BCE reports 2010 fourth-quarter and full-year results and announces 2011 business outlook

MONTREAL, Feb. 10 /PRNewswire-FirstCall/ - BCE Inc., Canada's largest communications company, today reported BCE and Bell results for the fourth quarter of 2010 and announced its financial guidance for 2011.

BCE delivered strong financial performance with net revenues applicable to common shares growing by 25.4% to $439 million. EPS and Adjusted EPS(2) for the quarter were $0.58 and $0.60, representing growth of 26.1% and 17.6%, respectively. Bell had revenue growth of 0.9% on service revenue growth of 1.3%, reflecting strong wireless and TV revenue growth of 8.3% and 7.9%, respectively; operating income growth of 20.8%; EBITDA growth of 1.1%; wireless gross subscriber activations of 552,714 and postpaid net additions of 156,708; TV net additions of 23,019 and high-speed Internet net additions of 12,099.

Clear goal - to be recognized

Bell is focused on achieving a clear goal - to be recognized by clients as Canada's leading communications company - through the execution of 5 Strategic Imperatives: Invest in Broadband Networks and Services, Accelerate Wireless, Leverage Wireline Momentum, Improve Customer Service, and Achieve a Competitive Cost Structure.

"Our fourth-quarter performance closed an impressive year of execution by the Bell team, with very strong wireless performance, significant wireline EBITDA growth and continued progress in cost reductions and efficiency. We met all our increased financial targets for 2010," said George Cope, President and CEO of BCE and Bell Canada. "We substantially advanced Bell's strategic agenda through our significantly increased investments in wireless and wireline broadband Internet capacity, driving customer additions on our growth services platforms, and acquisitions that support our strategic execution going forward - including CTV, Canada's #1 media company, as so then as Hypertec and xwave to support the growth in data hosting and cloud computing at Bell Business Markets."

"Bell Wireless has significantly increased its postpaid market share thanks to strong market execution that leverages Bell's world-leading HSPA+ network, superior range of smartphones and other devices, enhanced data services like Bell Mobile TV and the country's largest wireless distribution network. Together, Bell Wireline achieved strong EBITDA growth, substantial decreases in NAS landline losses and solid Internet and TV net activations, thanks to the launches of at once-generation Fibe TV and Fibe Internet on our quickly expanding broadband fibre network," said Mr. Cope.

"Our financial performance for 2010 was highlighted by strong net revenues growth of 32.7% and substantial free cash flow generation, reflecting accelerated wireless revenue growth, industry-leading wireline EBITDA growth of 5.9% and margin improvement," said Siim Vanaselja, Chief Financial Officer of BCE and Bell Canada.

Sharp focus on our capital market objectives in 2010

"We as well continued to maintain a sharp focus on our capital market objectives in 2010. We delivered on our commitment to increase returns to our shareholders through two increases in the common share dividend over the past twelve months, delivering a 35% increase overall since Q4 2008, and the completion of a $500 million share buyback in December at an average price per share of $30.80. We repaid $400 million of debt in 2010 from cash on hand, accessed the capital markets on attractive terms in November, and have maintained strong investment grade credit ratings. Just in case, with the $750 million special voluntary pension contribution made in December, we are systematically addressing our solvency deficit in a permanent and comprehensive way," said Mr. Vanaselja. "The 2011 financial guidance announced today reflects a so then-balanced financial plan that calls for substantial free cash flow generation in excess of $2.2 billion and Adjusted EPS growth of 4% to 8% that supports the execution of our business plan and capital markets strategy centred on delivering increasing returns to BCE shareholders."

Bell's operating earnings increased by 0.9% this quarter, to $4,017 million, as higher wireless and TV earnings more than offset declines in local and access, long distance, wireline data and equipment and other earnings. For the full year, Bell's operating revenues were $15,425 million, an increase of 2.7% compared to 2009.

Bell's operating income increased by 20.8% to $691 million this quarter and by 22.2% to $2,972 million for the full year due to higher EBITDA, lower restructuring and other costs and lower depreciation and amortization. Bell's EBITDA grew by 1.1% to $1,411 million this quarter and by 2.4% to $5,857 million for the full year with higher earnings, lower pension expense and cost reductions more than offsetting the impact of increased wireless subscriber acquisition and retention costs. In spite of a significantly higher number of postpaid subscriber activations and customer handset upgrades year over year, Bell's EBITDA margin was in substance unchanged, increasing by 0.1 percentage points to 35.1% this quarter.

Bell Wireless operating earnings increased by 8.3% this quarter with service earnings increasing by 9.1% and product earnings increasing by 3.9%. Bell Wireless operating income and EBITDA decreased by 18.8% and 11.5%, respectively, due to the significantly higher levels of gross activations and customer upgrades. Blended ARPU increased by $1.26 to $52.34 year over year as data revenue growth of 38% more than offset voice ARPU declines due to customer adoption of richer rate plans.

Bell Wireline operating earnings decreased by 2.5% as TV revenue growth was more than offset by declines in local and access, long distance, wireline data and equipment and other earnings. Bell Wireline operating income increased by 62.1% as a result of higher EBITDA, lower restructuring and other costs and lower depreciation and amortization. Bell Wireline EBITDA increased by 6.9% due to cost reductions and lower pension expense.

Bell Wireline had total NAS losses of 64,172 this quarter, an improvement of 40.3% compared to last year. TV subscribers increased by 23,019 compared to an increase of 40,889 in the same period last year. High-speed Internet subscribers increased by 12,099, an increase of 55.0% compared to the fourth quarter last year, led by increases in residential Internet clients that more than doubled year over year.

Bell invested $860 million of capital this quarter, or 34.4% more than the same period last year, reflecting increased investment in both our wireless and wireline broadband Internet capacity, including the continued rollout of fibre to residential neighbourhoods, multiple-dwelling units and fibre-to-the-home in Québec City, and the ongoing enhancement of our network to support Bell's Fibe Internet and Fibe TV services. For the full year, Bell invested $2,463 million of capital, or 3.1% more than 2009. Bell's capital intensity in 2010 was 16.0% with its focus on wireline fibre and HSPA+ wireless networks.

BCE's operating earnings increased by 0.7% to $4,683 million this quarter and by 1.9% to $18,069 million for the full year as higher earnings at Bell were in some cases offset by lower earnings at Bell Aliant.

The launch of its world-leading HSPA+ network

Bell Wireless SegmentWith continued momentum from the launch of its world-leading HSPA+ network, Bell Wireless delivered another record quarter for gross activations along with strong postpaid net additions, data revenue growth of 38% and increased smartphone penetration.

Bell Wireline SegmentThe Bell Wireline segment delivered improved year-over-year EBITDA performance, a significant improvement in network access line erosion and healthy subscriber activations in TV and high-speed Internet.

Bell Aliant Regional CommunicationsBell Aliant's earnings decreased to $777 million this quarter, or by 1.0%, due to lower local and access and long distance earnings. Bell Aliant's operating income decreased by 19.0%, to $145 million due to lower earnings.

Quarterly dividend of $0

Common Share DividendBCE's Board of Directors declared a quarterly dividend of $0.4925 per common share, payable on April 15, 2011 to shareholders of record at the close of business on March 15, 2011.

The financial guidance provided for revenue growth, EBITDA growth, Adjusted EPS growth, and free cash flow growth are based on financial results prepared using IFRS. Similarly, the guidance provided for Adjusted EPS, free cash flow and capital intensity are calculated using IFRS-based results.

The trajectory of its wireless

Given the trajectory of its wireless, TV and Internet businesses and an improving outlook in NAS erosion, Bell is targeting revenue growth of 1% to 2% in 2011. Bell Wireless revenue growth is expected to benefit from the significant investment made in 2010 in customer acquisition and retention along with continued growth in smartphone activations and data usage. Bell Wireline earnings are expected to benefit from growth in TV and Internet earnings from ARPU performance and the rollout of the Fibe TV footprint.

With higher wireless earnings and a continued focus on cost reduction, Bell is targeting EBITDA growth of 2% to 4% in 2011.

Caution Concerning Forward-Looking Statements Certain statements made in this news release, including, now not limited to, statements relating to our 2011 financial guidance, our business outlook, objectives, plans and strategic priorities, BCE's dividend policy, the proposed acquisition by BCE of the remaining 85% interest in CTV that it does not already own, and other statements that are not historical facts, are forward-looking. Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions which give rise to the opportunity that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements. As a result, we cannot guarantee that any forward-looking statement will materialize and you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements contained in this news release describe our expectations at February 10, 2011 and, consequently, are subject to change afterwards such date. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or if not. Except as furthermore indicated by BCE, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur afterwards February 10, 2011. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. We conclusively cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Forward-looking statements are provided to that end of providing information about management's current expectations and plans relating, in particular, to 2011 and allowing investors and others to get a better understanding of our operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Economic and Market AssumptionsA number of Canadian economic and market assumptions were made by BCE in preparing its forward-looking statements for 2011 contained in this news release, including, nevertheless not limited to: growth in Canadian GDP of roughly 2.4% in 2011, compared to 2010, based on the Bank of Canada's recent estimate, cost rationalization and cautious spending by business clients to continue given the modest pace of economic recovery, current levels of residential wireline competition to continue especially from cable companies and providers of Voice over Internet Protocol services, higher wireline substitution primarily due to the presence of new wireless entrants and the accelerating adoption of mobile Internet and mobile television, and wireless industry penetration gain of 4 to 5 basis points in 2011 stimulated in particular by new entrant competition, the accelerating adoption of smartphones and the use of data applications, as so then as by the emergence of new types of wireless devices just as tablets.

Operational Assumptions Our forward-looking statements for 2011 are as well based on certain internal operational assumptions concerning Bell, including, nevertheless not limited to: residential and business network access services losses to furthermore slow down in spite of continuing intense competition, continued customer migration to Internet Protocol-based systems and ongoing pricing pressures in our business and wholesale markets, Bell Mobility to maintain its market share of the incumbent wireless postpaid market, Bell's ability to leverage its HSPA+ network investments to drive a higher mix of smartphone and other high-value clients, resulting in higher data and roaming earnings, higher wireless average revenue per unit driven by data usage and roaming growth, offset in some cases by lower voice ARPU due to increased competition, wireless EBITDA margin expansion, in spite of increased total spending on customer retention and acquisition, due to the favourable impact of significant subscriber loadings in 2010 and year-over-year growth in ARPU, continued broadband infrastructure and fibre expansion and upgrades to support our Internet Protocol Television and Internet services, roughly 2 million Fibe TV ready households and broadband fibre footprint to be extended to roughly 4 million homes by the end of 2011, broadband fibre improvements to drive increased subscriber and ARPU growth, as then as lower customer churn, * Fibe TV to contribute to stronger overall video subscriber growth, wireline expense reductions and operating efficiency gains, resulting from our ongoing focus on cost saving opportunities, to help offset costs associated with scaling Bell's Fibe TV service and to continue to support maintenance of stable EBITDA margins.

Material RisksImportant risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by our forward-looking statements, including our 2011 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2011 financial guidance, in substance depends on our business performance which, in turn, is subject to many risks. Consequently, readers are cautioned that any of the following risks could have a material adverse effect on our forward-looking statements. These risks include, now are not limited to: the intensity of competitive activity, including the increase in wireless competitive activity resulting from Industry Canada's licensing of AWS spectrum to new wireless entrants and their ability to launch or expand services, and the resulting impact on our rates of NAS erosion and, as a rule, on our ability to retain existing, and attract, new clients, and the resulting impact on our pricing strategies, ARPU and financial results; variability in subscriber acquisition and retention costs based on subscriber acquisitions, retention volumes, smartphone sales and subsidy levels; the level of technological substitution contributing to reduced utilization of traditional wireline voice services and increasing numbers of households that only have wireless telephone services; the increased adoption by clients of TV alternative services; general economic and financial market conditions, the level of consumer confidence and spending, and the demand for, and prices of, our products and services; our ability to implement our strategies and plans in order to produce the expected benefits; our ability to continue to implement our cost reduction initiatives and contain capital intensity during seeking to improve customer service; our ability to respond to technological changes and rapidly offer new products and services; increased contributions to employee benefit plans; events affecting the functionality of, and our ability to protect, maintain and replace, our networks, information research systems and software; the complexity and costs of our IT environment; events affecting the ability of third-party suppliers to provide to us essential products and services and our ability to purchase such essential products and services just as handsets; the quality of our network and customer equipment and the extent to which they may be subject to manufacturing defects; labour disruptions; the potential adverse effects on our Internet and wireless networks of the significant increase in broadband demand and in the volume of wireless data-driven traffic; capital and other expenditure levels, financing and debt requirements and our ability to raise the capital we need to implement our business plan, including for dividend payments and to fund capital and other expenditures and as a rule meet our financial obligations; our ability to discontinue certain traditional services as necessary to improve capital and operating efficiencies; regulatory initiatives or proceedings, litigation, changes in laws or regulations and tax matters; launch and in-orbit risks of satellites used by Bell TV; competition from unregulated U.S. DTH satellite television services sold illegally in Canada and the theft of our satellite television services; BCE's dependence on the ability of its subsidiaries, joint ventures and other companies in which it has an interest to pay dividends and make other distributions; there can be no certainty that dividends will be declared by BCE's board of directors or that BCE's dividend policy will be maintained; stock market volatility; our ability to maintain customer service and our networks operational when all is said and done of the occurrence of environmental disasters or epidemics, pandemics and other health risks; health concerns about radio frequency emissions from wireless devices; the expected timing and completion of the proposed acquisition by BCE of the remaining 85% interest in CTV that it does not already own is subject to closing conditions, termination rights and other risks and uncertainties including, without limitation, any required regulatory approvals; and employee retention and performance.

About BCEBCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business clients in Canada. Operating pursuant to this agreement the Bell and Bell Aliant brands, the Company's services include telephone services, wireless communications, high-speed Internet, digital television, IP-broadband services and information and communications research services.

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