BCE Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Wireless Strategy: Focus on margin-accretive customers; stopped selling prepaid service on Virgin Plus and plan to discontinue Bell branded prepaid in Q4.
• Residential Wireline: Fiber drives new Internet subscriber growth and multiproduct penetration.
• Media Initiatives: Continued growth in digital revenues, investments in content (e.g., TSN and RDS on Amazon Prime, expansion of licensing agreements), and acquisition of Ziply Fiber.
• Transformation Initiatives: Progress in modernizing operations via technology, automation, and simplification; ahead of CapEx reduction plan; acquisition of HGC Technologies and CloudKettle to strengthen B2B tech services.
• Acquisition of Ziply Fiber: Significant investment to enhance growth in the U.S. fiber market; expected to be free cash flow accretive post fiber build-out.

Segment Performance

• Wireless: Combined mobile phone and connected device net adds in Q3 totaled 158,412. Q3 added 102,196 new net mobile phone subscribers, with postpaid net adds at 33,111 and prepaid net adds at 69,085. ARPU was down 3.4%.
• Residential Wireline: Fiber anchored new Internet subscriber growth, with 42,415 new net retail subs in Internet and around 9,200 new net IPTV subscribers. Internet revenue growth improved to ~5%.
• Media: Digital revenues up 19% over last year, now comprising 42% of total media revenues. Total advertising revenue increased for the third consecutive quarter, Crave subscribers were up 12%, and TSN and RDS digital subscriptions collectively grew subscribers by 45%.

Guidance

• Revised BCE revenue guidance for 2024 due to top-line pressures.
• Consolidated EBITDA grew 2.1% and margin increased to 45.6% in Q3.
• Expect Ziply Fiber transaction to be free cash flow accretive post fiber build-out.

Risks

• Competitive pricing pressures impacting revenue.
• Slow economic growth and transition in media advertising market.
• Impact of CRTC rulings on resale business.
• Trailing effect of low pricing on ARPU and churn.

Question and Answer

Q: About BCE's appetite for further M&A in U.S. long-term.

A: Mirko Bibic talks about fiber being core, Ziply's growth potential, and considering other opportunities if they turbocharge growth.

Q: On TPIA subs write-down and prepaid shutdown.

A: Mirko Bibic explains CRTC ruling stopping resell business, migration of customers, and small ARPU benefit from prepaid shutdown.

Q: On broadband business churn and bundling benefits.

A: Mirko Bibic discusses market slowing, fiber product superiority, and go-to-market approach with high-speed tiers and bundled customers.

Q: On industry growth outlook and EBITDA growth.

A: Mirko Bibic talks about product vs service revenue, pricing stabilization, and growth in fiber, business solutions, and media.

Q: On balance sheet and asset sales.

A: Curtis Millen mentions leveraging MLSE proceeds for Ziply acquisition and reviewing asset sales for better capital allocation.

Q: On CapEx outlook and operational improvement.

A: Mirko Bibic discusses CapEx efficiency, moving to cloud shifting CapEx to OpEx, and ongoing transformation initiatives.

Q: On ARPU and churn trends.

A: Mirko Bibic talks about ARPU depending on Black Friday/holiday promotions and churn improving but still high.

Q: On immigration impact on wireless net adds.

A: Curtis Millen mentions immigration slowing but BCE increasing market share.