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7.2 Quarterly financial information

7.2 Quarterly financial information

The following table shows selected BCE consolidated financial data by quarter for 2016 and 2015. This quarterly information is unaudited but has been prepared on the same basis as the annual consolidated financial statements. We discuss the factors that caused our results to vary over the past eight quarters throughout this MD&A.





Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1  

Operating revenues

5,702   5,407   5,340   5,270   5,603   5,345   5,326   5,240  

Adjusted EBITDA

2,121   2,236   2,268   2,163   2,073   2,187   2,197   2,094  

Severance, acquisition and other costs

(11 ) (25 ) (57 ) (42 ) (152 ) (46 ) (24 ) (224 )


(719 ) (706 ) (713 ) (739 ) (731 ) (727 ) (720 ) (712 )


(165 ) (161 ) (156 ) (149 ) (136 ) (133 ) (134 ) (127 )

Net earnings

699   800   830   758   542   791   814   583  

Net earnings attributable to common shareholders

657   752   778   707   496   739   759   532  

Net earnings per common share



0.75   0.87   0.89   0.82   0.58   0.87   0.90   0.63  


0.75   0.87   0.89   0.82   0.58   0.87   0.90   0.63  

Included in net earnings attributable to common shareholders:


Severance, acquisition and other costs

(9 ) (20 ) (44 ) (31 ) (112 ) (35 ) (16 ) (164 )

Net (losses) gains on investments

(1 ) (12 ) (2 ) 12   (1 ) (16 ) 40   (2 )

Early debt redemption costs

      (8 ) (6 )     (7 )

Adjusted net earnings

667   784   824   734   615   790   735   705  

Adjusted EPS

0.76   0.91   0.94   0.85   0.72   0.93   0.87   0.84  

Average number of common shares outstanding – basic (millions)

870.5   869.9   869.1   867.1   853.5   848.9   844.9   841.0  



Cash flows from operating activities

1,520   1,943   1,890   1,290   1,510   1,878   1,841   1,045  

Free cash flow

923   951   934   418   916   921   931   231  

Capital expenditures

(993 ) (976 ) (950 ) (852 ) (958 ) (927 ) (914 ) (827 )


Fourth quarter highlights



Bell Wireless

1,883   1,770   113   6.4 %

Bell Wireline

3,137   3,161   (24 ) (0.8 %)

Bell Media

845   816   29   3.6 %

Inter-segment eliminations

(163 ) (144 ) (19 ) (13.2 %)

Total BCE operating revenues

5,702   5,603   99   1.8 %


ADJUSTED EBITDA Q4 2016   Q4 2015   $ CHANGE   % CHANGE  

Bell Wireless

674   641   33   5.1 %

Bell Wireline

1,259   1,248   11   0.9 %

Bell Media

188   184   4   2.2 %

Total BCE adjusted EBITDA

2,121   2,073   48   2.3 %

BCE operating revenues were up by 1.8% in Q4 2016, compared to Q4 2015, as a result of solid revenue growth from both our Bell Wireless and Bell Media segments, moderated by a decline in our Bell Wireline segment.

BCE adjusted EBITDA grew by 2.3% in Q4 2016, compared to last year, reflecting year-over-year growth across all three of our segments. BCE adjusted EBITDA margin increased to 37.2% compared to 37.0% in Q4 2015.

Bell Wireless operating revenues were 6.4% higher in Q4 2016, compared to last year, reflecting service revenue growth of 7.2% driven by a larger postpaid subscriber base together with blended ARPU growth of 4.7%, resulting from increased postpaid ARPU due to higher average monthly rates driven by rate increases and the ongoing migration by customers from three-year to two-year rate plans, as well as reflecting the favourable impact from higher smartphone penetration and a growing base of 4G LTE and LTE-A customers in our subscriber mix, which drove greater data consumption. Wireless product sales were essentially stable year over year as greater promotional pricing in a highly competitive market was mitigated by a higher number of postpaid gross additions in Q4 2016 compared to last year.

Bell Wireless adjusted EBITDA was up 5.1%, year over year, with adjusted EBITDA margin based on service revenues of 39.6%, a 0.8% decline over last year. The year-over-year growth in adjusted EBITDA reflected higher postpaid service revenues, from an increased mix of higher-value postpaid subscribers in our overall customer base and price discipline. This growth was mitigated by higher customer retention spending and subscriber acquisition costs, attributable to greater promotional pricing driven by a highly competitive market during the holiday season, along with more expensive smartphones in our upgrade and activation mix and greater postpaid gross additions.

Bell Wireline operating revenues in Q4 2016 declined by 0.8%, year over year, attributable to lower wholesale revenues as a result of downward revisions to wholesale internet tariffs by the CRTC and lower sales of international minutes, as well as slow economic growth in our business markets, which drove lower customer spending on connectivity services and equipment, combined with competitive pricing pressures. Additionally, the ongoing erosion in residential voice and satellite TV further reduced operating revenues. This decline was moderated by growth in Internet and IPTV subscriber bases coupled with higher residential household ARPU, and growth in business solutions services revenue driven primarily by the acquisition of Q9.

Bell Wireline adjusted EBITDA in Q4 2016 increased by 0.9%, year over year, with a corresponding adjusted EBITDA margin improvement to 40.1% from 39.5% in Q4 2015, resulting from the growth in our Internet and IPTV businesses, the favourable impact from the acquisition of Q9, lower post-employment benefit expense driven by a higher discount rate and ongoing effective cost containment, which more than offset the continued erosion in our voice and legacy data services and the unfavourable impact from the CRTC’s revision of interim rates for aggregated wholesale high-speed Internet access services.

Bell Media operating revenues grew by 3.6% in Q4 2016, compared to the same period last year, due to higher subscriber revenues driven by Bell Media’s expansion of TMN into a national pay TV service in March 2016 coupled with the continued growth from CraveTV and TV Everywhere GO products. Advertising revenue was essentially unchanged compared to last year as declines in conventional TV, mainly due to the non-recurrence of revenues generated last year from the 2015 federal election and a soft radio advertising market, were offset by OOH advertising revenue growth from the Métromédia acquisition and new contract wins in 2016, as well as higher year-over-year revenues from specialty entertainment and news channel services.

Bell Media adjusted EBITDA increased by 2.2% in Q4 2016, compared to the same period last year, driven by the growth in revenues, partially offset by higher content costs related to the TMN expansion and CraveTV combined with additional costs associated with the Métromédia acquisition and new contract wins in OOH.

BCE capital expenditures increased by $35 million year over year in Q4 2016 to $993 million, corresponding to a capital intensity ratio of 17.4%, which increased 0.3% compared to the same period last year. The higher year-over-year capital investment was driven by our Bell Wireline segment with increased spending of $37 million, compared to Q4 2015, attributable to our continued deployment 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 locations. Greater spending to support the execution of business customer contracts also contributed to the year-over-year growth in capital expenditures.

BCE severance, acquisition and other costs of $11 million in Q4 2016 decreased by $141 million, compared to Q4 2015, mainly due to higher workforce reduction initiatives in our Bell Wireline and Bell Media segments in Q4 2015 to address increasing competition, media industry regulation, a soft business market and declines in home phone subscribers.

BCE depreciation of $719 million in Q4 2016 decreased by $12 million, year over year, due to an increase in the estimate of useful lives of certain assets as a result of our ongoing annual review process, partly offset by a higher depreciable asset base as we continued to invest in our broadband and wireless networks as well as our IPTV service. The changes to useful lives have been applied prospectively, effective January 1, 2016, as described in section 10.1, Our accounting policies - Critical accounting estimates and key judgments.

BCE amortization was $165 million in Q4 2016, up from $136 million in Q4 2015, due mainly to a higher asset base.

BCE net earnings attributable to common shareholders of $657 million in Q4 2016, or $0.75 per share, were higher than the $496 million, or $0.58 per share, reported in Q4 2015. The year-over-year increase was due mainly to growth in operating revenues that drove a higher adjusted EBITDA, lower severance, acquisition and other costs and lower other expense, partly offset by higher income taxes and increased amortization expense. Adjusted net earnings increased to $667 million, from $615 million in Q4 2015, and adjusted EPS increased to $0.76 from $0.72 in Q4 2015.

BCE cash flows from operating activities was $1,520  million in Q4 2016 compared to $1,510 million in Q4 2015. The increase is mainly attributable 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 Q4 2016 and reduced working capital.

BCE free cash flow generated in Q4 2016 was $923 million, or 0.8% higher than in Q4 2015. This was due to an increase in cash flows from operating activities and lower cash dividends paid on preferred shares as a result of timing of payments, partly offset by higher capital expenditures.


Seasonality considerations

Some of our segments’ revenues and expenses vary slightly by season, which may impact quarter-to-quarter operating results.

Bell Wireless operating results are influenced by the timing of our marketing and promotional expenditures and higher levels of subscriber additions and handset discounts, resulting in higher subscriber acquisition and activation-related expenses in certain quarters. In particular, subscriber activations are typically lowest in the first quarter, while adjusted EBITDA tends to be lower in the third and fourth quarters, due to higher subscriber acquisition and retention costs associated with a higher number of new subscriber activations and upgrades during the back-to-school, Black Friday and Christmas holiday periods. Additionally, wireless ARPU historically has experienced a seasonal sequential increase in the third quarter, reflecting higher levels of usage and roaming in the summer.

Bell Wireline revenues tend to be higher in the fourth quarter because of higher data and equipment product sales to business customers and higher consumer electronics equipment sales during the Q4 Christmas holiday period. However, this may vary from year to year depending on the strength of the economy and the presence of targeted sales initiatives, which can influence customer spending. Home Phone, TV and Internet subscriber activity is subject to modest seasonal fluctuations, attributable largely to residential moves during the summer months and the back-to-school period in the third quarter. Targeted marketing efforts conducted during various times of the year to coincide with special events or broad-based marketing campaigns also may have an impact on overall wireline operating results.

Bell Media revenues and related expenses from TV and radio broadcasting are largely derived from the sale of advertising, the demand for which is affected by prevailing economic conditions, as well as cyclical and seasonal variations. Seasonal variations are driven by the strength of TV ratings, particularly during the fall programming season, major sports league seasons and other special sporting events such as the Olympic Games, NHL playoffs and World Cup soccer, as well as fluctuations in consumer retail activity during the year.

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