Bell Canada Reports Q3

Bell Canada reports revenue of C$4.8B, up by 3.3% from 3Q03, but restructuring charges meant earnings per share fell $0.49 to $0.09

November 3, 2004

3 Min Read

MONTREAL -- For the third quarter of 2004, BCE Inc. (TSX, NYSE: BCE - News News) reported revenue of $4.8 billion, up 3.3% and EBITDA(1) of $1.9 billion, up 2.2% when compared to the same period last year.

"In the third quarter we continued to make steady progress in the execution of our business plans," said Michael Sabia, President and Chief Executive Officer of BCE. "We continue to focus successfully on medium-term revenue growth opportunities, on effective cost management and on rapidly transforming the company to meet new market realities."

The company recorded restructuring and other charges(2) in the quarter which had a negative impact on reported operating income and on earnings per share (EPS). Exclusive of these restructuring and other charges and the net gains on investments, BCE's operating income was up $56 million or 5.3% and EPS was $0.52, an increase of 8.3% over the previous year. Including restructuring and other charges, operating income was $25 million, down $1,024 million from the third quarter of last year while EPS was $0.09, down from $0.49 last year.

The restructuring charge reflects the cost of Bell's Voluntary Employee Departure Program, introduced over the summer. Under the program 5,052 Bell Canada employees (approximately 11% of Bell Canada's total workforce) will leave the company. Departures have begun and will be largely completed by year- end. The departures are being managed to ensure a smooth transition and that service levels will not be affected. The company has taken a charge of $985 million ($647 million after-tax) in this quarter relating to these departures. Annual savings of $390 million are expected going forward.

"The industry is in a period of rapid change and we are committed to remaining in step with that change," said Mr. Sabia. "New entrants and emerging technologies are altering the competitive landscape and new business models are required to maintain our leadership and meet our customers' expectations. The Employee Departure Program helps us build a new cost structure for the company and strengthens our position as the marketplace continues to evolve."

Recognizing that evolution, the company is building on its growth potential in wireless, DSL and video in Bell's Consumer segment and on the provision of Internet Protocol (IP) and value-added solutions in the Business segment. In wireless, total subscribers are up 11.5% over last year. DSL subscribers are up 27% and, by nearly doubling the number of new video customers year over year, ExpressVu became the third largest broadcast distribution company in Canada. Revenue from value-added solutions in both the Enterprise and SMB groups was up this quarter. At the end of September 2004, 60% of the traffic on Bell Canada's core network was IP-based, already meeting Bell's 2004 year-end target.

Cost management and financial discipline across the company allowed BCE to continue its focus on margin improvement. Bell Canada continues its internal transformation through the implementation of IP technology, the simplification of operations and the reinvention of processes. The company is now well positioned to reach its goal of removing $1 billion in annual costs by the end of 2006.

Bell Canada Financial Performance

Excluding the impact of the labour disruption at Aliant (which ended in late September) and the restructuring and other charges (2), Bell Canada's revenue growth was 1.6%, operating income increased 8.7% and operating margin increased to 26.1% from 24.4%. Including these factors, Bell Canada's revenue growth was 1.2%, operating income decreased from $1,012 million to an operating loss of $13 million, and operating margin was negative 0.3% compared to 24.4%.

BCE Inc.

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