BCE Inc.

Good morning, ladies and gentlemen. Welcome to the BCE Q2 2020 results conference call. I would now like to turn the meeting over to Mr. Zane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Louise, and good morning, everyone, and thank you for joining us this morning. Participating on the call today will be Mirko Bibic, BCE's president and CEO, and Glenn LeBlanc, our CFO. Our second quarter results package and other disclosure documents, including today's news release, Slide presentation, as well as other documents issued earlier, are available on BC's Investor Relations webpage. However, before we get started, I want to draw your attention to slide two, our safe harbor statement. 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. 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 required 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, over to Mirko.

Good morning, everyone. Thanks, Hank. We're still in the midst of what continues to be a long journey for all of us, and the Bell team stepped up in Q2 by focusing on the operating principles that have guided our crisis response from the very start. keeping Canadians connected and informed, prioritizing the health and safety of the public, our customers, and of course our team, and supporting our customers and communities. I'm proud of the thousands of team members who have been serving our customers at Bell workplaces and in the field since the crisis began. Against this backdrop, we delivered operating results for Q2 that underscore Bell's broadband network leadership, reinforce the critical nature of our services, and demonstrate our ability to execute effectively under very difficult circumstances. Despite ongoing heavy demand for all our services, we have maintained internet speeds and reliability while continuing to operate our networks at a near perfect 99.99% overall availability. We enabled work from home for about 90% of our employees, which included some 12,000 call center agents. By mid-April, service levels were back to what they were pre-COVID, and our call centers resumed full hours of operation at the beginning of June. In short, in a matter of a few weeks, we pivoted from full crisis mode to the stabilization phase. And now, with Q2 behind us, we are focused on building momentum back into the business. As Canada gradually reopens, our focus has been on ensuring customer access to our retail locations wherever possible, and as of now, 99% of our Bell, The Source, and authorized dealer stores and kiosks are back in full operation. In Q2, we continued to grow broadband market share with more than 50,000 total net new wireless, retail internet and IPTV customer additions. We also achieved a noteworthy milestone during the quarter, surpassing 10 million wireless subscribers. More impressively, despite significant COVID impacts absorbed in the quarter, we maintained our consolidated EBITDA margin essentially stable at 43.5%. In addition, we generated 50% higher year-over-year free cash flow. This contributed to our very strong liquidity position of $5.4 billion at the end of Q2, which provides ample financial flexibility to execute on our capital investment priorities and comfortably sustain BCE's common share dividend for the foreseeable future. In fact, just this morning, we declared as scheduled our common share dividend for Q3 that will be paid on October 15th. I'll now turn to slide four in our presentation. In the midst of COVID, we've made meaningful progress in advancing our strategic priorities so as to generate continued operating momentum in the near term and ultimately emerge from the crisis in an even stronger competitive position. 55% of our broadband footprint is now fiberized with 5.4 million homes and businesses able to access the fastest internet speeds in the market today of 1.5 gigabits per second. We also fast-tracked our wireless home internet service footprint with 137,000 additional homes passed in April alone, bringing the total number of rural locations equipped with fixed wireless technology to about 400,000. We're taking this unique technology even further by doubling internet download speeds from 25 to 50 megabits per second to the first 300,000 households starting this fall, while also expanding to rural communities throughout Atlantic Canada. And on June 11th, we launched Canada's largest first-generation 5G network, with service available in five of the country's largest cities, which will be rolled out to more urban centers later this year. Championing the customer experience is a core strategic imperative for us at Bell. To this end, Given that our retail stores were closed for an extended period, we accelerated investments on digital platforms and self-serve tools. More and more, these are the channels many customers prefer to use to interact with us. We are encouraging customers to take advantage of online and mobile self-serve options. The MyBell and Virgin Mobile My Account self-serve apps are the clear leaders in their space in terms of app ratings and provide customers best-in-class integrated access to their Bell and Virgin products and services. Since the start of COVID, approximately half of all customer transactions have been executed online. I'm also pleased to report that Virgin Mobile topped every wireless carrier in Canada from a J.D. Power ranking perspective for a fourth consecutive year as number one in overall customer service in the eyes of consumers, a very strong result for our Virgin Mobile brand. Bell's strategic focus on customer experience was also reflected in the latest report from the CCTS for Q2, which showed a 26% drop in the number of CCTS complaints by Bell customers. Again, the best performance among national carriers. And as part of our ongoing efforts to safeguard the health and safety of the public, we introduced appointment-based selling in retail stores and ramped up our assisted self-installation and repair programs. In fact, one-third of all new installs and repairs in Q2 were completed without entering the customer's home. In short, strong progress has been made on our imperative to champion customer experience, and all these measures position us well in the short and the long term. Underscoring our ongoing leadership and service innovation, we launched Virgin TV a few weeks ago in Ontario and Quebec. Virgin TV is an app-based TV service that does not require a traditional set-top box or install and works on virtually all streaming devices. This new TV platform enhances our multi-brand strategy by offering TV services to Virgin customers who we know are clearly consuming vast amounts of content but who are not subscribed to one of Bell's other TV brands currently. Our latest TV innovation just announced on Tuesday is the Bell Streamer. This is a compact 4K HDR streaming device powered by Android TV that offers customers all-in-one access to live TV and on-demand content from Bell Alt TV, support for the top streaming services, and access to apps on Google Play. As you know, we also announced on June 1st the sale of most of our data centers to global data center operator Equinix. in an all-cash transaction valued at just over $1 billion. We will maintain a strategic partnership with the acquirer to provide our enterprise clients with full access to Equinix's advanced hosting and cloud solutions. The transaction is expected to close before the end of this year. As I've said before, and I think it's important to reiterate here again today, this is not the time to pull back on investment in critical network infrastructure and customer service improvements. They are necessary to keep us competitive in the short term and will definitely benefit our company, our customers, and our economy in so many ways over the medium and long term. And the COVID crisis has underscored in a very real way the benefits of Canada's global network leadership, whether that's wireless or wireline, all of which has been made possible because of our significant capital spending supported by longstanding facilities-based regulatory policies. It has never been more important for governments and regulators to support policies that encourage continued deployment of high-speed fiber networks, wireless home internet in Canada's underserved rural communities, and next-generation mobile 5G. And also, as I've said numerous times in the past, but again, which merits emphasizing with key regulatory decisions on the horizon, we just can't risk losing our global network leadership. Canada cannot afford to fall behind in the construction of digital infrastructure, which we all know will power so many segments of our economy as we recover and heal from the impacts of COVID-19. Over to slide five now for a quick overview of some key operating metrics, and I'm going to start with Bell Wireless. COVID did have a significant impact on subscriber and promotional activity due to temporary store closures and stay at home requirements that were in place for much of the quarter. This led to a 35% year-over-year decline in post-paid gross ads in Q2. Consistent with this reduction in wireless sales activity, we also saw a corresponding decline in customer churn this quarter. In fact, post-paid churn was 0.82%, our lowest rate ever, which helped drive positive post-paid net additions of $22,000 for Q2. This result is net of a provision we took estimating the number of customer deactivations that would have otherwise occurred in the quarter for delayed or non-payment, if not for the financial support actions we put in place because of COVID. So if you normalize for this non-payment churn provision totaling 39,000 subscribers, our post-paid churn rate would have been 0.68% or 14 basis points lower than our reported result. And with the introduction of device financing plans on Virgin Mobile in mid-May, Bell Wireless is now 100% EIP-based across all our brands. In prepaid, 13,000 new customers were added in the quarter. It's a good result given the COVID-driven market slowdown and the lapping of our Dollarama distribution agreement in May. With 99% of our wireless retail points of sale now reopened for business, we are beginning to see some pickup in demand, although it is still too early to predict when consumers' typical shopping activity will resume. However, when it does, and it will, we'll be ready to leverage our industry-leading distribution strength, our wireless network leadership, our fastest speeds, and the improvements we are making right now to our digital platforms. So to finish up on wireless, blended APU was down 8.8% over last year, not an unexpected result given the material impact of COVID on roaming revenue, the ongoing decline in data overage, our increasing prepaid customer mix, as well as the customer accommodations that we put in place during COVID to help those facing financial challenges. Okay, I'm going to move to Bell Wireline. Our subscriber results continue to reflect the importance and quality of our connectivity services. Although fewer residential and business customers are installing new services, fewer are also switching service providers. This drove 19,000 retail internet net ads in Q2, which is unchanged versus last year in what is traditionally a slower quarter for broadband. We also added another 46,000 FTTH subscribers this quarter, bringing the total number of direct fiber customers to more than 1.5 million up 18 percent over last year. The broadband footprint advantage that we are building with the fastest fiber network and WHR speeds in the market today positions us extremely well in both our consumer and business segments over the long term to grow internet revenue which increased a strong 7.5 percent in Q2. On the TV side of things, we lost 4,000 net IPTV subscribers in Q2 This was the direct result of reduced sales activity and promotional offers as well as overall TV market maturity. And we also experienced good results in satellite TV and home phone with customer losses improving 17% in satellite and 34% in home phone as consumers continue to shelter and work from home. While we have not yet experienced any significant changes in customer behaviors or trends to date, Some customers have delayed payment as they deal with the economic impacts of COVID. As a result, consistent with the incremental bad debt provision we took in the quarter, we recorded an involuntary customer churn provision for nonpayment, as we did for Bell Wireless, so as not to overstate our net subscriber additions and overall churn in Q2 for Wireline. The provision for Bell Wireline amounted to roughly 45,000 customers. That's $19,000 in internet, $14,000 in TV, and $12,000 in home phone. Going to move now to Bell Media. Although total advertising revenue was down, we have started to see signs of improvement. Some industries like automotive, retail, and food are beginning to spend again. Also, the return of some key sporting events including PGA Tour golf, UFC, NASCAR, F1, and MLS soccer have shown promising results. Most of these events have seen higher than usual audiences, and this improvement is expected to continue into Q3 and will be further positively influenced by the return of even more live sports, including, of course, the NBA, which is on right now, golf's major championships, which start today, and the U.S. Open tennis. Impressively, even with the absence of live sports broadcasts, TSN and RDS subscriber deactivations remained minimal in Q2. Crave also continued to deliver with strong direct-to-consumer growth as total subscribers increased to 2.8 million at the end of June, which is up from 2.7 million in Q1. And earlier this summer, in keeping with our imperative to deliver compelling content, we expanded Crave and added HBO Max program. So while it's still too early to predict what the recovery holds, We believe that BCE's Q2 consolidated results represent a low watermark and although we don't expect to return to pre-COVID operating performance in the near term, Q3 is anticipated to show a marked improvement. We remain very confident in the underlying long-term fundamentals and performance of BCE. We're competitively well positioned to succeed with a healthy balance sheet and substantial ongoing free cash flow generation that provides us with considerable financial flexibility to navigate through the COVID-19 crisis and to more than meet all our cash requirements for the balance of 2020. And with that, I thank you all, and I'll turn it over to Glenn.