BCE, Inc.

Good morning, ladies and gentlemen. Welcome to the BCE Q2 2025 results conference call. I would now like to turn the meeting over to Chris Summers. Please go ahead, Mr. Summers. Thank you,

Matthew. Good morning, everyone, and thank you for joining our call. With me here today are Mirko Bibic, BCE's president CEO, and our CFO, Curtis Millen. You can find all our Q2 disclosure documents on the investor relations page of the BCE.ca website, which we posted earlier this morning. Now, before we begin, I'd like 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 assumptions and risks. With that out of the way, I'll turn the call over to Mirko.

Thanks, Chris, and good morning, everyone. So earlier this year, as you know, I shared the strategic plan

and capital allocation strategy that will guide Bell in driving sustainable, free cashflow growth and shareholder value in the near and long-term. And I'm pleased to report that in Q2, the Bell team made meaningful progress towards our objectives. Bell's unique and differentiated assets continue to work together to diversify our revenue streams and to drive overall performance. We remain deeply committed to executing our plan and it's delivering results. I'd now like to provide an update on our progress against each of our four focus strategic priorities, which are putting the customer first, delivering the best fiber and wireless networks, leading an enterprise with AI-powered solutions and building a digital media and content powerhouse. Moreover, we'll continue to modernize and simplify how we do business and how we operate. Turning to slide four, for 145 years, our purpose has been rooted in connection. We connect Canadians with each other. We empower our enterprise clients to connect with our customers. Through consistent long-term investments in core infrastructure, we've enabled Canadians to connect to the latest global technology innovations. Our objective is to put our customers at the heart of every interaction with us. We know their time is valuable and that's why we're prioritizing self-serve tools to help customers get the support they need whenever they need it. And I'm delighted to share some of our initiatives and the tangible results we've seen so far. So let's turn to slide five. Our self-install program started in Ontario and Quebec in 2020, enabling customers to install their Bell services on their own schedule. It's been a resounding success. Since 2022, more than 1 million self-installs have been performed and over 90% of new residential customers are opting to do their own installation. It's more convenient for our customers and generates significant cost savings. Our customers can use our AI-powered virtual repair diagnostics tool to detect and resolve a wide range of technical issues without a support call or a technician visit. And since 2022, 1.2 million calls have been eliminated as a result. And our AI-powered virtual assistant has been rolled out nationally for online chat support with much more natural conversations with our customers. Again, saves time for our customers and improves productivity for Bell. Customer-first initiatives like these materially improve customer satisfaction. They lead to improved churn, higher customer lifetime value and better financial performance. The next key priority area for us is to deliver the best fiber and wireless networks. Last Friday, we were delighted to announce the completion of our acquisition of Ziply Fiber, the leading fiber internet provider in the US Pacific Northwest. And we did this several months ahead of schedule. I want to thank the Bell and Ziply teams for their dedication and their perseverance in making this happen. We're pleased to welcome Ziply Fiber colleagues to the BC family, and we look forward to working together to accelerate and to expand their fiber build, reaching more communities and delivering the connectivity and service the Ziply Fiber customers deserve. This acquisition expands Bell's fiber footprint by 1.4 million locations, and it cements our position as the third largest fiber internet provider in North America. This marks a key milestone in our fiber growth strategy and diversifies our fiber revenues in an unregulated geography. By combining Bell's deep fiber expertise with Ziply Fiber's experience management team, we're creating a powerful platform for material long-term growth, scale and geographic diversification that positions us to unlock significant value for our shareholders. Our strategic partnership with PSP Investments will support Ziply's fiber infrastructure in underserved markets in the US, and we'll do that in a financially disciplined way. The plan is to reach a total of 8 million fiber passings in the US. Ziply's been outperforming our expectations with the team driving very strong customer acquisition and penetration on its fiber network. These metrics will get even better as we go forward, as we capture the incremental synergies and growth opportunity from the PSP partnership. Curtis will share some of our expectations for Ziply's 2025 financial and operational performance when he speaks next. In Canada, this quarter we deliver 27,000 new FTTH customers, a strong result amidst the slowdown in our Canadian fiber build and pricing, reflective of the significant value we deliver to customers. This contributed to internet revenue growth of 3%. We continue to capture the majority of new growth in the areas where we have fiber. Fiber is a superior service offering and it resonates with customers. Fiber continues to drive higher multi-product penetration, contributing to an 8% increase in households subscribing to mobility and internet service bundles where we have fiber. In wireless, our relative performance has improved meaningfully. We added 94,479 new Net Mobile Phone subscribers in Q2. This demonstrates our execution upside on gross activations and customer retention. Notably, postpaid sharing improved 12 basis points to 1.06%, marking the first quarter of year over year improvement in nearly three years. It's a clear highlight in the quarter and it's a direct result of customer service improvements, increased product intensity and effective real-time retention offers. We added 44,547 new Net Postpaid wireless subscribers this quarter and all were on our main Bell brand. This is consistent with our operating strategy to focus on better quality, profitable and margin a creative subscriber acquisition. Prepaid Net Ads were relatively steady versus last year at 49,932 as our strategy to better address the value and newcomer market with our lucky mobile brand continues to hunt. Q2 marked a third straight quarter of year over year ARPU improvement with a decline of 0.7%. Our result this quarter reflected sustained competitive pricing pressure and lower roaming due in part to decrease travel to the US. These factors were partly offset by non-recurring revenues from the G7 Summit. We've regained operating momentum in wireless with a focus on networks, customer experience, product intensity and churn reduction. We expect to continue to capture our fair share of subscriber additions and to strengthen our financial performance going forward. Turning to slide six now. It's great to discuss the enterprise growth strategy that we've been thoughtfully building out over the past couple of years. Our strategy, basically in summary, our strategy is based on reinventing our core services and our core service delivery and leading the country in AI power technology solutions. So I'll start first with the reinvention of our core services and service delivery. Everybody knows we're the largest provider of core connectivity and communication services to enterprises in Canada. We're modernizing what we're doing by developing unified communication as a service and network as a service and we're leveraging our partnerships with Zoom, ServiceNow and Salesforce among others. We expect this modernization to move core enterprise services towards positive growth. Importantly, and we've talked about this several times, we've also brought in our suite of offerings in ways that are adjacent, unregulated and complimentary to our core services with AI power technology solutions. These offerings are driving strong growth and we expect that momentum to continue. One key element of that is to lead in cybersecurity. Bell already had a robust security business and this was enhanced with our acquisition of Stratagem last year. The combination of Stratagem's fully automated cloud-based AI-powered security operations center and the Bell network platform is a unique and compelling offering for our customers. Another key element is Ateco, which we launched in May with a focus specialization in five major platforms used globally, ServiceNow, Salesforce, AWS, Azure and Google Cloud. Ateco is also focused, as we've talked about before, on four industry verticals where we have deep customer relationships and those are financial institutions, utilities, public sector and TMT. And the final key component of the BBM growth strategy is Bell AI Fabric and it's about being the backbone of Canada's AI ecosystem and Bell AI Fabric is essentially comprised of four layers. There's the hardware infrastructure layer, which includes Canada's largest sovereign AI data centers on the largest fiber network. There's a software infrastructure layer, which includes LLMs customized for Bell to offer unique capabilities for the Canadian market. There's advisory tech and professional services led by Ateco and the application layer of consumer and business AI applications. I'll share more on Bell's significant opportunity in AI service offerings in a few minutes. But you put all those together, we've got a unique set of interrelated assets and expertise that cannot be replicated in Canada. And the common glue to all this is the highly trusted Bell brand, our superior networks and our deep longstanding enterprise relationships. The strategy is highly differentiated and it's delivering results right now as you can see. This is in stark contrast to North American peers who've seen significantly higher rates of decline for their enterprise businesses. I'll move over to slide seven. Still more on BBM, Bell Business Markets. It delivered a record quarter of revenue growth driven by net positive contributions from all four growth vectors I just talked about. Core connectivity and communication services, which represents the largest portion of BBM revenues, those stabilized in Q2 and showed modest growth. As expected, Ateco and our cybersecurity business are growing rapidly and so is AI fabric. And as I mentioned, Bell has always connected Canadians to technology at scale. It's a core skill. The next generation of large scale technology infrastructure is sovereign AI compute. It will deeply transform Canada the way the telephone and internet did. We're uniquely placed to build and to manage this infrastructure in Canada for Canada. As I mentioned, our ambition is to become the backbone of Canada's AI economy, just as we've been the foundation of the country's communications infrastructure for the past 145 years. Bell AI fabric will deliver high performance, sovereign and environmentally responsible AI computing services to Canadian businesses, researchers and public institutions. Just wanna emphasize, this is not a standard co-location business. Bell AI fabric is going to encompass purpose-built AI data centers with a cluster of high impact AI services attached to them. They'll feature cutting edge enterprise grade AI technology enabling faster, more efficient processing tailored for large language models and AI workloads. Since announcing our first AI fabric facility in Kamloops in June, in partnership with Grok, we've seen strong interest from potential partners looking to work with us. You saw that recently when we announced a partnership with Cohere, a global leader in large language models who will join us to provide full stack sovereign AI solutions for government enterprise customers across Canada, accelerating adoption and driving innovation in our Canadian economy. We're gonna enable the creation of truly end to end sovereign AI bundled solutions. AI fabric, again, represents a meaningful future unregulated revenue in EBITDA stream, a new free cashflow vertical for Bell Enterprise Business. Demand for Canadian AI data centers is projected to grow at an annual rate exceeding 20%. This growth is distinct from the surging demand for compute, inferencing, large language models and other AI driven solutions, which also continues to accelerate across industries. So given our strategic advantages, we're well positioned to capture significant share of the AI opportunity. We have national fiber connectivity, owned or leased land in key locations, access to a significant amount of low cost power and cooling and deep customer relationships. And we can provide the full stack of services that a customer would need. We have the scale and the right to win in this business. Again, it's real and delivering results right now at manageable investments, at manageable investment levels fully reflected in our leverage and capital intensity targets. Now turning to media, digital was up 9% over last year and now makes up 43% of total media revenues. Driving this performance was Crave, which grew direct streaming subscribers by 72% over last year, as well as continued growth in products such as connected TV, Crave with ads and fast channels. Investments to sustain the strategic shift are continuing with a major expansion of Crave to offer CTV and nouveau, entertainment content, news, select sports and a larger kids collection. We've got new streaming bundle offers that include Disney Plus, Crave and TSN for the Canadian market and integration of the Bell marketing platform into the trade desk, providing advertisers with seamless access to Bell's premium first party data and custom audience building capabilities. Bell Media has delivered a strong first half and it's because of our digital pivot and our focus on flagship franchises and it's paying off after five years of dedicated effort and investment. While we expect Bell Media to generate positive revenue and EBITDA for the full year, segment results may be somewhat uneven due to industry dynamics and near term macroeconomic headwinds that may impact advertiser demand in the second half of this year. That said, our goal remains unchanged. For Bell Media to consistently deliver annual revenue and EBITDA growth while contributing meaningful free cash flow to BCD. Slide eight provides a summary of the Q2 metrics I've already covered. So before I turn it over to Curtis, I should say that obviously we're disappointed with the decision of the federal government last night to decline to alter the CRTC's decision to expand mandatory wholesale access. At this stage, we'd urge the government and the CRTC to ensure that network builders are fully compensated for the significant built costs and investment risk they take in building. And I also wanna emphasize that the Bell team remains sharply focused on executing our strategic plan and delivering value for customers and shareholders. We're building made in Canada tech services champions with Ateco and Bell Cyber. We're building the backbone of the AI ecosystem with Bell AI Fabric. We continue to invest significantly in Canadian content as Canada's digital media and content leader. These are the types of major investments BC continues to make in Canada to connect Canadians with each other, with their customers and with technology. We will generate growth through our customer first initiatives, our renewed momentum in wireless, our momentum in enterprise and now significant growth in the unregulated US fiber market. And therefore I'm pleased to announce that BC will host an investor day on October 14th in Toronto, where we'll showcase how the elements of our strategy come together in a highly differentiated way to create long-term shareholder value. And we'll share additional details shortly with all of you and as we look to the future, I wanna reiterate our unwavering focus on disciplined execution, financial resilience and value creation. And I wanna thank the Bell team for their hard work and for delivering results for our customers and our shareholders. And with that, over to you Curtis.

Thank you, Marco and good morning everyone. I'll begin on slide 10 with BC's consolidated financial results. In the second quarter, we returned a total positive revenue growth, delivering a solid .3% increase. This is the direct result of our successful fiber strategy, our ability to attract and retain premium wireless subscribers and drive greater cross-sell penetration of mobility and internet households, continued digital media growth and our momentum in enterprise as our AI powered technology solutions are driving rapid growth. EBITDA was down .9% due to higher cost of goods sold, associated with significant growth and product revenue. Net earnings and statutory EPS were up over last year due to lower asset impairment charges as well as a non-cash loss recorded in Q2 of 24. On BC's share of an obligation to repurchase the minority interest in a joint venture, equity investment at fair value. Adjusted EPS was down 19.2%, reflecting some non-cash mark to market losses on FX hedges and options, higher interest expense and lower year over year tax adjustments. Consistent with our plan to reduce capital spending by approximately $500 million in 2025, CapEx was down $215 million in Q2, bringing year to date CapEx savings of $488 million. We have also delivered a solid 5% increase in free cashflow in the second quarter. Turning to Bell CTS on slide 11. Financial performance of Bell Business Markets was a clear highlight this quarter. After putting the building blocks in place over the past few years, Momentum is building with strong demand for a unique and differentiated suite of enterprise services. The BBM team drove significant year over year growth in revenues in the second quarter. And although already pointed out by Mirko, it bears repeating that all four elements of Bell Business Markets contributed to this result. This includes modest growth in core connectivity and communication services, which represents the largest portion of BBM revenues, rapid growth in both the -o-managed services and our cybersecurity business, and the introduction of Bell AI Fabric with our first facility launched in June. Under this AI data center agreement, we recognize revenue and EBITDA upon delivery with annual cashflow to be realized over the coming years. Internet revenue was up 3%. A solid result showing we're striking a healthy balance between subscriber growth and disciplined pricing, supported by Fiber. Greater sales of mobile devices from higher upgrade volumes and contracted activations also contributed to higher revenues on the product side in Q2. Wireless service revenue was down .3%. This represents a second straight quarter of improvement in the year over year rate of decline. Our result this quarter reflected competitive pricing pressures that were partially offset by non-recurring revenue related to the G7 set. Despite a 1% increase in total CTS revenues, Q2 EBITDA declined by 1.6%, primarily due to a .2% rise in operating costs. This increase was driven by higher cost of goods sold, reflecting significant growth in product revenues this quarter. Turning to Bell Media on slide 12. Continued digital momentum and solid overall financial performance marked by fifth consecutive quarter of revenue in EBITDA growth. Total Q2 revenue was up approximately 4%. This result was driven by an .1% increase in sub revenue on the back of continued strong Craven Sports D2C streaming growth. The F1 Canadian Grand Prix and our acquisition of Sphere Advocates also contributed to higher revenue this quarter. Despite strong digital video ad growth in the quarter, total advertising revenue was down .1% due to continued weakness in traditional broadcast TV advertiser demand for non-sports programming and the previously announced divestiture of 45 radio stations of which the majority were completed during the quarter. Consistent with the increase in revenue, media EBITDA was up 7.8%, driving a 1.1 point increase in margin to 27.9%. Really strong performance by Bell Media with growth across revenue EBITDA and margins. Turning to slide 13. Balance sheet remains quite well positioned with 3.8 billion of available liquidity and a strong solvency surplus of 4.1 billion for all BC defined benefit pension plans. Our reported net debt leverage ratio at the end of Q2 was approximately 3.5 times adjusted EBITDA. This does not reflect our acquisition of Zipley Fiber, which closed on August 1st and was funded with the 4.2 billion in net sale proceeds from MLSC received at the beginning of July, together with cash on hand. We are assuming 2.6 billion of incremental Zipley Fiber net debt that has been rolled over and remains outstanding. We are targeting a year end 2025 net debt leverage ratio of approximately 3.8 times, reflecting the impacts of the MLSC sale and Zipley Fiber acquisition. On a pro former basis, adjusted to include 12 months of Zipley Fiber EBITDA, our net debt leverage ratio would be approximately 3.7 times. In addition, our review of non-core assets continues to progress. I'm pleased to report that we have entered into an agreement to sell our home security and monitored alarm assets, with the transaction expected to close later this year. In line with our capital allocation priorities, proceeds from this divester will be reused to reduce our leverage ratio and strengthen our balance sheet. Moving to slide 14, Zipley Fiber will operate as a separate business unit with results reported separately beginning in Q3 2025. In the meantime, to assist investors with their financial modeling, I will share some of our expectations for Zipley Fiber's 2025 financial and operating performance. As you will see, Zipley Fiber continues to deliver consistently strong results, driven by the strength of its Fiber the Pram platform. During the interim period, performance remained robust, with both revenue and EBITDA tracking ahead of our expectations, we said, at the time of announcement. Last quarter, we called out their impressive EBITDA growth to 17% in 2024. This is projected to accelerate to 20% plus in 2025, driven by continued operational execution and significant growth runaway. Zipley Fiber continues to grow its subscriber base, now providing high-speed internet to approximately 440,000 retail subscribers, 85% of which are on pure Fiber service. Zipley Fiber's more mature tenured markets have already reached 40% penetration. That compares with an average penetration of 23% in locations built in the last few years. So there's still meaningful growth ahead on the current footprint, particularly when you consider that over 40% of the Fiber locations were built in the last four years. Our acquisition of Zipley Fiber is an important part of our plan to generate sustained core business, top line and EBITDA growth at an attractive return on count. Lastly, turning to our updated financial guidance targets for 2025 as summarized on slide 15. With the inclusion of Zipley Fiber in our operating results for five months this year, we are increasing both BC's consolidated revenue and adjusted EBITDA guidance for full year 2025 to a range of zero to 2%. Our adjusted EPS guidance for 2025 is being revised to a range of minus 13 to minus 10% from the previous range of minus 13 to minus eight. This is to reflect higher depreciation and amortization as well as increased interest expense assumptions related to the Zipley Fiber acquisitions. This revised range does not reflect any purchase price allocation for Zipley Fiber as valuation has not yet been completed. Given Zipley Fiber's planned capex spending to execute its in-footprint Fiber build-out for the remaining five months of the year, our expectation for BC capital intensity increases to approximately 15% in 2025 from 14% previously. As a reminder to investors, our previously announced partnership with PSP Investments, which is on track to close later this year, significantly reduces the capital investment by BC and Zipley Fiber and improves free cashflow during the network build phase. As a result, our US Fiber build-out can be accelerated and we continue to expect to maintain pro forma combined company capital intensity at around 14.5%. We would also expect our capital intensity to further decrease following Zipley Fiber's build-out of approximately 500,000 fiber locations in its copper footprint by year end 2028. As a result, we are adjusting our free cashflow guidance for 2025 to a range of 6% to 11%. And I'll also qualify that our guidance ranges do not reflect the pending divestiture of Northwest Town. I'll now hand the call back to Chris and the operator to begin Q&A.

Thank you, Curtis. And before we start, to keep the call as efficient as possible, please limit yourself to just one question and a brief follow-up. So that we can get to as many in the queue as possible. With that, Matthew, we are ready to take our first question.

Thank you. As a reminder, if you're on the phone and wish to ask a question, please press star one. The first question is from Stephanie Pierce from CIBC World Markets. Please go ahead.

Good morning. I'm hoping you can unpack the guidance a little bit more just in terms of your initial estimates of Zipley, any adjustments to your thoughts and anything outside of Zipley that's included in the revised guidance. Thank you.

Hi, Stephanie. Thanks for the call. So on the Zipley side of it, so as is in the presentation, Zipley, both on the revenue and the EBITDA side, continue to outperform our investment case and outperform what the financials provided in November. So that continues to be a very good operating performance story. And in terms of revised guidance, so I'd say the revised guidance reflects our current view of the combined company performance, right? So this is reported both the existing business and overlaid with the Zipley performance, but it's not a straight A plus B.

Okay, thank you very much. And maybe just a follow-up just on the free cashflow side and maybe some comments on the free cashflow round, Zipley, except for 2025.

Yeah, so in somewhat odds with what I just said, Stephanie, on the free cashflow side, we are very happy with our Canadian free cashflow performance and midpoint of guidance on the free cashflow metric actually is simply a Canadian expectation overlay with Zipley Fiber.

Perfect, thank you very much.

Thank you. Our next question is from Jérôme Dubray from Desjardins Securities. Please go ahead.

Hey, good morning. Thanks for taking my question. Also thanks for the guidance update. I'm interested in the kind of longer term free cash profile that Zipley brings. So if you can please discuss the free cashflow profile and the evolution in the coming years, because we're seeing the free cash headwind this year, but from my understanding, you have a bigger capex only in the first two years. And then there's a significant change in the capex profile with the infrequent structure taken over. So if you can discuss maybe what you're seeing in the coming years, is there an inflection in free cash profile from Zipley? Thanks.

Hi, Jérôme, thanks for the question. So you're right, a few stepping stones, building blocks to that question. Again, the EBITDA performance as Zipley through the interim period has been very strong. Growth in 2024 was 17%, expected to be north of 20% in 2025. So continued EBITDA growth, which ultimately falls to free cashflow. And you're right, given the PSP partnership, is Fiber Build Partnership, what it allows us to do is once we're through the 500,000 fiber locations built in the Zipley Copper footprint, the vast, vast majority of Fiber Build will be done through the partnership with PSP, which means capex at Zipley that we consolidate is largely kind of nearly all gonna be success driven and a much lower number dollar wise. So you're right that we do continue to expect free cashflow growth and frankly, accelerated once the PSP partnership is up and running, which we believe is gonna happen by the end of this year.

Thank

you. Thank you. Our next question is from Aravinda Galapithigi from Canon Corp Genuity, please go ahead.

Good morning, thanks for picking my question. I wanted to dig in a little bit into Bell AI fabric. Mokum, maybe you can just talk a little bit about the sort of the longer term revenue opportunity here. I know in one of the press releases, you've indicated at $9 billion, Tam, I'm not sure how broad that sort of estimate is. How should sort of investors think about sort of the medium term opportunity here from a revenue perspective and then obviously the free cashflow elements as well?

Yeah, so the, and as I said in my opening remarks, thanks Aravinda, we're gonna execute on the enterprise growth strategy at very manageable investment levels and we expect to generate significant IRRs on that strategy and the growth, the Tam is large and the growth rates, market growth rates are quite significant and we're poised to compete and lead and it's not just AI fabric, it's the way every element of the BBM strategy work in unison. So it starts with having the best network connectivity and having the ability to deliver purpose-built AI data centers fast and in this environment, the time to power and the time to construction are a massive competitive advantage and you saw that we were able to deliver a data center in June and there are more to come on stream and you'll see some interesting announcements in the weeks to come that show you the continued momentum in Bell AI fabric. But when we have the best networking, the access to the power and the cooling, the land and the building, the ability to stand up the facilities fast, it just spins the service revenue potential as well because now we have a tech co that goes in there and provides AI and technology and systems integration advisory services. We have the partnership with Cohere where we can provide access to that software layer and then of course we wrap everything in with cybersecurity services. So it's a powerful foundation for long-term growth and it's a powerful recipe for our customers and it's a significant opportunity to drive product intensity in the enterprise space because of that integration between all elements of the strategy which are working in harmony. Teams done an amazing job putting this together over 18 months and you're starting to see the results.

Thanks, Mirko and just a quick follow up before I hand the line on asset divestitures. I mean we saw a tower monetization transaction with TELUS recently. Beyond the seven billion that you've sort of earmarked, how should we think of sort of the potential there beyond fiscal 25 to further sort of strengthen the balance sheet, thanks.

Thanks, so we don't have any updates to share at this time with respect to something like a potential tower sale or monetization of infrastructure. Earlier this year in February we announced what our priorities were going to be at least in the near term and the focus for us has been to execute against each of those and for example close Zipley, get the PSP partnership done, get churn down, we indicated that we were gonna have a couple of non-core asset sales and Curtis mentioned one on the home monitoring and alarm. So that's been the priority to date but clearly we view our infrastructure as potentially a valuable source of capital and we fully recognize the strategic value of a lot of our infrastructure. It could be towers, it could be AI fabric, it could be other things and as we've kind of demonstrated to investors with our US expansion plans, we'll consider and certainly execute on partnerships that help us achieve our long-term goals and that help us drive shareholder value. So it's a long way to say Aravinda that we're gonna remain open to exploring opportunities and under the right conditions going forward.

Thank

you. Thank you. Our next question is from Tim Casey from BMO Capital Markets, please go ahead.

Thanks, good morning. Your wireless metrics were encouraging this quarter, could you, Mirko, just talk a little bit about the market dynamics that drove that for BC in Q2 and your assessment of, I know it's early days and back to school, but what you're seeing in Q3 and then just as a quick follow up, just on the regulatory side, Mirko, are all your avenues of appeal exhausted with respect to the cabinet decision last night or should we anticipate that you'll try and seek other avenues there? Thank you.

Thanks, Tim. Look on wireless, really pleased with the performance that we delivered and if you look on a first half of the year basis, you can see that over the course of the first six months of the year, we certainly captured our fair share of gross ads and net ads and that's the goal. Again, it's all elements of the strategy working together in harmony to deliver those results and particularly a big, big focus on putting the customer first and that has allowed our churn to come down dramatically and there's more upside to come on churn execution and the team is laser focused on that. A couple of other elements, I think we all know, we see it across the industry, that market growth is still growing but not growing as fast as in years past but we're still able to, in particular as a result of the drop off in newcomer growth but we weren't as exposed to the newcomer segment as others and there's still opportunity there for us so that would have been one factor. Churn would be another factor and of course, we're kind of happy as we look into the beginnings of Q3 and going forward, I think we've got to quite pleased with the pricing structure that we see with tiered pricing and better differentiation between brands which allows us certainly to have kind of pricing that's appropriately reflective of the value that we provide to customers both on the service side and the hardware pricing side and so we like the shift to tiered pricing. It allows us to separate the value prop of the different brands. It allows us to add more value to the customer who is on the higher service rate plans and then we're able to differentiate even further with content quality and service and other value drivers so I'd say, and our distribution, our position on distribution has always been strong so you put all those elements together and you see the results that we delivered in wireless and then on the regulatory side, I think I'll leave it at what I said in my opening remarks. I mean, obviously disappointed, you don't think it's the right decision but now the focus is on ensuring that all of us who build networks in Canada get fully compensated for the significant costs of building and for the investment risk taken when we build and that's what we're gonna focus on right now and obviously at the macro level continue to focus on driving growth in the various diversified revenues to growth streams that we have. We're diversified geographically and we're diversified in terms of the things we are investing in beyond network and we spent a lot of time unpacking those media and the various elements of the enterprise strategy and the customer initiatives.

Thank you. Thank you. Our next question is from Mayor Yaghi from Scotiabank. Please go ahead.

Great, good morning and thanks for taking my question. Wanted to maybe just dig a little bit deeper into wireless. So the improvement in churn metrics, how sustainable are those and are they coming dependent on a lot of handset financing efforts on your part to improve those churn metrics? And second, on ARPU, again in wireless, the improvement in the year on year decline, how should we think about those improvements? Can they be continued to improve as we go into the second half? From here you mentioned there are some one-time offs that help the year on year decline. In Q2 Curtis maybe you can peel off a little bit here and see what could be sustained. And lastly, you mentioned in your slides that about 40% of new internet activations are coming with bundled wireless services. How much of your base is actually bundled? Or in another way, how much of that kind of push into bundling can be extended to your existing internet subscriber base to help grow your wireless business even further? Thank you.

Thanks Mayor for the question. On ARPU, when you exclude the impact of the one-time items and particularly the lift from G7 ARPU decline was closer to in line with previous quarters but still industry leading. So that's still quite positive. And pace of ARPU improvements gonna largely depend on pricing stability in the second half of the year. The back book continues to transition into the new pricing environment. I'd say the new pricing environment right now as I'm speaking to all of you is better than it has been in months past. So assuming pricing remains stable, we expect to see kind of positive ARPU movement within the next three to five quarters. So that bodes well and so far so good as we see some signs of pricing stabilization in the beginning of Q3. And that's encouraging particularly as we head into the busy back to school season. On internet, I would turn it over to Curtis to answer that one. I would say the focus certainly for us is going to be to penetrate the fiber plant that's already been built. There's lots of upside there because we have built a significant amount of new fiber passings in the last three years that that's not yet at full run rate in terms of penetration equilibrium. So we have upside there for sure.

And then Myron it's Curtis when I was going through the rest of your questions, the one that I had was, so on the handset product margin, it's a positive product margin and it's actually increased quarter over quarter and you're over here.

And on churn reduction, I'll pile on here, on the churn reduction, it's a multifaceted approach to churn reduction. So the retention activities that we've put in place, to which Curtis's answer relates, there's the broad customer service improvements, there's leaning into our distribution. So, as I mentioned to Tim, it's multifaceted.

Okay, and just to follow up Curtis, you mentioned that the new guidance is a reflection of an updated view about your existing business plus DIPLY. But maybe can you help us understand, just to get a glimpse of how you're viewing your existing business now versus the beginning when you gave that guidance into wireless and wireline, have the view improved or stayed the same or became a little bit less positive by segment, just to understand how you're viewing the business now versus the beginning of the year. Thank you.

Yeah, thanks Mar. Probably can't provide all the detail you want on that, but when you have a moment to run through the math, you'll see if you look at midpoint of guidance relative to what it was, and you kind of overlay what we've announced in terms of DIPLY, you'll see revenue midpoint is increased. EBITDA is slightly decreased in line with consensus and free cashflow is simply reflective where midpoint is kind of still the right place to be, just overlaying a ZIPLY fiber impact.

Okay, great, thank you.

Thank you. Our next question is from Vince Valentini from TD Cohen. Please go ahead. Hey, thanks

very much. Curtis, can you just walk down exactly the 335 million US, we can all do 512ths of that and apply an exchange rate. Is that just simply what's added for ZIPLY in the last five months and the rest of the Delta is changes in your Canadian guidance, or is there some sort of accounting adjustment or integration or restructuring costs or anything else that would create that not being a straight line from 335 US to whatever's in your numbers?

Yeah, Vince, you're on the right track. I mean, it's not ever gonna be just exact 512th, but you're on the right track. And it does reflect impact of our consolidated view. And again, we've said the underlying business at ZIPLY continues to outperform. So I saw your note earlier, it's not a ZIPLY fiber EBITDA impact. ZIPLY EBITDA is actually doing better than our investment case.

Okay, no, that's totally fine. Just wanna make sure I understand where the moving piece is. So if I take the 335 US relative to 335 US, correct me if I'm wrong, 7.6 billion total enterprise value by the time the deal closed, I mean, that's 16 and a half times EBITDA's what you paid. I assume that's pre-synergies, but is there something wrong with that,

Matt? Well, a few things, Vince. One, I wouldn't look at closing that debt, right? Transaction values are done on the announcement. We've accelerated fiber build and their subscriber acquisition in the interim period, which is a positive for us. So ultimately the transaction multiple would be based on the 2025 EBITDA. So multiple has actually gone down since we announced. And then a couple of other things, which impossible to see, but in terms of our ability to hedge US dollars between announcement and closing, we've probably picked up a hundred million dollars of value that we hadn't seen before. And then of course, their big, beautiful bill has a NPV benefit on the tax side of the world. So again, NPV positive, changing depreciation and a few other things, which ultimately saves tax dollars, cash tax when they're a cash taxpayer, which is NPV that we hadn't seen at time of announcement, but it wouldn't be reflected in EBITDA closing. So we're still pretty comfortable. And the way we would look at it, multiple has come down over time as EBITDA performance has gone up and adjustments to net transaction value have come to our side as well.

Thanks. I'll keep it at one less than mayor, but one last quick one. Alarm proceeds from that proposed transaction and you didn't disclose it. Is it that mean it's not material?

No, it's in the disclosure. It's $90 million guaranteed with $80 million conditional. So 80 million earned up.

The 170 potential.

Correct.

Okay,

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

Hi, thank you for taking the question. I guess congratulations on closing the Zipley transaction, but just thinking about Mirko and Curtis, the US opportunity obviously with PSP, closing later in the year. Had your view about organic growth within the market and trying to scale up the PSP, JV passings organically through a build relative to perhaps some tuck-ins or smaller deals like that changed at all over the course of the last couple of months or did stall any update on that relative to perhaps initial expectations. And then if you could just perhaps help us think about the converged opportunity, obviously lots of focus on that in the Canadian market and you guys gave out some great statistics today, but you're perhaps thinking about that evolving over time within Zipley and within the perhaps JV construct. Is that something we'll come back to further down the road or is that something we'll see maybe some movement on more near term? Thank you.

Thanks, Abishano. When you talk about Zipley here, the US fiber market's very attractive and which is the reason why we're so pleased to have closed the deal last Friday. US fiber deployment lags Canada, we know that. Only 50% or so of homes in the US have fiber. So it's a way of saying that the opportunity is pretty significant there as we start executing the fiber build, completing the copper overbuild for Zipley in its core ILEC market and activating at the same time a bit later this year, the build engine with PSP. So that's the focus right now, which get the build, continue the build engine of Zipley fiber in its own right. And as Curtis mentioned, they accelerated their build in the last 12 months compared to what they had been doing. So off to a very good start there and you can see it in the results and we're getting organized with PSP later this year to start activating the build engine there as well. So both will be performing together. It's not sequential, it's not like we're gonna start building with PSP once we finish the 500,000 copper lines and Zipley fibers ILEC footprint, we're gonna be running both more or less at the same time. And I think I've said in the past as well, if there are opportunities that allow us to efficiently and if cost effectively execute on the 8 million fiber passings plan with some accretive acquisitions, we'll take a look at it and we'll take a look at it in conjunction with PSP. So that remains the high level approach. There's no specific details to share on that point. And on the convergence side of it, it remains the case that customers, whether or not they're in Canada or the US, consistently will choose the superior broadband product above all else. So Zipley fiber today doesn't have a mobility offering and the numbers on page 14 of our slide deck speak for themselves as it relates to their performance. That said, again, I'll reiterate, when the time comes to offer a bundled service, we will be ready. And again, on that, there's nothing to share this morning.

Thank you. Maybe one quick, I'll take a stab at it, but in terms of enterprise service revenue, is there any way to perhaps unpack maybe what that is in terms of contribution at a CTF level? Just as we kind of think about some of the growth drivers within BBM and maybe how that perhaps impacts the consolidated segment. Thank

you. Yeah, hi, thanks, Bassiano. So as Mirko said, it's positive revenue growth across the floor and I'd say it's low double digit revenue growth across BBM. So we're quite happy with the momentum we've kind of built up here over the last 18 months. It's really starting to perform.

Thank you. Thank you. Our next question is from Drew McReynolds from RBC Capital Markets, please go ahead. Yeah, thanks very

much. Maybe a follow up there Curtis on the Bell Business Market. So obviously great to see all the moving parts pick up here. Where do these kind of three or four revenue streams kind of fit in into the segmented disclosure? Like, obviously we see product revenue, what fits into the wireless or wireline data side, can you help us kind of size that up a little bit?

Yeah, thanks for the question, Drew. So I think that the new item, because the other items kind of work through generally the Ateco side of the world and cybersecurity, it's service revenue for the most part. I mean, we will sell equipment which will hit our product revenue, but again, those are managed services, majority businesses. And on the fabric AI side, which is the newer business line, frankly, the answer to that is it depends. So it depends on the contract and the agreement partnership that we sign with third parties and customers, whether or not they'll be accounted for as financing leases or operating leases, which will determine whether or not those revenues actually hit service revenue or product revenue. So it's not a one size fits all answer for you, apologies for that, but the accounting follows the contract and the contract can lead it to either be service or product. So we'll try to help you along as we continue to monetize and sign more and more contracts that are in our funnel at this point.

Okay, now that's great. And maybe a follow-up for you, Mirko, just back to the TPIA file and the rates needing to be kind of balanced. Just wondering from your perspective, as we get kind of a finalized framework here, in Canada, what's your updated thoughts with respect to further fiber to the home expansion? Assuming you get rates that you're pleased with, do you see further fiber expansion opportunities from a BC perspective? Thank you.

Well, we certainly have a fiber opportunity in Canada from we're gonna be laser focused on penetrating what we've already built. And we're close to 8 million homes and more fiber than everyone else. So that's gonna be the focus right now. Already you've seen quite unfortunately a significant scaling back of our fiber build in the last 18 months, not too long ago, when we were having these conversations, we were aiming to 9 million fiber locations passed and that's largely gonna plateau around the 8 million mark. So that gives you a sense of the impact that decisions already had. So, I mean, right now, again, the focus is decisions of decision. So I look at it from this perspective, we've got a lot of opportunity with fiber that's already been built that hasn't been penetrated. That would be one. Secondly, again, I would urge the federal government, the CRTC to ensure that not just Bell, but all network builders get properly compensated for what's being built and what is going to be built. So that'd be the second point. And the third point is I take a big step back. No, it's not, we react to the signals around us. The rule has been in place. The TPIA rule has been in place since, I guess it was fall of 2023. If you look at our very tight four pillar strategy, they all work in unison and they're allowing us to drive revenue growth in diversified ways, diversified domains and diversified geographies. So, that's a very, very good thing for us.

Understood, thank you very much. Thank you. Our next question is from Matthew Griffiths from Bank of America, please go ahead.

Great,

thanks

for taking the question. On the updated guidance for free cashflow, I know that includes obviously the contributions, but does it also factor in the kind of bonus depreciation extension that was passed? And related to that, within the JV structure, will the US operations on the capex side and the cash tax side continue to benefit from that extension of the bonus tax depreciation? And then one final question, I was wondering Mirko, if you could set some expectations for what you're planning to communicate on the October 14th, investor day, whether it includes kind of a longer term guidance, the way we often see these days with investor days or fit you planning some deeper dive into a certain segment of the business where we could potentially get some additional disclosure on numbers to match the kind of qualitative descriptions that we receive, which just would be helpful to level set. Thank you.

You should just come to October 14th. I will.

We'll, so the short answer to this, we're bird, it's going to be an investor day, so we'll be laser focused on sharing with you what we believe matters the most to our investor base. And the agenda is going to be structured around the four strategic pillars of growth that I've outlined time and again, as well as basically we've got four strategic pillars and all of that is supported by our business transformation program and the amazing Bell team. So that's what we'll be showcasing all of those elements.

And then Matthew, other questions. So in terms of the bonus depreciation, there's no impact in 2025. So I guess it would be reflected, but there's no benefit captured. I think that cash benefit is going to be captured over time for us, but not in 2025.

In terms of the JV structure, you're still going to be able to benefit from those rules or does the JV structure, and this may be a silly question, but I'm just not sure how these types of structures can impact your ability to leverage kind of favorable tax legislation in a different country. So any kind of day would be helpful. It's

a fair question, Matthew. That's the expectation, right? The entity that's going to be spending the capital gets the benefit from the 100% bonus depreciation. So the expectation is still be able to benefit within that partnership.

Thank you. Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Summers.

Thanks again, everyone, for your participation on the call this morning. Richard and I will be available throughout the day for follow-up questions or clarifications. Thanks and have a great day.

Thank you, everyone. Bye, everyone.

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