Exhibit 99.1

 

Building Better Experiences 2020 Q3 Third Quarter Shareholder Report November 4, 2020

Table of contents

 

 

Table of contents

 

Management’s discussion and analysis						1
1		Overview				2
		1.1		Financial highlights		3
		1.2		Key corporate and business developments		5
		1.3		Assumptions		6
2		Consolidated financial analysis				7
		2.1		BCE consolidated income statements		7
		2.2		Customer connections		8
		2.3		Operating revenues		9
		2.4		Operating costs		10
		2.5		Net earnings		11
		2.6		Adjusted EBITDA		11
		2.7		Severance, acquisition and other costs		12
		2.8		Depreciation and amortization		12
		2.9		Finance costs		12
		2.10		Impairment of assets		12
		2.11		Other (expense) income		13
		2.12		Income taxes		13
		2.13		Net earnings attributable to common shareholders and EPS		13
3		Business segment analysis				14
		3.1		Bell Wireless		14
		3.2		Bell Wireline		18
		3.3		Bell Media		22
4		Financial and capital management				24
		4.1		Net debt		24
		4.2		Outstanding share data		24
		4.3		Cash flows		25
		4.4		Post-employment benefit plans		26
		4.5		Financial risk management		27
		4.6		Credit ratings		29
		4.7		Liquidity		29
5		Quarterly financial information				30
6		Regulatory environment				31
7		Business risks				32
8		Accounting policies, financial measures and controls				35
		8.1		Our accounting policies		35
		8.2		Non-GAAP financial measures and key performance indicators (KPIs)		35
		8.3		Controls and procedures		38
Consolidated financial statements						39
		Consolidated income statements				39
		Consolidated statements of comprehensive income				40
		Consolidated statements of financial position				41
		Consolidated statements of changes in equity				42
		Consolidated statements of cash flows				43

Notes to consolidated financial statements						44
		Note 1		Corporate Information		44
		Note 2		Basis of presentation and significant accounting policies		44
		Note 3		Discontinued operations		45
		Note 4		Segmented information		46
		Note 5		Operating costs		48
		Note 6		Severance, acquisition and other costs		48
		Note 7		Impairment of assets		49
		Note 8		Other (expense) income		49
		Note 9		Earnings per share		50
		Note 10		Trade and other receivables		50
		Note 11		Other non-current assets		50
		Note 12		Debt		51
		Note 13		Post-employment benefit plans		51
		Note 14		Financial assets and liabilities		52
		Note 15		Share capital		54
		Note 16		Share-based payments		54
		Note 17		Contingency		56
		Note 18		COVID-19		56

MD&A

 

 

Management’s discussion and analysis

In this management’s discussion and analysis (MD&A), we, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements and associates. Bell means, as the context may require, either Bell Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements and associates.

All amounts in this MD&A are in millions of Canadian dollars, except where noted. Please refer to section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) on pages 35 to 38 for a list of defined non-GAAP financial measures and KPIs.

Please refer to BCE’s unaudited consolidated financial statements for the third quarter of 2020 (Q3 2020 Financial Statements) when reading this MD&A. We also encourage you to read BCE’s MD&A for the year ended December 31, 2019 dated March 5, 2020 (BCE 2019 Annual MD&A) as updated in BCE’s MD&A for the first quarter of 2020 dated May 6, 2020 (BCE 2020 First Quarter MD&A) and BCE’s MD&A for the second quarter of 2020 dated August 5, 2020 (BCE 2020 Second Quarter MD&A). In preparing this MD&A, we have taken into account information available to us up to November 4, 2020, the date of this MD&A, unless otherwise stated.

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

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

This MD&A comments on our business operations, performance, financial position and other matters for the three months (Q3) and nine months (YTD) ended September 30, 2020 and 2019.

 

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This MD&A, and in particular, but without limitation, the introduction to section 1, Overview, section 1.2, Key corporate and business developments, section 1.3, Assumptions, section 3.1, Bell Wireless – Key business developments, section 3.2, Bell Wireline – Key business developments and section 4.7, Liquidity, contain forward-looking statements. These forward-looking statements include, without limitation, statements relating to the potential impacts on our business, financial condition, liquidity and financial results of the COVID-19 pandemic, the expected continued payment by BCE of its common share dividend for the foreseeable future, our network deployment and capital investment plans, the sources of liquidity we expect to use to meet our anticipated cash requirements for the foreseeable future, potential future purchases by BCE of its preferred shares pursuant to a normal course issuer bid (NCIB), BCE’s business outlook, objectives, plans and strategic priorities, and other statements that do not refer to historical facts. A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements are typically identified by the words assumption, goal, guidance, objective, outlook, project, strategy, target, and other similar expressions or future or conditional verbs such as aim, anticipate, believe, could, expect, intend, may, plan, seek, should, strive and will. All such forward-looking statements are made pursuant to the safe harbour provisions of applicable Canadian securities laws and of the United States (U.S.) Private Securities Litigation Reform Act of 1995.

Unless otherwise indicated by us, forward-looking statements in this MD&A describe our expectations as at November 4, 2020 and, accordingly, are subject to change after that date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

We have made certain assumptions in preparing the forward-looking statements contained in this MD&A and, in particular, but without limitation, the forward-looking statements contained in the previously mentioned sections of this MD&A. These assumptions include, without limitation, the assumptions described in section 1.3, Assumptions, which section is incorporated by reference in this cautionary statement. Subject to various factors including, without limitation, the future impacts of the COVID-19 pandemic, which we cannot predict, we believe that our assumptions were reasonable at November 4, 2020. If our assumptions turn out to be inaccurate, our actual results could be materially different from what we expect.

Important risk factors including, without limitation, pandemics, epidemics and other public health risks, including the COVID-19 pandemic, economic, financial, competitive, regulatory, security, technological, operational and other risks that could cause actual results or events to differ materially from those expressed in, or implied by, the previously-mentioned forward looking statements and other forward-looking statements contained in this MD&A, include, but are not limited to, the risks described or referred to in section 7, Business risks, which section is incorporated by reference in this cautionary statement.

We caution readers that the risks described in the previously mentioned section and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition, liquidity, financial results or reputation. Except as otherwise indicated by us, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after November 4, 2020. The financial impact of these transactions and special items can be complex and depends on facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way, or in the same way we present known risks affecting our business.

 

 

BCE Inc. 2020 Third Quarter Shareholder Report         1

1 MD&A Overview

 

 

1    Overview

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

The gradual easing of certain of the emergency measures starting in the latter part of the second quarter had a positive impact on the Canadian economy and business and consumer activity in the third quarter. This allowed many businesses to resume some level of, or increase, commercial activities, resulting in a marked improvement in our financial results in the third quarter, compared to the second quarter of 2020, across all of our three segments. The reopening of our retail distribution channels stimulated wireless and wireline subscriber activity and wireless product sales. As well, the reopening of businesses and the gradual return of certain live sporting events, which began at the end of the second quarter, provided a lift to Bell Media advertising revenues. Although the adverse impact of the COVID-19 pandemic on our financial results in the third quarter was not as severe as what we experienced in the second quarter, the pandemic had the following principal consequences on our business and financial results in the third quarter of 2020 compared to the third quarter of 2019:

 

•

Lower advertising revenues from our Bell Media segment as market activity did not return to pre-COVID levels despite the reopening of most businesses due to reduced spending by advertisers driven by economic uncertainty. The COVID-19 pandemic had a more pronounced impact on out-of-home (OOH) and radio advertising.

 

•

Decreased service revenues in our Bell Wireless segment primarily due to lower outbound roaming revenues resulting from reduced customer travel

 

•

A reduction in Bell Wireless and Bell Wireline gross subscriber activity from reduced traffic in our retail distribution channels and lower back to school activity, moderated by lower customer deactivations

 

•

Customer accommodations, including delayed implementation of price increases and revenue credits due to the financial difficulty experienced by customers

 

•

Lower customer spending in our small and large business markets, due to the uncertain economic environment

 

•

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

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

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

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

 

2             BCE Inc. 2020 Third Quarter Shareholder Report

1 MD&A Overview

 

 

1.1    Financial highlights

On June 1, 2020, BCE announced that it had entered into an agreement to sell substantially all of its data centre operations in an all-cash transaction valued at $1.04 billion.

We have reclassified amounts related to the announced sale for the previous periods to discontinued operations in our consolidated income statements and consolidated statements of cash flows to make them consistent with the presentation for the current period. We have also reclassified the assets and liabilities of the data centre operations to be sold as held for sale in our consolidated statements of financial position at September 30, 2020, measured at their carrying amount, which is lower than the estimated fair value less costs to sell. Property, plant and equipment and intangible assets included in assets held for sale are no longer depreciated or amortized effective June 1, 2020.

Subsequent to quarter end, we completed the previously announced sale for cash proceeds of approximately $940 million (net of debt and other items), and expect to record a gain on sale of approximately $220 million in Q4 2020. The capital gain as a result of the sale is expected to be mainly offset by the recognition of previously unrecorded capital loss carry forwards.

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

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

BCE Q3 2020 SELECTED QUARTERLY INFORMATION

 

Operating revenues		Net earnings		Adjusted EBITDA (1)
$5,787		$740		$2,454
million		million		million
(2.6%) vs. Q3 2019		(19.7%) vs. Q3 2019		(4.4%) vs. Q3 2019

 

 

 

Net earnings attributable		Adjusted net earnings		Cash flows from		Free cash flow
to common shareholders				operating activities
$692		$712		$2,110		$1,034
million		million		million		million
(20.2%) vs. Q3 2019		(12.3%) vs. Q3 2019		(6.6%) vs. Q3 2019		(11.5%) vs. Q3 2019
BCE CUSTOMER CONNECTIONS
Wireless		Retail high-speed Internet		Retail television (TV)		Retail residential network
Total						access services (NAS) lines
+3.1%		+4.0%		(1.2%)		(7.9%)
10.1 million subscribers		3.7 million subscribers		2.7 million subscribers		2.5 million subscribers
at September 30, 2020		at September 30, 2020		at September 30, 2020		at September 30, 2020

 

(1)

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

 

BCE Inc. 2020 Third Quarter Shareholder Report         3

1 MD&A Overview

 

 

BCE INCOME STATEMENTS – SELECTED INFORMATION

 

		Q3 2020				Q3 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Operating revenues
Service			4,924				5,141				(217	)			(4.2%)				14,742				15,331				(589	)			(3.8	%)
Product			863				799				64				8.0%				2,039				2,187				(148	)			(6.8	%)
Total operating revenues			5,787				5,940				(153	)			(2.6%)				16,781				17,518				(737	)			(4.2	%)
Operating costs			(3,333	)			(3,372	)			39				1.2%				(9,578	)			(9,996	)			418				4.2	%
Adjusted EBITDA			2,454				2,568				(114	)			(4.4%)				7,203				7,522				(319	)			(4.2	%)
Adjusted EBITDA margin (1)			42.4	%			43.2	%							(0.8) pts				42.9	%			42.9	%							–
Net earnings from continuing operations attributable to:
Common shareholders			686				859				(173	)			(20.1%)				1,594				2,344				(750	)			(32.0	%)
Preferred shareholders			32				37				(5	)			(13.5%)				104				113				(9	)			(8.0	%)
Non-controlling interest			16				18				(2	)			(11.1%)				54				49				5				10.2	%
Net earnings from continuing operations			734				914				(180	)			(19.7%)				1,752				2,506				(754	)			(30.1	%)
Net earnings from discontinued operations			6				8				(2	)			(25.0%)				15				24				(9	)			(37.5	%)
Net earnings			740				922				(182	)			(19.7%)				1,767				2,530				(763	)			(30.2	%)
Net earnings attributable to:
Common shareholders			692				867				(175	)			(20.2%)				1,609				2,368				(759	)			(32.1	%)
Preferred shareholders			32				37				(5	)			(13.5%)				104				113				(9	)			(8.0	%)
Non-controlling interest			16				18				(2	)			(11.1%)				54				49				5				10.2	%
Net earnings			740				922				(182	)			(19.7%)				1,767				2,530				(763	)			(30.2	%)
Adjusted net earnings			712				812				(100	)			(12.3%)				1,999				2,335				(336	)			(14.4	%)
Net earnings from continuing operations per common share			0.76				0.96				(0.20	)			(20.8%)				1.76				2.61				(0.85	)			(32.6	%)
Net earnings from discontinued operations per common share			0.01				–				0.01				n.m.				0.02				0.02				–				–
Net earnings per common share (EPS)			0.77				0.96				(0.19	)			(19.8%)				1.78				2.63				(0.85	)			(32.3	%)
Adjusted EPS			0.79				0.91				(0.12	)			(13.2%)				2.21				2.60				(0.39	)			(15.0	%)
n.m.: not meaningful   (1) Adjusted EBITDA margin is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other issuers. See section 8.2, Non-GAAP financial measures and key performance indicators (KPIs) – Adjusted EBITDA and adjusted EBITDA margin in this MD&A for more details, including reconciliations to the most comparable IFRS financial measure.
BCE STATEMENTS OF CASH FLOWS – SELECTED INFORMATION
		Q3 2020				Q3 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Cash flows from operating activities			2,110				2,258				(148	)			(6.6%)				6,123				5,867				256				4.4%
Capital expenditures			(1,031	)			(1,009	)			(22	)			(2.2%)				(2,708	)			(2,824	)			116				4.1%
Free cash flow			1,034				1,169				(135	)			(11.5%)				3,256				2,864				392				13.7%

 

 

Q3 2020 FINANCIAL HIGHLIGHTS

BCE revenues decreased by 2.6% in Q3 2020, compared to the same period last year. This represented a significant improvement over Q2 2020 performance driven by the gradual reopening of businesses and resumption of commercial activity. However, we did not return to pre-COVID levels of performance as the pandemic continued to adversely affect all three of our operating segments with a more pronounced impact on media advertising revenues, wireless outbound roaming revenues and product volumes. Q3 2020 service revenues decreased by 4.2% year over year, driven by lower wireless service revenues, the continued erosion in our voice, satellite TV and legacy data revenues, as well as reduced media advertising and subscriber revenues, moderated by the continued growth of our postpaid and prepaid wireless, retail Internet, and Internet protocol television (IPTV) subscriber bases, along with the flow-through of rate increases. Product revenues increased by 8.0% year over year, primarily due to higher sales of premium devices and higher handset prices in our wireless segment, moderated by lower equipment sales to large enterprise customers attributable to the COVID-19 pandemic.

Net earnings decreased by 19.7% in the third quarter of 2020, compared to the same period last year, mainly due to lower adjusted EBITDA, higher other expense and higher net depreciation and amortization, partly offset by lower income taxes.

BCE’s adjusted EBITDA decreased by 4.4% in Q3 2020, compared to the same period last year. This represented a significant improvement over Q2 2020 performance. However, we continued to be unfavourably impacted by the COVID-19 pandemic with declines across all three of our segments. This resulted in an adjusted EBITDA margin of 42.4% in Q3 2020, down 0.8 pts compared to 43.2% in Q3 2019, mainly from lower service revenue flow-through, and a higher proportion of low-margin product sales in our revenue base.

 

 

4             BCE Inc. 2020 Third Quarter Shareholder Report

1 MD&A Overview

 

BCE’s EPS of $0.77 in Q3 2020 decreased by $0.19 compared to the same period last year.

Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on derivatives used to economically hedge equity settled share-based compensation plans, net gains (losses) on investments, early debt redemption costs, impairment of assets and discontinued operations, net of tax and non-controlling interest (NCI), adjusted net earnings in the third quarter of 2020 was $712 million, or $0.79 per common share, compared to $812 million, or $0.91 per common share, for the same period last year.

Cash flows from operating activities in the third quarter of 2020 decreased by $148 million, compared to the same period last year, mainly due to higher income taxes paid in Q3 2020 from the deferral of Q1 and Q2 2020 tax payments due to government relief measures related to COVID-19 and lower adjusted EBITDA, partly offset by higher cash from working capital due in part to timing of supplier payments.

Free cash flow in Q3 2020 decreased by $135 million, compared to the same period last year, mainly due to lower cash flows from operating activities, excluding cash from discontinued operations and acquisition and other costs paid, and higher capital expenditures.

 

 

1.2    Key corporate and business developments

BELL MEDIA LEADERSHIP CHANGE

On October 19, 2020, BCE announced that Bell Group President and Vice Chair Wade Oosterman will assume operational leadership of Bell Media in 2021 following the departure of Bell Media President Randy Lennox on January 4, 2021. Mr. Oosterman has also served as Bell’s Chief Brand Officer since he joined the company. As he focuses fully on his role at Bell Media, we announced that Senior Vice-President, Brand Devorah Lithwick has been appointed Senior Vice-President & Chief Brand Officer, effective January 2021.

Mr. Oosterman joined Bell in 2006 as President of Bell Mobility and Chief Brand Officer, and was promoted to President of Mobility and Residential Services in 2010, to Group President – responsible for strategic direction of Bell’s wireless, residential and media segments – in 2015, and additionally as Bell Vice Chair in 2018.

 

 

SALE OF DATA CENTRES COMPLETED

Subsequent to quarter end, BCE completed its sale of 25 data centres at 13 sites to global interconnection and data centre company Equinix, Inc. (Equinix). Bell will continue to own and operate 5 other data centres that are located in its network central offices in Calgary, Halifax, Saint John, St. John’s and Toronto. This all-cash transaction valued at $1.04 billion reinforces Bell’s strategy to focus investment on network infrastructure, content and service innovation. As part of the transaction, Bell Business Markets became the first Equinix Platinum Partner in Canada, providing Bell enterprise clients with access to the international scale of Equinix’s advanced integrated network and cloud solutions.

 

 

NORMAL COURSE ISSUER BID FOR BCE FIRST PREFERRED SHARES

On November 4, 2020, BCE’s Board of Directors authorized the company to commence a NCIB to purchase for cancellation up to 10% of the public float of each series of BCE’s outstanding First Preferred Shares (Preferred Shares) that are listed on the Toronto Stock Exchange (TSX). The NCIB will extend from November 9, 2020 to November 8, 2021, or an earlier date should BCE complete its purchases under the NCIB.

Under the NCIB, BCE is authorized to repurchase up to 800,000 Series R Preferred Shares, 351,344 Series S Preferred Shares, 448,655 Series T Preferred Shares, 808,149 Series Y Preferred Shares, 191,850 Series Z Preferred Shares, 1,139,839 Series AA Preferred Shares, 860,015 Series AB Preferred Shares, 1,002,969 Series AC Preferred Shares, 997,030 Series AD Preferred Shares, 651,531 Series AE Preferred Shares, 948,468 Series AF Preferred Shares, 498,535 Series AG Preferred Shares, 901,464 Series AH Preferred Shares, 594,988 Series AI Preferred Shares, 805,011 Series AJ Preferred Shares, 2,274,592 Series AK Preferred Shares, 225,407 Series AL Preferred Shares, 954,661 Series AM Preferred Shares, 195,338 Series AN Preferred Shares, 460,000 Series AO Preferred Shares and 920,000 Series AQ Preferred Shares, representing approximately 10% of the public float in respect of each series of Preferred Shares.

The actual number of Preferred Shares to be repurchased under the NCIB and the timing of such repurchases will be at BCE’s discretion and shall be subject to the limitations set out by the TSX.

BCE is making this NCIB because it believes that, from time to time, the Preferred Shares may trade in price ranges that do not fully reflect their value. BCE believes that, in such circumstances, the repurchase of its Preferred Shares represents an appropriate use of its available funds.

A copy of BCE’s Notice of Intention to Commence a Normal Course Issuer Bid through the facilities of the TSX may be obtained, without charge, by contacting BCE’s Investor Relations department at investor.relations@bce.ca or by phone at 1-800-339-6353.

 

 

PUBLIC DEBT OFFERING AND REDEMPTIONS

On August 14, 2020, Bell Canada completed a public offering of $750 million of medium term note (MTN) debentures pursuant to its MTN program. The $750 million Series M-53 MTN debentures will mature on August 16, 2027 and carry an annual interest rate of 1.65%. The MTN debentures are fully and unconditionally guaranteed by BCE Inc. The net proceeds of the offering were used to fund the early redemption on September 14, 2020 of Bell Canada’s $750 million principal amount of 3.15% Series M-30 MTN debentures due September 29, 2021.

On October 6, 2020, Bell Canada announced it will redeem, on November 6, 2020, prior to maturity, all of its outstanding $850 million principal amount of 2.00% Series M-42 MTN debentures due October 1, 2021.

 

BCE Inc. 2020 Third Quarter Shareholder Report         5

1 MD&A Overview

 

 

BELL JOINS GENDER AND DIVERSITY KPI ALLIANCE

Bell joined more than 50 global corporations and organizations as part of the groundbreaking Gender and Diversity KPI Alliance (GDKA) to support the adoption and use of the following set of KPIs to measure and improve diversity throughout the organization:

 

•

Percentage of representation on our board

 

•

Percentage of representation on our team

 

•

Pay equality: the ratio of compensation by employee category

The KPIs provide participants with a closer look at underrepresented groups in their organizations and were developed from the work of the World Economic Forum International Business Council, the Global Reporting Initiative, and other advocates.

 

 

APPOINTMENT TO BCE’S BOARD OF DIRECTORS

On November 4, 2020, Louis P. Pagnutti was appointed to the BCE Board of Directors. Mr. Pagnutti was Global Managing Partner Business Enablement of EY (an accounting firm) and a member of EY’s Global Executive Board until his retirement in September 2020. As Global Managing Partner, he was responsible for EY’s business functions across the globe. From 2004 until 2010, he was Chairman and Chief Executive Officer of EY Canada and a member of the EY Americas Executive Board. He was EY Asia-Pacific Area Managing Partner from 2010 to 2013. A Chartered Accountant who was honored with a Fellow Chartered Accountant designation in 2006, Mr. Pagnutti holds an Honors Bachelor of Commerce degree from Laurentian University, Ontario. He has served on the Sunnybrook Hospital Foundation and Pathways to Education boards.

 

 

1.3    Assumptions

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

ASSUMPTIONS

 

•

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

 

•

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

 

6             BCE Inc. 2020 Third Quarter Shareholder Report

2 MD&A Consolidated financial analysis

 

 

2    Consolidated financial analysis

This section provides detailed information and analysis about BCE’s performance in Q3 and YTD 2020 compared with Q3 and YTD 2019. It focuses on BCE’s consolidated operating results and provides financial information for our Bell Wireless, Bell Wireline and Bell Media business segments. For further discussion and analysis of our business segments, refer to section 3, Business segment analysis.

 

 

2.1   BCE consolidated income statements

 

		Q3 2020				Q3 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Operating revenues
Service			4,924				5,141				(217	)			(4.2%)				14,742				15,331				(589	)			(3.8%)
Product			863				799				64				8.0%				2,039				2,187				(148	)			(6.8%)
Total operating revenues			5,787				5,940				(153	)			(2.6%)				16,781				17,518				(737	)			(4.2%)
Operating costs			(3,333	)			(3,372	)			39				1.2%				(9,578	)			(9,996	)			418				4.2%
Adjusted EBITDA			2,454				2,568				(114	)			(4.4%)				7,203				7,522				(319	)			(4.2%)
Adjusted EBITDA margin			42.4	%			43.2	%							(0.8) p	ts			42.9	%			42.9	%							–
Severance, acquisition and other costs			(26	)			(23	)			(3	)			(13.0%)				(64	)			(86	)			22				25.6%
Depreciation			(876	)			(852	)			(24	)			(2.8%)				(2,603	)			(2,604	)			1				–
Amortization			(232	)			(225	)			(7	)			(3.1%)				(696	)			(662	)			(34	)			(5.1%)
Finance costs
Interest expense			(279	)			(280	)			1				0.4%				(836	)			(840	)			4				0.5%
Interest on post-employment benefit obligations			(12	)			(16	)			4				25.0%				(35	)			(47	)			12				25.5%
Impairment of assets			(4	)			(1	)			(3	)			n.m.				(460	)			(6	)			(454	)			n.m.
Other (expense) income			(29	)			62				(91	)			n.m.				(156	)			113				(269	)			n.m.
Income taxes			(262	)			(319	)			57				17.9				(601	)			(884	)			283				32.0%
Net earnings from continuing operations			734				914				(180	)			(19.7%)				1,752				2,506				(754	)			(30.1%)
Net earnings from discontinued operations			6				8				(2	)			(25.0%)				15				24				(9	)			(37.5%)
Net earnings			740				922				(182	)			(19.7%)				1,767				2,530				(763	)			(30.2%)
Net earnings from continuing operations attributable to:
Common shareholders			686				859				(173	)			(20.1%)				1,594				2,344				(750	)			(32.0%)
Preferred shareholders			32				37				(5	)			(13.5%)				104				113				(9	)			(8.0%)
Non-controlling interest			16				18				(2	)			(11.1%)				54				49				5				10.2%
Net earnings from continuing operations			734				914				(180	)			(19.7%)				1,752				2,506				(754	)			(30.1%)
Net earnings attributable to:
Common shareholders			692				867				(175	)			(20.2%)				1,609				2,368				(759	)			(32.1%)
Preferred shareholders			32				37				(5	)			(13.5%)				104				113				(9	)			(8.0%)
Non-controlling interest			16				18				(2	)			(11.1%)				54				49				5				10.2%
Net earnings			740				922				(182	)			(19.7%)				1,767				2,530				(763	)			(30.2%)
Adjusted net earnings			712				812				(100	)			(12.3%)				1,999				2,335				(336	)			(14.4%)
Net earnings per common share
Continuing operations			0.76				0.96				(0.20	)			(20.8%)				1.76				2.61				(0.85	)			(32.6%)
Discontinued operations			0.01				–				0.01				n.m.				0.02				0.02				–				–
Net earnings per common share			0.77				0.96				(0.19	)			(19.8%)				1.78				2.63				(0.85	)			(32.3%)
Adjusted EPS			0.79				0.91				(0.12	)			(13.2%)				2.21				2.60				(0.39	)			(15.0%)

n.m.: not meaningful

 

BCE Inc. 2020 Third Quarter Shareholder Report         7

2 MD&A Consolidated financial analysis

 

2.2  Customer connections   BCE NET ACTIVATIONS (LOSSES)

		Q3 2020				Q3 2019				% CHANGE				YTD 2020				YTD 2019				% CHANGE
Wireless subscribers net activations			128,168				204,067				(37.2%)				182,465				391,827				(53.4%)
Postpaid			87,529				127,172				(31.2%)				132,811				280,356				(52.6%)
Prepaid			40,639				76,895				(47.2%)				49,654				111,471				(55.5%)
Wireline retail high-speed Internet subscribers net activations			62,859				58,137				8.1%				104,477				100,222				4.2%
Wireline retail TV subscribers net (losses) activations			(296	)			4,842				(106.1%)				(34,395	)			5,632				(710.7%)
IPTV			18,837				31,746				(40.7%)				18,085				69,437				(74.0%)
Satellite			(19,133	)			(26,904	)			28.9%				(52,480	)			(63,805	)			17.7%
Wireline retail residential NAS lines net losses			(49,792	)			(65,656	)			24.2%				(159,792	)			(205,215	)			22.1%
Total services net activations			140,939				201,390				(30.0%)				92,755				292,466				(68.3%)

TOTAL BCE CUSTOMER CONNECTIONS

 

		Q3 2020				Q3 2019				% CHANGE
Wireless subscribers			10,140,427				9,834,380				3.1%
Postpaid			9,292,751				9,038,341				2.8%
Prepaid			847,676				796,039				6.5%
Wireline retail high-speed Internet subscribers			3,660,078				3,519,962				4.0%
Wireline retail TV subscribers			2,738,069				2,772,043				(1.2%)
IPTV			1,785,267				1,745,143				2.3%
Satellite			952,802				1,026,900				(7.2%)
Wireline retail residential NAS lines			2,537,691				2,755,593				(7.9%)
Total services subscribers			19,076,265				18,881,978				1.0%

BCE had 140,939 net retail customer activations in Q3 2020, declining by 30.0% compared to the same period last year. The net retail customer activations in Q3 2020 consisted of:

 

•

87,529 postpaid wireless net customer activations, and 40,639 prepaid wireless net customer activations

 

•

62,859 retail high-speed Internet net customer activations

 

•

296 retail TV net customer losses comprised of 19,133 retail satellite TV net customer losses, moderated by 18,837 retail IPTV net customer activations

 

•

49,792 retail residential NAS net losses

During the first nine months of the year, BCE had 92,755 net retail customer activations, decreasing by 68.3% year over year. The net retail customer activations in the first nine months of the year consisted of:

 

•

132,811 postpaid wireless net customer activations, and 49,654 prepaid wireless net customer activations

 

•

104,477 retail high-speed Internet net customer activations

 

•

34,395 retail TV net customer losses comprised of 52,480 retail satellite TV net customer losses, offset in part by 18,085 retail IPTV net customer activations

 

•

159,792 retail residential NAS net losses

At September 30 2020, BCE retail customer connections totaled 19,076,265, up 1.0% year over year, and consisted of the following:

 

•

10,140,427 wireless subscribers, up 3.1% compared to Q3 2019, comprised of 9,292,751 postpaid subscribers, an increase of 2.8% over last year, and 847,676 prepaid subscribers, up 6.5% year over year

 

•

3,660,078 retail high-speed Internet subscribers, 4.0% higher than last year

 

•

2,738,069 total retail TV subscribers, down 1.2% compared to Q3 2019, comprised of 1,785,267 retail IPTV subscribers, up 2.3% year over year, and 952,802 retail satellite TV subscribers, down 7.2% year over year

 

•

2,537,691 retail residential NAS lines, a decline of 7.9% compared to Q3 2019

 

8             BCE Inc. 2020 Third Quarter Shareholder Report

2 MD&A Consolidated financial analysis

 

 

2.3  Operating revenues

 

BCE Revenues (in $ millions)		BCE Revenues (in $ millions)

 

		Q3 2020				Q3 2019				$ CHANGE				% CHANGE				YTD 2020				YTD 2019				$ CHANGE				% CHANGE
Bell Wireless			2,318				2,310				8				0.3%				6,275				6,547				(272	)			(4.2%)
Bell Wireline			3,032				3,057				(25	)			(0.8%)				9,111				9,182				(71	)			(0.8%)
Bell Media			628				751				(123	)			(16.4%)				1,959				2,338				(379	)			(16.2%)
Inter-segment eliminations			(191	)			(178	)			(13	)			(7.3%)				(564	)			(549	)			(15	)			(2.7%)
Total BCE operating revenues			5,787				5,940				(153	)			(2.6%)				16,781				17,518				(737	)			(4.2%)

BCE

Total operating revenues at BCE decreased by 2.6% in Q3 2020, and by 4.2% in the first nine months of the year, compared to the same periods in 2019. Although revenue performance has improved significantly compared to Q2 2020 due to the gradual reopening of businesses and resumption of commercial activity, we have not yet returned to pre-COVID levels of performance as the pandemic continues to adversely affect revenues with a more pronounced impact on media advertising revenues, as well as wireless outbound roaming revenues and product volumes. BCE service revenues of $4,924 million in Q3 2020 and $14,742 million in the first nine months of the year, declined by 4.2% and 3.8%, respectively, over the same periods in 2019. BCE product revenues of $863 million in Q3 2020 increased by 8.0% over Q3 2019, while year-to-date product revenues of $2,039 million declined by 6.8% over the same period last year. Wireless operating revenues increased by 0.3% in Q3 2020 compared to the same period last year, driven by higher product revenues of 11.9%, offset in part by reduced service revenues of 4.3%. Year-to-date wireless operating revenues decreased by 4.2% due to both lower service and product revenues of 3.4% and 6.2%, respectively. Wireline operating revenues declined by 0.8% in both Q3 2020 and in the first nine months of the year, compared to the same periods in 2019, driven by lower service revenues of 0.4% in both periods, from reduced voice revenues, moderated by higher data revenues, along with product revenue declines of 10.4% in the quarter and 9.3% year to date. Bell Media operating revenues declined by 16.4% in Q3 2020 and by 16.2% in the first nine months of the year, compared to the same periods in 2019, due to lower advertising and subscriber revenues.

 

BCE Inc. 2020 Third Quarter Shareholder Report         9