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Earnings name: BCE outlines robust 2024 strategy amid restructuring

2024.02.08 19:39

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In a current earnings name, BCE Inc . (NYSE:) CEO Mirko Bibic highlighted the corporate’s sturdy monetary efficiency and strategic path for 2024. Despite exterior challenges, BCE has met its monetary targets for 2023 and is embarking on vital transformation initiatives.

The firm plans to streamline its workforce, ensuing within the elimination of 4,800 positions, and goals to cut back capital expenditures by over $1 billion within the subsequent two years.

BCE’s deal with increasing its broadband and 5G networks, coupled with digital media and tech providers, underscores its dedication to development and shareholder returns, as evidenced by a 3.1% dividend improve for 2024.

Key Takeaways

  • BCE achieved its 2023 monetary targets, with progress in broadband and 5G protection.
  • The firm plans to get rid of 4,800 jobs, saving $150 million to $200 million in 2024.
  • BCE will scale back capital expenditures by a minimum of $1 billion over two years.
  • A dividend improve of three.1% for 2024 marks the sixteenth 12 months of development.
  • BCE anticipates income and adjusted EBITDA development of 0% to 4% and 1.5% to 4.5%, respectively, in 2024.
  • Adjusted EPS is predicted to be 2% to 7% decrease, and free money circulation 3% to 11% decrease, primarily as a result of restructuring severance funds.
  • The firm maintains a powerful monetary place with $5.8 billion in liquidity and a steady web debt leverage ratio.

Company Outlook

  • BCE forecasts a metamorphosis 12 months in 2024, transitioning to a tech providers and digital media chief.
  • Revenue and adjusted EBITDA development are projected within the 0% to 4% and 1.5% to 4.5% ranges, respectively.
  • The firm expects to keep up operational momentum whereas balancing development with monetary efficiency.

Bearish Highlights

  • Higher rates of interest, inflation, and altering shopper preferences pose challenges.
  • Adjusted EPS and free money circulation are projected to be decrease as a result of restructuring prices.
  • Government insurance policies and market situations might affect funding and CapEx spending.

Bullish Highlights

  • Strong gross sales and web provides in wi-fi, and natural ARPU development have been reported.
  • Digital income within the media sector grew by 19%, with profitable partnerships and launches.
  • BCE’s sturdy liquidity and pension solvency surplus bolster its monetary stability.


  • Total promoting income within the media sector declined regardless of digital income development.
  • The anticipated lower in free money circulation as a result of severance funds and different elements.

Q&A Highlights

  • Dividend development might be assessed yearly, with a 3% improve deemed applicable for 2024.
  • Cost discount initiatives embody shifting to a single IPTV platform and leveraging AI.
  • Fixed wi-fi entry shouldn’t be seen as aggressive in areas with current fiber and top-tier cable.

BCE’s strategic plans for the approaching years contain leveraging family bundling, specializing in premium providers, and bettering buyer expertise to regulate churn. The firm has adjusted its CapEx targets as a result of regulatory environments and is prioritizing development vectors and transformation initiatives over reaching beforehand set fiber location targets. Despite scaling again on some ambitions, BCE stays dedicated to sustaining its market place and enhancing shareholder worth.

InvestingPro Insights

BCE Inc. (BCE) stays a staple within the telecommunications sector, with a market capitalization of $34.63 billion and a strategy targeted on increasing its broadband and 5G networks. As the corporate navigates by means of a transformational interval, it is necessary to contemplate numerous monetary metrics and analyst insights that would affect investor selections.

InvestingPro Data highlights a Price/Earnings (P/E) ratio of 19.82 for the final twelve months as of Q3 2023, which suggests a valuation that traders may discover affordable within the context of the {industry}. The firm has additionally proven resilience with a Gross Profit Margin of 43.03% throughout the identical interval, indicating efficient value administration relative to its revenues.

An necessary InvestingPro Tip to contemplate is that BCE has raised its dividend for 15 consecutive years, demonstrating a powerful dedication to returning worth to shareholders. This is additional substantiated by its vital dividend yield of seven.62% as of late 2023, which is engaging for income-focused traders.

For these keen on additional evaluation and insights, there are further InvestingPro Tips obtainable, comparable to the corporate’s low value volatility and its standing as a distinguished participant within the Diversified Telecommunication Services {industry}. To discover these insights intimately, think about using the coupon code SFY24 for an extra 10% off a 2-year InvestingPro+ subscription, or SFY241 for an extra 10% off a 1-year subscription.

BCE’s strategy and monetary metrics current a nuanced image for traders, mixing its lengthy historical past of dividend development with present market challenges and alternatives for growth in digital media and tech providers.

Full transcript – BCE Inc (BCE) This fall 2023:

Operator: Good morning, women and gents. Welcome to the BCE This fall 2023 Results and 2024 Guidance Conference Call. I might now like to show the assembly over to Mr. Thane Fotopoulos. Please go forward, Mr. Fotopoulos.

Thane Fotopoulos: Thank you, Matthew, and good morning, everybody, and thanks for becoming a member of our name. With me right here at the moment are Mirko Bibic, BCE’s President and CEO, and our CFO, Curtis Millen. You can discover all of our This fall disclosure paperwork together with our protected harbor discover regarding forward-looking statements for 2024 on the Investor Relations web page of the web site, which we posted earlier this morning. We have loads of materials to get by means of on the decision. However, earlier than we start, I wish to draw your consideration to our protected harbor assertion on Slide 2, reminding you that at the moment’s slide presentation and remarks made throughout the name will embody forward-looking info, and due to this fact are topic to dangers and uncertainties. Results may differ materially. We disclaim any obligation to replace forward-looking statements besides as required by legislation. Please confer with our publicly filed paperwork for extra particulars on assumptions and dangers. With that, Mirko, over to you.

Mirko Bibic: Thank you, Thane, and good morning, everybody. Our quarterly and full 12 months monetary efficiency display the soundness of our enterprise and our confirmed means to execute beneath any circumstances. The Bell crew takes pleasure in delivering what we promised, taking the required near-term actions, together with driving prices out of the enterprise and balancing development with profitability to satisfy our commitments to our clients and to our traders, whereas on the identical time, setting up the expertise, product, customer support and cultural basis that we all know will drive development within the medium to long run. Our outcomes for 2023 validate this reality as we achieved all our monetary steerage targets and maintained a steady EBITDA margin even whereas dealing with vital media promoting headwinds, unsupportive authorities and regulatory selections, and a macroeconomic surroundings, marked by greater rates of interest and sustained inflation. We additionally made tangible progress on our key strategic imperatives in 2023, exhibiting that the investments we have been making throughout each a part of our enterprise for the reason that onset of COVID are working, and these priorities stay the muse for Bell’s future success. We met our broadband fibre buildout goal, and we surpassed our cellular 5G and 5G+ protection goals. In reality, we now supply multi-gig symmetrical Internet speeds of three gigabits in 6.5 million places. That’s an enormous aggressive benefit that our cable rivals can not match throughout their whole footprints. And our efficiency and high quality hole over cable is mirrored in our Internet subscriber metrics. We additionally secured new 5G+ spectrum licenses within the not too long ago accomplished 3,800 megahertz public sale. We now have essentially the most 5G+ spectrum in Canada, acquired at a complete value that was the bottom amongst nationwide wi-fi carriers. In wi-fi, we delivered an awesome end in an more and more aggressive surroundings. We delivered a wholesome step-up in gross sales, sturdy web provides targeted on high-quality premium model buyer loadings, optimistic natural ARPU development in This fall and all year long, and importantly, we managed our promotional presents in a disciplined solution to stability development with profitability with a large enchancment in product margin in This fall. Fueled by our fibre footprint, we additionally grew broadband Internet market share, contributing to sturdy residential Internet income development of seven.1% in 2023. In specific, we stepped up share features and our competitiveness within the province of Quebec given our fibre benefit and bundling capabilities. Turning to media, digital income was up 19% and represented 35% of complete media income versus 29% final 12 months, and that is a notable outcome given present difficult promoting market situations. This can be notable given our strategic shift to digital and investments to maintain this strategy are persevering with with long-term entry to premier content material from core companions, together with Warner Bros. Discovery (NASDAQ:) and the NFL, the current introduction of ad-supported subscription tiers on Crave, and upcoming distribution on Amazon (NASDAQ:) Prime Video, which we introduced this week, in addition to the launch of addressable promoting that can allow advertisers to focus on advertisements to particular households or gadgets. We’re nicely positioned to seize an excellent greater share of {industry} digital advert market income going ahead. On the client expertise entrance, our investments in constructing the very best broadband networks, that are constantly acknowledged by third events as being the quickest, along with on-line digital assist instruments and revolutionary apps, proceed to ship higher buyer experiences. These efforts are an enormous motive why we have elevated our share of digital on-line service transactions by means of self-serve instruments to almost 70% of all digital transactions and why Bell buyer satisfaction scores proceed to enhance as mirrored within the newest report from the CCTS, which confirmed, as you realize, a 6% drop in Bell’s share of total complaints. Again, the very best efficiency amongst nationwide service suppliers for an eight consecutive 12 months. Now, on Slide 5 of our presentation, it is clear from all the information factors I simply offered that we made good progress towards our strategic imperatives in 2023. And we totally respect that our shareholders look to Bell for the security and development of our money flows. However, we should tackle various elements in our working surroundings, and that features unsupportive federal authorities insurance policies, greater rates of interest and inflation, altering shopper preferences relating to service expertise and supply, and managing by means of a basic expertise transformation. Competition and buyer expectations are additionally placing downward strain on ARPUs, requiring a extra agile and scaled-down value construction. Media firms are dealing with growing competitors from world tech gamers, an ongoing promoting recession and a declining legacy distribution enterprise. And the Canadian regulatory surroundings is marked by insurance policies on fibre resale which can be detrimental, particularly goal Bell, and a broadcasting framework that curiously nonetheless does little or no to help Canadian media firms. Because of the CRTC’s focused motion, we’re halting the elevated CapEx spending program that we have been working beneath since 2021. As a outcome, we’re notably slowing the tempo of our fibre footprint growth and we’re capping fibre speeds at 3-gigabits per second. This additionally led to $105 million much less capital being invested than deliberate for in This fall of 2023. And we intend to cut back CapEx by a minimum of an extra $1 billion over the subsequent two years, together with a minimal $500 million year-over-year lower in 2024 alone. Given the dearth of presidency and regulatory assist for the historic capital investments Bell has made for the reason that onset of COVID in 2020 and an unwillingness or incapability to stage the enjoying subject between home rivals and world tech giants, we’re additionally shifting our focus away from overly regulated elements of our enterprise in direction of key development areas the place we plan to speed up funding, comparable to cloud and safety providers, superior promoting and digital transformation, simply to call just a few. And in step with this refocusing, we’re at the moment saying the sale of 45 radio stations and the closure of 107 Source shops. To reach a panorama that is being reshaped, it is extra necessary than ever to proceed to align our working mannequin and value construction to buyer expectations and the income profile of our enterprise segments. And for these causes, we’re enterprise a major workforce restructuring initiative, our largest in practically 30 years, that can get rid of roughly 4,800 positions, together with 750 contractors or 9% of all BCE staff. This restructuring initiative will yield in-year value financial savings within the vary of $150 million to $200 million for 2024 or $250 million on an annualized foundation. Now, restructuring the enterprise isn’t a straightforward determination, but it surely’s what we have to do to simplify our group and speed up our transformation. Where doable, we’re leveraging vacant positions and pure attrition with a purpose to reduce the affect on our crew. We’ll take away overlaps and consolidate sure features throughout completely different groups, decreasing company features by 20% and over-indexing reductions in non-customer dealing with roles. While we’re eliminating positions in areas the place demand and income are declining, we’re persevering with to rent in development areas. And this restructuring program is enabled partially by our accelerated investments in automation, digitization and AI, strategic acquisitions, new partnerships and repair launches to enhance our competitiveness and innovation agenda. Given the transformation investments we have made since 2020, we’re in a greater place now to drive prices out of the enterprise. These transformation investments will proceed in 2024 and past, and so they’ll drive extra OpEx financial savings within the medium to long run than these being realized on account of at the moment’s announcement. Now, shifting to Slide 6, I wish to present some coloration for you on how we’re driving our operational transformation from a conventional telco to a tech providers and digital media chief with various examples of investments, partnerships, and initiatives we have been enterprise. In wi-fi, as we have already introduced, we have entered right into a long-term strategic partnership with Best Buy (NYSE:) Canada to rebrand, excuse me, 165 Source shops to Best Buy Express. Bell will stay accountable for retailer operations whereas Best Buy assumes duty for shopper electronics merchandising, procurement, advertising, stock possession and administration, logistics and provide chain, in addition to different assist features. Importantly, Bell will proceed to regulate all mobility and Internet gross sales. At Bell Business Markets, we have superior our capabilities in cloud computing options and digital workflow automation with the acquisition of FX Innovation final 12 months and our partnership with ServiceNow (NYSE:), the worldwide chief in digital workflow options. Our collaboration with ServiceNow creates distinctive worth for the Canadian enterprise market and can elevate the end-to-end expertise for our clients. And on the media aspect, it is about decreasing our dependence on overly-regulated companies like radio and pushing much more aggressively into digital-targeted advert platforms by means of scaling ad-supported subscription tiers on Crave, increasing addressable promoting throughout extra media properties and buying OUTFRONT Media’s Canadian out-of-home enterprise. And as I’ve talked about, we’ll distribute Crave on Amazon Prime Video channels, which is able to allow even higher Crave development trying ahead. Against the backdrop of accelerating investments in key development areas, we’re additionally laser-focused on reworking our current core enterprise. And we’re taking a look at issues like how you can construct higher and extra resilient networks, offering higher service by means of enhanced distribution channels and gross sales protection, dashing up innovation and time to market, modernizing and rationalizing our suite of merchandise, and embracing digital options and automation. And a key piece of our product modernization program is leveraging our current all fibre community to supply higher service to clients, saving cash on upkeep prices, and, in fact, decreasing our environmental footprints. We’ve made progress migrating clients and gear to our fibre community, in addition to consolidating and eradicating cables and gear not required within the subject. We’ve launched fibre migration now to 105 central places of work, transitioning 110,000 residential clients in 2023. And in 2024, copper clients in Manitoba and Atlantic Canada who want a restore might be transitioned over to fibre the place we’ve got fibre as we already do in Ontario and Quebec. We launched a brand new next-generation Fibe TV service powered by Bell’s in-house software program on an Android TV set-top field, and that importantly units the stage for a transfer to a single IPTV platform and addressable TV capabilities at scale all over the place we function. This new service is at the moment obtainable to residential clients in Atlantic Canada, and that might be rolled out, as I mentioned, to different areas throughout our footprint within the coming quarters. We’re additionally consolidating actual property, decreasing the variety of distributors we take care of, and really importantly, simplifying our ordering and billing expertise platforms by shifting all core shopper merchandise to a single billing structure. This has now been launched at scale to 1.3 million clients in Ontario and Quebec, and we’ll proceed emigrate extra clients on the brand new billing platform because the 12 months progresses. Each of those packages, and I’ve given you many examples, every of them will drive development, higher serve clients, and take prices out of the enterprise. Importantly, they’re going to assist a stronger EBITDA development trajectory, margin accretion and free money circulation growth within the years forward, and that is going to assist assist our dividend development goal. And that brings me to Slide 7 and our dividend announcement for this morning. We’re growing the BCE frequent share dividend by 3.1% for 2024. It’s our sixteenth 12 months of uninterrupted development, demonstrating our unwavering dedication to dividend development. Dividend development stays central to our worth proposition and we’ll proceed to prioritize it in our capital allocation. And it’s obvious from our dividend yield that, right now, BCE share value shouldn’t be being rewarded for the upper 5% dividend development profile. We respect that our shareholders desire a steady and a rising dividend, and we’re delivering on that expectation. The 3.1% improve for this 12 months, 2024, will enable us to raised stability capital allocation priorities with the final word goal of getting our payout ratio under 100%, and that gives us further monetary flexibility on the identical time, given the upper rate of interest surroundings, vital workforce restructuring we’re enterprise and the acceleration of our Techco transformation that can function the long run catalyst to development and ship the monetary outcomes that we proceed to ship for our traders and which you can proceed to count on from us. And on that, I’ll flip it over to Curtis.

Curtis Millen: Thank you, Mirko, and good morning, everybody. I’ll start on Slide 9 with BCE’s consolidated monetary outcomes. We had a powerful quarter to finish the 12 months with 5.3% greater adjusted EBITDA that drove a 1.9 level improve in margin to 39.7%, and seven% adjusted EPS development. This EBITDA outcome was achieved regardless of ongoing media promoting headwinds and a step-up in shopper promotional supply depth and moderated service income development this quarter. Regarding CapEx, because of the deceleration of our fibre community buildout within the again half of the 12 months, CapEx was down $609 million in full 12 months 2023. As Mirko identified, we decreased deliberate capital funding by an extra $105 million in This fall as a direct results of the CRTC’s fibre resale determination. Our sturdy EBITDA development, substantial CapEx discount, decrease money taxes and the optimistic change in working capital, that we had signaled to the Street all year long, drove a $913 million year-over-year optimistic swing in This fall free money circulation. Turning to Bell CTS (NYSE:) on Slide 10, beginning with a high-level abstract of This fall subscriber metrics. Overall, I might say that we’re doing an excellent job in wi-fi, hanging a wholesome stability between quantity development, acquisition value, and ARPU. We delivered a document quarter for postpaid cell phone gross activations that drove 128,715 new web subscribers. This outcome, which contains our second highest This fall for shopper postpaid web provides after final 12 months, was achieved even with a better variety of switchers, reflecting aggressive presents from our rivals that we selected to match selectively. This disciplined strategy was mirrored in our promotional presents the place handset subsidies had been on common 32% decrease than they had been in ’22, driving a major enchancment in wi-fi product margin. Wireless ARPU was up 0.4% this quarter, pushed by our deal with premium 5G subscriber loadings and additional development in outbound roaming, an awesome end in gentle of the extra aggressive fee plan presents throughout the Black Friday and December vacation gross sales interval, demonstrating our reliance on community high quality and distribution energy moderately than promotional discounting to drive worthwhile subscriber development. Switching to our industry-leading broadband section. Bell Internet added 55,591 complete new web retail subscribers, our second-best This fall end in practically twenty years. And on the TV aspect of issues, we added 23,537 web IPTV subs, which is roughly 17,000 decrease versus This fall of 2022. This was an anticipated outcome as our outcome final 12 months benefited from a major variety of buyer activations, pushed by the World Cup. Moving to Bell CTS financials. This is an excellent set of outcomes to finish the 12 months. Top-line income grew a good 1.7% in This fall. This was achieved regardless of ongoing legacy declines, a troublesome year-over-year comp for enterprise product gross sales, and a richer residential service bundle reductions, reflecting a extra intense promotions market in comparison with final 12 months. Total shopper wi-fi income elevated 5.5%, cashing in on a better gross sales mixture of premium cellphones on the product aspect and optimistic ARPU development on the service aspect. Residential Internet income was up 5.4%. CTS income additionally benefited from greater gross sales of safety and cloud-focused managed {and professional} service options to companies, in addition to the monetary contribution from our acquisition of FX Innovation in June. The mixed affect of continued shopper energy throughout our wi-fi residential dwelling providers, along with improved enterprise wireline outcomes, higher wi-fi promotional supply self-discipline and decrease weather-related value pressures drove sturdy EBITDA development of 4.8%. Clearly, this can be a monetary spotlight for This fall. On to Slide 11. Bell Media continued its digital income development, and in combination, carried out higher than we anticipated throughout the quarter. Digital revenues had been up 27% over final 12 months. Underpinning this outcome was Crave, which grew direct streaming subscribers by 14% on the again of market-leading content material, in addition to continued sturdy development of our SAM TV gross sales device, which noticed a 70% improve in gross sales in This fall. Despite sturdy digital advert development within the quarter, complete advert income was down 13.7%, as advertiser spending, notably for TV, continued to be impacted by the economic system and now resolved Hollywood strikes. Furthermore, income generated in This fall 2022 from the World Cup contributed to the year-over-year decline. Normalizing for the World Cup, advert income web of displacements was down 9%. That efficiency is best than our friends, which is a testomony to Bell Media’s programming energy, diversified mixture of property and targeted execution of our digital-first strategy. Despite the unfavorable income backdrop, EBITDA elevated 14.7% in This fall. This outcome was supported by the favorable affect of assorted restructuring initiatives undertaken in ’23 to assist right-size our value construction and asset portfolio, together with decrease TV programming prices because of the Hollywood strikes and final 12 months’s World Cup broadcasts. I’ll now flip to our 2024 monetary outlook, beginning with income and EBITDA on Slide 13. Based on the most recent financial forecasts and {industry} outlooks, our income and adjusted EBITDA development ranges for ’24 think about potential recessionary dangers, aggressive pricing pressures and enterprise product gross sales lumpiness. Additionally, our strategic distribution partnership with Best Buy Canada will see the elimination of roughly $300 million in largely shopper electronics income from our consolidated ends in 2024. The affect on EBITDA is not going to be materials given comparatively low margin for shopper electronics. As a outcome, we’re setting our steerage development ranges for 2024 at 0% to 4% for complete income and 1.5% to 4.5% for adjusted EBITDA. Given this outlook and benefiting from the price financial savings we count on to understand from the transformation initiatives that Mirko outlined earlier, together with a 9% discount in our workforce, we predict BCE’s margin for 2024 to stay, at a minimal, steady year-over-year. And notably, in case you exclude the monetary affect of the Best Buy transaction, our goal guided ranges are in step with final 12 months, exhibiting the relative stability of our enterprise and the boldness we’ve got in our confirmed means to execute beneath any circumstance. Underpinning this regular development is our continued deal with premium cell phone subs with elevated emphasis on market development, as we capitalize on our wi-fi community management, ongoing 5G improve cycle and robust immigration efforts. We additionally plan to proceed profitable the house by leveraging our industry-leading symmetrical Internet pace benefit over cable, delivering the very best buyer expertise with our merchandise and driving better cross-sell penetration of upper worth mobility and Internet households. In our B2B sector, our goal is to construct on our momentum from 2023 by accelerating development in cloud, safety and workflow automation options within the giant enterprise area, whereas additionally increasing key channels and leveraging our fibre footprint in SMB. At Bell Media, though the timing of an promoting restoration stays unsure, we’ll proceed to drive superior promoting, digital merchandise like Crave, in addition to new distribution initiatives comparable to Crave’s partnership with Amazon to additional develop our market share of digital advert spend. These digital alternatives, along with the monetary contribution from our pending acquisition of OUTFRONT Media and restructuring value financial savings, ought to drive improved Media monetary efficiency in 2024. Moving to Slide 14, regardless of development in EBITDA, we challenge adjusted EPS to be within the vary of $2.98 to $3.13 per share in 2024, or 2% to 7% decrease versus final 12 months. This year-over-year decline may be attributed largely to an approximate $200 million step-up in curiosity expense as a result of greater charges and extra debt excellent from investments in our development strategy, an estimated $100 million improve in depreciation and amortization expense, in step with the expansion in our broadband community capital asset base, greater pension financing value and features on the sale of actual property realized in 2023 associated to our multiyear consolidation and conversion program that totaled $67 million or $0.05 per share. Turning to Slide 15, we count on to generate $2.8 billion to $3.05 billion of free money circulation in 2024. This is 3% to 11% decrease in comparison with 2023 and displays round $400 million in one-time severance funds associated to the 4,800 worker reductions that Mirko detailed. Normalizing for the severance funds related to our introduced workforce restructuring initiatives in 2023 and 2024, free money circulation development is within the vary of 0% to 7% this 12 months, offering assist for the three.1% dividend improve we declared this morning. This underlying development in free money circulation is the results of greater year-over-year EBITDA and a $500 million lower in CapEx that can drive our capital depth ratio of 16.5% or much less in 2024. Although we’ve got at the moment budgeted roughly $4.1 billion in CapEx spending for 2024, this quantity can probably be even decrease relying on authorities coverage selections throughout the course of the 12 months that will additional disincentivize funding. 2024 free money circulation additionally displays greater curiosity paid, steady to greater money taxes, because the federal authorities’s accelerated CCA program is phasing out starting this 12 months, and decrease projected money from working capital. This working capital drag is attributable primarily to the numerous enhancements in AR and stock ranges realized in ’23, which normalize following substantial COVID and provide chain impacts in 2022, in addition to potential recessionary impacts on buyer collections that will materialize with a tougher financial touchdown. Moving to Slide 16, as we start the 12 months, we’re in a really sturdy monetary place. We have entry to $5.8 billion of liquidity and a stability sheet with a large pension solvency surplus totaling $3.6 billion, which offers good total monetary flexibility to execute on our marketing strategy and strategic priorities for 2024. Our web debt leverage ratio at just below 3.5 occasions adjusted EBITDA, as a result of a number of years of generational CapEx spending and important spectrum investments, is projected to stay roughly steady this 12 months. Our debt capital construction additionally stays very nicely structured with a mean time period to maturity of roughly 12 years, an after-tax value of borrowing that’s under prevailing rates of interest at round 3%, and a floating rate of interest publicity that’s under our historic goal vary of 20% to 30%. At these ranges, along with no materials debt refinancing necessities till Q1 2025, rates of interest which can be anticipated to ease and entry to lower-cost short-term financing choices, we may be opportunistic in accessing the debt capital markets this 12 months if market situations are favorable to pre-fund upcoming maturities and mitigate rate of interest pressures. Lastly, I needed to notice that capital leases are anticipated to start declining this 12 months, having reached a peak in 2023, which is able to drive decrease principal repayments starting in 2025. To conclude on Slide 17, 2024 is a vital transformation 12 months for Bell. It’s a 12 months the place we glance to keep up operational momentum whereas balancing development with monetary efficiency as we proceed our transition to a tech providers and digital media chief. Within that context, the steerage targets we’re offering at the moment are applicable given the present financial, aggressive and regulatory backdrops, whereas additionally reflecting the impacts of our workforce restructuring and different transformation initiatives that can higher place the corporate for future development and monetary success. I’ll now flip the decision again over to Thane and the operator to start Q&A.

Thane Fotopoulos: Thanks, Curtis. So given the quantity of knowledge we offered this morning, I’m delicate to the time we’ve got left for Q&A, so I might please ask that you simply restrict your self to at least one query, so we will get to all people within the queue. With that, Matthew, we’re able to take our first query.

Operator: Thank you. The first query is from Maher Yaghi from Scotiabank. Please go forward.

Maher Yaghi: Thank you for taking my query. Believe it or not, I will not ask you about This fall or 2024. I feel we have to talk about the elephant within the room right here. One cannot fulfill the regulatory surroundings when taking a look at pricing strain hitting Canadian telcos on each wi-fi and wireline. I imply, we’ve got seen related points within the Canadian broadcasting {industry} as a result of gradual evolution on regulation. Mirko, I needed to ask you, is your telecom service in Canada liable to seeing related long-term profitability points if regulation continues to lag technological developments? Underlying my query is that this query, past 2024, ought to we count on future years to see further materials value reductions to proceed to remain forward of those regulatory pressures? Thank you.

Mirko Bibic: Thanks, Maher. Thanks for that query. It’s rather a lot there. Let me begin with, I wish to reemphasize what I began with in my opening remarks. We proceed to ship sturdy outcomes every quarter, and that is as a result of we’re at all times planning forward. So, we had been making investments in 2020, 2021 to get us ready the place we may ship sturdy ends in 2023. And we’re persevering with to try this, at all times plan for the surroundings that is round us now and the place we count on it to go. And that is form of the place your query goes. So, that could possibly be expertise, that could possibly be form of macroeconomic, buyer expectations, clearly, matter rather a lot, aggressive surroundings and considerably regulatory. So, I imply — okay, in case you take a look at our free money circulation information — sorry, our CapEx steerage for 2024, we are saying much less — 16.5% capital depth ratio or much less. And we are saying that we’re form of decreasing CapEx by a minimum of $1 billion over the subsequent two years and the — or much less. And the a minimum of is principally saying if it will get worse on the regulatory entrance when it comes to a few of these guidelines that we all know very nicely, fibre entry, on this specific case, we are going to do extra, and that could possibly be reducing investments in these areas with out — after which redirecting monies to development CapEx and transformation CapEx, and it could possibly be extra restructuring, for certain. Like, the 16.5% capital depth ratio is about $4.1 billion of CapEx deliberate for this 12 months. And sadly, I had truly thought that we would be at $4.1 billion in 2026, not in 2024 or 2025, after we had been form of anticipating to construct to 9 million fibre places by the top of 2025. So, we have pulled our spending in sooner than deliberate, particularly due to the regulatory guidelines and federal public insurance policies. We received to name these out as nicely. And within the midterm, we will function this firm under that capital depth, Maher, given the work we’re doing now on our development and our transformation agenda. I will not relist them. I went at size at them on — in my opening remarks. So, now let’s return. On fibre, essentially, why — the query we’ve got to ask ourselves is why proceed to take a position on the tempo that we did in 2020, 2021, 2022 and 2023 if we will make investments which can be going to complement the shareholders of our main incumbent telcos and cablecos. I imply, you bought to ask your self sooner or later, why do not we simply form of journey on their networks, proper? But finally, that will be a horrible consequence for resiliency, community competitors, value competitors, et cetera. So, yeah, the lengthy reply — brief reply is there could possibly be extra to return, relying on the place this goes. And you did not deal with media in your query an excessive amount of, aside from calling out form of what’s been a gradual evolution within the broadcasting surroundings on regulatory. But, I imply, give it some thought. We’ve been speaking concerning the want for a similar guidelines for all in broadcasting, home and worldwide rivals for years and we have nonetheless gotten nowhere. We truly had the renewal of our TV licenses till 2026 with out significant prior session, although we’re mired in an advert recession and an existential media {industry} disaster. We have the CBC that has better flexibility on their information obligations than we do, although we have made it very public that we lose $40 million a 12 months on information. Like, we wish to ship information, however we wish to discover a solution to make this work. So, the checklist can go on, however I’ll cease there.

Maher Yaghi: Thank you.

Operator: Thank you. The subsequent query is from David Barden from Bank of America. Please go forward.

David Barden: Hey, guys, thanks a lot for taking the query. I suppose, perhaps, Curtis, I feel the free money circulation information was most likely the most important shock. I simply wish to be certain that I’m interested by this appropriately. If we do a free money circulation stroll from 2023, beginning at $3.14 billion and we add a $500 million CapEx discount tailwind, we add a $300 million midpoint steerage EBITDA improve and we subtract the $400 million of severance, after which we subtract $300 million of upper curiosity expense, we get to about $3.25 billion. So that implies that there is a minimum of a [$0.25 billion] (ph) extra incremental stuff, I suppose that will be taxes and dealing capital. Could you form of tackle the hole there? And I apologize to Thane for asking a associated query, which is that if your free money circulation is $3 billion and your frequent dividend is $3.5 billion and your most well-liked dividends are $200 million, we have a reasonably large hole there. When can we shut it? Thanks.

Curtis Millen: Great. Thanks for the query, David. So finally, we proceed to drive free money circulation development whereas we’re funding generational investments in our community. There are development initiatives that Mirko talked about that we’re funding, that is cloud and safety providers and all of the digital transformation initiatives. As Mirko mentioned, we had been trying to spend greater than $4.1 billion, however $4.1 billion nonetheless stays a reasonably vital stage of funding. I’d say it isn’t a shock. 2024 is a transformational 12 months given the dimensions of our workforce discount. So that is $400 million of severance. That’s an distinctive one-time drag on free money circulation. As you talked about, I imply, there are a few one-time timing points right here when it comes to working cap, driving some strain in 2024. One instance is we’re constructing out broadband — fibre and broadband [sub-seg] (ph) areas. So, we incur these prices after which we get refunded by the federal government. But there’s a timing hole there. Again, it is only a matter of time, we do get the cash again, but it surely causes a strain in 2024. And then, once more, as you famous, curiosity paid is sort of a step-up this 12 months, given rates of interest and the larger stability sheet. So, there are a handful of shifting items. But finally, we’re fairly assured in our means to drive free money circulation development. And our dividend at this stage is supported by the free money circulation development we will push ahead this 12 months.

David Barden: Thanks.

Operator: Thank you. The subsequent query is from Stephanie Price from CIBC World Markets. Please go forward.

Stephanie Price: Good morning. Thank you. Just following up on the final query, I hoped you would speak somewhat bit concerning the longer-term outlook for dividend development. Do you see 3% as the brand new regular right here, or is it extra of a near-term affect from the restructuring? How ought to we take into consideration dividend development going ahead?

Mirko Bibic: We’ll assess that, Stephanie. Hi, it is Mirko. We’ll assess that 12 months by 12 months, in fact. Look, we’re at all times going to make use of funds obtainable to us in a balanced method according to the priorities I outlined in my opening remarks. So, dividend development stays primary this 12 months. For this 12 months, the three% is totally applicable, notably given the place our dividend yield sits at proper now. And then, we’ll at all times stability that towards the expansion CapEx that I’ve talked about, the transformation CapEx I’ve talked about. There may be some smaller-scale M&A alternatives that come up. They typically do. So that’ll be how we line up our priorities and we’ll reassess it once more subsequent 12 months. But I’d say 3% is a stable bump on this surroundings and it is nonetheless aggressive with our peer group.

Stephanie Price: Thank you very a lot.

Operator: Thank you. The subsequent query is from Drew McReynolds from RBC Capital Markets. Please go forward.

Drew McReynolds: Yeah. Thanks very a lot. Good morning. So, Mirko, with respect to a few of the top-line uncertainty, whether or not it is in your management, however loads of it isn’t in your management, together with regulatory. Certainly from our perspective, reducing the price to serve turns into a reasonably large protector and driver of EBITDA and free money circulation development. And I feel you’ve got alluded to that definitely in your opening feedback. Can you simply communicate to the way you’re reducing the price to serve form of programming — program past 2024, and in that, simply the place do you form of stand on copper decommissioning for this 12 months, and what ought to we count on over the subsequent few years? Thank you.

Mirko Bibic: Yeah. Thank you for the query. So once more, as we line up how we will spell — spend our capital most effectively, you bought form of dividends on one aspect, then, yeah, you bought community growth, which sadly is at a considerably decreased tempo, however that’ll proceed. And then, it is a query of allocating the remaining as between form of, what I’ve been calling this morning, the expansion CapEx and the transformation CapEx and the right combination there. And as we make investments extra within the transformation of Bell, we’re capable of get extra environment friendly with our CapEx {dollars} over time, and naturally, drive prices out of the enterprise and drive development. So, some examples, and I’m repeating somewhat bit what I mentioned in my opening remarks, but it surely’s necessary. Moving core shopper merchandise to single ordering and billing structure is — I imply, has so many advantages; a extra comprehensible invoice, a greater buyer expertise, clearly, you solely have one structure to handle, not a number of billers to handle, fewer handbook kick outs, which suggests fewer folks needing to supervise billing and fewer — shorter time to market while you wish to make changes. So that is one thing we had been actually targeted on for the final a number of years. And fortunately, mid final 12 months, we had been capable of begin migrating clients. We’re going to proceed to put money into our digital apps. We’ve been speaking about that for a number of years now and it retains getting higher. Customer self-install continues to scale, particularly the place we — clearly, the place we’ve got fibre. AI and generative AI are large alternatives that we will harness at — extra meaningfully in 2024 and particularly past. On the copper decommissioning, as much as 105 central places of work, as I discussed, and that is going to continue to grow over time. We’ve received too many legacy merchandise, particularly within the enterprise aspect, and we will rationalize that, and that is going to form of make us leaner and higher. I highlighted in my opening remarks the transfer to a single IPTV platform that has a number of advantages. Better product, higher clients expertise, that is one. A single Fibe TV structure throughout our whole working territory. We’re not going to have three or 4 Fibe TV providers, which we at the moment do. So, large value financial savings there. And on the expansion aspect of that’s the addressable TV capabilities which can be going to drive digital promoting income for Bell Media. So, that one there has a number of advantages, from higher buyer expertise, the higher digital advert capabilities to decrease value construction. Real property, at all times taking a look at that. We’re consolidating our distributors, managing our provide preparations very rigorously, standardizing contractor charges, in-sourcing the place we will, terminating some long-term partnerships that we have had, a few of which have been public. Like, these are all of the issues that we’re doing to drive prices out of the enterprise and really allow higher development.

Drew McReynolds: Comprehensive checklist. Thanks for that.

Operator: Thank you. The subsequent query is from Simon Flannery from Morgan Stanley. Please go forward.

Simon Flannery: Great. Thank you very a lot. Good morning. I needed to only speak concerning the macro if I may for a minute. You talked just a few occasions about potential recession being included in your steerage. And I wish to actually see what you had been seeing on the bottom at the moment. I feel you talked about greater enterprise disconnects, in addition to some lengthening of payable cycles and so forth. So, to what extent are you being cautious right here, otherwise you’re truly beginning to see some indicators? Obviously, you’ve got talked rather a lot about media, however extra within the communication aspect of the enterprise? Thanks.

Mirko Bibic: Right. Okay. So, look, our steerage on income and EBITDA are just about in-line with earlier years, however for the affect of the Best Buy transaction on product revenues. So, I imply, that is one factor I’d say proper off the highest. So, we’re balancing form of what we see as and the macro surroundings, but additionally the areas the place we have finished fairly nicely, whether or not or not it would be Internet or wi-fi loadings. We’re seeing on the enterprise aspect fairly sturdy service income development and form of what we name the expansion verticals, cloud service resolution, safety, automation, digitization, that form of work that we do for our clients. Actually, we noticed fairly sturdy natural options income development at Bell Business Markets. And, in fact, then that is excluding the affect of FXI, which can be going to going to develop. So, I feel on the enterprise aspect, it is a query of continuous to keep up our place in our core enterprise, the form of the legacy enterprise whereas taking prices out of that enterprise, persevering with to harness the expansion that we’re seeing on form of the brand new options and bettering the client expertise, that will be the — what we’re attempting to do on the enterprise aspect. In the small enterprise section, we’re not likely seeing an excessive amount of downsizing and rationalizing, or an excessive amount of of a rise in enterprise closures. But like I mentioned in earlier quarters, we’re monitoring that rigorously. And then, on the wi-fi aspect, I’d say, buyer fee patterns are okay. We have not seen a fabric change, however once more, worthy of additional monitoring, and the surroundings stays fairly aggressive. But I’ve to say I used to be fairly happy in This fall with how we managed the competitiveness. Like, we did a very nice job leveraging our premium model strategy to load clients on the higher community at greater ARPUs, and you may see that in our natural ARPU development, and we have used the flanker, Virgin specifically, to raised section the client base and serve the worth section. So, we’re resisting dropping value on the premium model for the sake of claiming that we’re loading clients on the premium model. So, I imply, I feel there’s nonetheless some upside there on the wi-fi aspect, and naturally on Internet.

Simon Flannery: Great. Thanks rather a lot.

Operator: Thank you. The subsequent query is from Tim Casey from BMO Capital Markets. Please go forward.

Tim Casey: Thanks. Curtis, can we return to your walkdown on free money circulation and your touch upon working capital? Are you implying there is a aid coming in 2025? Because you are speaking about these working capital objects being one time in nature. I imply, I simply assume individuals are battling the walkdown on this and the way you find yourself with free money circulation guiding under $3 billion. Thanks.

Curtis Millen: Yeah. Thanks for the query, Tim. I feel there are a few issues, and a few of these issues, sadly, will take a couple of 12 months to normalize out. I imply, in case you’re trying on the one which I discussed when it comes to authorities subsidy construct, so we’ll be constructing out over the subsequent couple of years, after which the 2 years after that, it swings in our favor. Another one I’d point out, so in ’23, as provide chain normalize, our AR, excuse me, so receivables and stock ranges got here down fairly considerably, however that creates a year-over-year strain the place there is not any incremental or restricted incremental enchancment year-over-year. So, it was a win in ’23, but it surely’s already regular in ’23, so there is not any incremental win in ’24.

Tim Casey: Thank you.

Operator: Thank you. The subsequent query is from Jerome Dubreuil from Desjardins Securities. Please go forward.

Jerome Dubreuil: Hi, thanks. Good morning. One on community convergence. You do have a excessive stage of overlap between your wi-fi and wireline networks, however you are not 100%. We’re seeing rivals making strides and placing extra deal with mounted wi-fi, even in city areas. Is this one thing you’re more and more contemplating, or are you cheerful along with your present addressable market? And perhaps, additionally, is that this doable within the context of community sharing settlement? Thank you.

Mirko Bibic: Hey, Jerome. We’ve had a set wi-fi product in market since 2018, and we had a reasonably aggressive construct goal initially, which we needed to cut back due to some common regulatory outcomes after which solid forward once more when the regulatory guidelines received somewhat bit higher in 2019 and ’20. By the way in which, one other — it exhibits how regulatory selections do matter. But we’ve got a reasonably sizable addressable market with mounted wi-fi. We’ve been promoting our merchandise since 2018. We proceed to improve it, and it really works in rural the place you do not — very nicely in rural the place you do not have fibre or DOCSIS cable. It’s my view mounted wi-fi entry won’t ever be aggressive the place there’s fibre and top-tier cable. And then, in rural areas, you even have to understand, in comparison with 2018, there’s now Starlink as an choice for purchasers. So, lengthy solution to say, I’m pleased with the place we’re with our addressable market on mounted wi-fi entry, and the way that product carried out particularly originally after we launched.

Jerome Dubreuil: Thank you.

Operator: Thank you. The subsequent query is from Aravinda Galappatthige from Canaccord Genuity. Please go forward.

Aravinda Galappatthige: Good morning. Thanks for taking my query. It’s on the adjusted EBITDA information, 1.5% to 4.5%. Just needed to know kind of the decrease finish there. I imply, there’s clearly the advantage of the acquisition in media after which the $150 million to $200 million interprets to someplace between 1.5% to 2% roughly. Is it that maybe you due to the advert situations you are assuming a steeper decline in media, is that what kind of dragging down that low finish? I needed to know the low finish of that vary somewhat bit higher. Thanks.

Curtis Millen: Yeah. Hi, Aravinda. Thanks in your query. I imply, the straightforward reply is it is the identical steerage as final 12 months, however for the adjustment on the low finish, which takes into consideration the vary of $150 million to $200 million of value financial savings. So that $50 million vary there pushed by our workforce discount. So, in-line with final 12 months’s steerage vary.

Aravinda Galappatthige: Okay. But then, I imply, the acquisition clearly provides about [half a turn] (ph), is not that case? 0.5%?

Curtis Millen: Yeah. So, you are speaking about OUTFRONT. Yeah, OUTFRONT hasn’t closed but. So, you are proper, there is a little bit of a stability right here between advert market restoration and potential closing of the acquisition.

Aravinda Galappatthige: Okay. Thanks.

Operator: Thank you. The subsequent query is from Batya Levi from UBS. Please go forward.

Unidentified Analyst: Good morning. This is Chris for Batya. Just digging into the postpaid telephone churn outcome, any coloration you may give on the efficiency you are seeing by geography and whether or not the extent of competitors has been constant throughout areas? And any early coloration you may be capable to present on 1Q? Has the extent of switching depth eased thus far in January? Thanks.

Mirko Bibic: Yeah. So, look on churn, we’re not sitting idly by. Like, we have to look at this very rigorously. It has gone up. It feels much more clearly like pre-COVID than it has within the final a number of years. So, what we will do is proceed to leverage our family bundling strategy the place we have been fairly efficient over the past couple of years, together with in 2023, deal with the premium loadings in the way in which I instructed a few questions in the past, proceed to enhance buyer expertise. I feel that frequent billing platform I’ve talked about goes to assist. We’re going to make use of Crave fairly strategically. And these are the issues that we will do to make it possible for churn stays beneath management, but it surely needs to be checked out fairly critically, and that is what we will be searching for. Now, if we glance again at This fall, you may see how diligent we had been, proper? We managed to ship document gross sales, sturdy service development, stable nets, natural ARPU development, considerably higher product margin, and principally, we did not should overspend to ship form of the stable outcomes we did. So once more, it is at all times about balancing the spend on the share you acquire whereas ensuring that you simply’re doing all the correct issues tactically to maintain churn in test.

Unidentified Analyst: Okay. Thank you.

Thane Fotopoulos: Yeah. Matthew, we’re beginning to outing. So, this might be our final query.

Operator: Perfect. Thank you. The subsequent query is from David McFadgen from Cormark Securities. Please go forward.

David McFadgen: Okay. Thanks for squeezing me in. Just a query on the CapEx. I do know just like the regulatory selections which were made, however do not the monetary metrics simply pressure you to chop CapEx anyhow? If you wish to get all the way down to 100% payout ratio and you need to pay $400 million in severance, $300 million in greater curiosity expense, would not that simply form of pressure your hand to decrease the CapEx anyhow? And now with the decrease CapEx, when would you count on to succeed in the 9 million houses?

Mirko Bibic: Well, no. We outlined two years in the past on 2021 that our purpose was to hit 9 million fibre places, and we signaled fairly clearly and constantly to shareholders that consequently, we had been going to function at an elevated payout ratio, but it surely was the correct factor to do on the time given the surroundings for the long-term strategic advantage of shareholders. But that was finished within the context of the regulatory surroundings we had in entrance of us then. So, we’re decreasing CapEx as a direct results of the regulatory surroundings, as a result of we had clearly signaled that we had been going to function on the elevated payout ratio, as a result of, once more, we’re at all times managing for form of in-year, however we’re additionally managing for the long run. And we’re — we will at all times at $4.1 billion of CapEx in comparison with $4.6 billion, clearly, it is a discount, however we get to decide on the place to spend that $4.1 billion, proper? And we have chosen to deemphasize fibre and deal with different development vectors and transformation. So, even throughout the decreased CapEx funds for 2024, there are allocation selections which can be completely in our management.

David McFadgen: Okay. All proper. Thank you.

Operator: Thank you. There are not any additional questions right now. I might now like to show the assembly over to Mr. Fotopoulos.

Thane Fotopoulos: Thank you, Matthew. So, thanks once more in your participation this morning. As typical, Richard and I might be obtainable all through the day for follow-up questions and clarifications. On that, have an awesome day. Thank you.

Operator: The convention has now ended. Please disconnect your traces right now, and we thanks in your participation.

This article was generated with the assist of AI and reviewed by an editor. For extra info see our T&C.

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