Financial reports

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

The statements relating to BCE’s financial guidance (including revenues, adjusted EBITDA, capital intensity, adjusted EPS and free cash flow), which are contained on this Webpage, are forward-looking statements. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws and of the United States Private Securities Litigation Reform Act of 1995.

Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements and that our business outlook, objectives, plans and strategic priorities may not be achieved. These statements are not guarantees of future performance or events, and we caution you against relying on any of these forward-looking statements. The forward-looking statements contained on this Webpage describe our expectations as of October 31, 2019 and, accordingly, are subject to change after such date. Except as may be required by applicable securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained on this Webpage, whether as a result of new information, future events or otherwise. Except as otherwise indicated by BCE, forward-looking statements do not reflect the potential impact of any special items or of any dispositions, monetizations, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after October 31, 2019. The financial impact of these transactions and special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Forward-looking statements are presented on this Webpage for the purpose of assisting investors and others in understanding certain key elements of our expected financial results. Readers are cautioned that such information may not be appropriate for other purposes.

Material Assumptions
A number of economic, market, operational and financial assumptions were made by BCE in preparing the forward-looking statements contained on this Webpage, including, but not limited to:

Canadian Economic and Market Assumptions

• Higher economic growth, given the Bank of Canada’s most recent estimated growth in Canadian gross domestic product of 1.5% in 2019, representing an increase from the earlier estimate of 1.3%
• Employment gains expected to continue in 2019, as the overall level of business investment is expected to grow but remain variable
• Interest rates expected to remain at or near current levels
• Canadian dollar expected to remain at near current levels. Further movements may be impacted by the degree of strength of the U.S. dollar, interest rates and changes in commodity prices.
• A consistently high level of wireline and wireless competition in consumer, business and wholesale markets
• Higher, but slowing, wireless industry penetration and smartphone adoption
• Increased adoption of unlimited data plans and installment payment plans
• A shrinking data and voice connectivity market as business customers migrate to lower-priced traditional telecommunications solutions or alternative over-the-top (OTT) competitors
• Advertising market expected to be impacted by audience declines and variable demand
• Continued escalation of media content costs to secure TV programming
• Ongoing linear TV subscriber erosion, due to growing cord-cutter and cord-never customer segments

Assumptions Concerning our Bell Wireless Segment

• Maintain our market share of incumbent wireless postpaid net additions
• Higher prepaid customer net additions
• Continued adoption of smartphone devices, tablets and data applications, as well as the introduction of more Fourth Generation (4G) LTE and LTE-A devices and new data services
• Higher subscriber acquisition and retention spending, driven by higher handset costs
• Improving blended ABPU, driven by a higher postpaid smartphone mix, increased data consumption on 4G LTE and LTE-A networks, and higher access rates partly offset by the impact of a higher prepaid mix in our overall subscriber base and the impact from Bell Mobility’s SSC contract
• Increased adoption of unlimited data plans and installment payment plans
• Expansion of the LTE-A network coverage to approximately 94% of the Canadian population, and continued Fifth Generation (5G) preparations with network technology trials, as well as the deployment of small cells and equipping all new sites with fibre
• No material financial, operational or competitive consequences of changes in regulations affecting our wireless business

Assumptions Concerning our Bell Wireline Segment

• Positive full-year adjusted EBITDA growth
• Continued growth in retail residential IPTV and Internet subscribers
• Increasing wireless and Internet-based technological substitution
• Residential services household average revenue per user growth from increased penetration of multi-product households and price increases
• Continued aggressive residential service bundle offers from cable TV competitors in our local wireline areas
• Continued large business customer migration to IP-based systems
• Ongoing competitive repricing pressures in our business and wholesale markets
• Continued competitive intensity in our small and mid-sized business markets as cable operators and other telecommunications competitors continue to intensify their focus on business customers
• Traditional high-margin product categories challenged by large global cloud and OTT providers of business voice and data solutions expanding into Canada with on-demand services
• Accelerating customer adoption of OTT services resulting in downsizing of TV packages
• Further deployment of direct fibre to more homes and businesses within our wireline footprint and an acceleration in our fixed WTTH rural buildout
• Growing consumption of OTT TV services and on-demand streaming video, as well as the proliferation of devices, such as tablets, that consume large quantities of bandwidth, will require considerable ongoing capital investment
• Realization of cost savings related to management workforce reductions including attrition and retirements, lower contracted rates from our suppliers, operating efficiencies enabled by a growing direct fibre footprint, changes in consumer behaviour and product innovation, as well as the realization of additional synergies from the next phases of integration of Manitoba Telecom Services Inc.
• No material financial, operational or competitive consequences of changes in regulations affecting our wireline business

Assumptions Concerning our Bell Media Segment

• Revenue performance expected to reflect further Crave subscriber growth, flow-through of broadcasting distribution undertaking rate increases, and strategic pricing on advertising sales
• Operating cost growth driven by higher programming costs, excluding IFRS 16, mainly due to continued investment in Crave content
• Continued scaling of Crave and sports direct-to-consumer products
• Ability to successfully acquire and produce highly rated programming and differentiated content
• Building and maintaining strategic supply arrangements for content across all screens and platforms
• Monetization of content rights and Bell Media properties across all platforms
• TV unbundling and growth in OTT viewing expected to result in lower subscriber levels for many Bell Media video properties
• No material financial, operational or competitive consequences of changes in regulations affecting our media business

Financial Assumptions Concerning BCE

The following constitute BCE’s principal financial assumptions for 2019:

• Total post-employment benefit plans cost to be approximately $310 million to $330 million, based on an estimated accounting discount rate of 3.8%, comprised of an estimated above adjusted EBITDA post-employment benefit plans service cost of approximately $250 million to $260  million and an estimated below adjusted EBITDA net post-employment benefit plans financing cost of approximately $60 million to $70 million
• Depreciation and amortization expense of approximately $4,375 million to $4,475 million
• Interest expense of approximately $1,125 million to $1,150 million
• An effective tax rate of approximately 25%
• NCI of approximately $50 million
• Total cash pension plan funding of approximately $375 million
• Cash taxes of approximately $650 million to $700 million
• Net interest payments of approximately $1,125 million to $1,150 million
• Average BCE common shares outstanding of approximately 900 million
• An annual common share dividend of $3.17 per share

The foregoing assumptions, although considered reasonable by BCE on October 31, 2019, may prove to be inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth on this Webpage.

Material Risks
Important risk factors that could cause our assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in, or implied by, our forward-looking statements, including our 2019 financial guidance, are listed below. The realization of our forward-looking statements, including our ability to meet our 2019 financial guidance, essentially depends on our business performance, which, in turn, is subject to many risks. Accordingly, readers are cautioned that any of the following risks could have a material adverse effect on our forward-looking statements. These risks include, but are not limited to:

• the intensity of competitive activity, including from new and emerging competitors, coupled with new product launches, and the resulting impact on the cost of retaining existing customers and attracting new ones, as well as on our market shares, service volumes and pricing strategies
• the level of technological substitution and the presence of alternative service providers contributing to reduced utilization of our traditional wireline services
• the adverse effect of the fundamental separation of content and connectivity, which is changing our TV and media ecosystems and may accelerate the disconnection of TV services and the reduction of TV spending, as well as the fragmentation of, and changes in, the advertising market
• competition with global competitors, in addition to traditional Canadian TV competitors, for programming content, which could drive significant increases in content acquisition costs and challenge our ability to secure key content
• the proliferation of content piracy impacting subscriber growth and our ability to monetize products and services, as well as creating bandwidth pressure
• adverse economic and financial market conditions, a declining level of retail and commercial activity, and the resulting negative impact on the demand for, and prices of, our products and services and the level of bad debts
• regulatory initiatives, proceedings and decisions, government consultations and government positions that affect us and influence our business, including, in particular, those relating to mandatory access to networks, spectrum auctions, consumer-related codes of conduct, approval of acquisitions, broadcast licensing and foreign ownership requirements
• the inability to protect our physical and non-physical assets, including networks, IT systems, offices, corporate stores and sensitive information, from events such as information security attacks, unauthorized access or entry, fire and natural disasters
• the failure to optimize network and IT deployment and upgrade timelines, accurately assess the potential of new technologies, or invest and evolve in the appropriate direction
• the failure to continue investment in next-generation capabilities in a disciplined and strategic manner
• the inability to drive a positive customer experience in all aspects of our engagement with customers
• the complexity in our operations resulting from multiple technology platforms, billing systems, sales channels, marketing databases and a myriad of rate plans, promotions and product offerings
• the failure to maintain optimal network operating performance in the context of significant increases in capacity demands on our Internet and wireless networks
• the failure to implement or maintain highly effective IT systems supported by an effective governance and operating framework
• the risk that we may need to incur significant capital expenditures beyond our capital intensity target in order to provide additional capacity and reduce network congestion
• the failure to generate anticipated benefits from our corporate restructurings, system replacements and upgrades, staff reductions, process redesigns and the integration of business acquisitions
• events affecting the functionality of, and our ability to protect, test, maintain and replace, our networks, IT systems, equipment and other facilities
• in-orbit and other operational risks to which the satellites used to provide our satellite TV services are subject
• our dependence on third-party suppliers, outsourcers and consultants to provide an uninterrupted supply of the products and services we need to operate our business, deploy new network and other technologies and offer new products and services, as well as to comply with various obligations
• changes to our base of suppliers or outsourcers that we may decide or be required to implement
• the failure of our vendor selection, governance and oversight processes established to seek to ensure full risk transparency associated with existing and new suppliers
• security and data leakage exposure if security control protocols affecting our suppliers are bypassed
• the quality of our products and services and the extent to which they may be subject to manufacturing defects or fail to comply with applicable government regulations and standards
• the failure to attract and retain employees with the appropriate skill sets and to drive their performance in a safe environment
• labour disruptions
• the inability to access adequate sources of capital and generate sufficient cash flows from operations to meet our cash requirements, fund capital expenditures and provide for planned growth
• uncertainty as to whether dividends will be declared by BCE’s board of directors, whether the dividend on common shares will be increased, or whether BCE’s dividend payout policy will be maintained
• the inability to manage various credit, liquidity and market risks
• pension obligation volatility and increased contributions to post-employment benefit plans
• new or higher taxes due to new tax laws or changes thereto or in the interpretation thereof, and the inability to predict the outcome of government audits
• the failure to reduce costs as well as unexpected increases in costs
• the failure to evolve practices to effectively monitor and control fraudulent activities
• unfavourable resolution of legal proceedings and, in particular, class actions
• new or unfavourable changes in applicable laws and the failure to proactively address our legal and regulatory obligations
• health concerns about radiofrequency emissions from wireless communications devices and equipment
• the inability to maintain customer service and our networks operational in the event of epidemics, pandemics or other health risks
• the failure to recognize and adequately respond to climate change concerns or public and governmental expectations on environmental matters

We caution that the foregoing list of risk factors is not exhaustive and other factors could also adversely affect our results. We encourage investors to also read BCE’s 2018 Annual MD&A dated March 7, 2019 (included in BCE’s 2018 Annual Report), BCE’s 2019 First, Second and Third Quarter MD&As dated May 1, 2019, July 31, 2019 and October 30, 2019, respectively, and BCE’s news release dated October 31, 2019 announcing its financial results for the third quarter of 2019 for additional information with respect to certain of these and other assumptions and risks, filed by BCE with the Canadian provincial securities regulatory authorities (available at Sedar.com) and with the U.S. Securities and Exchange Commission (available at SEC.gov). These documents are also available at BCE.ca.