BCE, Inc.

Please stand by, your meeting is about to begin. Good morning, ladies and gentlemen. Welcome to the BCE Q3 2022 Results Conference Call. I would like to turn the meeting over to Mr. Thayne Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Donna, and good morning, everyone, and thank you for joining our call. With me here today are Mirko Bibic, BC's President and CEO, and our CFO, Glenn LeBlanc. You can find all our Q3 disclosure documents on the investor relations page of the bce.ca website, which we posted earlier this morning. Before we begin, I want to draw your attention to our safe harbor statement on slide two, reminding you that today's slide presentation and remarks made during the call will include forward-looking information. and therefore are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements except as required by law. Please refer to our publicly filed documents for more details on our assumptions and risks. With that, I'll turn the call over to Mirko.

Thank you, Thayne, and good morning, everyone. The Bell Team's continued execution excellence and customer-centric approach combined with our unmatched leading broadband networks, yielded a record 401,132 total broadband wireless and wireline net customer activations in Q3. Our disciplined focus on balancing market share growth and financial performance delivered healthy consolidated revenue growth of 3.2%, despite an ad recession causing pressure in media advertising and some continued pressures in the B2B sector. Adjusted EBITDA grew a more modest 1.2% as we absorbed $38 million in exceptional storm-related costs and inflationary pressures, while also funding record subscriber acquisitions. Hurricane Fiona, which devastated Canada's Atlantic region and eastern Quebec in late September, was the biggest storm to ever hit anywhere in Canada, and our team stepped up like never before. Our preparations ensured our core networks remained largely operational, but the damage to our infrastructure in the field was unprecedented. A huge thank you to our field, network, and wireless operations teams who work tirelessly to keep our customers connected. I also want to acknowledge every Bell employee who supported our storm efforts, whether you're a part of service and restoration, managing customer inquiries, welcoming people in our stores to charge phones, or news crews covering the story. Your focus on preparing and delivering for customers is greatly appreciated and I'm so proud to be part of this dedicated and talented team. Without question, this event underscores how much Canadians value fast and dependable connections. This is why Bell has been investing in our networks to build a communications infrastructure that is among the best and most reliable in Canada, if not the world. In fact, a study recently commissioned by the CWTA shows that Canada's network operators outpaced international peers in CapEx in 2021, investing $168 per subscriber compared to a G7 and Australia average of only $87. But we are not standing still. As you know, we continue to push ahead with our historic CapEx acceleration program, having invested close to $3.5 billion so far this year. We remain firmly on pace to reach $5 billion in planned CapEx for 2022. By the end of the year, 80% of our mid-term broadband internet build-out plan, comprising 10 million residential and business locations, will be completed and 5G Plus service will be available to 60% of the addressable population, offering the best data speeds and lowest latency of any Canadian network provider. Both PCMag and Ookla recognize Bell's 5G mobile network as Canada's fastest in their latest reports. Such third-party recognition reinforces Bell's network leadership and the value of our unprecedented generational investments, which will continue to drive socioeconomic benefits to Canadians while supporting substantial free cash flow generation for years to come for our investors. A quick look now at Bell's wireless operating results in Q3. It was another standout performance with our highest ever number of total mobile phone net ads, which increased 64% over last year to more than 224,000. This drove strong revenue growth of 7.4% and 7.8% higher adjusted EBITDA, demonstrating that our consistent focus on higher value mobile phone loadings, customer-based management, and acquisition cost discipline continues to pay off. We achieved these results against the backdrop of declining wireless prices, even as the Canadian economy faces rampant inflation. According to latest StatsCan data, the price of all goods and services in aggregate has increased approximately 7% over the past year and 11.6% since the beginning of 2020, while the cost of cellular services has declined 3% and 25.7% respectively. In residential wireline, fueled by a growing fiber footprint, we continue to gain a significant share of internet subscriber growth. We added 95,036 new net fiber customers in Q3. That's up 33% over last year and our best ever result, driving strong residential internet revenue growth of 8%. These results are a direct reflection of the differentiated value of fiber-based Internet services that provide the fastest, dedicated, symmetrical speeds that cable cannot match. By the end of the year, 5 million homes will qualify for symmetrical speeds of at least 3 gigabits. That is the broadest multi-gig broadband footprint anywhere in North America. And in September, we announced an agreement to purchase Internet Reseller Distributel, This acquisition will further strengthen our competitive position and support Bell's internet growth strategy, particularly in the value segments of the residential and SMB markets. Turning to media now. We continue to see good momentum across our streaming distribution platforms and digital ad markets, which enabled us to take share in a TV ad market that is currently facing some significant pressures. Growing customer usage of Bell Media's SAM TV advertising sales tool platform, which more than doubled bookings in Q3, together with a 29% increase in Crave direct-to-consumer subscriptions, contributed to strong 40% growth in digital revenues this quarter. I'd also give a quick update on some recent ESG developments. Clean50, a national sustainability organization, named Bell its inaugural GHG reductions champion for achieving meaningful greenhouse gas emissions reductions and recognized Bell's solar cell site initiative as one of the most innovative and inspiring sustainability projects undertaken in Canada in the last two years. Additionally, our science-based targets for GHG emissions reduction were approved by the Science-Based Targets Initiative positioning Bell as a corporate leader in the transition to a low carbon economy. By reducing GHG emissions across our operations, we are continuing to take action to help fight climate change and improve our energy performance. One way we're tackling direct emissions is through the electrification of our vehicle fleet and the shift away over time from fossil fuel based transportation. we've installed over 200 EV charging stations to power our growing fleet of electric vehicles. I'm going to turn now to slide five of our presentation for a review of some key operating metrics. First off, wireless. We added 167,798 new net postpaid mobile phone subscribers, which is up 46% over last year. This record Q3 result can be attributed to greater foot traffic as retail stores return to full operation, continued 5G momentum, immigration growth, strong business customer demand, increased focus on bundling wireless with residential internet service, as well as our lowest ever Q3 churn rate, which improved three basis points over last year to 0.9%. Our ARPU is up 2.2%, which is our sixth consecutive quarter of year-over-year growth. This was supported by higher roaming revenue that is now at 114% of pre-COVID levels. Roaming should continue to support ARPU growth for the balance of the year. And beyond roaming, we remain focused on driving sustainable ARPU growth via our 5G monetization strategy. With only 35% of post-paid subscribers currently on a 5G-capable device and the vast majority of them taking premium unlimited data plans, we see good runway for continued growth. As for mobile-connected devices, net ads increased 49% over last year to 49,044, driven by higher demand for all of our IoT solutions. Let me turn now to Bell Wireline. It was an outstanding quarter for Bell Internet with 89,652 retail net ads, our best result in 17 years as we leveraged our rapidly growing fiber footprint, strong brands, fastest symmetrical speeds, and network reliability. And as I mentioned earlier, we had our best ever five performance for fiber net ads. We also added 38,093 net new IPTV subscribers, which is up 20.4%. and that's on the strength of our multiple brand customer segmentation approach and a more active back-to-school period versus last year. Taken all together, total retail residential net customer ads, including satellite and local phone, were 56,314 this quarter, which is up 70% or 23,000 higher than last year. This represents our strongest results since 2005 and really is a testament to the Bell team's execution and our extensive network investments. I'll turn now to Bell Media again. As I mentioned, advertiser demand slowed in Q3 due to the economy and ongoing supply chain issues and certain key consumer good verticals, and that impacted traditional TV and radio advertising sales. However, given Bell Media's broad mix of assets and consistently top-ranked properties, the year-over-year decline in total advertising was contained to only 2%. Notwithstanding this backdrop, digital revenues continue to accelerate, as I mentioned earlier, growing 40% over last year, and that now represents 31% of total Bell Media revenue, up from 22% last year. This was supported by growth in Crave subscriptions and the strong increase in SAM TV bookings that I referenced earlier. CTV remained Canada's most watched conventional network in Q3, expanding its lead with a 29% increase in audience market share, while Bell Media's English language entertainment specialty channels also had a strong showing, finishing the broadcast year with five of the top ten properties, including the top three spots for CTV comedy, CTV drama, and Discovery. On the French language TV side, Nouveau continued to gain viewership, outpacing its French-language TV competitors with market share primetime audiences up 4%. And RDS was once again the top-ranked sports TV channel, benefiting from record audiences for F1 racing and a strong start to the NFL season. And before I hand the call over to Glenn for a financial overview of the quarter, I wanted to end by saying that I have great confidence in our long-term outlook. That confidence is underpinned by our investments in leading long-life infrastructure assets that will support meaningful growth opportunities and cost reduction across the business, the strength of our products and services, and consistent strong execution by the Bell team within our well-defined and clearly articulated strategy. Although no company obviously is completely immune to the risks of a recession, We do have a very stable and diversified business that generates consistent and substantial cash flow. We have a strong balance sheet and cost discipline, and all of that enables us to offset economic pressures as they arise. Glenn, over to you. Thank you, Mirko, and good morning, everyone. Our Q3 financial results highlight our consistent execution excellence and leading asset mix across all Bell operating segments. Total BCE revenue grew 3.2%, which delivered a 1.2% increase in adjusted EBITDA. Our results this quarter included the cost impact of Hurricane Fiona, as well as ongoing inflationary pressures, particularly on fuel, utility, and labor costs, which in aggregate totaled $38 million. Normalizing for these exceptional costs, adjusted EBITDA growth would have been 2.7%. Despite higher EBITDA net earnings and statutory EPS, we're down year over year. But this is mainly due to the non-cash market to market equity derivative losses from a decline in the BCE share price during the quarter. Additionally, as part of our multi-year post-COVID plan to consolidate real estate space that I detailed last quarter, we recorded a further asset impairment charge this quarter as we continued to vacate some leased properties. However, adjusted EPS was up 7.3%, benefiting from an $80 million tax provision reversal from the resolution of uncertain tax positions related to the MTS acquisition. As a result, we now expect an effective tax rate of 25% for the full year of 2022, down from our previous expectation of 27. No further tax adjustments are anticipated in Q4. Lastly, despite a $153 million increase in capital expenditures consistent with our broadband acceleration program. Free cash flow was up 13.4%, reflecting the timing of cash tax installments, lower pension funding due to our strong solvency position of our defined benefit pension plans. Turning to wireless on slide eight, another strong quarter and a long line of strong quarters. Service revenue is up 7%, driven by our focus on high-value 5G subscriber growth, strong year-over-year mobile connected device growth, and continued recovery and roaming with the Q3 amount at approximately 114% of pre-COVID 2019 levels. Despite consumers holding onto the handsets longer and a sustained high level of pre-owned device activations, Equipment revenue increased 8.6% year-over-year, reflecting a higher sales mix of premium mobile phones. Due to the flow-through of high-margin service revenues and our disciplined and targeted response to competitors' promotional offers, wireless EVTA grew a very healthy 7.8%, which delivered a 20 basis point margin increase to 44.2%. Let's move now to slide nine. Wireline reported its first quarter of positive top line growth in almost two years, with total revenue up 1%. This was led by residential internet revenue, which increased 8% on the combined impact of strong subscriber growth, including higher year-over-year business activations and higher ARPU. Although our overall B2B results continue to reflect the effects of the global chip shortages and related spending delays on new services, the year-over-year rate of service revenue client has stabilized. Total product revenue, however, was up 46%, and this can largely be attributed to the timing of sales to certain large enterprise customers and easier year-over-year comparisons given that the data equipment supply issues began to intensify in Q3 of 21. Notwithstanding the increase in revenue this quarter, wireline EBITDA did decline 1.2%. This was a direct result of $34 million in costs absorbed because of Hurricane Fiona and ongoing inflationary impacts. Normalizing for these cost pressures, underlying EBITDA growth was quite respectable this quarter increasing 1.4%. Over to media on slide 10. Despite a weaker advertising market this quarter, total media revenues remain stable year over year. As Mirko said in his opening remarks, and it's worth repeating, that it is a testament to our diversified mix of media assets, including a growing contribution from digital platforms and consistently high ratings for all, of our TV properties. Advertising revenue is down 2.3%, reflecting softer TV advertiser demand and a slow radio recovery from COVID due to ongoing macroeconomic uncertainty, as well as the non-recurrence of approximately $15 million in revenue generated last year from the federal election, Euro Cup soccer, and the Tokyo Summer Olympics. The financial impact of these factors was moderated by a strong COVID recovery in our out-of-home, further gains in digital advertising, as Mirko mentioned, and a 2.2% increase in subscriber revenue from ongoing crave streaming growth. Although total media revenue was flat year-over-year, EBITDA was down 15.3%. This result was expected given our higher programming and broadcast rights costs associated with the return this year to regular sports broadcast schedules and the normalization of TV content deliveries. This return to a more typical pre-COVID cost structure and a choppy advertising market are expected to weigh heavily on Bell Media's EBITDA in Q4. That said, advanced advertising for the upcoming FIFA World Cup is exceeding our expectations with revenue already up 50% from the 2018 World Cup. This success is a testament to the massive popularity and value advertisers place on premium sporting events. And lastly, I'll finish on slide 11. With $3.5 billion of available liquidity, a manageable debt leverage ratio of 3.2 times adjusted EBITDA, A historically low after-tax cost of debt of just 2.8%, with an average term to maturity of 14 years, and a capital structure that has a substantially high portion of fixed-rate debt, BCE's balance sheet is very healthy, helping to mitigate the impact of rising interest rates. Moreover, with a substantial pension solvency surplus totaling $3 billion in that has low sensitivity to interest rate movements, approximately $1 billion in US dollar spending that has been economically hedged well into 2024, and a relatively low cyclical cycle for our majority of our revenues. BCE's free cash flow generation is strong, reliable, and well protected from market uncertainty. With three quarters of favorable consolidated results already reported, sound industry fundamentals, and a competitive position that is better than ever, we are on track to deliver on our 2022 financial guidance despite some difficult economic conditions that are expected to persist in parts of our business through Q4. And on that note, Dane, I'll turn it over to you and the operator to begin Q&A.

Great. Thanks, Glenn. So before we start, so that we can get to everybody in the queue that I see here, I'd please ask you to limit yourselves to one question and a brief follow-up if you want. On that note, Donna, we are ready to take our first questions.

Thank you. We'll now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. To cancel the question, please press star 2. Please press star 1 at this time if you have a question. There will be a brief pause of participants' register. Thank you for your patience. And the first question is from Maya Yagi from Scotiabank. Please go ahead.

Yes, good morning guys. I wanted to start maybe quickly on your internet loading. Very impressive in the quarter. You recently introduced 8GB symmetrical internet speeds in the market. Are there any services that are requiring such high speeds? And just in terms of competition, Comcast also announced in September that they have shown that DOCSIS 4.0 is capable of achieving speeds of up to 10 gigs in symmetrical capability. Are you concerned that this technology could help your cable peers close the gap here in Canada, and do you think they can do it in a cost-effective way? And just to follow up on that, the wireless also very strong subscriber loading there, you know, probably helped by immigration and students coming back to university. Are you expecting the strength to continue? Is it sustainable in your view? And, you know, just in terms of what you're expecting for 2023 and Q4? Thank you.

Thanks for the question. Let me start first with the wireline question on fiber. Look, here's the way I look at it. Our best networks value proposition clearly is standing out. It's been doing so for a while, but particularly stood out in Q3, and we think that that will continue. It's clear to me that multi-gig speeds and network reliability really are at the forefront of the purchase decision, Myron. 62% of consumer demand fiber to the home activations in September for Bell were on multi-gig speeds. And it's even higher on the Bell brand. So those are big numbers. So what that shows to me is that there's a clear demand for multi-gig services because symmetrical upload and download actually does matter. Consumers realize that and they understand the benefits of fiber. And if you think about our footprint, We've got, by the end of the year, this year, which is only two or three months away, we'll have 7 million fiber locations. All of them will be capable of delivering gigabit symmetrical upload and download speeds, 5 million capable of 3 gigs, and over 1 million capable of 8 gigs, and that's just at the end of this year alone. And we've got strong growth in all territories. And basically, we're at a point, it's pretty clear that the traditional telco technology disadvantage is gone. And it's now a sustainable advantage, which is going to persist for a long time. And I think cable is going to be catching up for quite a long time. And you asked me about that in your reference to the Comcast 8 gig trial. That's a trial. And it speeds delivered in the laboratory environment. And when we look at it, we don't see true symmetrical multi-gig DOCSIS path. The true symmetrical DOCSIS path is quite unclear, and it's going to take a while. And even then, I don't think they're going to come close to our upload speeds, and it's going to be an expensive proposition either way. So you've got to decide, do you do a fiber overlay, which is expensive, or determine a DOCSIS path, which is uncertain. So again, that just comes back to The fiber advantage is a sustainable long-term one. On wireless, I think it's been strong for the entire industry. You see our results are very strong, the record results. I think you're going to see healthy growth across the entire industry, and I do think it will continue. And I don't say that in a cavalier manner. Just look at the kind of tailwinds that are operating in everyone's favor. There's immigration. and federal governments indicated that's going to continue to grow over the foreseeable future. We've got, in the near term here, strong consumer roaming, and we're seeing roaming pick up in business. We've got very healthy increases in network usage. A big one is the 5G upgrade cycle. Probably should have started with that one. We still only have 35% of subscribers with 5G devices, so there's a lot of room for growth there. And 5G customers, I mean, I say this all the time, You know, they use twice as much data and they spend more. And we're seeing strength in all channels. So I think there's continued room for momentum there. Hope that answers both of those questions, Mark.

Yes, thank you very much.

Question, please.

Thank you. The next question is from Vince Valentini from TD Securities. Please go ahead.

Thanks very much. Hopefully I can sneak in a clarification before my big question. The $38 million, any chance you can break that apart between what was actually storm, which is obviously non-recurring, and what was just the inflationary pressures?

Good morning, Vince. Sure. The total cost, as I mentioned, $38 million. About $34 of that impacts our wireline business of about $4 million wireless. I broke it down by storm and inflation. $19 million is storm. The vast, vast majority of that is related to Fiona. And unfortunately, there will probably be additional costs flowing to Q4 as we're still doing tree clearing and cleanup from that devastating storm that hit Atlantic Canada. Of the $19 million that's inflationary, it's really split between fuel and utility as about half of that, and labor and about the other half as we've seen. We've had to put through higher than typical wage increases, and we've had some collective bargaining agreements related to our unionized labor workforce come to an agreement. So that's a pretty good breakdown, Vince, of how that 38.

Oh, no, no, that's more than what I expected, Glenn. Thank you. And just a bigger picture question, probably for Marcoe. I think you'd admit that your Internet ads in Q3, which were phenomenal, were partially driven by a bit more aggressive promotional activity than we've seen from you guys typically, probably for good reason, leaning in on the good network and the problems that your competitor was facing in the quarter. But I just wonder, are you happy with the blend of sort of ARPU and margins and plus volume that you gained so that you just keep up the current pace, or should we view Q3 as a bit unusual because of the outage and the ability to lean in on promotions?

Well, first of all, I am quite happy with the balance of all those things, Vince, and I wouldn't interpret the record results as being singularly driven by competitors' network outage in early July. Actually, the momentum has been there for quite a while, and as the footprint grows, you're going to see the momentum continue. On the promotional intensity, it's a bit higher in Q3, but to me, that's not unexpected, given our share gains. And on terms of... kind of managing margins. Don't forget that we kind of have a double benefit with the fiber build, right? Or triple benefit, however you want to put it. As we grow the footprint, share swings our way, and we get the benefit of embedded cost reductions by having better fiber network where the cost support and service costs are much less, as you know. And Ultimately, our share gains don't have to be at the expense of industry profitability, if you think about it.

Fair enough.

Thank you.

Thank you. The next question is from Stephanie Price from CIBC. Please go ahead.

Hi. Good morning. I was hoping you could comment on the fiber rollout and talk about the competitive environment that you're seeing against cable peers here. Is there any update on how we should be thinking about fiber share gains?

I guess the short answer is we're taking significant share of market growth in every area where we have fiber. So even just kind of a macro answer, for us, 89,000 total internet net ads, which is very high, 95,000 fiber net ads. So we're continuing to see Big growth where we have fiber and customer losses where we have copper networks where the speeds just don't keep up with customer demand. So it comes back to my first answer to Mara. Speeds do matter, and upload and download speeds do matter for subscribers. And when you get asked or when I get asked, well, are there any services – actually, Mara asked me the question and I didn't answer it. Are you – Are you seeing services that need 8 gigs? I think he asked me, but I get asked that all the time. Multi-gig does matter, and you can't think of things as one user, one session in the home, and therefore anything can work on a 100-meg pipe. It's very rare that you have one user, one session in the home. In fact, most households have multiple family members in them, everyone using things at the very same time. and more and more and more devices are being connected at the same time. So these things do matter. So again, it's a bit of a macro answer, but you're going to see share gains swing to us where we have fiber. Yeah, and just adding to that, Stephanie, we made a decision a number of years ago to accelerate our broadband investment. And I think it's truly paying off. The results speak for themselves. We set a record for the highest fiber internet ads in our history. And I think that speaks volume to the strategy is working. Where we have fiber, we take share.

Thanks. And just a follow-up here on bundling. It looks like wireless and wireless bundling offers have picked up across both Bell and Virgin. I'm hoping you can share some early learnings from that.

Yeah. So one of the cross-sell of... or the bundling cross-sell of mobility to internet and vice versa is actually one of the key drivers of competitive success in the communications industry today. Our focus on that in the last couple of years is bearing fruit, and that's how you can compete in this industry. For us, it's focused on high-quality loadings, focused on the Bell brand, whether or not it's wireless or wireline. We've made major investments in digital channels and in self-install capabilities. And one of the other elements of the strategy and our execution has been that cross-sell. And if you... If you have a large installed base that you can cross-sell to, whether it's one side to the other and vice versa, you're in good shape. And if you own your own networks, you're in good shape. So those are the kind of two things, high-quality networks, owner economics, and the ability to cross-sell to an installed base of customers.

Thank you. Thank you. The next question is from Jerome Debray from Desjardins. Please go ahead.

Yes, thanks for taking my questions and congrats for the strong loading in the quarter. However, you did mention in your prepared remarks, you talked about a bit of difficult wireless prices. We got 5G, and we'll see what happens with competition in Canada. What would or could make wireless pricing turn around in the next few quarters?

Well, what I said is I was referring to the StatsCan data, which shows that the wireless services basket, as measured by StatsCan, shows a continued decrease as compared to general inflation across all goods and services in Canada growing dramatically. So I wasn't referring to wireless plants in any specific manner. It was the StatsCan data. And in fact, where we see the significant growth right now is in 5G, and 5G pricing has held up really, really well, which shows that we're in a good position to monetize 5G. So yeah, of course, we're always in a competitive environment, and we adjust, and we do things. And I think, frankly, the promotional intensity in wireless has been pretty good. handset discounting has been pretty good. 5G rate plan pricing has held up. So those are the things you should look at to sustain both continued loading momentum, as I talked about earlier, and the ability to monetize that appropriately.

Great, thanks. And then second, on Bell Ventures, From what I understand, it's been a 100% new endeavor here, but it does seem like a renewed focus. Are you looking to integrate maybe more products in your lineup, or maybe is it more adopting a strategy that's a bit more similar to one of your Canadian peers?

We're always looking to showcase our superior networks, and frankly, Canada's globally leading networks and infrastructure, so start from that proposition. We do have phenomenal networks in Canada, so how do we take advantage of those and showcase them? So the approach starts right there. Second part of the approach then is to encourage early stage and growth companies to drive innovation by using these networks, and if we can partner with them strategically and through direct and indirect investments, we're going to do that. So that's what we're trying to do. The focus is on direct investments where we're going to hold minority equity interest in target companies and in direct fund investments. And again, either way, the objective is to secure strategic partnership positions for ourselves and for the partner and ultimately to kind of highlight innovation using our networks.

Very clear. Thank you.

Thank you. The next question is from Drew McReynolds from RBC. Please go ahead.

Yeah, thanks very much. Good morning. Two for me. Just first on the economic headwinds, either for you, Glenn, or Mirko. I don't think anyone should be surprised they're going to persist here into Q4. Just would love to just get a better sense of the cadence of the economic headwinds through Q3. Essentially, are things still getting worse out there, or is there any stabilization that you see here in real time? And then the second question on 5G monetization, maybe for you, Mirko, as you look into 2023, what are your expectations in terms of how the different buckets will or won't kind of ramp up here as we go through the year? Thank you.

Okay, on the first question, let me start, and then Glenn... I'll start at the highest level and then Glenn can unpack some of this for you. On the economic pressures that we're either seeing now, and when I say we, I don't necessarily mean Bell, but just the macro economy or from a macro perspective that we're seeing or feeling or is likely to come. I'd say this from our perspective. We are a multi-segment and highly diversified and resilient communications and media company. The diversified revenue portfolio is really helping us in otherwise difficult economic circumstances. And I said in my opening remarks, we continue to generate substantial cash flow and we're very disciplined on costs and we have a strong balance sheet. And ultimately, the accelerated capital investments that we've been making are bearing fruit. You see it in the results. So we knew at the time when we accelerated them that it was the right strategy. And I've never been more certain than right now. So what we're going to do is we're going to keep driving on that strategy and execute against it. And so grow share and manage costs. So I think I'll say that. If I unpack it a little bit more on the consumer side. Data usage is so ubiquitous and important and critical today that it's not quite as simple to manage that down like it might have been 10, 15 years ago. On the enterprise side, things are fairly stable for us in the context of a difficult supply chain environment and a potential recession. So I don't want to minimize the impacts, but they're stable. And on the media side, we are in an ad recession. Glenn and I both talked about it. Can't hide from that. but we are taking share because of our diversified asset mix in media. The only thing I would add is another segment, S&B, we tend to see pullback in spending in recessionary times, but we're not seeing that right now. Actually, I would say the contrary, as S&B is still recovering from the pandemic. And then the final thing that obviously drew eyewatch carefully is consumer payment patterns. And to date, there's been no material change, though. As Mirko said, if there's a canary in the coal mine or an area that we're facing the greatest headwind, it's media advertising. But all in all, I would say we're quite recessionary proof, as we have proven in the past, and quite resilient. And on wireless and 5G, I guess as our – Here are the three things for me. We're going to continue to expand our 5G footprint, so that's good, which is going to continue to create demand for 5G. So we'll take advantage of the 5G upgrade cycle. So that's kind of on the demand side. On the pricing side, of course, as long as 5G pricing holds, which it has and I think it will, both of those factors – you know, increased subscriptions to 5G and a pricing environment which allows us to monetize it are the two key drivers. And I think that's going to hold up well into next year.

Okay. That's very helpful. Thank you.

Thank you, Drew.

Thank you. The next question is from Batia Levy from UBS. Please go ahead.

Great. Thank you. With the majority of your residential households on the FIBO network right now, can you talk a bit more on the cost efficiencies you can get? Maybe provide some examples where they would come from and how quickly you think you can get there. And just to follow up on advertising, can you provide a bit more color on the weakness you're seeing? Is it across the board or in certain verticals, and how has that progressed into 4Q? I think you mentioned digital was still holding up. If you maybe trip out to demand for World Cup, are you seeing any change there? Thank you.

Good morning. I'll handle the last part, and then we'll probably tag team the first part. On media advertising, as Mirko mentioned in his opening remarks, we're actually seeing pretty good strength and recovery in the out-of-home, and that's really a product of how out-of-home was so significantly impacted during the pandemic, and we're seeing healthy recovery. Mirko also mentioned that we're having great success in our digital advertising focus. The areas that are being impacted the most is traditional linear TV advertising and that of radio, as you can expect. When I mentioned in my remarks about one specific property, we are quite excited about FIFA World Cup and the success we're seeing there on selling advertising. But the overall advertising, TV and radio advertising, is where we're seeing the headwinds. And we expect that to persist into Q4 and, frankly, probably into 2023. And I think you've seen it from others in our industry who have reported results recently. Marco, on the first question? Yeah, I think, I mean, the typical stat we share is that where we have fiber, our service and support costs tend to be 40% lower than they used to be on copper. I mean, that would be the headline answer. And just to give you a little bit more flavor to that, better network means more stable and reliable network means fewer customer calls to address issues. And it's really end-to-end, because you can start scaling up self-install, so then you don't have an install cost. And then post-install, customers can mediate with you online through the app, so they don't have to call in. So ultimately, all these things lead to better service and support costs, and frankly, the most important thing Better network, superior network, happier customer, happier customer, lower churn. And you gain share along the way, of course, as you can see. So the fiber story is a good one all the way around.

Got it. Thanks so much.

Thank you. The next question is from David Joyce from Barclays. Please go ahead.

Thank you. This kind of follows on an earlier question, but could you help us understand how the very strong mobile phone net ads this quarter alone were possibly approaching half of the Canadian-wide population growth? How much of those net ads are coming from the incremental immigration? How much is coming from increased penetration of products for their account? and how much is coming from the competition? Thanks.

Actually, the short answer would be it's from all three, and it's hard to unpack, but there's certainly growth there because of immigration. I think we are doing well on switchers, which is the last item you identified, and there is still room to grow in the industry in terms of device penetration in Canada compared to what we've seen in some other countries. So it's I mean, you identified all three, but for me to assign a percentage to the mix, it's difficult.

All right, thanks. And if I could just follow up on the CapEx side of things. How do you balance the CapEx spending with free cash flow generation? This kind of ties in with the inflation issue and some of the supply constraints, but Are you really at your maximum operating capacity for upgrading? I know you need to sort of manage through the seasonality of when you can do the upgrades, but are there limiting factors with your infrastructure? I'm just wondering what dials that you can adjust to maybe to continue accelerating your CapEx upgrade plans. Thanks.

Good morning. Look, I couldn't be more pleased of what we're accomplishing with our accelerated CapEx program this year. I mentioned earlier and I've mentioned in previous quarters, this will be our largest spend in the history of BCE, topping over $5 billion, passing over 900,000 homes and continuing on our ultimate fiber journey to pass 10 million homes. Nine of those will be fiber and about a million of those will be wireless to the home. The constraint really is just the magnitude of work. And we have... finite window of construction in this country as you could appreciate and the teams have worked very hard through the summer and through and through the the fall here but we're we're very pleased uh you know the guidance we've given on capex is to be roughly in that five billion range and the guidance we've given on free cash flow two to ten percent is still in line and we're confident in that guidance so uh couldn't be more pleased we don't feel we have any constraints on product or that's slowing us in the ability to deploy our fiber and 5G strategy.

That's great. Thank you very much.

Thank you, Dave.

Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead.

Hi, good morning. This is DAO Barajas filling in for Simon. Thanks for taking the question. On enterprise, can you just talk about what you're seeing on that front? Is there any update to the product sales translating to services sales cycle and if that has improved and any higher level changes on buying patterns from enterprise customers. And then the second question is, is there any update on how you think about managing leverage through this environment and especially with the big rise in rates? That would be helpful. Thank you.

Yeah, sure. As I mentioned in my opening remarks, we're pleased with our balance sheet, the liquidity situation we find ourselves in, with over $3.5 billion available. Our debt leverage ratio stays stable at 3.2 times. We have a historically low after-tax cost of debt of $2.8, as I said. So what we did was very opportunistic in the low interest rate environment. We took advantage and did significant term placements. You watched us do upwards of $6 billion between Canada and the US in the last year or so. And that was all opportunistic in preparing us such that in a time of rising interest rates, we could lean on things like commercial paper and securitization and use more of a floating debt structure in order to manage this. So I think we're in great shape. If you look out to 2023 and you look at our towers, we have very little maturing. I think it's about $600 million in 2023. So kudos to our team. I'm very proud of the fact that we've set ourselves up to manage through a rising interest rate environment very well with the placements and the tapping the market as opportunistically as we did. And your first question on enterprise? The update is largely the same update as I gave last quarter, actually. So we're still not seeing any cancellation of projects in the enterprise segment, but revenues continue to be delayed for the same reasons as I shared last quarter. So we're not losing market share. We don't think. And then we also still believe that we're poised to capitalize when some of that supply chain disruption eases. So, for example, just a data point for you, the equipment we're receiving now is for orders that we placed 6 to 12 months ago, which kind of gives you a bit of a sense. And then if I pivot to the small and mid-segment of the business market, we're seeing in the SMB side Continued improvement, actually. Seeing volumes up, churn down, and the second quarter of revenue improvement. So we're pleased with that.

Great. Thank you.

Thanks, Diego.

Thank you. And the next question is from Aravinda Galapetsky from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my questions. I wanted to ask about internet ARPU growth. Obviously, the internet revenue numbers are very strong, 8% growth, you reported again. It looks like the vast majority, maybe close to 7% of that is subscriber-driven. And I know that we're at a point where you're sort of driving forward with your fiber deployment and there's going to be some promotional activity around that. But when you think of sort of the higher quality of services, the speeds and so forth that you're delivering, maybe just touch on the upside to pricing and how the ARPU component can become a bigger piece of that down the road, particularly in an inflationary environment where I think, you know, there's some justification for that. And secondly, a quick follow-up on your comments about Bell Ventures. Can you just sort of share your thoughts on sort of the 5G business models? You know, obviously it's not completely clear at this point, but... You know, you want to drive revenues above just, you know, connectivity. You know, 5G can potentially be different than 4G in terms of, you know, the telecom share of that economic pie and how sort of the venture initiative sort of plays into that. Thank you.

Well, the venture, I'll start with the latter. The venture's initiative is in large part designed to do just that, actually. So how do we How do we partner with the right strategic partners in which we can take equity interest to do exactly what you just said, which is both showcase the value of our networks, not just for the connectivity part of it or the connectivity revenue part of it, but to move up the solution stack, as you say. So, yes, that's what we are trying to do. On that side of things, we are playing the long game. These are long-term investments we're making on fiber in particular, long-life infrastructure assets, which we plan to monetize for decades to come. So the investments are bearing fruit now, but they're going to bear fruit for decades to come, and we will continue to be patient on that strategy and play the long game, as I say. Then in terms of... ARPU growth in wireline, the quarterly growth has been pretty consistent all year, and I look at overall internet revenue growth as a key thing, and that continues to be up significantly, 8%. And really the approach is a multi-pronged. New footprint, new subs. In existing footprint, increased penetration. get customers who are on our network to tier up to higher rate plans. Then, of course, there are tactical pricing initiatives that we always put into place at the right time. And the last element of this multi-pronged strategy is product intensity. We had someone ask me earlier, I think it was Stephanie, about cross-selling. That's another way to kind of drive the overall revenue performance on the network asset. a little bit different than your specific question, but it is part of the multi-pronged strategy.

Thank you. Great. Donna, we're running out of time, so this will be our last question that we'll take right now.

Thank you. So the last question will be from Matthew Griffiths from Bank of America. Please go ahead.

Good morning, and thanks for taking the question. I just wanted to quickly ask on the – if you see a lot of more runway on roaming, I know that's been a nice tailwind in the past, but are you seeing that level off or do you expect that to continue? And just maybe for Glenn, I just want to, we've been asking a lot of companies to clarify something on the pensions. Just you see some reporting, some kind of liability backed investments that are you know, with market volatility and rising rates are creating some pension problems. I know you mentioned that you're, you know, well-funded and the sensitivity is relatively low. I just wanted to just double check that there's no volatility or interest rate risks that are creeping up in the pension.

Good morning, Matthew. Actually, this is a It's been quite a journey on pension management for us and my time here. We had many, many years of falling in significant deficit position, and we followed a very clear glide path towards immunizing, if you will, the liabilities by moving to a lower risk or fixed income weighted portfolio and less on equity. And I think it's proven to play out in times like this, despite the fact that interest rates and discount rates have been all over the map and rising at an unprecedented rate. We really never saw any change in our funding position. We bounced around from $113 to $118 during the quarter, I think, of our solvency position. So still sitting at $2.9, $3 billion of a... The surplus, excuse me, that's sitting in the pension plan. Do I expect that to continue to change over time? Sure. But the important thing is we don't see it having an impact on our ability to take contribution holidays in the foreseeable future. You could give back some of that and have a surplus fall down to $2 billion. But no, we are not seeing any problems in our pension plan. We're delighted with the holidays we've been able to take. and continue to think that that will be available to us for the foreseeable future. On roaming, 114% I mentioned is where we're at. That's a product of both volume and rate because there were rate increases. I would say we're probably at the high 90s right now in volume, and the rest is rate-driven. But Mirko mentioned it in his remarks. Most of that has come from consumers returning to travel, although we have not seen as much come back on the business side yet. So we do believe... Tailwinds exist, and we'll continue to see a bit of that tailwind in the coming quarters ahead, albeit naturally it's not going to be at the same level of what we've enjoyed the last four quarters as we went from virtually nothing and roaming to a recovery to 114%. So thank you, Matthew, for your question, and thank you, everyone, for the morning.

Great. Thank you, everyone. Thank you so much. Thank you so much for your participation and the great questions that you asked. So thanks again. Have a great day.

Thank you. The conference has now concluded. Please disconnect your lines at this time, and we thank you for your participation.