Exhibit 99.1

 

Building Better Q2 2020 Experiences Second Quarter Shareholder Report August 5, 2020

Table of contents

 

 

Table of contents

 

Management’s discussion and analysis						1
1		Overview				2
		1.1		Financial highlights		3
		1.2		Key corporate and business developments		5
		1.3		Assumptions		6
2		Consolidated financial analysis				7
		2.1		BCE consolidated income statements		7
		2.2		Customer connections		8
		2.3		Operating revenues		9
		2.4		Operating costs		10
		2.5		Net earnings		11
		2.6		Adjusted EBITDA		11
		2.7		Severance, acquisition and other costs		12
		2.8		Depreciation and amortization		12
		2.9		Finance costs		12
		2.10		Impairment of assets		12
		2.11		Other (expense) income		13
		2.12		Income taxes		13
		2.13		Net earnings attributable to common shareholders and EPS		13
3		Business segment analysis				14
		3.1		Bell Wireless		14
		3.2		Bell Wireline		18
		3.3		Bell Media		22
4		Financial and capital management				24
		4.1		Net debt		24
		4.2		Outstanding share data		24
		4.3		Cash flows		25
		4.4		Post-employment benefit plans		26
		4.5		Financial risk management		27
		4.6		Credit ratings		29
		4.7		Liquidity		29
5		Quarterly financial information				30
6		Regulatory Environment				31
7		Business risks				32
8		Accounting policies, financial measures and controls				36
		8.1		Our accounting policies		36
		8.2		Non-GAAP financial measures and key performance indicators (KPIs)		36
		8.3		Controls and procedures		39
Consolidated financial statements						40
		Consolidated income statements				40
		Consolidated statements of comprehensive (loss) income				41
		Consolidated statements of financial position				42
		Consolidated statements of changes in equity				43
		Consolidated statements of cash flows				44
Notes to consolidated financial statements						45

		Note 1		Corporate Information		45
		Note 2		Basis of presentation and significant accounting policies		45
		Note 3		Discontinued operations		46
		Note 4		Segmented information		47
		Note 5		Operating costs		49
		Note 6		Severance, acquisition and other costs		49
		Note 7		Impairment of assets		50
		Note 8		Other (expense) income		50
		Note 9		Earnings per share		51
		Note 10		Trade and other receivables		51
		Note 11		Other non-current assets		51
		Note 12		Debt		51
		Note 13		Post-employment benefit plans		52
		Note 14		Financial assets and liabilities		53
		Note 15		Share-based payments		55
		Note 16		COVID-19		56

MD&A

 

 

Management’s discussion and analysis

In this management’s discussion and analysis (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.

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 36 to 39 for a list of defined non-GAAP financial measures and KPIs.

Please refer to BCE’s unaudited consolidated financial statements for the second quarter of 2020 (Q2 2020 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2019 dated March 5, 2020 (BCE 2019 Annual MD&A) as updated in BCE’s MD&A for the first quarter of 2020 dated May 6, 2020 (BCE 2020 First Quarter MD&A). In preparing this MD&A, we have taken into account information available to us up to August 5, 2020, the date of this MD&A, unless otherwise stated.

You will find additional information relating to BCE, including BCE’s annual information form for the year ended December 31, 2019 dated March 5, 2020 (BCE 2019 AIF) and recent financial reports, including the BCE 2019 Annual MD&A and the BCE 2020 First Quarter MD&A, on BCE’s website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.

Documents and other information contained in BCE’s website or in any other site referred to in BCE’s website or in this MD&A are not part of this MD&A and are not incorporated by reference herein.

This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q2) and six months (YTD) ended June 30, 2020 and 2019.

 

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This MD&A, and in particular, but without limitation, the introduction to section 1, Overview, section 1.2, Key corporate and business developments, section 1.3, 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 4.7, Liquidity, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to the potential impacts on our business, financial condition, liquidity and financial results of the COVID-19 pandemic, the expected continued payment by BCE of its common share dividend for the foreseeable future, our network deployment and capital investment plans, the sources of liquidity we expect to use to meet our anticipated 2020 cash requirements, the expected timing and completion of the proposed sale of 25 data centres at 13 sites to Equinix, Inc. (Equinix), 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 August 5, 2020 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. These statements are not guarantees of future performance or events, 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 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 section 1.3, Assumptions, which section is incorporated by reference in this cautionary statement. Subject to various factors including, without limitation, the future impacts of the COVID-19 pandemic, which we cannot predict, we believe that our assumptions were reasonable at August 5, 2020. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect.

Important risk factors including, without limitation, pandemics, epidemics and other public health risks, including the COVID-19 pandemic, economic, financial, competitive, regulatory, security, technological, operational 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 7, Business risks, which section is incorporated by reference in this cautionary statement.

We caution readers that the risks described in the previously mentioned section 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 business, financial condition, liquidity, financial results 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 August 5, 2020. 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.

 

BCE Inc. 2020 Second Quarter Shareholder Report         1

1 MD&A Overview

 

 

1    Overview

The COVID-19 pandemic has resulted in governments and businesses worldwide adopting emergency measures to combat the spread of the coronavirus while seeking to maintain essential services. These measures have significantly disrupted retail and commercial activities in most sectors of the economy and resulted in extreme volatility in financial markets. This has resulted, starting in the latter part of the first quarter and continuing into the second quarter, in a sharp economic downturn marked by high levels of unemployment, as most businesses reduced or ceased business operations, and reduced consumer spending.

We have confronted the COVID-19 pandemic by keeping Canadians connected and informed; prioritizing the health and safety of the public and our team; and supporting our customers and communities with special initiatives. Despite unprecedented demand across our networks due to the pandemic, we have maintained service availability at 99.99+% throughout the crisis; introduced innovative tactics focused on customer experience, including equipping 12,000 call centre agents to work from home, retraining thousands of team members as service agents and introducing innovative remote installation practices; and launched enhanced online and appointment-based sales options. As part of its support for Canadian communities during the pandemic, Bell Let’s Talk also announced new funding for frontline mental health providers including Kids Help Phone, Canadian Red Cross, Canadian Mental Health Association, Revivre and Bell True Patriot Love Fund.

Certain of the emergency measures have gradually started being eased across Canada in the latter part of the second quarter which has allowed many businesses to resume some level of, or increase, activities, often with certain operational adjustments, amid the uncertainty caused by the COVID-19 pandemic. With appropriate health and safety precautions, Bell call centres resumed operations and are now achieving pre-COVID-19 service levels, while 99% of Bell, The Source (Bell) Electronics Inc. (The Source) and authorized dealer stores and kiosks have reopened nationwide.

However, given that emergency measures remained in place for most or all, as the case may be, of the second quarter, the impact of such measures on the Canadian economy and business and consumer activity was significantly more prolonged and severe in the second quarter than the first quarter. Accordingly, our second quarter financial results were more significantly impacted than our first quarter financial results. In the second quarter, all of our segments were affected by the COVID-19 pandemic. In particular, the pandemic had the following principal consequences on our business and financial results:

 

•

Lower advertising revenues from our Bell Media segment due to customer cancellations attributable to the temporary shutdown of businesses and the cancellation and/or postponement of sporting events

 

•

Lower wireless product sales driven by reduced market activity, less promotional offers and the temporary closure of our retail distribution channels

 

•

A reduction in Bell Wireless and Bell Wireline subscriber activity due to reduced market activity, fewer promotions and the temporary closure of our retail distribution channels resulting in lower activations, moderated by lower deactivations

 

•

Higher bad debt expense and customer accommodations, including delayed implementation of price increases and revenue credits, due to the financial difficulty experienced by customers

 

•

Decreased service revenues in our Bell Wireless segment primarily due to lower outbound roaming revenues resulting from reduced customer travel and the waiving of roaming charges during the month of April 2020 and lower data overages

 

•

Higher COVID-19 related expenses primarily in our Bell Wireline segment, including greater donations, employee redeployment costs, purchase of personal protective equipment (PPE) and incremental building cleaning costs and supplies

 

•

Higher investment in wireless and wireline network capacity enhancements to support increased demand

 

•

Lower and delayed customer spending in our small and large business markets, respectively, due to the temporary shutdown of businesses and difficulties accessing client premises

 

•

Higher conferencing revenues from business customers due to increased demand for remote work capabilities

Due to uncertainties relating to the severity and duration of the COVID-19 pandemic, including possible resurgences in the number of COVID-19 cases, and various potential outcomes, we are not able at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Our business and financial results could continue to be significantly and negatively impacted in future periods. The extent to which the COVID-19 pandemic will continue to adversely impact us will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity, duration and possible resurgences of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impacts, among others. Any of the developments and risks referred to in this MD&A, including, in particular, in Section 7, Business risks – Update to the description of business risks, of this MD&A, and others arising from the COVID-19 pandemic, could have a material adverse effect on our business, financial condition, liquidity, financial results or reputation.

Given this unprecedented and highly uncertain environment, BCE withdrew on May 6, 2020 all of its 2020 financial guidance that it announced on February 6, 2020, as well as all of its business outlooks and assumptions set out in the BCE 2019 Annual MD&A, its February 6, 2020 earnings news release and the BCE 2019 AIF including, without limitation, those included in section 1.4, Capital markets strategy, in section 2, Strategic imperatives, in section 3.2, Business outlook and assumptions and under the headings Competitive landscape and industry trends and Business outlook and assumptions included in section 5, Business segment analysis, of the BCE 2019 Annual MD&A.

However, BCE’s underlying business fundamentals remain strong. Our strong liquidity position, underpinned by a healthy balance sheet, substantial free cash flow generation and access to the debt and bank capital markets, is expected to provide significant financial flexibility to execute on our planned capital expenditures for 2020 and to sustain BCE’s common share dividend payments for the foreseeable future.

 

2             BCE Inc. 2020 Second Quarter Shareholder Report

1 MD&A Overview

 

 

1.1    Financial highlights

On June 1, 2020, BCE announced that it had entered into an agreement to sell substantially all of its data centre operations in an all-cash transaction valued at $1.04 billion. The transaction is expected to close in the second half of 2020, subject to customary closing conditions. As a result, we have reclassified amounts related to the announced sale for the previous periods to discontinued operations in our consolidated income statements and consolidated statements of cash flows to make them consistent with the presentation for the current period. We have also reclassified the assets and liabilities of the data centre operations to be sold as held for sale in our consolidated statements of financial position at June 30, 2020, measured at their carrying amount, which is lower than the estimated fair value less costs to sell. Property, plant and equipment and intangible assets included in assets held for sale are no longer depreciated or amortized effective June 1, 2020.

In Q2 2020, we updated our definitions of adjusted net earnings ⁽¹⁾, adjusted EPS ⁽¹⁾ and free cash flow ⁽¹⁾ to exclude the impacts of discontinued operations as they may affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. As a result of this change, prior periods have been restated for comparative purposes. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs), for more details.

To align with changes in how we manage our business and assess performance, the operating results of our public safety land radio network business are now included within our Bell Wireline segment effective January 1, 2020, with prior periods restated for comparative purposes. Previously, these results were included within our Bell Wireless segment. Our public safety land radio network business, which builds and manages land mobile radio networks primarily for the government sector, is now managed by our Bell Business Markets team in order to better serve our customers with end-to-end communications solutions.

BCE Q2 2020 SELECTED QUARTERLY INFORMATION

 

Operating revenues		Net earnings		Adjusted EBITDA (1)
$5,354		$294		$2,331
million		million		million
(9.1%) vs. Q2 2019		(64.0%) vs. Q2 2019		(9.4%) vs. Q2 2019

 

 

 

Net earnings attributable		Adjusted net earnings		Cash flows from		Free cash flow
to common shareholders				operating activities
$237		$573		$2,562		$1,611
million		million		million		million
(68.9%) vs. Q2 2019		(31.8%) vs. Q2 2019		+22.4% vs. Q2 2019		+49.7% vs. Q2 2019
BCE CUSTOMER CONNECTIONS
Wireless		Retail high-speed Internet		Retail television (TV)		Retail residential network
Total						access services (NAS) lines
+4.0%		+3.9%		(1.0%)		(8.3%)
10.0 million subscribers		3.6 million subscribers		2.7 million subscribers		2.6 million subscribers
at June 30, 2020		at June 30, 2020		at June 30, 2020		at June 30, 2020

 

(1)

Adjusted net earnings, adjusted EPS, free cash flow and adjusted EBITDA are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted net earnings and adjusted EPS, Free cash flow and dividend payout ratio and Adjusted EBITDA and adjusted EBITDA margin, in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure.

 

BCE Inc. 2020 Second Quarter Shareholder Report         3

1 MD&A Overview

 

 

BCE INCOME STATEMENTS – SELECTED INFORMATION

 

		Q2 2020				Q2 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Operating revenues
Service			4,800				5,190				(390	)			(7.5%)				9,818				10,190				(372	)			(3.7	%)
Product			554				699				(145	)			(20.7%)				1,176				1,388				(212	)			(15.3	%)
Total operating revenues			5,354				5,889				(535	)			(9.1%)				10,994				11,578				(584	)			(5.0	%)
Operating costs			(3,023	)			(3,317	)			294				8.9%				(6,245	)			(6,624	)			379				5.7	%
Adjusted EBITDA			2,331				2,572				(241	)			(9.4%)				4,749				4,954				(205	)			(4.1	%)
Adjusted EBITDA margin (1)			43.5	%			43.7	%							(0.2) p	ts			43.2	%			42.8	%							0.4	pts
Net earnings from continuing operations attributable to:
Common shareholders			233				754				(521	)			(69.1%)				908				1,485				(577	)			(38.9	%)
Preferred shareholders			34				38				(4	)			(10.5%)				72				76				(4	)			(5.3	%)
Non-controlling interest			23				18				5				27.8%				38				31				7				22.6	%
Net earnings from continuing operations			290				810				(520	)			(64.2%)				1,018				1,592				(574	)			(36.1	%)
Net earnings from discontinued operations			4				7				(3	)			(42.9%)				9				16				(7	)			(43.8	%)
Net earnings			294				817				(523	)			(64.0%)				1,027				1,608				(581	)			(36.1	%)
Net earnings attributable to:
Common shareholders			237				761				(524	)			(68.9%)				917				1,501				(584	)			(38.9	%)
Preferred shareholders			34				38				(4	)			(10.5%)				72				76				(4	)			(5.3	%)
Non-controlling interest			23				18				5				27.8%				38				31				7				22.6	%
Net earnings			294				817				(523	)			(64.0%)				1,027				1,608				(581	)			(36.1	%)
Adjusted net earnings			573				840				(267	)			(31.8%)				1,287				1,523				(236	)			(15.5	%)
Net earnings from continuing operations per common share			0.26				0.84				(0.58	)			(69.0%)				1.00				1.65				(0.65	)			(39.4	%)
Net earnings from discontinued operations per common share			–				0.01				(0.01	)			(100.0%)				0.01				0.02				(0.01	)			(50.0	%)
Net earnings per common share (EPS)			0.26				0.85				(0.59	)			(69.4%)				1.01				1.67				(0.66	)			(39.5	%)
Adjusted EPS			0.63				0.93				(0.30	)			(32.3%)				1.42				1.69				(0.27	)			(16.0	%)
(1) Adjusted EBITDA margin is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure.
BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION
		Q2 2020				Q2 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Cash flows from operating activities			2,562				2,093				469				22.4%				4,013				3,609				404				11.2%
Capital expenditures			(900	)			(967	)			67				6.9%				(1,677	)			(1,815	)			138				7.6%
Free cash flow			1,611				1,076				535				49.7%				2,222				1,695				527				31.1%

 

 

Q2 2020 FINANCIAL HIGHLIGHTS

BCE revenues declined by 9.1% in Q2 2020, compared to the same period last year, reflecting a full quarter impact of the COVID-19 pandemic that drove declines across all three of our operating segments due to reduced economic and commercial activity. Media advertising revenues, wireless product sales and outbound roaming revenues were the most significantly affected by the COVID-19 pandemic. Service revenues decreased by 7.5% year over year, due to a decline in wireless service revenues, the ongoing erosion in our voice, satellite TV and legacy data revenues, as well as lower media advertising and subscriber revenues, moderated by the continued growth of our postpaid and prepaid wireless, retail Internet, and Internet protocol television (IPTV) subscriber bases, as well as the flow-through of 2019 rate increases. Product revenues decreased by 20.7% year over year, primarily due to lower wireless product sales and lower equipment sales to large enterprise customers attributable to the COVID-19 pandemic.

Net earnings decreased by 64.0% in the second quarter of 2020, compared to the same period last year, mainly due to a $448 million increase in impairment of assets primarily related to broadcast licenses, program and feature film rights, and other assets related to certain English and French TV services as well as various radio markets within our Bell Media segment, as well as lower adjusted EBITDA, partly offset by lower income taxes.

BCE’s adjusted EBITDA declined by 9.4% in Q2 2020, compared to the same period last year, driven by declines in all of our segments, mainly due to the unfavourable impact of the COVID-19 pandemic on revenues, moderated by operating cost savings. This resulted in an adjusted EBITDA margin of 43.5% in Q2 2020, down 0.2 pts compared to the 43.7% achieved in Q2 2019, mainly from lower service revenue flow-through, offset in part by lower operating expenses and reduced low-margin product revenues.

BCE’s EPS of $0.26 in Q2 2020 decreased by $0.59 compared to the same period last year.

 

4             BCE Inc. 2020 Second Quarter Shareholder Report

1 MD&A Overview

 

Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net gains (losses) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and non-controlling interest (NCI), adjusted net earnings in the second quarter of 2020 was $573 million, or $0.63 per common share, compared to $840 million, or $0.93 per common share, for the same period last year.

Cash flows from operating activities in the second quarter of 2020 increased by $469 million mainly due to higher cash from working capital, as a result of strong cash collections as well as delayed tax payments due to government relief measures related to COVID-19.

Free cash flow in Q2 2020 increased by $535 million mainly due to higher cash flows from operating activities, excluding cash from discontinued operations and acquisition and other costs paid, and lower capital expenditures.

 

 

1.2    Key corporate and business developments

SALE OF DATA CENTRES

On June 1, 2020, BCE announced that it entered into a definitive agreement to sell 25 data centres at 13 sites to global interconnection and data centre company Equinix in an all-cash transaction valued at Cdn $1.04 billion. The transaction reinforces Bell’s strategy to focus investment on network infrastructure, content and service innovation. Equinix will be acquiring 13 sites representing 25 Bell data centre facilities in 8 cities across Canada. Bell will continue to own and operate 5 other data centres that are located in its network central offices in Calgary, Halifax, Saint John, St. John’s and Toronto. All required regulatory approvals have been obtained and the transaction is expected to close in the second half of 2020 subject to customary closing conditions. As part of the transaction, Bell Business Markets will become the first Equinix Platinum Partner in Canada, which will provide Bell enterprise clients with access to the international scale of Equinix’s advanced integrated network and cloud solutions.

 

 

PUBLIC DEBT OFFERING

On May 14, 2020, Bell Canada completed a public offering of Cdn $1.5 billion of medium term notes (MTN) debentures in two series pursuant to its MTN program. The Cdn $500 million Series M-51 MTN debentures, which were issued pursuant to a re-opening of an existing series of MTN debentures, will mature on September 30, 2050 and carry an annual interest rate of 3.50%. The Cdn $1 billion Series M-52 MTN debentures will mature on May 14, 2030 and carry an annual interest rate of 2.50%. The MTN debentures are fully and unconditionally guaranteed by BCE Inc. The net proceeds of the offering were used to repay short-term debt and for general corporate purposes.

 

 

SERVICE IMPROVEMENTS HIGHLIGHTED IN CCTS REPORT

Bell’s investments in customer experience helped drive a 26.3% drop in the number of customer complaints accepted by the Commission for Complaints for Telecom-television Services (CCTS) according to the federal agency’s mid-year report. Bell’s improvement was the best performance among national carriers. The CCTS report, which covers the period from August 1, 2019 to January 31, 2020, also showed Bell’s overall share of total complaints dropped by more than 16%. Bell was the only major communications provider to see its share of total complaints decline in the report, continuing a trend established over the last 4 annual CCTS reports. Complaints to the CCTS from across the industry were down 12% overall during the reporting period, due mostly to the decline in the number of Bell customer complaints.

 

 

RECOGNITION OF BELL’S ENVIRONMENTAL LEADERSHIP

Bell was named one of Canada’s Greenest Employers by Canada’s Top 100 Employers program for the fourth consecutive year. The award recognizes our environmental leadership and ongoing efforts to improve the sustainability of our operations. Bell was the first Canadian communications company to achieve ISO 14001 environmental certification in 2009 and has a proven environmental track record. The following are some highlights:

 

•

Since 2016, Bell has recovered nearly 10 million TV receivers, modems and mobile phones through the internal take back processes and Bell Trade-in and Bell Blue Box programs

 

•

We have installed more than 90 electric vehicle charging stations at Bell locations for use by our team members

 

•

In 2019, we were successful in generating 170,000 kilowatt hour (kWh) of renewable energy through innovative wind and solar projects

 

•

This year, we plan to have our Energy Management System audited for the ISO 50001 certification to continuously improve our energy performance and efficiency through a structured framework, thus generating additional savings

 

BCE Inc. 2020 Second Quarter Shareholder Report         5

1 MD&A Overview

 

 

1.3    Assumptions

The forward-looking statements set out in this MD&A are based on certain assumptions including, without limitation, the following assumptions. Due to uncertainties relating to the severity and duration of the COVID-19 pandemic, including possible resurgences in the number of COVID-19 cases, and various potential outcomes, we are not able at this time to estimate the impacts of the COVID-19 pandemic on our business or future financial results and related assumptions. Accordingly, the assumptions outlined in this MD&A and, consequently, the forward-looking statements based on such assumptions, may turn out to be inaccurate. The extent to which the COVID-19 pandemic will continue to adversely impact our business, financial condition, liquidity and financial results will depend on future developments that are unknown and cannot be predicted, as well as new information which may emerge concerning the severity, duration and possible resurgences of the COVID-19 pandemic and the actions required to contain the coronavirus or remedy its impacts, among others. Readers should also refer to Section 7, Business risks, of this MD&A for a description of risk factors including, without limitation, those relating to the COVID-19 pandemic, which could cause any of our assumptions, and related forward-looking statements, not to materialize.

ASSUMPTIONS

 

•

Our liquidity from our cash and cash equivalents balance, the remaining capacity under our committed credit facilities, our cash flows from operations, continued access to the public capital, bank credit and commercial paper markets based on investment-grade credit ratings, and continued access to our securitized trade receivables programs, will be sufficient to meet our cash requirements for the remainder of 2020

 

•

No material financial, operational or competitive consequences of changes in regulations affecting any of our business segments

 

6             BCE Inc. 2020 Second Quarter Shareholder Report

2 MD&A Consolidated financial analysis

 

 

2    Consolidated financial analysis

This section provides detailed information and analysis about BCE’s performance in Q2 and YTD 2020 compared with Q2 and YTD 2019. 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.

 

 

2.1   BCE consolidated income statements

 

		Q2 2020				Q2 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Operating revenues
Service			4,800				5,190				(390	)			(7.5%)				9,818				10,190				(372	)			(3.7%)
Product			554				699				(145	)			(20.7%)				1,176				1,388				(212	)			(15.3%)
Total operating revenues			5,354				5,889				(535	)			(9.1%)				10,994				11,578				(584	)			(5.0%)
Operating costs			(3,023	)			(3,317	)			294				8.9%				(6,245	)			(6,624	)			379				5.7%
Adjusted EBITDA			2,331				2,572				(241	)			(9.4%)				4,749				4,954				(205	)			(4.1%)
Adjusted EBITDA margin			43.5	%			43.7	%							(0.2) p	ts			43.2	%			42.8	%							0.4 pts
Severance, acquisition and other costs			(22	)			(39	)			17				43.6%				(38	)			(63	)			25				39.7%
Depreciation			(869	)			(879	)			10				1.1%				(1,727	)			(1,752	)			25				1.4%
Amortization			(234	)			(220	)			(14	)			(6.4%)				(464	)			(437	)			(27	)			(6.2%)
Finance costs
Interest expense			(280	)			(279	)			(1	)			(0.4%)				(557	)			(560	)			3				0.5%
Interest on post-employment benefit obligations			(11	)			(15	)			4				26.7%				(23	)			(31	)			8				25.8%
Impairment of assets			(449	)			(1	)			(448	)			n.m.				(456	)			(5	)			(451	)			n.m.
Other (expense) income			(80	)			(54	)			(26	)			(48.1%)				(127	)			51				(178	)			n.m.
Income taxes			(96	)			(275	)			179				65.1%				(339	)			(565	)			226				40.0%
Net earnings from continuing operations			290				810				(520	)			(64.2%)				1,018				1,592				(574	)			(36.1%)
Net earnings from discontinued operations			4				7				(3	)			(42.9%)				9				16				(7	)			(43.8%)
Net earnings			294				817				(523	)			(64.0%)				1,027				1,608				(581	)			(36.1%)
Net earnings from continuing operations attributable to:
Common shareholders			233				754				(521	)			(69.1%)				908				1,485				(577	)			(38.9%)
Preferred shareholders			34				38				(4	)			(10.5%)				72				76				(4	)			(5.3%)
Non-controlling interest			23				18				5				27.8%				38				31				7				22.6%
Net earnings from continuing operations			290				810				(520	)			(64.2%)				1,018				1,592				(574	)			(36.1%)
Net earnings attributable to:
Common shareholders			237				761				(524	)			(68.9%)				917				1,501				(584	)			(38.9%)
Preferred shareholders			34				38				(4	)			(10.5%)				72				76				(4	)			(5.3%)
Non-controlling interest			23				18				5				27.8%				38				31				7				22.6%
Net earnings			294				817				(523	)			(64.0%)				1,027				1,608				(581	)			(36.1%)
Adjusted net earnings			573				840				(267	)			(31.8%)				1,287				1,523				(236	)			(15.5%)
Net earnings per common share
Continuing operations			0.26				0.84				(0.58	)			(69.0%)				1.00				1.65				(0.65	)			(39.4%)
Discontinued operations			–				0.01				(0.01	)			(100.0%)				0.01				0.02				(0.01	)			(50.0%)
Net earnings per common share			0.26				0.85				(0.59	)			(69.4%)				1.01				1.67				(0.66	)			(39.5%)
Adjusted EPS			0.63				0.93				(0.30	)			(32.3%)				1.42				1.69				(0.27	)			(16.0%)

n.m.: not meaningful

 

BCE Inc. 2020 Second Quarter Shareholder Report         7

2 MD&A Consolidated financial analysis

 

2.2  Customer connections   BCE NET (LOSSES) ACTIVATIONS

 

		Q2 2020				Q2 2019				% CHANGE				YTD 2020				YTD 2019				% CHANGE
Wireless subscribers net activations			34,702				149,478				(76.8%)				54,297				187,760				(71.1%)
Postpaid			21,632				102,980				(79.0%)				45,282				153,184				(70.4%)
Prepaid			13,070				46,498				(71.9%)				9,015				34,576				(73.9%)
Wireline retail high-speed Internet subscribers net activations			19,023				19,414				(2.0%)				41,618				42,085				(1.1%)
Wireline retail TV subscribers net (losses) activations			(15,544	)			2,350				(761.4%)				(34,099	)			790				n.m.
IPTV			(3,604	)			16,775				(121.5%)				(752	)			37,691				(102.0%)
Satellite			(11,940	)			(14,425	)			17.2%				(33,347	)			(36,901	)			9.6%
Wireline retail residential NAS lines net losses			(48,405	)			(72,780	)			33.5%				(110,000	)			(139,559	)			21.2%
Total services net (losses) activations			(10,224	)			98,462				(110.4%)				(48,184	)			91,076				(152.9%)

n.m.: not meaningful

TOTAL BCE CUSTOMER CONNECTIONS

 

		Q2 2020				Q2 2019				% CHANGE
Wireless subscribers			10,012,259				9,630,313				4.0%
Postpaid			9,205,222				8,911,169				3.3%
Prepaid			807,037				719,144				12.2%
Wireline retail high-speed Internet subscribers			3,597,219				3,461,825				3.9%
Wireline retail TV subscribers			2,738,365				2,767,201				(1.0%)
IPTV			1,766,430				1,713,397				3.1%
Satellite			971,935				1,053,804				(7.8%)
Wireline retail residential NAS lines			2,587,483				2,821,249				(8.3%)
Total services subscribers			18,935,326				18,680,588				1.4%

BCE had 10,224 net retail customer losses in Q2 2020, compared to 98,462 net retail activations in Q2 2019. The net retail customer losses in Q2 2020 consisted of:

 

•

21,632 postpaid wireless net customer activations, and 13,070 prepaid wireless net customer additions

 

•

19,023 retail high-speed Internet net customer activations

 

•

15,544 retail TV net customer losses comprised of 11,940 retail satellite TV net customer losses and 3,604 retail IPTV net customer losses

 

•

48,405 retail residential NAS net losses

During the first six months of the year, BCE had 48,184 net retail customer losses, compared to 91,076 net retail activations last year. The year-to-date net retail customer losses consisted of:

 

•

45,282 postpaid wireless net customer activations, and 9,015 prepaid wireless net customer additions

 

•

41,618 retail high-speed Internet net customer activations

 

•

34,099 retail TV net customer losses comprised of 33,347 retail satellite TV net customer losses and 752 retail IPTV net customer losses

 

•

110,000 retail residential NAS net losses

At June 30 2020, BCE retail customer connections totaled 18,935,326, up 1.4% year over year, and consisted of the following:

 

•

10,012,259 wireless subscribers, up 4.0% compared to Q2 2019, comprised of 9,205,222 postpaid subscribers, an increase of 3.3% over last year, and 807,037 prepaid subscribers, up 12.2% year over year

 

•

3,597,219 retail high-speed Internet subscribers, 3.9% higher than last year

 

•

2,738,365 total retail TV subscribers, down 1.0% compared to Q2 2019, comprised of 1,766,430 retail IPTV customers, up 3.1% year over year, and 971,935 retail satellite TV subscribers, down 7.8% year over year

 

•

2,587,483 retail residential NAS lines, a decline of 8.3% compared to Q2 2019

 

8             BCE Inc. 2020 Second Quarter Shareholder Report