- 2016 Annual Report
- MANAGEMENT’S DISCUSSION AND ANALYSIS
- REPORTS ON INTERNAL CONTROL
- CONSOLIDATED FINANCIAL STATEMENTS
- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total BCE operating costs
Total BCE operating costs decreased by 0.2% in 2016, compared to 2015, as cost savings realized in our Bell Wireline segment more than offset increases in Bell Wireless and Bell Media.
Bell Wireless operating costs increased by 2.7% in 2016 compared to last year. The year-over-year increase in operating costs reflected:
- Higher customer retention spending mainly attributable to greater promotional pricing in a very competitive market coupled with a greater proportion of premium smartphone devices in our upgrade mix. This increase was partially offset by lower year-over-year subsidized upgrade volumes as a result of the convergence of three-year and two-year contract expiries (referred to as double cohort in the wireless industry) following the final application of the mandatory code of conduct on June 3, 2015 for providers of retail mobile wireless voice and data services in Canada (Wireless Code), which drove greater activity in the marketplace in 2015.
- Increased subscriber acquisition costs driven by higher year-over-year gross activations, higher sales of more expensive smartphones, greater promotional pricing due to a competitive marketplace and a larger proportion of postpaid gross activations in our activation mix
- Higher bad debt expense generated by increased revenues
- Higher network operating costs driven by LTE and LTE-A network expansion and increased usage
- Increased payments to other carriers resulting from higher data usage volume
These factors were offset partly by lower labour costs driven by reduced call volumes to customer service centres.
Bell Wirelines operating costs declined by 2.7% in 2016, compared to last year, as a result of:
- Lower labour costs attributable to workforce reductions, declining call volumes to customer service centres and vendor contract savings
- Reduced post-employment benefit expense resulting from a higher year-over-year discount rate. Additionally, a gain recorded on an alignment of certain Bell Aliant DB pension plans with those of Bell Canada in the first quarter of 2016 also contributed to the year-over-year reduction.
- Lower cost of goods sold consistent with lower product sales
- Decreased payments to other carriers driven by reduced volumes
The decline in operating costs was offset in part by increased programming costs for TV services attributable to a greater number of total TV subscribers and programming rate increases, combined with higher costs associated with the acquisition of Q9 in the fourth quarter of 2016.
Operating costs increased by 3.9% in 2016, compared to last year, due to higher content costs related to sports broadcast rights, the TMN national expansion and continued ramp-up in CraveTV content, as well as an increase in expenses associated with the Métromédia acquisition and outdoor advertising contract wins. This was mitigated in part by lower labour costs as a result of a 2015 workforce reduction initiative.