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BCE Inc. sees solid progress in 2005, announces 10 %
common share dividend increase
MONTREAL, Dec. 15, 2004 -- BCE Inc. (TSX, NYSE: BCE) today announced an
increase to its annual common share dividend of 12 cents per share or 10%,
raising the annual dividend to $1.32 per share. The announcement was made
just prior to the opening of the company's annual "Business Review
Conference" with the financial community which includes a solid outlook for
2005.
"We are successfully executing our plan to reshape Bell Canada by 2006,"
said Michael Sabia, President and Chief Executive Officer of BCE Inc.
"During 2004, we defined the path to our success and laid the foundations.
In 2005, we will drive the execution of our strategy and deliver strong
operating results which will translate into improved financial performance.
By 2006 we will deliver a company focused on growth, service innovation and
increasing returns to shareholders with more than half of its revenues
expected to come from new generation services."
"Our strategy is to change the "customer experience" by making it easy to
use our services and to stay with Bell, to build a broadband network that
can deliver all the services of the future, and then deliver that future by
creating the next generation of services that customers want," he said. "In
achieving this, we deliver a stronger BCE: one that has undergone a step
change in its cost structure and that has strengthening growth and
shareholder returns as our growth services overtake our legacy services."
Today, 60 per cent of Bell Canada's revenues come from its "legacy" services
such as local and long distance and 40 per cent from its new, high- growth
services - such as wireless, video, high-speed Internet, Internet Protocol
(IP) and Value-Added Services. By the end of 2006, Bell expects the ratio to
have shifted with about 45 per cent of revenue coming from legacy services
and about 55 per cent coming from new services. Today, Bell adds
approximately $1.50 in new service revenue for every $1 decline in revenue
from legacy services. By late 2006, the company expects to generate $2.50 in
new service revenue for every $1 decline in legacy revenue.
"In managing this transition, our focus continues to be on providing our
customers with simple ways to be connected, entertained and informed," said
Mr. Sabia. "We are assembling the skills, building the networks, delivering
the services and creating the cost structure to ensure our leadership. We
will be our customers' first choice for the broadband home, we'll set the
benchmark in innovation and be the standard in IP."
Highlights of Business Review Conference:
- The implementation of a new cost structure (known as Galileo) is expected
to result in a $1 billion to $1.5 billion of annualized expense reduction by
the end of 2006 - Bell will invest $1.2 billion to bring high-speed
broadband access to 4.3 million households by 2008 - Bell's recently
announced EVDO high-speed wireless data service will bring a host of new
services, including video messaging and conferencing, to mobile devices -
BCE's 2005 guidance forecasts solid financial performance by the company
with the medium-term expectation that annual free-cash flow(1) should be
sustainable at at least $1 billion.
On the topic of the company's dividend increase, Mr. Sabia said: "Given the
level of change within the communications industry and within the company
itself, BCE has taken a judicious approach to the issue of raising its
annual dividend over the past several years. However, we are now at the
point where we have clear evidence of our progress in re-shaping our company
and the nature of our business. That, coupled with a solid balance sheet,
has enabled BCE to reward its equity investors with this dividend increase."
Presentations to be given today during the conference by Mr. Sabia and other
BCE executives will demonstrate the progress Bell Canada is making. They
will include an update on Bell Canada's new operating model being
implemented through the Galileo initiative and will detail the company's
leadership in areas such as IP, wireless, high-speed Internet, video
services and the role that Bell's expanding broadband capabilities will
play.
Galileo
As part of Bell's move to IP, the company has launched a comprehensive
program called Galileo. In addition to guiding the implementation of IP,
Galileo is driving the simplification of Bell's business. It aims to give
Bell competitive advantage by being the simplest and easiest to deal with
service provider in the marketplace. The Galileo project is expected to
reduce the company's annual cost base by between $1 billion to $1.5 billion
by the end of 2006.
Consumer Market
To be the leading provider of "simplicity" to customers represents a
considerable market opportunity for Bell and will serve as a differentiating
competitive advantage.
"Galileo has given us a blueprint for rebuilding a complex and often
disparate organization into one that operates as a single entity and that
brings simplicity to our customers' lives," said Pierre Blouin, Group
President, Bell Consumer Markets. "Galileo initiatives such as a common
bill, the web-enablement of our customers via our bell.ca site and
simplified product offers with simple pricing structures all lead to a
common result: enhancing the customer's experience when dealing with Bell
Canada."
Business Market
IP and the introduction of value-added solutions are changing the nature of
the entire business market. Bell is leveraging these changes in its efforts
to build a $6 billion combined SMB/Enterprise business by the end of 2006.
Enterprise Business Market
One year ago, Bell made clear its intention to be the Canadian leader in the
implementation of IP technology for its customers. Its progress has been
rapid with 60% of its core network now running on IP. A variety of IP-based
products have been introduced including a full suite of managed IP services
- such as those recently chosen by Manulife Financial under a seven-year,
$140 million contract. Manulife's IP network will serve the company's needs
for global voice and data applications.
"IP delivers great simplicity in the design and delivery of the products and
solutions we offer," said Isabelle Courville, President, Bell Canada's
Enterprise business segment. "The power of IP has had a marked impact on our
own operations. It reduces and eliminates network elements and support
processes. By 2006 we will have retired 100 legacy services and 10,000
network elements with the removal of 5,000 product and service codes from
our systems. With every customer that adopts IP, that powerful simplifying
effect is delivered to them."
Value-Added Services (VAS) are also providing attractive opportunities
within the Enterprise segment. These services - including security, storage
and hosting, outsourcing and contact centre management - represent a $500
million business today for Bell that is growing at 20 per cent per year.
Small and Medium Business Market
The advent of IP and the efficiencies of Galileo are also having an impact
on Bell's Small and Medium Business (SMB) segment. Here the focus is on
being the preferred communications and technology solution provider for
customers through a strategy of becoming their virtual CIO. SMBs in Ontario
and Québec alone currently consume $5 billion in information services each
year, a figure expected to grow by 10 per cent annually. Virtually nobody is
offering integrated information services/telecom solutions that SMBs can
afford.
"By strengthening our capabilities, Bell will be Canada's trusted technology
advisor to SMBs - their virtual CIO - by 2006," said Karen Sheriff,
President, Bell Canada SMB. "Our suite of services continues to grow, most
recently with the announcement of Bell's offer to acquire Nexxlink
Technologies Inc., a provider of integrated solutions. Bell has also
announced a new joint initiative with Microsoft to deliver specialized
technology management applications especially tailored for SMBs. This
initiative enhances Bell's ability to offer a simple one-stop shop for fully
integrated technology and communications solutions that fit SMBs' needs,
increase their productivity and help them boost their competitive
potential."
The Broadband World
Bell has launched a $1.2 billion, five-year program to extend the reach and
speed of its broadband network to serve some 4.3 million households by 2008.
This represents 85 per cent of urban households in the Québec City/Windsor
corridor.
"We are extending the reach of our fibre network into "local nodes" in
neighbourhoods and directly into multiple-dwelling buildings," said Eugene
Roman, Group President, Bell Systems and Technology. "The network is our
conduit into the broadband home which by 2006 will be able to provide up to
26 Mbps capability. It is 'broadband you can count on' because it is always
on, never shared and highly reliable."
The power and reach of that network will provide the technological
foundation to greatly expand the market for Bell's video and high-speed
Internet services.
Video
Building ExpressVu - Canada's largest digital TV provider - over the past
seven years has given Bell the skills and insights it needs to lead in the
delivery of video services into the broadband home. The company's expanded
broadband network will serve as terrestrial complement to the delivery of
ExpressVu vast content line-up and its feature-rich capabilities.
"We have industry-leading capabilities in areas such as content aggregation
and new service development," said Robert Odendaal, President, Bell Canada
Video Group. "We're skilled in serving customers and providing them with
technical support, and we have expertise in the retailing and distribution
of our products. In terms of our ability to innovate, Bell's IPTV service -
video delivered over Internet Protocol - is currently in technical trials
and will be ready for launch shortly thereafter."
High-Speed Internet
The expansion of Bell's broadband networks will enable the next generation
of applications and content that represent new revenue opportunities for the
company.
"The development of the next generation of Internet services will be
predicated on the needs and wants of our extensive customer base," said
Charlotte Burke, Senior Vice-President, Consumer Internet Services. "As the
Internet leader in Canada and with more than 14 million users accessing our
Sympatico.MSN.ca portal every month, we have unparalleled access to deep
market knowledge and customer preferences."
A New Generation of Wireless
Bell is also the leading Canadian innovator in the wireless sector. Earlier
this week, Bell announced technical trials of the next generation of
wireless technology - known as EVDO (Evolution, Data Optimized) -
specifically designed to support high-speed wireless data applications. This
will be the fastest and most advanced wireless data network in Canada and
will change the way customers view their wireless service.
"EVDO will essentially create a high-speed Internet access for your cell
phone or personal digital assistant," said Michael Neuman, President of Bell
Mobility and Bell Distribution Inc. "Bell's EVDO network will offer Canada's
fastest wireless experience and deliver leading-edge innovation to the
market. The network will deliver up to 2.4 Mbps that will carry services
such as video streaming, e-mail and video messaging, video conferencing and
location based services." The company expects to launch EVDO beginning in
major Canadian urban centres in late 2005.
Financial Guidance:
BCE Inc. confirmed its 2004 guidance and announced 2005 guidance as
follows:
<< 2004 E Guidance 2005E Medium-Term Outlook
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Revenue Growth approx. 2% (equal or (equal or greater than) GDP greater
than) GDP
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Galileo Savings $500-600M $1B - $1.5B(a)
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EPS(b) approx. $2.00 Single Digit Growth Mid-to-High Single Digit Growth
-------------------------------------------------------------------------
Free Cash Flow(c)approx. $1B $700 - $900M Sustainable at (equal or greater
than) $1B (After restruc- turing)(d) approx. $700M
-------------------------------------------------------------------------
Bell Canada Capital Intensity(e) 18% 18 % - 19% Decrease beginning in 2006
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(a) The implementation of a new cost structure is expected to result in a $1
billion to $1.5 billion of annualized expense reduction by the end of 2006.
(b) Before net investment gains/losses, or impairment or restructuring
charges. (c) Cash from operating activities less capital expenditures, total
dividends and other investing activities (please see note one for additional
details). (d) Before the end of the year, Bell expects to pay approximately
$300 million in connection with the recently implemented employee departure
program. (e) Capital expenditures as a percentage of revenues.
"The prudent management of our capital expenditures will remain a key
priority for the company," said Siim Vanaselja, Chief Financial Officer of
BCE. "Our capital spending will focus on areas that create financial
efficiencies for the company, such as Galileo, and on revenue growth
opportunities such as those in expanding the reach and speed of broadband,
in wireless and in new services and applications. In so doing, we expect to
see continued growth in our return on invested capital."
Building on our progress
Strong subscriber growth in wireless, video and High-Speed Internet services
serves as a barometer of Bell's overall progress towards its new operating
model where the focus is on such high-growth opportunities. Expected 2005
subscriber growth for video and wireless is in the 10 to 15 per cent range,
and subscribers to high-speed Internet are expected to grow between 15 to 20
per cent. "We are encouraged by the traction our strategies for
re-positioning Bell have achieved," said Mr. Sabia. "In short, we are
entering a period when we will benefit from the strategies and foundations
put in place for the new Bell - a company defined by its strengthening
growth prospects, its ability to generate solid free cash flow which in turn
creates an attractive return for our shareholders."
Webcast/Call with media:
BCE's Business Review Conference will be webcast live beginning at 8:00 am
today from the company's website: www.bce.ca.
BCE will hold a teleconference/Webcast (audio only) for the media to discuss
financial guidance for 2005 on Wednesday, December 15, 2004 at 1:30 PM
(Eastern). Michael Sabia will be present for this media conference.
Interested participants are asked to dial (416) 405-9310 for local calls or
1 (877) 211-7911 for long distance calls at 1:30 PM. If you are disconnected
from the call, simply redial the number. If you need assistance during the
teleconference, you can reach the operator by pressing "0". This
teleconference will also be Webcast live (audio only) on our Web site at
www.bce.ca.
ABOUT BCE
Bell Canada Enterprises is Canada's largest communications company. Through
its 26 million customer connections, BCE provides the most comprehensive and
innovative suite of communication services to residential and business
customers in Canada. Under the Bell brand, the company's services include
local, long distance and wireless phone services, high speed and wireless
Internet access, IP-broadband services, value-added business solutions and
direct-to-home satellite and VDSL television services. Other BCE businesses
include Canada's premier media company, Bell Globemedia, and Telesat, a
pioneer and world leader in satellite operations and systems management. BCE
shares are listed in Canada, the United States and Europe.
This news release and the financial information herein have been reviewed by
the Board of Directors of BCE Inc.
Caution Concerning Forward-Looking Statements
Certain statements made in this press release, including, but not limited
to, financial guidance, expected growth in subscribers, anticipated cost
reductions and investments, the expected launch of new services, products
and technologies, our plans and strategies and other statements that are not
historical facts, are forward-looking statements and are subject to
important risks, uncertainties and assumptions. The results or events
predicted in these forward-looking statements may differ materially from
actual results or events. These statements do not reflect the potential
impact of any special items or of any dispositions, monetizations, mergers,
acquisitions, other business combinations or other transactions that may be
announced or that may occur after the date hereof.
Other factors that could cause results or events to differ materially from
current expectations include, among other things: our ability to complete
within our targeted timeframe, and the impact on our financial results of,
the migration of our multiple service-specific networks to a single IP-based
network; our ability to implement our strategies and plans in order to
produce the expected benefits and growth prospects, including meeting
targets for revenue growth, earnings per share, free cash flow, capital
intensity and cost reductions; general economic and market conditions and
the level of consumer confidence and spending, and the demand for, and
prices of, our products and services; the intensity of competitive activity
from both traditional and new competitors, Canadian or foreign, including
cross-platform competition, which is increasing following the introduction
of new technologies such as Voice over Internet Protocol (VoIP) which have
reduced barriers to entry that existed in the industry, and its resulting
impact on the ability to retain existing, and attract new, customers, and on
pricing strategies and financial results; the ability to improve
productivity, reduce costs and contain capital intensity while maintaining
quality of services; the ability to anticipate, and respond to, changes in
technology, industry standards and client needs and migrate to and deploy
new technologies, including VoIP, and offer new products and services
rapidly and achieve market acceptance thereof; the availability and cost of
capital required to implement our financing plans and fund capital and other
expenditures; our ability to retain major customers; our ability to find
suitable companies to acquire or to partner with; the impact of pending or
future litigation and of adverse changes in laws or regulations, including
tax laws, or in how they are interpreted, or of adverse regulatory
initiatives or proceedings, including decisions by the CRTC affecting our
ability to compete effectively, including, more specifically, decisions
concerning the regulation of VoIP services; the risk of litigation should
BCE stop funding a subsidiary or change the nature of its investment, or
dispose of all or part of its interest, in a subsidiary; the risk of
increased pension plan contributions resulting from Bell Canada's recent
early retirement program and from the risk of low returns on pension plan
assets; our ability to manage effectively labour relations, negotiate
satisfactory labour agreements, including new agreements replacing expired
labour agreements, while avoiding work stoppages, and maintain service to
customers and minimize disruptions during strikes and other work stoppages;
events affecting the functionality of our networks or of the networks of
other telecommunications carriers on which we rely to provide our services;
stock market volatility; our ability to increase the number of customers who
buy multiple products; our ability to implement the significant changes in
processes, in how we approach our markets, and in products and services,
required by our strategic direction; Canadian government action in respect
of the foreign ownership restrictions that apply to telecommunications
carriers and to broadcasting distribution undertakings; the risk that the
amount of the expected annual savings relating to Bell Canada's recent
employee voluntary departure program will be lower than anticipated due to
various factors including the incurrence of outsourcing, replacement and
other costs; and launch and in-orbit risks, including the ability to obtain
appropriate insurance coverage at favourable rates, concerning Telesat's
satellites, certain of which are used by Bell ExpressVu to provide services.
For additional information with respect to certain of these and other
factors, please refer to the Safe Harbor Notice Concerning Forward- Looking
Statements dated December 14, 2004 filed by BCE Inc. with the U.S.
Securities and Exchange Commission, under Form 6-K, and with the Canadian
securities commissions. The forward-looking statements contained in this
press release represent our expectations as of December 15, 2004 and,
accordingly, are subject to change after such date. However, we disclaim any
intention and assume no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
(1) The term "free cash flow" does not have any standardized meaning
prescribed by Canadian GAAP and is therefore unlikely to be comparable to
similar measures presented by other issuers. We define it as cash from
operating activities less capital expenditures, total dividends and other
investing activities. Free cash flow is presented on a basis that is
consistent from period to period. We consider free cash flow as an important
indicator of the financial strength and performance of our business as it
demonstrates the cash available to repay debt and reinvest in our company.
Free cash flow allows us to compare our financial performance on a
consistent basis. We believe that free cash flow is also used by certain
investors and analysts in valuing a business and its underlying assets. The
most comparable Canadian GAAP financial measure is cash from operating
activities.
The following is a reconciliation of our guidance for free cash flow to cash
from operating activities for the year ended December 31, 2004:
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Free cash flow Approximately $1 billion (approximately $700 million after
restructuring)
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Add: Capital expenditures Approximately $3.4 billion
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Total dividends Approximately $1.4 billion
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Cash from operating activities Approximately $5.8 billion (approximately
$5.5 billion after restructuring)
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For 2005, we expect to generate approximately $700 million to $900 million
in free cash flow. This amount reflects expected cash from operating
activities of approximately $5.9 billion to $6.1 billion less capital
expenditures, total dividends and other investing activities.
For further information: France Poulin, Communications, (514) 786-8033;
George Walker, Investor Relations, (514) 870-2488, Web site:
www.bce.ca To request a free copy of this
organization's annual report, please go to
http://www.newswire.ca and click on
reports@cnw.
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