BCE Inc.

All participants, please stand by. Your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to the BCE Q1 2020 Results Conference Call. I would now like to turn the meeting over to Mr. Zane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Alana, and good morning, everyone. Joining me on the call today are Mirko Bibic, BC's President and CEO, and Glenn LeBlanc, our CFO. As a reminder, our first quarter results package 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 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 risk and uncertainties. These forward-looking statements represent our expectations as of today and accordingly are subject to change. We disclaim any obligation to update forward-looking statements except as recorded by law. Factors that may affect future results are contained in BCE's filings with both the Canadian Securities Commission and the SEC and are also available on our corporate website.

With that, I'll turn it over to Mirko. Thank you, Thayne, and good morning, everyone. We hope that you're all staying safe and following government measures. so that we may resume as much as possible given the circumstances of our daily lives. I also want to open up by acknowledging government efforts at all levels and extending our deepest gratitude to all health professionals and other frontline workers who are working tirelessly around the clock. And speaking of frontline workers, I am especially proud of the Bell team whose outstanding work to keep Canadians connected 24-7 is being widely recognized as critical to our country's ability to withstand the COVID-19 crisis. This is the biggest challenge our country has faced in generations and I'm so proud to be working alongside the more than 50,000 Bell employees as we build on our legacy as the company that's always there when Canadians need us. Our people and our networks have certainly risen to the challenge. Thank you. I'll now turn to highlighting the key operational priorities that have guided us over the last few weeks. One of the key operational priorities is to keep Canadians connected and informed at a time when the country needs it the most. We have taken a number of steps to ensure continuity of critical services, including enhanced capacity and redundancy for our wireless, wireline, and broadcast media networks, ongoing special support for health care providers and first responders, and a commitment to delivering the latest news to Canadians at the local, regional, and national levels. We've been operating our networks at a remarkable 99.99% overall availability, despite surging demand, while maintaining internet speeds, even with increases in peak daily traffic of up to 60%. Rural customers are also keeping connected with a 40% increase in usage of our innovative wireless home internet service. And by the end of April, we made this service available to 137,000 more rural homes than we had initially planned. we understand the importance of this service for rural communities. We've also seen an increase in voice traffic, including a 250% increase in conference call usage as Canadians are keeping connected to their family, their friends and offices while sheltering and working from home. And Canadians are turning to Bell Media for news and entertainment now more than ever, with significant increases in viewership across our platforms, including Crave that is registering 75% higher usage. Now turning our focus to a second key operational priority, which has been to meet the needs of our team members, our customers, and our communities. We're safeguarding our people with stringent sanitation and safety procedures, enhanced support for remote work capability, and we source significant supplies of personal protective equipment. Our assisted self-installation and repair program enables field techs to perform installations and repairs entirely from outside the home by voice and video links. While technicians will enter a customer's premises where necessary, the new program has decreased time spent by technicians in customers' homes by up to 85%. With disruptions to our call center operations, remote customer service has ramped up. We have equipped 4,000 agents with specialized and secure connections to work at home, further reducing the number of people at our work sites. We've also built service capacity by redeploying team members, including retail employees displaced by store closing, to frontline customer service roles. The team has done an amazing job reestablishing service levels in extremely difficult circumstances. We're also enhancing self-serve capabilities. Digital self-serve now represents more than 50% of all customer transactions across all channels since the start of the COVID-19 crisis. These initiatives are protecting our team members and our customers while improving the customer experience in this time of crisis. In that regard, we're also providing significant additional support for customers isolated and working from home in our efforts to champion customer experience. We removed any extra usage fees for customers not already on unlimited residential internet plans and waived wireless roaming fees for customers traveling abroad. We also understand many are facing financial difficulties right now because of the economic impact of COVID-19 and we will work with customers on flexible payment arrangements if they're having trouble. This is also why we have delayed implementation of previously planned price increases for home phone and certain TV services. Bell TV has made CTV News Channel, CP24, and other Canadian youth services available as free previews, in addition to a variety of family, lifestyle, and entertainment channels. Bell Media is also offering 30-day free trials of CRAVE. From a broader community perspective, we are supporting the frontline response to COVID-19 with over 3,500 Bell Mobility phones and airtime for a wide range of organizations across the country, including mental health and other health care facilities, homeless shelters, children's aid societies, and other social service providers. And we donated 1.5 million protective masks for use on the front lines throughout Canada while at the same time procuring the personal protective equipment needed for our own team members. And we increased our Bell Let's Talk commitment by an additional $5 million with particular emphasis on funding agencies delivering remote mental health services. In taking all these steps, we have been guided by our new goal unveiled on January 6th advancing how Canadians connect with each other and the world. And focusing on these key operational priorities has reinforced that our updated strategic imperatives are the right ones to guide us not only through this period, but also over the long term. Building the best networks will always be a core strategic imperative for Bell, in good times and bad. To that end, we are making the necessary investments now to keep up with the demand from all sectors of society. at this now to keep up with the demand from all sectors of society. At the same time, we are maintaining our network deployment plans, whether that be fiber to the home, expanding our leading wireless networks, getting ready for 5G, or accelerating our wireless home internet service footprint with, as I said, 137,000 additional homes passed in April. This is not a time to pull back capital spending on critical network infrastructure. The country is depending on us. These are healthy investments for the long-term benefit of our company, our customers, and our economy. We are also making the investments we need to champion the customer experience, especially as it relates to online fulfillment, self-serving automation tools, or improved app functionality. The importance of such investments has been made all the more pressing in the current environment where retail stores were temporarily closed and only now ramping back up slowly. where call center operations are disrupted, and where Canadians are sheltering at home and teleworking is the order of the day. In short, now is not the time to curtail strategically critical investments in customer experience. They are necessary to keep us competitive in the short term and will benefit us in so many ways over the medium and long term. The current crisis also highlights in a very clear way the benefits of Canada's global network leadership. which has been made possible because of our massive investments supported by long-standing facilities-based regulatory policies. It has never been more important for governments and regulators to stay the course with policies that incent continued deployment of high-speed fiber networks, wireless home internet in Canada's underserved rural communities, and next-generation mobile 5G technology. The bottom line is Canada cannot risk losing its global leadership on networks. Now I'll turn to slide five of our presentation and our financial outlook for 2020. Like every other company, we are being affected by COVID-19. The situation is evolving continuously and its ultimate length, severity and outcome is unknown. As a result, we are withdrawing our 2020 financial guidance previously announced on February 6th. Against the backdrop of this uncertainty, I am confident BCE will exit the crisis in strong shape. we remain highly focused on managing our cost structure and ensuring continued financial flexibility Bell's underlying business fundamentals have not changed our liquidity position is strong underpinned by healthy balance sheet and substantial free cash flow generation that provides significant financial flexibility to execute on our capital investment priorities and to sustain BCE's common share dividend payments for the foreseeable future in fact we just declared this morning, as scheduled, our common share dividend for Q2 that will be paid to shareholders on July 15. As mentioned, we plan to make the investments Canada needs now and for the future, and we will do so without putting the dividend in jeopardy. This will provide a strong foundation for growth going forward that will benefit all stakeholders, our customers, our employees, and our more than 1.4 million shareholders. Maintaining our planned level of capital spending will result in a dividend payout ratio that exceeds the upper end of our historical target policy range. Turning now to slide six and a quick overview of some key operating metrics by segment. I'll start with wireless. Subscriber and promotional activity was down significantly in the last few weeks of the quarter with a temporary closure of retail stores and call center disruptions due to COVID. which resulted in a 12% year-over-year decline in post-paid gross activations in Q1. As fewer wireless consumers are shopping, we also saw a corresponding decline in customer churn. In fact, we reported our lowest ever post-paid churn rate of 0.97% this quarter. As a result of fewer customer disconnections, combined with some temporary new COVID-19-related government activations, post-paid net ads in Q1 totaled 24,000. With respect to prepaid, gross ads were up 38% on the continued strength of Lucky Mobile and our Dollarama distribution agreement, which drove a 66% year-over-year improvement in net subscriber losses to 4,000. Blended ABPU was down 2.7% compared to last year. Not an entirely unexpected result, given the restrictions on travel and waiving of roaming fees due to COVID, as well as the continued decline in data over revenue due to more subscribers on unlimited plans, including a growing mix of installment customers in the base. Now I'll move to Bell Wireline. Our subscriber results reflect the resiliency of our household products in the current environment and should fare relatively well during the COVID crisis as consumers are now spending more time at home using broadband internet and video services. Therefore, although fewer customers are installing new residential services, Fewer are also disconnecting. This drove 23,000 retail internet net additions in Q1, unchanged versus last year. We also added another 48,000 fiber to the home subscribers this quarter, bringing the total number of direct fiber customers to around 1.5 million, up 19% over last year. On the TV side of things, we added 3,000 net new IPTV subscribers, a modest yet reasonable result given the impact of sales channel disruptions on gross additions, as well as overall TV market maturity and the maturity of our footprint. We also continue to see nice year-over-year improvement in retail satellite TV and residential home phone customer losses, which were down 5% and 8% respectively. For Bell Media, while overall TV viewership is up 25% since the start of COVID-19, TSN and RDS subscriber deactivations have been minimal even without live sports. This speaks to the quality and depth of our programming, which is unparalleled in the Canadian market. Lastly, at the beginning of April, the CRTC approved our acquisition of television network V, supporting our growing media presence in Quebec and offering more competition in consumer choice and French language conventional TV. With all the regulatory approvals in place, the transaction is scheduled to close in the second quarter. Thank you, and I'll turn it over to Glenn.

Thank you, Mirko, and thank you everyone for joining us, and I hope you are all remaining healthy and safe. Firstly, let me echo Mirko's thanks to our employees for ensuring Canadians remain connected and informed, and to my finance team specifically, thank you. If I would have told you two months ago that we would close out the quarter and prepare our financial documents released remotely, we would have said that's not possible. But you did just that and you did it flawlessly as usual. So again, thank you. I'm going to begin on slide eight with an overview of our Q1 financial results. The financial impact of COVID-19 was limited in Q1 as government lockdown measures increased. and related shutdown of businesses only went into effect towards the end of the quarter. Although difficult to assess with any pinpoint accuracy, we estimate that normalizing for COVID, our overall consolidated results for Q1 were tracking to our now withdrawn guidance targets for 2020. Total service revenue remained positive in Q1 despite the curtailment of commercial activity starting in mid-March, as well as the impact of initiatives to support Bell customers sheltering and working from home. However, product revenue was down, decreasing 10% year-over-year. This was a result of a significant reduction in wireless customer transactions attributable to retail channel disruptions, as well as lower business wireline data equipment sales given last year's strength and the current economic environment. Despite the year-over-year revenue decline, adjusted EBITDA grew a respectable 1.4%, reflecting a 2.6% decrease in total operating costs, which drove a one-point increase in margin to 43%. As customer activity has waned, so has call volumes and technician visits to the home. This, combined with fewer promotional offers, reduced mobile handset subsidies, as well as decreased advertising and travel, helped to mitigate some of the revenue softness we saw in the quarter. And as Mirko mentioned, we will continue to make the necessary changes to our cost structure to offset as much of the COVID-related financial pressure as possible. With respect to earnings, adjusted EPS was up 3 cents over last year. However, statutory EPS decreased due to the net mark-to-market loss on equity derivative contracts, resulting from a decline in BC's share price this quarter. versus a sizable increase this time last year. As for free cash flow, the modest year-over-year decline was driven mainly by a reduction in cash from working capital, which I'm going to expand on later. Lastly, I want to bring your attention to a couple of reporting changes we made in Q1. Our public safety radio network business, which builds and manages private land mobile radio networks primarily for the government sector, will now be managed within our Bell business markets in order to better align with how we manage that part of our business and assess performance. Therefore, those operating results are now included within our wireline segment with prior periods restated for comparative purposes. Previously, these results were included within the Bell wireless segment. In addition, Our wireless APU definition was updated to include billing from device payment plans. With a growing mix of EIP customer activations, this metric now more accurately reflects the full monthly cash amounts received from customers. Let's turn to wireless on slide nine. Of our three operating segments, COVID-19 had the biggest immediate impact on wireless activity. with a reduction in new customer loadings and device upgrades. As a result, product revenue decreased 9.1% in the quarter. This subscriber slowdown, together with reduced roaming volumes and the ongoing steady decline in overage revenue from customer adoption of unlimited data and installment plans, also moderated service revenue growth, which saw a step down versus last quarter. Consistent with the decrease in wireless market activity, variable COA costs including device subsidization and other marketing and selling expenses also decreased, driving a 6.6% year-over-year improvement in operating costs. Therefore, the impact of COVID on wireless EBITDA, which grew a solid 4%, was not overly material in Q1. However, the longer the COVID shutdown persists, the more significant the effect on EBITDA. given the financial impact of slower subscriber growth, the decline in roaming revenue, and the amortization of deferred customer acquisition costs from previous periods. Let's move on to wireline on slide 10. Our wireline results for Q1 were impacted only minimally by COVID. Although we experienced a reduction in new residential service installation requests, waived internet overage fees, and implemented flexible payment options for customers financially impacted by the crisis, our consumer wireline unit delivered stable and consistent results this quarter. Combined Internet and TV revenue was up approximately 3% year-over-year, while the rate of voice revenue decline improved, reflecting fewer deactivations and increased long-distance usage. For business wireline, a softer quarter as we laughed the revenue down, growth acceleration enjoyed in the first half of 2019 and saw reduced or delayed customer spending given the current economic situation. Despite more near-term financial risk from the after-effects of COVID compared to our residential services unit, the impact of data on business wireline has been relatively contained. While we have seen an increase in pricing concessions to customers, particularly in the SME space, as well as lower data equipment and business service solution sales to larger enterprise customers. We also provide critical connectivity services needed to maintain business continuity. Against this backdrop, we have reduced discretionary expenses and digitized customer service delivery to optimize our cost structure. This resulted in a 1.6% reduction in operating costs this quarter, which drove positive wireline EBITDA growth of 0.5% and a 50 basis point improvement in margin. Let's turn to slide 11 on our media business. Total revenue was up 0.9% in the quarter. This was as a result of 5.6% year-over-year increase in subscriber revenue driven by crave growth over the past year and contract renewals with Canadian TV distributors. Not surprisingly, advertising revenue is down 2.5% year-over-year, affected by the industry-wide decline in ad sales because of COVID-19. Advertising is frequently one of the first discretionary expense items that many companies cut back on. Although the reduction in spending was relatively small this quarter, that should accelerate in Q2 as advertisers rationalize, delay, or eliminate advertising budgets in light of COVID-related impacts on their businesses. And although media consumption and TV viewership is up, as Mirko described, ad spending won't necessarily follow. Much, of course, will depend on the length of the shutdown and the depth of the resulting economic downturn. Due largely to the fact that advertising has a very high revenue flow-through, Bell Media's EBITDA decreased 6.1% in Q1. Let's turn to slide 12. It provides a walk-down of the main components of adjusted EPS. which was $0.80 per share in Q1, up 3.9% compared to last year. In addition to higher EBITDA, which drove $0.03 of earnings growth this quarter, adjusted EPS also reflected lower net interest expense due to the impact of lower interest rates on a short-term debt and a favorable income tax expense benefit due to the change in Nova Scotia's corporate tax rate. Turning to slide 13, you will see that we generated $627 million of free cash flow this quarter. Adjusted EBITDA, less CapEx, or what I commonly refer to as simple free cash flow, grew 6.5% over last year, contributing $106 million of higher cash year over year. However, this was more than offset by the large COVID-related swing in working capital. Driven mainly by a build-up, of mobile handset inventory, anticipation of potential supply chain constraints, and a slowing in customer account collections. This quarter's results also reflected a year-over-year decrease in cash taxes enabled by recently enacted government measures that allow for a delay of tax installment payments until later this year, as well as higher interest-paid due mainly to a higher level of debt outstanding as we tap the bond markets in Q1 to strengthen our already strong liquidity position. That's a good lead-in to slide 14. We ended Q1 with $3.2 billion of liquidity, providing us with good financial flexibility to navigate through the COVID crisis. Our cash balances and undrawn portions of our $4 billion committed credit facilities, together with substantial daily cash inflows from operation and continued access to public debt and bank markets are expected to be more than adequate to meet our cash requirements for the remainder of 2020. Our debt leverage ratio remains manageable at 2.86 times adjusted EBITDA and our interest coverage ratio is high, providing good predictability in our debt service costs. Moreover, we have no near-term refinancing requirements as our next public debt maturity does not occur until the end of Q3 2021. As for Bell Canada's defined benefit pension plan, the estimated funded position has declined only modestly since the end of 2019, but remains fully funded. As a result, our cash pension funding requirements for 2020 are unchanged. This can be attributed to the pension plan's assets, which are invested conservatively. have ample liquidity, and are well diversified. Public equity securities make up only 22% of the plan assets. We have allocated over time a greater portion of the plan's assets to fixed income securities that have returns much less impacted by the current equity markets and that serve as a natural hedge to lower interest rates. Lastly, I would like to add that BCE's close to $1 billion in annual U.S. dollar spending has been hedged substantially through to the end of 2021, effectively insulating our free cash flow exposure until that time. To conclude, I think it's worth reiterating what Mirko said earlier, and that is that BCE's dividend remains safe. Our substantial free cash flow generation provides the required funding to support our planned network investments and dividend payments for 2020. While we expect a higher than normal dividend payout ratio this year, the dividend is secure given BC's resilient free cash flow profile, reasonable leverage, and the company's relatively easy access to liquidity markets if required. That concludes my formal remarks, so I'd like to turn the call back over to Thayne and the operator to begin questions.

Thanks, Glenn. So before we start the Q&A period, I want to remind participants that due to the time constraints this morning because of our AGM, which is taking place right after this call, please limit yourselves to one question and a brief follow-up so we can get to as many of you as possible in the queue. So with that, Alana, we're ready to take our first question.

Certainly. Thank you. Please press star 1 at this time if you have a question. The first question is from Richard Cho with J.P. Morgan. Please go ahead.

Hi, service revenue and wireless was up on the quarter, but there was some impact at the end due to COVID and who was down. What is going to be the full impact going forward? How much roaming and data overage exposure do you have relative to overall service revenue?

Thank you. So thanks, Richard. As I mentioned at the outset, in terms of our APCU, right, we have obviously there's a data overage impact there. And like I've said in past quarters, our overage decline actually in Q1 of this year was relatively, focus on the word relatively muted, like in Q4 2019. And it's just another border where we have demonstrated that base management, it really is one of our core competencies and that will continue. As far as roaming, clearly that's going to have an impact in Q2 given the restrictions on, basically the outright restrictions on travel. So whether or not that's inbound or outbound roaming, that's going to be significantly impacted in Q2 and for as long as the crisis lasts and travel restrictions remain in place. And Glenn, do you want to add to that?

Not much, Mirko. I think that's pretty good. Richard, I'm not going to try to forecast the duration and severity of COVID and try to predict its implications on service revenues go forward. Certainly, I'm not equipped to do that. I think, as Mirko said, naturally, roaming revenue is going to be significantly impacted for the foreseeable future. We're managing the data overage. Transactions are significantly down in wireless, but all in all, I think the underlying health of our business remains, and as Mirko said in his opening remarks, the fundamentals remain strong.

No, it seems like you're managing the service revenue part well. To follow up on the equipment side, what was the kind of decline in the second half of March versus the 9%, 10% that you saw in the overall quarter?

Not going to provide any specifics on that, Richard. Suffice to say that as retail channels closed, we saw a significant reduction in transactions and that has continued well through the month of April. The good news is we're starting to see signs across the country that retail channels are opening. Storefronts are coming back online and let's hope that that this is relatively short-lived and we start to see Canadian shopping again and transactions picking up. Great. Thank you. Thank you, Richard.

Thank you. The next question is from Aravinda Galapatik with Canaccord. Please go ahead.

Good morning. Thanks for taking my questions. You referred to some of the impact you expect on the SME side or seeing on the SME side. Can you expand a little bit on what you believe would be the impact on enterprise? Obviously, there could be some pricing pressure as the contracts roll over, but at the same time, I think as you alluded to in your prepared remarks, there could be some upside because of the increased spend on connectivity, including conferencing, video conferencing, et cetera. Can you maybe just talk to some of the dynamics there?

Sure. Thank you. Thank you. Pleased to. So, The pandemic certainly has highlighted the importance of our wireline services generally to Canadian homes and businesses. We're seeing usage up and churn down. As it relates to the enterprise segment, we are seeing an increase or saw early increases in demand for connectivity, which was a positive. That said, there has been lower demand for data equipment and some lower demand for service solutions. But ultimately, Canadian businesses do rely on Bell to keep them connected, so it's no surprise that we're seeing that stability, stability to an increase in demand for connectivity. Now, that's in the enterprise segment, and in the small business segment, that's clearly more exposed, given the economic circumstances that small businesses are facing. But that also is a smaller portion of our business segment revenue.

Thank you. And just as my follow-up, you talked to some of the cost reductions in wireless. Can you speak to your expectations in terms of the industries that are potentially moving towards lower-handed subsidies in general? I know that the current period is not necessarily the best representation, but I know there was some progress even prior to COVID-19 hitting. Just wanted to get your thoughts on that. Thank you.

Right. Okay. So we are seeing some subsidy savings from two sources. One is clearly the decrease in transactions due to the retail store closures. Glenn touched on that, so no need repeating that. But we also saw a reduction in subsidy due to scaling of installment plans. And they have been scaling quite nicely. We're quite pleased with it. And as we said in previous calls, we're quite favorably with it. And as we said in previous calls, we're quite favorably disposed to the installment the installment plan model and we like the early results whether or not that was the latter part of q4 of last year and into q1 of this year nice scaling and we see the financial benefits that will come and a couple of points to to highlight at the end of april the bell brand has fully switched over to the smart pay model and I believe I mentioned on our last call together that we were doing the IT work necessary to transition the Virgin brand over to installment plans, and I'm happy to report that installment plans will be available on the Virgin brand this month, actually. So it's looking good. We like the early results, and I think that answers the question.

Thank you. Thank you. The next question is from David Barden with Bank of America. Please go ahead.

Hey, guys. Thanks for... I guess, could you talk a little bit about what behavioral changes we saw emerge in the wireless business kind of in the last month, month and a half, specifically with respect to whether you saw customers ratcheting down spend to lower-end metered plans or from supposed to be prepaid or whether as a function of kind of the greater need for connectivity, we saw a greater uptake of the demand.

I didn't hear the last part of it, but I'll start with the answer. I think, look, we saw, let me answer the question by contrasting wireline to wireless for a second. We saw the huge surges in usage on the On the wireline side, whether or not it's broadband or voice, on the wireless side, it was pretty stable. Usage was pretty stable. We didn't see much of a spike up or down. We did see greater usage in rural areas than in urban areas, but pretty stable, and also pretty stable in terms of the behavior on acquisition of the various data packages, and didn't see downgrades. from customers in the packages they were acquiring. Well, we can't hear you. Your connection is not clear.

Can you hear me better now?

Yeah, that's better.

Sorry. Just as a quick follow-up, thank you for that answer. As a quick follow-up on your comments with respect to SMB, we did see For instance, AT&T and Verizon take bad debt reserves for potential payment misses from that category. I apologize if I missed it, but did you take any of those reserves yet or do you plan to in coming quarters? Thanks.

Good morning, David. It's Glenn. Look, absolutely great question. We are monitoring our daily cash collections like never before. They remain strong. We're not seeing what I would call disturbing trends. That said, your observation is a good one. We are ensuring that we increase our provisions across our business, whether that be in SME, whether that be in our media operations, or that be in our consumer segment of our business. Naturally, the longer this goes on, Canadians... and are going to run into their own liquidity challenges, and they're going to be looking for reasonable payment terms and payment arrangements, and we're going to have to be cognizant of how that impacts reserves, but I can assure you I'm monitoring that daily. We have taken additional reserves, modest, albeit in the Q1, but that will accelerate for additional reserves in Q2. Thank you, David.

I'll just add a little bit to that by saying that we're seeing those small businesses that are the most affected and who we are working with, we're seeing suspensions rather than just everyone necessarily disconnecting, which is favorable in relative terms. And we're also working with those affected small businesses on alternative payment arrangements. And Glenn, as he mentioned, is taking the appropriate provisions.

Okay, great. Thank you, guys.

Thank you. And the next question is from Simon Flannery with Morgan Stanley. Please go ahead.

Great. Thank you very much. Good morning. You talked about maintaining your capital spending program. Could you talk a little bit about your 5G plans? And you talked about maintaining your capital spending program. Could you talk a little bit about your 5G plans and where does that stand at this point? with a potential 5G iPhone coming later this year? And maybe layer into that, when are we gonna get some clarity from the government on Huawei's potential role or not in the networks? Thanks.

Okay, thanks for the question. So we are ready with our initial 5G network, but frankly, we don't think that it's the right time right now to officially launch it for marketing purposes. I just don't think that customers are paying attention to this right now, and that's not what is top of mind for our customer base. They have other priorities, understandably. But we are ready. As you know, I think we are carrying the first 5G phones that have been brought to market. Samsung GS20 would be one example. And as the economy opens up, we'll have more news on when we will launch our initial 5G services. And as for Huawei and the government, I really don't know and couldn't provide more insight than I provided the last couple of times we spoke. We're waiting for the government's decision, and we will follow all government rules with respect to usage of equipment in our 5G network. And as you know, we work with multiple suppliers in our supply chain.

Great, and do you think the auction timing could be impacted by the crisis?

Well, on the auction timing, here's what, back to my opening comments about, my general comments in my opening about we cannot risk as a country falling behind in communications networks, and now it makes it as clear as ever how important world-leading communications are. So with that as context, I don't think we can and shouldn't want to fall behind on 5G and 3,500 megahertz, as we all know, is the backbone of 5G. So my point of view is we need to have that auction as planned or very soon after. If it's not December 15th, then very soon after December 15th. And that would be our position. Let's have the auction. Let's move forward. Let's make that spectrum available. Let's lead in 5G. Now, with that having been said, I would... also say that given how our industry has stepped up with accelerated investments this year in particular, if the government would be open to delaying payments until calendar year 2022, that would be helpful to everyone concerned. But ultimately, the short answer to your question is let's have the auction.

Great. Thank you.

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

Yeah, thanks very much. Can I start with one clarification? Glenn, we talked about the equipment revenues in wireless and the volume declining in March. Are you able to give us what the figures are on how much both the OPEX for equipment costs as well as the cash costs for equipment subsidies went down in Q1?

Vince, I don't have that at my fingertips, but obviously it's not overly material due to the fact that we basically had 10 or so weeks of what I would deem normality prior to the COVID. Naturally, what I've experienced in the past month has been substantial in April, and you'll see that in our Q2 results.

Okay. And a bigger picture question, Marco. Do you have any thoughts about when we come out of this crisis? And obviously, there's a lot of people talking about COVID. a new way for society to interact and more work from home and more embracing of a digital economy. When you think about your business telecom operations, is this a net positive or negative in your view? If there's less office lines and less people in offices but more connectivity required in services so people can work from home, is it a net neutral or positive or negative in your mind?

I view it as a medium to long-term net positive. for all the reasons you mentioned in the question. And also, we've all had to adjust the way we serve customers. And that's why I mentioned in the opening remarks that we are making the investments necessary now in digital adoption and self-serve and self-install in apps and online fulfillment. On January 6th, when we updated our strategic imperatives and we added one that talked about operating with agility and cost efficiency, and we talked about the need for digital adoption, we identified it then that we were all going to be on this journey. Now, of course, this crisis highlighted how important it is to serve customers in that manner. Customers we're seeing are prepared and very comfortable in being served in this manner so what that does is a lot of goodness on the cost structure because if we can accelerate those investments in the long term it's going to reduce our cost of operations much like building fiber has an obvious win in terms of market share but a win in terms of cost structure so to answer your question I do see it on the business side as a net positive and the whole way we're shifting and how we're serving the customer is also going to have some medium and long-term benefits on the cost side. Thank you.

Thank you. The next question is from Jeff Fan with Scotiabank. Please go ahead.

Thanks. Good morning. Hope you guys are doing well. First question is just a clarification, probably for Glenn. Regarding your CapEx comment, normally you give CapEx intensity guidance, but it looks like what you guys are saying is you're going to keep the same CapEx dollar Are we calculating that based on the previous, I guess, revenue guidance and getting to roughly a $4 billion number? I just wanted to check the math to make sure that's the number that you're referring to on CapEx. And then the second question, probably looking beyond COVID-19 and wireless, as stores start to reopen, as we start to get back to some kind of a normalcy, I'm wondering how, Merkel, you think about the you know, post-shutdown competitive environment given a lot of contracts that probably lapse, you know, a lot of pent-up perhaps demand on upgrades. Wondering how you see that competitive environment sort of play out post the shutdown. Thanks.

Why don't you go ahead, Glenn, on the first one? Sure.

Good morning, Jeff. On CapEx, you're absolutely right in your assessment of what we were attempting to say if I wasn't clear. Obviously, our ability to forecast CI or capital intensity in this environment is extraordinarily difficult because we really don't know the length, the duration, the severity of COVID and how that's going to impact our top line. So what I said on CapEx, what I intended to say is that we intend to spend roughly on an absolute dollar basis consistent to what our target was I said in our February 6th guidance that we would spend approximately 16.5% intensity. And if you took that against our revenue guidance of 1% to 3% growth, you'd get a number of $4 billion, $4.1 billion, I believe. So our intended remarks were that we intend to spend to that level. And as Mirko said, this is not a time to be shy. This is a time to lean forward. We're going to make the investments we need to keep this business healthy, to keep this business vibrant, and to keep Canadians connected. With the strength of our balance sheet, the healthy liquidity position, the health of our balance sheet, we're going to lean in and we're going to make the investments we need.

Okay, thanks, Glenn. And Jeff, on the second question, in terms of wireless demand as things open up, I feel... I feel pretty good about our position as the economy slowly opens up and as our stores open up. We'll see how long it takes for consumers to get comfortable to go out and start shopping. Put aside predictions as to when that will be. When that does happen, we're in a very good position. We have strong inventory. As the stores open up, we lead in distribution, which is great news. And we have the best networks, and we will have our 5G network lit up. And so that puts us in a very strong position competitively. And kind of leave it at that. And I think when people do start going out, we'll see. I think my sense is those who go out to shop, we're going out to shop with a purpose, and that's to buy. rather than to just browse.

Thank you both. Thank you. The next question is from Mayor Yagi with Desjardins. Please go ahead.

Thank you for taking my question. So I wanted to just go back to your comment about your wire laundering. And now that you're looking at April, can you maybe just tell us The effect of the shutdown on small and medium-sized businesses, how is that being reflected on your P&L? Are these businesses asking for credit for the months that they're closed, or they're deciding to reduce actual... spending on their bill. And so I'm trying to just figure out how you're viewing the situation on cash flow versus P&L type of, on that business. And my other question is, my follow-up question on wireless is, we're seeing an alarming increase in number of criminal acts on powers, starting more and more in Canada, which we have not seen in the past. It used to be more in Europe. It seems like the pandemic has increased alarm for some people against the wireless towers. In Quebec, we've seen a few criminal acts. How are you expected or what are you looking in terms of protecting your assets in this situation that this could continue to increase in the future?

Okay, thank you. I'll take the second one, Glenn. I'll take the second one first, Glenn, and then I'll turn it over to you. So on the vandalism, those are really unfortunate criminal acts against our wireless towers across the industry. These are facilities that communities need for critical communications and that our first responders need out there in the field. And so, you know, it's rather unfortunate. Now, what we're doing is as you'd expect we'd be doing. We are hardening our security. We're being very vigilant. We're working with law enforcement. And I noted that Prime Minister did issue a communication, a tweet, not that long ago, actually, decrying these acts of vandalism. And so thank you to the Prime Minister for that because it's important for us to educate consumers and the public that there is no link between our wireless facilities and the coronavirus. And I think there have been a couple of arrests actually related to some of these recent acts of vandalism. So that's positive news. So over to you, Glenn.

Sure. Good morning, Mayor. On the SME activity, what are we seeing? We're literally seeing everything that you alluded to. When you think about restaurants and bars, many of them have suspended service. Therefore, they've taken a pause. So that impacts our cash flow naturally, but it impacts the P&L as well as they're not in operations. Other small businesses that are continuing to operate but operate in a more limited capacity have retained their services. We've seen minimal requests for payment arrangements. or changes in the manner in which they pay. But in some instances, we've provided that, and we're trying to do everything we can to make it easy and possible for our small and medium-sized businesses to remain healthy and to ensure that they return. But we've seen it across the board, as you can appreciate. Some have suspended service. Some have continued operations with no disruption in the manner in which they're paying. And others have requested a modest amount of requests additional terms for paying. But I would say at this point, I'm going to go back to my earlier comments, we've changed the way we track cash collections. We literally track it daily compared to the day-to-day comparisons. We do comparisons to previous week, previous month, and same period last year. We are monitoring everything on cash collections to ensure that we are proactive in the way we reach customers and and introduce terms to them that make the flexibility available to them so that ultimately we don't result in unforeseen bad debt. But as I say, it's across the board, and thanks for the question, Mayor.

Thank you.

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

Great, thank you. Just to follow up on wireline, I'm sorry if I missed this, but can you remind us what percent of your wireline mix is from the business segment and in specific from the SME segment? And maybe if you could provide more color on where you expect cost efficiencies to come from in light of the current environment that could potentially keep the sort of wireline profitability more flattish as results have been so far resilient except for this SME more flattish. As results have been so far resilient except for this SME pressure that you're highlighting. Thank you.

Okay, so, you know, business segment revenues writ large are about a third of our wireline revenues. And then in terms of, you know, In terms of the puts and takes on OpEx, we'll see subsidy savings with a lowering of transactions, as I mentioned earlier, and with the scaling of installment plans. So savings there, we will see. Of course, we have to watch collections, as Glen has mentioned a couple of times already. savings on travel, as you'd expect, and other discretionary spending. On the other hand, if we're going to talk about puts and takes, PPE and cleaning is going up. We're installing plexiglass in stores, obviously for the safety of our customers and our team members. Ultimately, at the end of this, as I mentioned in response to an earlier question, we're going to see in the medium term some cost savings goodness just from accelerated footprint deployment which we're continuing to engage on or embark on throughout 2020, and as we had initially planned, and as we continue to evolve our service delivery model with more self-serve, one-touch, digital, there will be savings, and I would say significant savings on the delivery side in that respect. Look, ultimately, we generate substantial cash inflows that will continue. Our cost discipline is second to none, and that will continue, and it really puts us in good stead to be able to make these long-term investments for the long-term health of BCE, as well as to continue to sustain that dividend.

Okay. Thank you.

Thank you. The next question is from Tim Casey with BMO. Please go ahead.

Thanks. Just following up on that, what other things are you considering, Mirko, in terms of, permanent changes to work and processes within the company. Are you looking at having people work permanently from home or maybe, you know, on a team basis so you can reduce, you know, your real estate footprint and things like that? And just wondering what you're contemplating to do on the permanent side. And second, can you comment on... How are you going to manage media? Obviously, it's going to be a rough summer, and the fall schedules are in disarray, so there's going to be challenges there. How will you manage the cost side on media going forward?

Thanks. Thanks for the questions. So the first one is a really good question in terms of, future long-range planning. So as we undertake our planning exercises, which we have a regular cadence as you would expect that we would have, one of the items that we're going to be taking away is what have we learned from this crisis in terms of operations that we can adopt permanently that will enhance our competitive position, improve our cost structure, or improve the customer experience so we're going to be looking at everything through that lens and that will include what we do in terms of real estate footprint but it's still early days on that but definitely something we'll be looking at and we'll be looking at those things across the entire scope of our operations and look on media I'd say this. I mean, the Q1 impacts, as you saw, were relatively small. Obviously, there'll be impacts on media in Q2 and beyond, depending on how long this lasts. But customers and viewers are rediscovering the value and attractiveness of linear TV, and you can see it in the ratings. You can see it in terms of the engagement with Crave. which is an absolutely phenomenal product and more customers are discovering it. And we've also seen in the last few days, last couple of weeks, some stabilization in the number of cancellations of ad buys, which is also a positive sign. And we have puts and takes. We see a decline across some advertising sectors, but a pickup in things like financial services, technology, consumer packaged goods. So You know, I'd say we're going to be managing our cost structure very carefully at media. Managing our cost structure very carefully at media. Our subscriber revenues are remaining strong, and we're seeing that some live sports are going to start coming back on fairly soon. Think of UFC and NASCAR and the PGA Tour, and I think there's going to be a pent-up demand for sports viewership, so that bodes well as well.

Thank you.

Thank you. The next question is from David McFadgen with Cormark Securities. Please go ahead.

Hi. Thanks for taking my question. Just following along with that last question, I mean, now that we're into May, I was wondering, could you give us an idea what the trend you saw for the month of April was? How much it might be down?

I'm not going to give forward-looking numbers, David, as you can appreciate, but suffice to say that there was a substantive decrease in advertising in the month of April. Well managed, as Mirko alluded to, on the cost side, as we took the necessary actions we could. I need to remind everybody that our media operations represents about 8% of our consolidated EBITDA, so not overly impacting to our consolidated cash flow, but we took actions on costs. Advertising was certainly down, but that was a relatively short window when we think here we are in early May, and as Mirko alluded to, we're NASCAR and PGA Tour, and we're starting to hear about UFC and many sports coming back online that I'm optimistic that we will start to see some return of advertising. Although, let's be honest, Q2 is going to be a difficult quarter compared to historic advertising levels.

And could you give us any color on the declines for your sports properties versus non-sports properties? Any help there would be great.

No, I think, look, sports decline advertising and then there's subscription revenue. In our sports subscriptions, cancellations have been frankly minimal. So customers are not disconnecting, customers are the ones who make the ultimate call and so far those cancellations have been frankly minimal and with live sports coming back soon, I think you're going to see a pickup there certainly in viewership and stability that we've seen continue in subscriptions.

All right, so with that said, we've timed out. So thank you again for your participation this morning. I will be available throughout the day for follow-ups and clarifications. So take care, everybody, and stay safe. Thank you, everyone.

Thank you.

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