UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
| For the month of: March 2021 | Commission File Number: 1-8481 |
BCE Inc.
(Translation of Registrant’s name into English)
1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada H3E 3B3,
(514) 870-8777
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F Form 40-F X
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____.
Notwithstanding any reference to BCE Inc.’s Web site on the World Wide Web in the documents attached hereto, the information contained in BCE Inc.’s site or any other site on the World Wide Web referred to in BCE Inc.’s site is not a part of this Form 6-K and, therefore, is not furnished to the Securities and Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BCE Inc. |
| (signed) Glen LeBlanc Glen LeBlanc Executive Vice-President and Chief Financial Officer |
| March 11, 2021 |
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EXHIBIT INDEX
99.1 News Release
99.2 Annual Report of BCE Inc. for the year ended December 31, 2020
99.3 Code of Business Conduct
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Exhibit 99.1
|
|
For Immediate Release
BCE files 2020 annual report on Form 40-F
MONTRÉAL, March 11, 2021 – BCE Inc. (TSX, NYSE: BCE) today announced the filing of
its 2020 annual report on
Form 40-F with the U.S. Securities and Exchange Commission (SEC).
BCE’s Form 40-F includes audited financial statements for the year ended December 31, 2020, and is available on BCE’s website at BCE.ca in the Investors section and on the SEC’s website at SEC.gov.
Holders of BCE securities may receive a printed copy of BCE’s audited financial statements at no charge by contacting BCE Investor Relations by phone at 1-800-339-6353, by email at investor.relations@bce.ca or by mail at 1, carrefour Alexander-Graham-Bell, Building A, 8th Floor, Verdun, Québec H3E 3B3.
About BCE
BCE is Canada’s largest communications company, providing advanced Bell broadband wireless, TV, Internet and business communications services alongside Canada’s premier content creation and media assets from Bell Media. To learn more, please visit Bell.ca or BCE.ca.
The Bell Let’s Talk initiative 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 leadership initiatives. 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
Exhibit 99.2
IN TWENTY-TWENTY WE WERE AT THE OF CONNECTIONS WHEN IT MATTERED MOST. ANNUAL REPORT 2020
Advancing how Canadians connect
with each other and the world
OUR FINANCIAL PERFORMANCE Stepping up in a year like no other As the Bell team kept Canada connected in a challenging 2020, we built marketplace momentum with world-class network, service and content innovations for our customers while delivering sustainable dividend growth for our shareholders. 2020 financial performance Revenue * (3.8%) Adjusted EBITDA (1) * (4.0%) Capital intensity 18.4% Adjusted EPS (1) $3.026.1 % Dividend yield in 2020 (2) +307% Total shareholder return 2009–2020 (3) +5.1 % Increase in dividend per common share for 2021(1) Adjusted EBITDA, adjusted EPS and free cash flow are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. For a full description of these measures, see section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) on pp. 115 to 117 of the MD&A. (2) Annualized dividend per BCE common2 | BCE Inc. 2020 Annual Report Free cash flow (1) * (10.4%) Compared to 2019+140% Increase in dividend per common share 2009–2021
OUR PURPOSE Bell’s goal and Strategic Imperatives Our goal is to advance how Canadians connect with each other and the world, and the Bell team is executing a clear strategy that leverages our strengths and highlights the opportunities of the broadband economy for our company and all our stakeholders. 1 Build the best networks Continuing to enhance our key competitive advantage with a focus on delivering the leading broadband fibre and wireless networks in locations large and small. 2 Drive growth with innovative services Leveraging our leading networks to provide truly differentiated communications services to Canadians and drive revenue growth. 3 Deliver the most compelling content Taking a unified approach across our media and distribution assets to deliver the content Canadians want the most. 4 Champion customer experience Making it easier for customers to do business with Bell at every level, from sales to installation to ongoing support. 5 Operate with agility and cost efficiency Underscoring a focus on operational excellence and cost discipline throughout every part of our business. 6 Engage and invest in our people Strengthening our leading workplace culture, recognizing that Bell’s success requires a dynamic and engaged team. BCE INC. 2020 ANNUAL REPORT | 3
BCE INC. 2020 ANNUAL REPORT | 3
FINANCIAL AND OPERATIONAL HIGHLIGHTS Connecting Canadians with the best in broadband communications With a consistent focus on customer experience, the Bell team rebounded from the impacts of the COVID-19 crisis to deliver consecutive quarterly operational improvement and growth in next-generation broadband services. Our high-performance network connections, innovative services and compelling content enabled Bell to achieve solid increases in retail Internet, IPTV and wireless subscribers while improving the rate of decline in legacy services like landline phone and satellite TV. Investing for future growth as we also play a key role in Canada’s economic recovery from COVID-19, Bell over-delivered on our fibre, wireless and rural network expansion objectives in 2020. BCE retail subscribers (millions) 2020 2019 Change Wireless 10.22 9.96 +2.6% High-speed Internet (1) 3.70 3.56 +4.2% Television (1) 2.74 2.77 (1.2%) Local residential telephone services (1) (2) 2.48 2.70 (7.9%) Total (1) 19.15 18.98 +0.9% 22.32M Total Bell consumer, business and wholesale customer connections 1) Excludes wholesale subscribers. (2) Excludes business telephone services. 4 | BCE Inc. 2020 Annual Report
FINANCIAL AND OPERATIONAL HIGHLIGHTS Competing in a dynamic marketplace, investing in recovery and future growth Strong strategic execution enabled us to succeed in the uniquely challenging communications sector of 2020, achieving 96% of 2019 revenue and adjusted EBITDA while also accelerating our capital investment in network expansion and enhancement. Operating revenues ($ millions) 2020 (3.8%) $22,883 2019 $23,793 Operating revenues by segment (%) 2020 2019 10% 12% 50% 52% 38% 38% Bell Wireline Bell Wireless Bell Media Adjusted EBITDA ($ millions) 2020 (4.0%) $9,607 2019 $10,006 Cash flows from operating activities ($ millions) 2020 (2.6%) $7,754 2019 $7,958 Net earnings ($ millions) 2020 (17.0%) $2,699 2019 $3,253 Free cash flow ($ millions) 2020 (10.4%) $3,348 2019 $3,738 Adjusted net earnings (1) ($ millions) 2020 (12.5%) $2,730 2019 $3,119 Capital expenditures ($ millions) 2020 5.7% $4,202 2019 $3,974 Adjusted net earnings is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. For a full description of this measure, see section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) on pp. 115 to 117 of the MD&A.
BCE INC. 2020 ANNUAL REPORT | 5
MESSAGE FROM THE CHAIR OF THE BOARD Building on our strengths to deliver now and into the future Bell has always stepped up for Canadians during difficult times in our country’s history, and 2020 was no exception. Rapidly adjusting to the unprecedented impacts of COVID-19, the BCE group of companies delivered the reliable connections and outstanding service that enabled the national response at every level. Core to that effort was accelerating investment in Bell network and service innovation, ensuring critical support now and building a long-range foundation for future growth. 2020 was a year unlike any other. For Canada’s leading communications company, the unprecedented increases in network usage and capacity demands, rigorous new health and safety requirements, and an uncertain economy required swift and agile action to ensure uninterrupted service for millions of customers while continuing to grow our business in a responsible and sustainable manner. I am immensely proud of the clear and direct way Bell’s management team has addressed the COVID-19 challenge, a crucial element in Canada’s overall response that has been widely acknowledged by our stakeholders. Throughout, Bell met the needs of a country facing crisis, providing customers with billing relief and complimentary services, increasing mental health funding, and donating 1.5 million protective masks and other supports for healthcare and frontline workers. At the same time, Bell continued to drive the evolution of Canada’s network infrastructure and next-generation communications services, increasing broadband deployments, especially in rural and other underserved areas, while also launching Canada’s fastest 5G wireless network in multiple centres. Determined to keep Canadians connected, informed and entertained, Bell continued to build momentum in an unpredictable and challenging environment, encouraged by government policies that support the investments required to ensure Canada remains a global leader in communications and the digital economy. Building a leadership position in ESG standards 2020 underscored how integral Bell is to how Canadians live and work. Since 1880, we have led the way in communications while setting a standard for excellence in how we deliver. Today, this means dedication to leadership in environmental, social and governance standards (ESG). Bell’s goal to advance how Canadians connect with each other and the world is the core of our commitment to all the stakeholders we serve, supported by our unparalleled investments in the country’s core network infrastructure, ongoing broadband service 6 | BCE INC. 2020 ANNUAL REPORT
6 | BCE INC. 2020 ANNUAL REPORT
innovation, and adherence to the highest financial, operational and data governance standards. I am pleased to note that oversight of this purpose will be added to the Corporate Governance Committee’s responsibilities in 2021. Bell networks and services help to enable a clean economy, with 5G wireless poised to be a major factor in helping multiple sectors reduce emissions. In 2020, Bell became the first communications company in North America to achieve ISO 50001 certification for our energy management system, and we are proud to build on that leadership and announce our objective to achieve carbon neutral operations in 2025. At the same time, Bell Let’s Talk is supporting mental health action in communities throughout Canada. We accelerated the initiative in 2020 with $5 million in additional funding to respond to the unique mental health challenges of COVID-19, and a new Bell Let’s Talk Diversity Fund to help address the impact of systemic racism on the mental health of Black, Indigenous and People of Colour (BIPOC) communities. Our diverse national team is building an inclusive workplace, fostering innovation and creativity as we work to eliminate any systemic impediments to team members reaching their full potential. We undertook meaningful actions to foster a more diverse workplace in 2020, including new targets for BIPOC representation in Bell’s senior management team (25% by 2025) and graduate and student hiring (at least 40%), as well as forging new technology, education and employment partnerships to enable our diversity objectives. BCE is also a member of the 30% Club and a signatory to the Catalyst Accord 2022, which aim to increase the proportion of women serving on Canadian corporate boards to at least 30%. At our annual shareholders meeting, we expect to exceed that objective. Bell is consistently recognized as one of Canada’s Top Employers, and in 2020 as one of the greenest, most family-friendly and best diversity employers in the country, and a top workplace for young professionals. Solid financial performance in uncertain times Significant declines in commercial activity during COVID-19, including reduced spending by both consumers and businesses, significantly impacted BCE’s financial results throughout most of 2020. However, consistently strong strategic execution by the Bell team resulted in consecutive quarterly performance improvements throughout the COVID crisis, including achieving 96% of our 2019 revenue and adjusted EBITDA results in 2020. We also generated $3.35 billion in free cash flow to enable Bell’s unmatched network, service and content investments, as well as returns to the shareholders who have invested in our strategy. BCE remains on a very sound financial footing, with $3.8 billion in liquidity at the end of 2020, fully funded pension plans, and ready access to financial markets, with no significant debt maturities until 2022. As a result, BCE was proud to announce both an acceleration in capital investment of at least an additional $1 billion over the next 2 years while also increasing our common share dividend 5.1% to $3.50 effective with the Q1 2021 payment on April 15, 2021. This is the 13th consecutive year that BCE has increased the dividend by 5% or more, and total shareholder return over that timeframe has been 307%. Changes to your BCE Board Directors Barry Allen, Robert Brown and Paul Weiss will be retiring from the Board at our annual shareholder meeting this year, and I would like to thank them for their dedication and outstanding service to you and our great company over more than a decade. I am also very pleased to announce the nominations of Jennifer Tory and Cornell Wright to your Board. A renowned corporate strategist, Jennifer was Chief Administrative Officer for Royal Bank of Canada until her retirement in 2019, previously RBC’s Group Head, Personal and Commercial Banking, and serves as Chair of the Toronto International Film Festival and on the Board of the Sunnybrook Hospital Foundation. Cornell is Chair of the Corporate Department at Torys LLP, previously co-head of its Mergers & Acquisitions practice, and is Chair of the National Ballet of Canada, a trustee of University Health Network, and Executive in Residence at the Rotman School of Management. As your Chair, and on behalf of every member of the BCE Board of Directors, I thank our shareholders for your support and confidence in our company. I trust that you share our pride in BCE’s accomplishments over the course of 2020, and our excitement about the tremendous opportunities ahead. Gordon M. Nixon Chair of the Board BCE Inc. BCE INC. 2020 ANNUAL REPORT | 7
BCE INC. 2020 ANNUAL REPORT | 7
MESSAGE FROM THE PRESIDENT AND CEO Driving Canada’s communications leadership in a fast-changing world The strength of Bell’s broadband networks, service innovations and dedicated team were on full display in 2020 as we kept Canadians connected, informed and entertained around the clock throughout COVID-19, while also continuing to build our momentum in a dynamic communications marketplace. By accelerating the country’s shift to next-generation communications technologies, Bell is advancing how Canadians connect with each other and the world. The Bell team is guided by 6 Strategic Imperatives that highlight our strengths while underscoring the opportunities for Bell to excel in a fast-changing and highly competitive communications landscape: Build the best networks; drive growth with innovative services; deliver the most compelling content; champion customer experience; operate with agility and cost efficiency; and engage and invest in our people. This clear roadmap for success was fundamental to Bell’s solid financial and operating progress in a uniquely challenging 2020. Supplemented by 3 key principles developed to guide our operations during the COVID crisis – keep Canadians connected and informed; protect the health and safety of the public, our customers and team; and support our customers and communities – our strategy was also core to our team’s outstanding response to the unprecedented impacts of COVID-19. Building the networks of the future now The robustness of Bell’s network infrastructure during COVID-19, further reinforced with continued investment in capacity and coverage in response to unprecedented usage by consumers, businesses, governments and emergency responders, was reflected in 99.99+% availability across our wireline and wireless networks throughout the crisis. Bell also exceeded our broadband network expansion objectives for the year, including a significant acceleration of our service footprint in rural and remote communities. Our all-fibre connections reached approximately 5.6 million homes and businesses by the end of the year, and we accelerated our rural Wireless Home Internet (WHI) rollout in response to increased demand during COVID-19 to reach nearly half a million households. That included expansion to rural Atlantic Canada, alongside an increase in WHI download/upload speeds to 50/10 megabits per second (Mbps). Bell also launched the country’s fastest 5G wireless network in more than 150 centres, laying the groundwork for a generational change in connectivity possibilities for all Canadians. Building on our world-class 4G LTE network, which today reaches over 99% of Canadians, Bell’s early 5G leadership means we’re well prepared to continue offering Canadians the best in broadband wireless into the future. Our leading investments in research and development continue to enable the rollout of innovative communications services, including new residential Internet and TV options; enhanced Bell Smart Home monitoring and control systems; and more advanced connections for Canadian businesses of all sizes, including the integrated 5G, cloud and IoT solutions that will be key drivers of Canada’s growing digital economy. Bell remains committed to delivering the most compelling content across all platforms, and to seeking new opportunities for growth in a fast-changing media sector marked by changing consumer tastes, all-new ways for audiences to access content and growing competition from well-funded international competitors. We built on our position as Canada’s top TV provider in 2020 by launching new viewing platforms like Virgin TV and Bell Streamer, and continuing to grow our Crave customer base with the addition of extensive French-language content. Recognizing the opportunity to bring fresh choice and enhanced competition to the Québec media market, Bell Media also launched the French-language Noovo network, which joins our other premier media brands including CTV, Canada’s #1 English-language TV network, and TSN and RDS, the top sports networks in the country. Champion customer experience Network leadership combined with innovation in service delivery enabled our team to further enhance the Bell customer experience in 2020. We continued to unveil a broad array of new support options, many accelerated by the unique challenges of COVID-19. In 2020, we launched appointment-based sales, customer self-installations and our unique Move Valet service, while also making significant investments in digital sales and support platforms. Today, more than half of all Bell customer transactions are taking place online. A strong indicator of the progress Bell is making in improving customer experience is the most recent annual report from Canada’s Commission for Complaints for Telecom-television Services (CCTS). For the fifth consecutive year, Bell led all major competitors in significantly reducing the number of customer service complaints to the CCTS. 8 | BCE INC. 2020 ANNUAL REPORT
8 | BCE INC. 2020 ANNUAL REPORT
Supporting our team With as many as 80% of our team members working from home during COVID-19, and those in our stores and other workplaces adhering to strict safety protocols and government restrictions, it has not been business as usual. In line with our COVID-19 operating principles, Bell provided our team with the tools necessary to adjust to changes in the way we work, and we enhanced support services with dedicated mental health and wellness resources, increased psychological care benefits, and mobile access to our Employee and Family Assistance Program, as well as online learning and collaboration resources. Consistently recognized as one of Canada’s top employers, Bell continues to adopt new best practices to empower our team and ensure we are as agile, efficient and productive as possible – including making significant strides in promoting diversity and inclusion in our workplaces and communities. Accelerating our momentum We’re taking our commitment to lead the way in Canadian communications further still with an unprecedented acceleration in our capital spending of an additional $1 billion to $1.2 billion over the next 2 years to enhance our fibre, rural and 5G network rollout plans. A supplement to the approximately $4 billion in capital we typically invest in networks each year, the project is the largest of its kind in Bell’s history, and will bring fast fibre and WHI coverage to up to 400,000 more homes and businesses than originally planned while also doubling the national population coverage of Bell 5G. This investment plan is an excellent example of Bell’s focus on supporting Canada’s response to and recovery from COVID-19 as we also lay the groundwork for our country’s long-range leadership in next-generation communications. Thank you Bell is a Canadian company with a celebrated past and a bright future, and the shareholders who have invested in our company’s vision have always been critical to making it all possible. On behalf of the entire Bell team, I thank you for your ongoing support as we move forward with our goal to advance how Canadians connect with each other and the world. Mirko Bibic President and Chief Executive Officer BCE Inc. and Bell Canada
BCE INC. 2020 ANNUAL REPORT | 9
STRATEGIC IMPERATIVE 1 Build the best networks Driving the reach and capabilities of Canada’s critical communications infrastructure has been Bell’s mission since our company’s founding in 1880, and we continued to lead the way 140 years later with unparalleled investment in the world’s top broadband fibre and wireless technologies. Bell’s enduring commitment to build the best networks ensured the country had the communications foundation necessary to respond to the COVID-19 crisis, and that Canadians in urban, rural and remote locations alike will have the next-generation connections they need to thrive in a broadband digital economy. Bell takes broadband network innovation to the next level with industry-leading investments in infrastructure, support systems and research and development (R&D). Our capital expenditures of $4.2 billion in 2020 reflected ongoing expansion and enhancement of our fibre, rural Wireless Home Internet (WHI) and mobile 5G networks, increases in network capacity and redundancy investments to manage the unprecedented usage volumes driven by COVID-19, and the highest spending on Canadian R&D in the communications industry. Bell’s wireless and wireline networks delivered 99.99+% availability throughout the COVID situation as usage volumes increased exponentially. Internet traffic increased up to 60% during the day and 20% at night at the peak of the crisis, WHI usage grew 40%, voice calling up to 200% at peak calling times, and business conference calling as much as 250% as stay at home measures took effect across the country. In response to increased demand during the COVID crisis, Bell also accelerated the rollout of our rural WHI service, including to 137,000 more households by the end of April 2020. WHI is a revolutionary new broadband Internet service specifically designed to serve smaller and more remote communities, and in 2020 we increased Internet access speeds to 50/10 (50 Mbps downloads and 10 Mbps uploads) and began rolling out service in the Atlantic provinces. WHI will ultimately reach approximately 1 million rural and remote locations in 7 provinces, and we’ve achieved almost 50% of this overall build plan so far. Now, to enable Canada’s ongoing recovery from the COVID crisis while ensuring our long-term leadership in global broadband communications, Bell is implementing an ambitious program to accelerate our network rollouts with $1 billion to $1.2 billion in additional capital investment in 2021 and 2022. An addition to Bell’s typical annual capital expenditures of approximately $4 billion, this bold investment plan will boost our combined fibre and rural WHI locations to approximately 6.9 million by the end of 2021 while doubling 5G network coverage. The project is expected to generate $2 billion in additional economic activity and create approximately 5,300 additional direct and indirect Canadian jobs. Working with infrastructure suppliers Ericsson and Nokia, Bell launched mobile 5G service in multiple centres in summer 2020, covering 26% of the national population by the end of the year. Our 5G leadership was recognized by PCMag, which ranked Bell’s network as the clear winner in its 2020 Fastest Mobile Networks Canada report. After extensive testing, PCMag found Bell offered faster, more reliable connection speeds in more cities than any other Canadian carrier. Customers outside Bell’s 5G coverage areas are seamlessly connected to our 4G LTE network, which offers coverage for more than 99% of the Canadian population. Our high-speed fibre rollouts continued in Canadian centres large and small in 2020. We announced an investment of approximately $400 million to bring fibre links to homes and businesses throughout Winnipeg, and a similar program to deliver fibre connections to more than 200,000 residences and commercial locations in Hamilton. And from Churchill, Manitoba, to Lakefield, Ontario and Val-David, Québec, to Bouctouche, New Brunswick, Souris, Prince Edward Island and Hantsport, Nova Scotia, and on to Fortune in Newfoundland and Labrador, Bell is also bringing broadband fibre connectivity to a broad range of smaller communities. • With fast and reliable data speeds enabled by fibre interconnections, Bell’s 5G network was launched in 2020 in multiple Canadian centres, and coverage is expected to double in 2021. 10 | BCE INC. 2020 ANNUAL REPORT
10 | BCE INC. 2020 ANNUAL REPORT
• Accelerating fibre and rural broadband network investment will bring additional connections to centres large and small while supporting Canada’s economic recovery from COVID-19. We also work with the federal and provincial governments to bring fibre to areas that are especially difficult and costly to reach. Bell fibre is coming to 32,000 more rural towns and farms as part of the Internet for Nova Scotia Initiative, and in PEI we are completing links to 9,400 additional households in a partnership with the provincial and federal governments. In Newfoundland and Labrador, Bell, the provincial government and community organizations are bringing LTE wireless service to 11 small and remote communities, many of which will have wireless access for the first time. In Québec, Bell fibre is rolling out to more than 100 underserved communities through projects in partnership with the Québec and federal governments and the new Régions branchées initiative. To help further accelerate broadband network innovation and access in Québec, Bell has simplified the process other service providers use to safely access our communications support structures. We also announced a Centre of Excellence to share technology best practices and offer dedicated technical support access to service providers. In Canada’s North, Bell subsidiary Northwestel is expanding its fibre connections to Hay River and Inuvik in the Northwest Territories, with Inuvik becoming Bell’s first all-fibre community north of the Arctic Circle. Northwestel is also bringing faster Internet to residents of Yukon and other communities in the Northwest Territories in partnership with the CRTC’s Broadband Fund. Bell worked with Société de transport de Montréal (STM) and industry partners to complete deployment of wireless service throughout the 68 stations and 71 kilometres of tunnels that make up Montréal’s métro transit system, the largest indoor digital network in Canada. Canada’s #1 investor in communications R&D, Bell launched new 5G research partnerships in 2020, including the creation of new 5G research centres at Western University and Université de Sherbrooke to support innovations in IoT and smart energy management. BCE INC. 2020 ANNUAL REPORT | 11
BCE INC. 2020 ANNUAL REPORT | 11
STRATEGIC IMPERATIVE 2 Drive growth with innovative services Building the best networks enables Bell to provide the widest range of innovative and integrated communications services for consumers and business customers – fast home and mobile Internet access, industry-leading Wi-Fi and Smart Home products, and the next generation of remote work, security and cloud solutions for business customers of all kinds. From affordable Lucky Mobile prepaid to Canada’s fastest 5G service, Bell wireless brands offer a full range of mobile pricing and service options. The critical role of dependable Internet service was highlighted throughout 2020 as millions of Canadians worked remotely and families sheltered at home during the COVID crisis, relying on Bell’s wireline and wireless services to stay connected, informed and entertained. With increasing usage of multiple Internet-enabled devices in the home, Bell continued to expand the availability of our Whole Home Wi-Fi product, including to Atlantic Canada. Integrating a Fibe Internet HomeHub modem, specialized pods and the Bell Wi-Fi app, Whole Home Wi-Fi enables customers to optimize their networks to provide the strongest signals and fastest speeds everywhere in the home. From a smartphone or tablet, customers can easily see who’s connected, set parental controls, and test speed and signal strength. Bell is Canada’s largest Internet service provider, and the ongoing expansion of our fibre connections is contributing to subscriber growth and increased customer satisfaction. Reflecting the high speed and low latency of our all-fibre network, PCMag named Virgin Mobile Home Internet as Canada’s best Internet service for gaming in 2020, with the highest scores ever awarded in the category. Bell Smart Home also grew its suite of home monitoring and security services, making it easier than ever for residential customers to protect their properties and manage multiple smart devices. A new self-monitored home automation solution lets customers link popular smart products, like cameras, video doorbells and thermostats, with the Bell Smart Home app to control their home systems from anywhere. 12 | BCE INC. 2020 ANNUAL REPORT
12 | BCE INC. 2020 ANNUAL REPORT
• Wireless Home Internet is bringing the benefits of Bell’s broadband home Internet services to Canadians in smaller towns and rural communities. Driving Canada’s wireless leadership Bell has quickly become Canada’s 5G leader with a fast-growing network footprint offering “faster, more reliable connection speeds in more cities than any other Canadian carrier,” according to PCMag, which notes that customers who switch to Bell 5G “will see a big boost in network performance.” Bell played a key role in the launch of several next-generation mobile products in 2020, including the exclusive introduction of Apple Family Setup, which allows kids and older family members to use Apple Watch even if they don’t have an iPhone, and the launch of Apple’s first 5G smartphones. Bell’s 5G device lineup includes the Apple iPhone 12 series, Samsung’s full roster of 5G smartphones, Google’s 5G Pixel series, LG Velvet 5G and Motorola Edge. Offering a full range of mobile service and pricing options, Bell continued to expand the reach of our Lucky Mobile prepaid wireless service to even more budget-conscious Canadians. We renewed our ground-breaking prepaid SIM card distribution agreement with Dollarama and signed a new agreement with the Giant Tiger discount chain to make Lucky Mobile available in more than 250 locations. We also partnered with Loblaws to expand its PC mobile prepaid service in more than 840 store locations across Canada. Business market momentum Even as the COVID crisis heavily impacted every level of the business communications sector, Bell Business Markets continued to build its market momentum with timely innovation in advanced security, remote work support and enhanced cloud opportunities. BBM’s new Managed Cloud Security Gateway is providing enterprise customers with advanced security solutions, including protection from malware, phishing and other cyber threats. Partnering with BlackBerry, we delivered advanced mobile security solutions to business and government customers to support their remote work programs, and launched Bell Virtual Office, an integrated suite of remote work solutions to enhance productivity, optimize costs and grow employee engagement in remote environments. With the sale of Bell data centres to Equinix in 2020, Bell also became the first Equinix Platinum Partner in Canada, offering our customers access to an unmatched worldwide network of data and cloud centres to support their digital transformations. Echoing the success of Whole Home Wi-Fi, we launched Total Business Wi-Fi to provide small business customers with enhanced Wi-Fi coverage and easy network management. BCE INC. 2020 ANNUAL REPORT | 13
BCE INC. 2020 ANNUAL REPORT | 13
STRATEGIC IMPERATIVE 3 Deliver the most compelling content Bell is Canada’s #1 multimedia company with the top TV, radio, digital and advertising brands in the country, leading-edge digital platforms like Crave, and TV services including Bell Fibe TV, Alt TV, Virgin TV and Satellite TV offering a full range of pricing and service options. Keeping Canada connected during COVID-19 included ensuring Canadians had full access to the most compelling news, sports, lifestyle and entertainment content across any platform they chose. Bell Media is home to the biggest names in Canadian media, and our roster continues to grow. In 2020, we introduced Noovo, the exciting rebrand of our newly acquired French-language conventional and digital TV services for the Québec media marketplace. Noovo is bringing renewed investment to French-language content production and fresh choice for viewers, including the upcoming launch of Noovo Info news services. CTV marked its 19th consecutive year as Canada’s top network, led by the #1 new CTV original drama Transplant and the top primetime drama and comedy programs in the country. As Canadians turned to the most trusted name in news, CTV News continued its leadership with the top national newscast, CTV National News with Lisa Laflamme, while CTV News Channel, CP24 and BNN Bloomberg all achieved their highest annual viewership in at least the last 5 years. Bell Media is also Canada’s sports leader, with TSN the most-watched sports network in Canada in 2020 and RDS maintaining its leadership in French-language sports TV. TSN and RDS broadcasts of the most recent IIHF World Junior Championship won the biggest total audience for Canada’s hockey tradition since 2015 – including a 121% year-over-year increase in live streaming. Home to the most championship events, Canada’s sports networks also announced exclusive long-term rights extensions with Formula 1 and Curling Canada. Canada’s top radio broadcaster with 109 stations available through our iHeartRadio platforms, Bell Media rebranded more stations as part of the national Pure Country and Virgin radio networks, and launched contemporary radio brand MOVE Radio in 10 markets across Canada. Astral, our out-of-home advertising business, secured an exclusive agreement with the Québec City airport and with the Toronto Parking Authority to manage advertising faces at Bike Share Stations across the city, adding to its more than 50,000 advertising locations in key urban markets nationally. • With significant investment in Canadian talent and production, Bell Media creates compelling English and French language content that is winning audiences across the country and internationally. 14 | BCE INC. 2020 ANNUAL REPORT
14 | BCE INC. 2020 ANNUAL REPORT
New ways to access the best content Our established Crave platform continued to grow its reach, serving a total of 2.8 million customers by the end of 2020 and launching bilingual service with more than 7,500 hours of exclusive new French-language content, leading to a doubling of Crave streams in Québec in 2020. Crave launched its most successful original production ever, Canada’s Drag Race, and introduced exclusive HBO Max programming as part of our long-term licensing agreement with Warner Bros. Bell continues to develop new ways to watch, including the launch of Virgin TV, the app-based service that requires no set-top box; Bell Streamer, a powerful new Bell-operated Android TV device offering live and on-demand content; and CTV’s ad-supported all-in-one digital video platform offering access to live and on-demand CTV programming. Reflecting our strategy to deliver the most compelling content in the Canadian market and beyond, Bell Media original productions are also enjoying growing success in the United States. Crave’s comedy series Letterkenny has achieved widespread acclaim and CTV’s Transplant is airing on NBC, original comedy Jann is streaming on Hulu and reality series Holmes Family Effect has been picked up by Fox. Bell Media further enhanced its content creation and production resources in 2020 through a new partnership with Montréal’s Grandé Studios and significant expansion of sound stages and other facilities at Pinewood Toronto Studios. For the 2020–2021 broadcast year, Bell Media is working with nearly 50 production companies across the country to create hundreds of hours of original content in French and English. Bell Media and partners took home 57 awards at the 2020 Canadian Screen Awards, the most of any private broadcaster – including 5 awards for the Crave original film Song of Names – and collected 46 awards from the Radio Television Digital News Association, including awards for CTV News, W5 and TSN. • With #1 CTV and the new Noovo network in Québec, Crave streaming and top specialty channels like sports network TSN, Bell has the TV brands that Canadians watch the most. BCE INC. 2020 ANNUAL REPORT | 15
BCE INC. 2020 ANNUAL REPORT | 15
STRATEGIC IMPERATIVE 4 Champion customer experience Fully focused on delivering the best customer experience, the Bell team quickly adapted to confront the unique service challenges of COVID-19 while also accelerating the development of our next-generation support platforms, including increasingly popular digital sales and self-serve options. As Bell embraces new ways of working and invests in next-generation technology, we’re making it easier to do business with us at every level. Providing the nation’s critical communications backbone, Bell’s high-capacity networks delivered the reliable, round-the-clock connections that consumers, businesses, governments and public health responders have needed to weather COVID-19. These high-quality fibre and wireless connections are also core to the Bell service advantage every day, supporting ongoing subscriber growth and customer churn reduction in a competitive marketplace, and enhancing our service responsiveness and cost efficiency. Building on these core service strengths were our Bell customer experience teams, who rapidly adjusted to the challenges of COVID-19, operating with a strict focus on safety and finding innovative new ways to deliver on our service imperative. Delivering essential installation and repair support to keep people connected, Bell instituted new safety protocols for field technicians serving homes and businesses, and introduced innovations like remote-assisted self-install programs, which enable field techs to guide customers through service setups by phone or video from outside the premises. Bell retail locations including The Source stores were revamped with protective enhancements and access restrictions for team and customer safety, and select locations remained open even in lockdown areas to provide essential repair and replacement services with in-store appointments. Thousands of Bell call centre agents were equipped to work remotely and securely, and many team members in hard-hit parts of the business such as retail and media were redeployed to customer support roles. We continued to develop the specialized services for residential and business customers that set Bell apart, including Move Valet, to ensure the seamless transfer of Internet, TV and phone services when customers move their residence, and Virtual Office from Bell Business Markets, providing corporate customers with new ways to connect and engage with their remote workforces. • The Bell team adapted rapidly to the strict public health and safety changes necessary to continuing serving our customers while keeping everyone safe during COVID-19. 16 | BCE INC. 2020 ANNUAL REPORT
16 | BCE INC. 2020 ANNUAL REPORT
Leadership in digital transactions As more customers embrace digital platforms to buy services and manage their accounts, Bell is leading the way with our increasingly popular online and app self-serve options. By the end of 2020, 54% of total Bell customer transactions were taking place online. MyBell.ca, MyBell app and our other branded self-serve platforms enable customers to easily view and pay bills, manage services or check usage, putting control in the customer’s hands while reducing call centre and field service volumes. In 2020, we added the Manage Your Appointment tool to MyBell, while Virgin Mobile’s My Account app was named Best Telecommunications Mobile Application of the Year at the 2020 Mobile Web Awards. Award-winning service Virgin Mobile Canada was also named #1 in customer care satisfaction by J.D. Power for the fourth year in a row, and the fifth time in the last 6 years. Virgin outperformed all other Canadian wireless providers in customer satisfaction with phone, in-store and online support, and the overall wireless purchase experience. And for the fifth straight year, Bell led service improvement among major communications providers in the annual report of the Commission for Complaints for Telecom-television Services (CCTS). Complaint volumes declined by more than 35%, and Bell’s overall share was down 6 basis points to 24% despite having the most customers by far of all Canadian communications carriers. Bell also got top marks in a 2020 secret shopper report from the Canadian Radio-television and Telecommunications Commission (CRTC), which found that Bell was the industry leader in providing clear and easy to understand information and recommending services that are right for a customer’s needs. • J.D. Power once again ranked Virgin Mobile Canada #1 in customer care across phone, in-store and online support and overall customer experience. • More than half of Bell customer transactions now take place online including with our award-winning self-serve apps. BCE INC. 2020 ANNUAL REPORT | 17
BCE INC. 2020 ANNUAL REPORT | 17
STRATEGIC IMPERATIVE 5 Operate with agility and cost efficiency In our fast-changing and highly competitive Canadian communications industry, the Bell team is always working to grow more nimble and efficient in all that we do. Every day, Canada’s largest communications company is finding new ways to simplify and enhance how we build networks, create compelling content and deliver top-notch service, streamlining our systems and reducing costs to enable long-term growth, innovation and a better customer experience. Bell’s sharpened organizational responsiveness was key to our ability to adapt quickly to the challenges of COVID-19 as we equipped most of our team members to work from home, found new ways to safely serve customers in our stores and in the field, and made timely investments in network capacity and customer support to manage unprecedented growth in usage volumes throughout the crisis. As Bell kept Canada fully connected in these uncertain times, our seasoned team was able to accelerate our fibre and wireless buildouts and deliver new service options despite the unique challenges of the year. Our proven 6 Strategic Imperatives combined with a collective commitment to agility, efficiency and proactive industry leadership enabled us to succeed in the dynamic communications marketplace of 2020. A Canadian leader in sustainability Bell is the first telecommunications company in North America to achieve the internationally recognized ISO 50001 standard awarded for our energy management system, further underscoring our position as one of Canada’s greenest employers and positioning us for sustainable operational efficiencies for years to come. Fuel and energy savings from fleet modernization, electric vehicle charging stations, lighting and heating system optimization, renewable energy use, and enhanced leveraging of cloud and virtual conferencing services all contributed to reductions in our environmental impact and operational costs. The fibre advantage Bell is rebuilding Canada’s communications backbone with fast fibre connections, and we’re past the midway point of this historic program with links to approximately 5.6 million homes and businesses completed by the end of 2020. Our unparalleled fibre footprint allows Bell to realize operational benefits including in subscriber growth and market share, customer retention, and installation and repair costs. Our secure and scalable fibre infrastructure now connects approximately 92% of our wireless network cell sites, enabling Bell’s next-generation 5G wireless network with the unmatched backhaul capacity to handle IoT, Smart City and other enhanced digital opportunities, as well as our Wireless Home Internet (WHI) service for rural Canada. Bell’s ambitious plan to accelerate our fibre, rural and 5G rollouts with an additional $1 billion to $1.2 billion in capital investment over the next 2 years will further drive these competitive efficiencies. Funded in part by the sale of Bell data centres to Equinix in 2020, the program also leverages the federal capital cost allowance program that results in cash tax savings that can be reinvested in further infrastructure development. 18 | BCE INC. 2020 ANNUAL REPORT
18 | BCE INC. 2020 ANNUAL REPORT
• Bell’s ability to invest and compete is underpinned by our team’s proven commitment to operational excellence and agility in making the most of our scale and resources. Simplifying how we do business Bell is dedicated to delivering a positive customer experience at every level, and to leveraging new technologies and innovative approaches to achieve our objective more cost-effectively. In 2020, this focus helped grow customer satisfaction and reduce churn as well as decrease our overall operating costs. Our easy-to-use digital tools that enable customers to self-manage a variety of straightforward service and account options are reducing call volumes and freeing call centre and online agents to manage more complex service issues. During COVID-19, this focus on empowering the customer extended to the launch of new assisted self-installation and repair options for many of our popular residential products, alongside new specialized service programs like Move Valet, with dedicated teams of cross-functional representatives ensuring the seamless transfer of Bell Internet, TV and phone services when customers move. At Bell Media, we’re bringing a renewed focus to customer experience to confront the rapid changes in the Canadian media sector, investing in content creation and new technologies as we also develop new ways to make Canada’s top media provider more accessible to all our stakeholders. Bell Media and Environics Analytics (EA), one of Canada’s leading data and analytics companies, are also working together to open up new opportunities for advanced media advertising strategies while further enhancing content apps and other delivery platforms. A strong financial foundation BCE’s solid financial position, including significant liquidity, a strong balance sheet and fully funded pension plans, underpins Bell’s ability to invest and compete in an evolving communications sector. We’re dedicated to making the most of our scale and resources by ensuring operational excellence across our business, reducing our costs, supporting new investment and driving a strong marketplace performance. As we re-engineered our operations to ensure we continued to deliver for Canadians throughout the challenges of COVID-19, we also reduced our total operating costs by 3.7% in 2020. It’s a reflection of our team’s strict focus on cost management: leveraging the efficiency of fibre and other new technologies; minimizing discretionary expenses at all levels; finding synergies across our business, including the rapid redeployment of team members to new roles during COVID; and renegotiating contracts with a wide range of suppliers. Thriving in today’s communications marketplace requires an unprecedented focus on operational excellence, and Bell is delivering with disciplined cost management and the operational innovation necessary to advance how Canadians connect with each other and the world. BCE INC. 2020 ANNUAL REPORT | 19
BCE INC. 2020 ANNUAL REPORT | 19
STRATEGIC IMPERATIVE 6 Engage and invest in our people Essential to our goal to advance how Canadians connect with each other and the world, the Bell team is more than 50,000 strong, working in centres large and small in every province and territory to serve our customers and communities. When faced with the challenges of the global health crisis, the Bell team responded with dedication, agility and innovation to keep our customers safe and connected while also delivering on our strategy in the marketplace. Consistently recognized as a top Canadian employer, Bell is committed to ensuring everyone on #TeamBell can reach their full potential, providing our team members with the tools and resources they need to deliver for our customers and other stakeholders, supporting their career development, and fostering their well-being, including with consistent leadership in workplace mental health. This commitment was reflected in our rapid response to the demands of the COVID crisis. We developed clear operating principles and strict safety measures for our team and customers aligned with the most current public health protocols; implemented technology support and revamped processes to enable flexible and remote work; made timely enhancements to benefits and health resources, including virtual online medical and mental wellness consultations; and put in place a wide range of operational innovations to protect our team and the public at retail stores and other Bell workplaces, and in the field at customer homes and business locations. A diverse and inclusive workplace As Canada faced off against COVID-19, we also saw our society step up the fight against systemic racism in our communities and workplaces. In response, Bell accelerated our work to create an inclusive, equitable and accessible workplace, building new partnerships and making new commitments for action. Bell partnered with the Onyx Initiative to help bridge the gap in the recruitment of Black college and university students at Bell and across corporate Canada, and teamed up with the Black Professionals in Tech Network, Ascend Canada and Indigenous Works to further drive hiring and promotion of Black, Indigenous and People of Colour (BIPOC) talent. As Canada’s #1 multimedia provider, Bell also launched a Content Diversity Task Force to enhance the representation of diverse voices in programming and decision-making, which included a Bell Media partnership with BIPOC TV & Film to enhance career development and grow employment through the new HireBIPOC website. Bell Let’s Talk also stepped up with a special $5 million Diversity Fund and a new advisory committee to support the mental health of racialized Canadians in communities nationwide. • Consistently ranked as a top Canadian employer, Bell offers a diverse and inclusive workplace focused on enabling all team members to reach their full potential. 20 | BCE INC. 2020 ANNUAL REPORT
20 | BCE INC. 2020 ANNUAL REPORT
Building a talent advantage To underline our resolve for positive change, Bell set new targets for BIPOC representation in senior management of at least 25% by 2025, as well as student and graduate hiring of at least 40%. And to build a better understanding of unconscious bias and other impacts on our team members, Bell has worked with our external partners and employee networks like Black Professionals at Bell to educate team members on the issues with events and resources, and created the Inclusive Leadership Development Program completed by more than 1,500 team leaders across Bell. • During COVID-19, Bell supported team members with a strict focus on health and safety, redeployment opportunities and innovative remote work solutions. Recruitment and career development went online in 2020, shifting to virtual campus visits and recruiting drives that contributed to over 1 million social media impressions (up 73%) and more than 35,000 total applicants (up 114%), including more interest from BIPOC candidates. Virtual onboarding and career programs included the introduction of Bell U, an in-house continuous learning program focused on critical skills development in a range of technology-focused roles, and external initiatives with universities like Western and Sherbrooke to develop the next-generation of 5G and cybersecurity professionals. Over 1,200 graduate and other students joined the company last year through our recruitment initiatives, including our award-winning Graduate Leadership Program that offers unparalleled work, networking and mentoring opportunities at Bell. Our virtual career development and learning programs tripled in interest in 2020 with more than 1.7 million online video courses completed and over 77,000 hours of self-directed learning provided by the Bell team. Bell was again named a top employer for young people and one of Canada’s best diversity employers in 2020, alongside honours as an outstanding place to work both nationally and in our headquarters city of Montréal; as one of Canada’s greenest employers; and as a top family-friendly company. BCE INC. 2020 ANNUAL REPORT | 21
BCE INC. 2020 ANNUAL REPORT | 21
CORPORATE RESPONSIBILITY 2020 environmental, social and governance highlights Bell’s ESG approach balances economic growth, social responsibility, and environmental performance. Focused on our goal of advancing how Canadians connect with each other and the world, Bell provides millions of Canadian consumers and businesses with leading communications networks, services and media content, creates value for shareholders, provides meaningful careers for people nationwide, and makes a significant overall contribution to Canada’s social and economic prosperity. The topics Bell reports on reflect the intersection of our company’s value chain, current and emerging sustainability trends and stakeholder interests and their potential impacts on our business: Climate change Bell is taking action to help address climate change and adapt to its consequences. Our efforts to mitigate climate change start with energy consumption as we strive to both save energy and reduce associated greenhouse gas (GHG) emissions. Among other targets, we are increasing electricity efficiency at Bell facilities, reducing the fuel consumption of our vehicles and boosting the use of renewable energy. • Key metrics Bell’s objective is to achieve carbon neutral operations starting in 2025, with an interim 2021 target to reduce the ratio of operational GHG emissions to our network usage by 40% from 2019 levels. Key target: Reduce the ratio of our operational GHG emissions to our network usage by 40% by 2021 vs. 2019 Actual (tonnes) 30 __ usage 25 20 Target network __ __ emissions(1) 15 __%—by (petabytes) __% 10—Operational divided 5 0 2019 2020 2021 • Key achievements In 2020, Bell’s Energy Management System received ISO 50001 certification, a first for North American telecommunications companies. We also surpassed our GHG reduction target for the year, reducing the ratio of our operational emissions to our network usage by 34% from 2019 levels. Diversity and inclusion At Bell, we are proud of our commitment to foster an inclusive, equitable and accessible workplace where all team members and customers feel valued, respected and supported. We are dedicated to building a workforce that reflects the diversity of the communities we serve, with a commitment to ensuring every team member has the opportunity to reach their full potential. Key target: At least 35% women in executive positions (vice president level and above) by the end of 2021 40 Target __% __% __% 30 __% 20 10 0 2018 2019 2020 Key target: 30% women non-executive directors on the BCE Board by the end of 2021 40 __% (3) Target 30 __% __% __% __% (2) 20 10 0 2018 2019 2020 2021 nominees Director (1) Operational emissions include scope 1, GHG emissions from sources owned or controlled by Bell, and scope 2, GHG emissions associated with the consumption of purchased electricity, heat, steam and cooling. (2) The variation from 2019 to 2020 is the result of appointments made to the BCE Board during 2020 in anticipation of the retirements of 3 directors at the 2021 annual shareholder meeting. (3) Based on director nominees for election at the 2021 annual shareholder meeting. 22 | BCE INC. 2020 ANNUAL REPORT
22 | BCE INC. 2020 ANNUAL REPORT
• With strict focus on the protection of customer information, data governance is a key factor in all of our business decisions. • Key metrics A member of the 30% Club and a signatory to the Catalyst Accord 2022, Bell is committed to achieving the Accord’s objective of women representing at least 30% of non-executive directors on the BCE Board by 2022, and to women representing at least 35% of Bell leaders at the VP level and above by the end of 2021. In 2020, Bell updated its 2025 targets for Black, Indigenous and People of Colour (BIPOC) representation in Bell senior management to at least 25% and in student and graduate hiring to at least 40%. • Key achievements Women represent 36% of the BCE Board non-executive directors based on director nominees for election at BCE’s 2021 annual shareholder meeting, exceeding our 30% objective. Women currently represent 32% of Bell leaders at the VP level and above. Our support for gender equity in the workplace has been recognized with Gold Parity Certification for the third year in a row by Women in Governance. Bell was again recognized as one of Canada’s Best Diversity Employers in 2020. To further accelerate diversity and inclusion on our team, Bell partnered with the Onyx Initiative, which brings together major companies and academic institutions to support professional development and recruiting opportunities for Black post-secondary students and graduates. We also teamed up with the Black Professionals in Tech Network, Ascend Canada and Indigenous Works to drive progress in hiring and promotion for BIPOC talent in Canadian telecom and tech, and joined with BIPOC TV & Film to launch HireBIPOC to connect creators and crew with opportunities in Canadian media. Privacy and information security Our customers, team members and investors expect us to demonstrate that we collect data appropriately, use it for purposes that advance their interests, and keep it secure. Our approach to data governance encompasses the protection and appropriate use of data across its lifecycle, and we incorporate data governance proactively as a core consideration in all our business initiatives and technology decisions. • Key metrics In 2021, Bell plans to develop and deploy enhanced data governance training and complete the rollout of new BeCyberSavvy Information Security training to all applicable team members across the company. • Key achievements The BCE Board adopted an enhanced data governance policy in 2020, bringing together multiple existing policies and programs in the interrelated areas of privacy, information security, data access management and records management. To learn more about our ESG approach and our reporting, please visit BCE.ca/Responsibility. BCE INC. 2020 ANNUAL REPORT | 23
BCE INC. 2020 ANNUAL REPORT | 23
COMMUNITY INVESTMENT Bell Let’s Talk accelerates investment in Canadian mental health 11th annual Bell Let’s Talk Day goes virtual across the country and around the world The stress and uncertainty of the COVID-19 situation, alongside heightened attention to the impacts of systemic racism, meant significantly increased need for mental health supports in 2020. Bell Let’s Talk responded with new funding and action to help meet the challenge. In March, Bell Let’s Talk began working with national partners providing front-line mental health-care to identify ways to provide additional support quickly and effectively, especially to young people and families. A key focus was the need for enhanced virtual access to care. Bell Let’s Talk put in place an emergency $5 million fund in response to COVID-19 demands, enabling new and expanded mental health programs from the Canadian Mental Health Association, Canadian Red Cross, Kids Help Phone, Revivre and Strongest Families Institute. As Canada also confronted the urgent need to address systemic racism in our society, increasing access to culturally informed mental health services for Canadians from BIPOC communities became an important part of the Bell Let’s Talk response in 2020. Bell launched a new $5 million Bell Let’s Talk Diversity Fund, working with expert advisors and partners from within BIPOC communities to identify new opportunities to support the mental health needs of racialized Canadians. To date, the fund has distributed $1.5 million to 10 groups, including initial grants to Black Youth Helpline and the National Association of Friendship Centres. • To address the mental health impacts of the COVID-19 crisis, we increased Bell Let’s Talk funding to support groups delivering emergency care and support for kids and families. The crises of 2020 reinforced the need to address mental illness in new ways, as well as the important role all Canadians can play in putting the focus on mental health. This was underscored by the theme of our 2021 Bell Let’s Talk Day campaign: When it comes to mental health, now more than ever, every action counts. Every Bell Let’s Talk Day, Bell donates 5 cents to mental health programs for every eligible call, text and social media message of support for action in mental health, at no cost to participants other than what they may normally pay their service provider for phone, text or Internet access. On our most recent Bell Let’s Talk Day, Canadians and people around the world set all-new records for engagement in the mental health conversation, sharing 159,173,435 messages of support. The additional $7,958,671.75 generated by the messaging total brought Bell’s overall funding commitment to $121,373,806.75, well on the way to our objective of at least $155 million in 2025. Despite restrictions imposed by COVID-19, Canadians found new ways to take part in Bell Let’s Talk Day in 2021. Virtual events enabled people from every corner of the country to join together and share messages of support and ideas for action, including more than 200 universities and colleges that took part in the Bell Let’s Talk Campus Campaign. Many communities and partner organizations across the country took part in Bell Let’s Talk flag raisings to show their support for the mental health message. More than 160 flags were raised by cities, towns and legislative assemblies; universities and colleges; hospitals and other public facilities; and by the Canadian Armed Forces, including at CFS Alert near the North Pole, by soldiers overseas in Latvia, and sailors onboard HMCS Halifax in the North Sea. 24 | BCE INC. 2020 ANNUAL REPORT
24 | BCE INC. 2020 ANNUAL REPORT
Every action counts all year round Bell Let’s Talk is active year round funding organizations in every province and territory that are working to reduce stigma, improving access to mental health care and undertaking critical research. Bell has partnered with more than 1,100 hospitals, universities, national associations and local community service providers since 2010. This year, Bell Let’s Talk announced almost $7 million in funding for new mental health projects: • Following the release of the National Standard of Canada for Mental Health and Well-Being for Post-Secondary Students (itself funded in part by Bell), we launched the $2.5 million Bell Let’s Talk Post-Secondary Fund to support Canadian colleges and universities in implementing the Standard. • A $500,000 donation to Jack.org will further support youth mental health by expanding the reach of Jack Chapters around the country. • A $2 million donation, matched by the Government of Canada, to the Brain Canada Foundation for the Bell Let’s Talk-Brain Canada Mental Health Research Program will accelerate brain research in the wake of COVID-19. • Halifax’s QEII Foundation will use $420,000 from Bell Let’s Talk to support new repetitive Transcranial Magnetic Stimulation (rTMS) clinics at the Nova Scotia Hospital and Valley Regional Hospital. • Montréal’s CHU Sainte-Justine Foundation received $300,000 to support an ambulatory care program for teenage patients being treated for eating disorders. Please visit Bell.ca/LetsTalk to learn more about how Bell is supporting Canadian mental health every day of the year. • Millions of Michael Bublé @MichaelBuble people in Canada and around the Today is Bell Let’s Talk Day and simply watching this video helps support mental health. For every view of the official Bell world took action Let’s Talk Day video and every tweet and retweet using and helped #BellLetsTalk, Bell will donate 5¢ to Canadian mental health spread the initiatives. Join the conversation. mental health message on Bell Let’s Talk @Bell_LetsTalk Today, every view of this video helps create positive change. All you Bell Let’s Talk Day, need to do is watch it and Bell will donate 5¢ more to Canadian mental setting all-new health initiatives. Retweet to help spread the word! #BellLetsTalk records for engagement. 10:40 PM · Jan 27, 2021 Ryan Reynolds @VancityReynolds It’s critical to have open, honest and healthy discussions around mental health. By retweeting #BellLetsTalk you can make a difference. In case that’s not enough, before Disney bought Fox, Deadpool 3 was gonna be a road trip between Deadpool and Logan. Rashomon style. For real. 2:50 PM · Jan 28, 2021 Celine Dion 46.7K 13.9K Share this Tweet @celinedion Now more than ever, taking care of our #mentalhealth is so very important. Let’s all join the conversation & make positive changes to help those who are struggling. Help is out there if you need it, please reach out. – Celine xx… #BellLetsTalk 8:59 AM · Jan 28, 2021 1.8K 1.6K Share this Tweet BCE INC. 2020 ANNUAL REPORT | 25
BCE INC. 2020 ANNUAL REPORT | 25
BELL ARCHIVES Bell stepped up for Canadians during pandemics of the past Since our beginning in 1880, Bell has supported Canadians in good times and bad with reliable connections, dedicated service and support for our communities. The Bell team’s outstanding response to the COVID-19 crisis has powerful echoes in Canada’s experience with pandemics of the past. Just 5 years after Bell was founded in the city, Montréal was at the centre of the last uncontrolled outbreak of smallpox in North America. As with COVID-19, people were warned to protect themselves by avoiding gatherings, and Bell employees were required to follow strict safety precautions. The company also ordered vaccinations for all employees in the city. While the 1885 smallpox outbreak was largely confined to Montréal, the influenza pandemic that followed in 1918 was a global crisis that reached every corner of Canada. Similar to the huge increases in Internet, phone, business communications and other Bell services during COVID-19, Bell’s network traffic surged during the 1918 flu outbreak as Canadians were forced to isolate in their homes and began using their landline phone services at unprecedented levels. The Bell team itself was hit hard by influenza, with as many as 25% of employees absent in larger worksites at times. In smaller centres, the impact was often even worse: Joseph Gagnier, a Plant Chief in Trois-Rivières, reported he had only 2 workers available after 8 others became ill. • Bell took out newspaper ads asking customers to limit phone conversations to keep lines free during the emergency. Protecting the Bell team In 1918, Bell President Lewis McFarlane sent advice to employees about influenza symptoms and how they could protect themselves, urging the team to “avoid this epidemic by every possible means.” In 2020, Bell implemented strict health and safety measures across the business, providing our team with personal protective equipment, remote work capabilities and enhanced access to virtual health services including mental health support. • Lewis McFarlane, Bell President, 1918 26 | BCE INC. 2020 ANNUAL REPORT
26 | BCE INC. 2020 ANNUAL REPORT
In major centres, clerks and other office staff were redeployed to take on the work of switchboard operators, also echoed in our COVD-19 response as we moved many team members from heavily impacted businesses like retail and media to take on customer service and support roles during the crisis. Looking back after the influenza crisis had subsided, Bell Vice President (later President) Charles Sise Jr. described how the Bell team had responded: “Probably never before has the operating staff been called upon to carry such heavy loads over such an extended period. That they did this willingly, in an endeavor to meet the crisis, shows a strong sense of loyalty to the community, the Company, and their fellow-workers.” Bell’s key operating principles during the COVID crisis are a modern reflection of that enduring focus on delivering for all our stakeholders: Keep Canadians connected and informed; protect the health and safety of the public, our customers and team; and support our customers and communities. In 2020, Bell stepped up for our customers, with 99.99+% network reliability, complimentary TV and Internet services, relief for those struggling with their bills and accelerated network deployments, and for our communities with additional Bell Let’s Talk funding and significant donations of protective equipment, and complimentary mobile services for healthcare and other workers on the front lines. Innovative delivery for customers In 1918, installers like Port Perry’s Don McIntosh and his colleagues found ways to stay safe and keep customers connected, including wearing “a crude mask of cheesecloth saturated in formaldehyde. Sometimes a telephone would be fastened to a board and pushed through the window.” In 2020, Bell’s Assisted Self-Installation and Repair program allowed technicians to support customers remotely by voice and video links from their vehicles. BCE INC. 2020 ANNUAL REPORT | 27
BCE INC. 2020 ANNUAL REPORT | 27
Today just got better 28 | BCE INC. 2020 ANNUAL REPORT
28 | BCE INC. 2020 ANNUAL REPORT
MD&A
BCE INC. 2020 ANNUAL REPORT | 31
1 MD&A Overview
COVID-19
2020 REPORTING CHANGES
| (1) | Adjusted net earnings, adjusted EPS and free cash flow are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted net earnings and adjusted EPS, and Free cash flow and dividend payout ratio in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure. |
32 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
BCE 2020 CONSOLIDATED RESULTS
| Operating revenues | Net earnings | Adjusted EBITDA (1) | ||
| $22,883 | $2,699 | $9,607 | ||
| million | million | million | ||
| (3.8%) vs. 2019 | (17.0%) vs. 2019 | (4.0%) vs. 2019 |
| Net earnings attributable | Adjusted net earnings | Cash flows from | Free cash flow | |||
| to common shareholders | operating activities | |||||
| $2,498 | $2,730 | $7,754 | $3,348 | |||
| million | million | million | million | |||
| (17.8%) vs. 2019 | (12.5%) vs. 2019 | (2.6%) vs. 2019 | (10.4%) vs. 2019 | |||
|
BCE CUSTOMER CONNECTIONS
| ||||||
| Wireless | Retail high-speed | Retail TV | Retail residential network | |||
| Total | Internet | access services (NAS) lines | ||||
| +2.6% | +4.2% | (1.2%) | (7.9%) | |||
| 10.2 million subscribers | 3.7 million subscribers | 2.7 million subscribers | 2.5 million subscribers | |||
| at the end of 2020 | at the end of 2020 | at the end of 2020 | at the end of 2020 | |||
OUR GOAL
BCE’s goal is to advance how Canadians connect with each other and the world. Our strategic imperatives frame our longstanding strengths in networks, service innovation and content creation, and position the company for continued growth and innovation leadership in a fast-changing communications marketplace. Our primary business objectives are to grow our subscriber base profitably and to maximize revenues, operating profit, free cash flow and return on invested capital by further enhancing our position as the foremost provider in Canada of comprehensive communications services to residential, business and wholesale customers, and as Canada’s premier content creation company. We seek to take advantage of opportunities to leverage our networks, infrastructure, sales channels, and brand and marketing resources across our various lines of business to create value for both our customers and other stakeholders.
Our strategy is centred on our disciplined focus and execution of six strategic imperatives that position us to deliver continued success. The six strategic imperatives that underlie BCE’s business plan are:
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BELL’S 6 STRATEGIC IMPERATIVES |
1
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2
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3
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| Build the |
Drive growth with |
Deliver the most |
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innovative services
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compelling content
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| Champion |
Operate with agility |
Engage and invest |
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| customer experience |
and cost efficiency |
in our people |
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| (1) | Adjusted EBITDA is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin in this MD&A for more details, including a reconciliation to the most comparable IFRS financial measure. |
34 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
We report the results of our operations in three segments: Bell Wireless, Bell Wireline and Bell Media. We describe our product lines by segment below, to provide further insight into our operations.
OUR PRODUCTS AND SERVICES
| (1) | Peak theoretical download speeds of up to 1.5 Gbps on LTE-A are currently available in Kingston, Waterloo, Toronto, Mississauga, Vaughan, Richmond Hill, Markham, Brampton, North Bay, Niagara-on-the-Lake, Cambridge, Pickering, Ajax, Burlington, Guelph, London, Niagara Falls, Oakville, St. Catharines, Thorold, Thunder Bay, Welland and Ottawa. Compatible device required. |
| (2) | Network speeds vary with location, signal and customer device. Compatible device required. |
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1 MD&A Overview
Bell Wireline
36 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
Bell Media
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| Other BCE investments
BCE also holds investments in a number of other assets, including:
• a 28% indirect equity interest in MLSE, a sports and entertainment company that owns several sports teams, including the Toronto Maple Leafs, the Toronto Raptors, Toronto FC and the Toronto Argonauts, as well as real estate and entertainment assets in Toronto
• a 50% indirect equity interest in Glentel, a Canadian-based connected services retailer
• an 18.4% indirect equity interest in entities that operate the Montreal Canadiens Hockey Club, evenko (a promoter and producer of cultural and sports events) and the Bell Centre in Montréal, Québec as well as Place Bell in Laval, Québec |
|
OUR PEOPLE
| EMPLOYEES
At the end of 2020, our team comprised 50,704 employees, a decrease of 1,396 employees compared to the end of 2019, due to natural attrition, retirements and workforce reductions, partly offset by call centre hiring.
Approximately 41% of total BCE employees were represented by labour unions at December 31, 2020. |
|
BELL CODE OF BUSINESS CONDUCT
1.3 Key corporate developments
This section contains forward-looking statements, including relating to our capital investment acceleration program. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
CAPITAL INVESTMENT ACCELERATION PROGRAM
SALE OF DATA CENTRES
38 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
BELL MEDIA LEADERSHIP CHANGE
DIVIDEND GROWTH AND PAYOUT POLICY
| Dividend yield (1) | 2021 dividend increase | Dividend payout policy | ||
| 6.1% | +5.1% | 65%–75% | ||
| in 2020 | to $3.50 per common share | of free cash flow |
EXECUTIVE COMPENSATION ALIGNMENT
BCE’s management equity-based incentive plans are structured to maximize shareholder value, share price and capital returns, as well as delivering on our goal of advancing how Canadians connect with each other and the world, through the successful execution of our six strategic imperatives. We have a strong alignment of interest between shareholders and our management’s equity-based incentive plans.
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Best practices adopted by BCE for executive compensation |
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Stringent share ownership requirements
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| •
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Emphasis on pay at risk for executive compensation
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Double trigger change-in-control policy |
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Anti-hedging policy on share ownership and incentive compensation |
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Clawbacks for the President and Chief Executive Officer (CEO) and all Executive Vice-Presidents as well as all option holders
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Caps on BCE supplemental executive retirement plans and annual bonus payouts, in addition to mid-term and long-term incentive grants
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| • |
Vesting criteria fully aligned to shareholder interests
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| (1) | Annualized dividend per BCE common share divided by BCE’s share price at the end of the year. |
| (2) | Dividend payout ratio is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) – Free cash flow and dividend payout ratio for more details. |
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1 MD&A Overview
USE OF LIQUIDITY
TOTAL SHAREHOLDER RETURN PERFORMANCE
| Five-year total | One-year total | |
| shareholder return (1) | shareholder return (1) | |
| +32% | (4.1%) | |
| 2016–2020 | 2020 |
FIVE-YEAR CUMULATIVE TOTAL VALUE OF A $100 INVESTMENT (2)
DECEMBER 31, 2015 – DECEMBER 31, 2020
STRONG CAPITAL STRUCTURE
| ATTRACTIVE LONG-TERM PUBLIC DEBT MATURITY PROFILE (4)
• Average term of Bell Canada’s publicly issued debt securities: approximately 11.8 years
• Average after-tax cost of publicly issued debt securities: 3.0%
• No material publicly issued debt securities maturing until Q4 2022 |
STRONG LIQUIDITY POSITION (4)
• $3,151 million available under our $3.5 billion multi-year committed credit facilities
• $400 million accounts receivable securitization available capacity
• $224 million cash and cash equivalents on hand |
INVESTMENT GRADE CREDIT PROFILE (4) (5)
• Long-term debt credit rating of BBB (high) by DBRS Limited (DBRS), Baa 1 by Moody’s Investors Service, Inc. (Moody’s) and BBB+ by S&P Global Ratings Canada (S&P), all with stable outlooks |
| (1) | The change in BCE’s common share price for a specified period plus BCE common share dividends reinvested, divided by BCE’s common share price at the beginning of the period. |
| (2) | Based on BCE’s common share price on the Toronto Stock Exchange (TSX) and assuming the reinvestment of dividends. |
| (3) | As the headline index for the Canadian equity market, the S&P/TSX Composite Index is the primary gauge against which to measure total shareholder return for Canadian-based, TSX-listed companies. |
| (4) | As at December 31, 2020 |
| (5) | These credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency. Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor. Each credit rating should be evaluated independently of any other credit rating. |
40 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
1.5 Corporate governance and risk management
CORPORATE GOVERNANCE PHILOSOPHY
The Board and management of BCE believe that strong corporate governance practices contribute to superior results in creating and maintaining shareholder value. That is why we continually seek to strengthen our leadership in corporate governance and ethical business conduct by adopting best practices, and providing full transparency and accountability to our shareholders. The Board is responsible for the supervision of the business and affairs of the company.
Below are our key Board information and governance best practices:
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✓ Directors are ALL Independent (except CEO) |
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✓ Board Interlocks Guidelines | ||
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96% 2020 Board and Committee Director Attendance Record |
✓ Directors’ Tenure Guidelines | |||
| ✓ Board Committees Members are All Independent |
✓ Share Ownership Guidelines for Directors and Executives | |||
| ✓ Board Diversity Policy and Target for Gender Representation |
✓ Code of Business Conduct and Ethics Program | |||
| ✓ Annual Election of All Directors |
✓ Annual Advisory Vote on Executive Compensation | |||
| ✓ Directors Elected Individually |
✓ Formal Board Evaluation Process | |||
| ✓ Majority Voting Policy for Directors |
✓ Board Risk Oversight Practices | |||
| ✓ Separate Chair and CEO |
✓ Robust Succession Planning |
For more information, please refer to BCE’s most recent notice of annual general shareholder meeting and management proxy circular (the Proxy Circular) filed with the Canadian provincial securities regulatory authorities (available at sedar.com) and furnished to the U.S. Securities and Exchange Commission (available at sec.gov), and available on BCE’s website at BCE.ca.
| (1) | Net debt, net debt leverage ratio and adjusted EBITDA to net interest expense ratio are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) - Net debt, Net debt leverage ratio and Adjusted EBITDA to net interest expense ratio in this MD&A for more details. |
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RISK GOVERNANCE FRAMEWORK
BOARD OVERSIGHT
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SOCIETY
TEAM MEMBERS
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46 | BCE INC. 2020 ANNUAL REPORT
1 MD&A Overview
ENVIRONMENT
| (1) | Our ISO 14001 certification covers Bell Canada’s oversight of the environmental management system associated with the development of policies and procedures for the delivery of landline, wireless, TV and Internet services, broadband and connectivity services, data hosting, cloud computing, radio broadcasting and digital media services, along with related administrative functions. |
| (2) | Our ISO 50001 certification covers Bell Canada’s energy management program associated with the activities of real estate management services, fleet services, radio broadcasting and digital media services, landline, wireless, TV, Internet services, connectivity, broadband services, data hosting and cloud computing, in addition to related general administrative functions. |
| (3) | Operational GHG emissions include scope 1 and scope 2 emissions. Scope 1 GHG emissions are direct emissions from sources that are owned or controlled by Bell. Scope 2 GHG emissions are indirect emissions associated with the consumption of purchased electricity, heat, steam and cooling. |
| (4) | Performance is based on energy consumption and network usage data from January 1 to December 31 of calendar years 2014 to 2017. Starting in 2018, performance is based on energy consumption and network usage data from October 1 of the previous year to September 30 of the reporting year. Network usage includes residential and wholesale Internet, business Internet dedicated (BID), VPN, IPTV, Inter-Network Exchange (INX), prepaid and postpaid wireless services, Wireless Home Internet, Voice-over-LTE traffic, IoT, and enterprise usage, both in Canada and on international roaming partners’ networks. As the methodology for gathering network usage differs from one carrier to another, and because a company’s business model directly impacts the amount of GHG it emits and how those GHG emissions are calculated and classified, the ratio itself cannot be used to directly compare carrier performance. This metric excludes our Bell MTS division. |
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1 MD&A Overview
PRIVACY AND INFORMATION SECURITY
48 | BCE INC. 2020 ANNUAL REPORT
2 MD&A Strategic imperatives
Our success is built on the BCE team’s dedicated execution of the six strategic imperatives that support our goal to advance how Canadians connect with each other and the world.
This section contains forward-looking statements, including relating to our network deployment and capital investment plans and our 2021 objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
|
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Expand Bell’s next-generation network leadership with continued capital investment in all-fibre home and business connections in more places, enhanced rural connectivity with Wireless Home Internet and the buildout of our mobile 5G network. |
BCE INC. 2020 ANNUAL REPORT | 49
2 MD&A Strategic imperatives
2.2 Drive growth with innovative services
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Leverage our network superiority to provide innovative, integrated communications services to Canadian consumers and businesses, including the fastest Internet and best Wi-Fi technology, the highest-quality mobile services and a growing range of next-generation IoT solutions, smart home products and business solutions like Virtual Network Services. |
50 | BCE INC. 2020 ANNUAL REPORT
2 MD&A Strategic imperatives
2.3 Deliver the most compelling content
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Inform and engage Canadian audiences with a unified approach to delivering our top TV, media and entertainment assets, leveraging our trusted media brands and content creation leadership to bring Canadians the content they want the most on any platform they choose. |
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2 MD&A Strategic imperatives
2.4 Champion customer experience
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Deliver a positive customer experience for consumers and business customers by making it easier to do business with Bell at every level, from sales to installation to ongoing support. |
2.5 Operate with agility and cost efficiency
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Enhance our operational excellence in a competitive marketplace and build on our industry-leading cost structure with a focus on efficiency and disciplined cost management across our business segments. |
| (1) | Adjusted EBITDA margin is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin in this MD&A for more details. |
52 | BCE INC. 2020 ANNUAL REPORT
2 MD&A Strategic imperatives
BCE INC. 2020 ANNUAL REPORT | 53
3 MD&A Outlook, assumptions and risks
3 Outlook, assumptions and risks
This section provides information pertaining to our consolidated business outlook and operating assumptions for 2021 and our principal business risks.
3.1 Business outlook and assumptions
This section contains forward-looking statements, including relating to our projected financial performance for 2021, our 2021 business outlook, objectives, plans and strategic priorities and our 2021 annualized common share dividend. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
OUTLOOK
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3 MD&A Outlook, assumptions and risks
COMPETITIVE ENVIRONMENT
56 | BCE INC. 2020 ANNUAL REPORT
3 MD&A Outlook, assumptions and risks
REGULATORY ENVIRONMENT
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3 MD&A Outlook, assumptions and risks
SECURITY MANAGEMENT
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4 MD&A Consolidated financial analysis
4 Consolidated financial analysis
This section provides detailed information and analysis about BCE’s performance in 2020 compared with 2019. 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 5, Business segment analysis.
BCE CONSOLIDATED INCOME STATEMENTS
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Operating revenues |
||||||||||||||||
| Service |
19,832 | 20,566 | (734 | ) | (3.6 | %) | ||||||||||
| Product |
3,051 | 3,227 | (176 | ) | (5.5 | %) | ||||||||||
| Total operating revenues |
22,883 | 23,793 | (910 | ) | (3.8 | %) | ||||||||||
| Operating costs |
(13,276 | ) | (13,787 | ) | 511 | 3.7 | % | |||||||||
| Adjusted EBITDA |
9,607 | 10,006 | (399 | ) | (4.0 | %) | ||||||||||
| Adjusted EBITDA margin |
42.0 | % | 42.1 | % | (0.1 | ) pts | ||||||||||
| Severance, acquisition and other costs |
(116 | ) | (114 | ) | (2 | ) | (1.8 | %) | ||||||||
| Depreciation |
(3,475 | ) | (3,458 | ) | (17 | ) | (0.5 | %) | ||||||||
| Amortization |
(929 | ) | (886 | ) | (43 | ) | (4.9 | %) | ||||||||
| Finance costs |
||||||||||||||||
| Interest expense |
(1,110 | ) | (1,125 | ) | 15 | 1.3 | % | |||||||||
| Interest on post-employment benefit obligations |
(46 | ) | (63 | ) | 17 | 27.0 | % | |||||||||
| Impairment of assets |
(472 | ) | (102 | ) | (370 | ) | n. | m. | ||||||||
| Other (expense) income |
(194 | ) | 95 | (289 | ) | n. | m. | |||||||||
| Income taxes |
(792 | ) | (1,129 | ) | 337 | 29.8 | % | |||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | (751 | ) | (23.3 | %) | ||||||||||
| Net earnings from discontinued operations |
226 | 29 | 197 | n. | m. | |||||||||||
| Net earnings |
2,699 | 3,253 | (554 | ) | (17.0 | %) | ||||||||||
| Net earnings from continuing operations attributable to: |
||||||||||||||||
| Common shareholders |
2,272 | 3,011 | (739 | ) | (24.5 | %) | ||||||||||
| Preferred shareholders |
136 | 151 | (15 | ) | (9.9 | %) | ||||||||||
|
Non-controlling interest |
65 | 62 | 3 | 4.8 | % | |||||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | (751 | ) | (23.3 | %) | ||||||||||
| Net earnings attributable to: |
||||||||||||||||
| Common shareholders |
2,498 | 3,040 | (542 | ) | (17.8 | %) | ||||||||||
| Preferred shareholders |
136 | 151 | (15 | ) | (9.9 | %) | ||||||||||
|
Non-controlling interest |
65 | 62 | 3 | 4.8 | % | |||||||||||
| Net earnings |
2,699 | 3,253 | (554 | ) | (17.0 | %) | ||||||||||
| Adjusted net earnings |
2,730 | 3,119 | (389 | ) | (12.5 | %) | ||||||||||
| Net earnings per common share (EPS) |
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| Continuing operations |
2.51 | 3.34 | (0.83 | ) | (24.9 | %) | ||||||||||
| Discontinued operations |
0.25 | 0.03 | 0.22 | n. | m. | |||||||||||
| Net earnings per common share |
2.76 | 3.37 | (0.61 | ) | (18.1 | %) | ||||||||||
| Adjusted EPS |
3.02 | 3.46 | (0.44 | ) | (12.7 | %) | ||||||||||
| n.m.: not meaningful |
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BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Cash flows from operating activities |
7,754 | 7,958 | (204 | ) | (2.6 | %) | ||||||||||
| Capital expenditures |
(4,202 | ) | (3,974 | ) | (228 | ) | (5.7 | %) | ||||||||
| Free cash flow |
3,348 | 3,738 | (390 | ) | (10.4 | %) | ||||||||||
BCE NET ACTIVATIONS (LOSSES)
| 2020 | 2019 | % CHANGE | ||||||||||
| Wireless subscribers net activations |
263,721 | 515,409 | (48.8 | %) | ||||||||
| Postpaid |
225,739 | 401,955 | (43.8 | %) | ||||||||
| Prepaid |
37,982 | 113,454 | (66.5 | %) | ||||||||
| Wireline retail high-speed Internet subscribers net activations |
148,989 | 135,861 | 9.7 | % | ||||||||
| Wireline retail TV subscribers net (losses) activations |
(33,859 | ) | 6,053 | n. | m. | |||||||
| IPTV |
39,191 | 91,476 | (57.2 | %) | ||||||||
| Satellite |
(73,050 | ) | (85,423 | ) | 14.5 | % | ||||||
| Wireline retail residential NAS lines net losses |
(213,551 | ) | (263,325 | ) | 18.9 | % | ||||||
| Total services net activations |
165,300 | 393,998 | (58.0 | %) | ||||||||
n.m.: not meaningful
TOTAL BCE CUSTOMER CONNECTIONS
| 2020 | 2019 | % CHANGE | ||||||||||
| Wireless subscribers |
10,221,683 | 9,957,962 | 2.6 | % | ||||||||
| Postpaid |
9,385,679 | 9,159,940 | 2.5 | % | ||||||||
| Prepaid |
836,004 | 798,022 | 4.8 | % | ||||||||
| Wireline retail high-speed Internet subscribers |
3,704,590 | 3,555,601 | 4.2 | % | ||||||||
| Wireline retail TV subscribers |
2,738,605 | 2,772,464 | (1.2 | %) | ||||||||
| IPTV |
1,806,373 | 1,767,182 | 2.2 | % | ||||||||
| Satellite |
932,232 | 1,005,282 | (7.3 | %) | ||||||||
| Wireline retail residential NAS lines |
2,483,932 | 2,697,483 | (7.9 | %) | ||||||||
| Total services subscribers |
19,148,810 | 18,983,510 | 0.9 | % | ||||||||
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4 MD&A Consolidated financial analysis
BCE
Revenues
(in $ millions)
|
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| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||||
|
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Bell Wireless |
8,683 | 9,001 | (318 | ) | (3.5%) | |||||||||||||
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Bell Wireline |
12,206 | 12,317 | (111 | ) | (0.9%) | |||||||||||||
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Bell Media |
2,750 | 3,217 | (467 | ) | (14.5%) | |||||||||||||
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Inter-segment eliminations |
(756 | ) | (742 | ) | (14 | ) | (1.9%) | |||||||||||
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Total BCE operating revenues |
22,883 | 23,793 | (910 | ) | (3.8%) | |||||||||||||
|
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BCE
| BCE | BCE | BCE | ||||
| Operating costs | Operating cost profile | Operating cost profile | ||||
| (in $ millions) | 2019 | 2020 | ||||
| ||||||
| (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. |
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| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
(5,017 | ) | (5,210 | ) | 193 | 3.7% | ||||||||||
| Bell Wireline |
(6,960 | ) | (6,952 | ) | (8 | ) | (0.1% | ) | ||||||||
| Bell Media |
(2,055 | ) | (2,367 | ) | 312 | 13.2% | ||||||||||
| Inter-segment eliminations |
756 | 742 | 14 | 1.9% | ||||||||||||
| Total BCE operating costs |
(13,276 | ) | (13,787 | ) | 511 | 3.7% | ||||||||||
BCE
| BCE Net earnings (in $ millions) |
In 2020, net earnings decreased by 17.0%, compared to 2019, mainly due to lower adjusted EBITDA, an increase in impairment of assets primarily at our Bell Media segment, higher other expense and higher depreciation and amortization, partly offset by lower income taxes and higher net earnings from discontinued operations as a result of a gain on sale, net of taxes, of $211 million in Q4 2020 from the completion of the sale of substantially all of our data centre operations. | |
|
|
| BCE Adjusted EBITDA (in $ millions) |
BCE Adjusted EBITDA (in $ millions) (% adjusted EBITDA margin) | |
|
|
| |
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
3,666 | 3,791 | (125 | ) | (3.3 | %) | ||||||||||
| Bell Wireline |
5,246 | 5,365 | (119 | ) | (2.2 | %) | ||||||||||
| Bell Media |
695 | 850 | (155 | ) | (18.2 | %) | ||||||||||
| Total BCE adjusted EBITDA |
9,607 | 10,006 | (399 | ) | (4.0 | %) | ||||||||||
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BCE
4.7 Severance, acquisition and other costs
This category includes various income and expenses that are not related directly to the operating revenues generated during the year. This includes severance costs consisting of charges related to involuntary and voluntary employee terminations, as well as 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.
| BCE Severance, acquisition and other costs (in $ millions)
|
2020
Severance, acquisition and other costs included:
• Severance costs of $35 million related to involuntary and voluntary employee terminations
• Acquisition and other costs of $81 million
2019
Severance, acquisition and other costs included:
• Severance costs of $63 million related to involuntary and voluntary employee terminations
• Acquisition and other costs of $51 million |
4.8 Depreciation and amortization
| The amount of our depreciation and amortization in any year is affected by:
• How much we invested in new property, plant and equipment and intangible assets in previous years
• How many assets we retired during the year
• Estimates of the useful lives of assets |
BCE Depreciation (in $ millions)
|
BCE Amortization (in $ millions)
|
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| BCE Interest expense (in $ millions)
|
BCE Interest on post-employment benefit obligations (in $ millions)
|
INTEREST EXPENSE
Interest expense in 2020 decreased by $15 million, compared to 2019, mainly due to lower average interest rates, partly offset by higher average debt levels.
INTEREST ON POST-EMPLOYMENT BENEFIT OBLIGATIONS
Interest on our post-employment benefit obligations is based on market conditions that existed at the beginning of the year. On January 1, 2020, the discount rate was 3.1% compared to 3.8% on January 1, 2019.
In 2020, interest expense on post-employment benefit obligations decreased by $17 million, compared to last year, due to a lower discount rate and a lower net post-employment benefit obligation at the beginning of the year.
The impacts of changes in market conditions during the year are recognized in other comprehensive income (OCI). |
| 2020
During the second quarter of 2020, we identified indicators of impairment for certain of our Bell Media TV services and radio markets, notably declines in advertising revenues, lower subscriber revenues and overall increases in discount rates resulting from the economic impact of the COVID-19 pandemic. Accordingly, impairment testing was required for certain groups of cash generating units (CGUs) as well as for goodwill.
During Q2 2020, we recognized $452 million of impairment charges for our English and French TV services as well as various radio markets within our Bell Media segment. These charges included $291 million allocated to indefinite-life intangible assets for broadcast licences, $146 million allocated to finite-life intangible assets, mainly for program and feature film rights, and $15 million to property, plant and equipment for network and infrastructure and equipment. There was no impairment of Bell Media goodwill.
2019
Impairment charges in 2019 included $85 million allocated to indefinite-life intangible assets, and $8 million allocated primarily to property, plant and equipment. These impairment charges related to broadcast licences and certain assets for various radio markets within our Bell Media segment. The impairment charges were a result of continued advertising demand and ratings pressures in the industry resulting from audience declines, as well as competitive pressure from streaming services. |
BCE Impairment of assets (in $ millions)
|
| Other (expense) income includes income and expense items, such as:
• Gains or losses on retirements and disposals of property, plant and equipment and intangible assets
• Net mark-to-market gains or losses on derivatives used to economically hedge equity settled share-based compensation plans
• Early debt redemption costs
• Equity income or losses from investments in associates and joint ventures
• Net gains or losses on investments, including gains or losses when we dispose of, write down or reduce our ownership in investments |
BCE Other (expense) income (in $ millions)
|
64 | BCE INC. 2020 ANNUAL REPORT
4 MD&A Consolidated financial analysis
| BCE Income taxes (in $ millions)
|
The following table reconciles the amount of reported income taxes in the income statements with income taxes calculated at a statutory income tax rate of 26.9% for 2020 and 27.0% for 2019.
|
| ||||||||||
|
|
||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||||||
|
|
||||||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||||||
| Add back income taxes |
792 | 1,129 | ||||||||||
|
|
||||||||||||
| Earnings from continuing operations before income taxes |
3,265 | 4,353 | ||||||||||
| Applicable statutory tax rate |
26.9 | % | 27.0% | |||||||||
|
|
||||||||||||
| Income taxes computed at applicable statutory rates |
(878 | ) | (1,175) | |||||||||
| Non-taxable portion of gains on investments |
1 | 5 | ||||||||||
| Uncertain tax positions |
21 | 15 | ||||||||||
| Effect of change in provincial corporate tax rate |
9 | 25 | ||||||||||
| Change in estimate relating to prior periods |
6 | 14 | ||||||||||
| Non-taxable portion of equity gains (losses) |
2 | (20) | ||||||||||
| Previously unrecognized tax benefits |
47 | 5 | ||||||||||
| Other |
– | 2 | ||||||||||
|
|
||||||||||||
| Total income taxes from continuing operations |
(792 | ) | (1,129) | |||||||||
|
|
||||||||||||
| Average effective tax rate |
24.3 | % | 25.9% | |||||||||
|
|
||||||||||||
| Income taxes in 2020 decreased by $337 million, compared to 2019, mainly due to lower taxable income and a higher value of previously unrecognized tax benefits, partly offset by a favourable change in the corporate income tax rate in Alberta in Q2 2019. |
| |||||||||||
4.13 Net earnings attributable to common shareholders and EPS
| BCE | BCE | BCE | BCE | |||
| Net earnings attributable | EPS | Adjusted net earnings | Adjusted EPS | |||
| to common shareholders (in $ millions) |
(in $) | (in $ millions) | (in $) | |||
|
|
|
|
| |||
BCE INC. 2020 ANNUAL REPORT | 65
4 MD&A Consolidated financial analysis
| BCE Capital expenditures (in $ millions) Capital intensity (%)
|
BCE capital expenditures increased by 5.7% in 2020 over the prior year to $4,202 million for a corresponding capital intensity ratio of 18.4%, up 1.7 pts compared to the 16.7% achieved in 2019. The year-over-year increase in capital spending was driven by greater investments in Bell Wireless and Bell Media, moderated by reduced spending in Bell Wireline. We continued to focus our investments on network expansion with the ongoing deployment of our FTTP and WTTP networks to more locations along with the launch of our mobile 5G network in June 2020 and the continued rollout of our LTE-A network, which at the end of 2020 reached 26% and 96% of the Canadian population, respectively. Additionally, we invested in capacity enhancements to support increased demand due to the COVID-19 pandemic, as well as investments in online fulfillment, customer self-serve and automation tools, as well as improved app functionality, also driven by the COVID-19 pandemic. |
| In 2020, BCE’s cash flows from operating activities decreased by $204 million, compared to 2019, mainly due to lower adjusted EBITDA and higher income taxes paid due to timing of installments, partly offset by higher cash from working capital and lower severance and other costs paid.
Free cash flow decreased by $390 million in 2020, compared to 2019, mainly due to higher capital expenditures and lower cash flows from operating activities, excluding cash from discontinued operations and acquisition and other costs paid. |
BCE Cash flows from operating activities (in $ millions)
|
BCE Free cash flow (in $ millions)
|
66 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireless
We grew our wireless customer base by 2.6% in 2020 with the addition of 263,721 total net postpaid and prepaid subscribers, the vast majority of which were new mobile phone customers. An impressive result in the context of the challenging COVID-19 situation that speaks to our focus on driving service revenue and adjusted EBITDA growth through accretive smartphone transactions.
FINANCIAL PERFORMANCE ANALYSIS
2020 PERFORMANCE HIGHLIGHTS
| Bell Wireless | Bell Wireless | |
| Revenues | Adjusted EBITDA | |
| (in $ millions) | (in $ millions) | |
| (% adjusted EBITDA margin) | ||
|
|
| |
| Total | Postpaid | Prepaid | Postpaid | Blended | ||||
| subscriber | net activations | net activations | churn | average billing | ||||
| growth | in 2020 | in 2020 | in 2020 | per user (ABPU) (1) | ||||
| per month | ||||||||
| +2.6% | 225,739 | 37,982 | 0.99% | (5.4%) | ||||
| in 2020 | Declined 43.8% | Declined 66.5% | Improved 0.14 pts | 2020: $64.69 | ||||
| vs. 2019 | vs. 2019 | vs. 2019 | 2019: $68.36 | |||||
| (1) | In Q1 2020, we updated our definition of ABPU to include monthly billings related to device financing receivables owing from customers on contract. Consequently, we restated previously reported 2019 ABPU for comparability. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs), in this MD&A for the definition of ABPU. |
BELL WIRELESS RESULTS
REVENUES
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| External service revenues |
6,122 | 6,323 | (201 | ) | (3.2 | %) | ||||||||||
| Inter-segment service revenues |
47 | 49 | (2 | ) | (4.1 | %) | ||||||||||
| Total operating service revenues |
6,169 | 6,372 | (203 | ) | (3.2 | %) | ||||||||||
| External product revenues |
2,508 | 2,623 | (115 | ) | (4.4 | %) | ||||||||||
| Inter-segment product revenues |
6 | 6 | – | – | ||||||||||||
| Total operating product revenues |
2,514 | 2,629 | (115 | ) | (4.4 | %) | ||||||||||
| Total Bell Wireless revenues |
8,683 | 9,001 | (318 | ) | (3.5 | %) | ||||||||||
BCE INC. 2020 ANNUAL REPORT | 67
5 MD&A Business segment analysis Bell Wireless
OPERATING COSTS AND ADJUSTED EBITDA
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(5,017 | ) | (5,210 | ) | 193 | 3.7% | ||||||||||
| Adjusted EBITDA |
3,666 | 3,791 | (125 | ) | (3.3%) | |||||||||||
| Total adjusted EBITDA margin |
42.2 | % | 42.1 | % | 0.1 pts | |||||||||||
BELL WIRELESS OPERATING METRICS
| 2020 | 2019 | CHANGE | % CHANGE | |||||||||||||
| Blended ABPU ($/month) (1) |
64.69 | 68.36 | (3.67 | ) | (5.4% | ) | ||||||||||
| Gross activations |
1,805,732 | 2,117,517 | (311,785 | ) | (14.7% | ) | ||||||||||
| Postpaid |
1,286,307 | 1,568,729 | (282,422 | ) | (18.0% | ) | ||||||||||
| Prepaid |
519,425 | 548,788 | (29,363 | ) | (5.4% | ) | ||||||||||
| Net activations |
263,721 | 515,409 | (251,688 | ) | (48.8% | ) | ||||||||||
| Postpaid |
225,739 | 401,955 | (176,216 | ) | (43.8% | ) | ||||||||||
| Prepaid |
37,982 | 113,454 | (75,472 | ) | (66.5% | ) | ||||||||||
| Blended churn % (average per month) |
1.28 | % | 1.39 | % | 0.11 p | ts | ||||||||||
| Postpaid |
0.99 | % | 1.13 | % | 0.14 p | ts | ||||||||||
| Prepaid |
4.60 | % | 4.44 | % | (0.16) | pts | ||||||||||
| Subscribers |
10,221,683 | 9,957,962 | 263,721 | 2.6% | ||||||||||||
| Postpaid |
9,385,679 | 9,159,940 | 225,739 | 2.5% | ||||||||||||
| Prepaid |
836,004 | 798,022 | 37,982 | 4.8% | ||||||||||||
| (1) | In Q1 2020, we updated our definition of ABPU to include monthly billings related to device financing receivables owing from customers on contract. Consequently, we restated previously reported 2019 ABPU for comparability. See section 10.2, Non-GAAP financial measures and key performance indicators (KPIs), in this MD&A for the definition of ABPU. |
68 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireless
COMPETITIVE LANDSCAPE AND INDUSTRY TRENDS
This section contains forward-looking statements, including relating to our business outlook. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
BCE INC. 2020 ANNUAL REPORT | 69
5 MD&A Business segment analysis Bell Wireless
BUSINESS OUTLOOK AND ASSUMPTIONS
This section contains forward-looking statements, including relating to our projected financial performance for 2021 and our 2021 business outlook, objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
70 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireless
KEY GROWTH DRIVERS
PRINCIPAL BUSINESS RISKS
This section discusses certain principal business risks specifically related to the Bell Wireless segment. For a detailed description of the other principal risks that could have a material adverse effect on our business, including those related to the COVID-19 pandemic, refer to section 9, Business risks.
| AGGRESSIVE COMPETITION
RISK
• The intensity of competitive activity from national wireless operators, regional facilities-based wireless service providers, non-traditional players and resellers
POTENTIAL IMPACT
• Pressure on our revenue, adjusted EBITDA, ABPU and churn would likely result if competitors continue to aggressively pursue new types of price plans, increase discounts, offer shared plans based on sophisticated pricing requirements or offer other incentives, such as multi-product bundles, to attract new customers |
REGULATORY ENVIRONMENT
RISK
• Greater regulation of wireless services, pricing and infrastructure (e.g., additional mandated access to wireless networks and limitations placed on future spectrum bidding)
POTENTIAL IMPACT
• Greater regulation could influence network investment and the market structure, limit our flexibility, improve the business position of our competitors, limit network-based differentiation of our services, and negatively impact the financial performance of our wireless business
|
MARKET MATURITY
RISK
• Slower subscriber growth due to high Canadian smartphone penetration and reduced or slower immigration flow
POTENTIAL IMPACT
• A maturing wireless market could challenge subscriber growth and cost of acquisition and retention, putting pressure on the financial performance of our wireless business |
BCE INC. 2020 ANNUAL REPORT | 71
5 MD&A Business segment analysis Bell Wireline
The advantages of fast, reliable and high-capacity broadband networks in a challenging and competitive marketplace, together with lower customer churn, drove an industry-leading 148,989 retail Internet net additions in 2020, up 9.7%, despite the impact of the COVID-19 pandemic on customer activity. The broadband footprint advantage that we are building, with the fastest fibre network and Wireless Home Internet speeds in the market today, positions us favourably in both our consumer and business segments over the long term to grow Internet revenue.
FINANCIAL PERFORMANCE ANALYSIS
2020 PERFORMANCE HIGHLIGHTS
| Bell Wireline | Bell Wireline | |
| Revenues | Adjusted EBITDA | |
| (in $ millions) | (in $ millions) | |
| (% adjusted EBITDA margin) | ||
|
| |
| Retail high-speed Internet | Retail high-speed Internet | Fibre and WTTP footprint | ||
| +4.2% | 148,989 | 10.3 million | ||
| Subscriber growth | Total net subscriber activations | Homes and businesses | ||
| in 2020 | in 2020 | at the end of 2020 | ||
| Retail TV | Retail IPTV | Retail residential NAS lines | ||
| (1.2%) | 39,191 | (7.9%) | ||
| Subscriber decline | Total net subscriber activations | Subscriber decline | ||
| in 2020 | in 2020 | in 2020 |
72 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireline
BELL WIRELINE RESULTS
REVENUES
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Data |
7,691 | 7,617 | 74 | 1.0% | ||||||||||||
| Voice |
3,402 | 3,564 | (162 | ) | (4.5% | ) | ||||||||||
| Other services |
248 | 251 | (3 | ) | (1.2% | ) | ||||||||||
| Total external service revenues |
11,341 | 11,432 | (91 | ) | (0.8% | ) | ||||||||||
| Inter-segment service revenues |
321 | 281 | 40 | 14.2% | ||||||||||||
| Total operating service revenues |
11,662 | 11,713 | (51 | ) | (0.4% | ) | ||||||||||
| Data |
494 | 556 | (62 | ) | (11.2% | ) | ||||||||||
| Equipment and other |
49 | 48 | 1 | 2.1% | ||||||||||||
| Total external product revenues |
543 | 604 | (61 | ) | (10.1% | ) | ||||||||||
| Inter-segment product revenues |
1 | – | 1 | n.m. | ||||||||||||
| Total operating product revenues |
544 | 604 | (60 | ) | (9.9% | ) | ||||||||||
| Total Bell Wireline revenues |
12,206 | 12,317 | (111 | ) | (0.9% | ) | ||||||||||
n.m.: not meaningful
OPERATING COSTS AND ADJUSTED EBITDA
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(6,960 | ) | (6,952 | ) | (8 | ) | (0.1%) | |||||||||
| Adjusted EBITDA |
5,246 | 5,365 | (119 | ) | (2.2%) | |||||||||||
| Adjusted EBITDA margin |
43.0 | % | 43.6 | % | (0.6) pts | |||||||||||
BCE INC. 2020 ANNUAL REPORT | 73
5 MD&A Business segment analysis Bell Wireline
BELL WIRELINE OPERATING METRICS
DATA
| Retail high-speed Internet |
||||||||||||||||
| 2020 | 2019 | CHANGE | % CHANGE | |||||||||||||
| Retail net activations |
148,989 | 135,861 | 13,128 | 9.7% | ||||||||||||
| Retail subscribers |
3,704,590 | 3,555,601 | 148,989 | 4.2% | ||||||||||||
| Retail TV |
||||||||||||||||
| 2020 | 2019 | CHANGE | % CHANGE | |||||||||||||
| Retail net subscriber (losses) activations |
(33,859 | ) | 6,053 | (39,912 | ) | n.m. | ||||||||||
| IPTV |
39,191 | 91,476 | (52,285 | ) | (57.2% | ) | ||||||||||
| Satellite |
(73,050 | ) | (85,423 | ) | 12,373 | 14.5% | ||||||||||
| Total retail subscribers |
2,738,605 | 2,772,464 | (33,859 | ) | (1.2% | ) | ||||||||||
| IPTV |
1,806,373 | 1,767,182 | 39,191 | 2.2% | ||||||||||||
| Satellite |
932,232 | 1,005,282 | (73,050 | ) | (7.3% | ) | ||||||||||
n.m.: not meaningful
| VOICE
|
||||||||||||||||
| 2020 | 2019 | CHANGE | % CHANGE | |||||||||||||
| Retail residential NAS lines net losses |
(213,551 | ) | (263,325 | ) | 49,774 | 18.9% | ||||||||||
| Retail residential NAS lines |
2,483,932 | 2,697,483 | (213,551 | ) | (7.9% | ) | ||||||||||
74 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireline
COMPETITIVE LANDSCAPE AND INDUSTRY TRENDS
This section contains forward-looking statements, including relating to our business outlook. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
BCE INC. 2020 ANNUAL REPORT | 75
5 MD&A Business segment analysis Bell Wireline
BUSINESS OUTLOOK AND ASSUMPTIONS
This section contains forward-looking statements, including relating to our projected financial performance for 2021 and our 2021 business outlook, objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
2021 OUTLOOK
76 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Wireline
KEY GROWTH DRIVERS
BCE INC. 2020 ANNUAL REPORT | 77
5 MD&A Business segment analysis Bell Wireline
PRINCIPAL BUSINESS RISKS
This section discusses certain principal business risks specifically related to the Bell Wireline segment. For a detailed description of the other principal risks that could have a material adverse effect on our business, including those related to the COVID-19 pandemic, refer to section 9, Business risks.
| AGGRESSIVE COMPETITION
RISK
• The intensity of competitive activity coupled with new product launches for retail customers (e.g., IoT, smart home systems and devices, innovative TV platforms, etc.) and business customers (e.g., OTT VoIP, collaboration and SD WAN solutions) from national operators, non-traditional players and wholesalers
POTENTIAL IMPACT
• An increase in the intensity level of competitive activity could result in lost revenue, higher churn and increased acquisition and retention expenses, all of which would put pressure on Bell Wireline’s adjusted EBITDA |
REGULATORY ENVIRONMENT
RISK
• The CRTC mandates rates for the new disaggregated wholesale high-speed access service available on FTTP facilities that are materially different from the rates we proposed, and which do not sufficiently account for the investment required in these facilities or modifies the network configuration of this new service in a way that materially improves the business position of our competitors
• The CRTC does not materially revise the rates for aggregated wholesale high-speed access service (available on FTTN facilities and the cable facilities of large cable carriers), which rates the CRTC substantially reduced in August 2019 although this reduction is currently stayed by the CRTC pending its final decision on the review and vary applications
POTENTIAL IMPACT
• In respect of the new disaggregated wholesale high-speed access service available on FTTP facilities, the mandating of rates that are materially different from the rates we proposed or the adoption of a network configuration advantageous for our competitors, or the implementation of the rates reduced by the CRTC in August 2019 for aggregated wholesale high-speed access services, could change our investment strategy, especially in relation to investment in next-generation wireline networks in smaller communities and rural areas, improve the business position of our competitors, further accelerate penetration and disintermediation by OTT players, and negatively impact the financial performance of our wireline business |
TECHNOLOGICAL ADVANCEMENT AND CHANGING CUSTOMER BEHAVIOUR
RISK
• With technological advancement, the traditional TV viewing model (i.e., the subscription for bundled channels) is challenged by an increasing number of legal and illegal viewing options available in the market offered by traditional, non-traditional and global players, as well as increasing cord-cutting and cord-shaving trends
• The proliferation of network technologies impacts business customers’ decision to migrate to OTT, VoIP and/or leverage SD WAN architecture
• Changing customer habits further contribute to the erosion of NAS lines
POTENTIAL IMPACT
• Our market penetration and number of TV subscribers could decline as a result of offerings by BDUs and an increasing number of domestic and global unregulated OTT providers, as well as a significant volume of content piracy
• The proliferation of IP-based products, including OTT content and OTT software offerings directly to consumers, may accelerate the disconnection of TV services or the reduction of TV spending, as well as the reduction in business IT investments by customers
• The ongoing loss of NAS lines from technological substitution challenges our traditional voice revenues and compels us to develop other service offerings |
78 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Media
Operating performance was impacted materially in 2020 by reduced advertiser spending across all platforms – TV, radio, out of home and digital –, reflecting lower commercial activity during the COVID-19 pandemic as well as the related impacts on major league sports and other live TV events and programming.
FINANCIAL PERFORMANCE ANALYSIS
2020 PERFORMANCE HIGHLIGHTS
| Bell Media | Bell Media | |
| Revenues | Adjusted EBITDA | |
| (in $ millions) | (in $ millions) | |
|
| |
| Bell Media | Bell Media | |
| Revenue mix | Revenue mix | |
| (product) | (line of business) | |
|
|
| |
BELL MEDIA RESULTS
REVENUES
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Total external revenues |
2,369 | 2,811 | (442 | ) | (15.7% | ) | ||||||||||
| Inter-segment revenues |
381 | 406 | (25 | ) | (6.2% | ) | ||||||||||
| Total Bell Media revenues |
2,750 | 3,217 | (467 | ) | (14.5% | ) | ||||||||||
BCE INC. 2020 ANNUAL REPORT | 79
5 MD&A Business segment analysis Bell Media
OPERATING COSTS AND ADJUSTED EBITDA
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Operating costs |
(2,055 | ) | (2,367 | ) | 312 | 13.2% | ||||||||||
| Adjusted EBITDA |
695 | 850 | (155 | ) | (18.2%) | |||||||||||
| Adjusted EBITDA margin |
25.3 | % | 26.4 | % | (1.1) pts | |||||||||||
COMPETITIVE LANDSCAPE AND INDUSTRY TRENDS
This section contains forward-looking statements, including relating to our business outlook. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
COMPETITIVE LANDSCAPE
80 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Media
BCE INC. 2020 ANNUAL REPORT | 81
5 MD&A Business segment analysis Bell Media
BUSINESS OUTLOOK AND ASSUMPTIONS
This section contains forward-looking statements, including relating to our projected financial performance for 2021 and our 2021 business outlook, objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
82 | BCE INC. 2020 ANNUAL REPORT
5 MD&A Business segment analysis Bell Media
KEY GROWTH DRIVERS
PRINCIPAL BUSINESS RISKS
This section discusses certain principal business risks specifically related to the Bell Media segment. For a detailed description of the other principal risks that could have a material adverse effect on our business, including those related to the COVID-19 pandemic, refer to section 9, Business risks.
| AGGRESSIVE COMPETITION, PIRACY AND REGULATORY CONSTRAINTS
RISK
• The intensity of competitive activity from new technologies and alternative distribution platforms such as unregulated OTT content offerings, VOD, personal video platforms, DTC distribution and pirated content, in addition to traditional TV services, in combination with the development of more aggressive product and sales strategies from non-traditional global players and regulations that require all BDUs to make TV services available à la carte
POTENTIAL IMPACT
• Adverse impact on the level of subscriptions and/or viewership for Bell Media’s TV services and on Bell Media’s revenue streams |
ADVERTISING AND SUBSCRIPTION REVENUE UNCERTAINTY
RISK
• Advertising is heavily dependent on economic conditions and viewership, as well as on our ability to grow alternative advertising media such as digital and OOH platforms, in the context of a changing and fragmented advertising market. Conventional media is under increasing pressure for advertising spend against dominant non-traditional/ global digital services.
• The advertising market could be further impacted by cancelled/delayed advertising campaigns from many sectors due to the economic downturn during the COVID-19 pandemic
• Bell Media has contracts with a variety of BDUs, under which monthly subscription fees for specialty and pay TV services are earned, that expire on a specific date
POTENTIAL IMPACT
• Economic uncertainty could reduce advertisers’ spending. Our failure to increase or maintain viewership or capture our share of the changing and fragmented advertising market could result in the loss of advertising revenue.
• The COVID-19 pandemic could continue to drive a material decline in advertising revenue across all Bell Media platforms
• If we are not successful in obtaining favourable agreements with BDUs, it could result in the loss of subscription revenue |
RISING CONTENT COSTS AND ABILITY TO SECURE KEY CONTENT
RISK
• Rising content costs, as an increasing number of domestic and global competitors seek to acquire the same content or to restrict content within their own ecosystems, and the ability to acquire or develop key differentiated content to drive revenues and subscriber growth.
• Production delays attributable to the COVID-19 pandemic could further pressure our ability to secure key content in the short term.
POTENTIAL IMPACT
• Rising programming costs could require us to incur unplanned expenses, which could result in negative pressure on adjusted EBITDA
• Our inability to acquire or develop popular programming content could adversely affect Bell Media’s viewership and subscription levels and, consequently, advertising and subscription revenues |
BCE INC. 2020 ANNUAL REPORT | 83
6 MD&A Financial and capital management
6 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.
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Debt due within one year |
2,417 | 3,881 | (1,464 | ) | (37.7% | ) | ||||||||||
| Long-term debt |
23,906 | 22,415 | 1,491 | 6.7% | ||||||||||||
| Preferred shares (1) |
2,002 | 2,002 | – | – | ||||||||||||
| Cash and cash equivalents |
(224 | ) | (145 | ) | (79 | ) | (54.5% | ) | ||||||||
| Net debt |
28,101 | 28,153 | (52 | ) | (0.2% | ) | ||||||||||
| (1) | 50% of outstanding preferred shares of $4,003 million and $4,004 million in 2020 and 2019, respectively, are classified as debt consistent with the treatment by some credit rating agencies. |
84 | BCE INC. 2020 ANNUAL REPORT
6 MD&A Financial and capital management
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Cash flows from operating activities |
7,754 | 7,958 | (204 | ) | (2.6%) | |||||||||||
| Capital expenditures |
(4,202 | ) | (3,974 | ) | (228 | ) | (5.7%) | |||||||||
| Cash dividends paid on preferred shares |
(132 | ) | (147 | ) | 15 | 10.2% | ||||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(53 | ) | (65 | ) | 12 | 18.5% | ||||||||||
| Acquisition and other costs paid |
35 | 60 | (25 | ) | (41.7%) | |||||||||||
| Cash from discontinued operations (included in
cash flows |
(54 | ) | (94 | ) | 40 | 42.6% | ||||||||||
| Free cash flow |
3,348 | 3,738 | (390 | ) | (10.4%) | |||||||||||
| Cash from discontinued operations (included in cash
flows |
54 | 94 | (40 | ) | (42.6%) | |||||||||||
| Business acquisitions |
(65 | ) | (51 | ) | (14 | ) | (27.5%) | |||||||||
| Acquisition and other costs paid |
(35 | ) | (60 | ) | 25 | 41.7% | ||||||||||
| Acquisition of spectrum licences |
(86 | ) | – | (86 | ) | n.m. | ||||||||||
| Other investing activities |
(79 | ) | 7 | (86 | ) | n.m. | ||||||||||
| Cash from (used in) discontinued operations (included in cash flows |
892 | (18 | ) | 910 | n.m. | |||||||||||
| Net repayment of debt instruments |
(638 | ) | (1,209 | ) | 571 | 47.2% | ||||||||||
| Issue of common shares |
26 | 240 | (214 | ) | (89.2%) | |||||||||||
| Purchase of shares for settlement of share-based payments |
(263 | ) | (142 | ) | (121 | ) | (85.2%) | |||||||||
| Cash dividends paid on common shares |
(2,975 | ) | (2,819 | ) | (156 | ) | (5.5%) | |||||||||
| Other financing activities |
(93 | ) | (54 | ) | (39 | ) | (72.2%) | |||||||||
| Cash used in discontinued operations (included in cash flows |
(7 | ) | (6 | ) | (1 | ) | (16.7%) | |||||||||
| Net increase (decrease) in cash and cash equivalents |
79 | (280 | ) | 359 | n.m. | |||||||||||
n.m.: not meaningful
CASH FLOWS FROM OPERATING ACTIVITIES AND FREE CASH FLOW
CAPITAL EXPENDITURES
| 2020 | 2019 | $ CHANGE | % CHANGE | |||||||||||||
| Bell Wireless |
916 | 671 | (245 | ) | (36.5%) | |||||||||||
| Capital intensity ratio |
10.5 | % | 7.5 | % | (3.0) pts | |||||||||||
| Bell Wireline |
3,161 | 3,195 | 34 | 1.1% | ||||||||||||
| Capital intensity ratio |
25.9 | % | 25.9 | % | – | |||||||||||
| Bell Media |
125 | 108 | (17 | ) | (15.7%) | |||||||||||
| Capital intensity ratio |
4.5 | % | 3.4 | % | (1.1) pts | |||||||||||
| BCE |
4,202 | 3,974 | (228 | ) | (5.7%) | |||||||||||
| Capital intensity ratio |
18.4 | % | 16.7 | % | ( 1.7) pts | |||||||||||
BCE INC. 2020 ANNUAL REPORT | 85
6 MD&A Financial and capital management
CASH FROM DISCONTINUED OPERATIONS (INCLUDED IN CASH FLOWS FROM INVESTING ACTIVITIES)
In 2020, cash from discontinued operations (included in cash flows from investing activities) increased by $910 million mainly due to $933 million (net of debt and other items) received in Q4 2020 from the completion of the sale of substantially all of our data centre operations.
DEBT INSTRUMENTS
We use a combination of short-term and long-term debt to finance our operations. Our short-term debt consists mostly of notes payable under commercial paper programs, loans securitized by trade receivables and bank facilities. We usually pay fixed rates of interest on our long-term debt and floating rates on our short-term debt. As at December 31, 2020, all of our debt was denominated in Canadian dollars with the exception of our commercial paper, and Series US-1 and Series US -2 Notes, which are denominated in U.S. dollars and have been hedged for foreign currency fluctuations through forward currency contracts and cross currency interest rate swaps.
ISSUANCE OF COMMON SHARES
The issuance of common shares in 2020 decreased by $214 million, compared to 2019, mainly due to a lower number of exercised stock options.
CASH DIVIDENDS PAID ON COMMON SHARES
In 2020, cash dividends paid on common shares of $2,975 million increased by $156 million, compared to 2019, due to a higher dividend paid in 2020 of $3.2900 per common share compared to $3.1325 per common share in 2019.
6.4 Post-employment benefit plans
86 | BCE INC. 2020 ANNUAL REPORT
6 MD&A Financial and capital management
Management’s objectives are to protect BCE and its subsidiaries on a consolidated basis against material economic exposures and variability of results from various financial risks including credit risk, liquidity risk, foreign currency risk, interest rate risk, commodity price risk, equity price risk and longevity risk. These risks are further described in Note 2, Significant accounting policies, Note 9, Other (expense) income, Note 26, Post-employment benefit plans and Note 28, Financial and capital management in BCE’s 2020 consolidated financial statements.
The following table outlines our financial risks, how we manage these risks and their financial statement classification.
| FINANCIAL | DESCRIPTION | MANAGEMENT OF RISK AND | ||
| RISK | OF RISK | FINANCIAL STATEMENT CLASSIFICATION | ||
| Credit risk | We are exposed to credit risk from operating activities and certain financing activities, the maximum exposure of which is represented by the carrying amounts reported in the statements of financial position. We are exposed to credit risk if counterparties to our trade receivables, wireless device financing plan receivables, and derivative instruments are unable to meet their obligations. |
• Large and diverse customer base
• Deal with institutions with investment-grade credit ratings
• Regularly monitor our credit risk and exposure
• Our trade receivables and allowance for doubtful accounts balances at December 31, 2020, which both include the current portion of wireless device financing plan receivables, were $3,414 million and $149 million, respectively. The allowance for doubtful accounts reflects an increase of $87 million for the period ended December 31, 2020, mainly as a result of the impact of the COVID-19 pandemic.
• Our contract assets and allowance for doubtful accounts balances at December 31, 2020 were $1,002 million and $59 million, respectively
• Our non-current wireless device financing plan receivables and allowance for doubtful accounts balances at December 31, 2020 were $399 million and $16 million, respectively | ||
| Liquidity risk | We are exposed to liquidity risk for financial liabilities. |
• Sufficient cash from operating activities, possible capital markets financing and committed bank facilities to fund our operations and fulfill our obligations as they become due
• Refer to section 6.7, Liquidity – Contractual obligations, for a maturity analysis of our recognized financial liabilities | ||
| Foreign currency risk | We are exposed to foreign currency risk related to anticipated transactions and certain foreign currency debt.
A 10% depreciation (appreciation) in the value of the Canadian dollar relative to the U.S. dollar would result in a gain (loss) of $7 million ($19 million) recognized in net earnings from continuing operations at December 31, 2020 and a gain (loss) of $245 million ($215 million) recognized in OCI from continuing operations at December 31, 2020, 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 $4 million recognized in OCI from continuing operations at December 31, 2020, with all other variables held constant.
Refer to the following Fair value section for details on our derivative financial instruments. |
• Foreign currency forward contracts and options on our anticipated transactions and commercial paper maturing in 2021 to 2022 of $2.2 billion in U.S. dollars ($2.9 billion in Canadian dollars) and $2.2 billion in Philippine pesos ($59 million in Canadian dollars) at December 31, 2020, to manage foreign currency risk related to anticipated transactions and certain foreign currency debt
• For cash flow hedges, changes in the fair value are recognized in OCI from continuing operations, except for any ineffective portion, which is recognized immediately in earnings in Other (expense) income. Realized gains and losses in Accumulated OCI are reclassified to the income statements or to the initial cost of the non-financial asset in the same periods as the corresponding hedged transactions are recognized.
• For economic hedges, changes in the fair value are recognized in Other (expense) income
• At December 31, 2020, we had outstanding cross currency interest rate swaps with notional amounts of $1,750 million in U.S. dollars ($2,301 million in Canadian dollars) to hedge the U.S. currency exposure of our Series US-1 and Series US-2 Notes maturing in 2048 and 2049, respectively
• For cross currency interest rate swaps, changes in the fair value of these derivatives and the related debt are recognized in Other (expense) income in the income statements and offset, unless a portion of the hedging relationship is ineffective | ||
| Interest rate risk | We are exposed to risk on the interest rates of our debt, our post-employment benefit plans and on dividend rate resets on our preferred shares.
A 1% increase (decrease) in interest rates would result in an increase (decrease) of $20 million ($26 million) in net earnings from continuing operations at December 31, 2020.
Refer to the following Fair value section for details on our derivative financial instruments. |
• We use interest rate swaps to economically hedge dividend rate resets on preferred shares. We also use interest rate locks to hedge the interest rates on future debt issuances.
• In 2020, we entered into interest rate options to economically hedge the dividend rate resets on $582 million of our preferred shares having varying reset dates in 2021
• For interest rate options, changes in the fair value of these derivatives are recognized immediately in Other (expense) income in the income statements
• There were no interest rate locks outstanding as of December 31, 2020
• For our post-employment benefit plans, the interest rate risk is managed using a liability matching approach which reduces the exposure of the DB pension plans to a mismatch between investment growth and obligation growth | ||
BCE INC. 2020 ANNUAL REPORT | 87
6 MD&A Financial and capital management
| FINANCIAL | DESCRIPTION | MANAGEMENT OF RISK AND | ||
| RISK | OF RISK | FINANCIAL STATEMENT CLASSIFICATION | ||
| Equity price risk | We are exposed to risk on our cash flow related to the settlement of equity settled share-based compensation plans and the equity price risk related to a cash-settled share-based payment plan.
A 5% increase (decrease) in the market price of BCE’s common shares at December 31, 2020 would result in a gain (loss) of $39 million recognized in net earnings from continuing operations for 2020, with all other variables held constant.
Refer to the following Fair value section for details on our derivative financial instruments. |
• Equity forward contracts with a fair value liability of $82 million at December 31, 2020 on BCE’s common shares to economically hedge the cash flow exposure related to the settlement of equity settled share-based compensation plans and the equity price risk related to a cash-settled share-based payment plan
• Changes in the fair value of these derivatives are recorded in the income statements in Operating costs for derivatives used to hedge a cash-settled share-based payment plan and Other (expense) income for derivatives used to hedge equity settled share-based payment plans | ||
| Commodity price risk | We are exposed to risk on the purchase cost of fuel.
A 25% increase (decrease) in the market price of fuel at December 31, 2020 would result in a gain (loss) of $3 million recognized in net earnings from continuing operations, with all other variables held constant.
Refer to the following Fair value section for details on our derivative financial instruments. |
• In 2020, we entered into fuel swaps to economically hedge the purchase cost of fuel in 2020 and 2021. The fair value of our fuel swaps at December 31, 2020 was an asset of $3 million.
• Changes in the fair value of these derivatives are recorded in the income statements in Other (expense) income | ||
| Longevity risk | We are exposed to life expectancy risk on our post-employment benefit plans. |
• The Bell Canada pension plan has an investment arrangement which hedges part of its exposure to potential increases in longevity, which covers approximately $4 billion of post-employment benefit obligations | ||
FAIR VALUE
The following table provides the fair value details of other financial instruments measured at amortized cost in the statements of financial position.
|
DECEMBER 31, 2020 |
DECEMBER 31, 2019 | |||||||||||||||||||
| CARRYING | FAIR | CARRYING | FAIR | |||||||||||||||||
| CLASSIFICATION | FAIR VALUE METHODOLOGY | VALUE | VALUE | VALUE | 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 |
82 | 86 | 82 | 85 | ||||||||||||||
| Debt securities and other debt | Debt due within one year and long-term debt | Quoted market price of debt | 20,525 | 24,366 | 18,653 | 20,905 | ||||||||||||||
88 | BCE INC. 2020 ANNUAL REPORT
6 MD&A Financial and capital management
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
| FAIR VALUE OF ASSET (LIABILITY) |
||||||||||||||||||
| CLASSIFICATION | CARRYING VALUE | |
QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1) |
|
|
OBSERVABLE MARKET DATA (LEVEL 2) |
(1) |
|
NON-OBSERVABLE MARKET INPUTS (LEVEL 3) |
(2) | ||||||||
| December 31, 2020 | ||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets | 126 | 3 | – | 123 | |||||||||||||
| Derivative financial instruments | Other current assets, trade |
(51 | ) | – | (51 | ) | – | |||||||||||
| MLSE financial liability (4) | Trade payables and other liabilities |
(149 | ) | – | – | (149 | ) | |||||||||||
| Other | Other non-current assets and liabilities |
109 | – | 167 | (58 | ) | ||||||||||||
| December 31, 2019 | ||||||||||||||||||
| Publicly-traded and privately-held investments (3) | Other non-current assets |
129 | 2 | – | 127 | |||||||||||||
| Derivative financial instruments | Other current assets, trade |
165 | – | 165 | – | |||||||||||||
| MLSE financial liability (4) | Trade payables and other liabilities |
(135 | ) | – | – | (135 | ) | |||||||||||
| Other | Other non-current assets and liabilities |
71 | 1 | 128 | (58 | ) | ||||||||||||
| (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 and impairment charges are recorded in Impairment of assets in the income statements. |
| (4) | Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust) 9% interest in MLSE at a price not less than an agreed minimum price, should the Master Trust exercise its put option. The obligation to repurchase is marked to market each reporting period and any gain or loss is recorded in Other (expense) income in the income statements. |
The following table provides BCE’s and Bell Canada’s credit ratings, which are considered investment grade, as at March 4, 2021 from DBRS, Moody’s and S&P.
KEY CREDIT RATINGS
| BELL CANADA (1) | ||||||||||||
| MARCH 4, 2021 | DBRS | MOODY’S | S&P | |||||||||
| Commercial paper |
R-2 (high) | P-2 | A-1 (Low) (Canadian scale) | |||||||||
| A-2 (Global scale) | ||||||||||||
| Long-term debt |
BBB (high) | Baa1 | BBB+ | |||||||||
| Subordinated long-term debt |
BBB (low) | Baa2 | BBB | |||||||||
| BCE (1) | ||||||||||||
| DBRS | MOODY’S | S&P | ||||||||||
| Preferred shares |
Pfd-3 | – | P-2 (Low) (Canadian scale) | |||||||||
| BBB- (Global scale) | ||||||||||||
| (1) | These credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency. Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor. Each credit rating should be evaluated independently of any other credit rating. |
As of March 4, 2021, BCE and Bell Canada’s credit ratings have stable outlooks from DBRS, Moody’s and S&P.
BCE INC. 2020 ANNUAL REPORT | 89
6 MD&A Financial and capital management
This section contains forward-looking statements, including relating to the sources of liquidity we expect to use to meet our 2021 cash requirements. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
SOURCES OF LIQUIDITY
The table below is a summary of our total bank credit facilities at December 31, 2020.
| DECEMBER 31, 2020 | TOTAL AVAILABLE |
DRAWN | LETTERS OF CREDIT |
COMMERCIAL PAPER OUTSTANDING |
NET AVAILABLE |
|||||||||||||||
| Committed credit facilities |
||||||||||||||||||||
| Unsecured revolving and expansion credit facilities (1) (2) |
3,500 | – | – | 349 | 3,151 | |||||||||||||||
| Other |
106 | – | 106 | – | – | |||||||||||||||
| Total committed credit facilities |
3,606 | – | 106 | 349 | 3,151 | |||||||||||||||
| Total non-committed credit facilities |
1,939 | – | 1,082 | – | 857 | |||||||||||||||
| Total committed and non-committed credit facilities |
5,545 | – | 1,188 | 349 | 4,008 | |||||||||||||||
| (1) | Bell Canada’s $2.5 billion committed revolving credit facility expires in November 2024 and its $1 billion committed expansion credit facility expires in November 2022. |
| (2) | As of December 31, 2020, Bell Canada’s outstanding commercial paper included $274 million in U.S. dollars ($349 million in Canadian dollars). All of Bell Canada’s commercial paper outstanding is included in debt due within one year. |
CASH REQUIREMENTS
90 | BCE INC. 2020 ANNUAL REPORT
6 MD&A Financial and capital management
| 2021 EXPECTED FUNDING | TOTAL | |||
| DB pension plans |
180 | |||
| DC pension plans |
120 | |||
| OPEBs |
70 | |||
| Total net post-employment benefit plans |
370 | |||
DIVIDEND PAYMENTS
In 2021, the cash dividends to be paid on BCE’s common shares are expected to be higher than in 2020 as BCE’s annual common share dividend increased by 5.1% to $3.50 per common share from $3.33 per common share effective with the dividend payable on April 15, 2021. The declaration of dividends is subject to the discretion of the BCE Board.
CONTRACTUAL OBLIGATIONS
The following table is a summary of our contractual obligations at December 31, 2020 that are due in each of the next five years and thereafter.
| AT DECEMBER 31, 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | THERE- AFTER |
TOTAL | |||||||||||||||||||||
| Recognized financial liabilities |
||||||||||||||||||||||||||||
| Long-term debt |
221 | 1,785 | 1,665 | 1,278 | 2,125 | 13,540 | 20,614 | |||||||||||||||||||||
| Notes payable |
392 | – | – | – | – | – | 392 | |||||||||||||||||||||
| Lease liabilities (1) |
921 | 832 | 611 | 459 | 406 | 2,077 | 5,306 | |||||||||||||||||||||
| Loan secured by trade receivables |
1,050 | – | – | – | – | – | 1,050 | |||||||||||||||||||||
| Interest payable on long-term debt, notes payable |
844 | 824 | 756 | 693 | 641 | 7,623 | 11,381 | |||||||||||||||||||||
| Net (receipts) payments on cross currency basis swaps |
(1 | ) | (1 | ) | – | – | – | 64 | 62 | |||||||||||||||||||
| MLSE financial liability |
149 | – | – | – | – | – | 149 | |||||||||||||||||||||
| Commitments (off-balance sheet) |
||||||||||||||||||||||||||||
| Commitments for property, plant |
975 | 835 | 608 | 416 | 250 | 352 | 3,436 | |||||||||||||||||||||
| Purchase obligations |
545 | 479 | 331 | 225 | 144 | 269 | 1,993 | |||||||||||||||||||||
| Leases committed not yet commenced |
2 | 2 | 1 | 1 | – | – | 6 | |||||||||||||||||||||
| Total |
5,098 | 4,756 | 3,972 | 3,072 | 3,566 | 23,925 | 44,389 | |||||||||||||||||||||
| (1) | Includes imputed interest of $950 million. |
LITIGATION
BCE INC. 2020 ANNUAL REPORT | 91
7 MD&A Selected annual and quarterly information
| 2020 | 2019 | 2018 | ||||||||||
| CONSOLIDATED INCOME STATEMENTS |
||||||||||||
| Operating revenues |
||||||||||||
| Service |
19,832 | 20,566 | 20,264 | |||||||||
| Product |
3,051 | 3,227 | 3,027 | |||||||||
| Total operating revenues |
22,883 | 23,793 | 23,291 | |||||||||
| Operating costs |
(13,276 | ) | (13,787 | ) | (13,855 | ) | ||||||
| Adjusted EBITDA |
9,607 | 10,006 | 9,436 | |||||||||
| Severance, acquisition and other costs |
(116 | ) | (114 | ) | (136 | ) | ||||||
| Depreciation |
(3,475 | ) | (3,458 | ) | (3,110 | ) | ||||||
| Amortization |
(929 | ) | (886 | ) | (852 | ) | ||||||
| Finance costs |
||||||||||||
| Interest expense |
(1,110 | ) | (1,125 | ) | (995 | ) | ||||||
| Interest on post-employment benefit obligations |
(46 | ) | (63 | ) | (69 | ) | ||||||
| Impairment of assets |
(472 | ) | (102 | ) | (200 | ) | ||||||
| Other (expense) income |
(194 | ) | 95 | (146 | ) | |||||||
| Income taxes |
(792 | ) | (1,129 | ) | (980 | ) | ||||||
| Net earnings from continuing operations |
2,473 | 3,224 | 2,948 | |||||||||
| Net earnings from discontinued operations |
226 | 29 | 25 | |||||||||
| Net earnings |
2,699 | 3,253 | 2,973 | |||||||||
| Net earnings from continuing operations attributable to: |
||||||||||||
| Common shareholders |
2,272 | 3,011 | 2,760 | |||||||||
| Preferred shareholders |
136 | 151 | 144 | |||||||||
|
Non-controlling interest |
65 | 62 | 44 | |||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | 2,948 | |||||||||
| Net earnings attributable to: |
||||||||||||
| Common shareholders |
2,498 | 3,040 | 2,785 | |||||||||
| Preferred shareholders |
136 | 151 | 144 | |||||||||
|
Non-controlling interest |
65 | 62 | 44 | |||||||||
| Net earnings |
2,699 | 3,253 | 2,973 | |||||||||
| Net earnings per common share – basic and diluted |
||||||||||||
| Continuing operations |
2.51 | 3.34 | 3.07 | |||||||||
| Discontinued operations |
0.25 | 0.03 | 0.03 | |||||||||
| Net earnings per common share – basic and diluted |
2.76 | 3.37 | 3.10 | |||||||||
| RATIOS |
||||||||||||
| Adjusted EBITDA margin (%) |
42.0 | % | 42.1 | % | 40.5 | % | ||||||
| Return on equity (%) (1) |
14.7 | % | 18.2 | % | 17.1 | % | ||||||
| (1) | Net earnings attributable to common shareholders divided by total average equity attributable to BCE shareholders excluding preferred shares. |
BCE INC. 2020 ANNUAL REPORT | 93
7 MD&A Selected annual and quarterly information
| 2020 | 2019 | 2018 | ||||||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||||||||||||
| Property, plant and equipment |
27,513 | 27,636 | 24,844 | |||||||||
| Total assets |
60,665 | 60,146 | 57,100 | |||||||||
| Debt due within one year (including notes payable and loans secured by trade receivables) |
2,417 | 3,881 | 4,645 | |||||||||
| Long-term debt |
23,906 | 22,415 | 19,760 | |||||||||
| Total non-current liabilities |
31,065 | 28,961 | 25,982 | |||||||||
| Equity attributable to BCE shareholders |
20,989 | 21,074 | 20,363 | |||||||||
| Total equity |
21,329 | 21,408 | 20,689 | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||
| Cash flows from operating activities |
7,754 | 7,958 | 7,384 | |||||||||
| Cash flows used in investing activities |
(3,540 | ) | (4,036 | ) | (4,386 | ) | ||||||
| Capital expenditures |
(4,202 | ) | (3,974 | ) | (3,956 | ) | ||||||
| Business acquisitions |
(65 | ) | (51 | ) | (395 | ) | ||||||
| Cash from (used in) discontinued operations |
892 | (18 | ) | (15 | ) | |||||||
| Cash flows used in financing activities |
(4,135 | ) | (4,202 | ) | (3,198 | ) | ||||||
| Issue of common shares |
26 | 240 | 11 | |||||||||
| Net (repayment) issuance of debt instruments |
(638 | ) | (1,209 | ) | 160 | |||||||
| Cash dividends paid on common shares |
(2,975 | ) | (2,819 | ) | (2,679 | ) | ||||||
| Cash dividends paid on preferred shares |
(132 | ) | (147 | ) | (149 | ) | ||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(53 | ) | (65 | ) | (16 | ) | ||||||
| Free cash flow |
3,348 | 3,738 | 3,489 | |||||||||
| SHARE INFORMATION |
||||||||||||
| Average number of common shares (millions) |
904.3 | 900.8 | 898.6 | |||||||||
| Common shares outstanding at end of year (millions) |
904.4 | 903.9 | 898.2 | |||||||||
| Market capitalization (1) |
49,226 | 54,379 | 48,440 | |||||||||
| Dividends declared per common share (dollars) |
3.33 | 3.17 | 3.02 | |||||||||
| Dividends declared on common shares |
(3,011 | ) | (2,857 | ) | (2,712 | ) | ||||||
| Dividends declared on preferred shares |
(136 | ) | (151 | ) | (144 | ) | ||||||
| Closing market price per common share (dollars) |
54.43 | 60.16 | 53.93 | |||||||||
| Total shareholder return |
(4.1 | %) | 17.5 | % | (5.6 | %) | ||||||
| RATIOS |
||||||||||||
| Capital intensity (%) |
18.4 | % | 16.7 | % | 17.0 | % | ||||||
| Price to earnings ratio (times) (2) |
19.72 | 17.85 | 17.40 | |||||||||
| OTHER DATA |
||||||||||||
| Number of employees (thousands) |
51 | 52 | 53 | |||||||||
| (1) | BCE’s common share price at the end of the year multiplied by the number of common shares outstanding at the end of the year. |
| (2) | BCE’s common share price at the end of the year divided by EPS. |
94 | BCE INC. 2020 ANNUAL REPORT
7 MD&A Selected annual and quarterly information
7.2 Quarterly financial information
The following table shows selected BCE consolidated financial data by quarter for 2020 and 2019. This quarterly information is unaudited but has been prepared on the same basis as the annual consolidated financial statements. We discuss the factors that caused our results to vary over the past eight quarters throughout this MD&A. Refer to section 1, Overview – COVID-19, in this MD&A for a description of the impacts of the COVID-19 pandemic on our financial results during 2020.
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||||||||||
| Service |
5,090 | 4,924 | 4,800 | 5,018 | 5,235 | 5,141 | 5,190 | 5,000 | ||||||||||||||||||||||||
| Product |
1,012 | 863 | 554 | 622 | 1,040 | 799 | 699 | 689 | ||||||||||||||||||||||||
| Total operating revenues |
6,102 | 5,787 | 5,354 | 5,640 | 6,275 | 5,940 | 5,889 | 5,689 | ||||||||||||||||||||||||
| Adjusted EBITDA |
2,404 | 2,454 | 2,331 | 2,418 | 2,484 | 2,568 | 2,572 | 2,382 | ||||||||||||||||||||||||
| Severance, acquisition and other costs |
(52 | ) | (26 | ) | (22 | ) | (16 | ) | (28 | ) | (23 | ) | (39 | ) | (24 | ) | ||||||||||||||||
| Depreciation |
(872 | ) | (876 | ) | (869 | ) | (858 | ) | (854 | ) | (852 | ) | (879 | ) | (873 | ) | ||||||||||||||||
| Amortization |
(233 | ) | (232 | ) | (234 | ) | (230 | ) | (224 | ) | (225 | ) | (220 | ) | (217 | ) | ||||||||||||||||
| Finance costs |
||||||||||||||||||||||||||||||||
| Interest expense |
(274 | ) | (279 | ) | (280 | ) | (277 | ) | (285 | ) | (280 | ) | (279 | ) | (281 | ) | ||||||||||||||||
| Interest on post-employment |
(11 | ) | (12 | ) | (11 | ) | (12 | ) | (16 | ) | (16 | ) | (15 | ) | (16 | ) | ||||||||||||||||
| Impairment of assets |
(12 | ) | (4 | ) | (449 | ) | (7 | ) | (96 | ) | (1 | ) | (1 | ) | (4 | ) | ||||||||||||||||
| Other (expense) income |
(38 | ) | (29 | ) | (80 | ) | (47 | ) | (18 | ) | 62 | (54 | ) | 105 | ||||||||||||||||||
| Income taxes |
(191 | ) | (262 | ) | (96 | ) | (243 | ) | (245 | ) | (319 | ) | (275 | ) | (290 | ) | ||||||||||||||||
| Net earnings from continuing operations |
721 | 734 | 290 | 728 | 718 | 914 | 810 | 782 | ||||||||||||||||||||||||
| Net earnings from discontinued operations |
211 | 6 | 4 | 5 | 5 | 8 | 7 | 9 | ||||||||||||||||||||||||
| Net earnings |
932 | 740 | 294 | 733 | 723 | 922 | 817 | 791 | ||||||||||||||||||||||||
| Net earnings from continuing operations attributable |
678 | 686 | 233 | 675 | 667 | 859 | 754 | 731 | ||||||||||||||||||||||||
| Net earnings attributable to common shareholders |
889 | 692 | 237 | 680 | 672 | 867 | 761 | 740 | ||||||||||||||||||||||||
| Net earnings per common share – basic and diluted |
||||||||||||||||||||||||||||||||
| Continuing operations |
0.75 | 0.76 | 0.26 | 0.74 | 0.73 | 0.96 | 0.84 | 0.81 | ||||||||||||||||||||||||
| Discontinued operations |
0.23 | 0.01 | – | 0.01 | 0.01 | – | 0.01 | 0.01 | ||||||||||||||||||||||||
| Net earnings per common share – basic and diluted |
0.98 | 0.77 | 0.26 | 0.75 | 0.74 | 0.96 | 0.85 | 0.82 | ||||||||||||||||||||||||
| Weighted average number of common
shares |
904.4 | 904.3 | 904.3 | 904.1 | 903.8 | 901.4 | 899.5 | 898.4 | ||||||||||||||||||||||||
| OTHER INFORMATION |
||||||||||||||||||||||||||||||||
| Cash flows from operating activities |
1,631 | 2,110 | 2,562 | 1,451 | 2,091 | 2,258 | 2,093 | 1,516 | ||||||||||||||||||||||||
| Free cash flow |
92 | 1,034 | 1,611 | 611 | 874 | 1,169 | 1,076 | 619 | ||||||||||||||||||||||||
| Capital expenditures |
(1,494 | ) | (1,031 | ) | (900 | ) | (777 | ) | (1,150 | ) | (1,009 | ) | (967 | ) | (848 | ) | ||||||||||||||||
BCE INC. 2020 ANNUAL REPORT | 95
7 MD&A Selected annual and quarterly information
FOURTH QUARTER HIGHLIGHTS
| OPERATING REVENUES | Q4 2020 | Q4 2019 | $ CHANGE | % CHANGE | ||||||||||||
| Bell Wireless |
2,408 | 2,454 | (46 | ) | (1.9%) | |||||||||||
| Bell Wireline |
3,095 | 3,135 | (40 | ) | (1.3%) | |||||||||||
| Bell Media |
791 | 879 | (88 | ) | (10.0%) | |||||||||||
| Inter-segment eliminations |
(192 | ) | (193 | ) | 1 | 0.5% | ||||||||||
| Total BCE operating revenues |
6,102 | 6,275 | (173 | ) | (2.8%) | |||||||||||
| ADJUSTED EBITDA | Q4 2020 | Q4 2019 | $ CHANGE | % CHANGE | ||||||||||||
| Bell Wireless |
903 | 931 | (28 | ) | (3.0%) | |||||||||||
| Bell Wireline |
1,312 | 1,348 | (36 | ) | (2.7%) | |||||||||||
| Bell Media |
189 | 205 | (16 | ) | (7.8%) | |||||||||||
| Total BCE adjusted EBITDA |
2,404 | 2,484 | (80 | ) | (3.2%) | |||||||||||
96 | BCE INC. 2020 ANNUAL REPORT
7 MD&A Selected annual and quarterly information
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7 MD&A Selected annual and quarterly information
SEASONALITY CONSIDERATIONS
98 | BCE INC. 2020 ANNUAL REPORT
8 MD&A Regulatory environment
100 | BCE INC. 2020 ANNUAL REPORT
8 MD&A Regulatory environment
8.3 Broadcasting Act
8.4 Radiocommunication Act
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8 MD&A Regulatory environment
8.5 Bell Canada Act
8.6 Other
102 | BCE INC. 2020 ANNUAL REPORT
9 MD&A Business risks
A risk is the possibility that an event might happen in the future that could have a negative effect on our business, financial condition, liquidity, financial results or reputation. The actual effect of any event could be materially different from what we currently anticipate. The risks described in this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, liquidity, financial results or reputation.
This section describes the principal business risks that could have a material adverse effect on our business, financial condition, liquidity, financial results or reputation, and cause actual results or events to differ materially from our expectations expressed in, or implied by, our forward-looking statements. Certain of these principal business risks have already been discussed in other sections of this MD&A, and we refer the reader to those sections for a discussion of such risks. All of the risk discussions set out in the sections referred to in the table below, as well as the risk discussion relating to the COVID-19 pandemic and general economic conditions set out in Section 3.2, Principal business risks, are incorporated by reference in this section 9.
| RISKS DISCUSSED IN OTHER SECTIONS OF THIS MD&A |
SECTION REFERENCES | |
| Competitive environment |
Section 3.2, Principal business risks
Section 5, Business segment analysis (Competitive landscape and industry trends section for each segment) | |
| Regulatory environment |
Section 3.2, Principal business risks
Section 8, Regulatory environment | |
| Security management |
Section 3.2, Principal business risks | |
|
Risks specifically relating to our Bell Wireless, Bell Wireline and Bell Media segments |
Section 5, Business segment analysis (Principal business risks section for each segment) | |
The other principal business risks that could also have a material adverse effect on our business, financial condition, liquidity, financial results or reputation are discussed below.
TECHNOLOGY/INFRASTRUCTURE TRANSFORMATION
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9 MD&A Business risks
CUSTOMER EXPERIENCE
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9 MD&A Business risks
OPERATIONAL PERFORMANCE
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9 MD&A Business risks
PEOPLE
DEPENDENCE ON THIRD-PARTY SUPPLIERS
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9 MD&A Business risks
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9 MD&A Business risks
FINANCIAL MANAGEMENT
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9 MD&A Business risks
LITIGATION AND LEGAL OBLIGATIONS
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9 MD&A Business risks
ENVIRONMENTAL AND HEALTH CONCERNS
110 | BCE INC. 2020 ANNUAL REPORT
10 MD&A Financial measures, accounting policies and controls
10 Financial measures, accounting policies and controls
This section discusses key estimates and assumptions that management has made and how they affect the amounts reported in the financial statements and notes. It also describes key changes in accounting standards and our accounting policies, and how they affect our financial statements.
We have prepared our consolidated financial statements using IFRS. Other significant accounting policies, not involving the same level of measurement uncertainty as those discussed in this section, are nevertheless important to an understanding of our financial statements. See Note 2, Significant accounting policies, and Note 3, Discontinued operations, in BCE’s 2020 consolidated financial statements for more information about the accounting principles we used to prepare our consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGMENTS
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SENSITIVITY ANALYSIS
The following table shows a sensitivity analysis of key assumptions used to measure the net post-employment benefit obligations and the net post-employment benefit plans cost for our DB pension plans and OPEB plans.
| IMPACT ON NET POST-EMPLOYMENT BENEFIT PLANS COST FOR 2020 – INCREASE/(DECREASE) |
IMPACT ON POST-EMPLOYMENT BENEFIT OBLIGATIONS AT DECEMBER 31, 2020 – INCREASE/(DECREASE) |
|||||||||||||||||||
| CHANGE IN ASSUMPTION |
INCREASE IN ASSUMPTION |
DECREASE IN ASSUMPTION |
INCREASE IN ASSUMPTION |
DECREASE IN ASSUMPTION | ||||||||||||||||
| Discount rate |
0.5% | (76 | ) | 64 | (1,897 | ) | 2,127 | |||||||||||||
| Life expectancy at age 65 |
1 year | 38 | (38 | ) | 1,092 | (1,092 | ) | |||||||||||||
112 | BCE INC. 2020 ANNUAL REPORT
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ADOPTION OF NEW OR AMENDED ACCOUNTING STANDARDS
As required, effective January 1, 2020, we adopted the following new or amended accounting standards.
| STANDARD |
DESCRIPTION |
IMPACT | ||
| IFRIC Agenda Decision on IFRS 16 – Leases |
International Financial Reporting Interpretations Committee (IFRIC) agenda decision clarifying the determination of the lease term for cancellable or renewable leases under IFRS 16. | This agenda decision did not have a significant impact on our financial statements. | ||
| Definition of a Business, Amendments to IFRS 3 – Business Combinations |
These amendments to the implementation guidance of IFRS 3 clarify the definition of a business to assist entities to determine whether a transaction should be accounted for as a business combination or an asset acquisition. | These amendments did not have any impact on our financial statements. They may affect whether future acquisitions are accounted for as business combinations or asset acquisitions, along with the resulting allocation of the purchase price between the net identifiable assets acquired and goodwill. | ||
FUTURE CHANGES TO ACCOUNTING STANDARDS
The following amended accounting standards issued by the IASB have an effective date after December 31, 2020 and have not yet been adopted by BCE.
| STANDARD |
DESCRIPTION |
IMPACT |
EFFECTIVE DATE | |||
| COVID-19-Related Rent Concessions, Amendment to IFRS 16 – Leases |
This amendment provides an optional relief to lessees from applying IFRS 16’s guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. | We did not adopt the optional relief. | Effective for annual reporting periods beginning on or after June 1, 2020. Early application is permitted. | |||
| Onerous Contracts –
|
These amendments clarify which costs should be included in determining the cost of fulfilling a contract when assessing whether a contract is onerous. | We are currently assessing the impact of these amendments. | Effective for annual reporting periods beginning on or after January 1, 2022. Early application is permitted. | |||
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10 MD&A Financial measures, accounting policies and controls
10.2 Non-GAAP financial measures and key performance indicators (KPIs)
This section describes the non-GAAP financial measures and KPIs we use in this MD&A to explain our financial results. It also provides reconciliations of the non-GAAP financial measures to the most comparable IFRS financial measures.
In 2020, we updated our definitions of adjusted net earnings, adjusted EPS and free cash flow to exclude the impacts of discontinued operations as they may affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. As a result of this change, prior periods have been restated for comparative purposes.
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
Adjusted EBITDA and adjusted EBITDA margin have no directly comparable IFRS financial measure. Alternatively, the following table provides a reconciliation of net earnings to adjusted EBITDA.
| 2020 | 2019 | |||||||
| Net earnings |
2,699 | 3,253 | ||||||
| Severance, acquisition and other costs |
116 | 114 | ||||||
| Depreciation |
3,475 | 3,458 | ||||||
| Amortization |
929 | 886 | ||||||
| Finance costs |
||||||||
| Interest expense |
1,110 | 1,125 | ||||||
| Interest on post-employment benefit obligations |
46 | 63 | ||||||
| Impairment of assets |
472 | 102 | ||||||
| Other expense (income) |
194 | (95 | ) | |||||
| Income taxes |
792 | 1,129 | ||||||
| Net earnings from discontinued operations |
(226 | ) | (29 | ) | ||||
| Adjusted EBITDA |
9,607 | 10,006 | ||||||
| BCE operating revenues |
22,883 | 23,793 | ||||||
| Adjusted EBITDA margin |
42.0 | % | 42.1 | % | ||||
ADJUSTED NET EARNINGS AND ADJUSTED EPS
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10 MD&A Financial measures, accounting policies and controls
The following table is a reconciliation of net earnings attributable to common shareholders and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.
| 2020 | 2019 | |||||||||||||||
| TOTAL | PER SHARE | TOTAL | PER SHARE | |||||||||||||
| Net earnings attributable to common shareholders |
2,498 | 2.76 | 3,040 | 3.37 | ||||||||||||
| Severance, acquisition and other costs |
85 | 0.10 | 83 | 0.10 | ||||||||||||
| Net mark-to-market losses
(gains) on derivatives used to economically |
37 | 0.04 | (101 | ) | (0.11 | ) | ||||||||||
| Net (gains) losses on investments |
(46 | ) | (0.05 | ) | 39 | 0.04 | ||||||||||
| Early debt redemption costs |
37 | 0.04 | 13 | 0.01 | ||||||||||||
| Impairment of assets |
345 | 0.38 | 74 | 0.08 | ||||||||||||
| Net earnings from discontinued operations |
(226 | ) | (0.25 | ) | (29 | ) | (0.03 | ) | ||||||||
| Adjusted net earnings |
2,730 | 3.02 | 3,119 | 3.46 | ||||||||||||
FREE CASH FLOW AND DIVIDEND PAYOUT RATIO
NET DEBT
116 | BCE INC. 2020 ANNUAL REPORT
10 MD&A Financial measures, accounting policies and controls
NET DEBT LEVERAGE RATIO
ADJUSTED EBITDA TO NET INTEREST EXPENSE RATIO
KPIs
In addition to the non-GAAP financial measures described previously, we use a number of 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 | |
| ABPU |
Average billing per user (ABPU) or subscriber approximates the average amount billed to customers on a monthly basis, including monthly billings related to device financing receivables owing from customers on contract, which is used to track our recurring billing streams. Wireless blended ABPU is calculated by dividing certain customer billings by the average subscriber base for the specified period and is expressed as a dollar unit per month. | |
|
Capital intensity |
Capital expenditures divided by operating revenues. | |
| Churn |
Churn is the rate at which existing subscribers cancel their services. It is a measure of our ability to retain our customers. Wireless churn is calculated by dividing the number of deactivations during a given period by the average number of subscribers in the base for the specified period and is expressed as a percentage per month. | |
| Subscriber unit |
Wireless subscriber unit is comprised of an active revenue-generating unit (e.g. mobile device, tablet or wireless Internet products), with a unique identifier (typically International Mobile Equipment Identity (IMEI) number), that has access to our wireless networks. We report wireless subscriber units in two categories: postpaid and prepaid. Prepaid subscriber units are considered active for a period of 90 days following the expiry of the subscriber’s prepaid balance.
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet, satellite TV, IPTV, and/or 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 NAS subscribers are based on a line count and are represented by a unique telephone number | ||
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10.3 Effectiveness of internal controls
DISCLOSURE CONTROLS AND PROCEDURES
INTERNAL CONTROL OVER FINANCIAL REPORTING
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes were made in our internal control over financial reporting during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
118 | BCE INC. 2020 ANNUAL REPORT
Consolidated financial statements
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Consolidated financial statements
CONSOLIDATED INCOME STATEMENTS
| FOR THE YEAR ENDED DECEMBER 31 (IN MILLIONS OF CANADIAN DOLLARS, EXCEPT SHARE AMOUNTS) |
NOTE | 2020 | 2019 | |||||||||
| Operating revenues |
4 | 22,883 | 23,793 | |||||||||
| Operating costs |
4, 5 | (13,276 | ) | (13,787 | ) | |||||||
| Severance, acquisition and other costs |
6 | (116 | ) | (114 | ) | |||||||
| Depreciation |
16 | (3,475 | ) | (3,458 | ) | |||||||
| Amortization |
18 | (929 | ) | (886 | ) | |||||||
| Finance costs |
||||||||||||
| Interest expense |
7 | (1,110 | ) | (1,125 | ) | |||||||
| Interest on post-employment benefit obligations |
26 | (46 | ) | (63 | ) | |||||||
| Impairment of assets |
8, 16, 18 | (472 | ) | (102 | ) | |||||||
| Other (expense) income |
9 | (194 | ) | 95 | ||||||||
| Income taxes |
10 | (792 | ) | (1,129 | ) | |||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||||||
| Net earnings from discontinued operations |
3 | 226 | 29 | |||||||||
| Net earnings |
2,699 | 3,253 | ||||||||||
| Net earnings from continuing operations attributable to: |
||||||||||||
| Common shareholders |
2,272 | 3,011 | ||||||||||
| Preferred shareholders |
136 | 151 | ||||||||||
|
Non-controlling interest |
65 | 62 | ||||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||||||
| Net earnings attributable to: |
||||||||||||
| Common shareholders |
2,498 | 3,040 | ||||||||||
| Preferred shareholders |
136 | 151 | ||||||||||
|
Non-controlling interest |
35 | 65 | 62 | |||||||||
| Net earnings |
2,699 | 3,253 | ||||||||||
| Net earnings per common share – basic and diluted |
11 | |||||||||||
| Continuing operations |
2.51 | 3.34 | ||||||||||
| Discontinued operations |
3 | 0.25 | 0.03 | |||||||||
| Net earnings per common share – basic and diluted |
2.76 | 3.37 | ||||||||||
| Weighted average number of common shares outstanding – basic (millions) |
904.3 | 900.8 | ||||||||||
124 | BCE INC. 2020 ANNUAL REPORT
Consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| FOR THE YEAR ENDED DECEMBER 31 (IN MILLIONS OF CANADIAN DOLLARS) |
NOTE | 2020 | 2019 | |||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||||||
| Other comprehensive income from continuing operations, net of income taxes |
||||||||||||
| Items that will be subsequently reclassified to net earnings |
||||||||||||
| Net change in value of publicly-traded and privately-held investments, net of income taxes |
(15 | ) | 6 | |||||||||
| Net change in value of derivatives designated as cash flow hedges, net of income
taxes |
(33 | ) | 112 | |||||||||
| Items that will not be reclassified to net earnings |
||||||||||||
| Actuarial gains on post-employment benefit plans, net of income taxes of ($184) million |
26 | 503 | 140 | |||||||||
| Net change in value of derivatives designated as
cash flow hedges, net of income taxes |
(1 | ) | (25 | ) | ||||||||
| Other comprehensive income from continuing operations |
454 | 233 | ||||||||||
| Net earnings from discontinued operations attributable to common shareholders |
226 | 29 | ||||||||||
| Total comprehensive income |
3,153 | 3,486 | ||||||||||
| Total comprehensive income attributable to: |
||||||||||||
| Common shareholders |
2,953 | 3,277 | ||||||||||
| Preferred shareholders |
136 | 151 | ||||||||||
|
Non-controlling interest |
35 | 64 | 58 | |||||||||
| Total comprehensive income |
3,153 | 3,486 | ||||||||||
BCE INC. 2020 ANNUAL REPORT | 125
Consolidated financial statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| (IN MILLIONS OF CANADIAN DOLLARS) | NOTE | DECEMBER 31, 2020 | DECEMBER 31, 2019 | |||||||||
| ASSETS |
||||||||||||
| Current assets |
||||||||||||
| Cash |
224 | 141 | ||||||||||
| Cash equivalents |
– | 4 | ||||||||||
| Trade and other receivables |
12 | 3,528 | 3,038 | |||||||||
| Inventory |
13 | 439 | 427 | |||||||||
| Contract assets |
14 | 687 | 1,111 | |||||||||
| Contract costs |
15 | 402 | 415 | |||||||||
| Prepaid expenses |
209 | 194 | ||||||||||
| Other current assets |
199 | 190 | ||||||||||
| Total current assets |
5,688 | 5,520 | ||||||||||
| Non-current assets |
||||||||||||
| Contract assets |
14 | 256 | 533 | |||||||||
| Contract costs |
15 | 362 | 368 | |||||||||
| Property, plant and equipment |
16 | 27,513 | 27,636 | |||||||||
| Intangible assets |
18 | 13,102 | 13,352 | |||||||||
| Deferred tax assets |
10 | 106 | 98 | |||||||||
| Investments in associates and joint ventures |
19 | 756 | 698 | |||||||||
| Post-employment benefit assets |
26 | 1,277 | 558 | |||||||||
| Other non-current assets |
20 | 1,001 | 716 | |||||||||
| Goodwill |
21 | 10,604 | 10,667 | |||||||||
| Total non-current assets |
54,977 | 54,626 | ||||||||||
| Total assets |
60,665 | 60,146 | ||||||||||
| LIABILITIES |
||||||||||||
| Current liabilities |
||||||||||||
| Trade payables and other liabilities |
22 | 3,935 | 3,954 | |||||||||
| Contract liabilities |
14 | 717 | 683 | |||||||||
| Interest payable |
222 | 227 | ||||||||||
| Dividends payable |
766 | 729 | ||||||||||
| Current tax liabilities |
214 | 303 | ||||||||||
| Debt due within one year |
23 | 2,417 | 3,881 | |||||||||
| Total current liabilities |
8,271 | 9,777 | ||||||||||
| Non-current liabilities |
||||||||||||
| Contract liabilities |
14 | 242 | 207 | |||||||||
| Long-term debt |
24 | 23,906 | 22,415 | |||||||||
| Deferred tax liabilities |
10 | 3,810 | 3,561 | |||||||||
| Post-employment benefit obligations |
26 | 1,962 | 1,907 | |||||||||
| Other non-current liabilities |
27 | 1,145 | 871 | |||||||||
| Total non-current liabilities |
31,065 | 28,961 | ||||||||||
| Total liabilities |
39,336 | 38,738 | ||||||||||
| Commitments and contingencies |
33 | |||||||||||
| EQUITY |
||||||||||||
| Equity attributable to BCE shareholders |
||||||||||||
| Preferred shares |
29 | 4,003 | 4,004 | |||||||||
| Common shares |
29 | 20,390 | 20,363 | |||||||||
| Contributed surplus |
29 | 1,174 | 1,178 | |||||||||
| Accumulated other comprehensive income |
103 | 161 | ||||||||||
| Deficit |
(4,681 | ) | (4,632 | ) | ||||||||
| Total equity attributable to BCE shareholders |
20,989 | 21,074 | ||||||||||
|
Non-controlling interest |
35 | 340 | 334 | |||||||||
| Total equity |
21,329 | 21,408 | ||||||||||
| Total liabilities and equity |
60,665 | 60,146 | ||||||||||
126 | BCE INC. 2020 ANNUAL REPORT
Consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
ATTRIBUTABLE TO BCE SHAREHOLDERS |
||||||||||||||||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2020 (IN MILLIONS OF CANADIAN DOLLARS) |
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, 2019 |
4,004 | 20,363 | 1,178 | 161 | (4,632 | ) | 21,074 | 334 | 21,408 | |||||||||||||||||||||||||||
| Net earnings |
– | – | – | – | 2,634 | 2,634 | 65 | 2,699 | ||||||||||||||||||||||||||||
| Other comprehensive (loss) income |
– | – | – | (48 | ) | 503 | 455 | (1 | ) | 454 | ||||||||||||||||||||||||||
| Total comprehensive (loss) income |
– | – | – | (48 | ) | 3,137 | 3,089 | 64 | 3,153 | |||||||||||||||||||||||||||
| Common shares issued under |
29 | – | 27 | (1 | ) | – | – | 26 | – | 26 | ||||||||||||||||||||||||||
| Other share-based compensation |
29 | – | – | (3 | ) | – | (35 | ) | (38 | ) | – | (38 | ) | |||||||||||||||||||||||
| Repurchase of preferred shares |
29 | (1 | ) | – | – | – | – | (1 | ) | – | (1 | ) | ||||||||||||||||||||||||
| Dividends declared on BCE common |
– | – | – | – | (3,147 | ) | (3,147 | ) | – | (3,147 | ) | |||||||||||||||||||||||||
| Dividends declared by subsidiaries |
– | – | – | – | – | – | (53 | ) | (53 | ) | ||||||||||||||||||||||||||
| Settlement of cash flow hedges |
– | – | – | (10 | ) | – | (10 | ) | – | (10 | ) | |||||||||||||||||||||||||
| Other |
– | – | – | – | (4 | ) | (4 | ) | (5 | ) | (9 | ) | ||||||||||||||||||||||||
| Balance at December 31, 2020 |
4,003 | 20,390 | 1,174 | 103 | (4,681 | ) | 20,989 | 340 | 21,329 | |||||||||||||||||||||||||||
|
ATTRIBUTABLE TO BCE SHAREHOLDERS |
||||||||||||||||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 (IN MILLIONS OF CANADIAN DOLLARS) |
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, 2018 |
4,004 | 20,036 | 1,170 | 90 | (4,937 | ) | 20,363 | 326 | 20,689 | |||||||||||||||||||||||||||
| Adoption of IFRS 16 |
2 | – | – | – | – | (19 | ) | (19 | ) | (1 | ) | (20 | ) | |||||||||||||||||||||||
| Balance at January 1, 2019 |
4,004 | 20,036 | 1,170 | 90 | (4,956 | ) | 20,344 | 325 | 20,669 | |||||||||||||||||||||||||||
| Net earnings |
– | – | – | – | 3,191 | 3,191 | 62 | 3,253 | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
– | – | – | 97 | 140 | 237 | (4 | ) | 233 | |||||||||||||||||||||||||||
| Total comprehensive income |
– | – | – | 97 | 3,331 | 3,428 | 58 | 3,486 | ||||||||||||||||||||||||||||
| Common shares issued under |
29 | – | 251 | (11 | ) | – | – | 240 | – | 240 | ||||||||||||||||||||||||||
| Common shares issued under |
29 | – | 75 | – | – | – | 75 | – | 75 | |||||||||||||||||||||||||||
| Other share-based compensation |
29 | – | 1 | 19 | – | 1 | 21 | – | 21 | |||||||||||||||||||||||||||
| Dividends declared on BCE common |
– | – | – | – | (3,008 | ) | (3,008 | ) | – | (3,008 | ) | |||||||||||||||||||||||||
| Dividends declared by subsidiaries |
– | – | – | – | – | – | (64 | ) | (64 | ) | ||||||||||||||||||||||||||
| Settlement of cash flow hedges |
– | – | – | (26 | ) | – | (26 | ) | – | (26 | ) | |||||||||||||||||||||||||
| Other |
– | – | – | – | – | – | 15 | 15 | ||||||||||||||||||||||||||||
| Balance at December 31, 2019 |
4,004 | 20,363 | 1,178 | 161 | (4,632 | ) | 21,074 | 334 | 21,408 | |||||||||||||||||||||||||||
BCE INC. 2020 ANNUAL REPORT | 127
Consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
| FOR THE YEAR ENDED DECEMBER 31 (IN MILLIONS OF CANADIAN DOLLARS) |
NOTE | 2020 | 2019 | |||||||||
| Cash flows from operating activities |
||||||||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities |
||||||||||||
| Severance, acquisition and other costs |
6 | 116 | 114 | |||||||||
| Depreciation and amortization |
16, 18 | 4,404 | 4,344 | |||||||||
| Post-employment benefit plans cost |
26 | 315 | 309 | |||||||||
| Net interest expense |
1,087 | 1,101 | ||||||||||
| Impairment of assets |
8 | 472 | 102 | |||||||||
| Gains on investments |
9 | (3 | ) | (18 | ) | |||||||
| Income taxes |
10 | 792 | 1,129 | |||||||||
| Contributions to post-employment benefit plans |
26 | (297 | ) | (290 | ) | |||||||
| Payments under other post-employment benefit plans |
26 | (61 | ) | (72 | ) | |||||||
| Severance and other costs paid |
(78 | ) | (167 | ) | ||||||||
| Interest paid |
(1,112 | ) | (1,079 | ) | ||||||||
| Income taxes paid (net of refunds) |
(846 | ) | (725 | ) | ||||||||
| Acquisition and other costs paid |
(35 | ) | (60 | ) | ||||||||
| Net change in operating assets and liabilities |
473 | (48 | ) | |||||||||
| Cash from discontinued operations |
3 | 54 | 94 | |||||||||
| Cash flows from operating activities |
7,754 | 7,958 | ||||||||||
| Cash flows used in investing activities |
||||||||||||
| Capital expenditures |
4 | (4,202 | ) | (3,974 | ) | |||||||
| Business acquisitions |
(65 | ) | (51 | ) | ||||||||
| Acquisition of spectrum licences |
(86 | ) | – | |||||||||
| Other investing activities |
(79 | ) | 7 | |||||||||
| Cash from (used in) discontinued operations |
3 | 892 | (18 | ) | ||||||||
| Cash flows used in investing activities |
(3,540 | ) | (4,036 | ) | ||||||||
| Cash flows used in financing activities |
||||||||||||
| Decrease in notes payable |
(1,641 | ) | (1,073 | ) | ||||||||
| Increase in securitized trade receivables |
– | 131 | ||||||||||
| Issue of long-term debt |
24 | 6,006 | 1,954 | |||||||||
| Repayment of long-term debt |
24 | (5,003 | ) | (2,221 | ) | |||||||
| Issue of common shares |
29 | 26 | 240 | |||||||||
| Purchase of shares for settlement of share-based payments |
30 | (263 | ) | (142 | ) | |||||||
| Cash dividends paid on common shares |
(2,975 | ) | (2,819 | ) | ||||||||
| Cash dividends paid on preferred shares |
(132 | ) | (147 | ) | ||||||||
| Cash dividends paid by subsidiaries to non-controlling interest |
(53 | ) | (65 | ) | ||||||||
| Other financing activities |
(93 | ) | (54 | ) | ||||||||
| Cash used in discontinued operations |
3 | (7 | ) | (6 | ) | |||||||
| Cash flows used in financing activities |
(4,135 | ) | (4,202 | ) | ||||||||
| Net increase (decrease) in cash |
83 | (284 | ) | |||||||||
| Cash at beginning of year |
141 | 425 | ||||||||||
| Cash at end of year |
224 | 141 | ||||||||||
| Net (decrease) increase in cash equivalents |
(4 | ) | 4 | |||||||||
| Cash equivalents at beginning of year |
4 | – | ||||||||||
| Cash equivalents at end of year |
– | 4 | ||||||||||
128 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
Notes to consolidated financial statements
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
Note 2 | Significant accounting policies
A) BASIS OF PRESENTATION
B) BASIS OF CONSOLIDATION
C) REVENUE FROM CONTRACTS WITH CUSTOMERS
BCE INC. 2020 ANNUAL REPORT | 129
Notes to consolidated financial statements
D) SHARE-BASED PAYMENTS
130 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
DSP
E) INCOME AND OTHER TAXES
F) CASH EQUIVALENTS
Cash equivalents are comprised of highly liquid investments with original maturities of three months or less from the date of purchase and are measured at amortized cost.
G) SECURITIZATION OF TRADE RECEIVABLES
Proceeds on the securitization of trade receivables are recognized as a collateralized borrowing as we do not transfer control and substantially all the risks and rewards of ownership to another entity.
H) INVENTORY
I) PROPERTY, PLANT AND EQUIPMENT
BCE INC. 2020 ANNUAL REPORT | 131
Notes to consolidated financial statements
J) INTANGIBLE ASSETS
132 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
K) DEPRECIATION AND AMORTIZATION
L) INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS
M) BUSINESS COMBINATIONS AND GOODWILL
N) IMPAIRMENT OF NON-FINANCIAL ASSETS
BCE INC. 2020 ANNUAL REPORT | 133
Notes to consolidated financial statements
O) FINANCIAL INSTRUMENTS AND CONTRACT ASSETS
P) DERIVATIVE FINANCIAL INSTRUMENTS
Q) POST-EMPLOYMENT BENEFIT PLANS
DEFINED BENEFIT (DB) AND OTHER POST-EMPLOYMENT BENEFIT (OPEB) PLANS
134 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
R) PROVISIONS
S) ESTIMATES AND KEY JUDGMENTS
BCE INC. 2020 ANNUAL REPORT | 135
Notes to consolidated financial statements
136 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
T) ADOPTION OF NEW OR AMENDED ACCOUNTING STANDARDS
As required, effective January 1, 2020, we adopted the following new or amended accounting standards.
| STANDARD | DESCRIPTION | IMPACT | ||
| IFRIC Agenda Decision on IFRS 16 – Leases |
International Financial Reporting Interpretations Committee (IFRIC) agenda decision clarifying the determination of the lease term for cancellable or renewable leases under IFRS 16.
|
This agenda decision did not have a significant impact on our financial statements. | ||
| Definition of a Business, Amendments to IFRS 3 – Business Combinations |
These amendments to the implementation guidance of IFRS 3 clarify the definition of a business to assist entities to determine whether a transaction should be accounted for as a business combination or an asset acquisition. | These amendments did not have any impact on our financial statements. They may affect whether future acquisitions are accounted for as business combinations or asset acquisitions, along with the resulting allocation of the purchase price between the net identifiable assets acquired and goodwill.
| ||
U) FUTURE CHANGES TO ACCOUNTING STANDARDS
The following amended accounting standards issued by the IASB have an effective date after December 31, 2020 and have not yet been adopted by BCE.
| STANDARD | DESCRIPTION | IMPACT | EFFECTIVE DATE | |||
| COVID-19-Related Rent Concessions, Amendment to IFRS 16 – Leases
|
This amendment provides an optional relief to lessees from applying IFRS 16’s guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic.
|
We did not adopt the optional relief. | Effective for annual reporting periods beginning on or after June 1, 2020. Early application is permitted. | |||
| 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. | We are currently assessing the impact of these amendments. | Effective for annual reporting periods beginning on or after January 1, 2022. Early application is permitted. | |||
Note 3 | Discontinued operations
The following table summarizes the carrying value of the assets and liabilities sold:
| 2020 | ||||
| Contract assets |
1 | |||
| Contract costs |
2 | |||
| Property, plant and equipment |
484 | |||
| Intangible assets |
227 | |||
| Goodwill |
115 | |||
| Total assets sold |
829 | |||
| Long-term debt |
113 | |||
| Deferred tax liability |
37 | |||
| Other non-current liabilities |
9 | |||
| Total liabilities sold |
159 | |||
| Net assets sold |
670 | |||
BCE INC. 2020 ANNUAL REPORT | 137
Notes to consolidated financial statements
The following tables summarize the income statements and statements of cash flows of our discontinued operations up to the point of sale.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Operating revenues |
118 | 171 | ||||||
| Operating costs |
(57 | ) | (71 | ) | ||||
| Depreciation |
(18 | ) | (38 | ) | ||||
| Amortization |
(7 | ) | (16 | ) | ||||
| Interest expense |
(6 | ) | (7 | ) | ||||
| Other expense |
(8 | ) | (6 | ) | ||||
| Income taxes |
(7 | ) | (4 | ) | ||||
| Net earnings attributable to common shareholders before gain on sale |
15 | 29 | ||||||
| Gain on sale (net of taxes of $3 million) |
211 | – | ||||||
| Net earnings attributable to common shareholders |
226 | 29 | ||||||
|
|
||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Cash flows from operating activities |
54 | 94 | ||||||
| Cash flows from (used in) investing activities |
892 | (18 | ) | |||||
| Cash flows used in financing activities |
(7 | ) | (6 | ) | ||||
| Net increase in cash |
939 | 70 | ||||||
Note 4 | Segmented information
138 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
SEGMENTED INFORMATION
| FOR THE YEAR ENDED DECEMBER 31, 2020 | NOTE | BELL WIRELESS |
BELL WIRELINE |
BELL MEDIA |
INTER-SEGMENT ELIMINATIONS |
BCE | ||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||
| External customers |
8,630 | 11,884 | 2,369 | – | 22,883 | |||||||||||||||||||
| Inter-segment |
53 | 322 | 381 | (756 | ) | – | ||||||||||||||||||
| Total operating revenues |
8,683 | 12,206 | 2,750 | (756 | ) | 22,883 | ||||||||||||||||||
| Operating costs |
5 | (5,017 | ) | (6,960 | ) | (2,055 | ) | 756 | (13,276 | ) | ||||||||||||||
| Segment profit (1) |
3,666 | 5,246 | 695 | – | 9,607 | |||||||||||||||||||
| Severance, acquisition and other costs |
6 | (116 | ) | |||||||||||||||||||||
| Depreciation and amortization |
16, 18 | (4,404 | ) | |||||||||||||||||||||
| Finance costs |
||||||||||||||||||||||||
| Interest expense |
7 | (1,110 | ) | |||||||||||||||||||||
| Interest on post-employment benefit obligations |
26 | (46 | ) | |||||||||||||||||||||
| Impairment of assets |
8 | (472 | ) | |||||||||||||||||||||
| Other expense |
9 | (194 | ) | |||||||||||||||||||||
| Income taxes |
10 | (792 | ) | |||||||||||||||||||||
| Net earnings from continuing operations |
2,473 | |||||||||||||||||||||||
| Net earnings from discontinued operations |
3 | 226 | ||||||||||||||||||||||
| Net earnings |
2,699 | |||||||||||||||||||||||
| Goodwill |
21 | 3,046 | 4,612 | 2,946 | – | 10,604 | ||||||||||||||||||
| Indefinite-life intangible assets |
18 | 4,063 | 1,692 | 2,085 | – | 7,840 | ||||||||||||||||||
| Capital expenditures |
916 | 3,161 | 125 | – | 4,202 | |||||||||||||||||||
| (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 YEAR ENDED DECEMBER 31, 2019 | NOTE | BELL WIRELESS |
BELL WIRELINE |
BELL MEDIA |
INTER-SEGMENT ELIMINATIONS |
BCE | ||||||||||||||||||
| Operating revenues |
||||||||||||||||||||||||
| External customers |
8,946 | 12,036 | 2,811 | – | 23,793 | |||||||||||||||||||
| Inter-segment |
55 | 281 | 406 | (742 | ) | – | ||||||||||||||||||
| Total operating revenues |
9,001 | 12,317 | 3,217 | (742 | ) | 23,793 | ||||||||||||||||||
| Operating costs |
5 | (5,210 | ) | (6,952 | ) | (2,367 | ) | 742 | (13,787 | ) | ||||||||||||||
| Segment profit (1) |
3,791 | 5,365 | 850 | – | 10,006 | |||||||||||||||||||
| Severance, acquisition and other costs |
6 | (114 | ) | |||||||||||||||||||||
| Depreciation and amortization |
16, 18 | (4,344 | ) | |||||||||||||||||||||
| Finance costs |
||||||||||||||||||||||||
| Interest expense |
7 | (1,125 | ) | |||||||||||||||||||||
| Interest on post-employment benefit obligations |
26 | (63 | ) | |||||||||||||||||||||
| Impairment of assets |
8 | (102 | ) | |||||||||||||||||||||
| Other income |
9 | 95 | ||||||||||||||||||||||
| Income taxes |
10 | (1,129 | ) | |||||||||||||||||||||
| Net earnings from continuing operations |
3,224 | |||||||||||||||||||||||
| Net earnings from discontinued operations |
3 | 29 | ||||||||||||||||||||||
| Net earnings |
3,253 | |||||||||||||||||||||||
| Goodwill |
21 | 3,046 | 4,675 | 2,946 | – | 10,667 | ||||||||||||||||||
| Indefinite-life intangible assets |
18 | 3,948 | 1,692 | 2,381 | – | 8,021 | ||||||||||||||||||
| Capital expenditures |
671 | 3,195 | 108 | – | 3,974 | |||||||||||||||||||
| (1) | The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs. |
BCE INC. 2020 ANNUAL REPORT | 139
Notes to consolidated financial statements
REVENUES BY SERVICES AND PRODUCTS
The following table presents our revenues disaggregated by type of services and products.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
|
Services (1) |
||||||||
| Wireless |
6,122 | 6,323 | ||||||
| Wireline data |
7,691 | 7,617 | ||||||
| Wireline voice |
3,402 | 3,564 | ||||||
| Media |
2,369 | 2,811 | ||||||
| Other wireline services |
248 | 251 | ||||||
| Total services |
19,832 | 20,566 | ||||||
|
Products (2) |
||||||||
| Wireless |
2,508 | 2,623 | ||||||
| Wireline data |
494 | 556 | ||||||
| Wireline equipment and other |
49 | 48 | ||||||
| Total products |
3,051 | 3,227 | ||||||
| Total operating revenues |
22,883 | 23,793 | ||||||
| (1) | Our service revenues are generally recognized over time. |
| (2) | Our product revenues are generally recognized at a point in time. |
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Labour costs |
||||||||||||
| Wages, salaries and related taxes and benefits (1) |
(4,108 | ) | (4,281 | ) | ||||||||
| Post-employment benefit plans service cost (net of capitalized amounts) |
26 | (269 | ) | (246 | ) | |||||||
| Other labour costs (2) |
(975 | ) | (1,004 | ) | ||||||||
| Less: |
||||||||||||
| Capitalized labour |
1,007 | 1,028 | ||||||||||
| Total labour costs |
(4,345 | ) | (4,503 | ) | ||||||||
| Cost of revenues (3) |
(6,967 | ) | (7,356 | ) | ||||||||
| Other operating costs (4) |
(1,964 | ) | (1,928 | ) | ||||||||
| Total operating costs |
(13,276 | ) | (13,787 | ) | ||||||||
| (1) | Costs reported in 2020 are net of amounts from the Canada Emergency Wage Subsidy, a wage subsidy program offered by the federal government to eligible employers as a result of the COVID-19 pandemic. |
| (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. |
Research and development expenses of $47 million and $109 million are included in operating costs for 2020 and 2019, respectively.
Note 6 | Severance, acquisition and other costs
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Severance |
(35 | ) | (63 | ) | ||||
| Acquisition and other |
(81 | ) | (51 | ) | ||||
| Total severance, acquisition and other costs |
(116 | ) | (114 | ) | ||||
140 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
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.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Interest expense on long-term debt |
(1,072 | ) | (1,017 | ) | ||||
| Interest expense on other debt |
(87 | ) | (153 | ) | ||||
| Capitalized interest |
49 | 45 | ||||||
| Total interest expense |
(1,110 | ) | (1,125 | ) | ||||
BCE INC. 2020 ANNUAL REPORT | 141
Notes to consolidated financial statements
Note 9 | Other (expense) income
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Losses on retirements and disposals of property, plant and equipment and intangible assets |
(83 | ) | (9 | ) | ||||||||
| Net mark-to-market (losses)
gains on derivatives used to economically hedge equity settled |
(51 | ) | 138 | |||||||||
| Early debt redemption costs |
24 | (50 | ) | (18 | ) | |||||||
| Equity gains (losses) from investments in associates and joint ventures |
19 | |||||||||||
| Gain (loss) on investment |
43 | (53 | ) | |||||||||
| Operations |
(38 | ) | (19 | ) | ||||||||
| Gains on investments |
3 | 18 | ||||||||||
| Other |
(18 | ) | 38 | |||||||||
| Total other (expense) income |
(194 | ) | 95 | |||||||||
LOSSES ON RETIREMENTS AND DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
In 2020, we recorded a loss of $45 million due to a change in strategic direction related to the ongoing development of some of our TV platform assets under construction.
EQUITY GAINS (LOSSES) FROM INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
GAINS ON INVESTMENTS
In 2019, we recorded gains of $18 million, which included a gain on an obligation to repurchase at fair value the minority interest in one of our subsidiaries.
The following table shows the significant components of income taxes deducted from net earnings from continuing operations.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Current taxes |
||||||||
| Current taxes |
(776 | ) | (761 | ) | ||||
| Uncertain tax positions |
26 | 6 | ||||||
| Change in estimate relating to prior periods |
32 | 22 | ||||||
| Previously unrecognized tax benefits |
40 | – | ||||||
| Deferred taxes |
||||||||
| Deferred taxes relating to the origination and reversal of temporary differences |
(107 | ) | (316 | ) | ||||
| Change in estimate relating to prior periods |
(26 | ) | (8 | ) | ||||
| Recognition and utilization of loss carryforwards |
15 | (106 | ) | |||||
| Effect of change in provincial corporate tax rate |
9 | 25 | ||||||
| Uncertain tax positions |
(5 | ) | 9 | |||||
| Total income taxes |
(792 | ) | (1,129 | ) | ||||
142 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
The following table reconciles the amount of reported income taxes in the income statements with income taxes calculated at a statutory income tax rate of 26.9% for 2020 and 27.0% for 2019.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Net earnings from continuing operations |
2,473 | 3,224 | ||||||
| Add back income taxes |
792 | 1,129 | ||||||
| Earnings from continuing operations before income taxes |
3,265 | 4,353 | ||||||
| Applicable statutory tax rate |
26.9 | % | 27.0 | % | ||||
| Income taxes computed at applicable statutory rates |
(878 | ) | (1,175 | ) | ||||
| Non-taxable portion of gains on investments |
1 | 5 | ||||||
| Uncertain tax positions |
21 | 15 | ||||||
| Effect of change in provincial corporate tax rate |
9 | 25 | ||||||
| Change in estimate relating to prior periods |
6 | 14 | ||||||
| Non-taxable portion of equity gains (losses) |
2 | (20 | ) | |||||
| Previously unrecognized tax benefits |
47 | 5 | ||||||
| Other |
– | 2 | ||||||
| Total income taxes from continuing operations |
(792 | ) | (1,129 | ) | ||||
| Average effective tax rate |
24.3 | % | 25.9 | % | ||||
The following table shows aggregate current and deferred taxes relating to items recognized outside the income statements.
| 2020 | 2019 | |||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | OTHER COMPREHENSIVE INCOME |
DEFICIT | OTHER COMPREHENSIVE INCOME |
DEFICIT | ||||||||||||
| Current taxes |
– | 14 | 3 | 4 | ||||||||||||
| Deferred taxes |
(172 | ) | (20 | ) | (90 | ) | 13 | |||||||||
| Total income taxes (expense) recovery |
(172 | ) | (6 | ) | (87 | ) | 17 | |||||||||
The following table shows deferred taxes resulting from temporary differences between the carrying amounts of assets and liabilities recognized in the statements of financial position and their corresponding tax basis, as well as tax loss carryforwards.
| NET DEFERRED TAX LIABILITY | NON- CAPITAL LOSS CARRY- FORWARDS |
POST- EMPLOYMENT BENEFIT PLANS |
INDEFINITE- LIFE INTANGIBLE ASSETS |
PROPERTY, PLANT AND EQUIPMENT AND FINITE- LIFE INTANGIBLE ASSETS |
CRTC TANGIBLE BENEFITS |
OTHER | TOTAL | |||||||||||||||||||||
| January 1, 2019 |
129 | 415 | (1,763 | ) | (1,642 | ) | 16 | (199 | ) | (3,044 | ) | |||||||||||||||||
| Income statement |
(105 | ) | 3 | – | (173 | ) | (9 | ) | (112 | ) | (396 | ) | ||||||||||||||||
| Business acquisitions |
5 | – | – | (6 | ) | – | (1 | ) | (2 | ) | ||||||||||||||||||
| Other comprehensive income |
– | (54 | ) | – | – | – | (36 | ) | (90 | ) | ||||||||||||||||||
| Deficit |
– | – | – | – | – | 13 | 13 | |||||||||||||||||||||
| Discontinued operations |
– | – | – | (4 | ) | – | – | (4 | ) | |||||||||||||||||||
| Other |
2 | – | – | 46 | – | 12 | 60 | |||||||||||||||||||||
| December 31, 2019 |
31 | 364 | (1,763 | ) | (1,779 | ) | 7 | (323 | ) | (3,463 | ) | |||||||||||||||||
| Income statement |
13 | 5 | 46 | (426 | ) | (7 | ) | 255 | (114 | ) | ||||||||||||||||||
| Business acquisitions |
25 | – | – | – | – | 1 | 26 | |||||||||||||||||||||
| Other comprehensive income |
– | (184 | ) | – | – | – | 12 | (172 | ) | |||||||||||||||||||
| Deficit |
– | – | – | – | – | (20 | ) | (20 | ) | |||||||||||||||||||
| Discontinued operations |
– | – | – | 30 | – | – | 30 | |||||||||||||||||||||
| Other |
– | – | – | – | – | 9 | 9 | |||||||||||||||||||||
| December 31, 2020 |
69 | 185 | (1,717 | ) | (2,175 | ) | – | (66 | ) | (3,704 | ) | |||||||||||||||||
BCE INC. 2020 ANNUAL REPORT | 143
Notes to consolidated financial statements
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 YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Net earnings from continuing operations attributable to common shareholders – basic |
2,272 | 3,011 | ||||||
| Net earnings from discontinued operations attributable to common shareholders – basic |
226 | 29 | ||||||
| Net earnings attributable to common shareholders – basic |
2,498 | 3,040 | ||||||
| Dividends declared per common share (in dollars) |
3.33 | 3.17 | ||||||
| Weighted average number of common shares outstanding (in millions) |
||||||||
| Weighted average number of common shares outstanding – basic |
904.3 | 900.8 | ||||||
| Assumed exercise of stock options (1) |
0.1 | 0.6 | ||||||
| Weighted average number of common shares outstanding – diluted (in millions) |
904.4 | 901.4 | ||||||
| (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 10,783,936 in 2020 and 61,170 in 2019. |
Note 12 | Trade and other receivables
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Trade receivables (1) |
3,414 | 2,981 | ||||||||||
| Allowance for revenue adjustments |
(185 | ) | (104 | ) | ||||||||
| Allowance for doubtful accounts |
28 | (149 | ) | (62 | ) | |||||||
| Commodity taxes receivable |
122 | 12 | ||||||||||
| Current tax receivable |
92 | 23 | ||||||||||
| Other accounts receivable |
234 | 188 | ||||||||||
| Total trade and other receivables |
3,528 | 3,038 | ||||||||||
| (1) | The details of securitized trade receivables are set out in Note 23, Debt due within one year. |
WIRELESS DEVICE FINANCING PLAN RECEIVABLES
Wireless device financing plan receivables represent amounts owed to us under financing agreements that have not yet been billed. The current portion of these balances is included in Trade receivables within the Trade and other receivables line item on our statements of financial position and the long-term portion is included within the Other non-current assets line item on our statements of financial position.
The following table summarizes our wireless device financing plan receivables at December 31, 2020.
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Current |
649 | 85 | ||||||||||
|
Non-current |
20 | 399 | 65 | |||||||||
| Total wireless device financing plan receivables (1) |
1,048 | 150 | ||||||||||
| (1) | Excludes allowance for doubtful accounts and allowance for revenue adjustments on the current portion of $28 million and $9 million at December 31, 2020 and December 31, 2019, respectively, and allowance for doubtful accounts and allowance for revenue adjustments on the non-current portion of $17 million and $5 million at December 31, 2020 and December 31, 2019, respectively. |
144 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Wireless devices and accessories |
189 | 199 | ||||||
| Merchandise and other |
250 | 228 | ||||||
| Total inventory |
439 | 427 | ||||||
The total amount of inventory subsequently recognized as an expense in cost of revenues was $2,927 million and $3,141 million for 2020 and 2019, respectively.
Note 14 | Contract assets and liabilities
The table below provides a reconciliation of the significant changes in the contract assets and the contract liabilities balances.
| CONTRACT ASSETS (1) | CONTRACT LIABILITIES | |||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
| Opening balance, January 1 |
1,644 | 1,493 | 890 | 899 | ||||||||||||||||
| Revenue recognized included in contract liabilities |
– | – | (643 | ) | (666 | ) | ||||||||||||||
| Revenue recognized from contract liabilities included |
188 | 131 | – | – | ||||||||||||||||
| Increase in contract liabilities during the year |
– | – | 688 | 644 | ||||||||||||||||
| Increase in contract liabilities included in contract assets |
(186 | ) | (175 | ) | – | – | ||||||||||||||
| Increase in contract assets from revenue recognized |
834 | 1,915 | – | – | ||||||||||||||||
| Contract assets transferred to trade receivables |
(1,376 | ) | (1,461 | ) | 51 | 47 | ||||||||||||||
| Acquisitions |
– | – | – | (4 | ) | |||||||||||||||
| Contract terminations transferred to trade receivables |
(145 | ) | (205 | ) | 19 | 24 | ||||||||||||||
| Discontinued operations |
3 | (1 | ) | – | – | – | ||||||||||||||
| Other |
(15 | ) | (54 | ) | (46 | ) | (54 | ) | ||||||||||||
| Ending balance, December 31 |
943 | 1,644 | 959 | 890 | ||||||||||||||||
| (1) | Net of allowance for doubtful accounts of $59 million and $68 million at December 31, 2020 and December 31, 2019, respectively. See Note 28, Financial and capital management, for additional details. |
The table below provides a reconciliation of the contract costs balance.
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Opening balance, January 1 |
783 | 707 | ||||||||||
| Incremental costs of obtaining a contract and contract fulfillment costs |
535 | 602 | ||||||||||
| Amortization included in operating costs |
(552 | ) | (523 | ) | ||||||||
| Impairment charges included in operating costs |
– | (3 | ) | |||||||||
| Discontinued operations |
3 | (2 | ) | – | ||||||||
| Ending balance, December 31 |
764 | 783 | ||||||||||
Contract costs are amortized over a period ranging from 12 to 84 months.
BCE INC. 2020 ANNUAL REPORT | 145
Notes to consolidated financial statements
Note 16 | Property, plant and equipment
| FOR THE YEAR ENDED DECEMBER 31, 2020 |
NOTE | |
NETWORK INFRASTRUCTURE AND EQUIPMENT |
(1) |
|
LAND AND BUILDINGS |
(1) |
|
ASSETS UNDER CONSTRUCTION |
|
TOTAL | |||||||||
| COST |
||||||||||||||||||||
| January 1, 2020 |
67,597 | 8,079 | 1,687 | 77,363 | ||||||||||||||||
| Additions |
2,414 | 247 | 2,071 | 4,732 | ||||||||||||||||
| Acquired through business combinations |
2 | 5 | – | 7 | ||||||||||||||||
| Transfers |
964 | 49 | (1,825 | ) | (812 | ) | ||||||||||||||
| Retirements and disposals |
(1,348 | ) | (54 | ) | (32 | ) | (1,434 | ) | ||||||||||||
| Impairment losses recognized in earnings |
8 | (17 | ) | (9 | ) | (1 | ) | (27 | ) | |||||||||||
| Discontinued operations |
3 | (135 | ) | (485 | ) | (11 | ) | (631 | ) | |||||||||||
| December 31, 2020 |
69,477 | 7,832 | 1,889 | 79,198 | ||||||||||||||||
| ACCUMULATED DEPRECIATION |
||||||||||||||||||||
| January 1, 2020 |
45,914 | 3,813 | – | 49,727 | ||||||||||||||||
| Depreciation |
3,035 | 440 | – | 3,475 | ||||||||||||||||
| Retirements and disposals |
(1,268 | ) | (54 | ) | – | (1,322 | ) | |||||||||||||
| Discontinued operations |
3 | (70 | ) | (77 | ) | – | (147 | ) | ||||||||||||
| Other |
(48 | ) | – | – | (48 | ) | ||||||||||||||
| December 31, 2020 |
47,563 | 4,122 | – | 51,685 | ||||||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||||||
| January 1, 2020 |
21,683 | 4,266 | 1,687 | 27,636 | ||||||||||||||||
| December 31, 2020 |
21,914 | 3,710 | 1,889 | 27,513 | ||||||||||||||||
| (1) | Includes right-of-use assets. See Note 17, Leases, for additional details. |
| FOR THE YEAR ENDED DECEMBER 31, 2019 |
NOTE | |
NETWORK INFRASTRUCTURE AND EQUIPMENT |
(1) |
|
LAND AND BUILDINGS |
(1) |
|
ASSETS UNDER CONSTRUCTION |
|
TOTAL | |||||||||
| COST |
||||||||||||||||||||
| January 1, 2019 |
65,048 | 7,528 | 1,764 | 74,340 | ||||||||||||||||
| Additions |
2,508 | 567 | 1,694 | 4,769 | ||||||||||||||||
| Acquired through business combinations |
3 | 38 | – | 41 | ||||||||||||||||
| Transfers |
1,130 | (14 | ) | (1,772 | ) | (656 | ) | |||||||||||||
| Retirements and disposals |
(1,085 | ) | (42 | ) | – | (1,127 | ) | |||||||||||||
| Impairment losses recognized in earnings |
8 | (11 | ) | (4 | ) | – | (15 | ) | ||||||||||||
| Discontinued operations |
3 | 4 | 6 | 1 | 11 | |||||||||||||||
| December 31, 2019 |
67,597 | 8,079 | 1,687 | 77,363 | ||||||||||||||||
| ACCUMULATED DEPRECIATION |
||||||||||||||||||||
| January 1, 2019 |
43,834 | 3,405 | – | 47,239 | ||||||||||||||||
| Depreciation |
3,015 | 443 | – | 3,458 | ||||||||||||||||
| Retirements and disposals |
(1,003 | ) | (27 | ) | – | (1,030 | ) | |||||||||||||
| Discontinued operations |
3 | 14 | 23 | – | 37 | |||||||||||||||
| Other |
54 | (31 | ) | – | 23 | |||||||||||||||
| December 31, 2019 |
45,914 | 3,813 | – | 49,727 | ||||||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||||||
| January 1, 2019 |
21,214 | 4,123 | 1,764 | 27,101 | ||||||||||||||||
| December 31, 2019 |
21,683 | 4,266 | 1,687 | 27,636 | ||||||||||||||||
| (1) | Includes right-of-use assets. See Note 17, Leases, for additional details. |
146 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
RIGHT-OF-USE ASSETS
BCE’s significant right-of-use assets under leases are satellites, office premises, land, cellular tower sites, retail outlets and OOH advertising spaces. Right-of-use assets are presented in Property, plant and equipment in the statements of financial position.
| FOR THE YEAR ENDED DECEMBER 31, 2020 | NOTE | NETWORK INFRASTRUCTURE AND EQUIPMENT |
LAND AND BUILDINGS |
TOTAL | ||||||||||||
| COST |
||||||||||||||||
| January 1, 2020 |
3,609 | 2,933 | 6,542 | |||||||||||||
| Additions |
470 | 200 | 670 | |||||||||||||
| Transfers |
(360 | ) | (2 | ) | (362 | ) | ||||||||||
| Acquired through business combinations |
– | 4 | 4 | |||||||||||||
| Lease terminations |
(20 | ) | (10 | ) | (30 | ) | ||||||||||
| Impairment losses recognized in earnings |
8 | (1 | ) | (9 | ) | (10 | ) | |||||||||
| Discontinued operations |
3 | (8 | ) | (121 | ) | (129 | ) | |||||||||
| December 31, 2020 |
3,690 | 2,995 | 6,685 | |||||||||||||
| ACCUMULATED DEPRECIATION |
||||||||||||||||
| January 1, 2020 |
1,301 | 817 | 2,118 | |||||||||||||
| Depreciation |
377 | 294 | 671 | |||||||||||||
| Transfers |
(199 | ) | – | (199 | ) | |||||||||||
| Lease terminations |
(2 | ) | (6 | ) | (8 | ) | ||||||||||
| Discontinued operations |
3 | (4 | ) | (19 | ) | (23 | ) | |||||||||
| December 31, 2020 |
1,473 | 1,086 | 2,559 | |||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||
| January 1, 2020 |
2,308 | 2,116 | 4,424 | |||||||||||||
| December 31, 2020 |
2,217 | 1,909 | 4,126 | |||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 | NOTE | NETWORK INFRASTRUCTURE AND EQUIPMENT |
LAND AND BUILDINGS |
TOTAL | ||||||||||||
| COST |
||||||||||||||||
| January 1, 2019 |
3,329 | 2,453 | 5,782 | |||||||||||||
| Additions |
526 | 512 | 1,038 | |||||||||||||
| Transfers |
(233 | ) | – | (233 | ) | |||||||||||
| Acquired through business combinations |
– | 8 | 8 | |||||||||||||
| Lease terminations |
(12 | ) | (38 | ) | (50 | ) | ||||||||||
| Impairment losses recognized in earnings |
8 | (2 | ) | (3 | ) | (5 | ) | |||||||||
| Discontinued operations |
3 | 1 | 1 | 2 | ||||||||||||
| December 31, 2019 |
3,609 | 2,933 | 6,542 | |||||||||||||
| ACCUMULATED DEPRECIATION |
||||||||||||||||
| January 1, 2019 |
1,042 | 536 | 1,578 | |||||||||||||
| Depreciation |
372 | 298 | 670 | |||||||||||||
| Transfers |
(111 | ) | – | (111 | ) | |||||||||||
| Lease terminations |
(3 | ) | (22 | ) | (25 | ) | ||||||||||
| Discontinued operations |
3 | 1 | 5 | 6 | ||||||||||||
| December 31, 2019 |
1,301 | 817 | 2,118 | |||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||
| January 1, 2019 |
2,287 | 1,917 | 4,204 | |||||||||||||
| December 31, 2019 |
2,308 | 2,116 | 4,424 | |||||||||||||
BCE INC. 2020 ANNUAL REPORT | 147
Notes to consolidated financial statements
LEASES IN NET EARNINGS FROM CONTINUING OPERATIONS
The following table provides the expenses related to leases recognized in net earnings from continuing operations.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Interest expense on lease liabilities |
199 | 213 | ||||||
| Variable lease payment expenses not included in the measurement of lease liabilities |
150 | 148 | ||||||
| Expenses for leases of low value assets |
60 | 58 | ||||||
| Expenses for short-term leases |
31 | 30 | ||||||
LEASES IN THE STATEMENTS OF CASH FLOWS
Total cash outflow related to leases was $1,219 million and $1,214 million for the period ended December 31, 2020 and December 31, 2019, respectively.
ADDITIONAL DISCLOSURES
| FINITE-LIFE | INDEFINITE-LIFE | |||||||||||||||||||||||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2020 |
NOTE | SOFTWARE | CUSTOMER RELATION- SHIPS |
PROGRAM AND FEATURE |
OTHER | TOTAL | BRANDS | SPECTRUM AND OTHER LICENCES |
BROADCAST LICENCES |
TOTAL | TOTAL INTANGIBLE ASSETS |
|||||||||||||||||||||||||||||||||
| COST |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2020 |
10,522 | 2,017 | 716 | 489 | 13,744 | 2,409 | 3,586 | 2,026 | 8,021 | 21,765 | ||||||||||||||||||||||||||||||||||
| Additions |
344 | – | 874 | 41 | 1,259 | – | 116 | – | 116 | 1,375 | ||||||||||||||||||||||||||||||||||
| Acquired through business |
1 | – | 10 | – | 11 | – | – | – | – | 11 | ||||||||||||||||||||||||||||||||||
| Transfers |
810 | – | – | – | 810 | – | – | – | – | 810 | ||||||||||||||||||||||||||||||||||
| Retirements and disposals |
(2,479 | ) | – | – | (36 | ) | (2,515 | ) | – | – | – | – | (2,515 | ) | ||||||||||||||||||||||||||||||
| Impairment losses |
8 | (13 | ) | – | (110 | ) | (25 | ) | (148 | ) | – | (1 | ) | (296 | ) | (297 | ) | (445 | ) | |||||||||||||||||||||||||
| Amortization included in |
– | – | (845 | ) | – | (845 | ) | – | – | – | – | (845 | ) | |||||||||||||||||||||||||||||||
| Discontinued operations |
3 | (16 | ) | (281 | ) | – | – | (297 | ) | – | – | – | – | (297 | ) | |||||||||||||||||||||||||||||
| December 31, 2020 |
9,169 | 1,736 | 645 | 469 | 12,019 | 2,409 | 3,701 | 1,730 | 7,840 | 19,859 | ||||||||||||||||||||||||||||||||||
| ACCUMULATED AMORTIZATION |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2020 |
7,345 | 839 | – | 229 | 8,413 | – | – | – | – | 8,413 | ||||||||||||||||||||||||||||||||||
| Amortization |
787 | 99 | – | 43 | 929 | – | – | – | – | 929 | ||||||||||||||||||||||||||||||||||
| Retirements and disposals |
(2,480 | ) | – | – | (37 | ) | (2,517 | ) | – | – | – | – | (2,517 | ) | ||||||||||||||||||||||||||||||
| Discontinued operations |
3 | (8 | ) | (60 | ) | – | – | (68 | ) | – | – | – | – | (68 | ) | |||||||||||||||||||||||||||||
| December 31, 2020 |
5,644 | 878 | – | 235 | 6,757 | – | – | – | – | 6,757 | ||||||||||||||||||||||||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2020 |
3,177 | 1,178 | 716 | 260 | 5,331 | 2,409 | 3,586 | 2,026 | 8,021 | 13,352 | ||||||||||||||||||||||||||||||||||
| December 31, 2020 |
3,525 | 858 | 645 | 234 | 5,262 | 2,409 | 3,701 | 1,730 | 7,840 | 13,102 | ||||||||||||||||||||||||||||||||||
148 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
|
FINITE-LIFE |
INDEFINITE-LIFE |
|||||||||||||||||||||||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 |
NOTE | SOFTWARE | CUSTOMER RELATION- SHIPS |
PROGRAM AND FEATURE |
OTHER | TOTAL | BRANDS | SPECTRUM AND OTHER LICENCES |
BROADCAST LICENCES |
TOTAL | TOTAL INTANGIBLE ASSETS |
|||||||||||||||||||||||||||||||||
| COST |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2019 |
9,525 | 2,014 | 704 | 500 | 12,743 | 2,409 | 3,587 | 2,111 | 8,107 | 20,850 | ||||||||||||||||||||||||||||||||||
| Additions |
388 | – | 1,004 | 4 | 1,396 | – | – | – | – | 1,396 | ||||||||||||||||||||||||||||||||||
| Acquired through business |
– | 6 | – | – | 6 | – | – | – | – | 6 | ||||||||||||||||||||||||||||||||||
| Transfers |
657 | – | – | – | 657 | – | – | – | – | 657 | ||||||||||||||||||||||||||||||||||
| Retirements and disposals |
(52 | ) | (3 | ) | – | (14 | ) | (69 | ) | – | – | – | – | (69 | ) | |||||||||||||||||||||||||||||
| Impairment losses |
8 | – | – | – | (1 | ) | (1 | ) | – | (1 | ) | (85 | ) | (86 | ) | (87 | ) | |||||||||||||||||||||||||||
| Amortization included in |
– | – | (992 | ) | – | (992 | ) | – | – | – | – | (992 | ) | |||||||||||||||||||||||||||||||
| Discontinued operations |
3 | 4 | – | – | – | 4 | – | – | – | – | 4 | |||||||||||||||||||||||||||||||||
| December 31, 2019 |
10,522 | 2,017 | 716 | 489 | 13,744 | 2,409 | 3,586 | 2,026 | 8,021 | 21,765 | ||||||||||||||||||||||||||||||||||
| ACCUMULATED AMORTIZATION |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2019 |
6,720 | 727 | – | 198 | 7,645 | – | – | – | – | 7,645 | ||||||||||||||||||||||||||||||||||
| Amortization |
743 | 98 | – | 45 | 886 | – | – | – | – | 886 | ||||||||||||||||||||||||||||||||||
| Retirements and disposals |
(51 | ) | – | – | (14 | ) | (65 | ) | – | – | – | – | (65 | ) | ||||||||||||||||||||||||||||||
| Discontinued operations |
3 | 2 | 14 | – | – | 16 | – | – | – | – | 16 | |||||||||||||||||||||||||||||||||
| Other |
(69 | ) | – | – | – | (69 | ) | – | – | – | – | (69 | ) | |||||||||||||||||||||||||||||||
| December 31, 2019 |
7,345 | 839 | – | 229 | 8,413 | – | – | – | – | 8,413 | ||||||||||||||||||||||||||||||||||
| NET CARRYING AMOUNT |
||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2019 |
2,805 | 1,287 | 704 | 302 | 5,098 | 2,409 | 3,587 | 2,111 | 8,107 | 13,205 | ||||||||||||||||||||||||||||||||||
| December 31, 2019 |
3,177 | 1,178 | 716 | 260 | 5,331 | 2,409 | 3,586 | 2,026 | 8,021 | 13,352 | ||||||||||||||||||||||||||||||||||
Note 19 | Investments in associates and joint ventures
The following tables provide summarized financial information with respect to BCE’s associates and joint ventures. For more details on our associates and joint ventures, see Note 34, Related party transactions.
STATEMENTS OF FINANCIAL POSITION
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||||||
| Assets |
3,953 | 4,045 | ||||||||||
| Liabilities |
(2,448 | ) | (2,689 | ) | ||||||||
| Total net assets |
1,505 | 1,356 | ||||||||||
| BCE’s share of net assets |
756 | 698 | ||||||||||
|
|
||||||||||||
| INCOME STATEMENTS
|
||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Revenues |
1,359 | 2,398 | ||||||||||
| Expenses |
(1,351 | ) | (2,545 | ) | ||||||||
| Total net income (losses) |
8 | (147 | ) | |||||||||
| BCE’s share of net income (losses) |
9 | 5 | (72 | ) | ||||||||
BCE INC. 2020 ANNUAL REPORT | 149
Notes to consolidated financial statements
Note 20 | Other non-current assets
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Long-term wireless device financing plan receivables |
12 | 399 | 65 | |||||||||
| Investments (1) |
28 | 167 | 128 | |||||||||
| Publicly-traded and privately-held investments |
28 | 126 | 129 | |||||||||
| Long-term receivables |
128 | 83 | ||||||||||
| Derivative assets |
28 | 92 | 200 | |||||||||
| Other |
89 | 111 | ||||||||||
| Total other non-current assets |
1,001 | 716 | ||||||||||
| (1) | These amounts have been pledged as security related to obligations for certain employee benefits and are not available for general use. |
The following table provides details about the changes in the carrying amounts of goodwill for the years ended December 31, 2020 and 2019. BCE’s groups of CGUs correspond to our reporting segments.
| NOTE | BELL WIRELESS |
BELL WIRELINE |
BELL MEDIA |
BCE | ||||||||||||||||
| Balance at January 1, 2019 |
3,046 | 4,681 | 2,931 | 10,658 | ||||||||||||||||
| Acquisitions and other |
– | (6 | ) | 15 | 9 | |||||||||||||||
| Balance at December 31, 2019 |
3,046 | 4,675 | 2,946 | 10,667 | ||||||||||||||||
| Acquisitions and other |
– | 52 | – | 52 | ||||||||||||||||
| Discontinued operations |
3 | – | (115 | ) | – | (115 | ) | |||||||||||||
| Balance at December 31, 2020 |
3,046 | 4,612 | 2,946 | 10,604 | ||||||||||||||||
IMPAIRMENT TESTING
150 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
Note 22 | Trade payables and other liabilities
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Trade payables and accruals |
2,595 | 2,604 | ||||||||||
| Compensation payable |
592 | 589 | ||||||||||
| Maple Leaf Sports and Entertainment Ltd. (MLSE) financial liability (1) |
28 | 149 | 135 | |||||||||
| Derivative liabilities |
28 | 69 | 49 | |||||||||
| Provisions |
25 | 53 | 33 | |||||||||
| Commodity taxes payable |
33 | 101 | ||||||||||
| Severance and other costs payable |
23 | 35 | ||||||||||
| CRTC deferral account obligation |
28 | 13 | 13 | |||||||||
| Other current liabilities |
408 | 395 | ||||||||||
| Total trade payables and other liabilities |
3,935 | 3,954 | ||||||||||
| (1) | 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 recorded in Other (expense) income in the income statements. |
Note 23 | Debt due within one year
| FOR THE YEAR ENDED DECEMBER 31 | NOTE |
WEIGHTED AVERAGE INTEREST RATE AT |
2020 | 2019 | ||||||||||||
| Notes payable (1) |
28 | 0.24% | 392 | 1,994 | ||||||||||||
| Loans secured by trade receivables |
28 | 1.10% | 1,050 | 1,050 | ||||||||||||
| Long-term debt due within one year (2) |
24 | 5.52% | 975 | 837 | ||||||||||||
| Total debt due within one year |
2,417 | 3,881 | ||||||||||||||
| (1) | Includes commercial paper of $274 million in U.S. dollars ($349 million in Canadian dollars) and $1,502 million in U.S. dollars ($1,951 million in Canadian dollars) as at December 31, 2020 and December 31, 2019, respectively, which were issued under our U.S. commercial paper program and have been hedged for foreign currency fluctuations through forward currency contracts. See Note 28, Financial and capital management, for additional details. |
| (2) | Included in long-term debt due within one year is the current portion of lease liabilities of $754 million and $775 million as at December 31, 2020 and December 31, 2019, respectively. |
SECURITIZED TRADE RECEIVABLES
CREDIT FACILITIES
BCE INC. 2020 ANNUAL REPORT | 151
Notes to consolidated financial statements
The table below is a summary of our total bank credit facilities at December 31, 2020.
| TOTAL AVAILABLE |
DRAWN | LETTERS OF CREDIT |
COMMERCIAL PAPER OUTSTANDING |
NET AVAILABLE |
||||||||||||||||
| Committed credit facilities |
||||||||||||||||||||
| Unsecured revolving and expansion credit facilities (1) (2) |
3,500 | – | – | 349 | 3,151 | |||||||||||||||
| Other |
106 | – | 106 | – | – | |||||||||||||||
| Total committed credit facilities |
3,606 | – | 106 | 349 | 3,151 | |||||||||||||||
| Total non-committed credit facilities |
1,939 | – | 1,082 | – | 857 | |||||||||||||||
| Total committed and non-committed credit facilities |
5,545 | – | 1,188 | 349 | 4,008 | |||||||||||||||
| (1) | Bell Canada’s $2.5 billion committed revolving credit facility expires in November 2024 and its $1 billion committed expansion credit facility expires in November 2022. |
| (2) | As of December 31, 2020, Bell Canada’s outstanding commercial paper included $274 million in U.S. dollars ($349 million in Canadian dollars). All of Bell Canada’s commercial paper outstanding is included in debt due within one year. |
RESTRICTIONS
Some of our credit agreements:
| • | require us to meet specific financial ratios |
| • | require us to offer to repay and cancel the credit agreement upon a change of control of BCE or Bell Canada |
We are in compliance with all conditions and restrictions under such credit agreements.
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | WEIGHTED AVERAGE INTEREST RATE AT DECEMBER 31, 2020 |
MATURITY | 2020 | 2019 | |||||||||||||||
| Debt securities |
||||||||||||||||||||
| 1997 trust indenture |
3.68% | 2022–2050 | 16,400 | 14,500 | ||||||||||||||||
| 1976 trust indenture |
9.54% | 2021–2054 | 1,100 | 1,100 | ||||||||||||||||
| 2011 trust indenture |
4.00% | 2024 | 225 | 225 | ||||||||||||||||
| 2016 U.S. trust indenture (1) |
4.41% | 2048–2049 | 2,228 | 2,273 | ||||||||||||||||
| 1996 trust indenture (subordinated) |
8.21% | 2026–2031 | 275 | 275 | ||||||||||||||||
| Lease liabilities |
4.91% | 2021–2065 | 4,356 | 4,599 | ||||||||||||||||
| Other |
386 | 328 | ||||||||||||||||||
| Total debt |
24,970 | 23,300 | ||||||||||||||||||
| Net unamortized (discount) premium |
(19 | ) | 15 | |||||||||||||||||
| Unamortized debt issuance costs |
(70 | ) | (63 | ) | ||||||||||||||||
| Less: |
||||||||||||||||||||
| Amount due within one year |
23 | (975 | ) | (837 | ) | |||||||||||||||
| Total long-term debt |
23,906 | 22,415 | ||||||||||||||||||
| (1) | At December 31, 2020 and 2019, notes issued under the 2016 U.S. trust indenture totaled $1,750 million in U.S. dollars, and have been hedged for foreign currency fluctuations through cross currency interest rate swaps. See Note 28, Financial and capital management, for additional details. |
Bell Canada’s debt securities have been issued in Canadian dollars with the exception of debt securities issued under the 2016 U.S. trust indenture, which have been issued in U.S. dollars. All debt securities bear a fixed interest rate.
RESTRICTIONS
Some of our debt agreements:
| • | impose covenants and new issue tests |
| • | require us to make an offer to repurchase certain series of debt securities upon the occurrence of a change of control event as defined in the relevant debt agreements |
We are in compliance with all conditions and restrictions under such debt agreements.
152 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
| FOR THE YEAR ENDED DECEMBER 31 |
NOTE | AROs | OTHER | (1) | TOTAL | |||||||||||
| January 1, 2020 |
199 | 132 | 331 | |||||||||||||
| Additions |
21 | 95 | 116 | |||||||||||||
| Usage |
(8 | ) | (20 | ) | (28 | ) | ||||||||||
| Reversals |
(1 | ) | (1 | ) | (2 | ) | ||||||||||
| Discontinued operations |
3 | (9 | ) | – | (9 | ) | ||||||||||
| December 31, 2020 |
202 | 206 | 408 | |||||||||||||
| Current |
22 | 15 | 38 | 53 | ||||||||||||
|
Non-current |
27 | 187 | 168 | 355 | ||||||||||||
| December 31, 2020 |
202 | 206 | 408 | |||||||||||||
| (1) | Other includes environmental, legal, vacant space and other provisions. |
AROs reflect management’s best estimates of expected future costs to restore current leased premises to their original condition prior to lease inception. Cash outflows associated with our ARO liabilities are generally expected to occur at the restoration dates of the assets to which they relate, which are long-term in nature. The timing and extent of restoration work that will be ultimately required for these sites is uncertain.
BCE INC. 2020 ANNUAL REPORT | 153
Notes to consolidated financial statements
Note 26 | Post-employment benefit plans
POST-EMPLOYMENT BENEFIT PLANS COST
COMPONENTS OF POST-EMPLOYMENT BENEFIT (OBLIGATIONS) ASSETS
The following table shows the change in post-employment benefit obligations and the fair value of plan assets.
| DB PENSION PLANS | OPEB PLANS | TOTAL | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Post-employment benefit obligations, January 1 |
(25,650 | ) | (23,404 | ) | (1,529 | ) | (1,469 | ) | (27,179 | ) | (24,873 | ) | ||||||||||||
| Current service cost |
(219 | ) | (193 | ) | (2 | ) | (3 | ) | (221 | ) | (196 | ) | ||||||||||||
| Interest on obligations |
(782 | ) | (872 | ) | (46 | ) | (55 | ) | (828 | ) | (927 | ) | ||||||||||||
| Actuarial losses (1) |
(1,830 | ) | (2,498 | ) | (90 | ) | (80 | ) | (1,920 | ) | (2,578 | ) | ||||||||||||
| Benefit payments |
1,342 | 1,326 | 67 | 77 | 1,409 | 1,403 | ||||||||||||||||||
| Employee contributions |
(10 | ) | (10 | ) | – | – | (10 | ) | (10 | ) | ||||||||||||||
| Other |
– | 1 | – | 1 | – | 2 | ||||||||||||||||||
| Post-employment benefit obligations, December 31 |
(27,149 | ) | (25,650 | ) | (1,600 | ) | (1,529 | ) | (28,749 | ) | (27,179 | ) | ||||||||||||
| Fair value of plan assets, January 1 |
25,530 | 23,071 | 320 | 287 | 25,850 | 23,358 | ||||||||||||||||||
| Expected return on plan assets (2) |
772 | 853 | 10 | 11 | 782 | 864 | ||||||||||||||||||
| Actuarial gains (1) |
2,632 | 2,742 | 20 | 27 | 2,652 | 2,769 | ||||||||||||||||||
| Benefit payments |
(1,342 | ) | (1,326 | ) | (67 | ) | (77 | ) | (1,409 | ) | (1,403 | ) | ||||||||||||
| Employer contributions |
183 | 180 | 61 | 72 | 244 | 252 | ||||||||||||||||||
| Employee contributions |
10 | 10 | – | – | 10 | 10 | ||||||||||||||||||
| Fair value of plan assets, December 31 |
27,785 | 25,530 | 344 | 320 | 28,129 | 25,850 | ||||||||||||||||||
| Plan asset (deficit) |
636 | (120 | ) | (1,256 | ) | (1,209 | ) | (620 | ) | (1,329 | ) | |||||||||||||
| Effect of asset limit |
(65 | ) | (20 | ) | – | – | (65 | ) | (20 | ) | ||||||||||||||
| Post-employment benefit asset (liability), December 31 |
571 | (140 | ) | (1,256 | ) | (1,209 | ) | (685 | ) | (1,349 | ) | |||||||||||||
| Post-employment benefit assets |
1,277 | 558 | – | – | 1,277 | 558 | ||||||||||||||||||
| Post-employment benefit obligations |
(706 | ) | (698 | ) | (1,256 | ) | (1,209 | ) | (1,962 | ) | (1,907 | ) | ||||||||||||
| (1) | Actuarial gains (losses) include experience gains of $2,613 million in 2020 and $2,525 million in 2019. |
| (2) | The actual return on plan assets was $3,434 million or 13.7% in 2020 and $3,633 million or 16.0% in 2019. |
154 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
FUNDED STATUS OF POST-EMPLOYMENT BENEFIT PLANS COST
The following table shows the funded status of our post-employment benefit obligations.
| FUNDED | PARTIALLY FUNDED (1) | UNFUNDED (2) | TOTAL | |||||||||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||
| Present value of post-employment benefit obligations |
(26,421 | ) | (24,961 | ) | (2,011 | ) | (1,918 | ) | (317 | ) | (300 | ) | (28,749 | ) | (27,179 | ) | ||||||||||||||||
| Fair value of plan assets |
27,727 | 25,474 | 402 | 376 | – | – | 28,129 | 25,850 | ||||||||||||||||||||||||
| Plan surplus (deficit) |
1,306 | 513 | (1,609 | ) | (1,542 | ) | (317 | ) | (300 | ) | (620 | ) | (1,329 | ) | ||||||||||||||||||
| (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 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. |
SIGNIFICANT ASSUMPTIONS
We used the following key assumptions to measure the post-employment benefit obligations and the net benefit plans cost for the DB pension plans and OPEB plans. These assumptions are long-term, which is consistent with the nature of post-employment benefit plans.
| DB PENSION PLANS AND OPEB PLANS | ||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Post-employment benefit obligations |
||||||||
| Discount rate |
2.6 | % | 3.1 | % | ||||
| Rate of compensation increase |
2.25 | % | 2.25 | % | ||||
| Cost of living indexation rate (1) |
1.6 | % | 1.6 | % | ||||
| Life expectancy at age 65 (years) |
23.2 | 23.2 | ||||||
|
(1) Cost of living indexation rate is only applicable to DB pension plans.
|
||||||||
| DB PENSION PLANS AND OPEB PLANS | ||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Net post-employment benefit plans cost |
||||||||
| Discount rate |
3.2 | % | 4.0 | % | ||||
| Rate of compensation increase |
2.25 | % | 2.25 | % | ||||
| Cost of living indexation rate (1) |
1.6 | % | 1.6 | % | ||||
| Life expectancy at age 65 (years) |
23.2 | 23.1 | ||||||
| (1) | Cost of living indexation rate is only applicable to DB pension plans. |
SENSITIVITY ANALYSIS
The following table shows a sensitivity analysis of key assumptions used to measure the net post-employment benefit obligations and the net post-employment benefit plans cost for our DB pension plans and OPEB plans.
| IMPACT ON NET
POST-EMPLOYMENT BENEFIT PLANS COST FOR 2020 – INCREASE/(DECREASE) |
IMPACT ON POST-EMPLOYMENT
BENEFIT OBLIGATIONS AT DECEMBER 31, 2020 – INCREASE/(DECREASE) |
|||||||||||||||||||
| CHANGE IN ASSUMPTION |
INCREASE IN ASSUMPTION |
DECREASE IN ASSUMPTION |
INCREASE IN ASSUMPTION |
DECREASE IN ASSUMPTION |
||||||||||||||||
| Discount rate |
0.5 | % | (76 | ) | 64 | (1,897 | ) | 2,127 | ||||||||||||
| Life expectancy at age 65 |
1 year | 38 | (38 | ) | 1,092 | (1,092 | ) | |||||||||||||
BCE INC. 2020 ANNUAL REPORT | 155
Notes to consolidated financial statements
POST-EMPLOYMENT BENEFIT PLAN ASSETS
The investment strategy for the post-employment benefit plan assets is to maintain a diversified portfolio of assets invested in a prudent manner to maintain the security of benefits.
The following table shows the target allocations for 2020 and the allocation of our post-employment benefit plan assets at December 31, 2020 and 2019.
|
WEIGHTED AVERAGE TARGET ALLOCATION |
TOTAL PLAN ASSETS FAIR VALUE | |||||||||||
| ASSET CATEGORY | 2020 | DECEMBER 31, 2020 | DECEMBER 31, 2019 | |||||||||
| Equity securities |
0%–40% | 23% | 22% | |||||||||
| Debt securities |
60%–100% | 60% | 62% | |||||||||
| Alternative investments |
0%–50% | 17% | 16% | |||||||||
| Total |
100% | 100% | ||||||||||
The following table shows the fair value of the DB pension plan assets for each category.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Observable markets data |
||||||||
| Equity securities |
||||||||
| Canadian |
1,027 | 1,017 | ||||||
| Foreign |
5,242 | 4,534 | ||||||
| Debt securities |
||||||||
| Canadian |
13,361 | 13,216 | ||||||
| Foreign |
2,913 | 2,385 | ||||||
| Money market |
369 | 219 | ||||||
| Non-observable markets inputs |
||||||||
| Alternative investments |
||||||||
| Private equities |
2,564 | 2,119 | ||||||
| Hedge funds |
1,200 | 1,001 | ||||||
| Real estate |
1,033 | 948 | ||||||
| Other |
76 | 91 | ||||||
| Total |
27,785 | 25,530 | ||||||
The following table shows the amounts we contributed to the DB and DC pension plans and the payments made to beneficiaries under OPEB plans.
| DB PLANS | DC PLANS | OPEB PLANS | ||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||
| Contributions/payments |
(183) | (180) | (114) | (110) | (61) | (72) | ||||||||||||||||||
We expect to contribute approximately $180 million to our DB pension plans in 2021, subject to actuarial valuations being completed. We expect to contribute approximately $120 million to the DC pension plans and to pay approximately $70 million to beneficiaries under OPEB plans in 2021.
156 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
Note 27 | Other non-current liabilities
| FOR THE YEAR ENDED DECEMBER 31 | NOTE | 2020 | 2019 | |||||||||
| Long-term disability benefits obligation |
361 | 305 | ||||||||||
| Provisions |
25 | 355 | 298 | |||||||||
| Derivative liabilities |
28 | 98 | 7 | |||||||||
| CRTC deferral account obligation |
28 | 69 | 69 | |||||||||
| Other |
262 | 192 | ||||||||||
| Total other non-current liabilities |
1,145 | 871 | ||||||||||
Note 28 | Financial and capital management
FINANCIAL MANAGEMENT
The following table provides the fair value details of other financial instruments measured at amortized cost in the statements of financial position.
| DECEMBER 31, 2020 | DECEMBER 31, 2019 | |||||||||||||||||||||||
| CLASSIFICATION |
FAIR VALUE METHODOLOGY |
NOTE |
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 |
22, 27 | 82 | 86 | 82 | 85 | |||||||||||||||||
| Debt securities and other debt | Debt due within one year and long-term debt |
Quoted market price of debt | 23, 24 | 20,525 | 24,366 | 18,653 | 20,905 | |||||||||||||||||
BCE INC. 2020 ANNUAL REPORT | 157
Notes to consolidated financial statements
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
| FAIR VALUE OF ASSET (LIABILITY) | ||||||||||||||||||||
| CLASSIFICATION | NOTE | CARRYING VALUE |
QUOTED PRICES IN IDENTICAL ASSETS (LEVEL 1) |
OBSERVABLE MARKET DATA (LEVEL 2) (1) |
NON-OBSERVABLE MARKET INPUTS (LEVEL 3) (2) | |||||||||||||||
| December 31, 2020 |
||||||||||||||||||||
| Publicly-traded and privately-held investments | Other non-current assets | 20 | 126 | 3 | – | 123 | ||||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
(51 | ) | – | (51) | – | ||||||||||||||
| MLSE financial liability (3) | Trade payables and other liabilities | 22 | (149 | ) | – | – | (149) | |||||||||||||
| Other | Other non-current assets and liabilities | 109 | – | 167 | (58) | |||||||||||||||
| December 31, 2019 |
||||||||||||||||||||
| Publicly-traded and privately-held investments | Other non-current assets | 20 | 129 | 2 | – | 127 | ||||||||||||||
| Derivative financial instruments | Other current assets, trade payables and other liabilities, other non-current assets and liabilities |
165 | – | 165 | – | |||||||||||||||
| MLSE financial liability (3) | Trade payables and other liabilities | 22 | (135 | ) | – | – | (135) | |||||||||||||
| Other | Other non-current assets and liabilities | 71 | 1 | 128 | (58) | |||||||||||||||
| (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) | Represents BCE’s obligation to repurchase the Master Trust Fund’s 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 any gain or loss is recorded in Other (expense) income in the income statements. |
158 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
LIQUIDITY RISK
Our cash and cash equivalents, cash flows from operations and possible capital markets financing are expected to be sufficient to fund our operations and fulfill our obligations as they become due. Should our cash requirements exceed the above sources of cash, we would expect to cover such a shortfall by drawing on existing committed bank facilities and new ones, to the extent available.
The following table is a maturity analysis for recognized financial liabilities at December 31, 2020 for each of the next five years and thereafter.
| AT DECEMBER 31, 2020 | NOTE |
2021 |
2022 |
2023 |
2024 |
2025 |
THERE- AFTER |
TOTAL |
||||||||||||||||||||||||||||
| Long-term debt |
24 | 221 | 1,785 | 1,665 | 1,278 | 2,125 | 13,540 | 20,614 | ||||||||||||||||||||||||||||
| Notes payable |
23 | 392 | – | – | – | – | – | 392 | ||||||||||||||||||||||||||||
| Lease liabilities (1) |
921 | 832 | 611 | 459 | 406 | 2,077 | 5,306 | |||||||||||||||||||||||||||||
| Loan secured by trade receivables |
23 | 1,050 | – | – | – | – | – | 1,050 | ||||||||||||||||||||||||||||
| Interest payable on long-term debt, notes payable |
844 | 824 | 756 | 693 | 641 | 7,623 | 11,381 | |||||||||||||||||||||||||||||
| Net (receipts) payments on cross currency basis swaps |
(1 | ) | (1 | ) | – | – | – | 64 | 62 | |||||||||||||||||||||||||||
| MLSE financial liability |
22 | 149 | – | – | – | – | – | 149 | ||||||||||||||||||||||||||||
| Total |
3,576 | 3,440 | 3,032 | 2,430 | 3,172 | 23,304 | 38,954 | |||||||||||||||||||||||||||||
(1) Includes imputed interest of $950 million.
We are also exposed to liquidity risk for financial liabilities due within one year as shown in the statements of financial position.
MARKET RISK
The following table provides further details on our outstanding foreign currency forward contracts and options as at December 31, 2020.
| TYPE OF HEDGE | BUY CURRENCY |
AMOUNT TO RECEIVE |
SELL CURRENCY |
AMOUNT TO PAY |
MATURITY | HEDGED ITEM | ||||||||||||||||||
| Cash flow |
USD | 675 | CAD | 885 | 2021 | Anticipated transactions | ||||||||||||||||||
| Cash flow |
USD | 274 | CAD | 349 | 2021 | Commercial paper | ||||||||||||||||||
| Cash flow |
PHP | 2,174 | CAD | 59 | 2021 | Anticipated transactions | ||||||||||||||||||
| Cash flow |
USD | 479 | CAD | 614 | 2022 | Anticipated transactions | ||||||||||||||||||
| Cash flow – call options |
USD | 231 | CAD | 299 | 2022 | Anticipated transactions | ||||||||||||||||||
| Cash flow – put options |
USD | 231 | CAD | 295 | 2022 | Anticipated transactions | ||||||||||||||||||
| Economic |
USD | 130 | CAD | 180 | 2021 | Anticipated transactions | ||||||||||||||||||
| Economic – call options |
USD | 12 | CAD | 17 | 2021 | Anticipated transactions | ||||||||||||||||||
| Economic – call options |
CAD | 17 | USD | 12 | 2021 | Anticipated transactions | ||||||||||||||||||
| Economic – put options |
USD | 120 | CAD | 154 | 2021 | Anticipated transactions | ||||||||||||||||||
| Economic – put options |
USD | 99 | CAD | 123 | 2022 | Anticipated transactions | ||||||||||||||||||
BCE INC. 2020 ANNUAL REPORT | 159
Notes to consolidated financial statements
CAPITAL MANAGEMENT
| (1) | Our net debt leverage ratio represents net debt divided by adjusted EBITDA. 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 our statements of financial position. Adjusted EBITDA is defined as operating revenues less operating costs as shown in our income statements. |
| (2) | Our adjusted EBITDA to net interest expense ratio represents adjusted EBITDA divided by net interest expense. Adjusted EBITDA is defined as operating revenues less operating costs as shown in our income statements. Net interest expense is net interest expense as shown in our statements of cash flows plus 50% of declared preferred share dividends as shown in our income statements. |
160 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
PREFERRED SHARES
BCE’s articles of amalgamation, as amended, provide for an unlimited number of First Preferred Shares and Second Preferred Shares, all without par value. The terms set out in the articles authorize BCE’s directors to issue the shares in one or more series and to set the number of shares and the conditions for each series.
The following table provides a summary of the principal terms of BCE’s First Preferred Shares as at December 31, 2020. There were no Second Preferred Shares issued and outstanding at December 31, 2020. BCE’s articles of amalgamation, as amended, describe the terms and conditions of these shares in detail.
| ANNUAL | NUMBER OF SHARES | STATED CAPITAL | ||||||||||||||||||||||||||||||
| SERIES | DIVIDEND RATE |
CONVERTIBLE INTO |
CONVERSION DATE | REDEMPTION DATE | REDEMPTION PRICE |
AUTHORIZED | ISSUED AND OUTSTANDING |
DECEMBER 31, 2020 |
DECEMBER 31, 2019 |
|||||||||||||||||||||||
| Q |
floating | Series R | December 1, 2030 | $25.50 | 8,000,000 | – | – | – | ||||||||||||||||||||||||
| R(1) |
3.018% | Series Q | December 1, 2025 | December 1, 2025 | $25.00 | 8,000,000 | 7,998,900 | 200 | 200 | |||||||||||||||||||||||
| S |
floating | Series T | November 1, 2021 | At any time | $25.50 | 8,000,000 | 3,511,848 | 88 | 88 | |||||||||||||||||||||||
| T(1) |
3.019% | Series S | November 1, 2021 | November 1, 2021 | $25.00 | 8,000,000 | 4,486,552 | 112 | 112 | |||||||||||||||||||||||
| Y |
floating | Series Z | December 1, 2022 | At any time | $25.50 | 10,000,000 | 8,079,291 | 202 | 202 | |||||||||||||||||||||||
| Z(1) |
3.904% | Series Y | December 1, 2022 | December 1, 2022 | $25.00 | 10,000,000 | 1,918,509 | 48 | 48 | |||||||||||||||||||||||
| AA (1) |
3.61% | Series AB | September 1, 2022 | September 1, 2022 | $25.00 | 20,000,000 | 11,397,196 | 291 | 291 | |||||||||||||||||||||||
| AB |
floating | Series AA | September 1, 2022 | At any time | $25.50 | 20,000,000 | 8,599,204 | 219 | 219 | |||||||||||||||||||||||
| AC (1) |
4.38% | Series AD | March 1, 2023 | March 1, 2023 | $25.00 | 20,000,000 | 10,027,991 | 256 | 256 | |||||||||||||||||||||||
| AD |
floating | Series AC | March 1, 2023 | At any time | $25.50 | 20,000,000 | 9,963,209 | 254 | 254 | |||||||||||||||||||||||
| AE |
floating | Series AF | February 1, 2025 | At any time | $25.50 | 24,000,000 | 6,512,913 | 163 | 232 | |||||||||||||||||||||||
| AF (1) |
3.865% | Series AE | February 1, 2025 | February 1, 2025 | $25.00 | 24,000,000 | 9,481,487 | 237 | 168 | |||||||||||||||||||||||
| AG (1) |
2.80% | Series AH | May 1, 2021 | May 1, 2021 | $25.00 | 22,000,000 | 4,984,851 | 125 | 125 | |||||||||||||||||||||||
| AH |
floating | Series AG | May 1, 2021 | At any time | $25.50 | 22,000,000 | 9,012,249 | 225 | 225 | |||||||||||||||||||||||
| AI (1) |
2.75% | Series AJ | August 1, 2021 | August 1, 2021 | $25.00 | 22,000,000 | 5,949,884 | 149 | 149 | |||||||||||||||||||||||
| AJ |
floating | Series AI | August 1, 2021 | At any time | $25.50 | 22,000,000 | 8,050,116 | 201 | 201 | |||||||||||||||||||||||
| AK (1) |
2.954% | Series AL | December 31, 2021 | December 31, 2021 | $25.00 | 25,000,000 | 22,735,621 | 568 | 569 | |||||||||||||||||||||||
| AL (2) |
floating | Series AK | December 31, 2021 | At any time | 25,000,000 | 2,254,079 | 56 | 56 | ||||||||||||||||||||||||
| AM (1) |
2.764% | Series AN | March 31, 2021 | March 31, 2021 | $25.00 | 30,000,000 | 9,542,615 | 218 | 218 | |||||||||||||||||||||||
| AN (2) |
floating | Series AM | March 31, 2021 | At any time | 30,000,000 | 1,952,085 | 45 | 45 | ||||||||||||||||||||||||
| AO (1) |
4.26% | Series AP | March 31, 2022 | March 31, 2022 | $25.00 | 30,000,000 | 4,600,000 | 118 | 118 | |||||||||||||||||||||||
| AP (3) |
floating | Series AO | March 31, 2027 | 30,000,000 | – | – | – | |||||||||||||||||||||||||
| AQ (1) |
4.812% | Series AR | September 30, 2023 | September 30, 2023 | $25.00 | 30,000,000 | 9,200,000 | 228 | 228 | |||||||||||||||||||||||
|
AR (3) |
floating | Series AQ | September 30, 2028 | 30,000,000 | – | – | – | |||||||||||||||||||||||||
| 4,003 | 4,004 | |||||||||||||||||||||||||||||||
| (1) | BCE may redeem each of these series of First Preferred Shares on the applicable redemption date and every five years after that date. |
| (2) | BCE may redeem Series AL and AN First Preferred Shares at $25.00 per share on December 31, 2021 and March 31, 2021, respectively, and every five years thereafter (each, a Series conversion date). Alternatively, BCE may redeem Series AL or AN First Preferred Shares at $25.50 per share on any date which is not a Series conversion date for the applicable series of First Preferred Shares. |
| (3) | If Series AP or AR First Preferred Shares are issued on March 31, 2022 and September 30, 2023, respectively, BCE may redeem such shares at $25.00 per share on March 31, 2027 and September 30, 2028, respectively, and every five years thereafter (each, a Series conversion date). Alternatively, BCE may redeem Series AP or AR First Preferred Shares at $25.50 per share on any date which is not a Series conversion date for the applicable series of First Preferred Shares. |
BCE INC. 2020 ANNUAL REPORT | 161
Notes to consolidated financial statements
COMMON SHARES AND CLASS B SHARES
BCE’s articles of amalgamation provide for an unlimited number of voting common shares and non-voting Class B shares, all without par value. The common shares and the Class B shares rank equally in the payment of dividends and in the distribution of assets if BCE is liquidated, dissolved or wound up, after payments due to the holders of preferred shares. No Class B shares were outstanding at December 31, 2020 and 2019.
The following table provides details about the outstanding common shares of BCE.
| 2020 | 2019 | |||||||||||||||||||
| NOTE | NUMBER OF SHARES |
STATED CAPITAL |
NUMBER OF SHARES |
STATED CAPITAL |
||||||||||||||||
| Outstanding, January 1 |
903,908,182 | 20,363 | 898,200,415 | 20,036 | ||||||||||||||||
| Shares issued under employee stock option plan |
30 | 506,828 | 27 | 4,459,559 | 251 | |||||||||||||||
| Shares issued under ESP |
– | – | 1,231,479 | 75 | ||||||||||||||||
| Shares issued under DSP |
– | – | 16,729 | 1 | ||||||||||||||||
| Outstanding, December 31 |
904,415,010 | 20,390 | 903,908,182 | 20,363 | ||||||||||||||||
CONTRIBUTED SURPLUS
Contributed surplus in 2020 and 2019 includes premiums in excess of par value upon the issuance of BCE common shares and share-based compensation expense net of settlements.
Note 30 | Share-based payments
The following share-based payment amounts are included in the income statements as operating costs.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| ESP |
(31 | ) | (29 | ) | ||||
| RSUs/PSUs |
(51 | ) | (54 | ) | ||||
| Other (1) |
(9 | ) | (10 | ) | ||||
| Total share-based payments |
(91 | ) | (93 | ) | ||||
| (1) | Includes DSP, DSUs and stock options. |
162 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
DESCRIPTION OF THE PLANS
ESP
The following table summarizes the status of unvested employer contributions at December 31, 2020 and 2019.
| NUMBER OF ESP SHARES | 2020 | 2019 | ||||||
| Unvested contributions, January 1 |
1,124,198 | 1,120,426 | ||||||
| Contributions (1) |
648,812 | 623,705 | ||||||
| Dividends credited |
62,171 | 57,083 | ||||||
| Vested |
(581,119 | ) | (523,359 | ) | ||||
| Forfeited |
(107,082 | ) | (153,657 | ) | ||||
| Unvested contributions, December 31 |
1,146,980 | 1,124,198 | ||||||
| (1) | The weighted average fair value of the shares contributed was $57 in 2020 and $60 in 2019. |
RSUs/PSUs
The following table summarizes outstanding RSUs/PSUs at December 31, 2020 and 2019.
| NUMBER OF RSUs/PSUs | 2020 | 2019 | ||||||
| Outstanding, January 1 |
2,915,118 | 2,812,697 | ||||||
|
Granted (1) |
866,127 | 975,348 | ||||||
| Dividends credited |
165,435 | 149,648 | ||||||
| Settled |
(935,117 | ) | (932,133 | ) | ||||
| Forfeited |
(38,170 | ) | (90,442 | ) | ||||
| Outstanding, December 31 |
2,973,393 | 2,915,118 | ||||||
| Vested, December 31 (2) |
1,065,454 | 904,266 | ||||||
| (1) | The weighted average fair value of the RSUs/PSUs granted was $63 in 2020 and $58 in 2019. |
| (2) | The RSUs/PSUs vested on December 31, 2020 were fully settled in February 2021 with BCE common shares and/or DSUs. |
BCE INC. 2020 ANNUAL REPORT | 163
Notes to consolidated financial statements
The following table summarizes the status of outstanding DSUs at December 31, 2020 and 2019.
| NUMBER OF DSUs | 2020 | 2019 | ||||||
| Outstanding, January 1 |
4,623,099 | 4,391,997 | ||||||
| Issued (1) |
77,042 | 84,588 | ||||||
| Settlement of RSUs/PSUs |
90,435 | 146,960 | ||||||
| Dividends credited |
255,960 | 236,079 | ||||||
| Settled |
(815,864 | ) | (236,525 | ) | ||||
| Outstanding, December 31 |
4,230,672 | 4,623,099 | ||||||
| (1) | The weighted average fair value of the DSUs issued was $61 in 2020 and $59 in 2019. |
STOCK OPTIONS
The following table summarizes BCE’s outstanding stock options at December 31, 2020 and 2019.
| 2020 | 2019 | |||||||||||||||||||
| NOTE |
NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
||||||||||||||||
| Outstanding, January 1 |
12,825,541 | 57 | 14,072,332 | 56 | ||||||||||||||||
| Granted |
3,420,407 | 65 | 3,357,303 | 58 | ||||||||||||||||
| Exercised (1) |
29 | (506,828 | ) | 52 | (4,459,559 | ) | 54 | |||||||||||||
| Forfeited or expired |
(88,886 | ) | 61 | (144,535 | ) | 58 | ||||||||||||||
| Outstanding, December 31 |
15,650,234 | 59 | 12,825,541 | 57 | ||||||||||||||||
| Exercisable, December 31 |
5,186,600 | 58 | 2,786,043 | 56 | ||||||||||||||||
| (1) | The weighted average market share price for options exercised was $63 in 2020 and $62 in 2019. |
The following table provides additional information about BCE’s stock option plans at December 31, 2020 and 2019.
| STOCK OPTIONS OUTSTANDING | ||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||
| RANGE OF EXERCISE PRICES | NUMBER | WEIGHTED AVERAGE REMAINING LIFE (YEARS) |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
NUMBER | WEIGHTED AVERAGE REMAINING LIFE (YEARS) |
WEIGHTED AVERAGE EXERCISE PRICE ($) |
||||||||||||||||||
| $40-$49 |
187,744 | – | (1) | 48 | 449,216 | 1 | 47 | |||||||||||||||||
| $50-$59 |
11,998,200 | 5 | 58 | 12,271,003 | 6 | 58 | ||||||||||||||||||
| $60 & above |
3,464,290 | 9 | 65 | 105,322 | 4 | 61 | ||||||||||||||||||
| 15,650,234 | 7 | 59 | 12,825,541 | 5 | 57 | |||||||||||||||||||
| (1) | Stock options outstanding expire in February 2021. |
164 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
| 2020 | 2019 | |||||||
| Weighted average fair value per option granted |
$1.55 | $2.34 | ||||||
| Weighted average share price |
$63 | $58 | ||||||
| Weighted average exercise price |
$65 | $58 | ||||||
| Expected dividend growth |
5 | % | 5 | % | ||||
| Expected volatility |
12 | % | 14 | % | ||||
| Risk-free interest rate |
1 | % | 2 | % | ||||
| Expected life (years) |
4 | 4 | ||||||
Expected dividend growth is commensurate with BCE’s dividend growth strategy. Expected volatility is based on the historical volatility of BCE’s share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options.
Note 31 | Additional cash flow information
The following table provides a reconciliation of changes in liabilities arising from financing activities.
| NOTE | |
DEBT DUE WITHIN ONE YEAR AND LONG-TERM DEBT |
|
|
DERIVATIVE TO HEDGE FOREIGN CURRENCY ON DEBT |
(1) |
|
DIVIDENDS PAYABLE |
|
|
OTHER LIABILITIES |
|
TOTAL | |||||||||||
| January 1, 2020 |
26,296 | 56 | 729 | – | 27,081 | |||||||||||||||||||
| Cash flows (used in) from financing activities |
||||||||||||||||||||||||
| (Decrease) increase in notes payable |
(1,810 | ) | 169 | – | – | (1,641 | ) | |||||||||||||||||
| Issue of long-term debt |
6,006 | – | – | – | 6,006 | |||||||||||||||||||
| Repayment of long-term debt |
(5,003 | ) | – | – | – | (5,003 | ) | |||||||||||||||||
| Cash dividends paid on common |
– | – | (3,107 | ) | – | (3,107 | ) | |||||||||||||||||
| Cash dividends paid by
subsidiaries |
35 | – | – | (53 | ) | – | (53 | ) | ||||||||||||||||
| Discontinued operations |
3 | (7 | ) | – | – | – | (7 | ) | ||||||||||||||||
| Other financing activities |
(31 | ) | – | – | (52 | ) | (83 | ) | ||||||||||||||||
| Total cash flows (used in) from financing
activities |
(845 | ) | 169 | (3,160 | ) | (52 | ) | (3,888 | ) | |||||||||||||||
| Non-cash changes arising from |
||||||||||||||||||||||||
| Increase in lease liabilities |
675 | – | – | – | 675 | |||||||||||||||||||
| Dividends declared on common |
– | – | 3,147 | – | 3,147 | |||||||||||||||||||
| Dividends declared by
subsidiaries |
– | – | 53 | – | 53 | |||||||||||||||||||
| Effect of changes in foreign exchange rates |
159 | (159 | ) | – | – | – | ||||||||||||||||||
| Business acquisitions |
7 | – | – | – | 7 | |||||||||||||||||||
| Discontinued operations |
3 | (106 | ) | – | – | – | (106 | ) | ||||||||||||||||
| Other |
137 | – | (3 | ) | 52 | 186 | ||||||||||||||||||
| Total non-cash changes |
872 | (159 | ) | 3,197 | 52 | 3,962 | ||||||||||||||||||
| December 31, 2020 |
26,323 | 66 | 766 | – | 27,155 | |||||||||||||||||||
| (1) | Included in Other current assets, Other non-current assets and Trade payables and other liabilities in the statements of financial position. |
BCE INC. 2020 ANNUAL REPORT | 165
Notes to consolidated financial statements
| NOTE | |
DEBT DUE WITHIN ONE YEAR AND LONG-TERM DEBT |
|
|
DERIVATIVE TO HEDGE FOREIGN CURRENCY ON DEBT |
(1) |
|
DIVIDENDS PAYABLE |
|
|
OTHER LIABILITIES |
|
TOTAL | |||||||||||
| December 31, 2018 |
24,405 | (169 | ) | 691 | – | 24,927 | ||||||||||||||||||
| Adoption of IFRS 16 |
2,304 | – | – | – | 2,304 | |||||||||||||||||||
| January 1, 2019 |
26,709 | (169 | ) | 691 | – | 27,231 | ||||||||||||||||||
| Cash flows (used in) from financing activities |
||||||||||||||||||||||||
| Decrease in notes payable |
(1,045 | ) | (28 | ) | – | – | (1,073 | ) | ||||||||||||||||
| Issue of long-term debt |
1,954 | – | – | – | 1,954 | |||||||||||||||||||
| Repayment of long-term debt |
(2,221 | ) | – | – | – | (2,221 | ) | |||||||||||||||||
| Increase in securitized trade receivables |
131 | – | – | – | 131 | |||||||||||||||||||
| Cash dividends paid on common and preferred shares |
– | – | (2,966 | ) | – | (2,966 | ) | |||||||||||||||||
| Cash dividends paid by subsidiaries to non-controlling interests |
35 | – | – | (65 | ) | – | (65 | ) | ||||||||||||||||
| Discontinued operations |
3 | (6 | ) | – | – | – | (6 | ) | ||||||||||||||||
| Other financing activities |
(34 | ) | – | – | (20 | ) | (54 | ) | ||||||||||||||||
| Total cash flows used in financing
activities |
(1,221 | ) | (28 | ) | (3,031 | ) | (20 | ) | (4,300 | ) | ||||||||||||||
| Non-cash changes arising from |
||||||||||||||||||||||||
| Increase in lease liabilities |
1,005 | – | – | – | 1,005 | |||||||||||||||||||
| Dividends declared on common |
– | – | 3,008 | – | 3,008 | |||||||||||||||||||
| Dividends declared by
subsidiaries |
– | – | 64 | – | 64 | |||||||||||||||||||
| Effect of changes in foreign exchange rates |
(261 | ) | 261 | – | – | – | ||||||||||||||||||
| Discontinued operations |
3 | 1 | – | – | – | 1 | ||||||||||||||||||
| Other |
63 | (8 | ) | (3 | ) | 20 | 72 | |||||||||||||||||
| Total non-cash changes |
808 | 253 | 3,069 | 20 | 4,150 | |||||||||||||||||||
| December 31, 2019 |
26,296 | 56 | 729 | – | 27,081 | |||||||||||||||||||
| (1) | Included in Other current assets and Other non-current assets in the statements of financial position. |
Note 32 | Remaining performance obligations
The following table shows revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as at December 31, 2020.
| 2021 | 2022 | 2023 | 2024 | 2025 | THERE- AFTER |
TOTAL | ||||||||||||||||||||||
| Wireline |
1,411 | 1,098 | 593 | 371 | 180 | 530 | 4,183 | |||||||||||||||||||||
| Wireless |
1,645 | 635 | 44 | 1 | 1 | 1 | 2,327 | |||||||||||||||||||||
| Total |
3,056 | 1,733 | 637 | 372 | 181 | 531 | 6,510 | |||||||||||||||||||||
When estimating minimum transaction prices allocated to the remaining unfulfilled, or partially unfulfilled, performance obligations, BCE applied the practical expedient to not disclose information about remaining performance obligations that have an original expected duration of one year or less and for those contracts where we bill the same value as that which is transferred to the customer.
166 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
Note 33 | Commitments and contingencies
COMMITMENTS
The following table is a summary of our contractual obligations at December 31, 2020 that are due in each of the next five years and thereafter.
| 2021 | 2022 | 2023 | 2024 | 2025 | THERE- AFTER |
TOTAL | ||||||||||||||||||||||
| Commitments for property, plant and |
975 | 835 | 608 | 416 | 250 | 352 | 3,436 | |||||||||||||||||||||
| Purchase obligations |
545 | 479 | 331 | 225 | 144 | 269 | 1,993 | |||||||||||||||||||||
| Leases committed not yet commenced
|
|
2
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
–
|
|
|
–
|
|
|
6
|
| |||||||
| Total
|
|
1,522
|
|
|
1,316
|
|
|
940
|
|
|
642
|
|
|
394
|
|
|
621
|
|
|
5,435
|
| |||||||
CONTINGENCIES
BCE INC. 2020 ANNUAL REPORT | 167
Notes to consolidated financial statements
Note 34 | Related party transactions
SUBSIDIARIES
The following table shows BCE’s significant subsidiaries at December 31, 2020. BCE has other subsidiaries which have not been included in the table as each represents less than 10% individually and less than 20% in aggregate of total consolidated revenues.
All of these significant subsidiaries are incorporated in Canada and provide services to each other in the normal course of operations. The value of these transactions is eliminated on consolidation.
| OWNERSHIP PERCENTAGE | ||||||||
| SUBSIDIARY | 2020 | 2019 | ||||||
| Bell Canada |
100% | 100% | ||||||
| Bell Mobility Inc. |
100% | 100% | ||||||
| Bell Media Inc. |
100% | 100% | ||||||
TRANSACTIONS WITH JOINT ARRANGEMENTS AND ASSOCIATES
During 2020 and 2019, BCE provided communication services and received programming content and other services in the normal course of business on an arm’s length basis to and from its joint arrangements and associates. Our joint arrangements and associates include MLSE, Glentel Inc. and Dome Productions Partnership. From time to time, BCE may be required to make capital contributions in its investments.
In 2020, BCE recognized revenues and incurred expenses with our joint arrangements and associates of $14 million (2019 – $17 million) and $133 million (2019 – $200 million), respectively.
BCE MASTER TRUST FUND
Bimcor Inc. (Bimcor), a wholly-owned subsidiary of Bell Canada, is the administrator of the Master Trust Fund. Bimcor recognized management fees of $13 million from the Master Trust Fund for 2020 and $12 million for 2019. The details of BCE’s post-employment benefit plans are set out in Note 26, Post-employment benefit plans.
COMPENSATION OF KEY MANAGEMENT PERSONNEL AND BOARD OF DIRECTORS
The following table includes compensation of key management personnel and the board of directors for the years ended December 31, 2020 and 2019 included in our income statements. Key management personnel included the company’s Chief Executive Officer, Chief Operating Officer, Group Presidents and the Presidents who reported directly to them.
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Wages, salaries, fees and related taxes and benefits |
(30 | ) | (24 | ) | ||||
| Post-employment benefit plans and OPEBs cost |
(3 | ) | (3 | ) | ||||
| Share-based compensation |
(26 | ) | (29 | ) | ||||
| Key management personnel and board of directors compensation expense |
(59 | ) | (56 | ) | ||||
168 | BCE INC. 2020 ANNUAL REPORT
Notes to consolidated financial statements
Note 35 | Significant partly-owned subsidiary
The following tables show summarized financial information for our subsidiary with significant non-controlling interest (NCI).
SUMMARIZED STATEMENTS OF FINANCIAL POSITION
| CTV SPECIALTY (1) (2) | ||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Current assets |
357 | 314 | ||||||
|
Non-current assets |
1,032 | 994 | ||||||
| Total assets |
1,389 | 1,308 | ||||||
| Current liabilities |
159 | 151 | ||||||
|
Non-current liabilities |
227 | 192 | ||||||
| Total liabilities |
386 | 343 | ||||||
| Total equity attributable to BCE shareholders |
699 | 671 | ||||||
| NCI |
304 | 294 | ||||||
| (1) | At December 31, 2020 and 2019, the ownership interest held by NCI in CTV Specialty Television Inc. (CTV Specialty) was 29.9%. CTV Specialty was incorporated and operated in Canada as at such dates. |
| (2) | CTV Specialty’s net assets at December 31, 2020 and 2019 include $6 million and $8 million, respectively, directly attributable to NCI. |
SELECTED INCOME AND CASH FLOW INFORMATION
| CTV SPECIALTY (1) | ||||||||
| FOR THE YEAR ENDED DECEMBER 31 | 2020 | 2019 | ||||||
| Operating revenues |
754 | 878 | ||||||
| Net earnings |
202 | 193 | ||||||
| Net earnings attributable to NCI |
64 | 61 | ||||||
| Total comprehensive income |
200 | 181 | ||||||
| Total comprehensive income attributable to NCI |
63 | 58 | ||||||
| Cash dividends paid to NCI |
53 | 65 | ||||||
| (1) | CTV Specialty’s net earnings and total comprehensive income include $5 million directly attributable to NCI for 2020 and 2019. |
Starting in the latter part of the first quarter of 2020, our business has been negatively impacted by the emergency measures adopted to combat the spread of COVID-19 and the resulting adverse economic conditions. All of our segments have been adversely affected with a more pronounced impact on media advertising revenues, wireless product volumes and outbound roaming revenues. Depending on the severity and duration of the COVID-19 pandemic disruptions, including the number and intensity of resurgences in COVID-19 cases and the scope and duration of measures adopted in response thereto, our operations and financial results could continue to be significantly and negatively impacted in future periods. It is difficult at this time to estimate the magnitude of such future impacts.
BCE INC. 2020 ANNUAL REPORT | 169
|
SHARE FACTS
SYMBOL BCE
LISTINGS
TSX and NYSE stock exchanges
You will find a summary of the differences between our governance practices and the NYSE corporate governance rules in the Governance section of our website at BCE.ca.
COMMON SHARES OUTSTANDING
December 31, 2020 – 904,415,010
QUARTERLY DIVIDEND*
$0.875 per common share
|
TAX ASPECTS
Shareholders are required to pay tax on dividends received as well as on capital gains they realize, if any, when they sell their shares or are deemed to have sold them.
THE SALE OR DISPOSITION OF YOUR SHARES COULD TRIGGER A CAPITAL GAIN
IMPORTANT: If you received Nortel Networks common shares in May 2000 and/or Bell Aliant Regional Communications Income Fund units in July 2006, you should contact the Investor Relations group to learn more about the tax implications of these plans of arrangement and the impact on the calculation of your cost, or visit BCE.ca.
DIVIDENDS
Since January 1, 2006 and unless stated otherwise, dividends paid by BCE Inc. to Canadian residents are eligible dividends as per the Canadian Income Tax Act. Since March 24, 2006 and unless stated otherwise, dividends paid by BCE Inc. to Québec residents also qualify as eligible dividends.
NON-RESIDENTS OF CANADA
Dividends paid or credited to non-residents of Canada are subject to a 25% withholding tax unless reduced by a tax treaty. Under current tax treaties, U.S. and U.K. residents are subject to a 15% withholding tax.
Beginning in 2012, the Canada Revenue Agency introduced new rules requiring residents of any country with which Canada has a tax treaty to certify that they reside in that country and are eligible to have Canadian non-resident tax withheld on the payment of their dividends at the tax treaty rate. Registered shareholders should have completed the Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer and returned it to the transfer agent.
U.S. RESIDENTS
In addition to the Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer mentioned above, we are required to solicit taxpayer identification numbers and Internal Revenue Service (IRS) Form W-9 certifications of residency from certain U.S. residents. If these have not been received, we may be required to deduct the IRS’s specified backup withholding tax. For more information, please contact the transfer agent or the Investor Relations group.
NORMAL COURSE ISSUER BID
On November 5, 2020, BCE received acceptance from the Toronto Stock Exchange (TSX) of its Notice of Intention to Make a Normal Course Issuer Bid (Notice of Intention). The filing of the Notice of Intention allows BCE to purchase for cancellation up to 10% of the public float of each series of BCE’s outstanding First Preferred Shares (Preferred Shares) that are listed on the TSX. The normal course issuer bid (NCIB) will extend from November 9, 2020 to November 8, 2021, or an earlier date should BCE complete its purchases under the NCIB. BCE is making this NCIB because it believes that, from time to time, its Preferred Shares may trade in price ranges that do not fully reflect their value. BCE believes that, in such circumstances, the repurchase of its Preferred Shares represents an appropriate use of funds. Purchases under the NCIB may be conducted through a combination of discretionary transactions and purchases under an automatic securities purchase plan through the facilities of the TSX or alternative trading systems, if eligible, and by such other means as may be permitted by the TSX and under applicable laws. You can obtain a copy of the Notice of Intention on request, without charge, from BCE’s Investor Relations group. | |||
| 2021 DIVIDEND SCHEDULE*
| ||||
| Record date | Payment date** | |||
| March 15, 2021 | April 15, 2021 | |||
| June 15, 2021 | July 15, 2021 | |||
| September 15, 2021 | October 15, 2021 | |||
| December 15, 2021 | January 15, 2022 | |||
|
* Subject to dividends being declared by the board of directors ** When a dividend payment date falls on a weekend, the payment is made on the following business day
| ||||
| 2021 QUARTERLY EARNINGS | ||||
| RELEASE DATES
| ||||
| First quarter | April 29, 2021 | |||
| Second quarter | August 5, 2021 | |||
| Third quarter | November 4, 2021 | |||
| Fourth quarter | February 3, 2022 | |||
|
Quarterly and annual reports as well as other corporate documents can be found on our website. Copies can be requested from the Investor Relations group. | ||||
172 | BCE INC. 2020 ANNUAL REPORT
BCE.CA
Exhibit 99.3
Code of Business Conduct
What we do is who we are
Our Moral Compass
Policy Contact: corporate.secretariat@bell.ca
© Bell Canada 2021. All Rights Reserved.
| Code of Business Conduct |
| © Bell Canada 2021. All Rights Reserved. |
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| Code of Business Conduct |
A Message from our President and Chief Executive Officer
Mirko Bibic
President and Chief Executive Officer
BCE Inc. and Bell Canada
| © Bell Canada 2021. All Rights Reserved. |
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| Code of Business Conduct |
| 1 | INTRODUCTION |
| 1.1 | Scope: Who Does the Code Apply To? |
The Code applies to everyone at Bell, including all directors, executives and employees of BCE Inc., Bell Canada and their subsidiaries. Throughout the Code, we will refer to these companies as Bell.
| 1.2 | Objectives |
| 1.3 | Reporting a Misconduct or Violation of the Code – The Business Conduct Help Line |
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| Code of Business Conduct |
An unethical behaviour may be reported to your immediate manager. If this won’t meet your needs, is inappropriate, does not provide the necessary level of confidentiality or if you otherwise prefer, you can contact our confidential and anonymous Business Conduct Help Line at clearviewconnects.com on a 24/7 basis or by calling 1-866-298-2942 (toll free). You may also contact the Corporate Secretary or the Chair of the Audit Committee.
You can also consult the Complaint Procedures for Accounting and Auditing Matters on the Corporate Policies & Ethics Program intranet site.
| 1.4 | Responsibilities of Managers & Executives |
| 1.5 | Penalties for Violations |
Disciplinary action up to and including dismissal will be taken should an employee, manager or executive:
| ● | violate the Code or a Bell policy, disregard proper procedures or ask others to violate the Code or a Bell policy |
| ● | deliberately fail to promptly report a violation or withhold relevant information concerning a violation |
| ● | fail to cooperate in the investigation of a known or suspected violation or |
| ● | take action against an employee who reports a violation or breach of the Code or other policy. |
| 1.6 | Annual Review and Sign Off |
To demonstrate our commitment to the shared values and standards described in the Code, all employees, managers, executives and members of the Board of Directors must certify annually that they have reviewed and follow the Code. A copy of these certifications can be found at Attachments 1A and 2A. All employees must also take the on-line course on the Code at least every two years.
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| Code of Business Conduct |
| 2.2 | Conflicts of Interest |
As employees, managers and executives, our business loyalty rests in placing Bell’s interests – including those of its customers and shareholders – before our personal interests and relationships.
A conflict of interest arises whenever we allow, or appear to allow, personal interests or relationships to impair our judgment and ability to make decisions with integrity and honesty. By thinking of ourselves or our relationships first, we may act in a way that is damaging, or potentially damaging, to Bell. We may also harm our personal reputation.
We must not use our position to influence or bypass Bell procedures, or improperly take advantage of information we have access to by virtue of our positon, for personal gain nor for the benefit of our family, friends, colleagues or anyone else.
How Can I Tell If I Am In a Conflict of Interest?
If you are not sure about a particular situation, obtain the guidance you need. Start by asking yourself the following questions:
| ● | Am I following proper Bell procedures? |
| ● | Do I stand to potentially gain personally from my actions? |
| ● | Can my actions potentially result in a financial or other advantage for myself, a near relative (which would include a spouse, sibling, parent, child, or in-law), friend or other relationship? |
| ● | Am I uncomfortable discussing this with my manager or fellow employees? |
| ● | Would I act differently if a friend or near relative or relationship weren’t involved? |
If you have any doubts about a possible conflict, raise the matter with your manager or contact the Business Conduct Help Line at www.clearviewconnects.com or by calling 1-866-298-2942 (toll free).
If there is an actual or potential conflict of interest, you must disclose it immediately to your leader and as part of the annual online review process.
| 2.2.1 | Conflicts of Interest Relating to Family and Personal Relationships |
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| Code of Business Conduct |
My partner has just become an executive sales manager for a company that services the computers in my department. Do I need to tell anyone about this?
| ● | Yes. Someone could claim that Bell is giving your partner business because you are a Bell employee. You should notify your manager and make sure you are not involved in any decisions regarding your partner’s company. This relationship should be disclosed in your annual online review of the Code. |
| 2.2.2 | Conflicts of Interest Relating to Supplier-Funded Incentive Programs |
Supplier-funded incentive programs, often offered to sales employees by suppliers seeking to sell their products, may only be arranged through an authorized program administrator who does not work with the eligible employees.
It’s up to the program administrator to ensure there is no conflict between Bell’s marketing strategy and the supplier’s incentive program. For further information, please refer to the Incentive & Recognition Programs Guidelines on the Human Resources intranet site.
| 2.2.3 | Conflicts of Interest Arising from Outside Employment and Similar Activities |
I am a Bell technician who installs circuitry for small and medium-sized business customers. With the growth of the Internet and other communications services, demand for my expertise is booming. Can I take advantage of this opportunity and start up an installation business on my own time?
| ● | No. You cannot engage in any outside activity that might take business away from Bell or any of its subsidiaries. Furthermore, as an employee, you are expected to contribute your energy and ideas to your job as an installer for Bell. |
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| Code of Business Conduct |
As a customer service representative I happen to respond to my brother’s telephone call inquiring about a charge on his account for TV services. Can I respond to this call and make adjustments, if any, to his account?
| ● | No. Employees are not allowed to access or make changes to the billing accounts of their families and friends, including accessing their own or invoicing themselves. |
| 2.2.4 | Conflict of Interest Guidelines for Executives and External Directorships |
External Directorships
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| Code of Business Conduct |
| 2.3 | Loans, Gifts and Entertainment |
| 2.3.1 | Loans from Bell |
We do not accept, whether directly or indirectly, any loan or guarantee of obligations from Bell that are for our personal benefit.
| 2.3.2 | Business Gifts & Entertainment |
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| Code of Business Conduct |
Factors which you and your manager should consider when assessing the proper course of action include:
| ● | Is Bell potentially involved in a major procurement activity with the company offering the gift or entertainment? |
| ● | Would the gift or entertainment be considered appropriate or customary, taking into account the nature of the function or services you perform for Bell? |
| ● | Would it be perceived as insulting or damaging to the business relationship to return the gift or decline the hospitality? |
| ● | Can the gift or hospitality be applied to benefit all team members rather than certain individuals? |
| ● | Is the public sector involved? If so, consult the Regulatory and Government Affairs Team |
| 2.4 | Political Activities |
| 2.4.1 | Political Contributions |
| 2.4.2 | Lobbying on behalf of Bell |
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| Code of Business Conduct |
| 2.5 | Improper Influence on the Conduct of Audits |
Employees are prohibited from coercing, manipulating, misleading or fraudulently influencing Bell’s internal or external auditors at any time and especially when the employee knows or should know that his/her action, if successful, could result in rendering Bell’s financial statements misleading in any way.
| 2.6 | Trading in Securities |
| 2.6.1 | Insider Trading |
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| Code of Business Conduct |
Can I use information I obtain by accident or overheard?
| ● | No. Even when you obtain undisclosed material information by accident, such as by overhearing a discussion of a planned acquisition, you are prohibited by law from trading in securities of BCE Inc., Bell Canada or the target company. In addition, you cannot suggest to a spouse, near relative or friend that they trade in shares of BCE Inc., Bell Canada or the target company while in possession of such information as this would be considered tantamount to divulging that information to someone outside Bell for personal gain or the gain of someone else. Such securities could only be traded on the second business day after Bell or the company being acquired issues a press release publicly announcing the planned acquisition. |
| 2.6.2 | Short Sales, Calls and Puts |
| 2.7 | Public Disclosure of Information |
| 2.8 | Confidentiality of Customer and Employee Information |
| 2.8.1 | Customer Privacy |
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| Code of Business Conduct |
Interception of Private Communications
Communications between Bell and a customer may be monitored for quality assurance purposes, with an appropriate advisory to the customer.
The unlawful interception of a private communication is prohibited under the Criminal Code. The content of a customer’s transmissions (including telephone and email) may not be monitored, nor may the content, nature and existence of telephone calls and data transmissions be released to third parties except as explicitly authorized by law.
Unintentional interceptions of a call may occur when providing service, doing repairs or when conducting quality control checks. In these instances, the employee must advise the persons on the call of the unintended interception and immediately disconnect from that call.
Business Customer or Supplier Information
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| Code of Business Conduct |
I am a customer service representative for the residential market. A caller identifying himself as the spouse of a wireless customer requests billing details for the spouse’s account, indicating that he looks after bill payments for the family. Should I provide the information?
| ● | If the caller is not explicitly listed on the account as an authorized co-user, the information should not be provided. Account details, particularly for wireless accounts, can be very sensitive information and is often sought in the context of matrimonial disputes. Advise the caller to have the account holder of record contact Bell to have the spouse added to the account as an authorized co-user. This approach applies equally to all customer accounts, in all business units. |
| 2.8.2 | Employee Privacy |
| 2.8.3 | Bell Privacy Policies |
To support our commitment to privacy we have developed policies and a formal privacy code - the Bell Privacy Policy and the Bell Employee Privacy Policy - which spell out the commitments of Bell, its employees and agents and the rights of customers and employees regarding personal information.
The Bell Privacy Ombudsman oversees compliance with these privacy policies and may be contacted at privacy@bell.ca.
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| Code of Business Conduct |
The Bell Privacy Policy, the Bell Employee Privacy Policy and other privacy-related documents are available by following the “privacy” link on www.bell.ca or on the Bellnet policies page Corporate Policies & Ethics.
| 2.9 | Information Management |
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| Code of Business Conduct |
Post Employment Obligations
Your obligation to protect Bell’s confidential information continues after the employment relationship ends. Upon termination of employment or contract, or reassignment, all employees must:
| ● | return all copies of confidential information and documents, including electronic records, and all third party information entrusted to Bell |
| ● | return any equipment entrusted to them including mobile devices, laptops and external storage devices |
| ● | continue to uphold the confidentiality of Bell confidential information and not use or disseminate any such information. This continuing obligation is particularly important in the case of a departing employee who subsequently works for one of Bell’s competitors or suppliers. |
Preservation of Records under Legal Hold
How do I tell if a document (paper or electronic) is confidential if it is not marked as such?
| ● | You must begin by asking the person who issued the document (if known), as the originator is the person who must determine the security classification. If you can’t find the source of the information and the nature of the document does not make the classification obvious (such as information that has been made public), the document must be treated as confidential until the proper classification is determined. |
| 2.10 | Dealing with Customers |
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| Code of Business Conduct |
You are trying to close a sale with a customer. There are conditions applicable to the offer you’ve described that may make the customer reluctant to subscribe. You know those conditions will be described in the confirmation email the customer will receive and in the contract. Can you leave those details out and let the customer read about them?
| ● | It is your responsibility to communicate our offers and prices accurately. You must advise the customer of all applicable conditions so that they can make an informed choice prior to purchasing. |
| 2.11 | Dealing with Suppliers and Competitors |
| 2.11.1 | Supplier Relations - Reciprocity |
Our department is organizing a meeting at a hotel. Due to the large size of our group, and the fact we don’t want to travel far, we’ve chosen a nearby hotel serviced by a competitor. Is this okay, or should we find a hotel that uses Bell services?
| ● | It is not Bell policy to prohibit employees on company business from dealing with organizations that do not use Bell’s services. While we actively encourage everyone at Bell to do business with our customers, we must ensure that this is not done at the expense of price, quality and service. |
| ● | Although the hotel you’ve chosen is not a Bell customer, you were right to choose it if, in your judgment, it best meets the price-quality-service criteria you are looking for: the hotel is located close to your office, it can easily accommodate all the members of your department and, as a result, will enable your group to save both time and traveling expenses. |
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| Code of Business Conduct |
| 2.11.2 | Treating Competitors with Respect |
| 2.11.3 | Obtaining Information about our Competitors |
Our business unit recently hired someone who was employed with a competing radio station. This person has confidential information which would be very valuable to us. Can we ask him to disclose this confidential information?
| ● | Absolutely not. The new employee has an obligation to protect his/her former company’s confidential or proprietary information, just as you would be obliged to protect Bell’s confidential or proprietary information if you were to leave Bell. You must respect the employee’s personal integrity as well as his/her obligation to his/her former employer. |
Inducing an employee to disclose such confidential information is a violation of the Code.
If I become aware that this person is disclosing a competitor’s confidential information to Bell employees, should I report it?
| ● | Yes you must report this fact to your immediate supervisor or through the Business Conduct Help Line at clearviewconnects.com or by calling 1-866-298-2942 – and you must not use such confidential information. Bell’s reputation could be significantly harmed by such disclosure and taking immediate steps to contain the confidential information is critical. Failure to report is a violation of the Code. |
| 2.11.4 | Agreements with Competitors |
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| Code of Business Conduct |
| 2.11.5 | When a Competitor is a Customer |
When providing competitors with network facilities, broadcasting, access or other services, we cannot use information obtained as a result of that process in any manner which would give us an undue competitive advantage. This includes ensuring that this information is not made available to those within Bell or its affiliates who develop competitive service strategies. It also means that we must not disclose a customer’s choice of competitive carrier to anyone who does not clearly require the information to provide service to the customer.
| 2.12 | Safeguarding Bell Assets |
| 2.12.1 | Visible ID |
All employees, consultants and contractors must wear a visible, valid, designated ID card at all times while on Bell premises. An ID card can only be used by the employee to whom it is issued. It cannot be shared or lent. Visitors must wear a visible, valid, designated visitor’s card while on Bell premises and must be accompanied by a Bell team member at all times. Employees should question anyone on Bell premises not wearing a visible Bell ID or visitor’s card.
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| Code of Business Conduct |
| 2.12.2 | Prevention of Fraud |
What is Fraud?
| ● | Fraud is defined as an intentional deception, falsification or misrepresentation made for personal gain, or to damage or create loss for the organization, customers or individuals. This can include the misuse or misapplication of the organization’s resources or assets to conduct internal fraud. This can also include actions taken towards business partners such as clients and service providers as well as false or inflated insurance claims presented to Manulife or any other insurance provider. |
Successfully preventing fraud requires an ongoing commitment from all of us. This includes actively participating in the prevention, detection, and reporting of suspected fraud, whether committed by an internal or external party. As employees we will not engage, directly or indirectly, in bribery, kick-backs, account falsification, false claims, time fraud or any other fraudulent or corrupt business practices.
Fraudulent actions are not only unethical, but may also be a violation of law, Bell has a “zero tolerance” stance with regards to all confirmed fraud situations. If you are approached by anyone with an opportunity to engage in fraudulent activities, you must report the incident to your manager and Corporate Security or through the confidential Employee Help Line available at clearviewconnects.com or by calling 1-866-298-2942 (toll free).
| 2.12.3 | Corporate Credit Cards and Bell Funds |
We are personally responsible for funds, cash, cheques, postage, etc., over which we have control. Corporate credit cards are not to be used for personal cash withdrawals or purchases and other charge cards are to be used only for business purposes. We must also ensure that all expense vouchers, benefit claims and invoices are accurate and properly authorized.
Corporate policy regarding the use of corporate credit cards and corporate travel is detailed on the Travel and Expenses Management intranet site. We should, unless unavailable, use the services of suppliers with whom Bell has negotiated agreements (e.g. travel agents, airlines, carrental agencies, taxi companies, hotels).
| 2.12.4 | Hiring Consultants or Contractors |
Hiring of contractors, consultants or other external resources must follow the rules as outlined on the Contractors and Consultants Procurement intranet site and hiring of external resources must also comply with the principles and procedures of the Contractor Program Policy and the requirements of the relevant Bell Policies available on the Corporate Policies & Ethics intranet site, including the Personnel Security Policy. In addition, all contractors performing high-risk work must be pre-qualified to ensure all workers are competent, trained and compliant with the health and safety requirements of Bell, prior to conducting any work for Bell, as outlined in the Directive on contractor safety and high-risk services.
| 2.12.5 | Electronic Procurement and Electronic Processing of Expense Reports |
Bell electronically processes much of its procurement needs including employee expense reports and accounting for corporate credit card payments. All employee expense reports and credit card payments must be approved by a leader one level above the employee submitting the reports.
| 2.12.6 | Business Books and Records |
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| Code of Business Conduct |
| 2.12.7 | Standard Contracts and Agreements |
If you are in a position to develop or sign contracts, you must take necessary steps to protect the interests of Bell by ensuring that only Bell standard form template contracts are used and, in the case of purchase agreements, the Procurement Policy is followed. All contracts must be reviewed by appropriate departments such as, Legal, Regulatory and Government Affairs, Procurement, Corporate Security, Corporate Responsibility & Environment, Health, Safety and Workplace, Risk Advisory Services and Insurance. Standard contracts must not be modified without prior approval of the Legal Team.
| 2.12.8 | Information Security |
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| Code of Business Conduct |
| 2.12.9 | Intellectual Property |
| 2.12.10 | Proper Use of Bell-Provided Internet Access and Other IT Resources |
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| Code of Business Conduct |
My daughter has asked me if she can use my company laptop to do some research on the internet for a school project. Should I lend her my laptop?
No. To protect our networks, we can’t let anyone, even family members, use Bell equipment.
| 2.13 | Social Media |
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| Code of Business Conduct |
| 2.14 | Work Environment |
| 2.14.1 | Mental Health |
| 2.14.2 | Respect and Professionalism in the Workplace |
Upholding respect and professionalism in the workplace enables us to build and cultivate more meaningful, richer relationships with fellow team members, customers and the broader public, suppliers and shareholders. For this reason, we expect all our employees to respect their colleagues, team members and leaders.
We are committed to fostering a workplace which encourages respect, collaboration, openness and effective communication and which recognizes the intrinsic dignity and worth of all employees and values the diversity of team members, customers, suppliers and shareholders.
Bell supports prevention by equipping employees and leaders with practical resources (Civility guide, Leader’s guide to managing conflict, Guide to managing difficult customer or public interactions) available on the Respectful workplace ethics website.
| 2.14.3 | Diversity, Inclusion and Employment Equity |
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| Code of Business Conduct |
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| Code of Business Conduct |
| 2.14.4 | Preventing Workplace Violence and Harassment |
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| Code of Business Conduct |
| 2.14.5 | Health and Safety |
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| Code of Business Conduct |
| 2.14.6 | Emergency Management |
| 2.14.7 | Business Continuity |
Bell recognizes the importance of its infrastructure and services for its employees and customers. To that end, all business unit leaders and team members must ensure they have appropriate business continuity plans and disaster recovery plans in order to be ready to react to any type of events that may impair our activities.
| 2.14.8 | Alcohol, Drugs and Other Substances |
| 2.14.9 | Involvement in a Legal Matter |
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| Code of Business Conduct |
You are a member of the CTV News team and you receive a request from the Bell Residential Services team to profile an item they believe is newsworthy on CP24. What should you do?
| ● | Remember that it is acceptable for Bell employees to suggest story ideas, with respect for the CTV News team’s full authority to decide on news coverage |
| ● | If you decide the item is not newsworthy, but they persist or escalate the matter, you should discuss it with your supervisor to confirm your position and obtain support |
| ● | Ultimately, you can engage the President of CTV News who is the final arbiter in matters relating to independent news reporting and has the authority to take steps to ensure the situation is resolved in an appropriate manner in accordance with the Policy on Journalistic Independence |
| ● | Should you consider that the matter is not handled in accordance with the policy, you can report your concerns through the Business Conduct Help Line |
The Business Conduct Help Line may be reached 24/7 by calling 1-866-298-2942 or by visiting clearviewconnects.com.
Members of the public should call Bell Canada’s Complaint and Concerns Line at 1-866-317-3382 with any concerns about Bell activities.
| 2.16 | Environmental Leadership |
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| Code of Business Conduct |
| 3 | ROLES AND RESPONSIBILITIES |
| 3.1 | Business Unit Responsibility |
Managers are required to ensure that all employees have access to the Code either on-line or in a paper format if required, and that they know, understand and comply with its provisions. To this end, they should ensure that all employees review the Code annually and comply with the annual review process outlined in this Code.
| 3.2 | Board of Directors, Corporate Governance Committee and Audit Committee |
The Board of Directors, with the recommendation of the Corporate Governance Committee, has the authority to approve this policy. In addition, the Corporate Secretary’s Office in conjunction with Internal Audit, report quarterly to the Audit Committee on the number and scope of issues brought via the Business Conduct Help Line.
| 3.3 | Corporate Secretary’s Office |
The Corporate Secretary’s Office has the responsibility of administering the Code and managing the Business Conduct Help Line, securing annual certification of all executives and members of the Board of Directors under the Code, addressing conflict of interest issues and ensuring compliance by all Business Units.
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| Code of Business Conduct |
The Code of Business Conduct annual review is included in the annual performance process. These procedures are located in the Career Zone intranet site under Objective Performance.
|
Attachment 1A |
Certification of Directors and Executives under the Code of Business Conduct | |
|
Attachment 2A |
Form BC 3684 – Employee Annual Record of Review | |
|
Attachment 2B |
Form BC 3684A – Disclosure of Conflict of Interest or Potential Conflict of Interest | |
|
Attachment 3 |
Additional Resources | |
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| Code of Business Conduct |
Attachment 1A
CERTIFICATION OF DIRECTORS AND EXECUTIVES
UNDER THE CODE OF BUSINESS CONDUCT
|
|
The Boards of Directors of BCE Inc. and Bell Canada (in each case, the “Company”) and our shareholders, expect all Directors and executives of the Company to follow the highest possible standards of honest and ethical conduct and to encourage and promote a culture in which ethical business conduct is recognized, valued and exemplified.
Certification
I certify that I have reviewed, understand and follow the Bell Canada Code of Business Conduct (the “Code”).
In addition, I support the setting of standards needed to discourage wrongdoing and to promote:
| ● | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, |
| ● | full, fair, accurate and timely disclosure in reports and documents that the Company files with, or submits to, securities regulators and in other public communications made by the Company, in accordance with the Disclosure Policy, |
| ● | compliance with laws, rules and regulations of federal, provincial, state or local governments, and other relevant private and public regulatory agencies in all jurisdictions in which the Company operates, |
| ● | prompt reporting of all material violations of the Code to the Chair of the Audit Committee of the Board of Directors of the Company. |
To the best of my knowledge and ability, I will act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing my independent judgment to be compromised.
I acknowledge that I am accountable for following the Code and the responsibilities I have under it. I also acknowledge that complying with the Code is a condition of my employment. If I do not comply with it or applicable laws, rules or regulations, I may be subject to disciplinary measures, which could include dismissal from the Company.
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| Attachment 2A |
Form BC 3684 |
EMPLOYEE ANNUAL RECORD OF REVIEW
|
|
Note to immediate manager: If this form is completed in paper format, please file original in employee’s personnel file.
Policy on conflict of interest
Employees owe their first business allegiance to Bell, and therefore they must remain free of interests or relationships which are harmful or detrimental to Bell’s best interests. Employees should avoid not only a real conflict of interest, but also the appearance of one which could tarnish their own or Bell’s image. Even though it is not always possible to avoid relationships that could place you in a position of potential conflict, it is important to inform your manager and avoid actions or decisions that would conflict with Bell’s interests.
Conflict of interest can lead to disciplinary action, even to dismissal and/or prosecution. If you are in doubt, you should discuss your specific situation with your manager, who will then advise you as to the position of Bell with respect to the matter.
Annual certification
I have reviewed, fully understand and follow Bell Canada’s “Code of Business Conduct” including the section on Conflict of Interest. I have reported immediately to my manager and through the annual review process any relationship or other circumstances that do or could place me in conflict with the interests of Bell. Any new situations will be reported as they occur. I hereby certify that I have no real or potential conflict of interest, except what is disclosed through the annual review process.
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| Attachment 2B |
Form BC 3684A |
DISCLOSURE OF CONFLICT OF INTEREST
OR POTENTIAL CONFLICT OF INTEREST
|
|
Note to immediate manager: If this form is completed in paper format, please file original in employee’s personnel file. A copy should also be sent to the Corporate Secretary’s Office at corporate.secretariat@bell.ca.
| Employee |
||||||||
| Family name |
Given names |
Employee number | ||||||
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| ||||||
I am directly or indirectly involved in other business or employment, which may give rise to or is at present in conflict with, or potential conflict with, the best interests of Bell:
I have direct or indirect investment, business involvements or relationships, which may give rise to or is at present in conflict with, or potential conflict with, the best interests of Bell:
I have, in the past 2 years, been employed or otherwise commercially involved in endeavours or companies which are in competition with Bell Canada and its affiliated companies (e.g.: Rogers, Telus, Videotron, Cogeco, etc.):
I am currently or was recently bound by restrictive covenants such as non-competition or non-solicitation restrictions:
Other:
For employees who declare a conflict due to past employment by a competitor: I understand that in my previous employment or commercial involvement with a competitor of Bell Canada and its affiliated companies I may have become aware of or given access to undisclosed confidential or proprietary information of my previous employer. As such, unless this information has been publicly disclosed or otherwise available in the marketplace, I am not to share such information. I also acknowledge that I have returned to my previous employer all property belonging to my previous employer including any confidential or proprietary information and documents provided to me including any third party information that was entrusted to me.
| © Bell Canada 2021. All Rights Reserved. |
P a g e | 33 |
| Code of Business Conduct |
Attachment 3
ADDITIONAL RESOURCES
|
|
If you have any questions regarding the issues raised in this document or any questions on the Code, speak to your manager or use the Business Conduct Help Line at clearviewconnects.com or by calling 1-866-298-2942 (toll free).
If you wish to report any unethical or illegal behaviour such as corporate fraud, or to raise any concerns regarding Bell’s accounting, internal accounting controls or auditing matters, you may report the matter to your manager or use the Business Conduct Help Line at clearviewconnects.com or by calling 1-866-298-2942 (toll free).
You may also use the following resources:
| ● | Human resources intranet site |
| ● | Corporate Security intranet site: |
| ● | life-threatening emergencies: call 911 |
| ● | loss or theft of Bell assets, internal fraud, criminal activity, property damage, unauthorized disclosure of confidential information, known failures in security safeguards, malfunctioning doors and locks, emergency response system (non-life threatening emergencies), emergency conditions and service impacting situations are to be reported to Bell’s National Incident Centre (NIC) at 1-866-714-0911 or at cni-nic@bell.ca |
| ● | computer security incidents, virus, worms, spam or phishing using Bell’s name, any other computer or data network attacks, weaknesses in security systems, and unexplained systems changes are to be reported to 1-888-920-8888 |
| ● | significant facility or utility interruptions, surveillance, control systems or any service failures that impact our telecommunications networks are to be reported to 1-888-570-1091 |
| ● | Corporate Responsibility at 1-877-235-5368 or at responsibility@bell.ca. |
| ● | Enviro-Line Bell (environmental issues) at 1-877-235-5368 |
| ● | Branding at info.branding@bell.ca |
| ● | Corporate Secretary’s Office intranet site or at (514) 786-8424 |
| ● | Occupational Health, Safety and Workplace at (514) 870-5848 or at Info.ss-hs@bell.ca |
| ● | Bell Privacy Office for customer related privacy issues at privacy@bell.ca or for additional privacy related information, visit bell.ca |
| ● | Information on privacy in the workplace for employees is available on the Privacy intranet site or at: |
| ● | English: privacy.coordinator@bell.ca |
| ● | French: coord.rens.pers@bell.ca |
| © Bell Canada 2021. All Rights Reserved. |
P a g e | 34 |
| Code of Business Conduct |
|
Issuing BU |
Law & Regulatory Department | |
|
Policy sponsor |
Corporate Secretary | |
|
Policy owner |
Corporate Secretary’s Office | |
|
Primary contact |
Corporate Secretary’s Office | |
|
Required approvals |
Board of Directors, Corporate Governance Committee, Corporate Secretary | |
|
First Release |
1995 | |
|
Review cycle |
Annually | |
Required Policy or Practice management elements checklist
|
Monitoring compliance processes defined |
Yes | |
|
Communication plan complete |
Yes | |
|
Communication materials complete |
Yes | |
|
Training plan complete |
Yes | |
Revision history
|
Date |
Change owner | Changed by | Description | |||
|
June 2015 |
Mirko Bibic | Mirko Bibic | Update | |||
|
August 2015 |
Michel Lalande | Michel Lalande | Annual update | |||
|
August 2016 |
Michel Lalande | Michel Lalande | Annual update | |||
|
August 2017 |
Michel Lalande | Michel Lalande | Annual Update | |||
|
August 2018 |
Michel Lalande | Miguel Baz | Annual Update | |||
|
October 2018 |
Michel Lalande | Miguel Baz | Update | |||
|
August 2019 |
Michel Lalande | Miguel Baz | Annual Review | |||
|
January 2020 |
Michel Lalande | Miguel Baz | Update | |||
|
August 2020 |
Michel Lalande | Miguel Baz | Annual Review | |||
|
January 2021 |
Martin Cossette | Miguel Baz | Update | |||
| © Bell Canada 2021. All Rights Reserved. |
P a g e | 35 |