Good morning, ladies and gentlemen. Welcome to the BCE Q1 2024 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Matthew, and good morning, everyone, and thank you for joining our call. I'm here, as usual, with Mirko Bibic, our President and CEO, BCE; and our CFO, Curtis Millen. You can find all of our Q1 disclosure documents on the Investor Relations page of the bce.ca website, which we posted earlier this morning. Before we begin, I want to draw your attention to our safe harbor statement on Slide 2, reminding you that today's slide presentation and 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 BCE's 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. So back by the Bell team's consistent execution leading networks and products and cost discipline, we effectively navigated a dynamic competitive environment and the sluggish economy to achieve operational results in line with our internal plan for the quarter. And as expected and as we profiled in our quarterly budget at the start of the year, revenue was down slightly year-over-year, this was the result of a favorable onetime revenue adjustment at Bell Media in Q1 of 2023 that did not repeat this year and some marginal revenue loss at The Source as certain stores began their transition to Best Buy Express, which we've discussed in the past. Normalizing for these 2 items, revenue was basically flat this quarter. Notably, adjusted EBITDA margin for Q1 were higher than forecasted. BCE's margin expanded 0.8 percentage points to 42.7%, which demonstrates the team's focus on driving operational efficiencies across the organization, realigning costs to address near-term competitive and economic pressures, and effectively balancing growth with profitability in a highly competitive marketplace. So in terms of operating results, fiber continues to be on a roll. We're gaining share in all our markets because we have a superior product with a symmetrical speed advantage over cable and that drove our best Q1 retail Internet net additions in 17 years and it contributed to a 22% year-over-year increase in households subscribing to mobility and Internet service bundles where we have fiber. On wireless, we did a great job striking the right balance between volume growth and economics in what was a very competitive Q1. This is evidenced by strong growth in total gross mobile phone activations, which increased 25% over last year, together with healthy consumer service revenue growth of 4%, reflecting our focus on premium brand customer…

Thank you, Mirko, and good morning, everyone. I'll begin on Slide 7 with BCE's consolidated financial results. Adjusted EBITDA was up 1.1%, which drove an 80-point [indiscernible] 2% reduction in operating costs. Total revenue was down 0.7%, if you adjust for the onetime retro benefit of Bell Media last year and the loss of revenue from source this year, revenue was flat. We've actioned a number of cost and efficiency initiatives, including a sizable workforce restructuring that remains on track to generate in-year savings of $150 million to $200 million. Of this total, only a small amount was realized in Q1. As these OpEx benefits ramp up progressively and are fully realized, we anticipate stronger EBITDA growth in the back half of 2024. Despite higher EBITDA, net earnings declined in Q1, reflecting a large severance charge related to the workforce restructuring as well as a noncash mark-to-market equity derivative loss due to the decrease in BCE share price this quarter. Consistent with our guidance assumptions for the year, adjusted EPS was down versus last year. This was the result of higher financing cost, increased depreciation and amortization expense, the higher capital asset base and over $50 million in gains from sale of land in Q1 of 2023 related to our real estate optimization strategy. In line with our plan to reduce capital investments by $500 million in 2024, CapEx was down $84 million this quarter. The year-over-year quarterly step-down in spending will be more pronounced for the rest of the year as we advance spending in Q1 given favorable construction conditions this winter. Our Q1 free cash flow was flat compared to last year reflecting higher EBITDA, lower CapEx and a related positive change in working capital attributable due to lower supplier payments. These factors were offset by the timing…

Thanks, Curtis. So before we start, I want to remind everyone that due to time constraints this morning because of our Annual General Meeting that's taking place right after this call to please limit yourselves to one question and brief follow-up, so that we can get to as many queries as possible. With that, Matthew, we're ready to take our first question.

The first question is from Tim Casey from BMO Capital Markets.

Mirko, could you talk a little bit about margins as they flow through the quarter because it looked like you had some pretty good cost control. But in light of your comments that the benefits of the restructuring, not really in the numbers yet. How should we think about that kind of cadence through the rest of the year?

Thank you, Tim, for the question, and good morning. I'm going to pass it over to Curtis to answer for you.

As you said, it's two-faced, so I do think the team did a pretty good job of driving margin expansion in Q1, as you mentioned, in this competitive pricing environment. And you're correct. So the workforce restructuring is underway. It's not complete, but we haven't seen much of a benefit yet in Q1. So the estimate on our side is that as we continue to kind of finish that project, we'll continue to ramp up some cost savings over time.

And I'd add that there's a bit of a separate issue but related to managing the business carefully and with a particular focus on margins. We talked last -- on the last call about some of the transformation initiatives that have been underway for a couple of years, and that will not stop that are intended to drive results right now, but keep improving as we go on and it's largely about digitizing and automating and we were going to continue to accelerate that transformation, whether or not it's moving all core consumer products to a single ordering and billing architecture, improving the customer experience through digital platforms, things like virtual repair and customer self-install using Generative AI as best we can to offer better offer and rate plan personalization, all these things. We're going to continue to do [indiscernible] to have a very, very sharp focus on margins.

The next question is from Maher Yaghi from Scotiabank.

Mirko, I wanted to ask you a general view on wireless in Canada. We've seen churn ramp up really significantly over the last couple of quarters. More and more customers are BYOD and are taking advantage of the very strong offers you guys are making in the marketplace. Longer term, what's your view if churn remains elevated like this? How that will impact your overall wireless margins and the cost to operate in that business? And more specifically, can you discuss what's causing that earning elevation? Is it specific to any provinces and how you're doing in Québec in wireless?

Okay. Thank you for the question. At [indiscernible] actually a really good question, and it's -- the churn issue is -- I mean, I said this last quarter as well, I believe that it's concerning for sure. And because of that, it remains an area of focus. But before I dive into kind of giving you specific answers to the elements of your question, just take a step back, right, on how we are operating in this highly competitive wireless marketplace. We delivered our best postpaid results for Q1 in 6 years in a lower-price environment, where continue to drive consumer wireless service revenue growth at 4%, better product margins. And what that tells you is that as we execute, we're not overspending to deliver the results that investors expect of us. So we're going after the right loadings. The majority of our wireless loadings are on the Bell brand. And at the same time, we've seen very strong flanker growth on Virgin Plus. So we are managing all the levers very well. And we're going after the bundled household, which is something I highlighted in my opening remarks, that's because with a bundled household, we get better churn result and better lifetime value. So back to the specific elements of your question now. I think you've identified it. Right now, in the near term and in the near past, you've seen a customer that is feeling the pinch from a struggling economy and is shopping for deals. You have kind of aggressive price activity by certain of our competitors in the marketplace. So that's encouraging consumers to switch from -- amongst those carriers. So those carriers are basically swapping customers, and I'm not sure anyone is particularly winning. So that's why we're saying we're going to take a different…

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

I guess if I could just start the -- I noticed in the release, you guys have changed your assumption for ARPU growth for 2024 from decelerating growth to a decline. And yet in the first quarter, you were able to hold ARPU flat year-over-year. We noticed that it does seem that pricing activity in the market has relented a little bit. So could you talk about kind of how you expect the pricing environment to maybe evolve over the course of the year that would get you to that kind of assumption of negative ARPU growth? And then if I could just do a quick follow-up, which is -- it's a weird time in the world to be raising leverage targets, Mirko. Could you talk about why now is the right time to stop trying to get to 2% to 2.5% and why 3% is now the goal line?

On ARPU, it's just a reflection of the fact that we're in the lowest pricing environment basically in the history of wireless in Canada. And so what we're -- that's kind of what you're getting from us in terms of the release with ARPU on the references to ARPU. And we've got a very dynamic pricing environment. It's influxed, it's still too early to make a call fully on the direction of ARPU. I think you have seen some stabilization on pricing in the past couple of weeks as you've mentioned. But we don't know how long that's going to last. So it's a bit related to the question that Maher asked me, which is we're going to continue to focus on the premium subscriber loadings and on the bundling in order to generate kind of good household revenue and improve the lifetime value of the bundled customer, that's how we're going to approach it. So I'd say a little bit of focus on service revenue, given that we're operating in a pricing environment that we can't fully control. And on leverage, I'll turn it over to Curtis.

Thanks, David for the question. As you noted, we did update our leverage target to 3.0. And as you say, it's an increase but frankly, we're at 3.6x. That, I would say, is a stale-dated policy, 3x leverage we think is appropriate. It does reflect strong investment-grade credit ratings. And the other thing I'll note is at the time we instituted that original policy, we had a significant pension deficit. And we're now looking at a pension surplus that's north of $3 billion. So we think it's appropriate for our size and strength.

Our next question is from Aravinda Galappatthige from Canaccord Genuity.

I'll repeat it. So the main question is on Internet revenue growth. You've noted 3%, which seems a bit lower than I think the number that you've been citing in your presentations in the last couple of quarters. Maybe just talk to that element. I know that there were some price adjustments that happened in the beginning of the year. I'm not sure how exactly the timing of that plays out, perhaps it sort of steps up again in Q2, but I wanted to get some thoughts on that. And a quick follow-up, Mirko, on your Business Solutions organic growth number. Can you -- are you able to give us a sense of how much of a base we're talking about so we can assess the significance of it?

So on -- thank you for that. On the Internet revenue growth, it's -- my answer is going to be along the same lines as a couple of answers I've already given, Aravinda, it's -- that net revenue growth reflects the impact of residential service bundle discounts as we pursue a household bundling strategy. We're also focused and I've been very, very transparent over many quarters about this next point. We are focused where we are underpenetrated in our fiber market share. We're going to be focused on loading the network and make sure that we get the share that we deserve given the superiority of our product. And one of the geographies where we've traditionally been underpenetrated has been in the province of Quebec, and that is changing. So you're seeing the impacts of that strategy, which I've been very clear about for some time. But the bundled discounts that are having a temporary impact on revenue do drive better subscriber lifetime value, which I've also mentioned and it's improved retention long term. So it has a positive churn impact. So that's the story really on the Internet revenue growth. I'm very pleased. I'm pleased with the market share gains we're making. In the one province, I'm pleased with the market share that we've been able to achieve over time in the other geographies and I'm very happy with the success of the bundling strategy, which is something we've highlighted in our materials this morning. And the Business Solutions revenue, it's pretty significant. It would be over $500 million annually.

Our next question is from Stephanie Price from CIBC Markets.

I was hoping you could give us an update on the restructuring in terms of the timing of the cost synergies and how we should think about them rolling out through the year? And upside you see as you continue the restructuring and...

Yes. Stephanie, thanks for the question. So as mentioned in the prepared remarks, so we've executed a good portion of the workforce restructuring, but not all of it. We haven't captured much of anything in terms of benefits in Q1. So I'd say, it's a little bit lumpy, but grows over time. And given more than half has already taken place, I'd assume -- it's fair to assume that next quarter, we'll start seeing kind of a proportion and upside in that kind of space. And then as the program terminates across the end of the year, it continues to ramp up, if that's helpful for you.

That is. And then just on the partnership with Google Cloud that was announced to power their AI contact centers. Just curious how we should think of opportunities around managed services for BCE? And maybe more broadly, how we should think about opportunities within the enterprise business at this point?

Yes. So we're adopting a strategy in the enterprise marketplace where -- the innovative deployments that were -- well, the innovative solutions that we're deploying internally to improve our business as part of our internal transformation, where we intend to go to market and generate revenue with our customers. So as we undertake our own pretty significant digital transformation, the expertise we're developing as a result of that, we are then going to monetize with our large enterprise customer base. So the Google Cloud Contact Center AI is one perfect example of that. We're deploying that solution and that infrastructure internally at Bell to improve the customer experience, and we're also partnering with Google on a go-to-market basis. So over time, that's going to -- that's an example of how we're going to continue to organically grow our Business Solutions revenues. And we have other examples and Service Bridge would be -- with ServiceNow is another very good example. The SentinelOne example from my opening remarks will be a third example. But that's now a significant part of the Bell Business markets strategy.

Our next question is from Sebastiano Petti from JPMorgan.

Just one question on Business Wireless for a second, I mean, Mirko, you talked about some of the different levers that are perhaps from a competitive perspective, impacting maybe the consumer side, any update perhaps you can give us on what you're seeing from a business perspective, whether it's some mines being perhaps maybe some competition or maybe some lines being dropped because of workforce rationalization from some of your peers there in Canada? And then separately, on the leverage target, let me add 3.6x today. Any view in terms of the glide path down to that 3.0 over time? And then one last housekeeping question. Mirko, I think you talked about 22% increase in bundled subs on the fiber and wireless where fiber is available. And I think, if I'm not mistaken, Quebec, I think you said 39% increase. Maybe you can update us on where those numbers were perhaps maybe a year ago as we kind of think about the success that you've seen in this converged bundle strategy over the last 12 months or so?

Okay. So on the last question in terms of the bundle, the percentage increases in bundled households by geography, I'll probably leave that to Thane for another time. Thank you for the question, Sebastiano. On business wireless growth, I think that was -- okay, so on wireless, in particular, your question around business wireless, I'd say in the big picture was one of the softer areas due to slower subscriber growth on the revenue side, and that reflects lower demand. And you kind of identified them in your questions in this channel, our customers are undertaking workforce rationalization programs of their own, also other cost rationalization initiatives, which are affecting price and that's a reflection of the general economic uncertainty. There's also been a leveling off in roaming due to lower travel, as you can imagine, as our customers look to control their own discretionary expenses and data overage continues to be something we're managing well but continues to be in decline, including in the business segment.

Yes. And on leverage, you're right. So a 3.0 target leverage. Now ultimately, it's a matter of driving free cash flow growth, which we're focused on, right? You got there a handful of different ways, Sebastiano. So it's revenue growth as we leverage and monetize our fiber asset and bundling strategy, as Mirko alluded to. Its continued cost transformation leveraging digital transformation and ultimately, as CapEx comes down following our heavy fiber build period, we'll look to drive more positive free cash flow, delever and restart our payout ratio.

Yes. And on -- Sebastiano, just on Page 5 of our deck. So the 39% reference, it's mobility and Internet sales growth, like not internet but sales growth, and that's overall, not just in any one particular province are net. It's not on Page 5, but the combined mobility and Internet bundle nets have increased 100% year-over-year. So it shows you the traction we're getting with that strategy.

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

Just 2 for me. Mirko, in your commentary, you alluded to the advertising kind of recovery, which is great to see, just being uneven. Can you just unpack that a little bit for us in terms of where kind of pockets of strength and weaknesses are and how Q2 looks for you? And then secondly, one of your competitors just commenting on still continued relative kind of robust wireless market expansion here in 2024. Obviously, we see that continuation in Q1. Just what are your expectations for the remainder of the year? And how is Bell doing to certainly improve its share of new to Canada population growth?

So I'll start with the second one. We do continue to see strong market expansion, and we're taking part in that quite successfully. And the way we're going to take advantage of that growth, whether it's new to category or new to Canada is through our very strong distribution. So we're quite pleased with the results we're seeing from the Staples partnership we have, which has been in place for a year now, and that continues to improve. The other Best Buy Express is going to start kicking in, in the latter part of this year, and we see that as being a high potential distribution channel. And the other one that I mentioned, which is very recent with the no name mobile program, I think we're going to see some strong success there. And all of those, particularly the last one, I think, plays very nicely in terms of our desire to get bigger share or better share in the new to Canada category. And we've made strong progress in that segment. We're not where I want to be. Again, we've been very transparent about that. But when we put our focus on something, we tend to execute really well. So you're seeing the building blocks being put in place and you're going to see us gather a more appropriate share in that segment. And on the advertising market on the Media side, I think in terms of pockets of strength, really where we saw good growth was in radio advertising revenue and in the Out of Home segment as well was up nicely. TV advertising revenue, not as strong as the growth in Radio and Out of Home but certainly an improvement over what we've seen recently. And so when you put all those together, TV advertising, radio advertising, Out of Home, we saw growth for the first time in a while. So that's great. We're one of the only ones who've been able to pull that off. It's hard on your question about what I see for Q2 and going forward. It's hard to answer. I don't want to dodge your question. It's just -- it's too choppy to call. On the conventional side, there are -- some challenges remain on the digital side. It's good. So we'll just keep managing it. And we've got to just continue to believe in the strategy that we put in place several years ago which is the hard pivot to digital. So having the very best content on all the platforms that customers actually want to use to view our content, and that's how we're going to drive growth in this business, and we're seeing the early green shoots. So I'm pretty optimistic.

Our next question is from Simon Flannery from Morgan Stanley.

I wonder if I could continue on the broadband theme. Could you give us a little bit more color on your fiber passings and where the pacing is going? Obviously, the CapEx is down, but I think you referenced a positive winter weather condition. So where are we looking at for passing this year? And give us some sense, if you could, of the loading upside that you still have with the penetration rates you're seeing in your mature markets? And how much room you have in some of these other markets to get there? And then fixed wireless is something that we've seen a lot in the U.S. and [ Rogers ] has been talking about recently. What are you seeing in the market in terms of competition from fixed wireless? And are you thinking more about expanding that beyond sort of more rural areas into parts of the country where perhaps you're not the wireline operator?

Thank you for that, Simon. So on fixed wireless first, we're not seeing any competitive impacts to our core Internet business from fixed wireless competition. As I've said in the past, and I firmly believe, I don't think the fixed wireless product is going to be a competitive substitute in urban markets where there is fiber, which is by far the superior technology and Tier 1 premium cable. I don't think it's going to be a product that hunts. We don't intend to increase the footprint of our fixed wireless product. We were the first to launch fixed wireless Internet at scale and it works well, as I've said before, in rural areas where there is no broadband option or low-speed broadband, and that's where we're going to continue to focus with our product. And on fiber passings, the first question, we -- on our February call, we moved away from giving projections on an annual basis, and I'll stick with our plan now is to pass 8.3 million locations by the end of 2025. That was once a target of 9 million locations by the end of 2025. We've taken that down as a result of recent regulatory decisions and that's -- and as a result, we've also taken the CapEx down from -- by $1 billion over 2024 and 2025. So if you take CapEx down to that degree, you're going to take down your fiber passings targets. So 8.3 million remain -- we remain on track for that 8.3 million. And we'll get there over the rest of this year in 2025. And we still have a strong fiber penetration growth that we expect across our entire footprint. We're not where we want to be on market share yet. And that's from Manitoba all the way to [indiscernible].

Our next question is from Jerome Dubreuil from Desjardins Securities.

Two for me. First one, I think we all know the answer, but the -- I think it would be beneficial to have it out there. Any chance that the dividend in 2024 is not what has been communicated for the rest of the year? And then the second question, are there assets that you think you might like that you might acquire that could help you -- maybe put you in a position to generate maybe accelerated sustainable top line growth?

So on further assets, I'm going to not comment just because any deliberations we have internally on those kinds of things are strategically and competitively sensitive. But I do appreciate the question. It's something that we deliberate strategically, you always think about things like that. So I understand and appreciate the question but just don't think we should answer it. And the dividend is as -- for 2024, the dividend is as stated -- as was stated in February. That's the dividend.

Good. Seen as though we are timing out, we need to transit to our AGM location. We will call it a day on the conference call. So thank you very much for your participation. As usual, the IR team will be available throughout the day for follow-up questions and clarifications. On that, have a great day.

Thank you, everyone.