Good morning, ladies and gentlemen. Welcome to the BCE Q1 2025 Results Conference Call. I would now like to turn the meeting over to Mr. Richard Bengian. Please go ahead Mr. Bengian.

Thank you. Matthew. Good morning, everyone and thank you for joining our call. With me here today are Mirko Bibic, BCE's President and CEO, and our CFO, Curtis Millen. You can find all our Q1 disclosure documents on the Investor Relations page of the bce.ca website, which we posted earlier this morning. We have a lot of material to get through on this call. However, before we begin, I would like 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 our publicly filed documents for more details on assumptions and risks. With that out of the way, I'll turn the call over to Mirko.

Thank you, Richard, and good morning, everyone. I shared in February our strategic and operational roadmap that will guide our actions for 2025 and beyond, focusing on our customers and on creating value for shareholders. We have a clear strategy for growth and that's anchored in four key priority areas. Putting the customers first, providing the best internet and wireless networks and services, unlocking potential for businesses with technology solutions and building a digital and media content powerhouse. Moreover, we will continue to modernize and simplify how we do business and how we operate. And before providing an update on our progress against each of these, I want to call out two key and very material developments. This morning, we announced a major partnership with PSP Investments, one of Canada's largest pension investment managers. With approximately $265 billion in net assets. PSP is an extremely experienced telecom investor. It will be helping us fund the expansion of our U.S. business, which could see a commitment in excess of $1.5 billion. This will significantly de risk our future funding requirements and bring support for our U.S. Fiber growth strategy while still allowing us to proceed with our deleveraging plans. I'll describe our partnership in more detail in just a few minutes. Secondly, given the significant changes in our economic and operating environments that have occurred since the fall of 2024, our board has established the annualized dividend per BCE common share at $1.75 per share from $3.99 per share. This change will be effective with the July dividend payment. This will help us achieve more quickly our near-term deleveraging target of 3.5 times adjusted EBITDA by the end of 2027, as well as our longer-term target of 3.0 times. Both of these developments are consistent with our strategy to optimize the…

Thank you, Mirko, and good morning, everyone. I'll begin on Slide 18 with BCE. Adjusted EBITDA was essentially stable while margin improved 40 points on the back of a 2.1% reduction in operating costs. Total revenue was down 1.3%. This can be largely attributed to a 7.4% decrease in low margin product sales which included the loss of revenue from the source store closures in 2024 and conversions to Best Buy Express. Our service revenue result reflected the flow through impact of sustained competitive pricing pressures over the past year and ongoing declines in legacy voice, data and satellite TV services. Net earnings were up nearly 50% in Q1. The increase was due mainly to early debt redemption gains related to the repurchase. Excuse me, of certain bonds trading at a discount to par value. Nothing notable on adjusted EPS consistent with our 2025 guidance assumptions for interest and depreciation expense and a higher average number of shares outstanding because of the discounted treasury drip. It was down $0.03 compared to last year. CapEx was down $273 million this quarter. We remain on track to reduce capital investment by $500 million in 2025 in-line with our plan. The CapEx reduction, lower cash taxes and higher cash from working capital drove a $713 million year-over-year increase in Q1 free cash flow. Turning to Bell CTS on Slide 19. Starting with a high-level summary of Q1 subscriber metrics. Retail Internet net adds of 9.5 thousand were down versus an exceptionally strong Q1 last year. In addition to slowing industry growth due to fewer newcomers and less new Fiber footprint expansion, our results this quarter reflected our consistent strategy to balance subscriber growth with financial performance. Importantly, customers continue to choose Fiber because we offer a superior product with a symmetrical speed advantage…

Thanks Curtis. Before we start, I want to remind everyone that due to time constraints this morning because of our EDM that is taking place after this call to please limit yourselves to one question and a brief follow-up so that we can get to as many in the queue as possible. With that, Matthew, we are ready to take our first question.

Thank you. The first question is from Maher Yaghi from Scotiabank. Please go ahead.

Great. Thank you for taking my question. Never easy decisions when companies decide to cut the dividend, but doing it for the right reasons, I think it's very good. I wanted to ask you, in terms of your leverage targets that you mentioned in your prepared remarks and in your presentation, do they include any asset sales that have not been announced yet? And just a follow-up in terms of wireless. When we look at gross loading in the environment that you're operating in, do you think that Q1 was an aberrant quarter? Or this is more the environment that you're going to be probably in for the rest of the year?

Thanks for the question, Maher. In terms of the leverage target, so our plan remains as we announced a couple of months ago to sell the $7 billion in assets. That includes MLSE, Northwest Hall and a couple of other processes that we have on the go. So, it basically factors in what we announced last quarter.

Thanks for the question, Maher, it's Mirko. On the wireless question, I give you may be a bit of a broader answer basically to answer a very specific question, but more context. I would say that if you looked at early on in Q1. We were seeing some pricing stability green shoots. I think in the back half of Q1, there was a reversion to kind of frothy pricing activity across the industry. So you see from that, the overall industry loadings including ours are affected by the macro environment as well, including the clamp down on immigration and then there's the kind of impact of pricing. So if you put the two together, we decided not to go after non-accretive loadings. So what -- the numbers behind the numbers is that we had pretty strong performance on the Bell brand again. And we had strong performance on cross-sell and our wireless product margins remained positive. So I think now to end -- that's the context for Q1, not to answer your specific question. as we look into Q2 and the progress so far, we see the metrics trending in the right direction for sure. And we see ARPU decline improvement. We're seeing churn improvement. Our sales were we're okay in Q1. And as we improve churn, I think that we're going to deliver what investors are expecting.

Thank you.

Thank you. Our next question is from Drew McReynolds from RBC. Please go ahead.

Yes. Thanks very much. Good morning. I guess, first on the 2025 reiteration of guidance. Mirko, you're being able to talk about Q2. And I understand visibility is not great. Just want to get a sense of the working assumptions in terms of reiterating guidance with respect to the competitive environment in macro. We're just trying to assess I guess, your degree of confidence in keeping within your existing guidance range? And then my follow-up just on the target 3.5 times leverage for 2027, so great, obviously, to get a target out there. Simplistically, if I kind of run that through my forecast, including kind of the noncore asset sales that you've announced, the aggregate $7 billion. I get the leverage by 2027, that's just a little 0.2 times, 0.3 times lower than 3.5 times. So, I'm just trying to figure out if there's anything else here, whether it's EBITDA growth or higher kind of CapEx investment, given the announcement this morning, just any other big picture puts and takes that may help reconcile that? And if I need to take that offline with Curtis, that's great.

Yes. Drew, thanks for the question. Yes. We delevered in Q1 as we issued the hybrids. I thought it was a good idea to issue hybrids to delever given the kind of uncertainty in the market. So once we close Ziply leverage would go back up, given we're assuming simply Fiber debt as well. And going forward, as you say, free cash flow growth, asset sales, then you made a comment about funding needs. The funding needs at the partnership actually quite limited given our partnership with PSP and the ability to lever at the partnership level. So as Mirko said, the partnership by itself actually improves our free cash flow by over $1 billion in the first three years. So all of that will lead us to better free cash flow and deleveraging.

On the first question, Drew, it's Mirko, just in terms of the reconfirming of guidance. If you go back to February and when we provided guidance for the year, that's why we had a view of what the year would look like. And therefore, we put the ranges in place that we did kind of with a fairly relative terms fairly wide range on either end to acknowledge the environment that we thought we would be in. So, we're in a position to reconfirm that guidance today.

Thank you.

Thank you. Our next question is from Vince Valentini from TD Securities. Please go ahead.

Thanks very much. First, just to clarify on guidance as well. $300 million gain on the bond redemptions that helped your free cash flow in the first quarter, but you've not changed the guidance. Should you be at least trending to the high end of that free cash flow guidance given that boost, which I'm pretty sure you didn't expect when you gave us the guidance originally in February. And then on the Ziply joint venture, can you just confirm you would be the exclusive retail partner on the network Fiber Co and the extra six million homes, is that all planned construction? Or could some of that be buying existing assets in combination with CapEx? Thank you.

Thank you, Vince. It's Mirko. On the first -- well, I'll answer the last two questions first. So yes, the plan is for Ziply Fiber to be the exclusive tenant on the network. And on Fiber and on reaching the additional six million homes. And you asked a question there about the possibility of M&A. Like right now, the focus is closing the Ziply Fiber transaction. And shortly after that, we'll be in a position to close network Fiber Co, which is the strategic partnership. And the focus is going to be to execute on the build plan in that attractive U.S. market. So those are -- I highlight that for a reason, and that's going to be the focus. If down the road, we see we can more efficiently hit build targets through M&A. The goal will be to do so but within the partnership and without intending to veer off of our deleveraging targets that we've expressed to all of you today.

Thanks. And then, Vince, the gain on the repurchase. So, while we're able to reduce our debt amount principal amount by over 500, the actual gain is not included in our free cash flow.

The $798 million in the first quarter did not include that $300 million, Curtis?

Correct. The outperformance is largely working capital and cash tax on it.

Okay. I may have to take it offline because I don't see where it's backed out in your numbers, but I'll trust you. Thank you.

Thank you. Our next question is from Matthew Griffiths from Bank of America. Please go ahead.

Oh, hi. Thanks for taking the question. On the timing of this -- the PSP kind of network Fiber Co, how should we think about that? I mean, obviously, I know you're focused on closing things first. But is it -- what is the time frame generally for the six million homes passed. And is the $1.5 million -- billion, sorry, contribution from PSP. Is that directly tied to the six million passing number? Or is that just the initial investment and to achieve the six million additional funding is required? Any detail would be helpful in understanding how this all -- how the numbers are presented kind of tied together? And then just quickly on the 25,000 net adds on the main Bell brand. I was curious how that compares year-over-year? Thank you.

Thank you, Matthew. So on -- so it's a long -- the partnership is a long-term partnership through the infra side of PSP, as I mentioned. So the goal will be to get to the six million homes over time. You can't build instantaneously, so that will take time. And the commitment that we expressed in terms of the financial contribution that will be provided over time as we build. So that's the intent there. And as I mentioned, will be providing debt financing at that partnership level as well to help fund that program.

And then on the Bell brand?

Yes, I was looking for it. So that's why there was a little bit of a stall. So, it's down 9,000 year-over-year.

Okay. Okay, great. Thank you so much. I appreciate the clarity.

Thank you. Our next question is from Sebastiano Petti from JPMorgan. Please go ahead.

Hi, good morning, everyone. Just one quick follow-up on the $1.5 billion. Is that a capital call or a lump sum payment that you'll have to make? And then just following up on Drew's question, just thinking about the delevering profile or the 3.5 net debt to leverage target over time. We're just -- a lot of questions, a lot of inbounds from investors just trying to understand or square the math there. I mean you have $7 billion of asset sales coming through. You have $2 billion of Ziply debt that's coming on. That implies pretty significant delevering, but then it sounds like you're going to be relevering -- so is there a downgrade to free cash flow that we should be thinking about, particularly in light of the dividends, you have $2 million without the dividend payment of cash each year. I'm just trying to square that math there. And then also lastly, on the dividend -- sorry, Curtis, why $1.75? Why did you land there? Thank you.

Okay. So I'll Curtis will answer the free cash flow question, but let me address the other two. Your first question, same essentially what Matthew asked me. So it's going to the contributions to network Fiber co are over time as we build. So it's not a onetime payment. The third question on why $1.75 on that when the Board considered a range of options, as I'm sure you can imagine. And this is the level that the BCE Board believes gives us the flexibility to achieve our capital allocation objectives. And they're on Page 15 of our presentation. So it's optimized the balance sheet, essentially accelerate deleveraging and optimize the cost of capital. the flexibility to invest for growth. It's incumbent on us to continue to grow this franchise and then return, deliver total shareholder returns to our shareholders by being a sustainable dividend-paying company. So that's -- so the range of options that we had considered and taking the input of investors over time, that's the number that the Board felt gave us that flexibility.

And then to address your leverage question, Sebastiano. So, the $7 billion of assets is the gross number, but the MLSE proceeds, so the net proceeds from the $4.7 billion sale of LSC are part of the sources and uses to acquire Ziply Fiber.

Got it. Understood. And then maybe -- so the open access partnership, I guess, I mean, yes, maybe the U.S. is behind in terms of Fiber build-out in the U.S., but relative to Canada. But the U.S. built 10 million Fiber passing last year on pace to build another 10 million over the next several years. We have very long-term, well-capitalized companies chasing additional passing. Just trying to what gives you comfort, I guess, maybe in the greenfield opportunity of getting to that incremental five million that you guys have outlined above and beyond the three that you originally talked about with Ziply. Thank you.

We've done the work and our due diligence on the extent of passings that are there and ready to be built to at a low cost to build. So we've done some extensive due diligence on that. So we are quite comfortable as is the Ziply Fiber team, as you can imagine. And on the first part, you said open access, but I don't know what you meant there, as Vince asked.

Yes. Sorry, more on the wholesale partnership just -- we're not open a...

The market ship is just to be clear, the partnership is not an open access partnership, just to be clear on that. And then we also will be able to get to those six million homes, which we've kind of, like I said, done extensive work on at an attractive cost of capital given the structure that we've established with PSP. And I'd say PSP is also a very experienced telecom infrastructure investor. And they see the potential here in the U.S. and particularly with Ziply Fiber, which they're already a shareholder of and working with us given our expertise.

Thank you.

Thank you. Our next question is from Jerome Dubreuil from Desjardin Securities. Please go ahead.

Hey, thank you. Thanks for taking my question. First is on the acceleration of favor deployment. Actually, it looks like an acceleration. I'm not sure the time frame is comparable, and it looks to be significant. So I'm trying to see, what is the rationale behind that? Is it now that your capital structure is in a better place that you can afford to do that? Or maybe are you seeing additional opportunity? And the second one, I mean investors are going to be trying to figure out what the pro forma great cash flow is going to be pro forma, the Infra Co and the acceleration. So any details you can provide? Are you investing more in terms of free cash, net of all the transactions you are announcing this morning?

Thanks, Jerome. So, on the acceleration point, I just want to clarify. So, when we announced Ziply Fiber initially, we indicated that they had a base case build plan to get about three million homes by 2029 and with BCE's scale and resources, we would accelerate that three million homes to 2028. So that doesn't change. We think we'll get to around three million homes by 2028. Two million of those three million -- and most -- and those three million will largely be in the four Pacific Northwest states in which simply Fiber currently operates. What's different here is at close, we'll have 1.5 million of those three million already done. There's another 500,000 copper lines in Ziply Fiber ILEC footprint that we need to upgrade to Fiber by 2028. That will be funded by BCE. The other million homes will be part of the partnership. So it's a different way of getting to the same three million homes in a way that's immediately free cash flow kind of immediately improves the free cash flow profile of BCE by the $1 billion that I mentioned, given the support of PSP. It strengthens and increases our ability to capture that Fiber opportunity. And in terms of the additional five million homes, therefore, those will be tackled over time beyond 2028 with PSP as a world-class financial partner. So therefore, that's going to accelerate Ziply Fibers growth and accelerate and provide it with expanded growth potential, again, in a financially flexible way given that we'd be doing it through the strategic partnership. So all told, we're going to be enhancing the returns associated with the Ziply Fiber investment, not to mention that it's already looking more accretive than in November of 2024 given the management team's performance even since we announced the deal.

Then Jerome, just to pile on, you asked a question about the free cash flow. I think one other input. So we had said in November, CapEx pro forma for Ziply would live within the 16.5% CDI envelope, given the partnership with PSP, we expect that's going to be close to 14.5%. And then after Ziply has built out the 500,000 locations within its ILEC footprint, as Mirko mentioned, and we would expect that CDI percentage to drop from there.

Thank you.

Thank you. Our next question is from Patrick Ho from Morgan Stanley. Please go ahead.

Hey guys, thanks for having me on. Just two questions for me. The first question is, can you guys talk about how you guys are thinking about the new government's impact on key areas like TPI and immigration. And then the second question I had is you guys upsized your cost savings target goal by $500 million to $1.5 billion. Can you just unpack the various buckets that are within that additional $500 million cost savings? And just where these items come from. Thank you.

I'll take both. On the business transformation, like I said in my remarks, we've been quite successful. On the initiatives we've undertaken since 2022, and that's delivered the $500 million that I've outlined and I've shared before. And that's one of the key drivers that allows us to increase margins across BCE quarter-after-quarter. In terms of the initiatives, just to keep it kind of quick and simple, it's things like automation use of AI, consolidating billing stacks, modernizing ordering stacks, obviously continue on the copper to Fiber migration, self-serve, self-install use of chat bots, virtual agents, including voice. So those are the kinds of things. And we're also actually we're relying in part on the expertise of Ateko, the folks at Ateko to help drive workflow automation and unlocking the value from our sales force in ServiceNow environments. And if you think about it, there are significant learnings there, which we, of course, can bring to the benefit of our enterprise customers as we drive growth through tech services. So, we're both we go to the customers, so we're both an operator because the things we're suggesting our enterprise customers do, we're doing for ourselves through Ateko. So that's the answer on the business transformation and the first one was -- first question. Working with government. So, thank you -- thank you, Richard. We're looking forward to having constructive dialogue with the new federal government and top of the list in terms of topics would be the Fiber resale file I think comes down to this. We celebrated our 145 birthday just last week and for 145 years, we've been building critical infrastructure in Canada or Canadians to connect Canadians and that allows Canada to grow, right? Because if you think about the networks that our industry provides, you need it for everything from AI to cloud services to bank game, to connecting with your loved ones to entertaining yourself everything. And so we want to continue to do that, in order to continue to do that at levels which we've been doing it, you do need ultimately an environment that encourages investment and allowing the largest players in the market to resell services on each other's networks is actually a direct this incentive to investment. And it's going to undermine the goal to have more resiliency and connect more Canadians, particularly in rural Canada. So very kind of intent to take a very constructive approach and it's a logical position we have. and we're looking forward to the dialogue.

Thank you.

Thank you. Our next question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my question. Start with the follow-up. I just wanted to make sure I heard you correctly. So the CapEx intensity ratio beyond 2025, it sounds like basically, you will not exceed 49.5%. That would be sort of the new high point. I just wanted to confirm that. And secondly, based on sort of the business transformation cost reductions that you talked about with respect to severance restructuring cash cost, I think it was $330 million last year, how should we -- should that kind of be sort of the standard for the next sort of next couple of years, I wanted to confirm that as well.

So thanks, Arvind, for the question. Yes, I think 14.5% is the right range. I don't know if it's quite under 14.5%, but it's in and around 14.5%. Obviously, it depends a little bit on how fast we're driving subscriber growth and demand CapEx that comes along with that. But in the 14.5% range is a good estimate. And in terms of the cost reductions and cost to actually capture those -- I would say these past couple of years have been higher on the onetime costs. There's still going to be some costs going forward to be able to capture benefits of transformation, but I would expect the cost to be going down over time as it's more and more process improvement as well.

Okay, thank you. I'll pass the line.

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

Thanks again for your participation on the call this morning. As usual, I will be available throughout the day for follow-up questions or clarifications. Thanks, and have a great day.

Thanks, everyone.

Thank you.

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