Q1 2025 BCE Inc Earnings Call

Speaker Change: Good morning, ladies and gentlemen. Welcome to the BCE Q1 2025 Results Conference call. I would now like to turn the meeting over to Mr. Richard Benjian. Please go ahead, Mr. Benjian.

Richard Benjian: Thank you, Matthew. Good morning, everyone, and thank you for joining our call. With me here today are Mirko Bibic, BCE's president and CEO , and our CFO , Curtis Millen.

Speaker Change: You can find all our Q1 Disclosure documents on the Invest Relations page of the BC.ca website, which we posted earlier this morning.

Speaker Change: We have a lot of material to get through on this call.

Speaker Change: However, before we begin, I would like to draw your attention to our safe harbor statement on slide 2 reminding you that today's slide presentation and remarks made during the call will include forward-looking information and therefore are subject to risks and uncertainties

Speaker Change: Results could differ materially. We display any obligation to update forward the statements, except as required by law. Please refer to our publicly filed documents for more details on assumptions and risks. With that out of the way, I'll turn the call over to Mirko.

Mirko Bibic: Thank you, Richard, and good morning, everyone. I shared in February our strategic and operational road map that will guide our actions for 2025 and beyond.

focusing on our customers and on creating value for shareholders.

Mirko Bibic: We have a clear strategy for growth and that's anchored in four key priority areas, putting the customers first, providing the best internet and wireless networks and services, unlocking potential for businesses with technology solutions and building a digital and media content powerhouse.

Mirko Bibic: Moreover, we will continue to modernize and simplify how we do business and how we operate.

Mirko Bibic: And before providing an update on our progress against each of these, I want to call out two key and very material developments. This morning we announced a major partnership with PSP Investments, one of Canada's largest pension investment managers with approximately $265 billion in net assets.

Mirko Bibic: PSP is an extremely experienced telecom investor. It will be helping us find the expansion of our US business, which could see a commitment and excess of $1.5 billion dollars.

Mirko Bibic: This will significantly de-risk our future funding requirements and bring support for our U.S. fiber growth strategy while still allowing us to proceed with our de-leveraging plans. I'll describe our partnership in more detail in just a few minutes.

Mirko Bibic: Secondly, given the significant changes in our economic and operating environments that have occurred since the fall of 2024, our board has established the annualized dividend per BC common share at $1.75 per share from $3.99 per share.

Mirko Bibic: Both of these developments are consistent with our strategy to optimize the balance sheet, invest for growth, and enhance total shareholder returns. Now on to the four priorities.

Mirko Bibic: As you see on slide four, we're putting customers first as our top priority Earlier this year we became the first Canadian Telecom company to name a dedicated chief customer experience officer [inaudible]

Mirko Bibic: Since taking on this role, Badeer Hassan has been hard at work on improving the entire customer experience and that's grounded in four key commitments that define service excellence from a customer's point of view and our path towards making it easy to do business with Bell.

Mirko Bibic: Our objective is to put our customers at the heart of every interaction with us.

Mirko Bibic: We know their time is valuable. That's why we're prioritizing self-serve tools to help customers get the support they need whenever they need it, including 24-7 AI-powered virtual assistants while keeping our phone lines free for more complex cases or people who prefer to speak to someone directly.

Mirko Bibic: We've also introduced the new intuitive digital bill and we're improving the tools available to our representatives so that no matter how customers interact with us, our team is access to the same up to date information.

Mirko Bibic: And because we know that life does not wait, we're enhancing our callback experience so that our team can follow up without customers having to sit on hold. This approach will materially improve customer satisfaction, turn and ultimately customer lifetime value and financial performance.

Mirko Bibic: Turning to slide five now. The next key priorities to provide the best fiber and the best 5G networks.

Mirko Bibic: Internet and wireless, as you all know, are our largest businesses and most important revenue drivers.

Mirko Bibic: We've made significant investments over the past several years in Fiber and 5G, which continue to receive third-party recognition for delivering the fastest download and upload speeds, lowest latency, robust security, and stand out reliability and resiliency.

Now over to slide 6. [inaudible]

Mirko Bibic: I know I say this often, but I can say it again. Fiber is the future. It's clearly the superior technology and customers knowing. Fiber gives us a sustainable advantage that will last for decades.

Mirko Bibic: Since 2020, when we made the decision to accelerate fiber deployment, we've increased our total footprint by more than 50% We have the largest fiber footprint in Canada at more than 7.28 million households in business locations and it's clear that our strategic investment is paying off [inaudible]

Mirko Bibic: We more than doubled our internet customer base on 5 or 3 million, and over 60% of these customers are taking gigabit plus speeds.

Mirko Bibic: We doubled our fiber revenue over the same period, where we have fiber and market share has grown 18% to 48% [inaudible]

Mirko Bibic: Where we've had fiber for a longer time, our market shares above 50% [inaudible]

Mirko Bibic: And if you look at our numbers quarter after quarter, we consistently capture the majority of new broadband additions with fiber Moreover, where we have fiber, however mobility and internet bundled sales continue to grow and now comprise more than 50% of our total residential households.

Mirko Bibic: Our residential fiber penetration rate is approximately 44% across our entire footprint. That's a blended figure that comprises older tenured and more recently deployed markets.

Mirko Bibic: In our oldest tenured markets, penetration is at 50% or higher. In our experience, the average penetration rate in U-Fiber footprint reaches 45% by the third year after deployment.

Mirko Bibic: And since we've built more than 1.9 million new fiber locations in the last three years, many of our markets are lower on the penetration curve, all that to say lots of room to grow. The bottom line is this, our commitment to fibers at the core of our strategy and where we have fiber we win.

Mirko Bibic: Turning to the U.S. fiber market now on slide 7, the U.S. is a natural expansion market for BCE where we can leverage our deep expertise in building fiber infrastructure. As a reminder to investors, let me briefly outline the reasons why the U.S. fiber market is so attractive. The U.S. fiber market is so attractive. The U.S. fiber market is so attractive. The U.S. fiber market is so attractive.

Mirko Bibic: U.S. Fiber, deployment, lags behind Canada, only 51% of homes in the U.S. have fiber.

Compared to 75% here in Canada. Fiber penetration also lags

Speaker Change: Competitive Dynamics are favorable, given a largely two-player market driven by retail competition with no mandated wholesale access to fibers.

The market structure is even more attractive for Ziply.

Speaker Change: Household Income and Economic Growth across its four states in the Pacific Northwest is above the national average.

Speaker Change: There are one or fewer gigabit capable competitors in 93% of the Zipley Fibers operating footprint, no multi-gig capable competitors and relatively less overbuilding activity in the Pacific Northwest than in some other U.S. regions.

Speaker Change: The U.S. has attracted fiber economics with a low cost to build and strong art group growth importantly like in Canada, U.S. customers are choosing fiber

Speaker Change: Which brings me to our acquisition of Zipley on sliding. Zipley's delivering consistently strong resulting with EBITDA growing an impressive 17% in 2024, powered by fiber. This growth rate is even greater than planned.

Speaker Change: which is a testament to the Zipley Management team's execution excellence. Management's demonstrated ability to execute will become even more valuable as the foot-fiber footprint

Zipley's more mature tenured markets have already reached 40% penetration.

Speaker Change: So we're getting in at a very opportune time where there's still meaningful growth ahead of that penetration particularly when you consider that over 40% of fiber locations were built in the last four years with more to come [inaudible]

Speaker Change: 85% of Zipley's approximately 400,000 retail subscribers are on Pure Fiber service

Speaker Change: Zipley also benefits from a favorable operating mix with over 70% of total revenues from consumer and SMB and with a robust enterprise and wholesale business also built on the back of fiber.

Speaker Change: The acquisition is on track to close in the second half of 2025. It's an important part of our plan to generate sustained top line in EBITDA growth.

Speaker Change: There has been strong interest amongst financial partners to join us in capturing a significant growth opportunity given the power of Zipley's assets and strong track record of its management team and BC's experience and success with fiber.

Speaker Change: As mentioned, we're very pleased to announce the long-term strategic partnership with PSP Investments through their infrastructure portfolio to build new fiber locations in the U.S. and support Zip Lease footprint expansion.

Speaker Change: PSP has been an investor in Zipley and knows the management team well.

Speaker Change: Zipley will also retain all retail customer relationships associated with the incremental fiber locations to be built by the strategic partnership.

Speaker Change: What the partnership will be focused on is building last mile fiber in Zipley's growth markets.

Speaker Change: This includes the near-term development of approximately 1 million fiber passings in Zipley's existing states.

Speaker Change: with the ability to expand to 6 million fiber locations longer term. This will enable Zipley to eventually reach up to 8 million total fiber locations and increase from its original target of 3 million.

Speaker Change: The Strategic Partnership Structure is a cost-effective and capital-efficient way to fund our U.S. fiber growth while still meeting our de-leveraging targets, and I'll detail that momentarily.

Now let's move to slide ten.

Speaker Change: This long-term partnership provides clarity on our U.S. fiber ambitions. Zipley's I-Leck footprint covers approximately 2 million customer premises. Upon closing of the acquisition, fiber will already be available to approximately 1.5 million of these locations.

Speaker Change: And as I mentioned, the partnership has long-term visibility into as many as six million additional locations outside of Zipley's two million location I like footprint.

Speaker Change: The partnership unlocks our ability to capture this significant additional footprint and related financial benefits.

Speaker Change: So when you combine our 8 million locations in Canada that have Fiber this year, our US Fiber assets will grow BC's position as North America's third largest Fiber Internet provider with access to approximately 16 million total passings.

There's clearly long-term growth potential in this critical space [inaudible]

Speaker Change: Turning now to Slide 11 to wrap up on the U.S. fiber

Speaker Change: The PSP Strategic Partnership is an exciting announcement for BCE and for our shareholders. It allows us again to support the fiber expansion in a cost-efficient manner while optimizing the balance sheet and improving our free cash flow profile.

Speaker Change: Through this endeavor, Zipley will retain the retail economics of its existing and future customer relationships and the fiber footprint to be deployed by the partnership, and this will improve B.C.'s revenue and EBITDA growth profiles.

Speaker Change: BC and PSP will proportionately fund any equity needed by the partnership as required over time.

Speaker Change: This significantly reduces the capital investment by BCE and improves BCE free cash flow by over $1 billion over the 2026 to 2028 time period.

Speaker Change: The partnership will also have its own non-recourse debt financing, which is anticipated to be the majority of its capital over time. This further reduces BCE's cash funding requirement.

Speaker Change: The partnership will be deconsolidated with all CapEx and debt financing remaining off B.C.'s

Speaker Change: This structure and attractive cost of capital will improve our expected returns in the US, we're estimating an all-in rate of return in the US of 20% or higher.

Speaker Change: So now let me turn to the next element of our strategic roadmap, and that's on slide 12.

Speaker Change: Our third priority is to unlock the potential of businesses with the best technology solutions, and we've set an ambitious goal, which I've shared before, to generate a billion dollars in revenue by 2030. And we're well on our way.

Speaker Change: And just two days ago, we launched ATECCO. It's an all new Montreal Headquarter technology solutions provider, and ATECCO brings together under the same banner. The tech startups we've recently acquired, which are FX Nevasion, Cloud Kettle, and HGC technologies. [inaudible]

Speaker Change: Its competitive differentiators uniquely position it to deliver better outcomes for enterprise customers.

Speaker Change: Ateco's team of workflow automation experts will draw on their experience in the world's largest hyperscalers and automation platforms.

Speaker Change: Like AWS, Azure, Google Cloud, Salesforce, and Service now, to help customers streamline their operations, improve automation, enhance customer experience.

and facilitate data driven decision making.

Speaker Change: We've created a one-stop shop for businesses networking and technology solutions needs. ATECO's capabilities position us to achieve significant growth in the enterprise space.

Speaker Change: On that move to slide 13. The fourth key area focus is to build a digital media and content powerhouse. Our digital pivot and media is bearing fruit after a lot of hard work and focused investment.

Speaker Change: Digital advertising is expected to have a total addressable market of $22 billion in Canada in 2028.

Speaker Change: Up from 16 billion in 2024, as we continue to capture more share of that digital advertising market, profitable growth lies ahead for Bell Media. Our priorities in digital media and content are the following.

Speaker Change: Grow Crave from 4 million subscribers today to 6 million by 2028. Maintain sports leadership through the best breadth of content.

Speaker Change: Accelerating, Conversion to Digital Inventory, and a focus on extending content value and monetization. This is already being realized with Belmedia's acquisition of a majority stake of global content distributor sphere abacus.

This move expands Belmedia's content distribution opportunities

Speaker Change: Let me touch briefly now on the fifth key pillar on slide 14.

Speaker Change: We started this transformation in 2022 and it's already delivered $500 million in savings. At the time, I stated that we had $500 million more to go through 2028 to achieve our goal of a billion dollars in cost saving us.

Speaker Change: Given our transformation momentum to date, we've upsized that objective by an additional $500 million for a new goal of $1.5 billion in total cost savings by the end of 2028.

Speaker Change: I'll now turn to our Capitol Allocation Strategy on slide 15.

Speaker Change: We're navigating a complex operating environment which has evolved significantly since the fall of 2024. In February of this year, we laid out a clear roadmap to adapt to this evolving environment and I've kind of expanded on it today. Court of this plan is our Capital Allocation Strategy.

Speaker Change: Strengthening the balance sheet, investing for growth and driving total returns are the key priorities Let me share the meaningful progress we've made over the last few months beginning with optimizing our balance sheet

Speaker Change: In February and March, we successfully access the hybrid debt markets in the US and Canada, raising the Canadian equivalent of approximately $4.4 billion in our first hybrid notes offerings in each market.

Speaker Change: Given the 50% equity treatment afforded by the credit rating agencies, this has meaningfully improved our leverage ratio.

Speaker Change: Consistent with our de-leveraging plans, we repurchased several bonds trading at a discount to par-value, reducing the amount of debt. These actions have collectively lowered our net debt leverage ratio by approximately 0.3 times since Q4, bringing it to approximately 3.6 times of adjusted EBITDA.

Speaker Change: Given B.C.'s healthy balance sheet and business mix, we are best in class from a credit ratings perspective in Canadian Telecom.

Speaker Change: In addition, our review of non-core assets continues to advance. The previously announced by vestitures of Northwest Tell and MLSC are progressing as expected, and we've launched two processes for additional divestitures.

Proceeds from any new sale will support our de-leveraging efforts [inaudible]

Speaker Change: The acquisition funding for Zipley is leveraged neutral and we structure the transaction in a way that balances growth with financial discipline.

Speaker Change: I've explained that in detail in the earlier sections on the U.S.

Speaker Change: Bottom line is the partnership will enable us to better capture the significant upside of fiber expansion, unlocking incremental cash flow to support deleverging at the BC level, and it complements our bread, broader efforts to strengthen the balance sheet.

Speaker Change: And as I mentioned earlier, we're already seeing ziply out-perform expectations. We're seeing ziply out-perform expectations.

Speaker Change: In fact, since we announced the acquisition in November , the transaction multiple of 14.3 times estimated 2025 adjust the deed, but does not already close with a 13-tie.

Speaker Change: The Zipley team is driving very strong customer acquisition and penetration on its fiber metrics and the metrics will get even better as we go forward, as we capture the incremental synergies and growth opportunity from the PSP partnership. Thank you.

Speaker Change: The investments are designed to position us for sustained success in an evolving market

Speaker Change: And the third aspect of our strategy is delivering value to shareholders. The focus is on maintaining a resilient and sustainable dividend, achieving leverage racial targets, and greater flexibility

Speaker Change: And that brings me to slide 16 and our dividend announcement this morning, which encompasses all three components of our capital allocation strategy.

Speaker Change: We must address a number of significant changes in our economic and operating environments that have occurred since the fall of 2024, as I've mentioned.

Speaker Change: Considering these factors, we've made the appropriate decision to adjust our dividend. [inaudible]

Speaker Change: The annualized dividend per BC comment share will be established at $1.75 per year, effective with the Q2 dividend payment.

Speaker Change: Even with the adjustment of the to the dividend, we continue to provide an attractive yield that is among the highest on the TSX60.

Speaker Change: Additionally, we're updating our long-term common share dividend payout policy to target a payout range of 40-55% of free cash flow. This policy range provides us with more flexibility for de-leverging.

Speaker Change: to make it easier for the investors to consider the effects of capital leases on our cash flow.

Speaker Change: We will begin to also disclose our free cash flow after capital E's repayments going forward. In addition, we will provide on an annual basis the implied dividend payout ratio on the basis of free cash flow after capital E's repayments, along with the payout ratio based on the policy.

Speaker Change: The adjusted dividend will support a de-leveraging effort while providing enhanced flexibility and positions us as a resilient dividend-paying company.

Speaker Change: By the end of 2027, we expect to achieve a net debt leverage ratio approximately 3.5 times adjusted to EBITDA Proforma Zipley, with a longer-term goal of approaching 3 times by 2030.

Speaker Change: We will also eliminate the Treasury discount feature of the drip effective with the Q2 dividend payment of July 15th We will eliminate the Treasury discount feature of July 15th

Speaker Change: These decisions are the right ones for the long-term health of BC and the long-term interests of our shareholders.

Speaker Change: As we look to the future, I want to reiterate our unwavering focus on disciplined execution, financial resilience and value creation. The steps we've taken is quarter-demonstrate our ability to adapt and deliver the challenging environment. And with that, I'll turn the call over to Curtis.

I'll begin on slide 18 with B.C.

Curtis Millen: Adjusted even down with essentially stable, one margin improved 40 points on the back of a 2.1% reduction in operating costs.

Total revenue was down 1.3% [inaudible]

Curtis Millen: This can be largely attributed to a 7.4% decrease in low margin products sales, which included the loss of revenues from the source store closures in 2024 and conversions to Best Buy Express.

Curtis Millen: Our service revenue result reflected the flow through impact of sustained competitive pricing pressures over the past year and ongoing declines in legacy voice data and satellite TV services.

Curtis Millen: That earnings were up nearly 50% in Q1. The increase was due mainly to early debt redemption gains related to the repurchase, excuse me, of certain bonds trading at a discount to part of value.

Curtis Millen: Nothing notable on adjusted EPS, consistent with our 2025 guidance, assumptions for interest and depreciation expense, and a higher average number of shares are standing because of the discounted treasury draft. It was down three cents compared to last year.

Curtis Millen: CapEx was down $273 million this quarter. We remain on track to remove capital investment by $500 million in 2025 in line with our plan.

Curtis Millen: The CapEx reduction, lower cash taxes, and higher cash from working capital, drove a $713 million year-over-year increase in Q1 free cash funds.

Turning Bell CTS on Slide 19

Starting with a high-level summary of Q1's subscriber metrics.

Curtis Millen: Retail Internet Net of 9.5,000. We're down versus an exceptionally strong Q1 last year.

Curtis Millen: Importantly, customers continue to choose fiber because we offer a superior product with a symmetrical speed advantage over cable.

Curtis Millen: Where we have Fiverr, our subscriber loadings and marketer gains remain strong.

Curtis Millen: Our father-of-the-home customer base now accounts for 58% of our total retail internet subscriber base.

Curtis Millen: Moving to wireless. We recorded a small net loss in total mobile phone subs in Q1 compared to 25,000 net ads last year.

Curtis Millen: This was a function of a 7.7% decrease in gross activations reflecting a slower market.

Curtis Millen: However, consistent with our operating strategy to focus on margin of credo's subscribe acquisition, we gain 25,000 net new customers on the main bell brand.

Curtis Millen: Notably, post page turn remains stable in Q1 following nine consecutive quarters of year-over-year increases.

Curtis Millen: While it remains higher than we'd like, we're pleased with the improving trajectory. Managing our turn will continue to be a top priority

Curtis Millen: Mobile phone RPU is down 1.8%, this represents a second straight quarter of improvement in the year-over-year rate of decline. Our RPU result this quarter reflects its same competitive price and pressure and lower roaming due in part to decrease travel to the US. [inaudible]

Curtis Millen: Louis de Bell, CTS Financials. Internet Revenue was up 2.4%

Curtis Millen: Solid result showing we're striking the right balance between sunroath and discipline pricing.

Curtis Millen: We also saw continued strength in business solutions where revenue grew 8% over last year.

Curtis Millen: This was driven by higher sales of technology solutions as well as acquisitions made over the past year.

Curtis Millen: Wireless service revenue was down .8%, due to the notable improvement from the 1.5% decline in Q4.

Curtis Millen: We expect the rate of decline will continue to approve going forward as our poo improves.

Curtis Millen: However, the industry will continue to feel the impact of the pricing levels in market over the last 12 months for a while longer

Curtis Millen: Arla's product revenue was down $60 million this quarter. The year over year decline was the result of lower sales of mobile devices to large enterprise customers in the government sector, as well as the loss of revenue from the source store closures and 24 and conversions to Best Buy Express.

Curtis Millen: Our epithel result was in line with Flann, notably margining increased 20 points over the last year to 45.7%

Curtis Millen: The direct result of our significant and ongoing focus on cost management as evidenced by a 2.7% reduction in operating costs this quarter.

Turning over to Belmedia on slide 20. [inaudible]

Curtis Millen: Continuous digital momentum and strong overall financial performance marked by a fourth consecutive quarter of revenue and EBITDA growth.

Curtis Millen: Digital revenues were up 12%. This was mainly on the back a strong crave DTC streaming growth, which drove a 22% increase in crave subscribers to 3.8 million.

Curtis Millen: Notably, direct-to-consumer streaming subscriptions now comprise the majority of total craved subscribers.

Curtis Millen: Total advertising revenue increased for a fifth straight quarter on the strength of digital live sports and events, increased spending related to the federal election, and the contribution

Curtis Millen: Subscribe for revenue growth of 7.8% was driven by continued direct consumer crave and sports

Curtis Millen: The EBITDA was up 35.9%, driving a substantial 4.4 point increase in margin to 20.5%.

Curtis Millen: Really a nice performance by media by growing revenue, EBITDA, and Mark.

Thank you. Thank you. Thank you.

Turning to slide 21

Curtis Millen: Our balance sheet is very healthy with 4.7 billion of available liquidity and pension solvency surplus is totaling 3.8 billion at the end of Q1.

Curtis Millen: We end at Q1 with a net dead leverage ratio of below 3.6 times adjusted EBITDA, compared to 3.8 times at the end of Q4.

Curtis Millen: The decrease can be attributed to the combined impact of $4.4 billion in hybrid notes offerings issued in advance of the Zipley Fiber Transaction.

Curtis Millen: and repurchases of bonds trading at a discount to principal value.

Curtis Millen: We are highly focused on deleveraging our balance sheet with the execution of our plan toward a net dead leverage ratio of approximately 3.5 times adjusted either job by the end of 2027.

Curtis Millen: The plan includes substantial free cash flow generation, divesture of non-core assets, and applying incremental retain cash resulting from the revised dividend level for paying down debt.

Curtis Millen: Our updated dividend payout policy of 40-55% of free cash flow is reflective of a balanced approach to capital

Curtis Millen: This policy range allows us to fund our capital allocation priorities, which are to optimize the balance sheet, invest for growth, and return capital to shareholders.

to wrap up on slide 22. Thank you.

Curtis Millen: We remain confident in our proven ability to deliver under any circumstances [inaudible]

Curtis Millen: backed by the best networks and services. Our ongoing business transformation.

Consistent operational execution and cost discipline [inaudible]

Mirko Bibic: Relays are focused on the key strategic priorities that Mirko outlined to create long-term value for shareholders

Speaker Change: I'd also notice that I am reconfirming our Financial Guidance targets for 2025 with the annualized common dividend at $1.75 per share. I will now turn the call back over to Richard and the Operator to begin Q&A.

Richard Benjian: Thanks, Curtis. Before we start, I want to remind everyone that due to time constraints this morning because of our AGM that is taking place after this call, to please limit yourselves to one question and a brief follow up so that we can get to as many in the queue as possible.

Speaker Change: With that, Matthew, we are ready to take our first question.

Speaker Change: Thank you. The first question is from Maher Yaghi from Scotia Bank. Please go ahead.

Mayor Jaggi: Great, thank you for taking my question. Never easy decisions when companies decide to cut the dividends but

Speaker Change: doing it for the right reasons, I think it's very good. I wanted to ask you in terms of your leverage targets.

Speaker Change: that you mentioned in your preferred remarks and in your presentation. Do they include any answer sales that have not been announced yet?

and just to follow up in terms of wireless.

Do you think that Q1 was a...

Speaker Change: Abarant Quarter, or this is more the environment that you're going to be probably in for the rest of the year. Thank you.

Speaker Change: Thanks for the question of the wire. In terms of the leveraged targets, so, you know, our plan remains as we announced a couple of months ago to sell the $7 billion in assets that includes MLSC, Northwest Hell, and a couple other processes that we have on the go. So it basically factors in what we announced last quarter.

Speaker Change: Thanks for the question, Mayor Smirko. On the the wireless question, I'll give you maybe a bit of a...

Speaker Change: A broader answer, basically that to answer a very specific question, but more context. So I would say that if you look at early on in Q1...

Speaker Change: We were seeing some pricing stability, green shoots. I think in back half of Q1 there was a reversion too.

kind of fraught the pracing activity across the industry

Speaker Change: So, you see from that the overall industry loadings and that including ours are affected.

by the macro environment as well, including the clamp down on immigration, and then there's the-

Speaker Change: kind of impact of pricing. So if you put the two together, we decided not to not to go after non-creative loadings. So the numbers behind the numbers is that we had pretty strong performance on the bell brand again.

Speaker Change: and we had strong performance on Cross-Cell and our wireless product margins remained positive so I think now to end, that's the context for Q1, that's answers a specific question.

Speaker Change: As we're we look into Q2 and the progress so far we see the metrics trending in the right direction for sure so far we see the metrics trending in the right direction

Speaker Change: and we see our coup d'account improvement. We're seeing churn improvement in ourselves. We're okay in Q1 and as we improve churn, I think that's going to deliver what investors are expecting.

Thank you

Speaker Change: Thank you. Our next question is from Drew McReynolds from RBC.

Please go ahead.

Drew Mcreynolds: Yeah, thanks very much, good morning. I guess first on the 2025's Reiteration of Guidance.

Drew Mcreynolds: You know, Marco, you began to talk about Q2, and I understand visibility is not great. Just want to get a sense of, you know, the working assumptions in terms of reiterating guidance with respect to the competitive environment in macro. You know, we're just trying to assess.

Drew Mcreynolds: I guess you're a degree of confidence in keeping within your existing guidance range. And then I follow up just on the on the target. It's

Drew Mcreynolds: 3.5 times, leverage for 2027, so great obviously to get a target out there, you know, simplistic way if I kind of run that through my forecast, including kind of the non-core asset sales that you've announced.

Drew Mcreynolds: The aggregate $7 billion. I get a leverage by 2027, that's just a little .2.3 times lower than 3.5 times, so I'm just trying to...

Drew Mcreynolds: Figure out if there's anything else here, whether it's even dog growth or higher kind of CAPEX investment, giving the announcement this morning. Just any other big picture puts and takes that, you know, may help reconcile that and if I need to take that offline with Curtis, that's great.

Yeah, I'll hide Drew. Thanks for the question.

Speaker Change: Yeah, we delivered in Q1 as we issued the hybrids, thought it was a good idea to issue hybrids to deliver given the kind of uncertainty in the market. So once we closed Dippley leverage would go back up, given we're assuming Dippley Fogger dead as well.

and going forward as you say.

Speaker Change: for Casual Growth, Asset Sales. Then you made a comment about funding needs, the funding needs at the partnership are actually quite limited given our partnership with PSP and the ability to lever at the partnership level.

Mirko Bibic: So, as Mirko said, the partnership by itself actually improves our free castle by over a billion dollars in the first three years So, all of that will lead us to better free castle and delivering

Mirko Bibic: On the first question, Drew McReynolds, Mirko, in terms of the…

Mirko Bibic: The reconfirming of guidance, if you go back to February , and when we provided guidance for the years, that's why we had a view of what the year would look like, and therefore we put the ranges in place that we did, you know, kind of with

fairly

Mirko Bibic: Relative terms, fairly wide range on either end to acknowledge the environment that we thought we would be in. So we're in a position to reconfirm that guidance today.

and Thane Fotopoulos.

Thank you.

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

Thanks very much for just a clarifying guidance as well

Vince Valentini: 300 million gain on the bond redemptions helped your free casual in the first quarter, but you not changed. The guidance, should you be at least treading to the high end of that free casual guidance given that boost, which I'm pretty sure you didn't expect when you gave us the guidance originally.

Vince Valentini: in February , and then on the Zipley Joint Venture, can you just confirm you would be the exclusive?

Retail Partner on the Network Fiber Co.

And the extra six million homes, is that all? [inaudible]

Vince Valentini: planned construction, or could some of that be buying existing assets in combination with the CapEx. Thank you.

Speaker Change: Thank you, thank you, Vince, it's Mirko on the first while I'll answer the last two questions first.

Vince Valentini: So yes, the plan is for a ziply fiber to be the exclusive tenant on the network and on fiber and on reaching the additional 6 million homes.

Drew Mcreynolds: And you asked a question there about the possibility of M&A, like right now the focus is closing

Vince Valentini: And shortly after that, we'll be in a position to close Network Fiberco, which is the Strategic Partnership, then the focus is going to be to execute on the build plan in that attractive U.S. market. So those are those are high like that for a reason that's going to be the focus.

Vince Valentini: If down the road, we see we can more efficiently hit Bill Targets through M&A.

Vince Valentini: The goal will be to do so, but within the partnership and without intending to veer off of our v-leveraging targets that we've expressed to all of you today.

Curtis Millen: The $798 million in the first quarter did not include that $300 million Curtis.

Curtis Millen: Correct. The O-Performance is largely working capital in cash tax finance.

Curtis Millen: Okay, I may have taken off line because I don't see where it's backed out in your numbers but I'll trust you. Thank you.

Thank you.

Speaker Change: Thank you. Our next question is from Matthew Griffiths, from Bank of America. Please go ahead.

Matthew Griffiths: Oh hi, thanks for taking the question. On the timing of this, the PSP, a kind of network, Fiber Co.

Speaker Change: How should we think about that? I mean obviously, I know you're focused on closing things first, but what is the time frame?

Speaker Change: Generally, for the six million homes past and is the 1.5 million, a billion, sorry, contribution from PSP is that, is that directly tied to the six.

Speaker Change: Million Passing Number, or is that just the initial investment and to achieve the 6 million?

Additional funding is required. [inaudible]

Speaker Change: Any detail would be, you know, helpful in understanding how the numbers that were presented kind of tied together. And then just quickly on the 25,000 net ads on the main bell brand, I was curious how that compares year over year. Thank you.

Thank you. Thank you Matthew. So on on, um...

Speaker Change: through the infraside of DSB, as I mentioned. So, you know, the goal will be to get to the six million homes over time. You can't build instantaneously so that will take time and the...

Speaker Change: The commitment that we express in terms of the financial contribution that will be provided over time as we build. So that's the intent there, and as I mentioned, will be...

Speaker Change: We will be.

Speaker Change: Providing debt financing at that partnership level as well as well too.

Speaker Change: Leverage target over time.

Speaker Change: There were just a lot of questions a lot of inbounds from investors just trying to understand your square the math there I mean, you have $7 billion of asset sales.

Speaker Change: Coming through $2 billion of <unk> debt, that's coming on that implies pretty significant delevering.

Speaker Change: But then.

Speaker Change: It sounds like you're going to be re levering.

Speaker Change: So is there a downgrade to free cash flow that we should be thinking about particularly in light of the dividend you have $2 billion without the dividend payment of cash each year.

Speaker Change: I'm, just trying to square that math there.

Speaker Change: And then also definitely on the dividend.

Speaker Change: Sorry Curtis.

Speaker Change: Why why is 175 why did you land there. Thank you.

Speaker Change: Okay. So oh.

Speaker Change: Curtis will answer the free cash flow question, but let me let me address the other to your first question same.

Speaker Change: Essentially what Matthew asked me so it's going to the contributions to network fiber co or over time as we build so its not a one time payment.

Speaker Change: The third question on why $1 75.

Speaker Change: When the board considered a range of options as I'm sure you can imagine in this is the level that the BCE Board believes gives us the flexibility to achieve our capital allocation objectives and they are on page 15 of our presentation. So it's optimize the balance sheet, essentially accelerate deleveraging and optimize the cost of capital.

Speaker Change: The flexibility to invest for growth. It is incumbent on us to continue to grow this franchise and then.

Speaker Change: Return deliver total shareholder returns.

Speaker Change: To our shareholders by being a sustainable dividend paying.

Speaker Change: <unk>.

Speaker Change: So that's and so the range of options that we had considered and taking the input of investors over time, that's the number that the board felt gave us that flexibility.

Speaker Change: Then to address your leverage question Sebastiano. So the $7 billion of asset sales is the gross number.

Speaker Change: But the MLS see proceeds so the net proceeds from the $4 7 billion sale of Myc are part of our sources and uses to acquire simply fiber.

Speaker Change: Got it understood and then maybe.

Speaker Change: So the open access partnership I guess I mean.

Speaker Change: Yes, maybe the U S is behind in terms of fiber build out in the U S, but relative to Canada.

Speaker Change: With the U S built 10 million fiber passing last year on pace to build another $10 million over the next several years and you have very long term well capitalized companies chasing additional passing.

Speaker Change: Just trying to.

Speaker Change: What gives you comfort I guess, maybe in the greenfield opportunity of getting to that incremental five 5 million that you got.

Speaker Change: Does have outlined above and beyond the three that you originally talked about would simply thank you.

Speaker Change: But we've done we've done the work in our due diligence on the extent of.

Speaker Change: As things that are there.

Speaker Change: There and ready to be built to.

Speaker Change: Our low cost to build so we've done some extensive due diligence on that so we are quite comfortable.

Speaker Change: Simply fiber team as you can imagine on the first part you said open open.

Speaker Change: Open access, but I don't know what you meant there.

Speaker Change: Vincent.

Alright.

Speaker Change: Yes, sorry, it was more of a wholesale partnership.

Speaker Change: Yes, so not necessarily open.

Speaker Change: The partnership is just to be clear the partnership is not an open access partnership just to be clear on that and then we.

Speaker Change: Also we will be able to get to those 6 million homes, which we've.

Speaker Change: Kind of like I said done extensive work on at a at an attractive cost of capital given the structure that we've established with PSP and I'd say PSP is also a very experienced telecom infrastructure investor and and they see the potential here in the U S and particularly with simply fiber, which they are.

Speaker Change: Already to shareholder and working with us given our expertise.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is from Jones from <unk> Securities. Please go ahead.

Speaker Change: Hey, Thank you thanks for taking my question.

Speaker Change: First is on the acceleration of fiber deployments it actually it looks like an acceleration and I'm not sure. The timeframe is comparable and it looks to be a significant so I'm trying to see what is the rationale behind that is it now.

Speaker Change: Now that your capital structure is in a better place that you can afford to do that or maybe are you seeing additional opportunity in the second one.

Speaker Change: I mean investors are going to be trying to figure out what would the pro forma free cash flow.

Speaker Change: Going to be a pro forma the infra co and the acceleration. So any details you can provide are you investing more.

Speaker Change: In terms of our free cash net of all the transactions. You are you are announcing this morning. Thank you.

Speaker Change: Thanks, Joe So on the acceleration point I just wanted to clarify so when we announced it simply fiber.

Speaker Change: Italy, we indicated that they had a base case build plan to get to about 3 million homes by.

Speaker Change: By 2029, and with BCE scale and resources, we would accelerate that 3 million homes to 2028.

Speaker Change: So that doesn't change we think we will get to around 3 million homes by $2028 2 million of those of those $3 million.

Speaker Change: And most and those 3 million will largely be in the four Pacific Northwest States in which simply fiber currently operates what what's different here is at close we will have $1 5 million of those 3 million already done. There is another 500000 copper lines in Zip leased fiber ILEC footprint that we need to upgrade to fiber.

Speaker Change: By 2028 that will be funded by BCE.

Speaker Change: The other million homes will be part of the partnership so it's a different way of getting to the same 3 million homes in a way that's immediately free cash flow kind of immediately improves our free cash flow profile of BCE by the $1 billion that I mentioned, given the support of <unk>.

Speaker Change: PSP, it strengthens and increases our ability to capture that fiber opportunity.

Speaker Change: And in terms of the additional 5 million homes. Therefore, those will be tackled over time beyond 2028 with PSP as a world class financial partner. So therefore, that's going to accelerate visibly fibers growth and accelerate and provided with expanded.

Speaker Change: Growth potential again in a financially flexible way given that we'd be doing it through the strategic partnerships. So all all told we're going to be enhancing the returns associated with the simply fiber investment not to mention that.

Speaker Change: It's already.

Speaker Change:

Speaker Change: Looking more accretive than in November of 2024, given the management team's performance, even since we announced the deal.

Speaker Change: Then just to pile on.

Speaker Change: Yes, a question about the free cash flow I think one other input so we've said in.

Speaker Change: November Capex pro forma presumably would live within a 16, 5% C&I envelope.

Speaker Change: Given the partnership with PSP, we expect that's going to be closer to 14, 5%.

Speaker Change: And then after.

Speaker Change: After simply is built out.

Speaker Change: 500000 locations within its ILEC footprint.

Speaker Change: <unk> mentioned, then we would expect that percentage to drop from there.

Speaker Change: Thank you.

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

Speaker Change: Hey, guys. Thanks for having me on just two questions from me. The first question is can you guys talk about how you guys are thinking about the new governments impact.

Speaker Change: On key areas like TPI and immigration.

Speaker Change: And then the second question I had is you guys Upsized your cost savings target goal by 500 million to $1 5 billion can you just unpack the various buckets that are within that additional $500 million cost savings and just where are these items come from thank you.

Speaker Change: Yeah I'll take both on the on the business transformation like I said in my remarks, we have been quite successful on.

Speaker Change: The initiatives we have.

Speaker Change: Undertaken since 2022, and that's delivered the $500 million.

Speaker Change: Wind and I've shared before.

Speaker Change: And that's that's one of the key drivers that allows us to increase margins across BCE or after quarter.

Speaker Change: In terms of the initiatives just to keep it to keep it kind of a quick and simple it's things like automation use of AI consolidating billing stacks modernizing ordering stocks, obviously continue on the copper to fiber migration self serve self install use of chat bots virtual agents, including.

Speaker Change: Voice.

Speaker Change: Those are the kinds of things and we're also actually.

Speaker Change: We're relying in part on the expertise of our tech or the folks at <unk> to help drive workflow automation and unlocking the value from our sales force and service now environments and if you think about it there's significant learnings there, which we of course can bring to the benefit of our enterprise customers as we drive growth through Tech services. So we're.

Speaker Change: Both.

Speaker Change: On and off we go to the customers who were both on operator because of the things, we're suggesting our enterprise customers do we're doing for ourselves through a telco.

Speaker Change: So that's.

Speaker Change: The answer on.

Speaker Change: On the business transformation and the first one was.

Speaker Change: First question <unk> you are working with government. So thank you. Thank you Richard.

Speaker Change: We're looking forward to having constructive dialogue with the new federal government in profitable list in terms of topics would be.

Speaker Change: The fiber fiber resale file and then it comes down that comes down to this we've.

Speaker Change: Celebrated our 100 <unk>.

Speaker Change: <unk> hundred 45th birthday, just last week and for 145 years.

Speaker Change: We've been building critical infrastructure in Canada.

Speaker Change: For Canadians to connect Canadians and that.

Speaker Change: Allows candidate a girl because if you think about the networks that our industry provides.

Speaker Change: You need it for everything from AI to cloud services to banking to connecting with your loved ones to entertaining yourself everything.

Speaker Change: And so we want to continue to do that and in order to continue to do that at levels, which we've been doing it you do need ultimately an environment that encourages investment and allowing the largest players in the market to resell services on each other's networks is actually a direct disincentive.

Speaker Change: Two investment.

Speaker Change: And that's going to undermine the goal to have more resiliency and connect more Canadians, particularly in rural Canada, So Barry and intend to take a very constructive approach.

Speaker Change: So the logical position, we have and we're looking forward to the dialogue.

Speaker Change: Alright, thank you.

Speaker Change: Thank you. Our next question is from <unk> <unk> from Canaccord Genuity. Please go ahead.

Speaker Change: Good morning, Thanks for taking my question start with a follow up.

I wanted to make sure I heard you correctly so.

Speaker Change: The capex intensity ratio beyond 2025, it sounds like basically you will not exceed 49, 5% that would be sort of the new high point I just wanted to confirm that and secondly.

Speaker Change: Based on set of business transformation.

Speaker Change: Cost reductions that you talked about with respect to severance and restructuring cash costs.

Speaker Change: $330 million last year.

Speaker Change: How should we should should that kind of be set a standard for the next.

Speaker Change: Next couple of years I wanted to confirm that as well.

Speaker Change: So thanks for the question Yeah I think.

Speaker Change: 14, a half is the right range.

Speaker Change: I don't know if its quite under 14, five but it's in and around 14 five obviously.

Speaker Change: It depends a little bit on on how fast we're driving subscriber growth and.

Speaker Change: And demand Capex that comes along with that but in the 14, 5% ranges is a good estimate and in terms of in terms of the cost reductions and cost to actually capture those I would say the past couple of years have been higher on the onetime cost theres still going to be some costs going forward.

Speaker Change: Two.

Speaker Change: To be able to capture benefits of transformation, but I would expect the cost to be going down over time.

Speaker Change: More and more.

Speaker Change: Process improvement as well.

Speaker Change: Okay. Thank you I'll pass the line.

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

Speaker Change: Thanks again for your participation on the call. This morning as usual I'll be available throughout the day for follow up questions or clarifications, thanks and have a great day.

Speaker Change: Thanks, everyone.

Speaker Change: Thank you.

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

Speaker Change: Please standby and enjoy this music if you wish to ask a question dial star one.

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