Good morning ladies and gentlemen. And welcome to the BCE Q2 2022 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Paul and good morning, everyone and thank you for joining our call today. As usual, I'm here with Mirko Bibic, BCE's President and CEO; and our CFO, Glen LeBlanc. You can find all our Q2 disclosure documents on the Investor Relations page of the bce.ca website which we posted earlier this morning. However, before we begin, I want to draw your attention to our Safe Harbor statement on Slide 2 of the presentation, remind you that today's remarks made 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 our publicly filed documents for more details on our assumptions and risks. With that, I'll turn the call over to Mirko.

Thank you, Thane and good morning, everyone. The Bell team continues to deliver for all the stakeholders we serve. We remain focused on our strategic plan. It's working. Q2 marked another quarter of consistent operational execution with a disciplined focus on balancing market share growth and financial performance. Our approach drove consolidated service revenue and adjusted EBITDA growth 3.8% and 4.6%, respectively. These strong results are underpinned by our extensive and unprecedented network investments that are building unmatched broadband fiber 5G infrastructure in Canada and frankly, if not the world. By the end of this year, we'll have invested more than $14 billion since 2020, the highest ever over a 3-year period by Canadian Telecom. This includes planned CapEx for 2022 of approximately $5 billion which also represents peak spending by Canadian Telco in 1 single year. These massive investments are focused primarily on our FTTH and 5G wireless networks, our ongoing expansion into rural and remote communities and considerable spending on capacity and on resiliency. With approximately 900,000 more new FTTP connections deployed this year, 80% of our midterm broadband Internet build-out plan comprising 10 million residential and business locations will be completed and 5G LTE network service will be available to more than 80% of Canadians. And recent events have illustrated the vital importance of communications networks and the role they play as an integral part in the lives of all Canadians. They have also illustrated the relevance of our corporate purpose which as you know, is to advance how Canadians connect with each other and the world. It's this purpose that guides us in how we design and how we build our networks to keep our customers at the forefront of all that we do. So I want to take a couple of moments now to make…

Thank you, Mirko and good morning, everyone. Our financial performance continues to demonstrate the Bell's team's consistent execution and disciplined focus on profitable customer growth as evidenced by another quarter of strong consolidated revenue and adjusted EBITDA growth which remain in line with the 2022 guidance targets we announced last February. Service revenue was up a very solid 3.8% which drove 4.6% higher adjusted EBITDA, delivering a $0.7 million point margin increase to 44.2%. As a result of the strong EBITDA contribution from operations and the lower year-over-year pension financing costs due to the high net asset surplus position of our DB pension plans. Adjusted EPS was up 4.8% to $0.87 per share. However, net earnings and statutory EPS were down compared to last year, directly as a result of a noncash mark-to-market equity derivative losses from a decrease in the BCE's share price during the quarter. Notably, our net earnings results this quarter also included an asset impairment charge related to the consolidation of real estate space post-COVID as we shift increasingly to a hybrid work model and aggressively execute on a multiyear plan to reduce real estate costs. We anticipate taking further noncash impairment charges as we vacate other leased properties. We are confident that over the next 5 to 7 years, we can rationalize our physical footprint, by up to 3 million square feet which will generate cumulative cash savings in the range of $250 million to $300 million. As for CapEx spending in the quarter, it was up year-over-year with a total investment of more than $1.2 billion as we continue to expand our network leadership with advanced spending on the rollout of the fiber and 5G, consistent with our 2-year capital acceleration program. And free cash flow was notably strong, increasing 7.1% over last year…

Great. Thank you, Glen. So we are prepared and ready to take our first question. So Paul, please explain to the participants how in queue up.

[Operator Instructions] The first question is from Maher Yaghi from Scotiabank.

And a very nice quarter in wireless. I just wanted to first maybe start on the wireline side. Continued very strong cost containment beyond the equipment impact on profitability because of the year-on-year decline in equipment sales. What do you expect -- where do you expect these cost savings to continue to carry your growth in wireline over the next couple of quarters, Glen? And on wireless, I wanted to ask you if you have seen any impact on customer loading since the network issues that Rogers [ph] had witnessed? And if these impacts have continued up to now or were they mostly in the early days only? And just on the churn, can you maybe unpack the improvement in churn as a very, very low churn here. How much of it is due to bundling and -- or other reasons, if you can name them, please?

Glen, I'll start with the first part of the question here. Look, I don't think it's a surprise to anyone that we continue to show exceptional cost discipline and cost control that has been something that I think has been ongoing with us and this management team for many, many years. Now of course, we were able to achieve, as I said in my opening remarks, a 0.7% margin expansion despite absorbing what turned out to be about $7 million in fuel cost pressures, I expect that to be probably more like $20 million on a full year basis. labor pressures as we compete for hot skills resulted in approximately $5 million of wage pressure in the quarter. I don't see that going anywhere anytime soon. So we certainly are feeling inflationary pressures. As I mentioned in my opening remarks, we had higher-than-normal storm costs; that was approximately $10 million. So altogether, we were able to improve margins by 0.7%, while absorbing that due to just general cost discipline. And I can assure you that we will -- if things change with inflation and we start to see additional inflationary pressures beyond what we've felt so far, then we'll be more aggressive in doing what we need to do to protect margins into the future. So I don't think it's a surprise to anyone, Maher, that we will take the necessary steps to manage our costs in our wireline business and for that matter in our entire business.

I'll take the next two which kind of -- I'll pull together really kind of the loadings that you're expecting us to see in Q3 kind of my interpretation of your question, of course, the associated churn. So I kind of take your question in a more general way. Obviously, we're pleased with our results across the board and we're continuing the momentum we've shown the last 5, 6, 7 quarters based on executing against our pretty clear strategy. And really kind of all anchored off of best networks customer value proposition which is really resonating. So that's kind of a very general answer to your question more specifically, I think the market dynamics that supported our performance in Q2, we see continuing in Q3. So things like retail store traffic coming back, our continued scaling of our digital and direct sales which we got a lot better at during COVID, 5G growth, immigration travel, those elements, of course, on the financial side, there's the roaming tailwinds. And last but certainly not least, network superiority. And the best networks value proposition is certainly standing out in Q3 and that's speeds. Of course, everybody talks about speeds, both on the wireless and wireline side. And then on the wireline side, bearing away from your wireless-focused question but on the wireline side, upload speeds are really starting to become a key competitive differentiator just in a kind of an interesting fact for all of you on the call. We're seeing -- on the wireline side, we're seeing kind of meaningful material loadings on the higher speed plans. And we're finding that customers who are on the higher speed plans have 20% to 30% more connected devices in their homes. And their upload consumption is 3x higher. So upload is going to continue to be a big deal for customers and we're unbeatable in that regard. And of course, reliability and resiliency is now at the forefront of customers purchasing decisions. And again, that's why I spent quite a bit of time in my opening remarks on how we have architected our network. So really back to your question, market dynamic condition to our network superiority is going to continue to give us momentum in Q3. And on churn, a number of factors. Of course, customer experience improvements have a big impact. Back to the best networks, that's having a big impact and that number obviously related to customer experience. We're also benefiting from devices lasting longer. So when customers aren't switching both -- and we're not having to provide new handsets. They're just trying to say, even though devices are lasting longer, we're managing to keep customers on our network with the customer experience improvements and network superiority. And yes, the combining of offers that include residential Internet and wireless are improving churn as well. We're seeing better churn for customers who have more than one product with.

And just on -- have you seen any initial bump up in loading due to the Rogers network issues?

Yes. Customers are choosing Bell.

The next question is from Drew McReynolds from RBC Capital Markets.

Maybe for you, Glen, probably just on the macro side, not just people looking at telecom but just looking more broadly, everyone is wondering what we're in for as we move forward here and BCE certainly has a wide variety of touch points here with the economy. Are you seeing either any incremental inflation? And from a macro standpoint, any problems with receivables? You made some commentary on the ad market being a little soft. Just as we get here a little bit deeper into the summer, anything post-quarter that you would flag? And then secondly, maybe back to you, Mirko. Thanks for some of the data points on the fiber to the home market share. Just curious how fiber performs versus DOCSIS but then versus other fiber competitors because presumably those fiber footprints of competitors will grow over time as we've seen globally and may see increasingly more here in Canada. Just wondering what your experience would be there?

Yes, your question on what we're seeing in the macroeconomic outlook, Look, to be very honest, I unpacked what we're seeing in inflation quite specifically in the past quarter. But other than that, we're not really seeing material issues. And while economic growth is slowing. It remains relatively strong and the labor market remains robust. Specifically, you asked a question on customer payment, we have not experienced a material change in customer payment patterns. As a result, there's been no related increase in bad debts nor are we increasing provisions at this time or having extended payment terms. So frankly, it's been quite manageable despite, as I said, unpacking a few inflationary pressures that are specific to our industry, having a large fleet like we have, obviously, the escalating fuel prices and, of course, attacking hot skills and ensuring we retain and attract the right people, some pressure there. And then, the final comment I'll make is that you brought up is, yes, we're monitoring media closely and what impacts might be on TV advertising due to the macroeconomic pressures we are seeing globally. As I said but this past quarter, we're quite pleased. We had the F1 to lean on. We have World Cup of soccer coming up, so we're excited about that. But I think it's an area of the business that we tend to see macroeconomic pressures hit first. So we're monitoring that.

So on fiber, look, we're seeing growth in all of our fiber geographies. So that's real positive. So -- and that's been the case for quarter after quarter after quarter. In terms of fiber competition, it's kind of difficult to answer your question because right now, you don't really have very many areas where you have 2 fiber operators competing against each other in actually the same geography that, that fiber overlap is really minimal to date. And it will take across the multiple operators, whether or not they're small fiber pure-play operators or the cable companies that will literally take years and billions of dollars of CapEx for them to materially overlap our fiber footprint. And then while that's going on and I say this from direct experience, right, having been at Bell for our entire fiber journey. I know how long it takes and how much money it takes and so do you. And meanwhile, while that may go on with our competitors, we shall see. Here, we are today with 3 gigabit per second Internet speed symmetrical to right now, today to literally millions of households across our footprint and only growing. And we just announced the 8-gig launch starting, of course, like next month in September in the GTA or stating the obvious, the largest market and other areas in the back half of this year in Ontario and Quebec and in a very short period of time. I'm talking about 2 or 3 years, we'll have 8 gigabits per second to upwards of 6 million locations passed so in a very short period of time. So I guess what I'm saying is, while others are going to try to catch up potentially over multiple years, billions of we're pushing forward quite aggressively. And if you take a step back at how our accelerated CapEx program is all coming together. This quarter alone, 250,000 additional locations passed, a meaningful growth in locations pass in the back half of this year. Wireless 5G plus to 60% of the addressable population, increased resiliency and a new TV product. So you can see how that accelerated CapEx program has really allowed us to take a significant lead in the collection of services that ride on our fiber networks.

The next question is from David Barden from Bank of America.

It's Matt sitting in for Dave. Just first on the wireline and the kind of large enterprise supply chain-related delay in some of the business. I mean, do you have any visibility on when those supply chain-related delays will resolve? And then on the back side of it, is there capacity enough to -- for us to see a bump up in delivery on that kind of backlog? Or should we expect a pretty smooth return to business once the supply chain clears? And then maybe secondly, just on the kind of real estate opportunity that you highlighted. It sounded like that was mostly related to workers in their office and office space. And just trying to relate the real estate opportunity to maybe what you can do with central offices. Do you have any kind of additional color on what that potential might be? And maybe just a general time line for when that can be -- over what you can be realized?

I'll handle the back half first, Matt and Mirko will talk about B2B supply chain. But yes, the real estate numbers I gave you today is really focused on leased real estate space where we would have traditional office workers and naturally, like most in this country or globally or we're moving to more of a hybrid. Central offices is a bigger question to unpack. I mean obviously, as we look to the future and copper decommissioning, we were going to see how we rationalize their central offices. But for now, the numbers I quoted today are really focused on office. And as we get a better understanding and are further along the copper decommissioning path, we'll be able to give better insights on what central office opportunities we will have. And with that, I'll over to Mirko.

On B2B, so you see the trajectory is improving sequentially. So that's a positive. And like I said in Q1 and it's continued in Q2 and up to date on 1 month and into Q3, we haven't seen cancellation of projects which is another positive sign. But revenues obviously are delayed reasons that you've highlighted which is largely supply chain. I do think that we will be poised to capitalize reasonably quickly when the supply chain stabilizes to answer your question fairly directly. And on the small and medium segment, we are gaining momentum there. So we're seeing volumes come back which is a positive and we're seeing some revenue growth there which is also another positive. And then as you look into 2023 and beyond, we remain quite optimistic about 5G B2B growth coming as all the components are now being put together. So that's another positive.

The next question is from Vince Valentini from TD Securities.

Congrats as well on a very strong quarter. The EBITDA growth in the first half of the year is 5.5%. You're still sticking with your 2% to 5% guidance. It seems like there's a lot of tailwinds in -- especially on the wireless side. I'm wondering, is there something specific you're seeing on competitive developments in the second half or some unforeseen costs to keep you at that guidance and not even talking about the high end of that guidance range? Or is it just conservatism?

I think I kind of unpacked this already when I talked about higher inflation and escalating fuel costs and labor or wage pressures as we attack and retain hot skills, attracting them to our organization. I mentioned about media and that's something we really have to monitor with TV advertising due to the macroeconomic pressure. So it's really -- it's no more than that. We're extremely pleased with the front end of the first 6 months and the performance we've had. But I remain committed to the guidance range I provided for you in February.

So specifically on -- as we're getting into back-to-school period, there's nothing you're seeing that's alarming you on a let's say, a resurgence of competitive intensity. You're seeing similar trends in Q3 to the second quarter, you said earlier.

Well, I'll say so on wireless, yes. seeing the same trends, plus we come back to the answer earlier around kind of the best network superiority resiliency redundance which is obviously benefiting us. On the wireline side, there's a little bit more promotional intensity feels a little bit more like the days pre-COVID. And look, it's -- when I think of that question and I look at the dynamics and I observed the higher promotional intensity on the wireline side compared to wireless, I guess it doesn't surprise me. Some of our competitors are under pressure given the products we have out there in our network. And that's to be expected and we're going to -- we're not going to let up how is that? We're not going to let up. We have the better network with the better services and we're going to keep pushing. And -- but it's still early, right? We're only 1 month into Q3.

And Mirko, just to confirm, you said that it's the fixed line where you may be seeing a bit of an escalation?

Yes. Fixed line wireless seems to be pretty stable as it has been quite a while in terms of things like promotional intensity and handset discounting, those kind of things.

Cool. And one last one quick, Glen. The 98% roaming revenue figure from pre-pandemic. Can you give any color on the volume that is attached to that? Like is it in the range of 75% of volume leading to that kind of revenue traction?

Sure, Vince. Great question. 89% is where we're at the end of June for volume recovery, 98% of revenue, obviously, the differential is rate. We were much later introducing rate increases than some of our competitors were. It was July, I believe, before our rate increases went in.

The next question is from Stephanie Price from CIBC.

The wireless and wireline bundling offerings have picked up across both in the Bell and the Virgin brands. Can you share any early learnings with bundling and if you have any longer-term targets around bundling?

Well, I think it's just a reflection of -- it's a reflection of wanting to serve the household to serve the consumer rather than being pretending that there's 2 different customer bases, 1 for wireless, 1 for wireline. It really is the same consumer, the same household. So when you go to market with that mindset, it's going to lead to offers. And we are seeing higher lifetime value and lower churn as a result of that. And it's been in place in the industry for quite some time and maybe you're seeing a little bit more activity from us as we focus a little bit more on it but there are huge benefits for us to do so.

And as spending capabilities become more important, how do you think about your competitive positioning in the West? Would you consider wholesale or maybe fixed wireless as an option and part of the strategy?

Look, on that, when you're thinking about kind of 4 -- potentially up to 4 product bundling, competition or dual, trios and quads, we are in a very good competitive position compared to any others as we have owner economics in 75% of the country. And that puts us in a better position than anyone else. It's difficult to compete effectively unless you have owner economics. And that's really what's going to play in our favor. And unlike almost any other, we also have a vast array of content services that we can offer to our customers and you're kind of seeing it in the wireless side today, right, not even talking about bundling across the country. But just in wireless today on our ultimate plans where we include Crave as a competitive differentiator. Again, having owner economics on content plays to our strengths. No other provider can really meaningfully have owner economics on content within their overall bundles.

That makes sense. And just finally for me, with I sad looking for all the telcos to work together to keep emergency services working in the event of an outage, do you see any additional CapEx requirements potentially arising from this?

Not for us. And that's why I did spend quite some time this morning outlining how much we've invested over the last few years on things like that. We are well positioned in that regard, Stephanie. And beyond the very specific question, we'll obviously work with all the other providers to serve Canadians and to help each other. We always have. And to be fair, when we run into the occasional spot. Others are quick to help us as well. So that's always been the culture within the industry.

The next question is from David Joyce from Barclays.

On the upgrade cycle. I appreciate that you mentioned about the 56% the fiber and cable overlap metric. I just wanted to kind of sense check and how that's progressing. Was that the figure around 30% that you wouldn't have mentioned in the first quarter? And just wanted to see if you could update us on how many fiber home passes you expect to be at year-end and when you expect to be completed on that.?

Yes. So on -- for the year 2022, the entire year 2022, we still expect to be very close to 900,000 additional fiber locations passed. That will put us at around 7.1 million total fiber locations passed. So we're right on track. I did mention 250,000 locations passed in Q2. But for the entire year, it will be 900,000. And on fiber, cable overlap, we're at 56%. We were -- I mean we're more today than we were last quarter. But we were not -- last year but we weren't at 30% last year. We're somewhere slightly above 50% last year. So that's progressing well. So 56% cable overlap really good, got 44% to go. So a lot of upside. So lots of promise there.

All right. And is it still roughly the 3-year time frame when you expect to be fully upgraded?

Yes. So we want to be at 10 million broadband locations, high-speed broadband locations passed by the end of 2024. That's been our medium-term broadband build-out plan. So 1 million of those 10 million locations will be -- or are already done with wireless home Internet. And so we're looking to have 9 million fiber locations passed by the end of 2025 and we'll be at 7.1 million or so by the end of this year, 7.2 million maybe. So that leaves 1.8 million or 1.9 million fiber locations to go over the years, '23, '24, '25.

The next question is from Jerome Dubreuil from Desjardins Bank.

So the first one is on the 8-gigabit per second, definitely impressive and will future-proof your network for sure. If you can share maybe what percentage of your Internet customer base in your fiber footprint that are already taking your highest speed tier. I'm trying to get a sense here of the potential attractiveness of this new product in the current context.

Yes. It's -- so I'm not going to give you the exact figures but I will tell you that I will say that subscribers who were on 500 megs and above is quite material, like very high. And those who are 1.5-gig and above quite high as well. The gig just launched a couple of months ago and 8-gig hasn't launched yet. So those numbers are smaller but interesting successes on 3 gigs to date, frankly. So customers, the majority of customers are not buying the lower speed plant. And like I said earlier, the upload speed is going to be a game changer, Wi-Fi 6E, an absolute game changer because Wi-Fi 6E is going to give you very high-speed Wi-Fi throughout the house, very consistent quality of service. So that's going to be really good as well. And I already shared with you how those customers who buy [indiscernible] plant are using more and have more connected devices and that's not going to change. I -- we've all -- everyone in the industry has been in meetings over the last 10, 15 years, where you, every single time underestimate how much bandwidth consumption there will be and how much consumers are going to make use of higher speeds. And I think that's what's going to happen with 3 gigs and 8 gigs as well.

Great. And then on the NFL deal, we've seen sports rights continue increasing in prices. So has there been a significant change in the cost of this contract? And also, do you fully allocate these costs to media?

Yes. The cost -- Jerome, yes, the costs are fully allocated to media but I'm not going to disclose what our contract details are in the NFL contract. Suffice to say that you just unpacked it as all sports packages and renewals are up in price but we are comfortable with the economics of the contract or we wouldn't have signed it.

The next question is from Batya Levi from UBS.

A follow-up on the wireless ARPU side. Can you provide an update on what percent of your postpaid base has the unlimited premium plan as of now? I believe that was 20% last quarter. And along with roaming rate increases you mentioned, should we expect mid-single-digit ARPU growth can continue in the second half? And just a quick question on the cost side. Wireless, you mentioned acquisition retention is pretty steady. Any inflationary impact on the other part of cost that we should bake in for second half for wireless?

No. On the cost side, we're seeing stability in handset pricing. We're not seeing any supply chain issues there. The -- so nothing to speak of specifically at this time. You asked us to unpack roaming. Look, I gave some specifics that roaming we're at about 89% of pre-COVID volume. So I do anticipate continued increases in roaming which will support our ARPU but not to the same extent of the rebound you saw in roaming in Q2. So yes, ARPU will be supported by continued roaming improvements into the future but probably not to the same degree as we've enjoyed in the past few quarters. I think your first question was on?

On the unlimited premium mix, of their subscriber base.

Yes. We haven't disclosed the mix of customers who are on those specific plans. We have said that 27% of our base is on 5G-enabled devices and their 5G plans. But we haven't broken that down further into the specifics you're requesting and we're not going to do that right now.

So Paul, I think we've timed out. So I think we'll end the conference call on that question. So, thanks again for everybody's participation on the call this morning. I, as usual, I will be available throughout the day for any follow-ups and clarifications. So on that, have a great rest of the day.

Thank you, everyone and have a good day.

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