ongoing legacy data erosion |
These factors were partly offset by:
| • | Greater retail Internet and IPTV subscriber bases combined with the flow-through of residential rate increases |
| • | Voice revenues declined by 4.0% in Q1 2022, compared to Q1 2021, driven by: |
| • | Ongoing retail residential NAS line erosion mainly due to technological substitution to wireless and Internet based services |
| • | Greater business voice erosion across the customer base |
These factors were partly offset by:
| • | The flow-through of residential rate increases |
| • | Higher sales of international wholesale long distance minutes |
| • | Other services revenues grew by 4.1% in Q1 2022, compared to the same period last year, from higher data and analytics related revenues. |
Bell Wireline operating product revenues decreased by 28.6% in Q1 2022, compared to the same period last year, attributable to strong Q1 2021 equipment sales in our business market, primarily to the government sector, coupled with reduced or delayed spending by business customers due to global supply chain challenges, driven by the COVID-19 pandemic.
OPERATING COSTS AND ADJUSTED EBITDA
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(1,646 | ) | (1,718 | ) | 72 | 4.2% | ||||||||||
| Adjusted EBITDA |
1,367 | 1,363 | 4 | 0.3% | ||||||||||||
| Adjusted EBITDA margin |
45.4 | % | 44.2 | % | 1.2 p | ts | ||||||||||
Bell Wireline operating costs decreased by 4.2% in Q1 2022, compared to Q1 2021, due to:
| • | Lower product cost of goods sold corresponding to the lower product revenues |
| • | TV programming and content cost savings, combined with the impact of lower associated revenues |
These factors were partly offset by:
| • | Greater payments to other carriers from higher sales of international wholesale long distance minutes |
| • | Increased marketing costs, including greater spend during the Beijing 2022 Winter Olympics |
Bell Wireline adjusted EBITDA increased by 0.3% in Q1 2022, compared to the same period last year, driven by operating expense savings, offset in part by lower year-over-year operating revenues. Adjusted EBITDA margin of 45.4% in Q1 2022, increased by 1.2 points over Q1 2021, attributable to a decreased proportion of low-margin product sales in our total revenue base, along with lower operating costs.
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3 MD&A Business segment analysis – Bell Wireline
BELL WIRELINE OPERATING METRICS
DATA
Retail high-speed Internet
| Q1 2022 | Q1 2021 | CHANGE | % CHANGE | |||||||||||||
| Retail net subscriber activations |
26,024 | 21,208 | 4,816 | 22.7% | ||||||||||||
| Retail subscribers (1) |
3,954,767 | 3,730,576 | 224,191 | 6.0% | ||||||||||||
| (1) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet subscriber base increased by 67,090 subscribers. |
Retail high-speed Internet net subscriber activations increased by 6.0% in Q1 2022, compared to the same period last year, driven by lower year-over-year retail residential deactivations, resulting from an expanded fibre service footprint and our ongoing investment in customer retention, along with fewer customers coming off of promotional offers.
Retail high-speed Internet subscribers totaled 3,954,767 at March 31, 2022, up 6.0% from 3,730,576 subscribers reported at the end of Q1 2021. Our retail high-speed Internet subscriber base increased by 67,090 subscribers in Q1 2022, as a result of the acquisition of EBOX and other related companies.
Retail TV
| Q1 2022 | Q1 2021 | CHANGE | % CHANGE | |||||||||||||
| Retail net subscriber (losses) activations |
(8,361 | ) | (9,112 | ) | 751 | 8.2% | ||||||||||
| IPTV |
12,260 | 10,696 | 1,564 | 14.6% | ||||||||||||
| Satellite |
(20,621 | ) | (19,808 | ) | (813 | ) | (4.1% | ) | ||||||||
| Total retail subscribers (1) |
2,735,674 | 2,723,368 | 12,306 | 0.5% | ||||||||||||
| IPTV (1) |
1,903,726 | 1,817,069 | 86,657 | 4.8% | ||||||||||||
| Satellite |
831,948 | 906,299 | (74,351 | ) | (8.2% | ) | ||||||||||
| (1) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail IPTV subscriber base increased by 9,025 subscribers. |
Retail IPTV net subscriber activations increased by 14.6% in Q1 2022, compared to Q1 2021, attributable to fewer year-over-year deactivations resulting from reduced churn in our IPTV fibre footprint and our continued investment in customer retention.
Retail satellite TV net subscriber losses increased by 4.1% in Q1 2022, compared to Q1 2021, driven by higher small business net losses, due to the unfavourable impact of the COVID-19 pandemic on this market.
Total retail TV net subscriber losses (IPTV and satellite TV combined) improved by 8.2% in Q1 2022, compared to the same period last year, driven by higher IPTV net activations, offset in part by higher satellite TV net losses.
Retail IPTV subscribers at March 31, 2022 totaled 1,903,726, up 4.8% from 1,817,069 subscribers reported at the end of Q1 2021. Our IPTV subscriber base increased by 9,025 subscribers in Q1 2022, as a result of the acquisition of EBOX and other related companies.
Retail satellite TV subscribers at March 31, 2022 totaled 831,948, down 8.2% from 906,299 subscribers reported at the end of Q1 2021.
Total retail TV subscribers (IPTV and satellite TV combined) at March 31, 2022 were 2,735,674, representing a 0.5% increase from 2,723,368 subscribers at the end of Q1 2021. Our retail TV subscriber base increased by 9,025 subscribers in Q1 2022, as a result of the acquisition of EBOX and other related companies.
Voice
| Q1 2022 | Q1 2021 | CHANGE | % CHANGE | |||||||||||||
| Retail residential NAS lines net losses |
(42,345 | ) | (51,069 | ) | 8,724 | 17.1% | ||||||||||
| Retail residential NAS lines (1) |
2,259,716 | 2,432,863 | (173,147 | ) | (7.1% | ) | ||||||||||
| (1) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail residential NAS lines subscriber base increased by 3,456 subscribers. |
Retail residential NAS lines net losses improved by 17.1% in Q1 2022 compared to the same period last year, resulting from lower year-over-year deactivations driven by ongoing impacts from the COVID-19 pandemic.
Retail residential NAS lines at March 31, 2022 of 2,259,716 declined by 7.1% from 2,432,863 lines reported at the end of Q1 2021. Our retail residential NAS lines subscriber base increased by 3,456 subscribers in Q1 2022, as a result of the acquisition of EBOX and other related companies. The decline in retail residential NAS lines of 7.1% represented an improvement over the 7.7% rate of erosion experienced in Q1 2021, primarily driven by fewer deactivations.
18 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
3 MD&A Business segment analysis – Bell Wireline
ASSUMPTIONS
As at the date of this MD&A, our forward-looking statements set out in the BCE 2021 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic, market and other assumptions referred to in section 1.3, Assumptions, of this MD&A.
| • | Further deployment of direct fibre to more homes and businesses within our wireline footprint |
| • | Continued growth in retail Internet and IPTV subscribers |
| • | Increasing wireless and Internet-based technological substitution |
| • | Continued aggressive residential service bundle offers from cable TV competitors in our local wireline areas, moderated by growing our share of competitive residential service bundles |
| • | Continued large business customer migration to IP-based systems |
| • | Ongoing competitive repricing pressures in our business and wholesale markets |
| • | Continued competitive intensity in our small and medium-sized business markets as cable operators and other telecommunications competitors continue to intensify their focus on business customers |
| • | Traditional high-margin product categories challenged by large global cloud and OTT providers of business voice and data solutions expanding into Canada with on-demand services |
| • | Accelerating customer adoption of OTT services resulting in downsizing of TV packages |
| • | Growing consumption of OTT TV services and on-demand streaming video, as well as the proliferation of devices, such as tablets, that consume large quantities of bandwidth, will require ongoing capital investment |
| • | Realization of cost savings related to operating efficiencies enabled by a growing direct fibre footprint, changes in consumer behaviour and product innovation, expanding self-serve capabilities, other improvements to the customer service experience, management workforce reductions including attrition and retirements, and lower contracted rates from our suppliers |
| • | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our wireline business |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 19
3 MD&A Business segment analysis – Bell Media
| 3.3 | Bell Media |
KEY BUSINESS DEVELOPMENTS
LAUNCH OF NOOVO.INFO DIGITAL NEWS PLATFORM
Bell Media unveiled noovo.info, a website dedicated entirely to news, which represents the final piece to Noovo’s multi-platform news division. Helmed by a talented and experienced editorial team, noovo.info presents information in a variety of ways: news articles, video reports, columns and exclusive features. The new platform reinforces Noovo Info’s intent to approach news differently, notably through the distribution of information on social media and including the creation of news content for TikTok and Instagram to reach younger audiences.
EXPANSION OF TSN 5G VIEW FOR WINNIPEG JETS
TSN 5G View, the exclusive immersive experience powered by Bell’s mobile 5G network, was expanded for TSN’s regional coverage of Winnipeg Jets home games. Powered by the Bell 5G network, Jets fans with a TSN subscription and a Bell 5G device can use the innovative TSN 5G View technology to get up close to every shot, assist, save, and hit with zoom, pause, rewind, and slow motion, as well as nearly 360° replay capabilities. With the fastest-ranked 5G network speeds in the country and ultra-low latency, Bell 5G helps TSN and RDS connect a fan’s smartphone to the in-game cameras with lightning-fast response. TSN 5G View / Vision 5G RDS also continues to be available for Montréal Canadiens and Toronto Maple Leafs regional home game broadcasts on TSN and RDS, as well as coverage of Toronto Raptors home games.
TSN PARTNERSHIP WITH FANDUEL
On April 4, 2022, TSN and FanDuel Group, North America’s premier online gaming company, announced an exclusive multi-year agreement to introduce FanDuel’s leading sportsbook to Canadian sports fans. FanDuel will be the official sportsbook partner for TSN, starting first in Ontario. The partnership comes as the province has legalized online sports and casino wagering. The deal provides opportunity for scaled expansion into other Canadian provinces and territories pending regulation.
FINANCIAL PERFORMANCE ANALYSIS
Q1 2022 PERFORMANCE HIGHLIGHTS
BELL MEDIA RESULTS
REVENUES
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| External revenues |
741 | 623 | 118 | 18.9% | ||||||||||||
| Inter-segment revenues |
84 | 90 | (6 | ) | (6.7% | ) | ||||||||||
| Bell Media operating revenues |
825 | 713 | 112 | 15.7% | ||||||||||||
Bell Media operating revenues increased by 15.7% in Q1 2022, compared to the same period last year, driven by both higher subscriber and advertising revenues, including 84% higher year-over-year digital revenues (1). The growth reflected a one-time retroactive adjustment related to a contract with a Canadian TV distributor and the ongoing recovery from the effects of the COVID-19 pandemic.
| • | Advertising revenues increased by 8.5% in Q1 2022, compared to Q1 2021, due to growth across all advertising platforms (TV, radio, out-of-home (OOH)) driven by the ongoing recovery from the unfavourable effects of the COVID-19 pandemic. Conventional and specialty TV advertising revenue growth was driven by increased demand by advertisers primarily due to the return of regular sports and TV programming schedules compared to COVID-19 related delays in Q1 2021. TV advertising revenues also benefited from a strong NFL postseason including our broadcast of Super Bowl LVI. Although Q1 2022 radio and OOH advertising revenues continued to be unfavourably impacted by the COVID-19 pandemic due to government restrictions, particularly on certain non-essential services (restaurants, bars, arenas), in place at the beginning of the quarter, the effects have moderated year over year resulting in higher OOH and radio advertising revenues. |
| (1) | Digital revenues are comprised of advertising revenue from digital platforms including web sites, mobile apps, connected TV apps and OOH digital assets/platforms, as well as advertising procured through Bell digital buying platforms and subscription revenue from direct-to-consumer services and Video on Demand services. |
20 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
3 MD&A Business segment analysis – Bell Media
| • | Subscriber revenues increased by 22.1% in Q1 2022, compared to the same period last year, primarily from a one-time retroactive adjustment related to a contract with a Canadian TV distributor along with the continued growth in DTC subscribers from Crave, including the recent launch of Crave Mobile, a mobile-only product that launched in Q4 2021, as well as ongoing growth in STARZ, and sports streaming services. |
OPERATING COSTS AND ADJUSTED EBITDA
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(617 | ) | (570 | ) | (47 | ) | (8.2% | ) | ||||||||
| Adjusted EBITDA |
208 | 143 | 65 | 45.5% | ||||||||||||
| Adjusted EBITDA margin |
25.2 | % | 20.1 | % | 5.1 p | ts | ||||||||||
Bell Media operating costs increased by 8.2% in Q1 2022, compared to Q1 2021, driven by:
| • | Higher broadcast rights and programming costs due to increasing sports rights costs and the return of regular TV programming schedules in Q1 2022 compared to COVID-19 related delays in the same period last year |
| • | The temporary waiving in Q1 2021 of Canadian Radio-television and Telecommunications Commission (CRTC) Part I and II broadcasting license fees due to the COVID-19 pandemic |
Bell Media adjusted EBITDA grew by 45.5% in Q1 2022 compared to the same period last year, driven by higher operating revenues, moderated by higher operating costs.
ASSUMPTIONS
As at the date of this MD&A, our forward-looking statements set out in the BCE 2021 Annual MD&A, as updated or supplemented in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic, market and other assumptions referred to in section 1.3, Assumptions, of this MD&A.
| • | Overall revenue expected to reflect continued strong demand in TV advertising revenue including scaling of our SAM TV and Bell demand-side-platform (DSP) buying platforms, a gradual recovery in radio and OOH advertisements, as well as DTC subscriber growth |
| • | Continued escalation of media content costs to secure quality programming, as well as the continued return to normal volumes of entertainment programming |
| • | Continued scaling of Crave through broader content offering, user experience improvements and Crave Mobile |
| • | Continued investment in Noovo original programming to better serve our French-language customers with a wider array of content, in the language of their choice, on their preferred platforms |
| • | Leveraging of first-party data to improve targeting, advertisement delivery and attribution |
| • | Ability to successfully acquire and produce highly rated programming and differentiated content |
| • | Building and maintaining strategic supply arrangements for content across all screens and platforms |
| • | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our media business |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 21
4 MD&A Financial and capital management
| 4 | Financial and capital management |
This section tells you how we manage our cash and capital resources to carry out our strategy and deliver financial results. It provides an analysis of our financial condition, cash flows and liquidity on a consolidated basis.
| 4.1 | Net debt (1) |
| MARCH 31, 2022 | DECEMBER 31, 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Long-term debt |
26,877 | 27,048 | (171 | ) | (0.6% | ) | ||||||||||
| Debt due within one year |
3,082 | 2,625 | 457 | 17.4% | ||||||||||||
| 50% of preferred shares (2) |
1,943 | 2,002 | (59 | ) | (2.9% | ) | ||||||||||
| Cash |
(104 | ) | (207 | ) | 103 | 49.8% | ||||||||||
| Net debt |
31,798 | 31,468 | 330 | 1.0% | ||||||||||||
| (1) | Net debt is a non-GAAP financial measure. See section 9.1, Non-GAAP financial measures in this MD&A for more information on this measure. |
| (2) | 50% of outstanding preferred shares of $3,885 million and $4,003 million at March 31, 2022 and December 31, 2021, respectively, are classified as debt consistent with the treatment by some credit rating agencies. |
The increase of $457 million in debt due within one year and the decrease of $171 million in long-term debt was due to:
| • | the issuance by Bell Canada of Series US-7 Notes, with a total principal amount of $750 million in U.S. dollars ($954 million in Canadian dollars). The Notes are fully and unconditionally guaranteed by BCE. |
| • | an increase in our notes payable (net of repayments) of $469 million |
Partly offset by:
| • | the early redemption of Series M-26 MTN debentures with a total principal amount of $1 billion in Canadian dollars |
| • | a net decrease of $137 million due to lower lease liabilities and other debt |
The decrease in cash of $103 million was mainly due to:
| • | $1,258 million repayment of long-term debt |
| • | $952 million of capital expenditures |
| • | $795 million of dividends paid on BCE common shares |
| • | $139 million paid, net of cash acquired, for the acquisition of EBOX and other related companies |
| • | $115 million paid for the repurchase of preferred shares |
| • | $106 million paid for the purchase on the open market of BCE common shares for the settlement of share-based payments |
Partly offset by:
| • | $1,716 million of cash flows from operating activities |
| • | $945 million of issuance of long-term debt |
| • | $469 million increase in notes payable |
| • | $161 million from the issuance of common shares under our employee stock option plan |
| 4.2 | Outstanding share data |
| COMMON SHARES OUTSTANDING | NUMBER OF SHARES |
|||
| Outstanding, January 1, 2022 |
909,018,871 | |||
| Shares issued under employee stock option plan |
2,795,351 | |||
| Outstanding, March 31, 2022 |
911,814,222 | |||
| STOCK OPTIONS OUTSTANDING | NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
||||||
| Outstanding, January 1, 2022 |
10,778,724 | 60 | ||||||
| Exercised (1) |
(2,795,351 | ) | 58 | |||||
| Forfeited or expired |
(23,624 | ) | 65 | |||||
| Outstanding, March 31, 2022 |
7,959,749 | 61 | ||||||
| Exercisable, March 31, 2022 |
4,696,829 | 58 | ||||||
| (1) | The weighted average market share price for options exercised during the three months ended March 31, 2022 was $69. |
22 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
4 MD&A Financial and capital management
| 4.3 | Cash flows |
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Cash flows from operating activities |
1,716 | 1,992 | (276 | ) | (13.9% | ) | ||||||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | 60 | 5.9% | ||||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (31 | ) | (2 | ) | (6.5% | ) | ||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (13 | ) | 2 | 15.4% | ||||||||||
| Acquisition and other costs paid |
3 | 4 | (1 | ) | (25.0% | ) | ||||||||||
| Free cash flow |
723 | 940 | (217 | ) | (23.1% | ) | ||||||||||
| Business acquisitions |
(139 | ) | – | (139 | ) | n.m. | ||||||||||
| Business dispositions |
52 | – | 52 | n.m. | ||||||||||||
| Acquisition and other costs paid |
(3 | ) | (4 | ) | 1 | 25.0% | ||||||||||
| Other investing activities |
(9 | ) | (21 | ) | 12 | 57.1% | ||||||||||
| Increase (decrease) in notes payable |
469 | (357 | ) | 826 | n.m. | |||||||||||
| Decrease in securitized trade receivables |
– | (13 | ) | 13 | 100.0% | |||||||||||
| Issue of long-term debt |
945 | 2,915 | (1,970 | ) | (67.6% | ) | ||||||||||
| Repayment of long-term debt |
(1,258 | ) | (226 | ) | (1,032 | ) | n.m. | |||||||||
| Issue of common shares |
161 | 10 | 151 | n.m. | ||||||||||||
| Purchase of shares for settlement of share-based payments |
(106 | ) | (91 | ) | (15 | ) | (16.5% | ) | ||||||||
| Repurchase of preferred shares |
(115 | ) | – | (115 | ) | n.m. | ||||||||||
| Cash dividends paid on common shares |
(795 | ) | (753 | ) | (42 | ) | (5.6% | ) | ||||||||
| Other financing activities |
(28 | ) | (17 | ) | (11 | ) | (64.7% | ) | ||||||||
| Net (decrease) increase in cash |
(103 | ) | 1,683 | (1,786 | ) | n.m. | ||||||||||
| Net increase in cash equivalents |
– | 700 | (700 | ) | (100.0% | ) | ||||||||||
n.m.: not meaningful
CASH FLOWS FROM OPERATING ACTIVITIES AND FREE CASH FLOW
Cash flows from operating activities in the first quarter of 2022 decreased by $276 million, compared to the same period last year, mainly due to lower cash from working capital reflecting the timing of supplier payments, and higher interest paid, partly offset by higher adjusted EBITDA.
Free cash flow in the first quarter of 2022 decreased by $217 million, compared to the same period last year, mainly due to lower cash flows from operating activities, excluding cash from acquisition and other costs paid, partly offset by lower capital expenditures.
CAPITAL EXPENDITURES
| Q1 2022 | Q1 2021 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
248 | 286 | 38 | 13.3% | ||||||||||||
| Capital intensity (1) |
11.2 | % | 13.6 | % | 2.4 p | ts | ||||||||||
| Bell Wireline |
681 | 707 | 26 | 3.7% | ||||||||||||
| Capital intensity |
22.6 | % | 22.9 | % | 0.3 p | ts | ||||||||||
| Bell Media |
23 | 19 | (4 | ) | (21.1% | ) | ||||||||||
| Capital intensity |
2.8 | % | 2.7% | (0.1) p | ts | |||||||||||
| BCE |
952 | 1,012 | 60 | 5.9% | ||||||||||||
| Capital intensity |
16.3 | % | 17.7 | % | 1.4 p | ts | ||||||||||
| (1) | Capital intensity is defined as capital expenditures divided by operating revenues. |
BCE capital expenditures of $952 million in Q1 2022 declined by 5.9% or $60 million, compared to the same period last year, corresponding to a capital intensity of 16.3%, down 1.4 pts over Q1 2021. The decline is mainly attributable to timing, as we are in the second year of our capex advancement program. The year-over-year decline reflected:
| • | Lower capital spending in our wireless segment of $38 million in Q1 2022, compared to the same period last year, primarily due to slower pace of spending as we continued to focus on the deployment of our mobile 5G network |
| • | Reduced capital spending in our wireline segment of $26 million in Q1 2022, compared to the same period last year, mainly due to timing of spend and lower year-over-year investment in the buildout of our wireless-to-the-home (WTTH) network, which was essentially completed by the end of last year. Capital investments in our wireline segment were focused on the continued accelerated rollout of our fibre-to-the-home (FTTH) network to more homes and businesses. |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 23
4 MD&A Financial and capital management
BUSINESS ACQUISITIONS
In February 2022, Bell acquired EBOX and other related companies, which provide Internet, telephone and television services to consumers and businesses in Québec and parts of Ontario for a total cash consideration of $153 million ($139 million net of cash acquired).
BUSINESS DISPOSITIONS
On March 1, 2022, we completed the previously announced sale of our wholly-owned subsidiary Createch, for cash proceeds of $53 million.
DEBT INSTRUMENTS
2022
In the first quarter of 2022, we issued debt, net of repayments. This included:
| • | $945 million issuance of long-term debt comprised of the issuance of Series US-7 Notes, with a total principal amount of $750 million in U.S. dollars ($954 million in Canadian dollars), partly offset by a $9 million discount on our debt issuance |
| • | $469 million issuance (net of repayments) of notes payable |
Partly offset by:
| • | $1,258 million repayment of long-term debt comprised of the early redemption of Series M-26 MTN debentures with a total principal amount of $1 billion in Canadian dollars, and net payments of leases and other debt of $258 million |
2021
In the first quarter of 2020, we issued debt, net of issuances. This included:
| • | $2,915 million issuance of long-term debt comprised of the issuance of Series M-54 and Series M-55 MTN debentures with total principal amounts of $1 billion and $550 million, respectively, and the issuance of Series US-3 and Series US-4 Notes with total principal amounts of $600 million and $500 million in U.S. dollars, respectively ($747 million and $623 million in Canadian dollars, respectively), partly offset by $5 million of discounts on our debt issuances |
Partly offset by:
| • | $357 million repayment (net of issuances) of notes payable |
| • | $226 million repayment of long-term debt comprised of net payments of leases and other debt |
| • | $13 million decrease in securitized trade receivables |
ISSUANCE OF COMMON SHARES
The issuance of common shares in the first quarter of 2022 increased by $151 million, compared to the same period in 2021, due to a higher number of exercised stock options.
REPURCHASE OF PREFERRED SHARES
In Q1 2022, BCE redeemed its 4,600,000 issued and outstanding Series AO Preferred Shares for a total cost of $115 million.
CASH DIVIDENDS PAID ON COMMON SHARES
In the first quarter of 2022, cash dividends paid on common shares increased by $42 million compared to Q1 2021, due to a higher dividend paid in Q1 2022 of $0.8750 per common share compared to $0.8325 per common share in Q1 2021.
| 4.4 | Post-employment benefit plans |
For the three months ended March 31, 2022, we recorded an increase in our post-employment benefit plans and a gain, before taxes, in OCI from continuing operations of $879 million, due to a higher actual discount rate of 4.3% at March 31, 2022, compared to 3.2% at December 31, 2021, partly offset by a loss on plan assets and an increase in the effect of the asset limit.
For the three months ended March 31, 2021, we recorded an increase in our post-employment benefit plans and a gain, before taxes, in OCI from continuing operations of $1,565 million, due to a higher actual discount rate of 3.4% at March 31, 2021, as compared to 2.6% at December 31, 2020, partly offset by a lower-than-expected return on plan assets.
24 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
4 MD&A Financial and capital management
| 4.5 | Financial risk management |
FAIR VALUE
The following table provides the fair value details of financial instruments measured at amortized cost in the consolidated statements of financial position.
| MARCH 31, 2022 | DECEMBER 31, 2021 | |||||||||||||||||||
| CLASSIFICATION | FAIR VALUE METHODOLOGY | CARRYING VALUE |
FAIR VALUE |
CARRYING VALUE |
FAIR VALUE |
|||||||||||||||
| CRTC deferral account obligation | Trade payables and other liabilities and other non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 62 | 63 | 66 | 67 | ||||||||||||||
| Debt securities and other debt | Debt due within one year and long-term debt | Quoted market price of debt | 23,552 | 23,897 | 23,729 | 26,354 | ||||||||||||||
The following table provides the fair value details of financial instruments measured at fair value in the consolidated statements of financial position.
| FAIR VALUE | ||||||||||||||||||
| CLASSIFICATION | CARRYING VALUE OF ASSET (LIABILITY) |
QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |
OBSERVABLE MARKET DATA (LEVEL 2) (1) |
NON-OBSERVABLE
MARKET INPUTS (LEVEL 3) (2) |
||||||||||||||
| March 31, 2022 |
||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets | 186 | 26 | – | 160 | |||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities | 348 | – | 348 | – | |||||||||||||
| Maple Leaf Sports & Entertainment Ltd. (MLSE) financial liability (4) | Trade payables and other liabilities | (149 | ) | – | – | (149) | ||||||||||||
| Other | Other non-current assets and liabilities | 113 | – | 176 | (63) | |||||||||||||
| December 31, 2021 |
||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets | 183 | 24 | – | 159 | |||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities | 279 | – | 279 | – | |||||||||||||
| MLSE financial liability (4) | Trade payables and other liabilities | (149 | ) | – | – | (149) | ||||||||||||
| Other | Other non-current assets and liabilities | 122 | – | 185 | (63) | |||||||||||||
| (1) | Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
| (2) | Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 financial instruments. |
| (3) | Unrealized gains and losses are recorded in OCI from continuing operations in the statements of comprehensive income and are reclassified from Accumulated OCI to Deficit in the statements of financial position when realized. |
| (4) | Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust Fund exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other income in the income statements. |
MARKET RISK
CURRENCY EXPOSURES
We use forward contracts, options and cross currency interest rate swaps to manage foreign currency risk related to anticipated purchases and certain foreign currency debt.
In Q1 2022, we entered into cross currency interest rate swaps with a total notional amount of $750 million in U.S. dollars ($954 million in Canadian dollars) to hedge the U.S. currency exposure of our U.S. Notes maturing in 2052. See section 4.1, Net debt, in this MD&A, for additional details.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a loss of $3 million (loss of $41 million) recognized in net earnings at March 31, 2022 and a gain of $207 million (loss of $188 million) recognized in Other comprehensive income at March 31, 2022, with all other variables held constant.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the Philippine peso would result in a gain (loss) of $6 million recognized in Other comprehensive income at March 31, 2022, with all other variables held constant.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 25
4 MD&A Financial and capital management
The following table provides further details on our outstanding foreign currency forward contracts and options as at March 31, 2022.
| TYPE OF HEDGE | BUY CURRENCY |
AMOUNT TO RECEIVE |
SELL CURRENCY |
AMOUNT TO PAY |
MATURITY | HEDGED ITEM | ||||||||||||||||||
| Cash flow |
USD | 950 | CAD | 1,199 | 2022 | Commercial paper | ||||||||||||||||||
| Cash flow |
USD | 429 | CAD | 545 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
PHP | 1,743 | CAD | 45 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
PHP | 2,147 | CAD | 51 | 2023 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
USD | 595 | CAD | 732 | 2023 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
USD | 240 | CAD | 299 | 2024 | Anticipated purchases | ||||||||||||||||||
| Cash flow – call options |
USD | 157 | CAD | 203 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow – put options |
USD | 157 | CAD | 200 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic |
USD | 39 | CAD | 48 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – put options |
USD | 219 | CAD | 270 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
USD | 113 | CAD | 134 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
CAD | 142 | USD | 113 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – options (1) |
USD | 135 | CAD | 164 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – options (1) |
USD | 95 | CAD | 115 | 2023 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
USD | 120 | CAD | 146 | 2024 | Anticipated purchases | ||||||||||||||||||
| (1) | Foreign currency options with a leverage provision and a profit cap limitation. |
INTEREST RATE EXPOSURES
In Q1 2022, we entered into cross currency basis rate swaps with a notional amount of $63 million to hedge economically the basis rate exposure on future debt issuances. The fair value of these cross currency basis rate swaps at March 31, 2022 was nil.
We use leveraged interest rate options to hedge economically the dividend rate resets on $582 million of our preferred shares which had varying reset dates in 2021, for the periods ending in 2026. The fair value of these leveraged interest rate options at March 31, 2022 and December 31, 2021 was a net liability of $1 million and $2 million, respectively, recognized in Trade payables and other liabilities and Other non-current liabilities in the statements of financial position. A gain of $1 million for the three months ended March 31, 2022 relating to these leveraged interest rate options is recognized in Other income in the income statements.
A 1% increase (decrease) in interest rates would result in a loss of $17 million and a (gain of $19 million) recognized in net earnings at March 31, 2022, with all other variables held constant.
EQUITY PRICE EXPOSURES
We use equity forward contracts on BCE’s common shares to hedge economically the cash flow exposure related to the settlement of equity settled share-based compensation plans. The fair value of our equity forward contracts at March 31, 2022 and December 31, 2021 was a net asset of $112 million and $130 million, respectively, recognized in Other current assets, Trade payables and other liabilities and Other non-current assets in the statements of financial position. A gain of $75 million for the three months ended March 31, 2022, relating to these equity forward contracts is recognized in Other income in the income statements.
A 5% increase (decrease) in the market price of BCE’s common shares would result in a gain (loss) of $38 million recognized in net earnings at March 31, 2022, with all other variables held constant.
| 4.6 | Credit ratings |
BCE’s and Bell Canada’s key credit ratings remain unchanged from those described in the BCE 2021 Annual MD&A.
| 4.7 | Liquidity |
This section contains forward-looking statements, including relating to the expectation that our available liquidity (1), which is comprised of cash and cash equivalents and amounts available under our securitized trade receivable program and our committed bank credit facilities, will be sufficient to meet our cash requirements for the remainder of 2022. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
AVAILABLE LIQUIDITY
Total available liquidity at March 31, 2022 was $2.8 billion, comprised of $104 million in cash, $400 million available under our securitized trade receivable program and $2.3 billion available under our $3.5 billion committed bank credit facilities (given $1.2 billion of commercial paper outstanding).
We expect our available liquidity to be sufficient to meet our cash requirements for the remainder of 2022, including for capital expenditures, post-employment benefit plans funding, dividend payments, the payment of contractual obligations, maturing debt, on-going operations, and other cash requirements.
We continuously monitor our operations, capital markets and the Canadian economy with the objective of maintaining adequate available liquidity.
| (1) | Available liquidity is a non-GAAP financial measure. Refer to section 9.1, Non-GAAP financial measures in this MD&A for more information on this measure. |
26 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
4 MD&A Financial and capital management
COMMITMENTS (OFF-BALANCE SHEET)
The following table provides an update at March 31, 2022 of our commitments (off-balance sheet) that are due in 2022 and in each of the next four years and thereafter, that were described in the summary of our contractual obligations set out in section 6.7, Liquidity of the BCE 2021 Annual MD&A.
| 2022 | 2023 | 2024 | 2025 | 2026 | THEREAFTER | TOTAL | ||||||||||||||||||||||
| Commitments for property, plant and equipment and intangible assets |
1,102 | 1,301 | 734 | 491 | 354 | 1,035 | 5,017 | |||||||||||||||||||||
| Purchase obligations |
424 | 455 | 342 | 297 | 373 | 392 | 2,283 | |||||||||||||||||||||
| Leases committed not yet commenced |
7 | 3 | 6 | – | – | – | 16 | |||||||||||||||||||||
| Total |
1,533 | 1,759 | 1,082 | 788 | 727 | 1,427 | 7,316 | |||||||||||||||||||||
Our commitments for property, plant and equipment and intangible assets include program and feature film rights and investments to expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service and product contracts for operating expenditures and other purchase obligations.
Our commitments for leases not yet commenced include OOH advertising spaces, fibre use and real estate. These leases are non-cancellable.
| 4.8 | Litigation |
RECENT DEVELOPMENTS IN LEGAL PROCEEDINGS
The following is an update to the legal proceedings described in the BCE 2021 AIF under section 8, Legal proceedings.
CLASS ACTION AND PURPORTED CLASS ACTION CONCERNING ROUNDING-UP OF MINUTES
On May 3, 2022, the Ontario Superior Court dismissed the purported class action initially filed on July 25, 2008 pursuant to the Class Proceedings Act (Ontario) against BCE Inc. on behalf of all its residential long distance customers in Canada who, since July 2002, have had their call times rounded up to the next full minute for billing purposes. Accordingly, this legal proceeding is now concluded.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 27
5 MD&A Quarterly financial information
| 5 | Quarterly financial information |
BCE’s Q1 2022 Financial Statements were prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), under International Accounting Standard (IAS) 34, Interim Financial Reporting and were approved by BCE’s board of directors on May 4, 2022.
The following table, which was also prepared in accordance with IFRS, shows selected consolidated financial data of BCE for the eight most recent completed quarters.
| 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | |||||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||||||||||
| Service |
5,177 | 5,243 | 5,099 | 5,040 | 4,968 | 5,090 | 4,924 | 4,800 | ||||||||||||||||||||||||
| Product |
673 | 966 | 737 | 658 | 738 | 1,012 | 863 | 554 | ||||||||||||||||||||||||
| Total operating revenues |
5,850 | 6,209 | 5,836 | 5,698 | 5,706 | 6,102 | 5,787 | 5,354 | ||||||||||||||||||||||||
| Adjusted EBITDA |
2,584 | 2,430 | 2,558 | 2,476 | 2,429 | 2,404 | 2,454 | 2,331 | ||||||||||||||||||||||||
| Severance, acquisition and other costs |
(13 | ) | (63 | ) | (50 | ) | (7 | ) | (89 | ) | (52 | ) | (26 | ) | (22 | ) | ||||||||||||||||
| Depreciation |
(891 | ) | (925 | ) | (902 | ) | (905 | ) | (895 | ) | (872 | ) | (876 | ) | (869 | ) | ||||||||||||||||
| Amortization |
(260 | ) | (251 | ) | (245 | ) | (248 | ) | (238 | ) | (233 | ) | (232 | ) | (234 | ) | ||||||||||||||||
| Net earnings from continuing operations |
934 | 658 | 813 | 734 | 687 | 721 | 734 | 290 | ||||||||||||||||||||||||
| Net earnings from discontinued operations |
– | – | – | – | – | 211 | 6 | 4 | ||||||||||||||||||||||||
| Net earnings |
934 | 658 | 813 | 734 | 687 | 932 | 740 | 294 | ||||||||||||||||||||||||
| Net earnings from continuing operations attributable to common shareholders |
877 | 625 | 757 | 685 | 642 | 678 | 686 | 233 | ||||||||||||||||||||||||
| Net earnings attributable to common shareholders |
877 | 625 | 757 | 685 | 642 | 889 | 692 | 237 | ||||||||||||||||||||||||
| EPS – basic and diluted |
||||||||||||||||||||||||||||||||
| Continuing operations |
0.96 | 0.69 | 0.83 | 0.76 | 0.71 | 0.75 | 0.76 | 0.26 | ||||||||||||||||||||||||
| Discontinued operations |
– | – | – | – | – | 0.23 | 0.01 | – | ||||||||||||||||||||||||
| EPS – basic and diluted |
0.96 | 0.69 | 0.83 | 0.76 | 0.71 | 0.98 | 0.77 | 0.26 | ||||||||||||||||||||||||
| Weighted average number of common shares outstanding – basic (millions) |
910.1 | 908.8 | 906.9 | 905.0 | 904.5 | 904.4 | 904.3 | 904.3 | ||||||||||||||||||||||||
28 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
6 MD&A Regulatory environment
| 6 | Regulatory environment |
The following is an update to the regulatory initiatives and proceedings described in the BCE 2021 Annual MD&A under section 3.3, Principal business risks and section 8, Regulatory environment.
TELECOMMUNICATIONS ACT
REVIEW OF MOBILE WIRELESS SERVICES
Further to the CRTC’s April 15, 2021 decision in respect of the regulatory framework for mobile wireless services, on July 14, 2021 Bell Mobility Inc. (Bell Mobility) , Rogers Communications Canada Inc. (Rogers), Telus Communications Inc. (Telus) and Saskatchewan Telecommunications filed proposed tariff terms and conditions for the mandated mobile virtual network operator (MVNO) access service and Bell Mobility, Rogers and Telus filed proposed amendments to their mandated roaming tariffs to reflect the CRTC’s determinations. On April 6, 2022, the CRTC issued a decision on the mandated roaming tariffs in which it directed Bell Mobility, Rogers and Telus to make specified changes to their tariffs by April 21, 2022, for CRTC approval. The CRTC’s review process for the proposed MVNO tariffs and amendments is also ongoing.
Further to the release of the CRTC’s April 15, 2021 decision, a petition was brought by DOT Mobile before Cabinet to eliminate eligibility requirements for mandated MVNO access and establish tariffed rates for the service. On April 14, 2022, Cabinet issued its decision to deny the petition, allowing the CRTC’s decision to stand.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 29
7 MD&A Business risks
| 7 | Business risks |
The following is an update to the risk factors described in the BCE 2021 Annual MD&A under section 9, Business risks and the other sections of the BCE 2021 Annual MD&A referred to therein.
UPDATE TO THE DESCRIPTION OF BUSINESS RISKS
COVID-19 PANDEMIC AND ASSOCIATED GENERAL ECONOMIC CONDITIONS
During the first quarter of 2022, the unfavourable effects of the COVID-19 pandemic on our financial and operating performance continued to moderate due to our operational execution and easing of government restrictions during the quarter. However, due to uncertainties relating to the severity and duration of the COVID-19 pandemic and possible further resurgences in the number of COVID-19 cases, including as a result of the potential emergence of other variants, and various potential outcomes, it is difficult at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Our business and financial results could continue to be unfavourably impacted, and could again become more significantly and negatively impacted, in future periods, including, among others, as a result of global supply chain challenges adversely affecting our wireless and wireline product revenues. The extent to which the COVID-19 pandemic will continue to adversely impact us will depend on future developments that are difficult to predict, including the prevalence of COVID-19 variants that are more contagious and may lead to increased health risks, the development and timely distribution of effective vaccines and treatments, vaccination hesitancy and the number of individuals who choose to remain unvaccinated, the time required to achieve broad immunity, as well as new information which may emerge concerning the severity and duration of the COVID-19 pandemic, including the number and intensity of resurgences in COVID-19 cases, and the actions required to contain the coronavirus or remedy its impacts, among others.
GEOPOLITICAL EVENTS, INCLUDING THE CONFLICT BETWEEN RUSSIA AND UKRAINE
Geopolitical events, in particular the conflict between Russia and Ukraine, could have an adverse impact on our business or future financial results and related assumptions, the extent of which is difficult to predict. This conflict, and the economic sanctions imposed or to be imposed as a result thereof, could give rise to new risks and exacerbate pre-existing risk factors, given that they could adversely impact the global economy and cause increased financial and capital market volatility, broader geopolitical instability and armed conflicts, higher energy prices, increased inflationary pressures limiting consumer and business spending and increasing our operating costs, increased disruptions in our supply chain and increased information security threats. The extent to which the conflict between Russia and Ukraine could impact us will depend on events that are difficult to predict, including the duration and extent of escalation of hostilities as well as the international response to the crisis.
30 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
8 MD&A Accounting policies
| 8 | Accounting policies |
BCE’s Q1 2022 Financial Statements were prepared in accordance with IFRS, as issued by the IASB, under IAS 34 – Interim Financial Reporting and were approved by BCE’s board of directors on May 4, 2022. These financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Significant accounting policies in BCE’s consolidated financial statements for the year ended December 31, 2021, except as noted below. BCE’s Q1 2022 Financial Statements do not include all of the notes required in the annual financial statements.
ADOPTION OF AMENDED ACCOUNTING STANDARDS
As required, effective January 1, 2022, we adopted the following amendments to accounting standards issued by the IASB.
| STANDARD | DESCRIPTION | IMPACT | ||
| Onerous Contracts – Cost of Fulfilling a Contract, Amendments to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets | These amendments clarify which costs should be included in determining the cost of fulfilling a contract when assessing whether a contract is onerous. | These amendments did not have a significant impact on our financial statements. | ||
FUTURE CHANGES TO ACCOUNTING STANDARDS
The following amendments and clarification to standards issued by the IASB have not yet been adopted by BCE.
| STANDARD | DESCRIPTION | IMPACT | EFFECTIVE DATE | |||
| Disclosure of Accounting Policies – Amendments to IAS 1 – Presentation of Financial Statements | These amendments require that entities disclose material accounting policies, as defined, instead of significant accounting policies. | We are currently assessing the impact of these amendments on the disclosure of our accounting policies. | Effective for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. | |||
| IFRIC Agenda Decision on Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 – Statement of Cash Flows) | In April 2022, the International Financial Reporting Interpretations Committee (IFRIC) issued an agenda decision clarifying that an entity should present a demand deposit with restrictions on use arising from a contract with a third party as cash and cash equivalents in the statements of financial position and cash flows, unless those restrictions change the nature of the deposit such that it no longer meets the definition of cash in IAS 7. | We are currently assessing the impact of this IFRIC agenda decision on our financial statements. | As permitted by the IASB, application of this IFRIC agenda decision is expected in the second quarter of 2022. | |||
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 31
9 MD&A Non-GAAP financial measures, other financial measures and key performance indicators (KPIs)
| 9 | Non-GAAP financial measures, other financial measures and key performance indicators (KPIs) |
BCE uses various financial measures to assess its business performance. Certain of these measures are calculated in accordance with International Financial Reporting Standards (IFRS or GAAP) while certain other measures do not have a standardized meaning under GAAP. We believe that our GAAP financial measures, read together with adjusted non-GAAP and other financial measures, provide readers with a better understanding of how management assesses BCE’s performance.
National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure, prescribes disclosure requirements that apply to the following specified financial measures:
| • | Non-GAAP financial measures; |
| • | Non-GAAP ratios; |
| • | Total of segments measures; |
| • | Capital management measures; and |
| • | Supplementary financial measures. |
This section provides a description and classification of the specified financial measures contemplated by NI 52-112 that we use to explain our financial results except that, for supplementary financial measures, an explanation of such measures is provided where they are first referred to if the supplementary financial measures’ labelling is not sufficiently descriptive.
| 9.1 | Non-GAAP financial measures |
A non-GAAP financial measure is a financial measure used to depict our historical or expected future financial performance, financial position or cash flow and, with respect to its composition, either excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in BCE’s consolidated primary financial statements. We believe that non-GAAP financial measures are reflective of our on-going operating results and provide readers with an understanding of management’s perspective on and analysis of our performance.
Below are descriptions of the non-GAAP financial measures that we use to explain our results as well as reconciliations to the most comparable IFRS financial measures.
ADJUSTED NET EARNINGS
The term adjusted net earnings does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI.
We use adjusted net earnings and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
The most directly comparable IFRS financial measure is net earnings attributable to common shareholders.
The following table is a reconciliation of net earnings attributable to common shareholders to adjusted net earnings on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||
| Net earnings attributable to common shareholders |
877 | 642 | ||||||
| Reconciling items: |
||||||||
| Severance, acquisition and other costs |
13 | 89 | ||||||
| Net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans |
(75 | ) | (60 | ) | ||||
| Net gains on investments |
(37 | ) | – | |||||
| Early debt redemption costs |
18 | 53 | ||||||
| Impairment of assets |
2 | 3 | ||||||
| Income taxes for the above reconciling items |
13 | (23 | ) | |||||
| Adjusted net earnings |
811 | 704 | ||||||
32 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
9 MD&A Non-GAAP financial measures, other financial measures and key performance indicators (KPIs)
ADJUSTED NET INTEREST EXPENSE
The term adjusted net interest expense does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net interest expense as twelve-month trailing net interest expense as shown in our consolidated statements of cash flows, plus 50% of twelve-month trailing net earnings attributable to preferred shareholders as shown in our consolidated income statements.
We use adjusted net interest expense as a component in the calculation of the adjusted EBITDA to adjusted net interest expense ratio, which is a capital management measure. For further details on the adjusted EBITDA to adjusted net interest expense ratio, see section 9.4 – Capital management measures. We use, and believe that certain investors and analysts use, the adjusted EBITDA to adjusted net interest expense ratio, among other measures, to evaluate the financial health of the company.
The most directly comparable IFRS financial measure is net interest expense. The following table is a reconciliation of net interest expense to adjusted net interest expense on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||
| Net interest expense (three months ended March 31, 2022 and 2021, respectively) |
258 | 263 | ||||||
| Net interest expense (year ended December 31, 2021 and 2020, respectively) |
1,063 | 1,087 | ||||||
| Net interest expense (three months ended March 31, 2021 and 2020, respectively) |
(263 | ) | (270 | ) | ||||
|
12-month trailing net interest expense (ended March 31, 2022 and 2021, respectively) |
1,058 | 1,080 | ||||||
| 50% of net earnings attributable to preferred shareholders (three months ended March 31, 2022 and 2021, respectively) |
17 | 16 | ||||||
| 50% of net earnings attributable to preferred shareholders (year ended December 31, 2021 and 2020, respectively) |
66 | 68 | ||||||
| 50% of net earnings attributable to preferred shareholders (three months ended March 31, 2021 and 2020, respectively) |
(16 | ) | (19 | ) | ||||
| 50% of 12-month trailing net earnings attributable to preferred shareholders (ended March 31, 2022 and 2021, respectively) |
67 | 65 | ||||||
| Adjusted net interest expense for the twelve months ended March 31, 2022 and 2021, respectively |
1,125 | 1,145 | ||||||
AVAILABLE LIQUIDITY
The term available liquidity does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define available liquidity as cash, cash equivalents and amounts available under our securitized trade receivable program and our committed bank credit facilities.
We consider available liquidity to be an important indicator of the financial strength and performance of our businesses because it shows the funds available to meet our cash requirements, including for, but not limited to, capital expenditures, post-employment benefit plans funding, dividend payments, the payment of contractual obligations, maturing debt, on-going operations, the acquisition of spectrum, and other cash requirements. We believe that certain investors and analysts use available liquidity to evaluate the financial strength and performance of our businesses. The most directly comparable IFRS financial measure is cash.
The following table is a reconciliation of cash to available liquidity on a consolidated basis.
| MARCH 31, 2022 | DECEMBER 31, 2021 | |||||||
| Cash |
104 | 207 | ||||||
| Amounts available under our securitized trade receivables program (1) |
400 | 400 | ||||||
| Amounts available under our committed bank credit facilities (2) |
2,314 | 2,789 | ||||||
| Available liquidity |
2,818 | 3,396 | ||||||
| (1) | At March 31, 2022 and December 31, 2021, $400 million was available under our securitized trade receivables program, under which we borrowed $900 million as at March 31, 2022 and December 31, 2021. Loans secured by trade receivables are included in Debt due within one year in our consolidated financial statements. |
| (2) | At March 31, 2022 and December 31, 2021, respectively, $2,314 million and $2,789 million were available under our committed bank credit facilities, given outstanding commercial paper of $949 million in U.S. dollars ($1,186 million in Canadian dollars) and $561 million in U.S. dollars ($711 million in Canadian dollars) as at March 31, 2022 and December 31, 2021, respectively. Commercial paper outstanding is included in Debt due within one year in our consolidated financial statements. |
FREE CASH FLOW AND EXCESS FREE CASH FLOW
The terms free cash flow and excess free cash flow do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers.
We define free cash flow as cash flows from operating activities, excluding cash from discontinued operations, acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude cash from discontinued operations, acquisition and other costs paid and voluntary pension funding because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
We define excess free cash flow as free cash flow less dividends paid on common shares.
We consider free cash flow and excess free cash flow to be important indicators of the financial strength and performance of our businesses. Free cash flow shows how much cash is available to pay dividends on common shares, repay debt and reinvest in our company. Excess free cash flow shows
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 33
9 MD&A Non-GAAP financial measures, other financial measures and key performance indicators (KPIs)
how much cash is available to repay debt and reinvest in our company, after the payment of dividends on common shares. We believe that certain investors and analysts use free cash flow and excess free cash flow to value a business and its underlying assets and to evaluate the financial strength and performance of our businesses. The most directly comparable IFRS financial measure is cash flows from operating activities.
The following table is a reconciliation of cash flows from operating activities to free cash flow and excess free cash flow on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||
| Cash flows from operating activities |
1,716 | 1,992 | ||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | ||||
| Cash dividends paid on preferred shares |
(33 | ) | (31 | ) | ||||
| Cash dividends paid by subsidiaries to NCI |
(11 | ) | (13 | ) | ||||
| Acquisition and other costs paid |
3 | 4 | ||||||
| Free cash flow |
723 | 940 | ||||||
| Dividends paid on common shares |
(795 | ) | (753 | ) | ||||
| Excess free cash flow |
(72 | ) | 187 | |||||
NET DEBT
The term net debt does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define net debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash and cash equivalents, as shown in BCE’s consolidated statements of financial position. We include 50% of outstanding preferred shares in our net debt as it is consistent with the treatment by certain credit rating agencies.
We consider net debt to be an important indicator of the company’s financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use net debt to determine a company’s financial leverage.
Net debt is calculated using several asset and liability categories from the statements of financial position. The most directly comparable IFRS financial measure is long-term debt. The following table is a reconciliation of long-term debt to net debt on a consolidated basis.
| MARCH 31, 2022 | DECEMBER 31, 2021 | |||||||
| Long-term debt |
26,877 | 27,048 | ||||||
| Debt due within one year |
3,082 | 2,625 | ||||||
| 50% of outstanding preferred shares |
1,943 | 2,002 | ||||||
| Cash |
(104 | ) | (207 | ) | ||||
| Net debt |
31,798 | 31,468 | ||||||
| 9.2 | Non-GAAP ratios |
A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage or similar representation and that has a non-GAAP financial measure as one or more of its components.
ADJUSTED EPS
The term adjusted EPS does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted EPS as adjusted net earnings per BCE common share. Adjusted net earnings is a non-GAAP financial measure. For further details on adjusted net earnings, see section 9.1 – Non-GAAP financial measures.
We use adjusted EPS, and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
DIVIDEND PAYOUT RATIO
The term dividend payout ratio does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define dividend payout ratio as dividends paid on common shares divided by free cash flow. Free cash flow is a non-GAAP financial measure. For further details on free cash flow, see section 9.1 – Non-GAAP financial measures.
34 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
9 MD&A Non-GAAP financial measures, other financial measures and key performance indicators (KPIs)
We consider dividend payout ratio to be an important indicator of the financial strength and performance of our businesses because it shows the sustainability of the company’s dividend payments.
| 9.3 | Total of segments measures |
A total of segments measure is a financial measure that is a subtotal or total of 2 or more reportable segments and is disclosed within the Notes to BCE’s consolidated primary financial statements.
ADJUSTED EBITDA
We define adjusted EBITDA as operating revenues less operating costs as shown in BCE’s consolidated income statements.
The most directly comparable IFRS financial measure is net earnings. The following table is a reconciliation of net earnings to adjusted EBITDA on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||
| Net earnings |
934 | 687 | ||||||
| Severance, acquisition and other costs |
13 | 89 | ||||||
| Depreciation |
891 | 895 | ||||||
| Amortization |
260 | 238 | ||||||
| Finance costs |
||||||||
| Interest expense |
260 | 267 | ||||||
| Net (return) interest on post-employment benefit plans |
(18 | ) | 5 | |||||
| Impairment of assets |
2 | 3 | ||||||
| Other income |
(93 | ) | (8 | ) | ||||
| Income taxes |
335 | 253 | ||||||
| Adjusted EBITDA |
2,584 | 2,429 | ||||||
| 9.4 | Capital management measures |
A capital management measure is a financial measure that is intended to enable a reader to evaluate our objectives, policies and processes for managing our capital and is disclosed within the Notes to BCE’s consolidated financial statements.
The financial reporting framework used to prepare the financial statements requires disclosure that helps readers assess the company’s capital management objectives, policies, and processes, as set out in IFRS in IAS 1 – Presentation of Financial Statements. BCE has its own methods for managing capital and liquidity, and IFRS does not prescribe any particular calculation method.
ADJUSTED EBITDA TO ADJUSTED NET INTEREST EXPENSE RATIO
The adjusted EBITDA to adjusted net interest expense ratio represents adjusted EBITDA divided by adjusted net interest expense. For the purposes of calculating our adjusted EBITDA to adjusted net interest expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA. Adjusted net interest expense used in the calculation of the adjusted EBITDA to adjusted net interest expense ratio is a non-GAAP financial measure defined as twelve-month trailing net interest expense as shown in our consolidated statements of cash flows, plus 50% of twelve-month trailing net earnings attributable to preferred shareholders as shown in our consolidated income statements. For further details on adjusted net interest expense, see section 9.1, Non-GAAP financial measures.
We use, and believe that certain investors and analysts use, the adjusted EBITDA to adjusted net interest expense ratio, among other measures, to evaluate the financial health of the company.
NET DEBT LEVERAGE RATIO
The net debt leverage ratio represents net debt divided by adjusted EBITDA. Net debt used in the calculation of the net debt leverage ratio is a non-GAAP financial measure. For further details on net debt, see section 9.1, Non-GAAP financial measures. For the purposes of calculating our net debt leverage ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA.
We use, and believe that certain investors and analysts use, the net debt leverage ratio as a measure of financial leverage.
| 9.5 | Supplementary financial measures |
A supplementary financial measure is a financial measure that is not reported in BCE’s consolidated financial statements, and is, or is intended to be, reported periodically to represent historical or expected future financial performance, financial position, or cash flows.
An explanation of such measures is provided where they are first referred to if the supplementary financial measures’ labelling is not sufficiently descriptive.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 35
9 MD&A Non-GAAP financial measures, other financial measures and key performance indicators (KPIs)
| 9.6 | KPIs |
In addition to the non-GAAP financial measures and other financial measures described previously, we use the following KPIs to measure the success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by other issuers.
| KPI | DEFINITION | |
| Adjusted EBITDA margin | Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues. | |
| ARPU | Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a dollar unit per month. | |
| Capital intensity | Capital intensity is defined as capital expenditures divided by operating revenues. | |
| Churn | Mobile phone churn is the rate at which existing mobile phone subscribers cancel their services. It is a measure of our ability to retain our customers. Mobile phone churn is calculated by dividing the number of mobile phone deactivations during a given period by the average number of mobile phone subscribers in the base for the specified period and is expressed as a percentage per month. | |
| Subscriber unit | Mobile phone subscriber unit is comprised of a recurring revenue generating portable unit (e.g. smartphones and feature phones) on an active service plan, that has access to our wireless networks and includes voice, text and/or data connectivity. We report mobile phone subscriber units in two categories: postpaid and prepaid. Prepaid mobile phone subscriber units are considered active for a period of 90 days following the expiry of the subscriber’s prepaid balance.
Mobile connected device subscriber unit is comprised of a recurring revenue generating portable unit (e.g. tablets, wearables, mobile Internet devices and IoT) on an active service plan, that has access to our wireless networks and is intended for limited or no cellular voice capability.
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet, satellite TV, IPTV, and/or residential NAS. A subscriber is included in our subscriber base when the service has been installed and is operational at the customer premise and a billing relationship has been established. | |
| • Retail Internet, IPTV and satellite TV subscribers have access to stand-alone services, and are primarily represented by a dwelling unit | ||
|
• Retail residential NAS subscribers are based on a line count and are represented by a unique telephone number | ||
36 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
10 MD&A Controls and procedures
| 10 | Controls and procedures |
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes were made in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 37
Exhibit 99.2
Consolidated financial statements
Consolidated financial statements
CONSOLIDATED INCOME STATEMENTS
| FOR THE PERIOD ENDED MARCH 31 (IN MILLIONS OF CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS) (UNAUDITED) |
NOTE | 2022 | 2021 | |||||||||
| Operating revenues |
3 | 5,850 | 5,706 | |||||||||
| Operating costs |
3, 5 | (3,266 | ) | (3,277 | ) | |||||||
| Severance, acquisition and other costs |
6 | (13 | ) | (89 | ) | |||||||
| Depreciation |
(891 | ) | (895 | ) | ||||||||
| Amortization |
(260 | ) | (238 | ) | ||||||||
| Finance costs |
||||||||||||
| Interest expense |
(260 | ) | (267 | ) | ||||||||
| Net return (interest) on post-employment benefit plans |
10 | 18 | (5 | ) | ||||||||
| Impairment of assets |
(2 | ) | (3 | ) | ||||||||
| Other income |
7 | 93 | 8 | |||||||||
| Income taxes |
(335 | ) | (253 | ) | ||||||||
| Net earnings |
934 | 687 | ||||||||||
| Net earnings attributable to: |
||||||||||||
| Common shareholders |
877 | 642 | ||||||||||
| Preferred shareholders |
34 | 32 | ||||||||||
|
Non-controlling interest |
23 | 13 | ||||||||||
| Net earnings |
934 | 687 | ||||||||||
| Net earnings per common share – basic and diluted |
8 | 0.96 | 0.71 | |||||||||
| Weighted average number of common shares outstanding – basic (millions) |
910.1 | 904.5 | ||||||||||
38 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| FOR THE PERIOD ENDED MARCH 31 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
NOTE | 2022 | 2021 | |||||||||
| Net earnings |
934 | 687 | ||||||||||
| Other comprehensive income, net of income taxes |
||||||||||||
| Items that will be subsequently reclassified to net earnings |
||||||||||||
| Net change in value of derivatives designated as cash flow hedges, net of income taxes of ($55) million and ($24) million for the three months ended March 31, 2022 and 2021, respectively |
148 | 65 | ||||||||||
| Items that will not be reclassified to net earnings |
||||||||||||
| Actuarial gains on post-employment benefit plans, net of income taxes of ($235) million and ($420) million for the three months ended March 31, 2022 and 2021, respectively (1) |
10 | 644 | 1,145 | |||||||||
| Net change in value of publicly-traded and privately-held investments, net of income taxes of nil for the three months ended March 31, 2022 and 2021, respectively |
1 | (3 | ) | |||||||||
| Net change in value of derivatives designated as cash flow hedges, net of income taxes of $3 million and $2 million for the three months ended March 31, 2022 and 2021, respectively |
(8 | ) | (6 | ) | ||||||||
| Other comprehensive income |
785 | 1,201 | ||||||||||
| Total comprehensive income |
1,719 | 1,888 | ||||||||||
| Total comprehensive income attributable to: |
||||||||||||
| Common shareholders |
1,662 | 1,843 | ||||||||||
| Preferred shareholders |
34 | 32 | ||||||||||
|
Non-controlling interest |
23 | 13 | ||||||||||
| Total comprehensive income |
1,719 | 1,888 | ||||||||||
| (1) | The discount rate used to value our post-employment benefit obligations at March 31, 2022 was 4.3% compared to 3.2% at December 31, 2021. The discount rate used to value our post-employment benefit obligations at March 31, 2021 was 3.4% compared to 2.6% at December 31, 2020. |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 39
Consolidated financial statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) | NOTE | MARCH 31, 2022 | DECEMBER 31, 2021 | |||||||||
| ASSETS |
||||||||||||
| Current assets |
||||||||||||
| Cash |
104 | 207 | ||||||||||
| Trade and other receivables |
3,549 | 3,949 | ||||||||||
| Inventory |
567 | 482 | ||||||||||
| Contract assets |
386 | 414 | ||||||||||
| Contract costs |
564 | 507 | ||||||||||
| Prepaid expenses |
375 | 254 | ||||||||||
| Other current assets |
271 | 335 | ||||||||||
| Assets held for sale |
7 | – | 50 | |||||||||
| Total current assets |
5,816 | 6,198 | ||||||||||
| Non-current assets |
||||||||||||
| Contract assets |
247 | 251 | ||||||||||
| Contract costs |
365 | 387 | ||||||||||
| Property, plant and equipment |
28,108 | 28,235 | ||||||||||
| Intangible assets |
15,825 | 15,570 | ||||||||||
| Deferred tax assets |
108 | 105 | ||||||||||
| Investments in associates and joint ventures |
654 | 668 | ||||||||||
| Post-employment benefit assets |
10 | 4,110 | 3,472 | |||||||||
| Other non-current assets |
1,378 | 1,306 | ||||||||||
| Goodwill |
4 | 10,724 | 10,572 | |||||||||
| Total non-current assets |
61,519 | 60,566 | ||||||||||
| Total assets |
67,335 | 66,764 | ||||||||||
| LIABILITIES |
||||||||||||
| Current liabilities |
||||||||||||
| Trade payables and other liabilities |
3,841 | 4,455 | ||||||||||
| Contract liabilities |
838 | 799 | ||||||||||
| Interest payable |
162 | 247 | ||||||||||
| Dividends payable |
854 | 811 | ||||||||||
| Current tax liabilities |
189 | 141 | ||||||||||
| Debt due within one year |
9 | 3,082 | 2,625 | |||||||||
| Liabilities held for sale |
7 | – | 35 | |||||||||
| Total current liabilities |
8,966 | 9,113 | ||||||||||
| Non-current liabilities |
||||||||||||
| Contract liabilities |
244 | 246 | ||||||||||
| Long-term debt |
9 | 26,877 | 27,048 | |||||||||
| Deferred tax liabilities |
5,065 | 4,679 | ||||||||||
| Post-employment benefit obligations |
10 | 1,464 | 1,734 | |||||||||
| Other non-current liabilities |
934 | 1,003 | ||||||||||
| Total non-current liabilities |
34,584 | 34,710 | ||||||||||
| Total liabilities |
43,550 | 43,823 | ||||||||||
| Commitments |
14 | |||||||||||
| EQUITY |
||||||||||||
| Equity attributable to BCE shareholders |
||||||||||||
| Preferred shares |
12 | 3,885 | 4,003 | |||||||||
| Common shares |
20,830 | 20,662 | ||||||||||
| Contributed surplus |
12 | 1,137 | 1,157 | |||||||||
| Accumulated other comprehensive income |
355 | 213 | ||||||||||
| Deficit |
(2,740 | ) | (3,400 | ) | ||||||||
| Total equity attributable to BCE shareholders |
23,467 | 22,635 | ||||||||||
|
Non-controlling interest |
318 | 306 | ||||||||||
| Total equity |
23,785 | 22,941 | ||||||||||
| Total liabilities and equity |
67,335 | 66,764 | ||||||||||
40 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| ATTRIBUTABLE TO BCE SHAREHOLDERS | ||||||||||||||||||||||||||||||||||||
| FOR THE PERIOD ENDED MARCH 31, 2022 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
NOTE |
PREFERRED SHARES |
COMMON SHARES |
CONTRI- BUTED SURPLUS |
ACCUM- ULATED OTHER COMPRE- HENSIVE INCOME |
DEFICIT | TOTAL |
NON- CONTROL- LING INTEREST |
TOTAL EQUITY |
|||||||||||||||||||||||||||
| Balance at December 31, 2021 |
4,003 | 20,662 | 1,157 | 213 | (3,400 | ) | 22,635 | 306 | 22,941 | |||||||||||||||||||||||||||
| Net earnings |
– | – | – | – | 911 | 911 | 23 | 934 | ||||||||||||||||||||||||||||
| Other comprehensive income |
– | – | – | 142 | 643 | 785 | – | 785 | ||||||||||||||||||||||||||||
| Total comprehensive income |
– | – | – | 142 | 1,554 | 1,696 | 23 | 1,719 | ||||||||||||||||||||||||||||
| Common shares issued under employee stock option plan |
– | 168 | (6 | ) | – | – | 162 | – | 162 | |||||||||||||||||||||||||||
| Other share-based compensation |
– | – | (17 | ) | – | (21 | ) | (38 | ) | – | (38 | ) | ||||||||||||||||||||||||
| Repurchase of preferred shares |
12 | (118 | ) | – | 3 | – | – | (115 | ) | – | (115 | ) | ||||||||||||||||||||||||
| Dividends declared on BCE common and preferred shares |
– | – | – | – | (873 | ) | (873 | ) | – | (873 | ) | |||||||||||||||||||||||||
| Dividends declared by subsidiaries to non-controlling interest |
– | – | – | – | – | – | (11 | ) | (11 | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2022 |
3,885 | 20,830 | 1,137 | 355 | (2,740 | ) | 23,467 | 318 | 23,785 | |||||||||||||||||||||||||||
| ATTRIBUTABLE TO BCE SHAREHOLDERS | ||||||||||||||||||||||||||||||||||||
| FOR THE PERIOD ENDED MARCH 31, 2021 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
PREFERRED SHARES |
COMMON SHARES |
CONTRI- BUTED SURPLUS |
ACCUM- ULATED OTHER COMPRE- HENSIVE INCOME |
DEFICIT | TOTAL | NON- CONTROL- LING INTEREST |
TOTAL EQUITY |
||||||||||||||||||||||||||||
| Balance at December 31, 2020 |
4,003 | 20,390 | 1,174 | 103 | (4,681 | ) | 20,989 | 340 | 21,329 | |||||||||||||||||||||||||||
| Net earnings |
– | – | – | – | 674 | 674 | 13 | 687 | ||||||||||||||||||||||||||||
| Other comprehensive income |
– | – | – | 56 | 1,145 | 1,201 | – | 1,201 | ||||||||||||||||||||||||||||
| Total comprehensive income |
– | – | – | 56 | 1,819 | 1,875 | 13 | 1,888 | ||||||||||||||||||||||||||||
| Common shares issued under employee stock option plan |
– | 10 | (1 | ) | – | – | 9 | – | 9 | |||||||||||||||||||||||||||
| Other share-based compensation |
– | – | (19 | ) | – | (8 | ) | (27 | ) | – | (27 | ) | ||||||||||||||||||||||||
| Dividends declared on BCE common and preferred shares |
– | – | – | – | (823 | ) | (823 | ) | – | (823 | ) | |||||||||||||||||||||||||
| Dividends declared by subsidiaries to non-controlling interest |
– | – | – | – | – | – | (13 | ) | (13 | ) | ||||||||||||||||||||||||||
| Settlement of cash flow hedges transferred to the cost basis of hedged items |
– | – | – | 4 | – | 4 | – | 4 | ||||||||||||||||||||||||||||
| Other |
– | – | – | – | – | – | (1 | ) | (1 | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2021 |
4,003 | 20,400 | 1,154 | 163 | (3,693 | ) | 22,027 | 339 | 22,366 | |||||||||||||||||||||||||||
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 41
Consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
| FOR THE PERIOD ENDED MARCH 31 (IN MILLIONS OF CANADIAN DOLLARS) (UNAUDITED) |
NOTE | 2022 | 2021 | |||||||||
| Cash flows from operating activities |
||||||||||||
| Net earnings |
934 | 687 | ||||||||||
| Adjustments to reconcile net earnings to cash flows from operating activities |
||||||||||||
| Severance, acquisition and other costs |
6 | 13 | 89 | |||||||||
| Depreciation and amortization |
1,151 | 1,133 | ||||||||||
| Post-employment benefit plans cost |
10 | 51 | 79 | |||||||||
| Net interest expense |
258 | 263 | ||||||||||
| Impairment of assets |
2 | 3 | ||||||||||
| Gains on investments |
7 | (37 | ) | – | ||||||||
| Income taxes |
335 | 253 | ||||||||||
| Contributions to post-employment benefit plans |
(79 | ) | (79 | ) | ||||||||
| Payments under other post-employment benefit plans |
(15 | ) | (15 | ) | ||||||||
| Severance and other costs paid |
(28 | ) | (43 | ) | ||||||||
| Interest paid |
(373 | ) | (306 | ) | ||||||||
| Income taxes paid (net of refunds) |
(116 | ) | (109 | ) | ||||||||
| Acquisition and other costs paid |
(3 | ) | (4 | ) | ||||||||
| Change in contract assets |
32 | 144 | ||||||||||
| Change in wireless device financing plan receivables |
59 | (91 | ) | |||||||||
| Net change in operating assets and liabilities |
(468 | ) | (12 | ) | ||||||||
| Cash flows from operating activities |
1,716 | 1,992 | ||||||||||
| Cash flows used in investing activities |
||||||||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | ||||||||
| Business acquisitions |
4 | (139 | ) | – | ||||||||
| Business dispositions |
7 | 52 | – | |||||||||
| Other investing activities |
(9 | ) | (21 | ) | ||||||||
| Cash flows used in investing activities |
(1,048 | ) | (1,033 | ) | ||||||||
| Cash flows (used in) from financing activities |
||||||||||||
| Increase (decrease) in notes payable |
469 | (357 | ) | |||||||||
| Decrease in securitized trade receivables |
– | (13 | ) | |||||||||
| Issue of long-term debt |
9 | 945 | 2,915 | |||||||||
| Repayment of long-term debt |
9 | (1,258 | ) | (226 | ) | |||||||
| Issue of common shares |
161 | 10 | ||||||||||
| Purchase of shares for settlement of share-based payments |
(106 | ) | (91 | ) | ||||||||
| Repurchase of preferred shares |
12 | (115 | ) | – | ||||||||
| Cash dividends paid on common shares |
(795 | ) | (753 | ) | ||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (31 | ) | ||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (13 | ) | ||||||||
| Other financing activities |
(28 | ) | (17 | ) | ||||||||
| Cash flows (used in) from financing activities |
(771 | ) | 1,424 | |||||||||
| Net (decrease) increase in cash |
(103 | ) | 1,683 | |||||||||
| Cash at beginning of period |
207 | 224 | ||||||||||
| Cash at end of period |
104 | 1,907 | ||||||||||
| Net increase in cash equivalents |
– | 700 | ||||||||||
| Cash equivalents at beginning of period |
– | – | ||||||||||
| Cash equivalents at end of period |
– | 700 | ||||||||||
42 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Notes to consolidated financial statements
Notes to consolidated financial statements
These consolidated interim financial statements (financial statements) should be read in conjunction with BCE’s 2021 annual consolidated financial statements, approved by BCE’s board of directors on March 3, 2022.
These notes are unaudited.
We, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates.
Note 1 | Corporate information
BCE is incorporated and domiciled in Canada. BCE’s head office is located at 1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada. BCE is a telecommunications and media company providing wireless, wireline, Internet and television (TV) services to residential, business and wholesale customers in Canada. Our Bell Media segment provides conventional TV, specialty TV, pay TV, streaming services, digital media services, radio broadcasting services and out-of-home advertising services to customers in Canada.
Note 2 | Basis of presentation and significant accounting policies
These financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), under International Accounting Standard (IAS) 34 – Interim Financial Reporting and were approved by BCE’s board of directors on May 4, 2022. These financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Significant accounting policies in our consolidated financial statements for the year ended December 31, 2021, except as noted below.
These financial statements do not include all of the notes required in annual financial statements.
All amounts are in millions of Canadian dollars, except where noted.
ADOPTION OF AMENDED ACCOUNTING STANDARDS
As required, effective January 1, 2022, we adopted the following amendments to accounting standards issued by the IASB.
| STANDARD | DESCRIPTION | IMPACT | ||
| Onerous Contracts – Cost of Fulfilling a Contract, Amendments to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets | These amendments clarify which costs should be included in determining the cost of fulfilling a contract when assessing whether a contract is onerous. | These amendments did not have a significant impact on our financial statements. | ||
FUTURE CHANGES TO ACCOUNTING STANDARDS
The following amendments and clarification to standards issued by the IASB have not yet been adopted by BCE.
| STANDARD | DESCRIPTION | IMPACT | EFFECTIVE DATE | |||
| Disclosure of Accounting Policies – Amendments to IAS 1 – Presentation of Financial Statements | These amendments require that entities disclose material accounting policies, as defined, instead of significant accounting policies. | We are currently assessing the impact of these amendments on the disclosure of our accounting policies. | Effective for annual reporting periods beginning on or after January 1, 2023. Early application is permitted. | |||
| IFRIC Agenda Decision on Demand Deposits with Restrictions on Use arising from a Contract with a Third Party (IAS 7 – Statement of Cash Flows) | In April 2022, the International Financial Reporting Interpretations Committee (IFRIC) issued an agenda decision clarifying that an entity should present a demand deposit with restrictions on use arising from a contract with a third party as cash and cash equivalents in the statements of financial position and cash flows, unless those restrictions change the nature of the deposit such that it no longer meets the definition of cash in IAS 7. | We are currently assessing the impact of this IFRIC agenda decision on our financial statements. | As permitted by the IASB, application of this IFRIC agenda decision is expected in the second quarter of 2022. | |||
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 43
Notes to consolidated financial statements
Note 3 | Segmented information
Our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. Our segments reflect how we manage our business and how we classify our operations for planning and measuring performance.
The following tables present financial information by segment for the three month periods ended March 31, 2022 and 2021.
| FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2022 | NOTE | BELL WIRELESS |
BELL WIRELINE |
BELL MEDIA |
INTERSEGMENT ELIMINATIONS |
BCE | ||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||
| External service revenues |
1,635 | 2,801 | 741 | – | 5,177 | |||||||||||||||||||
| Inter-segment service revenues |
11 | 102 | 84 | (197 | ) | – | ||||||||||||||||||
| Operating service revenues |
1,646 | 2,903 | 825 | (197 | ) | 5,177 | ||||||||||||||||||
| External product revenues |
563 | 110 | – | – | 673 | |||||||||||||||||||
| Inter-segment product revenues |
1 | – | – | (1 | ) | – | ||||||||||||||||||
| Operating product revenues |
564 | 110 | – | (1 | ) | 673 | ||||||||||||||||||
| Total external revenues |
2,198 | 2,911 | 741 | – | 5,850 | |||||||||||||||||||
| Total inter-segment revenues |
12 | 102 | 84 | (198 | ) | – | ||||||||||||||||||
| Total operating revenues |
2,210 | 3,013 | 825 | (198 | ) | 5,850 | ||||||||||||||||||
| Operating costs |
5 | (1,201 | ) | (1,646 | ) | (617 | ) | 198 | (3,266 | ) | ||||||||||||||
| Adjusted EBITDA (1) |
1,009 | 1,367 | 208 | – | 2,584 | |||||||||||||||||||
| Severance, acquisition and other costs |
6 | (13 | ) | |||||||||||||||||||||
| Depreciation and amortization |
(1,151 | ) | ||||||||||||||||||||||
| Finance costs |
||||||||||||||||||||||||
| Interest expense |
(260 | ) | ||||||||||||||||||||||
| Net return on post-employment benefit plans |
10 | 18 | ||||||||||||||||||||||
| Impairment of assets |
(2 | ) | ||||||||||||||||||||||
| Other income |
7 | 93 | ||||||||||||||||||||||
| Income taxes |
(335 | ) | ||||||||||||||||||||||
| Net earnings |
934 | |||||||||||||||||||||||
|
(1) The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs.
|
| |||||||||||||||||||||||
| FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2021 | NOTE | BELL WIRELESS |
BELL WIRELINE |
BELL MEDIA |
INTERSEGMENT ELIMINATIONS |
BCE | ||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||
| External service revenues |
1,503 | 2,842 | 623 | – | 4,968 | |||||||||||||||||||
| Inter-segment service revenues |
11 | 85 | 90 | (186 | ) | – | ||||||||||||||||||
| Operating service revenues |
1,514 | 2,927 | 713 | (186 | ) | 4,968 | ||||||||||||||||||
| External product revenues |
584 | 154 | – | – | 738 | |||||||||||||||||||
| Inter-segment product revenues |
2 | – | – | (2 | ) | – | ||||||||||||||||||
| Operating product revenues |
586 | 154 | – | (2 | ) | 738 | ||||||||||||||||||
| Total external revenues |
2,087 | 2,996 | 623 | – | 5,706 | |||||||||||||||||||
| Total inter-segment revenues |
13 | 85 | 90 | (188 | ) | – | ||||||||||||||||||
| Total operating revenues |
2,100 | 3,081 | 713 | (188 | ) | 5,706 | ||||||||||||||||||
| Operating costs |
5 | (1,177 | ) | (1,718 | ) | (570 | ) | 188 | (3,277 | ) | ||||||||||||||
| Adjusted EBITDA (1) |
923 | 1,363 | 143 | – | 2,429 | |||||||||||||||||||
| Severance, acquisition and other costs |
6 | (89 | ) | |||||||||||||||||||||
| Depreciation and amortization |
(1,133 | ) | ||||||||||||||||||||||
| Finance costs |
||||||||||||||||||||||||
| Interest expense |
(267 | ) | ||||||||||||||||||||||
| Net interest on post-employment benefit plans |
10 | (5 | ) | |||||||||||||||||||||
| Impairment of assets |
(3 | ) | ||||||||||||||||||||||
| Other income |
7 | 8 | ||||||||||||||||||||||
| Income taxes |
(253 | ) | ||||||||||||||||||||||
| Net earnings |
687 | |||||||||||||||||||||||
| (1) | The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
44 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Notes to consolidated financial statements
REVENUES BY SERVICES AND PRODUCTS
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
|
Services (1) |
||||||||
| Wireless |
1,635 | 1,503 | ||||||
| Wireline data |
1,953 | 1,965 | ||||||
| Wireline voice |
771 | 803 | ||||||
| Media |
741 | 623 | ||||||
| Other wireline services |
77 | 74 | ||||||
| Total services |
5,177 | 4,968 | ||||||
|
Products (2) |
||||||||
| Wireless |
563 | 584 | ||||||
| Wireline data |
99 | 144 | ||||||
| Wireline equipment and other |
11 | 10 | ||||||
| Total products |
673 | 738 | ||||||
| Total operating revenues |
5,850 | 5,706 | ||||||
| (1) | Our service revenues are generally recognized over time. |
| (2) | Our product revenues are generally recognized at a point in time. |
Note 4 | Business acquisition
In February 2022, Bell acquired EBOX and other related companies, which provide Internet, telephone and television services to consumers and businesses in Québec and parts of Ontario for a total cash consideration of $153 million ($139 million net of cash acquired). The acquisition of EBOX and other related companies is expected to accelerate growth in Bell’s residential and small business customers. The results of the acquired companies are included in our Bell Wireline segment.
The allocation of the purchase price includes provisional estimates and has been primarily allocated to goodwill. Goodwill arises principally from expected synergies and future growth and is not deductible for tax purposes.
The transaction did not have a significant impact on our consolidated operating revenues and net earnings for the three months ended March 31, 2022.
Note 5 | Operating costs
| FOR THE PERIOD ENDED MARCH 31 | NOTE | 2022 | 2021 | |||||||||
| Labour costs |
||||||||||||
| Wages, salaries and related taxes and benefits (1) |
(1,040 | ) | (1,033 | ) | ||||||||
| Post-employment benefit plans service cost (net of capitalized amounts) |
10 | (69 | ) | (74 | ) | |||||||
| Other labour costs (1) (2) |
(237 | ) | (246 | ) | ||||||||
| Less: |
||||||||||||
| Capitalized labour |
260 | 255 | ||||||||||
| Total labour costs |
(1,086 | ) | (1,098 | ) | ||||||||
| Cost of revenues (1) (3) |
(1,728 | ) | (1,740 | ) | ||||||||
| Other operating costs (1) (4) |
(452 | ) | (439 | ) | ||||||||
| Total operating costs |
(3,266 | ) | (3,277 | ) | ||||||||
| (1) | We have reclassified amounts from the previous period to make them consistent with the presentation for the current period. |
| (2) | Other labour costs include contractor and outsourcing costs. |
| (3) | Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers. |
| (4) | Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology costs, professional service fees and rent. |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 45
Notes to consolidated financial statements
Note 6 | Severance, acquisition and other costs
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
| Severance |
(18 | ) | (97 | ) | ||||
| Acquisition and other |
5 | 8 | ||||||
| Total severance, acquisition and other costs |
(13 | ) | (89 | ) | ||||
SEVERANCE COSTS
Severance costs consist of charges related to involuntary and voluntary employee terminations.
ACQUISITION AND OTHER COSTS
Acquisition and other costs consist of transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions, employee severance costs related to the purchase of a business, the costs to integrate acquired companies into our operations, costs relating to litigation and regulatory decisions, when they are significant, and other costs.
Note 7 | Other income
| FOR THE PERIOD ENDED MARCH 31 | NOTE | 2022 | 2021 | |||||||||
| Net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans |
75 | 60 | ||||||||||
| Gains on investments |
37 | – | ||||||||||
| Early debt redemption costs |
9 | (18 | ) | (53 | ) | |||||||
| Equity losses from investments in associates and joint ventures |
||||||||||||
| Operations |
(9 | ) | (13 | ) | ||||||||
| Losses on retirements and disposals of property, plant and equipment and intangible assets |
(6 | ) | (5 | ) | ||||||||
| Other |
14 | 19 | ||||||||||
| Total other income |
93 | 8 | ||||||||||
GAINS ON INVESTMENTS
On March 1, 2022, we completed the previously announced sale of our wholly-owned subsidiary 6362222 Canada Inc. (Createch), for cash proceeds of $53 million. As a result, we recorded a gain on sale of $36 million (before tax expense of $2 million).
Our results for the three months ended March 31, 2022 and 2021 included $10 million and $17 million of revenue and net earnings of nil, respectively, related to the assets held for sale.
Note 8 | Earnings per share
The following table shows the components used in the calculation of basic and diluted net earnings per common share for earnings attributable to common shareholders.
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
| Net earnings attributable to common shareholders – basic |
877 | 642 | ||||||
| Dividends declared per common share (in dollars) |
0.92 | 0.875 | ||||||
| Weighted average number of common shares outstanding (in millions) |
||||||||
| Weighted average number of common shares outstanding – basic |
910.1 | 904.5 | ||||||
| Assumed exercise of stock options (1) |
0.7 | – | ||||||
| Weighted average number of common shares outstanding – diluted (in millions) |
910.8 | 904.5 | ||||||
| (1) | The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future compensation cost of dilutive options. It excludes options for which the exercise price is higher than the average market value of a BCE common share. The number of excluded options was nil for the first quarter of 2022, compared to 15,031,826 for the first quarter of 2021. |
46 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Notes to consolidated financial statements
Note 9 | Debt
On February 11, 2022, Bell Canada issued, under its 2016 trust indenture, 3.65% Series US-7 Notes, with a principal amount of $750 million in U.S. dollars ($954 million in Canadian dollars), which mature on August 15, 2052. The Series US-7 Notes have been hedged for foreign currency fluctuations through cross currency interest rate swaps. See Note 11, Financial assets and liabilities, for additional details.
The Series US-7 Notes are fully and unconditionally guaranteed by BCE.
On March 16, 2022, Bell Canada redeemed, prior to maturity, its 3.35% Series M-26 medium-term note (MTN) debentures, having an outstanding principal amount of $1 billion, which were due on March 22, 2023. As a result, in Q1 2022, we recognized early debt redemption charges of $18 million, which were recorded in Other income in the consolidated income statement.
Note 10 | Post-employment benefit plans
POST-EMPLOYMENT BENEFIT PLANS COST
We provide pension and other benefits for most of our employees. These include defined benefit (DB) pension plans, defined contribution (DC) pension plans and other post-employment benefits (OPEBs).
COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS SERVICE COST
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
| DB pension |
(48 | ) | (55 | ) | ||||
| DC pension |
(38 | ) | (36 | ) | ||||
| OPEBs |
– | (1 | ) | |||||
| Less: |
||||||||
| Capitalized benefit plans cost |
17 | 18 | ||||||
| Total post-employment benefit plans service cost |
(69 | ) | (74 | ) | ||||
| COMPONENTS OF POST-EMPLOYMENT BENEFIT PLANS FINANCING INCOME (COST)
|
| |||||||
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
| DB pension |
26 | 3 | ||||||
| OPEBs |
(8 | ) | (8 | ) | ||||
| Total net return (interest) on post-employment benefit plans |
18 | (5 | ) | |||||
FUNDED STATUS OF POST-EMPLOYMENT BENEFIT PLANS
The following table shows the funded status of our post-employment benefit obligations.
| FUNDED | PARTIALLY FUNDED (1) | UNFUNDED (2) | TOTAL | |||||||||||||||||||||||||||||
| FOR THE PERIOD ENDED |
MARCH 31, 2022 |
DECEMBER 31, 2021 |
MARCH 31, 2022 |
DECEMBER 31, 2021 |
MARCH 31, 2022 |
DECEMBER 31, 2021 |
MARCH 31, 2022 |
DECEMBER 31, 2021 |
||||||||||||||||||||||||
| Present value of post-employment benefit obligations |
(20,592 | ) | (23,872 | ) | (1,606 | ) | (1,840 | ) | (251 | ) | (289 | ) | (22,449 | ) | (26,001 | ) | ||||||||||||||||
| Fair value of plan assets |
25,676 | 27,979 | 410 | 412 | – | – | 26,086 | 28,391 | ||||||||||||||||||||||||
| Plan surplus (deficit) |
5,084 | 4,107 | (1,196 | ) | (1,428 | ) | (251 | ) | (289 | ) | 3,637 | 2,390 | ||||||||||||||||||||
| Effect of asset limit |
(991 | ) | (652 | ) | – | – | – | – | (991 | ) | (652 | ) | ||||||||||||||||||||
| Post-employment benefit asset (liability) |
4,093 | 3,455 | (1,196 | ) | (1,428 | ) | (251 | ) | (289 | ) | 2,646 | 1,738 | ||||||||||||||||||||
| (1) | The partially funded plans consist of supplementary executive retirement plans (SERPs) for eligible employees and certain OPEBs. The company partially funds the SERPs through letters of credit and a retirement compensation arrangement account with the Canada Revenue Agency. Certain paid-up life insurance benefits are funded through life insurance contracts. |
| (2) | Our unfunded plans consist of certain OPEBs, which are paid as claims are incurred. |
In Q1 2022, we recorded an increase in our post-employment benefit plans and a gain, before taxes, in Other comprehensive income of $879 million due to a decrease in the present value of our post-employment benefit obligations of $3,440 million as a result of an increase in the discount rate to 4.3% at March 31, 2022, compared to 3.2% at December 31, 2021, partly offset by a decrease in the fair value of plan assets of $2,222 million as a result of a loss on plan assets of 7.0% and an increase in the effect of the asset limit of $339 million.
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 47
Notes to consolidated financial statements
Note 11 | Financial assets and liabilities
FAIR VALUE
The following table provides the fair value details of financial instruments measured at amortized cost in the consolidated statements of financial position.
| MARCH 31, 2022 | DECEMBER 31, 2021 | |||||||||||||||||||
| CLASSIFICATION | FAIR VALUE METHODOLOGY | CARRYING VALUE |
FAIR VALUE |
CARRYING VALUE |
FAIR VALUE |
|||||||||||||||
| CRTC deferral account obligation | Trade payables and other liabilities and other non-current liabilities | Present value of estimated future cash flows discounted using observable market interest rates | 62 | 63 | 66 | 67 | ||||||||||||||
| Debt securities and other debt | Debt due within one year and long-term debt | Quoted market price of debt | 23,552 | 23,897 | 23,729 | 26,354 | ||||||||||||||
The following table provides the fair value details of financial instruments measured at fair value in the consolidated statements of financial position.
| FAIR VALUE | ||||||||||||||||||
| CLASSIFICATION | |
CARRYING VALUE OF ASSET (LIABILITY) |
|
|
QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |
|
|
OBSERVABLE MARKET DATA (LEVEL 2) |
(1) |
|
NON-OBSERVABLE MARKET INPUTS (LEVEL 3) |
(2) | ||||||
| March 31, 2022 |
||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets | 186 | 26 | – | 160 | |||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities | 348 | – | 348 | – | |||||||||||||
| Maple Leaf Sports & Entertainment Ltd. (MLSE) financial liability (4) | Trade payables and other liabilities | (149 | ) | – | – | (149 | ) | |||||||||||
| Other | Other non-current assets and liabilities | 113 | – | 176 | (63 | ) | ||||||||||||
| December 31, 2021 | ||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets | 183 | 24 | – | 159 | |||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities | 279 | – | 279 | – | |||||||||||||
| MLSE financial liability (4) | Trade payables and other liabilities | (149 | ) | – | – | (149 | ) | |||||||||||
| Other | Other non-current assets and liabilities | 122 | – | 185 | (63 | ) | ||||||||||||
| (1) | Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates. |
| (2) | Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our level 3 financial instruments. |
| (3) | Unrealized gains and losses are recorded in Other comprehensive income in the statements of comprehensive income and are reclassified from Accumulated other comprehensive income to Deficit in the statements of financial position when realized. |
| (4) | Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust Fund exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other income in the income statements. |
MARKET RISK
CURRENCY EXPOSURES
We use forward contracts, options and cross currency interest rate swaps to manage foreign currency risk related to anticipated purchases and certain foreign currency debt.
In Q1 2022, we entered into cross currency interest rate swaps with a total notional amount of $750 million in U.S. dollars ($954 million in Canadian dollars) to hedge the U.S. currency exposure of our U.S. Notes maturing in 2052. See Note 9, Debt, for additional details.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a loss of $3 million (loss of $41 million) recognized in net earnings at March 31, 2022 and a gain of $207 million (loss of $188 million) recognized in Other comprehensive income at March 31, 2022, with all other variables held constant.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the Philippine peso would result in a gain (loss) of $6 million recognized in Other comprehensive income at March 31, 2022, with all other variables held constant.
48 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Notes to consolidated financial statements
The following table provides further details on our outstanding foreign currency forward contracts and options as at March 31, 2022.
| TYPE OF HEDGE | BUY CURRENCY |
AMOUNT TO RECEIVE |
SELL CURRENCY |
AMOUNT TO PAY |
MATURITY | HEDGED ITEM | ||||||||||||||||||
| Cash flow |
USD | 950 | CAD | 1,199 | 2022 | Commercial paper | ||||||||||||||||||
| Cash flow |
USD | 429 | CAD | 545 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
PHP | 1,743 | CAD | 45 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
PHP | 2,147 | CAD | 51 | 2023 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
USD | 595 | CAD | 732 | 2023 | Anticipated purchases | ||||||||||||||||||
| Cash flow |
USD | 240 | CAD | 299 | 2024 | Anticipated purchases | ||||||||||||||||||
| Cash flow – call options |
USD | 157 | CAD | 203 | 2022 | Anticipated purchases | ||||||||||||||||||
| Cash flow – put options |
USD | 157 | CAD | 200 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic |
USD | 39 | CAD | 48 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – put options |
USD | 219 | CAD | 270 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
USD | 113 | CAD | 134 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
CAD | 142 | USD | 113 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – options (1) |
USD | 135 | CAD | 164 | 2022 | Anticipated purchases | ||||||||||||||||||
| Economic – options (1) |
USD | 95 | CAD | 115 | 2023 | Anticipated purchases | ||||||||||||||||||
| Economic – call options |
USD | 120 | CAD | 146 | 2024 | Anticipated purchases | ||||||||||||||||||
| (1) | Foreign currency options with a leverage provision and a profit cap limitation. |
INTEREST RATE EXPOSURES
In Q1 2022, we entered into cross currency basis rate swaps with a notional amount of $63 million to hedge economically the basis rate exposure on future debt issuances. The fair value of these cross currency basis rate swaps at March 31, 2022 was nil.
We use leveraged interest rate options to hedge economically the dividend rate resets on $582 million of our preferred shares which had varying reset dates in 2021, for the periods ending in 2026. The fair value of these leveraged interest rate options at March 31, 2022 and December 31, 2021 was a net liability of $1 million and $2 million, respectively, recognized in Trade payables and other liabilities and Other non-current liabilities in the statements of financial position. A gain of $1 million for the three months ended March 31, 2022 relating to these leveraged interest rate options is recognized in Other income in the income statements.
A 1% increase (decrease) in interest rates would result in a loss of $17 million and a (gain of $19 million) recognized in net earnings at March 31, 2022, with all other variables held constant.
EQUITY PRICE EXPOSURES
We use equity forward contracts on BCE’s common shares to hedge economically the cash flow exposure related to the settlement of equity settled share-based compensation plans. The fair value of our equity forward contracts at March 31, 2022 and December 31, 2021 was a net asset of $112 million and $130 million, respectively, recognized in Other current assets, Trade payables and other liabilities and Other non-current assets in the statements of financial position. A gain of $75 million for the three months ended March 31, 2022, relating to these equity forward contracts is recognized in Other income in the income statements.
A 5% increase (decrease) in the market price of BCE’s common shares would result in a gain (loss) of $38 million recognized in net earnings at March 31, 2022, with all other variables held constant.
Note 12 | Share capital
REDEMPTION OF SERIES AO PREFERRED SHARES
On March 31, 2022, BCE redeemed its 4,600,000 issued and outstanding Cumulative Redeemable First Preferred Shares, Series AO (Series AO Preferred Shares) with a stated capital of $118 million for a total cost of $115 million. The remaining $3 million was recorded to contributed surplus.
Note 13 | Share-based payments
The following share-based payment amounts are included in the income statements as operating costs.
| FOR THE PERIOD ENDED MARCH 31 | 2022 | 2021 | ||||||
| Employee savings plan |
(8 | ) | (8 | ) | ||||
| Restricted share units (RSUs) and performance share units (PSUs) |
(25 | ) | (20 | ) | ||||
| Other (1) |
(1 | ) | (2 | ) | ||||
| Total share-based payments
|
|
(34
|
)
|
|
(30
|
)
| ||
| (1) | Includes deferred share units and stock options. |
BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT | 49
Notes to consolidated financial statements
The following tables summarize the change in outstanding RSUs/PSUs and stock options for the period ended March 31, 2022.
RSUs/PSUs
| NUMBER OF RSUs/PSUs |
||||
| Outstanding, January 1, 2022 |
3,085,667 | |||
| Granted |
990,707 | |||
| Dividends credited |
40,632 | |||
| Settled |
(1,020,345 | ) | ||
| Forfeited |
(25,704 | ) | ||
| Outstanding, March 31, 2022 |
3,070,957 | |||
STOCK OPTIONS
| NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
|||||||
| Outstanding, January 1, 2022 |
10,778,724 | 60 | ||||||
| Exercised (1) |
(2,795,351 | ) | 58 | |||||
| Forfeited or expired |
(23,624 | ) | 65 | |||||
| Outstanding, March 31, 2022 |
7,959,749 | 61 | ||||||
| Exercisable, March 31, 2022 |
4,696,829 | 58 | ||||||
| (1) | The weighted average market share price for options exercised during the three months ended March 31, 2022 was $69. |
Note 14 | Commitments
The following table is a summary of our contractual obligations at March 31, 2022 that are due in 2022 and in each of the next four years and thereafter.
| 2022 | 2023 | 2024 | 2025 | 2026 | THEREAFTER | TOTAL | ||||||||||||||||||||||
| Commitments for property, plant and equipment and intangible assets |
1,102 | 1,301 | 734 | 491 | 354 | 1,035 | 5,017 | |||||||||||||||||||||
| Purchase obligations |
424 | 455 | 342 | 297 | 373 | 392 | 2,283 | |||||||||||||||||||||
| Leases committed not yet commenced |
7 | 3 | 6 | – | – | – | 16 | |||||||||||||||||||||
| Total |
1,533 | 1,759 | 1,082 | 788 | 727 | 1,427 | 7,316 | |||||||||||||||||||||
Our commitments for property, plant and equipment and intangible assets include program and feature film rights and investments to expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service and product contracts for operating expenditures and other purchase obligations.
Our commitments for leases not yet commenced include OOH advertising spaces, fibre use and real estate. These leases are non-cancellable.
Note 15 | COVID-19
During the first quarter of 2022, the unfavourable effects of the COVID-19 pandemic on our financial and operating performance continued to moderate due to our operational execution and easing of government restrictions during the quarter. However, due to uncertainties relating to the severity and duration of the COVID-19 pandemic and possible further resurgences in the number of COVID-19 cases, including as a result of the potential emergence of other variants, and various potential outcomes, it is difficult at this time to estimate the impacts of the COVID-19 pandemic on our business. Our business and financial results could continue to be unfavourably impacted, and could again become more significantly and negatively impacted, in future periods, including, among others, as a result of global supply chain challenges adversely affecting our wireless and wireline product revenues.
50 | BCE INC. 2022 FIRST QUARTER SHAREHOLDER REPORT
Exhibit 99.3
| ||
|
Supplementary Financial Information First Quarter 2022 | |
| BCE Investor Relations Thane Fotopoulos 514-870-4619 thane.fotopoulos@bell.ca |
| |
BCE (1)
Consolidated Operational Data
| (In millions of Canadian dollars, except share amounts) (unaudited) | Q1 2022 |
Q1 2021 |
$ change | % change | ||||||||||||||
| Operating revenues |
||||||||||||||||||
| Service |
5,177 | 4,968 | 209 | 4.2% | ||||||||||||||
| Product |
673 | 738 | (65 | ) | (8.8%) | |||||||||||||
| Total operating revenues |
5,850 | 5,706 | 144 | 2.5% | ||||||||||||||
| Operating costs |
(3,266 | ) | (3,277 | ) | 11 | 0.3% | ||||||||||||
| Adjusted EBITDA (A) |
2,584 | 2,429 | 155 | 6.4% | ||||||||||||||
| Adjusted EBITDA margin (B)(3) |
44.2% | 42.6% | 1.6 pts | |||||||||||||||
| Severance, acquisition and other costs |
(13 | ) | (89 | ) | 76 | 85.4% | ||||||||||||
| Depreciation |
(891 | ) | (895 | ) | 4 | 0.4% | ||||||||||||
| Amortization |
(260 | ) | (238 | ) | (22 | ) | (9.2%) | |||||||||||
| Finance costs |
||||||||||||||||||
| Interest expense |
(260 | ) | (267 | ) | 7 | 2.6% | ||||||||||||
| Net return (interest) on post-employment benefit plans |
18 | (5 | ) | 23 | n.m. | |||||||||||||
| Impairment of assets |
(2 | ) | (3 | ) | 1 | 33.3% | ||||||||||||
| Other income |
93 | 8 | 85 | n.m. | ||||||||||||||
| Income taxes |
(335 | ) | (253 | ) | (82 | ) | (32.4%) | |||||||||||
| Net earnings |
934 | 687 | 247 | 36.0% | ||||||||||||||
| Net earnings attributable to: |
||||||||||||||||||
| Common shareholders |
877 | 642 | 235 | 36.6% | ||||||||||||||
| Preferred shareholders |
34 | 32 | 2 | 6.3% | ||||||||||||||
| Non-controlling interest |
23 | 13 | 10 | 76.9% | ||||||||||||||
| Net earnings |
934 | 687 | 247 | 36.0% | ||||||||||||||
| Net earnings per common share - basic and diluted |
$ | 0.96 | $ | 0.71 | $ | 0.25 | 35.2% | |||||||||||
| Dividends per common share |
$ | 0.9200 | $ | 0.8750 | $ | 0.0450 | 5.1% | |||||||||||
| Weighted average number of common shares outstanding - basic (millions) |
910.1 | 904.5 | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted (millions) |
910.8 | 904.5 | ||||||||||||||||
| Number of common shares outstanding (millions) |
911.8 | 904.6 | ||||||||||||||||
| Adjusted net earnings and adjusted EPS |
||||||||||||||||||
| Net earnings attributable to common shareholders |
877 | 642 | 235 | 36.6% | ||||||||||||||
| Reconciling items: |
||||||||||||||||||
| Severance, acquisition and other costs |
13 | 89 | (76 | ) | (85.4%) | |||||||||||||
| Net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans |
(75 | ) | (60 | ) | (15 | ) | (25.0%) | |||||||||||
| Net gains on investments |
(37 | ) | - | (37 | ) | n.m. | ||||||||||||
| Early debt redemption costs |
18 | 53 | (35 | ) | (66.0%) | |||||||||||||
| Impairment of assets |
2 | 3 | (1 | ) | (33.3%) | |||||||||||||
| Income taxes for the above reconciling items |
13 | (23 | ) | 36 | n.m. | |||||||||||||
| Adjusted net earnings (A) |
811 | 704 | 107 | 15.2% | ||||||||||||||
| Adjusted EPS (A) |
$ | 0.89 | $ | 0.78 | $ | 0.11 | 14.1% | |||||||||||
n.m. : not meaningful
(A) Adjusted EBITDA is a total of segments measure, adjusted net earnings is a non-GAAP financial measure and adjusted EPS is a non-GAAP ratio. Refer to note 2.3, Total of segments measures, note 2.1, Non-GAAP financial measures and note 2.2, Non-GAAP ratios in the Accompanying Notes to this report for more information on these measures.
(B) Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues.
BCE Supplementary Financial Information - First Quarter 2022 Page 2
BCE
Consolidated Operational Data - Historical Trend
| (In millions of Canadian dollars, except share amounts) (unaudited) | Q1 2022 | TOTAL 2021 |
Q4 21 | Q3 21 | Q2 21 | Q1 21 | ||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||||||
| Service |
5,177 | 20,350 | 5,243 | 5,099 | 5,040 | 4,968 | ||||||||||||||||||||||
| Product |
673 | 3,099 | 966 | 737 | 658 | 738 | ||||||||||||||||||||||
| Total operating revenues |
5,850 | 23,449 | 6,209 | 5,836 | 5,698 | 5,706 | ||||||||||||||||||||||
| Operating costs |
(3,266 | ) | (13,556 | ) | (3,779 | ) | (3,278 | ) | (3,222 | ) | (3,277 | ) | ||||||||||||||||
| Adjusted EBITDA |
2,584 | 9,893 | 2,430 | 2,558 | 2,476 | 2,429 | ||||||||||||||||||||||
| Adjusted EBITDA margin |
44.2% | 42.2% | 39.1% | 43.8% | 43.5% | 42.6% | ||||||||||||||||||||||
| Severance, acquisition and other costs |
(13 | ) | (209 | ) | (63 | ) | (50 | ) | (7 | ) | (89 | ) | ||||||||||||||||
| Depreciation |
(891 | ) | (3,627 | ) | (925 | ) | (902 | ) | (905 | ) | (895 | ) | ||||||||||||||||
| Amortization |
(260 | ) | (982 | ) | (251 | ) | (245 | ) | (248 | ) | (238 | ) | ||||||||||||||||
| Finance costs |
||||||||||||||||||||||||||||
| Interest expense |
(260 | ) | (1,082 | ) | (275 | ) | (272 | ) | (268 | ) | (267 | ) | ||||||||||||||||
| Net return (interest) on post-employment benefit plans |
18 | (20 | ) | (5 | ) | (5 | ) | (5 | ) | (5 | ) | |||||||||||||||||
| Impairment of assets |
(2 | ) | (197 | ) | (30 | ) | - | (164 | ) | (3 | ) | |||||||||||||||||
| Other income |
93 | 160 | 26 | 35 | 91 | 8 | ||||||||||||||||||||||
| Income taxes |
(335 | ) | (1,044 | ) | (249 | ) | (306 | ) | (236 | ) | (253 | ) | ||||||||||||||||
| Net earnings |
934 | 2,892 | 658 | 813 | 734 | 687 | ||||||||||||||||||||||
| Net earnings attributable to: |
||||||||||||||||||||||||||||
| Common shareholders |
877 | 2,709 | 625 | 757 | 685 | 642 | ||||||||||||||||||||||
| Preferred shareholders |
34 | 131 | 33 | 34 | 32 | 32 | ||||||||||||||||||||||
| Non-controlling interest |
23 | 52 | - | 22 | 17 | 13 | ||||||||||||||||||||||
| Net earnings |
934 | 2,892 | 658 | 813 | 734 | 687 | ||||||||||||||||||||||
| Net earnings per common share - basic and diluted |
$ | 0.96 | $ | 2.99 | $ | 0.69 | $ | 0.83 | $ | 0.76 | $ | 0.71 | ||||||||||||||||
| Dividends per common share |
$ | 0.9200 | $ | 3.5000 | $ | 0.8750 | $ | 0.8750 | $ | 0.8750 | $ | 0.8750 | ||||||||||||||||
| Weighted average number of common shares outstanding - basic (millions) |
910.1 | 906.3 | 908.8 | 906.9 | 905.0 | 904.5 | ||||||||||||||||||||||
| Weighted average number of common shares outstanding - diluted (millions) |
910.8 | 906.7 | 909.6 | 907.6 | 905.3 | 904.5 | ||||||||||||||||||||||
| Number of common shares outstanding (millions) |
911.8 | 909.0 | 909.0 | 908.8 | 905.7 | 904.6 | ||||||||||||||||||||||
| Adjusted net earnings and adjusted EPS |
||||||||||||||||||||||||||||
| Net earnings attributable to common shareholders |
877 | 2,709 | 625 | 757 | 685 | 642 | ||||||||||||||||||||||
| Reconciling items: |
||||||||||||||||||||||||||||
| Severance, acquisition and other costs |
13 | 209 | 63 | 50 | 7 | 89 | ||||||||||||||||||||||
| Net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans |
(75 | ) | (278 | ) | (57 | ) | (61 | ) | (100 | ) | (60 | ) | ||||||||||||||||
| Net equity losses on investments in associates and joint ventures |
- | 49 | 35 | - | 14 | - | ||||||||||||||||||||||
| Net (gains) losses on investments |
(37 | ) | 6 | 6 | - | - | - | |||||||||||||||||||||
| Early debt redemption costs |
18 | 53 | - | - | - | 53 | ||||||||||||||||||||||
| Impairment of assets |
2 | 197 | 30 | - | 164 | 3 | ||||||||||||||||||||||
| Income taxes for the above reconciling items |
13 | (48 | ) | (9 | ) | 2 | (18 | ) | (23 | ) | ||||||||||||||||||
| NCI for the above reconciling items |
- | (2 | ) | (1 | ) | - | (1 | ) | - | |||||||||||||||||||
| Adjusted net earnings |
811 | 2,895 | 692 | 748 | 751 | 704 | ||||||||||||||||||||||
| Adjusted EPS |
$ | 0.89 | $ | 3.19 | $ | 0.76 | $ | 0.82 | $ | 0.83 | $ | 0.78 | ||||||||||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 3
BCE (1)
Segmented Data
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
Q1 2021 |
$ change | % change | ||||||||||||||
| Operating revenues |
||||||||||||||||||
| Bell Wireless |
2,210 | 2,100 | 110 | 5.2% | ||||||||||||||
| Bell Wireline |
3,013 | 3,081 | (68 | ) | (2.2%) | |||||||||||||
| Bell Media |
825 | 713 | 112 | 15.7% | ||||||||||||||
| Inter-segment eliminations |
(198 | ) | (188 | ) | (10 | ) | (5.3%) | |||||||||||
| Total |
5,850 | 5,706 | 144 | 2.5% | ||||||||||||||
| Operating costs |
||||||||||||||||||
| Bell Wireless |
(1,201 | ) | (1,177 | ) | (24 | ) | (2.0%) | |||||||||||
| Bell Wireline |
(1,646 | ) | (1,718 | ) | 72 | 4.2% | ||||||||||||
| Bell Media |
(617 | ) | (570 | ) | (47 | ) | (8.2%) | |||||||||||
| Inter-segment eliminations |
198 | 188 | 10 | 5.3% | ||||||||||||||
| Total |
(3,266 | ) | (3,277 | ) | 11 | 0.3% | ||||||||||||
| Adjusted EBITDA |
||||||||||||||||||
| Bell Wireless |
1,009 | 923 | 86 | 9.3% | ||||||||||||||
| Margin |
45.7% | 44.0% | 1.7 pts | |||||||||||||||
| Bell Wireline |
1,367 | 1,363 | 4 | 0.3% | ||||||||||||||
| Margin |
45.4% | 44.2% | 1.2 pts | |||||||||||||||
| Bell Media |
208 | 143 | 65 | 45.5% | ||||||||||||||
| Margin |
25.2% | 20.1% | 5.1 pts | |||||||||||||||
| Total |
2,584 | 2,429 | 155 | 6.4% | ||||||||||||||
| Margin |
44.2% | 42.6% | 1.6 pts | |||||||||||||||
| Capital expenditures |
||||||||||||||||||
| Bell Wireless |
248 | 286 | 38 | 13.3% | ||||||||||||||
| Capital intensity (A)(3) |
11.2% | 13.6% | 2.4 pts | |||||||||||||||
| Bell Wireline |
681 | 707 | 26 | 3.7% | ||||||||||||||
| Capital intensity |
22.6% | 22.9% | 0.3 pts | |||||||||||||||
| Bell Media |
23 | 19 | (4 | ) | (21.1%) | |||||||||||||
| Capital intensity |
2.8% | 2.7% | (0.1) pts | |||||||||||||||
| Total |
952 | 1,012 | 60 | 5.9% | ||||||||||||||
| Capital intensity |
16.3% | 17.7% | 1.4 pts | |||||||||||||||
(A) Capital intensity is defined as capital expenditures divided by operating revenues.
BCE Supplementary Financial Information - First Quarter 2022 Page 4
BCE
Segmented Data - Historical Trend
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
TOTAL 2021 |
Q4 21 | Q3 21 | Q2 21 | Q1 21 | ||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||
|
|
||||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||
| Bell Wireless |
2,210 | 8,999 | 2,475 | 2,296 | 2,128 | 2,100 | ||||||||||||||||||
| Bell Wireline |
3,013 | 12,178 | 3,079 | 3,015 | 3,003 | 3,081 | ||||||||||||||||||
| Bell Media |
825 | 3,036 | 849 | 719 | 755 | 713 | ||||||||||||||||||
| Inter-segment eliminations |
(198 | ) | (764 | ) | (194 | ) | (194 | ) | (188 | ) | (188 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Total |
5,850 | 23,449 | 6,209 | 5,836 | 5,698 | 5,706 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
||||||||||||||||||||||||
| Operating costs |
||||||||||||||||||||||||
| Bell Wireless |
(1,201 | ) | (5,146 | ) | (1,524 | ) | (1,286 | ) | (1,159 | ) | (1,177 | ) | ||||||||||||
| Bell Wireline |
(1,646 | ) | (6,863 | ) | (1,753 | ) | (1,682 | ) | (1,710 | ) | (1,718 | ) | ||||||||||||
| Bell Media |
(617 | ) | (2,311 | ) | (696 | ) | (504 | ) | (541 | ) | (570 | ) | ||||||||||||
| Inter-segment eliminations |
198 | 764 | 194 | 194 | 188 | 188 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Total |
(3,266 | ) | (13,556 | ) | (3,779 | ) | (3,278 | ) | (3,222 | ) | (3,277 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
||||||||||||||||||||||||
| Adjusted EBITDA |
||||||||||||||||||||||||
| Bell Wireless |
1,009 | 3,853 | 951 | 1,010 | 969 | 923 | ||||||||||||||||||
| Margin |
45.7% | 42.8% | 38.4% | 44.0% | 45.5% | 44.0% | ||||||||||||||||||
| Bell Wireline |
1,367 | 5,315 | 1,326 | 1,333 | 1,293 | 1,363 | ||||||||||||||||||
| Margin |
45.4% | 43.6% | 43.1% | 44.2% | 43.1% | 44.2% | ||||||||||||||||||
| Bell Media |
208 | 725 | 153 | 215 | 214 | 143 | ||||||||||||||||||
| Margin |
25.2% | 23.9% | 18.0% | 29.9% | 28.3% | 20.1% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Total |
2,584 | 9,893 | 2,430 | 2,558 | 2,476 | 2,429 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Margin |
44.2% | 42.2% | 39.1% | 43.8% | 43.5% | 42.6% | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Capital expenditures |
||||||||||||||||||||||||
| Bell Wireless |
248 | 1,120 | 274 | 254 | 306 | 286 | ||||||||||||||||||
| Capital intensity |
11.2% | 12.4% | 11.1% | 11.1% | 14.4% | 13.6% | ||||||||||||||||||
| Bell Wireline |
681 | 3,597 | 1,133 | 880 | 877 | 707 | ||||||||||||||||||
| Capital intensity |
22.6% | 29.5% | 36.8% | 29.2% | 29.2% | 22.9% | ||||||||||||||||||
| Bell Media |
23 | 120 | 52 | 25 | 24 | 19 | ||||||||||||||||||
| Capital intensity |
2.8% | 4.0% | 6.1% | 3.5% | 3.2% | 2.7% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Total |
952 | 4,837 | 1,459 | 1,159 | 1,207 | 1,012 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| Capital intensity |
16.3% | 20.6% | 23.5% | 19.9% | 21.2% | 17.7% | ||||||||||||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 5
Bell Wireless (1)
| Q1 | Q1 | |||||||||||||
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | 2022 | 2021 | % change | |||||||||||
| Bell Wireless |
||||||||||||||
| Operating revenues |
||||||||||||||
| External service revenues |
1,635 | 1,503 | 8.8% | |||||||||||
| Inter-segment service revenues |
11 | 11 | - | |||||||||||
| Operating service revenues |
1,646 | 1,514 | 8.7% | |||||||||||
| External product revenues |
563 | 584 | (3.6%) | |||||||||||
| Inter-segment product revenues |
1 | 2 | (50.0%) | |||||||||||
| Operating product revenues |
564 | 586 | (3.8%) | |||||||||||
| Total external revenues |
2,198 | 2,087 | 5.3% | |||||||||||
| Total operating revenues |
2,210 | 2,100 | 5.2% | |||||||||||
| Operating costs |
(1,201 | ) | (1,177 | ) | (2.0%) | |||||||||
| Adjusted EBITDA |
1,009 | 923 | 9.3% | |||||||||||
| Adjusted EBITDA margin |
45.7% | 44.0% | 1.7 pts | |||||||||||
| Capital expenditures |
248 | 286 | 13.3% | |||||||||||
| Capital intensity |
11.2% | 13.6% | 2.4 pts | |||||||||||
|
|
||||||||||||||
| Mobile phone subscribers(3) |
||||||||||||||
| Gross subscriber activations |
349,908 | 340,127 | 2.9% | |||||||||||
| Postpaid |
230,713 | 248,990 | (7.3%) | |||||||||||
| Prepaid |
119,195 | 91,137 | 30.8% | |||||||||||
| Net subscriber activations (losses) |
32,176 | 2,405 | n.m. | |||||||||||
| Postpaid |
34,230 | 32,925 | 4.0% | |||||||||||
| Prepaid |
(2,054 | ) | (30,520 | ) | 93.3% | |||||||||
| Subscribers end of period (EOP) |
9,491,361 | 9,166,748 | 3.5% | |||||||||||
| Postpaid |
8,664,275 | 8,361,264 | 3.6% | |||||||||||
| Prepaid |
827,086 | 805,484 | 2.7% | |||||||||||
| Blended average revenue per user (ARPU) ($/month)(A)(3) |
57.98 | 55.17 | 5.1% | |||||||||||
| Blended churn (%) (average per month)(3) |
1.12% | 1.23% | 0.11 pts | |||||||||||
| Postpaid |
0.79% | 0.89% | 0.10 pts | |||||||||||
| Prepaid |
4.61% | 4.68% | 0.07 pts | |||||||||||
| Mobile connected device subscribers(3) |
||||||||||||||
| Net subscriber activations |
48,877 | 74,159 | (34.1%) | |||||||||||
| Subscribers EOP |
2,298,671 | 2,130,312 | 7.9% | |||||||||||
n.m. : not meaningful
| (A) | Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a dollar unit per month. |
BCE Supplementary Financial Information - First Quarter 2022 Page 6
Bell Wireless - Historical Trend
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
TOTAL 2021 |
Q4 21 | Q3 21 | Q2 21 | Q1 21 | ||||||||||||||||||||||
| Bell Wireless |
||||||||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||||||
| External service revenues |
1,635 | 6,355 | 1,641 | 1,642 | 1,569 | 1,503 | ||||||||||||||||||||||
| Inter-segment service revenues |
11 | 45 | 11 | 12 | 11 | 11 | ||||||||||||||||||||||
| Operating service revenues |
1,646 | 6,400 | 1,652 | 1,654 | 1,580 | 1,514 | ||||||||||||||||||||||
| External product revenues |
563 | 2,593 | 821 | 642 | 546 | 584 | ||||||||||||||||||||||
| Inter-segment product revenues |
1 | 6 | 2 | - | 2 | 2 | ||||||||||||||||||||||
| Operating product revenues |
564 | 2,599 | 823 | 642 | 548 | 586 | ||||||||||||||||||||||
| Total external revenues |
2,198 | 8,948 | 2,462 | 2,284 | 2,115 | 2,087 | ||||||||||||||||||||||
| Total operating revenues |
2,210 | 8,999 | 2,475 | 2,296 | 2,128 | 2,100 | ||||||||||||||||||||||
| Operating costs |
(1,201 | ) | (5,146 | ) | (1,524 | ) | (1,286 | ) | (1,159 | ) | (1,177 | ) | ||||||||||||||||
| Adjusted EBITDA |
1,009 | 3,853 | 951 | 1,010 | 969 | 923 | ||||||||||||||||||||||
| Adjusted EBITDA margin |
45.7% | 42.8% | 38.4% | 44.0% | 45.5% | 44.0% | ||||||||||||||||||||||
| Capital expenditures |
248 | 1,120 | 274 | 254 | 306 | 286 | ||||||||||||||||||||||
| Capital intensity |
11.2% | 12.4% | 11.1% | 11.1% | 14.4% | 13.6% | ||||||||||||||||||||||
| Mobile phone subscribers |
||||||||||||||||||||||||||||
| Gross subscriber activations |
349,908 | 1,653,771 | 495,076 | 470,165 | 348,403 | 340,127 | ||||||||||||||||||||||
| Postpaid |
230,713 | 1,201,659 | 373,621 | 336,328 | 242,720 | 248,990 | ||||||||||||||||||||||
| Prepaid |
119,195 | 452,112 | 121,455 | 133,837 | 105,683 | 91,137 | ||||||||||||||||||||||
| Net subscriber activations (losses) |
32,176 | 294,842 | 109,726 | 136,464 | 46,247 | 2,405 | ||||||||||||||||||||||
| Postpaid |
34,230 | 301,706 | 109,527 | 114,821 | 44,433 | 32,925 | ||||||||||||||||||||||
| Prepaid |
(2,054 | ) | (6,864 | ) | 199 | 21,643 | 1,814 | (30,520 | ) | |||||||||||||||||||
| Subscribers EOP |
9,491,361 | 9,459,185 | 9,459,185 | 9,349,459 | 9,212,995 | 9,166,748 | ||||||||||||||||||||||
| Postpaid |
8,664,275 | 8,630,045 | 8,630,045 | 8,520,518 | 8,405,697 | 8,361,264 | ||||||||||||||||||||||
| Prepaid |
827,086 | 829,140 | 829,140 | 828,941 | 807,298 | 805,484 | ||||||||||||||||||||||
| Blended ARPU ($/month) |
57.98 | 57.66 | 58.61 | 59.47 | 57.36 | 55.17 | ||||||||||||||||||||||
| Blended churn (%) (average per month) |
1.12% | 1.23% | 1.37% | 1.21% | 1.10% | 1.23% | ||||||||||||||||||||||
| Postpaid |
0.79% | 0.93% | 1.08% | 0.93% | 0.83% | 0.89% | ||||||||||||||||||||||
| Prepaid |
4.61% | 4.31% | 4.42% | 4.15% | 3.98% | 4.68% | ||||||||||||||||||||||
| Mobile connected device subscribers |
||||||||||||||||||||||||||||
| Net subscriber activations |
48,877 | 193,641 | 38,998 | 33,035 | 47,449 | 74,159 | ||||||||||||||||||||||
| Subscribers EOP |
2,298,671 | 2,249,794 | 2,249,794 | 2,210,796 | 2,177,761 | 2,130,312 | ||||||||||||||||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 7
Bell Wireline (1)
| Q1 | Q1 | |||||||||||||
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | 2022 | 2021 | % change | |||||||||||
| Bell Wireline |
||||||||||||||
| Operating revenues |
||||||||||||||
| Data |
1,953 | 1,965 | (0.6%) | |||||||||||
| Voice |
771 | 803 | (4.0%) | |||||||||||
| Other services |
77 | 74 | 4.1% | |||||||||||
| External service revenues |
2,801 | 2,842 | (1.4%) | |||||||||||
| Inter-segment service revenues |
102 | 85 | 20.0% | |||||||||||
| Operating service revenues |
2,903 | 2,927 | (0.8%) | |||||||||||
| Data |
99 | 144 | (31.3%) | |||||||||||
| Equipment and other |
11 | 10 | 10.0% | |||||||||||
| External product revenues |
110 | 154 | (28.6%) | |||||||||||
| Inter-segment product revenues |
- | - | - | |||||||||||
| Operating product revenues |
110 | 154 | (28.6%) | |||||||||||
| Total external revenues |
2,911 | 2,996 | (2.8%) | |||||||||||
| Total operating revenues |
3,013 | 3,081 | (2.2%) | |||||||||||
| Operating costs |
(1,646 | ) | (1,718 | ) | 4.2% | |||||||||
| Adjusted EBITDA |
1,367 | 1,363 | 0.3% | |||||||||||
| Adjusted EBITDA margin |
45.4% | 44.2% | 1.2 pts | |||||||||||
| Capital expenditures |
681 | 707 | 3.7% | |||||||||||
| Capital intensity |
22.6% | 22.9% | 0.3 pts | |||||||||||
| Retail high-speed Internet subscribers(3) |
||||||||||||||
| Retail net subscriber activations |
26,024 | 21,208 | 22.7% | |||||||||||
| Retail subscribers EOP(A) |
3,954,767 | 3,730,576 | 6.0% | |||||||||||
| Retail TV subscribers(3) |
||||||||||||||
| Retail net subscriber (losses) activations |
(8,361 | ) | (9,112 | ) | 8.2% | |||||||||
| Internet protocol television (IPTV) |
12,260 | 10,696 | 14.6% | |||||||||||
| Satellite |
(20,621 | ) | (19,808 | ) | (4.1%) | |||||||||
| Total retail subscribers EOP(A) |
2,735,674 | 2,723,368 | 0.5% | |||||||||||
| IPTV(A) |
1,903,726 | 1,817,069 | 4.8% | |||||||||||
| Satellite |
831,948 | 906,299 | (8.2%) | |||||||||||
| Retail residential network access services (NAS)(3) |
||||||||||||||
| Retail residential NAS lines net losses |
(42,345 | ) | (51,069 | ) | 17.1% | |||||||||
| Retail residential NAS lines(A) |
2,259,716 | 2,432,863 | (7.1%) | |||||||||||
| (A) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 67,090, 9,025 and 3,456 subscribers, respectively. |
BCE Supplementary Financial Information - First Quarter 2022 Page 8
Bell Wireline - Historical Trend
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
TOTAL 2021 |
Q4 21 | Q3 21 | Q2 21 | Q1 21 | ||||||||||||||||||||||||||
| Bell Wireline |
||||||||||||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||||||||||
| Data |
1,953 | 7,871 | 1,986 | 1,976 | 1,944 | 1,965 | ||||||||||||||||||||||||||
| Voice |
771 | 3,154 | 779 | 778 | 794 | 803 | ||||||||||||||||||||||||||
| Other services |
77 | 289 | 75 | 73 | 67 | 74 | ||||||||||||||||||||||||||
| External service revenues |
2,801 | 11,314 | 2,840 | 2,827 | 2,805 | 2,842 | ||||||||||||||||||||||||||
| Inter-segment service revenues |
102 | 358 | 94 | 93 | 86 | 85 | ||||||||||||||||||||||||||
| Operating service revenues |
2,903 | 11,672 | 2,934 | 2,920 | 2,891 | 2,927 | ||||||||||||||||||||||||||
| Data |
99 | 463 | 132 | 86 | 101 | 144 | ||||||||||||||||||||||||||
| Equipment and other |
11 | 43 | 13 | 9 | 11 | 10 | ||||||||||||||||||||||||||
| External product revenues |
110 | 506 | 145 | 95 | 112 | 154 | ||||||||||||||||||||||||||
| Inter-segment product revenues |
- | - | - | - | - | - | ||||||||||||||||||||||||||
| Operating product revenues |
110 | 506 | 145 | 95 | 112 | 154 | ||||||||||||||||||||||||||
| Total external revenues |
2,911 | 11,820 | 2,985 | 2,922 | 2,917 | 2,996 | ||||||||||||||||||||||||||
| Total operating revenues |
3,013 | 12,178 | 3,079 | 3,015 | 3,003 | 3,081 | ||||||||||||||||||||||||||
| Operating costs |
(1,646 | ) | (6,863 | ) | (1,753 | ) | (1,682 | ) | (1,710 | ) | (1,718 | ) | ||||||||||||||||||||
| Adjusted EBITDA |
1,367 | 5,315 | 1,326 | 1,333 | 1,293 | 1,363 | ||||||||||||||||||||||||||
| Adjusted EBITDA margin |
45.4% | 43.6% | 43.1% | 44.2% | 43.1% | 44.2% | ||||||||||||||||||||||||||
| Capital expenditures |
681 | 3,597 | 1,133 | 880 | 877 | 707 | ||||||||||||||||||||||||||
| Capital intensity |
22.6% | 29.5% | 36.8% | 29.2% | 29.2% | 22.9% | ||||||||||||||||||||||||||
| Retail high-speed Internet subscribers |
||||||||||||||||||||||||||||||||
| Retail net subscriber activations |
26,024 | 152,285 | 47,618 | 65,779 | 17,680 | 21,208 | ||||||||||||||||||||||||||
| Retail subscribers EOP(A) |
3,954,767 | 3,861,653 | 3,861,653 | 3,814,035 | 3,748,256 | 3,730,576 | ||||||||||||||||||||||||||
| Retail TV subscribers |
||||||||||||||||||||||||||||||||
| Retail net subscriber (losses) activations |
(8,361 | ) | 2,530 | 6,049 | 10,521 | (4,928 | ) | (9,112 | ) | |||||||||||||||||||||||
| IPTV |
12,260 | 76,068 | 29,191 | 31,641 | 4,540 | 10,696 | ||||||||||||||||||||||||||
| Satellite |
(20,621 | ) | (73,538 | ) | (23,142 | ) | (21,120 | ) | (9,468 | ) | (19,808 | ) | ||||||||||||||||||||
| Total retail subscribers EOP(A) |
2,735,674 | 2,735,010 | 2,735,010 | 2,728,961 | 2,718,440 | 2,723,368 | ||||||||||||||||||||||||||
| IPTV(A) |
1,903,726 | 1,882,441 | 1,882,441 | 1,853,250 | 1,821,609 | 1,817,069 | ||||||||||||||||||||||||||
| Satellite |
831,948 | 852,569 | 852,569 | 875,711 | 896,831 | 906,299 | ||||||||||||||||||||||||||
| Retail residential NAS |
||||||||||||||||||||||||||||||||
| Retail residential NAS lines net losses |
(42,345 | ) | (185,327 | ) | (40,211 | ) | (42,755 | ) | (51,292 | ) | (51,069 | ) | ||||||||||||||||||||
| Retail residential NAS lines(A) |
2,259,716 | 2,298,605 | 2,298,605 | 2,338,816 | 2,381,571 | 2,432,863 | ||||||||||||||||||||||||||
| (A) | In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 67,090, 9,025 and 3,456 subscribers, respectively. |
BCE Supplementary Financial Information - First Quarter 2022 Page 9
BCE
Net debt and other information
| BCE - Net debt and preferred shares |
||||||||||||||||||||||||
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | ||||||||||||||||||||||||
| March 31 | December 31 | |||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||
| Long-term debt |
26,877 | 27,048 | ||||||||||||||||||||||
| Debt due within one year |
3,082 | 2,625 | ||||||||||||||||||||||
| 50% of preferred shares |
1,943 | 2,002 | ||||||||||||||||||||||
| Cash |
(104 | ) | (207 | ) | ||||||||||||||||||||
| Net debt (A) |
31,798 | 31,468 | ||||||||||||||||||||||
| Net debt leverage ratio (A) |
3.16 | 3.18 | ||||||||||||||||||||||
| Adjusted EBITDA /adjusted net interest expense ratio (A) |
8.94 | 8.77 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Cash flow information |
||||||||||||||||||||||||
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 | Q1 | ||||||||||||||||||||||
| 2022 | 2021 | $ change | % change | |||||||||||||||||||||
| Free cash flow (FCF) (A) |
||||||||||||||||||||||||
| Cash flows from operating activities |
1,716 | 1,992 | (276 | ) | (13.9% | ) | ||||||||||||||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | 60 | 5.9% | ||||||||||||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (31 | ) | (2 | ) | (6.5% | ) | ||||||||||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (13 | ) | 2 | 15.4% | ||||||||||||||||||
| Acquisition and other costs paid |
3 | 4 | (1 | ) | (25.0% | ) | ||||||||||||||||||
| FCF |
723 | 940 | (217 | ) | (23.1% | ) | ||||||||||||||||||
| Cash flow information - Historical trend |
||||||||||||||||||||||||
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 | TOTAL | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||
| 2022 | 2021 | 2021 | 2021 | 2021 | 2021 | |||||||||||||||||||
| FCF |
||||||||||||||||||||||||
| Cash flows from operating activities |
1,716 | 8,008 | 1,743 | 1,774 | 2,499 | 1,992 | ||||||||||||||||||
| Capital expenditures |
(952 | ) | (4,837 | ) | (1,459 | ) | (1,159 | ) | (1,207 | ) | (1,012 | ) | ||||||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (125 | ) | (32 | ) | (31 | ) | (31 | ) | (31 | ) | ||||||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (86 | ) | (45 | ) | (13 | ) | (15 | ) | (13 | ) | ||||||||||||
| Acquisition and other costs paid |
3 | 35 | 29 | - | 2 | 4 | ||||||||||||||||||
| FCF |
723 | 2,995 | 236 | 571 | 1,248 | 940 | ||||||||||||||||||
| (A) | Net debt and free cash flow are non-GAAP financial measures and net debt leverage ratio and adjusted EBITDA to adjusted net interest expense ratio are capital management measures. Refer to note 2.1, Non-GAAP financial measures and note 2.4, Capital management measures in the Accompanying Notes to this report for more information on these measures. |
BCE Supplementary Financial Information - First Quarter 2022 Page 10
BCE
Consolidated Statements of Financial Position
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | March 31 2022 |
December 31 2021 |
||||||||
| ASSETS |
||||||||||
| Current assets |
||||||||||
| Cash |
104 | 207 | ||||||||
| Cash equivalents |
- | - | ||||||||
| Trade and other receivables |
3,549 | 3,949 | ||||||||
| Inventory |
567 | 482 | ||||||||
| Contract assets |
386 | 414 | ||||||||
| Contract costs |
564 | 507 | ||||||||
| Prepaid expenses |
375 | 254 | ||||||||
| Other current assets |
271 | 335 | ||||||||
| Assets held for sale |
- | 50 | ||||||||
| Total current assets |
5,816 | 6,198 | ||||||||
| Non-current assets |
||||||||||
| Contract assets |
247 | 251 | ||||||||
| Contract costs |
365 | 387 | ||||||||
| Property, plant and equipment |
28,108 | 28,235 | ||||||||
| Intangible assets |
15,825 | 15,570 | ||||||||
| Deferred tax assets |
108 | 105 | ||||||||
| Investments in associates and joint ventures |
654 | 668 | ||||||||
| Post-employment benefit assets |
4,110 | 3,472 | ||||||||
| Other non-current assets |
1,378 | 1,306 | ||||||||
| Goodwill |
10,724 | 10,572 | ||||||||
| Total non-current assets |
61,519 | 60,566 | ||||||||
| Total assets |
67,335 | 66,764 | ||||||||
| LIABILITIES |
||||||||||
| Current liabilities |
||||||||||
| Trade payables and other liabilities |
3,841 | 4,455 | ||||||||
| Contract liabilities |
838 | 799 | ||||||||
| Interest payable |
162 | 247 | ||||||||
| Dividends payable |
854 | 811 | ||||||||
| Current tax liabilities |
189 | 141 | ||||||||
| Debt due within one year |
3,082 | 2,625 | ||||||||
| Liabilities held for sale |
- | 35 | ||||||||
| Total current liabilities |
8,966 | 9,113 | ||||||||
| Non-current liabilities |
||||||||||
| Contract liabilities |
244 | 246 | ||||||||
| Long-term debt |
26,877 | 27,048 | ||||||||
| Deferred tax liabilities |
5,065 | 4,679 | ||||||||
| Post-employment benefit obligations |
1,464 | 1,734 | ||||||||
| Other non-current liabilities |
934 | 1,003 | ||||||||
| Total non-current liabilities |
34,584 | 34,710 | ||||||||
| Total liabilities |
43,550 | 43,823 | ||||||||
| EQUITY |
||||||||||
| Equity attributable to BCE shareholders |
||||||||||
| Preferred shares |
3,885 | 4,003 | ||||||||
| Common shares |
20,830 | 20,662 | ||||||||
| Contributed surplus |
1,137 | 1,157 | ||||||||
| Accumulated other comprehensive income |
355 | 213 | ||||||||
| Deficit |
(2,740 | ) | (3,400 | ) | ||||||
| Total equity attributable to BCE shareholders |
23,467 | 22,635 | ||||||||
| Non-controlling interest |
318 | 306 | ||||||||
| Total equity |
23,785 | 22,941 | ||||||||
| Total liabilities and equity |
67,335 | 66,764 | ||||||||
| Number of common shares outstanding (millions) |
911.8 | 909.0 | ||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 11
BCE
Consolidated Cash Flow Data
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
Q1 2021 |
$ change | |||||||||||
| Net earnings |
934 | 687 | 247 | |||||||||||
| Adjustments to reconcile net earnings to cash flows from operating activities |
||||||||||||||
| Severance, acquisition and other costs |
13 | 89 | (76 | ) | ||||||||||
| Depreciation and amortization |
1,151 | 1,133 | 18 | |||||||||||
| Post-employment benefit plans cost |
51 | 79 | (28 | ) | ||||||||||
| Net interest expense |
258 | 263 | (5 | ) | ||||||||||
| Impairment of assets |
2 | 3 | (1 | ) | ||||||||||
| Gains on investments |
(37 | ) | - | (37 | ) | |||||||||
| Income taxes |
335 | 253 | 82 | |||||||||||
| Contributions to post-employment benefit plans |
(79 | ) | (79 | ) | - | |||||||||
| Payments under other post-employment benefit plans |
(15 | ) | (15 | ) | - | |||||||||
| Severance and other costs paid |
(28 | ) | (43 | ) | 15 | |||||||||
| Interest paid |
(373 | ) | (306 | ) | (67 | ) | ||||||||
| Income taxes paid (net of refunds) |
(116 | ) | (109 | ) | (7 | ) | ||||||||
| Acquisition and other costs paid |
(3 | ) | (4 | ) | 1 | |||||||||
| Change in contract assets |
32 | 144 | (112 | ) | ||||||||||
| Change in wireless device financing plan receivables |
59 | (91 | ) | 150 | ||||||||||
| Net change in operating assets and liabilities |
(468 | ) | (12 | ) | (456 | ) | ||||||||
| Cash flows from operating activities |
1,716 | 1,992 | (276 | ) | ||||||||||
| Capital expenditures |
(952 | ) | (1,012 | ) | 60 | |||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (31 | ) | (2 | ) | ||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (13 | ) | 2 | |||||||||
| Acquisition and other costs paid |
3 | 4 | (1 | ) | ||||||||||
| Free cash flow |
723 | 940 | (217 | ) | ||||||||||
| Business acquisitions |
(139 | ) | - | (139 | ) | |||||||||
| Business dispositions |
52 | - | 52 | |||||||||||
| Acquisition and other costs paid |
(3 | ) | (4 | ) | 1 | |||||||||
| Other investing activities |
(9 | ) | (21 | ) | 12 | |||||||||
| Increase (decrease) in notes payable |
469 | (357 | ) | 826 | ||||||||||
| Decrease in securitized trade receivables |
- | (13 | ) | 13 | ||||||||||
| Issue of long-term debt |
945 | 2,915 | (1,970 | ) | ||||||||||
| Repayment of long-term debt |
(1,258 | ) | (226 | ) | (1,032 | ) | ||||||||
| Issue of common shares |
161 | 10 | 151 | |||||||||||
| Purchase of shares for settlement of share-based payments |
(106 | ) | (91 | ) | (15 | ) | ||||||||
| Repurchase of preferred shares |
(115 | ) | - | (115 | ) | |||||||||
| Cash dividends paid on common shares |
(795 | ) | (753 | ) | (42 | ) | ||||||||
| Other financing activities |
(28 | ) | (17 | ) | (11 | ) | ||||||||
| (826 | ) | 1,443 | (2,269 | ) | ||||||||||
| Net (decrease) increase in cash |
(103 | ) | 1,683 | (1,786 | ) | |||||||||
| Cash at beginning of period |
207 | 224 | (17 | ) | ||||||||||
| Cash at end of period |
104 | 1,907 | (1,803 | ) | ||||||||||
| Net increase in cash equivalents |
- | 700 | (700 | ) | ||||||||||
| Cash equivalents at beginning of period |
- | - | - | |||||||||||
| Cash equivalents at end of period |
- | 700 | (700 | ) | ||||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 12
BCE
Consolidated Cash Flow Data - Historical Trend
| (In millions of Canadian dollars, except where otherwise indicated) (unaudited) | Q1 2022 |
TOTAL 2021 |
Q4 21 | Q3 21 | Q2 21 | Q1 21 | ||||||||||||||||||||||
| Net earnings |
934 | 2,892 | 658 | 813 | 734 | 687 | ||||||||||||||||||||||
| Adjustments to reconcile net earnings to cash flows from operating activities |
||||||||||||||||||||||||||||
| Severance, acquisition and other costs |
13 | 209 | 63 | 50 | 7 | 89 | ||||||||||||||||||||||
| Depreciation and amortization |
1,151 | 4,609 | 1,176 | 1,147 | 1,153 | 1,133 | ||||||||||||||||||||||
| Post-employment benefit plans cost |
51 | 286 | 69 | 70 | 68 | 79 | ||||||||||||||||||||||
| Net interest expense |
258 | 1,063 | 269 | 268 | 263 | 263 | ||||||||||||||||||||||
| Impairment of assets |
2 | 197 | 30 | - | 164 | 3 | ||||||||||||||||||||||
| (Gains) losses on investments |
(37 | ) | 6 | 6 | - | - | - | |||||||||||||||||||||
| Income taxes |
335 | 1,044 | 249 | 306 | 236 | 253 | ||||||||||||||||||||||
| Contributions to post-employment benefit plans |
(79 | ) | (282 | ) | (69 | ) | (64 | ) | (70 | ) | (79 | ) | ||||||||||||||||
| Payments under other post-employment benefit plans |
(15 | ) | (65 | ) | (18 | ) | (16 | ) | (16 | ) | (15 | ) | ||||||||||||||||
| Severance and other costs paid |
(28 | ) | (208 | ) | (55 | ) | (31 | ) | (79 | ) | (43 | ) | ||||||||||||||||
| Interest paid |
(373 | ) | (1,080 | ) | (192 | ) | (352 | ) | (230 | ) | (306 | ) | ||||||||||||||||
| Income taxes paid (net of refunds) |
(116 | ) | (913 | ) | (302 | ) | (407 | ) | (95 | ) | (109 | ) | ||||||||||||||||
| Acquisition and other costs paid |
(3 | ) | (35 | ) | (29 | ) | - | (2 | ) | (4 | ) | |||||||||||||||||
| Change in contract assets |
32 | 278 | (21 | ) | 53 | 102 | 144 | |||||||||||||||||||||
| Change in wireless device financing plan receivables |
59 | (365 | ) | (121 | ) | (92 | ) | (61 | ) | (91 | ) | |||||||||||||||||
| Net change in operating assets and liabilities |
(468 | ) | 372 | 30 | 29 | 325 | (12 | ) | ||||||||||||||||||||
| Cash flows from operating activities |
1,716 | 8,008 | 1,743 | 1,774 | 2,499 | 1,992 | ||||||||||||||||||||||
| Capital expenditures |
(952 | ) | (4,837 | ) | (1,459 | ) | (1,159 | ) | (1,207 | ) | (1,012 | ) | ||||||||||||||||
| Cash dividends paid on preferred shares |
(33 | ) | (125 | ) | (32 | ) | (31 | ) | (31 | ) | (31 | ) | ||||||||||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(11 | ) | (86 | ) | (45 | ) | (13 | ) | (15 | ) | (13 | ) | ||||||||||||||||
| Acquisition and other costs paid |
3 | 35 | 29 | - | 2 | 4 | ||||||||||||||||||||||
| Free cash flow |
723 | 2,995 | 236 | 571 | 1,248 | 940 | ||||||||||||||||||||||
| Business acquisitions |
(139 | ) | (12 | ) | - | (1 | ) | (11 | ) | - | ||||||||||||||||||
| Business dispositions |
52 | - | - | - | - | - | ||||||||||||||||||||||
| Acquisition and other costs paid |
(3 | ) | (35 | ) | (29 | ) | - | (2 | ) | (4 | ) | |||||||||||||||||
| Acquisition of spectrum licences |
- | (2,082 | ) | (1,664 | ) | (418 | ) | - | - | |||||||||||||||||||
| Other investing activities |
(9 | ) | (72 | ) | (23 | ) | (11 | ) | (17 | ) | (21 | ) | ||||||||||||||||
| Increase (decrease) in notes payable |
469 | 351 | 719 | (322 | ) | 311 | (357 | ) | ||||||||||||||||||||
| Decrease in securitized trade receivables |
- | (150 | ) | (130 | ) | (7 | ) | - | (13 | ) | ||||||||||||||||||
| Issue of long-term debt |
945 | 4,985 | - | 1,570 | 500 | 2,915 | ||||||||||||||||||||||
| Repayment of long-term debt |
(1,258 | ) | (2,751 | ) | (235 | ) | (249 | ) | (2,041 | ) | (226 | ) | ||||||||||||||||
| Issue of common shares |
161 | 261 | 16 | 172 | 63 | 10 | ||||||||||||||||||||||
| Purchase of shares for settlement of share-based payments |
(106 | ) | (297 | ) | (52 | ) | (83 | ) | (71 | ) | (91 | ) | ||||||||||||||||
| Repurchase of preferred shares |
(115 | ) | - | - | - | - | - | |||||||||||||||||||||
| Cash dividends paid on common shares |
(795 | ) | (3,132 | ) | (795 | ) | (793 | ) | (791 | ) | (753 | ) | ||||||||||||||||
| Other financing activities |
(28 | ) | (78 | ) | (3 | ) | (14 | ) | (44 | ) | (17 | ) | ||||||||||||||||
| (826 | ) | (3,012 | ) | (2,196 | ) | (156 | ) | (2,103 | ) | 1,443 | ||||||||||||||||||
| Net (decrease) increase in cash |
(103 | ) | (17 | ) | (1,879 | ) | 334 | (155 | ) | 1,683 | ||||||||||||||||||
| Cash at beginning of period |
207 | 224 | 2,086 | 1,752 | 1,907 | 224 | ||||||||||||||||||||||
| Cash at end of period |
104 | 207 | 207 | 2,086 | 1,752 | 1,907 | ||||||||||||||||||||||
| Net (decrease) increase in cash equivalents |
- | - | (81 | ) | 81 | (700 | ) | 700 | ||||||||||||||||||||
| Cash equivalents at beginning of period |
- | - | 81 | - | 700 | - | ||||||||||||||||||||||
| Cash equivalents at end of period |
- | - | - | 81 | - | 700 | ||||||||||||||||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 13
Accompanying Notes
| (1) | Our results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. Our segments reflect how we manage our business and how we classify our operations for planning and measuring performance. |
Throughout this report, we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.
| (2) | Non-GAAP and other financial measures |
BCE uses various financial measures to assess its business performance. Certain of these measures are calculated in accordance with International Financial Reporting Standards (IFRS or GAAP) while certain other measures do not have a standardized meaning under GAAP. We believe that our GAAP financial measures, read together with adjusted non-GAAP and other financial measures, provide readers with a better understanding of how management assesses BCE’s performance.
National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure, prescribes disclosure requirements that apply to the following specified financial measures:
| ● | Non-GAAP financial measures; |
| ● | Non-GAAP ratios; |
| ● | Total of segments measures; |
| ● | Capital management measures; and |
| ● | Supplementary financial measures. |
This section provides a description and classification of the specified financial measures contemplated by NI 52-112 that we use in this report to explain our financial results except that, for supplementary financial measures, an explanation of such measures is provided where they are first referred to in this report if the supplementary financial measures’ labelling is not sufficiently descriptive.
| (2.1) | Non-GAAP financial measures |
A non-GAAP financial measure is a financial measure used to depict our historical or expected future financial performance, financial position or cash flow and, with respect to its composition, either excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in BCE’s consolidated primary financial statements. We believe that non-GAAP financial measures are reflective of our on-going operating results and provide readers with an understanding of management’s perspective on and analysis of our performance.
Below are descriptions of the non-GAAP financial measures that we use in this report to explain our results. Except for adjusted net interest expense, for which a reconciliation is provided below, reconciliations to the most directly comparable IFRS financial measures on a consolidated basis are set out earlier in this report.
Adjusted net earnings
The term adjusted net earnings does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
BCE Supplementary Financial Information - First Quarter 2022 Page 14
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI.
We use adjusted net earnings and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
The most directly comparable IFRS financial measure is net earnings attributable to common shareholders. Refer to pages 2 and 3 of this report for a reconciliation of net earnings attributable to common shareholders to adjusted net earnings on a consolidated basis.
Adjusted net interest expense
The term adjusted net interest expense does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net interest expense as twelve-month trailing net interest expense as shown in our consolidated statements of cash flows, plus 50% of twelve-month trailing net earnings attributable to preferred shareholders as shown in our consolidated income statements.
We use adjusted net interest expense as a component in the calculation of the adjusted EBITDA to adjusted net interest expense ratio, which is a capital management measure. For further details on the adjusted EBITDA to adjusted net interest expense ratio, see note 2.4, Capital management measures below. We use and believe that certain investors and analysts use the adjusted EBITDA to adjusted net interest expense ratio, among other measures, to evaluate the financial health of the company.
The most directly comparable IFRS financial measure is net interest expense. The following table is a reconciliation of net interest expense to adjusted net interest expense on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||||
| Net interest expense (three months ended March 31, 2022 and 2021, respectively) | 258 | 263 | ||||||||
| Net interest expense (year ended December 31, 2021 and 2020, respectively) | 1,063 | 1,087 | ||||||||
| Net interest expense (three months ended March 31, 2021 and 2020, respectively) | (263 | ) | (270 | ) | ||||||
| 12-month trailing net interest expense (ended March 31, 2022 and 2021, respectively) | 1,058 | 1,080 | ||||||||
| 50% of net earnings attributable to preferred shareholders (three months ended March 31, 2022 and 2021, respectively) | 17 | 16 | ||||||||
| 50% of net earnings attributable to preferred shareholders (year ended December 31, 2021 and 2020, respectively) | 66 | 68 | ||||||||
| 50% of net earnings attributable to preferred shareholders (three months ended March 31, 2021 and 2020, respectively) | (16 | ) | (19 | ) | ||||||
| 50% of 12-month trailing net earnings attributable to preferred shareholders (ended March 31, 2022 and 2021, respectively) | 67 | 65 | ||||||||
| Adjusted net interest expense for the twelve months ended March 31, 2022 and 2021, respectively | 1,125 | 1,145 | ||||||||
BCE Supplementary Financial Information - First Quarter 2022 Page 15
Free cash flow
The term free cash flow does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define free cash flow as cash flows from operating activities, excluding cash from discontinued operations, acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude cash from discontinued operations, acquisition and other costs paid and voluntary pension funding because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
We consider free cash flow to be an important indicator of the financial strength and performance of our businesses. Free cash flow shows how much cash is available to pay dividends on common shares, repay debt and reinvest in our company. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets and to evaluate the financial strength and performance of our businesses. The most directly comparable IFRS financial measure is cash flows from operating activities. Refer to pages 10, 12 and 13 of this report for a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis.
Net debt
The term net debt does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define net debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash and cash equivalents, as shown in BCE’s consolidated statements of financial position. We include 50% of outstanding preferred shares in our net debt as it is consistent with the treatment by certain credit rating agencies.
We consider net debt to be an important indicator of the company’s financial leverage because it represents the amount of debt that is not covered by available cash and cash equivalents. We believe that certain investors and analysts use net debt to determine a company’s financial leverage.
Net debt is calculated using several asset and liability categories from the statements of financial position. The most directly comparable IFRS financial measure is long-term debt. Refer to page 10 of this report for a reconciliation of long-term debt to net debt on a consolidated basis.
| (2.2) | Non-GAAP ratios |
A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage or similar representation and that has a non-GAAP financial measure as one or more of its components.
Adjusted EPS
The term adjusted EPS does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted EPS as adjusted net earnings per BCE common share. Adjusted net earnings is a non-GAAP financial measure. For further details on adjusted net earnings, see note 2.1 – Non-GAAP financial measures above.
BCE Supplementary Financial Information - First Quarter 2022 Page 16
We use adjusted EPS, and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
| (2.3) | Total of segments measures |
A total of segments measure is a financial measure that is a subtotal or total of 2 or more reportable segments and is disclosed within the Notes to BCE’s consolidated primary financial statements.
Adjusted EBITDA
We define adjusted EBITDA as operating revenues less operating costs as shown in BCE’s consolidated income statements.
The most directly comparable IFRS financial measure is net earnings. The following table is a reconciliation of net earnings to adjusted EBITDA on a consolidated basis.
| Q1 2022 | Q1 2021 | |||||||||
| Net earnings | 934 | 687 | ||||||||
| Severance, acquisition and other costs | 13 | 89 | ||||||||
| Depreciation | 891 | 895 | ||||||||
| Amortization | 260 | 238 | ||||||||
| Finance costs | ||||||||||
| Interest expense |
260 | 267 | ||||||||
| Net (return) interest on post-employment benefit plans |
(18 | ) | 5 | |||||||
| Impairment of assets | 2 | 3 | ||||||||
| Other income | (93 | ) | (8 | ) | ||||||
| Income taxes | 335 | 253 | ||||||||
| Adjusted EBITDA | 2,584 | 2,429 | ||||||||
| (2.4) | Capital management measures |
A capital management measure is a financial measure that is intended to enable a reader to evaluate our objectives, policies and processes for managing our capital and is disclosed within the Notes to BCE’s consolidated financial statements.
The financial reporting framework used to prepare the financial statements requires disclosure that helps readers assess the company’s capital management objectives, policies, and processes, as set out in IFRS in IAS – 1 – Presentation of Financial Statements. BCE has its own methods for managing capital and liquidity, and IFRS does not prescribe any particular calculation method.
BCE Supplementary Financial Information - First Quarter 2022 Page 17
Adjusted EBITDA to adjusted net interest expense ratio
The adjusted EBITDA to adjusted net interest expense ratio represents adjusted EBITDA divided by adjusted net interest expense. For the purposes of calculating our adjusted EBITDA to adjusted net interest expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA. Adjusted net interest expense used in the calculation of the adjusted EBITDA to adjusted net interest expense ratio is a non-GAAP financial measure defined as twelve-month trailing net interest expense as shown in our consolidated statements of cash flows, plus 50% of twelve-month trailing net earnings attributable to preferred shareholders as shown in our consolidated income statements. For further details on adjusted net interest expense, see note 2.1, Non-GAAP financial measures above.
We use, and believe that certain investors and analysts use, the adjusted EBITDA to adjusted net interest expense ratio, among other measures, to evaluate the financial health of the company.
Net debt leverage ratio
The net debt leverage ratio represents net debt divided by adjusted EBITDA. Net debt used in the calculation of the net debt leverage ratio is a non-GAAP financial measure. For further details on net debt, see note 2.1, Non-GAAP financial measures above. For the purposes of calculating our net debt leverage ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA.
We use, and believe that certain investors and analysts use, the net debt leverage ratio as a measure of financial leverage.
| (2.5) | Supplementary financial measures |
A supplementary financial measure is a financial measure that is not reported in BCE’s consolidated financial statements, and is, or is intended to be, reported periodically to represent historical or expected future financial performance, financial position, or cash flows.
An explanation of such measures is provided where they are first referred to in this report if the supplementary financial measures’ labelling is not sufficiently descriptive.
| (3) | Key performance indicators (KPIs) |
In addition to the non-GAAP financial measures and other financial measures described previously, we use the following KPIs to measure the success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by other issuers.
Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues.
Capital intensity is defined as capital expenditures divided by operating revenues.
Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a dollar unit per month.
Mobile phone churn is the rate at which existing mobile phone subscribers cancel their services. It is a measure of our ability to retain our customers. Mobile phone churn is calculated by dividing the number of mobile phone deactivations during a given period by the average number of mobile phone subscribers in the base for the specified period and is expressed as a percentage per month.
Mobile phone subscriber unit is comprised of a recurring revenue generating portable unit (e.g. smartphones and feature phones) on an active service plan, that has access to our wireless networks and includes voice, text and/or data connectivity. We report mobile phone subscriber units in two categories: postpaid and prepaid. Prepaid mobile phone subscriber units are considered active for a period of 90 days following the expiry of the subscriber’s prepaid balance.
BCE Supplementary Financial Information - First Quarter 2022 Page 18
Mobile connected device subscriber unit is comprised of a recurring revenue generating portable unit (e.g. tablets, wearables, mobile Internet devices and Internet of Things) on an active service plan, that has access to our wireless networks and is intended for limited or no cellular voice capability.
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet, satellite TV, IPTV, and/or residential NAS. A subscriber is included in our subscriber base when the service has been installed and is operational at the customer premise and a billing relationship has been established.
| ● | Retail Internet, IPTV and satellite TV subscribers have access to stand-alone services, and are primarily represented by a dwelling unit |
| ● | Retail residential NAS subscribers are based on a line count and are represented by a unique telephone number |
BCE Supplementary Financial Information - First Quarter 2022 Page 19
Exhibit 99.4
Form 52-109F2 – Certification of Interim Filings - Full Certificate
I, Mirko Bibic, President and Chief Executive Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of BCE Inc. (the “issuer”) for the interim period ended March 31, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, 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.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
| A. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| I. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| II. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| B. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: May 5, 2022
| (signed) Mirko Bibic | ||
| Mirko Bibic | ||
| President and Chief Executive Officer |
Form 52-109F2 – Certification of Interim Filings - Full Certificate
I, Glen LeBlanc, Executive Vice-President and Chief Financial Officer of BCE Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of BCE Inc. (the “issuer”) for the interim period ended March 31, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, 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.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
| A. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
| I. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
| II. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| B. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: May 5, 2022
| (signed) Glen LeBlanc | ||
| Glen LeBlanc | ||
| Executive Vice-President and Chief Financial Officer |
Exhibit 99.5
|
|
This news release contains forward-looking statements. For a description of the related risk factors and assumptions, please see the section entitled “Caution Regarding Forward-Looking Statements” later in this news release. The information contained in this news release is unaudited.
BCE reports first quarter 2022 results
| ● | Consolidated adjusted EBITDA1 growth of 6.4% on 4.2% higher service revenue |
| ● | Net earnings of $934 million, up 36.0%, with net earnings attributable to common shareholders of $877 million, or $0.96 per common share, up 35.2%; adjusted net earnings1 of $811 million generated adjusted EPS1 of $0.89, up 14.1% |
| ● | Leading wireless financial results with best quarterly organic service revenue growth in 11 years of 8.7%, 9.3% higher adjusted EBITDA and 5.1% increase in mobile phone blended ARPU2; 34,230 new net mobile phone postpaid subscribers added, up 4.0% |
| ● | 26,024 retail Internet net activations, up 22.7%, driving 8% residential Internet revenue growth; IPTV net activations increased 14.6% to 12,260; 91% of Bell residential households with TV and Internet now on a pure fibre network |
| ● | First major operator to offer 3 Gbps symmetrical Internet speeds, three times faster than speeds available with cable technology |
| ● | On pace to deliver approximately 900,000 new fibre locations and mobile 5G to more than 80% of Canadians in 2022; 80% of planned broadband buildout program to be completed by year end |
| ● | Media revenue up 15.7% on stronger year-over-year TV performance and 84% higher digital revenue3, contributing to industry-best adjusted EBITDA growth of 45.5% |
| ● | Strong financial position maintained with more than $2.8 billion of available liquidity1 at end of Q1, including $104 million in cash |
| ● | Reconfirming all 2022 financial guidance targets |
MONTRÉAL, May 5, 2022 – BCE Inc. (TSX, NYSE: BCE) today reported results for the first quarter (Q1) of 2022.
“Bell’s Q1 results highlight our continued momentum from 2021 into this year, demonstrating that our accelerated fibre expansion and customer experience improvements continue to offer greater value to our growing base of customers and the communities we live in,” said Mirko Bibic, President and CEO of BCE and Bell Canada.
“Bell’s solid performance across all segments shows that we have the right strategy in place, we’re consistently executing on that strategy and our products and services are resonating with
1 Adjusted net earnings and available liquidity are non-GAAP financial measures, adjusted EPS is a non-GAAP ratio, and adjusted EBITDA is a total of segments measure. Refer to the Non-GAAP and Other Financial Measures section in this news release for more information on these measures.
2 Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a dollar unit per month. Refer to the Key Performance Indicators (KPIs) section in this news release for more information on blended ARPU.
3 Digital revenues are comprised of advertising revenue from digital platforms including web sites, mobile apps, connected TV apps and OOH digital assets/platforms, as well as advertising procured through Bell digital buying platforms and subscription revenue from direct-to-consumer services and Video on Demand services.
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our customers. In particular, I’m proud of the gains we made to continue championing the customer experience with a 36% decrease in complaints per the CCTS mid-year report.
We delivered our best quarterly organic wireless service revenue growth rate in 11 years through balancing the right market share growth with operating profitability. In addition, our net retail Internet and IPTV subscriber activations are up 20% over last year. With our historic capital expenditure acceleration program now in its second year, we will continue to bring direct fibre connections and 5G to more locations across our footprint throughout 2022.
This is the first quarter since the start of the pandemic in which our consolidated financial results surpassed pre-COVID levels and I am very proud of the Bell team for their continued focus on operational excellence, and all that they’ve done over the past two years to deliver for our customers.”
KEY BUSINESS DEVELOPMENTS
Champion customer experience
Bell had the largest reduction of customer complaints among national providers with a 36% decrease over the previous year in the Commission for Complaints for Telecom-television Services (CCTS) 2021-2022 mid-year report. The share of Bell’s overall complaints decreased by 13%, reducing its share for the seventh year in a row. To strengthen its presence in Québec, Bell acquired EBOX and other related companies, and will continue to offer Internet services to the budget-conscious segment of consumers and businesses in Québec and parts of Ontario under the EBOX brand. Lucky Mobile is now available in more than 160 Best Buy locations across Canada, increasing the reach of Bell’s prepaid wireless offering.
Building the best networks with the fastest speeds
Bell introduced a 3-gigabit per second symmetrical Internet service, speeds three times faster than speeds available with cable technology, in most areas of Toronto, and expanding soon to other localities. Bell is also expanding fibre Internet access to 87,000 additional homes in the Ontario communities of Amherstburg, Georgina, Guelph and Pickering, and Bell continued to work closely with governments on projects to bring broadband access to remote and other hard to serve areas, including a large-scale initiative in Newfoundland and Labrador with the federal Universal Broadband Fund.
5G leadership and technology innovation
Building on Bell’s strategic agreement with Amazon Web Services (AWS) to accelerate 5G innovation and cloud adoption, Bell deployed the first public MEC (multi-access edge computing) platform with AWS Wavelength in Canada at the edge of its 5G network. Bell also deployed the first global production implementation of Google Distributed Cloud Edge for its core network functions to drive its digital transformation and operational efficiencies. To continue accelerating the development and adoption of AI applications across Bell, it entered into a five-year strategic engagement with the Vector Institute, an independent, not-for-profit corporation dedicated to research in the field of artificial intelligence (AI) to encourage the development of this emerging technology in Canada.
Delivering the most compelling content
Super Bowl LVI was the most-watched broadcast in Canada since last year’s Super Bowl, attracting an average audience of 8.1 million viewers on CTV, TSN and RDS according to Numeris. Other sports action included the 2022 Masters Tournament on CTV, TSN and RDS, and the 2022 NCAA March Madness tournament on TSN. In addition, TSN and RDS secured
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the broadcast rights for the complete 2022 FIA Formula One World Championship season. TSN signed a multi-year agreement with FanDuel, designating FanDuel the official sportsbook partner of TSN with the introduction of sports betting in Ontario, and TSN expanded its TSN 5G View / Vision 5G RDS experience to now include regional coverage of the Winnipeg Jets home games on TSN.
Bell for Better: Better World, Better Workplace
Bell set absolute, science-based GHG emissions reduction targets that are consistent with limiting temperature rise to 1.5 degrees Celsius. Bell was the only telecommunications company included on the 2022 LinkedIn Top Companies List in Canada, was named one of Canada’s Top Diversity Employers for the sixth consecutive year by Mediacorp, and received the Women in Governance’s Platinum Parity Certification. Bell also welcomed its employees back to most office locations in April with its flexible, hybrid work model, Bell Workways.
Bell donated $100,000 to the Canadian Red Cross to support critical humanitarian relief efforts in Ukraine. Bell team members stepped up with over $54,000 in donations through the Team Bell Giving Program, and the funds were matched by Bell for an additional $108,000 donated to Ukraine relief efforts. Bell Let’s Talk announced $500,000 in new grants from the 2022 Diversity Fund to support 6 more organizations working to improve access to mental health care for members of Black, Indigenous and People of Colour (BIPOC) communities in Canada.
BCE RESULTS
Financial Highlights
|
($ millions except per share amounts) (unaudited) |
Q1 2022 | Q1 2021 | % change | |||||||||
| BCE |
||||||||||||
| Operating revenues |
5,850 | 5,706 | 2.5% | |||||||||
| Net earnings |
934 | 687 | 36.0% | |||||||||
| Net earnings attributable to common shareholders |
877 | 642 | 36.6% | |||||||||
| Adjusted net earnings |
811 | 704 | 15.2% | |||||||||
| Adjusted EBITDA |
2,584 | 2,429 | 6.4% | |||||||||
| Net earnings per common share (EPS) |
0.96 | 0.71 | 35.2% | |||||||||
| Adjusted EPS |
0.89 | 0.78 | 14.1% | |||||||||
| Cash flows from operating activities |
1,716 | 1,992 | (13.9%) | |||||||||
| Capital expenditures |
(952) | (1,012) | 5.9% | |||||||||
|
Free cash flow1 |
723 | 940 | (23.1%) | |||||||||
“Bell’s strong Q1 financial performance demonstrated excellent execution by the Bell team across all segments, with consolidated financial results surpassing pre-COVID levels for the first time since the start of the pandemic. Net earnings were up 36% on consolidated adjusted EBITDA growth of 6.4%, and 4.2% higher service revenue, driven by strong wireless, residential Internet and media results. Our media segment reported industry-leading financial performance
1 Free cash flow is a non-GAAP financial measure. Refer to the Non-GAAP and Other Financial Measures section in this news release for more information on this measure.
3/18
with revenue up 15.7% and adjusted EBITDA growth of 45.5%,” said Glen LeBlanc, Chief Financial Officer for BCE and Bell Canada.
“With healthy recurring cash flow and substantial liquidity, and all our major defined benefit pension plans in a surplus position, we have the financial strength to execute on our strategic priorities, keeping us on track to meet our financial guidance targets for 2022.”
| ● | BCE operating revenue increased 2.5% compared to Q1 2021 to $5,850 million, driven by 4.2% higher service revenue of $5,177 million on strong wireless, residential Internet and media growth. Product revenue was down 8.8% to $673 million, reflecting fewer new mobile device transactions and lower business wireline data equipment sales. |
| ● | Net earnings increased 36.0% to $934 million and net earnings attributable to common shareholders totalled $877 million, or $0.96 per share, up 36.6% and 35.2% respectively. The year-over-year increases were due to higher adjusted EBITDA, higher other income and lower severance, acquisition and other costs, partly offset by higher income taxes from higher earnings. |
| ● | Adjusted net earnings increased 15.2% to $811 million, delivering 14.1% higher adjusted EPS of $0.89. |
| ● | Adjusted EBITDA grew 6.4% to $2,584 million, driven by year-over-year increases at all Bell operating segments. BCE’s consolidated adjusted EBITDA margin1 increased 1.6 percentage points to 44.2% from 42.6% in Q1 2021, due to the flow-through impact of higher year-over-year service revenue and a decline in low-margin product sales. |
| ● | BCE capital expenditures were $952 million, compared to $1,012 million in Q1 2021, corresponding to a capital intensity2 of 16.3%, down from 17.7% last year. The year-over-year decrease can be attributed to timing. Capital expenditures this quarter were focused on the continued accelerated rollout of Bell’s pure fibre and wireless 5G networks. |
| ● | BCE cash flows from operating activities were $1,716 million, down 13.9% from Q1 2021, reflecting a reduction in cash from the timing of working capital and higher interest paid, partly offset by higher adjusted EBITDA. |
| ● | Free cash flow decreased 23.1% to $723 million from $940 million in Q1 2021, due to lower cash flows from operating activities, excluding acquisition and other costs paid, partly offset by lower capital expenditures. |
OPERATING RESULTS BY SEGMENT
Bell Wireless
| ● | Total wireless operating revenue increased 5.2% to $2,210 million, the result of strong service revenue growth, partly offset by lower year-over-year product revenue. |
| ● | Service revenue grew 8.7% to $1,646 million, driven by increases in our mobile phone and connected device subscriber bases and higher blended mobile phone ARPU, as well as higher roaming revenue as international travel volumes continued to recover. |
| ● | Product revenue decreased 3.8% to $564 million, due to lower year-over-year sales transaction volumes. |
1 Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues. Refer to the Key Performance Indicators (KPIs) section in this news release for more information on adjusted EBITDA margin.
2 Capital intensity is defined as capital expenditures divided by operating revenues. Refer to the Key Performance Indicators (KPIs) section in this news release for more information on capital intensity.
4/18
| ● | Wireless adjusted EBITDA increased 9.3% to $1,009 million on the flow-through of strong service revenue growth, yielding a 1.7 percentage-point margin increase to 45.7%. |
| ● | Bell added 32,176 total net new postpaid and prepaid mobile phone subscribers1, up significantly from 2,405 in Q1 2021. |
| ● | Postpaid mobile phone net subscriber activations totaled 34,230, up 4.0% from 32,925 in Q1 2021. The increase reflected a 10 basis-point improvement in mobile phone customer churn1 to 0.79%, partly offset by a 7.3% decrease in gross subscriber activations due to more targeted promotional offers and mobile device discounting compared to last year given a greater focus on higher-value subscriber loadings. |
| ● | Bell’s prepaid mobile phone customer base decreased by 2,054 net subscribers, compared to a net loss of 30,520 in Q1 2021. The improvement was the result of 30.8% higher gross activations from increased market activity as well as a lower customer churn rate, which improved 7 basis points to 4.61%. |
| ● | Bell’s mobile phone customer base totalled 9,491,361 at the end of Q1, a 3.5% increase over last year, comprising 8,664,275 postpaid subscribers, up 3.6%, and 827,086 prepaid customers, up 2.7%. |
| ● | Blended mobile phone ARPU was up 5.1% to $57.98, driven by higher roaming revenues as international travel volumes increased with the easing of COVID-19 restrictions, and more customers on higher-value rate plans. |
| ● | Mobile connected device net subscriber1 activations were down 34.1% to 48,877, despite continued healthy growth in Bell’s business IoT net connections. This was due to higher data device net losses, reflecting the continued de-emphasis of unprofitable, low-ARPU tablet transactions. Mobile connected device subscribers totalled 2,298,671 at the end of Q1, an increase of 7.9% over last year. |
Bell Wireline
| ● | Total wireline operating revenue decreased 2.2% to $3,013 million, compared to Q1 2021. |
| ● | Wireline service revenue was down 0.8% to $2,903 million, mainly the result of ongoing declines in legacy voice, data and satellite TV services, reduced sales of IP connectivity and business service solutions revenue2, due partly to delayed project spending by large enterprise customers because of ongoing COVID-related disruptions, and the sale of Createch on March 1, 2022. These impacts were partly offset by higher year-over-year residential Internet revenue. |
| ● | Product revenue decreased 28.6% to $110 million, due to lower sales of data equipment to enterprise business customers as a result of reduced or delayed spending attributable to global supply chain challenges because of COVID, as well as exceptionally strong demand from government sector customers in Q1 2021. |
| ● | Wireline adjusted EBITDA grew 0.3% to $1,367 million, reflecting a 4.2% reduction in operating costs and a decline in low-margin data equipment sales that drove a 1.2 percentage-point improvement in margin to 45.4%. |
| ● | Bell added 26,024 net new retail Internet subscribers1, up 22.7% from 21,208 in Q1 2021. Retail Internet subscribers totalled 3,954,767 at the end of Q1, up 6.0% from last year, which includes 67,090 customers gained from the acquisition of EBOX and other related companies. |
1 Refer to the Key Performance Indicators (KPIs) section in this news release for more information on churn and subscriber (or customer) units.
2 Business service solutions revenues are comprised of managed services, which include network management, voice management, hosting and security, and professional services, which include consulting, integration and resource services.
5/18
| ● | Bell TV added 12,260 net new retail IPTV subscribers1, up from 10,696 in Q1 2021, reflecting the success of our customer segmentation approach and lower customer churn in our IPTV fibre footprint. At the end of Q1, Bell served 1,903,726 retail IPTV subscribers, a 4.8% increase over last year, which includes 9,025 customers added due to the acquisition of EBOX and other related companies. |
| ● | Retail satellite TV net subscriber1 losses were 20,621, compared to 19,808 in Q1 2021. Bell’s retail satellite TV customer base totalled 831,948 at the end of Q1, down 8.2% from last year. |
| ● | Retail residential NAS1 net losses improved 17.1% to 42,345, reflecting fewer customer deactivations attributable to ongoing COVID-19 impacts. Bell’s retail residential NAS customer base totalled 2,259,716 at the end of Q1, a 7.1% decline since Q1 2021, which includes 3,456 customers added due to the acquisition of EBOX and other related companies. |
Bell Media
| ● | Media operating revenue increased 15.7% to $825 million, due to higher year-over-year advertising and subscriber revenue. The result this quarter included a one-time retroactive adjustment to subscriber revenue related to a contract with a Canadian TV distributor. |
| ● | Advertising revenue increased 8.5%, driven by more sports TV programming compared to Q1 2021, a strong NFL postseason including our broadcast of Super Bowl LVI, which was the most-watched program of Q1, stronger year-over-year specialty news performance, increased out-of-home advertiser demand as leisure and travel activities resumed more fully with the easing of COVID restrictions, improved year-over-year radio performance, as well as continued digital growth. |
| ● | Subscriber revenue was up 22.1%, due to the one-time retroactive adjustment referenced above and ongoing Crave streaming subscriber growth. |
| ● | Digital revenue increased 84%, driven by Crave direct-to-consumer growth, further rapid scaling of our strategic audience management (SAM) TV media sales tool and growth in TV digital advertising including with our CTV advertising-based video-on-demand (AVOD) service. |
| ● | Adjusted EBITDA grew 45.5% to $208 million, delivering a 5.1 percentage point increase in margin to 25.2%. This was driven by the flow-through of higher operating revenue, despite a 8.2% increase in total operating costs driven by more programming compared to last year and the temporary waiving of CRTC Part I and Part II broadcasting licence fees in Q1 2021 due to COVID. |
| ● | TSN remained Canada’s #1 sports network and was the top specialty channel overall in Q1; RDS remained the top-ranked French-language sports network. |
| ● | Noovo continued to outpace its French-language conventional TV competitors in viewership growth with primetime audiences up 13% in the winter season. |
COMMON SHARE DIVIDEND
BCE’s Board of Directors has declared a quarterly dividend of $0.92 per common share, payable on July 15, 2022 to shareholders of record at the close of business on June 15, 2022.
1 Refer to the Key Performance Indicators (KPIs) section in this news release for more information on churn and subscriber (or customer) units.
6/18
OUTLOOK FOR 2022
BCE confirmed its financial guidance targets for 2022, as provided on February 3, 2022, as follows:
|
2021 Results
|
2022 Guidance
|
|||||||
|
Revenue growth
|
2.5%
|
1% – 5%
|
| |||||
|
Adjusted EBITDA growth
|
3.0%
|
2% – 5%
|
||||||
|
Capital intensity
|
20.6%
|
21%
|
||||||
|
Adjusted EPS growth
|
5.6%
|
2% – 7%
|
||||||
|
Free cash flow growth
|
(10.5%)
|
2% – 10%
|
||||||
|
Annualized common dividend per share
|
$3.50
|
$3.68
|
For the full-year 2022, we expect growth in adjusted EBITDA, a reduction in contributions to post-employment benefit plans and payments under other post-employment benefit plans, and lower cash income taxes, will drive higher free cash flow.
During the first quarter of 2022, the unfavourable effects of the COVID-19 pandemic on our financial and operating performance continued to moderate due to our operational execution and easing of government restrictions during the quarter. However, due to uncertainties relating to the severity and duration of the COVID-19 pandemic and possible further resurgences in the number of COVID-19 cases, including as a result of the potential emergence of other variants, and various potential outcomes, it is difficult at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Our business and financial results could continue to be unfavourably impacted, and could again become more significantly and negatively impacted, in future periods, including, among others, as a result of global supply chain challenges adversely affecting our wireless and wireline product revenues. The extent to which the COVID-19 pandemic will continue to adversely impact us will depend on future developments that are difficult to predict, including the prevalence of COVID-19 variants that are more contagious and may lead to increased health risks, the development and timely distribution of effective vaccines and treatments, vaccination hesitancy and the number of individuals who choose to remain unvaccinated, the time required to achieve broad immunity, as well as new information which may emerge concerning the severity and duration of the COVID-19 pandemic, including the number and intensity of resurgences in COVID-19 cases, and the actions required to contain the coronavirus or remedy its impacts, among others. Please see the section entitled “Caution Regarding Forward-Looking Statements” later in this news release for a description of the principal assumptions on which BCE’s 2022 financial guidance targets are based, as well as the principal related risk factors.
CALL WITH FINANCIAL ANALYSTS
BCE will hold a conference call for financial analysts to discuss Q1 2022 results on Thursday, May 5 at 8:00 am eastern. Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-800-806-5484 or 416-340-2217 and enter passcode 6696161#. A replay will be available until midnight on June 5, 2022 by dialing 1-800-408-3053 or 905-694-9451 and entering passcode 8066296#.
A live audio webcast of the conference call will be available on BCE’s website at BCE Q1-2022 conference call.
7/18
NON-GAAP AND OTHER FINANCIAL MEASURES
BCE uses various financial measures to assess its business performance. Certain of these measures are calculated in accordance with International Financial Reporting Standards (IFRS or GAAP) while certain other measures do not have a standardized meaning under GAAP. We believe that our GAAP financial measures, read together with adjusted non-GAAP and other financial measures, provide readers with a better understanding of how management assesses BCE’s performance.
National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure, prescribes disclosure requirements that apply to the following specified financial measures:
| ● | Non-GAAP financial measures; |
| ● | Non-GAAP ratios; |
| ● | Total of segments measures; |
| ● | Capital management measures; and |
| ● | Supplementary financial measures. |
This section provides a description and classification of the specified financial measures contemplated by NI 52-112 that we use in this news release to explain our financial results except that, for supplementary financial measures, an explanation of such measures is provided where they are first referred to in this news release if the supplementary financial measures’ labelling is not sufficiently descriptive.
Non-GAAP Financial Measures
A non-GAAP financial measure is a financial measure used to depict our historical or expected future financial performance, financial position or cash flow and, with respect to its composition, either excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in BCE’s consolidated primary financial statements. We believe that non-GAAP financial measures are reflective of our on-going operating results and provide readers with an understanding of management’s perspective on and analysis of our performance.
Below are descriptions of the non-GAAP financial measures that we use in this news release to explain our results as well as reconciliations to the most comparable IFRS financial measures.
Adjusted net earnings – Adjusted net earnings is a non-GAAP financial measure and it does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI.
We use adjusted net earnings and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of
8/18
severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
The most directly comparable IFRS financial measure is net earnings attributable to common shareholders.
The following table is a reconciliation of net earnings attributable to common shareholders to adjusted net earnings on a consolidated basis.
| ($ millions) | ||||
|
Q1 2022
|
Q1 2021
| |||
| Net earnings attributable to common shareholders |
877 | 642 | ||
|
Reconciling items: |
||||
| Severance, acquisition and other costs |
13 | 89 | ||
| Net
mark-to-market gains on derivatives used to economically hedge equity settled |
(75) | (60) | ||
| Net gains on investments |
(37) | - | ||
| Early debt redemption costs |
18 | 53 | ||
| Impairment of assets |
2 | 3 | ||
|
Income taxes for above reconciling items |
13 | (23) | ||
|
Adjusted net earnings
|
811 | 704 | ||
Available liquidity – Available liquidity is a non-GAAP financial measure and it does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define available liquidity as cash, cash equivalents and amounts available under our securitized trade receivable program and our committed bank credit facilities.
We consider available liquidity to be an important indicator of the financial strength and performance of our businesses because it shows the funds available to meet our cash requirements, including for, but not limited to, capital expenditures, post-employment benefit plans funding, dividend payments, the payment of contractual obligations, maturing debt, on-going operations, the acquisition of spectrum, and other cash requirements. We believe that certain investors and analysts use available liquidity to evaluate the financial strength and performance of our businesses. The most directly comparable IFRS financial measure is cash.
9/18
The following table is a reconciliation of cash to available liquidity on a consolidated basis.
| ($ millions) | ||||||
| March 31, 2022 |
December 31, 2021 |
|||||
| Cash |
104 | 207 | ||||
| Amounts available under our securitized trade receivables program1 |
400 | 400 | ||||
| Amounts available under our committed bank credit facilities2 |
2,314 | 2,789 | ||||
|
Available liquidity |
2,818 | 3,396 | ||||
Free cash flow – Free cash flow is a non-GAAP financial measure and it does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define free cash flow as cash flows from operating activities, excluding cash from discontinued operations, acquisition and other costs paid (which include significant litigation costs) and voluntary pension funding, less capital expenditures, preferred share dividends and dividends paid by subsidiaries to NCI. We exclude cash from discontinued operations, acquisition and other costs paid and voluntary pension funding because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
We consider free cash flow to be an important indicator of the financial strength and performance of our businesses. Free cash flow shows how much cash is available to pay dividends on common shares, repay debt and reinvest in our company. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets and to evaluate the financial strength and performance of our businesses. The most directly comparable IFRS financial measure is cash flows from operating activities.
The following table is a reconciliation of cash flows from operating activities to free cash flow on a consolidated basis.
| ($ millions) | ||||||||||||
| Q1 2022 | Q1 2021 | |||||||||||
| Cash flows from operating activities |
1,716 | 1,992 | ||||||||||
| Capital expenditures |
(952) | (1,012) | ||||||||||
| Cash dividends paid on preferred shares |
(33) | (31) | ||||||||||
| Cash dividends paid by subsidiaries to NCI |
(11) | (13) | ||||||||||
|
Acquisition and other costs paid |
3 | 4 | ||||||||||
|
Free cash flow |
723 | 940 | ||||||||||
1 At March 31, 2022 and December 31, 2021, $400 million was available under our securitized trade receivables program, under which we borrowed $900 million as at March 31, 2022 and December 31, 2021. Loans secured by trade receivables are included in Debt due within one year in our consolidated financial statements.
2 At March 31, 2022 and December 31, 2021, respectively, $2,314 million and $2,789 million were available under our committed bank credit facilities, given outstanding commercial paper of $949 million in U.S. dollars ($1,186 million in Canadian dollars) and $561 million in U.S. dollars ($711 million in Canadian dollars) as at March 31, 2022 and December 31, 2021, respectively. Commercial paper outstanding is included in Debt due within one year in our consolidated financial statements.
10/18
Non-GAAP Ratios
A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage or similar representation and that has a non-GAAP financial measure as one or more of its components.
Below is a description of the non-GAAP ratio that we use in this news release to explain our results.
Adjusted EPS – Adjusted EPS is a non-GAAP ratio and it does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers.
We define adjusted EPS as adjusted net earnings per BCE common share. Adjusted net earnings is a non-GAAP financial measure. For further details on adjusted net earnings, refer to Non-GAAP Financial Measures above.
We use adjusted EPS, and we believe that certain investors and analysts use this measure, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net equity losses (gains) on investments in associates and joint ventures, net losses (gains) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring.
Total of Segments Measures
A total of segments measure is a financial measure that is a subtotal or total of 2 or more reportable segments and is disclosed within the Notes to BCE’s consolidated primary financial statements.
Below is a description of the total of segments measure that we use in this news release to explain our results as well as a reconciliation to the most comparable IFRS financial measure.
Adjusted EBITDA – Adjusted EBITDA is a total of segments measure. We define adjusted EBITDA as operating revenues less operating costs as shown in BCE’s consolidated income statements.
11/18
The most directly comparable IFRS financial measure is net earnings. The following table is a reconciliation of net earnings to adjusted EBITDA on a consolidated basis.
| ($ millions) |
||||||||
| Q1 2022 | Q1 2021 | |||||||
| Net earnings |
934 | 687 | ||||||
| Severance, acquisition and other costs |
13 | 89 | ||||||
| Depreciation |
891 | 895 | ||||||
| Amortization |
260 | 238 | ||||||
| Finance costs |
||||||||
| Interest expense |
260 | 267 | ||||||
| Net (return) interest on post-employment benefit plans |
(18) | 5 | ||||||
| Impairment of assets |
2 | 3 | ||||||
| Other income |
(93) | (8) | ||||||
|
Income taxes |
335 | 253 | ||||||
|
Adjusted EBITDA
|
|
2,584
|
|
|
2,429
|
| ||
Supplementary Financial Measures
A supplementary financial measure is a financial measure that is not reported in BCE’s consolidated financial statements, and is, or is intended to be, reported periodically to represent historical or expected future financial performance, financial position, or cash flows.
An explanation of such measures is provided where they are first referred to in this news release if the supplementary financial measures’ labelling is not sufficiently descriptive.
KEY PERFORMANCE INDICATORS (KPIs)
We use adjusted EBITDA margin, blended ARPU, capital intensity, churn and subscriber (or customers or NAS) units to measure the success of our strategic imperatives. These key performance indicators are not accounting measures and may not be comparable to similar measures presented by other issuers.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking statements. These statements include, without limitation, statements relating to BCE’s financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), BCE’s 2022 annualized common share dividend, our network deployment plans and anticipated capital expenditures, our science-based GHG emissions reduction targets, our anticipated cash post-employment benefit plans funding, the potential impacts on our business, financial condition, liquidity and financial results of the COVID-19 pandemic, BCE’s business outlook, objectives, plans and strategic priorities, and other statements that are not historical facts. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the ‘safe harbour’ provisions of applicable Canadian securities laws and of the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the
12/18
possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. These statements are not guarantees of future performance or events, and we caution you against relying on any of these forward-looking statements. The forward-looking statements contained in this news release describe our expectations as of May 5, 2022 and, accordingly, are subject to change after such date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. From time to time, we consider potential acquisitions, dispositions, mergers, business combinations, investments, monetizations, joint ventures and other transactions, some of which may be significant. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any such transactions or of special items that may be announced or that may occur after May 5, 2022. The financial impact of these transactions and special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Forward-looking statements are presented in this news release for the purpose of assisting investors and others in understanding certain key elements of our expected financial results, as well as our objectives, strategic priorities and business outlook, and in obtaining a better understanding of our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Material Assumptions
A number of economic, market, operational and financial assumptions were made by BCE in preparing its forward-looking statements contained in this news release, including, but not limited to the following:
Canadian Economic Assumptions
Our forward-looking statements are based on certain assumptions concerning the Canadian economy. As most public health restrictions in Canada have been lifted, pandemic-related effects on demand – notably consumer caution and reluctance to travel – are assumed to fade over 2022 and 2023. In particular, we have assumed:
| ● | Strong economic growth, given the Bank of Canada’s most recent estimated growth in Canadian gross domestic product of around 4.25% on average in 2022 |
| ● | Elevated consumer price index (CPI) inflation driven by sharp increases in energy and food prices as well as supply disruptions and strong demand for goods |
| ● | Tight labour market leading to rising wage growth |
| ● | Strong household consumption growth supported by job gains, the spending of some of the savings accumulated during the pandemic, and the lifting of public health restrictions |
| ● | Solid business investment outside the oil and gas sector supported by robust demand, the gradual easing of supply constraints and improved business confidence |
| ● | Higher interest rates |
| ● | Higher immigration levels |
| ● | The conflict between Russia and Ukraine affecting the Canadian economy predominantly through higher commodity prices |
| ● | Canadian dollar expected to remain at or near current levels. Further movements may be impacted by the degree of strength of the U.S. dollar, interest rates and changes in commodity prices. |
13/18
Canadian Market Assumptions
Our forward-looking statements also reflect various Canadian market assumptions. In particular, we have made the following market assumptions:
| ● | A consistently high level of wireline and wireless competition in consumer, business and wholesale markets |
| ● | Higher, but slowing, wireless industry penetration |
| ● | A shrinking data and voice connectivity market as business customers migrate to lower-priced telecommunications solutions or alternative over-the-top (OTT) competitors |
| ● | While the advertising market continues to be adversely impacted by cancelled or delayed advertising campaigns from many sectors due to the economic downturn during the COVID-19 pandemic, we do expect gradual recovery in 2022 |
| ● | Declines in BDU subscribers driven by increasing competition from the continued rollout of subscription video-on-demand (SVOD) streaming services together with further scaling of OTT aggregators |
Assumptions Concerning our Bell Wireless Segment
Our forward-looking statements are also based on the following internal operational assumptions with respect to our Bell Wireless segment:
| ● | Maintain our market share of national operators’ wireless postpaid mobile phone net additions and growth of our prepaid subscriber base |
| ● | Continued strong competitive intensity and promotional activity across all regions and market segments |
| ● | Ongoing expansion and deployment of 5G wireless networks, offering competitive coverage and quality |
| ● | Continued diversification of our distribution strategy with a focus on expanding direct-to-consumer (DTC) and online transactions |
| ● | Growth in mobile phone blended ARPU, driven by growth in 5G subscriptions, and increased roaming revenue from the easing of travel restrictions implemented as a result of the COVID-19 pandemic, partly offset by reduced data overage revenue due to the continued adoption of unlimited plans |
| ● | Accelerating business customer adoption of advanced 5G and IoT solutions |
| ● | Improving wireless handset device availability in addition to stable device pricing and margins |
| ● | Realization of cost savings related to operational efficiencies enabled by changes in consumer behaviour, digital adoption, product and service enhancements, new call centre and digital investments and other improvements to the customer service experience |
| ● | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our wireless business |
Assumptions Concerning our Bell Wireline Segment
Our forward-looking statements are also based on the following internal operational assumptions with respect to our Bell Wireline segment:
| ● | Further deployment of direct fibre to more homes and businesses within our wireline footprint |
| ● | Continued growth in retail Internet and IPTV subscribers |
| ● | Increasing wireless and Internet-based technological substitution |
| ● | Continued aggressive residential service bundle offers from cable TV competitors in our local wireline areas, moderated by growing our share of competitive residential service bundles |
| ● | Continued large business customer migration to IP-based systems |
14/18
| ● | Ongoing competitive repricing pressures in our business and wholesale markets |
| ● | Continued competitive intensity in our small and medium-sized business markets as cable operators and other telecommunications competitors continue to intensify their focus on business customers |
| ● | Traditional high-margin product categories challenged by large global cloud and OTT providers of business voice and data solutions expanding into Canada with on-demand services |
| ● | Accelerating customer adoption of OTT services resulting in downsizing of TV packages |
| ● | Growing consumption of OTT TV services and on-demand streaming video, as well as the proliferation of devices, such as tablets, that consume large quantities of bandwidth, will require ongoing capital investment |
| ● | Realization of cost savings related to operating efficiencies enabled by a growing direct fibre footprint, changes in consumer behaviour and product innovation, expanding self-serve capabilities, other improvements to the customer service experience, management workforce reductions including attrition and retirements, and lower contracted rates from our suppliers |
| ● | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our wireline business |
Assumptions Concerning our Bell Media Segment
Our forward-looking statements are also based on the following internal operational assumptions with respect to our Bell Media segment:
| ● | Overall revenue expected to reflect continued strong demand in TV advertising revenue including scaling of our SAM TV and Bell demand-side-platform (DSP) buying platforms, a gradual recovery in radio and out-of-home advertisements, as well as direct-to-customer (DTC) subscriber growth |
| ● | Continued escalation of media content costs to secure quality programming, as well as the continued return to normal volumes of entertainment programming |
| ● | Continued scaling of Crave through broader content offering, user experience improvements and Crave Mobile |
| ● | Continued investment in Noovo original programming to better serve our French-language customers with a wider array of content, in the language of their choice, on their preferred platforms |
| ● | Leveraging of first-party data to improve targeting, advertisement delivery and attribution |
| ● | Ability to successfully acquire and produce highly rated programming and differentiated content |
| ● | Building and maintaining strategic supply arrangements for content across all screens and platforms |
| ● | No adverse material financial, operational or competitive consequences of changes in or implementation of regulations affecting our media business |
Financial Assumptions Concerning BCE
Our forward-looking statements are also based on the following internal financial assumptions with respect to BCE for 2022:
| ● | An estimated post-employment benefit plans service cost of approximately $255 million |
| ● | An estimated interest on post-employment benefit obligations of approximately ($70) million |
| ● | Depreciation and amortization expense of approximately $4,700 million to $4,750 million |
| ● | Interest expense of approximately $1,075 million to $1,125 million |
| ● | Interest paid of approximately $1,125 million to $1,175 million |
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| ● | An average effective tax rate of approximately 27% |
| ● | NCI of approximately $60 million |
| ● | Contributions to post-employment benefit plans of approximately $200 million |
| ● | Payments under other post-employment benefit plans of approximately $75 million |
| ● | Income taxes paid (net of refunds) of approximately $800 million to $900 million |
| ● | Weighted average number of BCE common shares outstanding of approximately 911 million |
| ● | An annual common share dividend of $3.68 per share |
Assumptions underlying our estimated cash post-employment benefit plans funding savings
Our estimated cash post-employment benefit plans funding savings from a potential contribution holiday on some of our defined benefit pension plans starting in 2022 are based on the following principal assumptions:
| ● | At the relevant time, our defined benefit (DB) pension plans will remain in funded positions with going concern surpluses and maintain solvency ratios that exceed the minimum legal requirements for a contribution holiday to be taken |
| ● | No significant declines in our DB pension plans’ financial position due to declines in investment returns or interest rates |
| ● | No material experience losses from other unforeseen events such as through litigation or changes in laws, regulations or actuarial standards |
Assumptions underlying our GHG emissions reduction targets
Our GHG emissions reduction targets are based on a number of assumptions including, without limitation, the following principal assumptions:
| ● | Implementation of various corporate and business initiatives to reduce our electricity and fuel consumption, as well as reduce other direct and indirect GHG emissions enablers |
| ● | No new corporate initiatives, business acquisitions or technologies that would materially increase our anticipated levels of GHG emissions |
| ● | Ability to purchase sufficient credible carbon credits and renewable energy certificates to offset or further reduce our GHG emissions, if and when required |
| ● | No negative impact on the calculation of our GHG emissions from refinements in or modifications to international standards or the methodology we use for the calculation of such GHG emissions |
| ● | No required changes to our science-based targets (SBTs) pursuant to the Science Based Targets Initiative methodology that would make the achievement of our updated SBTs more onerous |
| ● | Sufficient supplier engagement and collaboration in setting their own SBTs and sufficient collaboration with partners in reducing their own GHG emissions |
The foregoing assumptions, although considered reasonable by BCE on May 5, 2022, may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth in this news release.
Material Risks
Important risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in, or implied by, our forward-looking statements, including our 2022 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2022 financial guidance targets,
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essentially depends on our business performance, which, in turn, is subject to many risks. Accordingly, readers are cautioned that any of the following risks could have a material adverse effect on our forward-looking statements. These risks include, but are not limited to: the adverse effects of the COVID-19 pandemic, including from the restrictive measures implemented or to be implemented as a result thereof, and the adverse effects of the conflict between Russia and Ukraine, including from the economic sanctions imposed or to be imposed as a result thereof, and supply chain disruptions resulting therefrom; adverse economic and financial market conditions, including from the COVID-19 pandemic and the conflict between Russia and Ukraine; a declining level of retail and commercial activity, and the resulting negative impact on the demand for, and prices of, our products and services; the intensity of competitive activity including from new and emerging competitors; the level of technological substitution and the presence of alternative service providers contributing to disruptions and disintermediation in each of our business segments; changing customer behaviour and the expansion of OTT TV and other alternative service providers, as well as the fragmentation of, and changes in, the advertising market; rising content costs and challenges in our ability to acquire or develop key content; the proliferation of content piracy; higher Canadian smartphone penetration and reduced or slower immigration flow; regulatory initiatives, proceedings and decisions, government consultations and government positions that affect us and influence our business including, without limitation, concerning the conditions and prices at which access to our networks may be mandated and spectrum may be acquired in auctions; the inability to protect our physical and non-physical assets from events such as information security attacks, which risk may be exacerbated by the conflict between Russia and Ukraine, unauthorized access or entry, fire and natural disasters; the failure to implement effective data governance; the failure to evolve and transform our networks, systems and operations using next-generation technologies while lowering our cost structure; the inability to drive a positive customer experience; the failure to attract, develop and retain a diverse and talented team capable of furthering our strategic imperatives; labour disruptions and shortages; the failure to maintain operational networks; the risk that we may need to incur significant unplanned capital expenditures to provide additional capacity and reduce network congestion; the complexity of our operations; the failure to implement or maintain highly effective processes and information technology (IT) systems; events affecting the functionality of, and our ability to protect, test, maintain, replace and upgrade, our networks, IT systems, equipment and other facilities; in-orbit and other operational risks to which the satellites used to provide our satellite TV services are subject; our dependence on third-party suppliers, outsourcers, and consultants to provide an uninterrupted supply of the products and services we need; the failure of our vendor selection, governance and oversight processes, including our management of supplier risk in the areas of security, data governance and responsible procurement; the quality of our products and services and the extent to which they may be subject to defects or fail to comply with applicable government regulations and standards; the inability to access adequate sources of capital and generate sufficient cash flows from operating activities to meet our cash requirements, fund capital expenditures and provide for planned growth; uncertainty as to whether dividends will be declared by BCE’s board of directors or whether the dividend on common shares will be increased; the inability to manage various credit, liquidity and market risks; new or higher taxes due to new tax laws or changes thereto or in the interpretation thereof, and the inability to predict the outcome of government audits; the failure to reduce costs, as well as unexpected increases in costs, and the inability to generate anticipated benefits from acquisitions and corporate restructurings; the failure to evolve practices to effectively monitor and control fraudulent activities; pension obligation volatility and increased contributions to post-employment benefit plans; unfavourable resolution of legal proceedings and, in particular, class actions; the failure to develop and implement strong corporate governance practices and compliance frameworks and to comply with legal and regulatory obligations; the failure to
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recognize and adequately respond to climate change and other environmental concerns and expectations; pandemics, epidemics and other health risks, including health concerns about radio frequency emissions from wireless communications devices and equipment; the inability to adequately manage social issues; and internal factors, such as the failure to implement sufficient corporate and business initiatives, as well as various external factors which could challenge our ability to achieve our environmental, social and governance (ESG) targets including, without limitation, those related to GHG emissions reduction and diversity, equity and inclusion.
We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. We encourage investors to also read BCE’s 2021 Annual MD&A dated March 3, 2022 (included in BCE’s 2021 Annual Report) and BCE’s 2022 First Quarter MD&A dated May 4, 2022 for additional information with respect to certain of these and other assumptions and risks, filed by BCE with the Canadian provincial securities regulatory authorities (available at Sedar.com) and with the U.S. Securities and Exchange Commission (available at SEC.gov). These documents are also available at BCE.ca.
About BCE
BCE is Canada’s largest communications company, providing advanced Bell broadband wireless, Internet, TV, media and business communications services. To learn more, please visit Bell.ca or BCE.ca.
Through Bell for Better, we are investing to create a better today and a better tomorrow by supporting the social and economic prosperity of our communities. This includes the Bell Let’s Talk initiative, which promotes Canadian mental health with national awareness and anti-stigma campaigns like Bell Let’s Talk Day and significant Bell funding of community care and access, research and workplace initiatives throughout the country. To learn more, please visit Bell.ca/LetsTalk.
Media inquiries:
Marie-Eve Francoeur
514-391-5263
marie-eve.francoeur@bell.ca
Investor inquiries:
Thane Fotopoulos
514-870-4619
thane.fotopoulos@bell.ca
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Exhibit 99.6
NOTICE OF RELIANCE
SECTION 13.4 OF NATIONAL INSTRUMENT 51-102
CONTINUOUS DISCLOSURE OBLIGATIONS
| To: | Alberta Securities Commission |
British Columbia Securities Commission
Manitoba Securities Commission
Financial and Consumer Services Commission, New Brunswick
Office of the Superintendent of Securities, Newfoundland and Labrador
Nova Scotia Securities Commission
Ontario Securities Commission
Office of the Superintendent of Securities, Prince Edward Island
Autorité des marchés financiers
Financial and Consumer Affairs Authority of Saskatchewan
Toronto Stock Exchange
Notice is hereby given that Bell Canada relies on the continuous disclosure documents filed by BCE Inc. pursuant to the exemption from the requirements of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”) provided in Section 13.4 of NI 51-102.
The continuous disclosure documents of BCE Inc. can be found for viewing in electronic format at www.sedar.com.
Attached to this notice and forming part thereof is the consolidating summary financial information for BCE Inc. as required by Section 13.4 of NI 51-102.
Dated: May 5, 2022
| BELL CANADA | ||
| By: (signed) Thierry Chaumont | ||
| Name: Thierry Chaumont | ||
| Title: Senior Vice-President, Controller and Tax | ||
|
BELL CANADA
|
UNAUDITED SELECTED SUMMARY FINANCIAL INFORMATION (1)
For the periods ended March 31, 2022 and 2021
(in millions of Canadian dollars)
BCE Inc. fully and unconditionally guarantees the payment obligations of its 100% owned subsidiary Bell Canada under the public debt issued by Bell Canada. Accordingly, the following summary financial information is provided by Bell Canada in compliance with the requirements of section 13.4 of National Instrument 51-102 (Continuous Disclosure Obligations) providing for an exemption for certain credit support issuers. The tables below contain selected summary financial information for (i) BCE Inc. (as credit supporter), (ii) Bell Canada (as credit support issuer) on a consolidated basis, (iii) BCE Inc.’s subsidiaries, other than Bell Canada, on a combined basis, (iv) consolidating adjustments, and (v) BCE Inc. and all of its subsidiaries on a consolidated basis, in each case for the periods indicated. Such summary financial information for BCE Inc. and Bell Canada and all other subsidiaries is intended to provide investors with meaningful and comparable financial information about BCE Inc. and its subsidiaries. This summary financial information should be read in conjunction with BCE Inc.’s audited consolidated financial statements for the year ended December 31, 2021 and the unaudited consolidated interim financial report for the three months ended March 31, 2022.
For the periods ended March 31:
| BCE INC. (“CREDIT SUPPORTER”)(2) |
BELL CANADA CONSOLIDATED (“CREDIT SUPPORT ISSUER”) |
SUBSIDIARIES OF BCE INC. OTHER THAN BELL CANADA(3) |
CONSOLIDATING ADJUSTMENTS(4) |
BCE
INC. CONSOLIDATED |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenues |
— | — | 5,850 | 5,706 | — | — | — | — | 5,850 | 5,706 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings from continuing operations attributable to owners |
911 | 674 | 928 | 696 | 37 | 32 | (965 | ) | (728) | 911 | 674 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings attributable to owners |
911 | 674 | 928 | 696 | 37 | 32 | (965 | ) | (728) | 911 | 674 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
As at March 31, 2022 and December 31, 2021, respectively:
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BCE INC. (“CREDIT SUPPORTER”)(2) |
BELL CANADA CONSOLIDATED (“CREDIT SUPPORT ISSUER”) |
SUBSIDIARIES OF BCE INC. OTHER THAN BELL CANADA(3) |
CONSOLIDATING ADJUSTMENTS(4) |
BCE
INC. CONSOLIDATED |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Current Assets |
672 | 561 | 6,779 | 6,826 | 329 | 292 | (1,964 | ) | (1,481 | ) | 5,816 | 6,198 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Non-current Assets |
24,837 | 23,804 | 55,125 | 54,140 | 39 | 38 | (18,482 | ) | (17,416 | ) | 61,519 | 60,566 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Current Liabilities |
2,026 | 1,672 | 8,823 | 8,841 | 81 | 81 | (1,964 | ) | (1,481 | ) | 8,966 | 9,113 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Non-current Liabilities |
16 | 58 | 33,984 | 34,066 | — | — | 584 | 586 | 34,584 | 34,710 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The summary financial information is prepared in accordance with International Financial Reporting Standards (IFRS) and is in accordance with generally accepted accounting principles issued by the Canadian Accounting Standards Board for publicly-accountable enterprises. |
| (2) | This column accounts for investments in all subsidiaries of BCE Inc. under the equity method. |
| (3) | This column accounts for investments in all subsidiaries of BCE Inc. (other than Bell Canada) on a consolidated basis. |
| (4) | This column includes the necessary amounts to eliminate the intercompany balances between BCE Inc., Bell Canada and other subsidiaries and other adjustments to arrive at the information for BCE Inc. on a consolidated basis. |
Exhibit 99.7
BCE Inc.
EXHIBIT TO 2022 FIRST QUARTER FINANCIAL STATEMENTS
EARNINGS COVERAGE
The following consolidated financial ratios are calculated for the twelve months ended March 31, 2022, give effect to the issuance and redemption of all long-term debt since April 1, 2021 as if these transactions occurred on April 1, 2021, and are based on unaudited financial information of BCE Inc.
| March 31, 2022 | ||
| Earnings coverage of interest on debt requirements based on net earnings attributable to owners of BCE Inc. before interest expense and income tax: | 4.5 times | |
| Earnings coverage of interest on debt requirements based on net earnings attributable to owners of BCE Inc. before interest expense, income tax and non-controlling interest: | 4.6 times | |