BCE, Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to the BCE Q1 2023 Results Conference Call. I would now like to turn the meeting over to Mr. Tain for Douglas. Please go ahead, sir.

Thank you, Maud. Good morning, everyone, and thank you for joining our call. Today I'm here with Mirko Vivic, President and CEO of BCE, our current CFO, Glenn LeBlanc, and our future incoming CFO, and current treasurer and SVP of corporate strategy, Curtis Millen. You can find all our Q1 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 obligations of the forward-looking statements except as required by law. Please refer to BCE's publicly filed documents for more details on our assumptions and risks. With that, I'll turn the call over to Mirko.

All right. Thank you, Dave. Good morning, everyone. The Bell team delivered operating results for Q1 that were in line with our planned performance for the quarter. We've been making some significant investments in the past three years, and they are bearing fruit. You can see in our continued operational momentum, and particularly this quarter, you can see it in our strong 3.5% consolidated revenue growth. And as expected, and as we profiled internally in our quarterly budget for 2023, adjusted EBITDA decreased year over year due to a $67 million favorable one-time retroactive revenue adjustment at Bell Media in Q1 of last year. and near-term cost pressures from inflation, strategic initiatives, and the normalization of our cost structure to pre-pandemic levels. In line with our accelerated CapEx program for 2023, we spent close to $1.1 billion in new capital in Q1, and that keeps us on pace to deliver another 650,000 new direct fiber connections and to grow our 5G service footprint to 85% of the country. And it will also enable standalone 5G plus service for almost half of Canadians by the end of the year. The generational investments we're making to build the best networks are consistently being recognized by third parties for superior network quality and speed for our low latency and the best overall experience. And we're leveraging our world-leading broadband infrastructure, our focus on service excellence, and customer value proposition to offer the best networks at affordable prices. and to deliver economically accretive subscriber additions across all our products. And you can see that in our Q1 operating results. In wireless, we grew our base of high-value post-paid subscribers. We increased our cross-sell penetration of wireless and Internet households, and we managed customer churn. Total mobile phone and connected device net ads were up 20% over last year to 97,377. and that drove healthy service revenue growth of 5.4%. Going forward, we're seeing very good growth catalysts from accelerating immigration levels, penetration headroom, the ongoing transition of 5G, we're bundling wireless with internet service, as well as retail channel expansion with partners including Staples, which we've talked about before, and most recently Air Canada, which we announced just a couple of days ago, earlier this week rather. Against this backdrop, we're expecting to use our proven execution and operating momentum to drive our fair share of customer growth in a competitive market. On the fixed side of the business, fueled by a growing fiber footprint, we continue to gain a significant share of new Internet subscriber growth. We added 47,757 new net fiber to the home customers in Q1, and that's up 24% over last year. This brings the total number of Fiber subscribers to approximately 2.5 million, or 57% of our total retail Internet customer base. And of these, close to 1.1 million are taking speeds of a gigabit or better, which contributed to Bell's industry-leading consumer Internet revenue growth of 10% this quarter. These results are a testament to the power of fiber-based internet service that provides the fastest dedicated symmetrical speeds that cable just cannot match. Bell has the broadest multi-gig footprint with 3 gigabits per second or higher speeds now available to more than 5 million locations. And at the end of this year, 4 million of those will have access to symmetrical speeds of 8 gigabits per second. It's a major competitive differentiator, and this will keep us sustainably ahead of any of our peers. We also continue to advance our cloud capabilities through an expanded partnership with Palo Alto Networks for cloud security solutions and the acquisition of FX Innovations, which is a leading Quebec-based IT services and consulting company, which has a specific expertise in digital workflow automation. We announced that today, and that will further accelerate our growing team of cloud-certified professional services employees. These developments are the latest building blocks in strengthening Bell's position as a tech services leader for enterprise customers. Let me turn to media now. Despite an advertising market that continues to face near-term headwinds across the continent, digital ad revenue was up 4% over last year, and that's a positive result, certainly, when you think about the current market backdrop generally. On the customer experience front, we continue to focus on serving customers on their terms, We've introduced a self-serve Wi-Fi optimization tool, and we've improved self-serve guides with step-by-step processes for same-day service activations, and we expanded our manage your appointment application. Our customer-first approach is clearly making a difference, and you can see that in the latest results from the CCTS. That CCTS report that I'm referring to shows Bell as the only national service provider to experience a decrease in complaints with a 6% reduction even as complaints were up 12% across the industry. In fact, Bell's share of complaints has decreased 16% over the past year and impressively 55% over the past five years. Really, really proud of the team on this and of our progress generally. We've achieved our financial and operating results against the backdrop of wireless prices that have remained essentially stable, even as the Canadian economy continues to face sustained inflation. If you refer to the latest StatsCan data, The price of all goods and services in aggregate has increased 4.3% over the past year. But if you look at the cost of cellular services, they've risen only 0.3%. And I want to highlight for you a few notable ESG accomplishments as well. You'll see that this was the first year that Bell issued an integrated annual report. It's a first for a major communications company in North America. We also ran third among global telecom companies in Corporate Night's 2023 Global 100 ranking of the most sustainable corporations in the world. And we were rated highly in the sustainable investment category, and that was driven by our investments in fleet electrification, electric vehicle charging stations, renewable energy alternatives, and energy savings. And reflecting our ongoing efforts to engage and invest in our people, Bell was named by Mediacorp as a top family-friendly employer in Canada for an 11th consecutive year, as well as one of the best workplaces for young people and young professionals in recognition of our graduate leadership and internship programs. I'll turn now, if you're following the slides, I'm going to turn now to slide six, take a look at some of the operating metrics for Q1, and I'm going to start with wireless. We added 43,289 new net postpaid mobile phone subscribers. That's up 26.5% from last year. Pretty strong result in what is typically a seasonally slower quarter for acquisitions. This was a function of an 18% increase in gross activations, and that was driven by higher retail traffic as pandemic-related restrictions were still in place in the early stages of Q1 of 2022. Population growth, continued 5G momentum, and healthy business customer demand. Although customer churn increased year over year, which reflected greater overall market activity, it was still well below pre-pandemic levels at 0.9%. Our ARPU was up 0.9%, and that's our eighth consecutive quarter of growth. This was supported by further roaming revenue improvement that now sits at 129% of pre-COVID levels, and our continued focus on higher value subscriber loagings. And with only 44% of post-paid customers currently on 5G-capable devices, the vast majority of which are subscribing to premium unlimited data plans, we're seeing good ARPU support going forward, despite competitive pressures on base rate plan pricing and the financial impact of the ongoing shift to installment plans. As for mobile-connected devices, net ads were up 45% over last year to $70,742. And that was driven by continued strong customer demand for Bell's IoT solutions. Let's turn to Wireline now. We added 27,274 total new net retail internet customers, and that's up 5% versus last year. But that number includes the competitive loss of DSL subscribers in our non-fiber footprint. But as I already mentioned, fiber net subscriber additions were much stronger at 47,757. We also added around 11,000 net new IPTV subscribers. That's down slightly versus last year, but we expected this due primarily to higher customer deactivations on our 5TV app streaming service after last year's FIFA World Cup. Satellite TV and home phone net losses both increased modestly compared to Q1 of last year. due to a step up in promotional offer intensity with a full return to pre-COVID levels of competition. Over at Bell Media now, our advertising demand held up reasonably well under the current circumstances and comparatively better than our peers. And this was the result of our TV broadcast of World Junior Hockey and the Super Bowl. And it shows if you've got strong content that viewers flock to, it's going to deliver value to advertisers and advertisers are placing value on premium sporting events. And that also helped TSN and RDS maintain the number one rankings in Q1 and allowed us to continue to grow in digital advertising, which I mentioned before, but really does bear repeating. Outlook. So in terms of our outlook for the balance of 2023 for media, the ad recession should begin to stabilize and improve gradually later in the year. Over at Crave, we continue to deliver with total subscribers up 6% over last year, and we're now more than 3.2 million subscribers. This was underpinned by a 24% increase in direct-to-consumer streaming subscribers. And we also recently launched our TSN Plus streaming product, which allows sports fans to access augmented feeds, multicasts, and other featured content that's incremental to the premium sports content that we're delivering across the flagship TSN platform. On the French-language TV front, we once again led all competitors in Q1 in the specialty market, including news and sports, while continuing to grow viewership with buzz-worthy programming such as Survivor Quebec, which premiered in early April on Bell Media's conventional TV channel Nouveau. Lastly, You will have seen a press release from us the other day announcing a landmark, long-term, and exclusive licensing deal with Warner Brothers Discovery that builds on our previous agreement from 2019. The deal ranges across many parts of their vast portfolio of content. It includes HBO and Max originals, the DC Universe, the Wizarding World of Harry Potter, new cable series, library TV series, pay and post-pay window rights for Warner Brothers films and library films, as well as French language rights across a wide range of content. Our valuable long-term HBO deal basically just got longer and broader, and that's going to provide further compelling content supporting our made-in-Canada Crave TV service. Streaming TV service, of course. In summary, a solid start to the year with results directly on plan for Q1, and results that again reflect the Bell team's consistently strong execution. I'm confident I will further extend this proven track record throughout the remainder of 2023. So I'm going to hand it over to Glenn in just a moment. But first, obviously, I want to acknowledge the news we issued this morning that Glenn will retire as CFO effective September 1st. Under Glenn's leadership, as you all certainly know, Bell has attained a solid financial position with a robust balance sheet, substantial cash flow and pension solvency, And all of that's helped us accelerate Bell's capital expenditures to expand our fiber and wireless networks and position us competitively and strategically for years and years to come. On behalf of everyone, I personally want to thank you, Glenn, for your exemplary leadership and your invaluable contributions to the company and to the executive team and to me personally. Thank you. Curtis, currently SVP Corporate Strategy and Treasurer, will be promoted to CFO effective September 1st. Curtis has a deep background in the financial industry and strategic leadership here at Bell, and he's well positioned to take on the CFO role and work closely with Glenn and with me during the remainder of 2023 and beyond to ensure a successful transition. Glenn, again, huge thank you to you. And of course, you're not going very far. You'll be right back here with me in August and Curtis for our Q2 results. And Curtis, congrats. And with that, over to you, Glenn. Thank you, Mirko, and good morning, everyone. Before I get started, I want to express my gratitude to Mirko and the entire Bell team for 30 incredible years. As Mirko mentioned, and I want to reinforce, Curtis is well positioned to take on the CFO role, and is a strong leader who will guide Bell through the next generation. He and I will work closely together through the remainder of 2023 to ensure a smooth transition And now on to results. We had a positive start to the year with strong 3.5% consolidated revenue growth that was achieved despite lapping a one-time $67 million retroactive revenue adjustment at Bell Media and coping with the economic conditions that continue to impact media advertising and the B2B sector. Normalizing for this one-time revenue adjustment from Q1 2022 Revenue is up nearly 5% this quarter, a very strong result driven by continued robust wireless and internet growth and a notable recovery in the business data equipment sales. While this revenue strength did not flow to the bottom line this quarter, our EBITDA results are very much expected and fully reflected in our internal forecast given the aforementioned one-time revenue adjustment that Bill made you last year. as well as the known near-time incremental cost pressures from inflation or strategic initiatives, higher TV content and programming costs, and normalization of cost structure to pre-COVID levels. Adjusting for just the media one-timer and normalizing for the TV hockey schedules this year, underlying consolidated EBITDA growth in Q1 was close to 2%. Net earnings and adjusted EPS were also down year over year, mainly the result of the lower expected EBITDA, increased interest expense due to higher rates, higher depreciation and amortization expense as more capital assets are being put into service consistent with our accelerated broadband network build-out plan. Our net earnings results this quarter also included an asset impairment charge related to the consolidation of real estate space due to Bell's hybrid work policy. As for free cash flow, our Q1 result was anticipated and right in line with our quarterly budget, reflecting the timing of working capital, which will largely reverse out by the end of the year, higher interest paid, and a timing of tax installment payments, as well as higher CapEx. On CapEx, the year-over-year increase was just timing related as we continue to project a $300 million plus step down in 2023. Turning to our new Bell CTS segment on slide 9 that amalgamates our former wireless and wireline operations. Service revenue grew 2.1%, fueled mainly by continued strong mobile phone and retail internet subscriber growth. Further roaming improvement and an improved B2B performance trajectory. In fact, Q1 was Bell Business Markets best quarterly service revenue performance since Q3 of 2020. The financial contribution from our acquisitions of Distributel and EBOX were largely offset in the quarter by lower sales of international wholesale long-distance minutes, which can be quite lumpy, and the sale of CREATEC in March of last year. On the product side, very strong growth with revenue up 24% year-over-year. This was attributable to higher business data equipment sales and improved product availability compared to the shortages we experienced last year, as well as a greater sales mix to higher-value mobile phones and more overall contracted device transactions. Notwithstanding the close to 5% increase in total CTS revenues, Q1 EBITDA growth was more modest at 1.3%. This was the result of some near-term expected cost pressures that I described earlier, which contributed to an 8.1% increase in operating costs this quarter. As we cycle through some of these added costs, we expect a stronger EBITDA growth trajectory for the balance of 2023, as was contemplated in our quarterly budget that we profiled for the year. Over to Bell Media on slide 10. As projected and in line with our budget, total revenue was down in Q1, decreasing 5.5% year-over-year. Despite the ongoing ad recession that's affected global advertising markets, advertising revenue for Q1 held up better than we expected going into the quarter and much better than our peers. This can be attributed to a diverse asset mix and focused execution on our digital-first transformation strategy. Subscriber revenue declined 4% due to the aforementioned one-time retroactive revenue adjustment that we lapped from last year, which was also a major contributor to the 36.5% decline in Bell Media's EBITDA this quarter. Normalizing for this one-timer from Q1 2022, EBITDA was down only 6%. That's pretty good performance given the macroeconomic context and the very much anticipated giving the normalization of hockey schedules this year, and the content cost inflation for premium sports and entertaining programming. Turning to the balance sheet on slide 11, our consistently strong operational and financial performance supports our robust balance sheet and liquidity position, which totaled $3.7 billion at the end of Q1. That maturity schedule remains very well-structured, with an average debt to maturity of around 13 years and a low after-tax cost of debt of just 2.9%. Additionally, our balance sheet strength is further enhanced by a sizable pension solvency surplus amounting to $3.7 billion and substantial recurring free cash flow generation that is reliable and well-protected from macro-uncertainty. Let's turn to slide 12. VC's fundamentals and competitive position remain as strong as ever. With the financial results we delivered in Q1, we are right on our internal plan, which may not have been obvious to the street as we don't provide quarterly guidance. Together with continued operating momentum across the business and our consistent proven execution in a competitive marketplace, I am reconfirming all of our guidance targets for 2023. And on that note, Dan, I'll turn it back over to you.

Okay, great. Thanks, Glenn. So before we start the Q&A, I want to remind everyone that due to some time constraints this morning because of our AGM that's taking place right after this call, to limit yourselves and ask your questions in the most efficient way possible so we can get to everybody in the queue. So on that note, we're ready to take our first question.

Thank you. We will now take questions from the telephone lines. If you have a question and you are 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. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be brief pause while participants register for questions. We thank you for your patience. Our first question is from Drew McReynolds from RBC. Please go ahead.

Yeah, thanks very much, and good morning, and Glenn, congratulations. It's been great working with you, and I'm sure everyone will share the same sentiments. You've been fantastic. Thank you, Drew. A couple of questions for me, and sorry, I missed some of the opening remarks. Just on the I think the street was well aware of the slower start to the year, just given the tough call-up on the EBITDA side. When you're see it improving year over year for the remainder of the year? Is that more or less a straight line improvement, just trying to kind of make sure expectations are set? And second question, you know, I normally don't kind of ask the performance of any company directly relative to competitors, but certainly the mobile post-paid net ads were notably improved. in line with expectations, but notably below what Rogers was able to put up in the quarter. Just wondering, from your perspective, what you thought the market dynamics were in the quarter, and with respect to Q2, just the overall strength of the wireless market, is it continuing? Thank you.

Thank you, Drew. I'll jump in on the first before Marco gives his remarks. I made it 30 years without giving quarterly guidance, so I guess I won't start now. What I would say is as I look out to the back half of the year, the back three quarters, we remain very confident of the guidance we've given for EBITDA. As I said in my opening remarks, we were lapping a pretty tough comp for Q1 due to that one-time retroactive adjustment and the normalization of hockey schedules. I normalize for those who are just sub 2%. I expect that to ramp each quarter, go forward, and quite confident or very confident on the ability to deliver on the guidance provided. And thank you for your comments, Drew. And on the second, Drew, I was really quite happy, actually, with our wireless results completely on plan and what we set out to achieve for the beginning part of the year. Q1, for us, and generally speaking, but for us, is a seasonally slower quarter. And we were closely watching promotional activity in Q1, in fact, pulled back on hardware pricing in Q1 quite deliberately. And we're glad to see handset discounting come down in January generally and remain pretty manageable. And again, I've talked about this over and over again since becoming CEO over three years ago. We watch closely our mix across the brand, the family of brands. And we had record bell mix on gross ads and on net ads. And that's the right way to go because it drives organic revenue growth going forward. And again, just to point out, Q1 is always seasonally light, but really strong if you compare to our own prior Q1s. We're up 26.5%. So, you know, really happy with where we are. Eight consecutive quarter of ARCU growth, which I pointed out in the opening remarks. You probably saw it in our release, but certainly pointed that out in the opening remarks. Thank you.

Great, Colette. Thank you.

Thank you. Following question is from Mayor Yagi from Scotiabank. Please go ahead.

Yes, good morning. Thank you for taking my questions. And Glenn, it was great working with you. Always very easy and meticulous on the financial, so you'll be missed. Thank you. I wanted to ask you a question. Now that the Rogers merger is complete, Mirko, what does the presence of a fourth player versus three previously mean for the long-term market structure and health of the Canadian wireless industry in your view, as well as implications for regulatory policy? Maybe I just wanted to ask you, when I look at your internet subs, they're up 8% year-on-year, but your wireline data revenue is only up 2.5%. It's a big divergence, and I'm trying to figure out what's going on because it's surprising since a lot of the net ads that you're adding here are on new technology that was costly to implement, and I'm trying to figure out what's the pricing on new customers versus old customers. and should we see that data revenue growth improve in the back half of the year? Thank you.

Okay, thank you, Mario. Look, on the first one, if you take a step back and you look at the industry in our country, we now have four well-capitalized, significant players with, very strong wireline footprints and near national wireless footprints. So that is very rare across the global footprint. And I think if you're sitting there from a public policy position, having four players like that is quite significant. and will enhance competition and consumer value. And on the wireless side specifically, we are one of the very few countries with four players and probably the only with the convergence between wireline and wireless that I just mentioned. So we have four wireless players. I think the job ought to be considered as having been done now on the wireless front from a public policy and regulatory perspective. And we're continuing to deliver value. In my opening remarks, I did take the time to point out how wireless pricing compares to broader inflation across the industry. It shows you that pricing is going down and value is going up. And let's not forget We have the lowest population density of pretty much any industrialized country. The G7, excluding Canada, has over 200 people per square kilometer. In Canada, we have four. Four. And it's not like inflation gives us a pass because we only have four people per square kilometer. So we still have to pay for all the input costs to build these incredible networks to 99% of the Canadian population. I'm not making a bell point here. I'm making an industry point. So increased value, improved networks. We're generating growth. We're delivering... what consumers want. The U.S. doesn't have four, Australia doesn't have four, Germany doesn't have four, Finland doesn't have four, South Korea doesn't have four, and it could go on and on and on. As far as the regulatory developments go, you asked me about that too. I'll just say we're closely watching regulatory developments, and we're going to see how that's going to affect our investment decisions going forward. For the rest, turn it over to Glenn. Thanks. Your question on data, let me remind you that consumer Internet is up 10%, and obviously data is more than just consumer Internet. It's really a product of legacy data and business service solutions that haven't recovered yet, satellite. But let me remind, consumer Internet up 10% and total Internet up 8%. We're extremely pleased with the growth we're seeing in those products. Okay, thank you. Thank you.

Thank you. Our following question is from Aravinda Kalabatige. Please go ahead. From Kanako Ingenuity.

Good morning. Thanks for taking my question. And, Glenn, let me just add my congratulations as well on a tremendous run at Bell. I just wanted to maybe, Mirko, sort of go back to the enterprise side of the business, Bell businesses. Maybe just touch on the backdrop of your FX acquisition, what you announced I think last quarter with respect to Bell Ventures. Your plan to maybe get that back towards neutrality or some sort of growth, is that really a case of maybe waiting for the IoT side of 5G to develop to a certain level where you can see those tailwinds? How do you see the shape of recovery in that business over the next couple of years. Just wanted to get a high-level sense of that.

Thank you, Aravinda. So, just maybe a couple of sentences on the quarter and then looking forward on the strategy. So, you know, bears repeating what Glenn said in his opening remarks that on the enterprise side, we had our best quarterly service revenue performance since the third quarter of 2020. You know, I've been saying on these calls, you know, for the last few quarters that we haven't been seeing cancellation of projects, just pauses on that. on new orders and pauses on our ability to complete projects given supply chain constraints. We're seeing signs of improvement in supply chains and we saw that of course in the product sales in Q1 of this year. So all of that is quite positive and I see some small tailwinds in the second half of 2023 as well. Now in terms of the strategy, Talked a lot over the last couple of years about how we're going to focus on IoT, private network security, cloud, and MEC, and quickly unpacking those. I think our IoT business continues to be strong, and that will grow over the years. Private networks. We're seeing now the beginnings of some interest in that. I would have thought that would be slower than MEC, for example, but it's turning out that private networks may hunt first. On MEC, it still continues to be, we're going to have to be more patient on MEC. And then that brings us to security and cloud. We are quite a meaningful player in the security space, and I think that part we're going to continue to grow and lean into. And then on cloud, we announced, I guess it was probably 18 months ago, the deal with AWS and Google Cloud. And now you're seeing the focus we're going to put in the cloud space. And the FX and Innovations deal shows that we are going to – have a focus in cloud particularly with FX on digital workflow automation. Enterprises who need assistance from professional and managed services as they digitize their workflows and their journeys to the cloud, we're going to go hunting there and FX is very strong in that space. Basically, Irvin, that's kind of, in a nutshell, the main areas that we're going to go hunting for growth in BBM, and now you're starting to see a sharper focus in some of those areas. And, of course, on the legacy side, I'll just complete the full answer. On the legacy side of our business, or the more traditional side of our enterprise business, probably a better way to put it, although we're starting to see some improvement there, we're always going to be very, very diligent on the cost structure. We just have to make sure that the underlying cost structure across the entirety of Bell that supports the enterprise business is in line with the revenue profile of that more traditional business while, of course, we go hunting for the growth I mentioned.

That's helpful. Thank you, Marco. I'll pass the line.

Thank you. The following question is from Vince Valentini from TD Cohen. Please go ahead.

Thanks very much. Two quick things. One, the recent Air Canada deal looks very impressive and interesting. I'm wondering if you can add any more colour on how much impact you think that could have on your market share of the new immigration market to Canada and maybe any comment on whether you think you haven't been punching to your proper weight in that space in the past few months. Second, on the regulatory front, again, great comments, Mirko, and I couldn't agree more that the policy objective should be met here on wireless. But just to reinforce that even further, a lot of the pricing studies seem to focus on sort of advertised pricing as opposed to what the industry actually realizes in ARPU. And we've seen a move this morning by one of your competitors to just lower the advertised rate to 65% 85 for a 25 gig plan. I'm wondering what your thoughts are on that. I guess both from a competitive perspective, but also does it make more sense to have everyday pricing advertised at lower levels so the government sees that as opposed to just discounting off those rates every time we get back to school and Black Friday period and end up at the same net point anyway?

Thank you, Vince. So on our peers' announcement this morning, I guess it just It further supports the point that I made and that you agree with. It's a competitive industry, isn't it? And we'll always be ready. And it shows, that announcement this morning also shows that the bundling value proposition, it really does matter in the marketplace to consumers, and it's going to continue to be an important differentiator. And the players with the largest wireline bases, in my view, will do very well. And on that, we cover 75% of the country with wireline infrastructure and increasingly fibered, as you know. On the pricing studies and the pricing discourse, let me say this. It's sadly unsophisticated, the discourse that we have on pricing. Comparing rack rates on a website and comparing those to prices around the world and saying that Canada is there for... significantly more expensive is so unsophisticated. It ignores so many things. It ignores really what the consumer is actually paying. And points in time matter. If you look at rack rate pricing in Q1, it tells you nothing about what customers are actually paying because everybody who operates in the industry know that the majority of sales are in the back half of the year, Q3 and Q4, back to school, Black Friday, the holiday season. And that's where the promotional intensity actually happens. That's when the majority of sales happen, and that's what most consumers in Canada are paying. So you've got to pay attention to typical buying patterns and typical competitive intensity patterns. And then you can't pretend that handsets don't cost over $1,000. and ignore that either. So again, the pricing dialogue is unsophisticated. Maybe the move this morning by a competitor to kind of bring what was otherwise perhaps below the line pricing above the line will help that regulatory dialogue. And on Air Canada, we're so excited. These are two great brands. The Aeroplan Platform is extremely powerful. Our family of brands, Bell, Virgin, Lucky as well, and putting those two together is, I think, going to be a very powerful proposition for both companies, but first and foremost for consumers. And, yeah, like 5G growth. A lot of wireless growth is coming and will continue to come from newcomers to Canada. And this allows us to speak directly to newcomers before they even enter the country on the airline that most newcomers use to make their new home in our country. So it's going to be powerful for both companies and for consumers.

But nothing on whether you can do better, and do you think the company should be doing better in that area?

In that square than it has been, Mirko, or are you still – this is just incremental, but you've already been satisfied with – We need to do better, and this is going to be a big, big initiative to make sure we deliver on doing better. Great. Thank you.

Thank you. Our following question is from Tim Casey from BMO. Please go ahead.

Thanks. Good morning. Mirko, could you talk a little bit about how you're thinking about wireless and wireline and bundling given, you know, you continue to roll out the fiber footprint and, you know, just as speeds with 5G converge or get closer to wireline, how you're thinking about addressing go-to-market strategies that may include a, you know, a more holistic bundle rather than just, you you know, retention efforts and things like that at the call centers. Thanks.

Yeah, so we'll have to continue to monitor closely kind of developments in wireless speeds and wireline speeds and holistic bundles rather than kind of necessarily a discounted price bundle if you buy two services. It may be where the world evolves. I don't think we're there yet. But Look, fundamentally, wireless will never catch up to wireline speeds, certainly not the wireline speeds that we're delivering today and will continue to deliver. The fiber advantage is profound. It's structural, and it's fairly long-term. And we're going to continue to lean heavily on that advantage to drive continued consumer Internet access. service revenue growth. I mean, these are still healthy revenue growth at 10%. It's quite sizable. And look, if you look at those numbers and unpack them, the 47,700 fiber internet net ads up 24%. That's a big number. But you see that we are losing, continue to lose customers where we don't have fiber. So the strategy, therefore, speaks for itself. And it kind of also shows you, doesn't it, that Our competitors who have cable infrastructure realize that they just can't compete where we have fiber, so they're going to go hunting where we don't. It makes total sense. But the bigger point is it just basically shows you fiber wins. So we're going to use the fiber pipe, and then we have 5G. Our 5G networks are leading networks, and we're going to continue to push on the areas of wireless growth. And we have, like I said in an earlier response, we have 75% of the country where we have wireline infrastructure where we can do what I just said. That's an advantage.

Thank you.

Thank you. Our following question is from Jerome Dubreuil from Desjardins. Please go ahead.

Good morning, and thanks for taking my questions, too, for me. First one, I think it's fair to say that last quarter you made sure that investors understood your medium-term CapEx plan. Now there's a different messaging from Ottawa. So is it possible that these kind of couple of years CapEx plan might be changed depending on on the outcome of the reviews by Ottawa on the TPIA side. And second question would be on the cost in the quarter. It might have been a bit higher than usual or you might have expected. You mentioned some tough comps, but are there actual costs in the quarter that you anticipate won't be as present in the coming quarters? Thank you.

Okay, so I'm going to keep My answer to your first question is short, just so that the proper emphasis is placed on it. So you asked me, can decisions from Ottawa affect our accelerated CapEx plans? And I'm going to answer very succinctly, yes. Over to Glenn. Yeah, there is some cost, as I mentioned in my opening remarks in Q1, that we don't see repeating. The first one is the amortization of TV broadcast, hockey schedules, that was fairly sizable in the first quarter, and obviously that's normalized now. Labor inflation, we think we're starting to lap that, as well as fuel inflation. So we feel that the worst is behind us, and you'll see a more normalized cost structure into the future. And as always, I think we've proven time and time again that it's a core competency of BCE to take the necessary steps we need to right-size our cost structure. and I can assure you we're doing that. As a matter of fact, you saw it in the impairment charge we took in Q1 as we continue to really push hard on real estate rationalization, and that's an opportunity for us. And then the final thing, again, said in my opening remarks, TV content. So we're in line with where we thought we'd be, and yes, Jerome, we'll have better quarter-over-quarter comps on costs in the coming three quarters.

Great. Thank you. Congrats, Glenn, on the career, and also congrats to Curtis.

Thank you, Gerald.

Thank you. Our following question is from David Barden from Bank of America. Please go ahead.

Hi. Good morning. Thanks for taking the question. It's Matt sitting in for Dave. And, Glenn, congratulations on the announcement, and best of luck going forward. Just two quick ones for me, focusing on really just the net ads. For wireless, is there any way to provide some color on the strength coming from consumers versus business, business providing a second line to workers and so on, and whether that has legs? Because I think on the consumer side, with population growth, I think everyone sees that as having legs to continue being fairly strong. And on the broadband side, mostly focusing on the DSL footprint that you still have. I think you alluded to higher intensity from cable in those areas, but also I wanted to see if you could provide any color on if you're seeing these subsidized builds that the government is focusing on to extend networks further out where the service is generally limited for high-speed connections. whether that's having an impact or if you anticipate that will have an impact on subscriber losses in the DSL footprint going forward. Thanks.

On the second one, we are also a significant player in securing subsidies, so actually that allows us to accelerate our fiber footprint in a way that we otherwise wouldn't be able to do commercially in those areas. I think it ends up being fairly kind of neutral if you consider the share of subsidy we get compared to what others get. And in some geographies, we actually get more of the subsidy and therefore cover more of the subsidized footprint than our competitors. So I wouldn't say that's going to be a driving factor in this, Matt. And then on wireless postpaid, quite happy with the strength in all the segments, whether or not it's consumer and we consumer, or enterprise, or small and medium business. And like I said in probably answering the first question, we're really happy with the strength of the Bell mix for both gross sales and the mix in the 43,000 net ads. High preponderance of Bell brand mix on both those sales and nets.

Thank you so much, guys. Thanks, Pat.

Thank you. Our following question is from Stephanie Price from CIBC. Please go ahead.

Good morning and congrats, Glenn. Thank you. Just wanted to circle back on the free cash flow in the quarter. Just curious if you could give some more color on what's driving the working capital changes and if you've seen any changes to bad debts and how we should kind of think about that working capital reversal through the year.

Yeah, first, the latter, bad debts, no change. We're not seeing any increase in day sales outstanding or anything like that. Fingers crossed that that will continue through the calendar year. Look, if you look at free cash flow, fourth quarter was one of the highest spending capital quarters in the history of BCE. Obviously, the payables of that would have been recorded in Q1. Secondly... If you look at where we are for capital spending in Q1, we are actually up over 100, I think 127 million, if memory serves correct, year over year in Q1, which when you consider that for the full year we've given guidance that will be 300 million under. What really happened in the quarter is that you make hay when the sun shines, and the weather allowed us to get out and do fiber construction earlier than we envisioned and planned. And the earlier you build it, the more customers we can load. So we've done that. But, of course, that affects working capital. And then we had some timing of tax installments I was completely planning on, but they can be lumpy from year to year, and we've incurred them early this year. So, Stephanie, that's the kind of unpacking of why the consensus on free cash flow versus what we delivered is so different, yet I remain so confident in the delivery of the annual free cash flow guidance.

That's helpful, Color. Thank you. And then just one more from me. Just curious on the integration of Distributel, whether you've migrated the subs to BC network, where that's possible, and how we should kind of think about the potential for margin improvement from that tuck-in.

Yes, strategically, in terms of Distributel and eBox, where we have fiber network and a Distributel subscriber is currently on the cable platform, We will migrate them over to Fibre over time. And note here that Distributel is a brand of Bell Canada. So there is no separate legal entity Distributel any longer. It's part of Bell Canada and it remains a brand. So we're going to move Distributel branded Bell subscribers to Bell Fibre footprint where we can over time.

Thanks so much.

Thank you. Our following question is from Sebastiano Petty from JP Morgan. Please go ahead.

Hi. Thank you for taking the question. I just wanted to see if you could update us on the competitive environment in wireless and wireline thus far in the second quarter. Obviously, you talked about a little bit more of a, I think, normalization in 1Q trends. What are you seeing thus far? And then secondly, looking across your perhaps maybe sports asset holdings, Obviously, headlines about the Ottawa Senators perhaps setting a record for NHL sale. It's not as though leverage is maybe a major concern or access to the capital markets, but how are you evaluating perhaps monetization or the long-term strategic value of some of your sports holdings? Thank you.

Good morning, Sebastian. It's Glenn on their second question, and Marco will handle the first one. The sports assets, we are very comfortable with the assets we have. We feel that the value they deliver continues, and we have no intention of doing anything with the sports assets in the near term. Yeah, and on the early... On the early signs for Q2, I would say generally in line with what we saw in Q1, where there was a typical seasonal slowdown compared to Q4 of last year. Generally speaking, I think at the flanker brand level, you see higher competitive intensity generally, but nothing out of the ordinary or nothing that we didn't expect. And like as always, we have to carefully watch to see how the dynamics are going to evolve. We're going to have to assess this morning's announcements by one of our competitors. And watching these kinds of things is definitely top of mind in everything we do. But bottom line is that there is a lot of growth in the wireless industry still, a lot of growth for all industry participants, whether or not it's immigration, newcomers to Canada, which we've talked about, or people moving from LTE to 5G or greater store traffic, return of business activity, et cetera, et cetera. So I think that growth will float all boats and we're ready to compete.

So as we're approaching the 9 a.m. end time, this will be our last question, though.

Perfect. Thank you. So I would now like to turn the meeting back over to you.

Great. So thank you all for your participation this morning, and as per usual, I will be available along with Richard to answer any questions and clarifications that you may have as a result of our announcements this morning. So on that, thank you very much, and have a great day. Thank you, everyone. Thank you.

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