November 10, 2000

Management's Discussion and Analysis

This document has been filed by BCE Inc. with Canadian securities commissions and the U.S. Securities and Exchange Commission. It can also be found on BCE Inc.'s Web site at www.bce.ca or is available upon request from:

BCE Inc.
Investor Relations
1000, rue de La Gauchetière Ouest
Bureau 3700
Montréal (Québec) H3B 4Y7
Tel.: 1 800 339-6353
Fax: (514) 786-3970
E-mail: investor.relations@bce.ca

MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis of financial condition and results of operations (MD&A) for the third quarter and the first nine months of the year 2000 focuses on the results of operations and financial situation of BCE Inc. and its subsidiaries, joint ventures and significantly influenced companies (collectively BCE) by principal operating group of BCE and should be read in conjunction with the unaudited consolidated financial statements contained on pages 35 to 41 Certain sections of this MD&A contain forward-looking statements with respect to BCE. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors which could cause actual results or events to differ materially from current expectations are discussed on pages 22 to 34 under "FORWARD-LOOKING STATEMENTS".

HIGHLIGHTS

On November 1, 2000, BCE completed the acquisition, by means of a plan of arrangement, of substantially all of the outstanding common shares of Teleglobe Inc. it did not already own. Teleglobe Inc. common shareholders received total consideration equivalent to 0.91 of a BCE Inc. common share (including $0.10 in cash) for each Teleglobe Inc. common share they owned. Teleglobe Inc. common shareholders also had the option to receive, in cash, up to 20% of the total consideration, instead of BCE Inc.common shares, based on the price of BCE Inc.common shares prior to the closing of the acquisition, which was determined under the plan of arrangement to be $35.71 per BCE Inc. common share. As a result of this transaction, as of November 7, 2000, BCE Inc. issued a total of approximately 174 million common shares and paid approximately $178 million in cash to Teleglobe Inc. common shareholders. Outstanding Teleglobe Inc. stock options will continue to be exercisable in accordance with their original terms and conditions. However, Teleglobe Inc. stock option holders will receive, upon exercise of the options, 0.91 of a BCE Inc. common share for each Teleglobe Inc. stock option held. This acquisition will be accounted for using the purchase method.

On October 25, 2000, BCE outlined a new corporate structure, to take effect on December 1, 2000, which will center BCE's activities around four operating businesses: Bell Canada (Canadian connectivity), Teleglobe Communications Corporation (Teleglobe) (global connectivity), its new media company (content) and BCE Emergis Inc. (BCE Emergis) (commerce). All other investments will be combined in a new group called BCE Ventures which will include BCE's investments in Bell Canada International Inc. (BCI), Telesat Canada (Telesat), CGI Group Inc. (CGI), BCE Capital Inc., Bimcor Inc., Excel Communications Inc. (Excel) and Look Communications Inc.

On September 15, 2000, BCE, The Thomson Corporation (Thomson) and The Woodbridge Company Limited (Woodbridge) announced the creation of a Canadian multi-media company. BCE will own 70.1% of the new company and its principal contributions to it will be its wholly owned interest in CTV Inc. (CTV) and its 71% interest in Sympatico-Lycos Inc. Thomson will own 20% of the new company and will contribute all of the assets and undertakings of The Globe and Mail (division of Thomson Canada) and of Globe Interactive (division of Thomson Canada) and its 50% interest in Report On Business TV. Woodbridge will own 9.9% of the new company and will contribute $385 million. The transaction is expected to be completed in the first quarter of 2001, subject to the approval by the Canadian Radio-television and Telecommunications Commission (CRTC) of BCE's acquisition of CTV, as well as other customary approvals.

On August 31, 2000, BCI announced the signing of a definitive share purchase agreement to sell its 20% interest in KG Telecommunications Co. Ltd. of Taiwan (KG Telecom) for gross proceeds of approximately $790 million. The transaction is expected to close no later than the first quarter of 2001, subject to certain customary regulatory and contractual approvals.

On September 26, 2000, BCI announced the signing of a definitive agreement to sell its interests in Vésper S.A., Vésper São Paulo S.A. and the Internet service provider, Interativa S.A. (collectively, Vésper companies) to VeloCom Inc. (VeloCom). BCI through its affiliates will receive gross proceeds of US $875 million, consisting of US $600 million in cash and US $275 million in promissory notes which, as discussed in more detail below, will be contributed to a new facilities-based communications company. The transaction is expected to close in the first quarter of 2001, subject to regulatory and other approvals and VeloCom concluding the necessary financing.

On September 26, 2000, BCI, Telefonos de Mexico S.A. de C.V. (Telmex) and SBC Communications Inc. (SBC) announced revisions to the June 7, 2000 agreement to form a new facilities-based communications company which will be their principal vehicle for expansion in Latin America. Under the revised agreement, Telmex has assigned its interest in the new company to its recently created sister company, America Movil S.A. de C.V. (America Movil). As a result, BCI and America Movil will each hold a 44.3% indirect interest in the new company. SBC will acquire an 11.4% interest in the new company by contributing its interest in the Brazilian cellular company, Algar Telecom Leste S.A. (ATL). The parties have also agreed that BCI will contribute the sale proceeds from the disposition of the Vésper companies to the new company, net of any additional BCI capital invested into the Vésper companies prior to closing, in lieu of its interests in the Vésper companies, as originally contemplated by the June 7, 2000 agreement. The new company's initial capitalization will be US $4 billion and will include the South American assets of BCI (excluding the Vésper companies) and Telmex's and SBC's investments in ATL. In addition, the new company will acquire Telmex's interest in the Argentine broadband company, Techtel Telecomunicaciones S.A. The transaction for the formation of the new facilities-based communications company is expected to be completed in the fourth quarter of 2000, subject to certain regulatory and other approvals.

RESULTS BY OPERATING GROUP

OVERVIEW

BCE's cash baseline earnings (net earnings applicable to common shares, excluding special items) increased $38 million or 13% to $329 million for the third quarter and $80 million or 10% to $910 million for the first nine months of 2000 compared with the same periods of 1999. The improved results for the first nine months of 2000 primarily reflected:

• improved results of $112 million at Corporate and Other driven primarily by higher interest income and lower financing costs;

partially offset by:

• decreased contribution of $24 million at Bell Canada due mainly to the 20% reduction in ownership interest which occurred on June 1, 1999, as a result of a strategic partnership formed between BCE Inc. and Ameritech Corporation (a wholly owned subsidiary of SBC (SBC/Ameritech)); and,
• a decreased contribution of $22 million from BCE Media primarily caused by decreased earnings from Bell ExpressVu Limited Partnership (Bell ExpressVu).

BCE's net earnings applicable to common shares were $640 million for the third quarter and $4,813 million for the first nine months of 2000 compared with net earnings applicable to common shares of $123 million and $4,657 million, respectively, for the same periods of 1999. Included in BCE's net earnings for the third quarter and for the first nine months of 2000 were special items of $(311) million and $(3,903) million, respectively. Special items for the third quarter and for the first nine months of 1999 were $168 million and $(3,827) million, respectively.

SPECIAL ITEMS

The special items for the first nine months of 2000 related mainly to the following:

• earnings from discontinued operations (Nortel Networks Corporation (Nortel Networks)) of $4,055 million. In May 2000, BCE distributed to BCE common shareholders an approximate 35% ownership interest in Nortel Networks. Accordingly, BCE's share of Nortel Networks' results were classified as discontinued operations, and were no longer included in BCE's cash baseline earnings. Included in the earnings from discontinued operations was a $4.2 billion dilution gain on the reduction of BCE's ownership interest in Nortel Networks, from 39% to 37%, primarily as a result of Nortel Networks' acquisitions, through the issuance of shares, of Qtera Corporation (Qtera), Clarify Inc. (Clarify), and Promatory Communications Inc. (Promatory) and the issuance of shares by Nortel Networks under its stock option plans; and
• BCE's share of BCI's net earnings of $282 million ($556 million net earnings for the third quarter of 2000);

partially offset by:

• goodwill expense of $289 million ($124 million for the third quarter of 2000); and
• losses from discontinued operations (ORBCOMM Global L.P. (ORBCOMM)) of $80 million ($67 million for the third quarter of 2000). On September 15, 2000, ORBCOMM voluntarily filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Act. Consequently, in the third quarter of 2000, BCE's results reflect a $60 million after tax write-down relating to its proportionate interest in ORBCOMM as a discontinued operation. BCE's proportionate interest in ORBCOMM's losses for prior periods, on the condensed consolidated statement of operations, have been reclassified from equity in net earnings (losses) of significantly influenced companies to discontinued operations.

The special items for the first nine months of 1999 related mainly to the following:

• a $4.2 billion dilution gain on the reduction of BCE's ownership in Bell Canada from 100% to 80%, as a result of the SBC/Ameritech partnership, for cash proceeds of $5.1 billion; and
• a $234 million gain on the sale of BCE's interest in Jones Intercable Inc. (Jones) for net cash proceeds of US $508 million;

partially offset by:

• BCE's share of BCI's losses of $230 million ($104 million for the third quarter of 1999);
• restructuring and other charges of $201 million relating primarily to Bell Canada ($127 million) and to the write-down of BCE Media's investment in Skyview Media Group Inc. ($62 million) in the third quarter of 1999;
• loss from discontinued operations of $171 million (Nortel Networks); and
• goodwill expense of $72 million ($25 million for the third quarter of 1999).

CONSOLIDATED REVENUES

Total revenues as reported increased $842 million or 23% for the third quarter and $2,402 million or 23% for the first nine months of 2000 compared with the same periods last year. Total revenues, including Aliant's revenues in 1999, increased $335 million or 8% for the third quarter and $1,137 million or 10% for the first nine months of 2000 compared with the same periods last year. These increases were mainly due to strong revenue growth at Bell Canada, BCE Emergis and Bell ExpressVu.

CONSOLIDATED EBITDA

Consolidated EBITDA (earnings before interest expense, income taxes, depreciation and amortization and excluding pension credits and restructuring and other charges) for BCE, including Aliant's results in 1999, increased $145 million or 9% to $1.8 billion for the third quarter and $354 million or 8% to $5.0 billion for the first nine months of 2000 compared with the same periods last year. The increases were mainly attributable to EBITDA growth at Bell Canada and BCE Emergis, partially offset by a lower EBITDA at BCI.

BELL CANADA

Overview

Bell Canada's results discussed in this MD&A represent the consolidation of BCH with Bell Canada and its consolidated subsidiaries (including Bell Mobility Inc. (Bell Mobility), BCE Nexxia Inc. (carrying on business in Canada under the name Bell Nexxia), Bell ActiMedia Inc. (Bell ActiMedia), Northern Telephone Limited, Northwestel Inc. and Télébec ltée), Bell Canada's equity investments in Manitoba Telecom Services Inc. (MTS) and Teleglobe Inc. as well as the consolidation of Aliant's results. In addition, in order to provide more meaningful comparative financial information, results for 1999 have been restated to reflect the consolidation of Aliant at 41%. These entities provide a full range of domestic and international communications services to customers. BCH owns 100% of Bell Canada. As of June 1, 1999, BCE owns 80% of BCH, the remaining 20% is owned by SBC.

On November 2, 2000, the Government of Alberta announced the award of a $300 million contract to a consortium of global and provincial technology companies, headed by Bell Canada and by two of its significantly influenced and subsidiary companies, Bell Intrigna Inc. and Bell Nexxia, to build and implement a high-speed, broadband Internet network.

On September 27, 2000, Bell Canada, Canadian Imperial Bank of Commerce (CIBC), The Bank of Nova Scotia (Scotiabank), La Confédération des caisses populaires et d'économies Desjardins du Québec (Desjardins) and BCE Emergis announced plans to launch a new e-procurement company, Procuron Inc. (Procuron), which will use combined purchasing volumes, along with its strategic sourcing and e-commerce expertise, to provide Canadian businesses and emerging vertical exchanges with a national business-to-business (B2B) exchange to buy business products and services. BCE Emergis will provide, manage, and operate the technology infrastructure. Procuron will be an independent entity operating separately from the five founding companies and is expected to commence operations later this year.

On August 31, 2000, Stratos Global Corporation, a subsidiary of Aliant, announced the signing of a definitive agreement to acquire the Inmarsat, VSAT and aeronautical businesses of British Telecommunications plc., which provide remote communications solutions to customers around the world, for a cash consideration of approximately $340 million. The transaction is expected to be completed in the fourth quarter of 2000, subject to regulatory approvals and other customary closing conditions.

Bell Canada's contribution to BCE's cash baseline earnings increased $55 million or 19% for the third quarter of 2000 compared with the same period of 1999 primarily due to revenue growth. Bell Canada's contribution to BCE's cash baseline earnings decreased $24 million or 3% for the first nine months of 2000 compared with the same period last year, mainly as a result of the 20% reduction of BCE's ownership interest in Bell Canada on June 1,1999.

Net earnings applicable to common shares decreased $69 million for the third quarter and increased $33 million for the first nine months of 2000 compared with the same periods of 1999. The results for the third quarter and for the first nine months of 2000 mainly reflected increased operating revenues, partially offset by increased cash operating expenses, reduced equity earnings and pension credits, higher interest expense and increased interest on equity-settled notes (issued in the fourth quarter of 1999 to fund the additional investment in Bell Mobility). In addition, for the third quarter of 2000, Bell Canada's results reflected losses from discontinued operations relating to Teleglobe Inc.'s investment in ORBCOMM. The results for the first nine months of 1999 were impacted by restructuring and other charges.

Bell Canada Operating Revenues

Local and access services

Local and access services revenues increased $122 million for the third quarter and $337 million for the first nine months of 2000 compared with the same periods of 1999 mainly due to network access services growth (primarily business line growth) and higher SmartTouch^TM services revenues of 19% for the third quarter and 23% for the first nine months of 2000, which were positively impacted by the increased penetration of these services combined with price increases. Penetration of capable network access services was approximately 56% in the third quarter of 2000, with each customer taking over three features on average and generating approximately $13 in monthly revenues.

SmartTouch is a trade-mark of Stentor Resource Centre Inc. Bell Canada is a licensed user.

Long distance and network services

Long distance and network services revenues increased $19 million for the third quarter and $56 million for the first nine months of 2000 compared with the same periods last year. The increases were mainly attributable to higher network services revenues due primarily to growth in digital frame-relay and other digital data services, partially offset by lower long distance services revenue. The decrease in long distance services revenues resulted from lower average prices which were impacted by the increased penetration of discount calling plans such as First Rate^TM. However, average price per minute has effectively remained stable throughout 2000. The increased penetration of these discount calling plans has led to an increase in long distance service volumes as measured in conversation minutes of 338 million or 8% to 4,372 million for the third quarter and 1,194 million or 10% to 13,264 million for the first nine months of 2000 compared with the same periods last year. Long distance settlements decreased slightly for the third quarter mainly due to lower settlement rates in the quarter, while on a year-to-date basis, long distance settlements reflected an increase primarily as a result of higher prices on inbound overseas traffic.

First Rate is a trade-mark of Manitoba Telecom Services Inc. Bell Canada is a licensed user.

Wireless services

Wireless operating revenues from Bell Mobility increased $47 million for the third quarter and $80 million for the first nine months of 2000 compared with the same periods last year resulting mainly from higher cellular and personal communications services (PCS) subscriber base, partially offset by lower average revenue per cellular and PCS subscriber. Average revenue per cellular and PCS subscriber decreased from $52 per month in the third quarter of 1999 to $48 per month in 2000 (but increased 9% over the second quarter of 2000), reflecting the combined impact of increased competition in the wireless market and the growth in prepaid subscribers.

At September 30, 2000, Bell Mobility had 2,154,000 cellular and PCS subscribers, of which 1,445,000 were cellular subscribers and 709,000 were PCS subscribers, reflecting net additions of 118,000 or 6% (of which 85% were postpaid) from June 30, 2000 and 467,000 or 28% (of which 51% were postpaid) from September 30, 1999. Included in the total subscriber base at September 30, 2000 were 621,000 prepaid subscribers and 1,533,000 postpaid subscribers compared with 391,000 and 1,296,000, respectively, at September 30, 1999.

Terminal sales, directory advertising and other

Terminal sales, directory advertising and other revenues increased $107 million for the third quarter and $379 million for the first nine months of 2000, compared with the same periods of 1999 principally due to increased data revenues from Bell Nexxia and Internet related services. On a year-to-date basis, the increase in terminal sales, directory advertising and other revenues also reflected higher terminal equipment sales.

Data revenues

Data revenues increased $182 million or 32% to $752 million for the third quarter and $439 million or 27% to $2,055 million for the first nine months of 2000 compared with the same periods last year. The increases in data revenues were primarily due to growth in the provision of Internet Protocol (IP)/Broadband and Internet related services as well as increased sales of inter-networking equipment and cabling. At September 30, 2000, Bell Canada's high-speed and total Internet subscribers amounted to approximately 201,000 and 887,000 respectively.

Data revenues are included in various revenue line items as follows:

• local and access services - include digital transmission services such as MEGALINK^TM, network access for Integrated Services Digital Network (ISDN) and Data, as well as Asymmetric Digital Subscriber Line (ADSL);


• long distance and network services - include competitive network services; and


• terminal sales, directory advertising and other - include national and regional IP data, inter-networking equipment and cabling, and Internet related services.

MEGALINK is a trade-mark of Stentor Resource Centre Inc. Bell Canada is a licensed user.

Bell Canada Operating Expenses

Cash operating expenses

Cash operating expenses increased $135 million for the third quarter and $440 million for the first nine months of 2000 compared with the same periods of 1999 mainly due to higher costs associated with volume increases mainly related to the provision of I/P Broadband services and terminal equipment sales, partially offset by lower long distance settlement payments.

At September 30, 2000, the total number of employees was 55,118 which reflected an increase of 1,790 employees from September 30, 1999 primarily due to acquisitions by Aliant in the first quarter of 2000 and increased workload related to installations. Total salaries and wages (including capitalized amounts) were $740 million for the third quarter and $2,157 million for the first nine months of 2000, representing increases of $12 million and $62 million, respectively, compared with the same periods of 1999 mainly reflecting the higher employee base.

EBITDA (operating revenues less cash operating expenses)

EBITDA was $1,763 million for the third quarter and $4,944 million for the first nine months of 2000 representing increases of $160 million and $412 million, respectively, compared with the same periods of 1999 as higher operating revenues driven by increases in local and access services revenues, including SmartTouch services, and wireless revenues more than offset increased cash operating expenses.

Pension credit

Bell Canada's pension credit of $29 million for the third quarter and $93 million for the first nine months of 2000, decreased $23 million and $61 million, respectively, compared with the same periods of 1999. The decreases in the pension credit were primarily as a result of the adoption of the recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 3461, Employee Future Benefits, effective January 1, 2000. (See "ADOPTION OF NEW ACCOUNTING STANDARDS" on page 22).

Depreciation and amortization

Depreciation and amortization expense of $688 million for the third quarter and $2,011 million for the first nine months of 2000, decreased $2 million and $46 million, respectively, compared with the same periods of 1999. The decreases were primarily due to lower net average plant in service and the impact of updated depreciation rates (effective January 2000) for certain outside plant assets, partially offset by the amortization of goodwill generated by the additional investment in Bell Mobility in the fourth quarter of 1999.

Restructuring and other charges

In the second quarter of 1999, Bell Canada recorded a pre-tax charge of $267 million ($141 million after tax and non-controlling interest) representing restructuring and other charges of $163 million and $104 million, respectively. The restructuring charges, mainly employee severance (for approximately 2,600 employees) and directly related incremental costs, resulted principally from the decision to outsource a portion of the Operator Services group, the windup of Stentor Canadian Network Management and cost rationalization within other operating groups. Other charges related mainly to the write-down of the Iridium investment. The restructuring programs are expected to be substantially completed by the end of the year.

In the third quarter of 1999, Aliant recorded a pre-tax charge of $78 million ($18 million after tax and non-controlling interest) relating to restructuring activities associated with the combination on May 31, 1999, of Bruncor Inc., Maritime Telegraph and Telephone Company, Limited and NewTel Enterprises Limited to form Aliant. The restructuring charge primarily included the cost associated with voluntary early retirement programs, employee transfer costs and other integration costs.

Interest Expense

Interest expense of $253 million for the third quarter and $760 million for the first nine months of 2000 increased $4 million and $113 million, respectively, compared with the same periods last year. The increase for the third quarter of 2000 was mainly due to a higher level of short-term debt financing compared with the same period of 1999. On a year-to-date basis higher interest expense primarily reflected increased financing costs associated with asset transfers from BCE on June 1, 1999 as part of the strategic partnership formed by BCE and SBC/Ameritech.

Other (Income) Expense

Other expenses (including equity in net earnings (losses) of significantly influenced companies) were $82 million for the third quarter and $156 million for the first nine months of 2000, compared with other income of $17 million and $31 million, respectively, for the same periods last year. The decreases in other income were mainly due to reduced equity earnings, primarily from Teleglobe Inc.

Discontinued Operations

In the third quarter of 2000, Teleglobe Inc. classified its investment in ORBCOMM as a discontinued operation. On September 15, 2000, ORBCOMM voluntarily filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Act. Consequently, Bell Canada's results reflected a $75 million ($60 million representing BCE's proportionate share) after tax write-down relating to its proportionate interest in ORBCOMM as a discontinued operation. Bell Canada's proportionate interest in ORBCOMM's losses for prior periods have been reclassified from other income, including equity in net earnings (losses) of significantly influenced companies, to discontinued operations.

Hedge of Special Compensation Payments (SCPs)

BCE grants from time to time options to purchase BCE common shares to officers and key employees of Bell Canada and its subsidiaries. Prior to 2000, simultaneously with the grant of an option, an officer or key employee of Bell Canada or one of its subsidiaries may also have been granted, by the employer, the right to a SCP. In May 2000, BCE distributed to its common shareholders an approximate 35% interest in Nortel Networks. As a result of this distribution of Nortel Networks common shares, the then outstanding options were divided into options over BCE and over Nortel Networks common shares, and the related SCPs were appropriately adjusted. As a result, SCP right holders now have, for each SCP right held prior to the distribution, SCP rights related to the increase in price of both the BCE and Nortel Networks common shares over the exercise prices of the related options. Bell Canada has designated approximately 5 million Nortel Networks common shares, that it acquired from BCE, as a hedge of its exposure to outstanding rights to SCPs relating to options over Nortel Networks common shares. In addition, during the second quarter, Bell Canada has entered into forward contracts to hedge its exposure to outstanding rights to SCPs related to options over BCE common shares.

Regulatory Decisions

On September 8, 2000, in Orders 2000-830 and 2000-831, the CRTC approved, on an interim basis, General Tariffs for Clearnet PCS Inc. (Clearnet) and Microcell Telecommunications Inc. (Microcell). Approval of the General Tariffs will permit Clearnet and Microcell to operate as Competitive Local Exchange Carriers in most areas where they currently provide wireless services.

On June 28, 2000, the Governor In Council (GIC) announced that it had dismissed appeals of Telecom Decisions CRTC 99-15: Unbundled Local Loop Service Order Charges (filed by Call-Net Enterprises Inc.), 99-16: Telephone Service to High Cost Serving Areas (filed by the Governments of Manitoba and Saskatchewan and other parties) and 99-20: Review of Frozen Contribution Rate Policy (filed by AT&T Canada Corp. and other parties). In addition to upholding the CRTC decisions, the GIC also required that the CRTC report annually over a five-year period on the status of telecommunications competition and deployment of advanced services at affordable rates across Canada.

On June 19, 2000, approval of Bell Canada's third annual price cap filing was essentially completed with the CRTC's approval of Tariff Notices (TN) 6465 and 6465a. TN 6465 and TN 6465a, which became effective June 19, 2000, will allow Bell Canada to increase prices for single-line residential telephone service for most customers, representing the first such increase for residential customers in over two years. Also included as part of the price cap filings were price decreases, filed and approved earlier in the year, for single-line and Private Branch Exchange services (used by businesses of all sizes), as well as digital data services (used primarily by larger businesses).

In a letter decision, dated March 9, 2000, the CRTC approved a proposal, filed December 13, 1999, by Bell Canada and other incumbent telephone companies (collectively ILECs), to reduce Direct Connect (switching and aggregation) rates paid by competitors to interconnect with ILEC networks. However, the CRTC denied the ILECs' request to offset reduced Direct Connect revenues with an exogenous adjustment to the price cap index. On March 17, 2000, the ILECs appealed the CRTC's decision asking that the CRTC review and vary that part of its decision that disallowed the exogenous factor adjustment. On May 16, 2000 the CRTC issued a decision that reversed its previous position by allowing the ILECs to partially recover the Direct Connect rate reductions.

BCE EMERGIS AND CGI

BCE Emergis delivers network-centric e-commerce services that significantly improve customer processes through secure B2B exchanges to the health care, financial services, telecommunications and transportation industries. CGI is an information technology (IT) services company, which provides outsourcing, systems integration and consulting services, as well as business solutions to customers in North America, Europe and twenty countries outside North America and Europe.

On October 24, 2000, CGI concluded a strategic alliance with Desjardins. Through this alliance, established for a 10-year period and worth more than $1 billion, Desjardins delegated the management of its data processing operations to CGI while keeping control of its technological orientations. Furthermore, Desjardins will look into the possibility of teaming up with CGI to develop the marketing of its data processing applications in the financial institutions market. Desjardins and CGI hope to reach a contractual agreement by spring 2001.

On September 28, 2000, BCE Emergis announced that it is accelerating its move into the U.S. market. BCE Emergis has set up three strategic business units, namely eHealth Solutions (to address the North American market), U.S. Business Unit (primarily to establish specific B2B exchanges in the U.S. market) and Canadian Business Unit (to focus on the Canadian market).

As discussed in more detail on page 6 of this MD&A, on September 27, 2000, Bell Canada, CIBC, Scotiabank, Desjardins and BCE Emergis announced plans to launch a new e-procurement company, Procuron.

On September 20, 2000, BCE Emergis announced that it had successfully completed its acquisition of InvoiceLink Corporation (InvoiceLink), a privately-held company which offers Web-based invoicing and payment solutions for B2B applications. Under the terms of the agreement, InvoiceLink was acquired for US $88 million and paid for in BCE Emergis shares and options.

BCE Emergis' third quarter 2000 results include the results of United Payors and United Providers Inc. (UP&UP) as of the date of acquisition, March 24, 2000. UP&UP provides, in the United States, claim processing, between insurance companies and health care providers, designed to produce cost savings and to offer benefits for insurance companies while increasing liquidity and improving efficiency in claims submissions for providers.

Revenues at BCE Emergis and CGI increased $48 million or 21% for the third quarter and $176 million or 29% for the first nine months of 2000 compared with the same periods last year. BCE Emergis recorded an increase of $85 million for the third quarter and $201 million for the first nine months of 2000, compared with the same periods last year, primarily due to strong growth in the healthcare and financial services sectors resulting mainly from the acquisitions of UP&UP at the end of the first quarter of 2000 and SNS/Assure Corp. and Assure Health Inc. (SNS/Assure Health) in November 1999, as well as internal growth from new solutions such as e-procurement. Subsequent to the UP&UP acquisition, 38% of BCE Emergis' revenues were generated in the United States, while the healthcare sector generated 48% of total revenues. Revenues at CGI decreased $37 million for the third quarter and $25 million for the first nine months of 2000. The third quarter decrease in revenues was reflective of a post-Y2K slowdown in the decision making process related to new investments in Information Technology and delays in the awarding of large outsourcing contracts.

EBITDA was $39 million for the third quarter and $101 million for the first nine months of 2000 reflecting increases of $11 million and $18 million, respectively, compared with the same periods in 1999. EBITDA at BCE Emergis reflected significant increases both on a quarter and on a year-to-date basis mainly as a result of the acquisitions of UP&UP and SNS/Assure Health, while EBITDA at CGI decreased for the third quarter and for the first nine months of 2000 compared with the same periods of 1999 due to delays experienced in the signing of contracts.

BCE's share of BCE Emergis' cash baseline earnings was $3 million for the third quarter and $6 million for the first nine months of 2000 reflecting increases of $2 million and $6 million, respectively, compared with the same periods last year. The increases were mainly attributable to revenue and EBITDA growth resulting from the UP&UP and SNS/Assure Health acquisitions.

CGI's cash baseline earnings contribution to BCE for the third quarter and for the first nine months of 2000 reflected decreases of $8 million and $14 million, respectively, compared with the same periods last year, mainly due to the downturn in post-Y2K contracts awarded to CGI.

BCE MEDIA

BCE Media includes Telesat, Bell ExpressVu, TMI Communications and Company Limited Partnership, as well as Other media interests. These entities deliver satellite entertainment and business services. Effective April 1, 2000, BCE Media also includes CTV which with its subsidiary, NetStar Communications Inc. (NetStar), is a conventional and specialty broadcaster with a local presence across Canada. As per the Voting Trust Agreement approved by the CRTC, the CTV shares, acquired under the BCE offer, have been transferred to a trustee until such time as the CRTC and other regulatory approvals required in this transaction are received by BCE. During the time that these shares are held by the trustee, CTV's results are included within BCE Media using the equity method of accounting.

Revenues at BCE Media increased $39 million or 32% for the third quarter and $144 million or 48% for the first nine months of 2000 compared with the same periods of 1999 mainly due to continued strong revenue growth at Bell ExpressVu driven by significant subscriber growth, and to higher revenues at Telesat from its new NIMIQ^TM satellite and from installation and maintenance by Telesat on the VSAT network at Ford Motor Company's sites in the United States.

NIMIQ is a trade-mark of Telesat Canada.

BCE Media's contribution to BCE's cash baseline earnings was a loss of $34 million for the third quarter and a loss of $71 million for the first nine months of 2000 compared with losses of $16 million and $49 million, respectively, for the same periods last year. Excluding CTV's negative cash baseline contribution of $4 million for the third quarter of 2000 ($13 million positive cash baseline contribution on a year-to-date basis), BCE Media's contribution to BCE's cash baseline earnings was a loss of $30 million for the third quarter and a loss of $84 million for the first nine months of 2000 reflecting increased losses of $14 million and $35 million, respectively, compared with the same periods last year. These increased cash baseline losses were due mainly to the continued investment to support the significant subscriber growth in the Bell ExpressVu direct-to-home (DTH) satellite television business and losses at Other media interests, partially offset by increased earnings at Telesat.

At September 30, 2000, Bell ExpressVu had approximately 594,000 subscribers compared with 304,000 subscribers at September 30, 1999, reflecting an increase of 95%. Average revenue per subscriber in the third quarter of 2000 was $45 compared with $42 in the third quarter of 1999. The increase was mainly attributable to higher Pay-Per-View and additional channels offered in 2000 contributing to higher revenues per subscriber.

CTV's contribution to BCE's cash baseline earnings amounted to a loss of $4 million for the third quarter and income of $13 million on a year-to-date basis. CTV reported revenues of $182 million for the third quarter representing an 82% increase, compared with the same period last year, due primarily to the consolidation of NetStar, effective April 2000.

BELL CANADA INTERNATIONAL

BCI owns and develops advanced communications companies in Latin America.

On July 26, 2000, BCI sold its 21% stake in Hansol M.com (Hansol) (formerly known as Hansol PCS Co., Ltd.) to Korea Telecom. BCI received gross proceeds in the form of cash, promissory notes and shares of SK Telecom Co. Ltd (a Korean mobile wireless operator) for an aggregate consideration of approximately $1.5 billion, which resulted in a pre-tax gain of approximately $1.1 billion.

BCI's revenues were $192 million for the third quarter and $687 million for the first nine months of 2000 reflecting a decrease of $17 million or 8% and an increase of $95 million or 16%, respectively, compared with the same periods last year. The decrease in the quarter was mainly attributable to the loss of revenues due to the sale of Hansol in July. The increase on a year-to-date basis was primarily due to higher revenues at the Asian PCS providers, Hansol and KG Telecom, and the recently launched Latin American competitive local exchange carriers (CLECs) (Axtel S.A. of Mexico and the Vésper Companies of Brazil). Revenues for the first nine months of 2000 were also enhanced by BCI's increased investment in KG Telecom (in June 1999, BCI increased its effective ownership in KG Telecom from 10% to 20% and began proportionately consolidating its results). The increased revenues generated by the Asian PCS providers and Latin American CLECs were partially offset by lower revenues from Comunicación Celular S.A. Comcel S.A.'s (Comcel) cellular operations primarily due to the devaluation of the Colombian peso against the Canadian dollar and a shift in the customer mix from postpaid to prepaid. Excluding Hansol, total revenues for the third quarter of 2000 were $168 million and $499 million for the first nine months of 2000 compared with revenues of $151 million and $446 million, respectively, for the same periods last year.

BCI's EBITDA decreased $53 million for the third quarter and $120 million for the first nine months in 2000 compared with the same periods of 1999 mainly due to early stage losses at BCI's recently launched CLECs in Brazil and Venezuela as well as decreasing revenues at Comcel. Excluding Hansol, EBITDA decreased by $55 million for the quarter and $123 million for the first nine months of 2000 compared with the same periods last year.

The total number of subscribers in companies in which BCI has an interest, excluding Hansol's subscribers, was approximately 4.2 million at September 30, 2000, representing an increase of approximately 1.8 million subscribers over September 30, 1999. On a proportionate basis (based on BCI's percentage ownership in each of its operations), the number of subscribers, excluding Hansol's subscribers, at September 30, 2000 was approximately 1.2 million, representing an increase of approximately 470,000 from September 30, 1999. The increase in total subscribers was mainly due to BCI's investment in KG Telecom, (approximately 1.9 million subscribers at September 30, 2000 which represents an increase of approximately 857,000 from September 30, 1999), the Vésper Companies (318,000 subscribers at September 30, 2000) and Americel S.A. and Telet S.A. (which together had approximately 752,000 subscribers at September 30, 2000, an increase of approximately 451,000 from September 30, 1999).

BCI's contribution to BCE's net earnings of $556 million for the third quarter and $282 million for the first nine months of 2000 compared with losses of $104 million and $230 million, respectively, for the same periods of 1999. The increases were primarily attributable to BCI's $1,015 million after tax gain on the sale of Hansol, partially offset by the losses incurred by BCI's CLECs in Brazil (the Vésper companies), which launched commercial services in the first quarter of 2000. In addition, BCI, as the controlling shareholder, began, in May 1999, to account for 100% of the losses of Comcel. The interest of minority shareholders in such losses would normally be reflected on BCI's balance sheet as a reduction of the non-controlling interest. However, Canadian generally accepted accounting principles (GAAP) require the controlling shareholder to account for 100% of the subsidiary's losses when the non-controlling interest has been eliminated on the balance sheet. The impact to BCE's earnings of recognizing the non-controlling interest in such losses was $27 million for the third quarter of 2000 and $73 million on a year-to-date basis.

CORPORATE AND OTHER

Corporate and Other income ­ net (excluding special items) was $27 million for the third quarter and $102 million for the first nine months of 2000 compared with Corporate and Other income ­ net (excluding special items) of $30 million and Corporate and Other expenses ­ net (excluding special items) of $10 million, respectively, for the same periods last year. The increase for the first nine months of 2000 compared with the previous period was mainly due to higher interest income and lower financing costs. Higher interest income resulted from the interest on the proceeds from the sale of BCE's 20% interest in Bell Canada on June 1, 1999 and on the $5.1 billion intercompany loans between BCE and Bell Canada (primarily due to the Bell Canada reorganization on June 1, 1999 resulting from the strategic partnership formed by BCE and SBC/Ameritech). Lower financing costs were mainly due to the repayment of debt funded by the proceeds from the sale of Jones in April 1999, and the 20% sale of Bell Canada.

Prior to 2000, BCE had granted, from time to time, stock options with accompanying rights to SCPs to officers and key employees of BCE and its subsidiaries. As a result of the distribution (dividend) of Nortel Networks common shares, the then outstanding options were divided into options over BCE and over Nortel Networks common shares, and the related SCPs were appropriately adjusted. As a result, SCP right holders now have, for each SCP right held prior to the distribution, SCP rights related to the increase in price of both the BCE and Nortel Networks common shares over the exercise prices of the related options. BCE has designated 6 million Nortel Networks common shares (which includes 5 million held by Bell Canada as discussed on page 10) as a hedge of its exposure to outstanding rights to SCPs related to the options over the Nortel Networks common shares. In addition, BCE has entered into forward contracts to hedge its exposure to outstanding SCP rights related to options over BCE common shares.

LEGAL PROCEEDINGS

Wage Practices Investigation

Following the rejection, in October 1999, of a tentative settlement regarding the 1994 pay equity complaints which were before the Canadian Human Rights Tribunal (Tribunal) by the members of the Communications, Energy and Paperworkers Union of Canada (CEP) and the Canadian Telephone Employees' Association (CTEA), the hearings before the Tribunal resumed in December 1999 at which time the Tribunal rendered a decision dismissing three of the preliminary objections that Bell Canada had previously raised. The Tribunal rendered another decision in April 2000 rejecting the final preliminary objection that had been raised by Bell Canada. The Federal Court of Canada rejected the applications for judicial review filed by Bell Canada concerning each of these two Tribunal decisions. Bell Canada has appealed both these decisions to the Federal Court of Appeal. On November 2, 2000, the Federal Court allowed Bell Canada's application for judicial review of the Tribunal's initial determination that it could proceed with an inquiry into the complaints. The Court found that the Tribunal lacks institutional independence and prohibited further proceedings in the matter until certain problems identified in its decision are corrected. Hearings into the merits of the case, which commenced in April 2000 are now suspended. Unless the matter is otherwise resolved, hearings and any appeals could last several years.

US West, Unical and Sonigem Litigation

Bell Canada instituted an action for trade-mark infringement seeking a permanent injunction and damages against US West, Inc. (which has merged with Qwest Communications International Inc.) (US West), Unical Enterprises, Inc. (Unical) and Sonigem Products Inc. (Sonigem) on February 11, 2000 in the Federal Court of Canada. The action alleges that the Defendants' sales in Canada of telephones and answering machines bearing among others the marks "Northwestern Bell" and the logo "Bell-in-a-circle design" infringe Bell Canada's exclusive rights to BELL trade-marks in Canada.

In their Statements of Defense and Counterclaims, the Defendants allege that Bell Canada's trade-marks are invalid and not distinctive of Bell Canada's products and services and are seeking damages of $135 million and punitive damages of $500,000 from Bell Canada for allegedly interfering with their businesses.

On June 16, 2000, the Federal Court of Canada permitted Sonigem to institute a third party claim against US West and Unical alleging that they had warranted Sonigem's use of the "Northwestern Bell" trade-mark in Canada by virtue of a Distribution Agreement and the statutory warranty of lawful use provided for in the Trade-Mark Act. US West and Unical have both filed a Defense to this third party claim.

The Defendants' counterclaims, if successful, should not have a material adverse impact on Bell Canada's consolidated financial position. Bell Canada is of the view that these counterclaims are without merit and intends to pursue its original action and vigorously defend itself against these counterclaims.

Teleglobe Inc. Class Action Lawsuits

In the third quarter of 2000, several class action lawsuits were filed in the United States District Court for the Southern District of New York against Teleglobe Inc. and certain former officers of Teleglobe Inc. alleging that certain misrepresentations and omissions were made between February 11, 1999 and July 29, 1999. Teleglobe Inc. considers these lawsuits to be without merit and will defend itself vigorously.

DISCONTINUED OPERATIONS

Discontinued operations, on the statement of operations, of $(67) million for the third quarter of 2000 mainly related to BCE's proportionate share of Teleglobe Inc.'s ORBCOMM write-down. Discontinued operations of $3,975 million for the first nine months of 2000 mainly reflected BCE's share of Nortel Networks' net earnings to common shareholders, as well as gains on the reduction of BCE's ownership in Nortel Networks, and the ORBCOMM write-down. Nortel Networks' contribution to BCE's net earnings applicable to common shares was $4,055 million for the first nine months of 2000 compared with a loss of $171 million for the first nine months of 1999. The $4,226 million increase was mainly due to a $4.2 billion dilution gain on the reduction of BCE's ownership interest in Nortel Networks, from 39% to 37%, primarily as a result of Nortel Networks' acquisitions, through the issuance of shares of Qtera, Clarify and Promatory, and the issuance of shares by Nortel Networks under its stock option plans.

LIQUIDITY AND CAPITAL RESOURCES

BCE CONSOLIDATED

The principal components of BCE's consolidated cash flows include:

Consolidated cash flows from operating activities for the first nine months of 2000 were $1,902 million compared with $1,537 million for the first nine months of 1999, mainly due to positive cash flows from Bell Canada.

Consolidated cash flows used in investing activities for the first nine months of 2000 were $6,037 million compared with cash flows from investing activities of $2,812 million for the first nine months of 1999. Investing activities for the first nine months of 2000 consisted principally of capital expenditures of $2,968 million ($2,410 million in 1999) and investments of $4,468 million ($865 million in 1999). Investments in 2000 comprised mainly of the $2.3 billion investment in CTV (not including the benefits package of $230 million), the $780 million investment in UP&UP, and a $498 million investment (net of cash acquired) in Aliant. Investments in 1999 consisted mainly of the $339 million investment in MTS and a $185 million investment in Teleglobe Inc. In addition, in the first nine months of 1999, cash flows from investing activities included divestitures of $6,052 million comprising the $5.1 billion of proceeds received on the sale of 20% of Bell Canada to SBC/Ameritech and the US $508 million ($763 million) on the sale of Jones.

Consolidated cash flows from financing activities were $2,223 million for the first nine months of 2000 compared with cash flows used in financing activities of $657 million for the same period last year. The increase resulted mainly from a higher level of notes payable issued in 2000 primarily to fund the CTV acquisition, the issuance of $400 million of Bell Canada preferred shares in the first quarter of 2000, and higher debt issues in 2000, partially offset by a higher level of dividends paid by subsidiaries to non-controlling interest (mainly as a result of dividends paid by Bell Canada to SBC/Ameritech), the issuance of $400 million of convertible debentures by BCI in the first quarter of 1999 and a redemption of $295 million of preferred shares by Bell Canada in the first quarter of 2000.

A discussion of the liquidity and capital resources of Bell Canada (as defined on page 5), BCI, and Corporate and Other is outlined below.

BELL CANADA

The principal components of Bell Canada's cash flow include:

Cash flows from operating activities for the first nine months of 2000 were $2,318 million, $492 million higher compared with the same period last year, mainly due to lower working capital requirements.

Cash flows used in investing activities were $2,401 million for the first nine months of 2000, representing a decrease of $274 million compared with the same period of 1999. This change was mainly attributable to a higher level of investments in 1999, partially offset by increased capital expenditures for the first nine months of 2000. Bell Canada's investments for the first nine months of 2000 totaled $215 million (primarily related to acquisitions made by Aliant) compared with investments of $601 million for the first nine months of 1999, consisting mainly of a $339 million investment in MTS and a $185 million investment in Teleglobe Inc. Capital expenditures of $2,247 million for the first nine months of 2000 increased $169 million compared with the same periods last year primarily due to the continued deployment of high-speed Internet service and local infrastructure upgrading due to increased data demand, partially offset by decreases in information systems and information technology spending on system implementation.

Cash flows used in financing activities were $24 million for the first nine months of 2000 compared with cash flows from financing activities of $938 million for the same period last year. The change was mainly attributable to: a higher level of notes payable issued in 1999 to finance investments; higher dividends paid on common shares in 2000; and increased interest on equity-settled notes in 2000. In addition, on June 1, 1999, as part of the strategic partnership formed by BCE and SBC/Ameritech and the resulting reorganization of Bell Canada, Bell Canada assumed $3.1 billion of debt due to BCE and issued $2.0 billion of new debt to BCE. These debts were repaid on June 1, 1999, using the $5.1 billion cash proceeds received from the issuance of BCH common shares to SBC/Ameritech.

During the first nine months of 2000, Bell Canada issued $1,250 million of MTN Debentures, pursuant to its medium-term debenture program, consisting of $200 million 6.65% Debentures, Series M-5 maturing March 1, 2006, $300 million 6.00% Debentures, Series M-6 maturing May 1, 2003 (which, on such date, may, at the holder's option, be exchanged for an equal principal amount of newly issued 6.55% Debentures, Series M-3, maturing May 1, 2029), $350 million 6.70% Debentures, Series M-7 maturing June 28, 2007 and $400 million 6.25% Debentures, Series M-8 maturing December 1, 2003. The proceeds from the issuance of the MTN Debentures were applied towards the repayment of $1,356 million of long-term debt, consisting primarily of a repayment of $616 million of a senior unsecured note due to BCE, $398 million of maturing debentures and $207 million of Series 1 senior unsecured notes of Bell Mobility. In addition, in January 2000, Bell Canada issued $400 million Cumulative Redeemable Class A Preferred Shares Series 15 at a price of $25 per share and an initial yield of 5.50%. Part of the proceeds from the issuance of the Series 15 Preferred Shares were used to redeem Bell Canada's Perpetual Cumulative Reset Redeemable Class A Preferred Shares Series 11 ($150 million) and Series 13 ($145 million). Bell Canada also redeemed $100 million of Cumulative Redeemable Retractable Reset Class A Preferred Shares Series 10 on August 15, 2000. For the remainder of 2000, Bell Canada is considering, subject to prevailing economic conditions, the repayment, prior to maturity, of approximately $200 million of notes due to BCE. Bell Canada's cash requirements during the remainder of 2000, including the financing of capital expenditures and investments, are expected to be met by internally generated funds and by the issuance of debt or equity.

On October 30, 2000, Bell Canada issued $300 million of MTN Debentures, Series M-9, pursuant to its medium-term debenture program. The Floating Rate Debentures, Series M-9 will mature on October 30, 2002 unless they are extended, at the holder's option, for additional one year terms on October 30 of each of 2002, 2003 and 2004, up to a final maturity date of October 30, 2005.

On June 29, 2000, Bell Mobility announced it will bid on additional PCS spectrum at an auction, which is scheduled for January 2001, to be conducted by Industry Canada, in order to increase and enhance the availability of Bell Mobility's wireless services on a national level. While auction prices have been exceptionally high, compared to traditional licensing fees, in some jurisdictions, e.g. the United Kingdom's April 1999 spectrum auction, it is not possible to speculate with any degree of certainty how price levels in Canada will equate. Furthermore, there can be no assurance that any additional PCS spectrum will be awarded to Bell Mobility.

On March 27, 2000, Bell Canada announced plans to invest $1.5 billion over three years to rapidly expand and enhance high-speed Internet availability for Bell Canada's residential and business customers. Bell Canada's high-speed Internet services are enabled by both Digital Subscriber Line (DSL) and optical fibre technologies. The $1.5 billion investment will be used to upgrade and expand DSL as well as other technologies, and to upgrade Bell Canada's access network using optical fibre and to extend optical fibre into Bell Canada's residential access network in order to accelerate its high-speed Internet connectivity in order to reach 70% of its residential and business customers by the end of 2000 and over 85% by the end of 2002. At the end of the third quarter of 2000, approximately 65% coverage of all residential and business lines within Bell Canada's territory was achieved.

On September 30, 2000, outstanding third party commercial paper totaled approximately $1.2 billion. The commercial paper program is supported by committed lines of credit, extended by several banks, totaling $1.8 billion.

BELL CANADA INTERNATIONAL

The principal components of BCI's cash flows include:

BCI's cash flows used in operating activities for the first nine months of 2000 were $23 million higher compared with the same period in 1999. The change was mainly due to higher operating losses, partially offset by lower working capital requirements.

Cash flows from investing activities for the first nine months of 2000 increased by $826 million compared with last year as the proceeds from the sale of Hansol in July 2000, net of cash of $885 million more than offset increased capital expenditures in 2000 related mainly to BCI's start-up operations in Brazil and Mexico.

Cash flows used in financing activites were $175 million for the first nine months of 2000 compared with cash flows from financing activities of $750 million for the same period last year. The change was primarily due to the repayment of short-term loan facilities in 2000, using part of the proceeds from the sale of Hansol, and a higher level of long-term debt issued in 1999 mainly relating to the issuance of convertible unsecured subordinated debentures of $400 million ($150 million to Nortel Networks) in February 1999.

CORPORATE AND OTHER

Investments for the first nine months of 2000 totaling $3,824 million consisted mainly of:

• an investment of $2,300 million (not including the benefits package of $230 million) in CTV;
• an additional investment of $800 million in BCE Emergis, consisting of an equity investment of $650 million and convertible debentures of $150 million to fund the UP&UP acquisition;
• a total investment of $498 million in Aliant by BCE Inc. consisting of a $392 million investment (net of cash acquired) in the first quarter of 2000, which increased BCE's approximate ownership interest in Aliant from 41% to 53% and an additional investment of $106 million in the second quarter of 2000 in order for BCE to maintain its approximate 53% ownership interest in Aliant, due to Aliant's public issue of common shares for approximately $200 million; and
• an investment of US $100 million ($147 million) in Teleglobe Inc. preferred shares during the second quarter of 2000 as part of BCE's committed funding of up to US $1.0 billion.

Cash flows from financing activities primarily included:

• the issuance of notes payable of $1,460 million by BCE Inc. ($173 million was repaid in the third quarter of 2000);
• dividends to common and preferred shareholders totaling $667 million for the first nine months of 2000 compared with $726 million for the first nine months of 1999. The decrease in the total dividend payout on a year-to-date basis reflects the reduction of BCE Inc.'s common dividend per share of $1.36 to $1.20 in the second quarter of 2000 in connection with the distribution of an approximate 35% interest in Nortel Networks;
• the issuance of 903,796 common shares for $31 million through BCE Inc.'s stock option plan during the first nine months of 2000; and
• the repayment of BCE Inc.'s $173 million Series 13 Notes in the first quarter of 2000.

On November 8, 2000, BCE Inc. received acceptance from the Toronto Stock Exchange of its notice of intention to make a Normal Course Issuer Bid. The filing of this notice allows BCE Inc. to purchase for cancellation up to 40,000,000 of its common shares, representing approximately five per cent of BCE Inc.'s 818,606,185 common shares outstanding as of the close of the market on November 7, 2000. The purchase of the common shares could be made from time to time, at market prices, during the period starting November 10, 2000, and ending no later than November 9, 2001.

On November 6, 2000, BCE Inc. announced that it will redeem, prior to maturity, on December 6, 2000, all of its outstanding $300 million 6.20% Series 14 Notes, maturing August 28, 2007 at a price equal to 101.259% of the principal amount, together with accrued and unpaid interest. The Series 14 Notes will be redeemed to facilitate long-term debt financing secured by Nortel Networks common shares and forward contracts. The financing is expected to be in place before the end of 2000. This long-term debt financing, together with the gain anticipated to result from the forward contracts referred to below, are expected to provide to BCE Inc. gross proceeds in the amount of approximately $4.7 billion.

On November 1 and November 10, 2000, BCE Inc. entered into credit facilities with Canadian financial institutions for an aggregate maximum amount of $1 billion. Any amounts borrowed by BCE Inc. under these credit facilities must be used for the purpose of carrying out purchases of BCE Inc. common shares under the Normal Course Issuer Bid referred to above and/or for the purpose of paying, to common shareholders of Teleglobe Inc., the cash portion of the consideration that was payable by BCE Inc. under the plan of arrangement referred to on page 1 of this MD&A. The aforesaid credit facilities are intended to provide to BCE Inc., pending completion of the above-mentioned long-term debt financing, short-term bridge financing which must be repaid by January 31, 2001.

Outstanding commercial paper totaled approximately $1.3 billion at September 30, 2000. The commercial paper program is supported by lines of credit, extended by several banks, totaling $1.8 billion.

During the second quarter of 2000, BCE entered into forward contracts, for up to one year, with several financial institutions to hedge its exposure to fluctuations in the market price of Nortel Networks common shares. As a result of these contracts, as of September 30, 2000, approximately 46.4 million of BCE's 60 million Nortel Networks common shares have been hedged at an average price of approximately $90 per share. In October 2000, BCE entered into additional derivative transactions for a total of 1.5 million shares which have been hedged at an average price of $103 per share. Furthermore, BCE may, depending on market conditions, enter into additional derivative transactions with respect to a portion of its remaining Nortel Networks shares for a total of up to 54 million shares. As previously mentioned, BCE currently intends to use the value of these Nortel Networks shares, including the hedged amounts, to raise in one or more transactions, gross proceeds of approximately $4.7 billion in long-term debt financing. The forward contracts will, in effect, become part of the long-term financing arrangements. The terms and conditions of the long-term financing have not yet been finalized. The remaining 6 million Nortel Networks common shares have been designated as a hedge of BCE's exposure to outstanding rights to SCPs, as discussed on page 15.

CREDIT RATINGS

Following BCE Inc.'s announcement in February 2000 of its proposed acquisition of Teleglobe, Moody's Investors Service downgraded BCE Inc.'s long-term debt rating from A1 to A2 and confirmed BCE Inc.'s commercial paper rating of Prime-1, with both ratings placed under review for possible downgrade. Standard & Poor's^TM Ratings Group, Dominion Bond Rating Service^TM (DBRS) and Canadian Bond Rating Service^TM (CBRS) confirmed BCE Inc.'s credit ratings with a Stable outlook. Following BCE Inc.'s announcement of its acquisition of CTV, DBRS and CBRS confirmed BCE Inc.'s ratings with a Stable outlook. In addition, DBRS completed its annual review of BCE Inc. in October 2000, and reaffirmed its ratings on commercial paper at R-1 (middle), on unsecured debentures at A (high), and on preferred shares at Pfd-2 (high).

Standard & Poor's is a trade-mark of The McGraw-Hill Companies Inc.
Dominion Bond Rating Service is a trade-mark of Dominion Bond Rating Service Ltd.
Canadian Bond Rating Service is a trade-mark of C.B.R.S. Inc.

ADOPTION OF NEW ACCOUNTING STANDARDS

On January 1, 2000, BCE adopted the recommendations of the new CICA Handbook Section 3465, Income Taxes, which changed the accounting for income taxes. BCE applied the new recommendations retroactively, without restating prior years. The deferral method, which focused on the income statement, was replaced with the liability method of tax allocation, which focuses on the balance sheet. The cumulative effect of adopting the new recommendations was to decrease retained earnings by $75 million.

On January 1, 2000, BCE adopted the recommendations of CICA Handbook Section 3461, Employee Future Benefits, which changed the accounting for pension and other types of employee future benefits. Previously, the costs of postemployment and postretirement benefits other than pensions were charged to earnings in the period in which they were paid. The new Handbook section requires companies to accrue the costs over the working lives of employees in a manner similar to pension costs. BCE applied the new recommendations retroactively, without restating prior years, by reflecting recognized and unrecognized amounts for all its benefit plans, consistent with United States GAAP. The cumulative effect of adopting the new recommendations as at January 1, 2000, was to decrease retained earnings by $722 million.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A, including statements which may contain words such as "anticipate", "could", "expect", "seek", "may", "intend", "will", and similar expressions, and statements that are based on current expectations and estimates about the markets in which BCE Inc. and its subsidiaries, joint ventures and significantly influenced companies (the "BCE Group companies") operate and management's beliefs and assumptions regarding these markets, constitute forward-looking statements within the meaning of the "safe harbor" provision of the United States Private Securities Litigation Reform Act of 1995 (the "Act"), with respect to the financial condition, results of operations and business of the BCE Group companies. For these statements, the BCE Group companies claim the protection of the "safe harbor" for forward-looking statements contained in the Act. In addition, other written or oral statements which constitute forward-looking statements may be made from time to time by or on behalf of one or more of the BCE Group companies. Such statements are subject to important risks, uncertainties, and assumptions which are difficult to predict. The results or events predicted in these written or oral statements may differ materially from actual results or events. Certain of the factors which could cause results or events to differ from current expectations are discussed below under the heading "RISK FACTORS". The risk factors discussed below relate primarily to the following units of BCE Inc.: Bell Canada, BCE Emergis and CGI, BCE Media, BCI and Teleglobe Inc. BCE Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The BCE Group companies' future operating results may be affected by various trends and factors which must be managed in order to achieve favourable operating results. In addition, there are trends and factors beyond the BCE Group companies' control which affect their operations. Such trends and factors include adverse changes in the conditions in the specific markets for the BCE Group companies' products and services, the conditions in the broader market for communications and the conditions in the domestic or global economy generally.

The BCE Group companies participate in a highly volatile and rapidly growing telecommunications industry which is characterized by vigorous competition for market share and rapid technological development. These factors could result in aggressive pricing practices and growing competition both from start-up and well capitalized companies.

In addition, changes in laws or regulations, including those governing the Internet and Internet commerce, as well as generally the uncertainties related to the Internet, including the Internet economy growing at a slower pace than is currently anticipated, could also have a material adverse effect on the BCE Group companies' business, operating results and financial condition.

Finally, all BCE Group companies are subject to the risks related to pending or future litigation.

RISK FACTORS

In addition to the other risk factors outlined in this document, the following additional factors should be considered. Collectively these factors increase the risks for the BCE Group companies.

As described in more detail on page 1 of this MD&A, the principal development which occurred in the third quarter of 2000 is the acquisition by BCE of substantially all of the outstanding common shares of Teleglobe Inc. it did not already own. As a result of this transaction, BCE Inc. issued, as of November 7, 2000, to holders of common shares of Teleglobe Inc., approximately 174 million common shares representing 27% of BCE Inc.'s total number of outstanding common shares immediately prior to the issuance of these shares. Consequently, this will have a dilutive impact on BCE Inc.'s earnings per share. See page 33 of this MD&A for more information on the risk factors relating to Teleglobe Inc. and its subsidiaries.

Stock Price Volatility

The common shares of BCE Inc. have recently experienced substantial price volatility generally due to certain announcements affecting BCE Inc. and the BCE Group companies.

Variations between BCE's actual or anticipated financial results and the published expectations of financial analysts may also contribute to this volatility. In addition, the stock market has experienced extreme price fluctuations that have affected the market price of many technology companies in particular and that have often been unrelated to the operating performance of these companies.

These factors, as well as general economic and political conditions, may also have a material adverse effect on the market price of BCE Inc.'s common shares.

Bell Canada

Expenditures, capital and demand for services

The level of expenditures necessary to maintain quality of service, the availability and cost of capital, and the extent of demand for telephone access lines, optional services, basic long distance services, wireless services, Internet services and other new and emerging services, in the markets served by Bell Canada and its subsidiaries and significantly influenced companies (the "Bell Canada Group companies"), constitute factors which could materially affect their results of operations and financial condition in the future. The level of expenditures could materially increase as the Bell Canada Group companies seek to expand the scope and scale of their businesses beyond traditional territories and service offerings. Furthermore, as the Bell Canada Group companies incur additional expenditures to update their networks, products and services to remain competitive, they may be exposed to incremental financial risks associated with newer technologies that are subject to accelerated obsolescence.

An increasingly important driver for network and infrastructure investments is the growth of Internet traffic. This traffic is driven by residential and business Internet usage and has overtaken the volume of voice telephony traffic on many routes. It is uncertain to what extent this traffic will continue to exhibit high growth rates as high-speed access services are deployed and increasingly data intensive Web sites and media are downloaded by users. Significant upgrades to network capacity will be required to sustain service levels if Internet data growth rates remain as high as they are today.

Economic fluctuations

The Bell Canada Group companies' performance is affected by the general condition of the economy, with demand for services and the amount of use tending to decline when economic growth and retail activity decline. It is not possible for the Bell Canada Group companies to accurately predict economic fluctuations and the impact of such fluctuations on their performance.

It should be noted that voice telephony revenues are generally linked to fairly stable economic factors such as population changes, housing starts and general economic activity levels. Internet traffic is likely to be related to more variable factors such as consumer discretionary spending on entertainment, the adoption of e-business, and other on-line activities.

Increasing competition

With the advent of competition in the local service market in 1998, all parts of the Bell Canada Group companies' businesses are facing substantial and intensifying competition. Factors such as product pricing and service are under continued pressure while the necessity to reduce costs is ongoing. The Bell Canada Group companies must not only try to anticipate, but must also respond promptly to, continuous and rapid developments in their businesses and their markets.

In addition, the significant growth and size, as well as the increasing global scope, of the telecommunications industry are attracting new entrants and encouraging parties other than existing participants to expand their services and their markets. Mergers and acquisitions, as well as alliances and joint ventures, are creating new or larger participants with broad skills and significant resources which will further impact the competitive landscape. Current and future competitors are coming not just from within Canada, but also globally, and include not only major telecommunications companies, such as TELUS Corporation (TELUS) (formerly known as BCT.TELUS Communications Inc., an associate company of Verizon Communications (the company resulting from the merger of GTE Corp. and Bell Atlantic Corp.)), AT&T Canada Inc. (AT&T) and Sprint Canada Inc., but also cable companies, Internet companies, wireless service providers and other companies that offer network services, such as providers of business information systems and systems integrators, as well as an increasing number of other companies that deal with or have access to customers through various communications networks. Many of these companies are significant in size and resources and have a significant market presence with brand recognition and existing customer relationships. A notable example is the entry into Internet telephony by Cisco Systems, Inc., which is primarily an equipment manufacturer rather than a communications service provider. In addition, as the Bell Canada Group companies selectively expand internationally, the number and strength of competitors will also increase.

Internet access services are especially competitive, and Canada has among the lowest prices for Internet access services in the world. Bell Canada is the largest provider of Internet access services in Canada, and cable television company competitors are aggressively pricing their services. High-speed digital subscriber line (DSL) access services will require considerable value-added features before they will provide a significant contribution to profits. It is not clear at this time which, if any, of a number of potential value-added features will finally be successful or when such features will be available to Bell Canada. Competitive pressure leads to Internet access pricing that is largely independent of usage patterns. Costs to Bell Canada, however, depend on the amount of traffic a user generates and the location of the server that stores the Web site the user visits. Such costs continue to increase and are beyond the ability of Bell Canada to control or to accurately predict.

The Canadian wireless telecommunications industry is highly competitive. Bell Mobility competes directly with other wireless service providers with aggressive product and service introductions, pricing and marketing. Bell Mobility expects competition to continue to increase through the development of new technologies, products and services, and through consolidations in the Canadian telecommunications industry. For example, in the third quarter of 2000, TELUS and Clearnet Communications Inc. announced that TELUS had acquired substantially all of the outstanding common shares of Clearnet Communications Inc. thereby creating a larger wireless service provider and, accordingly, a potentially more significant competitor to Bell Mobility.

On June 28, 2000, Industry Canada released its policy and licensing procedures which will govern the auction of the 40 MHz of PCS spectrum currently held in reserve. Industry Canada has determined that the spectrum will be sub-divided into four blocks of 10 MHz to be authorized as regional licenses. The policy also determined that, subject to meeting Canadian ownership and control regulations and the provisions of the PCS spectrum cap, any entity would be permitted to participate in the auction. Pursuant to the policy, Bell Mobility is eligible to bid on spectrum outside its traditional service area, e.g. in British Columbia and Alberta, as well as in Ontario and Quebec. Existing competitors as well as new entrants are expected to participate in the auction which is expected to commence in January 2001. The number of competitors may increase if new entrants win licenses or if wireless system operators choose to sell wireless services in bulk to other competitors for resale to the public. Although Bell Mobility has indicated that it intends to participate in the spectrum auction, there can be no assurance that Bell Mobility will win any additional licenses.

The market for paging services in Canada is also highly competitive. Bell Mobility currently competes with numerous local and national paging companies.

Bell Mobility is a participant in Mobility Canada, which was owned and operated by the wireless affiliates or divisions of Canada's major telephone companies. In May 1999, Mobility Canada announced a significant restructuring of its organization, creating two groups of carriers which can compete anywhere in the country to bring the fast-evolving benefits of wireless communications to national customers. The new agreement, which was implemented in the first quarter of 2000, changes the wireless landscape in Canada by removing restrictions that kept Mobility Canada members from competing in each other's territories. The new groups will each be able to offer Canada-wide wireless service, either by selling network services to each other or competing head-to-head. Although the new arrangement will permit Bell Mobility to expand its business from a territorial perspective, it will also have the effect of increasing competition in the territory in which Bell Mobility currently operates. There can be no assurance that Bell Mobility will be able to successfully expand its operations geographically or that it will be able to successfully compete with new competitors in its traditional territory. These factors could, in the future, have a material adverse effect on Bell Mobility's financial condition and results of operations.

An additional risk is that as Bell Canada moves to increased data and Internet communications, it may find it increasingly difficult to attract and to retain skilled and experienced personnel that are in high demand not only in Canada but across North America. It is possible that additional incentives may be required and that initiatives are jeopardized if skill shortages occur.

Technology

The telecommunications industry, as with many others, is characterized by rapidly changing technology with the related changes in customer demands and the need for new products and services at competitive prices. Technological developments are also shortening product life cycles and facilitating convergence of different segments of the increasingly global information industry. The Bell Canada Group companies' future success will be impacted by their ability to anticipate, invest in and implement new technologies with the levels of service and prices that consumers demand. Technological advances may also affect the Bell Canada Group companies' level of earnings by shortening the useful life of some of their assets. Furthermore, technological advances may well emerge that reduce or replace the costs of plant and equipment, and eliminate or reduce barriers that deter other companies from competing in particular market segments.

DSL technology is changing and associated service standards are evolving. It is possible that carriers and equipment manufacturers may in the future adopt a standard that is incompatible with Bell Canada's DSL services with the potential for loss of customers, increased capital expenditures, and stranded assets.

The high-speed Internet connectivity objectives mentioned in this document are subject to the uncertainties resulting from the magnitude of the deployment of the necessary technology, the uncertainties related to the novel nature of the relevant technology and to obtaining the necessary municipal or private rights-of-way.

The wireless telecommunications industry is experiencing significant technological change, as evidenced by the increasing pace of digital and other upgrades to existing analog wireless systems, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products, and enhancements to and changes in end-user requirements and preferences. Such continuing technological advances make it difficult to predict the extent of future competition with cellular, PCS and paging services. As a result, there can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render cellular, PCS or paging systems less profitable or even obsolete.

The operations of Bell Mobility depend in part upon the successful deployment of continually evolving wireless communications technologies, which will require significant capital expenditures to deploy. There can be no assurance that such technologies will be developed according to anticipated schedules, that they will perform according to expectations, or that they will achieve commercial acceptance. Bell Mobility may be required to make more capital expenditures than are currently expected if suppliers fail to meet anticipated schedules, if a technology's performance falls short of expectations, or if commercial success is not achieved

Decisions of the CRTC

During 1997, the CRTC released several important decisions which set out the rules for the evolution to total competition in Canada's telecommunications industry. Included in these decisions were those related to the introduction of local service competition, the implementation of price cap regulation, forbearance from long distance and forbearance for some segments of the private line market. Regulatory policies have continued to evolve since these decisions in keeping with continued intense competition across all lines of business coupled with the rapid pace of technological change (as previously discussed). Regulation will continue to have a significant impact on the Bell Canada Group companies' results in the future

Regulation

The operation of cellular, PCS and other radio-telecommunications systems in Canada is subject to initial licensing requirements and the oversight of Industry Canada. Operating licenses are issued at the discretion of the Minister of Industry pursuant to the Radiocommunication Act. Industry Canada grants cellular and PCS licenses for a maximum term of five years. Bell Mobility's cellular and PCS licenses will expire on March 31, 2001 and April 30, 2001, respectively. Industry Canada has the authority at any time to require modifications to the license conditions applicable to the provision of such services in Canada to the extent necessary to ensure the efficient and orderly development of radiocommunication facilities and services in Canada. Industry Canada can revoke a license at any time for failure to comply with its terms. At this time, Bell Mobility knows of no reason why its current licenses will not be renewed as they expire.

On November 5, 1999, Industry Canada released its decision in its review of the PCS Spectrum Cap. Industry Canada has increased the cap from its current level of 40 MHz to 55 MHz. Industry Canada stated that the increased cap is intended to help address capacity constraints, i.e. in Toronto and Montreal, as well as to assist in the development of third generation PCS services. As noted earlier, Industry Canada will be conducting an auction for the remaining 40 MHz of PCS spectrum in the C and E blocks

PCS operations

Bell Mobility launched PCS service in October 1997. Bell Mobility is continuing to incur significant costs to develop a PCS customer base including capital expenditures, promotional offerings and handset subsidies. Competition is intense in the PCS market with at least four PCS service providers in each service area. In addition, increases in Bell Mobility's PCS customer base will result in the reduction, over time, of Bell Mobility's existing cellular customer base. In particular, Bell Mobility has focused on migrating its existing high-usage cellular customers to PCS. While Bell Mobility believes its PCS operations will eventually become profitable and generate positive cash flow, building its PCS customer base will continue to adversely affect Bell Mobility's profitability in the short to medium term.

Radio frequency emission concerns

Media reports have suggested that certain radio frequency emissions from cellular telephones may be linked to certain medical conditions such as cancer. In addition, certain interest groups have requested investigations into claims that digital transmissions from handsets used in connection with digital wireless technologies pose health concerns and cause interference with hearing aids and other medical devices. There can be no assurance that the findings of such studies will not have a material effect on Bell Mobility's business or will not lead to governmental regulation. The actual or perceived health risks of wireless communications devices could adversely affect wireless communications service providers through reduced subscriber growth, reduced network usage per subscriber, threat of product liability lawsuits or reduced availability of external financing to the wireless communications industry.

BCE Emergis and CGI

Competition

The IT services and e-commerce businesses are intensely competitive and both BCE Emergis and CGI have many competitors with substantial financial, marketing, personnel and technological resources, competing for the same contracts. Other companies offer products and services that may be considered by customers to be acceptable alternatives to BCE Emergis' and CGI's products and services.

Principal competitors of CGI include IBM Global Services, EDS-Systemhouse Inc. and Andersen Consulting. Although BCE Emergis does not believe that there is a single competitor offering an integrated suite incorporating all of its services, it faces competition for each of its individual services from various competitors. Furthermore, in some areas, BCE Emergis may compete with internal groups of major organizations. BCE Emergis and CGI expect that other competitors will develop over time. Some of these will be companies that are not currently in their markets and others will be new companies. Competitive pressures could reduce BCE Emergis' and CGI's market share or require them to reduce their prices which would reduce their revenues.

Technological changes

The business markets in which BCE Emergis and CGI operate are characterized by rapid technological changes, changing client needs, frequent new product introductions and evolving industry standards. BCE Emergis' and CGI's future success will depend in significant part on their ability to anticipate industry standards, continue to apply advances in technologies, enhance their current products and services, and develop and introduce new products and services on a timely basis that keep pace with technological developments and changing client needs. However, there can be no assurance that BCE Emergis and CGI will be successful in developing and marketing new products and services, or product enhancements, that respond to technological change and achieve market acceptance.

Dependence and availability of key personnel

BCE Emergis' and CGI's success is largely dependent upon their ability to attract and retain highly skilled personnel and the loss of the services of key persons could materially harm their businesses and operating results. Competition in the recruitment of highly qualified personnel in the information technology and e-commerce industries is intense and the turnover rate for them is high. No assurance can be given that BCE Emergis and CGI will be able to retain key employees or that they will be able to attract qualified personnel in the future.

Growth through acquisitions

A key element of BCE Emergis' and CGI's growth strategy has been strategic acquisitions. There can be no assurance that in the future, acquisition candidates will be found on acceptable terms or that BCE Emergis and CGI will have adequate resources to consummate any acquisition. Furthermore, acquisitions involve a number of other special risks, including time and expenses associated with identifying and evaluating acquisitions, the diversion of management's attention, the difficulty in integrating operations, the difficulty in combining different company cultures and the potential loss of key employees of the acquired company. In addition, customer satisfaction or performance problems at a single acquired firm could have a material adverse effect on the reputation of CGI or BCE Emergis as a whole.

Acquisitions may also result in potentially dilutive issuance of equity securities, the incurrence of debt, the write-off of research and development and capitalized product costs, integration costs and the amortization of expenses related to goodwill and other intangible assets, all of which could have a material adverse effect on the results of operation and financial condition of CGI or BCE Emergis.

BCE Emergis - Adoption of e-commerce

In order for BCE Emergis to be successful, e-commerce must continue to be widely adopted in a timely manner. Because e-commerce, and communications over the Internet in general, are new and evolving, it is difficult to predict the size of this market and its sustainable growth rate. To date many businesses and consumers have been deterred from utilizing the Internet for a number of reasons.

To the extent that e-commerce continues to experience significant growth both in the number of users and the level of use, the Internet infrastructure may not be able to continue to support the demands placed on it by continued growth. Such continued growth could affect the Internet's technological ability to effectively support the high volume of transactions and any of these factors could materially harm BCE Emergis' business and operating results.

Businesses which have invested substantial resources in other methods of conducting business may be reluctant to adopt new methods. Also, businesses with established patterns of purchasing goods and services and effecting payments may be reluctant to change.

BCE Emergis - Operating results

Although BCE Emergis had, on a year-to-date basis in 2000, strong revenue growth, it had a net loss and does not expect to earn net income in the foreseeable future. Moreover, BCE Emergis intends to significantly increase its operating expenses as it:

• increases its research and development activities;
• expands its distribution channels;
• increases its sales and marketing activities, including expanding its direct sales force;
• builds its internal information technology systems; and
• makes acquisitions.

If BCE Emergis does not significantly increase revenue at least commensurate with these expenditures, its net losses will increase significantly.

BCE Emergis - Operations in the United States

BCE Emergis is currently planning on expanding its operations in the United States. BCE Emergis has limited experience in marketing, selling and supporting its services in other countries, including the United States. It may not be able to successfully market, sell, deliver and support its services in the United States. BCE Emergis will need to devote significant management and financial resources to its expansion in the United States. In particular, BCE Emergis will have to attract and retain experienced management and other personnel. Competition for such personnel is intense, particularly in the United States, and BCE Emergis may be unable to attract and retain qualified staff. If BCE Emergis is unable to expand its international operations successfully and in a timely manner, its business and operating results could be materially harmed.

The growth of BCE Emergis' healthcare vertical in the United States depends on BCE Emergis' ability to retain existing contracting providers, to attract additional contracting providers and to retain or improve the price concessions granted by contracting providers. BCE Emergis' contracts with contracting providers typically have a one-year term, are renewable automatically for successive one-year terms unless either party gives notice of intent not to renew, and may be terminated at any time, for any reason, upon satisfaction of the notification requirements. Also, these contracts do not prohibit the contracting providers from entering into discounted arrangements with others. The termination of a significant number of contracts with contracting providers having a high volume of claims with BCE Emergis' payor clients, the inability to replace those contracts with similar contracting providers or the renegotiation of contracts resulting in reduced price concessions could materially harm BCE Emergis' business and operating results.

BCE Emergis - Current government regulatory and industrial policy risks

Current regulations and laws governing the telecommunications industry generally do not apply to providers of data network access and e-commerce services and products, other than regulations applicable to businesses generally. Except for government regulations in certain foreign countries (which may affect the provision of certain of BCE Emergis' services or use of certain of its products) and regulations governing the ability of BCE Emergis to disclose the contents of communications by its customers, there are no government regulations pertaining to the pricing, service characteristics or capabilities, geographic distribution or quality control features of BCE Emergis' e-commerce services or products. There exists, however, the risk that governmental policies affecting the e-commerce industry could be implemented by legislation, executive order, administrative order or otherwise. If such policies are adopted, they could have a material adverse effect on the business, results of operations and financial condition of BCE Emergis.

Bell Canada International

Capital requirements

The majority of BCI's operations are in the start-up or early growth stages. Consequently, capital is required to fund ongoing operations and investment activities such as license fees, network construction and other start-up costs. Capital is also required for the acquisition of new properties.

BCI expects most of its operating companies to require additional debt and equity financing to complete or expand the construction of their networks. While BCI believes its operating companies will be able to secure debt financing from third parties and additional equity capital from BCI and its partners, there can be no assurance that financing will be available on terms satisfactory to or when required by BCI and its operating companies.

Dependence upon cash flow from operating companies

BCI's assets consist almost entirely of its shareholdings in its operating companies. Many of BCI's operating companies are in the start-up stage and do not currently generate distributable cash flows. There can be no assurance that BCI's operating companies will become profitable or produce positive cash flow. For those companies in which BCI holds a minority interest, BCI is legally unable to cause dividends or other distributions to be made to it.

Exchange rates

BCI reports its financial statements in Canadian dollars. BCI's principal operating companies function in different currency jurisdictions and all report in local currencies.

To the extent that the operating companies have commenced commercial operations, revenues that they generate will generally be paid to them in the local currency. However, many significant liabilities of these companies may be payable in currencies other than the local currency (such as U.S. dollar liabilities incurred for the financing of telecommunications equipment purchases). As a result, any devaluation in the local currency relative to the currencies in which such liabilities are payable could have a material adverse effect on BCI. In some developing countries, significant devaluation relative to the Canadian and United States dollars have occurred in the past and may occur again in the future.

BCE Media

General

The BCE Media group is comprised of four main business areas: satellite operations (Telesat), direct-to-home (DTH) satellite services (Bell ExpressVu), television broadcasting (CTV), programming services and business solutions. Factors beyond the BCE Media group's control such as those related specifically to the media and telecommunication industries and general domestic economic conditions may affect the operations of its businesses.

Telesat Canada

Risk of launch and in-orbit failure

Satellites are subject to the risk of launch failure, failure to achieve orbit and failure to operate once having reached orbit. Failure rates for such occurrences vary by launch vehicle and spacecraft manufacturer. Although Telesat has been successful in all 12 of its launches, there is no assurance that future launches will result in correct in-orbit placement with full satellite functionality. Telesat protects itself from launch and in-orbit failure through a variety of measures including engineering satellites with spare capacity and redundancies on board, as well as on-site monitoring at the manufacturer and launch service provider's sites. As a matter of policy, Telesat also purchases insurance for all its launches and where prudent, appropriate and commercially feasible, Telesat maintains in-orbit insurance coverage. A failure on board a future or existing satellite could reduce Telesat's available capacity and potentially have an adverse effect on its revenues.

Business risks and competition

Telesat's primary business activities (broadcast, telecommunications and carrier services) have been almost exclusively dedicated to the Canadian domestic market. Effective March 1, 2000, the monopoly that Telesat had over the provision of fixed satellite services ended. The Canadian domestic market is characterized by increasing competition and rapid technological development. Provision of services into the United States and Latin American markets is subject to certain risks such as changes in foreign government regulations and telecommunication standards, licensing requirements, tariffs, taxes and other matters. Latin American operations are also subject to risks associated with economic and social instability, regulatory and licensing restrictions, exchange controls and significant fluctuations in the value of foreign currencies. Telesat will face significant competition from other satellite companies already providing services in these markets, which may have the advantage of long-standing customer relationships, and may have greater financial resources than Telesat.

Governmental regulation

Prior to March 1, 2000, the CRTC regulated the rates, terms and conditions applicable to Telesat's RF Channel service rates under a form of rate of return regulation. In Telecom Decision 99-6, the CRTC approved an alternative form of regulation based on certain price ceilings, effective immediately for RF Channel services offered after March 1, 2000. While these price ceilings levels were established based on prevailing market conditions and are above current rates for certain of Telesat's existing satellite services, there can be no assurance that these ceilings will be appropriate as market conditions evolve.

In fiscal 1999, the U.S. State Department published amendments to the International Traffic in Arms Regulations which included satellites on the list of items requiring export permits. These provisions have and are likely to continue to have a negative impact on Telesat's international consulting business.

Bell ExpressVu

Capital requirements

Bell ExpressVu expects to generate operating losses for the next two to three years as it expands its subscriber base. To date, Bell ExpressVu has funded operating losses through capital injections from BCE. Bell ExpressVu believes that it will access sufficient sources of funding to achieve its business plan. However, such access is based on a business plan that is subject to various assumptions and estimates, including subscriber base, average revenue per subscriber and costs for acquiring new subscribers. If the business plan is not achieved, greater losses than planned would occur, requiring Bell ExpressVu to seek additional financing. There is no assurance that Bell ExpressVu will be successful in obtaining such financing on favourable terms and conditions.

DTH market risks

The success of Bell ExpressVu's DTH business strategy is subject to factors that are beyond its control and impossible to predict due, in part, to the limited history of digital DTH services in Canada. Consequently, the size of the Canadian market for digital DTH services, the rates of penetration of that market, the churn rate, the extent and nature of the competitive environment, and the ability of Bell ExpressVu to meet revenue and cost expectations are uncertain. There is no assurance that a viable DTH market will develop in Canada or, even if such a market does develop, that Bell ExpressVu will be profitable in delivering its DTH services.

Competition

Bell ExpressVu faces competition from other DTH satellite service providers, cable operators and other distributors, grey market satellite service providers and other competitors such as off-air television broadcasters. Bell ExpressVu's DTH and cable competitors have pursued, and may continue to pursue, aggressive marketing campaigns and pricing policies targeting the existing customers of Bell ExpressVu. Although Bell ExpressVu has, to date, been successful in increasing market share in the face of such competition, there is no assurance that such success will continue.

Satellite defects

Bell ExpressVu's DTH services are provided through the NIMIQ DBS satellite operated by Telesat. Satellites are subject to significant risks, including manufacturing defects, destruction or damage that may prevent proper commercial use, or in the loss of the satellite. Any such loss, damage or destruction of the satellite could have a material adverse impact on Bell ExpressVu's business and profits.

CTV

Television broadcasting is comprised of a conventional television sector of free over-the-air television services and a sector of specialty and pay television services delivered to subscribers by broadcast distribution undertakings, including cable and DTH operators. CTV operates in both the conventional and specialty sectors. Commercial advertising is the only source of revenue for the conventional television sector while the specialty sector is more dependent on subscriber revenues and benefits from commercial advertising. Commercial advertising, while being affected by normal economic cycles, is a function of the viewing share in a given market and viewing share is in turn dependent on program content and the number of choices available. Market fragmentation has increased over the last decade as a result of the introduction of additional television services, the extended reach of existing signals and the increased use of VCRs while the deployment of digital capability will further extend the choices available over the next years as new Canadian and foreign services are made available. Furthermore, new Web based services available over the Internet are expected to provide alternative niche services to consumers, continuing the fragmentation of the viewing market. Accordingly, reach and attractiveness of programming content are the two prominent variables in the ability to generate revenues. However, there can be no assurance that CTV will be able to maintain or increase its current ability to reach viewers with programming content that is satisfactory to the public nor that CTV will be able to maintain or increase its current advertising revenues.

Teleglobe Inc.

Teleglobe Inc., through its subsidiaries (collectively the "Teleglobe Inc. Group companies"), is a global telecommunications carrier providing a broad range of international and domestic long distance telecommunications services such as Internet connectivity, data transmission, broadcast, voice and other value-added services on a wholesale and retail basis.

In an effort to accelerate its expansion strategy, Teleglobe Inc. announced in May 1999 that Teleglobe would build, at a cost of approximately $5 billion, GlobeSystem^TM, a globally integrated Internet, voice, data and video network. GlobeSystem is currently in its initial phase and Teleglobe has to date invested approximately $1.1 billion in this project. Various risk factors are associated with the GlobeSystem initiative, including the following: the GlobeSystem initiative requiring more capital than anticipated to complete, or not being completed in time due, for example, to delays in the delivery of network components and the potential higher network lease costs that this may cause, or GlobeSystem not providing the anticipated benefits, or insufficient financing being available to BCE and/or Teleglobe to complete GlobeSystem, and the inability of GlobeSystem to expand Teleglobe's business as expected. Similar risk factors also apply to Teleglobe's proposed deployment of Internet Data Centers.

GlobeSystem is a trade-mark of Teleglobe Inc.

Other risk factors concerning the Teleglobe Inc. Group companies include: revenue fluctuations arising from the gain or loss of customers and pricing pressures on voice services; any difficulties in integrating the operations of BCE and the Teleglobe Inc. Group companies, including achieving expected synergies from the integration; the ability of the Teleglobe Inc. Group companies to increase revenues from business segments other than voice services (such as data and Internet services) in order to offset declining revenues in the voice business segment as well as the uncertainties related to the transformation of Teleglobe from a voice-driven global carrier to a global data and Internet provider; uncertainties related to the Internet including its expected growth rate; competition from others in the telecommunications market and other industry segments; the potential technological obsolescence of the Teleglobe Inc. Group companies' current network technologies; materially adverse changes in economic and business conditions in the markets the Teleglobe Inc. Group companies serve; future regulatory actions and conditions in the Teleglobe Inc. Group companies' operating areas; the extent of demand for telecommunications services; changes in applicable laws and regulations; the failure by the Teleglobe Inc. Group companies to achieve their strategic objectives; and most of the relevant risk factors (excluding those relating to Bell Mobility and the wireless industry) listed on pages 23 to 26 of this document under the headings "Expenditures, capital and demand for services", "Economic fluctuations", "Increasing competition" and "Technology" under "Bell Canada".

Notes to the Condensed Consolidated Financial Statements (unaudited)

Note 1. Significant accounting policies
For a full description of the accounting policies, refer to the 1999 Annual Report of BCE. All amounts are in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current presentation.

On January 1, 2000, BCE adopted the recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook section 3465, Income Taxes, which replaces the deferral method with the liability method of tax allocation. BCE applied the new recommendations retroactively without restating prior years. The cumulative effect of adopting the new recommendations as at January 1, 2000, was to increase investments in significantly influenced and other companies by $20 million, decrease investment in Nortel Networks Corporation (Nortel Networks) related to the discontinued operations by $113 million, increase goodwill and other assets by $36 million, increase future income taxes by $4 million, increase non-controlling interest by $14 million and decrease retained earnings by $75 million.

On January 1, 2000, BCE adopted the recommendations of the CICA Handbook section 3461, Employee Future Benefits, which changes the accounting for pension and other types of employee future benefits. Previously, the costs of postemployment and postretirement benefits other than pensions were charged to earnings in the period in which they were paid. The new Handbook section requires companies to accrue the costs over the working lives of employees in a manner similar to pension costs. BCE applied the new recommendations retroactively, without restating prior years, by reflecting recognized and unrecognized amounts for all its benefit plans, consistent with United States generally accepted accounting principles. The cumulative effect of adopting the new recommendations as at January 1, 2000, was to decrease deferred charges by $59 million, decrease investments in significantly influenced and other companies by $46 million, decrease investment in Nortel Networks related to the discontinued operations by $304 million, decrease future income taxes by $343 million, increase other long-term liabilities by $757 million, decrease non-controlling interest by $101 million and decrease retained earnings by $722 million.

Note 2. Other income
Sale of Hansol M.com
In July 2000, Bell Canada International Inc. (BCI) recorded a pre-tax gain of approximately $1.1 billion relating to the sale of its 21% indirect interest in Hansol M.com for an aggregate consideration of approximately $1.5 billion in the form of cash, promissory notes and SK Telecom Co., Ltd. shares.

Note 3. Discontinued operations
In May 2000, BCE distributed an approximate 35% interest in Nortel Networks to BCE common shareholders. BCE common shareholders received, for each common share of BCE held, approximately 1.57 post-split common shares of Nortel Networks. Consequently, BCE's results prior to May 2000 reflect its 35% interest in Nortel Networks as a discontinued operation. This transaction was recorded as a distribution (dividend) to shareholders at the pro-rata carrying value of BCE's approximate 37% interest in Nortel Networks prior to the distribution. This resulted in a decrease to investment in Nortel Networks related to the discontinued operations of $9,964 million, a decrease in retained earnings of $10,114 million (including transaction costs of $70 million), and an increase in currency translation adjustment of $150 million. BCE's remaining interest (approximately 2%) in Nortel Networks is now being recorded as an investment at cost.

Discontinued operations, for Nortel Networks, mainly reflects BCE's share of Nortel Networks' net earnings applicable to common shareholders, as well as gains on the reduction of BCE's ownership in Nortel Networks, mainly as a result of Nortel Networks' acquisitions, through the issuance of shares, of Qtera Corporation, Clarify Inc. and Promatory Communications, Inc.

In the third quarter of 2000, Teleglobe Inc. (Teleglobe) classified its investment in ORBCOMM Global L.P. (ORBCOMM) as a discontinued operation. On September 15, 2000, ORBCOMM voluntarily filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Act. Consequently, BCE's results reflect a $60 million after tax write-down relating to its proportionate interest in ORBCOMM as a discontinued operation. BCE's proportionate interest in ORBCOMM's losses for prior periods have been reclassified from equity in net earnings (losses) of significantly influenced companies, to discontinued operations.

Note 4. Business acquisition
CTV
In April 2000, BCE completed the acquisition of all of the outstanding common shares of CTV, including the CTV common shares held by Electrohome Broadcasting Inc., for a cash consideration of approximately $2.3 billion. CTV, including its subsidiary NetStar Communications Inc. (NetStar), is a conventional and specialty broadcaster with a local presence across Canada. As per the Voting Trust Agreement approved by the Canadian Radio-television and Telecommunications Commission (CRTC), the CTV shares acquired under the BCE offer have been transferred to a trustee until such time as the CRTC and other regulatory approvals required in this transaction are received by BCE. These approvals are expected to be received in the first quarter of 2001. As part of the CRTC approval process, an additional 10% (approximately $230 million) of the value of the transaction will be spent over the course of the license period on initiatives that will benefit the broadcasting industry (benefits package). The cost of the benefits package has been included as part of the purchase price for the acquisition of CTV, for a total purchase price of approximately $2.5 billion. The acquisition was accounted for using the purchase method. Goodwill of approximately $1.9 billion is being amortized over 20 years. During the time that these shares are held by the trustee, the investment in CTV will be accounted for using the equity method.

Note 5. Commitments
Creation of a Multi-Media Company by BCE, The Thomson Corporation and The Woodbridge Company Limited
On September 15, 2000, BCE, The Thomson Corporation (Thomson) and The Woodbridge Company Limited (Woodbridge) announced the creation of a $4 billion Canadian multi-media company. BCE will own 70.1% of the new company and its principal contributions to it will be its wholly owned interest in CTV and its 71% interest in Sympatico-Lycos Inc. Thomson will own 20% of the new company and will contribute all of the assets and undertakings of The Globe and Mail (division of Thomson Canada Limited) and of Globe Interactive (division of Thomson Canada Limited), and its 50% interest in Report on Business TV. Woodbridge will own 9.9% of the new company and will contribute $385 million. The transaction is expected to be completed in the first quarter of 2001, subject to the approval by the CRTC of BCE's acquisition of CTV (Note 4), as well as other customary approvals.

Sale of Vésper S.A. and Vésper São Paulo S.A.
On September 26, 2000, BCI announced the signing of a definitive agreement to sell its indirect interests in Vésper S.A, Vésper São Paulo S.A. and the internet service provider, Interativa S.A. (collectively, Vésper companies) to VeloCom Inc. (VeloCom). BCI through its affiliates will receive gross proceeds of US $875 million, consisting of US $600 million in cash and US $275 million in promissory notes. The transaction is expected to close in the first quarter of 2001, subject to regulatory and other approvals and VeloCom concluding the necessary financing.

BCI, Telefonos de Mexico S.A. de C.V. and SBC Partnership
On September 26, 2000, BCI, Telefonos de Mexico S.A. de C.V. (Telmex) and SBC announced revisions to the June 7, 2000 agreement to form a new facilities-based communications company which will be their principal vehicle for expansion in South America. Under the revised agreement, BCI and Telmex will each hold a 44.3% indirect interest in the new company. SBC will acquire an 11.4% interest in the new company by contributing its assets in the region. The parties have also agreed that BCI will contribute the sale proceeds from the disposition of the Vésper companies to the new facilities-based communications company, net of any additional BCI capital invested into the Vésper companies prior to closing, in lieu of its interests in the Vésper companies, as originally contemplated by the June 7, 2000 agreement. The new company's initial capitalization will be US $4 billion and will include the South American assets of BCI (excluding the Vésper companies) and Telmex's and SBC's investments in the Brazilian wireless company Algar Telecom Leste S.A. In addition, the new company will acquire Telmex's interest in the Argentine broadband company, Techtel Telecomunicaciones S.A. The transaction for the formation of the new facilities-based communications company is expected to be completed in the fourth quarter of 2000, subject to certain regulatory and other approvals.

Sale of KG Telecommunications Co. Ltd
On August 31, 2000, BCI announced the signing of a definitive share purchase agreement to sell its 20% interest in KG Telecommunications Co. Ltd. for gross proceeds of approximately $790 million. The transaction is expected to close no later than the first quarter of 2001, subject to certain customary regulatory and contractual approvals.

Acquisition of Teleglobe
On June 18, 2000, BCE, Teleglobe and the principal shareholders of Teleglobe reached an agreement to revise certain terms of BCE's initial offer announced on February 15, 2000, to acquire all of the outstanding common shares of Teleglobe it does not already own. Under the revised agreement, BCE provided Teleglobe with immediate financing of US $100 million and will provide additional financing if required prior to the closing of the transaction. BCE has also agreed to eliminate all conditions of the transaction except those provided by law and material regulatory approvals, and to accelerate the closing of the transaction. Teleglobe common shareholders will receive a fixed share exchange ratio of 0.91 of a BCE common share (less nominal cash consideration per share) for each Teleglobe common share they own. Teleglobe common shareholders can also choose to receive up to 20% in cash (including the nominal cash consideration) of the value of the BCE common share component. The value will be based on the price of BCE common shares prior to closing. Teleglobe stock option holders will receive, upon exercise of such options, 0.91 of a BCE common share for each Teleglobe stock option held. The transaction is anticipated to close early in November 2000, after regulatory, court and shareholder approvals have been received. Teleglobe's shareholders' meeting is scheduled to be held on October 31, 2000. Once completed, this acquisition will be accounted for using the purchase method

Note 6. Hedge of remaining interest in Nortel Networks
During the second quarter of 2000, BCE entered into forward contracts, for up to one year, with several financial institutions to hedge its exposure to fluctuations in the market price of Nortel Networks common shares. As a result of these contracts, approximately 46.4 million of BCE's 60 million Nortel Networks common shares have been hedged at an average price of approximately $90 per share. Furthermore, BCE may, depending on market conditions, enter into additional derivative transactions with respect to a portion of its remaining Nortel Networks shares for a total of up to 54 million shares. BCE currently intends to use the value of these Nortel Networks shares including the hedged amounts, to raise, in one or more transactions, net proceeds of approximately $5 billion in long-term debt financing. The forward contracts will, in effect, become part of the long-term financing arrangements. BCE anticipates the long-term debt financing arrangements to be in place prior to the end of the year. The terms and conditions of the long-term financing have not yet been finalized.

Prior to 2000, BCE had granted, from time to time, stock options with accompanying rights to Special Compensation Payments (SCPs) to officers and key employees of BCE and its subsidiaries. As a result of the distribution (dividend) of Nortel Networks common shares (Note 3), the then outstanding options were divided into options over BCE and over Nortel Networks common shares, and the related SCPs were appropriately adjusted. As a result, SCP right holders now have, for each SCP right held prior to the distribution, SCP rights related to the increase in price of both the BCE and Nortel Networks common shares over the exercise prices of the related options. In addition, BCE has entered into forward contracts to hedge its exposure to outstanding SCP rights related to options over BCE common shares. The remaining 6 million Nortel Networks common shares have been designated as a hedge of BCE's exposure to outstanding rights to SCPs related to the options over the Nortel Networks common shares.