Earnings Call Transcript
BCE INC (BCE)
Earnings Call Transcript - BCE Q2 2023
Operator, Operator
Good morning, ladies and gentlemen. Welcome to the BCE Q2 2023 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos. Thank you, Gisel. Good morning, everyone, and thank you for joining our call. Today I'm here with Mirko Bibic, President and CEO of BCE; our current CFO, Glen LeBlanc, and our future incoming CFO, Curtis Millen. You can find all of our Q2 disclosure documents on the Investor Relations page at the bce.ca website, which we posted earlier this morning. Before we begin, I'd like to draw your attention to our safe harbor statement on slide 2, reminding you that today's slide presentation and remarks made during the call will include forward-looking information and therefore are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements, except as required by law. Please refer to BCE's publicly filed documents for more details on our assumptions and risks. So with that, I'll turn the call over to Mirko.
Mirko Bibic, President and CEO
Thank you, Thane, and good morning, everyone. Our Q2 results released this morning highlight Bell's strong operating performance, which is supported by our team's consistent execution and focus on customers. We have made significant investments in broadband infrastructure, product bundling, quality subscriber loading, and careful cost management. Against this backdrop, BCE achieved a solid 3.5% growth in consolidated revenue for Q2 and a 2.1% increase in adjusted EBITDA compared to last year. We have front-loaded our CapEx spending, investing an additional $1.3 billion this quarter, positioning us to expand Bell's fiber network to 650,000 new locations and grow our 5G service coverage to 85% of the country, while also providing standalone 5G service for nearly half of all Canadians. Bell Wireless and Bell pure fiber are ranked as Canada’s fastest mobile, Internet, and WiFi services as per the latest network performance report, reinforcing Bell as Canada's most awarded mobile and Internet services provider. This third-party recognition emphasizes our leadership in technology and our commitment to providing the best networks at reasonable prices. During Q2, we recorded a record number of net subscriber additions in wireless, mobile connected devices, retail Internet, and IPTV, totaling an increase of 76.5% year-over-year to 241,516. Specifically in Wireless, we surpassed 10 million mobile phone subscribers this quarter, achieving our highest number of postpaid net adds in 18 years. In total, net activations for mobile phones and connected devices increased by 86% year-over-year, translating to 205,076 additions andhealthy service revenue growth of 4.4%. Going forward, population growth, penetration potential, the ongoing shift to 5G, and bundling wireless with Internet service will likely support subscriber growth for Bell and the industry as a whole. We are also reaching new Canadians more effectively by increasing our retail presence in communities with large immigrant populations, enhancing customer care and marketing services in multiple languages, and collaborating with organizations such as Air Canada and the Institute for Canadian Citizenship. We offer unlimited nationwide data usage plans with 5G access at competitive prices under the rebranded Virgin Plus. Notably, we have completed the rebranding of Virgin, which features a new look and value proposition focused on affordability, rewards for members, inclusiveness, and network quality. In residential wireline, as we expand our footprint, we are seeing stronger subscriber growth, with 52,148 new net fiber-to-the-home customers added in Q2, representing a 38% increase over last year. Approximately 17% of these new subscribers opted for gigabit-plus speed tiers, with 20% of all new Fibe customers in June selecting a 3-gigabit plan, driven by a successful F1 racing campaign in Quebec. This highlights that speed is an important factor for consumers and serves as a significant competitive advantage, keeping us ahead of our competitors. Our growing base of Fibe customers now represents more than 60% of Bell's retail residential Internet customer base, along with speed upgrades and improved tier mix leading to a 7% increase in Internet revenue for Q2. Importantly, we achieved these results amidst declining prices, demonstrating that our industry is providing high-quality services at rising prices despite persistent inflation. Recent data shows that prices for cellular and Internet access services have decreased, contrasting with a 2.8% overall rise in goods and services in the Canadian economy. Turning to Media, we have navigated the advertising recession in North America better than some competitors due to our strong platforms and digital-first media strategy. Digital revenues climbed 20% compared to last year, now accounting for 33% of total Bell Media revenue, a notable increase from 27% last year. At our upfront presentation in June, we introduced significant expansions to our advertising offerings, including a recently launched ad-supported subscription tier for Crave and plans for addressable advertising later this year. We are the first Canadian broadcaster to introduce addressable TV ads on linear channels through a BDU, allowing advertisers to target specific households or devices based on data. Additionally, we have launched a new analytics product, Bell Attribution Insights, to provide advertisers with detailed reports on campaign performance across Bell Media platforms, along with further improvements to our SAM sales tool, which saw a 30% revenue increase this quarter. On the customer service front, we utilize innovative Bell apps and online tools to enhance the customer experience, especially during a busy moving month in Quebec. These digital solutions have contributed to improving customer satisfaction, and our suite of apps remains the highest-rated telecom apps in Canada. For those following the presentation, let’s look at some key operating metrics for Q2. In Bell Wireless, we added 111,282 new net postpaid mobile phone subscribers, a 34% increase from last year, marking our best Q2 performance in 18 years. This growth was driven by a 30% rise in gross activations and reflects strong immigration growth, ongoing 5G and multiproduct bundling, and effective promotional offers in a competitive market. Customer churn was up year-over-year, but this aligns with increased market activity and competitive intensity, yet our churn remains well below pre-pandemic levels at 0.94%. Our ARPU remained stable year-over-year, which is positive considering competitive pricing pressures, particularly on larger capacity data plans. Notably, the monthly recurring charge portion of ARPU was stable due to more subscribers opting for premium 5G rate plans. By the end of Q2, 47% of postpaid customers were using 5G capable devices, up from 30% last year. For mobile connected devices, we saw 79,537 new net activations, reflecting robust demand for Bell IoT solutions. In Wireline, we achieved our highest Q2 retail Internet net adds since 2007, with an increase of 10.2% year-over-year to nearly 25,000, despite losing some legacy DSL subscribers in our copper areas. Within our FTTH footprint, net additions of 52,000 demonstrate the market share gains we are making with fiber. Bell IPTV also had a strong quarter, adding 11,506 new subscribers, three times higher than last year, benefiting from our pure fiber Internet and TV product strength. While satellite TV saw increased customer losses due to heightened competition, home phone losses improved by 6%. To briefly revisit Bell Media, digital growth was strong, underpinned by Crave and TSN streaming subscribers and a 30% revenue increase from SAM sales. Crave's subscribers increased by 5% year-over-year to around 3.2 million, bolstered by a 27% rise in direct-to-consumer streaming, while TSN Direct and RDS Direct subscribers grew collectively by 85%. CTV continued to outperform expectations, marking its 22nd consecutive year as the top network in prime time and expanding its audience advantage. On the French language TV side, Noovo saw a significant 17% increase in audience share among the key 25 to 54 demographic during Q2, even amid an overall decline in the French conventional TV market. RDS remained the top-ranked non-news specialty channel, boosted by events like the Canadian Grand Prix. In summary, I want to extend my gratitude to the Bell team for their efforts in Q2. Our performance highlights that the investments we’ve made over the past several years and our focus on core business opportunities are yielding results. However, we must continually prioritize day-to-day execution, particularly by aligning our cost structure with each operating segment's revenue profiles. We will also closely watch regulatory developments related to our fiber investments and ongoing issues surrounding Bills C11 and C18. Furthermore, more action is needed from the CRTC to support the media ecosystem, which is under significant strain and requires urgent government intervention. As we see large U.S. companies struggling with the advertising challenges, it raises questions about how Canadian broadcasters are expected to thrive under uneven regulations. Encouragingly, the federal government is attempting to assist on the news front, while the industry is pushing back against aggressive actions by Meta and Google. More needs to be done. Lastly, I want to address recent media reports regarding lead-covered cables and legacy telco copper networks. Only a small part of Bell's wireline infrastructure, specifically 0.36% of our network, still contains lead. We stopped installing lead-covered copper cables in the 1960s, shifting to plastic polymers for most deployments. Since the mid-2000s, we have also been replacing copper cables with fiber, and we remove any lead components during active construction where safe and feasible, following established safe handling protocols. Now, I will turn the call over to Glen, who will provide additional details on our Q2 financial results. I want to express my heartfelt thanks to Glen for his dedication and leadership as he prepares to retire at the end of the month. His contributions have greatly benefited our company, and he will be missed.
Glen LeBlanc, CFO
Good morning, everyone, and thank you, Mirko, for your kind words. I'm proud and honored to have been part of such an amazing organization for 30 years. I have witnessed the transformation of this great company from a legacy telco into a tech services powerhouse, and the best is yet to come. I will be keenly watching from the sidelines, as the next generation of leaders take Bell to the next level. And now for the last time, as CFO, on to the results. And what has become a hallmark for the company, another quarter of consistent and focused execution that delivered strong 3.5% consolidated revenue growth and 2.1% higher adjusted EBITDA. This was achieved despite ongoing media advertising headwinds Mirko mentioned, and the step-up in competitive intensity across all our consumer product lines and a B2B sector that has not yet fully recovered from the global supply chain disruptions experienced over the past couple of years. Despite the positive EBITDA contributions from operations, net earnings and statutory EPS were down year-over-year due to a $377 million noncash loss on BCE's share of an obligation to repurchase at fair value the minority interest in a joint venture equity investment. As profiled in our quarterly budget for 2023, adjusted EPS was also down this quarter, decreasing 9.2%. This was driven by an expected increase in interest expense due to higher rates, as well as higher depreciation and amortization, reflecting the rapid growth in our broadband capital assets. As for free cash flow, it was down approximately $300 million year-over-year mainly on the timing of working capital, which, as I mentioned last quarter, will largely reverse out by year-end and higher CapEx as we advanced some spending earmarked for later in the year, given favorable construction conditions this past spring. In line with our internal forecast and consistent with our guidance target for 2023, we expect a much stronger free cash flow trajectory in the back half of the year, with a minimum $600 million favorable year-over-year swing coming from just CapEx alone. Let's turn to our Bell CTS segment on Slide 8, where total revenue was up a very healthy 4.3% this quarter. A strong result that was driven by a 7% increase in residential Internet revenue and a 4.4% higher wireless service revenue, which were fueled on the back of some of the best Q2 mobile phone and retail Internet subscriber metrics as Mirko mentioned in well over 15 years. The year-over-year growth in revenue also reflected a much improved B2B performance trajectory, supported by the increased project spending by large enterprise customers, which strengthened as a result of the improvement in data equipment availability compared to the shortages that we experienced last year, as well as the financial contribution from our recent acquisition of cloud services provider FX Innovation. The ongoing recovery in the business data equipment sales together with increased sales of higher-value mobile phones yielded a 21.5% growth in Bell's ETX product revenue this quarter. The combined impact of the continued consumer strength across our wireless and residential home services, together with the improved business wireline results and lower year-over-year weather-related pressures drove improved EBITDA growth of 2.8% this quarter. Let's move over to Bell Media on slide nine. Against the backdrop of the ongoing ad recession in North America, Bell Media's revenue declined in Q2 was still only 1.9%. This represents a much better performance than our media peers which is a testament to the team's strong execution, our diversified asset mix, programming strength, and the success of our digital-first media strategy. Advertising revenue was down 9% owing to a continued soft in advertiser demand and spending across all traditional media platforms. This was moderated by robust digital advertising growth of 19%. Subscriber revenue increased 3.9% year-over-year driven by continued strong Crave and sports direct-to-consumer streaming growth. Consistent with the year-over-year decline in advertising this quarter, EBITDA decreased 5.3%. Although that may appear to be a decent result under current economic conditions, we and our industry continue to be greatly impacted by a number of challenges including operating losses across our news divisions, a prolonged advertising slump with no signs of immediate recovery, the shift of advertising revenue to foreign digital platforms, content cost inflation, and a more challenging regulatory environment that is not adapted to the new realities facing media. This has required us to right-size our operating cost structure and asset portfolio to align with the expected revenue potential of our Media business. Going forward, we will need to continue doing so in order to deliver for our shareholders in this unconstructive economic and regulatory environment. Let's turn to slide 10 for a brief update on our balance sheet and our liquidity position. We remain quite well-positioned with more than $4.4 billion of available liquidity at the end of Q2, which is bolstered by an $850 million public debt issuance during the quarter. Our debt maturity schedule also remains well-structured with an average debt to maturity of approximately 12 years and an after-tax cost of debt that is well below prevailing interest rates at just under 3%. Moreover, we have no outstanding financing requirements for the balance of this year as all 2023 debt maturities have already been pre-financed. And with a strong pension solvency surplus totaling $3.5 billion in free cash flow that is growing organically year-over-year, we have the financial strength against the current macroeconomic backdrop to execute on our strategic and capital market priorities for 2023 including the C-band spectrum auction later this year. Lastly, I wanted to highlight Bell's continued leadership in ESG financing structures with the launch of our first sustainability-linked derivatives this past May. This follows the announcement of our sustainable financing framework in April of 2021, Bell's inaugural $500 million sustainability bond offering in May of 2021, and the conversion of our $3.5 billion committed facilities to a sustainability-linked loan last November. We look forward to a follow-on sustainability bond issuance in the future when the right mix and size of eligible investments within our framework are available. Let's wrap up on slide 11 with consolidated financial results delivered in the first two quarters that are in line with budget together with a strong projected EBITDA and free cash flow trajectories in the second half of the year that are underpinned by our strong operating momentum across the business and our consistent proven execution in a competitive marketplace. I am reconfirming all our guidance targets for 2023. On that note, I'll turn the call back over to you, Thane.
Operator, Operator
Thank you, Glen. So to keep the call as efficient as possible, please limit yourself to one question and a brief follow-up so that we can get to as many of the questions in queue with the time we have left. However, before I hand it over to the operator, I just wanted to take the opportunity to say to Glen what a privilege and pleasure it's been to work with you. You are a great leader and mentor, and I'm grateful for all the guidance, support, and encouragement you have provided. But above all, what I have valued most is your kindness, trust, and friendship. With that, Giselle, we're ready to take our first question.
Operator, Operator
Thank you. The first question is from Maher Yaghi from Scotia Bank. Please go ahead.
Maher Yaghi, Analyst
Great. Thank you for taking my questions. And I do want to say Glen, thank you for all your support over the many years that we've known each other. You'll definitely be missed. So maybe I'll start with my first question. Mirko, I recognize that BCE is in the middle of an assay regarding MVNO with Quebecor. But I'm interested in getting your reaction to the announced MVNO ruling by the CRTC on the Rogers and Quebecor MVNO tariff. More specifically on the basis and precedents that the CRTC has chosen to arrive at this tariff calculation and its costing analysis. And just a follow-up question on free cash flow. Glen, I guess BCE has delivered year-after-year on its guidance targets. So I'm not implying any issues here, but when I observe your free cash flow generation, it's down 46% in the first half and your outlook is for growth of 2% to 10%. Lots of moving parts, I'm sure. CapEx, as you mentioned, is a big point here in the recovery. But could you help us bridge the results to date and how we're going to get to the 2% to 10% growth? Thank you.
Glen LeBlanc, CFO
Yes, I'll start. Thank you for your remarks, Maher. As I mentioned in my opening statement, we plan to spend more than $600 million in the second half of the year, which is less than what we spent last year. In 2022, we spent over $3 billion in the latter half of the year, and this year's expenditure will be more than $600 million lower. This reduction will also affect working capital. We will have lower cash tax installments in the second half, but we are confident we will meet the guidance we provided. Historically, our free cash flow profile has been smoother than this year's, but we made the decision to invest heavily in the first half of this year. As I’ve said before, you maximize your returns in this business when conditions are favorable. That’s our current situation. I remain confident, Maher, and now I’ll hand it over to Mirko for the second part of the question.
Mirko Bibic, President and CEO
Thank you, Glen. Good morning. Regarding the MVNO decision, I believe you are referring to the recent ruling involving two other providers. It's challenging to comment on it since we don’t have the details about the rates or offers involved in the final arbitration, as that information is confidential. Consequently, it's difficult to make predictions about what might happen next. I noticed some notable references in the ruling regarding how costs were determined and how the successful bid was selected. These points are significant because they deviate from traditional practices. However, it's important to understand that those comments were likely based on the specific facts presented to the CRTC regarding the offers made. If we interpreted those comments about appropriate costing as indicative of future trends, the consequences could be substantial. Additionally, shifting focus from Wireless to Wireline, we've spent considerable time discussing our accelerated CapEx program, aiming to achieve nearly 9 million fiber locations by 2025. While repeating this message can create the impression that the task will be completed by then, the reality is that the job won’t be finished by the end of 2025. Even after reaching close to 9 million locations, there will still be around 5 million households within Bell's operational area, from Manitoba to Newfoundland, that remain uncovered. This situation is concerning and poses a significant risk. Ultimately, I believe it’s crucial for public policy makers, the government, and regulators in Canada to determine whether the focus should be on ensuring coverage for all Canadians or on continuing to make decisions aimed at further reducing prices. When examining the overall market, pricing has been effectively managed by market dynamics recently. I'll conclude my remarks there.
Maher Yaghi, Analyst
No, you actually were right where I wanted you to be because fiber to the home is essential for your future growth. Thank you for those remarks.
Operator, Operator
Thank you. Next question please.
Operator, Operator
Thank you. Next question is from Drew McReynolds from RBC. Please go ahead.
Drew McReynolds, Analyst
Yeah. Thanks very much. And good morning, and all the best Glen. I wish you well. A couple for me. Just first on Bell Media actually Mirko you made a lot of progress digitizing this asset and the asset clearly punches above its weight certainly in the media landscape here in Canada. When you look at the digital revenue contribution, how do you want that to kind of trend let's say over the next two to three years? I know there's a ton of moving parts, but just what are your expectations there? And then, secondly shifting to Wireless. We've seen, and you mentioned a bunch of initiatives to better service immigrants into the country. Just wondering what your expectation there is in terms of incremental traction and success in doing that and whether we saw some of that in Q2?
Mirko Bibic, President and CEO
Yes. In the Wireless sector, there is a significant population increase in Canada that is likely to continue. We perform well in the premium market and also have a strong presence in the switcher market, which includes customers transitioning from one provider to another. We are managing well in attracting newcomers to Canada, but I believe we can improve further, and we are committed to doing so. We've been transparent about the initiatives we've introduced to capture a larger share of this market segment, although it’s still early in these efforts. Therefore, I don't think the strong results we reported in Q2 fully reflect our progress on these initiatives; we have room for growth there. Part of this is the re-launch of Virgin Plus. Although it's just a few weeks in, we've seen some positive trends following the re-launch, especially since it occurred in July. Regarding Media, we want to continue to strongly shift toward digital. We've been focusing on this for about three years, and I am pleased with the momentum we are generating in this area. Our revenue streams primarily come from subscriptions and advertising. For advertising, we've implemented several tools to encourage advertisers to choose us for their digital and targeted advertising needs, which will improve with the introduction of addressable TV. On the subscription side, it's crucial that we offer the best premium content and ensure it's accessible on our digital platforms to enhance the user experience. Looking ahead, the key growth areas for Bell Media will be Crave, the CTV and Noovo apps, and TSN and RDS direct.
Operator, Operator
Thank you. The next question is from Stephanie Price, CIBC. Please go ahead.
Stephanie Price, Analyst
Hi. Good morning. Hoping if you could talk a little bit about the sustainability of service revenue growth as we head into the back half of the year. Just curious how you think about the more competitive back-to-school and holiday periods. And then just my follow-up, just curious about how we should think about the enterprise piece of the business heading into the back half of the year. It sounds like the equipment availability has maybe started to improve a bit here.
Glen LeBlanc, CFO
I'm optimistic about the second half regarding enterprise. We're seeing our large enterprise customers return to full project activity. Although product availability isn't quite at pre-pandemic levels, it has significantly improved compared to recent years. We're encouraged by the momentum we're experiencing. There are no indications of a slowdown or recession effects; projects are being launched, as reflected in our product revenue growth this quarter. I'm confident that the second half will show additional momentum that we didn't see in the first half.
Mirko Bibic, President and CEO
Yes. Regarding the overall competitive landscape and revenue growth, particularly service revenue growth, our performance in Q2 reflected strong growth in mobile phone and retail Internet subscribers. This was accompanied by healthy service revenue growth in residential Internet at 7% and wireless service revenues at 4.4%. These figures are robust and quite comparable to those from the previous three quarters, especially considering the intense promotional pricing we experienced in Q2. I won't go into too much detail about the business side, but we are also observing decent strength in service solution revenue. When we consider all these factors and look ahead to the latter half of the year, I believe we will continue to achieve strong service revenues, particularly as we compare against the return to pre-COVID levels of promotional activity that we observed in the second half of last year, especially during the Black Friday period.
Stephanie Price, Analyst
Great. Thank you very much. And congrats Glen on the retirement.
Glen LeBlanc, CFO
Thank you.
Operator, Operator
Thank you. Next question is from Vince Valentini, TD Cowen. Please go ahead.
Vince Valentini, Analyst
Yes. Thanks very much. And best of luck to you Glen in your future. Two things if I can one I'll call a clarification. You gave a good answer on free cash flow earlier, but I have no doubt you'll hit your guidance you always do. But can we assume that the high end of that guidance range is starting to look a little out of reach given what we saw in the first half on free cash flow? And the second one, the spectrum thing we see you paid $145 million for to subordinate some spectrum from Explorer in Quebec. Given that it was 3500 band, I assume it adds to your cap for the upcoming auction? And can you clarify that and maybe tell us how many megahertz you bought?
Mirko Bibic, President and CEO
Yes, it does add to our cap.
Glen LeBlanc, CFO
Yes. And Vince on the free cash flow, as I provided the answer earlier, significant reduced year-over-year CapEx spend, a fairly sizable difference in timing of installment payments, and an acceleration of earnings. We have a higher earnings profile EBITDA profile in the back half of our business than we do in the front half. All of that leads me to be very confident. As you said, we will deliver on our guidance. Now, I would say, suffice to say, I don't see us at the high end but we'll deliver on the guidance.
Vince Valentini, Analyst
And the number of megahertz, is it 20 megahertz from Explore?
Curtis Millen, Incoming CFO
It varies across the different regions.
Operator, Operator
Thank you. The next question is from David Barden, Bank of America. Please go ahead.
Unidentified Analyst, Analyst
Hi, everyone. Thanks for taking my question. It's Math filling in for Dave this morning. Glen, I want to wish you all the best in your retirement. My first question is about the strategy with Virgin Plus and its new launch, particularly regarding the inclusion of 5G plans. Mirko, you mentioned that you're performing well in the premium segment, so I'm curious how the new Virgin strategy contributes to that and how you envision it enhancing your position. Any insights would be greatly appreciated. Additionally, on the ARPU side, I've noticed that overage has been a bit of a challenge as customers move to higher plans with less overage. Could you provide some context on this, specifically how much might still be left or how quickly it’s decreasing as more people transition? That information would be helpful. Thank you.
Mirko Bibic, President and CEO
Matt, it's Mirko. I'll address the question about the Virgin relaunch. Our aim is to revitalize the Virgin brand, especially since we perform well with the Bell brand in the premium segment. We want to make Virgin more attractive and relevant to a wider range of customers, particularly newcomers. That's the essence of our approach. Regarding 5G, we now have plans available for Virgin that include 5G and 4G, but not 5G Plus. It was quite predictable that one of our competitors would launch 5G under their brand, so we have to stay aware of the competitive landscape and strategically position ourselves. Additionally, there's still a price difference between the Virgin and Bell brands, primarily due to the premium offerings that Bell continues to provide.
Glen LeBlanc, CFO
Matt, it's Glen. On your question on ARPU, first of all, I'll say, I'm actually very pleased with how well ARPU held up. A couple of things I will unpack there for you. We are at the point that we're no longer enjoying the tailwind of roaming that we were. I mentioned that roaming revenues are up. Last quarter, I think 74% I said. And this quarter they're only up about 35%. We reached the point now that a number I quoted in Q1 was that roaming revenues were now at 124% of pre-COVID levels. Well, they're at 125% this quarter. So you're seeing a slowing there. It's impacting ARPU. As far as data overage, I would say a modest increase in the decline. We were down about $12 million year-over-year in the quarter versus $10 million in the first quarter. So it's not overly material. When I look out to the future on ARPU and what gives me confidence is only 47% of postpaid subscribers are currently on a 5G capable device, and as you know that we see quite double the usage when people move to the 5G device from LTE. So, that's a great opportunity for monetization and gives us confidence in the growth of ARPU for the future. And thank you for your remarks, Matt.
Unidentified Analyst, Analyst
All right. Thank you so much for the answers.
Operator, Operator
Thank you. Next participant, Simon Flannery from Morgan Stanley. Please go ahead.
Simon Flannery, Analyst
Thank you very much. Good morning and Glen best wishes for your retirement. I wonder if we could come back to fiber. Perhaps you referenced the nine million target for '25. Could you just update us on the passings year-to-date and the outlook and how that plays into the CapEx timing? And then strong net adds on the fiber side. Maybe give us a sense of what the headroom here is and how the cohorts have been behaving what sort of penetration rates are still left to get in those markets that you've been building over the last several years before they reach terminal penetration? Thanks.
Glen LeBlanc, CFO
There's no material change in our long-term fiber plans, Simon. As we said we'd get to pass approximately 9.5 million homes of our 12-plus million and then we have our wireless to the home footprint. I mean I think on the capital side of things just to remind you, 2022 was the high watermark on spending and you'd see a natural decline through 2023, which you're starting to see or you will particularly see in the back half. That decline will continue through 2025. So we ultimately see ourselves reaching a point where we'll reach what our strategic objective of fiber homes passed will be by the end of 2025. And then your sub-17 CI and maybe sub that in 2026.
Mirko Bibic, President and CEO
The penetration levels are competitive, and while I can't share specific numbers, we've seen robust growth with 52,000 fiber subscribers. Our penetration is strong in areas where we have established fiber, especially in markets where it's been available for a longer time. We are nearing our market share objectives in every community. For the year, we aim to reach around 650,000 locations, and we're making good progress in the first half of the year based on our investments. Strategically, we have a clear accelerated CapEx build plan from 2021 to 2025, and we've met our targets each year since initiating this plan. After 2025, we plan to continue building, but at a more traditional rate similar to before 2019. We're on track with this plan, although future public policy and regulatory changes could affect it.
Simon Flannery, Analyst
Great. Thanks a lot.
Mirko Bibic, President and CEO
Thanks, Simon.
Operator, Operator
Thank you. The next question is from Jerome Dubreuil, Desjardins. Please go ahead.
Jerome Dubreuil, Analyst
Thank you. Good morning, everyone. For all the comments, congrats on your tenure Glen. Again on the guidance, we've talked a lot about the free cash flow guidance but I want to dive a bit more on the EBITDA guidance. You said, you're expecting catch-up in the second half. If you can maybe describe what are the drivers of that improvement in the second half? And if you can maybe specify what's the expected impact of maybe storms and natural disasters that you have baked in your guidance and versus what we've seen so far?
Glen LeBlanc, CFO
Yes. Certainly, I'll give you some color commentary on that. A couple of things. One, you will recall that we incurred substantive storm costs in the back half of last year, with the vast majority of it being fined about $34 million with it. So that hold that's behind us. Just in this quarter alone, we saw quite an improvement in storm-related costs. We incurred about $2 million in this quarter versus about $7 million or $9 million for the same period last year, so about a $7 million improvement. You heard in our opening remarks that we took on a very aggressive workforce reduction program in the second quarter of this year and naturally the benefits of that will flow in the back half and not in Q2. So that is another area of improvement in trajectory or cost trajectory. Inflation, we're starting to see a slowdown or at least a lapping, I should say, of inflationary pressures about $13 million inflationary pressures in this quarter compared to about $12 million last year. When I look out to the back half of this year, and what we incurred last year, I actually see potential for modest improvement as opposed to a headwind that we've been experiencing for 12 months. And then the continued fiber technology as we build fiber, we have a lower cost structure, a digital transformation lower cost structure, or a real estate rationalization lower cost structure. Handset discounting has been better with BYOD. So all in all, I think it's all hands on deck. We're excited about the momentum we see in the business right now. We're excited about the health of growth in this country, as Mirko mentioned, immigration. So you get it from that perspective; we expect revenue growth to remain solid and I see some pretty nice momentum in place for the cost containment that we'll enjoy in the second half of the year.
Jerome Dubreuil, Analyst
Great. Thank you.
Glen LeBlanc, CFO
You're welcome.
Operator, Operator
Thank you. The next question is from Batya Levi from UBS. Please go ahead.
Batya Levi, Analyst
Great. Thank you. All the best for Glen as well. Two questions. One, on the new loadings. They've been very strong. Can you talk about the take rate for bundled offers versus the base and the impact that on churn? And on the cost transformation for Media, should we assume that that fully implemented and will start to provide some upside in the second half, or will there be more elements to it, as we move ahead? And can we see Media margins head back to mid-20% with that transformation? Thank you.
Glen LeBlanc, CFO
Yes. The cost initiatives that we've taken on were really done in the latter part of Q2. So we really haven't enjoyed any benefits of those. So, absolutely, we expect those benefits to kick in particularly through Q3 and absolutely in Q4 to help improve media. The media margins will return. What we're doing in our Media business is true transformation and the move to digitization that we've already talked about. Advertising will return. And when it does return, we are going to have our assets positioned to capture a larger share of the marketplace than ever before. I remain bullish on Media margins, but we're still in an advertising headwind. Advertisers are right now, reluctant. But when I believe when that returns, we will have used this time wisely to right the ship and focus on a broad suite of assets that allow us to capture greater share. And over to Mirko, on the front end.
Mirko Bibic, President and CEO
The market is clearly evolving towards a model where the customer value proposition is increasingly defined by bundled offers. We are well positioned in this shift, thanks to our expanding fiber network, superior fiber Internet service, and our national 5G and 5G plus wireless network, where we are highly rated. When you combine our attractive pricing with these strengths, it creates a compelling offering. We are seeing growth in the percentage of our Internet customers who also take mobile services and vice versa. Additionally, more new customers are choosing both services from us right from the start, and this trend is continuing to grow. This is a key focus for us and presents a significant opportunity for the BCE family of brands.
Batya Levi, Analyst
Okay. Got it. Thank you.
Operator, Operator
Thank you. The next question is from Drew McReynolds from RBC. Please go ahead.
Drew McReynolds, Analyst
Yeah. Thanks very much for the follow-up here. Glen, couldn't let you go without a pension question, sorry about that. On the pension solvency surplus, like we all know on this call, Bill's been or used to put a lot of money into the plan because of just the punitive decline in interest rates on the solvency calculation. Obviously, we're in a slightly different environment and it may get even more interesting going forward. So the question is, do you have any ability to get back some of that surplus over time? Is there a mechanism or a process where that $3.5 billion, if it gets to $4 billion, $4.5 billion, $5 billion, do you have any access to that is the question.
Glen LeBlanc, CFO
I appreciate the opportunity, Drew, to discuss our current position after a history of deficits. We're now in a surplus situation. The process allows us to take contribution holidays in the Bell Canada plant, including D.C. This applies to both defined benefit and defined contribution plans. Given our surplus of 116%, amounting to $3.5 billion, we can continue taking holidays for the foreseeable future. If your predictions hold true and the surplus increases beyond $3.5 billion, Curtis will benefit from a significant surplus in the years to come. Thank you, Drew, for giving me the chance to share this about our pensions.
Drew McReynolds, Analyst
Awesome. Thank you.
Operator, Operator
Thank you. The next question is from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.
Aravinda Galappatthige, Analyst
Good morning. Thank you and let me offer my best wishes to Glen as well. I had a question on the enterprise or B2B side in general. Having closed the FX innovation acquisition. Mirko, what are your thoughts on sort of the headroom to make similar acquisitions in that broader space and perhaps even your appetite and maybe connect that to sort of your strategy to taking that sort of the B2B segment back potentially to growth at some point, maybe an update on those elements? Thank you.
Mirko Bibic, President and CEO
Thank you for the question. Our strategy in the B2B segment is built on three main pillars. First, we aim to enhance the customer experience for enterprise clients. Second, we plan to sharpen our focus on managing the cost structure related to our legacy services, which are high margin but are declining. By doing this, we can strengthen our traditional areas of expertise, leveraging our strong connectivity, distribution capabilities, and established customer relationships. At the same time, we will concentrate on future growth areas in the enterprise market, particularly in 5G, IoT, private networks, and aspects of the cloud business where we can partner with our large customers on their digital transformation journeys. We are optimistic about potential in these sectors because of our connectivity strengths and relationships. The FX business will be crucial in this strategy, especially as our customers transition digitally to the cloud, and we intend to continue growing this aspect of our business, using our Montréal-based FX operations as a foundation for future expansion.
Aravinda Galappatthige, Analyst
Thank you.
Operator, Operator
Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Fotopoulos.
Thane Fotopoulos, SVP of Investor Relations
Thank you, Giselle, and thank you again to all who participated on the call this morning. As usual, the IR team will be available throughout the day for any follow-up questions and clarifications. So with that, have a good rest of the day.
Mirko Bibic, President and CEO
Thank you, everyone.
Glen LeBlanc, CFO
Thank you.
Operator, Operator
Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.