Good morning, ladies and gentlemen. Welcome to the BCE Q3 2021 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, sir.

Thank you, mode, and good morning to everybody. With me here today are Mirko Bibic, BCE's President and CEO; and Glen LeBlanc, our CFO. You can find all of our Q3 disclosure documents on the Investor Relations page of the bce.ca Web site, which we posted this morning. Before we begin, I’d like to draw your attention to our Safe Harbor statement reminding you that today’s slide presentation and remarks made by Mirko and Glen during the call will include forward-looking information and therefore are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements, except as required by law. Please refer to the company's publicly filed documents for more details on assumptions and risks. With that, I'll hand it over to Mirko.

Thank you, Thane, and good morning, everyone. Our Q3 results demonstrate another quarter of consistently strong and disciplined execution across all our operating segments that is firmly rooted in a strategic roadmap that has guided us over the past 18 months. Operationally, our objective was to improve steadily each quarter from the trough experienced in Q2 of 2020, when COVID began to significantly affect our business, and that’s exactly what we’ve done. Q3 marked a very notable milestone in our recovery as total revenue and adjusted EBITDA are for all intents and purposes back to pre-pandemic Q3 2019 levels, with consolidated service revenue up 3.6% and EBITDA 4.2% higher than last year, despite ongoing COVID-related headwinds affecting wireless roaming, business wireline customer spending and media advertising. Even as we focus on recovering from those impacts, we pushed ahead with our CapEx acceleration plan, building the best broadband infrastructure and remaining comfortably on track to hit our upsize network expansion targets for 2021. We invested another 1.2 billion in new capital this quarter, 12% higher than last year on direct fibre and fixed wireless connections, as well as further expanding mobile 5G coverage and deploying 3.5 gigahertz capable radios as we continue to get ready for the launch of true 5G next year. We leveraged our accelerated broadband network plan, retail channel strength, improved direct sales capabilities and multi-brand strategy to deliver 266,919 total mobile phone, mobile connected device, retail Internet and IPTV net additions in Q3, an increase of 10% over last year. In wireless, our sharp focus on higher value mobile phone loadings continues to pay off. Based on peers who have already reported Q3 results, we led the Canadian industry once again this quarter in terms of wireless service revenue, ARPU and EBITDA growth. These metrics really matter…

Thank you, Mirko, and good morning, everyone. I'm going to begin on Slide 6. Our consolidated Q3 financials demonstrated another step forward in our COVID recovery, as well as continued operational excellence and disciplined execution by the Bell team. With positive year-over-year contributions from all Bell operating segments, we delivered strong service revenue growth of 3.6% in Q3. Total revenue was only up 0.8 due to the softer wireline data equipment and mobile device sales versus last year. However, this did not affect overall adjusted EBITDA, which increased a healthy 4.2% as product revenues are generally low margin. Net earnings were up 9.9% year-over-year on the flow through of strong EBITDA growth and a non-cash net mark-to-market equity derivative gain resulting from the sharp increase in BCE share price this past quarter. Despite higher earnings, free cash flow was down approximately 460 million this quarter, as expected, due to the higher capital spending under our two-year accelerated broadband network plan, higher cash taxes and a reduction in cash related to the timing of working capital. Turning to Bell Wireless on Slide 7, another strong quarter with service revenue and EBITDA higher than Q3 2019 even without a material benefit from roaming, which improved only marginally this quarter and still remains 55% below pre-pandemic levels. Bell again delivered strong service revenue growth, which increased 5% versus last year. This result was a reflection of strong mobile phone postpaid subscriber base growth over the past year, driven by our disciplined focus on higher value smartphone loadings, higher ARPU, as customers move to higher tiered unlimited plans and continued strong demand for Bell's IoT solutions. The decline in data overage revenue improved this quarter despite a 74% increase in unlimited plan subscribers since last year. Product revenue was down 13.6 year-over-year, due to…

Great. Thanks, Glen. So before we start the Q&A period, I'd like to ask you to limit yourselves to one question and a brief follow up so we can get to everybody in the queue. And if we have some additional time, we can circle back afterwards. So thank you for that. With that, mode, we're ready to take our first question.

Thank you. We will now take questions from the telephone lines. [Operator Instructions]. Our first question is from Jeff Fan from Scotiabank. Please go ahead.

Good morning, everyone. Great numbers. I want to ask about the American business initiatives that you highlighted. Are there any revenue contribution coming from these yet in the quarter? If not, can you talk a little bit about the timing and perhaps the nature of the revenue streams? Like how are they structured with these partners? And the related question is, with these initiatives, what's helping you to get these initiatives in place? I'm just wondering, is it the network? Is it the hyperscale relationships, or is it the B2B relationships that you have? Can you just talk a little bit about that? Thanks.

Thanks, Jeff. Thanks for the question. So on the enterprise side, in particular, like what we're doing, our approach is obviously managing the puts and takes of COVID in the near term as we continue to drive forward with our kind of customary business, for lack of a better word. But at the same time, as you know, because I've been talking about it for the last few quarters, I'm really focused on making sure this organization puts in place the building blocks for industry leadership as the new wave of revenues come our way. So that's IoT scaling, that's 5G -- converge 5G and fibre, and that's multi-axis edge compute, so revenues and then moving up kind of getting revenue further up the stack beyond mere connectivity. So that's what we're trying to do, putting in place those building blocks. And I think the reason we're seeing a lot of early success in terms of securing deals or partnerships is really because of the asset mix we have. We have kind of an expanding fibre footprint. We have a leading 5G network. We have the largest presence in terms of kind of multi-access edge centers that we can deploy with hyperscale partners. We have the most fiberized cell sites and we have distribution leadership in the enterprise space. And we’re an attractive partner either for the hyperscalers or for applications developers, and you're seeing that manifest itself in terms of some of these announcements. Now, you asked about the contribution from these partnerships. They're just beginning, right? So it's early days. What we're doing here, again, is putting in place the building blocks, creating customer awareness, driving attention to what we can offer in this space, the revenues will come. And then there's also the IoT segment, like with a more traditional IoT segment. And you saw our 73% growth in that, Jeff. That business is growing. It's a pretty sizable business now, and it continues to grow. And that's going to -- I'm sure the team will continue to scale that. I hope that helps to answer your question.

So, I guess, just to clarify, the 5% service revenue growth that you're getting in wireless today, that's really coming from the consumer business, the existing business, the high value segment that you talked about. Nothing from this segment yet.

That's right. But it's not just the consumer. It's also the more traditional mobile phone, commercial enterprise segment as well as consumer, yes.

Okay, great. Thank you.

Thank you. A following question is from Vince Valentini from TD Securities. Please go ahead.

Yes. Thanks very much. And good set of results as well. Mirko, I’m hoping you can unpack the wireless market for me, because I’m a bit confused. Quebec reported this morning and they said they took 37% share of the gross ads in Quebec this quarter. We've seen Shaw report, which seems to suggest Shaw Mobile still adding a healthy amount of customers in Western Canada. And, of course, we saw 175,000 postpaid adds by Rogers a couple of weeks ago. So where's all -- and your results were very strong as well. So where's all the strength coming from? Are you gaining share or doing very well in sort of some other pockets of the country other than the Western and Quebec, if there's any color you can provide on that, or just more overall color on how the market is so strong for everybody, it would be much appreciated?

I think the market has kind of pent-up demand essentially, I'd say Vince and we're all benefiting from it, a little bit of the rising tide lifts all boats kind of approach to this. But in our case, I'm quite pleased with our performance in pretty much every geography, Vince. And I'm focused particularly on what we're doing. I think our results are a function of the strategy that we put in place and our strong execution against that strategy. So again, I'm repeating myself but obviously quality, smartphone loadings and in our case, particularly significant growth on the Bell brand. We've managed data overage really well, like I continue to be very pleased with the team's performance on managing the data overage decline. Prepaid is starting to come back. So there's a little bit of frothiness there, because there was some competitive activity in the flanker segment which had an impact on prepay, but we've nevertheless did quite well. And stores coming back helped in terms of capturing that pent-up demand. And as I said in my opening remarks, we’re so much better at direct sales than we were a year ago. And finally, the churn is helping those numbers, like our customer experience improvements are manifesting themselves in that record low churn, and that's obviously helping our underlying results.

Okay. Thanks for that. Just a follow up, which also relates to wireless market conditions going forward. Do you have any update on how long it's going to be before we get any sort of final rules and rates surrounding the CRTC's MVNO regime?

I don't have a good guess on that, Vince.

Thank you.

Thank you. A following question is from Jérôme Dubreuil from Desjardins Bank. Please go ahead. Jérôme Dubreuil: Yes. Thanks for taking my question. Good morning, everyone. So you made a comment on media EBITDA in the fourth quarter, possibly being significantly impacted. You've commented on that previously, but now you might seem to put a bit more emphasis on this. So I'm wondering if you can please quantify this.

Good morning. I certainly am not going to be able to provide Q4 outlook details, but let me just explain and unpack what I said. Generally, year-over-year in our media business, the sports schedules and the TV programming schedules line up, such that you don't have a large differential in the recognition of your programming costs. Well, obviously, with the pandemic, we had a material shift in programming, cancellation of programming in live sports that was delayed in their start. So the recognition of the broadcast revenues moved into Q3 for the sports. So what we're having happened here is when we look at this year -- excuse me, I said Q3. It’s Q4. When we look at this year, what's going to happen is that we are going to have a much higher recognition of the COGS related to the broadcast revenue recognition. So last year, we didn't have that COGS recognition. So it propped up the earnings. So this year, there's going to be a headwind on that. It's really nothing more than timing, and it's nothing to do with trends and there's nothing to be alarmed by it. It's just the year-over-year differential on the recognition of the COGS. Jérôme Dubreuil: Thanks. That's helpful. And maybe a follow up. You were confident earlier in the year regarding possible pension contribution pauses probably next year. Given the increased interest rates, do you still have this view?

Yes, great question. All of our major defined benefit plans are in great shape, and are in a solvency surplus position. Matter of fact, our largest DB Plan is that 109% funded position at the end of Q3. So I would say we've gained more and more confidence on contribution holidays. And now we're at a point that contribution holidays are imminent. It's no longer an if, it's just a when. I'll provide more insight on that in February, as I see where year-end rates end on December 31. But contribution holidays are imminent and could start as early as '22. Jérôme Dubreuil: Thank you.

You’re welcome. Thanks for the question.

Thank you. A following question is from Simon Flannery from Morgan Stanley. Please go ahead.

Thank you. Good morning. I wanted to touch on the broadband business if I could, another strong quarter. And it was really nice to see the broadband momentum, given what we saw in the U.S. with some of the cable companies reporting adds down 50% year-over-year. So perhaps you could just give us a little bit of color how you see the momentum on broadband? What's driving that? And it'd be really great if you could give us more color on the fibre opportunity given usually first penetration is going to kick in at a low level, but ramp over time. So presumably, you've got a bit of a tailwind from that. So any color around sustainability would be great. Thank you.

Thanks for the question. I like to start with the point that our fibre strategy is working. And we're on track on the capital acceleration program, which -- a lot of which, as you know, is going into fibre. So there's -- basically that's to kind of convey that there still is runway here. We've done a tremendous job over the last few years, in particular, the last two, three years to ramp up our fibre coverage across our footprint. But there's still a ways to go. And I view that only as an optimistic scenario, because the more fibre we lay, the more penetration we will deliver. Against some of our cable competitors, we're about 50% fibre overlap and we're doing extremely well. So we got 50% more to go. So we'll continue to do very well for quite a while. And really the underlying trend is there's a customer shift to quality, that's the bottom line. And it's not like a one-time COVID impact. If you need connectivity in your home, you're not going to disconnect once COVID subsides. So it's the shift of quality. And in terms of kind of financial performance that comes with it, we all know -- we've got 10 years of experience now with fibre. Churn is significantly lower when we have fibre. Lifetime value can be up to upwards of 50% better. Our ARPU growth is stronger when we have fibre. You mentioned the penetration growth. And then on the cost side, the annual support and service costs are materially lower where we have fibre. So I think there's -- the momentum ought to continue both on the subscriber loadings and on the financial performance associated with that asset.

Great. Just one follow up. To what extent are the gross adds on broadband coming when people move, or is this happening without a move?

Well, I think our results particularly on the financial side reflect a pretty healthy balance between volume, tier mix and price. I don't know if that directly answers your question. But I think basically what we're doing is we're getting a nice balance between new to Bell customer additions and existing Bell customers migrating from legacy technology to new technology and customers migrating up to higher speeds.

Great. Thanks a lot.

Thank you. A following question is from Tim Casey from BMO. Please go ahead.

Thanks. Good morning. Mirko, two for me. One, you talked about BYOD being a bigger mix. Is that something that you're stimulating from your call centers and your promotional activity, or is that driven by the market in terms of supply chain issues? Or do you think that is driven by a change in customer preferences away from subsidized devices? And second question, just to follow up on an earlier one related to the timing on clarity with respect to MVNO rates and whatnot. Can you -- I realize you don't have a timetable, but can you tell us how that dynamic evolves? Is it a -- like are there negotiations going on or is it just kind of a black box within the regulator and they let you know at some point down the road? Any color you could provide there would be helpful. Thank you.

Well, on the second one first, Tim -- good morning. On the second question first, the model is designed to encourage negotiations first. And in the absence of successful negotiations, then it moves over to the regulator. So it doesn't kind of first sit with the regulator in that black box, as you said. And I'll now leave it at that. On the first question in terms of the BYOD volumes, I think it's a mix of all the factors that you actually laid out. So you laid that out quite nicely. I think the supply chain issues are definitely a part of the growing mix of Bring Your Own Device customers, Tim. But on the other hand, what you're seeing -- what we're seeing with this phenomenon right now is you're starting to actually see the structural benefits of installment plans as our first cohort of installment customers are reaching the end of their first two-year contracts. They're actually hanging on to their devices longer because they paid for them. And combine that with kind of the supply chain issues, they're also motivated to hang on to their devices longer. And as Glen mentioned in his opening remarks, that's good for the economics of our business and the overall lifetime value. And what's particularly interesting here or a particular benefit here is they're not turning away. And that's due to the vast improvements we've made in our customer experience. So financially speaking, right now kind of that structural shift certainly has been a benefit.

Thank you.

Thank you. A following question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Yes. Thanks very much. Good morning. Following up on, I guess, Tim's question, but broadening it out, Mirko, to wireless EBITDA margins just in general. It looks as if there should be certainly some expansion looking forward. There's obviously operating leverage that you have to roaming coming back. It seems like equipment margins and the IP impact has been positive. And then we're seeing lower churn. You got digital initiatives in BYOD. Just love your thoughts, obviously not looking for specific guidance going forward, but just kind of the structural tailwinds here for wireless margins for Bell specifically.

Good morning, Drew. It's Glen. Thank you for your question. Look, we're extremely pleased with our wireless performance and our wireless margins. And I would agree with all of your comments as we look forward that we have some great opportunity for margin expansion. But we also have pressures in the business as we manage the government's desire to ensure affordable wireless pricing in this country. So we're managing that. But all of that said, I think we have some healthy upside for margin management. I think this past quarter is really demonstrative of what we can do when we focus on the high value customer and what we can do to drive 5% service revenue growth and a healthy 5.6% EBITDA by focusing on the right customer segment. You are right that roaming has been slower to return than we would have forecasted. And we expect that. And I would even say early indicators in October tell me that recovery is starting to happen. So we will expect that to give us a little bit of a tailwind for calendar '22. So I would say, yes, healthy margins remain in that business. We have to manage the pricing pressures on the competitive landscape. But we have all kinds of opportunity, as you alluded to, and roaming will be a tailwind to help us with that. So positive '22 for sure, Drew.

Thank you, Glen. And just while you're there, congrats on the 109% solvency surplus just for those on the line that have lived through pension questions for a decade. It's quite amazing. A follow up just on the Internet side. Again, just really stunning kind of momentum on residential Internet. Wondering if you can unpack a little bit in terms of what the fixed wireless contribution is to the overall trend there, that'd be great. Thank you.

Yes, we've had good growth on the fixed wireless, of course. And you'd understand why. When we come into a community that has had very poor Internet service or no Internet service, and we come in with quite a robust fixed wireless Bell branded solution, the uptake is strong. So there's been -- the numbers that you see here are really a reflection of extremely strong growth on the fibre side, good growth on the WHI or fixed wireless side and losses on the legacy copper side.

Got it. Thank you.

Thank you. A following question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my questions. Congrats on the very consistent results. I wanted to start with Internet. I know you've discussed the drivers of the 9% growth number. I wanted to sort of go back to one element there. I know that one of the items that may have helped you is sort of the somewhat tepid promotional activity through most of '20, and perhaps even the early part of '21. I was wondering if you can kind of give me an update as to where things stand on that front. Are you starting to see some of those discounting -- some of that promotional activity come back? And then a quick follow up on the media side. 22% of it being digital definitely is encouraging. I know that a bigger part of that is still Crave. Any kind of insight you can give us as to where Crave’s profitability is at this point would be helpful as well. Thanks.

Yes. So on the -- Glen, why don’t you take the Crave.

Yes. So obviously we're not going to give specifics, but Crave continues to be a profitable part of our media business and overall profits to BCE as a whole. Each quarter as we expand our subscriber base, that only gets better. And as we mentioned, when we had a 5% subscriber base increase, we're able to move further and further to direct to consumer with our customer base, as Mirko mentioned earlier, growing 33%. And that is a very simple delivery mechanism for us. So that it even provides a greater opportunity for margin improvement. But Crave has been a positive contributor for BCE for some time now. And I only see that expanding as we continue to grow the subscriber base.

Thank you, Glen. And on the first question, I think you see our financial performance on the Internet side, which continues to be strong and that's strong against pretty strong showing last year. In other words, we're lapping a pretty strong Q3 2020. We're still delivering some good growth. But I would say, Aravinda, the promotional intensity has come back a little bit in Q3 and into Q4, especially compared to last year. So we're managing through that. It is a competitive environment. But we're still able to deliver the results you see despite some of that promotion intensity coming back.

Thank you.

Thank you. A following question is from Sebastiano Petti from JPMorgan. Please go ahead.

Great. Thanks for taking the question. Just following up on the BYOD and the elongated device upgrade cycle, the dynamic that we have seen in the U.S. is that this will ultimately lead to a lower switching pool over time and could, therefore, create challenges on the loading front. Can you perhaps update us on where you are with EIP penetration today, and maybe any color around the transition to unlimited? And to that point, just following up, there remains a question in the U.S. as you shift to 5G, do consumers understand the importance or the benefits of 5G? And will that be a tailwind to not only loadings, but service revenue growth as you walk folks up the rate ladder? So can you just comment on those two things, that would be great. Thank you.

Okay. Thank you. I won't comment or give particular disclosure on our unlimited plan penetration or EIP penetration either. I would say that customers continue to move over to unlimited. As I mentioned in my opening remarks, I'm quite happy with how we're managing that whole shift. When consumers move to unlimited, like 60% of migrating up to higher rate plans, which is positive, of course, I'm parking old Virgin packs for when I say that, but then now Wi-Fi reintroduced the old Virgin packs, as you know. We've managed that quite well to the point where it's actually no longer a headwind or a tailwind. And I think we'll reach an equilibrium point pretty soon on data overage decline. On the installment plans, as I mentioned earlier, I think you've seen the structural benefits with the elongated device upgrade cycle that you mentioned. I think on the 5G upgrade cycle, I do believe it will come. We're seeing scaling of 5G subscribership right now. And it's continuing with double the data usage on 5G compared to 4G. So that trend continues. 5G customers continue to spend more than 4G customers. So that trend is continuing as well. And we'll see. There may be some headwinds as we go through this and they may be the ones that you identified. But on the other hand, think about all the 5G IoT MEK revenues that we'll be able to generate, because we have 5G networks and edge centers and fiberized cell sites and low latency solutions, et cetera, et cetera. So there's a ton of opportunity on the enterprise side as well.

Right. And one quick follow up. Any color perhaps you could give on the lower OpEx in the quarter, underline drivers of that on the wireless side?

Yes. The biggest driver on the wireless side is the fact that product sales were down so much. So we had, as I mentioned in my opening remarks, significant softness in product sales related to the supply chain issues. So obviously, the associated product COGS is the main driver of that.

Thank you.

Thank you. A following question is from Batya Levi from UBS. Please go ahead.

Great. Thank you. Can you tell us a little bit about the trends you're seeing in the enterprise segment, aside from the impact of non-recurring COVID-related sales, but what do you see in terms of maybe any change in demand for type of services in the funnel and the pricing environment? And just a quick follow up with fixed wireless. Can you share maybe speed performance metrics and usage that you see from subscribers? Thank you.

On the second one, you have to follow up with Thane to the extent that there’s information there that we can provide. On the first one, look, I think we're seeing some IT spending coming back. There's modest growth that's encouraging in the cloud computing space. And so we are seeing some growth in business service solutions. So some of that spending is coming back, again, an encouraging trend. And the service revenue performance has essentially been quite consistent with previous quarter, so there's not much more to add than what I've said in the past. And you actually in your question asked me not to kind of really park the kind of COVID-related bump in spending last year. So I would just basically answer to say, it's more or less what we've seen the last two or three quarters and with some delays in spending in some categories and some spending coming back particularly in some of the business service solution.

And anything in the pricing environment you could call out?

No. The enterprise space continues to be pretty competitive. And it all depends on which category of service you're talking about.

Got it. Thank you.

Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Mr. Fotopoulos.

Thank you, mode. So thanks again to everybody for your participation on the call this morning. As usual, I'll be available for follow ups and clarifications throughout the day. So have a good rest of the day, everybody. Thank you.

Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.