SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Bce Inc – ‘6-K’ for 11/1/18 – ‘EX-99.1’

On:  Thursday, 11/1/18, at 2:22pm ET   ·   For:  11/1/18   ·   Accession #:  718940-18-31   ·   File #:  1-08481

Previous ‘6-K’:  ‘6-K’ on / for 10/17/18   ·   Next:  ‘6-K’ on / for 1/9/19   ·   Latest:  ‘6-K’ on / for 5/2/24

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of                Filer                Filing    For·On·As Docs:Size

11/01/18  Bce Inc                           6-K        11/01/18    7:4.9M

Document/Exhibit                   Description                      Pages   Size 

 1: 6-K         Current Report by a Foreign Private Issuer --       HTML     10K 
                          form6k                                                 
 2: EX-99.1     Bce Inc. 2018 Third Quarter Shareholder Report      HTML    989K 
 3: EX-99.2     Supplementary Financial Information - Third         HTML    634K 
                          Quarter 2018                                           
 4: EX-99.3     CEO CFO Certifications                              HTML     15K 
 5: EX-99.4     News Release                                        HTML     77K 
 6: EX-99.5     Bell Canada Unaudited Selected Summary Financial    HTML     32K 
                          Information                                            
 7: EX-99.6     Exhibit to 2018 Third Quarter Financial Statements  HTML      6K 
                          - Earnings Coverage                                    

Exhibit 99.1

In this management’s discussion and analysis of financial condition and results of operations (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates. MTS means, as the context may require, until March 17, 2017, either Manitoba Telecom Services Inc. or, collectively, Manitoba Telecom Services Inc. and its subsidiaries; and Bell MTS means, from March 17, 2017, the combined operations of MTS and Bell Canada in Manitoba.

All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) on pages 34 to 36 for a list of defined non-GAAP financial measures and KPIs.

Please refer to BCE’s unaudited consolidated financial statements for the third quarter of 2018 (Q3 2018 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2017 dated March 8, 2018 (BCE 2017 Annual MD&A) as updated in BCE’s MD&A for the first quarter of 2018 dated May 2, 2018 (BCE 2018 First Quarter MD&A) and BCE’s MD&A for the second quarter of 2018 dated August 1, 2018 (BCE 2018 Second Quarter MD&A). In preparing this MD&A, we have taken into account information available to us up to October 31, 2018, the date of this MD&A, unless otherwise stated.

As required by International Financial Reporting Standards (IFRS), effective January 1, 2018, we have adopted IFRS 15, Revenue from Contracts with Customers, as described in section 8.1, Our accounting policies, retrospectively to each period in 2017 previously reported. We have also reclassified some amounts from previous periods to make them consistent with the presentation for the current period. As a result of the adoption of IFRS 15, we have also updated certain of our assumptions set out in the BCE 2017 Annual MD&A.

You will find more information about us, including BCE’s annual information form for the year ended December 31, 2017 dated March 8, 2018 (BCE 2017 AIF) and recent financial reports, including the BCE 2017 Annual MD&A, the BCE 2018 First Quarter MD&A and the BCE 2018 Second Quarter MD&A, on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.

This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q3) and nine months (YTD) ended September 30, 2018 and 2017.

This MD&A, and in particular, but without limitation, the section and sub-sections entitled Assumptions, section 3.1, Bell Wireless – Key business developments, section 3.2, Bell Wireline – Key business developments, section 3.3, Bell Media – Key business developments, and section 6, Regulatory environment, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to our network deployment plans and related capital investments, BCE’s business outlook, objectives, plans and strategic priorities, and other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target, and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities laws and of the United States (U.S.) Private Securities Litigation Reform Act of 1995.

Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at October 31, 2018 and, accordingly, are subject to change after that date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in, or implied by, such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. Forward-looking statements are presented in this MD&A for the purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes.

We have made certain economic, market and operational assumptions in preparing the forward-looking statements contained in this MD&A and, in particular, but without limitation, the forward-looking statements contained in the previously mentioned sections of this MD&A. These assumptions include, without limitation, the assumptions described in the various sections and sub-sections of this MD&A entitled Assumptions, which section and sub-sections are incorporated by reference in this cautionary statement. We believe that our assumptions were reasonable at October 31, 2018. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect. Unless otherwise indicated in this MD&A, in the BCE 2018 First Quarter MD&A or in the BCE 2018 Second Quarter MD&A, the strategic priorities, business outlook and assumptions described in the BCE 2017 Annual MD&A remain substantially unchanged.

Important risk factors including, without limitation, competitive, regulatory, economic, financial, operational, technological and other risks that could cause actual results or events to differ materially from those expressed in, or implied by, the previously-mentioned forward looking statements and other forward-looking statements contained in this MD&A, include, but are not limited to, the risks described or referred to in section 6, Regulatory environment, and section 7, Business risks, which sections are incorporated by reference in this cautionary statement.

We caution readers that the risks described in the previously mentioned sections and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. Except as otherwise indicated by us, forward-looking 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 October 31, 2018. The financial impact of these transactions and special items can be complex and depends on facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way, or in the same way we present known risks affecting our business.

As required by IFRS, effective January 1, 2018, we have adopted IFRS 15, Revenue from Contracts with Customers, as described in section 8.1, Our accounting policies, retrospectively to each period in 2017 previously reported. We have also reclassified some amounts from previous periods to make them consistent with the presentation for the current period.

BCE Q3 2018 SELECTED QUARTERLY INFORMATION

BCE delivered revenue growth of 3.2% in Q3 2018, compared to last year, driven by higher service revenues of 1.2% reflecting a favourable contribution from all three of our segments. Product revenues grew by 18.2%, compared to last year, due to greater sales of premium wireless devices and higher equipment sales to large business customers. Wireless service revenues benefited from a continued subscriber base expansion, which was moderated by lower average revenue per user (ARPU). The growth in our wireline service revenues was driven by higher Internet and IPTV revenues, and reflected improved business markets performance from greater IP-based and business solutions services revenue, which more than offset the ongoing erosion in our legacy voice and data services. Bell Media grew both advertising and subscriber revenues in the quarter.

Net earnings increased by 2.0% in the third quarter of 2018, compared to the same period last year, due to higher adjusted EBITDA, as growing revenues more than offset an increase in operating costs, lower income taxes and lower other expense, partly offset by higher severance, acquisition and other costs, higher depreciation and amortization expense and higher finance costs.

Q3 2018 adjusted EBITDA grew by 2.2%, compared to last year, mainly driven by the service revenue flow-through, along with continued disciplined cost containment, offset in part by escalating content and programming costs.

BCE’s EPS of $0.90 in Q3 2018 remained stable compared to the same period last year.

Excluding the impact of severance, acquisition and other costs, net mark-to-market (losses) gains on derivatives used to economically hedge equity settled share-based compensation plans, net (losses) gains on investments, early debt redemption costs and impairment charges, adjusted net earnings in the third quarter of 2018 was $861 million, or $0.96 per common share, compared to $824 million, or $0.91 per common share, for the same period last year.

Cash flows from operating activities in the third quarter of 2018 decreased by $190 million, compared to Q3 2017, due mainly to a decrease in cash from working capital and higher income taxes paid, partly offset by higher adjusted EBITDA.

Free cash flow in Q3 2018 decreased by $169 million, compared to the same period last year, mainly due to lower cash flows from operating activities excluding acquisition and other costs paid, partly offset by lower capital expenditures.

MIRKO BIBIC APPOINTED AS CHIEF OPERATING OFFICER

On October 4, 2018, BCE appointed Mirko Bibic as Chief Operating Officer (COO) for BCE and Bell Canada. As Chief Operating Officer, Mr. Bibic will leverage his deep knowledge of Bell’s business and his experience in executing major corporate initiatives to lead the company’s largest customer-facing business units. Rizwan Jamal, President of Bell Residential and Small Business; Blaik Kirby, President of Bell Mobility; and Tom Little, President of Bell Business Markets report to Mr. Bibic in his role as COO. Mr. Bibic also continues to lead legal and regulatory strategy for BCE and the Bell group of companies. Mr. Bibic has been a key driver in the success of Bell’s broadband investment and innovation strategy as Executive Vice President of Corporate Development. This includes his oversight of strategic mergers and acquisitions transactions such as the acquisitions of Astral Media Inc. and MTS, Bell’s participation in multiple wireless spectrum auctions, and a wide range of other investment and partnership initiatives.

Bell also appointed Wade Oosterman as Vice Chair of BCE and Bell Canada. A highly respected leader in the Canadian communications industry, including 12 years at Bell in increasingly expansive executive roles, Mr. Oosterman assumes a senior advisory and oversight role on the Bell executive team, in addition to his existing leadership of Bell Media as Group President and his role as Bell’s Chief Brand Officer. Bell Media President Randy Lennox continues to report to Mr. Oosterman.

On August 31, 2018, Bell completed its acquisition of Axia NetMedia Corporation (Axia), the Calgary-based operator of SuperNet, the Alberta broadband network connecting thousands of provincial and municipal offices, Indigenous communities, schools, libraries, healthcare institutions, businesses and Internet service providers throughout the province, which will add approximately 10,000 kilometres of fibre capacity to our footprint.

On August 21, 2018, Bell Canada completed a public offering of $1 billion of medium term notes (MTN) debentures pursuant to its MTN program. The $1 billion Series M-48 MTN debentures will mature on August 21, 2028 and carry an annual interest rate of 3.80%. The MTN debentures are fully and unconditionally guaranteed by BCE Inc. The net proceeds of the offering were used to fund the early redemption in September 2018 of Bell Canada’s $1 billion principal amount of 3.35% Series M-25 debentures due June 18, 2019.

On September 14, 2018, Bell Canada completed a public offering of US $400 million of Series US-1 Notes (Notes). The Notes represent a re-opening of, and form a single series with, Bell Canada’s outstanding 4.464% Series US-1 Notes due 2048 in the principal amount of US $750 million that were issued on March 29, 2018. The Notes will mature on April 1, 2048 and carry an annual interest rate of 4.464%. The Notes are fully and unconditionally guaranteed by BCE Inc. The net proceeds of the offering were used to fund the early redemption in October 2018 of Bell Canada’s $200 million principal amount of 5.625% Series 8 notes due December 16, 2019, for the repayment of short-term debt and for general corporate purposes.

As at the date of this MD&A, our forward-looking statements set out in the BCE 2017 Annual MD&A, as updated or supplemented in the BCE 2018 First Quarter MD&A, in the BCE 2018 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following economic and market assumptions as well as the various assumptions referred to under the sub-sections entitled Assumptions set out in section 3, Business segment analysis of this MD&A.

ASSUMPTIONS ABOUT THE CANADIAN ECONOMY

• A gradual improvement in economic growth, given the Bank of Canada’s most recent estimated growth in Canadian gross domestic product of 2.1% in 2018, representing a slight increase from the earlier estimate of 2.0%
• Employment gains expected to slow in 2018, as the overall level of business investment is expected to remain soft
• Interest rates expected to increase modestly in 2018
• Canadian dollar expected to remain at near current levels. Further movements may be impacted by the degree of strength of the U.S. dollar, interest rates and changes in commodity prices

MARKET ASSUMPTIONS

• A higher level of wireline and wireless competition in consumer, business and wholesale markets
• Higher, but slowing, wireless industry penetration and smartphone adoption
• A soft media advertising market, due to variable demand, and continued escalation of costs to secure TV programming
• Ongoing linear TV subscriber erosion, due to growing cord-cutter and cord-never customer segments

This section provides detailed information and analysis about BCE’s performance in Q3 and YTD 2018 compared with Q3 and YTD 2017. It focuses on BCE’s consolidated operating results and provides financial information for our Bell Wireless, Bell Wireline and Bell Media business segments. For further discussion and analysis of our business segments, refer to section 3, Business segment analysis.

As required by IFRS, effective January 1, 2018, we have adopted IFRS 15, Revenue from Contracts with Customers, as described in section 8.1, Our accounting policies, retrospectively to each period in 2017 previously reported. We have also reclassified some amounts from previous periods to make them consistent with the presentation for the current period.

n.m.: not meaningful

TOTAL BCE CONNECTIONS

BCE NET ACTIVATIONS (LOSSES)

n.m.: not meaningful

BCE added 234,184 net new customer connections to its growth services in Q3 2018, a 52.9% increase over the 153,144 net new customer connections achieved in Q3 2017. This was comprised of:

• 135,323 postpaid wireless customers and 42,511 prepaid wireless customers
• 47,749 high-speed Internet customers
• 40,091 IPTV customers and 31,490 satellite TV net customer losses

In the first nine months of the year, BCE added 411,838 net new customer connections to its growth services, a 97.9% increase over the 208,128 net new customer connections achieved last year. This consisted of:

• 325,902 postpaid wireless customers and 10,795 prepaid wireless customers
• 78,212 high-speed Internet customers
• 74,317 IPTV customers and 77,388 satellite TV net customer losses

Residential NAS net losses were 74,921 in Q3 2018, and 203,119 in the first nine months of the year, increasing by 30.6% and 2.7%, respectively, over the same periods in 2017.

Total BCE customer connections across all services increased by 2.2% in Q3 2018 compared to last year, driven by an increase in our growth services customer base, moderated by ongoing erosion in residential NAS lines.

At September 30, 2018, BCE customer connections totaled 19,287,130 and consisted of the following:

• 9,487,368 wireless subscribers, up 5.3% compared to Q3 2017, and included 8,728,436 postpaid wireless subscribers, an increase of 5.9% compared to the prior year
• 3,904,304 high-speed Internet subscribers, 3.8% higher year over year
• 2,843,828 total TV subscribers, up 0.6% compared to Q3 2017, and included 1,639,233 IPTV customers, representing an increase of 8.0% year over year
• 3,051,630 residential NAS lines, a decline of 6.8% compared to Q3 2017

BCE

Total operating revenues at BCE increased by 3.2% in both Q3 2018 and in the first nine months of the year, compared to the same periods in 2017. Q3 2018 growth resulted from increases across all three of our segments. The first nine months of the year were favourably impacted by growth in both our Bell Wireless and Bell Wireline segments, while our Bell Media segment remained stable year-over-year. Service revenues of $5,117 million in Q3 2018 and $15,210 million in the first nine months of the year, grew by 1.2% and 1.8%, respectively, over the same periods last year. Product revenues of $760 million in Q3 2018 and $2,043 million in the first nine months of 2018, increased by 18.2% and 14.9%, respectively, over the same periods last year.

BELL WIRELESS

Bell Wireless operating revenues increased by 5.9% in Q3 2018 and by 6.9% for the first nine months of the year, compared to the same periods in 2017, driven by growth in both service and product revenues. Service revenues grew by 2.5% in the current quarter and by 4.0% year to date, compared to the same periods last year, due to the continued expansion of our postpaid subscriber base moderated by lower blended ARPU. The decrease in blended ARPU was driven by a decline in voice and data overages due to greater customer adoption of plans with higher usage thresholds, lower ARPU generated from the long-term mobile services contract with Shared Services Canada and the dilutive impact on blended ARPU from the continued ramp-up in prepaid customers from Lucky Mobile. The growth in year-to-date service revenues also benefited from the acquisition of MTS in March 2017, offset in part by the unfavourable retroactive impact of the Canadian Radio-television and Telecommunications Commission (CRTC) decision on wholesale wireless domestic roaming rates of $14 million. Product revenues increased by 17.2% in this quarter and by 17.3% for the first nine months of the year, compared to the same periods last year, due to increased sales of premium devices with higher retail handset prices, combined with higher sales volumes due to greater gross activations and upgrades.

BELL WIRELINE

Bell Wireline operating revenues increased by 1.9% in the third quarter of 2018 and by 2.0% in the first nine months of the year, compared to the same periods last year, attributable to service revenue growth of 0.8% and 1.6%, respectively, as well as product revenue growth of 20.1% and 9.3%, respectively. The increase in service revenues was driven by the ongoing growth in Internet and IPTV revenues, as well as greater IP-based and business solutions services revenues. This was moderated by continued erosion in our voice, satellite TV and legacy data services, combined with higher residential customer acquisition, retention and bundle discounts to match aggressive offers from cable competitors. The increase in product revenues was driven by greater demand by large business customers for telecommunications equipment, which resulted in overall revenue growth for our business markets. Year-to-date revenues were also favourably impacted by the acquisition of MTS.

BELL MEDIA

Bell Media operating revenues increased by 1.1%, in Q3 2018 and remained essentially unchanged in the first nine months of the year, compared to the same periods in 2017. This reflected higher year-over-year advertising revenues in Q3 2018, mainly from specialty TV led by the broadcast of the 2018 Fédération Internationale de Football Association (FIFA) World Cup. This more than offset the impact of overall viewership declines and the ongoing shift in customer spending to over-the-top (OTT) and digital platforms, which unfavourably impacted conventional TV and radio. The increase in subscriber revenues also favourably impacted operating revenues, mainly due to continued growth in our CraveTV and TV Everywhere GO products as well as the contribution from TSN and RDS Direct, our direct-to-consumer sports streaming services that launched in June 2018, along with rate increases to certain broadcasting distribution undertakings (BDUs), offset in part by lower subscriber levels. In the first nine months of the year, advertising revenues declined, as compared to the same period in 2017, reflecting the shift in advertising dollars in Q1 2018 to the main broadcaster of the PyeongChang 2018 Winter Olympics, moderated by higher out-of-home (OOH) advertising revenues from increased demand on digital faces.

BCE

Total BCE operating costs increased by 3.9% in Q3 2018 and by 3.5% in the first nine months of the year, compared to the same periods in 2017, attributable to higher costs across all three of our segments.

BELL WIRELESS

Bell Wireless operating costs increased by 7.0% in Q3 2018 and by 7.7% year to date, compared to the same periods in 2017, as a result of:

• Higher product cost of goods sold from increased sales volumes and handset costs

• Increased network operating costs driven by the expansion of network capacity to support subscriber growth and higher data consumption

• Greater labour costs to support key initiatives and growth of the business

These factors were partially offset by lower advertising spend.

Year-to-date operating costs also reflected higher costs related to the acquisition of MTS.

BELL WIRELINE

Bell Wireline operating costs increased by 2.4% in Q3 2018 and by 2.2% in the first nine months of the year, compared to the same periods in 2017, mainly driven by higher cost of goods sold resulting from increased product sales and greater payments to other carriers in the quarter, driven by higher sales of international long distance minutes. In the first nine months of the year, operating costs were further pressured by the acquisition of MTS, higher pension expense due to a gain in Q1 2017 on post-employment benefit expense related to an alignment of certain Bell Aliant defined benefit (DB) pension plans with those of Bell Canada, contractual programming rate increases in our TV business and increased advertising spend in Q1 2018 during the PyeongChang 2018 Winter Olympics.

BELL MEDIA

Bell Media operating costs increased by 2.4% in Q3 2018 and by 1.7% in the first nine months of the year, compared to the corresponding periods last year, due to the continued escalation of programming and content costs for sports broadcast rights, primarily relating to the 2018 FIFA World Cup, ongoing content expansion for CraveTV, as well as deal renewals for specialty TV programming.

Net earnings increased by 2.0% in the third quarter of 2018, compared to the same period last year, due to higher adjusted EBITDA, as growing revenues more than offset an increase in operating costs, lower income taxes and lower other expense, partly offset by higher severance, acquisition and other costs, higher depreciation and amortization expense and higher finance costs.

Year to date, net earnings of $2,331 million decreased by 0.9%, compared to the same period last year, due to higher other expense, higher depreciation and amortization expense and higher finance costs, partly offset by higher adjusted EBITDA, as growing revenues more than offset an increase in operating costs, lower severance, acquisition and other costs and lower income taxes.

BCE

BCE’s adjusted EBITDA grew by 2.2% in Q3 2018 and by 2.7% in the first nine months of the year, compared to the same periods last year, driven by growth in both our Bell Wireless and Bell Wireline segments, offset in part by a decline in our Bell Media segment. Adjusted EBITDA margin declined by 0.4 pts to 41.8% in Q3 2018 and by 0.2 pts to 41.4% in the first nine months of the year, over the same periods last year, driven by a higher proportion of low-margin product sales in our total revenue base.

The year-over-year increase in adjusted EBITDA was driven by growth across wireless, Internet, IPTV, IP-based and business solutions services and media revenues, coupled with ongoing disciplined cost management. This was moderated by the continued erosion in our voice, satellite TV and legacy data revenues, increased cost of goods sold and escalating programming and content costs. Additionally, the first nine months of the year were favourably impacted by the contribution from the acquisition of MTS, offset in part by higher pension expense due to a gain realized in Q1 2017 and lower Bell Media advertising revenues.

BELL WIRELESS

Bell Wireless adjusted EBITDA increased by 4.5% in Q3 2018 and by 5.8% year to date, compared to the same periods in 2017, due to the flow-through of the revenue growth, offset in part by higher operating expenses. The first nine months of the year also benefited from the acquisition of MTS, moderated by the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million.

BELL WIRELINE

Bell Wireline adjusted EBITDA grew by 1.2% in Q3 2018 and by 1.8% during the first nine months of the year, compared to the same periods last year, driven by increased revenues, moderated by higher operating expenses. Additionally, the first nine months of the year were favourably impacted by the acquisition of MTS, offset in part by higher pension expense as a result of a gain realized in Q1 2017.

BELL MEDIA

Bell Media adjusted EBITDA decreased by 2.7% in Q3 2018 and by 5.1% in the first nine months of the year, compared to the same periods in 2017, as the increase in operating revenues was more than offset by higher operating expenses.

2018

Severance, acquisition and other costs of $54 million in the third quarter of 2018 and $78 million on a year-to-date basis included:

• Severance costs of $52 million in Q3 2018 and $76 million on a year-to-date basis, for workforce reduction initiatives including a 4% reduction in management workforce across BCE
• Acquisition and other costs of $2 million in Q3 2018 and on a year-to-date basis, including transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions

2017

Severance, acquisition and other costs of $23 million in the third quarter of 2017 and $143 million on a year-to-date basis included:

• Severance costs related to workforce reduction initiatives of $14 million in Q3 2017 and $61 million on a year-to-date basis
• Acquisition and other costs of $9 million in Q3 2017 and $82 million on a year-to-date basis, including transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions, severance and integration costs relating to the MTS acquisition as well as a loss on sale of spectrum licences to Xplornet Communications Inc. incurred in Q1 2017

DEPRECIATION

Depreciation in the third quarter and on a year-to-date basis in 2018 increased by $19 million and $95 million, respectively, compared to the same periods in 2017, mainly due to a higher asset base as we continued to invest in our broadband and wireless networks as well as our IPTV service. The year-to-date increase in depreciation also reflects the acquisition of MTS.

AMORTIZATION

Amortization in the third quarter and on a year-to-date basis in 2018 increased by $13 million and $51 million, respectively, compared to the same periods in 2017, mainly due to a higher asset base. The year-to-date increase in amortization also reflects the acquisition of MTS.

INTEREST EXPENSE

Interest expense in the third quarter of 2018 and on a year-to-date basis in 2018 increased by $13 million and $27 million, respectively, compared to the same periods last year, mainly as a result of higher average debt levels and higher interest rates. The year-to-date increase in interest expense also reflects the acquisition of MTS.

INTEREST ON POST-EMPLOYMENT BENEFIT OBLIGATIONS

Interest on our post-employment benefit obligations is based on market conditions that existed at the beginning of the year. On January 1, 2018, the discount rate was 3.6% compared to 4.0% on January 1, 2017.

In the third quarter of 2018 and on a year-to-date basis in 2018, interest expense on post-employment benefit obligations decreased by $1 million and $3 million, respectively, compared to the same periods last year, due to a lower discount rate, partly offset by a higher post-employment benefit obligation at the beginning of the year.

The impacts of changes in market conditions during the year are recognized in other comprehensive income (loss) (OCI).

2018

Other expense of $41 million in the third quarter of 2018 included losses from our equity investments and net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans.

Other expense of $190 million on a year-to-date basis in 2018 included net mark-to-market losses on derivatives used to economically hedge equity settled share-based compensation plans, losses from our equity investments, which included BCE’s share of an obligation to repurchase at fair value the minority interest in one of BCE’s joint ventures, and early debt redemption costs.

2017

Other expense of $56 million in the third quarter of 2017 included losses from our equity investments and early debt redemption costs.

Other expense of $40 million on a year-to-date basis in 2017 included losses on retirements and disposals of property, plant and equipment and intangible assets, early debt redemption costs, losses on investments and losses from our equity investments, partly offset by net mark-to-market gains on derivatives used to economically hedge equity settled share-based compensation plans.

Income taxes in the third quarter and on a year-to-date basis in 2018 decreased by $25 million and $46 million, respectively, compared to the same periods last year, due to lower taxable income and a higher value of uncertain tax positions favourably resolved in 2018 compared to 2017.

Net earnings attributable to common shareholders of $814 million in the third quarter of 2018 increased by $11 million, compared to the same period last year, due to higher adjusted EBITDA, as growing revenues more than offset an increase in operating costs, lower income taxes and lower other expense, partly offset by higher severance, acquisition and other costs, higher depreciation and amortization expense and higher finance costs.

Year to date, net earnings attributable to common shareholders of $2,179 million decreased by $31 million, compared to the same period last year, due to higher other expense, higher depreciation and amortization expense and higher finance costs, partly offset by higher adjusted EBITDA, as growing revenues more than offset an increase in operating costs, lower severance, acquisition and other costs and lower income taxes.

BCE’s EPS of $0.90 in Q3 2018 remained stable compared to the same period last year and decreased by $0.06 on a year-to-date basis in 2018 to $2.42.

Excluding the impact of severance, acquisition and other costs, net mark-to-market (losses) gains on derivatives used to economically hedge equity settled share-based compensation plans, net (losses) gains on investments, early debt redemption costs and impairment charges, adjusted net earnings in the third quarter of 2018 was $861 million, or $0.96 per common share, compared to $824 million, or $0.91 per common share, for the same period last year. Adjusted net earnings in the first nine months of 2018 was $2,357 million, or $2.62 per common share, compared to $2,322 million, or $2.60 per common share, for the first nine months of 2017.

KEY BUSINESS DEVELOPMENTS

LTE ADVANCED WIRELESS COVERAGE EXTENDED IN SOUTHEASTERN MANITOBA

Bell MTS announced the latest expansion of its leading long-term evolution (LTE) Advanced (LTE-A) wireless coverage in Manitoba, extending wireless service to the Southeastern communities of Stuartburn, Woodridge and Zhoda. Part of the $1 billion Bell MTS infrastructure investment plan for the province, this service expansion offers residents and businesses in Southeastern Manitoba access to the latest evolution of broadband wireless technology. LTE-A wireless service became available in Woodridge in September 2018, and will launch in Stuartburn and Zhoda in 2019.

MOBILE DEVICE LINEUP EXPANDED

Bell Mobility’s extensive device lineup continued to expand in Q3 2018 with the addition of a number of new Fourth Generation (4G) LTE and LTE-A devices from leading handset manufacturers, including the Samsung Galaxy Note 9 smartphone, the LG Q Stylo+ smartphone, Apple’s iPhone Xs and Xs Max and the Apple Watch Series 4. Additionally, Apple’s iPhone XR was available to pre-order on October 19.

PARTNERSHIP WITH FORD IN NEW CONNECTED CAR INITIATIVE

Bell is the first Canadian wireless service provider to enable built-in wireless fidelity (Wi-Fi) hotspots in supported Ford and Lincoln vehicles with Bell’s Connected Car – Built In service. Available vehicle diagnostics services will also be supported on Bell’s national LTE network. Ideal for mobile workers, commuters and long family trips, Connected Car enables passengers to browse, stream and share on Bell’s broadband LTE wireless network when they are on the road or nearby the vehicle when it is parked. The Wi-Fi hotspot features a dedicated external antenna, supports up to 10 devices at a time, and is powered by the vehicle’s electrical system rather than the device battery. Connected Car is the next evolution in the smart vehicle experience and part of Bell’s Internet of Things leadership to enable the connected vehicles, homes, businesses and smart cities of the future.

Q3 2018 PERFORMANCE HIGHLIGHTS

BELL WIRELESS RESULTS

REVENUES

Bell Wireless operating revenues grew by 5.9% in Q3 2018 and 6.9% in the first nine months of the year, compared to the same periods in 2017, driven by both higher service and product revenues.

• Service revenues increased by 2.5% in the current quarter and by 4.0% year to date, compared to the same periods in 2017, due to the continued expansion of our postpaid subscriber base moderated by lower blended ARPU. The growth in year-to-date service revenues also benefited from the acquisition of MTS, offset in part by the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million.
• Product revenues increased by 17.2% in this quarter and by 17.3% for the first nine months of the year, compared to the same periods in 2017, due to increased sales of premium devices with higher retail handset prices, combined with higher sales volumes due to greater gross activations and upgrades.

OPERATING COSTS AND ADJUSTED EBITDA

Bell Wireless operating costs increased by 7.0% in Q3 2018 and by 7.7% year to date, compared to the same periods in 2017, as a result of:

• Higher product cost of goods sold from increased sales volumes and handset costs
• Increased network operating costs driven by the expansion of network capacity to support subscriber growth and higher data consumption
• Greater labour costs to support key initiatives and growth of the business

These factors were partially offset by lower advertising spend.

Year-to-date operating costs also reflected higher costs related to the acquisition of MTS.

Bell Wireless adjusted EBITDA increased by 4.5% in Q3 2018 and by 5.8% year to date, compared to the same periods in 2017, due to the flow-through of the revenue growth, offset in part by higher operating expenses. The first nine months of the year also benefited from the acquisition of MTS, moderated by the unfavourable retroactive impact of the CRTC decision on wholesale wireless domestic roaming rates of $14 million. Adjusted EBITDA margin, based on wireless operating revenues, declined by 0.6 pts in Q3 2018 and by 0.4 pts year-to-date, compared to the same periods in 2017, driven by the greater proportion of low-margin product sales in our total revenue base.

BELL WIRELESS OPERATING METRICS

Blended ARPU of $56.67 decreased by 1.9 % in Q3 2018 and by 0.8% year to date, compared to the same periods in 2017, driven by a decline in voice and data overages due to greater customer adoption of plans with higher usage thresholds, lower ARPU generated from the contract with Shared Services Canada and the dilutive impact on blended ARPU from the continued ramp-up in prepaid customers from Lucky Mobile. A larger proportion of premium smartphone devices in our sales mix combined with higher retail handset prices resulted in a greater allocation of revenues to product revenues, thereby unfavourably impacting blended ARPU. This decline was moderated by a higher postpaid subscriber mix, the flow-through of 2017 and 2018 pricing changes, and more customers moving to higher-value monthly plans with greater data allotments.

Blended ABPU approximates the average amount billed to customers on a monthly basis and is the same as blended ARPU prior to the adoption of IFRS 15. Blended ABPU of $69.28 decreased by 0.7% in Q3 2018, compared to the same period last year and was similarly impacted by the items affecting ARPU. However, since ABPU is based on average billing, it is not impacted by the greater allocation to product revenues. Year to date blended ABPU of $67.86 increased by 0.4%, compared to the same period last year, as the higher postpaid subscriber mix, the flow-through of 2017 and 2018 pricing changes and more customers moving to higher-value monthly plans with larger data allotments more than offset the pressures described above.

Total gross wireless activations increased by 16.4% in the third quarter of 2018 and by 16.2% year to date, compared to the same periods in 2017, due to both higher postpaid and prepaid gross activations.

• Postpaid gross activations increased by 9.1% in Q3 2018 and by 13.7% for the first nine months of the year, driven by the continued on-boarding of customers from the contract with Shared Services Canada, our mobile network speed and technology leadership and the effective sales execution across our retail channels
• Prepaid gross activations increased by 57.7% in the current quarter and by 30.0% year to date, driven by the continued ramp-up from Lucky Mobile

Blended wireless churn of 1.27% improved by 0.05 pts in Q3 2018 reflecting both lower postpaid and prepaid churn. In the first nine months of the year, blended churn improved by 0.02 pts to 1.29%, driven by lower postpaid churn.

• Postpaid churn improved by 0.02 pts to 1.14% in the current quarter and by 0.01 pts to 1.13%, year to date, driven by our ongoing investment in network speeds and customer retention
• Prepaid churn of 2.76% improved by 0.19 pts in this quarter, due to the favourable impact on the subscriber base from the ramp-up of Lucky Mobile. Conversely, for the first nine months of the year, prepaid churn of 3.17% increased by 0.02 pts reflecting a declining subscriber base, offset in part by lower deactivations.

Postpaid net activations increased by 15.5% in the third quarter of 2018 and by 34.9% year to date, compared to the same periods in 2017, due to an increase in gross activations, partially offset by higher customer deactivations.

Prepaid net activations improved significantly in Q3 2018 and year to date, compared to the same periods in 2017, due to higher gross activations and less customer deactivations.

Wireless subscribers at September 30, 2018 totaled 9,487,368, up 5.3% from 9,008,273 subscribers reported at the end of Q3 2017. The proportion of Bell Wireless customers subscribing to postpaid services increased by 0.5 pts to 92.0% in Q3 2018, compared to 91.5% in the prior year.

As at the date of this MD&A, our forward-looking statements set out in the BCE 2017 Annual MD&A, as updated or supplemented in the BCE 2018 First Quarter MD&A, in the BCE 2018 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.

• Maintain our market share of incumbent wireless postpaid net additions
• Continued adoption of smartphone devices, tablets and data applications, as well as the introduction of more 4G LTE and LTE-A devices and new data services
• Higher handset cost, driven by a higher sales mix of premium devices, increased new customer activations and more customer device upgrades attributable to a higher number of off-contract subscribers due to earlier expiries under two-year contracts
• Wireless revenue growth driven by postpaid subscriber base expansion and a higher volume of handset sales
• Expansion of the LTE-A network coverage to approximately 92% of the Canadian population
• Ability to monetize increasing data usage and customer subscriptions to new data services
• Ongoing technological improvements by handset manufacturers and from faster data network speeds that allow customers to optimize the use of our services
• No material financial, operational or competitive consequences of changes in regulations affecting our wireless business

KEY BUSINESS DEVELOPMENTS

FIBE INTERNET TOP SPEED INCREASED TO INDUSTRY-LEADING 1.5 GIGABITS PER SECOND

Bell increased Fibe Internet access speeds to 1.5 Gigabits per second (Gbps), the fastest access speed to the home available in Canada. Unlimited Gigabit Fibe 1.5 service is now available in Ontario and Québec and is expected to be launched in the Atlantic provinces in November. Delivered over Bell’s fibre-to-the-premises (FTTP) network and leveraging the powerful Home Hub 3000 modem/router already used by most Bell FTTP customers, the enhanced Internet service offers total download speeds of up to 1.5 Gbps and uploads of up to 940 Megabits per second (Mbps).

Bell’s rapidly expanding broadband fibre network is Canada’s most extensive, covering a total of more than 9.5 million homes and businesses in 7 provinces, including approximately 4.4 million locations served by direct FTTP connections at the end of Q3 2018, up from approximately 3.7 million at the end of 2017.

ROLL OUT OF HIGH-SPEED BROADBAND INTERNET SERVICE IN RURAL COMMUNITIES

Following successful wireless-to-the-home (WTTH) trials in the 3.5 Gigahertz (GHz) and 28 GHz spectrum bands utilizing Fifth Generation (5G)-oriented Massive Multiple Input Multiple Output and 8T8R technology earlier this year, Bell began the buildout of WTTH to rural locations in the second quarter of 2018 with plans to rollout service to 30 rural communities by the end of 2018. Bell’s WTTH solution is expected to deliver broadband speeds of 25 to 50 Mbps, or up to 10 times faster than average speeds currently available in these areas. At the end of the third quarter of 2018, Bell’s WTTH footprint encompassed 16 communities covering approximately 12,000 homes. Innovation in WTTH complements Bell’s extensive broadband fibre build in urban markets, and our deployment of WTTH in rural locations underscores our focus on full utilization of Bell’s assigned wireless spectrum resources.

BELL LAUNCHES CANADA’S FIRST CLOUD-BASED VIRTUAL NETWORK SERVICES PLATFORM

On October 18, 2018, Bell launched its new Virtual Network Services (VNS) platform, which offers enterprise business customers a catalogue of on-demand network functions that reside securely in Bell’s private cloud. The first of its kind in Canada, Bell VNS responds to customers’ on-demand needs by transforming and centralizing hardware-based networks in virtualized, software-driven networks. Bell also announced it will be the first Canadian service provider to offer a managed software-defined wide area network (SD-WAN) solution powered by Cisco Viptela, the first Virtual Network Function offered on the Bell VNS platform. Bell VNS is an end-to-end managed solution for enterprise customers across Canada.

Q3 2018 PERFORMANCE HIGHLIGHTS

BELL WIRELINE RESULTS

REVENUES

n.m.: not meaningful

Bell Wireline operating revenues increased by 1.9% in Q3 2018 and by 2.0% in the first nine months of 2018, compared to the same periods last year, attributable to growth in data, other services and product revenues, offset in part by the continued erosion of voice revenues.

Bell Wireline operating service revenues grew by 0.8% and by 1.6% in Q3 2018 and the first nine months of the year, respectively, compared to the same periods last year.

• Data revenues increased by 2.8% in Q3 2018 and by 3.9% during the first nine months of the year, compared to the same periods last year, resulting from growth in Internet and IPTV subscribers, the flow-through of 2017 and 2018 pricing changes, as well as greater IP-based and business solutions services revenues. This was partly offset by increased acquisition, retention and bundle discounts on residential services due to aggressive offers from cable competitors, the ongoing decline in our satellite TV subscriber base, as well as continued legacy data erosion due in part to migrations to IP-based services along with competitive pricing pressures in our business markets. Additionally, year-to-date revenues were favourably impacted by the acquisition of MTS.
• Voice revenues declined by 4.4% in Q3 2018 and by 4.6% in the first nine months of the year, compared to the same periods in 2017, reflecting ongoing NAS line erosion due to technological substitution to wireless and Internet-based services, large business customer conversions to IP-based data services combined with competitive pricing pressures, and long distance rate pressure in our residential market from customer adoption of premium rate plans, as well as lower usage of traditional long distance services by residential and business customers. This was mitigated by the flow-through of 2017 and 2018 pricing changes on our voice services, along with higher sales of international long distance minutes in our wholesale market in Q3 2018. The contribution from the acquisition of MTS favourably impacted voice revenues in the first nine months of the year.
• Other services revenues increased by 15.4% in Q3 2018 and by 23.8% in the first nine months of the year, compared to the same periods last year, driven by the acquisition of AlarmForce Industries Inc. (AlarmForce).

Bell Wireline product revenues increased by 20.1% and by 9.3%, in Q3 2018 and year to date, respectively, compared to the same periods in 2017, due to increased demand in the large business market for telecommunication equipment. Year-to-date revenues were also favourably impacted by the acquisition of MTS.

OPERATING COSTS AND ADJUSTED EBITDA

Bell Wireline operating costs grew by 2.4% in Q3 2018 and by 2.2% in the first nine months of the year, compared to the same periods in 2017, mainly driven by higher cost of goods sold resulting from increased product sales and greater payments to other carriers in the quarter, driven by higher sales of international long distance minutes. In the first nine months of the year, operating costs were further pressured by the acquisition of MTS, higher pension expense due to a gain in Q1 2017 on post-employment benefit expense related to an alignment of certain Bell Aliant DB pension plans with those of Bell Canada, contractual programming rate increases in our TV business and increased advertising spend in Q1 2018 during the PyeongChang 2018 Winter Olympics.

Bell Wireline adjusted EBITDA increased by 1.2% in Q3 2018 and by 1.8% during the first nine months of the year, compared to the same periods last year, due to higher revenues, moderated by increased operating expenses. The first nine months of the year were also favourably impacted by the acquisition of MTS, offset in part by increased pension expense as a result of a gain realized in Q1 2017. Adjusted EBITDA margin of 42.1% in Q3 2018 decreased by 0.3 pts and year-to-date adjusted EBITDA margin of 42.1% decreased by 0.1pts, compared to the same periods last year, driven by greater low-margin product sales in our total revenue base.

BELL WIRELINE OPERATING METRICS

DATA

High-speed Internet

High-speed Internet subscriber net activations increased by 7.5% in Q3 2018 and by 28.6% in the first nine months of the year, compared to the same periods in 2017, attributable to greater net activations from Home Internet service by Virgin Mobile Canada, higher retail activations in our fibre-to-the-home (FTTH) footprint, greater back to school activations, increased pull-through from our application-based live TV services Alt TV and higher activations in our small business market. The growth was offset in part by aggressive offers from cable competitors in both our retail and wholesale markets, along with a greater number of residential customers coming off promotional offers.

High-speed Internet subscribers at September 30, 2018 totaled 3,904,304 up 3.8% from the end of Q3 of last year.

TV

IPTV net subscriber activations increased by 10.1% in Q3 2018, compared to the same period last year, driven by the continued growth in activations from Alt TV, higher gross activations in our FTTH footprint and greater footprint expansion in 2018. This was moderated by increased deactivations driven by aggressive service bundle offers from cable competitors, a greater number of customers coming off promotional offers, higher substitution of traditional TV services with OTT services, the impact of maturing Fibe TV markets, as well as lower customer migrations from satellite TV. Year-to-date IPTV net additions decreased by 1.2% as higher deactivations, driven by the factors described above, were only partially offset by greater activations.

Satellite TV net subscriber losses improved by 9.1% in Q3 2018 and by 24.5% in the first nine months of the year, compared to the same periods last year, attributable to fewer retail deactivations and lower migrations to IPTV reflecting a more mature subscriber base geographically better-suited for satellite TV service, coupled with reduced promotional offers from cable competitors in rural markets. Year-to-date results were also favourably impacted by a lower number of customers coming off of promotional offers.

Total TV net subscriber activations (IPTV and satellite TV combined) improved by 6,863 in Q3 2018, compared to last year, resulting from higher IPTV net activations, along with reduced satellite TV net losses. Net subscriber losses improved by 24,191 in the first nine months of the year, compared to last year, due to fewer satellite TV net losses, offset in part by lower IPTV net activations.

IPTV subscribers at September 30, 2018 totaled 1,639,233, up 8.0% from 1,517,833 subscribers reported at the end of Q3 2017.

Satellite TV subscribers at September 30, 2018 totaled 1,204,595, down 7.9% from 1,307,921 subscribers at the end of Q3 2017.

Total TV subscribers (IPTV and satellite TV combined) at September 30, 2018 were 2,843,828, representing a 0.6% increase since the end of Q3 2017.

VOICE

Residential NAS net losses increased by 30.6% in Q3 2018 and by 2.7% during the first nine months of the year, compared to the same periods last year, driven by fewer activations resulting from aggressive competitive offers from cable TV providers, ongoing wireless and Internet-based technology substitution, reduced pull-through from our IPTV service bundle offers and lower acquisition of three-product households.

Residential NAS subscribers at September 30, 2018 totaled 3,051,630, down 6.8% from 3,275,589 subscribers reported at the end of Q3 2017. This represented an increase in the rate of erosion compared to the 1.3% decline experienced in the third quarter of 2017, driven by the year-over-year increase in subscribers from the acquisition of MTS which benefited Q3 2017.

As at the date of this MD&A, our forward-looking statements set out in the BCE 2017 Annual MD&A, as updated or supplemented in the BCE 2018 First Quarter MD&A, in the BCE 2018 Second Quarter MD&A and in this MD&A, are based on certain assumptions including, without limitation, the following assumptions and the assumptions referred to in each of the other business segment discussions set out in this section 3, Business segment analysis, as well as the economic and market assumptions referred to in section 1.3, Assumptions, of this MD&A.

• Positive full-year adjusted EBITDA growth
• Continued growth in residential IPTV and Internet subscribers
• Increasing wireless and Internet-based technological substitution
• Residential services household ARPU growth from increased penetration of multi-product households and price increases
• Aggressive residential service bundle offers from cable TV competitors in our local wireline areas
• Continued large business customer migration to IP-based systems
• Ongoing competitive repricing pressures in our business and wholesale markets
• Continued competitive intensity in our small and mid-sized business markets as cable operators and other telecom competitors continue to intensify their focus on business customers
• Traditional high-margin product categories challenged by large global cloud and OTT providers of business voice and data solutions expanding into Canada with on-demand services
• Accelerating customer adoption of OTT services resulting in downsizing of TV packages
• Ongoing deployment of direct fibre and growing consumption of OTT TV services and on-demand streaming video, as well as the proliferation of devices, such as tablets, that consume vast quantities of bandwidth, will require considerable ongoing capital investment
• Realization of cost savings related to management workforce reductions including attrition and retirements, lower contracted rates from our suppliers, reduction of traffic that is not on our network and operating synergies from the integration of MTS
• No material financial, operational or competitive consequences of changes in regulations affecting our wireline business