Good morning, ladies and gentlemen. Welcome to the BCE Q2 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. With me here today are Mirko Bibic, President and CEO of BCE; and our CFO, Curtis Millen. You can find all of our Q2 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, of the analyst presentation reminding you that today’s 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 turn the call over to Mirko.

Thank you, Thane, and good morning, everyone. So looking at our overall second quarter operating results, the Bell team managed well and we executed with financial discipline against the backdrop of a highly competitive marketplace. We have a clear vision for how we're competing now and into the future, combined with our proven trademark consistent execution. While consolidated top line growth continued to be impacted by sustained competitive pricing pressures and expected revenue loss from the source, we remain laser focused on profitable margin accretive subscriber growth and driving costs out of the organization, as you can see by 2% EBITDA growth in Q2 and a 1.3 point increase in BCE's margin to 44.9%. Both of these results were higher than forecasted, demonstrating our success in driving efficiencies and reducing costs to offset near term competitive and economic pressures. This contributed to $1.1 billion of free cash flow being delivered in Q2, which represents an increase of 8% over last year and aligns with the expectations we shared with you on our Q1 conference call in May for higher free cash flow generation as profiled in our quarterly budget at the start of the year. As for operating results, our CTS segment subscriber metrics continue to be underpinned by leading broadband fiber network that is consistently recognized by third parties for its best in class performance and customer experience, by mobile 5Gs speed that are being further enhanced with deployment of 3800 megahertz spectrum, as well as increased customer bundling of mobility and Internet that serves as an important churn management and value driver tool. In wireless, we were arguably the most disciplined in striking the right balance between volume growth and economics in a heightened competitive pricing environment. We managed our promotional offers prudently to deliver a healthy step…

Thanks, Mirko, and good morning, everyone. As you can see on Slide 7, our consolidated financial results for Q2 demonstrate the Bell team's consistent and responsible execution in an intensely competitive marketplace. We returned to positive service revenue growth in Q2 following declines in the 2 previous quarters. This is the direct result of our successful fiber strategy, our ability to attract premium wireless subscribers, and drive greater cross sell penetration of mobility and Internet households, our expanded business tech services capabilities, and continued strong digital media growth. Total revenue was down 1%. This can be attributed to an 8.7% decrease in low margin wireless and wireline product sales, which included the loss of revenue from the source store closures. Adjusted EBITDA grew 2%, delivering a notable margin improvement of 1.3 points on the back of a 3.3% reduction in operating costs. Net earnings were up 52% in Q2 while helped by EBITDA, the increase was due mainly to a large noncash loss recorded in Q2 of 2023 on BCE share of an obligation to repurchase the minority interest in a joint venture equity investment at fair value. Nothing notable on adjusted EPS, consistent with our 2024 guidance assumptions for interest and depreciation expense, it was down $0.01 compared to last year. As for free cash flow, it grew a strong 8% this quarter benefiting from the flow through of higher EBITDA and lower CapEx. In line with our plan to reduce capital spending by at least $500 million in 2024, CapEx was down $329 in Q2. This brought year to date CapEx savings to $413 million. So well on track to achieve our plan reduction for the year. Turning to Bell CTS financial results on Slide 8. Top line story here is all about low margin product revenue, which…

Thanks, Curtis. So before we start, to keep the call as efficient as possible, please limit yourselves to one question and a brief follow-up if you must so that we can get to as many questions in the queue as possible with the time we have left. With that, Matthew, we're ready to take our first question.

Thank you. The first question is from Maher Yaghi from Scotiabank.

Great. Thank you for taking my question. Good morning, everyone. So I wanted to ask you, I won't ask you about wireless. I'll ask you about wireline, actually. So we are seeing significant promotional and retention activities in the market with some, like, lifetime price locks, guarantees by Videotron, which is the Canadian market hasn't seen before, but also aggressive signing promotions by Bell with prices as low as $55 or 1.5 gigs. We are waiting for the decision by the CRTC, but I would say the market is quite competitive. But that's just me. We'll see what they have in mind. But my question on this topic is the following. When first -- when BCE first embarked on its fiber to the home deployment, I remember quite clearly quite, like, 10 years ago, the expectation was that broadband ARPU was going to be in the $90 to a $100 range, and now we're sitting at $55, $60 range. Are we still seeing positive NPVs on fiber to the home, when you look at your models and you look at the pricing currently in the marketplace? What's your view on that investment and its potential positive return for shareholders?

Thank you, Maher. That's for the question. Look, fiber continues to be the growth engine of Bell on the wireline side. And frankly, if you look at the communication segments pretty much everywhere, the area of growth in wireline is actually fiber. So still quite positive on the fiber strategy. Obviously, it remains the bedrock of our wireline strategy and the investments were much needed, critical, and will serve us well for years and years to come. I'm quite pleased with our Internet performance over time, but including Q2 of this year. It was our second best Q2 since 2007 after last year, which was a standout quarter a year ago. So I already said that in my opening remarks. We're seeing very good, very good bundling success, and that's adding to the lifetime value of customers, Maher. Now there is room for ARPU growth. In some markets, though, I'd say we've seen promotional intensity stabilize as bill credits lowered. You're giving an example of a particular offer that's maybe in market in particular areas, but they're really cater to higher value customers, which remains part of our overall strategy. But we're in an intense pricing environment in wireless and wireline. Everybody knows this, but we're going to continue to focus on generating lifetime value for customers who choose the very best and who want premium product, and that's Bell 5. And we're doing a very good job, standing out in the marketplace. I would say though to end the answer to your question, as you see, we're going to adjust to circumstances as they arise, right, whether it's pricing environment, macroeconomic pressures, regulatory pressures. We're just going to adjust and you've seen a major adjustment over the last 12 months in terms of the pace of our fiber build as we get closer and closer to reaching our near term build out target and we'll continue to adjust very quickly in the face of pressures and that's one of the hallmarks of how Bell operates.

Our next question is from Stephanie Price from CIBC World Markets.

Good morning. I was hoping to understand more around the opportunities with ServiceNow and AI and automation. Are these initiatives included in your original cost savings initiatives or should we think about them as additive? If so, how do we think about the magnitude and timing around automation and digitization?

Thanks for the question. On ServiceNow, we are embedding ServiceNow into our own environment in order to increase efficiency both in how we operate and of course driving costs out of the business, but I'm particularly energized in terms of that partnership with our ability to go-to-market in conjunction with ServiceNow and to serve our enterprise customers in their own digital transformation journeys and that's across cloud security and managed automation and integrating ServiceNow into the environments of our customers and co-creating with ServiceNow so that we can jointly go to market. So that's where for me it's equally positive initiative is on the go-to-market side, including embedding it into our own environment. So that's going to continue to drive costs out of our business combined with more robotic process automation and more use of AI, Stephanie. I gave a list of examples in my opening remarks of how we're going to use AI to improve the customer experience, attract more customers and importantly drive costs out of the business and I shared the 20 million figures. So I can't give you a precise figure as to how we're going to continue or the quantum of cost efficiencies quarter-by-quarter that are going to come from deploying AI in ServiceNow, but we're going to continue to do that in the business and you can count on us to do it.

And Stephanie, the only thing I'll add just the second part of your question, we've been looking at those types of opportunities for years and we do see the results day-in, day out, these are part of them. But to answer the other part of your question, we would look at this as incremental to the workforce for structuring benefits that we talked about in February and just on that we do remain on track in terms of hitting those targets. We continue to see a way through to $150 million to $200 million of in-year savings. As you can appreciate, it's a pretty big workforce for structuring, so it will continue to scale throughout the year, but we see those as two different opportunities.

Our next question is from Sebastiano Petti from JP Morgan.

Thank you. Just a quick follow-up there, Curtis. On the $150 million to $200 million of cost savings, can you maybe tell us where we're at in terms of the run rate exiting the second quarter? And I think how should we anticipate that perhaps tracking and phasing over the balance of the year would be helpful? And then I think we talked about to Mirko, I guess or to Curtis as well, in terms of just thinking about prepaid and the new to Canada market, strong results there, part of that obviously driven by the No Name Mobile, Lucky initiative you talked about, but this has been building for some times. Can you help us think about, how the team is evaluating maybe the prepaid versus postpaid mix given the emphasis and the focus on premium loadings on the Bell brand? Should we think about above and beyond perhaps some of your initiatives, with No Name Mobile and Lucky, do you and new the new to Canada markets continue to be robust? Should we think about maybe a higher mix towards the prepaid loadings over the, you know, over the coming quarters and maybe over the next or the foreseeable future rather as a way to perhaps combat, you know, flanker brand competition? Just maybe your thoughts on that would be great.

Hi, Sebastiano. Thanks for the question. I'll answer the first question I had and then hand it over to Mirko. So we don't, we're not gonna report that information on a quarterly basis, but I would say as we reiterate our confidence in capturing those savings in year that we expect and continue to expect to reach our run rate benefit by the end of Q4. So it'll continue to ramp up through the year and we'll hit our in year target and we'll be at full run rate by end of the calendar year.

Thanks, Curtis. So, I'm glad you asked the question on prepaid because, I would allows me to kind a emphasize that the this very strong growth you see in prepaid actually is in my mind very well aligned with the premium loading strategy, actually. So if you think through how we're trying to segment customers, we need to better align base pricing with in market pricing or better align in market pricing with base pricing, number 1. We need to better align the pricing differential between, bring your own device and contract pricing. And, you know, on at the same time, we need to differentiate between prepaid and value based postpaid plans. And we did a much better job in Q2, making prepaid the true entry point for those looking to enter wireless in at the lower price point, and that includes a portion of newcomers and other customers. And then what you do is you work on migrating your prepaid customers, those who were seeking an entry price point. You seek to migrate them up to a postpaid plan. So if you do that properly, what you're going to do is you're going to attract, you know, a bigger portion of those newcomers in Canada or those newcomers into the segment to into the prepaid rather than into postpaid, which was a problem on how we were pricing as an industry, let's say, a year ago. And, so I think what we did there is we saw, as we better align that pricing and as we better segmented customers, we saw very strong growth in premium postpaid loadings and strong growth in prepaid, particularly, adept at attracting new comers to Canada in that segment. So the success you see there is completely align premium postpaid, better growth on newcomers, which is a continue a category that continues to grow, and that's because we did a better job at differentiating the pricing across the various brands.

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

Hey, guys. Thank you for taking the questions. Good morning. I guess my first question would be, Mirko, at the very beginning of the year, there was a hope that we might see decelerating ARPU growth last quarter. There was a change in expectations that we would maybe see declining ARPU for the year. Your comments just now seem maybe to express some cautious optimism that the second half is yet to be written. Could you maybe map out for us the good base and bad case scenarios and how you see those unfolding in the back part of the year for Bell Canada in the wireless ARPU front? And then as a follow-up, could you share with us any traction that you think Bell Canada has achieved through your decisions to cut CapEx, cut employment in response to some of the regulatory decisions that have been made? Do you think that that's borne any fruit or may bear fruit to, yet?

Thank you. Well, I'd say -- and I'm in wireless and I'm pricing, we are facing the most intense competitive pressure in the history of our industry in Canada. I said that in my opening comments, but I won't repeat the lengthy answer I gave to Sebastiano, but I'll say that, you know, I'll add to that, that we did take steps in early July to reset pricing to what we feel is more sustainable while continuing and this is really important, while continuing to deliver exceptional value to our customers. So, too early to call what that might bring for the balance of the year, but what we did take those steps in early July and it's in keeping with that kind of customer segmentation strategy that I described a few minutes ago. On the second part of your question, David, I know our views on the overall environment are very well known, so I won't repeat them. What I will say, though, is we're going to continue to focus on our strategy, which is, I hope is crystal clear, which is continue to capitalize on our fiber momentum. It's the product of choice for customers. Continue to focus on the premium loadings in wireless. Continue to focus on mobility and Internet bundles. We're going to use our advantage, our lead in AI, to continue to improve the customer experience and lower costs. And maybe a little bit more pertinent to your direct question, we're focused on investments in our core business and in growth segments. So, whether or not that's things like the acquisition of OUTFRONT, our ServiceNow partnership, the acquisitions of Stratejm, the shift from the source to Best Buy, No Name Mobile, those are very important investments in growth areas. And so, those are the elements of the strategy.

Our next question is from Vince Valentini from TD Securities.

Hi, thanks very much. First, can I just clarify the 70% BYOD, Curtis, would that be on total activations or just postpaid? And then just a follow-up question on a different topic. Any, a couple of your peers use dividend sort of drip discount programs to help alleviate the increase in their debt as they pay their dividends. I'm wondering, is that not something that BCE has considered? It seems to be very eloquently to match the interests of equity shareholders plus credit rating agencies and bondholders?

Yeah. Hi, Vince. Thanks for the questions. On the first one, just a clarification, the 70% BYOD is on postpaid and gross. Yeah. Postpaid gross. And in terms of the discounted grip, so, we've certainly considered it. It's not in our plan at this point. We believe we have a path to getting our payout ratio below a 100%, driving free cash flow through all of the levers that Mirko and I have mentioned. Obviously, going forward, it is a tactic that we would have, but it's not in the cards, right now.

Our next question is from Simon Flannery from Morgan Stanley.

Great. Thank you very much. So thank you for the data on convergence and bundles. Very interesting. A number of, the U.S. companies and also Rogers are looking at fixed wireless to help provide essentially a national bundle. How are you thinking about whether you how you address maybe areas where you don't have fiber either in footprint or out of footprint with, either a fixed wireless or a resale type bundle.

Our strategy remains primarily focused on generating growth through our fiber superiority. And that's where the focus is. In other areas, we have the ability to combine, TV product with, or content rather with wireless. But, in 75% of the country where we have network overlap between fixed and wireless, really the emphasis is fiber. And we're seeing as you mentioned, we're seeing very good results on bundling wireless and internet in fiber territory.

[Operator Instructions] With that our next question is from Jerome Dubreuil from Desjardins Securities.

The first one you it seems like, we're transitioning a bit higher percentage of subscriber base on wireless towards prepaid. If you can discuss what's the margin -- dollar margin profile on prepaid versus just postpaid and we talking something that is similar across both type of services and second question is on capital allocation on wireless again, where you have a government that making it more difficult to earn returns on required wireless investments. We've talked a lot about the OpEx side of the equation, but what about wireless CapEx? Excluding the new generation, the new spectrum onboarding, how do you see wireless CapEx evolving directionally in the future versus what it has been in the last decade or so?

Well, on the CapEx question, whether or not it's wireless or wireline, overall, you're going to -- I mean, you've already seen a step down in our CapEx year-over-year, and we're going to continue to, lower the overall CapEx spend. So next year, it'll be lower than this year. And, I think we can run this company at a capital intensity below 15%, which is a level where Bell operated historically for a long time. And I think we can do that while continuing to invest in the key strategic areas. And that's not the long term. I'm talking about the short to medium term there. I'll leave it at that on CapEx.

And then, [indiscernible], on your first question. So ultimately, we manage EBITDA margins on a consolidated basis and we don't provide prepaid only reporting. I'd say ultimately, we manage, as you've seen in our results, quarter-after-quarter, we manage costs diligently, whether it's prepaid or postpaid. And we're looking to lower our cost to serve while providing the same break service to customers again, whether they're prepaid customers or postpaid customers.

Our next question is from Batya Levy from UBS.

Thank you. On the revenue guidance, you're tracking below your guidance so far. I think it's mostly due to lower margin equipment revenues. But what are some drivers to get back to growth in the second half of the year? And also, if you could remind us revenue and EBITDA contribution from our funds media, that would be helpful.

Yes. Hi, Batya. Thanks for the question. So as we said in our preparation remarks, we are reconfirming all of our guidance targets for 2024. I won't go through the laundry list of our revenue generating tactics, but I would remind everyone that the majority of the revenue declines here have been driven by a decrease in very low margin product sales, which is consistent with our strategy of not chasing low value subscriber loadings.

And on OUTFRONT Media?

Yes, and OUTFRONT Media closed midway through June. So the contribution on revenue is single-digits. I mean, it's an immaterial number given the timeline of when that transaction closed.

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

Okay. Great. Thank you, Matthew. And thanks again to everybody who participated on the call this morning. I'll give you back your 15 minutes to enjoy the nice summer day. As usual, the IR team will be available throughout the day for any follow-ups and clarifications on that. Have a good day, everybody. Thank you.

Thanks, everyone.