BCE, Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Discipline: Executed with financial discipline, achieving 2% EBITDA growth in Q2 and a margin of 44.9% (1.3 point increase). Delivered $1.1 billion free cash flow in Q2, up 8% year-over-year.
• Subscriber Growth: CTS segment subscriber metrics were supported by a leading broadband fiber network, mobile 5G speed, and bundling. Wireless focused on premium brand loadings and prudent pricing to drive new subscriber activations. Wireline gained share in new Internet subscribers via its fiber network.
• Media Transformation: Bell Media transitioned to digital media, with digital advertising revenues up 35%, new partnerships, and 10 fast channels launched.
• Acquisitions and Partnerships: Acquired Stratejm and CloudKettle, and expanded a partnership with ServiceNow to enhance efficiency and customer solutions.
• AI and Automation: Utilized AI for self-serve virtual repair, an Infobot, virtual assistants, agent support models, and call quality assurance, resulting in $20 million in labor cost savings.
• Asset Sales and Store Transition: Sold Northwestel for up to $1 billion and transitioned 167 source stores to Best Buy Express, with remaining 107 stores closed.

Segment Performance

• Wireless: Added 131,043 new net mobile phone subscribers in Q2, up 4.4% year-over-year. Postpaid net ads were 78,500 (down vs Q2 last year), while prepaid net additions were 52,543 (up meaningfully). ARPU decreased 1.9% year-over-year. Connected device net ads were approximately 88,000, up 10.5% over prior year.
• Wireline: Had 23,841 new retail Internet additions (second best Q2 since 2007). Bundle sales of mobility and Internet service increased 23% in Q2, comprising 48% of total residential households. Bell-branded IPTV added 3% more new net subscribers, but gross activations on 5 TV app streaming service declined due to a $5 rate increase.
• Media: Total advertising revenue rose, driven by digital and live sports. Digital revenues increased 23% year-over-year, now 41% of media revenue. Crave saw 21% growth in direct streaming subscribers. TSN and RDS direct-to-consumer streaming subscribers more than doubled. CTV remained Canada's most-watched network, and Bell Media led in the French-language entertainment market.
• Business Enterprise: Business solution services revenue grew 22% due to cloudification, security, and managed automation. Acquisitions of Stratejm and CloudKettle enhanced cybersecurity and Salesforce workflow automation, and a partnership with ServiceNow was expanded to accelerate digital transformation.

Guidance

• Consolidated financial results for 2024 guidance remains on track. Free cash flow is expected to grow, and the CapEx reduction plan is on track to save $500 million in 2024. Management remains confident in delivering financial guidance targets for 2024.

Risks

• Competitive pricing pressures impacting top-line growth.
• Regulatory uncertainties.
• Intense pricing environment in wireless and wireline.
• Elevated churn in wireless.

Question and Answer

Q: On wireline fiber ARPU and NPV A: Mirko Bibic stated fiber is the growth engine, positive on the strategy, noted ARPU has room for growth, and mentioned adjusting to market pressures.

Q: ServiceNow and AI initiatives A: Mirko Bibic and Curtis Millen discussed ServiceNow integration for efficiency, AI initiatives as additive to cost savings, and tracking cost savings to reach targets by end of Q4.

Q: Prepaid mix and cost savings A: Curtis Millen spoke about cost savings ramping up, and Mirko Bibic explained prepaid growth aligning with premium loading strategy and migrating prepaid to postpaid.

Q: Wireless ARPU and investments A: Mirko Bibic discussed wireless strategy, focus on premium loadings, mobility bundles, and AI for customer experience.

Q: BYOD and dividend programs A: Curtis Millen clarified 70% BYOD is on postpaid gross and mentioned dividend drip discount not currently considered.

Q: Convergence and fixed wireless A: Mirko Bibic emphasized focus on fiber superiority and bundling in fiber territory.

Q: Revenue guidance and OUTFRONT A: Curtis Millen reaffirmed 2024 guidance and noted OUTFRONT contribution was immaterial due to closing timeline.