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6.3 Cash flows

6.3 Cash flows

 

 

2016   2015   $ CHANGE   % CHANGE  

Cash flows from operating activities

6,643   6,274   369   5.9 %

Capital expenditures

(3,771 ) (3,626 ) (145 ) (4.0 %)

Cash dividends paid on preferred shares

(126 ) (150 ) 24   16.0 %

Cash dividends paid by subsidiaries to non-controlling interest

(46 ) (41 ) (5 ) (12.2 %)

Acquisition and other costs paid

126   292   (166 ) (56.8 %)

Voluntary DB pension plan contribution

400   250   150   60.0 %

Free cash flow

3,226   2,999   227   7.6 %

Business acquisitions

(404 ) (311 ) (93 ) (29.9 %)

Acquisition and other costs paid

(126 ) (292 ) 166   56.8 %

Voluntary DB pension plan contribution

(400 ) (250 ) (150 ) (60.0 %)

Business dispositions

18   409   (391 ) (95.6 %)

Decrease in investments

107   11   96   n.m.  

Acquisition of spectrum licences

(1 ) (535 ) 534   99.8 %

Loan to related party

(517 )   (517 )  

Other investing activities

(16 ) (62 ) 46   74.2 %

Net issuance (repayment) of debt instruments

719   (510 ) 1,229   n.m.  

Issue of common shares

99   952   (853 ) (89.6 %)

Common shares issuance cost

  (35 ) 35   100.0 %

Repurchase of shares for settlement of share-based payments

(106 ) (138 ) 32   23.2 %

Cash dividends paid on common shares

(2,305 ) (2,169 ) (136 ) (6.3 %)

Other financing activities

(54 ) (22 ) (32 ) n.m.  

Net increase in cash and cash equivalents

240   47   193   n.m.  

 

Cash flows from operating activities and free cash flow

In 2016, BCE’s cash flows from operating activities increased $369 million, compared to 2015, due mainly to higher adjusted EBITDA, lower acquisition and other costs paid and lower income taxes paid, partly offset by a higher voluntary DB pension plan contribution made in 2016.

Free cash flow available to BCE’s common shareholders increased $227 million in 2016 due to higher cash flows from operating activities, partly offset by higher capital expenditures.

 

Capital expenditures

 

 

2016   2015   $ CHANGE  

% CHANGE

 

Bell Wireless

733   716   (17 ) (2.4 %)

Capital intensity ratio

10.2 % 10.4 %     0.2 %

Bell Wireline

2,936   2,809   (127 ) (4.5 %)

Capital intensity ratio

24.3 % 22.9 %     (1.4 %)

Bell Media

102   101   (1 ) (1.0 %)

Capital intensity ratio

3.3 % 3.4 %     0.1 %

BCE

3,771   3,626   (145 ) (4.0 %)

Capital intensity ratio

17.4 % 16.9 %     (0.5 %)

BCE capital expenditures totalled $3,771 million for 2016 representing an increase of 4.0%, compared to last year, driven by greater spending in our Bell Wireline and Bell Wireless segments. Capital expenditures as a percentage of revenue (capital intensity ratio) was 17.4% in 2016, compared to 16.9% in 2015. The year-over-year increase in capital expenditures reflected:

  • Higher wireline capital investment of $127 million compared to last year, due to our ongoing rollout of broadband fibre directly to more homes and businesses, including the build-out of Gigabit Fibe infrastructure in the city of Toronto and other urban areas. This was moderated by the slower pace of expansion of our IPTV service footprint in Québec and Ontario.
  • Higher wireless capital spending of $17 million compared to 2015, reflecting our continued investment in the expansion of our 4G LTE mobile network as well as our LTE-A network which reached 73% of the Canadian population at December 31, 2016. The ongoing investment to increase network capacity to support our growing customer base and accommodate higher speeds and greater data consumption also contributed to the increased spending.

 

Voluntary DB pension plan contribution

In 2016, we made a voluntary contribution of $400 million, compared to a voluntary contribution of $250 million in 2015, to fund our post-employment benefit obligation. The voluntary contributions were funded from cash on hand at the end of 2016 and 2015 and will reduce the amount of BCE’s future pension funding obligations.

 

Business acquisitions

On October 3, 2016, BCE acquired the remaining 64.6% of the issued and outstanding shares of Q9 that it did not already own for a total cash consideration of approximately $170 million ($158 million, net of cash on hand).

In Q1 2016, BCE completed a transaction with Corus under which Corus waived its HBO content rights in Canada and ceased operations of its Movie Central and Encore Avenue pay TV services in Western and Northern Canada, thereby allowing Bell Media to become the sole operator of HBO Canada nationally across all platforms and to expand TMN into a national pay TV service. TMN was successfully launched nationally on March 1, 2016. BCE paid to Corus a total consideration of $218 million, of which $21 million was paid in 2015.

Subsequent to year end, on January 3, 2017, BCE acquired all of the issued and outstanding common shares of Cieslok Media for a total cash consideration of $161 million.

On May 20, 2015, BCE completed the acquisition of all of Glentel’s issued and outstanding common shares for a total consideration of $592 million, of which $296 million ($284 million net of cash on hand) was paid in cash and the balance through the issuance of 5,548,908 BCE common shares.

 

Acquisition and other costs paid

Acquisition and other costs of $292 million in 2015 related mainly to a charge of $142 million incurred for the payment in full satisfaction of the judgment rendered in a litigation claim for Satellite TV signal piracy.

 

Business dispositions

Business dispositions of $409 million in 2015 reflected BCE’s divestiture of 50% of its ownership interest in Glentel to Rogers for a total cash consideration of approximately $473 million ($407 million net of divested cash and transaction costs).

 

Decrease in investments

Decrease in investments of $107 million in 2016 included proceeds received from one of our equity investments from the sale of a portion of its operations.

 

Acquisition of spectrum licences

On April 21, 2015, Bell Mobility acquired AWS-3 wireless spectrum in key urban and rural markets as part of ISED’s AWS-3 spectrum auction. Bell Mobility acquired 13 licences for 169 million MHz-pop of AWS-3 spectrum for $500 million.

On May 12, 2015, Bell Mobility acquired an additional 243 million MHz-pop of 2500 MHz wireless spectrum for $29 million. This acquisition increased Bell Mobility’s 2500 MHz spectrum holdings in a number of urban and rural markets.

 

Loan to a related party

In 2016, prior to closing the acquisition of Q9 on October 3, 2016, Bell Canada provided a loan of $517 million to Q9 for the repayment of certain of its debt.

 

Debt instruments

We use a combination of short-term and long-term debt to finance our operations. Our short-term debt consists mostly of notes payable under commercial paper programs, loans securitized by trade receivables and bank facilities. We usually pay fixed rates of interest on our long-term debt and floating rates on our short-term debt. As at December 31, 2016, all of our debt was denominated in Canadian dollars with the exception of one of our credit facilities and our commercial paper, which are denominated in U.S. dollars, all of which have been hedged for foreign currency fluctuations through forward currency contracts.

2016

We issued $719 million of debt, net of repayments. This included the issuance of Series M-41 MTN, M-42 MTN and M-43 MTN debentures at Bell Canada with principal amounts of $750 million, $850 million and $650 million, respectively, and the issuance (net of repayments) of $991 million of notes payable. These issuances were partly offset by the early debt redemption of Series M-18 MTN, M-19 MTN, M-23 MTN and M-32  debentures, with principal amounts of $700  million, $200 million, $500 million and $500 million, respectively, the repayment of Series M-38 debentures of $150 million and payments of finance leases and other debt of $472 million.

2015

We repaid $510 million of debt, net of issuances. This included the repayment of approximately $500 million of our unsecured committed term credit facility, redemption of Series M-21 MTN debentures at Bell Canada with a principal amount of $1 billion, a $474 million repayment of finance leases and other debt, and a $112 million repayment of Glentel’s outstanding debt. These repayments were partly offset by the issuance of Series M-39 and M-40 MTN debentures at Bell Canada with principal amounts of $500 million and $1 billion, respectively, and the issuance, net of repayments, of $76 million of notes payable.

 

Issue of common shares

In 2015, we issued 15,111,000 BCE common shares for $863 million under a public bought deal offering.

 

Cash dividends paid on common shares

In 2016, cash dividends paid on common shares increased by $136 million compared to 2015, due to a higher dividend paid in 2016 of $2.6975 per common share compared to $2.5675 per common share in 2015 and a higher number of outstanding common shares, partly offset by lower cash dividend payments as a result of common shares issued in Q1 2016 under BCE’s dividend reinvestment plan.

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