Q3 2024 BCE Inc Earnings Call

Speaker Change: You are in listen-only mode. If you wish to ask a question, dial star 1. ...EQ3 2024 results conference call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

at PCE.ca website, which we posted earlier this morning. Before we begin, I'll draw your attention to the safe harbor on slide two, reminding you that today's slide presentation and remarks made during the call will include four looking statements.

and information and therefore are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements except as required by law. Please refer to BC's publicly filed documents for more details on our assumptions and risks. With that, over to Marko.

Marko: Against this backdrop, we remain focused on better quality, long-term, margin-accretive subscriber acquisition and reducing costs to help offset short-term revenue impacts from sustained competitive pricing pressures.

Expected revenue losses from the source, which we've discussed in the past.

Slow economic growth and a media advertising market that's still in tradition Transition pardon me particularly on the on the linear side This focus on disciplined customer growth and ongoing efforts to drive cost savings across the organization

through our advanced broadband networks, expanded digital and AI capabilities, as well as other transformation work streams.

is reflected in our Q3 consolidated EBITDA growth of 2.1% and a 1.7 point margin increase to 45.6%.

I'm going to move now to our operating results.

Marko: Starting first with wireless, you'll see combined mobile phone and connected device net ads in Q3 totaled $158,412. Our objective was to strike a balance between subscriber loadings and economics.

We also tried to reset rate plan pricing to more rational levels, reflective of the tremendous value our services provide to customers.

Despite some green shoots, those didn't stick throughout the quarter.

Nevertheless, we held firm to our strategy and we chose not to match every promotional offer just for the sake of capturing a higher number of subscriber activations.

Rather, as I said, our focus was on acquiring margin accretive customers and increasing our service bundle penetration given its importance as a churn management and value driver tool.

Marko: In fact, all of our new post-paid customer net activations this quarter were on the main Bell brand.

Moreover, in an effort to strike a better pricing tier balance between our various brands, we stopped selling prepaid service on Virgin Plus at the end of September and we plan to discontinue Bell-branded prepaid service in Q4.

Now on to residential wireline. Not surprisingly, fiber continues to anchor new internet subscriber growth and drive higher multi-product penetration, contributing to a 15% increase in households subscribing to mobility and internet service where we have fiber.

Notably, internet revenue growth improved to around 5%, which represents our best quarterly results since Q2 of 2023, and it's a direct reflection, again, of our balanced approach to broadband market share growth and discipline pricing.

This result was driven by continued growth in products such as Crave with Ads and Connected TV, strong client demand for Bell Media's advanced advertising solutions, and ongoing direct-to-consumer streaming growth.

Speaker Change: Investments to sustain the strategic shift to digital are continuing, with the availability of TSN and RDS content on Amazon Prime Video channels in Canada.

Speaker Change: and the expansion of Bell Media's existing licensing agreement with Warner Bros. Discovery announced in 2023 to extend Cray for multiple years as the exclusive home of HBO and of Max Content.

Speaker Change: Bell Media also recently secured a content and licensing agreement with NBC Universal to bring USA Network and Oxygen True Crime cable channels to Canada for the first time.

Speaker Change: Discovery Canada will be rebranded as USA Network at the start of the year, of next year.

As for our transformation initiatives, we're making significant progress modernizing how we operate across the company by leveraging technology, automation, and simplification in a way that's more agile, digital, and lower cost.

And all this is designed to drive significant capex and operating cost efficiencies.

Speaker Change: In fact, we're ahead of plan in decreasing CapEx by more than $1 billion over the 2024-2025 timeframe.

Speaker Change: including a year-to-date reduction this year of more than $600 million while working towards our fiber-built target of 8.3 million locations by the end of next year.

However, as we move more workloads to the cloud, it will result in a shift of dollars from CapEx to OpEx that will moderate margin expansion in the short term, but this will be meaningfully cash-cost-decretive longer term.

Speaker Change: And we remain on track to deliver in-year savings of approximately $200 million from workforce reductions announced in February.

Speaker Change: We also continue to advance our transformation to a tech services leader in the B2B space with FX Innovation's acquisition last month of HGC Technologies, a leading ServiceNow managed services provider based in Montreal.

Speaker Change: This investment builds on our purchase in July of Cloud Kettle, based in Halifax, to further strengthen FXI's expertise in process automation, cloud technologies, and digital transformation.

Speaker Change: and in line with our strategic goal to become a cybersecurity managed services leader in Canada and North America.

Speaker Change: complementing our acquisition of tech services company Stratagem in July. We expanded our relationship with Palo Alto Networks in a first-of-its-kind partnership to offer their full suite of managed security services.

Speaker Change: This agreement directly supports our Bell Business Markets growth agenda and is already evident in key wins with some of our largest Canadian customers.

Against the backdrop of these investments...

Speaker Change: On Monday, we announced our acquisition of Ziply Fiber, the largest broadband and fiber internet provider in the U.S. Pacific Northwest.

The acquisition marks a bold milestone in Bell's history.

Speaker Change: It's a significant investment that will help us take our competitive edge beyond Canada and it will enhance long-term growth for Bell by providing us with a foothold in the under-penetrated U.S. fibre market while increasing our scale, diversifying our operating footprint,

and establishing a platform for further expansion opportunities.

Speaker Change: The acquisition is immediately accretive to cash flow from operations, enhancing BC's financial growth profile.

Speaker Change: We expect the transaction to be free cash flow creative post the completion of simply fibers planned fiber build out to more than 3 million locations

Speaker Change: All in, it will help to support our long-term capital markets objectives.

Speaker Change: We intend to finance a transaction largely with the $4.2 billion of net proceeds from the pending sale of MLSC.

effectively.

Speaker Change: What we're doing is monetizing an asset with no impact on B.C.'s operating results.

Speaker Change: to fund the acquisition of an asset aligned with our core business and our fiber growth strategy.

which is again very strategic.

Speaker Change: Importantly, as part of the condition of sale of MLSC, as you all know, Bell Media secured access to content rights for the Maple Leafs and Raptors for the next 20 years, and that will solidify TSN's position as Canada's sports leader.

Speaker Change: The pending sale of Northwestel that we announced earlier this year is another clear indication that we'll take seriously any opportunity to monetize assets where and when it makes sense.

Speaker Change: I'm turning now to slide 5, reviewing with you some key operating metrics for the quarter, again, starting first with wireless. We added 102,196 new net mobile phone subscribers in Q3, down from 167,000 in Q3 of last year.

Speaker Change: Although post-paid net ads of 33,111 were down compared to an exceptionally strong prior year, consistent with our operating strategy to focus on margin-accretive subscriber ads and disciplined device subsidization, like I said at the beginning, all new customers were on our main bell brand.

Speaker Change: While post-pay churn this quarter was up against the backdrop of elevated competitive activity relative to seasonal trends and higher than we'd like, it did represent a third consecutive quarter of deceleration in the year-over-year rate of increase.

Speaker Change: So we're moving in the right direction when it comes to churn.

Speaker Change: Prepaid net ads were up considerably versus last year, increasing to 69,085. This represents our best quarterly result since Q3 2019, and it's a direct reflection of the strategy to increasingly address the flanker in newcomer market.

with our prepaid brand.

To close off on wireless, Arpoo was down 3.4%.

Speaker Change: As expected, this result represents the accumulation of excessive rate plan discounting and promotional offer intensity over the past year.

Speaker Change: Until prices stabilize, we'll continue to focus our efforts on delivering enhanced customer experiences and value, and on improving wireless ARPU and margins.

Speaker Change: Now to Wireline. In Internet, we delivered 42,415 new net retail subs.

Speaker Change: Although the environment remains ultra-competitive and overall industry growth is slowing, we continue to capture the majority of new growth in our markets because of our superior fiber internet service offering.

We also added around 9,200 new NetITTV subscribers.

Speaker Change: And lastly, I'll turn to Bell Media. Total advertising revenue increase for a third consecutive quarter on the strength of digital, the strength of live sports, and our acquisition of OutEdge that we completed in June.

Speaker Change: Crave subscribers were up an impressive 12% to more than 3.4 million, driven by a 34% increase in direct-to-consumer streaming subscribers.

Speaker Change: TSN and RDS digital subscriptions collectively grew subscribers by 45% thanks to premium sports content including the President's Cup, Euro Cup Soccer, Copa America, and the Summer Olympics, which helped TSN and RDS retain their number one rankings in Q3 yet again.

Speaker Change: In summary, the Bell team continues to consistently execute our plan with discipline in the most competitive market we've seen in years, to grow subscribers responsibly, to serve our customers with the best pure fiber and mobile 5G networks.

Speaker Change: to further improve the customer experience through digitization and of course to reduce costs to align with the revenue profiles of each of our segments.

Speaker Change: Due to top-line pressures in the first three quarters of the year stemming mainly from lower than anticipated product sales, which Curtis will discuss,

Speaker Change: as well as an unconstructive wireless pricing environment. We're revising BC revenue guidance for 2024. And again, Curtis will cover that with you in a second. On that, I'll turn the call over to him. Thanks for the time, everyone, and looking forward to the Q&A after Curtis presents.

Curtis: Great, thank you Marko and good morning everyone. I'll begin on slide 7 with BC's consolidated financial results.

Curtis: We delivered positive service revenue growth for a second straight quarter on the back of stronger internet revenue growth as well as the continued successful execution of our B2B tech services and digital first media strategies.

Speaker Change: Total revenue was down 1.8%. Similar to the last quarter, this was due to a 14.3% decrease in low-margin wireless and wireline product sales.

Speaker Change: which included the loss of revenue from the source foreclosures and conversions to Best Buy Express.

Speaker Change: Our positive service revenue result was achieved despite an intensely competitive pricing environment, particularly in wireless.

Speaker Change: where we intentionally slowed down subscriber acquisition to strike a better balance between volume growth and economics so as to not lock in customers on low ARPU contracts.

Speaker Change: Against this competitive backdrop, the transformation investments Mirko described are helping to drive very meaningful OPEC savings, as evidenced by a 4.8% reduction in operating costs this quarter.

This drove a 1.7 point improvement in margin to 45.6%.

Speaker Change: which bears repeating, was our best result in well over 30 years.

Speaker Change: Net earnings and statutory EPS declined in Q3. This resulted from approximately $2.1 billion in non-cash asset impairment charges, mainly for Bell Media's TV and radio properties, to reflect continued market-related pressures on the traditional advertising ecosystem.

Speaker Change: Advertising EPS was down six cents versus last year. This was due to higher financing costs and depreciation and amortization expense as profiled in our plan at the beginning of the year.

Speaker Change: This helped drive a 10.3% increase in free cash flow for Q3.

Speaker Change: The greater year-to-date CapEx savings can be attributed to the realization of efficiencies from our prior investments in digital transformation initiatives.

Speaker Change: Importantly, these efficiencies will enable us to operate at lower capital intensity levels in future years while continuing to invest in key strategic areas.

Turning the bell CTS on slide 8.

Speaker Change: Product revenue was down notably this quarter, decreasing by $114 million compared to Q3 2023. More than half of the year-over-year decline was due to lower sales at the source that I just referenced.

Speaker Change: The remainder can be attributed to lower mobile phone transaction volumes, which are down 25 percent, and the timing of mobile and data equipment sales to large enterprise clients, particularly in the government sector.

Speaker Change: Importantly, the EBITDA impact was non-material, as these product revenues are very low margin.

Thane Fotopoulos, Curtis Millen, Thane Fotopoulos

Speaker Change: Internet revenue is up approximately 5%, representing our best quarterly growth rate since Q2 2023.

Speaker Change: An encouraging result that shows we are striking a responsible balance between broadband market share

and subscriber profitability.

Speaker Change: The decrease in wireless service revenue this quarter was largely expected given sustained price compression over the past year, which has had a significant cumulative impact on ARPU.

Speaker Change: This quarter's performance also reflects a step up in data overage decline and lower outbound roaming revenue as customers continue to move to larger capacity and North American data plans.

Speaker Change: We also saw continued strength in business solutions where revenue grew 10% over last year as our enterprise strategy further progresses.

Speaker Change: This was driven by higher sales of cloud-based computing, managed automation, and security services.

Speaker Change: as well as our recent acquisitions of Stratagem and CloudKennel, which complement our acquisition of FX Innovation last year.

Speaker Change: In fact, when excluding the favorable impact of those acquisitions, Business Solutions revenue still grew a strong 7% organically.

Speaker Change: Bell's CTF EBITDA was positive, growing by 0.2%, to yield a strong margin of 46.7%.

Speaker Change: That's a 160-point increase over last year, and the direct results of our significant and ongoing focus on cost management, as evidenced by a 6.2% reduction in operating costs this quarter.

Over to Bell Media on slide 9.

Speaker Change: Strong financial performance marked by a second consecutive quarter of revenue and EBITDA growth.

Total advertising revenue is up 7.9%.

Speaker Change: driven by stronger TV sports specialty performance, continued robust digital advertising growth, and our acquisition of outage media.

Speaker Change: Subscriber revenue growth of 13.5% reflected retroactive adjustments related to contract renewals for certain Canadian TV distributors, as well as continued D2C crave and sports streaming growth.

Even when normalizing for the retroactive revenue adjustments.

Belmira Ibuta was up a very solid 5% this quarter.

Speaker Change: Turning to slide 10, balance sheet remains quite well positioned with $4.4 billion of available liquidity, a well-structured debt maturity schedule, and a strong solvency surplus of $4.1 billion for all BC defined benefit pension plans.

Speaker Change: At 3.7x adjusted EBITDA, our debt leverage ratio is essentially unchanged compared to Q2, even with the recent acquisitions of OutEdge, Stratagem, and CloudKettle.

Speaker Change: Importantly, the funding for our planned acquisition of ZipliFiber is being structured to maintain our net debt leverage ratio relatively unchanged and our credit rating is investment grade.

No incremental debt will be required to finance this transaction.

Speaker Change: Rather, we intend to fund with MLSC net sale proceeds totaling $4.2 billion, together with cash generated from implementation of a discounted Treasury DRIP program that is commencing with BC's Q4 2024 Common Share Dividend Payment.

Speaker Change: In the event that Ziply Fiber acquisition is completed before sale of MLSE, we have secured a fully committed delayed draw term loan facility to meet the cash funding requirement at closing.

Speaker Change: Lastly, on slide 11, as you read in our press release this morning, we are revising our revenue guidance target for 2024.

Speaker Change: As I referenced earlier, Bell's CTS product revenues are down approximately $200 million a year to date.

Speaker Change: which is substantially more than anticipated at the start of the year.

Speaker Change: Moreover, we have been facing sustained wireless price compression over the past year, which has increasingly put pressure on ARPU and wireless service revenue growth.

Speaker Change: As a result of these near-term top-line pressures, we now expect total BC revenue to decline by approximately 1.5% this year, down from our previous expectation of 0-4% growth.

Speaker Change: Importantly, all other financial guidance targets for 2024 as announced in February remain unchanged.

Speaker Change: We believe this revised revenue outlook is appropriate and responsible, given the current competitive and economic environments that we are currently navigating, and provides an appropriate amount of flexibility to make the right business decisions for the long-term health of the company.

Speaker Change: On that, I'll now hand the call back to Thane and the operator to begin Q&A. Great, thanks Curtis. So before we start, so we can get to everybody in the queue, I would ask to please limit yourselves to one question and a brief follow-up. So with that, Matthew, we are ready to take our first question.

Matthew: Thank you. Our first question is from Sebastiano Petti from J.P. Morgan. Please go ahead.

Thane Fotopoulos

Thane Fotopoulos

Matthew: Hi, thank you. Mirko, obviously, you know, Ziply's EBITDA, you know, pro forma for Ziply, you know, that would only constitute, you know, call it a low to mid-single-digit percentage of, you know, BC's current EBITDA.

Matthew: As you think about, you know, the D.C.'s new, you know, let's call it a U.S.-based strategy,

Mirko: How should we gauge the company's appetite for further M&A in the U.S. long term? How meaningful of a contribution could this U.S. fiber strategy be to consolidated financials over the medium-long term?

Speaker Change: You know, maybe said differently, is this a one-off opportunity to pursue high growth assets that just happen to be in the U.S., or do you think the U.S. could become a more meaningful driver of BCE?

growth algorithm over time.

Thank you.

Thank you for the question.

and Sebastiano. So maybe I'll start by...

first principles and then work down to the specific question.

for the highest level.

Speaker Change: Fiber is at the core of what we do. We turn ourselves into a fiber-first company.

Speaker Change: Fibre is superior technology to anything else that's out there and is.

Speaker Change: You know, we start with that premise and we've invested billions in Canada on becoming a fibre-first company and you can see it quarter after quarter.

Speaker Change: the performance that we're delivering, including this most recent quarter that we're reporting on in a.

very, very competitive environment.

Speaker Change: company, you kind of look at where the growth opportunities are. And when we looked at the U.S., like I said on Monday, we're so much further ahead in Canada in terms of how much fiber has been built.

Speaker Change: and in terms of the value being delivered to customers here on a price and value perspective. And, you know, the U.S. is just behind us, so it's a great growth opportunity that's right in our swim lane.

Speaker Change: And so now on Ziply specifically, there is a high growth potential within the asset itself, particularly in those kind of IGDP attractive customer kind of states.

Thane Fotopoulos, Curtis Millen, Thane Fotopoulos

Speaker Change: But it also had, you know, the Ziply management team has done a tremendous job transforming what was a legacy asset into a modern asset, not just from a fiber network perspective.

but how they serve the customer and their IT stack.

Speaker Change: So as we look at other opportunities, if other opportunities come up, we'll take a look. And what Ziply Fibre has built would allow us, if there were other opportunities that came along to, you know, to include those within.

the Ziply fiber platform and be able to kind of

Speaker Change: consolidate and merge other assets into what ZipliFibre has built in an elegant way. So I think, all to say, if there are other opportunities where we can turbocharge the already high ZipliFibre growth, we'll take a look.

Thank you.

Speaker Change: Thank you. Our next question is from Vince Valentini from TD Securities. Please go ahead.

Vince Valentini: Hi, thanks very much. Can I come back to your core business and try to clarify a couple of things? The...

Vince Valentini: First of all, they write down on TPIA subs. So 106,000 customers in your footprint are currently riding on cable TPIA, so you have to...

Speaker Change: shut down that business and do you have to turn off the customers or you just don't count them in your sub base anymore? And a second part of that, would you not fully intend to try to just migrate those to your own networks because you have a network in to every home and in these regions? I'm a little surprised why you'd need to take the

Speaker Change: Subscribe, we're right down there and what's going to happen to these customers going forward. Similar on the prepaid if you can just clarify if

Speaker Change: You take out 78,000 for Virgin prepaid. I assume you'll take another sub right down in Q4. If you're gonna shut down the Bell prepaid, can you just level set us on what that does to ARPU? I assume that should mean that ARPU mathematically will get a little bit better in Q4 and Q1. Thanks.

Speaker Change: So I'll start first on the TPIA resale business and Curtis will cover the wireless question. Vince, good morning. Look, on the resale business, the reseller business,

Speaker Change: The 106,000 customers that are ours today under those various brands that are served off of the cable network, we can continue to...

Speaker Change: serve them for as long as they choose to remain our subscribers on those networks because they are grandfathered, but we cannot add new subscribers on them.

TPIA, so that that business is essentially...

shut down. Now on the migration from...

Speaker Change: From cable to fiber, that was the business, you know, one of one of the significant elements of the business case of those acquisitions all along was migrating where we have fiber footprint, migrating those subscribers to fiber.

Speaker Change: and we've done quite a bit of that already, so I don't have off the top of my head how many of the 106,000 customers are also in Fibre Footprint, but for those that are, we'll continue to migrate them.

Speaker Change: And where we don't have fiber, we're going to keep them on TPIA for as long as they remain our subscribers or our customers. So that's the answer on that one, Vince. And I'll turn it over to Curtis for wireless. Then, Vince, on the second one, you're right. So in terms of the prepaid stop sell on Bell, so we'll stop selling.

Speaker Change: That service on Bell, and you're right, it's a very small impact, but there will be a small benefit to our crew.

Thank you.

Speaker Change: Thank you. Our next question is from David Barton from Bank of America. Please go ahead.

Speaker Change: Good morning. Thanks for taking the question. It's Matt sitting in for Dave this morning. I just wanted to ask about the broadband business. I think you referenced in your remarks, or maybe it was just in the press release, higher deactivations.

Speaker Change: you know, due to promotions and competition and so on. But there's also reference to, you know, success in.

Speaker Change: you know, increasing the percentage of subscribers who are bundled, which usually would have, I would think, you know, a churn benefit. So maybe if you can put those into context and maybe, you know, share, you know, what...

Speaker Change: the what you know kind of churn reduction or you know other benefits you're getting from bundling these subscribers together. It'd be helpful. Thanks.

Speaker Change: So, what you're seeing is the general market is generally slowing, whether or not it's on the wireline or the wireless side, and there's a number of factors there. One is population growth, particularly newcomer growth is going to be slowing.

Speaker Change: You know more more sustained than what we would have thought given new policies You know that that has an impact on housing starts and that's penetration increases and in both segments. You'll just kind of see a Slowing of market growth although the markets are continuing to grow in in that environment. We're continue on the wireline side

...continuing to take...

Speaker Change: share away from our competitors or taking a larger share of new market growth, and that's because of our product superiority with fiber. And we have a particularly strong mix of customers coming in on the high-speed tiers.

Speaker Change: to protect market share at any and all costs and you're seeing that in some results of our of our peers.

where particularly since you asked me about wireline you're seeing

Speaker Change: serious compression on both revenues and ARPU on the wireline side. We're doing it differently. As you can see, our revenue growth is growing nicely on our internet. ARPU has been growing and that's a factor of our go-to-market approach.

Speaker Change: We are being very diligent in the customers we're bringing in on the premium brands, so always favoring Bell over Virgin.

and that.

Speaker Change: applies both to internet and wireless and of course there's there's the benefit.

Speaker Change: of lower churn for customers who buy more than one product from us. So, you know, I said it probably five times in my opening remarks, it's

Speaker Change: It's that you've got to be really disciplined in an environment like this, getting the right loads on the right brands, and not chasing every single load at all costs, because that's not a winning formula. And we made that call, and I think you see it in the margin expansion.

Vince Valentini: Thanks, and maybe a quick follow-up. Your views on convergence, I mean there's some who view it as a more of a defensive strategy, but you kind of referenced your share gains and so on. Like for Bell, are you looking at

Vince Valentini: Your converged offering has more of an offensive strategy, or is it, you know, defensive to protect what you have?

Itts...?

Speaker Change: Well, we're doing we're doing both and it's just kind of managing the entire kind of portfolio across the board now our mix of customers who buy both Either the you know an existing wireless adding Internet or an existing internet adding wireless or a new to Bell buying both at the same time. That's increasing

Speaker Change: So that mix is increasing but if you look at our overall base, you know, the bundled customer is still the minority of customers.

All right, thank you so much.

Speaker Change: Thank you. Our next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Good morning.

Drew Mcreynolds: For you, Marko, a big picture question, and it just kind of ties, I think, a lot of the earlier questions together, and it's on the outlook for industry growth in Canada.

Drew Mcreynolds: And within that, just trying to kind of gauge an EBITDA growth profile for BCE. You know, you had the revenue headwinds this year, which you've characterized as transitory. They're holding the line on 2% consolidated EBITDA and doing, you know, great work on lowering the cost of CERD.

Drew Mcreynolds: Are you able to, within that environment, sustain positive evid dog growth on the core business here in Canada?

Speaker Change: A good question, thank you. Look, on the, if you break down the revenue, like...

Speaker Change: to two chunks, product and service. On the product side, we really have the impact of, as Curtis said, the...

the song

Speaker Change: Wireline equipment Revenue declines and there's been some timing issues on on general on recognizing some of the revenue on on the wireline side So that's a product which which you know

Speaker Change: It's understandable, and of course it's low margin, so the flow-through impacts are relatively small. On the service side, it really is a question of needing the pricing to more appropriately align to the value that we are delivering to customers. And to kind of give you some...

Speaker Change: Some examples, like we've had to, you know, we've been, and I mentioned this I think at the last quarter, making sure that there's proper stratification across repaid and postpaid.

Speaker Change: and across, you know, the various brands therefore and also across, you know, the two brands in Postpaid.

Speaker Change: and I think everyone lost its way in that regard in the early part of this year. And so that's why I spent some time in my remarks talking about that.

Now, if you look at October.

Speaker Change: October pricing was lower year over year, but better than what we saw in Q1 and Q2. And part of that is kind of that proper stratification across prepaid, flanker postpaid, and premium postpaid.

Is there

Speaker Change: He's going to need to stabilize, number one, and then we'll get through some of the other impacts that we're seeing. In our case, data overage decline, like we've managed our data overage very, very tightly over the last four or five years. So, you know, our data overage decline has been over a much longer period of time than some of our competitors, and that was a good thing.

Speaker Change: and then we'll get through the outbound roaming pressures. But I think I would focus on the areas of growth.

Speaker Change: You know the areas of growth are the key things that's what you've got to do. So in our case, it's fiber

Speaker Change: as Curtis mentioned, and that hardcore pivot in media from traditional broadcasting to digital.

Speaker Change: is paying off now, and you can see it in the results.

Speaker Change: is continue to invest in those growth areas, and I've talked about this throughout the entire year. You've got to align your cost structure in those segments that are declining to align the cost to the revenues.

Speaker Change: If some assets are going to perpetually decline, we might shed those lines of business, like some of the radio stations. So, we're being pretty diligent.

Speaker Change: in managing the declining segments in order to continue to kind of harvest those in an accretive fashion and we're continuing to invest aggressively in the growth areas and Monday was an example.

Thanks. That's great context.

Speaker Change: Thank you. Our next question is from Mayor Jaggi from Scotiabank. Please go ahead.

Low-profit wireless subs is the right strategy.

Speaker Change: But it's hard to extirpate yourself from this long term because you are a national incumbent player and if you don't stay competitive, it could lead to a...

Speaker Change: material market share loss. So how should we think about this strategy going into 2025 as we look at these issues and and

Speaker Change: How can you solve these issues if we're not seeing a...

Speaker Change: clear sign that the competition, which is pressuring those prices, is looking to change their approach to the marketplace. When we headed into 2024, you were seeing

Speaker Change: and decent wireless pricing and strong subscriber loading. And as we head into 2025 we're seeing negative pricing and

Speaker Change: declining momentum in subscriber loading, very very low subscriber growth at all. So how can we generate revenue growth?

Speaker Change: in 2025 in that approach, in that approach, the strategy that you're taking. Thank you.

Speaker Change: Thanks Mayor. Simple on fiber continues to grow so our market share is growing, our revenue is growing, our ARPU is growing.

Speaker Change: So continue to invest there. On wireless, on the Bell brand...

Speaker Change: The market share is strong, and the market share is stable to growing.

Speaker Change: So we're going to continue to focus on the Bell brand. So I am looking at the numbers, behind the numbers, and like I said, all the loadings were on the premium Bell brand, and that's a good thing, and that sustains market share.

Speaker Change: The significant growth that we've had on prepaid, particularly on the Lucky Brand for us

Speaker Change: means you bring the customers in and then we're going to have to focus on

Speaker Change: Life cycle management and get the customers from migrate them from from the prepaid their entry point over to the premium brand over time So that's going to sustain and a growth and market share stability and The third element to that is lower the cost to serve

and you do those things, we'll be okay.

Speaker Change: underlying kind of what you're what you're saying in your question

Speaker Change: There is no hiding from the fact, and this is an industry point that I'm going to make now, there is no hiding from the fact.

that

The impacts of low pricing will be felt.

for quarters in the future, right? So you feel...

Speaker Change: You feel the impact of a low-pricing environment six, nine, and twelve months later. There's a trailing effect on that. And some are going to feel that more dramatically than others based on

chasing low accretive lows at all costs.

Thane Fotopoulos, Curtis Millen, Thane Fotopoulos

Speaker Change: What's your expectation about that API? Can you solve it through proactive measures that you can take to protect your own subscribers or it's more an industry-wide phenomenon that it's hard to

you know, bring down.

Speaker Change: I think it's a bit of both, Mayor. I'm not happy with where Churn is. I don't think anyone...

Speaker Change: would be given given the numbers. However, look, I'm also pleased with the improving trajectory.

Speaker Change: So kind of two sides of that coin. It is a reality, a marketplace reality, that consumers are continuing to shop for deals given the sustained aggressive promotional offers that are in the marketplace. So because of that you're going to see a lot of switching activity.

Speaker Change: That said, there are a number of tools at our disposal to...

Speaker Change: to minimize that churn. That's why we've seen an improving trajectory. I'm not going to outline a chapter and verse of all the things we're doing because it's competitive.

Speaker Change: But some of the things we're doing are taking hold and you're seeing the improving trajectory, which I've now said a couple of times, and we're going to continue to focus on that to make sure that that improving trajectory continues to improve.

Thank you.

Speaker Change: Thank you. Our next question is from Simon Flattery from Morgan Stanley. Please go ahead.

Simon Flattery: Thanks very much. Good morning. I wanted to just talk about the balance sheet again, if I could. Obviously, MLSC brought in a lot of or will bring in a lot of liquidity.

Simon Flattery: on the EBITDA line and the growth line. Could you just talk about other ways to enhance the balance sheet? What are your thoughts given these deals around tower monetization, additional real estate monetization, and some of these structured equity deals that some of your peers are looking at? Thanks.

Yeah, hi Simon, thanks for the for the question.

Thane Fotopoulos

So, a couple of things there. One, you're right, we...

Simon Flattery: You know, we announced the acquisition of Ziply Fiber shortly on the heels of announcing MLSC, so ultimately we're selling off a sports asset at a great value that didn't contribute to our financials and acquiring a fast-growth fiber company that'll expand our footprint and drive, as you say, EBITDA and free cash flow.

Speaker Change: So, leverage neutral basically there. I think that's just good capital allocation. And then in terms of other asset sales, you know, we're constantly reviewing opportunities to improve our asset portfolio and.

Speaker Change: If there's an opportunity to unlock value or capture a growth opportunity, then for sure we're going to look at it.

Speaker Change: Towers is one that you mentioned, asset securitizations, we'll look at it. It's all a matter of use of proceeds and fundamentally is it a better allocation of capital and does it drive EBITDA and free cash flow growth for our shareholders?

For more information, visit www.fema.gov

Thank you.

Speaker Change: Thank you. Our next question is from Aravinda Galapathigi from Canada Corps of Genuity. Please go ahead.

Aravinda Galapathigi: Good morning. Thanks for taking my question. On the CapEx outlook, Marko, I think that you'd sort of indicated at some of the public conference calls that, you know, there's perhaps even more downside as we kind of look to 2025 and beyond, you know, given the US venture and obviously the incremental CapEx that comes with that.

Aravinda Galapathigi: Do you think that there is even more room to readjust the capital spend in the Canadian market in light of those commitments and try and perhaps manage the balance sheet and free cash flow payout ratio factors? That was my first and I have a follow up.

Speaker Change: Thank you for that Aravinda. So on CapEx, a couple things. So for this year we're trending to to be within our our guidance for CapEx which is essentially around a sixteen and a half percent.

Speaker Change: Capital Intensity Ratio, and we've said in the past that Bell, as it is today, Bell CapEx can get to less than 15%.

and that continues to be the plan.

Aravinda Galapathigi: Thane Fotopoulos, Curtis Millen, Thane Fotopoulos, Curtis Millen, Thane Fotopoulos, Thane Fotopoulos,

Aravinda Galapathigi: at a lower cap, you know, with a lower CapEx budget.

Aravinda Galapathigi: then we're going to get to the end of our 2025 fibre build-out target, essentially in 12 months or so.

Aravinda Galapathigi: But all of that, I got that CapEx efficiency and allowing us to run in Canada at less than 15% is going to give us the room to accelerate the Zibley Fibre Build program and still operate BCE Pro Forma the U.S.

Aravinda Galapathigi: at probably around 16.5% consolidated CapEx. And when we embarked on our accelerated CapEx build in Canada over the last four years, in some years we were over 20%.

Aravinda Galapathigi: will be able to do the accelerated build and simply fiber footprint and maintain BC at consolidated 16 and a half. So you know I think that's that's a very good news both for growth and the efficiency of the investment.

Aravinda Galapathigi: Thanks, Marko. Maybe I'll just use my follow-up differently with respect to the comments you just made about the 16.5 pro-FOMA number. Should we translate that 16.5 as more of a steady-state number? I'm trying to understand whether at the peak of the rollout in the U.S., I suspect it goes a lot higher than that, or am I wrong?

Speaker Change: Nope, no no. So in terms of that, in terms of the information we shared on Monday which is that we plan to go from

Aravinda Galapathigi: You know, Ziply currently, Ziply Fibre currently has 1.3 million households pass and we'd like to get to over 3 million by 2028 that that would be done with the Consolidated 16 and a half percent is my expectation I mean more information to come as we close, but that would be the that would be the expectation

Speaker Change: That's what I was trying to convey in my longer answer at the beginning.

Thank you.

Speaker Change: Thank you. Our next question is from Jérôme Dubré from Desjardins Securities. Please go ahead.

Yes, thanks. Good morning.

Speaker Change: First, you know, you mentioned in the preferred remarks that you continue to make investments in digitization, modernization of Bell.

Speaker Change: I'm wondering how much further operational improvement you are seeing in the Bell business as it stands right now. Can we maybe be expecting a program similar to what you announced earlier this year? Maybe this could happen every second year or something? Is this a magnitude that would make sense going forward?

Oh, well, we're, um...

Speaker Change: Thank you, Jean. Let me break that up into two parts. The transformation work or journey continues because we're in the early days of some of the programs to harness the benefits of technology.

Speaker Change: So moving all our core consumer products to a single ordering and billing architecture, and we're in the process of doing that in Ontario and Quebec. And then there's other.

Speaker Change: You know, the digital platforms and the self-serve apps and virtual agents and contact centers in the cloud and all the benefits we'll get there from churn reduction, sales increase and the cost to serve, that's in the early days, so that's going to ramp.

Speaker Change: Again, early days, the more fiber homes we have connected, the more we can enable full self-install in the future, continuing to move.

Speaker Change: you know, the hundreds, the apps that we have on on-prem to the cloud. You know, we're in the early innings of that journey as well. So I could go on. So on that part of it, you know, we're in the early to mid innings. So.

Speaker Change: On programs like the one we announced in February, we continue to recalibrate.

Speaker Change: To the extent we shed lines of business, either through closing them down or selling, that obviously has those positions move with the buyer. In other areas, we're going to continue to align our cost structure to revenue streams. We have to do that. So that's how we're going to approach it.

Thank you.

Speaker Change: Thank you. Our next question is from Dadia Levy from UBS. Please go ahead.

Bye.

Speaker Change: Great, thank you. A couple of follow-ups. First, you mentioned that in October you saw a bit of pricing stability. Do you think that we've seen the worst in terms of the output declines and for Q, can we start to see maybe just better trends?

Speaker Change: from here. And then same question on churn. Still high, but you're lapping a much higher churn level from last year. So can we expect at least churn to improve annually in the fourth quarter? Thank you.

Speaker Change: Yeah, I mean, I'm sure, like I said in response to the Mayor,

Speaker Change: We'd like to get it lower, and we're going to continue to work on getting it lower, but we're happy, pleased with the improving trajectory.

It's going to depend on Black Friday.

and the holiday period.

Speaker Change: on where it's going to go, I'll just highlight the obvious, which is, you know, if,

Speaker Change: If Black Friday and the holiday period is relatively stable, I'm recognizing that those are heavier promotional periods.

Speaker Change: By design, I suppose, then we'll be okay. And if to the extent promotions are more focused on hardware than rate plans, then that will bode well for service revenue and margins.

Speaker Change: And can you maybe just touch on what the guidance assumes in terms of our expectations for?

Karku

Speaker Change: On the reviews, it's in the revised guidance that Curtis highlighted earlier and during his remarks.

Right. Continuation of service revenue to clients.

Thank you for coming.

Thank you.

Speaker Change: Thank you. Our next question is from Lauren Bonham from Barclays. Please go ahead.

Speaker Change: See how much of the change in times that we've seen this quarter usually we have the sequential

Net Ad Uplift in M3Q. So how much of that?

Speaker Change: changes just from being more targeted promotionally, as we've talked about, versus from the decline in foreign students and how you sort of expect those lower immigration expectations to impact industry growth next year and beyond.

Speaker Change: Yeah, thank you. Thank you for the question. I think I think there are a couple of trends here. One...

Speaker Change: You know, immigration levels are still positive, but they are going to slow down year over year. And I think we're continuing to see the benefit of our increased focus and

Speaker Change: distribution channels so we're doing quite well in this market on a relative basis but you're right the overall pie is shrinking but for us it's not a big not as big an impact because we are increasing our share in that market on a historical basis.

You can see it in the prepaid results.

Thank you.

Speaker Change: Thank you. Thank you. There are no further registered questions at this time. I would now like to turn the meeting over to Mr. Fotopoulos.

Speaker Change: Thanks, Matthew. So thank you again to everybody for their participation on the call. As usual, the RR team is available throughout the day for any follow-ups, questions, and clarifications. Have a good rest of the day. Thank you. Thanks, everyone. Thank you.

Speaker Change: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

Speaker Change: Please stand by and enjoy this music. If you wish to queue to ask a question, dial star 1.

Thane Fotopoulos, Curtis Millen, Thane Fotopoulos

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