Exhibit 99.1

 

Building Better 2020 Experiences Q1First Quarter Shareholder Report May 6, 2020

Table of contents

 

 

Table of contents

 

Management’s discussion and analysis						1
1		Overview				2
		1.1		Financial Highlights		3
		1.2		Key corporate and business developments		5
		1.3		Assumptions		6
2		Consolidated financial analysis				7
		2.1		BCE consolidated income statements		7
		2.2		Customer connections		7
		2.3		Operating revenues		8
		2.4		Operating costs		9
		2.5		Net earnings		9
		2.6		Adjusted EBITDA		10
		2.7		Severance, acquisition and other costs		10
		2.8		Depreciation and amortization		10
		2.9		Finance costs		10
		2.10		Other (expense) income		11
		2.11		Income taxes		11
		2.12		Net earnings attributable to common shareholders and EPS		11
3		Business segment analysis				12
		3.1		Bell Wireless		12
		3.2		Bell Wireline		15
		3.3		Bell Media		18
4		Financial and capital management				20
		4.1		Net debt		20
		4.2		Outstanding share data		20
		4.3		Cash flows		21
		4.4		Post-employment benefit plans		22
		4.5		Financial risk management		22
		4.6		Credit ratings		24
		4.7		Liquidity		24
5		Quarterly financial information				26
6		Business risks				27
7		Accounting policies, financial measures and controls				30
		7.1		Our accounting policies		30
		7.2		Non-GAAP financial measures and key performance indicators (KPIs)		30
		7.3		Controls and procedures		33
Consolidated financial statements						34
Consolidated income statements						34
Consolidated statements of comprehensive income						35
Consolidated statements of financial position						36
Consolidated statements of changes in equity						37
Consolidated statements of cash flows						38
Notes to consolidated financial statements						39

		Note 1		Corporate Information		39
		Note 2		Basis of presentation and significant accounting policies		39
		Note 3		Segmented information		40
		Note 4		Operating costs		41
		Note 5		Severance, acquisition and other costs		41
		Note 6		Other (expense) income		42
		Note 7		Earnings per share		42
		Note 8		Other non-current assets		42
		Note 9		Debt		42
		Note 10		Post-employment benefit plans		43
		Note 11		Financial assets and liabilities		44
		Note 12		Share-based payments		45
		Note 13		COVID-19		47

MD&A

 

 

Management’s discussion and analysis

In this management’s discussion and analysis (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.

All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 7.2, Non-GAAP financial measures and key performance indicators (KPIs) on pages 30 to 33 for a list of defined non-GAAP financial measures and KPIs.

Please refer to BCE’s unaudited consolidated financial statements for the first quarter of 2020 (Q1 2020 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2019 dated March 5, 2020 (BCE 2019 Annual MD&A). In preparing this MD&A, we have taken into account information available to us up to May 6, 2020, the date of this MD&A, unless otherwise stated.

You will find additional information relating to BCE, including BCE’s annual information form for the year ended December 31, 2019 dated March 5, 2020 (BCE 2019 AIF) and recent financial reports, including the BCE 2019 Annual MD&A, on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.

Please also refer to BCE’s news release announcing its results for the first quarter of 2020 to be issued on May 7, 2020, available on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.

Documents and other information contained in BCE’s website or in any other site referred to in BCE’s website or in this MD&A are not part of this MD&A and are not incorporated by reference herein.

This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q1) ended March 31, 2020 and 2019.

 

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This MD&A, and in particular, but without limitation, the introduction to section 1, Overview, section 1.2, Key corporate and business developments, section 1.3, Assumptions, section 3.1, Bell Wireless – Key business developments, section 3.2, Bell Wireline – Key business developments and section 4.7, Liquidity, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to the potential impacts on our business, financial condition, liquidity and financial results of the outbreak of the COVID-19 pandemic, BCE’s 2020 annualized common share dividend and the expected continued payment thereof for the foreseeable future, our network deployment and capital investment plans, the sources of liquidity we expect to use to meet our anticipated 2020 cash requirements, the expected timing and completion of the proposed acquisition of conventional television (TV) network V and related digital assets, BCE’s business outlook, objectives, plans and strategic priorities, and other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target, and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities laws and of the United States (U.S.) Private Securities Litigation Reform Act of 1995.

Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at May 6, 2020 and, accordingly, are subject to change after that date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in, or implied by, such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. These statements are not guarantees of future performance or events, and we caution you against relying on any of these forward-looking statements. Forward-looking statements are presented in this MD&A for the purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.

We have made certain assumptions in preparing the forward-looking statements contained in this MD&A and, in particular, but without limitation, the forward-looking statements contained in the previously mentioned sections of this MD&A. These assumptions include, without limitation, the assumptions described in section 1.3, Assumptions, which section is incorporated by reference in this cautionary statement. Subject to various factors including, without limitation, the future impacts of the COVID-19 pandemic, which we cannot predict, we believe that our assumptions were reasonable at May 6, 2020. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect.

Important risk factors including, without limitation, pandemics, epidemics and other public health risks, including the COVID-19 pandemic, economic, financial, competitive, regulatory, security, technological, operational and other risks that could cause actual results or events to differ materially from those expressed in, or implied by, the previously-mentioned forward looking statements and other forward-looking statements contained in this MD&A, include, but are not limited to, the risks described or referred to in section 6, Business risks, which section is incorporated by reference in this cautionary statement.

We caution readers that the risks described in the previously mentioned section and in other sections of 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 have a material adverse effect on our business, financial condition, liquidity, financial results or reputation. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after May 6, 2020. The financial impact of these transactions and special items can be complex and depends on facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way, or in the same way we present known risks affecting our business.

 

BCE Inc. 2020 First Quarter Shareholder Report            1

1 MD&A Overview

 

 

1    Overview

The COVID-19 pandemic has resulted in governments and businesses worldwide adopting emergency measures to combat the spread of the coronavirus while seeking to maintain essential services. These measures have significantly disrupted retail and commercial activities in most sectors of the economy and created extreme volatility in financial markets. This has resulted in a sharp economic downturn marked by rising levels of unemployment, as most businesses have reduced or ceased business operations, and reduced consumer spending.

As Canada’s largest communications company, Bell continues to deliver critical services and support to consumers, businesses, governments and public health responders during the COVID-19 situation. We are guided by three key operating principles during this crisis: Keep Canadians connected and informed; Prioritize the health and safety of the public, our customers and team; and Support our customers and communities. We have taken a number of steps aimed at maintaining the continuity of essential services, ensuring the health and safety of the public, our customers and our employees, and supporting our customers, frontline workers and the community.

KEEP CANADA CONNECTED AND INFORMED

 

•

Accelerated investments in network capacity, reliability and redundancy to manage the significant increases in network usage due to remote work, self-isolation and support for government and emergency response

 

•

This includes Internet data increases of up to 60% during the day and 20% at night; 40% growth in rural Wireless Home Internet usage; 25% increase in live TV viewing and 75% for Crave; surges in wireline voice traffic volumes up to 200% at peak times; and a 250% increase in conference calling alongside increased demand for 1-800 services to support public health and other government information lines

 

•

Accelerated the rollout of new or enhanced Wireless Home Internet service in April to 137,000 more homes than originally anticipated in 180 rural communities

 

•

Equipped over 4,000 customer service agents to work remotely, and redeployed thousands of Bell team members to frontline service roles

 

•

Encouraged customers to take advantage of MyBell online and mobile self-serve options; digital self-serve represents more than 50% of total customer transactions since the start of the COVID-19 crisis

 

•

Our capital investment program continues, including ongoing deployment of high-speed fibre, preparation for the launch of mobile Fifth Generation (5G), and investment in Customer Experience improvements including online fulfillment, digital self-serve and improved app functionality

PRIORITIZE THE HEALTH AND SAFETY OF THE PUBLIC, OUR CUSTOMERS AND TEAM

 

•

Implemented strict sanitation and safety procedures across our operations in line with the latest public health protocols and equipped our teams with required personal protective equipment (PPE)

 

•

Implemented innovations such as Assisted Self-Installation and Repair, which enables field technicians to support customers from outside the home by voice and video links

 

•

Accelerated remote work arrangements for employees across Canada, ensured wage support for employees impacted by temporary closures or workload reduction who could not be redeployed to frontline service roles, and provided enhanced access to workplace mental health services

 

•

Temporarily closed retail locations nationally other than a limited number of street-front stores open for critical customer support, while enhancing online and phone sales and support

 

•

In addition to PPE necessary for the Bell team, acquired and donated 1.5 million protective N95 and KN95 face masks for use by frontline workers throughout Canada

SUPPORT OUR CUSTOMERS AND COMMUNITIES

 

•

Waived wireline residential Internet overage fees until June 30, 2020 and wireless roaming charges for customers travelling abroad until April 30, 2020

 

•

Implemented flexible payment options for customers financially impacted by the crisis and suspended all new service price increases

 

•

Offered free Bell TV previews of a wide range of news, family and entertainment channels, and 30-day free Crave trials for new customers

 

•

Provided thousands of complimentary smartphones, tablets and airtime to healthcare facilities, shelters and other social service providers

 

•

Increased Bell Let’s Talk mental health funding by $5 million, including immediate support for Canadian organizations providing emergency response and services for youth and families, such as Canadian Red Cross and Kids Help Phone

 

•

Bell Media presented the all-Canadian Stronger Together, Tous Ensemble benefit special on April 26, supporting frontline workers and Food Banks Canada with donations of more than $8.6 million

Although our telecommunications, media and broadcasting operations have been recognized by Canadian governments as essential services, our business has nonetheless, starting in the latter part of the first quarter, been negatively impacted by the emergency measures adopted to combat the spread of COVID-19 and the resulting economic conditions. All of our segments have been adversely affected, but we have seen a more pronounced impact on retail subscriber and promotional activity, wireless product sales, wireless roaming revenues, business customer spending and media advertising revenues. Given that measures taken to address the COVID-19 pandemic only started in the latter part of the first quarter, such measures had a relatively moderate impact on our Q1 2020 financial results.

 

2             BCE Inc. 2020 First Quarter Shareholder Report

1 MD&A Overview

 

Due to the speed with which the COVID-19 pandemic is developing and the uncertainty of its severity, duration and potential outcomes, we are not able at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. The extent to which the COVID-19 pandemic will continue to adversely impact our business, financial condition, liquidity and financial results will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity and duration of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impacts, among others. Any of the developments and risks referred to in Section 6, Business risks – Update to the description of business risks, of this MD&A, and others arising from the COVID-19 pandemic, could have a material adverse effect on our business, financial condition, liquidity, financial results or reputation.

Accordingly, given this unprecedented and highly uncertain environment, BCE is withdrawing all of its 2020 financial guidance that it announced on February 6, 2020. It is also withdrawing all of its business outlooks and assumptions set out in the BCE 2019 Annual MD&A, its February 6, 2020 earnings news release and the BCE 2019 AIF including, without limitation, those included in section 1.4, Capital markets strategy, in section 2, Strategic imperatives, in section 3.2, Business outlook and assumptions and under the headings Competitive landscape and industry trends and Business outlook and assumptions included in section 5, Business segment analysis, of the BCE 2019 Annual MD&A.

However, BCE’s underlying business fundamentals remain strong. Our strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide significant financial flexibility to execute on our planned capital expenditures for 2020 and to sustain BCE’s common share dividend payments for the foreseeable future.

 

 

1.1    Financial highlights

To align with changes in how we manage our business and assess performance, the operating results of our public safety land radio network business are now included within our Bell Wireline segment effective January 1, 2020, with prior periods restated for comparative purposes. Previously, these results were included within our Bell Wireless segment. Our public safety land radio network business, which builds and manages land mobile radio networks primarily for the government sector, is now managed by our Bell Business Markets team in order to better serve our customers with end-to-end communications solutions.

BCE Q1 2020 SELECTED QUARTERLY INFORMATION

 

Operating revenues		Net earnings		Adjusted EBITDA (1)
$5,680		$733		$2,442
million		million		million
(0.9%) vs. Q1 2019		(7.3%) vs. Q1 2019		+1.4% vs. Q1 2019

 

 

 

Net earnings attributable		Adjusted net earnings (1)		Cash flows from		Free cash flow (1)
to common shareholders				operating activities
$680		$720		$1,451		$627
million		million		million		million
(8.1%) vs. Q1 2019		+4.0% vs Q1 2019		(4.3%) vs. Q1 2019		(2.3%) vs. Q1 2019
BCE CUSTOMER CONNECTIONS
Wireless		Retail high-speed Internet		Retail TV		Retail residential network
Total						access services (NAS) lines
+5.2%		+3.9%		(0.4%)		(8.9%)
10.0 million subscribers		3.6 million subscribers		2.8 million subscribers		2.6 million subscribers
at March 31, 2020		at March 31, 2020		at March 31, 2020		at March 31, 2020

 

(1)

Adjusted EBITDA, adjusted net earnings 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 7.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin, 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.

 

BCE Inc. 2020 First Quarter Shareholder Report            3

1 MD&A Overview

 

 

BCE INCOME STATEMENTS – SELECTED INFORMATION

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Operating revenues
Service			5,058				5,045				13				0.3%
Product			622				689				(67	)			(9.7%)
Total operating revenues			5,680				5,734				(54	)			(0.9%)
Operating costs			(3,238	)			(3,325	)			87				2.6%
Adjusted EBITDA			2,442				2,409				33				1.4%
Adjusted EBITDA margin (1)			43.0	%			42.0	%							1.0 pt	s
Net earnings attributable to:
Common shareholders			680				740				(60	)			(8.1%)
Preferred shareholders			38				38				–				–
Non-controlling interest			15				13				2				15.4%
Net earnings			733				791				(58	)			(7.3%)
Adjusted net earnings			720				692				28				4.0%
Net earnings per common share (EPS)			0.75				0.82				(0.07	)			(8.5%)
Adjusted EPS (1)			0.80				0.77				0.03				3.9%
(1) Adjusted EBITDA margin and adjusted EPS 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 7.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin and Adjusted net earnings and adjusted EPS in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure.
BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION
		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Cash flows from operating activities			1,451				1,516				(65	)			(4.3%)
Capital expenditures			(783	)			(850	)			67				7.9%
Free cash flow			627				642				(15	)			(2.3%)

 

 

Q1 2020 FINANCIAL HIGHLIGHTS

BCE revenues declined by 0.9% in Q1 2020, compared to the same period last year, driven by reduced economic and commercial activity as a result of the impact of the COVID-19 pandemic in the latter part of the quarter, which negatively affected all of our segments, with a more pronounced impact on retail subscriber and promotional activity, wireless product sales and roaming revenues, as well as business customer spending and media advertising revenues. Service revenues increased by 0.3% year over year, from the continued growth of our postpaid and prepaid wireless, retail Internet, and Internet protocol television (IPTV) subscriber bases, higher residential household average revenue per unit and greater Bell Media subscriber revenues, moderated by the ongoing erosion in our voice, satellite TV and legacy data revenues, along with lower media advertising revenues. Product revenues decreased by 9.7% year over year, mainly due to lower wireless product sales and lower equipment sales to large enterprise customers partly attributable to the impact of the COVID-19 pandemic.

Net earnings decreased by 7.3% in the first quarter of 2020, compared to the same period last year, mainly due to higher other expense, mainly as a result of net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans, partly offset by higher adjusted EBITDA and lower income taxes.

BCE adjusted EBITDA grew by 1.4% in Q1 2020, compared to Q1 2019, despite the unfavourable impact of the COVID-19 pandemic, due to adjusted EBITDA growth in our wireless and wireline segments, moderated by a decline in our media segment. The decline in operating costs, offset in part by lower revenues, drove the year-over-year growth in adjusted EBITDA. This resulted in an adjusted EBITDA margin of 43.0% in Q1 2020, up 1.0 pts compared to the 42.0% achieved in Q1 2019, reflecting lower wireless device subsidies and reduced low-margin wireline product revenues.

BCE’s EPS of $0.75 in Q1 2020 decreased by $0.07 compared to the same period last year.

Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net gains (losses) on investments, early debt redemption costs and impairment charges, net of tax and non-controlling interest (NCI), adjusted net earnings in the first quarter of 2020 was $720 million, or $0.80 per common share, compared to $692 million, or $0.77 per common share, for the same period last year.

Cash flows from operating activities in the first quarter of 2020 decreased by $65 million, compared to Q1 2019, mainly due to higher interest paid and lower cash from working capital due in part to collections slowdown as a result of COVID-19, partly offset by delayed tax payments due to government relief measures related to COVID-19, higher adjusted EBITDA and lower severance and other costs paid.

Free cash flow in Q1 2020 decreased by $15 million, compared to the same period last year, mainly due to lower cash flows from operating activities, excluding acquisition and other costs paid, partly offset by lower capital expenditures.

 

4             BCE Inc. 2020 First Quarter Shareholder Report

1 MD&A Overview

 

 

1.2    Key corporate and business developments

COMMON SHARE DIVIDEND INCREASE

On February 5, 2020, BCE’s board of directors approved a 5%, or 16 cents per share, increase in the annualized common share dividend from $3.17 per share to $3.33 per share, effective with BCE’s 2020 first quarter dividend paid on April 15, 2020 to common shareholders of record on March 16, 2020. This dividend increase represents BCE’s 16th increase to its annual common share dividend since 2009, representing a total increase of 128%.

 

 

PUBLIC DEBT OFFERINGS AND REDEMPTION

On February 13, 2020, Bell Canada completed a public offering of $750 million of medium-term notes (MTN) debentures pursuant to its MTN program. The $750 million Series M-51 MTN debentures will mature on September 30, 2050 and carry an annual interest rate of 3.50%. The MTN debentures are fully and unconditionally guaranteed by BCE Inc.

On March 25, 2020, Bell Canada completed a public offering of $1 billion of MTN debentures pursuant to its MTN program. The $1 billion Series M-47 MTN debentures, which were issued pursuant to a re-opening of an existing series of MTN debentures, will mature on March 12, 2025 and carry an annual interest rate of 3.35%. The MTN debentures are fully and unconditionally guaranteed by BCE Inc.

The net proceeds of the offerings were used to fund the early redemption in March 2020 of Bell Canada’s $500 million principal amount of 4.95% Series M-24 MTN debentures due May 19, 2021, to repay short-term debt and for general corporate purposes.

 

 

CRTC APPROVAL OF V NETWORK AND NOOVO.CA ACQUISITION

On April 3, 2020, the Canadian Radio-television and Telecommunications Commission (CRTC) approved Bell Media’s agreement to acquire conventional TV network V along with its related digital assets, including the ad-supported video-on-demand service Noovo.ca, from Groupe V Média. Combining the dedicated and experienced Montréal-based management, programming and production teams of Bell Media and V, the successful completion of the transaction will provide Québec viewers with added diversity in news and entertainment programming on all platforms as well as extended opportunities for Québec’s advertising industry. The transaction is expected to close in Q2 2020, subject to closing conditions.

 

 

BELL LET’S TALK INITIATIVE EXTENDED TO 2025

On March 9, 2020, Bell extended the Bell Let’s Talk initiative to 2025 and increased Bell’s total funding commitment for mental health to at least $150 million. As the company kicks off the next five years of Bell Let’s Talk, Bell and the Graham Boeckh Foundation also unveiled a $10 million partnership to support integrated youth mental health and wellness services across Canada. The first donation from the partnership will support Aire ouverte’s existing youth hubs in Laval, Nord-de-l’Île-de-Montréal and Sept-Îles and four new sites currently in development. Aire ouverte will receive a multi-year gift of $1 million to support programming at the existing centres, help launch the new hub sites and develop a shared governance model and standardized metrics.

On March 26, 2020, Bell Let’s Talk announced a special program to support five organizations delivering mental health support on the front lines of Canadian communities and to kids and families with remote tools in a time of social distancing. Part of a $5 million increase in Bell Let’s Talk funding in response to the COVID-19 pandemic, donations to Canadian Red Cross, Canadian Mental Health Association (CMHA), Kids Help Phone, Revivre and Strongest Families Institute are enabling them to enhance their efforts to support Canadians confronting isolation, anxiety and other challenges during the crisis. With this $5 million increase in response to the COVID-19 pandemic, total Bell Let’s Talk funding commitment grew to $155 million.

Bell Let’s Talk was initially launched in 2010 as a 5-year initiative with a $50-million donation from Bell, the largest-ever corporate commitment to mental health in Canada. Focused on 4 key action pillars – anti-stigma, care and access, research and workplace leadership – Bell Let’s Talk has since partnered with more than 1,000 organizations providing mental health services throughout Canada, including hospitals, universities, local community service providers and other care and research organizations.

 

 

NOMINATION TO BCE’S BOARD OF DIRECTORS AND DEPARTURE OF SOPHIE BROCHU

In anticipation of the retirements of Messrs. Barry K. Allen, Robert E. Brown and Paul R. Weiss at the 2021 annual shareholder meeting, the election of Mr. Thomas E. Richards to the BCE Board of Directors (BCE Board or Board) will be proposed at BCE’s 2020 annual general shareholder meeting, which will be held live via webcast on Thursday, May 7, 2020, to facilitate a seamless transition and ensure Board renewal with the appropriate mix of skills, expertise and experience. Mr. Richards is a seasoned U.S.-based technology and telecommunications executive. He is a corporate director and was Executive Chairman of the Board of Directors of CDW Corporation (a provider of integrated information technology (IT) solutions) until December 2019. He previously served as Chairman, President and Chief Executive Officer of CDW Corporation until December 2018. Prior to joining CDW Corporation in 2009 as President and Chief Operating Officer, he held senior leadership positions at Qwest Communications International Inc., Clear Communications Corporation and Ameritech Corporation (telecommunications companies).

On April 2, 2020, BCE announced that Sophie Brochu will not seek re-election to the board of directors at BCE’s 2020 annual general shareholder meeting, following her appointment as President and Chief Executive Officer of Hydro-Québec effective April 6, 2020. Ms. Brochu has been a member of the board of directors of BCE and Bell Canada since 2010 and currently serves on their compensation and governance committees. She will remain a director until the BCE 2020 annual general shareholder meeting.

 

BCE Inc. 2020 First Quarter Shareholder Report            5

1 MD&A Overview

 

 

BELL NAMED ONE OF CANADA’S BEST DIVERSITY EMPLOYERS

For the fourth year in a row, Bell has been named one of Canada’s Best Diversity Employers in Mediacorp’s 2020 report on workplace diversity and inclusion. The award recognizes Bell’s commitment to providing an inclusive and accessible workplace that reflects Canada’s diversity and highlights our wide range of programs to enable women, persons with disabilities, Indigenous Peoples, visible minorities and other groups in their career development.

 

 

1.3    Assumptions

The forward-looking statements set out in this MD&A are based on certain assumptions including, without limitation, the following assumptions. Due to the speed with which the COVID-19 pandemic is developing and the uncertainty of its severity, duration and potential outcomes, we are not able at this time to estimate the impacts of the pandemic on our business or future financial results and related assumptions. Accordingly, the assumptions outlined in this MD&A and, consequently, the forward-looking statements based on such assumptions, may turn out to be inaccurate. The extent to which the COVID-19 pandemic will continue to adversely impact our business, financial condition, liquidity and financial results will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity and duration of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impacts, among others. Readers should also refer to Section 6, Business risks, of this MD&A for a description of risk factors including, without limitation, those relating to the COVID-19 pandemic, which could cause any of our assumptions, and related forward-looking statements, not to materialize.

ASSUMPTIONS

 

•

Our liquidity from our cash and cash equivalents balance, the remaining undrawn capacity under our committed credit facilities, our cash flows from operations, continued access to the public capital, bank credit and commercial paper markets based on investment-grade credit ratings, and continued access to our securitized trade receivables programs, will be sufficient to meet our cash requirements for the remainder of 2020

 

•

No material financial, operational or competitive consequences of changes in regulations affecting any of our business segments

 

6             BCE Inc. 2020 First Quarter Shareholder Report

2 MD&A Consolidated financial analysis

 

 

2    Consolidated financial analysis

This section provides detailed information and analysis about BCE’s performance in Q1 2020 compared with Q1 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 3, Business segment analysis.

 

 

2.1   BCE consolidated income statements

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Operating revenues
Service			5,058				5,045				13				0.3%
Product			622				689				(67	)			(9.7%)
Total operating revenues			5,680				5,734				(54	)			(0.9%)
Operating costs			(3,238	)			(3,325	)			87				2.6%
Adjusted EBITDA			2,442				2,409				33				1.4%
Adjusted EBITDA margin			43.0	%			42.0	%							1.0 pts
Severance, acquisition and other costs			(16	)			(24	)			8				33.3%
Depreciation			(868	)			(882	)			14				1.6%
Amortization			(234	)			(221	)			(13	)			(5.9%)
Finance costs
Interest expense			(279	)			(283	)			4				1.4%
Interest on post-employment benefit obligations			(12	)			(16	)			4				25.0%
Other (expense) income			(55	)			101				(156	)			n.m.
Income taxes			(245	)			(293	)			48				16.4%
Net earnings			733				791				(58	)			(7.3%)
Net earnings attributable to:
Common shareholders			680				740				(60	)			(8.1%)
Preferred shareholders			38				38				–				–
Non-controlling interest			15				13				2				15.4%
Net earnings			733				791				(58	)			(7.3%)
Adjusted net earnings			720				692				28				4.0%
EPS			0.75				0.82				(0.07	)			(8.5%)
Adjusted EPS			0.80				0.77				0.03				3.9%

n.m.: not meaningful       2.2  Customer connections   BCE NET ACTIVATIONS (LOSSES)

						Q1 2020				Q1 2019				% CHANGE
Wireless subscribers net activations (losses)							19,595				38,282				(48.8%)
Postpaid							23,650				50,204				(52.9%)
Prepaid							(4,055	)			(11,922	)			66.0%
Wireline retail high-speed Internet subscribers net activations							22,595				22,671				(0.3%)
Wireline retail TV subscribers net (losses) activations							(18,555	)			(1,560	)			n.m.
IPTV							2,852				20,916				(86.4%)
Satellite							(21,407	)			(22,476	)			4.8%
Wireline retail residential NAS lines net losses							(61,595	)			(66,779	)			7.8%
Total services net losses							(37,960	)			(7,386	)			n.m.

n.m.: not meaningful

 

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2 MD&A Consolidated financial analysis

 

TOTAL BCE CUSTOMER CONNECTIONS

 

		Q1 2020				Q1 2019				% CHANGE
Wireless subscribers			9,977,557				9,480,835				5.2%
Postpaid			9,183,590				8,808,189				4.3%
Prepaid			793,967				672,646				18.0%
Wireline retail high-speed Internet subscribers			3,578,196				3,442,411				3.9%
Wireline retail TV subscribers			2,753,909				2,764,851				(0.4%)
IPTV			1,770,034				1,696,622				4.3%
Satellite			983,875				1,068,229				(7.9%)
Wireline retail residential NAS lines			2,635,888				2,894,029				(8.9%)
Total services subscribers			18,945,550				18,582,126				2.0%

BCE had 37,960 net retail customer losses in Q1 2020, declining by 30,574 over the same period last year. The net retail customer losses in Q1 2020 consisted of:

 

•

23,650 postpaid wireless net customer activations, and 4,055 prepaid wireless net customer losses

 

•

22,595 retail high-speed Internet net customer activations

 

•

18,555 retail TV net customer losses comprised of 21,407 retail satellite TV net customer losses and 2,852 retail IPTV net customer additions

 

•

61,595 retail residential NAS net losses

At March 31 2020, BCE retail customer connections totaled 18,945,550, up 2.0% year over year, and consisted of the following:

 

•

9,977,557 wireless subscribers, up 5.2% compared to Q1 2019, comprised of 9,183,590 postpaid subscribers, an increase of 4.3% over last year, and 793,967 prepaid subscribers, up 18.0% year over year

 

•

3,578,196 retail high-speed Internet subscribers, 3.9% higher than last year

 

•

2,753,909 total retail TV subscribers, down 0.4% compared to Q1 2019, comprised of 1,770,034 retail IPTV customers, up 4.3% year over year, and 983,875 retail satellite TV subscribers, down 7.9% year over year

 

•

2,635,888 retail residential NAS lines, a decline of 8.9% compared to Q1 2019

 

 

 

2.3  Operating revenues

 

BCE

Revenues

(in $ millions)

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Bell Wireless			2,035				2,077				(42	)			(2.0%)
Bell Wireline			3,076				3,097				(21	)			(0.7%)
Bell Media			752				745				7				0.9%
Inter-segment eliminations			(183	)			(185	)			2				1.1%
Total BCE operating revenues			5,680				5,734				(54	)			(0.9%)

BCE

Total operating revenues at BCE declined by 0.9% in Q1 2020, compared to the same period last year, driven by reduced economic and commercial activity from the COVID-19 pandemic, which adversely affected all three of our segments, with a more significant impact on our wireless product sales and outbound roaming revenues, as well as media advertising revenues. Total operating revenues in Q1 2020, consisted of service revenues of $5,058 million, which grew by 0.3% year over year, and product revenues of $622 million, which declined by 9.7% year over year. Wireless operating revenues declined by 2.0% year over year in Q1 2020, driven by lower product revenue of 9.1%, partly offset by service revenue growth of 0.5%. Wireline operating revenues declined by 0.7% in Q1 2020 compared to Q1 2019, attributable to reduced product revenue of 11.8% combined with a modest decline in service revenues of 0.1%, reflecting lower voice and product revenues, moderated by higher data revenue. Bell Media revenues increased by 0.9% year over year in Q1 2020, driven by higher subscriber revenues, offset in part by reduced advertising revenues.

 

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2.4  Operating costs

 

BCE		BCE
Operating cost profile		Operating cost profile
Q1 2019		Q1 2020

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Bell Wireless			(1,107	)			(1,185	)			78				6.6%
Bell Wireline			(1,717	)			(1,745	)			28				1.6%
Bell Media			(597	)			(580	)			(17	)			(2.9%)
Inter-segment eliminations			183				185				(2	)			(1.1%)
Total BCE operating costs			(3,238	)			(3,325	)			87				2.6%

 

(1)	Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers.

 

(2)	Labour costs (net of capitalized costs) include wages, salaries and related taxes and benefits, post-employment benefit plans service cost, and other labour costs, including contractor and outsourcing costs.

 

(3)	Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, IT costs, professional service fees and rent.

BCE

Total BCE operating costs declined by 2.6% in Q1 2020, compared to Q1 2019, driven by reduced costs in Bell Wireless of 6.6%, and in Bell Wireline of 1.6%, partly offset by higher year-over-year costs at Bell Media of 2.9%. The decline in operating costs reflected lower cost of revenues related to the revenue decline resulting from the COVID-19 pandemic.

 

 

2.5  Net earnings

 

BCE Net earnings (in $ millions)		Net earnings decreased by 7.3% in the first quarter of 2020, compared to the same period last year, mainly due to higher other expense, mainly as a result of net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans, partly offset by higher adjusted EBITDA and lower income taxes.

 

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2 MD&A Consolidated financial analysis

 

 

2.6  Adjusted EBITDA

 

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Bell Wireless			928				892				36				4.0%
Bell Wireline			1,359				1,352				7				0.5%
Bell Media			155				165				(10	)			(6.1%)
Total BCE adjusted EBITDA			2,442				2,409				33				1.4%

BCE

BCE’s adjusted EBITDA grew by 1.4% in Q1 2020, compared to Q1 2019, despite the unfavourable impact from the COVID-19 pandemic, due to growth in our Bell Wireless segment of 4.0% and our Bell Wireline segment of 0.5%, partly offset by a decline in our Bell Media segment of 6.1%. The growth in adjusted EBITDA was driven by lower year-over-year operating expense, offset in part by the decline in revenues. This corresponded to an adjusted EBITDA margin of 43.0% in Q1 2020, up 1.0 pts over the same period last year, mainly driven by lower wireless device subsidies and reduced low-margin wireline product sales in our total revenue base.

 

 

2.7  Severance, acquisition and other costs

2020

Severance, acquisition and other costs of $16 million in the first quarter of 2020 included:

 

•

Severance costs of $8 million for workforce reduction initiatives

 

•

Acquisition and other costs of $8 million

2019

Severance, acquisition and other costs of $24 million in the first quarter of 2019 included:

 

•

Severance costs of $7 million for workforce reduction initiatives

 

•

Acquisition and other costs of $17 million

 

 

2.8  Depreciation and amortization

DEPRECIATION

Depreciation in Q1 2020 decreased by $14 million, compared to Q1 2019, due to an increase in the estimate of useful lives of certain assets as a result of our ongoing annual review process, partly offset by a higher asset base as we continued to invest in our broadband and wireless networks as well as our IPTV services.

AMORTIZATION

Amortization in Q1 2020 increased by $13 million, compared to Q1 2019, mainly due to a higher asset base.

 

 

2.9  Finance costs

INTEREST EXPENSE

Interest expense in the first quarter of 2020 decreased by $4 million, compared to the same period last year, 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 the first quarter of 2020, interest expense on post-employment benefit obligations decreased by $4 million, compared to the same period 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 (loss) (OCI).

 

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2.10  Other (expense) income

2020

Other expense of $55 million in the first quarter of 2020 included net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans and early debt redemption costs.

2019

Other income of $101 million in the first quarter of 2019 included net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans.

 

 

2.11  Income taxes

Income taxes in the first quarter of 2020 decreased by $48 million, compared to the same period last year, mainly due to lower taxable income.

 

 

2.12  Net earnings attributable to common shareholders and EPS

Net earnings attributable to common shareholders of $680 million in the first quarter of 2020 decreased by $60 million, compared to the same period last year, due to higher other expense, mainly as a result of net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans, partly offset by higher adjusted EBITDA and lower income taxes.

BCE’s EPS of $0.75 in Q1 2020 decreased by $0.07 compared to the same period last year.

Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net gains (losses) on investments, early debt redemption costs and impairment charges, net of tax and NCI, adjusted net earnings in the first quarter of 2020 was $720 million, or $0.80 per common share, compared to $692 million, or $0.77 per common share, for the same period last year.

 

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3 MD&A Business segment analysis - Bell Wireless

 

 

3    Business segment analysis

 

 

3.1   Bell Wireless

KEY BUSINESS DEVELOPMENTS

5G PARTNERSHIP WITH NOKIA CORPORATION (NOKIA)

As part of our mobile 5G strategy, we announced our first 5G network equipment supplier agreement with long-time partner Nokia on February 6, 2020. As part of our mobile 5G preparedness activities, we will continue to enhance 5G access speeds, capacity and coverage as additional 5G wireless spectrum, including in the 3.5 gigahertz band, becomes available following the federal government’s spectrum auction processes.

 

 

FINANCIAL PERFORMANCE ANALYSIS

Q1 2020 PERFORMANCE HIGHLIGHTS

 

Bell Wireless		Bell Wireless
Revenues		Adjusted EBITDA
(in $ millions)		(in $ millions)
		(% adjusted EBITDA margin)

 

 

 

Total subscriber growth		Postpaid net activations		Prepaid net losses
+5.2%		23,650		(4,055)
Q1 2020 vs. Q1 2019		in Q1 2020		in Q1 2020

Postpaid churn in Q1 2020		Blended average billing per user (ABPU) (1) per month
0.97%		(2.7%)
improved 0.10 pts vs. Q1 2019		Q1 2020: $65.53 Q1 2019: $67.35

 

(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 7.2, Non-GAAP financial measures and key performance indicators (KPIs), in this MD&A for the definition of ABPU.

BELL WIRELESS RESULTS

REVENUES

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
External service revenues			1,535				1,528				7				0.5%
Inter-segment service revenues			12				12				–				–
Total operating service revenues			1,547				1,540				7				0.5%
External product revenues			487				536				(49	)			(9.1%)
Inter-segment product revenues			1				1				–				–
Total operating product revenues			488				537				(49	)			(9.1%)
Total Bell Wireless revenues			2,035				2,077				(42	)			(2.0%)

 

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3 MD&A Business segment analysis - Bell Wireless

 

Bell Wireless operating revenues decreased by 2.0% in Q1 2020, compared to Q1 2019, driven by lower product revenue, offset in part by the growth in both our postpaid and prepaid service revenues.

Service revenues increased by 0.5% in the quarter, compared to Q1 2019, driven by:

 

•	Continued growth in our postpaid and prepaid subscriber base coupled with the flow-through of 2019 rate increases

These factors were partly offset by:

 

•	Reduced data overages driven by greater customer adoption of monthly plans with higher data allotments

 

•	Shift in device sales mix resulting in the increased adoption of lower-valued monthly plans

 

•	Less outbound roaming revenues due to the COVID-19 pandemic as a result of reduced customer travel and waiving of roaming charges

Product revenues declined by 9.1% in the current quarter, compared to the same period last year, due to lower device upgrades and gross activations, driven by reduced market activity from the temporary closure of retail distribution channels as a result of the COVID-19 pandemic, offset in part by lower discounting and higher handset prices.

OPERATING COSTS AND ADJUSTED EBITDA

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Operating costs			(1,107	)			(1,185	)			78				6.6%
Adjusted EBITDA			928				892				36				4.0%
Total adjusted EBITDA margin			45.6	%			42.9	%							2.7 pts

Bell Wireless operating costs decreased by 6.6% in Q1 2020, compared to Q1 2019, due to:

 

•	Lower product cost of goods sold due to reduced device sales primarily driven by the COVID-19 pandemic along with higher vendor rebates

These factors were partly offset by:

 

•	Higher network operating costs due to the expansion of network capacity and preparation for the launch of our 5G network

Bell Wireless adjusted EBITDA increased by 4.0% in Q1 2020, compared to Q1 2019, mainly attributable to lower operating costs and the flow-through of the service revenue growth. Adjusted EBITDA margin, based on wireless operating revenues, increased to 45.6% in the quarter, compared to 42.9% in Q1 2019, driven by lower device subsidies partly due to greater adoption of device financing, along with the service revenue flow-through.

BELL WIRELESS OPERATING METRICS

 

			Q1 2020				Q1 2019				CHANGE				% CHANGE
Blended ABPU ($/month) (1)			65.53				67.35				(1.82	)			(2.7%)
Gross activations			406,419				410,301				(3,882	)			(0.9%)
Postpaid			282,412				320,558				(38,146	)			(11.9%)
Prepaid			124,007				89,743				34,264				38.2%
Net activations (losses)			19,595				38,282				(18,687	)			(48.8%)
Postpaid			23,650				50,204				(26,554	)			(52.9%)
Prepaid			(4,055	)			(11,922	)			7,867				66.0%
Blended churn % (average per month)			1.30	%			1.31	%							0.01 pts
Postpaid			0.97	%			1.07	%							0.10 pts
Prepaid			5.03	%			4.49	%							(0.54) pts
Subscribers			9,977,557				9,480,835				496,722				5.2%
Postpaid			9,183,590				8,808,189				375,401				4.3%
Prepaid			793,967				672,646				121,321				18.0%

 

(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 7.2, Non-GAAP financial measures and key performance indicators (KPIs), in this MD&A for the definition of ABPU.

Blended ABPU of $65.53 decreased by 2.7% in Q1 2020, compared to the same period last year, driven by:

 

•	Lower data overages due to increased customer adoption of monthly plans with higher data allotments

 

•	Shift in device sales mix resulting in the increased adoption of lower-valued monthly plans

 

•	Lower roaming revenues driven by reduced travel and waiving of roaming charges as a result of the COVID-19 pandemic

 

•	The dilutive impact from the continued growth in prepaid customers driven by Lucky Mobile, our low-cost prepaid mobile service

These factors were partly offset by:

 

•	Year-over-year favourability from monthly billings relating to device financing plans launched in July 2019

 

•	The flow-through of 2019 rate increases

Total gross wireless activations declined by 0.9% in Q1 2020, compared to the same period last year, due to lower postpaid gross activations, offset in part by higher prepaid gross activations.

 

•

Postpaid gross activations decreased by 11.9% in the quarter, compared to Q1 2019, driven by reduced market activity from the temporary closure of retail distribution channels and call center disruptions as a result of the COVID-19 pandemic, offset in part by greater device financing activations combined with higher year-over-year additions from our contract with Shared Services Canada due to increased demand for remote work capability due to the COVID-19 pandemic

 

•	Prepaid gross activations increased by 38.2% in Q1 2020, compared to the same period last year, driven by the continued growth from Lucky Mobile combined with the benefit from our national retail distribution agreement with Dollarama, which remains open during the COVID-19 pandemic

 

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3 MD&A Business segment analysis - Bell Wireless

 

Blended wireless churn of 1.30% improved by 0.01 pts in Q1 2020, compared to Q1 2019.

 

•

Postpaid churn of 0.97% improved by 0.10 pts in the quarter, compared to Q1 2019, driven by fewer deactivations from reduced market activity due to the temporary closure of retail stores as a result of the COVID-19 pandemic, as well as reflecting our continued investment in customer retention and network speeds

 

•	Prepaid churn of 5.03% increased by 0.54 pts in the current quarter, compared to last year, due to greater competitive intensity in the discount mobile market

Net activations declined by 48.8% in Q1 2020, compared to Q1 2019, due to lower postpaid net activations, moderated by improved prepaid net losses.

 

•	Postpaid net activations decreased by 52.9% in Q1 2020, compared to Q1 2019, driven by lower gross activations, offset in part by reduced customer deactivations

 

•	Prepaid net losses improved by 66.0% in the current quarter, compared to the same period last year, due to higher gross activations, offset in part by greater customer deactivations

Wireless subscribers at March 31, 2020 totaled 9,977,557, an increase of 5.2% from 9,480,835 subscribers reported at the end of Q1 2019. This was comprised of 9,183,590 postpaid subscribers and 793,967 prepaid subscribers, an increase of 4.3% and 18.0%, respectively, year over year. At the end of Q1 2020, the proportion of Bell Wireless customers subscribing to our postpaid service decreased by 1 pt year over year to 92%.

 

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3 MD&A Business segment analysis - Bell Wireline

 

 

3.2  Bell Wireline

KEY BUSINESS DEVELOPMENTS

INVESTMENT IN HAMILTON’S DIGITAL INFRASTRUCTURE

On January 23, 2020, Bell announced an investment of approximately $400 million to expand broadband Internet access in urban and rural areas of Hamilton, the largest digital infrastructure investment in the city’s history. Over the next five years, Bell plans to bring direct fibre network connections to more than 200,000 homes and business locations throughout the city. The network will provide consumers with access to data speeds up to 1.5 gigabit per second, the fastest home Internet speeds in Canada. In addition to premium network support for the city’s business community, the Bell project includes the expansion of high-speed Bell Wireless Home Internet service to 8,000 homes in rural Hamilton. The majority of the network build will consist of new fibre installed underground, with additional fibre located on Bell telephone and utility poles.

WINNIPEG FIBRE INFRASTRUCTURE BUILDOUT

On March 2, 2020, as part of its $1 billion capital investment plan for Manitoba, Bell announced an investment of approximately $400 million to bring fibre-to-the-premise (FTTP) to Winnipeg, with direct fibre connections to approximately 275,000 homes and commercial locations throughout the city. Fully funded by Bell, the fibre project will offer Winnipeggers access to leading services marketed under our Bell MTS brand, such as Gigabit Fibe Internet, Whole Home Wi-Fi and Fibe TV in addition to future advanced technologies enabled by the high data speeds and capacity of fibre connections. Bell estimates the Winnipeg project will create more than 1,100 direct and indirect jobs in Winnipeg and other Manitoba locations and an additional $900 million in new economic activity. Bell is working closely with Manitoba Hydro and the City of Winnipeg to ensure maximum efficiency in the buildout, which will leverage innovative installation techniques and state-of-the-art equipment to minimize disruption for residents and businesses.

 

 

FINANCIAL PERFORMANCE ANALYSIS

Q1 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		Retail TV
+3.9%		22,595		(0.4%)
Subscriber growth		Total net subscriber activations		Subscriber decline
Q1 2020 vs. Q1 2019		in Q1 2020		Q1 2020 vs. Q1 2019

Retail IPTV		Retail residential NAS lines
2,852		(8.9%)
Total net subscriber activations in Q1 2020		Subscriber decline in Q1 2020

 

 

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3 MD&A Business segment analysis - Bell Wireline

 

BELL WIRELINE RESULTS    

REVENUES    

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Data			1,931				1,911				20				1.0%
Voice			872				907				(35	)			(3.9%	)
Other services			62				59				3				5.1%
Total external service revenues			2,865				2,877				(12	)			(0.4%	)
Inter-segment service revenues			76				67				9				13.4%
Total operating service revenues			2,941				2,944				(3	)			(0.1%	)
Data			123				142				(19	)			(13.4%	)
Equipment and other			12				11				1				9.1%
Total external product revenues			135				153				(18	)			(11.8%	)
Inter-segment product revenues			–				–				–				–
Total operating product revenues			135				153				(18	)			(11.8%	)
Total Bell Wireline revenues			3,076				3,097				(21	)			(0.7%	)

Bell Wireline operating revenues decreased by 0.7% in Q1 2020, compared to the same period last year, as the ongoing erosion in voice revenues and the year-over-year decline in product revenues more than offset the growth in data service revenues.

Bell Wireline operating service revenues were essentially stable year over year, declining by 0.1% in Q1 2020 compared to last year.

 

•	Data revenues grew by 1.0% in Q1 2020, compared to the same period last year, attributable to:

 

•

Growth in retail Internet and IPTV subscribers along with the flow-through of pricing changes

These factors were partly offset by:

 

•

Higher acquisition, retention and bundle discounts on residential services

 

•

The ongoing decline in our satellite TV subscriber base

 

•

Continued legacy data erosion

 

•	Voice revenues declined by 3.9% in Q1 2020, compared to Q1 2019, resulting from:

 

•

Continued NAS line erosion from technological substitution to wireless and Internet based services

 

•

Reduced usage of traditional long distance services by residential and business customers

 

•

Large business customer conversions to Internet protocol (IP) based data services

These factors were partly offset by:

 

•

The flow-through of pricing changes

 

•

Higher usage of conferencing services by business customers due to the increase in the number of employees working from home as a result of the COVID-19 pandemic

 

•

Greater sales of international wholesale long distance minutes

Bell Wireline operating product revenues declined by 11.8% in Q1 2020, compared to the same period last year, driven by strong sales in Q1 2019, primarily to the government sector, along with the impact of vendor delays relating to equipment purchases in the current quarter, as a result of the COVID-19 pandemic.

OPERATING COSTS AND ADJUSTED EBITDA

 

		Q1 2020				Q1 2019				$ CHANGE				% CHANGE
Operating costs			(1,717	)			(1,745	)			28				1.6%
Adjusted EBITDA			1,359				1,352				7				0.5%
Adjusted EBITDA margin			44.2	%			43.7	%							0.5 pts

Bell Wireline operating costs declined by 1.6% in Q1 2020, compared to the same period last year, resulting from:

 

•	Lower cost of goods sold attributable to reduced product sales

 

•	Reduced labour costs driven by workforce reductions, productivity initiatives, vendor contract savings and fewer call volumes to our customer service centres

 

•	Lower TV programming and content costs mainly from fewer subscribers

 

•	Reduced advertising costs

These factors were partly offset by:

 

•	Higher costs driven by the COVID-19 pandemic mainly relating to the purchase of PPE for field technicians and additional building cleaning costs and supplies

 

•	Increased pension expense reflecting a higher defined benefit cost driven by a lower discount rate

 

•	Greater payments to other carriers from higher sales of international wholesale long distance minutes

 

16             BCE Inc. 2020 First Quarter Shareholder Report