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BCE reports 2010 fourth-quarter and full-year results and announces 2011 business outlook

  • $439 million
  • Bell Q4 service revenue growth of 1.3%; operating income up 20.8%; EBITDA (1) up 1.1%
  • $1.26
  • $860 million
  • Another record quarter for wireless gross activations with 552,714; postpaid net activations up 42.6% to 156,708
  • Bell Wireline Q4 operating income up 62.1%; Bell Wireline EBITDA up 6.9% on slowing NAS losses, TV revenue growth of 7.9% and cost reductions
  • 2010 financial guidance met

This news release contains forward-looking statements. For a description of the related risk factors and assumptions please see the section entitled "Caution Concerning Forward-Looking Statements" later in this release.

MONTREAL Feb. 10

$439 million (2) $0.58 $0.60

Bell is focused on achieving a clear goal – to be recognized by customers as Canada’s leading communications company – through the execution of 5 Strategic Imperatives: Invest in Broadband Networks and Services, Accelerate Wireless, Leverage Wireline Momentum, Improve Customer Service, and Achieve a Competitive Cost Structure.

George Cope Bell Canada

"Bell Wireless has significantly increased its postpaid market share thanks to strong market execution that leverages Bell’s world-leading HSPA+ network, superior range of smartphones and other devices, enhanced data services like Bell Mobile TV and the country’s largest wireless distribution network. At the same time, Bell Wireline achieved strong EBITDA growth, substantial decreases in NAS landline losses and solid Internet and TV net activations, thanks to the launches of next-generation Fibe TV and Fibe Internet on our quickly expanding broadband fibre network," said Mr. Cope.

Siim Vanaselja Bell Canada

$500 million $30.80 $400 million $750 million $2.2 billion

$4,017 million $15,425 million

$691 million $2,972 million $1,411 million $5,857 million

$1.26 to $52.34

With gross activations of 552,714 and postpaid gross activations of 399,041, Bell Wireless surpassed records that were just set in Q3. In addition, Bell Wireless postpaid net additions of 156,708 represented the best Q4 postpaid net additions since Q4 2002. Full year 2010 postpaid gross activations and net additions and total gross activations were also records for Bell Wireless for any calendar year. Prepaid gross activations were 153,673, or 31.2% lower than last year, reflecting an increase in competitive intensity, particularly at the low end of the market. The prepaid client base declined by 39,926 this quarter compared to a gain of 52,938 last year.

Bell Wireline operating revenues decreased by 2.5% as TV revenue growth was more than offset by declines in local and access, long distance, wireline data and equipment and other revenues. Bell Wireline operating income increased by 62.1% as a result of higher EBITDA, lower restructuring and other costs and lower depreciation and amortization. Bell Wireline EBITDA increased by 6.9% due to cost reductions and lower pension expense.

Bell Wireline had total NAS losses of 64,172 this quarter, an improvement of 40.3% compared to last year. TV subscribers increased by 23,019 compared to an increase of 40,889 in the same period last year. High-speed Internet subscribers increased by 12,099, an increase of 55.0% compared to the fourth quarter last year, led by increases in residential Internet customers that more than doubled year over year.

$860 million $2,463 million

$568 million $948 million $750 million December 2010 $500 million December 2009 (3) $201 million $549 million $4,724 million $2,124 million $1,374 million

$439 million $0.58 $350 million $0.46 $2,165 million $2.85 $1,631 million $2.11

$0.60 $2.84

Financial Highlights      
($ millions except per share amounts) (unaudited)     Q4 2010         Q4 2009         % change
Bell      
Operating Revenues 4,017 3,982 0.9%
EBITDA 1,411 1,395 1.1%
Operating Income 691 572 20.8%
BCE      
Operating Revenues 4,683 4,650 0.7%
EBITDA 1,744 1,737 0.4%
Operating Income 836 751 11.3%
Net Earnings Applicable to Common Shares 439 350 25.4%
EPS 0.58 0.46 26.1%
Adjusted EPS 0.60 0.51 17.6%
Cash Flows from Operating Activities 568 948 (40.1%)
Free Cash Flow (549) 15 n.m

$4,683 million $18,069 million

$836 million $3,672 million $1,744 million $7,188 million

Bell Wireless Segment

  • $1,297 million $1,151 million $134 million $4,934 million $4,481 million $407 million
  • $1.26 to $52.34 $1.00 to $63.47 $1.49 to $16.96 $0.33 to $52.03 $0.62 to $63.49 $0.61 to $17.76
  • $237 million $1,160 million $385 million $1,721 million
  • EBITDA margins on wireless service revenues decreased to 33.4% this quarter from 41.2% last year.
  • Total gross activations were a new record this quarter at 552,714, or 5.5% higher than last year. Postpaid gross activations were 399,041, or 32.9% higher than last year, reflecting an emphasis on postpaid acquisition. Prepaid gross activations were 153,673, or 31.2% lower than last year, reflecting an increase in competitive intensity, particularly at the low end of the market.
  • Total net additions were 116,782 this quarter, or 28.3% lower than last year. Postpaid net additions were 156,708 this quarter or 42.6% higher than last year. The prepaid client base declined by 39,926 this quarter compared to a gain of 52,938 last year due to lower prepaid gross activations and an increase in churn.
  • The Bell Wireless client base reached 7,242,048 at the end of the quarter, an increase of 6.0% compared to last year.
  • Postpaid churn increased to 1.5% from 1.3% and prepaid churn increased to 3.6% from 3.2%, reflecting an increase in competitive intensity, particularly from new entrants at the low end of the market. Blended churn increased to 2.0% from 1.8% last year.
  • $448

Bell Wireline Segment

  • $2,769 million $10,695 million
  • $454 million $1,812 million
  • $1,026 million $4,136 million
  • $733 million
  • Total NAS declined by 64,172 this quarter compared to a decline of 107,503 last year. Business NAS declined by 27,622 this quarter compared to a decline of 28,493 last year. Residential NAS declined by 36,550 compared to a decline of 79,010 last year due to growth in our Wholesale unit and the continued improvement of retail residential NAS losses for the thirteenth consecutive quarter. On a year-over-year basis, total NAS declined by 5.6%.
  • $234 million
  • $970 million
  • High-speed Internet subscribers increased by 12,099 this quarter, an increase of 55.0% compared to the same period last year. At the end of the quarter, Bell had 2,097,326 high-speed Internet subscribers, a 2.0% increase over last year.
  • $450 million
  • Total TV subscribers increased by 23,019 this quarter compared to an increase of 40,889 in the same period last year. At the end of the quarter, there were 2,020,098 TV subscribers, or 3.7% more than at the end of last year.
  • TV subscriber churn increased to 1.5% from 1.3% last year.
  • $304 million

Bell Aliant Regional Communications
$777 million $145 million

Common Share Dividend
$0.4925 April 15, 2011 March 15, 2011

International Financial Reporting Standards (IFRS)
January 1, 2011 January 1, 2011

January 1, 2010 December 31, 2010 December 31, 2010 $4.5 billion December 31, 2010 December 30, 2010 $2.79

Outlook

The financial guidance provided for revenue growth, EBITDA growth, Adjusted EPS growth, and free cash flow growth are based on financial results prepared using IFRS. Similarly, the guidance provided for Adjusted EPS, free cash flow and capital intensity are calculated using IFRS-based results.

Given the trajectory of its wireless, TV and Internet businesses and an improving outlook in NAS erosion, Bell is targeting revenue growth of 1% to 2% in 2011. Bell Wireless revenue growth is expected to benefit from the significant investment made in 2010 in customer acquisition and retention along with continued growth in smartphone activations and data usage. Bell Wireline revenues are expected to benefit from growth in TV and Internet revenues from ARPU performance and the rollout of the Fibe TV footprint.

With higher wireless revenues and a continued focus on cost reduction, Bell is targeting EBITDA growth of 2% to 4% in 2011.

$2.90 to $3.00 $1.97

$2,200 million to $2,300 million

BCE’s financial guidance for 2011 is as follows:

     
          IFRS 2010         Guidance 2011
Bell    
Revenue $15,669 M  
Revenue Growth   1% – 2%
EBITDA $5,812 M  
EBITDA Growth   2% – 4%
Capital Intensity 16.0% ~16%
BC E    
Adjusted EPS $2.79 $2.90 – $3.00
Adjusted EPS Growth   4% – 8%
Free Cash Flow (ii) $1,412 M     $2,200 M – $2,300 M  
Free Cash Flow Growth (iii)       2% – 6%
(i)  Bell’s 2011 financial guidance for revenue, EBITDA and capital intensity is exclusive of Bell Aliant.
(ii) Free cash flow of $1,412 million in 2010 includes the impact of a $750 million voluntary pension plan contribution made in December 2010.
(iii) The range of free cash flow growth for 2011 excludes the $750 million voluntary pension plan contribution made in December 2010.

BCE’s financial guidance for 2011 does not reflect its pending acquisition of CTVglobemedia Inc. (CTV) and will be updated upon the completion of the CTV acquisition which is currently expected to close in Q2 2011.

Call with Financial Analysts
Thursday, February 10 8:00 a.m.

http://www.bce.ca/en/news/eventscalendar/webcasts/2011/20110210/

Notes

(1) The term EBITDA (earnings before interest, taxes, depreciation and amortization of intangible assets), as it relates to our 2010 and 2009 results prepared on a Canadian GAAP basis, does not have any standardized meaning according to Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. We define EBITDA as operating revenues less cost of revenue and selling, general and administrative expenses, meaning it represents operating income before depreciation, amortization of intangible assets and restructuring and other. We use EBITDA, among other measures, to assess the operating performance of our ongoing businesses without the effects of depreciation, amortization of intangible assets and restructuring and other. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. We exclude depreciation and amortization of intangible assets because it largely depends on the accounting methods and assumptions a company uses, as well as non-operating factors such as the historical cost of capital assets. Excluding restructuring and other does not imply they are non-recurring. EBITDA allows us to compare our operating performance on a consistent basis. We believe that certain investors and analysts use EBITDA to measure a company’s ability to service debt and to meet other payment obligations, or as a common measurement to value companies in the telecommunications industry. The most comparable Canadian GAAP financial measure is operating income. The following tables are reconciliations prepared under Canadian GAAP of operating income to EBITDA for 2010 and 2009 on a consolidated basis for BCE, Bell and for our Bell Wireline and Bell Wireless segments.
         
($ millions)        
Operating income 836 751 3,672 3,191
Depreciation and amortization of intangible assets     856 904 3,292 3,371
Restructuring and other 52 82 224 527
EBITDA 1,744 1,737     7,188     7,089
Operating income 691 572 2,972 2,432
Depreciation and amortization of intangible assets 715 758 2,726 2,804
Restructuring and other 5 65 159 483
EBITDA 1,411 1,395 5,857 5,719
Operating income 454 280 1,812 1,148
Depreciation and amortization of intangible assets 566 622 2,169 2,284
Restructuring and other 6 58 155 475
EBITDA 1,026 960 4,136 3,907
Operating income 237 292 1,160 1,284
Depreciation and amortization of intangible assets 149 136 557 520
Restructuring and other (1) 7 4 8
EBITDA 385 435 1,721 1,812
   
(2) The terms Adjusted net earnings and Adjusted EPS, as they relate to our 2010 and 2009 results prepared using Canadian GAAP, do not have any standardized meaning according to Canadian GAAP. They are therefore unlikely to be comparable to similar measures presented by other companies. We define Adjusted net earnings as net earnings before restructuring and other and net (gains) losses on investments. We define Adjusted EPS as Adjusted net earnings per BCE Inc. common share. We use Adjusted net earnings and Adjusted EPS, among other measures, to assess the operating performance of our ongoing businesses without the effects of after-tax restructuring and other and net (gains) losses on investments. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring. The most comparable Canadian GAAP financial measures are net earnings applicable to common shares and earnings per share. The following table is a reconciliation of net earnings applicable to common shares and earnings per share prepared under Canadian GAAP to Adjusted net earnings on a consolidated basis and per BCE Inc. common share (Adjusted EPS), respectively, for 2010 and 2009.
         
($ millions except per share amounts)        
  Q4 2010 Q4 2009 2010 2009
  TOTAL    TOTAL    TOTAL    TOTAL
Net earnings applicable to common shares    439 0.58 350 0.46 2,165 2.85 1,631 2.11
Restructuring and other 18 0.03 48 0.06 127 0.17 339 0.44
Net (gains) losses on investments (0.01) (11) (0.01) (133) (0.18) (41) (0.05)
Adjusted net earnings 457 0.60 387 0.51 2,159 2.84 1,929 2.50
   
(3) The term free cash flow, as it relates to our 2010 and 2009 results prepared using Canadian GAAP, does not have any standardized meaning according to Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other companies. We define free cash flow as cash flows from operating activities and distributions received from Bell Aliant less capital expenditures, preferred share dividends, dividends/distributions paid by subsidiaries to non-controlling interest, other investing activities and Bell Aliant free cash flow. We consider free cash flow to be an important indicator of the financial strength and performance of our business because it shows how much cash is available to repay debt and reinvest in our company. We present free cash flow consistently from period to period, which allows us to compare our financial performance on a consistent basis. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets. The most comparable Canadian GAAP financial measure is cash flows from operating activities. The following table is a reconciliation of cash flows from operating activities prepared under Canadian GAAP to free cash flow for 2010 and 2009 on a consolidated basis.

         
($ millions)        
  Q4 2010    Q4 2009 2010 2009
Cash flows from operating activities 568 948 4,724 4,884
Bell Aliant distributions to BCE 73 72 291 291
Capital expenditures (1,022) (760)     (2,959)     (2,854)
Other investing activities (22) (11) (98) (89)
Dividends paid on preferred shares (28) (26) (108) (107)
Cash distributions paid by subsidiaries to non-controlling interest    (93) (92) (370) (369)
Bell Aliant free cash flow (25) (116) (106) (300)
Free cash flow (549) 15 1,374 1,456

Caution Concerning Forward-Looking Statem ents
February 10, 2011 February 10, 2011

Material Assumptions

Economic and Market Assumptions

Operational Assumptions

Financial Assumptions
$120 million $170 million $50 million $400 million $200 million

$100 million to $150 million $1.97

February 10, 2011

Material Risks

February 10, 2011 www.sedar.com www.sec.gov www.bce.ca February 10, 2011 February 10, 2011

About BCE

www.bce.ca/mentalhealth the United States www.bce.ca www.bell.ca

SOURCE BCE Inc.

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