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BCE reports 2010 fourth-quarter and full-year results and announces 2011 business outlook

February 10, 2011
  • BCE Q4 net earnings applicable to common shares up 25.4% to $439
    million
    ; EPS up 26.1%
  • Bell Q4 service revenue growth of 1.3%; operating income up 20.8%;
    EBITDA
    ((1)) up 1.1%
  • Bell Wireless Q4 operating revenues up 8.3%, service revenues up 9.1%;
    blended ARPU up $1.26 on data revenue growth of 38%
  • Capital investment of $860 million up 34.4% year over year to expand
    wireless and wireline broadband Internet capacity
  • Another record quarter for wireless gross activations with 552,714;
    postpaid net activations up 42.6% to 156,708
  • Bell Wireline Q4 operating income up 62.1%; Bell Wireline EBITDA up 6.9%
    on slowing NAS losses, TV revenue growth of 7.9% and cost reductions
  • 2010 financial guidance met

This news release contains forward-looking statements. For a description
of the related risk factors and assumptions please see the section
entitled “Caution Concerning Forward-Looking Statements” later in this
release.

MONTREAL, Feb. 10 /PRNewswire-FirstCall/ – BCE Inc. (TSX, NYSE: BCE), Canada’s
largest communications company, today reported BCE and Bell results for
the fourth quarter of 2010 and announced its financial guidance for
2011.

BCE delivered strong financial performance with net earnings applicable
to common shares growing by 25.4% to $439 million. EPS and Adjusted EPS((2)) for the quarter were $0.58 and $0.60, representing growth of 26.1% and
17.6%, respectively. Bell had revenue growth of 0.9% on service revenue
growth of 1.3%, reflecting strong wireless and TV revenue growth of
8.3% and 7.9%, respectively; operating income growth of 20.8%; EBITDA
growth of 1.1%; wireless gross subscriber activations of 552,714 and
postpaid net additions of 156,708; TV net additions of 23,019 and
high-speed Internet net additions of 12,099.

Bell is focused on achieving a clear goal – to be recognized by
customers as Canada’s leading communications company – through the
execution of 5 Strategic Imperatives: Invest in Broadband Networks and
Services, Accelerate Wireless, Leverage Wireline Momentum, Improve
Customer Service, and Achieve a Competitive Cost Structure.

“Our fourth-quarter performance closed an impressive year of execution
by the Bell team, with very strong wireless performance, significant
wireline EBITDA growth and continued progress in cost reductions and
efficiency. We met all our increased financial targets for 2010,” said

George Cope, President and CEO of BCE and Bell Canada. “We
substantially advanced Bell’s strategic agenda through our
significantly increased investments in wireless and wireline broadband
Internet capacity, driving customer additions on our growth services
platforms, and acquisitions that support our strategic execution going
forward – including CTV, Canada’s #1 media company, as well as Hypertec
and xwave to support the growth in data hosting and cloud computing at
Bell Business Markets.”

“Bell Wireless has significantly increased its postpaid market share
thanks to strong market execution that leverages Bell’s world-leading
HSPA+ network, superior range of smartphones and other devices,
enhanced data services like Bell Mobile TV and the country’s largest
wireless distribution network. At the same time, Bell Wireline achieved
strong EBITDA growth, substantial decreases in NAS landline losses and
solid Internet and TV net activations, thanks to the launches of
next-generation Fibe TV and Fibe Internet on our quickly expanding
broadband fibre network,” said Mr. Cope.

“Our financial performance for 2010 was highlighted by strong net
earnings growth of 32.7% and substantial free cash flow generation,
reflecting accelerated wireless revenue growth, industry-leading
wireline EBITDA growth of 5.9% and margin improvement,” said Siim
Vanaselja
, Chief Financial Officer of BCE and Bell Canada.

“We also continued to maintain a sharp focus on our capital market
objectives in 2010. We delivered on our commitment to increase returns
to our shareholders through two increases in the common share dividend
over the past twelve months, delivering a 35% increase overall since Q4
2008, and the completion of a $500 million share buyback in December at
an average price per share of $30.80. We repaid $400 million of debt in
2010 from cash on hand, accessed the capital markets on attractive
terms in November, and have maintained strong investment grade credit
ratings. In addition, with the $750 million special voluntary pension
contribution made in December, we are systematically addressing our
solvency deficit in a permanent and comprehensive way,” said Mr.
Vanaselja. “The 2011 financial guidance announced today reflects a
well-balanced financial plan that calls for substantial free cash flow
generation in excess of $2.2 billion and Adjusted EPS growth of 4% to
8% that supports the execution of our business plan and capital markets
strategy centred on delivering increasing returns to BCE shareholders.”

Bell’s operating revenues increased by 0.9% this quarter, to $4,017
million
, as higher wireless and TV revenues more than offset declines
in local and access, long distance, wireline data and equipment and
other revenues. For the full year, Bell’s operating revenues were
$15,425 million, an increase of 2.7% compared to 2009.

Bell’s operating income increased by 20.8% to $691 million this quarter
and by 22.2% to $2,972 million for the full year due to higher EBITDA,
lower restructuring and other costs and lower depreciation and
amortization. Bell’s EBITDA grew by 1.1% to $1,411 million this quarter
and by 2.4% to $5,857 million for the full year with higher revenues,
lower pension expense and cost reductions more than offsetting the
impact of increased wireless subscriber acquisition and retention
costs. Despite a significantly higher number of postpaid subscriber
activations and customer handset upgrades year over year, Bell’s EBITDA
margin was essentially unchanged, increasing by 0.1 percentage points
to 35.1% this quarter.

Bell Wireless operating revenues increased by 8.3% this quarter with
service revenues increasing by 9.1% and product revenues increasing by
3.9%. Bell Wireless operating income and EBITDA decreased by 18.8% and
11.5%, respectively, due to the significantly higher levels of gross
activations and customer upgrades. Blended ARPU increased by $1.26 to
$52.34
year over year as data revenue growth of 38% more than offset
voice ARPU declines due to customer adoption of richer rate plans.

With gross activations of 552,714 and postpaid gross activations of
399,041, Bell Wireless surpassed records that were just set in Q3. In
addition, Bell Wireless postpaid net additions of 156,708 represented
the best Q4 postpaid net additions since Q4 2002. Full year 2010
postpaid gross activations and net additions and total gross
activations were also records for Bell Wireless for any calendar year.
Prepaid gross activations were 153,673, or 31.2% lower than last year,
reflecting an increase in competitive intensity, particularly at the
low end of the market. The prepaid client base declined by 39,926 this
quarter compared to a gain of 52,938 last year.

Bell Wireline operating revenues decreased by 2.5% as TV revenue growth
was more than offset by declines in local and access, long distance,
wireline data and equipment and other revenues. Bell Wireline operating
income increased by 62.1% as a result of higher EBITDA, lower
restructuring and other costs and lower depreciation and amortization.
Bell Wireline EBITDA increased by 6.9% due to cost reductions and lower
pension expense.

Bell Wireline had total NAS losses of 64,172 this quarter, an
improvement of 40.3% compared to last year. TV subscribers increased by
23,019 compared to an increase of 40,889 in the same period last year.
High-speed Internet subscribers increased by 12,099, an increase of
55.0% compared to the fourth quarter last year, led by increases in
residential Internet customers that more than doubled year over year.

Bell invested $860 million of capital this quarter, or 34.4% more than
the same period last year, reflecting increased investment in both our
wireless and wireline broadband Internet capacity, including the
continued rollout of fibre to residential neighbourhoods,
multiple-dwelling units and fibre-to-the-home (FTTH) in Quebec City,
and the ongoing enhancement of our network to support Bell’s Fibe
Internet and Fibe TV services. For the full year, Bell invested $2,463
million
of capital, or 3.1% more than 2009. Bell’s capital intensity in
2010 was 16.0% with its focus on wireline fibre and HSPA+ wireless
networks.

BCE’s cash flows from operating activities this quarter was $568 million
compared to $948 million in the same period last year due to a
voluntary special pension plan contribution of $750 million made in
December 2010 which represented a significant increase over the $500
million
voluntary special pension plan contribution made in December
2009
. Free cash flow((3)) this quarter, pre and post this special pension contribution, was $201
million
and negative $549 million respectively. For the full year,
BCE’s cash flows from operating activities was $4,724 million and free
cash flow, pre and post the special pension contribution, was $2,124
million
and $1,374 million, respectively.

BCE’s net earnings applicable to common shares this quarter were $439
million
, or $0.58 per share, compared to $350 million, or $0.46 per
share, for the same period last year. Earnings growth this quarter
reflected lower depreciation and amortization and lower restructuring
and other costs. For the full year, BCE’s net earnings applicable to
common shares were $2,165 million, or $2.85 per share, compared to
$1,631 million, or $2.11 per share.

BCE’s Adjusted EPS was $0.60 this quarter, an increase of 17.6% compared
to last year as a result of higher EBITDA, lower depreciation and
amortization and fewer outstanding BCE common shares as a result of
share purchases made under the 2010 normal course issuer bid program.
For the full year, BCE’s Adjusted EPS was $2.84 per share, or 13.6%
higher than last year.

Financial Highlights      
($ millions except per share amounts) (unaudited)     Q4 2010     Q4 2009     % change
Bell (i)      
Operating Revenues 4,017 3,982 0.9%
EBITDA 1,411 1,395 1.1%
Operating Income 691 572 20.8%
BCE      
Operating Revenues 4,683 4,650 0.7%
EBITDA 1,744 1,737 0.4%
Operating Income 836 751 11.3%
Net Earnings Applicable to Common Shares 439 350 25.4%
EPS 0.58 0.46 26.1%
Adjusted EPS 0.60 0.51 17.6%
Cash Flows from Operating Activities 568 948 (40.1%)
Free Cash Flow (549) 15 n.m

(i)  Bell includes the Bell Wireless and Bell Wireline segments.
n.m.: not meaningful

BCE’s operating revenues increased by 0.7% to $4,683 million this
quarter and by 1.9% to $18,069 million for the full year as higher
revenues at Bell were partly offset by lower revenues at Bell Aliant.

BCE’s operating income increased by 11.3% to $836 million this quarter
and by 15.1% to $3,672 million for the full year as higher operating
income at Bell was partly offset by lower operating income at Bell
Aliant. BCE’s EBITDA increased by 0.4% to $1,744 million this quarter
and by 1.4% to $7,188 million for the full year as EBITDA growth at
Bell was partly offset by lower EBITDA at Bell Aliant.

Bell Wireless Segment
With continued momentum from the launch of its world-leading HSPA+
network, Bell Wireless delivered another record quarter for gross
activations along with strong postpaid net additions, data revenue
growth of 38% and increased smartphone penetration.

  • Total Bell Wireless operating revenues increased by 8.3% to $1,297
    million
    this quarter. Service revenues increased by 9.1% to $1,151
    million
    due to subscriber growth and wireless data revenue growth of
    38%. Product revenues increased by 3.9% to $134 million due to an
    increase in activations and a higher smartphone mix. For the full year,
    total Bell Wireless operating revenues increased by 8.2% to $4,934
    million
    with service revenues increasing by 9.2% to $4,481 million and
    product revenues increasing by 0.5% to $407 million.
  • Blended ARPU increased by $1.26 to $52.34. Postpaid ARPU increased by
    $1.00 to $63.47 due to growth in data usage partly offset by increased
    customer adoption of competitive rate plans with more services and
    voice minutes included at lower monthly prices. Prepaid ARPU decreased
    by $1.49 to $16.96 due to the migration of high-value prepaid customers
    to postpaid plans. For the full year, blended ARPU increased by $0.33
    to $52.03
    , postpaid ARPU increased by $0.62 to $63.49 and prepaid ARPU
    increased by $0.61 to $17.76.
  • Bell Wireless operating income decreased by 18.8% to $237 million this
    quarter and by 9.7% to $1,160 million for the full year as a result of
    lower EBITDA and higher depreciation and amortization. Bell Wireless
    EBITDA decreased by 11.5% to $385 million this quarter and by 5.0% to
    $1,721 million for the full year due to higher subscriber acquisition
    costs associated with higher gross activations, an increase in customer
    upgrades, and a higher smartphone mix.
  • EBITDA margins on wireless service revenues decreased to 33.4% this
    quarter from 41.2% last year.
  • Total gross activations were a new record this quarter at 552,714, or
    5.5% higher than last year. Postpaid gross activations were 399,041, or
    32.9% higher than last year, reflecting an emphasis on postpaid
    acquisition. Prepaid gross activations were 153,673, or 31.2% lower
    than last year, reflecting an increase in competitive intensity,
    particularly at the low end of the market.
  • Total net additions were 116,782 this quarter, or 28.3% lower than last
    year. Postpaid net additions were 156,708 this quarter or 42.6% higher
    than last year. The prepaid client base declined by 39,926 this quarter
    compared to a gain of 52,938 last year due to lower prepaid gross
    activations and an increase in churn.
  • The Bell Wireless client base reached 7,242,048 at the end of the
    quarter, an increase of 6.0% compared to last year.
  • Postpaid churn increased to 1.5% from 1.3% and prepaid churn increased
    to 3.6% from 3.2%, reflecting an increase in competitive intensity,
    particularly from new entrants at the low end of the market. Blended
    churn increased to 2.0% from 1.8% last year.
  • Cost of acquisition increased by 37.0% this quarter, to $448 per gross
    activation, due to higher handset subsidies and commissions.

Bell Wireline Segment
The Bell Wireline segment delivered improved year-over-year EBITDA
performance, a significant improvement in network access line erosion
and healthy subscriber activations in TV and high-speed Internet.

  • Bell Wireline operating revenues decreased by 2.5% to $2,769 million
    this quarter as TV revenue growth was more than offset by decreases in
    local and access, long distance, data and equipment and other revenues.
    For the full year, Bell Wireline operating revenues increased by 0.3%
    to $10,695 million.
  • Bell Wireline operating income increased by 62.1% to $454 million this
    quarter and by 57.8% to $1,812 million for the full year due to higher
    EBITDA, lower restructuring and other costs and lower depreciation and
    amortization.
  • Bell Wireline EBITDA increased by 6.9% this quarter, to $1,026 million,
    due to cost reductions and lower pension expense more than offsetting
    lower operating revenues. For the full year, Bell Wireline EBITDA
    increased by 5.9% to $4,136 million due to cost reductions and lower
    pension expense.
  • Local and access revenues declined by 5.4% to $733 million this quarter
    due to ongoing residential and business NAS erosion.
  • Total NAS declined by 64,172 this quarter compared to a decline of
    107,503 last year. Business NAS declined by 27,622 this quarter
    compared to a decline of 28,493 last year. Residential NAS declined by
    36,550 compared to a decline of 79,010 last year due to growth in our
    Wholesale unit and the continued improvement of retail residential NAS
    losses for the thirteenth consecutive quarter. On a year-over-year
    basis, total NAS declined by 5.6%.
  • Long distance revenues declined by 11.7% to $234 million this quarter
    due mainly to ongoing residential and business NAS erosion, and the
    increased adoption of unlimited or large block-of-time plans by
    residential customers.
  • Data revenues decreased by 0.3% to $970 million this quarter as growth
    in IP and broadband connectivity service revenues, residential Internet
    service revenues and data-related equipment sales to large business
    customers were more than offset by lower legacy data service revenues.
  • High-speed Internet subscribers increased by 12,099 this quarter, an
    increase of 55.0% compared to the same period last year. At the end of
    the quarter, Bell had 2,097,326 high-speed Internet subscribers, a 2.0%
    increase over last year.
  • TV revenues increased by 7.9% to $450 million this quarter due to
    subscriber growth and customer upgrades to higher-priced programming
    packages.
  • Total TV subscribers increased by 23,019 this quarter compared to an
    increase of 40,889 in the same period last year. At the end of the
    quarter, there were 2,020,098 TV subscribers, or 3.7% more than at the
    end of last year.
  • TV subscriber churn increased to 1.5% from 1.3% last year.
  • Equipment and other revenues decreased by 6.2% to $304 million this
    quarter.

Bell Aliant Regional Communications
Bell Aliant’s revenues decreased to $777 million this quarter, or by
1.0%, due to lower local and access and long distance revenues. Bell
Aliant’s operating income decreased by 19.0%, to $145 million due to
lower revenues.

Common Share Dividend
BCE’s Board of Directors declared a quarterly dividend of $0.4925 per
common share, payable on April 15, 2011 to shareholders of record at
the close of business on March 15, 2011.

International Financial Reporting Standards (IFRS)
The Canadian Accounting Standards Board set January 1, 2011 as the date
that IFRS replaced Canadian generally accepted accounting principles
(GAAP) for publicly accountable enterprises, including Canadian
reporting issuers. BCE will prepare its financial statements in
accordance with IFRS commencing January 1, 2011. Financial reporting
under IFRS differs from Canadian GAAP in a number of respects, some of
which are significant.

Preliminary draft reconciliations between Canadian GAAP and IFRS for
BCE’s opening balance sheet at January 1, 2010, closing balance sheet
as at December 31, 2010, and consolidated statement of operations for
the year ended December 31, 2010 will be provided in BCE’s Annual MD&A.
The adoption of IFRS is expected to result in an overall reduction of
approximately $4.5 billion in BCE’s shareholders’ equity as at December
31, 2010
, mainly related to a write-down to fair value and
retrospective change to the straight-line method of depreciation for
certain capital assets, and the recognition of the unfunded pension
liability. Based on work performed to date, the adoption of IFRS will
have minimal impacts on BCE’s consolidated statement of operations.
Preliminary Adjusted EPS based on EPS using IFRS for the year ended
December 30, 2010 is $2.79.

Outlook
BCE’s 2011 financial guidance reflects the continued progress in the
execution of Bell’s 5 Strategic Imperatives and BCE’s capital markets
strategy.

The financial guidance provided for revenue growth, EBITDA growth,
Adjusted EPS growth, and free cash flow growth are based on financial
results prepared using IFRS. Similarly, the guidance provided for
Adjusted EPS, free cash flow and capital intensity are calculated using
IFRS-based results.

Given the trajectory of its wireless, TV and Internet businesses and an
improving outlook in NAS erosion, Bell is targeting revenue growth of
1% to 2% in 2011. Bell Wireless revenue growth is expected to benefit
from the significant investment made in 2010 in customer acquisition
and retention along with continued growth in smartphone activations and
data usage. Bell Wireline revenues are expected to benefit from growth
in TV and Internet revenues from ARPU performance and the rollout of
the Fibe TV footprint.

With higher wireless revenues and a continued focus on cost reduction,
Bell is targeting EBITDA growth of 2% to 4% in 2011.

BCE is targeting Adjusted EPS of $2.90 to $3.00 in 2011 due to higher
EBITDA and lower total pension costs. With the BCE annual common share
dividend increase of 7.7% to $1.97 per share announced in December,
BCE’s payout ratio is conservatively at the low end of its policy of
65% to 75% of Adjusted EPS for 2011.

BCE expects to be able to generate substantial free cash flow in 2011.
Targeted free cash flow of $2,200 million to $2,300 million will
provide BCE with financial flexibility to execute its capital markets
strategy while maintaining robust levels of strategic capital
investment at Bell to support the growth of its operations and further
improve its competitive position.

BCE’s financial guidance for 2011 is as follows:

     
      IFRS 2010     Guidance 2011
Bell (i)    
Revenue $15,669 M  
Revenue Growth   1% – 2%
EBITDA $5,812 M  
EBITDA Growth   2% – 4%
Capital Intensity 16.0% ~16%
BCE    
Adjusted EPS $2.79 $2.90 – $3.00
Adjusted EPS Growth   4% – 8%
Free Cash Flow (ii) $1,412 M     $2,200 M – $2,300 M  
Free Cash Flow Growth (iii)       2% – 6%
(i)  Bell’s 2011 financial guidance for revenue, EBITDA and capital intensity
is exclusive of Bell Aliant.
(ii) Free cash flow of $1,412 million in 2010 includes the impact of a $750
million voluntary pension plan contribution made in December 2010.
(iii) The range of free cash flow growth for 2011 excludes the $750 million
voluntary pension plan contribution made in December 2010.

BCE’s financial guidance for 2011 does not reflect its pending
acquisition of CTVglobemedia Inc. (CTV) and will be updated upon the
completion of the CTV acquisition which is currently expected to close
in Q2 2011.

Call with Financial Analysts
BCE will hold a conference call for financial analysts to discuss its
fourth quarter results and 2011 guidance on Thursday, February 10 at
8:00 a.m. (Eastern). Media are welcome to participate on a listen-only
basis. To participate, please dial (416) 340-8530 or toll-free
1-877-240-9772 shortly before the start of the call. A replay will be
available for one week by dialing (416) 695-5800 or 1-800-408-3053 and
entering pass code 1525180#.

There will also be a live audio webcast of the call available on BCE’s
website at: http://www.bce.ca/en/news/eventscalendar/webcasts/2011/20110210/. The mp3 file will be available for download on this page later in the
day.

Notes
The information contained in this news release is unaudited.

(1) The term EBITDA (earnings before interest, taxes, depreciation and
amortization of intangible assets), as it relates to our 2010 and 2009
results prepared on a Canadian GAAP basis, does not have any
standardized meaning according to Canadian GAAP. It is therefore
unlikely to be comparable to similar measures presented by other
companies. We define EBITDA as operating revenues less cost of revenue
and selling, general and administrative expenses, meaning it represents
operating income before depreciation, amortization of intangible assets
and restructuring and other. We use EBITDA, among other measures, to
assess the operating performance of our ongoing businesses without the
effects of depreciation, amortization of intangible assets and
restructuring and other. We exclude these items because they affect the
comparability of our financial results and could potentially distort
the analysis of trends in business performance. We exclude depreciation
and amortization of intangible assets because it largely depends on the
accounting methods and assumptions a company uses, as well as
non-operating factors such as the historical cost of capital assets.
Excluding restructuring and other does not imply they are
non-recurring. EBITDA allows us to compare our operating performance on
a consistent basis. We believe that certain investors and analysts use
EBITDA to measure a company’s ability to service debt and to meet other
payment obligations, or as a common measurement to value companies in
the telecommunications industry. The most comparable Canadian GAAP
financial measure is operating income. The following tables are
reconciliations prepared under Canadian GAAP of operating income to
EBITDA for 2010 and 2009 on a consolidated basis for BCE, Bell and for
our Bell Wireline and Bell Wireless segments.
         
($ millions)        

BCE

Q4 2010

  Q4 2009

    2010

    2009

Operating income 836 751 3,672 3,191
Depreciation and amortization of intangible assets     856 904 3,292 3,371
Restructuring and other 52 82 224 527
EBITDA 1,744 1,737     7,188     7,089

BELL

Q4 2010

Q4 2009

2010

2009

Operating income 691 572 2,972 2,432
Depreciation and amortization of intangible assets 715 758 2,726 2,804
Restructuring and other 5 65 159 483
EBITDA 1,411 1,395 5,857 5,719

BELL WIRELINE

Q4 2010

Q4 2009

2010

2009

Operating income 454 280 1,812 1,148
Depreciation and amortization of intangible assets 566 622 2,169 2,284
Restructuring and other 6 58 155 475
EBITDA 1,026 960 4,136 3,907

BELL WIRELESS

Q4 2010

Q4 2009

2010

2 009

Operating income 237 292 1,160 1,284
Depreciation and amortization of intangible assets 149 136 557 520
Restructuring and other (1) 7 4 8
EBITDA 385 435 1,721 1,812
   
(2) The terms Adjusted net earnings and Adjusted EPS, as they relate to our
2010 and 2009 results prepared using Canadian GAAP, do not have any
standardized meaning according to Canadian GAAP. They are therefore
unlikely to be comparable to similar measures presented by other
companies. We define Adjusted net earnings as net earnings before
restructuring and other and net (gains) losses on investments. We
define Adjusted EPS as Adjusted net earnings per BCE Inc. common share.
We use Adjusted net earnings and Adjusted EPS, among other measures, to
assess the operating performance of our ongoing businesses without the
effects of after-tax restructuring and other and net (gains) losses on
investments. We exclude these items because they affect the
comparability of our financial results and could potentially distort
the analysis of trends in business performance. Excluding these items
does not imply they are non-recurring. The most comparable Canadian
GAAP financial measures are net earnings applicable to common shares
and earnings per share. The following table is a reconciliation of net
earnings applicable to common shares and earnings per share prepared
under Canadian GAAP to Adjusted net earnings on a consolidated basis
and per BCE Inc. common share (Adjusted EPS), respectively, for 2010
and 2009.
         
($ millions except per share amounts)        
  Q4 2010 Q4 2009 2010 2009
  TOTAL PER

   SHARE

   TOTAL PER

   SHARE

   TOTAL PER

   SHARE

   TOTAL PER

   SHARE

Net earnings applicable to common shares    (439) (0.58) (350) (0.46) (2,165) (2.85) (1,631) (2.11)
Restructuring and other (18) (0.03) (48) (0.06) (127) (0.17) (339) (0.44)
Net (gains) losses on investments (-) ((0.01)) ((11)) ((0.01)) ((133)) ((0.18)) ((41)) ((0.05))
Adjusted net earnings (457) (0.60) (387) (0.51) (2,159) (2.84) (1,929) (2.50)
   
(3) The term free cash flow, as it relates to our 2010 and 2009 results
prepared using Canadian GAAP, does not have any standardized meaning
according to Canadian GAAP. It is therefore unlikely to be comparable
to similar measures presented by other companies. We define free cash
flow as cash flows from operating activities and distributions received
from Bell Aliant less capital expenditures, preferred share dividends,
dividends/distributions paid by subsidiaries to non-controlling
interest, other investing activities and Bell Aliant free cash flow. We
consider free cash flow to be an important indicator of the financial
strength and performance of our business because it shows how much cash
is available to repay debt and reinvest in our company. We present free
cash flow consistently from period to period, which allows us to
compare our financial performance on a consistent basis. We believe
that certain investors and analysts use free cash flow to value a
business and its underlying assets. The most comparable Canadian GAAP
financial measure is cash flows from operating activities. The
following table is a reconciliation of cash flows from operating
activities prepared under Canadian GAAP to free cash flow for 2010 and
2009 on a consolidated basis.
         
($ millions)        
  Q4 2010    Q4 2009 2010 2009
Cash flows from operating activities 568 948 4,724 4,884
Bell Aliant distributions to BCE 73 72 291 291
Capital expenditures (1,022) (760)     (2,959)     (2,854)
Other investing activities (22) (11) (98) (89)
Dividends paid on preferred shares (28) (26) (108) (107)
Cash distributions paid by subsidiaries to non-controlling interest    (93) (92) (370) (369)
Bell Aliant free cash flow (25) (116) (106) (300)
Free cash flow (549) 15 1,374 1,456

Caution Concerning Forward-Looking Statements
Certain statements made in this news release, including, but not limited
to, statements relating to our 2011 financial guidance (including
revenues, EBITDA, capital intensity, Adjusted EPS and free cash flow),
our business outlook, objectives, plans and strategic priorities, BCE’s
dividend policy, the proposed acquisition by BCE of the remaining 85%
interest in CTV that it does not already own, and other statements that
are not historical facts, are forward-looking. Forward-looking
statements, by their very nature, are subject to inherent risks and
uncertainties and are based on several assumptions 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. As a result, we cannot guarantee that any forward-looking
statement will materialize and you are cautioned not to place undue
reliance on these forward-looking statements. The forward-looking
statements contained in this news release describe our expectations at
February 10, 2011 and, accordingly, are subject to change after such
date. Except as may be required by Canadian securities laws, we do not
undertake any obligation to update or revise any forward-looking
statements contained in this news release, 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 non-recurring or other special items or of any dispositions,
monetizations, mergers, acquisitions, other business combinations or
other transactions that may be announced or that may occur after
February 10, 2011. The financial impact of these transactions and
non-recurring and other 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 provided
for the purpose of providing information about management’s current
expectations and plans relating, in particular, to 2011 and allowing
investors and others to get a better understanding of our operating
environment. Readers are cautioned that such information may not be
appropriate for other purposes.

Material Assumptions

Economic and Market Assumptions
A number of Canadian economic and market assumptions were made by BCE in
preparing its forward-looking statements for 2011 contained in this
news release, including, but not limited to: (i) growth in Canadian GDP
of approximately 2.4% in 2011, compared to 2010, based on the Bank of
Canada’s recent estimate, (ii) cost rationalization and cautious
spending by business customers to continue given the modest pace of
economic recovery, (iii) current levels of residential wireline
competition to continue especially from cable companies and providers
of Voice over Internet Protocol (VoIP) services, (iv) higher wireline
substitution primarily due to the presence of new wireless entrants and
the accelerating adoption of mobile Internet and mobile television, and
(v) wireless industry penetration gain of 4 to 5 basis points in 2011
stimulated in particular by new entrant competition, the accelerating
adoption of smartphones and the use of data applications, as well as by
the emergence of new types of wireless devices such as tablets.

Operational Assumptions
Our forward-looking statements for 2011 are also based on certain
internal operational assumptions concerning Bell (excluding Bell
Aliant), including, but not limited to: (i) residential and business
network access services (NAS) losses to further slow down despite
continuing intense competition, (ii) continued customer migration to
Internet Protocol (IP)-based systems and ongoing pricing pressures in
our business and wholesale markets, (iii) Bell Mobility to maintain its
market share of the incumbent wireless postpaid market, (iv) Bell’s
ability to leverage its HSPA+ network investments to drive a higher mix
of smartphone and other high-value customers, resulting in higher data
and roaming revenues, (v) higher wireless average revenue per unit
(ARPU) driven by data usage and roaming growth, offset partly by lower
voice ARPU due to increased competition, (vi) wireless EBITDA margin
expansion, despite increased total spending on customer retention and
acquisition, due to the favourable impact of significant subscriber
loadings in 2010 and year-over-year growth in ARPU, (vii) continued
broadband infrastructure and fibre expansion and upgrades to support
our Internet Protocol Television (Fibe TV) and Internet services,
(viii) approximately 2 million Fibe TV ready households and broadband
fibre footprint to be extended to approximately 4 million homes by the
end of 2011, (ix) broadband fibre improvements to drive increased
subscriber and ARPU growth, as well as lower customer churn, * Fibe
TV to contribute to stronger overall video subscriber growth, (xi)
wireline expense reductions and operating efficiency gains, resulting
from our ongoing focus on cost saving opportunities, to help offset
costs associated with scaling Bell’s Fibe TV service and to continue to
support maintenance of stable EBITDA margins.

Financial Assumptions
Our forward-looking statements for 2011 are also based on certain
financial assumptions for 2011 concerning Bell (excluding Bell Aliant)
including, but not limited to: (i) Bell’s pension expense to be
approximately $120 million, based on an estimated accounting discount
rate of 5.5% and an expected return on plan assets of 7%, with an
estimated above EBITDA current service cost of approximately $170
million
and an estimated below EBITDA net pension financing return of
approximately $50 million, (ii) Bell’s total pension plan cash funding
to be approximately $400 million, (iii) Bell’s cash taxes to be
approximately $200 million, and (iv) Bell to repay its 2011 debt
maturities.

Our forward-looking statements for 2011 are also based on certain
financial assumptions for 2011 concerning BCE, including, but not
limited to: (i) depreciation and amortization expense slightly lower
compared to 2010, (ii) restructuring and other expenses in the range of
$100 million to $150 million, (iii) a statutory tax rate of
approximately 28.3% and an effective tax rate of approximately 25%, and
(iv) an annual common share dividend of $1.97 per share.

The foregoing assumptions, although considered reasonable by BCE on
February 10, 2011, may prove to be inaccurate. Accordingly, our actual
results could differ materially from our expectations as set forth in
this news release.

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 2011 financial guidance, are listed below. The
realization of our forward-looking statements, including our ability to
meet our 2011 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 the increase in wireless competitive activity resulting from
Industry Canada’s licensing of AWS spectrum to new wireless entrants
and their ability to launch or expand services, and the resulting
impact on our rates of NAS erosion and, generally, on our ability to
retain existing, and attract, new customers, and the resulting impact
on our pricing strategies, ARPU and financial results; variability in
subscriber acquisition and retention costs based on subscriber
acquisitions, retention volumes, smartphone sales and subsidy levels;
the level of technological substitution contributing to reduced
utilization of traditional wireline voice services and increasing
numbers of households that only have wireless telephone services; the
increased adoption by customers of TV alternative services; general
economic and financial market conditions, the level of consumer
confidence and spending, and the demand for, and prices of, our
products and services; our ability to implement our strategies and
plans in order to produce the expected benefits; our ability to
continue to implement our cost reduction initiatives and contain
capital intensity while seeking to improve customer service; our
ability to respond to technological changes and rapidly offer new
products and services; increased contributions to employee benefit
plans; events affecting the functionality of, and our ability to
protect, maintain and replace, our networks, information technology
(IT) systems and software; the complexity and costs of our IT
environment; events affecting the ability of third-party suppliers to
provide to us essential products and services and our ability to
purchase such essential products and services such as handsets; the
quality of our network and customer equipment and the extent to which
they may be subject to manufacturing defects; labour disruptions; the
potential adverse effects on our Internet and wireless networks of the
significant increase in broadband demand and in the volume of wireless
data-driven traffic; capital and other expenditure levels, financing
and debt requirements and our ability to raise the capital we need to
implement our business plan, including for dividend payments and to
fund capital and other expenditures and generally meet our financial
obligations; our ability to discontinue certain traditional services as
necessary to improve capital and operating efficiencies; regulatory
initiatives or proceedings (including the possibility of Industry
Canada increasing spectrum licence fees and possible changes to foreign
ownership restrictions), litigation, changes in laws or regulations and
tax matters; launch and in-orbit risks of satellites used by Bell TV;
competition from unregulated U.S. DTH satellite television services
sold illegally in Canada and the theft of our satellite television
services; BCE’s dependence on the ability of its subsidiaries, joint
ventures and other companies in which it has an interest to pay
dividends and make other distributions; there can be no certainty that
dividends will be declared by BCE’s board of directors or that BCE’s
dividend policy will be maintained; stock market volatility; our
ability to maintain customer service and our networks operational in
the event of the occurrence of environmental disasters or epidemics,
pandemics and other health risks; health concerns about radio frequency
emissions from wireless devices; the expected timing and completion of
the proposed acquisition by BCE of the remaining 85% interest in CTV
that it does not already own is subject to closing conditions,
termination rights and other risks and uncertainties including, without
limitation, any required regulatory approvals; and employee retention
and performance.

We encourage investors to also read BCE’s Safe Harbour Notice Concerning
Forward-Looking Statements dated February 10, 2011, for additional
information with respect to certain of these and other assumptions and
risks, filed by BCE with the Canadian securities commissions (available
at www.sedar.com) and with the U.S. Securities and Exchange Commission (available at www.sec.gov). This document is also available on BCE’s website at www.bce.ca. BCE’s Safe Harbour Notice Concerning Forward-Looking Statements dated
February 10, 2011 is incorporated by reference into this news release.
For additional information, please refer to the February 10, 2011 Bell
Analyst Guidance Call presentation available on BCE’s website.

About BCE
BCE is Canada’s largest communications company, providing the most
comprehensive and innovative suite of communication services to
residential and business customers in Canada. Operating under the Bell
and Bell Aliant brands, the Company’s services include telephone
services, wireless communications, high-speed Internet, digital
television, IP-broadband services and information and communications
technology (ICT) services.

The Bell Mental Health Initiative is a multi-year charitable program
that promotes mental health across Canada via the Bell Let’s Talk
anti-stigma campaign and support for community care, research and
workplace best practices. To learn more, please visit www.bce.ca/mentalhealth. BCE shares are listed in Canada and the United States. For corporate
information on BCE, please visit www.bce.ca. For Bell product and service information, please visit www.bell.ca.

SOURCE BCE Inc.


Source: newswire