BCE Inc.

Good morning, ladies and gentlemen. Welcome to the BCE Q4 2019 results and 2020 guidance conference call. I would now like to turn the meeting over to Mr. Zane Sotopoulos. Please go ahead, Mr. Sotopoulos.

Thank you, Alana, and good morning to everyone on the call. Joining me this morning for the first time officially as president and CEO of BCE is Mirko Bibic, and also here with me as usual is our CFO, Glenn LeBlanc. As a reminder, our Q4 results package 2020 financial guidance targets and other disclosure documents, including today's slide presentation, are available on BC's Investor Relations webpage. However, before we get started, I want to draw your attention to our 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 additional information on such risks and assumptions, please consult BC's Safe Harbor Notice concerning forward-looking statements dated February 6, 2020, 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, I hand it over to Marco.

Thanks, Zane, and good morning, everyone. I'm very honored to be on the call with you all today in my new role as president and CEO of this amazing company. And I want to thank my predecessor, George Koch, for his leadership since 2008 and for putting in place such a foundation for Bell's future success. We have the right assets to lead the next wave of communications innovation in Canada. And as the world moves to increasingly rapid connections and the unlimited service potential of 5G, IoT, and artificial intelligence, Bell is well positioned to stay out front. As you know, we've updated our six strategic imperatives to frame every action we take to capture future growth opportunities in a converging wireless, wireline world. In many ways, these imperatives are consistent with our winning strategy over the past 10 years, overseen by a seasoned leadership team, but with an even stronger focus on the customer experience and recognizing the importance of all Bell team members in delivering our future success. It all begins with building the best networks. With significant capital investment over the past decade, networks have again become Bell's critical competitive advantage. In 2020, we will continue to expand our all-fibre connections, we'll open up wireless home internet to even more small communities, and we'll build on our 4G LTE lead by launching the next generation of wireless with mobile 5G. These next generation networks will be the launch pad to drive market share and revenue growth with new, innovative, integrated services, including IoT, smart home products, as well as business solutions like virtual network services, all delivered over the fastest internet, the best Wi-Fi, and the highest quality mobile networks. And we will continue to deliver the content consumers want on the platforms of their choice. We will support our network advantage, innovation services, and compelling content by simplifying, personalizing, and improving the end-to-end customer journey. Our mission, to make it easier for customers to do business with Bell. As you know, cost discipline has become a core competency at Bell. We'll take it to the next level, enabled by the continued deployment of fiber, utilization of new technologies, and incremental service improvements. which will deliver meaningful operational efficiencies and productivity gains across the organization. But none of what I just outlined can be accomplished without people. This is why we now have a new imperative to recognize how important our team is to Bell's success. Our company is recognized as a leading workplace and we're focused on making it even better going forward. Before diving into our detailed Q4 review, I did want to take a step back to comment on our overall operational execution and how well positioned we are to win. I can confidently say that we are managing the shift to unlimited wireless data plans better than our peers, while still maintaining our competitiveness. This is evidenced by our subscriber and ABPU performance that reflects our distribution and brand strength, sharp focus on customer-based management, and a strong growth in operating profitability. We grew wireless EBITDA 9.1% in 2019 while delivering a record number of gross activations. This combined with improved postpaid customer churn drove a 7.4% increase in total net subscriber additions to 515,000, our best annual result in 14 years. With respect to fiber, the strategy is working. we delivered strong retail internet and IPTV subscriber growth of 5% in 2019. Our 136,000 new net internet subscribers of 16.5% over last year are due to steady expansion of our direct fiber and wireless home internet footprints. Our fiber bill program is now 53% complete with over 5.1 million homes and businesses. able to access the fastest internet speeds in the market today of 1.5 gigabits per second. With technology evolution like 10GPON, those speeds will just get faster over time. We also have 250,000 locations equipped with fixed wireless technology that is bringing high speed internet speed to Canada's underserved communities that are two times faster than before. This positions us very well to keep growing broadband market share and internet revenue, which you all know yields very attractive EBITDA and cashflow margins. For 2020, we're targeting broadband CapEx spending, including demand capital, which is comparable to 2019 at around $2 billion. At Bell Media, our market leading brands, content and streaming services, together with a sharp focus on cost control, delivered strong financial performance in 2019 with cash flow growth that we redirected to capital investment in our broadband networks. And the landmark ruling by the Supreme Court this past December overturned the unfortunate CRTC decision banning simultaneous substitution during Super Bowl broadcasts. We're very happy that advertisers once again had exclusive access to Canadian viewers this past weekend during one of the most watched sports events of the year. I'd like to take you back to wireless for a moment because we're laser focused on being Canada's 5G leader. With wireline infrastructure that includes high-speed fiber already deployed to 88% of our cell sites, central offices that become data centers for mobile edge computing in a 5G world, a rapidly growing small cell footprint in urban markets, a network sharing arrangement, and 30 megahertz of 3.5 gig flexible use spectrum, No one is structurally better positioned than Bell to deliver true 5G in the most timely and capital-efficient manner possible, and to capitalize on the revenue growth opportunities that await. With the right regulatory environment supporting all facilities-based operators, there is no reason why Canada cannot have the best, most advanced 5G networks in the world like we do today with LTE networks. As you read in our press release this morning, Bell is ready to deliver initial 5G service in urban centers across Canada as next generation smartphones become available. And we will continue to be ready to launch true 5G service once flexible use 3.5 gigahertz spectrum becomes available after the federal government's auction later this year. Partnering with us for 5G is Nokia, whom we have chosen as Bell's first 5G network equipment supplier. Nokia has quickly become a leading international vendor of 5G network solutions with more than 60 commercial 5G contracts with wireless carriers worldwide. I think it's important to highlight that our wireless capital intensity during the 5G build cycle is only expected to increase to a range of 9% to 10% and can be comfortably accommodated within a stable, consolidated capital intensity ratio of approximately 16.5. It bears emphasizing, however, how important it will be to have public policies and a regulatory framework that support continued investment and focus on value, speed, access, and coverage. An environment that focuses instead on access to our mobile networks and grants below-cost access to our wireline networks will inevitably lead to significant cuts in investments. by Bell and by others in the industry. And this will harm Canadians and the Canadian economy going forward. Now I'll turn to slide five for some quick highlights on Q4. Overall, we're quite pleased with our operating results. We grew our market share of wireless, internet, and IPTV subscribers with 181,000 total net new customer additions in a seasonally busy and intensely competitive quarter. More impressively, this was achieved without sacrificing our consolidated EBITDA margin, which increased 1.2 percentage points to approximately 40%. We also generated wireless EBITDA growth of 7.4%, the best reported result among peers, while also delivering our highest ever wireless gross ad in a fourth quarter. For Bell Media, another great quarter to cap off an excellent year with strong revenue, adjusted EBITDA, and cash flow growth. Turning to slide 6 and some operating metrics by segment. I'll start with Bell Wireless. Continued healthy post-paid growth with 122,000 net ads, which were up 21% over Q4 of last year when excluding the federal government contract. This strong result was achieved despite a higher number of switchers driven by aggressive holiday offers from our competitors that we chose to match selectively. On the prepaid front, gross ads were up 43% on the strength of Lucky Mobile and our Dollarama distribution agreement, which drove 2,000 net ads. A good result in an exceptionally strong year of subscriber growth, while some of our competitors are seeing substantive declines in that segment. And blended ABPU declined only 0.4% compared to last year, despite the impact of unlimited plans on data over its revenue and a growing mix of customers on installment plans. So really effective reprice management by the Bell Mobility team. Moving to Bell Wireline. Continued good momentum on internet with 36,000 retail net ads, which were 10% higher than last year. And we added another 60,000 FTTH subscribers this quarter, bringing the total number of direct fiber customers at the end of 2019 to more than 1.4 million. That's up 20% over the previous year. On the TV side of things, we added 22,000 net new IPTV subscribers, a solid result given the already high rate of customer penetration in our current five markets, increasing maturity of alt TV, steady rate of over-the-top substitution, and persistently aggressive cable offers. We also continue to see nice year-over-year improvement in retail satellite TV and retail mass customer losses, which were down 7% and 3.2% respectively. And certainly, any time the rates have declined slow, that is important to us from a cash flow perspective. And last but not least, Bell Media. We maintain ratings and audience leadership in Q4, and we're also really excited about Crave. the strategy continues to work with the number of subscribers up 14% year over year. We think it is, quite frankly, one of the best SVOD services anywhere in terms of what's available from a content perspective. And just last week, we were proud to expand Crave to include French language content, and we made our Super Écran service available direct to consumers. So great operational execution of financial results delivered by the Bell team, Not just in Q4, but throughout the year, which sets us up nicely going into 2020. Finally, before turning it over to Glen, I'll turn to slide seven and our dividend announcement this morning. Obviously, we are very pleased and proud to announce for the, and I'm proud to announce this for the first time as BCE CEO, a dividend increase for our shareholders of 5% to $3.33 per share for 2020. It's our 12th consecutive year of a 5% or higher dividend increase done within a targeted payout ratio of 65% to 75%. This is being supported by strong free cash flow growth underpinned by stable absolute dollar capital spending in 2020, a pension plan that is fully funded, as well as a continued focus on subscriber profitability and cost disciplines. Our unmatched collection of assets, including the best networks and the most innovative products, will serve as the springboard for continuing to deliver the kind of operating metrics and financial results that shareholders have come to expect from our team, as you see reflected in our 2020 guidance targets that Glenn will now take you through. Over to you, Glenn.