Bell Canada Sees Lower Growth in Weakened Economy, Increases Dividend

Bell Canada’s operating revenues in Q4 2008 grew by 0.2% to $3,800 million as growth in wireless, video, and data revenues offset declines in local and access, long distance, and equipment and other revenues. Excluding product sales, Bell’s operating revenues grew by 1.2% this quarter. For the full year, Bell’s operating revenues were $14,873 million, an increase of 1.5% compared to 2007. Bell’s operating income was $520 million, or 6.6% lower than Q4 2007, due to higher depreciation and amortization expense and higher restructuring and other costs. For the full year, Bell’s operating income was $2,143 million, a decrease of 19.2% compared to 2007. BCE’s net loss per share (EPS) was $0.06 for the quarter compared to $2.93 for the same period last year. EPS this quarter included net losses on investments of $372 million, or $0.47 per share and restructuring and other costs of $0.14 per share.

“This was another quarter of clear progress by the Bell team in executing on our strategic imperatives in order to achieve our goal: to be recognized by customers as Canada’s leading communications company,” said George Cope, President and Chief Executive Officer of BCE and Bell Canada. “With a clear goal and strategy, improving operating performance, and a sound financial strategy, we are in a strong position to grow our free cash flow and earnings and return value to our shareholders now – as with the dividend increase announced today – and going forward.”

Some highlights for the quarter:

• At year end 2008, BCE had in excess of $3 billion in cash and cash equivalents on its balance sheet.
• BCE announced that the annual common share dividend will increase by 5% to $1.54 per share. Accordingly, the Board has declared a quarterly dividend of $0.385 per common share, payable on April 15, 2009 to shareholders of record at the close of business on March 16, 2009.

Wireless

• Postpaid and prepaid wireless ARPU decreased by $1.06 and $1.24 to $65.69 and $16.40 respectively due to lower usage as customers reacted to a weakening economy partly offset by significant growth in wireless data revenues. Blended ARPU decreased by $0.43 to $54.22. For the full year, blended ARPU increased by 0.7% to $54.29 with postpaid ARPU increasing 0.3% to $66.09 and prepaid ARPU increasing 0.2% to $17.14.
• Total gross wireless activations were 470,000 this quarter, or down 7.8% from last year’s record high.
• The Bell Wireless segment had 80,000 postpaid net activations, or 3.9% more than last year, and total net activations of 117,000.
• Postpaid churn improved to 1.3% from 1.4%. Bell Wireless EBITDA grew by 13.6% and EBITDA margin on wireless service revenues increased to 43%.

Wireline

• Wireline momentum continued with residential local access line (NAS) losses declining to 72,000 this quarter from 117,000 in the same quarter last year on the strength of customer winbacks and demand for Home Phone packages.
• High-speed Internet customer connections increased by 8,000 this quarter, compared to 29,000 in Q4 2007, due to lower overall market demand as a result of a weakening economy and the relatively high broadband Internet penetration rate.
• At the end of the quarter, Bell had 2,054,000 high-speed Internet customer connections, an increase of 2.5% compared to the end of 2007.
• Total video subscribers increased by 14,000 this quarter to reach a total of 1,852,000. For the full year, there were 30,000 net subscriber activations compared to 2,000 in 2007.
• Video subscriber churn of 1.3% was unchanged from last year.
• Video net activations were 14,000 this quarter, a significant improvement over the 2,000 net activations in Q4 of 2007, due to improved sales in direct and indirect channels.
• Total NAS declined by 9.1% over the last year. However, total NAS declined by just 5.4% when normalized for the previously announced contract termination with a major wholesale customer and a beginning-of-year adjustment to Bell’s residential NAS base following a review of historical records.
• Bell invested $854 million of capital this quarter, an increase of 11.8% compared to Q4 2007. On a full year basis, Bell invested $2,459 million of capital, or 1.8% more than 2007. For the full year, Bell’s capital intensity was 16.5%. Capital expenditures focused on enhancing the wireless network and the continuing expansion of the Fibre-to-the-node (FTTN) program, supporting Bell’s commitment to its strategic imperatives.
• Bell’s FTTN footprint reached 2.4 million homes at the end of 2008. This program is being accelerated in order to pass 5 million homes by 2012.

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