BCE Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the BCE Q4 2018 Results in 2019 Guidance Conference Call. I would now like to turn the meeting over to Mr. Thayne Fathopoulos. Please go ahead, Mr. Fathopoulos.

Thank you, Valerie. Good morning to everyone. With me here this morning are George Covici's President and CEO, as well as Glenn LeBlanc, our CFO. As a reminder, our Q4 Results Package 2019 Financial Guidance Targets and other disclosure documents, including today's slide presentation, are available on VC's Investor Relations webpage. However, before we get started, I want to draw your attention to the Safe Harbor Statement on slide two. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking and therefore subject to risks and uncertainties. For information, Additional information on such risks and assumptions, please consult BC's Safe Harbor Notice concerning forward-looking statements dated February 7, 2019. That is filed with both the Canadian Securities Commission and with the SEC, which is also available on our website. These forward-looking statements represent our expectations as of today and therefore are subject to change. We disclaim any obligation to update forward-looking statements except as required by law. So with that done, over to George.

Great. Good morning, everyone. Thank you for joining us. I'll just start on the presentation, give you a quick overview, and then turn it over to Glenn. Certainly, we ended the year on a positive note with all three of our operating segments reporting revenue growth and important EBITDA growth across the three groups. From the wireline perspective, the 2.4% revenue growth being our strongest organic revenue growth in over 10 years there, driving the 1.3% wireline EBITDA growth. and a growth in market share of internet and IPTV combined with net ads up 11% year over year. On the wireless side, I thought it was a balanced quarter with 143,000 total postpaid and prepaid net ads generating the revenue and EBITDA growth we reported this morning. I think one of the highlights of the quarter on top of the wireline revenue growth was the media's financial performance up 1.9% revenue and adjusted EBITDA growth to 2.9 and generating free cash flow growth. in the quarter. Turn to the next page, just stepping back and looking at the year. I think it was a very positive year from a broadband perspective for the company. Approximately 700,000 subscribers added during the year, up 32% year-over-year. Excellent wireless growth with 480,000 net adds, up 44%. Year-over-year, of course, a large part of that driven through the change in or trajectory of our prepaid business from negative to positive with the launch of the Lucky brand. And the Fiverr rollout continues to benefit us with 219,000 Internet and IPTV net ads in the year up approximately 12%, and about 233,000 additional customers now on our Fiverr footprint up 40%. So some obviously strong growth numbers for the year, and our investment thesis that we put in place a number of years ago starting to pay off with some broadband growth across all segments. We turn to the wireless business. Good quarter, 122,000 postpaid net ads. Just for investors, it is worth noting that we did lap the federal government in the fourth quarter, so there were some net ads last year in the fourth quarter, as there were this year, where the other quarters would have had no federal government net ads from a year-over-year comparison. So pleased with that relative to our largest peer. Post-pay churn coming down nine points, obviously a valuable metric for us. Prepaid having its second positive quarter in a row, and clearly we took market share in that segment. And importantly for us, as I mentioned, just taking what's been a negative revenue growth story for us for a number of years and turning that into something that's positive and adding a little bit of subscriber growth and giving us the ability to migrate over time some of those customers to post-pay. We continue to maintain the highest APU in the industry. Worth noting, if we take out the federal government, we were up slightly 0.3% in the fourth quarter on our average revenue. I guess APU now the term that we use for the quarter. Overall for the year, the EBITDA growth and the margin of 42.3 combined with a capital intensity ratio of under 8% is obviously driving significant free cash flow margin and quite healthy free cash flow margin for the company. enabling it to invest as it is in the fiber network and our LTE advanced network. Take a look at our network for next year 2019 on the wireless side. We'd expect to end 2019 at around 94% of the country covered with LTE advanced, providing Canadians in 60% of the population speeds of up to 750, but enjoying typical speeds of 222. megabits, which is really, as everyone knows on the call, incredible from a wireless perspective by any global standard. On the 5G side, we continue to do trials and continue to prepare ultimately for the launch of 5G mobility. To make a couple comments from a supplier perspective, there's a lot being talked about these days. Huawei has been a supplier in our radio access layer for 3G and 4G mobile networks for a number of years, with, of course, Canadian government support. We do not use Huawei's network in our core. As everyone knows, the government is conducting a cybersecurity review on whether to permit the continued use of Huawei equipment for 5G. We clearly recognize the issues at play and will manage those appropriately going forward and of course follow the law. For investors, it's important to know we've made no selection yet of our 5G vendor. And if there was a ban or we chose a different supplier than Huawei for 5G, we're quite comfortable all those developments would be addressed within our traditional capital intensity envelope and therefore no impact from a capital expenditure program outlook, nor do we think whatever the outcome is would in any way impact our timing in the market for 5G. The other point I want to draw out is our wireline fiber investment continues to truly benefit our wireless business. That's why you're seeing capital intensity levels at historical low levels for us now in our expectation for 2019 at approximately 7%. At the end of 19, 85% of our combined urban and now rural cell sites will also have fiber backhaul in place. Literally 90% of our capacity will have fiber backhaul. And we think that position is just well against any competitor in the Canadian market perspective. in terms of network quality and speed. Turn to Wireline. We added about 65,000 new fiber customers in the fourth quarter, 1.2 million at the end of the year in total. Pleased with the internet ads at 33,000, retail up 15% year over year. I mentioned the last quarter, and I'll mention again this quarter, we're not focused on the hotel segment. The revenue stream and the profitability of that stream is really not worth pursuing strategically. It's a regulatory obligation we will meet, but it's not a strategy of the company. On the TV side, 36,000 net ads up 12%, clearly all TV. Our streaming TV service that does not require a set-top box is available at a maximum of two streams. It's clearly helping us drive some additional TV and Internet pull-through growth with 14,000 overall TV net ads up in our wireline footprint, so up 27% year over year. And there's a number of highlights from a product perspective we'll pursue this year that you can see on the page, which makes us quite excited going into the next year that our leadership in broadband in the marketplace and our investments will continue to help grow the company. If you take a look at our wireline footprint on the next slide, really pleased with 2018. Many investors will recall that we had a target to add 800,000 to our footprint from a fiber perspective. In fact, we got closer to 900,000. still within the same capital envelope we'd had, so really pleased with that outcome. For this year going forward, we're targeting $700,000. That includes our fiber and our wireless to the home program. Again, we'll hope we do better than that, but that's what our current plan would show, and over to our engineering team to try to exceed that and do it within the same cost envelopes. We will surpass a fiber milestone this year, and we'll go over 50% of our fiber footprint completed, which of course is part of our long-term strategy in terms of continuing to grow our broadband share. And I want to announce also this morning that we've decided to take our wireless to the home program up from 800,000 homes was the plan to 1.2 million and that is really a 50% increase and that is particularly driven by the recently announced Canadian government program which allows for an acceleration of our capital cost allowance helping us out from a tax perspective which Glenn will talk about and us then reinvesting that capital in rural markets where we, one, they're underserved, and secondly, we think represent a significant market share opportunity for Bell, where in those markets we'd be anywhere maybe as high as 15% share and sometimes as low as five. So that rollout will continue. It'll be much more significant, as I mentioned. For next year, for the analysts, it will continue to be the 200,000 households with 28 communities getting access to that new service. On the media side, I mentioned best quarter for us in a number of quarters. Fourth quarter of 16 was the last time we saw these numbers. Driven by great growth in the last year and a bit on our sports network side, we've returned to being the number one sports network in the country. Some really nice growth metrics. Our investment in the Raptors is certainly paying off, not just in winning, but in ratings, where the ratings are up 71% year over year. We're also really excited about the relaunch of Crave with 2.3 million now linear and direct customers on that service. For our American friends or our investors on the phone, it's really quite a unique product at $20 Canadian. You have access to HBO Showtime. You can stream Game of Thrones or any other product, or you can get it through a traditional TV provider. And at $20 Canadian, we think it's, frankly, one of the best, if not the best, S-Pod service in the world in terms of what's available from a content perspective. And we're seeing some nice early growth on that as well. Just want to call out, not talk about much, our out-of-home business that we also own has just had a strong quarter, mid-single-digit growth from a revenue perspective. We are now the second-largest outdoor advertising company in the country with over 31,000 advertising faces. And we are growing our digital footprint and digital advertising outdoor, of course, is excellent for us from an integration perspective because all that backhaul required for that, of course, runs on our own infrastructure. Turning to the dividend announcement this morning, obviously really pleased, management is very pleased again to announce a 5% dividend increase to $3.17 per share. It's our 11th consecutive year of a 5% or higher dividend increase. And again, that will be done within our payout ratio, targeted payout ratio, 65 to 75%. Glenn will comment on this, but I just want to call it out that, you know, it's got all these changes in accounting rules. If you were to ignore those changes in accounting rules, we're probably close to the high end of that payout ratio. And if you take the new, if we're at 16, we're kind of in the midpoint of that payout ratio. Either way, we're within the bounds of the payout ratio. That's the 53rd consecutive quarter of EBITDA growth, and of course, that's given us the ability to announce this dividend increase this morning and the financial results that we've just reported on. Let me turn it over to Glenn.