BCE Reports Q2BCE Reports Q2

MONTREAL -- Bell Canada's continued focus on profitable growth, combined with further cost reductions, produced steady financial and operating results for BCE Inc. (TSX, NYSE: BCE), as Canada's largest communications company today reported for the second quarter of 2006.

BCE's total revenues of $4,803 million for the quarter ended June 30, 2006 increased 1% over the same period last year. Bell Canada's revenues - $4,296 million - were up 0.9% from the same quarter last year, based on double- digit revenue growth from services such as wireless, video and high speed Internet and Information, Communication and Technology (ICT) solutions.

The $980 million of operating income reported by BCE for the quarter, while down from $1,087 million for the same period last year, reflects a $50 million charge related to a previously announced workforce reduction program, the related closing of real estate facilities, transaction costs incurred to form the Bell Aliant Regional Communications Income Fund, as well as an increase in amortization and pension costs over last year, consistent with our expectations. These same factors contributed to Bell operating income of $894 million in the quarter, down $87 million over the same period last year.

BCE's EBITDA(1) of $1,973 million is largely attributable to a 1% increase in Bell Canada's EBITDA to $1,857 million this quarter.

The higher overall revenues, combined with improved EBITDA performance, allowed Bell Canada's EBITDA margin for the quarter to remain stable at 43.2%, a major performance objective for Bell as its revenue mix evolves in an open, competitive market.

These results generated earnings per share (EPS) of $0.53 in the second quarter of 2006, compared to $0.61 for the same period last year, principally due to costs associated with the early redemption of Aliant's long-term debt in the quarter and the positive effect of net gains on investments in the second quarter of 2005. EPS before restructuring and other items, net gains on investments and costs incurred to form the Bell Aliant Regional Communications Income Fund(2) were $0.54 compared to $0.58 in the same period last year, principally reflecting the increase in pension and amortization costs.

BCE generated $1,332 million in cash from operating activities in the quarter compared to $1,403 million for the same period last year, due mainly to changes in working capital. Free Cash Flow(3) is at $16 million for the first six months of 2006, an improvement of $87 million over the first half of 2005.

"Bell Canada made steady progress against key elements of its business plan and delivered steady financial results in the quarter even when compared to a strong second quarter last year," said Michael Sabia, President and Chief Executive Officer of BCE and Chief Executive Officer of Bell Canada. "A relentless focus on execution across the company is producing measurable results as we work to transform Bell Canada."

BCE Inc. (Bell Canada) (NYSE/Toronto: BCE)