Plain-text annual report
Better
connectivity
environment
security
network
service
technology
education
growth
workplace
communities
mental health
content
world
value
investments
opportunities
AnnuAl fInAnCIAl rEport 2022
Every day we work to
advance how Canadians connect
with each other
and the world. Our business
is communications, but our reach
goes far beyond this. As one of
Canada’s largest companies, we
believe
our passion and the way
we invest our time and
money will make a positive
difference.
Every day we work to
advance how Canadians
connect with each other
and the world. Our business
is communications, but our
reach goes far beyond this.
As one of Canada’s largest
companies, we believe
our passion and the way
we invest our time and
money will make a positive
difference.
Our financial performance
Financial and operational highlights
The Bell team provided the best in communications technologies in 2022 that enhanced the connectivity
of Canadians. These connections form the foundation for BCE’s long-term success and our objective
to deliver sustainable dividend growth for our shareholders.
2022 financial performance
Revenue growth †
Adjusted EBITDA (1) growth †
Net earnings growth †
Capital intensity (2)
Net earnings per share (EPS) growth †
Adjusted EPS (1) growth †
Cash flows from operating activities growth †
Free cash flow (1) growth †
† Compared to 2021
Actual
3.1%
3.1%
1.2%
21.2%
–0.3%
5.0%
4.5%
2.9%
Target
1%–5%
2%–5%
n/a
21%
n/a
2%–7%
n/a
2%–10%
6.2%
Dividend yield
in 2022(3)
5.2%
Increase in dividend
per common share
for 2023
15
Consecutive years
of 5% or greater
dividend growth
(1) Adjusted EBITDA is a total of segments measure, adjusted EPS is a non-GAAP ratio and free cash flow is a non-GAAP financial measure. These financial measures do not have any
standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. We define
adjusted EPS as adjusted net earnings per BCE common share. Refer to section 11, Non-GAAP financial measures, other financial measures and key performance indicators (KPIs) of the
BCE 2022 Annual MD&A for more information on these measures including, in the case of adjusted EBITDA, a reconciliation to net earnings as being the most comparable IFRS financial
measure and for free cash flow, a reconciliation to cash flows from operating activities as being the most comparable IFRS financial measure.
(2) Capital intensity is defined as capital expenditures divided by operating revenues.
(3) Annualized dividend per BCE common share divided by BCE’s share price at the end of the year.
Table of contents
Message from the Chair of the Board............................. 4
Message from the President and CEO ............................ 6
Management’s discussion and analysis .......................... 8
Reports on internal controls ...................................... 112
Consolidated financial statements ............................. 114
Board of directors ..................................................... 164
Executives ................................................................. 165
Investor information .................................................. 166
For a description of the risk factors and assumptions related to the forward-looking statements presented above and in the following Messages, please see the section entitled Caution
regarding forward-looking statements in the BCE 2022 Annual MD&A later in this report.
2
BCE InC. AnnuAl fInAnCIAl rEport 2022
Connecting Canadians with advanced technology services and media
Bell team members continue to champion the customer experience as we deliver advanced networks,
technology services and compelling content to individuals, families, communities, businesses and
governments across Canada. Our strong focus on expanding the availability and capabilities of our
fibre broadband, television and wireless services and making it easier to do business with Bell enabled
solid subscriber growth in retail Internet, Internet Protocol television (IPTV) and wireless in 2022.
2021
Change
9.46
2.25
3.86
2.74
2.30
+5.2%
+9.0%
+10.3%
+0.6%
–4.7%
+4.8%
BCE retail subscribers (millions)
Mobile phone
Mobile connected device
Internet (1) (2) (3)
TV (1) (2) (3)
Residential telephone services (1) (2) (3) (4)
2022
9.95
2.45
4.26
2.75
2.19
Total
21.60
20.60
24.28M
Total Bell consumer,
business and wholesale
customer connections
(1) Excludes wholesale subscribers.
(2) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our Internet, TV and residential telephone services subscriber bases increased by 67,090, 9,025 and
3,456 subscribers, respectively.
(3) In Q4 2022, as a result of the acquisition of Distributel, our Internet, TV and residential telephone services subscriber bases increased by 128,065, 2,315 and 64,498 subscribers, respectively.
(4) Excludes business telephone services.
3
Message from the Chair of the Board
Strong performance toward greater sustainability, resiliency
BCE excels at creating value for the benefit of customers, communities, employees
and shareholders. Our progress in 2022 combined strong financial performance with
an ongoing focus on contributing responsibly to creating a better, more sustainable
and resilient future.
Bell’s purpose is to advance how Canadians connect with each
other and the world. We accelerate our positive momentum by
investing in our networks, services and content to the benefit of
all Bell stakeholders. By working together, we seek to build a
sustainable future for our common benefit, guided by our six
strategic imperatives.
Growth and performance
Throughout our 143-year history, Bell has delivered the latest
communications technologies, helping Canadian businesses
compete and enabling customers to connect with increasingly
greater speed, reach and reliability to what they want,
when they want it.
Across the BCE group of companies, we are building fibre and
wireless networks that are among the fastest in North America
with the quality and resiliency that Canadians have come to
expect. We are consistently making it easier for customers
to do business with us. We are delivering innovative products
and services that make life and work easier and more
productive. We are informing and entertaining Canadians
across the country through our media properties. And we are
moving forward with responsible actions to enhance how we
perform and manage risk in an intensely competitive, highly
dynamic and rapidly changing environment.
These actions, combined with our commitments to ESG,
and through our Bell for Better initiatives in mental health,
environmental and workplace leadership, all contribute
to a more sustainable and resilient future for our customers,
our employees and our shareholders.
In 2022, Corporate Knights named Bell the top
telecommunications company, and fourth-ranked company
overall in Canada, on their Best 50 Corporate Citizens list, a
recognition earned based on the strengths of our ESG and
sustainability initiatives and the positive impacts we make
in communities across the country. We also successfully
completed our third year holding the ISO 50001 certification
for our Energy Management System – after becoming North
America’s first communications company to achieve that
designation – and we were named one of Canada’s Greenest
Employers for the sixth consecutive year, as we move closer
to our goal of achieving carbon neutral operations by 2025
and reducing absolute GHG emissions by 2030.
Reflecting our deeply embedded focus on workplace
benefits, skills development and diversity, equity, inclusion
and belonging, in 2022 Bell was named by Mediacorp one of
Canada’s Top Employers for the eighth year in a row and one
of Canada’s Top Employers for Young People for the fifth year
running. Bell also repeated as one of Canada’s Top Diversity
Employers, a Top Family-Friendly Employer and a Montréal
Top Employer. More recently, Bell was recognized as a Future
Workforce Top Employer in Computer Sciences based on input
from thousands of Canadian university and college students.
New Integrated Annual Report
In keeping with our ESG practices and our sustainability
goals, we have released an Integrated Annual Report for
2022 – a first for us and for a major communications company
in North America. This report combines both our traditional
annual report and our corporate responsibility report,
in recognition that our ESG practices are a fundamental
component to the daily operations of our business.
We’re proud of this new approach, and we encourage
stakeholders to access our public reports electronically to
do their part for environmental sustainability.
4
BCE InC. AnnuAl fInAnCIAl rEport 2022
Gordon M. nixon
Chair of the Board
BCE Inc.
We have increased our common
share dividend 5.2% to $3.87 in 2023,
the 15th consecutive year BCE has
increased the dividend by at least 5%.
Stakeholder returns
Bell’s growth strategy continues to deliver strong financial
results. Supported by healthy free cash flow generation
and a strong balance sheet, we continued accelerating
capital expenditures on advanced broadband and wireless
connectivity, reaching a historic high of $5.1 billion in 2022.
Our sound financial position also allowed us to increase
our common share dividend 5.2% to $3.87 effective with
the Q1 2023 payment on April 17, 2023, the 15th consecutive
year BCE has increased the dividend by at least 5%.
Board update
In October 2022, we welcomed Louis Vachon as a Director
on the BCE Board and as a member of our Management
Resources and Compensation and Risk and Pension Fund
committees. An exceptional business leader and experienced
corporate executive, Louis is a recipient of the Global Citizens
Award from the United Nations Association in Canada and is
also a Member of the Order of Canada and an Officer of the
National Order of Québec.
Last year also brought sad news with the loss of former Bell
and BCE CEO Jean de Grandpré. An important and influential
business leader, Jean played a key role in the creation of BCE
in 1983. Jean was fond of saying “It is the people that make the
company.” We could not agree more, and we extend a thank
you to all members of the BCE and Bell team who worked
every day and through many challenges in 2022 to deliver on
behalf of all Canadians.
As Chair and on behalf of every member of the BCE Board,
I thank all of our stakeholders for your ongoing support.
I trust you share our confidence in the future direction of the
BCE group of companies as we continue our journey toward
a more sustainable and resilient future.
Gordon M. Nixon
Chair of the Board
BCE Inc.
5
Message from the President and CEO
Delivering best-ever connectivity to more Canadians
At Bell, our purpose is to advance how Canadians connect with each other
and the world, and today we are providing more Canadians than ever
with the best in communications technologies while always prioritizing
customer service and support for the communities we serve.
Prioritizing customers
At Bell, we know that Canadians rely on us to keep them
connected. We continued to exceed 99.99% reliability across
our networks in 2022, and when extreme events like Hurricane
Fiona put our services to the test, the resiliency of our core
networks and the tremendous efforts of Bell team members
made a massive, positive difference for customers.
In 2022, Bell led all national service providers in significantly
reducing complaints to the Commission for Complaints for
Telecom-television Services, our seventh consecutive year of
improvement. We also continued to develop our award-winning
MyBell, Virgin Plus My Account and Lucky Mobile My Account
apps, delivering more real-time information and capabilities
than ever as part of initiatives that help make it easier for
customers to do business with Bell.
Always at the forefront of developments in communications
technologies, in 2022 we launched Bell Ventures to support
early-stage growth companies developing new solutions
that harness the power of our networks. We also built on our
partnership with Amazon Web Services to launch Bell Public
MEC with AWS Wavelength, a multi-access edge computing
service that unlocks more opportunities for Canadian
businesses to adopt augmented reality/virtual reality, artificial
intelligence (AI), machine learning (ML) and advanced robotics
to innovate faster and push boundaries like never before.
And we delivered more compelling content, viewable anytime,
anywhere for English- and French-language audiences over
our innovative digital platforms, including the newly launched
TSN+ streaming product, as well as iHeartRadio and Crave,
Canada’s only direct-to-consumer bilingual streaming service.
Bell is a technology services and media leader. Our sophisticated
networks and services – among the fastest in North America –
are foundational, enabling millions of Canadians to connect as
never before.
Achieving this new height is the direct result of our consistent
focus on six, purpose-driven strategic imperatives – build the
best networks; drive growth with innovative services; deliver
the most compelling content; champion customer experience;
operate with agility and cost efficiency; and engage and invest
in our people and create a sustainable future.
In step with our 2022 accomplishments and the positive
environmental, social and economic changes driven by our
leading ESG and Bell for Better actions and commitments,
today Bell is uniquely positioned to deliver more than
ever for consumers, businesses, innovators, communities,
our team members and shareholders.
Unparalleled reach and reliability
At the outset of COVID-19, Bell chose to accelerate investments
in our broadband, wireless and core networks to help
Canadians address and recover from the pandemic. Since
2020 and through the end of 2022, Bell has led Canada’s
communications industry with capital expenditures of
$14 billion, including a historic high of $5.1 billion in 2022.
Supported by these investments, Bell today delivers advanced
broadband services to millions of urban and rural homes and
businesses throughout our service footprint in Atlantic Canada,
Québec, Ontario and Manitoba. This includes the addition in
2022 of 854,000 new customer locations with access to Bell
pure fibre. We also launched multi-gigabit services – including
Bell Gigabit Fibe 8.0, North America’s fastest Internet when
introduced – as well as the new Giga Hub with Wi-Fi 6E to best
connect multiple devices in a single location. And we continue
working with all levels of government to deliver fibre to many
remote areas, including Indigenous and northern communities.
Bell’s 5G wireless network is currently available to more
than 80% of Canadians in all 10 provinces. We also launched
Bell 5G+ in 2022, which currently reaches 38% of the national
population, providing even faster and more responsive
connections.
6
BCE InC. AnnuAl fInAnCIAl rEport 2022
Mirko Bibic
President and
Chief Executive Officer
BCE Inc. and Bell Canada
Our ESG and Bell for Better
initiatives are cornerstones for
building a more sustainable and
resilient future, and Bell Let’s Talk
has been critical to growing
support for mental health.
Investing in communities and our team
Our ESG and Bell for Better initiatives are cornerstones for
building a more sustainable and resilient future, and Bell
Let’s Talk has been critical to growing support for mental
health. As part of the most recent annual Bell Let’s Talk Day,
we announced $10 million in additional funds for mental
health – our largest commitment ever on Bell Let’s Talk
Day – and adjusted our focus to highlight meaningful actions
community-based mental health organizations are taking
across Canada every day.
Bell team members also know that our commitment to
community extends to the workplace. As highlighted with our
new Employee Value Proposition launched in 2022, today we
offer more opportunities than ever for team members to grow
and succeed. Our Bell for Better and diversity, equity, inclusion
and belonging initiatives – including our strong focus on gender
parity, BIPOC representation on teams across the country,
learning and skills development and a more accessible work
environment – reflect values we are proud to build on.
On behalf of all Bell team members, thank you to all our
stakeholders for your ongoing support – together we are
driving important changes forward as we advance how
Canadians connect with each other and the world.
Mirko Bibic
President and Chief Executive Officer
BCE Inc. and Bell Canada
7
Management’s discussion and analysis
Table of contents
1 Overview
Introduction
1.1
1.2 About BCE
1.3 Key corporate developments
1.4 Capital markets strategy
1.5 Corporate governance and risk management
1.6 Capitals and our corporate responsibility
2 Strategic imperatives
2.1 Build the best networks
2.2 Drive growth with innovative services
2.3 Deliver the most compelling content
2.4 Champion customer experience
2.5 Operate with agility and cost efficiency
2.6 Engage and invest in our people and create
a sustainable future
3
Performance targets, outlook, assumptions
and risks
3.1 BCE 2022 performance vs. guidance targets
3.2 Business outlook and assumptions
3.3 Principal business risks
4 Consolidated financial analysis
Introduction
4.1
4.2 Customer connections
4.3 Operating revenues
4.4 Operating costs
4.5 Net earnings
4.6 Adjusted EBITDA
4.7 Severance, acquisition and other costs
4.8 Depreciation and amortization
4.9 Finance costs
4.10 Impairment of assets
4.11 Other (expense) income
4.12 Income taxes
4.13 Net earnings attributable to common shareholders
and EPS
4.14 Capital expenditures
4.15 Cash flows
12
12
14
18
19
22
25
33
33
33
34
35
35
36
37
37
38
39
44
44
45
46
47
47
48
48
49
49
50
50
51
51
52
52
5 Business segment analysis
5.1 Bell Wireless
5.2 Bell Wireline
5.3 Bell Media
5.4 Segmented business outlook, assumptions and risks
6 Financial and capital management
6.1 Net debt
6.2 Outstanding share data
6.3 Cash flows
6.4 Post-employment benefit plans
6.5 Financial risk management
6.6 Credit ratings
6.7 Liquidity
6.8 Litigation
7 Selected annual and quarterly information
7.1 Annual financial information
7.2 Quarterly financial information
8 Regulatory environment
9 Business risks
10 Accounting policies
11 Non-GAAP financial measures, other financial
measures and key performance indicators (KPIs)
11.1 Non-GAAP financial measures
11.2 Non-GAAP ratios
11.3 Total of segments measures
11.4 Capital management measures
11.5 Supplementary financial measures
11.6 KPIs
12 Effectiveness of internal controls
53
53
57
62
65
70
70
71
71
73
74
77
77
79
80
80
83
86
91
101
105
105
108
108
109
110
110
111
3
BCE InC. AnnuAl fInAnCIAl rEport 2022
MD&A In this management’s discussion and analysis (MD&A), we, us, our, BCE
and the company mean, as the context may require, either BCE Inc. or,
collectively, BCE Inc., Bell Canada, their subsidiaries, joint arrangements
and associates. Bell means, as the context may require, either Bell
Canada or, collectively, Bell Canada, its subsidiaries, joint arrangements
and associates.
All amounts in this MD&A are in millions of Canadian dollars, except
where noted. Please refer to section 11, Non-GAAP financial measures,
other financial measures and key performance indicators (KPIs) for a
list of defined non-GAAP financial measures, other financial measures
and KPIs.
Please refer to BCE’s audited consolidated financial statements for the
year ended December 31, 2022 when reading this MD&A.
In preparing this MD&A, we have taken into account information available
to us up to March 2, 2023, the date of this MD&A, unless otherwise stated.
You will find additional information relating to BCE, including BCE’s audited
consolidated financial statements for the year ended December 31, 2022,
BCE’s annual information form for the year ended December 31, 2022,
dated March 2, 2023 (BCE 2022 AIF) and recent financial reports, on BCE’s
website at BCE.ca, on SEDAR at sedar.com and on EDGAR at sec.gov.
Documents and other information contained in BCE’s website or in any
other site referred to in BCE’s website or in this MD&A are not part of
this MD&A and are not incorporated by reference herein.
This MD&A comments on our business operations, performance, financial
position and other matters for the two years ended December 31, 2022
and 2021.
4
MD&A Caution regarding forward-looking statements
This MD&A and, in particular, but without limitation, section 1.3, Key
corporate developments, section 1.4, Capital markets strategy, section 1.6,
Capitals and our corporate responsibility, section 2, Strategic imperatives,
section 3.2, Business outlook and assumptions, section 5, Business
segment analysis and section 6.7, Liquidity, contain forward-looking
statements. These forward-looking statements include, without limitation,
statements relating to our projected financial performance for 2023,
BCE’s dividend growth objective and 2023 annualized common share
dividend and dividend payout ratio level, BCE’s anticipated capital
expenditures, network deployment plans and the benefits expected to
result therefrom, BCE’s financial policy targets, the sources of liquidity
we expect to use to meet our anticipated 2023 cash requirements,
our expected post-employment benefit plans funding including an
anticipated reduction in contributions to our pension plans in 2023, Bell
Ventures’ planned investments in early-stage and growth companies
that provide advanced technology solutions, our environmental, social
and governance (ESG) objectives, which include, without limitation, our
objectives concerning diversity, equity, inclusion and belonging (DEIB), our
targeted reductions in the level of our greenhouse gas (GHG) emissions
including, without limitation, our plans to be carbon neutral for our
operational GHG emissions starting in 2025 and to achieve science-
based targets (SBTs) by 2026 or 2030, as applicable, our objectives
concerning reductions in waste to landfill, e-waste recovery, community
investment, privacy and information security, corporate governance and
ethical business conduct leadership, BCE’s business outlook, objectives,
plans and strategic priorities, and other statements that do not refer
to historical facts. A statement we make is forward-looking when it
uses what we know and expect today to make a statement about the
future. Forward-looking statements are typically identified by the words
assumption, goal, guidance, objective, outlook, project, strategy, target
and other similar expressions or future or conditional verbs such as aim,
anticipate, believe, could, expect, intend, may, plan, seek, should, strive
and will. All such forward-looking statements are made pursuant to the
safe harbour provisions of applicable Canadian securities laws and of
the United States (U.S.) Private Securities Litigation Reform Act of 1995.
Unless otherwise indicated by us, forward-looking statements in this
MD&A describe our expectations as at March 2, 2023 and, accordingly,
are subject to change after that date. Except as may be required by
applicable securities laws, we do not undertake any obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
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. Forward-looking statements are presented in this MD&A
for the purpose of assisting investors and others in understanding
our objectives, strategic priorities and business outlook as well as our
anticipated operating environment. Readers are cautioned, however,
that such information may not be appropriate for other purposes.
We have made certain economic, market, operational and other
assumptions in preparing the forward-looking statements contained in
this MD&A, and, in particular, but without limitation, the forward-looking
statements contained in the previously mentioned sections of this MD&A.
These assumptions include, without limitation, the assumptions described
in the various sub-sections of this MD&A entitled Assumptions, which
sub-sections are incorporated by reference in this cautionary statement.
Subject to various factors including, without limitation, the future impacts
of general economic conditions, of the COVID-19 pandemic and of
geopolitical events, which are difficult to predict, we believe that our
assumptions were reasonable at March 2, 2023. If our assumptions
turn out to be inaccurate, actual results or events could be materially
different from what we expect.
Important risk factors that could cause actual results or events to differ
materially from those expressed in, or implied by, the previously-
mentioned forward-looking statements and other forward-looking
statements contained in this MD&A, include, but are not limited to: the
negative effect of adverse economic conditions, including a potential
recession, and related inflationary cost pressures, higher interest
rates and financial and capital market volatility; the negative effect
of adverse conditions associated with the COVID-19 pandemic and
geopolitical events; a declining level of business and consumer spending,
and the resulting negative impact on the demand for, and prices of, our
products and services; regulatory initiatives, proceedings and decisions,
government consultations and government positions that affect us
and influence our business including, without limitation, concerning
mandatory access to networks, spectrum auctions, the imposition
of consumer-related codes of conduct, approval of acquisitions,
broadcast and spectrum licensing, foreign ownership requirements,
privacy and cybersecurity obligations and control of copyright piracy;
the inability to implement enhanced compliance frameworks and to
comply with legal and regulatory obligations; unfavourable resolution
of legal proceedings; the intensity of competitive activity and the failure
to effectively respond to evolving competitive dynamics; the level of
technological substitution and the presence of alternative service
providers contributing to disruptions and disintermediation in each of
0
BCE InC. AnnuAl fInAnCIAl rEport 2022
MD&A our business segments; changing customer behaviour and the expansion
of cloud-based, over-the-top (OTT) and other alternative solutions;
advertising market pressures from economic conditions, fragmentation
and non-traditional/global digital services; rising content costs and
challenges in our ability to acquire or develop key content; higher
Canadian smartphone penetration and reduced or slower immigration
flow; the inability to protect our physical and non-physical assets from
events such as information security attacks, unauthorized access or
entry, fire and natural disasters; the failure to implement effective data
governance; the failure to evolve and transform our networks, systems
and operations using next-generation technologies while lowering our
cost structure; the inability to drive a positive customer experience; the
failure to attract, develop and retain a diverse and talented team capable
of furthering our strategic imperatives; the failure to adequately manage
health and safety concerns; labour disruptions and shortages; the failure
to maintain operational networks; the risk that we may need to incur
significant capital expenditures to provide additional capacity and reduce
network congestion; the inability to maintain service consistency due
to network failures or slowdowns, the failure of other infrastructure, or
disruptions in the delivery of services; service interruptions or outages
due to legacy infrastructure and the possibility of instability as we
transition towards converged wireline and wireless networks and
newer technologies; the failure by us, or by other telecommunications
carriers on which we rely to provide services, to complete planned
and sufficient testing, maintenance, replacement or upgrade of our or
their networks, equipment and other facilities, which could disrupt our
operations including through network or other infrastructure failures;
events affecting the functionality of, and our ability to protect, test,
maintain, replace and upgrade, our networks, information technology (IT)
systems, equipment and other facilities; the complexity of our operations;
the failure to implement or maintain highly effective processes and IT
systems; in-orbit and other operational risks to which the satellites
used to provide our satellite television (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; the failure of our vendor selection, governance and oversight
processes, including our management of supplier risk in the areas of
security, data governance and responsible procurement; the quality of
our products and services and the extent to which they may be subject
to defects or fail to comply with applicable government regulations and
standards; reputational risks and the inability to meaningfully integrate
ESG considerations into our business strategy and operations; the
failure to take appropriate actions to adapt to current and emerging
environmental impacts, including climate change; pandemics, epidemics
and other health risks, including health concerns about radio frequency
emissions from wireless communications devices and equipment; the
inability to adequately manage social issues; the failure to develop and
implement strong corporate governance practices; various internal
and external factors that could challenge our ability to achieve our ESG
targets including, without limitation, those related to GHG emissions
reduction and diversity, equity, inclusion and belonging (DEIB); the
inability to access adequate sources of capital and generate sufficient
cash flows from operating activities 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
(Board) or whether the dividend on common shares will be increased;
the inability to manage various credit, liquidity and market risks; the
failure to reduce costs, as well as unexpected increases in costs; the
failure to evolve practices to effectively monitor and control fraudulent
activities; 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 impact on our financial statements and our
estimates from a number of factors; and pension obligation volatility
and increased contributions to post-employment benefit plans.
These and other risk factors that could cause actual results or events
to differ materially from our expectations expressed in, or implied by,
our forward-looking statements are discussed in this MD&A and, in
particular, in section 9, Business risks of this MD&A.
Forward-looking statements contained in this MD&A for periods
beyond 2023 involve longer-term assumptions and estimates than
forward-looking statements for 2023 and are consequently subject
to greater uncertainty. Forward-looking statements for periods
beyond 2023 further assume, unless otherwise indicated, that the
risks described above and in section 9, Business risks of this MD&A will
remain substantially unchanged during such periods, except for an
assumed improvement in the risks related to the COVID-19 pandemic
in future years.
We caution readers that the risk factors described above and in the
previously-mentioned section and in other sections of this MD&A are
not the only ones that could affect us. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial
may also have a material adverse effect on our business, financial
condition, liquidity, financial results or reputation. We regularly consider
potential acquisitions, dispositions, mergers, business combinations,
investments, monetizations, joint ventures and other transactions,
some of which may be significant. Except as otherwise indicated by
us, forward-looking statements do not reflect the potential impact
of any such transactions or of special items that may be announced
or that may occur after March 2, 2023. The financial impact of these
transactions and special items can be complex and depends on 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.
MD&A
In 2022, we applied this agenda decision retrospectively, to each prior
period presented, the impact of which was limited to the classification
of funding of $97 million received in Q1 2021 under a subsidy agreement
with the Government of Québec. For further details, see section 10,
Accounting policies in this MD&A.
Bell Wireline includes data revenues (including Internet, Internet protocol
television (IPTV), cloud-based services and business solutions), voice
and other communication services revenues, and wireline product sales.
These services are provided to our residential, small and medium-sized
business and large enterprise customers primarily in Ontario, Québec,
the Atlantic provinces and Manitoba, while satellite TV service and
connectivity to business customers are available nationally across
Canada. In addition, this segment includes the results of our wholesale
business, which buys and sells local telephone, long distance, data and
other services from or to resellers and other carriers.
Bell Media provides conventional TV, specialty TV, pay TV, streaming
services, digital media services, radio broadcasting services and
out-of-home (OOH) advertising services to customers nationally
across Canada. Revenues are derived primarily from advertising and
subscriber fees.
We also hold investments in a number of other assets, including:
• a 37.5% indirect equity interest in Maple Leaf Sports & Entertainment Ltd.
(MLSE)
• a 50% indirect equity interest in Glentel Inc. (Glentel)
• an 18.4% indirect equity interest in entities that operate the Montréal
Canadiens Hockey Club, evenko and the Bell Centre in Montréal,
Québec, as well as Place Bell in Laval, Québec
1 Overview
In April 2022, the International Financial Reporting Interpretations
Committee (IFRIC) issued an agenda decision clarifying that an entity
should present a demand deposit with restrictions on use arising
from a contract with a third party as cash and cash equivalents in the
statements of financial position and cash flows, unless those restrictions
change the nature of the deposit such that it no longer meets the
definition of cash in IAS 7.
1.1
Introduction
At a glance
BCE is Canada’s largest communications company, providing residential,
business and wholesale customers with a wide range of solutions for
all their communications needs. BCE’s shares are publicly traded on
the Toronto Stock Exchange and on the New York Stock Exchange
(TSX, NYSE: BCE).
Our results are reported in three segments: Bell Wireless, Bell Wireline and
Bell Media. Effective with our Q1 2023 results, our previous Bell Wireless
and Bell Wireline operating segments are being combined to form a
single reporting segment called Bell Communication and Technology
Services (Bell CTS). Bell Media remains a distinct operating segment
and is unaffected. Refer to section 1.2, About BCE for further details.
Bell Wireless includes wireless service revenues and product sales as
well as the results of operations of our national consumer electronics
retailer, The Source (Bell) Electronics Inc. (The Source). Wireless services
are provided to our residential, small and medium-sized business and
large enterprise customers across Canada.
BCE is Canada’s largest
communications company
BCE’s business segments
At December 31, 2022
BCE
Bell
Wireless
Bell
Wireline
Bell
Media
2
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview
Our purpose
BCE’s purpose is to advance how Canadians connect with each other and the world. Our strategy builds on our longstanding strengths in networks,
service innovation and content creation, and positions the company for continued growth and innovation leadership. Our primary business
objectives are to grow our subscriber base profitably and to maximize revenues, operating profit, free cash flow and return on invested capital
by further enhancing our position as the foremost provider in Canada of comprehensive communications services to residential, business and
wholesale customers, and as Canada’s leading content creation company. We seek to take advantage of opportunities to leverage our networks,
infrastructure, sales channels, and brand and marketing resources across our various lines of business to create value for our customers and
other stakeholders.
Our strategy is centred on our disciplined focus and execution of six strategic imperatives that position us to deliver continued success in a
fast-changing communications marketplace. The six strategic imperatives that underlie BCE’s business plan are:
Bell’s
six strategic
imperatives
Build the
best networks
Drive growth with
innovative services
Deliver the most
compelling content
Champion
customer experience
Operate with agility
and cost efficiency
Engage and invest in
our people and create
a sustainable future
In 2022, we embedded our focus on creating a more sustainable future directly into our six strategic imperatives, reflecting our long-standing
commitment to the highest ESG standards. As one of Canada’s largest companies, we are driven to continually improve our impact and our contribution
to society with our connectivity commitments, investments in mental health initiatives, environmental sustainability and an engaged workplace.
Our alignment to the International Integrated Reporting Framework
Following the principles of the International Integrated Reporting Framework ( Framework) of the International Integrated Reporting Council
(IIRC) (which now forms part of the Value Reporting Foundation), Bell released, concurrently with this MD&A, an Integrated Annual Report which
contains a strategic overview outlining our sustainable value creation process. This strategic overview discloses how we seek to generate
sustainable value for our stakeholders as the result of our business operations, guided by our strategic imperatives and use of capitals. Our
capitals are outlined below and serve as inputs that are transformed through our business strategy and strategic imperatives resulting in
outcomes that seek to create value for our stakeholders over time.
Our
networks
Reliable, accessible
and affordable
world-class
broadband fibre and
wireless networks.
Our customers
and relationships
Strong relationships
with customers,
communities
and suppliers.
Our products
and services
Innovative and
compelling products,
services and media
content addressing
societal demands.
Our
environment
Responsible
environmental
management
throughout
our operations.
Our
people
Skilled, engaged
and diverse
team members.
Our financial
resources
Capital from our
investors, returns
on our investments
and free cash flow
generated from our
operations.
To increase the connectivity of information, we have incorporated the icons representing our six capitals described above throughout this MD&A
to highlight the respective linkage between our capitals and the topics discussed.
5
2 MD&A Overview
BCE 2022 consolidated results
Operating revenues
Net earnings
$24,174
million
+3.1% vs. 2021
$2,926
million
+1.2% vs. 2021
Adjusted EBITDA (1)
$10,199
million
+3.1% vs. 2021
Net earnings attributable
to common shareholders
Adjusted net earnings (1)
$2,716
million
+0.3% vs. 2021
$3,057
million
+5.6% vs. 2021
Cash flows from
operating activities
$8,365
million
+4.5% vs. 2021
Free cash flow (1)
$3,067
million
+2.9% vs. 2021
BCE customer connections
Wireless
Total mobile phones
Retail high-speed
Internet (2) (3)
+5.2%
9.9 million subscribers
at the end of 2022
+10.3%
4.3 million subscribers
at the end of 2022
Retail TV (2) (3)
+0.6%
2.8 million subscribers
at the end of 2022
Retail residential network
access services (NAS) lines (2) (3)
(4.7%)
2.2 million subscribers
at the end of 2022
About BCE
1.2
Our 2022 results are reported in three segments: Bell Wireless, Bell Wireline and Bell Media. We describe our products and services by segment
in this section, to provide further insight into our operations.
Segmented reporting changes in 2023
In 2022, we began modifying our internal and external reporting
processes to align with organizational changes that were made
to reflect an increasing strategic focus on multiproduct sales, the
continually increasing technological convergence of our wireless and
wireline telecommunications infrastructure and operations driven by
the deployment of our Fifth Generation (5G) and fibre networks, and
our digital transformation. These factors have made it increasingly
difficult to distinguish between our wireless and wireline operations
and will result in changes in Q1 2023 to the financial information that is
regularly provided to our chief operating decision maker to measure
performance and allocate resources.
Effective with our Q1 2023 results, our previous Bell Wireless and Bell
Wireline operating segments are being combined to form a single
reporting segment called Bell CTS. Bell Media remains a distinct operating
segment and is unaffected. As a result of our reporting changes, prior
periods are being restated in 2023 for comparative purposes.
Our Bell CTS segment provides a wide range of communication products
and services to consumers, businesses and government customers
across Canada. Wireless products and services include mobile data and
voice plans and devices and are available nationally. Wireline products
and services comprise data (including Internet access, IPTV, cloud-based
services and business solutions), voice, and other communication
services and products, which are available to our residential, small and
medium-sized business and large enterprise customers primarily in
Ontario, Québec, the Atlantic provinces and Manitoba, while satellite TV
service and connectivity to business customers are available nationally
across Canada. In addition, this segment includes our wholesale business,
which buys and sells local telephone, long distance, data and other
services from or to resellers and other carriers, as well as the results
of operations of our national consumer electronics retailer, The Source.
Our Bell Media segment provides conventional TV, specialty TV, pay TV,
streaming services, digital media services, radio broadcasting services
and OOH and advanced advertising services to customers nationally
across Canada.
(1) Adjusted EBITDA is a total of segments measure, and adjusted net earnings and free cash flow are non-GAAP financial measures. See section 11.3, Total of segments measures and section
11.1, Non-GAAP financial measures in this MD&A for more information on these measures.
(2) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by
67,090, 9,025 and 3,456 subscribers, respectively.
(3) In Q4 2022, as a result of the acquisition of Distributel Communications Limited (Distributel), our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases
increased by 128,065, 2,315 and 64,498 subscribers, respectively.
6
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview Our brands include
Our products and services
• Data and voice plans: From plans focused on affordability to premium
services, we have plans that cater to all customer segments, available
on either postpaid or prepaid options, including unlimited data,
shareable, device financing plans and Connect Everything plans. Our
services provide fast Internet access for video, social networking,
messaging and mobile applications, as well as a host of call features.
• Specialized plans: for tablets, smartwatches, Connected Car, mobile
Internet, trackers, laptops and security cameras
• Extensive selection of devices: the latest 5G and 5G+ smartphones,
tablets, smartwatches, mobile Internet devices and connected things
(Bell Connected Car, trackers, connected home and virtual reality)
• Travel: international roaming in over 230 destinations, with LTE roaming
in 209 destinations and 5G roaming in 63 destinations
• Mobile business solutions: push-to-talk, field service management,
worker safety and mobility management
• IoT solutions: asset management, smart buildings, smart cities, fleet
management, smart supply chain and other IoT services
Our products and services
Our
networks
Our products
and services
Bell Wireless
Segment description
• Includes wireless service revenues and product sales as well as the
results of operations of our national consumer electronics retailer,
The Source
• Wireless services are provided to our residential, small and medium-
sized business and large enterprise customers across Canada
Our networks and reach
We hold wireless spectrum licences, with holdings across various
spectrum bands and regions across Canada, totalling more than
6.4 billion megahertz per population (MHz-Pop), corresponding
to an average of approximately 182 megahertz (MHz) of spectrum
per Canadian.
The vast majority of our cell towers are connected with fibre, the latest
network infrastructure technology, for a faster and more reliable
connection.
Our Fourth Generation (4G) Long-term Evolution (LTE) nationwide
wireless broadband network is compatible with global standards and
delivers high-quality and reliable voice and high-speed data services
coast to coast to virtually all of the Canadian population. 5G and 5G+
are the next generation of wireless technology, offering faster speeds
and lower latency. Our LTE network will be the backbone for our 5G
network as it expands across Canada.
• LTE coverage of over 99% of Canada’s population, with LTE Advanced
(LTE-A) covering approximately 96% of Canada’s population, and
5G coverage of 82% of Canada’s population, with 5G+ covering 38%
of Canada’s population at December 31, 2022
• Peak theoretical mobile data access download speeds: 5G and 5G+, up
to 1.7 gigabit(s) per second (Gbps) (average expected speeds of 76 to
469 megabits per second (Mbps) in select areas of Western Canada,
Ontario and Quebec); LTE-A, up to 1.5 Gbps (1) (average expected speeds
of 25 to 325 Mbps); LTE, up to 150 Mbps (expected average speeds of
18 to 40 Mbps); high-speed packet access plus (HSPA+), up to 42 Mbps
(expected average speeds of 7 to 14 Mbps) (2)
• Reverts to LTE/LTE-A technology and speeds when customers are
outside 5G and 5G+ coverage areas
• Bell also operates a LTE-category M1 (LTE-M) network, which is a
subset of our LTE network, supporting low-power Internet of Things
(IoT) applications with enhanced coverage, longer device battery life
and enabling lower costs for IoT devices connecting to Bell’s national
network. Our LTE-M network is available in most Canadian provinces.
We have more than 8,000 retail points of distribution across Canada,
including over 1,000 Bell, Virgin Plus, Lucky Mobile (Lucky) and The
Source locations, as well as Glentel-operated locations (WIRELESSWAVE,
Tbooth wireless and WIRELESS etc.) and other third-party dealer and
retail locations.
(1) Peak theoretical download speeds of up to 1.5 Gbps on LTE-A are currently available in Kingston, Waterloo, Toronto, Mississauga, Vaughan, Richmond Hill, Markham, Brampton, North Bay,
Niagara-on-the-Lake, Cambridge, Pickering, Ajax, Burlington, Guelph, London, Niagara Falls, Oakville, St. Catharines, Thorold, Thunder Bay, Welland and Ottawa. Compatible device required.
(2) Network speeds vary with location, signal and customer device. Compatible device required.
7
2 MD&A Overview Bell Wireline
Segment description
• Includes data revenues (including Internet, IPTV, cloud-based services
and business solutions), voice, and other communication services
revenues, and wireline product sales. These services are provided to
our residential, small and medium-sized business and large enterprise
customers primarily in Ontario, Québec, the Atlantic provinces and
Manitoba, while satellite TV service and connectivity to business
customers are available nationally across Canada. We also offer
competitive local exchange carrier (CLEC) services in Alberta and
British Columbia.
• Includes the results of our wholesale business, which buys and sells
local telephone, long distance, data and other services from or to
resellers and other carriers, and the wireline operations of Northwestel
Inc. (Northwestel), which provides telecommunications services in
Canada’s Northern Territories
Our networks and reach
• Extensive local access network in Ontario, Québec, the Atlantic
provinces and Manitoba, as well as in Canada’s Northern Territories
• Broadband fibre network, consisting of fibre-to-the-premise (FTTP)
and fibre-to-the-node (FTTN) locations, covering approximately
10 million homes and businesses in Ontario, Québec, the Atlantic
provinces and Manitoba
• Wireless-to-the-premise (WTTP) footprint covering approximately
1 million locations primarily in rural areas. WTTP is 5G-capable fixed
wireless technology delivered over Bell’s LTE wireless network that
provides broadband residential Internet access to smaller and
underserved communities.
• Largest Internet protocol (IP) multi-protocol label switching footprint
of any Canadian provider, enabling us to offer business customers
a virtual private network (VPN) service for IP traffic and to optimize
bandwidth for real-time voice and TV
• More than 650 Bell and Virgin Plus locations
Our products and services
residential
• Internet: high-speed Internet access through fibre optic broadband
technology, 5G-capable WTTP technology or digital subscriber line (DSL)
with a wide range of options, including reliable Wi-Fi, unlimited usage,
security services and mobile Internet. Our Internet service, marketed
as Fibe Internet, offers total download speeds of up to 8 Gbps and
total upload speeds of up to 8 Gbps with FTTP, or download speeds
of up to 100 Mbps with FTTN, while our Wireless Home Internet (WHI)
fixed wireless service currently delivers broadband download speeds
of up to 50 Mbps. We also offer Internet service under the Virgin Plus
brand offering download speeds of up to 300 Mbps.
• TV: IPTV services (Fibe TV, Fibe TV app and Virgin Plus TV) and satellite
TV service. Bell’s new Fibe TV service powered by Google Android TV
technology provides extensive live and on-demand content options
with 4K resolution (4K) picture quality and new capabilities and features
including access to thousands of apps, voice remote powered by
Google Assistant, universal search, cloud personal video recorder
(PVR), compact 4K high dynamic range (HDR) receiver and access to
6
BCE InC. AnnuAl fInAnCIAl rEport 2022
Our brands include
the Fibe TV app. The Fibe TV app live TV streaming service offers live
and on-demand programming on Bell Streamer, Apple TV, Amazon
Fire TV, Google Chromecast, Android TV devices, smartphones, tablets
and computers. Bell Streamer is a 4K HDR streaming device powered
by Android TV offering all-in-one access to the Fibe TV app, support
for all major streaming services and access to thousands of apps on
Google Play. We also offer an app-based live TV streaming service
branded as Virgin Plus TV.
• Home Phone: local telephone service, long distance and advanced
calling features
• Smart Home: home security, monitoring and automation services
from Bell Smart Home
• Bundles: multi-product bundles of Internet, TV, home phone, mobility
and smart home services with monthly discounts
Business
• Internet and network solutions: Through our advanced technologies
and end-to-end network, cloud and security expertise, Bell is a
network transformation partner of choice for Canadian businesses.
Our solutions include business Internet, software-defined solutions,
private networks, global networks, managed and professional services.
• Communications: We offer a variety of voice, unified communications
and contact centre solutions, including IP telephony, local and long
distance, audio, video and web conferencing and webcasting, and
a range of contact centre options from cloud-based and hybrid
solutions to dedicated, on-premises services that support a variety
of business sizes.
• Cloud: Bell supports every stage of businesses’ cloud journey with cloud,
network and security expertise, an advanced partner ecosystem and
advanced hybrid multi-cloud solutions. Our cloud solutions include
cloud professional and managed services, cloud computing, public
multi-access edge computing (MEC) with Amazon Web Services (AWS)
Wavelength, cloud connect, and cloud backup and disaster recovery.
• Other: We offer a full suite of solutions to address businesses’ security
concerns, including network security, cloud security and managed
and professional services.
2 MD&A Overview Bell Media
Segment description
• Canada’s leading content creation company with premier assets in TV,
radio and OOH, monetized through traditional and digital platforms
• Revenues are derived primarily from advertising and subscriber fees
• Conventional TV, radio and OOH revenues are derived from advertising
• Specialty TV revenue is generated from subscription fees and
advertising
• Pay TV and direct-to-consumer (DTC) streaming services revenue
is derived from subscription fees
Our brands include
Our assets and reach
tV
• 35 conventional TV stations including CTV, Canada’s #1 network for
21 consecutive years (1), #1 Canadian advertising-based video on
demand (AVOD) platform CTV.ca (2) and leading digital news destination
CTVNews.ca, and the French-language Noovo network in Québec,
including its popular AVOD platform and digital news destination
Noovo.info
• 27 specialty TV channels, including TSN, Canada’s sports leader (3) and
RDS, the top French-language sports network (1)
• 4 pay TV services and 4 DTC streaming services, including Crave, the
exclusive home of HBO in Canada, TSN and RDS
radio
• 109 licensed radio stations in 58 markets across Canada, all available
through the iHeartRadio Canada app alongside an extensive catalogue
of podcasts
ooH advertising
• Network of more than 45,000 advertising faces in key urban markets
across Canada
Broadcast rights
• Sports: long-term media rights to key sports properties and official
Canadian broadcaster of the Super Bowl, Grey Cup and International
Ice Hockey Federation (IIHF) World Junior Championship. Live sports
coverage includes the Toronto Maple Leafs, Montréal Canadiens,
Winnipeg Jets and Ottawa Senators, Canadian Football League (CFL),
National Football League (NFL), National Basketball Association (NBA),
Major League Soccer (MLS), Fédération Internationale de Football
Association (FIFA) World Cup events, Curling’s Season of Champions,
Major League Baseball (MLB), Golf’s Majors, NASCAR Cup Series,
Formula 1 (F1), Grand Slam Tennis, Ultimate Fighting Championship
(UFC), National Collegiate Athletic Association (NCAA), March Madness
and more.
• HBO: long-term agreement to deliver all current-season, past-season
and library HBO programming in Canada exclusively on our linear,
on-demand and OTT platforms
• HBO Max: long-term exclusive agreement to deliver original, non-
children’s programming produced by Warner Bros. Television Group
for HBO Max
• STARZ: long-term agreement with Lionsgate for premium STARZ
programming in Canada
• iHeartRadio: exclusive partnership for digital and streaming music
services in Canada
other assets
• Partnership in Just for Laughs, the live comedy event and TV producer
• Equity interest in Dome Productions Partnership, one of North America’s
leading providers of sports and other event production and broadcast
facilities
• Minority interest in Montréal’s Grandé Studios, a Montréal-based
multipurpose TV, film and equipment company which provides
production facilities, equipment rentals, and technical services
• Montréal’s Octane Racing Group Inc., promoter of the F1 Canadian
Grand Prix, the largest annual sports and tourism event in the country
Our products and services
• Varied and extensive array of video content to broadcast distributors
across Canada
• Advertising on our TV, radio, digital and OOH properties to both local
and national advertisers across a wide range of industry sectors
• Crave bilingual subscription-based on-demand TV streaming service
offering a large collection of premium content in one place, including
HBO, HBO Max, STARZ and original French-language programming, on
set-top boxes (STBs), mobile devices, streaming devices and online.
Crave is offered through a number of Canadian TV providers and is
available directly to all Canadian Internet subscribers as an OTT service.
• TSN and RDS streaming services offering live and on-demand TSN
and RDS content directly to consumers through an annual or monthly
subscription on computers, tablets, mobile devices, Apple TV and other
streaming devices
(1) Based on data provided by Numeris, a data company providing audience data and insights capturing media behaviours for the Canadian media industry.
(2) Based on data provided by Comscore, Inc., an American media measurement and analytics company.
(3) Based on the depth and breadth of broadcasted sporting events, and TSN’s reach, according to data provided by Numeris, and TSN being the consumer preferred brand for live sports
and sports news.
7
2 MD&A Overview Other BCE investments
BCE also holds investments in a number of other assets, including:
• a 37.5% indirect equity interest in MLSE, a sports and entertainment company that owns several sports teams,
including the Toronto Maple Leafs, the Toronto Raptors, Toronto FC and the Toronto Argonauts, as well as real
estate and entertainment assets in Toronto
• a 50% indirect equity interest in Glentel, a Canadian-based connected services retailer
• an 18.4% indirect equity interest in entities that operate the Montréal Canadiens Hockey Club, evenko (a promoter
and producer of cultural and sports events) and the Bell Centre in Montréal, Québec, as well as Place Bell
in Laval, Québec
Our people
Our
people
Employees
At the end of 2022, our team consisted
of 44,610 employees, a decrease
of 5,171 employees, compared to the
49,781 employees at the end of 2021,
attributable to the sale of a subsidiary,
coupled with natural attrition, retirements
and workforce reductions.
Approximately 43% of total BCE employees
were represented by labour unions at
December 31, 2022.
BCE
2021 employees
BCE
2022 employees
%
7%
49,781
72%
17% Bell Wireless
72% Bell Wireline
11% Bell Media
5%
3%
44,610
64%
18% Bell Wireless
69% Bell Wireline
13% Bell Media
Bell code of business conduct
The ethical business conduct of our people is core to the integrity with which we operate our business. The Bell Code of Business Conduct sets
out specific expectations and accountabilities, providing employees with practical guidelines to conduct business in an ethical manner. Our
commitment to the Code of Business Conduct is renewed by employees each year in an ongoing effort to ensure that all employees are aware
of, and adhere to, Bell’s standards of conduct.
1.3 Key corporate developments
Our customers
and relationships
Our
networks
Our products
and services
Our
people
This section contains forward-looking statements, including relating to our plans and strategic priorities. Refer to the section Caution regarding
forward-looking statements at the beginning of this MD&A.
Launch of Bell Ventures
On October 25, 2022, Bell introduced Bell Ventures, its corporate venture
capital initiative to encourage development of early-stage and growth
companies that harness the power of Bell’s networks to drive growth and
adoption of advanced technological solutions. Building on Bell’s history of
innovation and investments, Bell Ventures is a natural extension of Bell’s
purpose to advance how Canadians connect with each other and the
world. Bell Ventures invests in early-stage and growth companies that
provide advanced technology solutions seeking to further differentiate
Bell’s 5G and fibre networks and deliver solutions for its customers,
including in the areas of network security, IoT, robotics, telematics,
clean technology (cleantech), augmented/virtual reality (AR/VR), and
the metaverse. Recent investments by Bell Ventures include Cohere
Technologies, the creator of spectrum multiplier software for 4G and
5G networks, and Boreal Ventures, a venture capital fund supporting
promising Québec deep tech start-ups, created in partnership with
Montréal innovation centre Centech.
3
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview Acquisition of Distributel
On December 1, 2022, Bell completed its acquisition of Distributel, a national independent communications provider offering a wide range of
consumer, business and wholesale communications services for cash consideration of $303 million ($282 million net of cash acquired) and
$39 million of estimated additional cash consideration contingent on the achievement of certain performance objectives. The acquisition of
Distributel is expected to support Bell’s strategy to grow residential and business customers. The results of Distributel are included in our Bell
Wireline segment.
Strategic partnership with Staples Canada
On January 31, 2023, Bell and Staples Canada announced a multi-year exclusive agreement to sell Bell, Virgin Plus and Lucky Mobile wireless
and wireline services through Staples stores across Canada for consumers and small businesses, starting in the first half of 2023. In addition,
Bell and Staples will partner to sell Bell wireless and wireline services direct to medium-sized businesses through the Staples Professional sales
team, backed by Bell’s advanced communications expertise.
Bell Business Markets leadership change
On January 31, 2023, John Watson, Group President, Customer Experience and Artificial Intelligence (AI), took on an expanded role as Group
President, Business Markets, Customer Experience and AI, following the retirement of Bell Business Markets President Tom Little after a distinguished
13-year career at the company. This combined leadership approach highlights Bell’s focus on bringing the best digital connections and next-
generation services to Canadians and businesses while keeping customer experience at the centre of everything we do.
1.4 Capital markets strategy
Our fi nancial
resources
This section contains forward-looking statements, including relating to BCE’s dividend growth objective, 2023 annualized common share dividend,
dividend payout ratio and financial policy targets, anticipated capital expenditures and network deployment plans, and our business outlook,
objectives and plans. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
We seek to deliver sustainable shareholder returns through consistent dividend growth. This objective is underpinned by continued growth in
free cash flow and a strong balance sheet, supporting a significant ongoing capital investment on advanced broadband networks and services
that are essential to driving the long-term growth of our business.
Dividend growth and payout policy
Dividend yield (1)
6.2%
in 2022
2023 dividend increase
+5.2%
to $3.87 per common share
Dividend payout (2) policy
65%–75%
of free cash flow
On February 2, 2023, we announced a 5.2%, or 19 cents, increase in
the annualized dividend payable on BCE’s common shares for 2023 to
$3.87 per share from $3.68 per share in 2022, starting with the quarterly
dividend payable on April 17, 2023. This is BCE’s 15th consecutive year
of 5% or better dividend growth.
Our objective is to seek to achieve dividend growth while maintaining
our dividend payout ratio within the target policy range of 65% to 75%
of free cash flow and balancing our strategic business priorities. BCE’s
dividend payout policy, increases in the common share dividend and the
declaration of dividends are subject to the discretion of the BCE Board
and, consequently, there can be no guarantee that BCE’s dividend policy
will be maintained, that the dividend on common shares will be increased
or that dividends will be declared. As at December 31, 2022, our dividend
payout ratio was 108%, compared to 105% at December 31, 2021, which
is higher than our policy range due to a planned acceleration in capital
expenditures. Although capital expenditures are expected to decrease
in 2023, they will remain elevated compared to pre-2020 annual levels
as we continue to make generational investments in our networks to
support the buildout of our fibre, 5G and 5G+ network infrastructure.
As a result, BCE’s dividend payout ratio is expected to remain above
our target policy range in 2023.
(1) Annualized dividend per BCE common share divided by BCE’s share price at the end of the year.
(2) Dividend payout ratio is a non-GAAP ratio. Refer to section 11.2, Non-GAAP ratios in this MD&A for more information on this measure.
4
2 MD&A Overview
Executive compensation alignment
BCE’s management equity-based incentive plans are based on a pay-for-performance philosophy. The overall goal is to create sustainable
value for shareholders by attracting, motivating and retaining the executive officers needed to drive the business strategy, and rewarding them
for delivering on our goal of advancing how Canadians connect with each other and the world, through the successful execution of our six
strategic imperatives. We have strong alignment of interest between shareholders and management through our equity-based incentive plans.
Best practices
adopted by
BCE for executive
compensation
• Stringent share ownership requirements
• Emphasis on pay at risk for executive compensation
• Double trigger change-in-control policy
• Anti-hedging policy on share ownership and incentive compensation
• Clawbacks for the President and Chief Executive Officer (CEO) and
all Executive Vice-Presidents as well as all option holders
• Caps on BCE supplemental executive retirement plans and annual
bonus payouts, in addition to long-term incentive grants
• Vesting criteria fully aligned to shareholder interests
Capital markets priorities
Consistent with our capital markets objective to deliver sustainable
shareholder returns through dividend growth, while maintaining
planned levels of capital investment, investment-grade credit ratings
and considerable overall financial flexibility, we deploy excess free cash
flow, when available, in a balanced manner and on uses that include,
but are not limited to:
• Funding of strategic acquisitions and investments (including wireless
spectrum purchases) that support the growth of our business
• Debt reduction
• Voluntary contributions to BCE’s defined benefit (DB) pension plans to
improve the funded position of the plans and reduce the use of letters
of credit for funding deficits
• Share buybacks through normal course issuer bid programs
In 2022, excess free cash flow (1) was negative $245 million, down
from negative $152 million in 2021. The year-over-year decrease was
primarily attributable to higher capital expenditures consistent with
our accelerated capital expenditure program to accelerate the rollout
of Bell’s wireline fibre and wireless 5G and 5G+ infrastructure. Cash
flows from operating activities in 2022 were $8,365 million, up $357
million year-over-year.
Total shareholder return performance
Five-year total
shareholder return (2)
+30.3%
2018–2022
One-year total
shareholder return (2)
(4.2%)
2022
Five-year cumulative total value of a $100 investment (3)
December 31, 2017 – December 31, 2022
$175
$150
$125
$100
$75
2017
2018
BCE common shares
2019
2020
S&P/TSX Composite Index
2021
2022
This graph compares the yearly change in the cumulative annual total
shareholder return of BCE common shares against the cumulative annual
total return of the S&P Global Ratings Canada (S&P)/TSX Composite
Index (4), for the five-year period ending December 31, 2022, assuming
an initial investment of $100 on December 31, 2017 and the quarterly
reinvestment of all dividends.
(1) Excess free cash flow is a non-GAAP financial measure. Refer to section 11.1, Non-GAAP financial measures in this MD&A for more information on this measure.
(2) Shareholder return is defined as the change in BCE’s common share price for a specified period plus BCE common share dividends reinvested, divided by BCE’s common share price at
the beginning of the period.
(3) Based on BCE’s common share price on the TSX and assuming the reinvestment of dividends.
(4) As the headline index for the Canadian equity market, the S&P/TSX Composite Index is the primary gauge against which to measure total shareholder return for Canadian-based, TSX-listed
companies.
20
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview
Strong capital structure
BCE’s balance sheet is underpinned by a healthy available liquidity (1) position of $3.5 billion at the end of 2022, comprised of $99 million in cash,
$50 million in cash equivalents, $700 million available under our securitized receivables program and $2.65 billion available under our $3.5 billion
committed revolving and expansion credit facilities (2), and an investment-grade credit profile, providing the company with a solid financial
foundation and a high level of overall financial flexibility. BCE has an attractive long-term debt maturity profile with no maturities until the third
quarter of 2023. We continue to monitor the capital markets for opportunities to lower our cost of debt and optimize our cost of capital. We seek
to proactively manage financial risk in terms of currency exposure of our U.S. dollar-denominated purchases, as well as equity risk exposure
under BCE’s long-term equity-based incentive plans and interest rate and foreign currency exposure under our various debt instruments. We
also seek to maintain investment-grade credit ratings with stable outlooks.
Attractive long-term public
debt maturity profile (3)
• Average term of Bell Canada’s
publicly issued debt securities:
approximately 13 years
• Average after-tax cost of publicly
issued debt securities: 2.9%
• No publicly issued debt securities
maturing until Q3 2023
Strong liquidity position (3)
• $2.65 billion available under
our $3.5 billion multi-year committed
credit facilities
• $700 million accounts receivable
securitization available capacity
• $99 million cash
• $50 million cash equivalents
Investment-grade
credit profile (3) (4)
• Long-term debt credit rating of
BBB (high) by DBRS Limited (DBRS),
Baa 1 by Moody’s Investors Service, Inc.
(Moody’s) and BBB+ by S&P, all with
stable outlooks
We monitor our capital structure by utilizing a number of measures,
including net debt leverage ratio, adjusted EBITDA to adjusted net
interest expense ratio, and dividend payout ratio.
As a result of financing a number of strategic acquisitions made since
2010, including CTV Inc. (CTV), Astral Media Inc. (Astral), MLSE, Bell
Aliant Inc. and Manitoba Telecom Services Inc. (MTS); voluntary pension
plan funding contributions to reduce our pension solvency deficit;
wireless spectrum purchases; accelerated capital expenditures; as
well as a one-time unfavourable impact in 2019 due to the adoption
of IFRS 16 that added $2.3 billion of lease liabilities to net debt (1) on
our balance sheet on January 1, 2019, our net debt leverage ratio has
increased above our internal target range. At December 31, 2022, our net
debt leverage ratio (1) was 3.30 times adjusted EBITDA, which exceeded
the upper end of our internal target range by 0.80 times.
BCE’s adjusted EBITDA to adjusted net interest expense ratio (1) at the
end of 2022 remained above our internal target range of greater than
7.5 times adjusted EBITDA at 8.50 times, providing good predictability
in our debt service costs and protection from interest rate volatility.
BCE credit ratios
Internal
target
December 5 ,
2022
December 5 ,
202
Net debt leverage ratio
2.0–2.5
Adjusted EBITDA to adjusted
net interest expense ratio
>7.5
3.30
8.50
3.17
8.77
Bell Canada successfully accessed the debt capital markets in
February 2022 and November 2022, raising $750 million in U.S. dollars
($954 million in Canadian dollars) in gross proceeds from the issuance
of notes in the U.S., and a total of $1 billion in gross proceeds from the
issuance in Canada of medium-term note (MTN) debentures. Both the
Canadian-dollar and U.S.-dollar issuances contributed to maintaining
our after-tax cost of outstanding publicly issued debt securities relatively
stable at approximately 2.9% (4.0% on a pre-tax basis) and the average
term to maturity at approximately 13 years. The net proceeds of the 2022
offerings were used to fund the early redemption of $1 billion of Bell
Canada MTN debentures maturing in 2023, to repay short-term debt
and for general corporate purposes.
BCE also redeemed all of its outstanding Cumulative Redeemable First
Preferred Shares, Series AO (Series AO Preferred Shares) in March 2022
at a redemption price of $25.00 per Series AO Preferred Share, for a
total amount of $115 million.
In March 2022, Bell Canada renewed its short form base shelf prospectus,
enabling Bell Canada to offer debt securities from time to time until
April 7, 2024. The debt securities will be fully and unconditionally
guaranteed by BCE. Consistent with past practice, the short form base
shelf prospectus was renewed to continue to provide Bell Canada with
financial flexibility and efficient access to the Canadian and U.S. debt
capital markets.
Subsequent to year end, on February 9, 2023, Bell Canada completed a
public offering in Canada of $1.5 billion of MTN debentures in two series.
The $1.05 billion 4.55% Series M-58 MTN debentures will mature on
February 9, 2030. The $450 million 5.15% Series M-59 MTN debentures
will mature on February 9, 2053. The net proceeds of the offering were
used to repay short-term debt and for general corporate purposes.
As at March 2, 2023, Bell Canada had issued $2.5 billion principal amount
of debt securities under its new short form base shelf prospectus.
(1) Available liquidity and net debt are non-GAAP financial measures and net debt leverage ratio and adjusted EBITDA to adjusted net interest expense ratio are capital management measures.
See section 11.1, Non-GAAP financial measures and section 11.4, Capital management measures in this MD&A for more information on these measures.
(2) In 2022, Bell Canada converted its committed credit facilities into a sustainability-linked loan. The amendment introduces a borrowing cost that varies based on Bell’s performance of
certain sustainability performance targets.
(3) As at December 31, 2022
(4) These credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency.
Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor.
Each credit rating should be evaluated independently of any other credit rating.
2
2 MD&A Overview 1.5 Corporate governance and risk management
Corporate governance philosophy
The Board and management of BCE believe that strong corporate governance practices contribute to superior results in creating and maintaining
shareholder value. That is why we continually seek to strengthen our leadership in corporate governance and ethical business conduct by
adopting best practices, and providing full transparency and accountability to our shareholders. The Board is responsible for the supervision
of the business and affairs of the company.
Below are our key Board information and governance best practices:
Directors are ALL Independent (except CEO)
Directors’ Tenure Guidelines
99.5% 2022 Board and Committee Director Attendance Record
Board Committee Members are All Independent
Board Renewal: 8 Non-Executive Director
Nominees ≤ 7 Years Tenure
Board Diversity Policy and Target for Gender Representation
Annual Election of All Directors
Directors Elected Individually
Majority Voting for Directors
Separate Chair and CEO
Board Interlocks Guidelines
Share Ownership Guidelines for Directors and Executives
Code of Business Conduct and Ethics Program
Annual Advisory Vote on Executive Compensation
Formal Board Evaluation Process
Board Risk Oversight Practices
ESG Strategy Reviewed by Board
Robust Succession Planning
For more information, please refer to BCE’s most recent notice of annual general shareholder meeting and management proxy circular (the
Proxy Circular) filed with the Canadian provincial securities regulatory authorities (available at sedar.com) and furnished to the U.S. Securities
and Exchange Commission (available at sec.gov), and available on BCE’s website at BCE.ca.
Risk governance framework
Board oversight
BCE’s full Board is entrusted with the responsibility for identifying and
overseeing the principal risks to which our business is exposed and
seeking to ensure there are processes in place to effectively identify,
monitor and manage them. These processes seek to mitigate rather
than eliminate risk. A risk is the possibility that an event might happen
in the future that could have a negative effect on our business, financial
condition, liquidity, financial results or reputation. While the Board has
overall responsibility for risk, the responsibility for certain elements of
the risk oversight program is delegated to Board committees in order
to ensure that they are treated with appropriate expertise, attention
and diligence, with reporting to the Board on a regular basis.
Board
of Directors
Risk and
Pension Fund
Committee
Audit
Committee
Compensation
Committee
Governance
Committee
Risk information is reviewed by the Board or the relevant committee
throughout the year, and business leaders present regular updates on
the execution of business strategies, risks and mitigation.
• The Risk and Pension Fund Committee has oversight responsibility
for the organization’s risk governance framework, which exists to
identify, assess, mitigate and report key risks to which BCE is exposed.
As part of its Charter, the Risk and Pension Fund Committee is tasked
with oversight of risks relating to business continuity plans, work
stoppage and disaster recovery plans, regulatory and public policy,
information management and privacy, information security (including
cyber security), physical security, fraud, vendor and supply chain
management, ESG (including climate change), the pension fund, network
resiliency, and other risks as required. The Risk and Pension Fund
Committee receives reports on security matters, including information
security, and on environmental matters at each of its meetings.
• The Audit Committee is responsible for overseeing financial reporting
and disclosure, as well as the organization’s internal control systems
and compliance with legal requirements
• The Management Resources and Compensation Committee
(Compensation Committee) oversees risks relating to compensation,
succession planning and workplace policies and practices
• The Corporate Governance Committee (Governance Committee)
assists the Board in developing and implementing BCE’s corporate
governance guidelines and determining the composition of the
Board and its committees. The Governance Committee is responsible
for oversight of our corporate purpose and ESG strategy (including
integration of ESG within our company strategy), and monitoring
the implementation of ESG programs, goals and key initiatives, and
related disclosure. The Governance Committee is also responsible for
oversight of the organization’s policies concerning business conduct,
ethics and public disclosure of material information.
22
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview Risk management culture
There is a strong culture of risk management at BCE that is actively
promoted by the Board, the Risk and Pension Fund Committee and the
President and CEO, at all levels within the organization. It is a part of
how the company operates on a day-to-day basis and is woven into
its structure and operating principles, guiding the implementation of
the organization’s strategic imperatives.
The President and CEO, selected by the Board, has set his strategic focus
through the establishment of six strategic imperatives and focuses risk
management around the factors that could impact the achievement
of those strategic imperatives. While the constant state of change in
the economic environment and the industry creates challenges that
need to be managed, clarity around strategic objectives, performance
expectations, risk management and integrity in execution ensures
discipline and balance in all aspects of our business.
Risk management framework
While the Board is responsible for BCE’s risk oversight program,
operational business units are central to the proactive identification
and management of risk. They are supported by a range of corporate
support functions that provide independent expertise to reinforce
implementation of risk management approaches in collaboration with
the operational business units. The Internal Audit function provides a
further element of expertise and assurance, working to provide insight
and support to the operational business units and corporate support
functions, while also providing the Audit Committee, and other Board
committees as required, with an independent perspective on the state
of risk and control within the organization. Collectively, these elements
can be thought of as a “three lines” approach to risk management.
Although the risk management framework described in this section 1.5 is
aligned with industry practices, there can be no assurance that it will
be sufficient to prevent the occurrence of events that could have a
material adverse effect on our business, financial condition, liquidity,
financial results or reputation.
Board and
Committees
oversight
operational
Business units
st line
functions
risk and
control
environment
Internal
Audit
5rd line
assurance
function
Corporate
2nd line
support
functions
first line – operational business units
The first line refers to management within our operational business
units, who are expected to understand their operations in great detail
and the financial results that underpin them. There are regular reviews
of operating performance involving the organization’s executive and
senior management. The discipline and precision associated with this
process, coupled with the alignment and focus around performance
goals, creates a high degree of accountability and transparency in
support of our risk management practices.
As risks emerge in the business environment, they are discussed in a
number of regular forums to share details and explore their relevance
across the organization. Executive and senior management are integral
to these activities in driving the identification, assessment, mitigation
and reporting of risks at all levels. Formal risk reporting occurs through
strategic planning sessions, management presentations to the Board and
formal enterprise risk reporting, which is shared with the Board and the
Risk and Pension Fund Committee during the year.
Management is also responsible for maintaining effective internal
controls and for executing risk and control procedures on a day-to-day
basis. Each operational business unit develops its own operating controls
and procedures that fit the needs of its unique environment.
Second line – corporate support functions
BCE is a very large enterprise, with 44,610 employees as at December 31,
2022, multiple business units and a diverse portfolio of risks that is
constantly evolving based on internal and external factors. In a large
organization, it is common to manage certain functions centrally for
efficiency, scale and consistency. While the first line is often central to
identification and management of business risks, in many instances
operational management works collaboratively with, and also relies
on, the corporate functions that make up the second line of support in
these areas. These corporate functions include Regulatory, Finance,
Corporate Security, Corporate Risk Management, Legal, Corporate
Responsibility, Human Resources, Real Estate and Procurement.
Regulatory function: This function is responsible for the regulatory
portfolio, including an expanding range of obligations set out in new
privacy and data protection laws being enacted in Canada and around
the world. BCE has developed, and maintains, an enhanced Data
Governance Policy that encompasses the protection and appropriate
use of data across its life cycle. A significant element of the data
governance program relies on the Corporate Security activities
outlined below and these two functions work jointly with data owners,
data custodians and other relevant employees to ensure this policy is
appropriately implemented. We recognize that a strong and consistently
applied approach to data governance is essential to maintaining the
social licence necessary to achieve our business objectives. For more
information on our approach to privacy and data security, refer to
section 1.6, Capitals and our corporate responsibility, in this MD&A.
Finance function: BCE’s Finance function plays a pivotal role in seeking
to identify, assess and manage risks through a number of activities,
which include financial performance management, external reporting,
pension management, capital management, and oversight and execution
practices related to the U.S. Sarbanes-Oxley Act of 2002 and equivalent
Canadian securities legislation, including the establishment and
maintenance of appropriate internal control over financial reporting. BCE
has also established and maintains disclosure controls and procedures
to seek to ensure that the information it publicly discloses, including
25
2 MD&A Overview its business risks, is accurately recorded, processed, summarized and
reported on a timely basis. For more details concerning BCE’s internal
control over financial reporting and disclosure controls and procedures,
refer to the Proxy Circular and section 12, Effectiveness of internal
controls, in this MD&A.
Corporate Security function: This function is responsible for all aspects
of security, which requires a deep understanding of the business, the
risk environment and the external stakeholder environment. Based
on this understanding, Corporate Security sets the standards of
performance required across the organization through security policy
definitions and monitors the organization’s performance against these
policies. In high and emerging risk areas such as information security,
Corporate Security leverages its experience and competence and,
through collaboration with the operational business units, develops
strategies intended to seek to mitigate the organization’s risks. For
instance, we have implemented security awareness training and policies
and procedures that seek to mitigate information security threats. We
further rely on security assessments to identify risks, projects and
implementation controls with the objective of ensuring that systems
are deployed with the appropriate level of control based on risk and
technical capabilities, including access management, vulnerability
management, security monitoring and testing, to help identify and
respond to attempts to gain unauthorized access to our information
systems and networks. We evaluate and seek to adapt our security
policies and procedures designed to protect our information and
assets in light of the continuously evolving nature and sophistication of
information security threats. However, given in particular the complexity
and scale of our business, network infrastructure, technology and IT
support systems, there can be no assurance that the security policies
and procedures that we implement will prevent the occurrence of all
potential information security breaches. In addition, although BCE has
contracted an insurance policy covering information security risk, there
can be no assurance that any insurance we may have will cover the
costs, damages, liabilities or losses that could result from the occurrence
of any information security breach.
Corporate Risk Management function: This function works across
the company to gather information and report on the organization’s
assessment of its principal risks and the related exposures. Annually,
senior management participate in a risk survey that provides an
important reference point in the overall risk assessment process.
In addition to the activities described above, the second line is also
critical in building and operating the oversight mechanisms that bring
focus to relevant areas of risk and reinforce the bridges between the
first and second lines, thereby seeking to ensure that there is a clear
understanding of emerging risks, their relevance to the organization
and the proposed mitigation plans.
To further coordinate efforts between the first and second lines, BCE has
established a Health and Safety, Security, Environment and Compliance
Oversight Committee (HSSEC Committee). A significant number of
BCE’s most senior leaders are members of the HSSEC Committee,
the purpose of which is to oversee BCE’s strategic security (including
information security), compliance, environmental, and health and
safety risks and opportunities. This cross-functional committee seeks
to ensure that relevant risks are adequately recognized and mitigation
activities are well integrated and aligned across the organization and
are supported with sufficient resources. The HSSEC Committee also
mandates the company’s Energy Board, a working group composed
of business unit employees, including vice-presidents and directors,
to ensure oversight of our overall energy consumption and costs
with the objective of minimizing financial and reputational risks while
maximizing business opportunities. The Energy Board also oversees
the progress made towards meeting our GHG emissions reduction
and supplier engagement targets.
In addition, the company’s Corporate Responsibility (CR) Board, composed
of a significant number of employees at the senior vice-president, vice-
president and director levels, supports the evolution of our corporate
responsibility strategy. The CR Board has the responsibilities, among
others, to embed corporate responsibility considerations into corporate
and business unit strategies, assist in identifying corporate responsibility
areas for further improvement, establish relevant ESG metrics, respond
to stakeholders’ concerns, review ESG public disclosures, approve
procedures seeking to verify the accuracy of publicly disclosed ESG
information and support various corporate responsibility initiatives. The
CR Board reports on progress to the HSSEC Committee, the co-chairs
of which report to the Risk and Pension Fund Committee, Governance
Committee and Compensation Committee of the Board of Directors. The
CR Board also reports to the BCE Disclosure and Compliance Committee
with regards to the public disclosure of ESG information.
third line – internal audit function
Internal Audit is a part of the overall management information and
control system and has the responsibility to act as an independent
appraisal function. Its purpose is to provide the Audit Committee,
other Board committees, as required, and management with objective
evaluations of the company’s risk and control environment, to support
management in fulfilling BCE’s strategic imperatives and to maintain
an audit presence throughout BCE and its subsidiaries.
26
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview 1.6 Capitals and our corporate responsibility
This section contains forward-looking statements, including relating to our ESG objectives. Refer to the section Caution regarding forward-
looking statements at the beginning of this MD&A.
Since our founding in 1880, Bell has been enabling Canadians to connect with each other and the world. Our approach to corporate responsibility
is to manage the company in ways that support the social and economic prosperity of our communities while safeguarding the environment,
with a commitment to the highest ESG standards.
Corporate responsibility underpins our six strategic imperatives
Corporate responsibility is a fundamental element of each of the six
strategic imperatives that inform BCE’s policies, decisions and actions.
Our focus is on creating a more sustainable future by embedding it
directly into our six strategic imperatives. As one of Canada’s largest
companies, we are driven to continually improve our impact and our
contribution to society with our network deployments, investments in
mental health initiatives, environmental sustainability and an engaged
workplace. This approach also supports our purpose to advance how
Canadians connect with each other and the world.
safety. Since 2020, the Compensation Committee has formally added
ESG targets to the corporate performance metrics within the measures
of the company’s annual short-term incentive compensation program,
the Annual Incentive Plan (AIP). In 2022, to reflect how ESG is embedded
into the overall strategy of the business, ESG-related metrics were
embedded throughout our strategic imperatives score and represent,
in aggregate, at least 30% of the total strategic imperatives score. The
strategic imperative score represents 40% weighting of the Corporate
Performance Index within the AIP. The majority of team members
participate in the AIP.
Our corporate responsibility approach is informed by a set of guiding
principles that support our corporate strategy and policies throughout
the organization. Through stakeholder engagement and our own internal
processes, we monitor ESG issues and opportunities and set objectives
for priority issues seeking to enhance sustainability performance.
We constantly measure and report on our progress. Through these
actions, we strive to drive environmental leadership, achieve a diverse
and inclusive workplace, lead data governance, and protect and build
stronger, healthier communities.
The Board has established clear oversight of our corporate responsibility
programs and our approach to ESG practices with primary accountability
at the committee level. The Governance Committee is responsible for
oversight of our corporate purpose and our ESG strategy and disclosure,
which includes oversight and related disclosure of climate-related
risks. It is also responsible for our governance practices and policies,
including those concerning business conduct and ethics. In addition,
the Risk and Pension Fund Committee oversees environmental, safety
and security risks, including data governance and cybersecurity, while
the Audit Committee monitors significant ESG issues and approves our
risks and assumptions disclosures. The Compensation Committee has
oversight of human resource issues including respectful workplace
practices, DEIB, team survey results, human rights and health and
Since 1993, BCE has been publishing a Corporate Responsibility Report
detailing our performance in managing ESG issues. However, 2022
marks the first year we present our financial and non-financial
performance in an Integrated Annual Report following the principles
of the Framework. We believe this approach provides a useful
basis for disclosing how we seek to create sustained value for our
stakeholders over time. An integral element of the Framework
are the six pillars, called “capitals” (our networks, our customers and
relationships, our products and services, our environment, our people
and our financial resources). We call them capitals because they are
inputs to value creation.
BCE is recognized for its corporate responsibility and ESG programs, as
reflected in its inclusion in various sustainability indices and its receipt
of sustainability awards, such as the Global 100 by Corporate Knights (1)
and the Order of Excellence for Mental Health at Work by Excellence
Canada. (2) In 2022, BCE continued to be listed on socially responsible
investment indices, such as the FTSE4Good Index, the Jantzi Social Index,
the Ethibel Sustainability Index Excellence Global, the Euronext Vigeo
World 120 index, Oekom Research ISS index, MSCI ESG Index, the Global
Compact 100 index and since January 2023, we are a constituent of
the Global 100 index from Corporate Knights.
(1) In January 2023, Corporate Knights, a sustainable-economy media and research company, ranked Bell #42 in its 2023 ranking of the World’s 100 Most Sustainable Corporations. The
ranking is based on an assessment of more than 6,000 public companies with revenue over US $1 billion. All companies are scored on applicable metrics relative to their peers, with 50%
of the weight assigned to sustainable revenue and sustainable investment.
(2) Excellence Canada, an independent not-for-profit corporation dedicated to advancing organizational performance across Canada, awarded Bell Canada the Order of Excellence for
Mental Health at Work. This certification recognizes Bell’s establishment of mental health at work best practices benchmarked against world-class organizations, and the demonstrated
impact of Bell’s mental health focus over several years.
27
2 MD&A Overview Our networks
Our
networks
Our networks and services are fundamental to the communities we serve,
the nation’s economy and Canadian society as a whole. Our networks are
integral to delivering our wireless, wireline, and broadcasting services.
We work closely with governments, regulators and our customers to
maximize these societal benefits.
Additionally, privacy and information security present both potentially
significant risks and opportunities for any business operating in the digital
economy. They are the subject of an expanding range of obligations,
including under new privacy and data protection laws being enacted
in Canada and around the world. Our customers, team members and
investors increasingly expect us to demonstrate that we collect data
appropriately, use it for purposes that advance their interests, and
keep it secure.
How digital access helps create value
Advanced communications networks provide access to a broad
spectrum of everyday activities for all Canadians. Today, Bell’s network
technologies are a key part of Canada’s 21st century infrastructure.
Our networks provide an ever-increasing number of consumers and
businesses of all sizes with greater capabilities and new opportunities
to connect, build, and grow, while bridging the digital divide.
our activities and outcomes
Bell investments are delivering benefits directly to our customers,
from providing more consumers with better access to family and
friends, remote learning and entertainment to enabling businesses
and communities to operate more efficiently and grow in the digital
economy. At the same time, by continuing to close the digital divides
that separate communities, we are also supporting growth among
suppliers and partners and helping build and drive innovation across
the Canadian digital ecosystem.
In 2022, Bell’s capital expenditures were $5.1 billion as we continued to
accelerate fibre deployments directly to homes and businesses and
5G wireless connectivity throughout our footprint. As a direct result of
these investments, Bell’s pure fibre Internet was made available to an
additional 854,000 homes and businesses by the end of 2022.
Bell wireless and network technologies are a key part of Canada’s
21st century infrastructure. Bell’s LTE wireless network reached 99% of
Canadians by 2020. Since then we have launched and expanded our
5G network in urban and rural markets, reaching 82% of all Canadians
by the end of 2022.
Investing in network security, capacity and resiliency has helped Bell
achieve 99.9901% network reliability in 2022. Our investments provide
core network architecture, diversity and redundancy – including multiple
transport routes – which minimize the risk of major service disruptions.
We also proactively provide notifications to keep customers informed
if services are disrupted.
Key metrics
5G network coverage
at December 31
Number of additional
pure fibre locations built
32%
70%
376,000
6 ,000
26%
665,000
20
21
22
20
21
22
Bell’s network reliability (1)
21
22
44.4460%
44.440 %
Target: above 99.99%
How data privacy governance helps create value
We recognize that to achieve our purpose of advancing how Canadians
connect with each other and the world, we must maintain the social
licence from our customers and all Canadians to collect and use data
in our operations. A strong and consistently applied approach to data
governance is critical to maintaining that social licence by focusing
on respecting the privacy of our customers’ data and protecting such
data against information security threats. Conversely, failure to meet
customer expectations regarding the appropriate use and protection
of their data can have negative reputational, business and financial
consequences for our company.
(1) Bell’s network reliability refers to our high-speed Internet connection.
26
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview
our activities and outcomes
Our approach to data governance encompasses the protection and
appropriate use of data across their life cycle, and we are incorporating
data governance proactively as a core consideration in all our business
initiatives and technology decisions. We have a data governance policy
which covers privacy, information security, data access management
and records management. All employees are trained on data governance,
as part of our mandatory biannual code of business conduct training. In
2022, Bell continued to make significant investments in people, processes
and technology in order to seek to protect confidential information
from evolving cybersecurity threats.
Key metric
Number of unresolved well-founded
privacy complaints from the Office of
the Privacy Commissioner of Canada
0
0
0
2020
202
2022
How information security governance
helps create value
Cybersecurity threats give rise to new and emerging standards and
regulations. We need to be able to identify and address information
security risks in a timely manner in order to be in a better position to
protect our market share and reputation, and these efforts align with
our strategic imperative to champion customer experience, while at the
same time reducing exposure to cyberattacks. Avoiding data breaches
can also limit the increase in expenses associated with remediation
efforts and legal exposures, aligning with our strategic imperative to
operate with agility and cost efficiency.
our activities and outcomes
We are focused on maintaining the trust that our customers have in us to
protect their data. To do this, we are implementing prevention, detection,
and response programs related to security threats. In addition, we are
helping define industry security and risk management practices, and
we are training our team members on data protection.
In 2022, we have aligned our Information Security program at 80% of
the ISO/IEC 27001 standard which puts us in a good position to meet
our target of 100% alignment by the end of 2023. Starting in 2021, we
launched our Be Cyber Savvy information security training program.
This training program includes onboarding to our specialized Cyber
Awareness platform, the conducting of monthly phishing simulations and
the completion of four baseline courses. Team members must complete
these four courses within 12 months of being onboarded to the program.
This year, 88% of onboarded team members completed baseline training
by the end of 2022. As we move forward, we believe a combination of
training, clear messaging, and positive reinforcement when reporting
a phishing attempt, should lead to year-over-year phishing report rate
improvement. In addition, to demonstrate employee-level organizational
awareness in keeping Bell secure we are integrating a new metric,
which consists of the number of reported phish simulations between
our fully trained employees and non-trained employees on our Be
Cyber Savvy information security training. This year, we observed a
155% increase in reported phishing simulations, signaling we are moving
in the right direction.
Key metric
Reported phish simulation between our fully trained
employees and non-trained employees on our Be Cyber
Savvy information security training
Our customers and relationships
Our customers
and relationships
Since 2010, the Bell Let’s Talk mental health initiative has raised awareness
and action for Canadian mental health, with a focus on helping reduce
the stigma around mental illness, improving access to care, supporting
world-class research and leading by example in workplace mental
health. Over the last 13 years, Canadians and people worldwide have
taken action to create positive change by engaging in the mental health
conversation, working hard to help create a Canada where everyone
can get the culturally-appropriate mental health support they need.
Non-trained
Fully trained
+ 77% more reporting
How taking action on mental health
helps create value
Our products and services help communities thrive, and we believe the
way we invest – our time, our money and our passion – has a positive
impact on the communities we serve. Communities also benefit from
the engagement of our team members as they support the causes they
value deeply. Bell is taking a leading role in helping address the mental
health crisis in Canada with the Bell Let’s Talk mental health initiative.
The program encourages Canadians to take action and achieve positive
change in their mental health.
27
2 MD&A Overview our activities and outcomes
In the lead up to Bell Let’s Talk Day 2023, $2.3 million in funding for
mental health was awarded to projects across the country. This included:
• $1 million from the Bell Let’s Talk Post-Secondary Fund to support
10 colleges, universities and cégeps
• $1.1 million from the Bell Let’s Talk Diversity Fund to 11 organizations
supporting the mental health and well-being of Canada’s Black,
Indigenous and People of Colour (BIPOC) communities
• $200,000 to Cité de la Santé Foundation for the refurbishment of
the psychiatric unit at the Cité-de-la-Santé Hospital (CISSS in Laval).
In January 2023, more than 300 communities and organizations across
Canada and around the world showed their support for mental health
by raising the Bell Let’s Talk flag at city and town halls, military bases,
schools and other locations. Students at 210 Canadian universities,
colleges and cégeps across the country also engaged in a variety of
initiatives in their learning environments to promote student mental
health.
Our products and services
Our products
and services
Our products and services provide value to Canadians by helping them
both mitigate climate change and adapt to its impacts. Our solutions
enable customers to reduce environmental impacts, improve health
and safety and better safeguard protected data from growing risks.
How our products and services contributing
to climate change mitigation and adaptation
helps create value
Bell technologies and services can help our customers reduce energy
needs, minimize carbon footprints and enhance productivity. Our
solutions help businesses embrace new ways to communicate,
collaborate, ensure business continuity and be able to maintain services
in the event of emergencies and extreme incidents.
our activities and outcomes
Our solutions include:
• virtualization and cloud computing which encourage optimal use of
space, power and cooling resources by consolidating servers and
storage and improve business continuity through redundancies in
our network,
• IoT services which can help optimize asset and fleet management
and are effective for smart buildings, smart cities, smart operations
and smart fieldwork applications,
Key metric
On January 9, 2023, Bell committed an additional $10 million toward
our goal of $155 million for Canadian mental health programs by 2025.
This action replaced the donation of 5 cents per interaction that Bell
has made in previous years on Bell Let’s Talk Day. This new funding
of $10 million is more than Bell has ever committed on Bell Let’s Talk
Day and it shifted the emphasis on Bell Let’s Talk Day toward practical
actions that Canadians can all take throughout the year to create
change. With the additional $10 million, Bell has committed more than
$139 million towards its $155 million goal and has partnered with more
than 1,400 organizations providing mental health support and services
throughout Canada.
• teleconferencing and teleworking which help ensure business
continuity, as evidenced during the COVID-19 pandemic,
• dematerialization which substitutes technology (e.g., online banking
apps) for travel (e.g., commuting to the bank),
• social networks, enabled by our infrastructure, which have a broad
range of benefits, including car pooling and alternative travel solutions
when extreme climate events limit transportation options.
At Bell, we believe it is important to understand the net carbon abatement
impact of our solutions on the planet’s carbon load. To achieve this,
we have worked with Groupe AGECO, a third-party consultant with
expertise in GHG quantification, to develop a methodology which
quantifies the carbon reduction capacity of our products and services
used by our customers.
Key metric
GHG emissions avoided by our customers
through the use of Bell’s products and services
Number of times by which GHG emissions abated through the use
of Bell technologies exceed GHG emitted by Bell’s operations (1)
7.2
2.7
2.2
15
17
20
(1) Taking into account the products and services for which Bell has developed the technology and plays a fundamental role in its delivery to clients, as well as the products and services for
which Bell has not developed the technology but enables it by providing the network. GHG emitted by Bell’s operations refers to scope 1 emissions (direct GHG emissions from sources that
are owned or controlled by Bell) and scope 2 emissions (indirect GHG emissions associated with the consumption of purchased electricity, heating/cooling and steam required by Bell’s
activities.) The analyses were performed based on 2015, 2017 and 2020 data, respectively.
23
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview
Our environment
Our
environment
We strive to minimize the negative environmental impacts of our
operations and to create positive impacts where possible. We also know
that our team members, our customers, and our investors expect this.
Taking care of the environment makes good business sense. If we fail to
take action to reduce our negative impacts on the environment, we risk
losing our valuable team members and customers to competitors, we
risk increased costs due to fines or remediation requirements, and we
risk losing investors, all of which could adversely impact our business.
We have been implementing and maintaining programs to reduce
the environmental impact of our operations for more than 30 years.
Our Environmental Policy, first issued in 1993, reflects our team
members’ values, as well as the expectations of customers, investors
and society that we regard environmental protection as an integral
part of doing business that needs to be managed systematically under
a continuous improvement process. We implemented an environmental
management system (EMS) to help with this continuous improvement,
which has been certified ISO 14001 (1) since 2009, making us the first
North American communications company to be so designated. We
have continuously maintained this certification since then. In addition,
Bell’s energy management system was certified ISO 50001 (2) in 2020,
also making us the first North American communications company to
be so designated (3).
How addressing climate change
helps create value
Climate change poses risks to the health of our operating environment
and our ability to create value. To help mitigate these risks, we aim to
reduce our energy consumption and GHG emissions while continuing
to adapt to the impacts of climate change.
our activities and outcomes
We are taking action both to help fight climate change and adapt to
its consequences. We are adapting by taking action to maintain our
resiliency in the face of climate change, and are helping our customers
do the same. To fight climate change, we are focused on reducing our
energy consumption and GHG emissions, while also helping customers
reduce theirs. Fostering innovation that helps reduce our carbon
footprints is part of our culture. On an annual basis, we calculate,
monitor and publicly report on our energy performance and GHG
emissions as part of our environmental and energy management
systems. Since 2003, we report on our climate change mitigation and
adaptation efforts through the CDP (formerly the Carbon Disclosure
Project), a not-for-profit organization that gathers information on
climate-related risks and opportunities from organizations worldwide.
In 2022, we obtained an A- score, ranking us in the “Leadership Band”
for the seventh consecutive year, recognizing our leadership on climate
action, our alignment with current best practices and the transparency
of our climate-related disclosures. Furthermore, we disclose annually
on our risks and opportunities related to climate change following the
11 recommendations of the Financial Stability Board’s Task Force on
Climate-related Financial Disclosures (TCFD). We are also engaged in
reducing our GHG footprint to contribute to the global effort in fighting
climate change. We have set the target to be carbon neutral for our
operational GHG emissions (4) starting in 2025. For 2026 and 2030, we
have set science-based GHG emissions reduction targets that are
consistent with the goals of the Paris Agreement. The Science Based
Targets initiative (SBTi) (5) has approved the three specific targets set by
BCE Inc. that cover all scopes.
Key metrics
Energy intensity (Energy consumption (Megawatt hours
(MWh) equivalent) divided by network usage (petabytes))
737
766
6 7
55
266
227
7
05
14
15
16
17
18
19
20
21
22
Operational (scope 1 and 2) GHG emissions
262,47
267,0 0
276,527
20
21
22
(1) Our ISO 14001 certification covers Bell Canada’s oversight of the EMS associated with the development of policies and procedures for the delivery of landline, wireless, TV and Internet
services, broadband and connectivity services, data hosting, cloud computing, radio broadcasting and digital media services, along with related administrative functions.
(2) Our ISO 50001 certification covers Bell Canada’s energy management program associated with the activities of real estate management services, fleet services, radio broadcasting and
digital media services, landline, wireless, TV, Internet services, connectivity, broadband services, data hosting and cloud computing, in addition to related general administrative functions.
(3) Bell’s review in 2020 of publicly available information for North-American communications and telecommunications companies indicated Bell was the first of its North American
communications and telecommunications competitors to receive ISO 14001 and 50001 certifications.
(4) Operational GHG emissions include scope 1 and scope 2 emissions. Scope 1 GHG emissions are direct emissions from sources that are controlled by Bell. Scope 2 GHG emissions are indirect
emissions associated with the consumption of purchased electricity, heating/cooling and steam required by Bell’s activities.
(5) The SBTi is a partnership between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature driving ambitious climate action in the private
sector by enabling organizations to set science-based emissions reduction targets.
24
2 MD&A Overview
How circular economy helps create value
We are improving our circular economy model to focus on solutions
that detach growth from accelerating raw material consumption.
This approach effectively reduces the environmental impact of our
operations. Waste reduction is essential to our objective of improving on
our operational efficiency. Waste reduction also aligns with the values
and expectations of our team members and customers.
adopted a new target to reach and maintain a 15% reduction of total
waste sent to landfill by 2025, with a reference year of 2019. Through
setting ambitious waste reduction targets, such as the ones listed
above, we are striving to build a resilient path to circularity with the
general ambition of sending zero waste to landfill and are investing
in research and development of products where current technology
does not provide responsible waste diversion methods.
our activities and outcomes
Bell has managed waste reduction, reuse and recycling programs
for more than 30 years. We have ambitious waste reduction goals
and strong monitoring processes in place that enable us to track
and report on our waste-generating activities. To manage the waste
created from the electronic devices we distribute to customers, we have
implemented effective and accessible e-waste collection programs
for the recovery, reuse, refurbishment and recycling of customer-
facing devices, including national take-back programs, drop boxes
and mail-in instructions. To measure the success of these programs,
we have set a goal of collecting 7 million used TV receivers, modems,
mobile phones and Wi-Fi pods from January 2021 to the end of 2023.
At Bell, we believe in leading by example, and so to continue to manage
and reduce the waste generated from our own operations, we have
Key metric
Cumulative recovery of used TV receivers, modems,
Wi-Fi pods (1) and mobile phones
6.7M
6.2M
.7M
4.6M
7. M
6.7M
2.2M
16
17
18
19
20
21
22
Our people
Our
people
To execute on our strategic imperatives, we rely on the engagement and
expertise of our team members. We focus on attracting, developing and
retaining the best talent, as well as creating a positive team member
experience to drive effectiveness, high performance and agility in our
evolving business environment. Through workplace wellness initiatives
and by celebrating diversity in the workplace, we reinforce our goal
of creating a safe and inclusive atmosphere for all team members.
How well-being helps create value
Bell team members bring our corporate purpose and strategic
imperatives to life every day. To support the Bell team, we strive for a
dynamic culture where all team members feel valued and respected
in a safe, supported environment. We offer inclusive benefits, ongoing
education and awareness programs and a range of progressive
initiatives to foster well-being and success. At Bell, we believe that
taking care of the well-being of our team members is essential to their
personal success and to our organization’s ongoing progress.
our activities and outcomes
To foster the well-being of our team members, we believe that engaging
our team members as well as nurturing an inclusive environment are
both essential. We are proud to be ranked as one of Canada’s Top
Employers (2). Bell has been recognized by Mediacorp as one of Canada’s
Best Diversity Employers, Top Employers for Young People, Top Family-
Friendly Employers, one of Canada’s Greenest Employers and one of
Montréal’s Top Employers (3) (4) (5) (6) (7). Bell was also recognized as one
of Canada’s Future Workforce Top Employers in Computer Science
based on input from thousands of Canadian university and college
students (8). We are focused on developing and retaining the best talent
in the country by providing a workplace that is positive, professional
and rewarding, all of which enable creativity and innovation. We also
continue to develop, implement and share mental health practices in
the workplace, and to broaden our approach to emphasize total-health
support. We educate team members through our training programs and
campaigns, support them through an extensive range of mental health
services, and support and adapt workplace policies and practices to
foster a psychologically safe workplace. Since 2010, over 90 metrics
have been measured quarterly and assessed for trends and program
insights to closely monitor the psychological health of our workplace.
Collecting qualitative and quantitative data is crucial to ensuring that we
are heading in the right direction and making any required adjustments
to our mental health programs.
(1) Wi-Fi pods have been included in the scope starting in 2021.
(2) Bell was recognized as one of “Canada’s Top 100 Employers” in years 2016 to 2023 by Canada’s Top Employers, an editorial competition organized by Mediacorp Canada Inc., a publisher
of employment periodicals. Winners are evaluated and selected based on their industry leadership in offering exceptional workplaces for their employees. Employers are compared to
others in their field to determine which offers the most progressive and forward-thinking programs.
(3) Bell was recognized as one of “Canada’s Best Diversity Employers” in years 2017 to 2022 by Canada’s Top 100 Employers. Winners are selected based on successful diversity initiatives in
a variety of areas, when compared to other employers in the same field.
(4) Bell was recognized as one of “Canada’s Top Employers for Young People” in years 2018 to 2022 by Canada’s Top 100 Employers. Winners are evaluated and selected based on the programs
offered to attract and retain young employees, when compared to other employers in the same field.
(5) Bell was recognized as one of “Canada’s Top Family-Friendly Employers” in years 2020 to 2022 by Canada’s Top 100 Employers. Winners are evaluated and selected based on the programs
and initiatives offered to help employees balance work and family commitments, when compared to other employers in the same field.
(6) Bell was recognized as one of “Canada’s Greenest Employers” in years 2017 to 2022 by Canada’s Top 100 Employers. Winners are evaluated and selected based on the development of
sustainability initiatives and environmental leadership, when compared to other employers in the same field.
(7) Bell was recognized as one of “Montréal’s Top Employers” in years 2013 to 2023 by Canada’s Top Employers. Winners are evaluated and selected based on progressive and forward-thinking
programs offered in a variety of areas, when compared to other organizations in the same field.
(8) Bell was recognized in 2021, 2022 and 2023 as one of Canada’s Future Workforce Top Employers - Computer Science by Brainstorm Strategy Group Inc., a Canadian provider of advice,
insights and professional development to employers, universities and colleges. The most recent ranking was based on a survey conducted among more than 20,000 current Canadian
university and college students.
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview
Key metrics
People leaders who
completed mandatory
base training on
mental health
42%
4 %
Overall team member
engagement score (1)
76%
75% 76% 76% 76%
21
22
18
19
20
21
22
How fostering diversity, equity, inclusion
and belonging helps create value
At Bell, we are proud of our focus on fostering a diverse, inclusive,
equitable and accessible workplace where all team members feel valued,
respected and supported. We are dedicated to building a workforce
that reflects the diversity of the communities we serve, where every
team member has the opportunity to reach their full potential. The
integration of DEIB programs within Bell fosters the innovation and
creativity of our team members.
our activities and outcomes
Our DEIB strategy is supported by a governance framework that
includes the Diversity Leadership Council with senior leaders from every
business unit, business unit committees and employee-led networks,
including Black Professionals at Bell, Pride at Bell, Diversability at Bell
and Women at Bell.
In line with our objective of improving gender diversity, we are a
signatory to the Catalyst Accord 2022 (2) and a member of the 30%
Club (3). Our current gender diversity target is a minimum of 35% gender
diverse directors on the BCE Board, and at least 35% of Bell leaders
at the vice president level and above by the end of 2023. By the end
of 2022, we were at 32% for executives and 36% for Board members.
In 2022, Bell continued its commitment to taking meaningful actions to
address the impacts of systemic racism on team members and others
in BIPOC communities. This includes:
• Targets for BIPOC representation on our senior management team
of at least 25% by 2025 and 40% of new graduate and intern hires
• Partnerships with the Onyx Initiative and the Black Professionals in
Tech Network that are helping drive the recruitment of Black college
and university students and promote Black talent in technology
• Promoting greater diversity in Canadian media with the HireBIPOC
website and the Bell Media Content Diversity Task Force in partnership
with BIPOC TV & Film
Looking ahead, we plan to continue building momentum for our diversity,
equity, inclusion and belonging strategy based on concrete objective-
setting and the integration of inclusive leadership practices.
Key metrics
Gender diverse (4)
representation in
executive positions
(vice-president level and above)
Gender diverse (4)
representation
among directors
on the BCE Board
52% 52%
55%
52%
24%
56% 56%
24%
24%
27%
18
19
20
21
22
18
19
20
21
22
BIPOC
representation
in Bell senior
management
25%
20%
BIPOC
representation
among new graduates
and interns
72%
6 %
21
22
21
22
Our financial resources
Our fi nancial
resources
The financial resources of the company are addressed throughout this MD&A.
(1) This metric is calculated as the average score obtained in the annual Bell team member satisfaction survey. The Team Member Engagement score is based on five specific questions and
the percentage of employees who responded favourably (Strongly agree or Agree) to these questions out of the total number of employees who responded to the survey.
(2) The Catalyst Accord 2022 calls on Canadian boards and CEOs to pledge to accelerate the advancement of women in business through these actions: Increase the average percentage of
women on boards and women in executive positions in corporate Canada to 30% or greater by 2022.
(3) Recognizing Canada’s distinct corporate governance framework, the aim of the 30% Club Canada is to include both board Chairs and CEOs to achieve better gender balance at board
level, as well at senior management levels.
(4) Gender diverse is defined as a person who identifies as a woman or with a gender other than a man or a woman.
5
2 MD&A Overview
Assumptions
GHG emissions reduction and supplier
engagement targets
Our
environment
Our GHG emissions reduction and supplier engagement targets are
based on a number of assumptions including, without limitation, the
following principal assumptions:
• Implementation of various corporate and business initiatives to reduce
our electricity and fuel consumption, as well as reduce other direct and
indirect GHG emissions enablers
• No new corporate initiatives, business acquisitions, business divestitures
or technologies that would materially change our anticipated levels
of GHG emissions
• Our ability to purchase sufficient credible carbon credits and renewable
energy certificates to offset or further reduce our GHG emissions,
if and when required
• No negative impact on the calculation of our GHG emissions from
refinements in or modifications to international standards or the
methodology we use for the calculation of such GHG emissions
• No required changes to our SBTs pursuant to the SBTi methodology
that would make the achievement of our updated SBTs more onerous
or unachievable in light of business requirements
• Sufficient supplier engagement and collaboration in setting their
own SBTs, no significant change in the allocation of our spend by
supplier and sufficient collaboration with partners in reducing their
own GHG emissions
DEIB targets
Our
people
Our DEIB targets are based on a number of assumptions including,
without limitation, the following principal assumptions:
• Ability to leverage DEIB partnerships and recruitment agencies to help
identify qualified diverse talent for vacant positions
• Sufficient diverse labour market availability
• Implementation of corporate and business initiatives to increase
awareness, education and engagement in support of our DEIB targets
• Propensity of existing employees and job-seekers to self-identify to
enable a diverse workforce representation
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Overview 2 Strategic imperatives
Our success is built on the BCE team’s dedicated execution of the six strategic imperatives
that support our purpose to advance how Canadians connect with each other and the world.
This section contains forward-looking statements, including relating to our network deployment plans and our 2023 objectives, plans and
strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
2.1 Build the best networks
Continue to enhance our key competitive advantage
with a focus on delivering leading broadband fibre and
wireless networks in locations large and small.
2022 progress
• Expanded our FTTP direct fibre footprint to an additional 854,000
homes and businesses in communities throughout Manitoba, Ontario,
Québec and Atlantic Canada. FTTP delivers total broadband access
speeds of up to 8 Gbps currently, with faster speeds expected in the
future as equipment evolves to support these higher speeds.
• Expanded our 5G wireless network to reach 82% of Canada’s population
• Launched 5G+, the next evolution of 5G leveraging 3500 MHz wireless
spectrum acquired in 2021. 5G+ service is expected to be faster and
more responsive than 5G, allowing for a superior mobile experience.
5G+ coverage expanded to reach 38% of Canada’s population at the
end of 2022.
• Bell’s 4G and 5G networks were ranked Canada’s fastest for the third
year in a row in PCMag’s 2022 Fastest Mobile Networks Canada report,
the annual study of mobile network performance across the country (1)
• Announced a large-scale investment in broadband infrastructure as
part of the Ontario Accelerated High Speed Internet Program (AHSIP).
Bell is investing over $650 million in partnership with a Government
of Ontario investment of $484 million, enabling the deployment of our
all-fibre network to over 80,000 homes and businesses in underserved
regions across Ontario as part of AHSIP by 2025.
2025 focus
• Increase the number of customer locations covered with direct fibre
connections by up to 650,000
• Expand mobile 5G coverage to 85% of Canada’s population
• Increase coverage of 5G+ service to 46% of Canada’s population
2.2 Drive growth with innovative services
Leverage the power of our leading network technologies
to deliver differentiated communications services to
Canadians and drive our revenue growth.
2022 progress
• Added 489,901 total net postpaid and prepaid mobile phone subscribers,
up 66.2% over 2021
• Expanded our lineup of 5G, 4G LTE and LTE-A devices, including
Apple’s iPhone 14 Series, the Samsung Galaxy S22 series and Google’s
Pixel 7 and Pixel 7 Pro
• Introduced unlimited Ultimate plans, a tier of mobile unlimited share
plans that provide significant data and max speeds, international
messaging, high-definition (HD), video quality plus sharable data and
calling within Canada and the U.S. Customers who subscribe to an
Ultimate plan also receive a 24-month subscription to Crave Mobile.
• Building on Bell’s strategic partnership with AWS, we launched the first
public MEC platform with AWS Wavelength in Canada at the edge of
our 5G network
• Building on Bell’s strategic partnership with Google Cloud, we deployed
the first global production implementation of Google Distributed Cloud
Edge for our core network functions, driving digital transformation
and operational efficiencies
• Built on our position as the leading Internet service provider (ISP)
in Canada with a retail high-speed Internet subscriber base of
4,258,570 at December 31, 2022, up 10.3% over 2021
• Bell was named the top ISP among Canada’s major providers for gaming
for the second year in a row in PCMag’s Best Gaming ISPs Canada 2023
report based on PCMag’s Quality Index (speed, latency and jitter)
• Launched Bell Gigabit Fibe 3.0 service offering symmetrical download
and upload speeds of 3 Gbps in several communities across Ontario,
Québec and the Atlantic provinces
• Introduced Bell Gigabit Fibe 8.0 offering symmetrical download and
upload speeds of 8 Gbps, the fastest speeds available in the market
today among major ISPs in North America, in eligible areas of Toronto
• Launched the Giga Hub featuring Wi-Fi 6E, the fastest Wi-Fi technology
available, for fibre customers in Ontario and Québec
• Acquired EBOX and other related companies, which provide Internet,
telephone and TV services to consumers and businesses in Québec
and parts of Ontario, strengthening our competitive position in the
value-seeking segment of the market
• Acquired Distributel, a national independent communications
provider offering a wide range of consumer, business and wholesale
communications services, supporting our strategy to grow residential
and business customers
(1) PCMag delivers labs-based, independent reviews of the latest technology products and services. In September 2022, PCMag ranked Bell’s mobile networks number one in its 2022 study of
mobile network performance across Canada for a third year in a row. This study is based on a weighted average of download speeds, upload speeds and average latency in PCMag’s tests.
55
2 MD&A Strategic imperatives 2025 focus
• Maintain our market share of national operators’ postpaid mobile
• Cross sell to customers who do not have all their telecommunication
phone net additions
services with Bell
• Growth of our prepaid mobile phone subscriber base
• Introduction of more 5G devices and services
• In January 2023, Bell partnered with Snap Inc. to create a unique
immersive experience for Toronto Raptors fans with the first ever
5G multi-user AR basketball experience on Snapchat
• Increased adoption of unlimited data plans and device financing plans
• Accelerated business customer adoption of advanced 5G and IoT
solutions
• Continued growth in retail Internet subscribers
• Enhance Internet product superiority through new service offerings
with next generation speeds and hardware to provide an enhanced
customer experience in the home
• Continued diversification of Bell’s distribution strategy with a focus
on expanding DTC and online transactions
• In January 2023, Bell entered into a multi-year exclusive agreement
to sell its Bell, Virgin Plus and Lucky Mobile wireless and wireline
services through Staples stores across Canada. In addition, Bell and
Staples will partner to sell Bell wireless and wireline services direct
to medium-sized businesses through the Staples Professional sales
team, backed by Bell’s advanced communications expertise.
• Continue to deliver network-centric managed and professional services
solutions to large and medium-sized businesses that increase the
value of connectivity services
2.3 Deliver the most compelling content
Take a holistic approach to our mix of media and
distribution assets to deliver the content Canadians
want the most.
2022 progress
• Maintained our position as Canada’s largest TV provider with
2,751,498 retail subscribers at December 31, 2022, and increased our
total number of IPTV subscribers by 5.6% to 1,988,181
• Introduced the latest evolution of Fibe TV, with new capabilities and
features including access to the Google Play app catalogue, voice
remote powered by Google Assistant, universal search and Cloud
PVR, backed by Google Android TV
• Grew our Crave subscriber base to more than 3.1 million, up 6% over
2021
• Crave announced a long-term and exclusive Pay-One window licensing
agreement for theatrical feature films from Sony Pictures Entertainment
• Maintained CTV’s #1 ranking as the most-watched TV network in
Canada for the 21st year in a row (1)
• Formed a partnership with Lionsgate for a co-development deal to
produce comedy and drama TV series for the global market
• Announced a long-term expansion of our comprehensive media rights
agreement with the NFL, ensuring Bell Media remains the exclusive
TV broadcast partner of the NFL in Canada
• TSN, Canada’s sports leader (2), and RDS, the top French-language sports
network (1), entered into a multi-year agreement with MLS to deliver an
extensive schedule of regular season matches, plus marquee playoff
matchups and the annual MLS Cup championship game
• TSN and FanDuel Group, North America’s premier online gaming
company, announced an exclusive multi-year agreement to introduce
FanDuel’s sportsbook to Canadian sports fans
• Launched noovo.info, a digital news platform that approaches news
differently, notably through the distribution of information on social
media and creation of news content for TikTok and Instagram to reach
younger audiences
• Astral acquired Imagine Outdoor Advertising Ltd.’s entire digital OOH
advertising network in Alberta, bringing Astral’s total digital inventory
in Alberta to 39 faces
• Partnered with Air Canada to launch Live TV onboard select aircraft
and domestic routes, enabling passengers to watch live sports
coverage on TSN and RDS, and breaking news coverage from CTV
News Channel and BNN Bloomberg
2025 focus
• Continued growth in IPTV subscribers
• Enhance TV product superiority through new service offerings and
innovation to provide an enhanced customer experience in the home
• Reinforce industry leadership in conventional TV, specialty TV, pay TV,
streaming and sports services
• In January 2023, TSN acquired exclusive media rights to PGA Tour
Live, featuring more than 4,300 hours of live coverage from PGA
Tour events throughout the season.
• Continued scaling of Crave through broader content offering, user
experience improvements and expanded distribution
• Continued investment in Noovo originals to increase market share
and bolster our position through continued audience growth
• Grow advertising revenue and maximize market share
• Scale our Strategic Audience Management (SAM) TV and Bell
demand-side platform (DSP) buying platforms, Bell Media’s advertising
buying optimization platforms which give customers the ability to plan,
activate and measure marketing campaigns using Bell’s premium
first-party data and TV inventory
• Advance our digital-first media strategy including growing digital
revenues (3) and DTC subscribers
• Optimize unique partnerships and strategic content investments to
monetize content rights and Bell Media properties across all platforms
(1) Based on data provided by Numeris.
(2) Based on the depth and breadth of broadcasted sporting events, and TSN’s reach, according to data provided by Numeris, and TSN being the consumer preferred brand for live sports
and sports news.
(3) Digital revenues are comprised of advertising revenue from digital platforms including web sites, mobile apps, connected TV apps and OOH digital assets/platforms, as well as advertising
procured through Bell digital buying platforms and subscription revenue from direct-to-consumer services and Video on Demand services.
56
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Strategic imperatives 2.4 Champion customer experience
Make it easier for customers to do business
with Bell at every step, from sales to installation,
to ongoing support.
2022 progress
• Led national telecom service providers in reducing our share of
consumer complaints, according to the 2021 – 2022 Annual Report
from the Commission for Complaints for Telecom-television Services
(CCTS). While complaints to the CCTS as a whole decreased by 25%,
Bell again outpaced national competitors with a decrease of 38%. Bell’s
overall share of complaints decreased to 17.2%, down 3.5 percentage
points, which was the largest decline among national providers.
• Bell was awarded Best of Show Mobile Application and Best
Telecommunication Mobile Application for the MyBell app at the 2022
Mobile Web Awards by the Web Marketing Association (1)
• MyBell, Virgin Plus My Account and Lucky Mobile My Account all won
Gold as the top service apps at the 2022 MarCom Awards (2)
• Virgin Plus added a new “Request a Call” option to its self-serve
channels, allowing customers to book a call from a live care agent
through the app, website, chat and IVR channels if they have questions
or require additional support
• Improved postpaid mobile phone churn by 0.01 points (pts) over 2021
to 0.92%
• Launched new tool allowing customers in Ontario and Québec to
check for Internet outages in their area, including the ability to get
real-time updates and manage notifications on network status and
resolution time
• Launched app-based instructive flow for new self-install customers,
with customized support and the ability to advance the activation date
• Improved issue identification and assigned more case managers to
handle potentially challenging service experiences
• Leveraged AI to automate the service experience either through our
agents or our digital platforms
• Created a new dedicated queue to support Mandarin and Cantonese
customers in their own language to produce a more personalized
sales and service experience for many new Canadians
• Bell was ranked the most valuable communications brand in Canada
and the third most valuable overall in Kantar’s annual BrandZ report
on the most valuable Canadian brands of 2022, reflecting our Bell for
Better commitment to the highest ESG standards, and our network
reach, reliability and service excellence (3)
2025 focus
• Improve customer experience with continued scaling of digital sales
capabilities and functionality
• Further improve and expand self-installation capabilities
• Further improve customer satisfaction scores
• Further evolve our self-serve tools, including the addition of Wi-Fi
check-up functionality within the MyBell app, allowing customers to
optimize their Wi-Fi network and ensure each device has a strong signal
• Further reduce the total number of customer calls to our call centres
as well as the number of truck rolls
• Continue to invest in AI and machine learning to resolve customer
issues faster
Underscore our focus on operational
2.5 Operate with agility and cost efficiency
2025 focus
• Continued sharp focus on our cost structure
• Realize cost savings from:
• operating efficiencies enabled by a growing direct fibre footprint
excellence and cost discipline throughout
every part of our business.
2022 progress
• Maintained stable BCE consolidated adjusted EBITDA margin despite
• changes in consumer behaviour and digital adoption
$87 million in storm recovery and inflationary cost pressures (4)
• product and service enhancements and innovation
• Reduced wireline operating costs by 0.5%, contributing to Bell Wireline
• new call centre technology and digital investments that are enabling
adjusted EBITDA margin (5) improvement of 0.2 pts over 2021
self-serve capabilities
• Delivered productivity improvements and cost efficiencies resulting
from the expansion of Bell’s all-fibre network footprint and service
innovations enabled by new broadband technologies
• Maintained low average after-tax cost of Bell Canada’s publicly issued
debt securities of 2.9%
• other improvements to the customer service experience
• management workforce reductions including attrition and retirements
• lower contracted rates from our suppliers
• rationalization of real estate footprint
(1) The Mobile Web Award program recognizes the individual and team achievements of Web professionals all over the world who create and maintain the best mobile websites and the
best mobile applications. Bell won Best of Show Mobile Application for the MyBell App which also was recognized as Best Telecommunication Mobile Application. The MobileWebAwards
were judged on seven criteria seen as requirements for a success mobile website or mobile app. They include Creativity, Impact, Design, Content, Interactivity, Ease of use and Use of the
medium. Each mobile website or mobile app entry was judged against other entries of the same format in its industry category and then against an overall standard of excellence.
(2) Bell’s self-serve apps MyBell, Virgin Plus My Account and Lucky Mobile My Account all won Gold at the 2022 AVA Digital Awards in the App for Business category. The AVA Digital Awards,
managed by the Association of Marketing & Communication Professionals, is an international audio-visual arts competition that recognizes excellence in next-generation digital
communications. Bell’s family of apps was measured against more than 2,500 applications from across the world based on concept, direction, design and production.
(3) Kantar is a global data, insights and consulting company. The brands that appear in the Kantar BrandZ Most Valuable Canadian Brands 2022 report are the most valuable brands in Canada,
and were selected for inclusion based on the Kantar BrandZ brand valuation methodology that combines extensive and ongoing consumer insights with rigorous financial analysis.
(4) Inflationary cost pressures are defined as a year-over-year increase in operating costs driven by inflationary pressures related to fuel, utilities and salary expenses
(5) Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues.
57
2 MD&A Strategic imperatives 2.6 Engage and invest in our people and create a sustainable future
Strengthen our inclusive workplace culture and recognize
that Bell’s success requires dynamic and engaged team
members who embrace the highest ESG standards.
2022 progress
• Recognized as one of Canada’s Top 100 Employers for the eighth
consecutive year in Mediacorp’s annual review of the best workplaces
across the country, reflecting our success in key areas including
employee benefits, training and skills development and community
involvement
• Named one of Canada’s Best Diversity Employers for the sixth year in
a row in Mediacorp’s 2022 report on workplace diversity and inclusion,
in recognition of Bell’s commitment to fostering an inclusive, equitable
and accessible workplace where all team members can make an
impact, immerse themselves in opportunities, and feel like they belong
• Named one of Canada’s Top Employers for Young People for the fifth
consecutive year by Mediacorp in recognition of our industry-leading
recruitment and career development programs for students
• Named one of Canada’s Top Family-Friendly Employers by Mediacorp in
recognition of a wide range of employee benefits that support families
• Awarded the Order of Excellence certification in Mental Health at Work
from Excellence Canada for best practices and progress in employee
mental health and well-being
• Recognized by Women in Governance (WiG) at the Platinum Parity
Certification level, reflecting our leadership and progress on gender
parity and the effectiveness of systemic enablers (1)
• Bell signed on to the Progressive Aboriginal Relations (PAR) program,
established by the Canadian Council for Aboriginal Business (CCAB)
which supports progressive improvement in Indigenous relations
with a certification program that confirms corporate performance
and commitment
• Introduced our Employee Value Proposition, a clear statement of the
values and experiences that make Bell a unique workplace where
all team members can make an impact, immerse themselves in
opportunities, and feel like they belong
• Launched the Bell Mentoring program to enhance career opportunities
for Bell team members, build relationships and boost inclusion in the
workplace
• Modernized Bell’s Omniflex benefits program to offer more flexibility and
enhanced wellness support, including more inclusive and accessible
options
• Rolled out unlimited mental health benefit coverage for team members
and their eligible family members to support their mental health and
well-being
• Introduced a flexible holiday policy, including the ability to substitute
days, reflecting our support for flexibility and diversity in the workplace
• Obtained approval from the SBTi for our science-based absolute GHG
emissions reduction targets
• Named the top telecom company and #4 overall in Canada on the
June 2022 Corporate Knights Best 50 Corporate Citizens list (2)
• Named the inaugural GHG Reductions Champion by Canada’s
Clean50 Awards in recognition of our success reducing the GHG
emissions intensity of our operations (3)
• Named one of Canada’s Greenest Employers for the sixth straight year
2025 focus
• Continue to play an active role in engaging our team and the broader
community in diversity issues and deliver on DEIB objectives
• Evolve Bell Workways, a hybrid work model that provides our team
members with flexibility, collaboration and support in how and where
they work
• Continue to enhance our workplace programs for the mental health and
well-being of all Bell team members, by continuing to evolve existing
mental health programs and focus on prevention and protective
psychological workplace factors to proactively improve mental health
• Continue to implement our action plan to address climate change
• In January 2023, we were ranked 42nd overall in the Corporate Knights
Global 100 2023 ranking of the most sustainable corporations in the
world, in recognition of Bell’s commitment to the highest ESG standards
• Continue moving forward with ESG initiatives and Bell for Better
commitments
(1) Platinum Parity Certification is the highest certification level awarded by Women in Governance, a Canadian certification program that evaluates over 75 quantitative and qualitative
criteria taking into account the multiple impacts of diversity in women’s career advancement.
(2) The annual Corporate Knights ranking evaluated 332 of the largest Canadian companies on a set of 24 ESG indicators to single out the Best 50 that Corporate Knights considers “the
vanguard of corporate sustainability leadership in Canada.”
(3) Bell was named the inaugural Clean50 GHG Reductions Champion for 2023, in recognition of Bell’s performance between 2019 and 2022 in reducing our GHG intensity (CO2e per petabyte).
Canada’s Clean50 is primarily managed by Delta Management Group, a Canadian sustainability, ESG and cleantech focused search firm, and annually recognizes individuals, small teams
and business for their contributions to sustainability in Canada.
56
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Strategic imperatives 3 Performance targets, outlook, assumptions and risks
This section provides information pertaining to our performance against 2022 targets, our consolidated business outlook and operating
assumptions for 2023 and our principal business risks.
3.1 BCE 2022 performance vs. guidance targets
Financial
measure
Revenue growth
2022
target
1%–5%
Adjusted EBITDA
growth
2%–5%
2022
performance and results
3.1%
3.1%
BCE revenues grew by 3.1% in 2022, compared to 2021, driven by higher service revenue of 3.0%,
and higher product revenue of 3.8%, reflecting growth from our Bell Wireless and Bell Media
segments, partly offset by a modest decline in our Bell Wireline segment.
BCE adjusted EBITDA grew by 3.1% in 2022, compared to 2021, driven by increases in our Bell
Wireless and Bell Media segments, whereas our Bell Wireline segment remained stable year over
year. The growth reflected greater revenues, partly offset by higher operating expenses.
Net earnings
growth
Not applicable
1.2%
Capital intensity (1)
21%
21.2%
Net earnings
per share (EPS)
growth
Not applicable
(0.3%)
2%–7%
5.0%
Adjusted net
earnings per share
(adjusted EPS) (2)
growth
Cash flows from
operating activities
growth
Not applicable
4.5%
In 2022, net earnings increased by 1.2%, compared to 2021, due to higher adjusted EBITDA, lower
severance, acquisition and other costs, lower income taxes and a higher net return on post-
employment benefit plans, partly offset by higher other expense mainly due to net mark-to-market
losses on derivatives used to economically hedge equity settled share-based compensation plans,
higher depreciation and amortization, higher impairment of assets, and higher interest expense.
2022 capital expenditures of $5,133 million increased by 5.8% over last year, with a corresponding
capital intensity ratio of 21.2%, up 0.5 pts over 2021, reflecting the accelerated buildout of our
wireline FTTP and wireless 5G networks.
Net earnings attributable to common shareholders in 2022 increased by $7 million, compared to
2021, due to higher adjusted EBITDA, lower severance, acquisition and other costs, lower income
taxes and a higher net return on post-employment benefit plans, partly offset by higher other
expense mainly due to net mark-to-market losses on derivatives used to economically hedge equity
settled share-based compensation plans, higher depreciation and amortization, higher impairment
of assets, and higher interest expense. Despite increased net earnings attributable to common
shareholders, EPS in 2022 decreased by $0.01, compared to 2021, due to a higher average number
of common shares outstanding.
Excluding the impact of severance, acquisition and other costs, net mark-to-market gains (losses) on
derivatives used to economically hedge equity settled share-based compensation plans, net equity
gains (losses) on investments in associates and joint ventures, net gains (losses) on investments,
early debt redemption costs and impairment of assets, net of tax and NCI, adjusted net earnings
in 2022 was $3,057 million, or $3.35 per common share, compared to $2,895 million, or $3.19 per
common share, in 2021.
In 2022, BCE’s cash flows from operating activities of $8,365 million increased by $357 million,
compared to 2021, mainly due to higher adjusted EBITDA, lower income taxes paid, lower
contributions to post-employment benefit plans due to a partial contribution holiday in 2022, and
lower severance and other costs paid, partly offset by lower cash from working capital and higher
interest paid.
Free cash flow
growth
2%–10%
2.9%
Free cash flow of $3,067 million in 2022 increased by $87 million, compared to 2021, mainly due to
higher cash flows from operating activities, excluding cash from acquisition and other costs paid,
partly offset by higher capital expenditures.
Annualized dividend
per common share
$3.68 per share
$3.68 per
share
Annualized dividend per BCE common share for 2022 increased by 18 cents, or 5.1%, to $3.68
compared to $3.50 per share in 2021.
(1) Capital intensity is defined as capital expenditures divided by operating revenues.
(2) Adjusted EPS is a non-GAAP ratio. Refer to section 11.2, Non-GAAP ratios in this MD&A for more information on this measure.
57
2 MD&A Performance targets, outlook, assumptions and risks 3.2 Business outlook and assumptions
This section contains forward-looking statements, including relating to our projected financial performance and expected contribution levels
to our pension plans in 2023, our planned capital expenditures and network deployment plans, our 2023 annualized common share dividend,
and our business outlook, objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the
beginning of this MD&A.
2023 outlook
BCE’s 2023 outlook builds on the solid financial performance, accelerated
broadband investments and operating momentum we delivered in
2022. Our projected operating success is anchored to our strategic
framework to build, execute and transform, which centers on:
• Maintaining generational investments in our networks to support the
buildout of our fibre, 5G and 5G+ network infrastructure
• Leveraging our fibre-related speed advantage and product leadership
in the home to capture a high share of Internet and TV net additions
• Driving greater cross-sell penetration of Internet households with
wireless
• Maintaining momentum on our higher-value mobile phone and 5G
strategy
• Capitalizing on higher immigration levels
• Maintaining momentum in our Business-to-Business (B2B) sector
• Continuing to drive our digital-first media strategy
Assumptions
Assumptions about the Canadian economy
• Slowing economic growth, given the Bank of Canada’s most recent
estimated growth in Canadian gross domestic product of 1.0% in 2023,
down from 3.6% in 2022
• Easing, but still elevated, consumer price index (CPI) inflation due to
lower energy prices, improvements in global supply chains and the
effects of higher interest rates moving through the economy
• Tight labour market
• Slow growth in household spending as higher interest rates weigh
on disposable income
• Slow growth in business investment due to slowing demand, elevated
borrowing costs and increased uncertainty about future economic
conditions
• Prevailing high interest rates expected to remain at or near current
levels
• Higher immigration
• Canadian dollar expected to remain 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.
• Continuing to digitize the customer experience to scale online sales
capabilities, automation and enhanced self-serve functionality
• Maintaining a sharp focus on our cost structure
Underpinning our outlook for 2023 is a favourable financial profile that
reflects our sound operating fundamentals and consistent execution in a
competitive marketplace. Wireless, retail Internet and TV subscriber base
growth, together with promotional offer discipline and the flow-through
of operating cost savings from fibre-related operating efficiencies and
our digital transformation, are projected to drive year-over-year growth
in revenue and adjusted EBITDA. This, together with lower planned
capital expenditures and an expected reduction in contributions to our
pension plans, is expected to drive higher free cash flow.
Our projected financial performance for 2023 enabled us to increase
the annualized BCE common share dividend for 2023 by 19 cents, or
5.2%, to $3.87 per share.
Market assumptions
• A higher level of wireline and wireless competition in consumer,
business and wholesale markets
• Higher, but slowing, wireless industry penetration
• A shrinking data and voice connectivity market as business customers
migrate to lower-priced telecommunications solutions or alternative
OTT competitors
• The advertising market is adversely impacted due to economic
uncertainty resulting from inflationary cost pressures, increasing risk
of recession and ongoing supply chain challenges with improvement
expected in the second half of 2023
• Declines in broadcasting distribution undertaking (BDU) subscribers
driven by increasing competition from the continued rollout of
subscription video-on-demand (SVOD) streaming services together
with further scaling of OTT aggregators
Assumptions underlying expected reductions
in contributions to our pension plans
• At the relevant time, our DB pension plans will remain in funded positions
with going concern surpluses and maintain solvency ratios that exceed
the minimum legal requirements for a contribution holiday to be taken
for applicable DB and defined contribution (DC) components
• No significant declines in our DB pension plans’ financial position due
to declines in investment returns or interest rates
• No material experience losses from other unforeseen events such as
through litigation or changes in laws, regulations or actuarial standards
53
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Performance targets, outlook, assumptions and risks 3.3 Principal business risks
Provided below is a summary description of certain of our principal
business risks that could have a material adverse effect on all of
our segments. Certain additional business segment-specific risks
are reported in section 5, Business segment analysis. For a detailed
description of the principal risks relating to our regulatory environment
and of the other principal business risks that could have a material
adverse effect on our business, financial condition, liquidity, financial
results or reputation, refer to section 8, Regulatory environment and
section 9, Business risks, respectively.
General economic conditions, COVID-19
pandemic and geopolitical events
Our business and financial results could be negatively affected
by adverse economic conditions, including a potential recession
as well as conditions associated with the COVID-19 pandemic and
geopolitical events. The current global economic uncertainty could
further exacerbate pre-existing risk factors, including those described
in this MD&A, in light of elevated CPI inflation driven by sharp increases
in prices for products and services as well as strong demand for goods,
a tight labour market leading to sustained high wage growth, higher
interest rates, and financial and capital market volatility. All of these
could negatively affect our business and financial results, including by
adversely affecting business and customer spending and the resulting
demand for our products and services, our customers’ financial condition,
the availability of our offerings in light of supply chain disruptions, and
the cost and amount of funding available in the financial markets.
In addition, while most of the restrictions adopted by governments
and businesses to combat the COVID-19 pandemic were lifted during
2022, the COVID-19 pandemic still raises uncertainties. Resurgences
in new COVID-19 cases and the emergence and progression of new
variants could cause governments to reintroduce restrictive measures
including, depending on a resurgence’s intensity, certain or all of the
strict confinement measures and business closures previously mandated
or, potentially, additional measures. The reintroduction of restrictive
measures could result in economic disruption, reduced immigration
levels, financial market volatility and financial hardship adversely
affecting spending by our customers.
While the unfavourable effects of the COVID-19 pandemic on our financial
and operating performance moderated in 2022, it is difficult to estimate
the impacts that the COVID-19 pandemic could have in the future on our
business or financial results and related assumptions due to uncertainties
relating to the severity and duration of the COVID-19 pandemic and
possible further resurgences in the number of COVID-19 cases, including
as a result of the potential emergence of other variants, and various
potential outcomes. Our business and financial results could again, in
future periods, become more significantly and negatively impacted
by the COVID-19 pandemic, including, among others, as a result of
associated global supply chain challenges adversely affecting our
wireless and wireline product revenues. While we have implemented
business continuity plans and taken additional steps where required,
including various preventive measures and precautions, there can be
no assurance that these actions in response to the COVID-19 pandemic
will succeed in preventing or mitigating, in whole or in part, the negative
impacts of the pandemic on our company, employees or customers,
and these actions may have adverse effects on our business, which
may continue following the COVID-19 pandemic.
Furthermore, risk factors including, without limitation, those described in
this MD&A, could be exacerbated, or become more likely to materialize, as
a result of geopolitical events, which could have an adverse impact on our
business or future financial results and related assumptions, the extent
of which is difficult to predict. Geopolitical events could adversely impact
the global economy and cause financial and capital market volatility,
broader geopolitical instability and armed conflicts, higher energy
prices, increased inflationary pressures limiting consumer and business
spending and increasing our operating costs, increased disruptions
in our supply chain and increased information security threats.
Regulatory environment and compliance
Our products
Our customers
and services
and relationships
Our
networks
Our
environment
Our
people
Our fi nancial
resources
Our regulatory environment influences our strategies, and adverse
governmental or regulatory decisions could have negative financial,
operational, reputational or competitive consequences for our business
Although most of our retail services are not price-regulated, government
agencies and departments such as the Canadian Radio-television
and Telecommunications Commission (CRTC), Innovation, Science and
Economic Development Canada (ISED), Canadian Heritage and the
Competition Bureau continue to play a significant role in regulatory
matters such as establishing and modifying regulations for mandatory
access to networks, spectrum auctions, the imposition of consumer-
related codes of conduct, approval of acquisitions, broadcast and
spectrum licensing, foreign ownership requirements, privacy and
cybersecurity obligations and control of copyright piracy. As with all
regulated organizations, strategies are contingent upon regulatory
decisions. Adverse decisions by governments or regulatory agencies,
increased regulation or lack of effective anti-piracy remedies could
have negative financial, operational, reputational or competitive
consequences for our business.
For a discussion of our regulatory environment and the principal risks
related thereto, refer to section 8, Regulatory environment as well as
the applicable segment discussions under Principal business risks in
section 5, Business segment analysis.
54
2 MD&A Performance targets, outlook, assumptions and risks Changes in applicable laws, the failure to proactively address our
legal and regulatory obligations, and our involvement in various
claims and legal proceedings could have an adverse effect on our
business, financial performance and reputation
Changes in laws or regulations, or in how they are interpreted, and
the adoption of new laws or regulations, as well as pending or future
litigation, could have an adverse effect on our business, financial
performance and reputation. The increase in laws and regulations
around customer interactions and the technological evolution of
our business further create an environment of complex compliance
requirements that must be adequately managed. The failure to comply
with legal or regulatory obligations applicable to us could expose us to
litigation, significant fines and penalties, and operational restrictions,
as well as result in reputational harm. Heightened focus on consumer
protection through provincial legislation and regulatory consumer
codes, as well as increased legal and regulatory pressure in the areas
of privacy, accessibility, data governance and other ESG topics, require
enhanced compliance frameworks and could further increase the
company’s exposure to investigations, litigation, sanctions, fines and
reputational harm.
We become involved in various claims and legal proceedings as part of
our business. For a description of important legal proceedings involving
us, please see the section entitled Legal proceedings contained in the
BCE 2022 Annual Information Form.
Competitive environment
Our products
and services
Our
networks
Our fi nancial
resources
Competitive activity in our industry, including from technological
substitution and the expansion of alternative service providers, is
intense and contributes to disruptions in each of our business segments
As the scope of our businesses increases and evolving technologies
drive new services, delivery models and strategic partnerships, our
competitive landscape intensifies and expands to include new and
emerging competitors, certain of which were historically our partners
or suppliers, as well as global-scale competitors, including, in particular,
cloud and OTT service providers, IoT hardware and software providers,
voice over IP (VoIP) providers and other web-based players that are
penetrating the telecommunications space with significant resources
and a large customer base over which to amortize costs. Certain
of these competitors are changing the competitive landscape by
establishing a material market presence, which has accelerated
during the COVID-19 pandemic. Established competitors further seek
to consolidate or expand their product offerings through acquisitions
in order to increase scale and market opportunities in light of these
changes in market dynamics. Failure to effectively respond to such
evolving competitive dynamics could adversely affect our business
and financial results.
Technology substitution, IP networks and recent regulatory decisions,
in particular, continue to facilitate entry in our industry. In addition, the
effects of government policies reserving spectrum at favourable pricing
for regional facilities-based wireless service providers distort market
dynamics. Together, these factors have changed industry economics
and allowed competitors to launch new products and services and
gain market share with far less investment in financial, marketing,
human, technological and network resources than has historically
been required. In particular, some competitors deliver their services
over our networks, leveraging regulatory obligations applicable to us,
therefore limiting their need to invest in building their own networks
and impacting the network-based differentiation of our services. Such
lower required investment challenges the monetization of our networks
and our operating model. Moreover, foreign OTT players are currently
not subject to the same Canadian content investment obligations as
those imposed on Canadian domestic digital suppliers, which provides
them with a competitive advantage over us.
Greater customer adoption of services like 5G, as well as IoT services
and applications in the areas of retail (e.g., home automation), business
(e.g., remote monitoring), transportation (e.g., connected car and
asset tracking) and urban city optimization (smart cities), is expected
to accelerate growth opportunities as well as competition in these
areas. In addition, new technologies create a potential for diversifying
our product and service offerings and create growth opportunities.
If we are unable to develop and deploy new solutions in advance of
or concurrently with our competitors, if the market does not adopt
these new technologies in pace with our deployment of new solutions,
or if we fail to adequately assess and manage the risks associated
with these new solutions, our business and financial results could be
adversely affected.
We expect these trends, some of which have intensified during the
COVID-19 pandemic, to continue in the future, and the increased
competition we face as a result could negatively impact our business
including, without limitation, in the following ways:
• The acceleration of disruptions and disintermediation in each of our
business segments could adversely affect our business and financial
results
• Adverse economic conditions, such as economic downturns or
recessions, increasing interest rates and inflation, adverse conditions
in the financial markets or a declining level of retail and commercial
activity, could have a negative impact on the demand for, and prices
of, our wireline, wireless and media products and services
• The COVID-19 pandemic and the restrictive measures mandated
or recommended to contain the spread of the coronavirus have
changed consumer behaviour and activity and the way businesses
operate, and such changes could continue or further evolve, which
could adversely affect the sale of our products and services, as well
as our revenues and cash flows
• The shift to online transactions during the COVID-19 pandemic amid
store closures and reduced store traffic could continue, thereby
adversely impacting our ability to leverage our extensive retail
network to increase the number of subscribers and sell our products
and services
60
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Performance targets, outlook, assumptions and risks • Subscriber and viewer growth is challenged by changing viewer
habits, the expansion and continued market penetration of global
scale low-cost OTT content providers, OTT aggregators and other
alternative service providers, some of which may offer content
as loss leaders to support their core business, as well as account
stacking, CRTC arbitration and a fragmentation of audiences due to
an abundance of choices
• While most COVID-19 restrictive measures were lifted during 2022,
the ongoing resultant changes in customer behaviour could further
negatively affect Bell Media’s revenues. In addition, the reintroduction
of some or all of these measures could adversely affect Bell Media’s
revenues in future periods.
• Competition, with both global competitors and traditional Canadian
TV competitors, for programming content could drive significant
increases in content acquisition and development costs as well as
reduced access to key content as some competitors withhold content
to enhance their OTT service offering
• The proliferation of content piracy could negatively impact our ability
to monetize products and services beyond our current expectations,
while creating bandwidth pressure without corresponding revenue
growth in the context of regulated wholesale high-speed Internet
access rates
• Traditional radio faces accelerated substitution from new music players
and alternative streaming services such as those offered by global
audio streaming players and those made available by new technologies,
including smart car services, which has been exacerbated since the
beginning of the COVID-19 pandemic due to a decline in radio audience
driven by reduced travel needs and altered daily routines
• The launch by Canadian and international competitors of low earth
orbit (LEO) satellites to provide connectivity, primarily in rural areas
and the North, intensifies competition, which could adversely affect
our network deployment strategy in such areas and negatively impact
demand for our connectivity services. The ability of our subsidiary
Northwestel Inc. (Northwestel), operating in Canada’s North, to respond
to the competitive threat from these providers is further hampered
by CRTC retail Internet regulations.
For a further discussion of our competitive environment and related risks,
as well as a list of our main competitors, on a segmented basis, refer
to Competitive landscape and industry trends and Principal business
risks in section 5, Business segment analysis.
• Changes in customer behaviour adopted during the COVID-19 pandemic
could result in continued suppression by customers of mobile phone
data and offloading onto Wi-Fi networks as customers work from
home, as well as influence customer adoption of new services including,
without limitation, 5G and IoT
• Competitors’ aggressive market offers, combined with heightened
customer sensitivity around pricing, could result in pricing pressures,
lower margins and increased costs of customer acquisition and
retention, and our market share and sales volumes could decrease
if we do not match competitors’ pricing levels or increase customer
acquisition and retention spending
• Should our value proposition on pricing, network, speed, service
or features not be considered sufficient for customers in light of
available alternatives, or should our products and services not be
provided over customers’ preferred delivery channels, this could
lead to increased churn
• The proposed combination of Rogers Communications Inc. (Rogers)
and Shaw Communications Inc. (Shaw) could create a Canadian
competitor with larger scale, and the proposed sale of Freedom
Mobile to Québecor Inc. could change competitive dynamics in several
provinces, all of which could have adverse implications for each of
our business segments
• The convergence of wireline and wireless services is impacting
product purchase choice by customers and could increase product
substitution in favour of lower-margin products as well as increase
churn, which trends are expected to increase with the continued
adoption of 5G and 5G+
• Regulatory decisions regarding wholesale access to our wireless and
fibre networks could facilitate entry of new competitors, including OTT
players, or strengthen the market position of current competitors,
which may negatively impact our retail subscriber base in favour of
lower-margin wholesale subscribers and thus could negatively impact
our capacity to optimize scale and invest in our networks
• The timely rollout of 5G and 5G+ mobile services may be adversely
impacted by government decisions, constraints on access to network
equipment, labour shortages and potential operational challenges in
delivering new technology
• Cloud-based and OTT-based substitution and the market expansion
of lower-cost VoIP, collaboration and software-defined networking in
a wide area network (SD WAN) solutions offered by local and global
competitors, such as traditional software players, are changing our
approach to service offerings and pricing and could have an adverse
effect on our business
• Spending rationalization by business customers could lead to further
reductions in sales of traditional connectivity, value-added services
and margin erosion, driven by technology substitution, economic
factors and customers’ operational efficiencies
• Multinational business consumers’ desire to consolidate global network
service supply with one supplier could accelerate the disruptions in
our Bell CTS segment
• The pressure from simpler, lower-cost, agile service models is driving
in-sourcing trends, which could have an adverse impact on our
managed services business
6
2 MD&A Performance targets, outlook, assumptions and risks Security management and data governance
Our
networks
Our customers
and relationships
Our products
and services
Our
people
Our fi nancial
resources
Our operations, service performance, reputation and business
continuity depend on how well we protect our physical and
non-physical assets, including from information security threats
Our operations, service performance, reputation and business continuity
depend on how well we 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, natural disasters, power loss, building
cooling loss, acts of war or terrorism, sabotage, vandalism, actions of
neighbours and other events. The protection and effective organization
of our systems, applications and information repositories are central to
the secure and continuous operation of our networks and business, as
electronic and physical records of proprietary business and personal
data, such as confidential customer and employee information, are all
sensitive from a market and privacy perspective.
Information security breaches can result from deliberate or unintended
actions by a growing number of sophisticated actors, including hackers,
organized criminals, state-sponsored organizations and other parties.
Information security attacks have grown in complexity, magnitude and
frequency in recent years and the potential for damage is increasing.
Information security attacks may be perpetrated using a complex array
of ever evolving and changing means including, without limitation, the use
of stolen credentials, social engineering, computer viruses and malicious
software, phishing and other attacks on network and information
systems. Information security attacks aim to achieve various malicious
objectives including unauthorized access to, ransom/encryption of, and
theft of, confidential, proprietary, sensitive or personal information, as
well as extortion and business disruptions.
We are also exposed to information security threats as a result of actions
that may be taken by our customers, suppliers, outsourcers, business
partners, employees or independent third parties, whether malicious
or not, including as a result of the use of social media, cloud-based
solutions and IT consumerization. Our use of third-party suppliers
and outsourcers and reliance on business partners, which may also
be subject to information security threats, also expose us to risks as
we have less immediate oversight over their IT domains. Furthermore,
the introduction of 5G, cloud computing and the proliferation of data
services, including mobile TV, mobile commerce, mobile banking and IoT
applications, as well as increased digitization and the use of emerging
technologies such as AI, robotics and smart contracts leveraging
blockchain for digital certification, have significantly increased the threat
surface of our networks and systems, resulting in higher complexity
that needs to be carefully monitored and managed to minimize security
threats. Failure to implement an information security program that
efficiently considers relationships and interactions with business
partners, suppliers, customers, employees and other third parties across
all methods of communication, including social media and cloud-based
solutions, could adversely affect our ability to successfully defend
against information security attacks.
The COVID-19 pandemic and recent geopolitical events have further
increased our exposure to information security threats. Initially adopted
in the context of the COVID-19 pandemic, remote work arrangements
of our employees and those of our suppliers have increased remote
connectivity to our systems and the potential use of unauthorized
communications technologies. In addition, we have seen an increase in
global criminal activity, which further pressures our security environment.
If information security threats were to become successful attacks
resulting in information security breaches, they could harm our brand,
reputation and competitiveness, decrease customer and investor
confidence and adversely affect our business, financial results, stock
price and long-term shareholder value, given that they could lead to:
• Network operating failures and business disruptions, which could
negatively impact our ability to sell products and services to our
customers and adversely affect their ability to maintain normal
business operations and deliver critical services, and/or the ability
of third-party suppliers to deliver critical services to us
• Unauthorized access to proprietary or sensitive information about our
business, which could result in diminished competitive advantages
and loss of future business opportunities
• Theft, loss, unauthorized disclosure, destruction, encryption or
corruption of data and confidential information, including personal
information about our customers or employees, that could result
in financial loss, exposure to claims for damages by customers,
employees and others, extortion threats due to ransomware and
difficulty in accessing materials to defend legal actions
• Lost revenue resulting from the unauthorized use of proprietary
information or the failure to retain or attract customers after an incident
• Physical damage to network assets impacting service continuity
• Fines and sanctions for failure to meet legislative requirements or
from credit card providers for failing to comply with payment card
industry data security standards for protection of cardholder data
• Increased fraud as criminals leverage stolen information against our
customers, our employees or our company
• Remediation costs such as liability for stolen information, equipment
repair and service recovery, and incentives to customers or business
partners in an effort to maintain relationships after an incident
• Increased information security protection costs, including the costs of
deploying additional personnel and protection technologies, training
and monitoring employees, and engaging third-party security experts
and auditors
• Changes in the terms, conditions and pricing of customer, supplier and
financial contracts and agreements that we may have.
62
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Performance targets, outlook, assumptions and risks In light of the evolving nature and sophistication of information security
threats, our information security policies, procedures and controls must
continuously adapt and evolve in order to seek to mitigate risk and,
consequently, require constant monitoring to ensure effectiveness.
However, given the complexity and scale of our business, network
infrastructure, technology and IT supporting systems, there can be no
assurance that the security policies, procedures and controls that we
implement will be effective against all information security attacks. In
addition, there can be no assurance that any insurance we may have
will cover all or part of the costs, damages, liabilities or losses that
could result from the occurrence of any information security breach.
Failure to implement effective data governance could harm our brand
and reputation, expose us to regulatory pressure and penalties,
constrain our competitive opportunities, and adversely affect our
business and financial results
To achieve our purpose of advancing how Canadians connect with
each other and the world, we must preserve the social licence from our
customers and all Canadians to collect and use data in our operations. A
strong and consistently applied approach to data governance is critical
to maintaining that social licence, requiring us to focus on respecting
the privacy of our customers’ data and protecting such data against
information security threats. As our operations involve receiving,
processing and storing such proprietary business and personal data,
effective policies, procedures and controls must be implemented to
protect information systems and underlying data in accordance with
applicable privacy legislation. Failure to meet customer and employee
expectations regarding the appropriate use and protection of their data
could have negative reputational, business and financial consequences
for the company.
There has also been increased regulatory scrutiny over the use, collection,
and disclosure of personal information in Canada. We are subject to
various privacy legislation, such as Canada’s anti-spam legislation (CASL)
and the Personal Information Protection and Electronic Documents Act,
as well as foreign privacy legislation via the mandatory flow-through
of privacy-related obligations by our customers, including those of the
General Data Protection Regulation (EU). Global and domestic regulation
around privacy and data practices are evolving rapidly and new or
amended privacy legislation has been proposed or adopted federally
and in a number of Canadian provincial jurisdictions with significant
obligations, limitations on the use of personal information, penalties
and short implementation horizons. Our data governance framework
must not only meet applicable privacy requirements, but also be able to
evolve for continuous improvement. Effective data governance is also a
component of good ESG practices, which are considered an increasingly
important measure of corporate performance and value creation.
Failure to implement effective data governance encompassing the
protection and appropriate use of data across its life cycle, and
incorporating data governance as a core consideration in our business
initiatives and technology decisions, could harm our brand, reputation
and competitiveness, decrease customer and investor confidence and
adversely affect our business and financial results. It could give rise
to litigation, investigations, fines and liability for failure to comply with
increasingly stringent privacy legislation, as well as increased audit and
regulatory scrutiny that could divert resources from business operations.
65
2 MD&A Performance targets, outlook, assumptions and risks 4 Consolidated financial analysis
Our fi nancial
resources
This section provides detailed information and analysis about BCE’s performance in 2022 compared with 2021. It focuses on BCE’s
consolidated operating results and provides financial information for our Bell Wireless, Bell Wireline and Bell Media business segments.
For further discussion and analysis of our business segments, refer to section 5, Business segment analysis.
4.1
Introduction
BCE consolidated income statements
Operating revenues
Service
Product
Total operating revenues
Operating costs
Adjusted EBITDA
Adjusted EBITDA margin
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net return (interest) on post-employment benefit plans
Impairment of assets
Other (expense) income
Income taxes
Net earnings
Net earnings attributable to:
Common shareholders
Preferred shareholders
Non-controlling interest
Net earnings
Adjusted net earnings
Net earnings per common share (EPS)
Adjusted EPS
n.m.: not meaningful
2022
20,956
3,218
24,174
(13,975)
10,199
42.2%
(94)
(3,660)
(1,063)
(1,146)
51
(279)
(115)
(967)
2,926
2,716
152
58
2,926
3,057
2.98
3.35
202
$ change
% change
20,350
3,099
23,449
(13,556)
9,893
42.2%
(209)
(3,627)
(982)
(1,082)
(20)
(197)
160
(1,044)
2,892
2,709
131
52
2,892
2,895
2.99
3.19
606
119
725
(419)
306
115
(33)
(81)
(64)
71
(82)
(275)
77
34
7
21
6
34
162
(0.01)
0.16
3.0%
3.8%
3.1%
(3.1%)
3.1%
–
55.0%
(0.9%)
(8.2%)
(5.9%)
n.m.
(41.6%)
n.m.
7.4%
1.2%
0.3%
16.0%
11.5%
1.2%
5.6%
(0.3%)
5.0%
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Consolidated fi nancial analysis BCE statements of cash flows – selected information
Cash flows from operating activities
Capital expenditures
Free cash flow
BCE operating revenues grew by 3.1% in 2022, compared to last year,
resulting from higher year-over-year service revenues of 3.0%, mainly
driven by wireless, Internet, and media growth, moderated by ongoing
erosion in voice and satellite TV revenues and lower business solutions
services revenue. Product revenues also contributed to the increase
in operating revenues, reflecting a 3.8% year-over-year increase,
primarily due to higher wireless product sales.
In 2022, net earnings increased by 1.2%, compared to 2021, due to higher
adjusted EBITDA, lower severance, acquisition and other costs, lower
income taxes and a higher net return on post-employment benefit
plans, partly offset by higher other expense mainly due to net mark-
to-market losses on derivatives used to economically hedge equity
settled share-based compensation plans, higher depreciation and
amortization, higher impairment of assets, and higher interest expense.
2022
8,365
(5,133)
3,067
202
8,008
(4,852)
2,980
$ change
% change
357
(281)
87
4.5%
(5.8%)
2.9%
BCE’s adjusted EBITDA increased by 3.1% in 2022, over last year, driven
by growth from our Bell Wireless and Bell Media segments, whereas
our Bell Wireline segment remained stable year over year. The higher
operating costs, including greater media programming expenses,
inflationary cost pressures and storm recovery costs, were more than
offset by increased operating revenues. This drove a corresponding
adjusted EBITDA margin of 42.2% in 2022, which remained unchanged
from last year.
In 2022, BCE’s cash flows from operating activities increased by
$357 million, compared to 2021, mainly due to higher adjusted EBITDA,
lower income taxes paid, lower contributions to post-employment
benefit plans due to a partial contribution holiday in 2022, and lower
severance and other costs paid, partly offset by lower cash from
working capital and higher interest paid.
Free cash flow increased by $87 million in 2022, compared to 2021,
mainly due to higher cash flows from operating activities, excluding
cash from acquisition and other costs paid, partly offset by higher
capital expenditures.
4.2 Customer connections
Our customers
and relationships
BCE net activations (losses)
Wireless mobile phone net subscriber activations (losses)
Postpaid
Prepaid
Wireless mobile connected device net subscriber activations
Wireline retail high-speed Internet net subscriber activations
Wireline retail TV net subscriber activations (losses)
IPTV
Satellite
Wireline retail residential NAS lines net losses
Total services net activations
n.m.: not meaningful
2022
489,901
439,842
50,059
202,024
201,762
5,148
94,400
(89,252)
(175,788)
723,047
202
% change
294,842
301,706
(6,864)
193,641
152,285
2,530
76,068
(73,538)
(185,327)
457,971
66.2%
45.8%
n.m.
4.3%
32.5%
n.m.
24.1%
(21.4%)
5.1%
57.9%
67
2 MD&A Consolidated fi nancial analysis Total BCE customer connections
Wireless mobile phone subscribers
Postpaid
Prepaid
Wireless mobile connected device subscribers
Wireline retail high-speed Internet subscribers (1) (2)
Wireline retail TV subscribers (1) (2)
IPTV (1) (2)
Satellite
Wireline retail residential NAS lines (1) (2)
Total services subscribers
202
% change
2022
9,949,086
9,069,887
879,199
2,451,818
4,258,570
2,751,498
1,988,181
763,317
2,190,771
9,459,185
8,630,045
829,140
2,249,794
3,861,653
2,735,010
1,882,441
852,569
2,298,605
21,601,743
20,604,247
5.2%
5.1%
6.0%
9.0%
10.3%
0.6%
5.6%
(10.5%)
(4.7%)
4.8%
(1) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by
67,090, 9,025 and 3,456 subscribers, respectively.
(2) In Q4 2022, as a result of the acquisition of Distributel, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 128,065, 2,315 and
64,498 subscribers, respectively.
BCE added 723,047 net retail subscriber activations in 2022, up 57.9%
compared to last year. The net retail subscriber activations in 2022
consisted of:
• 489,901 wireless mobile phone net subscriber activations, along with
202,024 wireless mobile connected device net subscriber activations
At December 31, 2022, BCE’s retail subscriber connections totaled
21,601,743, up 4.8% year over year, and consisted of:
• 9,949,086 wireless mobile phone subscribers, up 5.2% year over
year, and 2,451,818 wireless mobile connected device subscribers,
up 9.0% year over year
• 201,762 retail high-speed Internet net subscriber activations
• 5,148 retail TV net subscriber activations comprised of 94,400 retail
IPTV net subscriber activations, partly offset by 89,252 retail satellite
TV net subscriber losses
• 175,788 retail residential NAS lines net losses
• 4,258,570 retail high-speed Internet subscribers, 10.3% higher year
over year
• 2,751,498 total retail TV subscribers, up 0.6% over the same period
last year, comprised of 1,988,181 retail IPTV subscribers, up 5.6% year
over year, and 763,317 retail satellite TV subscribers, down 10.5%
year over year
• 2,190,771 retail residential NAS lines, down 4.7% year over year
4.3 Operating revenues
BCE
Revenues
(in $ millions)
$25,664
$26, 76
Bell Wireless
Bell Wireline
Bell Media
+3.1%
Inter-segment eliminations
Total BCE operating revenues
21
22
2022
9,588
12,148
3,254
(816)
24,174
202
$ change
% change
8,999
12,178
3,036
(764)
23,449
589
(30)
218
(52)
725
6.5%
(0.2%)
7.2%
(6.8%)
3.1%
BCE
Total BCE operating revenues increased by 3.1% in 2022, compared to
last year, comprised of service revenues of $20,956 million, up 3.0%
and product revenues of $3,218 million, up 3.8% over 2021.
The higher year-over-year operating revenue was driven by growth
in our Bell Wireless and Bell Media segments, partly offset by a modest
decline in our Bell Wireline segment. Bell Wireless operating revenues
increased by 6.5% in 2022, due to higher service revenues of 7.3%,
combined with greater product revenues of 4.8%. Bell Media operating
revenues grew by 7.2% year over year, attributable to higher subscriber
and advertising revenues, along with revenues from the return of
the F1 Canadian Grand Prix in 2022. Bell Wireline operating revenues
declined by 0.2%, compared to 2021, driven by lower service revenues
of 0.2% resulting from ongoing voice revenues erosion, partly offset
by growth in data and other services revenue.
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Consolidated fi nancial analysis
4.4 Operating costs
BCE
Operating costs
(in $ millions)
BCE
Operating cost profile
2021
BCE
Operating cost profile
2022
$ 5,776
in 202
$ 5,477
in 2022
Bell Wireless
Bell Wireline
Bell Media
Inter-segment eliminations
Total BCE operating costs
5%
5%
55%
76%
52%
77%
54% Cost of revenues (1)
33% Labour (2)
13% Other (3)
55% Cost of revenues (1)
32% Labour (2)
13% Other (3)
2022
(5,451)
(6,831)
(2,509)
816
202
(5,146)
(6,863)
(2,311)
764
(13,975)
(13,556)
$ change
% change
(305)
32
(198)
52
(419)
(5.9%)
0.5%
(8.6%)
6.8%
(3.1%)
(1) Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers.
(2) Labour costs (net of capitalized costs) include wages, salaries and related taxes and benefits, post-employment benefit plans service cost, and other labour costs, including contractor
and outsourcing costs.
(3) Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, IT costs, professional service fees and rent.
BCE
BCE operating costs increased by 3.1% in 2022, compared to 2021, resulting from higher expenses in Bell Wireless of 5.9% and Bell Media of 8.6%,
partly offset by lower expenses in Bell Wireline of 0.5%. The increase in expenses reflected higher wireless cost of goods sold from increased
product sales, greater media programming and production costs, inflationary cost pressures and storm-related expenses.
In 2022, net earnings increased by 1.2%, compared to 2021, due to higher adjusted EBITDA,
lower severance, acquisition and other costs, lower income taxes and a higher net return
on post-employment benefit plans, partly offset by higher other expense mainly due to net
mark-to-market losses on derivatives used to economically hedge equity settled share-based
compensation plans, higher depreciation and amortization, higher impairment of assets, and
higher interest expense.
4.5 Net earnings
BCE
Net earnings
(in $ millions)
$2,342
$2,426
+1.2%
21
22
67
2 MD&A Consolidated fi nancial analysis
BCE
Adjusted EBITDA
(in $ millions)
(% adjusted EBITDA margin)
$4,345
in 202
62.2%
$ 0, 44
in 2022
62.2%
4.6 Adjusted EBITDA
BCE
Adjusted EBITDA
(in $ millions)
$4,345
$ 0, 44
$5,375
$6, 57
$7,5 7
$7,5 7
$727
$767
21
22
Bell Wireless
Bell Wireline
Bell Media
Bell Wireless
Bell Wireline
Bell Media
Total BCE adjusted EBITDA
+3.1%
2022
4,137
5,317
745
10,199
202
3,853
5,315
725
9,893
$ change
% change
284
2
20
306
7.4%
–
2.8%
3.1%
BCE
BCE’s adjusted EBITDA increased by 3.1% in 2022, compared to 2021, driven by growth from Bell Wireless and Bell Media, whereas Bell Wireline
adjusted EBITDA remained stable year over year. The growth in BCE’s adjusted EBITDA reflected higher operating revenues, moderated by
greater operating costs. Adjusted EBITDA margin of 42.2% remained unchanged from last year.
4.7 Severance, acquisition and other costs
This category includes various income and expenses that are not related directly to the operating revenues generated during the year. This
includes severance costs consisting of charges related to involuntary and voluntary employee terminations, as well as transaction costs, such
as legal and financial advisory fees, related to completed or potential acquisitions, employee severance costs related to the purchase of a
business, the costs to integrate acquired companies into our operations, costs relating to litigation and regulatory decisions, when they are
significant, and other costs.
BCE
Severance, acquisition
and other costs
(in $ millions)
$204
in 202
$46
in 2022
2022
Severance, acquisition and other costs included:
• Severance costs of $83 million related to involuntary and voluntary employee terminations
• Acquisition and other costs of $11 million
2021
Severance, acquisition and other costs included:
• Severance costs of $171 million related to involuntary and voluntary employee terminations
• Acquisition and other costs of $38 million
63
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Consolidated fi nancial analysis
4.8 Depreciation and amortization
The amount of our depreciation and
amortization in any year is affected by:
• How much we invested in new property,
plant and equipment and intangible
assets in previous years
• How many assets we retired during
the year
• Estimates of the useful lives of assets
BCE
Depreciation
(in $ millions)
$5,627
$5,660
BCE
Amortization
(in $ millions)
$ ,065
$432
21
22
21
22
Depreciation
Depreciation in 2022 increased by $33 million, compared to 2021,
mainly due to a higher asset base as we continued to invest in our
broadband and wireless networks as well as our IPTV services, partly
offset by lower accelerated depreciation of 4G network elements as
we transition to 5G.
Amortization
Amortization in 2022 increased by $81 million, compared to 2021, mainly
due to a higher asset base.
4.9 Finance costs
BCE
Interest expense
(in $ millions)
$ ,032
$ , 66
BCE
Net return (interest)
on post-employment
benefit plans
(in $ millions)
21
22
$7
22
21
($20)
Interest expense
Interest expense in 2022 increased by $64 million, compared to 2021,
mainly due to higher average debt balances and higher average interest
rates, partly offset by higher capitalized interest.
Net return (interest) on post-employment
benefit plans
Net return (interest) on our post-employment benefit plans is based
on market conditions that existed at the beginning of the year as well
as the net post-employment benefit plan asset (liability). On January 1,
2022, the discount rate was 3.2% compared to 2.6% on January 1, 2021.
In 2022, net return on post-employment benefit plans increased by
$71 million, compared to last year, as a result of a net asset position in
our post-employment benefit plans at the beginning of 2022 compared
to a net obligation position at the beginning of 2021, and a higher
discount rate in 2022.
The impacts of changes in market conditions during the year are
recognized in other comprehensive income (OCI).
64
2 MD&A Consolidated fi nancial analysis
4.10 Impairment of assets
2022
During the fourth quarter of 2022, we recognized $147 million of impairment charges for French TV channels
within our Bell Media segment. The impairment charges were the result of a reduction in advertising demand
in the industry resulting from global economic uncertainties and unfavourable impacts to assumptions
for discount rates. These charges included $94 million allocated to indefinite-life intangible assets for
broadcast licences, and $53 million to finite-life intangible assets for program and feature film rights.
BCE
Impairment of assets
(in $ millions)
$274
$ 47
There was no impairment of Bell Media goodwill.
Additionally in 2022, we recorded impairment charges of $132 million related mainly to right-of-use assets
for certain office spaces we ceased using as part of our real estate optimization strategy as a result of
our hybrid work policy.
2021
During the second quarter of 2021, we identified indicators of impairment for our Bell Media radio markets,
notably a decline in advertising revenue and an increase in the discount rate resulting from the impact
of the COVID-19 pandemic. Accordingly, impairment testing was required for our group of radio cash
generating units (CGUs).
During Q2 2021, we recognized $163 million of impairment charges for various radio markets within our
Bell Media segment. These charges included $150 million allocated to indefinite-life intangible assets for
broadcast licences, and $13 million to property, plant and equipment mainly for buildings and network
infrastructure and equipment.
There was no impairment of Bell Media goodwill.
21
22
4.11 Other (expense) income
Other (expense) income includes income and expense items, such as:
• Net mark-to-market gains or losses on derivatives used to economically hedge equity settled share-
based compensation plans
BCE
Other (expense) income
(in $ millions)
• Equity income or losses from investments in associates and joint ventures
• Gains or losses on retirements and disposals of property, plant and equipment and intangible assets
• Gains or losses on investments, including gains or losses when we dispose of, write down or reduce
our ownership in investments
• Early debt redemption costs
$ 60
21
for the year ended December 5
Net mark-to-market (losses) gains on derivatives used to economically hedge equity settled
share-based compensation plans
Equity losses from investments in associates and joint ventures
Loss on investment
Operations
Losses on retirements and disposals of property, plant and equipment and intangible assets
Gains (losses) on investments
Early debt redemption costs
Other
Total other (expense) income
70
BCE InC. AnnuAl fInAnCIAl rEport 2022
22
($ 7)
2022
(53)
(42)
(19)
(27)
24
(18)
20
(115)
202
278
(49)
(46)
(24)
(6)
(53)
60
160
2 MD&A Consolidated fi nancial analysis
2022
Other expense of $115 million included net mark-to-market losses on
derivatives used to economically hedge equity settled share-based
compensation plans, losses on our equity investments which included
a loss on BCE’s share of an obligation to repurchase at fair value the
minority interest in one of BCE’s joint ventures and losses on operations
from our equity investments, losses on retirements and disposals
of property, plant and equipment and intangible assets and early
debt redemption costs, partly offset by gains on investments which
included a gain related to the sale of our wholly-owned subsidiary,
6362222 Canada Inc. (Createch).
2021
Other income of $160 million included net mark-to-market gains on
derivatives used to economically hedge equity settled share-based
compensation plans, partly offset by early debt redemption costs, losses
on our equity investments which included a loss on BCE’s share of an
obligation to repurchase at fair value the minority interest in one of BCE’s
joint ventures and losses on operations from our equity investments.
4.12 Income taxes
BCE
Income taxes
(in $ millions)
$ ,066
in 202
$467
in 2022
The following table reconciles the amount of reported income taxes in the income statements
with income taxes calculated at a statutory income tax rate of 26.8% for 2022 and 2021.
for the year ended December 5
Net earnings
Add back income taxes
Earnings before income taxes
Applicable statutory tax rate
Income taxes computed at applicable statutory rates
Non-taxable portion of gains (losses) on investments
Uncertain tax positions
Change in estimate relating to prior periods
Non-taxable portion of equity losses
Previously unrecognized tax benefits
Other
Total income taxes
Average effective tax rate
2022
2,926
967
3,893
26.8%
(1,043)
4
91
–
(18)
–
(1)
(967)
24.8%
202
2,892
1,044
3,936
26.8%
(1,055)
(1)
16
2
(26)
15
5
(1,044)
26.5%
Income taxes in 2022 decreased by $77 million, compared to 2021, mainly due to a higher value of
uncertain tax positions favourably resolved in 2022 compared to 2021 and lower taxable income.
4.13 Net earnings attributable to common shareholders and EPS
BCE
Net earnings attributable
to common shareholders
(in $ millions)
BCE
EPS
(in $)
$2,704
$2,7 6
$2.44
$2.43
BCE
Adjusted net earnings
(in $ millions)
BCE
Adjusted EPS
(in $)
$2,347
$5,077
$5. 4
$5.57
21
22
21
22
21
22
21
22
7
2 MD&A Consolidated fi nancial analysis
Net earnings attributable to common shareholders in 2022 increased
by $7 million, compared to 2021, due to higher adjusted EBITDA, lower
severance, acquisition and other costs, lower income taxes and a higher
net return on post-employment benefit plans, partly offset by higher
other expense mainly due to net mark-to-market losses on derivatives
used to economically hedge equity settled share-based compensation
plans, higher depreciation and amortization, higher impairment of assets,
and higher interest expense. Despite increased net earnings attributable
to common shareholders, EPS in 2022 decreased by $0.01, compared to
2021, due to a higher average number of common shares outstanding.
Excluding the impact of severance, acquisition and other costs, net
mark-to-market gains (losses) on derivatives used to economically
hedge equity settled share-based compensation plans, net equity gains
(losses) on investments in associates and joint ventures, net gains (losses)
on investments, early debt redemption costs and impairment of assets,
net of tax and NCI, adjusted net earnings in 2022 was $3,057 million,
or $3.35 per common share, compared to $2,895 million, or $3.19 per
common share, in 2021.
4.14 Capital expenditures
BCE capital expenditures of $5,133 million in 2022 increased by 5.8% over last year, with a
corresponding capital intensity ratio of 21.2%, up 0.5 pts over 2021. Our capital spending reflected
the accelerated buildout of our wireline FTTP and wireless 5G networks.
BCE
Cash flows from operating activities
(in $ millions)
BCE
Free cash flow
(in $ millions)
$3,003
$3,567
$2,430
$5,067
+4.5%
+2.9%
21
22
21
22
Our
networks
BCE
Capital expenditures
(in $ millions)
Capital intensity
(%)
$7, 55
2 .2%
$6,372
20.7%
$ ,036
.5%
$ , 20
2.6%
$5,6 2
24.7%
$5,337
52.0%
Bell Wireless
Bell Wireline
Bell Media
$ 20
6.0%
$ 62
7.0%
21
22
4.15 Cash flows
In 2022, BCE’s cash flows from operating
activities increased by $357 million, compared
to 2021, mainly due to higher adjusted EBITDA,
lower income taxes paid, lower contributions
to post-employment benefit plans due to
a partial contribution holiday in 2022, and
lower severance and other costs paid, partly
offset by lower cash from working capital
and higher interest paid.
Free cash flow increased by $87 million
in 2022, compared to 2021, mainly due to
higher cash flows from operating activities,
excluding cash from acquisition and other
costs paid, partly offset by higher capital
expenditures.
72
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Consolidated fi nancial analysis
5 Business segment analysis
Our
networks
Our customers
and relationships
Our products
and services
Our fi nancial
resources
5.1 Bell Wireless
In 2022, we delivered industry-leading wireless financial results reflecting our focus on
profitable growth and customer base management, as we welcomed 489,901 total net new
postpaid and prepaid mobile phone subscribers, up 66.2% compared to 2021.
Financial performance analysis
2022 performance highlights
Bell Wireless
Revenues
(in $ millions)
$3,444
$4,733
7 %
72%
24%
23%
21
22
Total mobile
phone
subscriber
growth
+5.2%
in 2022
Bell Wireless
Adjusted EBITDA
(in $ millions)
(% adjusted EBITDA margin)
$5,375
in 202
62.3%
$6, 57
in 2022
65. %
Service
Product
+6.5%
+7.4%
Mobile phone
postpaid net
subscriber
activations
in 2022
439,842
Increased 45.8% vs. 2021
Mobile phone
prepaid net
subscriber
activations
in 2022
50,059
Increased by 56,923 net
activations vs. 2021
Mobile phone
postpaid
churn in 2022
0.92%
Decreased 0.01 pts vs. 2021
Mobile phone
blended average
revenue per user
(ARPU) (1)
per month
+2.8%
2022: $59.30
2021: $57.66
(1) Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber base for the specified period and is expressed as a
dollar unit per month.
75
2 MD&A Business segment analysis Bell Wireless
Bell Wireless results
revenues
External service revenues
Inter-segment service revenues
Operating service revenues
External product revenues
Inter-segment product revenues
Operating product revenues
Bell Wireless operating revenues
Bell Wireless operating revenues increased by 6.5% in 2022, compared
to last year, due to both higher service and product revenues.
Service revenues increased by 7.3% in 2022, compared to 2021, driven by:
• Continued growth in our mobile phone and connected device subscriber
bases
• Higher roaming revenues due to increased international travel resulting
from the easing of COVID-19 global travel restrictions
• Flow-through of rate increases
operating costs and adjusted EBItDA
Operating costs
Adjusted EBITDA
Adjusted EBITDA margin
Bell Wireless operating costs increased by 5.9% in 2022, compared
to last year, driven by:
• Greater cost of goods sold as a result of the higher product revenues
• Higher network operating costs from the continued deployment of
our mobile 5G network
• Greater payments to other carriers corresponding to the higher
roaming revenues
Bell Wireless operating metrics
Mobile phones
Blended ARPU ($/month)
Gross subscriber activations
Postpaid
Prepaid
Net subscriber activations (losses)
Postpaid
Prepaid
Blended churn % (average per month)
Postpaid
Prepaid
Subscribers
Postpaid
Prepaid
Mobile connected devices
Net subscriber activations
Subscribers
n.m.: not meaningful
76
BCE InC. AnnuAl fInAnCIAl rEport 2022
2022
6,821
44
6,865
2,714
9
2,723
9,588
202
6,355
45
6,400
2,593
6
2,599
8,999
$ change
% change
466
(1)
465
121
3
124
589
7.3%
(2.2%)
7.3%
4.7%
50.0%
4.8%
6.5%
These factors were partly offset by:
• Lower data overages driven by greater customer adoption of monthly
plans with higher data thresholds, including unlimited plans
Product revenues increased by 4.8% in 2022, compared to last year,
due to a greater sales mix of premium mobile phones, partly offset by
lower volumes.
2022
(5,451)
4,137
43.1%
202
(5,146)
3,853
42.8%
$ change
% change
(305)
284
(5.9%)
7.4%
0.3 pts
Bell Wireless adjusted EBITDA increased by 7.4% in 2022, compared
to 2021, due to greater operating revenues, moderated by higher
operating costs. Adjusted EBITDA margin of 43.1% in 2022 increased by
0.3 pts over last year, primarily driven by the flow-through of service
revenue growth.
2022
202
Change
% change
59.30
1,953,912
1,355,772
598,140
489,901
439,842
50,059
1.27%
0.92%
4.85%
9,949,086
9,069,887
879,199
202,024
2,451,818
57.66
1,653,771
1,201,659
452,112
294,842
301,706
(6,864)
1.23%
0.93%
4.31%
9,459,185
8,630,045
829,140
193,641
2,249,794
1.64
300,141
154,113
146,028
195,059
138,136
56,923
489,901
439,842
50,059
8,383
202,024
2.8%
18.1%
12.8%
32.3%
66.2%
45.8%
n.m.
(0.04) pts
0.01 pts
(0.54) pts
5.2%
5.1%
6.0%
4.3%
9.0%
2 MD&A Business segment analysis Bell Wireless Mobile phone blended ARPU of $59.30 in 2022 increased by 2.8%,
compared to last year, reflecting our continued focus on high-quality
subscriber growth. The year-over-year increase was driven by:
• Higher roaming revenues due to increased international travel resulting
from the easing of COVID-19 global travel restrictions
• Flow-through of rate increases
These factors were partly offset by:
• Decreased data overages driven by greater customer adoption of
monthly plans with higher data thresholds, including unlimited plans
Mobile phone gross subscriber activations grew by 18.1% in 2022,
compared to 2021, due to both higher postpaid and prepaid gross
subscriber activations.
• Mobile phone postpaid gross subscriber activations increased by
12.8% in 2022, compared to last year, driven by higher retail store traffic,
increased immigration due to the easing of COVID-19 restrictions,
greater business customer demand, continued 5G momentum and
successful promotions including an increased focus on bundling
wireless services with Internet
• Mobile phone prepaid gross subscriber activations increased by
32.3% in 2022, compared to last year, due to greater market activity
driven by increased immigration and travel to Canada as a result of
the easing of COVID-19 restrictions throughout the year
Mobile phone net subscriber activations increased by 66.2% in
2022, compared to 2021, due to both higher postpaid and prepaid net
subscriber activations.
• Mobile phone postpaid net subscriber activations increased by 45.8%
in 2022, compared to last year, driven by greater gross activations,
partly offset by higher subscriber deactivations
• Mobile phone prepaid net subscriber activations increased by
56,923 in 2022, compared to last year, due to higher gross activations,
partly offset by greater subscriber deactivations
Mobile phone blended churn of 1.27% in 2022 increased by 0.04 pts,
compared to 2021.
• Mobile phone postpaid churn of 0.92% in 2022 improved by 0.01 pts,
compared to last year, reflecting our continued investment in customer
experience, retention and mobile networks
• Mobile phone prepaid churn of 4.85% in 2022 increased by 0.54 pts,
compared to last year, due to higher year-over-year customer
deactivations, as a result of greater market activity and more attractive
promotional offers on postpaid discount brands
Mobile phone subscribers at December 31, 2022 totaled 9,949,086, an
increase of 5.2%, from 9,459,185 subscribers reported at the end of last
year. This consisted of 9,069,887 postpaid subscribers, an increase of
5.1% from 8,630,045 subscribers at the end of 2021, and 879,199 prepaid
subscribers, an increase of 6.0% from 829,140 subscribers at the end
of 2021.
Mobile connected device net subscriber activations increased by 4.3%
in 2022, compared to last year, due to greater demand for IoT solutions,
including connected car subscriptions, offset in part by higher net losses
from data devices, primarily fewer tablet activations.
Mobile connected device subscribers at December 31, 2022 totaled
2,451,818, an increase of 9.0% from 2,249,794 subscribers reported at
the end of 2021.
Competitive landscape and industry trends
This section contains forward-looking statements, including relating to our business outlook. Refer to the section Caution regarding forward-
looking statements at the beginning of this MD&A.
Competitive landscape
The Canadian wireless industry has experienced strong subscriber
growth in recent years, supported by immigration and population
growth; the trend toward multiple devices; the expanding functionality
of data and related applications; and the adoption of mobile devices and
services, including connected devices. Various public health measures
in place during the COVID-19 pandemic in 2020 and 2021 led to pent-up
demand for mobile devices in 2022. The mobile phone penetration
rate increased to over 102% in Canada in 2022, with further increases
in penetration expected in 2023. By comparison, the mobile phone
penetration rate in the U.S. is well over 100%, and even higher in Europe
and Asia, suggesting an opportunity for continued growth in Canada.
In 2022, the Canadian wireless market continued to recover from
the challenges related to the COVID-19 pandemic. Pandemic impacts,
particularly related to roaming, subsided as consumer travel volumes
largely returned to pre-pandemic levels. Additionally, with members
of the workforce returning to traditional work environments, workers
offloading their mobile device traffic onto Wi-Fi moderated, resulting
in increased domestic data usage. The Canadian wireless market
continued to experience increased levels of competition nationally.
This high level of competitive intensity has led to continued declines
in chargeable data usage and larger allotments of data, in addition
to other factors, such as the popularity of data sharing plans and an
evolving shift in the customer mix towards non-traditional wireless
devices and tools such as video chats. These factors, combined with
increases in overall data usage, which is expected to grow with the
ongoing commercialization of 5G, led to widespread adoption and
promotion of unlimited data plans and device financing plans by all
national carriers. The build-out of 5G network infrastructure continued
in 2022, with 5G coverage of approximately 80% of the Canadian
population by the national carriers at the end of 2022, compared to
approximately 70% at the end of 2021. For Bell, our accelerated 5G
investments are underpinned by our capital expenditure acceleration
program, which commenced in 2021 and continued in 2022. Our long-
standing commitment to network excellence is reflected in multiple
independent third-party awards and recognition received in 2022,
including from PCMag for three years in a row.
The Canadian wireless industry continues to be highly competitive and
capital-intensive, with carriers continuing to expand and enhance their
broadband wireless networks, including the ongoing build-out of 5G,
as well as significant investments in spectrum.
77
2 MD&A Business segment analysis Bell Wireless Competitors
• Large facilities-based national wireless service providers Rogers and
the Telus Corporation group of companies (Telus)
• Smaller facilities-based wireless service provider Shaw, which currently
provides service in Toronto, Calgary, Vancouver, Edmonton and Ottawa,
as well as in several communities in southwestern Ontario
• Regional facilities-based wireless service providers Vidéotron Ltée
(Vidéotron), which provides service in Montréal and other parts of
Québec; Saskatchewan Telecommunications Holding Corporation,
which provides service in Saskatchewan; Bragg Communications Inc.
(Eastlink), which provides service in the three Maritime provinces
Industry trends
Wireless growth continues to be driven by increasing data usage
and adoption, including: higher-value smartphones, unlimited data
offerings, shared family data plans, and growth in IoT devices. In addition,
consumers continue to replace wireline access with wireless access
and related data services. These trends are expected to continue to
drive a growing demand for wireless data services for the foreseeable
future, particularly as the industry continues to shift to 5G. Industry
ARPU is expected to continue growing at a more moderate rate than
2022, compared to periods prior to the COVID-19 pandemic, particularly
considering that roaming revenues have returned to pre-pandemic levels.
While LTE and LTE-A technologies increase download speeds, encourage
data usage and enhance the customer experience, growth in data traffic
poses challenges to mobile access technology. To better manage this
data traffic, Canadian providers continue to evolve their networks
and deploy spectrum to support the shift to 5G. In 2022, the industry,
including Bell, began to operationalize 3500 MHz spectrum acquired in
2021, enabling faster data speeds and increased capacity. We expect
the 3800 MHz and millimetre wave (mmWave) spectrum auctions held
by ISED to commence in 2023 and 2024, respectively, and these will
be important to the expansion of 5G networks. The high capacity and
near instant connections offered by mobile 5G and 5G+ will support a
virtually unlimited range of new consumer and business applications in
coming years, including virtual and augmented reality, AI and machine
learning, immersive entertainment services, connected vehicles, smart
cities and enhanced rural access, and unprecedented IoT opportunities
for business and government enterprises. We expect 5G and 5G+
technology to provide a significant opportunity for future growth in
the industry.
IoT technologies connect communications-enabled devices via wireless
technologies, allowing them to exchange key information and share
processes. Advanced platforms and networks are already in place
in industries such as transportation and logistics, utilities and fleet
management, with deployment ongoing in other sectors, including
smart cities, manufacturing, retail, food services, consumer utilities, and
connected cars. These and other industries are looking to IoT, combined
with other applications, to digitally transform themselves and generate
value from their connections. IoT represents a meaningful opportunity
for growth in wireless products and services, with secure connectivity,
customer value, productivity and efficiency. While IoT applications
generally have lower ARPU, they tend to generate high service volumes
with low or no subsidy costs, thereby supporting both revenue growth
and margins. In 2022, we added 202,024 connected devices, bringing our
connected device subscriber base to 2,451,818 million, up 9% from 2021.
76
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Wireless 5.2 Bell Wireline
We expanded our fibre network to an additional 854,000 locations in 2022, our biggest
annual fibre buildout ever, driving our highest retail Internet net activations in 16 years and
strong residential Internet revenue growth. These results are a testament to the power of
fibre-based Internet service that provides the fastest, dedicated symmetrical speeds that
cable technology cannot match.
Financial performance analysis
2022 performance highlights
Bell Wireline
Adjusted EBITDA
(in $ millions)
(% adjusted EBITDA margin)
Bell Wireline
Revenues
(in $ millions)
$ 2, 73
$ 2, 63
67%
67%
Data services
Voice
Product
Other services
24%
26%
6%
2%
5%
6%
21
22
(0.2%)
$7,5 7
in 202
65.6%
$7,5 7
in 2022
65.3%
Retail high-speed Internet (1) (2)
subscriber growth
Retail high-speed Internet
net subscriber activations in 2022
New fibre
connections
+10.3%
in 2022
201,762
Increased 32.5% vs. 2021
854,000
Homes and businesses
in 2022
Retail TV (1) (2)
subscriber growth
+0.6%
in 2022
Retail IPTV
net subscriber activations in 2022
Retail residential NAS lines (1) (2)
subscriber decline
94,400
Increased 24.1% vs. 2021
(4.7%)
in 2022
(1) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by
67,090, 9,025 and 3,456 subscribers, respectively.
(2) In Q4 2022, as a result of the acquisition of Distributel, our retail high-speed Internet, retail IPTV and retail residential NAS lines subscriber bases increased by 128,065, 2,315 and
64,498 subscribers, respectively.
77
2 MD&A Business segment analysis Bell Wireline
Bell Wireline results
revenues
Data
Voice
Other services
External service revenues
Inter-segment service revenues
Operating service revenues
Data
Equipment and other
External product revenues
Inter-segment product revenues
Operating product revenues
Bell Wireline operating revenues
n.m.: not meaningful
2022
7,920
3,002
309
11,231
412
11,643
459
45
504
1
505
202
7,871
3,154
289
11,314
358
11,672
463
43
506
–
506
$ change
% change
49
(152)
20
(83)
54
(29)
(4)
2
(2)
1
(1)
0.6%
(4.8%)
6.9%
(0.7%)
15.1%
(0.2%)
(0.9%)
4.7%
(0.4%)
n.m.
(0.2%)
(0.2%)
12,148
12,178
(30)
Bell Wireline operating revenues decreased by 0.2% in 2022, compared
to last year, resulting from ongoing voice revenues erosion, partly offset
by growth in data and other services revenue.
These factors were partly offset by:
• Higher acquisition, retention and bundle discounts on residential
services
Bell Wireline operating service revenues decreased by 0.2% in 2022,
compared to 2021.
• Data revenues grew by 0.6% in 2022, compared to the prior year,
• Continued decline in our satellite TV subscriber base
• Lower business solutions services revenue including the impact of
the sale of our wholly-owned subsidiary Createch on March 1, 2022
driven by:
• Higher retail Internet and IPTV subscriber bases, coupled with the
flow-through of residential rate increases
• The acquisition of EBOX and other related companies in February 2022,
along with the acquisition of Distributel in December 2022
• Q2 2021 unfavourable retroactive impact from the CRTC decision on
wholesale high-speed Internet access services of $44 million, which
did not recur this year
• Greater sales of maintenance contracts for data equipment sold to
business customers
operating costs and adjusted EBItDA
Operating costs
Adjusted EBITDA
Adjusted EBITDA margin
• Legacy data and IP data services revenue erosion
• Voice revenues declined by 4.8% in 2022, compared to last year,
resulting from:
• Continued retail residential NAS line erosion, coupled with business
voice erosion, reflecting the impact of technological substitution to
wireless and Internet-based services
• Lower sales of international wholesale long distance minutes
These factors were partly offset by:
• Flow-through of residential rate increases
• Other services revenues grew by 6.9% in the year, compared to 2021,
mainly from greater data and analytics-related revenues
Bell Wireline operating product revenues were essentially stable year
over year, decreasing by 0.2%, compared to last year.
2022
(6,831)
5,317
43.8%
202
(6,863)
5,315
43.6%
$ change
% change
32
2
0.5%
–
0.2 pts
Bell Wireline operating costs decreased by 0.5% in 2022, compared
to 2021, due to:
• Reduced TV programming and content costs from TV package mix
and lower related revenues
These factors were partly offset by:
• Inflationary cost pressures primarily impacting labour, fuel, and
utilities expenses
• Greater repairs expense related to storm damages, primarily due to
• Lower business solutions services and payments to other carriers
Hurricane Fiona
costs, associated with the lower corresponding revenues
• Labour savings driven by workforce reductions, employee
redeployment costs in 2021 due to the COVID-19 pandemic and lower
call volumes to our customer service centres
• Higher expenses related to maintenance contract revenue on data
equipment sold to business customers
73
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Wireline Bell Wireline adjusted EBITDA remained essentially unchanged in 2022,
compared to last year, as lower operating expenses were offset by
lower year-over-year operating revenues. Adjusted EBITDA margin of
43.8% in 2022 increased by 0.2 pts over 2021, driven by the retroactive
impact of the CRTC decision on wholesale high-speed Internet access
services in Q2 2021, which did not recur this year, partly offset by
inflationary expense pressures and storm-related costs.
Bell Wireline operating metrics
Data
Retail high-speed Internet
Retail net subscriber activations
Retail subscribers (1) (2)
2022
201,762
4,258,570
202
152,285
3,861,653
Change
49,477
396,917
% change
32.5%
10.3%
(1) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail high-speed Internet subscriber base increased by 67,090 subscribers.
(2) In Q4 2022, as a result of the acquisition of Distributel, our retail high-speed Internet subscriber base increased by 128,065 subscribers.
Retail high-speed Internet net subscriber activations increased by
32.5% in 2022, compared to last year, driven by strong residential net
activations attributable to the ongoing growth in our FTTP footprint,
coupled with increased promotional offers including bundled service
offerings, partly offset by greater competitive intensity.
Retail high-speed Internet subscribers totaled 4,258,570 at December 31,
2022, up 10.3% from 3,861,653 subscribers reported at the end of 2021.
Our retail high-speed Internet subscriber base includes an increase of
67,090 subscribers in Q1 2022, as a result of the acquisition of EBOX
and other related companies, and of 128,065 subscribers in Q4 2022,
attributable to the acquisition of Distributel.
Retail TV
Retail net subscriber activations (losses)
IPTV
Satellite
Total retail subscribers (1) (2)
IPTV (1) (2)
Satellite
n.m.: not meaningful
2022
5,148
94,400
(89,252)
2,751,498
1,988,181
763,317
202
2,530
76,068
(73,538)
2,735,010
1,882,441
852,569
Change
2,618
18,332
(15,714)
16,488
105,740
(89,252)
% change
n.m.
24.1%
(21.4%)
0.6%
5.6%
(10.5%)
(1) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail IPTV subscriber base increased by 9,025 subscribers.
(2) In Q4 2022, as a result of the acquisition of Distributel, our retail IPTV base increased by 2,315 subscribers.
Retail IPTV net subscriber activations grew by 24.1% in 2022, compared
to 2021, driven by increased net activations from higher Internet
pull-through, greater promotional offers, and also reflected higher
demand for our Fibe TV app streaming service, partly offset by greater
competitive intensity, and higher substitution with OTT services.
Retail IPTV subscribers at December 31, 2022 totaled 1,988,181, up 5.6%
from 1,882,441 subscribers reported at the end of 2021. Our retail IPTV
subscriber base includes an increase of 9,025 subscribers in Q1 2022, as
a result of the acquisition of EBOX and other related companies, and of
2,315 subscribers in Q4 2022, attributable to the acquisition of Distributel.
Retail satellite TV net subscriber losses increased by 21.4% in 2022,
compared to last year, attributable to aggressive offers from cable
competitors, particularly in rural areas.
Total retail TV net subscriber activations (IPTV and satellite TV combined)
increased by 2,618 in 2022, compared to 2021, driven by higher IPTV net
activations, partly offset by greater satellite TV net losses.
Retail satellite TV subscribers at December 31, 2022 totaled 763,317,
down 10.5% from 852,569 subscribers reported at the end of 2021.
Total retail TV subscribers (IPTV and satellite TV combined) at
December 31, 2022 were 2,751,498 representing a 0.6% increase from
2,735,010 subscribers at the end of 2021. Our retail IPTV subscriber
base includes an increase of 9,025 subscribers in Q1 2022, as a
result of the acquisition of EBOX and other related companies, and of
2,315 subscribers in Q4 2022, attributable to the acquisition of Distributel.
74
2 MD&A Business segment analysis Bell Wireline Voice
Retail residential NAS lines net losses
Retail residential NAS lines (1) (2)
2022
(175,788)
2,190,771
202
(185,327)
2,298,605
Change
9,539
(107,834)
% change
5.1%
(4.7%)
(1) In Q1 2022, as a result of the acquisition of EBOX and other related companies, our retail residential NAS lines subscriber base increased by 3,456 subscribers.
(2) In Q4 2022, as a result of the acquisition of Distributel, our retail residential NAS lines subscriber base increased by 64,498 subscribers.
Retail residential NAS lines net losses improved by 5.1% in 2022,
compared to last year, reflecting lower deactivations primarily in the
early part of 2022 due to the COVID-19 pandemic, partly offset by
reduced activations, attributable to the impact of ongoing substitution
to wireless and Internet-based technologies.
Retail residential NAS lines at December 31, 2022 of 2,190,771 declined by
4.7% from 2,298,605 lines reported at the end of 2021. Our retail residential
NAS lines subscriber base includes an increase of 3,456 subscribers
in Q1 2022, as a result of the acquisition of EBOX and other related
companies, and of 64,498 subscribers in Q4 2022, attributable to the
acquisition of Distributel. The decline in retail residential NAS lines of 4.7%
represented an improvement over the 7.5% rate of erosion experienced
in 2021, mainly from the impact of the aforementioned acquisitions.
Competitive landscape and industry trends
This section contains forward-looking statements, including related to our business outlook, anticipated capital expenditures and network
deployment plans. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
Competitive landscape
As with the Canadian wireless industry, wireline markets and operations
were affected by the COVID-19 pandemic, particularly during its earlier
waves. Physical distancing requirements impacted traditional wireline
installations, as installers were restricted from entering customers’
premises. Conversely, with large numbers of workers and students
working and learning from home, demand for wireline services surged,
with network traffic levels reaching historic levels during the pandemic.
Although the residential high-speed Internet market is maturing, with
a penetration rate of approximately 91% across Canada at the end
of 2022, subscriber growth is expected to continue over the coming
years. An estimated 7.5 million Internet subscribers received their
service over the networks of the four largest cable companies at the
end of 2022, up 2% from approximately 7.4 million at the end of 2021.
Meanwhile, an estimated 7.2 million Internet subscribers received their
service over the networks of incumbent local exchange carriers (ILECs)
like Bell at the end of 2022, up 6% from approximately 6.8 million at
the end of 2021. Bell continues to make gains in market share as a
result of the ongoing expansion of our FTTP direct fibre network and
increased customer penetration of bundled service offerings. Similar
to our accelerated 5G investments, our investments to expand our
fibre footprint are supported by our capital investment acceleration
program, which commenced in 2021 and continued in 2022. While
capital expenditures are expected to decrease in 2023, they will remain
elevated compared to pre-2020 annual levels as we continue to make
generational investments in our networks to support the buildout of
our fibre infrastructure. Additionally, we received recognition from
PCMag as the top ISP among Canada’s major providers for gaming for
the second year in a row.
While Canadians still watch traditional TV, digital platforms are playing an
increasingly important role in the broadcasting industry and in respect
of content. Popular online video services are providing Canadians with
more choice about where, when and how to access video content. In
2022, ILECs offering IPTV service grew their subscriber base by an
estimated 4% to reach 3.4 million customers, driven by expanded network
coverage, enhanced differentiated service and bundled offerings, and
marketing and promotions focused on IPTV. Despite this IPTV growth,
the combined cable TV and satellite TV subscriber penetration rate was
unchanged. Canada’s four largest cable companies had an estimated
4.8 million TV subscribers, or a 48% market share, flat compared to
the end of 2021. The balance of industry subscribers were served by
satellite TV and regional providers.
In recent years, three of the largest Canadian cable TV companies have
launched new TV services based on the Comcast X1 video platform,
including Shaw, Rogers and Québecor’s Vidéotron brand. Our IPTV
platform (Fibe TV, Fibe TV app and Virgin Plus TV) continues to offer
numerous service advantages compared to this cable platform.
The financial performance of the overall Canadian wireline
telecommunications market continues to be impacted by the ongoing
declines in legacy voice service revenues resulting from technological
substitution to wireless and OTT services, as well as by ongoing
conversion to IP-based data services and networks by large business
customers. Canada’s four largest cable companies had approximately
2.8 million telephony subscribers at the end of 2022, representing a
national residential market share of approximately 41%, down compared
to approximately 42% at the end of 2021. Telecommunications companies
had an estimated 3.4 million telephony subscribers at the end of 2022,
representing approximately 49% market share, relatively flat compared
to 2021. Other non-facilities-based competitors also offer local and
long distance VoIP services and resell high-speed Internet services.
60
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Wireline Competitors
• Cable TV providers offering cable TV, Internet and cable telephony
services, including:
• Rogers in Ontario, New Brunswick, Newfoundland and Labrador
• Vidéotron in Québec
• Cogeco Cable Inc. (a subsidiary of Cogeco Inc.) (Cogeco) in Ontario
and Québec
• Shaw in British Columbia, Alberta, Saskatchewan, Manitoba and
Ontario
• Shaw Direct, providing satellite TV service nationwide
• Eastlink in every province except Saskatchewan, where it does not
provide cable TV and Internet service
• Telus provides residential voice, Internet and IPTV services in British
Columbia, Alberta and Eastern Québec
• Telus and Allstream Inc. provide wholesale products and business
services across Canada
• Various others (such as TekSavvy Solutions, VMedia, and Vonage
Canada (a division of Vonage Holdings Corp.) offer resale or VoIP-
based local, long distance and Internet services
• LEO satellite providers offering Internet services
• OTT voice and/or video services, such as Zoom, Skype, Netflix, Prime
Video, Disney+ and YouTube
• Digital media streaming devices such as Apple TV, Roku and Google
Chromecast
• Other Canadian ILECs and cable TV operators
• Substitution to wireless services, including those offered by Bell
• Customized managed outsourcing solutions competitors, such as
systems integrators CGI and IBM
• Wholesale competitors include cable operators, domestic CLECs,
U.S. or other international carriers for certain services, and electrical
utility-based telecommunications providers
• Competitors for home security range from local to national companies,
such as Telus, Rogers, Chubb Fire & Security and Stanley Security.
Competitors also include do-it-yourself security providers such as
Lorex and home automation service providers such as Ring, Nest
and Wyze.
Industry trends
The wireline telecommunications market is expected to remain very
competitive in 2023. Technology substitution, including the growth of
wireless and VoIP services, is expected to continue to replace higher-
margin legacy voice revenues, while digital streaming services and
other online content providers are expected to impact traditional linear
TV services. Bell is a key provider of these substitution services and the
decline in this legacy business is continuing as expected.
The popularity of viewing TV and on-demand content anywhere,
particularly on handheld devices, is expected to continue to grow as
customers adopt services that enable them to view content on multiple
screens. Streaming media providers continue to enhance OTT and
DTC streaming services in order to compete for share of viewership
in response to evolving viewing habits and consumer demand. TV
providers are monitoring OTT developments and evolving their content
and market strategy to compete with these non-traditional offerings.
We view OTT as an opportunity to add further capabilities to our linear
and on-demand assets, providing customers with flexible options to
choose the content they want, and encourage greater customer usage
of Bell’s high-speed Internet and wireless networks. The latest evolution
of our Fibe TV service, powered by Google Android TV technology, has
new capabilities and features including access to thousands of apps,
including Crave, Netflix and Prime Video, voice remote powered by
Google Assistant, universal search and cloud PVR, as well as access
to the Fibe TV app.
The Canadian ILECs continue to make significant capital investments in
broadband networks, with a focus on FTTP to maintain and enhance their
ability to support enhanced IP-based services and higher broadband
speeds. Cable TV companies continue to evolve their cable networks
with DOCSIS-related bandwidth enhancements and node splitting.
Although this platform increases speed in the near term and is cost-
efficient, it does not offer the same advanced capabilities as FTTP over
the longer term, such as fast symmetrical upload and download speeds.
Bell’s pure fibre Internet Gigabit 8.0 offers symmetrical download and
upload speeds of 8 Gbps, delivering download speeds five times faster
than cable technology and upload speeds 150 times faster than cable
technology.
In the business market, the convergence of IT and telecommunications,
facilitated by the ubiquity of IP, continues to shape the competitive
environment, with non-traditional providers increasingly blurring the
lines of competition and business models. Cable TV companies continue
to make investments to better compete in the highly contested small
and medium-sized business space. Telecommunications companies
like Bell are providing network-centric managed applications that
leverage their significant FTTP investments, while IT service providers
are bundling network connectivity with their proprietary software as
service offerings. The development of IP-based platforms, which provide
combined IP voice, data and video solutions, creates potential cost
efficiencies that compensate, in part, for reduced margins resulting from
the continuing shift from legacy to IP-based services. The evolution of IT
has created significant opportunities for our business markets services,
such as cloud services, that can have a greater business impact than
traditional telecommunications services.
6
2 MD&A Business segment analysis Bell Wireline 5.3 Bell Media
Bell Media generated revenue and adjusted EBITDA growth in 2022, even as TV advertising
demand across the industry slowed due to uncertain economic conditions. This is a testament
to Bell Media’s diversified asset mix, including a growing contribution from digital platforms,
our breadth of programming and consistently high ratings for all our TV properties.
Financial performance analysis
2022 performance highlights
Bell Media
Revenues
(in $ millions)
$5,056
$5,276
Bell Media
Adjusted EBITDA
(in $ millions)
$727
$767
+7.2%
21
22
21
22
Bell Media
Revenue mix
(product)
5%
53%
202
74%
6%
60%
2022
76%
+2.8%
Bell Media
Revenue mix
(line of business)
6%
4%
202
37%
6%
3%
2022
36%
59% Advertising
38% Subscriber
3% Other
56% Advertising
40% Subscriber
4% Other
87% TV
9% Radio
4% OOH
86% TV
8% Radio
6% OOH
Bell Media results
revenues
External revenues
Inter-segment revenues
Bell Media operating revenues
2022
2,904
350
3,254
202
2,681
355
3,036
$ change
% change
223
(5)
218
8.3%
(1.4%)
7.2%
Bell Media operating revenues increased by 7.2% in 2022, compared
to last year, due to higher subscriber, advertising and other revenues.
This included continued growth in digital revenues of 54% in 2022.
• Advertising revenues grew by 3.7% in 2022, compared to last year,
driven by higher OOH and radio advertising revenues due to the
ongoing recovery from the effects of the COVID-19 pandemic. TV
advertising revenues also contributed to the year-over-year growth,
mainly from strong demand by advertisers for the FIFA World Cup
Qatar 2022, partly offset by pressures caused by the current economic
uncertainty due to inflationary cost pressures, a potential recession
and global supply chain challenges.
62
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Media
• Subscriber revenues increased by 8.3% in 2022, compared to 2021,
due to the benefit from a one-time retroactive adjustment related to a
contract with a Canadian TV distributor in Q1 2022 and the continued
growth in Crave and sports streaming direct-to-consumer subscribers
• Other revenues increased year over year due to the return of the
F1 Canadian Grand Prix in Q2 2022, which was cancelled in 2021 due
to the COVID-19 pandemic
operating costs and adjusted EBItDA
Operating costs
Adjusted EBITDA
Adjusted EBITDA margin
Bell Media operating costs increased by 8.6% in 2022, compared to
last year, due to higher sports programming costs, mainly related to the
broadcast rights for the FIFA World Cup Qatar 2022, as well as reflecting
the return to regular sports broadcast schedules and entertainment
programming content deliveries subsequent to COVID-19-related
delays in 2021. The year-over-year increase in operating costs was
also impacted by the higher costs associated with the return of the
F1 Canadian Grand Prix and the temporary waiving in Q1 2021 of CRTC
Part I and II broadcasting license fees due to the COVID-19 pandemic.
Bell Media adjusted EBITDA grew by 2.8% in 2022, compared to 2021,
driven by greater revenues, moderated by increased operating costs.
Bell Media operating metrics
• CTV maintained its #1 ranking as the most-watched network in Canada
for the 21st year in a row among total viewers in primetime, with 12 of
the top 20 programs nationally among total viewers (1)
• Bell Media maintained its leadership position in the specialty and pay
TV market with its English specialty and pay TV properties reaching 77%
of all Canadian English specialty and pay TV viewers in the average
week among key viewers aged 25 to 54 and with its French specialty
and pay TV properties reaching 77% of Québec French specialty and
pay TV viewers in an average week (1)
2022
(2,509)
745
22.9%
202
(2,311)
725
23.9%
$ change
% change
(198)
20
(8.6%)
2.8%
(1.0) pts
• Noovo had 3 out of the top 15 most watched regular shows on French
conventional TV among viewers aged 25 to 54 (1)
• Bell Media continued to rank first in unique visitors, total page views
and total page minutes in digital media in 2022 among Canadian
broadcast and video network competitors. Bell Media also ranked
sixth among online properties in the country in terms of unique visitors
and reach, with 23.7 million unique visitors per month, reaching 73%
of the digital audience in 2022 (2).
• Bell Media remained Canada’s top radio broadcaster in 2022, and it
had the #1 musical radio station in Montréal in Fall 2022 (1)
• Astral continues to be a leading OOH solution provider in Canada,
offering over 45,000 faces across Canada through a range of six
product lines: outdoor advertising, street furniture, airport, digital
large format, transit and indoor place-based. Our products have the
potential to reach 13.8 million Canadians weekly in 40 markets, and we
offer exclusive advertising presence including 6 of the top 15 airports
and 2 of the top transit commissions in Canada.
Competitive landscape and industry trends
This section contains forward-looking statements, including related to our business outlook. Refer to the section Caution regarding forward-
looking statements at the beginning of this MD&A.
Competitive landscape
Competition in the Canadian media industry has changed in recent
years as content is increasingly being controlled by a small number
of global competitors with significant scale and financial resources.
Technology has allowed new entrants to become media players in
their own right. Some players have become more vertically integrated
across both traditional and emerging platforms to better enable the
acquisition and monetization of premium content. Global aggregators
have also emerged and are competing for both content and viewers.
Bell Media competes in the TV, radio, OOH advertising and digital media
markets:
• TV: The TV market has become increasingly fragmented and this trend
is expected to continue as new services and technologies increase
the diversity of information and entertainment outlets available to
consumers
• Radio: Competition within the radio broadcasting industry occurs
primarily in discrete local market areas among individual stations
• OOH: The Canadian OOH advertising industry is fragmented, consisting
of a few large companies as well as numerous smaller and local
companies operating in a few local markets
• Digital media: Consumer demand for digital media, content on mobile
devices, and on-demand content is increasing and media products
have experienced significant digital uptake, requiring industry players
to increase their efforts in digital content and capabilities in order
to compete. In response to this trend, advertisers are shifting their
spending to premium video and audio products on global digital
platforms and social media that enable marketers to narrowly target
specific audiences instead of the previous mass marketing approach.
This results in lower use of traditional advertising methods and requires
a shift in focus. Bell Media and other media companies have initiated
programs to sell their advertising inventory on a more targeted basis
through updated buying platforms with enhanced access to data and
are now selling their inventory on programmatic buying platforms.
(1) Based on data provided by Numeris.
(2) Based on data provided by Comscore, Inc.
65
2 MD&A Business segment analysis Bell Media In 2022, advertising demand and spending across the North American
media industry was impacted by unfavourable economic conditions
and disruptions to supply chains. In particular, TV and radio advertising
demand softened as a result of persistently high inflation, fears of a
potential recession and supply chain issues in certain key consumer
verticals, such as the automotive industry. However, OOH advertising
improved as it recovered from the effects of the COVID-19 pandemic
due to increased circulation and traffic.
Competitors
TV
• Conventional Canadian TV stations (local and distant signals)
and specialty and pay channels, such as those owned by Corus
Entertainment Inc. (Corus), Rogers, Québecor and Canadian
Broadcasting Corporation (CBC)/Société Radio-Canada
• U.S. conventional TV stations and specialty channels
• OTT streaming providers such as Netflix, Prime Video, Disney+,
Apple TV+, Paramount +, discovery+ and DAZN
• Video-sharing websites such as YouTube, TikTok and Instagram
Radio
• Large radio operators, such as Rogers, Corus, Cogeco and Stingray
Group Inc. that also own and operate radio station clusters in various
local markets
• Radio stations in specific local markets
• Satellite radio provider SiriusXM
• Music streaming services such as Spotify and Apple Music
• Music downloading services such as Apple’s iTunes Store
• Other media such as newspapers, local weeklies, TV, magazines,
outdoor advertising and the Internet
OOH advertising
• Large outdoor and indoor advertisers, such as Jim Pattison Broadcast
Group, Outfront Media, Québecor, Branded City, REC Media, UB Media
and Rouge Media (a division of Rogers Sports & Media)
• Numerous smaller and local companies operating a limited number
of display faces in a few local markets
• Other media such as TV, radio, print media and the Internet
Industry trends
Consumers continue to have access to an array of online entertainment
and information alternatives that did not previously exist. While
traditional linear TV has historically been the only way to access
entertainment programming, the increase in alternative entertainment
options has led to a fragmentation in consumption habits. Although
more time is still spent on traditional linear TV compared to other forms
of video consumption, people are increasingly consuming content on
their own terms from an assortment of services and in a variety of
formats. In particular, today’s viewers are consuming more content
online, watching less scheduled programming live, time-shifting original
broadcasts through PVRs, viewing more video on mobile devices, and
catching up on an expanded library of past programming on-demand.
While the majority of households use pure OTT services, such as Crave,
Netflix, Prime Video, Disney+ and Apple TV+, to complement linear
TV consumption, an increasing number are using these services as
alternatives to a traditional linear package.
Premium video content has become increasingly important to media
companies in attracting and retaining viewers and advertisers. This
content, including live sports and special events, should continue to draw
audiences and advertisers moving forward. Heightened competition
for these rights from global competitors, including Netflix, Prime Video,
Disney+, DAZN and Apple TV+, has already resulted in higher program
rights costs and may also make it more difficult to secure content, which
is a trend that is expected to continue into the future.
Consumer viewing behaviour is continually changing and media
companies are adjusting by evolving and personalizing their content
offerings. They are launching their own solutions with the objective of
better competing with non-traditional offerings through DTC products
such as Bell Media’s bilingual Crave service, TSN and RDS, all of which
offer streaming on a variety of platforms. Access to live sports, immersive
experiences and other premium content has become even more
important for acquiring and retaining audiences that in turn attract
advertisers and subscriber revenue. Therefore, ownership of content
and/or long-term agreements with content owners has also become
increasingly important to media companies.
In addition, there has been a shift in how advertisers want to buy
advertising across all media platforms. The growth of digital consumption
has also given advertisers the opportunity to buy more targeted
inventory and to buy inventory via self-serve and programmatically. As
a result, Bell Media and other media companies have initiated programs
to sell their advertising inventory on a more targeted basis through
updated buying platforms with enhanced access to data and are now
selling their inventory on programmatic buying platforms.
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Media 5.4 Segmented business outlook, assumptions and risks
This section contains forward-looking statements, including relating to our projected financial performance for 2023 and our business outlook,
objectives, plans and strategic priorities. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
Effective Q1 2023, our externally reported segments will change to Bell CTS and Bell Media. As a result of our reporting changes, the business
outlook, assumptions and risks outlined in this section are presented in accordance with our new reporting segments. Refer to section 1.2, About
BCE for further details.
Bell CTS
Business outlook and assumptions
2025 outlook
We expect revenue growth to be driven by continued subscriber base
expansion.
Wireless subscriber growth is expected to be supported by an
accelerating 5G upgrade cycle, higher immigration levels and our
focus on multi-product cross sales. We remain focused on sustaining
our market share of national operators’ postpaid mobile phone net
additions in a disciplined and cost-conscious manner, while also
continuing to grow our prepaid subscriber base. We expect higher, but
more moderate, growth in ARPU driven by increased 5G subscriptions
and higher roaming revenue, partly offset by reduced data overage
revenue resulting from the continued adoption of unlimited plans. We
will also seek to achieve higher revenues from the flow-through of
pricing changes, as well as IoT services and applications in the areas
of retail, business, transportation, and urban city optimization.
Continued expansion of our retail Internet and TV subscriber bases is
expected to be supported by a broader FTTP service footprint together
with higher household penetration, further penetration of WHI access
technology in rural communities, further scaling of Bell’s app-based
live TV streaming services and the introduction of new products and
features. The broadband network advantage that we are building with
the continued deployment of fibre across our service footprint positions
us well to continue growing Internet market share and revenue. We will
continue to focus on winning the home by leveraging our symmetrical
Internet speed advantage over cable and delivering the best available
Wi-Fi experience and content on the customer’s TV platform of choice in
order to drive higher Internet and TV net customer additions. Consumer
wireline growth is also to be supported by our acquisitions of EBOX
and Distributel in 2022.
In our business markets, we expect an improving financial performance
trajectory predicated on higher product sales and resumption of
project spending by large enterprise customers as global supply
constraints for telecom data equipment are expected to ease. However,
as large enterprise customers continue to look for opportunities to
leverage low-cost technologies to grow and transform the workforce
of the future and face increased uncertainty about future economic
conditions, spending on telecommunications services and products is
expected to be variable. In addition, ongoing customer migrations from
traditional technologies to IP-based systems and demand for cheaper
bandwidth alternatives will continue to impact business markets’ results
in 2023. We intend to offset the revenue decline from traditional legacy
telecommunications services by continuing to develop unique services
and value enhancements to improve the client experience through new
features such as cloud access, and security and collaboration services.
Further, we intend to use marketing initiatives and other customer-
specific strategies to slow the pace of NAS erosion, while also investing
in direct fibre expansion, 5G and new solutions in key portfolios such as
Internet and private networks, cloud services, unified communications
and security. We will also continue to focus on delivering network-centric
managed and professional services solutions to large and medium-sized
businesses that increase the value of connectivity services.
We expect the overall level of competitive intensity in our small and
medium-sized business markets to remain high, as cable operators
and other telecom competitors look to these customer segments as
potential growth opportunities. We also intend to introduce service
offerings that help drive innovative solutions and value for our small
and medium-sized customers by leveraging Bell’s network assets,
broadband fibre expansion and service capabilities to expand our
relationships with them.
We are maintaining a sharp focus on our operating cost structure
to help offset pressures related to customer growth and retention,
the ongoing erosion of high-margin wireline voice and other legacy
revenues, and competitive repricing pressures in our residential,
business and wholesale markets. This, combined with further operating
efficiencies enabled by the ongoing expansion of our all-fibre network
footprint, changes in consumer behaviour, digital adoption, product and
service enhancements and innovation, digital investments and other
improvements to the customer service experience, is expected to deliver
meaningful cost savings and productivity gains across the organization.
67
2 MD&A Business segment analysis Bell Media Assumptions
• Maintain our market share of national operators’ wireless postpaid
mobile phone net additions and growth of our prepaid subscriber base
• Increased competitive intensity and promotional activity across all
regions and market segments
• Ongoing expansion and deployment of 5G and 5G+ wireless networks,
offering competitive coverage and quality
• Continued diversification of our distribution strategy with a focus on
expanding DTC and online transactions
• Moderating growth in mobile phone blended ARPU, driven by growth
in 5G subscriptions, and increased roaming revenue from the easing of
travel restrictions implemented as a result of the COVID-19 pandemic,
partly offset by reduced data overage revenue due, among others,
to the continued adoption of unlimited plans
• Accelerating business customer adoption of advanced 5G, 5G+ and
IoT solutions
• Improving wireless handset device availability in addition to stable
device pricing and margins
• Further deployment of direct fibre to more homes and businesses
within our wireline footprint
• Continued growth in retail Internet and IPTV subscribers
• Increasing wireless and Internet-based technological substitution
• Continued aggressive residential service bundle offers from cable TV
competitors in our local wireline areas, moderated by growing our
share of competitive residential service bundles
• 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 medium-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
• Increasing customer adoption of OTT services resulting in downsizing
of TV packages
• Growing consumption of OTT TV services and on-demand video
streaming, as well as the proliferation of devices, such as tablets,
that consume large quantities of bandwidth, will require ongoing
capital investment
• Realization of cost savings related to operating efficiencies enabled
by a growing direct fibre footprint, changes in consumer behaviour
and product innovation, digital adoption, product and service
enhancements, expanding self-serve capabilities, new call centre
and digital investments, other improvements to the customer service
experience, management workforce reductions including attrition and
retirements, and lower contracted rates from our suppliers
• No adverse material financial, operational or competitive consequences
of changes in or implementation of regulations affecting our
communication and technology services business
Key growth drivers
• Higher immigration levels
• A greater number of customers on our 5G and 5G+ networks
• Cross-sell to customers who do not have all their telecommunication
services with Bell
• Expansion of FTTP footprint
• Increasing FTTP and WTTP customer penetration
• Continued growth in retail Internet and IPTV subscribers
• Expansion of our business customer relationships to drive higher
revenue per customer
• Ongoing service innovation and product value enhancements
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Media Principal business risks
This section discusses certain principal business risks specifically related to the Bell CTS segment. For a detailed description of the other principal
risks that could have a material adverse effect on our business, refer to section 9, Business risks.
Aggressive competition
Risk
• The intensity of competitive activity
from national wireless operators, smaller
or regional facilities-based wireless
service providers, non-traditional players
and resellers
• The intensity of competitive activity
coupled with new wireline product
launches for residential customers (e.g.,
IoT, smart home systems and devices,
innovative TV platforms, etc.) and business
customers (e.g., OTT VoIP, collaboration and
SD WAN solutions) from national operators,
non-traditional players and wholesalers,
including the expanded offering of retail
services based on wholesale access by
large facilities-based competitors
Potential impact
• Pressure on our revenue, adjusted
EBITDA, ARPU and churn would likely
result if wireless competitors continue to
aggressively pursue new types of price
plans, increase discounts, offer shared
plans based on sophisticated pricing
requirements (e.g., installments) or offer
other incentives, such as cash-back
for upgrade with old smartphone and
multi-product bundles, in order to attract
new customers
• An increase in the intensity level of
competitive activity for wireline services
could result in lost revenue, higher churn
and increased acquisition and retention
expenses, all of which would put pressure
on Bell CTS’s adjusted EBITDA
Market environment, technological
advancement and changing
customer behaviour
Risk
• Slower wireless subscriber growth due
to high Canadian smartphone penetration
and reduced or slower immigration flow
• With technological advancement,
the traditional TV viewing model (i.e., a
subscription for bundled channels) is
challenged by an increasing number of
legal and illegal viewing options available
in the market offered by traditional,
non-traditional and global players,
as well as increasing cord-cutting and
cord-shaving trends
• The proliferation of network technologies
impacts business customers’ decision
to migrate to OTT, VoIP and/or leverage
SD WAN architecture
• Changing customer habits further
contribute to the erosion of NAS lines
Potential impact
• A maturing wireless market could
challenge subscriber growth and the
cost of subscriber acquisition and
retention, putting pressure on the financial
performance of our business
• Our market penetration and number
of TV subscribers could decline as a
result of innovative offerings by BDUs
and an increasing number of domestic
and non-domestic unregulated OTT
providers, as well as a significant volume
of content piracy
• The proliferation of IP-based products,
including OTT content and OTT software
offerings directly to consumers, may
accelerate the disconnection of TV services
or the reduction of TV spending, as well as
the reduction in business IT investments
by customers
• The ongoing loss of NAS lines challenges
our traditional voice revenues and compels
us to develop other service offerings
regulatory environment
Risk
• Increased regulation of wireless services,
pricing and infrastructure (e.g., additional
mandated access to wireless networks,
establishing rates for mandated wireless
services that are materially different from
the rates we propose, and limitations
placed on future spectrum bidding)
• The CRTC could mandate rates for the
new disaggregated wholesale high-speed
access service available on FTTP facilities
that are materially different from the rates
we proposed, and which do not sufficiently
account for the investment required in
these facilities, or modify the network
configuration of this new service in a way
that materially improves the business
position of our competitors
• The courts could overturn the new
wholesale rates the CRTC set for
aggregated high-speed access service
in 2021, which were much higher than
the rates it had proposed in 2019
Potential impact
• Increased regulation could influence
network investment and the market
structure, limit our flexibility, improve
the business position of our competitors,
limit network-based differentiation
of our services, and negatively impact
the financial performance of our Bell
CTS segment
• In respect of the new disaggregated
wholesale high-speed access service
available on FTTP facilities, the mandating
of rates that are materially different
from the rates we proposed or the
adoption of a network configuration
advantageous for our competitors, or the
implementation of the rates reduced by
the CRTC in August 2019 for aggregated
wholesale high-speed access services,
could change our investment strategy,
especially in relation to investment in next-
generation wireline networks in smaller
communities and rural areas, improve
the business position of our competitors,
further accelerate penetration and
disintermediation by OTT players,
and negatively impact the financial
performance of our business
67
2 MD&A Business segment analysis Bell Media Bell Media
Business outlook and assumptions
2025 outlook
We expect to generate positive media revenue growth in 2023. While
the advertising market continues to be adversely affected by economic
uncertainty, including fears of a potential recession, and ongoing
supply chain challenges, we expect a gradual recovery to begin in
the second half of the year. Subscriber revenue is expected to reflect
the non-recurrence of a one-time revenue adjustment in 2022, but
moderated by the flow-through of BDU carriage renewals and continued
scaling of DTC products, including Crave. The effects of shifting media
consumption towards competing OTT and digital platforms, as well as
further TV cord-shaving and cord-cutting, are also expected to continue
to negatively impact subscriber volumes.
We remain committed to advancing our digital-first media strategy,
including growing digital revenues and DTC subscribers, and increasing
usage of our ad buying optimization platforms. We also intend to
continue controlling costs by achieving productivity gains and pursuing
operational efficiencies across all of our media properties, while
continuing to invest in premium content across all screens and platforms.
Across our media properties, particularly in TV, we intend to leverage
the strength of our market position combined with enhanced audience
targeting to continue offering advertisers, both nationally and locally,
premium opportunities to reach their target audiences. Success in
this area requires that we focus on a number of factors, including:
successfully acquiring highly rated programming and differentiated
content; building and maintaining strategic supply arrangements for
content across all screens and platforms; producing and commissioning
high-quality Canadian content, including market-leading news; and
scaling our SAM TV and Bell DSP ad buying optimization platforms, which
give customers the ability to plan, activate and measure marketing
campaigns using Bell’s premium first-party data and TV inventory.
Our sports offerings are expected to continue to deliver popular content
and viewing experiences to our TV and DTC audiences. These offerings,
combined with the integration of our digital platforms, are integral parts
of our strategy to enhance viewership and engagement. We will also
continue to focus on creating innovative high-quality productions in
the areas of sports news and editorial coverage.
In non-sports specialty TV, audiences and advertising revenues are
expected to be driven by investment in quality programming and
production.
Through Crave, our bilingual TV and streaming service, we will continue
to leverage our investments in premium content (including HBO, HBO
Max, STARZ and original French-language programming) in order to
attract pay TV and DTC subscribers. We intend to continue expanding
platform distribution and delivering user experience improvements.
In our French-language TV services, we will continue to optimize
our programming with a view to increasing our appeal to audiences,
supported in particular by Noovo content offerings.
In radio, we intend to leverage the strength of our market position to
continue offering advertisers, both nationally and locally, attractive
opportunities to reach their target audiences. Additionally, in conjunction
with our TV properties, we will continue to pursue opportunities that
leverage our promotional capabilities, provide an expanded platform
for content sharing, and offer other synergistic efficiencies.
In our OOH operations, we plan to leverage the strength of our products
to provide advertisers with attractive opportunities in key Canadian
markets. We will also continue to seek new opportunities to support
the growing demand in digital, including converting certain outdoor
structures to digital and adding new boards.
Assumptions
• Overall revenue expected to reflect continued scaling of our SAM TV and
DSP buying platforms, as well as DTC subscriber growth contributing
towards the advancement of our digital-first media strategy
• Continued escalation of media content costs to secure quality
programming
• Continued scaling of Crave through broader content offering, user
experience improvements and expanded distribution
• Continued investment in Noovo original programming to better serve
our French-language customers with a wider array of content on their
preferred platforms
• Leveraging of first-party data to improve targeting, advertisement
delivery and attribution
• 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
• No adverse material financial, operational or competitive consequences
of changes in or implementation of regulations affecting our media
business
Key growth drivers
• Continued scaling of SAM TV and Bell DSP buying platforms
• Ongoing growth in BDU rates
• Build out digital experiences and expand distribution in order to support
audience growth and increase advertising inventory
• Grow TV audiences and generate revenue from continued investment
in Noovo original programming
• Maintain strength in audience performance across all platforms
63
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business segment analysis Bell Media Principal business risks
This section discusses certain principal business risks specifically related to the Bell Media segment. For a detailed description of the other
principal risks that could have a material adverse effect on our business, refer to section 9, Business risks.
Aggressive competition, piracy
and regulatory constraints
Risk
• The intensity of competitive activity
rising content costs and ability
to secure key content
Risk
• Rising content costs, as an increasing
from new technologies and alternative
distribution platforms such as
unregulated OTT content offerings,
video-on-demand (VOD), personal
video platforms, DTC distribution and
pirated content, in addition to traditional
TV services, in combination with the
development of more aggressive product
and sales strategies by non-traditional
global players with a much larger scale
Potential impact
• Adverse impact on the level of
subscriptions and/or viewership for Bell
Media’s TV services and on Bell Media’s
revenue streams
number of domestic and global
competitors seek to acquire the same
content or to restrict content within their
own ecosystems, and the ability to acquire
or develop key differentiated content to
drive revenues and subscriber growth
Potential impact
• Rising programming costs could
require us to incur unplanned expenses,
which could result in negative pressure
on adjusted EBITDA
• Our inability to acquire or develop
popular programming content could
adversely affect Bell Media’s viewership
and subscription levels and, consequently,
advertising and subscription revenues
Advertising and subscription
revenue uncertainty
Risk
• Advertising is heavily dependent on
economic conditions and viewership, and
traditional media is under increasing
pressure for advertising spend against
dominant non-traditional/global digital
services. Our ability to grow digital and
other alternative advertising revenue, in
the context of a changing and fragmented
advertising market, is further being
challenged by such global-scale players.
• The advertising market could be further
impacted by cancelled or delayed
advertising campaigns from many
sectors due to economic uncertainty or
a reintroduction of restrictive measures
related to the COVID-19 pandemic
• Bell Media has contracts with a variety of
BDUs, under which monthly subscription
fees for specialty and pay TV services are
earned, that expire on a specific date
Potential impact
• Economic uncertainty or a reintroduction
of restrictive COVID-19-related measures
could reduce advertisers’ spending. Our
failure to increase or maintain viewership
or capture our share of the changing and
fragmented advertising market could result
in the loss of advertising revenue.
• If we are not successful in obtaining
favourable agreements with BDUs, it could
result in the loss of subscription revenue
64
2 MD&A Business segment analysis Bell Media 6 Financial and capital management
Our fi nancial
resources
This section tells you how we manage our cash and capital resources to carry out our strategy and deliver financial results. It provides an
analysis of our financial condition, cash flows and liquidity on a consolidated basis.
6.1 Net debt
Long-term debt
Debt due within one year
50% of preferred shares (1)
Cash
Cash equivalents
Net debt
n.m.: not meaningful
2022
27,783
4,137
1,935
(99)
(50)
33,706
202
27,048
2,625
2,002
(289)
–
31,386
$ change
% change
735
1,512
(67)
190
(50)
2,320
2.7%
57.6%
(3.3%)
65.7%
n.m.
7.4%
(1) 50% of outstanding preferred shares of $3,870 million and $4,003 million at December 31, 2022 and December 31, 2021, respectively, are classified as debt consistent with the treatment
by some credit rating agencies.
The increase of $1,512 million in debt due within one year and $735 million
in long-term debt was due to:
• the issuance by Bell Canada of Series M-57 MTN debentures with a
total principal amount of $1 billion in Canadian dollars
• the issuance by Bell Canada of Series US-7 Notes, with a total principal
amount of $750 million in U.S. dollars ($954 million in Canadian dollars)
• an increase in our securitized receivables of $700 million
• an increase of $482 million mainly due to foreign exchange fluctuations
on hedged U.S. debt and net issuances of other debt
• an increase in our notes payable (net of repayments) of $111 million
Partly offset by:
• the early redemption of Series M-26 MTN debentures with a total
principal amount of $1 billion in Canadian dollars
The decrease in cash of $190 million and the increase in cash equivalents
of $50 million was mainly due to:
• $5,133 million of capital expenditures
• $3,312 million of dividends paid on BCE common shares
• $2,023 million of repayment of long-term debt
• $429 million paid, net of cash acquired, mainly for the acquisition of
Distributel and EBOX and other related companies
• $255 million paid for the purchase on the open market of BCE common
shares for the settlement of share-based payments
• $136 million of dividends paid on BCE preferred shares
• $125 million paid for the repurchase of BCE preferred shares
Partly offset by:
• $8,365 million of cash flows from operating activities
• $1,951 million of issuance of long-term debt
• $700 million increase in securitized receivables
• $171 million from the issuance of common shares under our employee
stock option plan
• $111 million increase in notes payable
70
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Financial and capital management 6.2 Outstanding share data
Common shares outstanding
Outstanding, January 1, 2022
Shares issued under deferred share plan
Shares issued under employee stock option plan
Outstanding, December 31, 2022
6.3 Cash flows
Cash flows from operating activities
Capital expenditures
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to non-controlling interest
Acquisition and other costs paid
Free cash flow
Business acquisitions
Business dispositions
Acquisition and other costs paid
Spectrum licences
Other investing activities
Increase in notes payable
Increase (decrease) in securitized receivables
Issue of long-term debt
Repayment of long-term debt
Issue of common shares
Purchase of shares for settlement of share-based payments
Repurchase of preferred shares
Cash dividends paid on common shares
Other financing activities
Net (decrease) increase in cash
Net increase in cash equivalents
n.m.: not meaningful
Number
of shares
909,018,871
11,003
2,952,992
911,982,866
Stock options outstanding
Outstanding, January 1, 2022
Exercised (1)
Forfeited or expired
Outstanding, December 31, 2022
Exercisable, December 31, 2022
Number of options
Weighted average
exercise price ($)
10,778,724
(2,952,992)
(23,624)
7,802,108
4,539,188
60
58
65
61
58
(1) The weighted average market share price for options exercised in 2022 was $69.
At March 2, 2023, 912,159,109 common shares and 7,625,865 stock
options were outstanding.
2022
8,365
(5,133)
(136)
(39)
10
3,067
(429)
52
(10)
(3)
(4)
111
700
1,951
(2,023)
171
(255)
(125)
(3,312)
(31)
(190)
50
202
8,008
(4,852)
(125)
(86)
35
2,980
(12)
–
(35)
(2,082)
(72)
351
(150)
4,985
(2,751)
261
(297)
–
(3,132)
19
65
–
$ change
% change
357
(281)
(11)
47
(25)
87
(417)
52
25
2,079
68
(240)
850
(3,034)
728
(90)
42
(125)
(180)
(50)
(255)
50
4.5%
(5.8%)
(8.8%)
54.7%
(71.4%)
2.9%
n.m.
n.m.
71.4%
99.9%
94.4%
(68.4%)
n.m.
(60.9%)
26.5%
(34.5%)
14.1%
n.m.
(5.7%)
n.m.
n.m.
n.m.
Cash flows from operating activities and free cash flow
In 2022, BCE’s cash flows from operating activities increased by
$357 million, compared to 2021, mainly due to higher adjusted EBITDA,
lower income taxes paid, lower contributions to post-employment
benefit plans due to a partial contribution holiday in 2022, and lower
severance and other costs paid, partly offset by lower cash from
working capital and higher interest paid.
Free cash flow increased by $87 million in 2022, compared to 2021,
mainly due to higher cash flows from operating activities, excluding
cash from acquisition and other costs paid, partly offset by higher
capital expenditures.
7
2 MD&A Financial and capital management Capital expenditures
Bell Wireless
Capital intensity (1)
Bell Wireline
Capital intensity
Bell Media
Capital intensity
BCE
Capital intensity
(1) Capital intensity is defined as capital expenditures divided by operating revenues.
BCE capital expenditures of $5,133 million in 2022 increased by 5.8% or
$281 million, compared to last year, for a capital intensity ratio of 21.2%,
up 0.5 pts over 2021. The variance reflected the following:
• Lower capital spending in our wireless segment of $36 million in 2022,
compared to last year, mainly due to slower pace of spending, as we
continued to execute on the deployment of our mobile 5G network,
which reached 82% of the Canadian population by the end of the year
Business acquisitions
On December 1, 2022, Bell acquired Distributel, a national independent
communications provider offering a wide range of consumer, business
and wholesale communications services, for cash consideration of
$303 million ($282 million net of cash acquired) and $39 million of
estimated additional cash consideration contingent on the achievement
of certain performance objectives.
Business dispositions
On March 1, 2022, we completed the previously announced sale of our
wholly-owned subsidiary, Createch. We recorded cash proceeds of
$54 million.
In December 2022, we entered into an agreement to sell our 63%
ownership in certain production studios and production studios currently
under construction, which are included in our Bell Media segment. The
transaction is expected to close in the first half of 2023 once we achieve
2022
1,084
11.3%
3,887
32.0%
162
5.0%
5,133
21.2%
202
1,120
12.4%
3,612
29.7%
120
4.0%
4,852
20.7%
$ change
% change
36
(275)
(42)
(281)
3.2%
1.1 pts
(7.6%)
(2.3) pts
(35.0%)
(1.0) pts
(5.8%)
(0.5) pts
• Higher year-over-year capital spending in our wireline segment of
$275 million in 2022, primarily due to the continued accelerated rollout
of our FTTP network to more homes and businesses, partly offset by
lower year-over-year investment in the buildout of our WTTP network,
which was essentially completed at the end of last year
• Higher capital expenditures at Bell Media of $42 million in 2022,
compared to last year, mainly due to greater investments in new
generation media content editing infrastructure and to support the
expansion of the distribution of our OTT services
In February 2022, Bell acquired EBOX and other related companies,
which provide Internet, telephone and TV services to consumers and
businesses in Québec and parts of Ontario, for cash consideration of
$153 million ($139 million net of cash acquired).
substantial completion of the construction of the production studios
and subject to customary closing conditions. As at December 31, 2022,
construction of the production studios was ongoing and there remain
significant construction activities which must be completed. We estimate
we will receive cash proceeds of approximately $220 million from the
sale transaction, which amount may vary primarily based on the actual
cost incurred to complete the construction of the production studios.
Spectrum licences
On December 17, 2021, Bell Mobility Inc. (Bell Mobility) acquired 271 licences in a number of urban and rural markets for 678 million MHz-Pop
of 3500 MHz spectrum for $2.07 billion.
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Financial and capital management Debt instruments
We use a combination of short-term and long-term debt to finance our operations. Our short-term debt consists mostly of notes payable under
commercial paper programs, loans securitized by trade receivables and wireless device financing plan receivables, and bank facilities. We
usually pay fixed rates of interest on our long-term debt and floating rates on our short-term debt. As at December 31, 2022, all of our debt was
denominated in Canadian dollars with the exception of our commercial paper, and Series US-1, US-2, US-3, US-4, US-5, US-6 and US-7 Notes,
which are denominated in U.S. dollars and have been hedged for foreign currency fluctuations through cross currency interest rate swaps.
2022
During 2022, we issued debt, net of repayments. This included:
• $1,951 million issuance of long-term debt comprised of the issuance of
Series M-57 MTN debentures with a total principal amount of $1 billion
in Canadian dollars and the issuance of Series US-7 Notes, with a
total principal amount of $750 million in U.S. dollars ($954 million
in Canadian dollars), partly offset by $3 million mainly related to
discounts on our debt issuances
• $700 million increase in securitized receivables
• $111 million issuance (net of repayments) of notes payable
2021
During 2021, we issued debt, net of repayments. This included:
• $4,985 million issuance of long-term debt comprised of the issuance
of Series US-3, Series US-4, Series US-5 and Series US-6 Notes, with
total principal amounts of $600 million, $500 million, $600 million
and $650 million in U.S. dollars, respectively ($747 million, $623 million,
$755 million and $818 million in Canadian dollars, respectively), and
the issuance of Series M-54, Series M-55 and Series M-56 MTN
debentures, with total principal amounts of $1 billion, $550 million
and $500 million in Canadian dollars, respectively, partly offset by
$8 million of discounts on our debt issuances
• $351 million issuance (net of repayments) of notes payable
Partly offset by:
• $2,023 million repayment of long-term debt comprised of the early
redemption of Series M-26 MTN debentures with a total principal
amount of $1 billion in Canadian dollars, and net payments of leases
and other debt of $1,023 million
Partly offset by:
• $2,751 million repayment of long-term debt comprised of the early
redemption of Series M-40 MTN debentures with a total principal
amount of $1,700 million in Canadian dollars and net payments of
leases and other debt of $1,051 million
• $150 million decrease in securitized receivables
Issuance of common shares
The issuance of common shares in 2022 decreased by $90 million, compared to 2021, mainly due to a lower number of exercised stock options.
Repurchase of preferred shares
In Q4 2022, BCE repurchased and canceled 584,300 First Preferred Shares for a total cost of $10 million.
Subsequent to year end, BCE repurchased and canceled 1,090,400 First Preferred Shares for a total cost of $20 million.
In Q1 2022, BCE redeemed its 4,600,000 issued and outstanding Cumulative Redeemable First Preferred Shares, Series AO for a total cost of
$115 million.
Cash dividends paid on common shares
In 2022, cash dividends paid on common shares of $3,312 million increased by $180 million, compared to 2021, due to a higher dividend paid in
2022 of $3.6350 per common share, compared to $3.4575 per common share in 2021.
6.4 Post-employment benefit plans
For the year ended December 31, 2022, we recorded an increase in
our post-employment benefit plans and a gain, before taxes, in OCI
of $566 million. This was due to a higher actual discount rate of 5.3%
at December 31, 2022, compared to 3.2% at December 31, 2021, partly
offset by a loss on plan assets, experience losses and an increase in
the effect of the asset limit.
For the year ended December 31, 2021, we recorded an increase in
our post-employment benefit plans and a gain, before taxes, in OCI of
$2,433 million. This was due to a higher-than-expected return on plan
assets in 2021 and a higher actual discount rate of 3.2% at December 31,
2021, compared to 2.6% at December 31, 2020.
75
2 MD&A Financial and capital management 6.5 Financial risk management
Management’s objectives are to protect BCE and its subsidiaries on a consolidated basis against material economic exposures and variability
of results from various financial risks, including credit risk, liquidity risk, foreign currency risk, interest rate risk, commodity price risk, equity
price risk and longevity risk. These risks are further described in Note 2, Significant accounting policies, Note 9, Other (expense) income, Note 27,
Post-employment benefit plans and Note 29, Financial and capital management in BCE’s 2022 consolidated financial statements.
The following table outlines our financial risks, how we manage these risks and their financial statement classification.
Financial risk
Description of risk
Credit risk
We are exposed to credit risk from
operating activities and certain
financing activities, the maximum
exposure of which is represented by
the carrying amounts reported in the
statements of financial position. We are
exposed to credit risk if counterparties
to our trade receivables, including
wireless device financing plan
receivables, and derivative instruments
are unable to meet their obligations.
Liquidity risk
We are exposed to liquidity risk for
financial liabilities.
Foreign
currency risk
We are exposed to foreign currency
risk related to anticipated purchases
and certain foreign currency debt.
A 10% depreciation (appreciation) in the
value of the Canadian dollar relative to
the U.S. dollar would result in a loss of
$10 million (loss of $17 million) recognized
in net earnings at December 31, 2022 and
a gain of $114 million (loss of $105 million)
recognized in OCI at December 31, 2022,
with all other variables held constant.
A 10% depreciation (appreciation) in the
value of the Canadian dollar relative to
the Philippine peso would result in a gain
(loss) of $4 million recognized in OCI at
December 31, 2022, with all other variables
held constant.
Refer to the following Fair value
section for details on our derivative
financial instruments.
Management of risk and financial statement classification
• Large and diverse customer base
• Deal with institutions with investment-grade credit ratings
• Regularly monitor our credit risk and credit exposure, and consider, among other factors,
the effects of rising interest rates and inflation
• Our trade receivables and allowance for doubtful accounts balances at December 31, 2022,
which both include the current portion of wireless device financing plan receivables, were
$4,102 million and $129 million, respectively
• Our non-current wireless device financing plan receivables and allowance for doubtful
accounts balances at December 31, 2022 were $386 million and $15 million, respectively
• Our contract assets balance at December 31, 2022 was $724 million, net of an allowance
for doubtful accounts balance of $19 million
• Our cash and cash equivalents, cash from operating activities, possible capital markets
financing, amounts available under our securitized receivables program and committed
bank facilities are expected to be sufficient to fund our operations and fulfill our obligations
as they become due
• Refer to section 6.7, Liquidity – Contractual obligations, for a maturity analysis of our
recognized financial liabilities
• At December 31, 2022, we had outstanding foreign currency forward contracts and options
maturing from 2023 to 2024 of $3.5 billion in U.S. dollars ($4.5 billion in Canadian dollars)
and ₱2.1 billion in Philippine pesos ($50 million in Canadian dollars), to manage foreign
currency risk related to anticipated purchases and certain foreign currency debt
• For cash flow hedges relating to anticipated purchases denominated in foreign currencies,
changes in the fair value are recognized in our statements of comprehensive income,
except for any ineffective portion, which is recognized in Other (expense) income in the
income statements. Realized gains and losses in Accumulated OCI are reclassified to the
income statements or to the initial cost of the non-financial asset in the same periods as
the corresponding hedged transactions are recognized.
• For cash flow hedges relating to our U.S. dollar debt under our commercial paper program,
securitization of receivables and committed credit facilities, changes in the fair value are
recognized in Other (expense) income in the income statements and offset the foreign
currency translation adjustment on the related debt, except for any portion of the hedging
relationship which is ineffective
• For economic hedges, changes in the fair value are recognized in Other (expense) income
in the income statements
• At December 31, 2022, we had outstanding cross currency interest rate swaps with notional
amounts of $4,250 million in U.S. dollars ($5,465 million in Canadian dollars) to hedge the
U.S. currency exposure of our U.S. Notes maturing from 2032 to 2052
• For these cross currency interest rate swaps, changes in the fair value of these derivatives
are recognized in our statements of comprehensive income, except for amounts recorded
in Other (expense) income in the income statements to offset the foreign currency
translation adjustment on the related debt and any portion of the hedging relationship
which is ineffective
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Financial and capital management Financial risk
Description of risk
Interest
rate risk
We are exposed to risk on the interest
rates of our debt, our post-employment
benefit plans and on dividend rate
resets on our preferred shares.
A 1% increase (decrease) in interest
rates would result in a loss of
$24 million (gain of $23 million)
recognized in net earnings at
December 31, 2022, with all other
variables held constant.
A 0.1% increase (decrease) in cross
currency basis swap rates would result
in a gain (loss) of $9 million recognized
in net earnings at December 31, 2022,
with all other variables held constant.
Refer to the following Fair value
section for details on our derivative
financial instruments.
Management of risk and financial statement classification
• We use interest rate swaps, cross currency basis rate swaps, cross currency interest rate
swaps, forward starting interest rate swaps and interest rate swaptions to hedge interest
rate exposure on existing and/or future debt issuances. We also use leveraged interest rate
options to economically hedge dividend rate resets on preferred shares.
• At December 31, 2022, we had outstanding interest rate swaps with a notional amount of
$500 million which will mature in 2027 and have been designated to hedge the fair value of
our Series M-53 MTN debentures
• For interest rate swaps, changes in the fair value of these derivatives and the related debt
are recognized in Other (expense) income in the income statements and offset each other,
except for any ineffective portion of the hedging relationship
• At December 31, 2022, we had outstanding cross currency basis rate swaps maturing
in 2023 with a notional amount of $638 million to hedge economically the basis rate
exposure on future debt issuances
• For these cross currency basis rate swaps, changes in the fair value of these derivatives
are recognized in the income statements in Other (expense) income
• At December 31, 2022, we had outstanding cross currency interest rate swaps with a
notional amount of $600 million in U.S. dollars ($748 million in Canadian dollars) to hedge
the interest exposure of our U.S. Notes maturing in 2024
• For these cross currency interest rate swaps, changes in the fair value of these derivatives
and the related debt are recognized in Other (expense) income in the income statements
and offset each other, except for any ineffective portion of the hedging relationship
• At December 31, 2022, we had outstanding leveraged interest rate options with a fair value
liability of $1 million to hedge economically the dividend rate resets on $582 million of our
preferred shares which had varying reset dates in 2021 for the periods ending in 2026
• For leveraged interest rate options, changes in the fair value of these derivatives are
recognized in the income statements in Other (expense) income
• For our post-employment benefit plans, the interest rate risk is managed using a liability
matching approach, which reduces the exposure of the DB plans to a mismatch between
investment growth and obligation growth
Equity price risk
We are exposed to risk on our cash flow
related to the settlement of equity settled
share-based payment plans.
• At December 31, 2022, we had outstanding equity forward contracts with a fair value
net liability of $48 million on BCE’s common shares to economically hedge the cash flow
exposure related to the settlement of equity settled share-based compensation plans
• Changes in the fair value of these derivatives are recorded in the income statements
in Other (expense) income for derivatives used to hedge equity settled share-based
payment plans
A 5% increase (decrease) in the
market price of BCE’s common
shares would result in a gain (loss) of
$33 million recognized in net earnings
at December 31, 2022, with all other
variables held constant.
Refer to the following Fair value
section for details on our derivative
financial instruments.
Commodity
price risk
We are exposed to risk on the purchase
cost of fuel.
• At December 31, 2022, there are no fuel swaps outstanding
• Changes in the fair value are recorded in the income statements in
Refer to the following Fair value
section for details on our derivative
financial instruments.
Other (expense) income
Longevity risk
We are exposed to life expectancy risk
on our post-employment benefit plans.
• The Bell Canada pension plan has an investment arrangement which hedges part of
its exposure to potential increases in longevity, which covers approximately $4 billion
of post-employment benefit obligations
77
2 MD&A Financial and capital management Fair value
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date.
Certain fair value estimates are affected by assumptions we make about
the amount and timing of future cash flows and discount rates, all of
which reflect varying degrees of risk. Income taxes and other expenses
that may be incurred on disposition of financial instruments are not
reflected in the fair values. As a result, the fair values may not be the
net amounts that would be realized if these instruments were settled.
The carrying values of our cash and cash equivalents, trade and
other receivables, dividends payable, trade payables and accruals,
compensation payable, interest payable, notes payable and loans
secured by receivables approximate fair value as they are short-term.
The carrying value of wireless device financing plan receivables
approximates fair value given that their average remaining duration is
short and the carrying value is reduced by an allowance for doubtful
accounts and an allowance for revenue adjustments.
The following table provides the fair value details of other financial instruments measured at amortized cost in the statements of financial position.
Classification
fair value methodology
Debt securities
and other debt
Debt due within one year
and long-term debt
Quoted market price of debt
December 31, 2022
December 5 , 202
Carrying
value
Fair
value
Carrying
value
fair
value
25,061
23,026
23,729
26,354
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
December 31, 2022
Publicly-traded and privately-held
investments (3)
Derivative financial instruments
Classification
Other non-current assets
Other current assets, trade
payables and other liabilities, other
non-current assets and liabilities
MLSE financial liability (4)
Trade payables and other liabilities
Other
Other non-current assets
and liabilities
December 31, 2021
Publicly-traded and privately-held
investments (3)
Derivative financial instruments
Other non-current assets
Other current assets, trade
payables and other liabilities, other
non-current assets and liabilities
MLSE financial liability (4)
Trade payables and other liabilities
Other
Other non-current assets
and liabilities
fair value
Carrying value of
asset (liability)
Quoted prices in
active markets for
identical assets
(level )
observable
market data
(level 2) (1)
non-observable
market inputs
(level 5) (2)
215
72
(149)
108
183
279
(149)
122
9
–
–
–
24
–
–
–
–
72
–
184
–
279
–
185
206
–
(149)
(76)
159
–
(149)
(63)
(1) Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates.
(2) Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our
level 3 financial instruments.
(3) Unrealized gains and losses are recorded in OCI in the statements of comprehensive income and are reclassified from Accumulated OCI to the deficit in the statements of financial position
when realized.
(4) Represents BCE’s obligation to repurchase the Master Trust Fund’s 9% interest in MLSE at a price not less than an agreed minimum price, should the Master Trust Fund exercise its put
option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other (expense) income in the income statements. Subsequent to year
end, BCE repurchased the Master Trust Fund’s interest for a cash consideration of $149 million.
76
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Financial and capital management 6.6 Credit ratings
Credit ratings generally address the ability of a company to repay
principal and pay interest on debt or dividends on issued and outstanding
preferred shares.
Our ability to raise financing depends on our ability to access the public
equity and debt capital markets as well as the bank credit market. Our
ability to access such markets and the cost and amount of funding
available partly depend on our assigned credit ratings at the time capital
is raised. Investment grade credit ratings usually mean that when we
borrow money, we qualify for lower interest rates than companies that
have ratings lower than investment grade. A ratings downgrade could
result in adverse consequences for our funding capacity or ability to
access the capital markets.
The following table provides BCE’s and Bell Canada’s credit ratings, which are considered investment grade, as at March 2, 2023 from DBRS,
Moody’s and S&P.
Key credit ratings
March 2, 2025
Commercial paper
Long-term debt
Subordinated long-term debt
Preferred shares
Bell Canada (1)
DBrS
Moody’s
S&p
R-2 (high)
P-2
A-1 (Low) (Canadian scale)
A-2 (Global scale)
BBB (high)
BBB (low)
DBrS
Pfd-3
Baa1
Baa2
BCE (1)
Moody’s
BBB+
BBB
S&p
–
P-2 (Low) (Canadian scale)
BBB- (Global scale)
(1) These credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency.
Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor.
Each credit rating should be evaluated independently of any other credit rating.
As of March 2, 2023, BCE’s and Bell Canada’s credit ratings have stable outlooks from DBRS, Moody’s and S&P.
6.7 Liquidity
This section contains forward-looking statements, including relating to the expectation that our available liquidity will, in 2023, be sufficient
to meet our cash requirements, our planned capital expenditures, our expected post-employment benefit plans funding, and our annualized
common share dividend. Refer to the section Caution regarding forward-looking statements at the beginning of this MD&A.
Available liquidity
Total available liquidity at December 31, 2022 was $3.5 billion, comprised
of $99 million in cash, $50 million in cash equivalents, $700 million
available under our securitized receivables program and $2.65 billion
available under our $3.5 billion committed revolving and expansion
credit facilities (given $849 million of commercial paper outstanding).
We expect that our available liquidity, 2023 estimated cash flows from
operations and capital markets financing will permit us to meet our cash
requirements in 2023 for capital expenditures, post-employment benefit
plans funding, dividend payments, the payment of contractual obligations,
maturing debt, ongoing operations and other cash requirements.
Should our 2023 cash requirements exceed our cash, cash equivalents,
cash generated from our operations, and funds raised under capital
markets financings and our securitized receivables program, we
would expect to cover such a shortfall by drawing under committed
credit facilities that are currently in place or through new facilities to
the extent available.
In 2023, our cash flows from operations, cash, cash equivalents,
capital markets financings, securitized receivables program and credit
facilities should give us flexibility in carrying out our plans for business
growth, including business acquisitions, as well as for the payment of
contingencies.
We continuously monitor our operations, capital markets and the
Canadian economy with the objective of maintaining adequate liquidity.
Securitization program
In 2022, we entered into a new securitization program which replaced
our previous securitized trade receivables program and now includes
wireless device financing plan receivables. As a result, the maximum
amount available under our securitization program increased from
$1.3 billion at December 31, 2021 to $2.3 billion at December 31, 2022.
77
2 MD&A Financial and capital management Similar to the previous program, the securitization program is recorded
as a floating rate revolving loan secured by certain receivables. We
continue to service trade receivables and wireless device financing plan
receivables under the securitization program, which matures in July 2025
unless previously terminated. The lenders’ interest in the collection of
these receivables ranks ahead of our interests, which means that we
are exposed to certain risks of default on the amounts securitized.
We have provided various credit enhancements in the form of
overcollateralization and subordination of our retained interests.
The lenders have no further claim on our other assets if customers do
not pay the amounts owed.
As of December 31, 2022, the balance of loans secured by receivables
was $1.2 billion in U.S. dollars ($1.6 billion in Canadian dollars) and
the total receivable balance collateralized under the program was
$3.4 billion. The foreign currency risk on these loans is managed using
foreign currency forward contracts. See section 6.5, Financial risk
management in this MD&A for additional details.
Credit facilities
The table below is a summary of our total bank credit facilities at December 31, 2022.
December 5 , 2022
Committed credit facilities
Unsecured revolving and expansion credit facilities (1) (2)
Unsecured non-revolving credit facilities (3)
Other
Total committed credit facilities
Total non-committed credit facilities
Total committed and non-committed credit facilities
Total
available
Drawn
Letters
of credit
Commercial paper
outstanding
Net
available
3,500
647
106
4,253
1,939
6,192
–
–
–
–
–
–
–
–
96
96
808
904
849
–
–
849
–
849
2,651
647
10
3,308
1,131
4,439
(1) Bell Canada’s $2.5 billion committed revolving credit facility expires in August 2027 and its $1 billion committed expansion credit facility expires in August 2025. In 2022, Bell Canada converted
its committed credit facilities into a sustainability-linked loan. The amendment introduces a borrowing cost that varies based on Bell’s performance of certain sustainability performance
targets.
(2) As of December 31, 2022, Bell Canada’s outstanding commercial paper included $627 million in U.S. dollars ($849 million in Canadian dollars). All of Bell Canada’s commercial paper
outstanding is included in Debt due within one year
(3) In 2022, Bell Canada entered into two 30-year senior unsecured non-revolving credit facilities in the aggregate principal amount of up to $647 million to partly fund the expansion of its
broadband networks as part of government subsidy programs.
Bell Canada may issue notes under its Canadian and U.S. commercial
paper programs up to the maximum aggregate principal amount of
$3 billion in either Canadian or U.S. currency provided that at no time
shall such maximum amount of notes exceed $3.5 billion in Canadian
currency, which equals the aggregate amount available under Bell
Canada’s committed supporting revolving and expansion credit facilities
as at December 31, 2022. The total amount of the net available committed
revolving and expansion credit facilities may be drawn at any time.
Some of our credit agreements require us to meet specific financial
ratios and to offer to repay and cancel the credit agreement upon a
change of control of BCE or Bell Canada. In addition, some of our debt
agreements require us to make an offer to repurchase certain series
of debt securities upon the occurrence of a change of control event as
defined in the relevant debt agreements. We are in compliance with all
conditions and restrictions under such agreements.
Cash requirements
Capital expenditures
In 2023, our planned capital spending will be focused on our strategic
imperatives, reflecting an appropriate level of investment in our networks
and services, including our historic accelerated capital expenditure
program for the rollout of Bell’s wireline fibre and wireless 5G networks.
Post-employment benefit plans funding
Our post-employment benefit plans include DB pension and DC pension
plans, as well as other post-employment benefits (OPEBs) plans. The
funding requirements of our post-employment benefit plans, resulting
from valuations of our plan assets and liabilities, depend on a number
of factors, including actual returns on post-employment benefit plan
assets, long-term interest rates, plan demographics, and applicable
regulations and actuarial standards. Actuarial valuations were last
performed for our significant post-employment benefit plans as at
December 31, 2021.
We expect to contribute approximately $50 million to our DB pension
plans in 2023, subject to actuarial valuations being completed in
mid-2023. We expect to contribute approximately $10 million to the DC
pension plans and to pay approximately $75 million to beneficiaries
under OPEB plans in 2023.
Dividend payments
In 2023, the cash dividends to be paid on BCE’s common shares are
expected to be higher than in 2022 as BCE’s annual common share
dividend increased by 5.2% to $3.87 per common share from $3.68 per
common share effective with the dividend payable on April 17, 2023. The
declaration of dividends is subject to the discretion of the BCE Board.
73
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Financial and capital management Contractual obligations
The following table is a summary of our contractual obligations at December 31, 2022 that are due in each of the next five years and thereafter.
At December 5 , 2022
Recognized financial liabilities
Long-term debt
Notes payable
Lease liabilities (1)
Loan secured by receivables
Interest payable on long-term debt, notes
payable and loan secured by receivables
Net payments (receipts) on cross currency
interest rate swaps
MLSE financial liability (2)
Commitments (off-balance sheet)
Commitments for property, plant
and equipment and intangible assets
Purchase obligations
Leases committed not yet commenced
2025
2026
2027
2026
2027
thereafter
total
2,103
2,174
1,582
1,724
16,863
25,196
750
869
1,111
1,588
1,100
36
149
–
923
–
931
(45)
–
–
561
–
877
5
–
2,015
1,392
1,052
602
14
458
21
443
16
–
515
–
825
4
–
516
560
16
–
320
–
787
4
–
216
276
17
–
1,932
–
869
5,362
1,588
9,833
14,353
(141)
–
(137)
149
949
955
96
6,140
3,294
180
Total
8,234
5,783
5,128
4,018
3,344
30,487
56,994
(1) Includes imputed interest of $960 million.
(2) Represents BCE’s obligation to repurchase the Master Trust Fund’s 9% interest in MLSE at a price not less than an agreed minimum price, should the Master Trust Fund exercise its put
option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other (expense) income in the income statements. Subsequent to year
end, BCE repurchased the Master Trust Fund’s interest for a cash consideration of $149 million.
Our commitments for property, plant and equipment and intangible
assets include program and feature film rights and investments to
expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service
and product contracts for operating expenditures and other purchase
obligations.
Our commitments for leases not yet commenced include real estate,
OOH advertising spaces and fibre use. These leases are non-cancellable.
Indemnifications and guarantees
(off-balance sheet)
As a regular part of our business, we enter into agreements that provide
for indemnifications and guarantees to counterparties in transactions
involving business dispositions, sales of assets, sales of services,
purchases and development of assets, securitization agreements and
leases. While some of the agreements specify a maximum potential
exposure, many do not specify a maximum amount or termination date.
We cannot reasonably estimate the maximum potential amount we
could be required to pay counterparties because of the nature of almost
all of these indemnifications and guarantees. As a result, we cannot
determine how they could affect our future liquidity, capital resources
or credit risk profile. We have not made any significant payments under
indemnifications or guarantees in the past.
6.8 Litigation
In the ordinary course of business, we become involved in various claims
and legal proceedings seeking monetary damages and other relief. In
particular, because of the nature of our consumer-facing business, we
are exposed to class actions pursuant to which substantial monetary
damages may be claimed. Due to the inherent risks and uncertainties
of the litigation process, we cannot predict the final outcome or timing
of claims and legal proceedings. Subject to the foregoing, and based on
information currently available and management’s assessment of the
merits of the claims and legal proceedings pending at March 2, 2023,
management believes that the ultimate resolution of these claims and
legal proceedings is unlikely to have a material and negative effect on
our financial statements or operations. We believe that we have strong
defences and we intend to vigorously defend our positions.
For a description of important legal proceedings pending at March 2,
2023, please see the section entitled Legal proceedings contained in
the BCE 2022 AIF.
74
2 MD&A Financial and capital management 7 Selected annual and quarterly information
7.1 Annual financial information
The following table shows selected consolidated financial data of BCE
for 2022, 2021 and 2020 based on the annual consolidated financial
statements, which are prepared in accordance with IFRS as issued
by the International Accounting Standards Board (IASB). We discuss
the factors that caused our results to vary over the past two years
throughout this MD&A.
The emergency measures put in place in Canada starting in March 2020
to combat the COVID-19 pandemic significantly disrupted retail and
commercial activities across most sectors of the economy and had
an adverse and pervasive impact on our financial and operating
performance throughout most of 2020. Consequently, this unfavourably
affected all three of our segments, with a more pronounced impact on
our Bell Wireless and Bell Media segments.
Our financial and operating performance saw a steady improvement
in 2021 despite the continued adverse impacts of the COVID-19 pandemic
experienced throughout the year, due to our strong operational execution
and the easing of government restrictions in the second half of the year.
It had been almost two years since the pandemic started affecting our
performance and BCE had since adapted many aspects of its business
to better operate in this environment. Additionally, compared to 2020,
the effects of the pandemic on our year-over-year performance were
considerably reduced, with Q2 2020 being the quarter most significantly
affected by the pandemic. The impacts of the COVID-19 pandemic,
although moderated, continued to unfavourably affect Bell Wireless
product and roaming revenues, Bell Media advertising revenues, as well
as Bell Wireline business market equipment revenues, due to reduced
commercial activity as a result of the government restrictions put in
place to combat the pandemic, particularly in the first half of 2021, and
the global supply chain challenges experienced in the second half of 2021.
In 2022, the unfavourable effects of the COVID-19 pandemic on our
financial and operating performance continued to moderate due to
our operational execution and the lifting of most of the government
restrictions during the year.
On June 1, 2020, BCE announced that it had entered into an agreement
to sell substantially all of its data centre operations in an all-cash
transaction valued at $1.04 billion. We presented amounts related
to the sale as discontinued operations in our consolidated income
statements and consolidated statements of cash flows. Property,
plant and equipment and intangible assets that were sold were no
longer depreciated or amortized effective June 1, 2020. In Q4 2020, we
completed the sale for proceeds of $933 million (net of debt and other
items) and recorded a gain on sale, net of taxes, of $211 million. The
capital gain as a result of the sale was mainly offset by the recognition
of previously unrecognized capital loss carry forwards.
In 2020, we recognized $452 million of impairment charges for our
English and French TV services as well as various radio markets within
our Bell Media segment. These charges included $291 million allocated
to indefinite-life intangible assets for broadcast licences, $146 million
allocated to finite-life intangible assets, mainly for program and feature
film rights, and $15 million to property, plant and equipment for network
and infrastructure and equipment.
30
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Selected annual and quarterly information Consolidated income statements
Operating revenues
Service
Product
Total operating revenues
Operating costs
Adjusted EBITDA
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net return (interest) on post-employment benefit obligations
Impairment of assets
Other (expense) income
Income taxes
Net earnings from continuing operations
Net earnings from discontinued operations
Net earnings
Net earnings from continuing operations attributable to:
Common shareholders
Preferred shareholders
Non-controlling interest
Net earnings from continuing operations
Net earnings attributable to:
Common shareholders
Preferred shareholders
Non-controlling interest
Net earnings
Net earnings per common share – basic and diluted
Continuing operations
Discontinued operations
Net earnings per common share – basic and diluted
Ratios
Adjusted EBITDA margin (%)
2022
202
2020
20,956
3,218
24,174
(13,975)
10,199
(94)
(3,660)
(1,063)
(1,146)
51
(279)
(115)
(967)
2,926
–
2,926
2,716
152
58
2,926
2,716
152
58
2,926
2.98
–
2.98
20,350
3,099
23,449
(13,556)
9,893
(209)
(3,627)
(982)
(1,082)
(20)
(197)
160
(1,044)
2,892
–
2,892
2,709
131
52
2,892
2,709
131
52
2,892
2.99
–
2.99
19,832
3,051
22,883
(13,276)
9,607
(116)
(3,475)
(929)
(1,110)
(46)
(472)
(194)
(792)
2,473
226
2,699
2,272
136
65
2,473
2,498
136
65
2,699
2.51
0.25
2.76
42.2%
42.2%
42.0%
3
2 MD&A Selected annual and quarterly information Consolidated statements of financial position
Property, plant and equipment
Total assets
Debt due within one year (including notes payable and loans secured by receivables)
Long-term debt
Total non-current liabilities
Equity attributable to BCE shareholders
Total equity
Consolidated statements of cash flows
Cash flows from operating activities
Cash flows used in investing activities
Capital expenditures
Business acquisitions
Business dispositions
Spectrum licences
Cash from discontinued operations
Cash flows used in financing activities
Issue of common shares
Increase (decrease) in notes payable
Increase (decrease) in securitized receivables
Issue of long-term debt
Repayment of long-term debt
Cash dividends paid on common shares
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to non-controlling interest
Free cash flow
Share information
Weighted average number of common shares (millions)
Common shares outstanding at end of year (millions)
Market capitalization (1)
Dividends declared per common share (dollars)
Dividends declared on common shares
Dividends declared on preferred shares
Closing market price per common share (dollars)
Total shareholder return
Ratios
Capital intensity (%)
Price to earnings ratio (times) (2)
Other data
Number of employees (thousands)
2022
202
2020
29,256
69,329
4,137
27,783
35,345
22,178
22,515
8,365
(5,517)
(5,133)
(429)
52
(3)
–
(2,988)
171
111
700
1,951
(2,023)
(3,312)
(136)
(39)
3,067
911.5
912.0
54,255
3.68
(3,356)
(152)
59.49
(4.2%)
21.2%
19.96
45
28,235
66,764
2,625
27,048
34,710
22,635
22,941
8,008
(7,018)
(4,852)
(12)
–
(2,082)
–
(925)
261
351
(150)
4,985
(2,751)
(3,132)
(125)
(86)
2,980
906.3
909.0
59,821
3.50
(3,175)
(131)
65.81
27.9%
20.7%
22.01
27,513
60,665
2,417
23,906
31,065
20,989
21,329
7,754
(3,540)
(4,202)
(65)
–
(86)
892
(4,135)
26
(1,641)
–
6,006
(5,003)
(2,975)
(132)
(53)
3,348
904.3
904.4
49,226
3.33
(3,011)
(136)
54.43
(4.1%)
18.4%
19.72
50
51
(1) BCE’s common share price at the end of the year multiplied by the number of common shares outstanding at the end of the year.
(2) Price to earnings ratio is defined as BCE’s common share price at the end of the year divided by EPS.
32
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Selected annual and quarterly information 7.2 Quarterly financial information
The following table shows selected BCE consolidated financial data by quarter for 2022 and 2021. This quarterly information is unaudited but has
been prepared on the same basis as the annual consolidated financial statements. We discuss the factors that caused our results to vary over
the past eight quarters throughout this MD&A. Refer to section 7.1, Annual Financial Information in this MD&A for a description of the impacts of
the COVID-19 pandemic on our financial results during 2022 and 2021.
Operating revenues
Service
Product
Total operating revenues
Adjusted EBITDA
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net return (interest) on post-employment
benefit plans
Impairment of assets
Other income (expense)
Income taxes
Net earnings
Net earnings attributable to common shareholders
Net earnings per common share – basic and diluted
Weighted average number of common shares
outstanding – basic (millions)
Other information
Cash flows from operating activities
Free cash flow
Capital expenditures
Fourth quarter highlights
operating revenues
Bell Wireless
Bell Wireline
Bell Media
Inter-segment eliminations
Total BCE operating revenues
Adjusted EBItDA
Bell Wireless
Bell Wireline
Bell Media
Total BCE adjusted EBITDA
Q4
5,353
1,086
6,439
2,437
(19)
(922)
(270)
2022
Q3
Q2
Q1
Q6
202
Q5
Q2
Q
5,193
831
6,024
2,588
(22)
(914)
(267)
5,233
628
5,861
2,590
(40)
(933)
(266)
5,177
673
5,850
2,584
(13)
(891)
(260)
5,243
966
6,209
2,430
(63)
(925)
(251)
5,099
737
5,836
2,558
(50)
(902)
(245)
5,040
658
5,698
2,476
(7)
(905)
(248)
4,968
738
5,706
2,429
(89)
(895)
(238)
(319)
(298)
(269)
(260)
(275)
(272)
(268)
(267)
13
(150)
19
(222)
567
528
0.58
13
(21)
(130)
(178)
771
715
0.78
7
(106)
(97)
(232)
654
596
0.66
18
(2)
93
(335)
934
877
0.96
(5)
(30)
26
(5)
–
35
(249)
(306)
658
625
0.69
813
757
0.83
(5)
(164)
91
(236)
734
685
0.76
(5)
(3)
8
(253)
687
642
0.71
912.0
911.9
911.9
910.1
908.8
906.9
905.0
904.5
2,056
376
1,996
642
2,597
1,333
(1,638)
(1,317)
(1,219)
1,716
716
(959)
1,743
229
1,774
566
2,499
1,245
1,992
940
(1,466)
(1,164)
(1,210)
(1,012)
Q4 2022
2,666
3,094
889
(210)
6,439
Q4 2022
990
1,318
129
2,437
Q6 202
2,475
3,079
849
(194)
6,209
$ change
% change
191
15
40
(16)
230
7.7%
0.5%
4.7%
(8.2%)
3.7%
Q6 202
$ change
% change
951
1,326
153
2,430
39
(8)
(24)
7
4.1%
(0.6%)
(15.7%)
0.3%
35
2 MD&A Selected annual and quarterly information Total operating revenues at BCE increased by 3.7% in Q4 2022,
compared to Q4 2021, driven by both higher product revenues of
$1,086 million, up 12.4% year over year and higher service revenues
of $5,353 million, up 2.1% year over year. The growth in operating
revenues was driven by increases across all three of our segments.
Wireless operating revenues grew by 7.7% year over year, attributable
to higher product revenues of 11.7%, as well as greater service revenues
of 5.8%. Bell Media operating revenues increased by 4.7% year over
year, driven by greater advertising and subscriber revenues. Bell
Wireline operating revenues grew by 0.5% in Q4 2022, over the same
period last year, due to greater product revenues of 17.2%, moderated
by lower service revenues of 0.3%.
BCE net earnings decreased by 13.8% in Q4 2022, compared to Q4 2021,
mainly due to higher impairment of assets, higher interest expense
and higher amortization, partly offset by lower severance, acquisition
and other costs, lower income taxes and higher net return on post-
employment benefit plans.
BCE’s adjusted EBITDA grew by 0.3% in Q4 2022, compared to the
same period last year, due to growth in Bell Wireless of 4.1%, partly
offset by declines in Bell Media of 15.7% and Bell Wireline of 0.6%. The
year-over-year increase in adjusted EBITDA reflected higher operating
revenues, partly offset by greater operating costs. Adjusted EBITDA
margin of 37.8% in Q4 2022 decreased by 1.3 pts over Q4 2021, driven by a
greater proportion of low-margin product sales in our total revenue base,
higher media programming costs, storm recovery costs, inflationary
cost pressures and increased wireless promotional offer intensity.
Bell Wireless operating revenues increased by 7.7% in Q4 2022,
compared to the same period last year, due to both higher service and
product revenues. Service revenues grew by 5.8% year over year, driven
by the continued growth in our mobile phone and connected device
subscriber bases, and greater roaming revenues due to increased
international travel resulting from the easing of COVID-19 global travel
restrictions, partly offset by subscriber mix and competitive pricing
pressures. Product revenues increased by 11.7% year over year, due to
higher contracted sales volumes, partly offset by greater promotional
intensity.
Bell Wireless adjusted EBITDA increased by 4.1% in Q4 2022, compared
to the same period in 2021, due to greater operating revenues, moderated
by higher operating costs. The increase in operating costs was primarily
due to higher cost of goods sold driven by the greater product sales,
increased network operating costs related to the ongoing deployment of
our mobile 5G network, greater payments to other carriers associated
with the increase in roaming revenues and higher labour cost, primarily
from customer service centres. Adjusted EBITDA margin of 37.1% in
Q4 2022, decreased by 1.3 pts, compared to the same period last year,
primarily driven by a greater proportion of low-margin product sales
in our total revenue base, and increased promotional offer intensity,
partly offset by the flow-through of the service revenue growth.
Bell Wireline operating revenues grew by 0.5% in Q4 2022, compared
to the same period last year, driven by higher product revenues of 17.2%,
due to the timing of sales to large business customers, along with an
improving year-over-year impact from global supply chain challenges.
This was partly offset by lower year-over-year service revenue of
0.3% due to higher acquisition, retention and bundle discounts on
residential services, ongoing voice and legacy data erosion, reduced
business solutions services revenue including the impact of the sale of
our wholly-owned subsidiary Createch on March 1, 2022, a declining
satellite TV subscriber base, as well as lower sales of international
wholesale long distance minutes. The decline in service revenue was
partly mitigated by greater retail Internet and IPTV subscriber bases,
the flow-through of residential rate increases, the acquisitions of
EBOX and other related companies in February 2022 and Distributel
in December 2022, as well as higher sales of maintenance contracts
on data equipment sold to business customers.
Bell Wireline adjusted EBITDA declined by 0.6% in Q4 2022, compared
to the same period last year, from higher operating costs, partly
offset by greater year-over-year operating revenues. The increase
in operating costs was mainly driven by higher product cost of goods
sold and maintenance contract costs associated with the higher
year-over-year revenues, along with greater storm recovery costs
and inflationary cost pressures primarily impacting labour and fuel
costs. This was partly offset by lower business solutions services costs,
reduced TV programming and content expenses and lower payments
to other carriers, driven by lower associated revenues, combined with
labour savings mainly reflecting workforce reductions. Adjusted EBITDA
margin of 42.6% in Q4 2022 decreased by 0.5 points over the same
period in 2021, due to an increased proportion of low-margin product
sales in our total revenue base, greater operating costs, and the impact
of lower year-over-year service revenue flow-through.
Bell Media operating revenues increased by 4.7% in Q4 2022, compared
to the same period last year, due to higher advertising and subscriber
revenues, including continued year-over-year growth in digital revenues
of 46%. Advertising revenues increased by 3.8% in Q4 2022, compared
to the same period last year, due to greater TV advertising revenues
from the broadcast of the FIFA World Cup Qatar 2022 and higher
OOH revenues due to the ongoing recovery from the effects of the
COVID-19 pandemic, partly offset by lower demand by advertisers
driven by the current economic uncertainty. Subscriber revenues grew
by 5.4% in Q4 2022, compared to the same period last year, primarily
from the continued growth in Crave and sports streaming direct-to-
consumer subscribers.
Bell Media adjusted EBITDA decreased by 15.7% in Q4 2022, compared
to the same period last year, as the higher operating costs more than
offset the increase in operating revenues. The year-over-year increase
in operating costs was mainly driven by higher sports programming
costs, primarily related to sports broadcast rights for FIFA World Cup
Qatar 2022, and from the return to regular sports broadcast schedules
and entertainment programming content deliveries, subsequent to
COVID-19-related delays in Q4 2021.
BCE capital expenditures of $1,638 million in Q4 2022 increased
by $172 million or 11.7%, compared to the same period last year. This
corresponded to a capital intensity ratio of 25.4%, up 1.8 pts over
Q4 2021. The increase in capital spending was driven by higher year-
over-year spending in our wireline and wireless segments of $110 million
and $35 million, respectively, mainly due to the ongoing deployment
of our wireline FTTP and wireless 5G networks. Bell Media capital
expenditures also increased year over year by $27 million, reflecting
greater investments to support the expansion of the distribution of
our OTT services.
36
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Selected annual and quarterly information BCE severance, acquisition and other costs of $19 million in Q4 2022
decreased by $44 million, compared to Q4 2021, mainly due to lower
severance costs related to involuntary and voluntary employee
terminations and lower acquisition and other costs.
partly offset by higher income on our equity investments due to a loss
recorded in Q4 2021 on BCE’s share of an obligation to repurchase at
fair value the minority interest in one of BCE’s joint ventures and higher
income on operations from our equity investments.
BCE depreciation of $922 million in Q4 2022 decreased by $3 million,
year over year, mainly due to lower accelerated depreciation of 4G
network elements as we transition to 5G, partly offset by a higher
asset base as we continued to invest in our broadband and wireless
networks as well as our IPTV services.
BCE amortization of $270 million in Q4 2022 increased by $19 million,
year over year, mainly due to a higher asset base.
BCE interest expense of $319 million in Q4 2022 increased by $44 million,
compared to Q4 2021, mainly due to higher average debt balances and
higher average interest rates, partly offset by higher capitalized interest.
BCE impairment of assets of $150 million in Q4 2022 is mainly due
to impairment charges for French TV channels within our Bell Media
segment as a result of a reduction in advertising demand in the industry
resulting from global economic uncertainties and unfavourable impacts
to assumptions for discount rates. These charges included $94 million
allocated to indefinite-life intangible assets for broadcast licences,
and $53 million to finite-life intangible assets for program and feature
film rights.
BCE other income of $19 million in Q4 2022 decreased by $7 million, year
over year, mainly due to lower net mark-to-market gains on derivatives
used to economically hedge equity settled share-based compensation
plans and higher losses on investments related to an obligation to
repurchase at fair value the minority interest in one of our subsidiaries,
Seasonality considerations
Some of our segments’ revenues and expenses vary slightly by season,
which may impact quarter-to-quarter financial results. Over the past
eight quarters, the COVID-19 pandemic has impacted our business. While
the unfavourable effects of the COVID-19 pandemic on our financial
and operating performance moderated in 2022, it is difficult to estimate
the impacts that the COVID-19 pandemic could have in the future on
our business or financial results due to uncertainties relating to the
severity and duration of the COVID-19 pandemic and possible further
resurgences in the number of COVID-19 cases, including as a result of the
potential emergence of other variants, and various potential outcomes.
Therefore, the typical seasonal variations described below may not fully
reflect the trends experienced during the COVID-19 pandemic, which
affected and continues to affect customer behaviour and spending, as
well as the way we operate our business. Accordingly, it is difficult at
this time to estimate the ultimate duration of the COVID-19 pandemic
or the extent of its impact on the seasonality trends that normally
characterize our business.
Bell Wireless operating results are influenced by the timing of new
mobile device launches and seasonal promotional periods, such as
back-to-school, Black Friday and the Christmas holiday period, as well
as the level of overall competitive intensity. Because of these seasonal
effects, subscriber additions and retention costs due to device upgrades
related to contract renewals are typically higher in the third and fourth
quarters. For ARPU, historically we have experienced seasonal sequential
increases in the second and third quarters, due to higher levels of usage
BCE income taxes of $222 million in Q4 2022 decreased by $27 million,
compared to Q4 2021, mainly as a result of lower taxable income.
BCE net earnings attributable to common shareholders of $528 million
in Q4 2022, or $0.58 per share, were lower than the $625 million, or
$0.69 per share, reported in Q4 2021. The year-over-year decrease
was mainly due to higher impairment of assets, higher interest
expense and higher amortization, partly offset by lower severance,
acquisition and other costs, lower income taxes and higher net return
on post-employment benefit plans. Adjusted net earnings decreased
to $654 million in Q4 2022, compared to $692 million in Q4 2021, and
adjusted EPS decreased to $0.71 from $0.76 in Q4 2021.
BCE cash flows from operating activities was $2,056 million in
Q4 2022 compared to $1,743 million in Q4 2021. The increase is mainly
attributed to higher cash from working capital due to timing of supplier
payments, lower contributions to post-employment benefit plans
due to a partial contribution holiday in 2022 and lower severance
and other costs paid, partly offset by higher interest paid and higher
income taxes paid.
BCE free cash flow generated in Q4 2022 was $376 million, compared
to $229 million in Q4 2021. The increase was mainly attributable to higher
cash flows from operating activities, excluding acquisition and other
costs paid, partly offset by higher capital expenditures.
and roaming in the spring and summer months, followed by historical
seasonal sequential declines in the fourth and first quarters. However,
this seasonal effect on ARPU has moderated, as unlimited voice and
data options have become more prevalent, resulting in less variability
in chargeable data usage.
Bell Wireline revenue tends to be higher in the fourth quarter because
of historically higher data and equipment product sales to business
customers. However, this may vary from year to year depending
on the strength of the economy and the presence of targeted sales
initiatives, which can influence customer spending. Home Phone, TV and
Internet subscriber activity is subject to modest seasonal fluctuations,
attributable largely to residential moves during the summer months
and the back-to-school period in the third quarter. Targeted marketing
efforts conducted during various times of the year to coincide with
special events or broad-based marketing campaigns also may have
an impact on overall wireline operating results.
Bell Media revenue and related expenses from TV and radio broad-
casting are largely derived from the sale of advertising, the demand for
which is affected by prevailing economic conditions as well as cyclical
and seasonal variations. Seasonal variations in TV are driven by the
strength of TV ratings, particularly during the fall programming season,
major sports league seasons and other special sporting events such as
the Olympic Games, National Hockey League (NHL) and NBA playoffs
and FIFA World Cup soccer, as well as fluctuations in consumer retail
activity during the year.
37
2 MD&A Selected annual and quarterly information 8 Regulatory environment
Introduction
8.1
This section describes certain legislation that governs our business and
provides highlights of recent regulatory initiatives and proceedings,
government consultations and government positions that affect
us, influence our business and may continue to affect our ability to
compete in the marketplace. Bell Canada and several of its direct and
indirect subsidiaries, including Bell Mobility, Bell ExpressVu Limited
Partnership (ExpressVu), Bell Media, NorthernTel, Limited Partnership
(NorthernTel), Télébec, Limited Partnership (Télébec), Group Maskatel
Québec LP (Maskatel), Distributel and Northwestel, are governed by the
Telecommunications Act, the Broadcasting Act, the Radiocommunication
Act and/or the Bell Canada Act. Our business is affected by regulations,
policies and decisions made by various regulatory agencies, including the
CRTC, a quasi-judicial agency of the Government of Canada responsible
for regulating Canada’s telecommunications and broadcasting industries,
and other federal government departments, in particular ISED and the
Competition Bureau.
In particular, the CRTC regulates the prices we can charge for retail
telecommunications services when it determines there is not enough
competition to protect the interests of consumers. The CRTC has
determined that competition is sufficient to grant forbearance from
retail price regulation under the Telecommunications Act for the vast
majority of our retail wireline and wireless telecommunications services.
The CRTC can also mandate the provision of access by competitors
to our wireline and wireless networks and the rates we can charge
8.2 Telecommunications Act
The Telecommunications Act governs telecommunications in Canada.
It defines the broad objectives of Canada’s telecommunications policy
and provides the Government of Canada with the power to give general
direction to the CRTC on any of its policy objectives. It applies to several
of the BCE group of companies and partnerships, including Bell Canada,
Bell Mobility, NorthernTel, Télébec, Maskatel, Distributel and Northwestel.
Under the Telecommunications Act, all facilities-based telecommuni-
cations service providers in Canada, known as telecommunications
common carriers (TCCs), must seek regulatory approval for all telecom-
munications services, unless the services are exempt or forborne from
regulation. Most retail services offered by the BCE group of companies
are forborne from retail regulation. The CRTC may exempt an entire
class of carriers from regulation under the Telecommunications Act if
the exemption meets the objectives of Canada’s telecommunications
policy. In addition, a few large TCCs, including those in the BCE group,
must also meet certain Canadian ownership requirements. BCE monitors
and periodically reports on the level of non-Canadian ownership of its
common shares.
them. Notably, it currently mandates wholesale high-speed access for
wireline broadband as well as domestic wireless roaming services and
is implementing a wholesale facilities-based mobile virtual network
operator (MVNO) access service. Lower mandated wholesale rates
or the imposition of unfavourable terms for mandated services could
undermine our incentives to invest in network improvements and
extensions, limit our flexibility, influence the market structure, improve the
business position of our competitors, limit network-based differentiation
of our services and negatively impact the financial performance of our
businesses. Our TV distribution and our TV and radio broadcasting
businesses are subject to the Broadcasting Act and are, for the most
part, not subject to retail price regulation.
Although most of our retail services are not price-regulated, government
agencies and departments such as the CRTC, ISED, Canadian Heritage
and the Competition Bureau continue to play a significant role in
regulatory matters such as establishing and modifying regulations for
mandatory access to networks, spectrum auctions, the imposition of
consumer-related codes of conduct, approval of acquisitions, broadcast
and spectrum licensing, foreign ownership requirements, privacy and
cybersecurity obligations, and control of copyright piracy. Adverse
decisions by governments or regulatory agencies, increasing regulation
or a lack of effective anti-piracy remedies could have negative financial,
operational, reputational or competitive consequences for our business.
New policy direction
On February 13, 2023, the Government of Canada adopted a new policy
direction to the CRTC in respect of telecommunications services. The
new policy direction replaces existing policy directions issued in 2006
and 2019. The new policy direction retains from the 2019 version that
the CRTC should consider how its decisions can promote competition,
affordability, consumer interests and innovation, and adds reference
to the importance of network resilience and reliability. It also directs the
CRTC to adhere to a list of principles of effective regulation, to maintain
or potentially expand its wholesale regimes for fixed Internet and mobile
wireless services, and to take certain steps to enhance and protect the
rights of consumers of telecommunications services. At this time, it is
unclear what impact, if any, the new policy direction could have on our
business and financial results, including our ability to continue to invest
at the same levels as we have in the past.
36
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Regulatory environment Review of mobile wireless services
On February 28, 2019, the CRTC launched its planned review of the
regulatory framework for mobile wireless services. The main issues in
the CRTC’s consultation included (i) competition in the retail market; (ii) the
current wholesale mobile wireless service regulatory framework, with a
focus on wholesale MVNO access; and (iii) the future of mobile wireless
services in Canada, with a focus on reducing barriers to infrastructure
deployment. On April 15, 2021, the CRTC released its decision, which
requires Bell Mobility, Rogers Communications Canada Inc. (Rogers
Canada), Telus Communications Inc. (Telus Communications) and
Saskatchewan Telecommunications (SaskTel) to provide MVNO access to
their networks to regional wireless carriers to allow them to operate as
MVNOs in ISED Tier 4 spectrum licence areas where they own spectrum.
The terms and conditions for MVNO access will be established in tariffs
to be approved by the CRTC. The rate for MVNO access will not be
subject to the CRTC tariff regime but instead is to be commercially
negotiated between the parties with final offer arbitration by the CRTC
as a recourse if negotiations fail. The CRTC indicated that the mandated
access service is intended to be a temporary measure and will, in the
absence of certain implementation delays, be phased out seven years
from the date tariffed terms and conditions are finalized. In the decision,
the CRTC has also required Bell Mobility, Rogers Canada and Telus
Communications to provide seamless handoffs as part of the CRTC’s
existing mandated domestic roaming service and has confirmed that
its mandatory roaming obligations apply to 5G. On July 14, 2021, Bell
Mobility, Rogers Canada, Telus Communications and SaskTel filed
proposed tariff terms and conditions for the mandated MVNO access
service and Bell Mobility, Rogers Canada and Telus Communications filed
proposed amendments to their mandated roaming tariffs to reflect the
CRTC’s determinations. On April 6, 2022, the CRTC issued a decision on
the mandated roaming tariffs in which it directed Bell Mobility, Rogers
Canada and Telus Communications to make specified changes to their
tariffs by April 21, 2022, for CRTC approval.
On October 19, 2022, the CRTC issued a decision in which it made certain
determinations regarding the terms and conditions of the proposed
MVNO tariffs previously filed by Bell Mobility, Rogers Canada, Telus
Communications and SaskTel, and directed them to file revised tariffs
reflecting these determinations within 30 days. In the decision, the
CRTC directed Bell Mobility, Rogers Canada, Telus Communications
and SaskTel to offer MVNO access service to regional carriers with a
home radio access network (RAN) and core network actively offering
mobile wireless services commercially to retail customers in Canada,
and confirmed that similar terms and conditions related to seamless
handoffs and 5G in the domestic roaming tariffs should apply to the
mandated MVNO tariffs. The CRTC required Bell Mobility, Rogers Canada,
Telus Communications and SaskTel to begin accepting requests for MVNO
access from regional wireless carriers from the date of the decision. Bell
Mobility is required to provide access to the mandated MVNO service
in all provinces (excluding Saskatchewan) and in the three territories.
It is unclear at this time what impact, if any, the measures set out in
this decision could have on our business and financial results, and our
ability to make investments at the same levels as we have in the past.
Mandated disaggregated wholesale
access to FTTP networks
On July 22, 2015, in Telecom Regulatory Policy CRTC 2015-326, the CRTC
mandated the introduction of a new disaggregated wholesale high-
speed access service, including over FTTP facilities. The first stage of its
implementation took place only in Ontario and Québec. This adverse
regulatory decision may impact the specific nature, magnitude, location
and timing of our future FTTP investment decisions. In particular, the
introduction by the CRTC of mandated wholesale services over FTTP
undermines the incentives for facilities-based digital infrastructure
providers to invest in next-generation wireline networks, particularly
in smaller communities and rural areas.
On August 29, 2017, in Telecom Order CRTC 2017-312, the CRTC set
interim rates for the new disaggregated wholesale high-speed access
service. The final rates remain to be determined. On June 11, 2020,
the CRTC launched a new proceeding (refer to Review of network
configuration for disaggregated wholesale access below) to reconsider
the network configuration of the disaggregated wholesale high-speed
access service it mandated in 2015 and suspended the finalization of
the interim rates and terms of tariff that were set in 2017 until further
notice. The mandating of final rates that are materially different from
the rates we proposed could further impact our investment strategy,
improve the business position of our competitors and adversely impact
our financial results.
CNOC’s application on retail FTTP
broadband services
On January 8, 2021, Canadian Network Operators Consortium Inc.
(CNOC) filed an application with the CRTC asking for an order mandating
Bell Canada and other large providers to sell retail FTTP broadband
services to ISPs, at a mandated discount off the retail price. ISPs would
then resell these services under their own brands. CNOC proposed
that this mandated access to retail FTTP services would last until the
CRTC completes its reviews of all current and near-term proceedings
related to wholesale high-speed services. The implementation of
CNOC’s proposal would undermine the incentives for facilities-based
digital infrastructure providers to invest in next-generation wireline
networks, particularly in smaller communities and rural areas, as well
as improve the business position of our competitors and adversely
impact our financial results.
Review of wholesale FTTN high-speed access
service rates
As part of its ongoing review of wholesale Internet rates, on October 6,
2016, the CRTC significantly reduced, on an interim basis, some of the
wholesale rates that Bell Canada and other major providers charge for
access by third-party Internet resellers to FTTN or cable networks, as
applicable. On August 15, 2019, the CRTC further reduced the wholesale
rates that Internet resellers pay to access network infrastructure built
by facilities-based providers like Bell Canada, with retroactive effect
to March 2016.
37
2 MD&A Regulatory environment The August 2019 decision was stayed, first by the Federal Court of Appeal
and then by the CRTC, with the result that it never came into effect. In
response to review and vary applications filed by each of Bell Canada,
five major cable carriers (Cogeco Communications Inc., Eastlink, Rogers
Canada, Shaw and Vidéotron Ltée) and Telus Communications, the CRTC
issued Decision 2021-182 on May 27, 2021, which mostly reinstated
the rates prevailing prior to August 2019 with some reductions to the
Bell Canada rates with retroactive effect to March 2016. As a result,
in the second quarter of 2021, we recorded a reduction in revenue of
$44 million in our consolidated income statements.
While there remains a requirement to refund monies to third-party
Internet resellers, the establishment of final wholesale rates that are
similar to those prevailing since 2019 reduces the impact of the CRTC’s
long-running review of wholesale Internet rates and ensures a better
climate for much-needed investment in advanced networks. The
largest reseller, TekSavvy Solutions Inc. (TekSavvy), obtained leave to
appeal the CRTC’s decision of May 27, 2021 before the Federal Court
of Appeal. The decision was also challenged in three petitions brought
by TekSavvy, CNOC and National Capital Freenet before Cabinet but,
on May 26, 2022, Cabinet announced it would not alter the decision.
Review of network configuration
for disaggregated wholesale access
On June 11, 2020, the CRTC launched a proceeding to reconsider the
network configuration of the disaggregated wholesale high-speed
access service mandated of Bell Canada and large cable carriers. The
consultation aims to adopt a model applicable to wholesale providers
across the country. It may also result in the adoption of a different level
of disaggregation for Bell Canada than had been mandated in 2015 as
discussed under Mandated disaggregated wholesale access to FTTP
networks above. The launch of this new consultation has suspended
the finalization of the rates of Bell Canada’s existing disaggregated
high-speed access service, which will remain at their current interim
level until further notice. Revisions that facilitate reseller access to
disaggregated wholesale access and/or the mandating of final rates
that are materially different from the rates Bell Canada has proposed
could undermine the incentives for facilities-based digital infrastructure
providers to invest in next-generation wireline networks, improve
the business position of resellers of high-speed access services and
adversely impact our financial results.
TekSavvy’s application regarding undue
preference in wholesale high-speed access
rates and services
On January 20, 2023, TekSavvy filed an application with the CRTC
in which it alleges that Rogers Canada and Bell Canada engaged in
undue preference in contravention of the Telecommunications Act.
Specifically, TekSavvy claimed that Rogers Canada and Bell Canada
entered into off-tariff agreements (OTAs) with Vidéotron Ltée and EBOX,
respectively. With respect to Bell Canada and EBOX, TekSavvy alleges
that Bell Canada provided EBOX with preferential wholesale high-speed
access rates and/or wholesale aggregated high-speed access over
FTTP, a service not available to other competitors. TekSavvy asked the
CRTC to commence an investigation into the alleged OTAs and to provide
interim relief, such as adopting the rates for wholesale aggregated high-
speed access set in its August 15, 2019 decision (which were largely
invalidated by the CRTC in Decision 2021-182, see Review of wholesale
FTTN high-speed access service rates above) or mandating wholesale
aggregated access to FTTP at retail-minus rates (which is similar to
CNOC’s pending application discussed under CNOC’s application on retail
FTTP broadband services above). We believe the application, at least in
regards to EBOX and Bell Canada, has no merit because it is based on
some factual assumptions which are not accurate. Nonetheless, it is
unclear what impact, if any, the results of the proceeding could have
on our business and financial results.
Review of the approach to rate setting
for wholesale telecommunications services
On April 24, 2020, the CRTC launched a proceeding to reconsider the
current approach used by the CRTC to set rates for mandated wholesale
telecommunications services. The proceeding aims to consider the
most appropriate methodology for ensuring that such rates are just
and reasonable and are established in an efficient manner. This may
result in the adoption of a new costing approach that substantially
differs from the current Phase II costing methodology. Phase II is a
prospective incremental costing methodology currently used by the
CRTC to determine rates for regulated wholesale services. If the current
Phase II costing methodology is revised or replaced, the impact of such
changes may result in more efficient and transparent rate setting,
or it may result in a rate-setting process that favours resellers and
undermines incentives for facilities-based investment. At this time, it
is unclear what impact, if any, the results of the proceeding could have
on our business and financial results.
Review of the CRTC’s regulatory framework
for Northwestel
On June 8, 2022, the CRTC launched the second phase of a proceeding
to review the regulatory framework for Northwestel and the state
of telecommunications services in Canada’s North. This proceeding
may result in modifications to the current regulatory framework for
Northwestel, including with respect to issues such as rates, wholesale
access and subsidies. Modifications to the current regulatory framework
may result in additional subsidies and rate flexibility for Northwestel,
which would encourage investment, or they may result in rate restrictions
or additional wholesale obligations, which would undermine incentives
for investment in the North. At this time, it is unclear what impact, if
any, the results of the proceeding could have on our business and
financial results.
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Regulatory environment CRTC review of access to poles
On February 15, 2023, the CRTC issued a decision which included a
number of determinations to facilitate access by third parties to poles
owned by Canadian carriers or poles to which Canadian carriers control
access. Among other directions, the CRTC’s decision: establishes new
timelines for each step in the pole access permitting process; reduces
the obligations of access seekers to pay costs for any pole repairs,
upgrades or replacements required to accommodate the addition of
the access seeker’s equipment; provides access seekers with greater
flexibility to carry out pole repairs and upgrades themselves; maintains
the circumstances under which pole owners may obtain priority access
to poles or reserve capacity for their future use on poles; and imposes
new notification and reporting obligations on pole owners. The decision
requires large ILECs to update their applicable tariffs to incorporate the
new determinations by April 3, 2023. We are analyzing the impacts of
the decision and assessing our operational and regulatory next steps.
Bill C-26, An Act Respecting Cyber Security
On June 14, 2022, the Government of Canada introduced Bill C-26, An Act
Respecting Cyber Security (ARCS). ARCS would enact the Critical Cyber
Systems Protection Act, which would establish a regulatory framework
requiring designated operators in the finance, telecommunications,
energy and transportation sectors to protect their critical cyber
systems. Also included in Bill C-26 are proposed changes to the
Telecommunications Act that would establish new authorities that would
enable the Government to take action to promote the security of the
Canadian telecommunications system, which could include measures
with respect to certain suppliers, such as Huawei and ZTE. If enacted, Bill
C-26 would give ISED additional order-making powers and establish
an enforcement regime under which the Minister responsible for ISED
could impose administrative monetary penalties, among other actions.
It is unclear at this time what impact the legislative changes could have
on our business and financial results.
Canada’s telecommunications foreign
ownership rules
Under the Telecommunications Act, there are no foreign investment
restrictions applicable to TCCs that have less than a 10% share of the total
Canadian telecommunications market as measured by annual revenues.
However, foreign investment in telecommunications companies can still
be refused by the government under the Investment Canada Act. The
absence of foreign ownership restrictions on such small or new entrant
TCCs could result in more foreign companies entering the Canadian
market, including by acquiring spectrum licences or Canadian TCCs.
8.3 Broadcasting Act
The Broadcasting Act outlines the broad objectives of Canada’s
broadcasting policy and assigns the regulation and supervision of
the broadcasting system to the CRTC. Key policy objectives of the
Broadcasting Act are to protect and strengthen the cultural, political,
social and economic fabric of Canada and to encourage the development
of Canadian expression.
Most broadcasting activities require a programming or distribution
licence from the CRTC. The CRTC may exempt broadcasting undertakings
from complying with certain licensing and regulatory requirements if
it is satisfied that non-compliance will not materially affect the imple-
mentation of Canadian broadcasting policy. A corporation must also
meet certain Canadian ownership and control requirements to obtain
a programming or distribution licence, and corporations must have
the CRTC’s approval before they can transfer effective control of a
broadcasting licensee.
Our TV distribution operations and our TV and radio broadcasting
operations are subject to the requirements of the Broadcasting Act, the
policies and decisions of the CRTC and their respective broadcasting
licences. Any changes in the Broadcasting Act, amendments to
regulations or the adoption of new ones, or amendments to licences,
could negatively affect our competitive position or the cost of providing
services.
Bill C-11, An Act to amend the Broadcasting Act
On February 2, 2022, the Government of Canada tabled Bill C-11, An Act
to amend the Broadcasting Act and to make related and consequential
amendments to other Acts. Key among the proposed amendments in Bill
C-11 is that foreign online broadcasting undertakings doing business in
Canada could be required to contribute to the Canadian broadcasting
system in a manner that the CRTC deems appropriate. The specifics
of such contribution would be determined through the CRTC’s public
consultation processes and enforced by way of conditions imposed by
the CRTC. Bill C-11 passed third reading in the House of Commons on
June 15, 2022 and it passed third reading in the Senate of Canada on
February 2, 2023. It will return to the House of Commons for review of
the changes from the Senate of Canada and will likely require further
review by the Senate of Canada if the House of Commons does not
accept all the changes the Senate of Canada has proposed before
receiving royal assent. Bill C-11 would result in the elimination of CRTC
Part II Licence Fees whereby the broadcasting industry pays an annual
tax of approximately $120 million per year. It is unknown when and if
Bill C-11 will receive royal assent, when and if any adopted reforms
would come into force, and whether the elimination of Part II Licence
Fees would be included in the final version of the Act. Therefore, the
impact that the legislative changes could have on our business and
financial results is unclear at this time.
34
2 MD&A Regulatory environment 8.4 Radiocommunication Act
ISED regulates the use of radio spectrum under the Radiocommu-
nication Act and Radiocommunication Regulations to ensure that
radiocommunication in Canada is developed and operated efficiently.
All companies wishing to operate radio apparatus in Canada must hold
a radio licence or spectrum licence to do so. The Radiocommunication
Regulations specify those persons (including corporations such as Bell
Canada and Bell Mobility) who are eligible to be issued radio licences
or spectrum licences.
Decision on 3800 MHz spectrum
licensing framework
On June 30, 2022, ISED released its decision on the technical, policy
and licensing framework to govern the auction and use of spectrum
licences in the 3800 MHz band. ISED will implement a cross-band
spectrum cap (with the 3500 MHz band) of 100 MHz. The auctioned
licences will have a 20-year term and licences will not be transferable
for the first five years of the licence term if the transfer results in
exceeding the cross-band spectrum cap. In addition, licensees will
be required to provide network coverage to a certain percentage
of the population at 5, 7, 10 and 20 years following licence issuance
depending on the licence area. Licensees with existing LTE networks
will be subject to additional deployment requirements based on their
existing LTE coverage. The auction is scheduled to begin October 24,
2023. It is unclear what impact the results of this decision could have
on our business and financial results.
Consultation on 26, 28 and 38 GHz (Millimeter
Wave) spectrum licensing framework
On June 6, 2022, ISED initiated a consultation seeking input regarding
a policy and licensing framework to govern the auction and use of
spectrum licences in the 26, 28 and 38 Gigahertz (GHz) (Millimeter Wave)
spectrum bands. The consultation paper seeks comments on the use
of a spectrum set-aside for certain auction bidders, or a spectrum
cap across the 26, 28 and 38 GHz spectrum bands. ISED proposes
that the auctioned licences will have a 10-year term and that there
will be limits on the extent of transferability of licences for the first five
years of the licence term. In addition, ISED proposes that licensees will
be required to deploy a certain number of sites in each licence area
at five and nine and a half years following licence issuance. ISED has
not yet indicated a specific date when the auction will take place. The
consultation paper also seeks comments on the transition process
for existing 38 GHz licensees from fixed to flexible use (i.e., mobile or
fixed use), as well as the limitations on the use of 38 GHz spectrum
by satellite earth stations. It is unclear what impact the results of this
consultation and future related processes could have on our business
and financial results.
8.5 Bell Canada Act
Among other things, the Bell Canada Act limits how Bell Canada voting shares and Bell Canada facilities may be sold or transferred. Specifically,
under the Bell Canada Act, the CRTC must approve any sale or other disposal of Bell Canada voting shares that are held by BCE, unless the sale
or disposal would result in BCE retaining at least 80% of all of the issued and outstanding voting shares of Bell Canada. Except in the ordinary
course of business, the sale or other disposal of facilities integral to Bell Canada’s telecommunications activities must also receive CRTC approval.
8.6 Other
Bill C-18, the Online News Act
On April 5, 2022, the Government of Canada tabled Bill C-18, An Act respecting online communications platforms that make news content
available to persons in Canada (the Online News Act). Bill C-18 would require digital news intermediaries, such as Google and Facebook, that
share news content produced by other news outlets to negotiate commercial arrangements with those outlets, compensating them for the
news content shared on digital platforms. The legislation, as currently drafted, would entitle Bell Media’s general news services, such as CTV
and Noovo, to compensation. Bill C-18 passed third reading through the House of Commons on December 14, 2022, and it is currently in second
reading before the Senate of Canada, after which it will be studied by the Standing Senate Committee on Transport and Communications before
returning to the Senate for third reading. It is unknown when and if Bill C-18 will receive royal assent, when and if any adopted reforms would
come into force, and the level of compensation that may be established under the Bill. Therefore, the impact that the legislative changes could
have on our business and financial results is unclear at this time.
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Regulatory environment 9 Business risks
A risk is the possibility that an event might happen in the future that could have a negative effect on our business, financial condition,
liquidity, financial results or reputation. The actual effect of any event could be materially different from what we currently anticipate.
The risks described in this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us
or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, liquidity, financial
results or reputation.
This section describes the principal business risks that could have a material adverse effect on our business, financial condition, liquidity,
financial results or reputation, and cause actual results or events to differ materially from our expectations expressed in, or implied by,
our forward-looking statements. Certain of these principal business risks have already been discussed in other sections of this MD&A,
and we refer the reader to those sections for a discussion of such risks. All of the risk discussions set out in the sections referred to in the
table below, as well as the risk discussion relating to general economic conditions, the COVID-19 pandemic and geopolitical events set out
in Section 3.3, Principal business risks, are incorporated by reference in this section 9.
Risks discussed in other sections of this MD&A
Section references
Competitive environment
Section 3.3, Principal business risks
Section 5, Business segment analysis (Competitive landscape and industry trends section
for each segment)
Regulatory environment
Section 3.3, Principal business risks
Section 8, Regulatory environment
Security management and data governance
Section 3.3, Principal business risks
Risks specifically relating to our Bell CTS
and Bell Media segments
Section 5, Business segment analysis (Principal business risks section for each segment)
The other principal business risks that could also have a material adverse effect on our business, financial condition, liquidity, financial results
or reputation are discussed below.
Technology/infrastructure transformation
Our products
Our customers
and services
and relationships
Our
networks
Our fi nancial
resources
The evolution and transformation of our networks, systems and
operations using next-generation technologies, while lowering our
cost structure, are essential to effective competition and customer
experience
Globalization, increased competition and ongoing technological advances
are driving customer expectations for faster market responses, improved
customer service, enhanced user experiences and cost-effective delivery.
Meeting these expectations requires the deployment of new service
and product technologies along with customer service tools that are
network-neutral and based on a more collaborative and integrated
development environment. The availability of improved networks and
software technologies further provides the foundation for better and
faster connections, which have in turn led to a significant growth in
IoT applications. Change can be difficult and may present unforeseen
obstacles that might impact successful execution, and this transition
is made more challenging by the complexity of our multi-product
environment, combined with the complexity of our network and IT
infrastructure. The failure to accurately assess the potential of new
technologies, or to invest and evolve in the appropriate direction in
an environment of changing business models, could have an adverse
impact on our business and financial results.
In particular, our network and IT evolution activities seek to use new
as well as evolving and developing technologies, including network
functions virtualization, software-defined networks, cloud technologies,
multi-edge computing, open source software, AI and machine learning.
They further seek to transform our networks and systems through
consolidation, virtualization and automation to achieve our objectives
of becoming more agile in our service delivery and operations, as
well as providing omni-channel capabilities for our customers. Our
evolution activities also focus on building next-generation converged
wireline and wireless networks leveraging smart-core technologies, to
enable competitive quality and customer experience at a competitive
cost structure amid rapidly growing capacity requirements. Alignment
across technology platforms, product and service development and
operations is increasingly critical to ensure appropriate trade-offs
and optimization of capital allocation. Failure to adopt best in class
technology practices in transforming our operations in order to enable
a truly customer-centric service experience may hinder our ability to
build customers’ trust in our innovation and technological capabilities
and our ability to compete on footprint, service experience and cost
structure. Any one or more of the above could have an adverse impact
on our business, financial results and reputation.
Customer retention and new customer acquisitions may be hindered
during our transformation activities if such transformation causes poor
service performance, which in turn may adversely affect our ability to
achieve operational and financial objectives. Failure to quickly maximize
adaptable infrastructures, processes and technologies to efficiently
respond to evolving customer patterns and behaviours and to leverage IP
and automation across many facets of our network, product and service
portfolio could inhibit a fully customer-centric approach. This could
reduce our ability to provide comprehensive self-serve convenience,
real-time provisioning, cost savings and flexibility in delivery and
consumption, leading to negative business and financial outcomes.
4
2 MD&A Business risks We further seek to expand our network footprint to enhance our value
proposition and meet customer needs while deploying technologies
to support growth. However, adverse regulatory or court decisions
may impact the specific nature, magnitude, location and timing of
investment decisions. In particular, the lowering of rates by the CRTC of
mandated wholesale services over FTTP, the imposition of unfavourable
terms or the adoption of unfavourable rates in arbitration processes
associated with the facilities-based MVNO access service the CRTC
is implementing, the potential for additional mandated access to our
networks, or the imposition of broader wholesale obligations on wireless
networks would undermine the incentives for facilities-based digital
infrastructure providers to invest in next-generation wireline and
wireless networks. Failure to continue investment in next-generation
capabilities in a disciplined, timely and strategic manner could limit
our ability to compete effectively and to achieve desired business
and financial results.
Other examples of risks affecting the achievement of our desired
technology/infrastructure transformation include the following:
• The current global economic uncertainty and the COVID-19 pandemic
may bring about further incremental costs, delays or unavailability of
equipment and materials, as well as unavailability of our employees,
or those of our suppliers or contractors, due to workforce reduction
initiatives, government actions, illness, or other restrictive measures,
which may impact our ability to expand our networks or to start,
advance or complete both currently planned network deployment
projects and other projects
• Challenges in hiring, retaining and developing technical and skilled
resources could adversely impact transformation activities
• We, and other telecommunications carriers upon which we rely to
provide services, must be able to purchase high-quality, reputable
network equipment and services from third-party suppliers on a
timely basis and at a reasonable cost
• Network construction and deployment on municipal or private property
requires the issuance of municipal or property owner consents,
respectively, for the installation of network equipment, which could
increase the cost of, and cause delays in, fibre and wireless rollouts
• Suboptimal capital deployment in network build, infrastructure and
process upgrades, and customer service improvements, could hinder
our ability to compete effectively
Customer experience
Our
networks
Our customers
and relationships
Our products
and services
• The successful deployment of WTTP and 5G mobile services could be
impacted by various factors affecting coverage and costs
• Higher demand for faster Internet speed and capacity, coupled with
governmental policies and initiatives, creates tensions around FTTP
and WTTP deployment in terms of geographic preference and pace
of rollout
• The increasing dependence on applications for content delivery, sales,
customer engagement and service experience drives the need for
new and scarce capabilities (sourced internally or externally), that
may not be available, as well as the need for associated operating
processes integrated into ongoing operations
• New products, services or applications could reduce demand for our
existing, more profitable service offerings or cause prices for those
services to decline, and could result in a shorter life cycle for existing
or developing technologies, which could increase depreciation and
amortization expense
• The decommissioning of legacy equipment could be challenged by
customer requirements to continue using older technologies as well
as inherent risks involved with transitioning to new systems
• As content consumption habits evolve and viewing options increase,
our ability to aggregate and distribute relevant content and our ability
to develop alternative delivery vehicles to compete in new markets
and increase customer engagement and revenue streams may be
hindered by the significant software development and network
investment required
• Successfully managing the development and deployment of relevant
product solutions on a timely basis to match the speed of adoption of
IoT in the areas of retail, business and government could be challenging
• Customers continue to expect improvements in customer service, new
functions and features, and reductions in the price charged to provide
those services. Our ability to provide such improvements increasingly
relies upon using a number of rapidly evolving technologies, including AI,
machine learning and “big data”. However, the use of such technologies
is being increasingly scrutinized by legislators and regulators. If we
cannot build market-leading competencies in the use of these emerging
technologies in a way that respects societal values, we may not be
able to continue to meet changing customer expectations and to
continue to grow our business.
Driving a positive customer experience in all aspects of our
engagement with customers is important to avoid brand degradation
and other adverse impacts on our business and financial performance
As the bar continues to be raised by customers’ evolving expectations of
service and value, failure to get ahead of such expectations and build a
more robust and consistent service experience at a fair value proposition
could hinder product and service differentiation and customer loyalty.
The foundation of effective customer service is the ability to deliver high-
quality, consistent and simple solutions to customers in an expeditious
manner and on mutually agreeable terms. However, complexity in our
operations resulting from multiple technology platforms, ordering and
billing systems, sales channels, marketing databases and a myriad of
rate plans, promotions, brands and product offerings, in the context
of a large customer base and a workforce that continuously requires
to be trained, monitored and replaced, may limit our ability to respond
quickly to market changes and reduce costs, and may lead to customer
confusion or billing, service or other errors, which could adversely affect
customer satisfaction, acquisition and retention. These challenges may
be exacerbated as services become more complex. Media attention
to customer complaints could also erode our brand and reputation
and adversely affect customer acquisition and retention. In addition,
the current global economic uncertainty and the COVID-19 pandemic
may bring about the unavailability of certain employees, or those of
our suppliers or contractors, due to workforce reduction initiatives,
government actions, illness or other restrictive measures, which could
negatively impact the rapidity of our response to customer demands
and the overall customer experience.
With the proliferation of connectivity services, apps and devices,
customers are accustomed to doing things when, how and where
they want through websites, self-serve options, web chat, call centres
and social media forums. These customer demands have intensified
in response to the COVID-19 pandemic and the resulting shift to online
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BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business risks transactions amid store closures, and we seek to provide the necessary
platforms for customers to research, interact, purchase and service.
Customers’ journey is increasingly completed on mobile devices,
requiring alignment of websites, customer support platforms and
marketing. Understanding the customer relationship as a whole in a
multi-product environment and delivering a simple, seamless experience
at a fair price is increasingly central to an evolving competitive dynamic.
While we introduced new services and tools, including self-managed
solutions, designed to accelerate our customer experience evolution, we
are unable to predict whether such services and tools will be sufficient
to meet customer expectations. Failure to develop true omni-channel
capabilities and improve our customer experience by digitizing and
developing a consistent, fast and on-demand end-to-end experience
before, during and after sales using new technologies such as AI and
machine learning, in parallel with our network evolution, could also
adversely affect our business, financial results, reputation and brand
value. Such development activities could further be challenged by
scarcity of skilled resources in the context of a tight labour market.
Customers’ perception of our products, services, brand and corporate
image is also important. Embracing topics that matter to the stakeholder
value proposition, such as increasing our focus on ESG topics and
on the reporting of same, adds an important layer to the customer
perception of our company and thus to the overall customer experience.
Failure to positively influence customer perceptions through effective
communication, including through our use of social media and other
communication media or otherwise, could adversely affect our business,
financial results, reputation and brand value.
People
Our
people
Our people are central to our success and attracting, developing
and retaining a diverse and talented team capable of furthering our
strategic imperatives is essential to driving a winning culture and
outstanding performance
Our business depends on the efforts, engagement and expertise of
our management and non-management employees and contractors,
who must be able to operate efficiently and safely based on their
responsibilities and the environment in which they are functioning.
Demand for highly skilled team members has recently intensified, as
retiring workers, limited immigration due to restrictions related to the
COVID-19 pandemic, and an increase in remote-work arrangements
allowing more global competition have created an even more competitive
marketplace. This emphasizes the importance of developing and
maintaining a comprehensive and inclusive human resources strategy
and employee value proposition to adequately compete for talent and
to identify and secure high-performing candidates for a broad range
of job functions, roles and responsibilities. In addition, an appropriately
skilled and diversified pool of talent is essential to support evolving
business priorities in the context of an ongoing business transformation
impacting job nature and skill sets. Failure to appropriately train, motivate,
remunerate or deploy employees on initiatives that further our strategic
imperatives, or to efficiently replace departing employees, could have
an adverse impact on our ability to attract and retain talent and drive
performance across the organization. Labour shortages could negatively
affect our ability to implement our strategic priorities, as well as sell
our products and services and more generally serve our customers.
Establishing a culture that drives inclusivity, employee engagement,
development and progression is essential to attract and retain talent.
In addition, employees are typically more engaged at work when their
value system aligns with their employer’s corporate values. Team
members and organizations that share values also share a bigger
purpose, and this match is critical to creating a long-lasting, successful
and motivating place to work. We seek to foster an inclusive, equitable
and accessible workplace where team members are valued, respected
and supported, reflecting the diversity of the communities we serve
and our desire to provide team members with the opportunity to
reach their full potential. We further endeavour to establish programs
and provide resources to support team members on a wide range of
topics, including mental health services and support. Failure to establish
robust programs to further these aspirations could adversely affect
our ability to attract and retain team members. Failure to sufficiently
address evolving employee expectations related to our culture and
value proposition could also adversely affect our ability to attract and
retain team members.
The COVID-19 pandemic introduced new, and amplified existing, people-
related risks. From the beginning of the COVID-19 pandemic, we
prioritized the health and safety of our team, including implementing
strict sanitation and safety procedures, accelerated remote work
arrangements, and providing enhanced access to workplace mental
health services. This led to the introduction of our Bell Workways program
to help team members and leaders in managing work, family and other
commitments by offering a new approach for our workplace that allows
flexibility for team members on how and where they work, depending
on their new designated role-based work profiles (remote, mobile or
full-time office). As we move forward with this approach, we must
nonetheless continue to manage health and safety concerns related
to the COVID-19 pandemic in relation to our regular daily activities. In
addition, flexible work models require a cultural shift and may bring
potential volatility, which could impact business activities. Should we fail
to establish an optimal post-pandemic work arrangement and develop
new leadership skills necessary in the context of a new hybrid model,
this could impair our ability to engage, motivate and retain employees,
impact productivity, increase the number of employees on disability
leave for mental health reasons, and introduce additional operational
risks or exacerbate our exposure to existing ones, which could impair
our ability to manage our business.
Other examples of people-related risks include the following:
• The increasing technical and operational complexity of our businesses
and the high demand in the market for skilled resources in strategic
areas create a challenging environment for hiring, retaining and
developing such skilled resources
• Failure to establish a complete and effective succession plan, including
preparation of internal talent and identification of potential external
candidates, where relevant, for senior executive and other key roles,
could impair our business until qualified replacements are found
• Ensuring the safety of our workforce operating in different
environments, including manholes, telephone poles, cell towers,
vehicles, foreign news bureaus and war zones, and/or in times of
pandemic, requires focus, effective processes and flexibility to avoid
injury, illness, service interruption, fines and reputational impact
• Potential deterioration in employee morale and engagement resulting
from staff reductions, cost reductions or reorganizations could
adversely affect our business and financial results
45
2 MD&A Business risks Challenges related to collective agreements could adversely affect
our business
Approximately 43% of BCE employees were represented by unions
and were covered by collective agreements at December 31, 2022.
The positive engagement of members of our team represented by
unions is contingent on negotiating collective agreements that deliver
competitive labour conditions and uninterrupted service, both of which
are critical to achieving our business objectives.
We cannot predict the outcome of collective agreement negotiations.
Renewal of collective agreements could result in higher labour costs
and be challenging in the context of a declining workload due to
transformation, a maturing footprint and improved efficiencies. If
during the bargaining process there were to be project delays and work
disruptions, including work stoppages or work slowdowns, this could
adversely affect service to our customers and, in turn, our customer
relationships and financial performance.
Operational performance
Our
networks
Our products
and services
Our fi nancial
resources
Our networks and IT systems are the foundation of high-quality
consistent services, which are critical to meeting service expectations
Our ability to provide high-quality and consistent wireless, wireline
and media services to customers in a complex and changing operating
environment is crucial for sustained success. Network capacity demands
for content offerings and other bandwidth-intensive applications on our
wireline and wireless networks have been growing at unprecedented
rates. Unexpected capacity pressures on our networks may negatively
affect our network performance and our ability to provide services. Stay-
at-home and work-from-home measures implemented by governments
and businesses during the COVID-19 pandemic have further impacted
the nature of our customers’ use of our networks, products and services.
This has created increased capacity pressure on certain areas of our
wireless, wireline and broadcast media networks in a short period of
time. As a result of taking various steps to maintain service continuity,
our networks have, in general, adequately sustained such increased
usage, but there can be no assurance that this will continue to be the
case. We may also need to incur significant capital expenditures in order
to provide additional capacity and reduce network congestion. Home
offices can be anywhere in the country and network performance
and/or reliability may vary depending on the location. The recent trend
for families to move from urban centres to less urbanized areas also
increases the need to develop and/or enhance our networks in areas
that were not previously served or that were underserved.
Customers and other stakeholders expect that we deliver reliable service
performance, enabled by our network and other infrastructure, as well
as the network and other infrastructure of third-party providers on
which we rely. Issues relating to network availability, speed, consistency
and traffic management on our more current as well as our legacy
networks could adversely affect our customers, including by preventing
the provisioning of critical services, and could have an adverse impact
on our business and financial performance. Furthermore, we may
need to manage the possibility of instability as we transition towards
converged wireline and wireless networks and newer technologies,
including software-defined networks leveraging open source software
and cloud services. Network failures and slowdowns, whether caused
by internal or external forces, human-caused error or threat, or external
events, could adversely affect our brand and reputation, subscriber
acquisition and retention as well as our financial results. While we invest
in the resiliency of our network and other infrastructure and establish
response strategies and business continuity protocols to seek to maintain
service consistency, there is no assurance that such investments and
protocols will be sufficient to prevent network failure or the failure
of other infrastructure, or a disruption in the delivery of our services.
In addition, we currently use a very large number of interconnected
internal and third-party operational and business support systems for
provisioning, networking, distribution, broadcast management, ordering,
billing and accounting, which may hinder our operational efficiency. If
we fail to implement, maintain or manage highly effective IT systems
supported by an effective governance and operating framework, this
may lead to inconsistent performance and dissatisfied customers,
which over time could result in higher churn.
Further examples of risks to operational performance that could impact
our reputation, business operations and financial performance include
the following:
• The current global economic uncertainty and the COVID-19 pandemic
may bring about further incremental costs, delays or unavailability of
equipment and materials, as well as unavailability of our employees
or those of our suppliers or contractors, due to workforce reduction
initiatives, government actions, illness, or other restrictive measures,
which may impact our ability to maintain or upgrade our networks
in order to accommodate increased network usage and to provide
the desired levels of customer service
• Failure to maintain required service delivery amid operational
challenges (including those related to flexible work models and the
availability of employees with the required skill set in the context of
a tight labour market) and a transformation of our infrastructure
and technology could adversely affect our brand, reputation and
financial results
• We may lose sales should we fail to maximize channel efficiencies,
which could adversely affect our financial results
• Corporate restructurings, system replacements and upgrades, process
redesigns, staff reductions and the integration of business acquisitions
may not deliver the benefits contemplated, or be completed when
expected, and could adversely impact our ongoing operations
• Failure to streamline our significant IT legacy system portfolio and
proactively improve operating performance could adversely affect
our business and financial results
• We may experience more service interruptions or outages due to
legacy infrastructure. In some cases, vendor support is no longer
available or legacy vendor operations have ceased.
• There may be a lack of replacement parts and competent and
cost-effective resources to perform the life cycle management and
upgrades necessary to maintain the operational status of legacy
networks and IT systems
• Climate change increases the probability of severe weather-related
events such as ice, snow and wind storms, wildfires, flooding, extended
heat waves, hurricanes, tornadoes and tsunamis, all of which could
impact network availability and performance and drive more repairs
of network equipment
46
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business risks Our operations and business continuity depend on how well we
protect, test, maintain, replace and upgrade our networks, IT systems,
equipment and other facilities
resources and result in significant remediation costs, which in turn could
have an adverse effect on our business and financial performance,
or impair our ability to keep existing subscribers or attract new ones.
Our operations, service performance, reputation, business continuity
and strategy depend on how well we and our contracted product and
service providers, as well as other telecommunications carriers on which
we rely to provide services, protect networks and IT systems, as well
as other infrastructure and facilities, from events such as information
security attacks, unauthorized access or entry, fire, natural disasters,
power loss, building cooling loss, acts of war or terrorism, sabotage,
vandalism, actions of neighbours and other events. Climate change,
especially in areas of greater environmental sensitivity, could heighten
the occurrence of certain of the above-mentioned risks. We must also
manage business continuity issues caused by internal forces, including
human error, human-caused threats and inefficiencies. Establishing
response strategies and business continuity protocols to maintain
service consistency if any disruptive event materializes is critical to the
achievement of effective customer service. Any of the above-mentioned
events, as well as the failure by us, or by other telecommunications
carriers on which we rely to provide services, to adequately complete
planned and sufficient testing, maintenance, replacement or upgrade of
our or their networks, equipment and other facilities, which is, among
other factors, dependent on our or their ability to purchase equipment
and services from third-party suppliers, could disrupt our operations
(including through disruptions such as network and other infrastructure
failures, billing errors or delays in customer service), require significant
In addition, the current global economic uncertainty and the
COVID-19 pandemic may bring about further incremental costs, delays
or unavailability of equipment and materials, as well as unavailability of
our employees or those of our suppliers or contractors, any of which
could impact our operations and business continuity strategies.
Satellites used to provide our satellite TV services are subject to
significant operational risks that could have an adverse effect on
our business and financial performance
Pursuant to a set of commercial arrangements between ExpressVu
and Telesat Canada (Telesat), we currently have satellites under
contract with Telesat. Telesat operates or directs the operation of these
satellites, which utilize highly complex technology and operate in the
harsh environment of space and are therefore subject to significant
operational risks while in orbit. These risks include in-orbit equipment
failures, malfunctions and other problems, commonly referred to as
anomalies, that could reduce the commercial usefulness of a satellite
used to provide our satellite TV services. Acts of war or terrorism,
magnetic, electrostatic or solar storms, or space debris or meteoroids
could also damage such satellites. Any loss, failure, manufacturing defect,
damage or destruction of these satellites, of our terrestrial broadcasting
infrastructure or of Telesat’s tracking, telemetry and control facilities
to operate the satellites could have an adverse effect on our business
and financial performance and could result in customers terminating
their subscriptions to our satellite TV service.
Vendor management/supply chain
Our
networks
Our customers
and relationships
Our products
and services
Our
environment
Our fi nancial
resources
We depend on third-party suppliers, outsourcers and consultants,
some of which are critical, to provide an uninterrupted supply of
the products and services we need, as well as comply with various
obligations
We depend on key third-party suppliers and outsourcers, over which we
have no operational or financial control, for products and services, some
of which are critical to our operations. If there are gaps in our vendor
selection, governance or oversight processes established to seek to
ensure full risk transparency at point of purchase and throughout the
relationship, including any contract renegotiations, there is the potential
for a breakdown in supply, which could impact our ability to make sales,
service customers and achieve our business and financial objectives.
In addition, any such gaps could result in suboptimal management of
our vendor base, increased costs and missed opportunities. Ongoing
relationships must further be adequately managed in order to address
existing and new operational and compliance requirements. Some
of our third-party suppliers and outsourcers are located in foreign
countries, which increases the potential for a breakdown in supply
due to the risks of operating in foreign jurisdictions with different laws,
geopolitical environments and cultures, as well as the potential for
localized natural disasters.
We may have to select different third-party suppliers for equipment or
other products and services, or different outsourcers, in order to meet
evolving internal company policies and guidelines as well as regulatory
requirements. Should we decide, or be required by a governmental
authority or otherwise, to terminate our relationship with an existing
supplier or outsourcer, this would decrease the number of available
suppliers or outsourcers and could result in significant increased costs,
as well as transitional, support, service, quality or continuity issues;
delay our ability to deploy new network and other technologies and
offer new products and services; and adversely affect our business
and financial results.
The use of third-party suppliers and the outsourcing of services generally
involve transfer of risks, and we must take appropriate steps to ensure
that our suppliers’ and outsourcers’ approach to risk management
is aligned with our own standards in order to maintain continuity of
supply and brand strength. Increased focus on supplier risks in areas
of security, data governance, responsible procurement and broader
ESG factors requires increased attention given that supplier actions
or omissions could have significant impacts on our business, financial
results, brand and reputation. Furthermore, cloud-based supplier
models have continued to evolve and grow and, while they offer many
potential benefits, cloud-based services can also change the level or
types of risks. Accordingly, our procurement and vendor management
practices must also continue to evolve to fully take into account the
potential risks of cloud-based services.
In addition, certain company initiatives rely heavily on professional
consulting services provided by third parties, and a failure of such
third-party services may not be reasonably evident until their work is
delivered or delayed. Difficulties in implementing remedial strategies
in respect of professional consulting services provided by third parties
that are not performed in a proper or timely fashion could result in
an adverse effect on our ability to comply with various obligations,
including applicable legal and accounting requirements.
47
2 MD&A Business risks Other examples of risks associated with third-party suppliers and
outsourcers include the following:
• We rely upon the successful implementation and execution of
business continuity plans by our product and service suppliers. To
the extent that such plans do not successfully mitigate the impacts
of the current global economic uncertainty, the COVID-19 pandemic,
geopolitical events or other events, and our suppliers or vendors
experience operational failures or inventory constraints, such failures or
constraints could result in, or amplify existing, supply chain disruptions
that could adversely affect our business. Incremental costs, delays or
unavailability of equipment, materials, products or services, as well
as unavailability of our suppliers’ or contractors’ employees, could
impact sales and execution of our strategic imperatives and adversely
affect our business and financial results.
• The current global economic uncertainty and recent geopolitical
events have given rise to inflationary pressures and sharp increases
in prices, which could put increased pressure on purchasing costs
• The insolvency of one or more of our suppliers could cause a breakdown
in supply and have an adverse effect on our operations, including
our ability to make sales or service customers, as well as on our
financial results
• Demand for products and services available from only a limited number
of suppliers, some of which dominate their global market, may lead to
decreased availability, increased costs or delays in the delivery of such
products and services, since suppliers may choose to favour global
competitors that are larger than we are and, accordingly, purchase
a larger volume of products and services. In addition, production
issues affecting any such suppliers, or other suppliers, could result in
decreased quantities or a total lack of supply of products or services.
Any of these events could adversely impact our ability to meet customer
commitments and demand.
• A suboptimal outsourcing model could result in the loss of key corporate
knowledge, reduced efficiency and effectiveness, and impede agile
delivery of new products or technology
• Cloud-based solutions may increase the risk of security and data
leakage exposure if security control protocols implemented by
our cloud-based partners or suppliers, or by us where we retain
responsibility for such protocols, are inadequate
• If existing suppliers do not have appropriate alternative cloud-based
products or services, our ability to complete desired migrations to
the cloud could be limited or delayed
• Failure to maintain strong discipline around vendor administration
(especially around initial account setup) may mask potential financial
or operational risks and complicate future problem resolutions
• If products and services important to our operations have manufac-
turing defects or do not comply with applicable government regulations
and standards (including product safety practices), our ability to sell
products and provide services on a timely basis may be negatively
impacted. We work with our suppliers to identify serious product
defects (including safety incidents) and develop appropriate remedial
strategies, which may include a recall of products. To the extent that a
supplier does not actively participate in, and/or bear primary financial
responsibility for, a recall of its products, our ability to perform such
recall programs at a reasonable cost and/or in a timely fashion may be
negatively impacted. Any of the events referred to above could have
an adverse effect on our business, reputation and financial results.
• Products (including software) and services supplied to us may contain
security issues including, but not limited to, latent security issues that
would not be apparent upon an inspection. Should we or a supplier
fail to correct a security issue in a timely fashion, there could be an
adverse effect on our business, reputation and financial results.
• We rely on other telecommunications carriers from time to time to
deliver services. Should these carriers fail to roll out new networks or
fail to upgrade existing networks, or should their networks be affected
by operational failures or service interruptions, such issues could
adversely affect our ability to provide services using such carriers’
networks and could, consequently, have an adverse effect on our
business, reputation and financial results.
• BCE depends on call centre and technical support services provided
by a number of external suppliers and outsourcers, some of which are
located in foreign countries. These vendors have access to customer
and internal BCE information necessary for the support services that
they provide. Information access and service delivery issues that
are not managed appropriately may have an adverse impact on our
business, reputation, the quality and speed of services provided to
customers, or our ability to address technical issues.
Reputation and ESG practices
Our
networks
Our customers
and relationships
Our products
and services
Our
environment
Our
people
Our ability to maintain positive customer relationships is significantly
influenced by our reputation
Many customers’ choice to purchase our products and services is
directly related to their perception of our company. Accordingly, our
ability to maintain positive customer relationships and acquire or retain
customers is significantly influenced by our reputation. The company
faces many sources of reputational risks, as discussed in this MD&A.
Should our perceived or actual outlook, plans, priorities or actions, or
those of our employees or suppliers, fail to align with stakeholders’
expectations, our reputation could be impacted, which could have an
adverse effect on our brand, our ability to retain or attract customers,
and more generally on our business, financial condition, liquidity and
financial results.
There is no assurance that we will succeed in meaningfully integrating
ESG considerations into our business strategy and operations to
generate a positive outcome for stakeholders
While we seek to understand the evolving ESG environment and
identify topics and activities that may expose us to ESG risks, there
is no assurance that we will succeed in meaningfully integrating ESG
considerations into our business strategy and operations to generate
positive outcomes for stakeholders. Good ESG practices are an important
measure of corporate performance and value creation. As such, we are
increasingly under scrutiny to address ESG matters of importance to our
stakeholders. A wide range of ESG topics have progressively become
important elements of corporate culture and embracing them reinforces
our value proposition to drive employee attraction and retention.
Customers now factor broader considerations into purchase decisions
and look for alignment of personal values with corporate behaviour.
46
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business risks Investors increasingly link investment decisions to the quality of ESG
practices and related disclosed metrics. Legal and regulatory pressures
have further intensified in the ESG sphere, including, without limitation,
in the areas of privacy, accessibility, data governance, climate change
and diversity. Accordingly, failure to integrate ESG considerations
into our governance activities and effectively manage ESG risks and
opportunities could harm our brand and reputation, and could lead to
negative business, financial, legal and regulatory consequences for
the company. Perceived misalignment of our actions with stakeholder
expectations could also harm our brand and reputation and lead to
further financial and other consequences. Finally, enhanced ESG-related
disclosures could increase the company’s exposure to claims for
misrepresentation in the primary or secondary market.
Failure to take appropriate actions to adapt to current and emerging
environmental impacts, including climate change, could have an
adverse effect on our business
We face risks related to environmental events, including climate-related
events, which could impact our operations, service performance,
reputation and business continuity, cost of insurance, and more generally
have an adverse effect on our business, financial performance and
reputation. In particular, climate change poses potential risks to our
business, our employees, our customers, our suppliers and outsourcers,
and the communities we operate in. Inadequate management of
environmental issues associated with our company and our business,
as well as our suppliers and other stakeholders, could also adversely
affect our business, financial condition, liquidity, financial results and
reputation given the implications for the company as well as various
stakeholders.
In alignment with the recommendations of the TCFD, we categorize
climate-related risks into physical and transition risks:
• Physical risks are associated with the physical impacts from a changing
climate and can either be event-driven (acute) or longer-term (chronic)
shifts in climate patterns. Global climate change could exacerbate
certain of the threats facing our business, including the frequency
and severity of weather-related events such as ice, snow and
wind storms, wildfires, flooding, extended heat waves, hurricanes,
tornadoes and tsunamis. These events could have a destructive
impact on our telecommunications network infrastructure, which
could affect our ability to deliver communications services that are
critical to our customers and society, and significantly increase the
cost of repairs. In addition, rising mean temperatures and extended
heat waves could increase the need for cooling or heating capacity in
our network infrastructure, thus increasing our energy consumption
and associated costs. In order to enhance our resiliency to these
increasing or decreasing temperatures, we may need to increase
our investments in our infrastructure, which would lead to increased
operational costs.
• Transition risks are associated with a transition to a lower-carbon
economy, which may include extensive regulatory, technology
and market changes to address mitigation and adaptation
requirements related to climate change. These risks may include
increased operational costs driven by the rising price of energy due
to carbon pricing regulations and the shifting supply and demand for
energy, increased operational costs related to e-waste treatment
programs and management systems, reputational risks related to
our management of climate-related issues as well as to our level of
disclosure related to such matters. There is also a reputational risk of
not demonstrating our proactive behaviour towards climate change,
which could affect customer perception and the cost and availability
of funding that has the potential to be increasingly tied to the quality
of our ESG practices and related disclosed metrics, all of which could
have negative financial outcomes.
Furthermore, climate-related events could also impact our suppliers,
which in turn could impact our business. Given that some of our third-
party suppliers and outsourcers are located in foreign countries,
localized natural disasters in such countries could further negatively
impact our business.
In addition, several areas of our operations raise other environmental
considerations, such as fuel storage, GHG emissions and energy
consumption reduction, waste management, disposal of hazardous
residual materials, and recovery and recycling of end-of-life electronic
products we sell or lease.
Our team members, customers, investors and governments expect that
we regard environmental protection as an integral part of doing business
and that we seek to minimize the negative environmental impacts of
our operations and create positive impacts where possible. Failure to
recognize and adequately respond to their evolving expectations, to
take action to reduce our negative impacts on the environment, to
achieve our environmental commitments and to effectively report on
environmental matters, could result in fines, and could harm our brand,
reputation and competitiveness, as well as lead to other negative
business, financial, legal and regulatory consequences for the company.
Pandemics, epidemics and other health risks, including health concerns
about radiofrequency emissions from wireless communications
devices and equipment, could have an adverse effect on our business
In addition to risks related to the COVID-19 pandemic, other pandemics,
epidemics and other health risks could occur, which could adversely
affect our ability to maintain operational networks and provide products
and services to our customers, as well as the ability of our suppliers to
provide us with products and services we need to operate our business.
Any such pandemics, epidemics and other health risks could also have
an adverse effect on the economy and financial markets resulting in
a declining level of retail and commercial activity, which could have a
negative impact on the demand for, and prices of, our products and
services.
Many studies have been performed or are ongoing to assess whether
mobile communications devices, such as smartphones, as well as
wireless networks and towers pose a potential health risk. While some
studies suggest links to certain conditions, others conclude there is no
established causation between mobile phone usage and adverse health
effects. The International Agency for Research on Cancer (IARC) of the
World Health Organization classified radiofrequency electromagnetic
fields from wireless phones as possibly carcinogenic to humans, but
also indicated that chance, bias or confounding could not be ruled out
with reasonable confidence. The IARC also called for additional research
into long-term heavy use of mobile phones.
ISED is responsible for approving radiofrequency equipment and
performing compliance assessments and has chosen Health Canada’s
Safety Code 6, which sets the limits for safe exposure to radiofrequency
emissions at home or at work, as its exposure standard. This code
also outlines safety requirements for the installation and operation of
devices that emit radiofrequency fields such as mobile communications
devices, Wi-Fi technologies and base station antennas. ISED has
made compliance to Safety Code 6 mandatory for all proponents and
operators of radio installations.
47
2 MD&A Business risks The following challenges, among others, could result from our business
being heavily dependent on radiofrequency technologies:
• We may face lawsuits relating to alleged adverse health effects on
customers, as well as relating to our marketing and disclosure practices
in connection therewith, and the likely outcome of such potential
lawsuits is unpredictable and could change over time
• Changes in scientific evidence and/or public perceptions could
lead to additional government regulations and costs for retrofitting
infrastructure and handsets to achieve compliance
• Public concerns could result in a slower deployment of, or in our inability
to deploy, infrastructure necessary to maintain and/or expand our
wireless network as required by market evolution
Any of these events could have an adverse effect on our business and
financial performance.
Various social issues, if not adequately managed, could have an
adverse effect on our business
Effective management of social risk is a component of good ESG
practices. Inadequate management of social issues associated with
our company and our business, as well as our suppliers and other
stakeholders, could adversely affect our business, financial condition,
liquidity, financial results and reputation. This may include social
issues discussed elsewhere in this MD&A such as DEIB, employees’
well-being, health and safety, responsible procurement, as well as
other social issues such as human rights, including Indigenous peoples’
rights, consultation and accommodation, and community acceptance
and engagement. Failure to sufficiently report on our management of
social issues and to achieve our social commitments could harm our
brand and reputation, and could lead to negative business, financial,
legal and regulatory consequences for the company.
There can be no assurance that our corporate governance practices
will be sufficient to prevent violations of legal and ethical standards
Our employees, officers, Board members, suppliers and other business
partners are expected to comply with applicable legal and ethical
standards including, without limitation, anti-bribery laws, as well as with
our governance policies and contractual obligations. Failure to comply
with such laws, policies, standards and contractual obligations could
expose us to litigation and significant fines and penalties, and result in
reputational harm or being disqualified from bidding on contracts. While
we have developed and implemented strong corporate governance
practices, including through our Code of Business Conduct which is
updated regularly and subject to an annual review by our team members,
there can be no assurance that such practices and measures will be
sufficient to prevent violations of legal and ethical standards. Any
such failure or violation could have an adverse effect on our business,
financial performance and reputation.
Various factors could negatively impact our ability to achieve our
ESG targets
We have set a number of ambitious ESG targets to monitor our ESG
performance and align to our strategic imperatives. However, our
ability to achieve these targets depends on many factors and is subject
to many risks that could cause our assumptions or estimates to be
inaccurate and cause actual results or events to differ materially from
those expressed in, or implied by, these targets. Failure to sufficiently
address evolving employee, customer, investor and other stakeholder
expectations through achievement of our ESG targets could harm our
brand, reputation and competitiveness, as well as lead to other negative
business, financial, legal and regulatory consequences for the company.
Important risk factors that could affect certain of our key ESG targets
are set out below.
GHG emissions reduction and supplier engagement targets
Our GHG emissions reduction targets rely in large part on our ability
to implement sufficient corporate and business initiatives in order
to reduce GHG emissions to the desired levels as reflected in such
targets. Failure to implement such initiatives according to planned
schedules due to changes in business plans, our inability to implement
requisite operational or technological changes, unavailability of capital,
technologies or employees, cost allocations, actual costs exceeding
anticipated costs, or other factors, or the failure of such initiatives,
including of new technologies, to generate anticipated GHG emissions
reductions, could negatively affect our ability to achieve our GHG
emissions reduction targets. In addition, future corporate initiatives,
such as business acquisitions and organic growth, could negatively
affect our ability to achieve our targets, as would the adoption of
new technologies that are carbon enablers or do not generate the
anticipated energy savings.
The achievement of our target to be carbon neutral for our operational
GHG emissions starting in 2025 and of our SBTs may require that we
purchase carbon credits and/or renewable energy certificates, as
applicable. Should a sufficient quantity of credible credits or certificates
be unavailable, should their cost of acquisition be considered too
onerous, or should regulations, applicable standards, public perception
or other factors limit the number of credits or certificates that we can
purchase, the achievement of our GHG emission reduction targets
could be negatively impacted.
A refinement in or modifications to international standards or to the
methodology we use for the calculation of GHG emissions that would
result in an increase in our GHG emissions could further impact our ability
to achieve our targets. In addition, as it relates to our SBTs specifically,
the SBTi requires the recalculation of our targets upon the occurrence
of certain events, such as business acquisitions or divestitures, or to
conform to evolving SBTi methodology or standards. A recalculation
resulting in the introduction of more ambitious targets could challenge
our ability to achieve such updated targets.
The achievement of our SBTs relating to purchased goods and services
could be negatively impacted should we fail to achieve the required
level of engagement from our suppliers over which we have no control,
despite the engagement measures that we may implement, or should
we change significantly the allocation of our spend by supplier.
In addition, we have much less control over the reduction of our scope
3 GHG emissions than over our scope 1 and scope 2 GHG emissions given
that we must rely on the engagement and collaboration of our suppliers
and partners in reducing their own GHG emissions. Accordingly, failure
to obtain our suppliers’ and partners’ engagement and collaboration
could adversely affect our ability to meet our scope 3 GHG emissions
reduction target.
DEIB targets
Failure to attract and retain a certain level of diverse talent across
the organization could negatively affect our ability to meet our DEIB
targets and objectives. In addition, our ability to achieve such targets
and objectives could also be challenged by reduced labour market
availability or restricted access to a diverse talent pool.
43
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business risks Financial management
Our
networks
Our products
and services
Our fi nancial
resources
If we are unable to raise the capital we need or generate sufficient
cash flows from operating activities, we may need to limit our capital
expenditures or our investments in new businesses, or try to raise
capital by disposing of assets
Our ability to meet our cash requirements, fund capital expenditures
and provide for planned growth depends on having access to adequate
sources of capital and on our ability to generate cash flows from
operating activities, which is subject to various risks, including those
described in this MD&A.
Our ability to raise financing depends on our ability to access the
public equity and debt capital markets, the money market, as well as
the bank credit market. Our ability to access such markets and the cost
and amount of funding available depend largely on prevailing market
conditions and the outlook for our business and credit ratings at the
time capital is raised.
Risk factors such as capital market disruptions, political, economic and
financial market instability in Canada or abroad, government policies,
central bank monetary policies, increasing interest rates, changes
to bank capitalization or other regulations, reduced bank lending in
general or fewer banks as a result of reduced activity or consolidation,
could reduce capital available or increase the cost of such capital. In
addition, an increased level of debt borrowings could result in lower
credit ratings, increased borrowing costs and a reduction in the amount
of funding available to us, including through equity offerings. Business
acquisitions and our acquisition of wireless spectrum licences could
also adversely affect our outlook and credit ratings and have similar
adverse consequences. There is no assurance that we will maintain
our current credit ratings and a ratings downgrade could result in
adverse consequences for our funding capacity or our ability to access
the capital markets. In addition, participants in the public capital and
bank credit markets have internal policies limiting their ability to invest
in, or extend credit to, any single entity or entity group or a particular
industry. Finally, with increasing emphasis by the capital markets on
ESG performance and reporting, there is a potential for the cost and
availability of funding to be increasingly tied to the quality of our ESG
practices and related disclosed metrics.
Our bank credit facilities, including credit facilities supporting our
commercial paper program, are provided by various financial institutions.
While it is our intention to renew certain of such credit facilities from time
to time, there are no assurances that these facilities will be renewed
on favourable terms or in similar amounts.
Global financial markets have experienced, and could again experience,
significant volatility and weakness as a result of market disruptions,
such as the COVID-19 pandemic and geopolitical events. The current
global economic uncertainty could continue to negatively impact equity
and debt capital markets, cause interest rate and currency volatility
and movements, and adversely affect our ability to raise financing
in the public capital, bank credit and/or commercial paper markets
as well as the cost thereof. Additionally, the negative impact of the
global economic uncertainty and potential recession, higher inflation
and higher interest rates on our customers’ financial condition could
adversely affect our ability to recover payment of receivables from
customers and lead to further increases in bad debts, thereby negatively
affecting our revenues and cash flows, as well as our position under
our securitized receivables program.
Differences between BCE’s actual or anticipated financial results and the
published expectations of financial analysts, as well as events affecting
our business or operating environment, may contribute to volatility in
BCE’s securities. A major decline in the capital markets in general, or an
adjustment in the market price or trading volumes of BCE’s securities,
may negatively affect our ability to raise debt or equity capital, retain
senior executives and other key employees, make strategic acquisitions
or enter into joint ventures.
If we cannot access the capital we need or generate cash flows to
implement our business plan or meet our financial obligations on
acceptable terms, we may have to limit our ongoing capital expenditures
and our investment in new businesses or try to raise additional capital
by selling or otherwise disposing of assets. Any of these could have
an adverse effect on our cash flows from operating activities and on
our growth prospects.
We cannot guarantee that dividends will be increased or declared
Increases in the BCE common share dividend and the declaration of
dividends on any of BCE’s outstanding shares are subject to the discretion
of the BCE Board and, consequently, there can be no guarantee that
the dividend on common shares will be increased or that dividends
will be declared. Dividend increases and the declaration of dividends
by the BCE Board are ultimately dependent on BCE’s operations and
financial results which are, in turn, subject to various assumptions and
risks, including those set out in this MD&A.
We are exposed to various credit, liquidity and market risks
Our exposure to credit, liquidity and market risks, including equity price,
interest rate and currency fluctuations, is discussed in section 6.5,
Financial risk management of this MD&A and in Note 29 to BCE’s 2022
consolidated financial statements.
Our failure to identify and manage our exposure to changes in interest
rates, foreign exchange rates, BCE’s share price and other market
conditions could lead to missed opportunities, increased costs, reduced
profit margins, cash flow shortages, inability to complete planned
capital expenditures, reputational damage, equity and debt securities
devaluations, and challenges in raising capital on market-competitive
terms.
The failure to reduce costs as well as unexpected increases in costs
could adversely affect our ability to achieve our strategic imperatives
and financial guidance
Our objectives for targeted cost reductions continue to be aggressive
but there is no assurance that we will be successful in reducing costs.
Examples of risks to our ability to reduce costs or limit potential cost
increases include the following:
• Increased inflation could continue to result in higher input costs for
equipment, products and services, and create increased pressure for
wage increases
• Increased costs related to the COVID-19 pandemic and geopolitical
events could continue for an undetermined period of time
• Increased interest rates could continue to negatively impact our cost
of financing
• Our cost reduction objectives require aggressive negotiations with
our suppliers and there can be no assurance that such negotiations
will be successful or that replacement products or services provided
will not lead to operational issues
44
2 MD&A Business risks • As suppliers continue to shorten software life cycles, the cost of seeking
to maintain adequate information security increases
• Achieving timely cost reductions while moving to an IP-based network
is dependent on disciplined network decommissioning, which can
be delayed by customer contractual commitments, regulatory
considerations and other unforeseen obstacles
• Failure to contain growing operational costs related to network sites,
network performance and resiliency, footprint expansion, spectrum
licences, insurance and content and equipment acquisition could have
a negative effect on our financial performance
• In addition to the current global economic uncertainty and recent
geopolitical events, which have given rise to sharp increases in energy
prices, fluctuations in energy prices are further partly influenced
by government policies to address climate change such as carbon
pricing which, combined with growing data demand that increases
our energy requirements, could increase our energy costs beyond
our current expectations
• Failure to successfully deliver on our contractual commitments, whether
due to security events, operational challenges or other reasons, may
result in financial penalties and loss of revenues
The failure to evolve practices to effectively monitor and control
fraudulent activities could result in financial loss and brand
degradation
As a public company with a range of desirable and valuable products
and services and a large number of employees, BCE requires a
disciplined program covering governance, exposure identification
and assessment, prevention, detection and reporting that considers
corruption, misappropriation of assets and intentional manipulation of
financial statements by employees and/or external parties. The current
global economic uncertainty could further result in increased fraud
activities, which could result in financial loss and brand degradation.
Specific examples relevant to us include:
• Copyright theft and other forms of unauthorized use that undermine
the exclusivity of Bell Media’s content offerings, which could divert
users to unlicensed or otherwise illegitimate platforms, thus impacting
our ability to derive distribution and advertising revenues
• Subscription fraud on accounts established with a false identity or
paid with a stolen credit card
• Fraudulent (unauthorized) access to, and manipulation of, customer
accounts, including through sim-swap and port out fraud
• Network usage fraud such as call/sell operations using our wireline
or wireless networks
• Ongoing efforts to steal the services of TV distributors, including Bell
Canada and ExpressVu, through compromise or circumvention of
signal security systems, causing revenue loss
Income and commodity tax amounts may materially differ from the
expected amounts
Our complex business operations are subject to various tax laws. The
adoption of new tax laws, or regulations or rules thereunder, or changes
thereto or in the interpretation thereof, could result in higher tax rates,
new taxes or other adverse tax implications. In addition, while we believe
that we have adequately provided for all income and commodity taxes
based on all of the information that is currently available, the calculation
of income taxes and the applicability of commodity taxes in many cases
require significant judgment in interpreting tax rules and regulations. Our
tax filings are subject to government audits that could result in material
changes to the amount of current and deferred income tax assets and
liabilities and other liabilities and could, in certain circumstances, result
in an assessment of interest and penalties.
A number of factors could impact our financial statements and
estimates
We base our estimates on a number of factors, including but not limited
to historical experience, current events such as the effects of the
COVID-19 pandemic, economic and financial market conditions such
as higher interest rates and inflation, supply chain disruptions and
the increasing risk of recession, and actions that the company may
undertake in the future, as well as other assumptions that we believe are
reasonable under the circumstances. A change in these assumptions
may have an impact on our financial statements including but not limited
to impairment testing, fair value determination, expected credit losses
and discount rates used for the present value of cash flows. By their
nature, these estimates and judgments are subject to measurement
uncertainty and actual results could differ.
The economic environment, pension rules or ineffective governance
could have an adverse effect on our pension obligations, and we
may be required to increase contributions to our post-employment
benefit plans
With a large pension plan membership and DB pension plans that
are subject to the pressures of the global economic environment
and changing regulatory and reporting requirements, our pension
obligations are exposed to potential volatility. Failure to recognize and
manage economic exposure and pension rule changes, or to ensure
that effective governance is in place for the management and funding
of pension plan assets and obligations, could have an adverse impact
on our liquidity and financial performance.
The funding requirements of our post-employment benefit plans, based
on valuations of plan assets and obligations, depend on a number of
factors, including actual returns on post-employment benefit plan
assets, long-term interest rates, plan demographics, and applicable
regulations and actuarial standards. Changes in these factors, including
changes caused by the current global economic uncertainty, the
COVID-19 pandemic and recent geopolitical events, could cause future
contributions to significantly differ from our current estimates, require
us to increase contributions to our post-employment benefit plans in
the future and, therefore, have a negative effect on our liquidity and
financial performance.
There is no assurance that the assets of our post-employment benefit
plans will earn their assumed rate of return. A substantial portion of our
post-employment benefit plans’ assets is invested in public and private
equity and debt securities. As a result, the ability of our post-employment
benefit plans’ assets to earn the rate of return that we have assumed
depends significantly on the performance of capital markets. Market
conditions also impact the discount rate used to calculate our pension
plan solvency obligations and could therefore also significantly affect
our cash funding requirements.
00
BCE InC. AnnuAl fInAnCIAl rEport 2022
2 MD&A Business risks 10 Accounting policies
This section discusses key estimates and assumptions that management has made and how they affect the amounts reported in the
financial statements and notes. It also describes key changes in accounting standards and our accounting policies, and how they affect
our financial statements.
We have prepared our consolidated financial statements using IFRS. Other significant accounting policies, not involving the same level of
measurement uncertainty as those discussed in this section, are nevertheless important to an understanding of our financial statements.
See Note 2, Significant accounting policies, in BCE’s 2022 consolidated financial statements for more information about the accounting
principles we used to prepare our consolidated financial statements.
Critical accounting estimates and key judgments
When preparing the financial statements, management makes estimates
and judgments relating to:
• reported amounts of revenues and expenses
• reported amounts of assets and liabilities
• disclosure of contingent assets and liabilities
We base our estimates on a number of factors, including but not limited
to historical experience, current events such as the effects of the
COVID-19 pandemic, economic and financial market conditions such
as higher interest rates and inflation, supply chain disruptions and
the increasing risk of recession, and actions that the company may
undertake in the future, as well as other assumptions that we believe are
reasonable under the circumstances. A change in these assumptions
may have an impact on our financial statements including but not limited
to impairment testing, fair value determination, expected credit losses
and discount rates used for the present value of cash flows. By their
nature, these estimates and judgments are subject to measurement
uncertainty and actual results could differ.
We consider the estimates and judgments described in this section to be
an important part of understanding our financial statements because
they require management to make assumptions about matters that
were highly uncertain at the time the estimates and judgments were
made, and changes to these estimates and judgments could have a
material impact on our financial statements and our segments.
Our senior management has reviewed the development and selection
of the critical accounting estimates and judgments described in this
section with the Audit Committee of the BCE Board.
Any sensitivity analysis included in this section should be used with
caution as the changes are hypothetical and the impact of changes in
each key assumption may not be linear.
Our more significant estimates and judgments are described below.
Estimates
useful lives of property, plant and equipment
and finite-life intangible assets
We review our estimates of the useful lives of property, plant and
equipment and finite-life intangible assets on an annual basis and
adjust depreciation or amortization on a prospective basis, as required.
Property, plant and equipment represent a significant proportion of
our total assets. Changes in technology or our intended use of these
assets, climate change and our environmental, social and corporate
governance initiatives as well as changes in business prospects or
economic and industry factors, may cause the estimated useful lives
of these assets to change.
The estimated useful lives of property, plant and equipment and finite-life
intangible assets are determined by internal asset life studies, which
take into account actual and expected future usage, physical wear and
tear, replacement history and assumptions about technology evolution.
When factors indicate that assets’ useful lives are different from the
prior assessment, we depreciate or amortize the remaining carrying
value prospectively over the adjusted estimated useful lives.
post-employment benefit plans
The amounts reported in the financial statements relating to DB pension
plans and OPEBs are determined using actuarial calculations that are
based on several assumptions.
Our actuaries perform a valuation at least every three years to determine
the actuarial present value of the accrued DB pension plan and OPEB
obligations. The actuarial valuation uses management’s assumptions
for, among other things, the discount rate, life expectancy, the rate of
compensation increase, cost of living indexation rate, trends in healthcare
costs and expected average remaining years of service of employees.
While we believe that these assumptions are reasonable, differences
in actual results or changes in assumptions could materially affect
post-employment benefit obligations and future net post-employment
benefit plans cost.
We account for differences between actual and expected results
in benefit obligations and plan performance in OCI, which are then
recognized immediately in the deficit.
The most significant assumptions used to calculate the net post-
employment benefit plans cost are the discount rate and life expectancy.
A discount rate is used to determine the present value of the future
cash flows that we expect will be needed to settle post-employment
benefit obligations.
The discount rate is based on the yield on long-term, high-quality
corporate fixed income investments, with maturities matching the
estimated cash flows of the post-employment benefit plans. Life
expectancy is based on publicly available Canadian mortality tables
and is adjusted for the company’s specific experience.
A lower discount rate and a higher life expectancy result in a higher net
post-employment benefit obligation and a higher current service cost.
0
20 MD&A Accounting policies Sensitivity analysis
The following table shows a sensitivity analysis of key assumptions used to measure the net post-employment benefit obligations and the net
post-employment benefit plans cost for our DB pension plans and OPEB plans.
Discount rate
Cost of living indexation rate
Life expectancy at age 65
Impact on net post-employment
benefit plans cost for 2022 –
increase/(decrease)
Impact on post-employment benefit
obligations at December 5 , 2022 –
increase/(decrease)
Change in
assumption
Increase in
assumption
Decrease in
assumption
Increase in
assumption
Decrease in
assumption
0.5%
0.5%
1 year
(83)
46
29
72
(38)
(31)
(1,022)
907
612
1,123
(752)
(634)
revenue from contracts with customers
We are required to make estimates that affect the amount of revenue
from contracts with customers, including estimating the stand-alone
selling prices of products and services.
For bundled arrangements, we account for individual products and
services when they are separately identifiable and the customer can
benefit from the product or service on its own or with other readily
available resources. The total arrangement consideration is allocated to
each product or service included in the contract with the customer based
on its stand-alone selling price. We generally determine stand-alone
selling prices based on the observable prices at which we sell products
separately without a service contract and prices for non-bundled
service offers with the same range of services, adjusted for market
conditions and other factors, as appropriate. When similar products
and services are not sold separately, we use the expected cost plus
margin approach to determine stand-alone selling prices. Products
and services purchased by a customer in excess of those included in
the bundled arrangement are accounted for separately.
Impairment of non-financial assets
Goodwill and indefinite-life intangible assets are tested for impairment
annually or when there is an indication that the asset may be impaired.
Property, plant and equipment and finite-life intangible assets are tested
for impairment if events or changes in circumstances, assessed at
each reporting period, indicate that their carrying amount may not be
recoverable. For the purpose of impairment testing, assets other than
goodwill are grouped at the lowest level for which there are separately
identifiable cash inflows.
Impairment losses are recognized and measured as the excess of the
carrying value of the assets over their recoverable amount. An asset’s
recoverable amount is the higher of its fair value less costs of disposal
and its value in use. Previously recognized impairment losses, other than
those attributable to goodwill, are reviewed for possible reversal at each
reporting date and, if the asset’s recoverable amount has increased,
all or a portion of the impairment is reversed.
We make a number of estimates when calculating recoverable amounts
using discounted future cash flows or other valuation methods to test
for impairment. These estimates include the assumed growth rates for
future cash flows, the number of years used in the cash flow model and
the discount rate. When impairment charges occur they are recorded
in Impairment of assets.
During the fourth quarter of 2022, we recognized $147 million of
impairment charges for French TV channels within our Bell Media
segment. The impairment charges were the result of a reduction in
advertising demand in the industry resulting from global economic
uncertainties and unfavourable impacts to assumptions for discount
rates. These charges included $94 million allocated to indefinite-life
intangible assets for broadcast licences, and $53 million to finite-life
intangible assets for program and feature film rights. The impairment
was determined by comparing the carrying value of the CGUs to their
fair value less cost of disposal. We estimated the fair value of the CGUs
using the discounted cash flow valuation models, which include five-year
cash flow projections derived from business plans reviewed by senior
management for the period of October 1, 2022 to December 31, 2027,
using a discount rate of 10.3% and a perpetuity growth rate of 0.5%. After
impairments, the carrying value of our impacted CGUs was $109 million.
Additionally in 2022, we recorded impairment charges of $132 million
related mainly to right-of-use assets for certain office spaces we
ceased using as part of our real estate optimization strategy as a result
of our hybrid work policy.
During the second quarter of 2021, we identified indicators of impairment
for our Bell Media radio markets, notably a decline in advertising revenue
and an increase in the discount rate resulting from the impact of the
ongoing COVID-19 pandemic. Accordingly, impairment testing was
required for our group of radio CGUs.
During Q2 2021, we recognized $163 million of impairment charges for
various radio markets within our Bell Media segment. These charges
included $150 million allocated to indefinite-life intangible assets for
broadcast licences, and $13 million to property, plant and equipment
mainly for buildings and network infrastructure and equipment. They
were determined by comparing the carrying value of the CGUs to their
fair value less cost of disposal. We estimated the fair value of the CGUs
using both discounted cash flows and market-based valuation models,
which include five-year cash flow projections derived from business
plans reviewed by senior management for the period of July 1, 2021
to December 31, 2026, using a discount rate of 8.5% and a perpetuity
growth rate of (2.0%), as well as market multiple data from public
companies and market transactions. After impairments, the carrying
value of our group of radio CGUs was $235 million.
Goodwill impairment testing
We perform an annual test for goodwill impairment in the fourth quarter
for each of our CGUs or groups of CGUs to which goodwill is allocated,
and whenever there is an indication that goodwill might be impaired.
A CGU is the smallest identifiable group of assets that generates cash
inflows that are independent of the cash inflows from other assets or
groups of assets.
We identify any potential impairment by comparing the carrying value
of a CGU or group of CGUs to its recoverable amount. The recoverable
amount of a CGU or group of CGUs is the higher of its fair value less costs
of disposal and its value in use. Both fair value less costs of disposal and
value in use are based on estimates of discounted future cash flows
or other valuation methods. Cash flows are projected based on past
experience, actual operating results and business plans, including any
impact from rising interest rates and inflation. When the recoverable
amount of a CGU or group of CGUs is less than its carrying value, the
02
BCE InC. AnnuAl fInAnCIAl rEport 2022
20 MD&A Accounting policies recoverable amount is determined for its identifiable assets and liabilities.
The excess of the recoverable amount of the CGU or group of CGUs
over the total of the amounts assigned to its assets and liabilities is the
recoverable amount of goodwill.
An impairment charge is recognized in Impairment of assets in the
income statements for any excess of the carrying value of goodwill
over its recoverable amount. For purposes of impairment testing of
goodwill, our CGUs or groups of CGUs correspond to our reporting
segments as disclosed in Note 3, Segmented information, in BCE’s 2022
consolidated financial statements.
Any significant change in each of the estimates used could have a
material impact on the calculation of the recoverable amount and
resulting impairment charge. As a result, we are unable to reasonably
quantify the changes in our overall financial performance if we had
used different assumptions.
We cannot predict whether an event that triggers impairment will occur,
when it will occur or how it will affect the asset values we have reported.
We believe that any reasonable possible change in the key assumptions
on which the estimates of recoverable amounts of the Bell Wireless and
Bell Wireline groups of CGUs are based would not cause their carrying
amounts to exceed their recoverable amounts.
For the Bell Media group of CGUs, a decrease of (0.9%) in the perpetuity
growth rate or an increase of 0.6% in the discount rate would have
resulted in its recoverable amount being equal to its carrying value.
There were no goodwill impairment charges in 2022 or 2021.
Deferred taxes
Deferred tax assets and liabilities are calculated at the tax rates that
are expected to apply when the asset or liability is recovered or settled.
Both our current and deferred tax assets and liabilities are calculated
using tax rates that have been enacted or substantively enacted at
the reporting date.
Deferred taxes are provided on temporary differences arising from
investments in subsidiaries, joint arrangements and associates, except
where we control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the
foreseeable future.
The amounts of deferred tax assets and liabilities are estimated with
consideration given to the timing, sources and amounts of future
taxable income.
leases
The application of IFRS 16 requires us to make estimates that affect the
measurement of right-of-use assets and liabilities, including determining
the appropriate discount rate used to measure lease liabilities. Lease
liabilities are initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using our
incremental borrowing rate, unless the rate implicit in the lease is
readily determinable. Our incremental borrowing rate is derived from
publicly available risk-free interest rates, adjusted for applicable credit
spreads and lease terms. We apply a single incremental borrowing rate
to a portfolio of leases with similar characteristics.
fair value of financial instruments
Certain financial instruments, such as investments in equity securities,
derivative financial instruments and certain elements of borrowings, are
carried in the statements of financial position at fair value, with changes
in fair value reflected in the income statements and the statements
of comprehensive income. Fair values are estimated by reference to
published price quotations or by using other valuation techniques that
may include inputs that are not based on observable market data, such
as discounted cash flows and earnings multiples.
Contingencies
In the ordinary course of business, we become involved in various
claims and legal proceedings seeking monetary damages and other
relief. Pending claims and legal proceedings represent a potential cost
to our business. We estimate the amount of a loss by analyzing potential
outcomes and assuming various litigation and settlement strategies,
based on information that is available at the time.
If the final resolution of a legal or regulatory matter results in a judgment
against us or requires us to pay a large settlement, it could have a
material adverse effect on our consolidated financial statements in
the period in which the judgment or settlement occurs.
onerous contracts
A provision for onerous contracts is recognized when the unavoidable
costs of meeting our obligations under a contract exceed the expected
benefits to be received under the contract. The provision is measured
at the present value of the lower of the expected cost of terminating
the contract and the expected net cost of completing the contract.
Judgments
post-employment benefit plans
The determination of the discount rate used to value our post-
employment benefit obligations requires judgment. The rate is set by
reference to market yields of long-term, high-quality corporate fixed
income investments at the beginning of each fiscal year. Significant
judgment is required when setting the criteria for fixed income
investments to be included in the population from which the yield curve
is derived. The most significant criteria considered for the selection of
investments include the size of the issue and credit quality, along with
the identification of outliers, which are excluded.
Income taxes
The calculation of income taxes requires judgment in interpreting tax rules
and regulations. There are transactions and calculations for which the
ultimate tax determination is uncertain. Our tax filings are also subject
to audits, the outcome of which could change the amount of current
and deferred tax assets and liabilities. Management believes that it
has sufficient amounts accrued for outstanding tax matters based on
information that currently is available.
Management judgment is used to determine the amounts of deferred tax
assets and liabilities to be recognized. In particular, judgment is required
when assessing the timing of the reversal of temporary differences to
which future income tax rates are applied.
leases
The application of IFRS 16 requires us to make judgments that affect
the measurement of right-of-use assets and liabilities. A lease contract
conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. At inception of the contract, we
assess whether the contract contains an identified asset, whether we
have the right to obtain substantially all of the economic benefits from
use of the asset and whether we have the right to direct how and for
what purpose the asset is used. In determining the lease term, we
include periods covered by renewal options when we are reasonably
certain to exercise those options. Similarly, we include periods covered
by termination options when we are reasonably certain not to exercise
05
20 MD&A Accounting policies those options. To assess if we are reasonably certain to exercise an
option, we consider all facts and circumstances that create an economic
incentive to exercise renewal options (or not exercise termination
options). Economic incentives include the costs related to the termination
of the lease, the significance of any leasehold improvements and the
importance of the underlying assets to our operations.
revenue from contracts with customers
The identification of performance obligations within a contract and
the timing of satisfaction of performance obligations under long-term
contracts requires judgment. For bundled arrangements, we account for
individual products and services when they are separately identifiable
and the customer can benefit from the product or service on its own or
with other readily available resources. When our right to consideration
from a customer corresponds directly with the value to the customer of
the products and services transferred to date, we recognize revenue in
the amount to which we have a right to invoice. We recognize product
revenues from the sale of wireless handsets and devices and wireline
equipment when a customer takes possession of the product. We
recognize service revenues over time, as the services are provided.
Revenues on certain long-term contracts are recognized using output
methods based on products delivered, performance completed to date,
time elapsed or milestones met.
Additionally, the determination of costs to obtain a contract, including the
identification of incremental costs, also requires judgment. Incremental
costs of obtaining a contract with a customer, principally comprised of
sales commissions, and prepaid contract fulfillment costs are included
in contract costs in the statements of financial position, except where
the amortization period is one year or less, in which case costs of
obtaining a contract are immediately expensed. Capitalized costs are
amortized on a systematic basis that is consistent with the period and
pattern of transfer to the customer of the related products or services.
CGus
The determination of CGUs or groups of CGUs for the purpose of
impairment testing requires judgment.
Contingencies
The determination of whether a loss is probable from claims and legal
proceedings and whether an outflow of resources is likely requires
judgment.
We accrue a potential loss if we believe a loss is probable and an outflow
of resources is likely and can be reasonably estimated, based on
information that is available at the time. Any accrual would be charged
to earnings and included in Trade payables and other liabilities or Other
non-current liabilities. Any payment as a result of a judgment or cash
settlement would be deducted from cash from operating activities. We
estimate the amount of a loss by analyzing potential outcomes and
assuming various litigation and settlement strategies.
Adoption of amended accounting standards
As required, we adopted the following amendments and clarifications to accounting standards issued by the IASB.
Standard
Description
Impact
Onerous Contracts – Cost
of Fulfilling a Contract,
Amendments to IAS 37 –
Provisions, Contingent
Liabilities and Contingent
Assets
IFRIC Agenda Decision on
Demand Deposits with
Restrictions on Use arising
from a Contract with
a Third Party (IAS 7 –
Statement of Cash Flows)
These amendments clarify which costs
should be included in determining the cost
of fulfilling a contract when assessing
whether a contract is onerous.
In April 2022, IFRIC issued an agenda
decision clarifying that an entity should
present a demand deposit with restrictions
on use arising from a contract with a third
party as cash and cash equivalents in the
statements of financial position and cash
flows, unless those restrictions change the
nature of the deposit such that it no longer
meets the definition of cash in IAS 7.
These amendments were adopted effective January 1, 2022 and did not have
a significant impact on our financial statements.
In 2022, we applied this agenda decision retrospectively to each prior period
presented, the impact of which was limited to the classification of funding of
$97 million received in Q1 2021 under a subsidy agreement with the Government
of Québec. The application of this agenda decision resulted in the following:
• an increase in Cash of $82 million with a corresponding decrease in Other current
assets in the statement of financial position as at December 31, 2021
• an increase in Capital expenditures and Other financing activities of ($15) million
and $97 million, respectively, for the year ended December 31, 2021 in the
statement of cash flows
• no impact in the statement of financial position as at January 1, 2021 as the funding
was received in Q1 2021.
Future changes to accounting standards
The following amendments to standards issued by the IASB have an effective date after December 31, 2022 and have not yet been adopted by BCE.
Standard
Description
Impact
Effective date
Disclosure of Accounting
Policies – Amendments
to IAS 1 – Presentation
of Financial Statements
These amendments require that
entities disclose material accounting
policies, as defined, instead of
significant accounting policies.
We are currently assessing the
impact of these amendments on the
disclosure of our accounting policies.
Effective for annual reporting periods
beginning on or after January 1, 2023.
Early application is permitted.
06
BCE InC. AnnuAl fInAnCIAl rEport 2022
20 MD&A Accounting policies 11 Non-GAAP financial measures, other financial
measures and key performance indicators (KPIs)
BCE uses various financial measures to assess its business performance.
Certain of these measures are calculated in accordance with
International Financial Reporting Standards (IFRS or GAAP) while certain
other measures do not have a standardized meaning under GAAP. We
believe that our GAAP financial measures, read together with adjusted
non-GAAP and other financial measures, provide readers with a better
understanding of how management assesses BCE’s performance.
National Instrument 52-112, Non-GAAP and Other Financial Measures
Disclosure (NI 52-112), prescribes disclosure requirements that apply
to the following specified financial measures:
• Non-GAAP financial measures;
11.1 Non-GAAP financial measures
A non-GAAP financial measure is a financial measure used to depict our
historical or expected future financial performance, financial position or
cash flow and, with respect to its composition, either excludes an amount
that is included in, or includes an amount that is excluded from, the
composition of the most directly comparable financial measure disclosed
in BCE’s consolidated primary financial statements. We believe that
• Non-GAAP ratios;
• Total of segments measures;
• Capital management measures; and
• Supplementary financial measures.
This section provides a description and classification of the specified
financial measures contemplated by NI 52-112 that we use to explain our
financial results except that, for supplementary financial measures, an
explanation of such measures is provided where they are first referred
to in this MD&A if the supplementary financial measures’ labelling is
not sufficiently descriptive.
non-GAAP financial measures are reflective of our ongoing operating
results and provide readers with an understanding of management’s
perspective on and analysis of our performance.
Below are descriptions of the non-GAAP financial measures that we use
to explain our results as well as reconciliations to the most comparable
IFRS financial measures.
Adjusted net earnings
The term adjusted net earnings does not have any standardized meaning
under IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define adjusted net earnings as net earnings attributable to common
shareholders before severance, acquisition and other costs, net mark-
to-market losses (gains) on derivatives used to economically hedge
equity settled share-based compensation plans, net equity losses (gains)
on investments in associates and joint ventures, net losses (gains) on
investments, early debt redemption costs, impairment of assets and
discontinued operations, net of tax and NCI.
We use adjusted net earnings and we believe that certain investors and
analysts use this measure, among other ones, to assess the performance
of our businesses without the effects of severance, acquisition and
other costs, net mark-to-market losses (gains) on derivatives used
to economically hedge equity settled share-based compensation
plans, net equity losses (gains) on investments in associates and joint
ventures, net losses (gains) on investments, early debt redemption costs,
impairment of assets and discontinued operations, net of tax and NCI.
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 directly comparable IFRS financial measure is net earnings
attributable to common shareholders.
The following table is a reconciliation of net earnings attributable to common shareholders to adjusted net earnings on a consolidated basis.
Net earnings attributable to common shareholders
Reconciling items:
Severance, acquisition and other costs
Net mark-to-market (gains) losses on derivatives used to economically
hedge equity settled share-based compensation plans
Net equity losses on investments in associates and joint ventures
Net losses (gains) on investments
Early debt redemption costs
Impairment of assets
Income taxes for the above reconciling items
NCI for the above reconciling items
Adjusted net earnings
Q4 2022
528
Q6 202
625
19
(27)
–
29
–
150
(37)
(8)
654
63
(57)
35
6
–
30
(9)
(1)
692
2022
2,716
94
53
42
(24)
18
279
(117)
(4)
202
2,709
209
(278)
49
6
53
197
(48)
(2)
3,057
2,895
07
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) Adjusted net interest expense
The term adjusted net earnings does not have any standardized meaning
under IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define adjusted net interest expense as twelve-month trailing net
interest expense as shown in our consolidated statements of cash
flows, plus 50% of twelve-month trailing net earnings attributable to
preferred shareholders as shown in our consolidated income statements.
We use adjusted net interest expense as a component in the calculation
of the adjusted EBITDA to adjusted net interest expense ratio, which
is a capital management measure. For further details on the adjusted
EBITDA to adjusted net interest expense ratio, see section 11.4 – Capital
management measures. We use, and believe that certain investors and
analysts use, the adjusted EBITDA to adjusted net interest expense ratio,
among other measures, to evaluate the financial health of the company.
Available liquidity
The term available liquidity does not have any standardized meaning
under IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
In Q3 2022, we updated our definition of available liquidity to exclude
amounts available under committed credit facilities that may only be
used for a pre-determined purpose given that such amounts are not for
general use by our businesses. This update was made subsequent to
a new committed non-revolving credit facility entered into in Q3 2022
that must exclusively be used to partly fund the expansion of our
broadband networks as part of government subsidy programs. See
section 6.7, Liquidity for additional details. This change does not impact
the available liquidity amounts previously presented.
We define available liquidity as cash, cash equivalents and amounts
available under our securitized receivables program and our committed
bank credit facilities, excluding credit facilities that are available
exclusively for a pre-determined purpose.
The most directly comparable IFRS financial measure is net interest
expense. The following table is a reconciliation of net interest expense
to adjusted net interest expense on a consolidated basis.
Net interest expense
50% of net earnings attributable
to preferred shareholders
Adjusted net interest expense
2022
1,124
76
1,200
202
1,063
66
1,129
We consider available liquidity to be an important indicator of the
financial strength and performance of our businesses because it shows
the funds available to meet our cash requirements, including for, but
not limited to, capital expenditures, post-employment benefit plans
funding, dividend payments, the payment of contractual obligations,
maturing debt, ongoing operations, the acquisition of spectrum, and other
cash requirements. We believe that certain investors and analysts use
available liquidity to evaluate the financial strength and performance of
our businesses. The most directly comparable IFRS financial measure
is cash.
The following table is a reconciliation of cash to available liquidity on
a consolidated basis.
December 31, 2022
December 5 , 202
Cash
Cash equivalents
Amounts available under our
securitized receivables program (1)
Amounts available under our
committed bank credit facilities (2)
Available liquidity
99
50
700
2,651
3,500
289
–
400
2,789
3,478
(1) At December 31, 2022 and December 31, 2021, respectively, $700 million and $400 million was
available under our securitized receivables program, under which we borrowed $1,173 million
in U.S. dollars ($1,588 million in Canadian dollars) and $900 million in Canadian dollars as
at December 31, 2022 and December 31, 2021, respectively. Loans secured by receivables
are included in Debt due within one year in our consolidated financial statements.
(2) At December 31, 2022 and December 31, 2021, respectively, $2,651 million and $2,789 million
were available under our committed bank credit facilities, given outstanding commercial
paper of $627 million in U.S. dollars ($849 million in Canadian dollars) and $561 million in
U.S. dollars ($711 million in Canadian dollars) as at December 31, 2022 and December 31,
2021, respectively. Commercial paper outstanding is included in Debt due within one year
in our consolidated financial statements.
06
BCE InC. AnnuAl fInAnCIAl rEport 2022
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) Free cash flow and excess free cash flow
The terms free cash flow and excess free cash flow do not have any
standardized meaning under IFRS. Therefore, they are unlikely to be
comparable to similar measures presented by other issuers.
We define free cash flow as cash flows from operating activities,
excluding cash from discontinued operations, acquisition and other
costs paid (which include significant litigation costs) and voluntary
pension funding, less capital expenditures, preferred share dividends and
dividends paid by subsidiaries to NCI. We exclude cash from discontinued
operations, acquisition and other costs paid and voluntary pension
funding 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.
We define excess free cash flow as free cash flow less dividends paid
on common shares.
We consider free cash flow and excess free cash flow to be important
indicators of the financial strength and performance of our businesses.
Free cash flow shows how much cash is available to pay dividends
on common shares, repay debt and reinvest in our company. Excess
free cash flow shows how much cash is available to repay debt and
reinvest in our company, after the payment of dividends on common
shares. We believe that certain investors and analysts use free cash
flow and excess free cash flow to value a business and its underlying
assets and to evaluate the financial strength and performance of our
businesses. The most directly comparable IFRS financial measure is
cash flows from operating activities.
The following tables provide reconciliations of cash flows from operating activities to free cash flow and excess free cash flow on a consolidated basis.
Cash flows from operating activities
Capital expenditures
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to NCI
Acquisition and other costs paid
Free cash flow
Dividends paid on common shares
Excess free cash flow
Cash flows from operating activities
Capital expenditures
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to NCI
Acquisition and other costs paid
Cash from discontinued operations
(included in cash flows from
operating activities)
Free cash flow
Dividends paid on common shares
Excess free cash flow
2021
8,008
(4,852)
(125)
(86)
35
–
2,980
(3,132)
(152)
2022
8,365
(5,133)
(136)
(39)
10
3,067
(3,312)
(245)
Q6 202
1,743
(1,466)
(32)
(45)
29
–
229
(795)
(566)
Q6 2022
2,056
(1,638)
(42)
(3)
3
376
(839)
(463)
Q5 202
1,774
(1,164)
(31)
(13)
–
–
566
(793)
(227)
Q5 2022
1,996
(1,317)
(27)
(11)
1
642
(839)
(197)
Q2 202
2,499
(1,210)
(31)
(15)
2
–
1,245
(791)
454
Q2 2022
2,597
(1,219)
(34)
(14)
3
1,333
(839)
494
Q 202
1,992
(1,012)
(31)
(13)
4
–
940
(753)
187
Q 2022
1,716
(959)
(33)
(11)
3
716
(795)
(79)
2020
7,754
(4,202)
(132)
(53)
35
(54)
3,348
(2,975)
373
Net debt
The term net debt does not have any standardized meaning under
IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define net debt as debt due within one year plus long-term debt
and 50% of preferred shares, less cash and cash equivalents, as shown
in BCE’s consolidated statements of financial position. We include 50%
of outstanding preferred shares in our net debt as it is consistent with
the treatment by certain credit rating agencies.
We consider net debt to be an important indicator of the company’s
financial leverage because it represents the amount of debt that is
not covered by available cash and cash equivalents. We believe that
certain investors and analysts use net debt to determine a company’s
financial leverage.
Net debt is calculated using several asset and liability categories from
the statements of financial position. The most directly comparable IFRS
financial measure is long-term debt. The following table is a reconciliation
of long-term debt to net debt on a consolidated basis.
Long-term debt
Debt due within one year
50% of preferred shares
Cash
Cash equivalents
Net debt
December 31, 2022
December 5 , 202
27,783
4,137
1,935
(99)
(50)
33,706
27,048
2,625
2,002
(289)
–
31,386
07
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) 11.2 Non-GAAP ratios
A non-GAAP ratio is a financial measure disclosed in the form of a ratio, fraction, percentage or similar representation and that has a non-GAAP
financial measure as one or more of its components.
Adjusted EPS
The term adjusted EPS does not have any standardized meaning under
IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define adjusted EPS as adjusted net earnings per BCE common
share. Adjusted net earnings is a non-GAAP financial measure. For
further details on adjusted net earnings, see section 11.1, Non-GAAP
financial measures.
We use adjusted EPS, and we believe that certain investors and analysts
use this measure, among other ones, to assess the performance of our
businesses without the effects of severance, acquisition and other costs,
net mark-to-market losses (gains) on derivatives used to economically
hedge equity settled share-based compensation plans, net equity losses
(gains) on investments in associates and joint ventures, net losses (gains)
on investments, early debt redemption costs, impairment of assets and
discontinued operations, net of tax and NCI. 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.
Dividend payout ratio
The term dividend payout ratio does not have any standardized meaning
under IFRS. Therefore, it is unlikely to be comparable to similar measures
presented by other issuers.
We define dividend payout ratio as dividends paid on common shares
divided by free cash flow. Free cash flow is a non-GAAP financial
measure. For further details on free cash flow, see section 11.1, Non-GAAP
financial measures.
We consider dividend payout ratio to be an important indicator of the
financial strength and performance of our businesses because it shows
the sustainability of the company’s dividend payments.
11.3 Total of segments measures
A total of segments measure is a financial measure that is a subtotal or total of 2 or more reportable segments and is disclosed within the Notes
to BCE’s consolidated primary financial statements.
Adjusted EBITDA
We define adjusted EBITDA as operating revenues less operating costs as shown in BCE’s consolidated income statements.
The most directly comparable IFRS financial measure is net earnings. The following tables provide reconciliations of net earnings to adjusted
EBITDA on a consolidated basis.
Net earnings
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net return on post-employment benefit plans
Impairment of assets
Other expense (income)
Income taxes
Adjusted EBITDA
2022
2,926
94
3,660
1,063
1,146
(51)
279
115
967
10,199
Q6 2022
Q5 2022
Q2 2022
Q 2022
567
19
922
270
319
(13)
150
(19)
222
771
22
914
267
298
(13)
21
130
178
654
40
933
266
269
(7)
106
97
232
934
13
891
260
260
(18)
2
(93)
335
2,437
2,588
2,590
2,584
03
BCE InC. AnnuAl fInAnCIAl rEport 2022
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) Net earnings
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net interest on post-employment
benefit plans
Impairment of assets
Other (income) expense
Income taxes
Adjusted EBITDA
2021
2,892
209
3,627
982
1,082
20
197
(160)
1,044
9,893
Q6 202
Q5 202
Q2 202
Q 202
658
63
925
251
275
5
30
(26)
249
813
50
902
245
272
5
–
(35)
306
734
7
905
248
268
5
164
(91)
236
2,430
2,558
2,476
687
89
895
238
267
5
3
(8)
253
2,429
2020
2,473
116
3,475
929
1,110
46
472
194
792
9,607
11.4 Capital management measures
A capital management measure is a financial measure that is intended
to enable a reader to evaluate our objectives, policies and processes
for managing our capital and is disclosed within the Notes to BCE’s
consolidated financial statements.
The financial reporting framework used to prepare the financial
statements requires disclosure that helps readers assess the company’s
capital management objectives, policies, and processes, as set out in
IFRS in IAS 1 – Presentation of Financial Statements. BCE has its own
methods for managing capital and liquidity, and IFRS does not prescribe
any particular calculation method.
Adjusted EBITDA to adjusted net interest expense ratio
The adjusted EBITDA to adjusted net interest expense ratio represents
adjusted EBITDA divided by adjusted net interest expense. For the
purposes of calculating our adjusted EBITDA to adjusted net interest
expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA.
Adjusted net interest expense used in the calculation of the adjusted
EBITDA to adjusted net interest expense ratio is a non-GAAP financial
measure defined as twelve-month trailing net interest expense as shown
in our consolidated statements of cash flows, plus 50% of twelve-month
trailing net earnings attributable to preferred shareholders as shown
in our consolidated income statements. For further details on adjusted
net interest expense, see section 11.1, Non-GAAP financial measures.
We use, and believe that certain investors and analysts use, the adjusted
EBITDA to adjusted net interest expense ratio, among other measures,
to evaluate the financial health of the company.
Net debt leverage ratio
The net debt leverage ratio represents net debt divided by adjusted
EBITDA. Net debt used in the calculation of the net debt leverage ratio
is a non-GAAP financial measure. For further details on net debt, see
section 11.1, Non-GAAP financial measures. For the purposes of calculating
our net debt leverage ratio, adjusted EBITDA is twelve-month trailing
adjusted EBITDA.
We use, and believe that certain investors and analysts use, the net
debt leverage ratio as a measure of financial leverage.
04
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) 11.5 Supplementary financial measures
A supplementary financial measure is a financial measure that is not
reported in BCE’s consolidated financial statements, and is, or is intended
to be, reported periodically to represent historical or expected future
financial performance, financial position, or cash flows.
An explanation of such measures is provided where they are first
referred to in this MD&A if the supplementary financial measures’
labelling is not sufficiently descriptive.
11.6 KPIs
In addition to the non-GAAP financial measures and other financial measures described previously, we use the following KPIs to measure the
success of our strategic imperatives. These KPIs are not accounting measures and may not be comparable to similar measures presented by
other issuers.
KPI
Definition
Adjusted EBITDA margin
Adjusted EBITDA margin is defined as adjusted EBITDA divided by operating revenues.
ARPU
Capital intensity
Churn
Subscriber unit
Mobile phone blended ARPU is calculated by dividing wireless operating service revenues by the average mobile phone subscriber
base for the specified period and is expressed as a dollar unit per month.
Capital intensity is defined as capital expenditures divided by operating revenues.
Mobile phone churn is the rate at which existing mobile phone subscribers cancel their services. It is a measure of our ability
to retain our customers. Mobile phone churn is calculated by dividing the number of mobile phone deactivations during a given
period by the average number of mobile phone subscribers in the base for the specified period and is expressed as a percentage
per month.
Mobile phone subscriber unit is comprised of a recurring revenue-generating portable unit (e.g. smartphones and feature phones)
on an active service plan, that has access to our wireless networks and includes voice, text and/or data connectivity. We report
mobile phone subscriber units in two categories: postpaid and prepaid. Prepaid mobile phone subscriber units are considered
active for a period of 90 days following the expiry of the subscriber’s prepaid balance.
Mobile connected device subscriber unit is comprised of a recurring revenue-generating portable unit (e.g. tablets, wearables,
mobile Internet devices and IoT) on an active service plan, that has access to our wireless networks and is intended for limited
or no cellular voice capability.
Wireline subscriber unit consists of an active revenue-generating unit with access to our services, including retail Internet,
satellite TV, IPTV, and/or residential NAS. A subscriber is included in our subscriber base when the service has been installed
and is operational at the customer premise and a billing relationship has been established.
• Retail Internet, IPTV and satellite TV subscribers have access to stand-alone services, and are primarily represented
by a dwelling unit
• Retail residential NAS subscribers are based on a line count and are represented by a unique telephone number
0
BCE InC. AnnuAl fInAnCIAl rEport 2022
22 MD&A Non-GAAP fi nancial measures, other fi nancial measures and key performance indicators (KPIs) 12 Effectiveness of internal controls
Disclosure controls and procedures
Our disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed by
us in reports filed or submitted under Canadian and U.S. securities
laws is recorded, processed, summarized and reported within the time
periods specified under those laws, and include controls and procedures
that are designed to ensure that the information is accumulated and
communicated to management, including BCE’s President and CEO and
Executive Vice-President and Chief Financial Officer (CFO), to allow
timely decisions regarding required disclosure.
Internal control over financial reporting
Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule 13a-15(f)
under the U.S. Securities Exchange Act of 1934, as amended, and under
National Instrument 52-109. Our internal control over financial reporting
is a process designed under the supervision of the CEO and CFO, and
effected by the Board, management and other personnel of BCE, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS as issued by the IASB. However,
because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements on a timely basis.
As at December 31, 2022, management evaluated, under the supervision
of and with the participation of the CEO and the CFO, the effectiveness
of our disclosure controls and procedures, as defined in Rule 13a-15(e)
under the U.S. Securities Exchange Act of 1934, as amended, and under
National Instrument 52-109 – Certification of Disclosure in Issuers’
Annual and Interim Filings.
Based on that evaluation, the CEO and CFO concluded that our disclosure
controls and procedures were effective as at December 31, 2022.
Management evaluated, under the supervision of and with the
participation of the CEO and the CFO, the effectiveness of our internal
control over financial reporting as at December 31, 2022, based on the
criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
Based on that evaluation, the CEO and CFO concluded that our internal
control over financial reporting was effective as at December 31, 2022.
Changes in internal control over financial reporting
No changes were made in our internal control over financial reporting during the year ended December 31, 2022 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
20 MD&A Effectiveness of internal controls
Reports on internal controls
Management’s report on internal control over financial reporting
The management of BCE Inc. (BCE) is responsible for establishing and
maintaining adequate internal control over financial reporting. Our
internal control over financial reporting is a process designed under
the supervision of the President and Chief Executive Officer and the
Executive Vice-President and Chief Financial Officer and effected by the
board of directors, management and other personnel of BCE, to provide
reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
Based on that evaluation, the President and Chief Executive Officer and
the Executive Vice-President and Chief Financial Officer concluded
that our internal control over financial reporting was effective as at
December 31, 2022. There were no material weaknesses that have
been identified by BCE’s management in internal control over financial
reporting as at December 31, 2022.
Our internal control over financial reporting as at December 31, 2022 has
been audited by Deloitte LLP, independent registered public accounting
firm, who also audited our consolidated financial statements for the year
ended December 31, 2022. Deloitte LLP issued an unqualified opinion
on the effectiveness of our internal control over financial reporting as
at December 31, 2022.
(signed) Mirko Bibic
President and Chief Executive Officer
(signed) Glen LeBlanc
Executive Vice-President and Chief Financial Officer
(signed) Thierry Chaumont
Senior Vice-President, Controller and Tax
March 2, 2023
Due to its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements on a timely basis. Also,
projections of any evaluation of the effectiveness of internal control
over financial reporting to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Management evaluated, under the supervision of and with the
participation of the President and Chief Executive Officer and the
Executive Vice-President and Chief Financial Officer, the effectiveness
of our internal control over financial reporting as at December 31,
2022, based on the criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
2
BCE InC. AnnuAl fInAnCIAl rEport 2022
Reports on internal controls Report of independent registered public accounting firm
To the Shareholders and the Board of Directors of BCE Inc.
Opinion on internal control over
financial reporting
We have audited the internal control over financial reporting of BCE Inc.
and subsidiaries (the “Company”) as of December 31, 2022, based on
criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as
of December 31, 2022, based on criteria established in Internal Control
– Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements as at and for the year ended
December 31, 2022, of the Company and our report dated March 2,
2023, expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as
we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and limitations of internal control
over financial reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ Deloitte LLP
Chartered Professional Accountants
Montréal, Canada
March 2, 2023
We have served as the Company’s auditor since 1880.
5
Reports on internal controls Consolidated financial statements
Table of contents
Management’s responsibility for financial reporting
Report of independent registered public accounting firm
Consolidated income statements
Consolidated statements of comprehensive income
Consolidated statements of financial position
Consolidated statements of changes in equity
Consolidated statements of cash flows
Interest expense
Impairment of assets
Notes to consolidated financial statements
Note 1 Corporate information
Note 2 Significant accounting policies
Note 3 Segmented information
Note 4 Business acquisitions and disposition
Note 5 Operating costs
Note 6 Severance, acquisition and other costs
Note 7
Note 8
Note 9 Other (expense) income
Note 10 Income taxes
Note 11 Earnings per share
Note 12 Trade and other receivables
Note 13 Inventory
Note 14 Contract assets and liabilities
Note 15 Contract costs
Note 16 Assets held for sale
Note 17 Property, plant and equipment
Note 18 Leases
Note 19 Intangible assets
Note 20 Investments in associates and joint ventures
Note 21 Other non-current assets
Note 22 Goodwill
Note 23 Trade payables and other liabilities
Note 24 Debt due within one year
Note 25 Long-term debt
Note 26 Provisions
Note 27 Post-employment benefit plans
Note 28 Other non-current liabilities
Note 29 Financial and capital management
Note 30 Share capital
Note 31 Share-based payments
Note 32 Additional cash flow information
Note 33 Remaining performance obligations
Note 34 Commitments and contingencies
Note 35 Related party transactions
Note 36 Significant partly-owned subsidiary
Note 37 COVID-19
6
BCE InC. AnnuAl fInAnCIAl rEport 2022
115
116
118
118
119
120
121
122
122
122
131
133
135
135
135
136
136
137
138
139
139
140
140
140
141
142
143
144
145
145
146
146
147
149
149
152
153
157
158
160
161
161
162
163
163
Consolidated fi nancial statements Management’s responsibility for financial reporting
These financial statements form the basis for all of the financial
information that appears in this report.
The financial statements and all of the information in this report are
the responsibility of the management of BCE Inc. (BCE) and have been
reviewed and approved by the board of directors. The board of directors
is responsible for ensuring that management fulfills its financial reporting
responsibilities. Deloitte LLP, Independent Registered Public Accounting
Firm, have audited the financial statements.
Management has prepared the financial statements in accordance
with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board. Under these principles,
management has made certain estimates and assumptions that are
reflected in the financial statements and notes. Management believes
that these financial statements fairly present BCE’s consolidated financial
position, results of operations and cash flows.
Management has a system of internal controls designed to provide
reasonable assurance that the financial statements are accurate and
complete in all material respects. This is supported by an internal audit
group that reports to the Audit Committee, and includes communication
with employees about policies for ethical business conduct. Management
believes that the internal controls provide reasonable assurance that
our financial records are reliable and form a proper basis for preparing
the financial statements, and that our assets are properly accounted
for and safeguarded.
The board of directors has appointed an Audit Committee, which is
made up of unrelated and independent directors. The Audit Committee’s
responsibilities include reviewing the financial statements and other
information in this report, and recommending them to the board
of directors for approval. You will find a description of the Audit
Committee’s other responsibilities in this report. The internal auditors
and the shareholders’ auditors have free and independent access to
the Audit Committee.
(signed) Mirko Bibic
President and Chief Executive Officer
(signed) Glen LeBlanc
Executive Vice-President and Chief Financial Officer
(signed) Thierry Chaumont
Senior Vice-President, Controller and Tax
March 2, 2023
7
Consolidated fi nancial statements Report of independent registered public accounting firm
To the Shareholders and the Board of Directors of BCE Inc.
Opinion on the financial statements
We have audited the accompanying consolidated statements of
financial position of BCE Inc. and subsidiaries (the “Company”) as
at December 31, 2022 and 2021, the related consolidated income
statements, statements of comprehensive income, changes in equity, and
cash flows, for each of the two years in the period ended December 31,
2022, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 2022 and 2021, and its financial performance and its
cash flows for each of the two years in the period ended December 31,
2022, in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated March 2, 2023,
expressed an unqualified opinion on the Company’s internal control
over financial reporting.
Basis for opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
6
BCE InC. AnnuAl fInAnCIAl rEport 2022
Consolidated fi nancial statements Critical audit matter
The critical audit matter communicated below is a matter arising from the
current-period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that (1)
relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does
not alter in any way our opinion on the financial statements, taken as
a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Goodwill and intangible assets –
Bell Media group – refer to notes 2n, 3, 4 and 22
to the financial statements
Critical Audit Matter Description
Goodwill and indefinite-life intangible assets (specifically broadcast
licenses) for the Bell Media group of cash generating units (“Bell Media”)
are tested annually or when there is an indication that the asset may be
impaired. As a result of the annual assessment of impairment of goodwill
and intangible assets for Bell Media, management has determined
that there is no impairment of goodwill and there is an impairment for
intangible assets relating to the French TV channels.
When testing goodwill and intangible assets for Bell Media, while there
are several assumptions that are required to determine the recoverable
amount, the judgments with the highest degree of subjectivity and
impact, are the forecasts of future operating performance, and
the determination of earnings before interest, taxes, depreciation
and amortization (“EBITDA”) multiples, discount rates and perpetuity
growth rates (“significant assumptions”). Changes in these significant
assumptions could have a significant impact on the recoverable amount
of Bell Media, resulting in an impairment charge to goodwill and/or
intangible assets as required. Auditing the significant assumptions
required a high degree of auditor judgment and an increased extent
of audit effort, which included the involvement of fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant assumptions used by
management to determine the recoverable amount for Bell Media
included the following, among others:
• Evaluated the effectiveness of controls over the assessment of
goodwill and intangible assets for impairment, including those over
the significant assumptions.
• Evaluated management’s ability to accurately forecast future operating
performance by comparing actual results to management’s historical
forecasts.
• Evaluated the reasonableness of management’s forecasts of future
operating performance by comparing the forecasts to:
• Historical operating performance;
• Analyst and industry reports for the Company and certain of its
peer companies, and other relevant publicly available information;
• Known changes in Bell Media’s operations or the industry in which
it operates, including recovery from the effects of the COVID-19
pandemic and the current economic uncertainty from inflationary
pressures, which are expected to impact future operating
performance;
• Internal communications to management and the Board of Directors.
• With the assistance of fair value specialists, evaluated the
reasonableness of the (1) EBITDA multiples, (2) discount rates, and
(3) perpetuity growth rates by:
• Testing the source information underlying the determination of the
discount rates;
• Reviewing relevant internal and external information, including
analyst and industry reports, to assess the reasonability of the
selected EBITDA multiples, discount rates and perpetuity growth rates;
• Developing a range of independent estimates and comparing those
to the EBITDA multiples, discount rates and perpetuity growth rates
selected by management.
/s/ Deloitte LLP
Chartered Professional Accountants
Montréal, Canada
March 2, 2023
We have served as the Company’s auditor since 1880.
7
Consolidated fi nancial statements Consolidated income statements
for the year ended December 5
(in millions of Canadian dollars, except share amounts)
Operating revenues
Operating costs
Severance, acquisition and other costs
Depreciation
Amortization
Finance costs
Interest expense
Net return (interest) on post-employment benefit plans
Impairment of assets
Other (expense) income
Income taxes
Net earnings
Net earnings attributable to:
Common shareholders
Preferred shareholders
Non-controlling interest
Net earnings
Net earnings per common share – basic and diluted
Weighted average number of common shares outstanding – basic (millions)
Consolidated statements of comprehensive income
for the year ended December 5
(in millions of Canadian dollars)
Net earnings
Other comprehensive income, net of income taxes
Items that will be subsequently reclassified to net earnings
Net change in value of derivatives designated as cash flow hedges, net of income taxes
of $118 million and ($23) million for 2022 and 2021, respectively
Items that will not be reclassified to net earnings
Actuarial gains on post-employment benefit plans, net of income taxes of ($151) million and
($653) million for 2022 and 2021, respectively
Net change in value of publicly-traded and privately-held investments, net of income taxes
of ($19) million and nil for 2022 and 2021, respectively
Net change in value of derivatives designated as cash flow hedges, net of income taxes
of ($21) million and ($1) million for 2022 and 2021, respectively
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to:
Common shareholders
Preferred shareholders
Non-controlling interest
Total comprehensive income
note
5
5, 7
6
7
4
7
27
3, 7, 4
4
0
56
note
27
56
2022
24,174
(13,975)
(94)
(3,660)
(1,063)
(1,146)
51
(279)
(115)
(967)
2,926
2,716
152
58
2,926
2.98
911.5
2022
2,926
202
23,449
(13,556)
(209)
(3,627)
(982)
(1,082)
(20)
(197)
160
(1,044)
2,892
2,709
131
52
2,892
2.99
906.3
202
2,892
(321)
63
415
30
58
182
3,108
2,891
152
65
3,108
1,780
24
4
1,871
4,763
4,578
131
54
4,763
3
BCE InC. AnnuAl fInAnCIAl rEport 2022
Consolidated fi nancial statements
Consolidated statements of financial position
(in millions of Canadian dollars)
ASSETS
Current assets
Cash
Cash equivalents
Trade and other receivables
Inventory
Contract assets
Contract costs
Prepaid expenses
Other current assets
Assets held for sale
Total current assets
Non-current assets
Contract assets
Contract costs
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments in associates and joint ventures
Post-employment benefit assets
Other non-current assets
Goodwill
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade payables and other liabilities
Contract liabilities
Interest payable
Dividends payable
Current tax liabilities
Debt due within one year
Liabilities held for sale
Total current liabilities
Non-current liabilities
Contract liabilities
Long-term debt
Deferred tax liabilities
Post-employment benefit obligations
Other non-current liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies
EQUITY
Equity attributable to BCE shareholders
Preferred shares
Common shares
Contributed surplus
Accumulated other comprehensive (loss) income
Deficit
Total equity attributable to BCE shareholders
Non-controlling interest
Total equity
Total liabilities and equity
note
December 31, 2022
December 5 , 202
2
2
5
6
7
2
6
6
7
7
4
0
20
27
2
22
25
6
26
6
6
27
0
27
23
56
50
50
50
56
99
50
4,138
656
436
540
244
324
–
6,487
288
603
29,256
16,183
84
608
3,559
1,355
10,906
62,842
69,329
5,221
857
281
867
106
4,137
–
11,469
228
27,783
4,953
1,311
1,070
35,345
46,814
3,870
20,840
1,172
(55)
(3,649)
22,178
337
22,515
69,329
289
–
3,949
482
414
507
254
253
50
6,198
251
387
28,235
15,570
105
668
3,472
1,306
10,572
60,566
66,764
4,455
799
247
811
141
2,625
35
9,113
246
27,048
4,679
1,734
1,003
34,710
43,823
4,003
20,662
1,157
213
(3,400)
22,635
306
22,941
66,764
4
Consolidated fi nancial statements Consolidated statements of changes in equity
Attributable to BCE shareholders
for the year ended December 5 , 2022
(in millions of Canadian dollars)
Balance at December 31, 2021
Net earnings
Other comprehensive (loss) income
Total comprehensive (loss) income
Common shares issued under
employee stock option plan
Other share-based compensation
Repurchase of preferred shares
Dividends declared on BCE common
and preferred shares
Dividends declared by subsidiaries
to non-controlling interest
Settlement of cash flow hedges
transferred to the cost basis
of hedged items
Other
note
Preferred
shares
Common
shares
Contributed
surplus
4,003
20,662
1,157
50
50
50
–
–
–
–
–
(133)
–
–
–
–
–
–
–
177
1
–
–
–
–
–
–
–
–
(6)
13
8
–
–
–
–
Balance at December 31, 2022
3,870
20,840
1,172
Accumulated
other com-
prehensive
income (loss)
213
–
(238)
(238)
–
–
–
–
–
(11)
(19)
(55)
Deficit
Total
Non-
controlling
interest
Total equity
(3,400)
22,635
306
22,941
2,868
413
3,281
–
(41)
–
2,868
175
3,043
171
(27)
(125)
(3,508)
(3,508)
58
7
65
–
–
–
–
2,926
182
3,108
171
(27)
(125)
(3,508)
–
–
19
–
(39)
(39)
(11)
–
–
5
(11)
5
(3,649)
22,178
337
22,515
for the year ended December 5 , 202
(in millions of Canadian dollars)
note
preferred
shares
Common
shares
Contributed
surplus
Accumulated
other com-
prehensive
income
Deficit
total
non-
controlling
interest
total equity
Balance at December 31, 2020
4,003
20,390
1,174
103
(4,681)
20,989
340
21,329
Attributable to BCE shareholders
Net earnings
Other comprehensive income
Total comprehensive income
Common shares issued under
employee stock option plan
Other share-based compensation
Dividends declared on BCE common
and preferred shares
Dividends declared by subsidiaries
to non-controlling interest
Settlement of cash flow hedges
transferred to the cost basis
of hedged items
Other
Balance at December 31, 2021
50
50
–
–
–
–
–
–
–
–
–
–
–
–
272
–
–
–
–
–
–
–
–
(10)
(7)
–
–
–
–
–
90
90
–
–
–
–
20
–
2,840
1,779
4,619
2,840
1,869
4,709
–
(32)
262
(39)
(3,306)
(3,306)
52
2
54
–
–
–
2,892
1,871
4,763
262
(39)
(3,306)
–
–
–
–
20
–
(87)
(87)
–
(1)
20
(1)
4,003
20,662
1,157
213
(3,400)
22,635
306
22,941
20
BCE InC. AnnuAl fInAnCIAl rEport 2022
Consolidated fi nancial statements Consolidated statements of cash flows
for the year ended December 5
(in millions of Canadian dollars)
Cash flows from operating activities
Net earnings
Adjustments to reconcile net earnings to cash flows from operating activities
Severance, acquisition and other costs
Depreciation and amortization
Post-employment benefit plans cost
Net interest expense
Impairment of assets
(Gains) losses on investments
Income taxes
Contributions to post-employment benefit plans
Payments under other post-employment benefit plans
Severance and other costs paid
Interest paid
Income taxes paid (net of refunds)
Acquisition and other costs paid
Change in contract assets
Change in wireless device financing plan receivables
Net change in operating assets and liabilities
Cash flows from operating activities
Cash flows used in investing activities
Capital expenditures
Business acquisitions
Business dispositions
Spectrum licences
Other investing activities
Cash flows used in investing activities
Cash flow used in financing activities
Increase in notes payable
Increase (decrease) in securitized receivables
Issue of long-term debt
Repayment of long-term debt
Issue of common shares
Purchase of shares for settlement of share-based payments
Repurchase of preferred shares
Cash dividends paid on common shares
Cash dividends paid on preferred shares
Cash dividends paid by subsidiaries to non-controlling interest
Other financing activities
Cash flow used in financing activities
Net (decrease) increase in cash
Cash at beginning of year
Cash at end of year
Net increase in cash equivalents
Cash equivalents at beginning of year
Cash equivalents at end of year
note
6
7, 4
27
3
4
0
27
27
6
2
2, 5
6
4, 6
4
26
27
27
50
5
50
2
2022
2,926
94
4,723
198
1,124
279
(24)
967
(140)
(64)
(129)
(1,197)
(749)
(10)
(59)
22
404
8,365
(5,133)
(429)
52
(3)
(4)
(5,517)
111
700
1,951
(2,023)
171
(255)
(125)
(3,312)
(136)
(39)
(31)
(2,988)
(190)
289
99
50
–
50
202
2,892
209
4,609
286
1,063
197
6
1,044
(282)
(65)
(208)
(1,080)
(913)
(35)
278
(365)
372
8,008
(4,852)
(12)
–
(2,082)
(72)
(7,018)
351
(150)
4,985
(2,751)
261
(297)
–
(3,132)
(125)
(86)
19
(925)
65
224
289
–
–
–
2
Consolidated fi nancial statements Notes to consolidated financial statements
We, us, our, BCE and the company mean, as the context may require, either BCE Inc. or, collectively, BCE Inc., Bell Canada, their subsidiaries,
joint arrangements and associates.
notE Corporate information
BCE is incorporated and domiciled in Canada. BCE’s head office is located at 1, Carrefour Alexander-Graham-Bell, Verdun, Québec, Canada.
BCE is a communications company providing wireless, wireline, Internet and television (TV) services to residential, business and wholesale
customers in Canada. Our Bell Media segment provides conventional TV, specialty TV, pay TV, streaming services, digital media services, radio
broadcasting services and out-of-home (OOH) advertising services to customers in Canada. The consolidated financial statements (financial
statements) were approved by BCE’s board of directors on March 2, 2023.
notE 2 Significant accounting policies
A) Basis of presentation
The financial statements were prepared in accordance with International
Financial Reporting Standards (IFRS), as issued by the International
Accounting Standards Board (IASB). The financial statements have
been prepared on a historical cost basis, except for certain financial
instruments that are measured at fair value as described in our
accounting policies.
B) Basis of consolidation
We consolidate the financial statements of all of our subsidiaries.
Subsidiaries are entities we control, where control is achieved when
the company is exposed or has the right to variable returns from its
involvement with the investee and has the current ability to direct the
activities of the investee that significantly affect the investee’s returns.
The results of subsidiaries acquired during the year are consolidated
from the date of acquisition and the results of subsidiaries sold
during the year are deconsolidated from the date of disposal. Where
necessary, adjustments are made to the financial statements of
All amounts are in millions of Canadian dollars, except where noted.
Functional currency
The financial statements are presented in Canadian dollars, the
company’s functional currency.
acquired subsidiaries to conform their accounting policies to ours.
All intercompany transactions, balances, income and expenses are
eliminated on consolidation.
Changes in our ownership interest in a subsidiary that do not result in a
loss of control are accounted for as equity transactions, with no effect on
net earnings or on Other comprehensive income. Any difference between
the change in the carrying amount of non-controlling interest (NCI)
and the consideration paid or received is attributed to owner’s equity.
C) Revenue from contracts with customers
Revenue is measured based on the value of the expected consideration in
a contract with a customer and excludes sales taxes and other amounts
we collect on behalf of third parties. We recognize revenue when control
of a product or service is transferred to a customer. When our right
to consideration from a customer corresponds directly with the value
to the customer of the products and services transferred to date, we
recognize revenue in the amount to which we have a right to invoice.
For bundled arrangements, we account for individual products and
services when they are separately identifiable and the customer can
benefit from the product or service on its own or with other readily
available resources. The total arrangement consideration is allocated to
each product or service included in the contract with the customer based
on its stand-alone selling price. We generally determine stand-alone
selling prices based on the observable prices at which we sell products
separately without a service contract and prices for non-bundled
service offers with the same range of services, adjusted for market
conditions and other factors, as appropriate. When similar products
and services are not sold separately, we use the expected cost plus
margin approach to determine stand-alone selling prices. Products
and services purchased by a customer in excess of those included in
the bundled arrangement are accounted for separately.
We may enter into arrangements with subcontractors and others
who provide services to our customers. When we act as the principal
in these arrangements, we recognize revenues based on the amounts
billed to our customers. Otherwise, we recognize the net amount that
we retain as revenues.
A contract asset is recognized in the consolidated statements of
financial position (statements of financial position) when our right to
consideration from the transfer of products or services to a customer
is conditional on our obligation to transfer other products or services.
Contract assets are transferred to trade receivables when our right
to consideration becomes conditional only as to the passage of time.
A contract liability is recognized in the statements of financial position
when we receive consideration in advance of the transfer of products
or services to the customer. Contract assets and liabilities relating to
the same contract are presented on a net basis.
22
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Incremental costs of obtaining a contract with a customer, principally
comprised of sales commissions, and prepaid contract fulfillment costs
are included in contract costs in the statements of financial position,
except where the amortization period is one year or less, in which case
costs of obtaining a contract are immediately expensed. Capitalized
costs are amortized on a systematic basis that is consistent with the
period and pattern of transfer to the customer of the related products
or services.
Wireless segment revenues
Our Wireless segment principally generates revenue from providing
integrated digital wireless voice and data communications products
and services to residential and business customers.
We recognize product revenues from the sale of wireless handsets
and devices when a customer takes possession of the product. We
recognize wireless service revenues over time, as the services are
provided. For bundled arrangements, stand-alone selling prices are
determined using observable prices adjusted for market conditions
and other factors, as appropriate.
For wireless products and services that are sold separately, customers
usually pay in full at the point of sale for products and on a monthly
basis for services. For wireless products and services sold in bundled
arrangements, including device financing plans, customers pay monthly
over a contract term of up to 24 months for residential customers and
up to 36 months for business customers. If they include a significant
financing component, device financing plan receivables are discounted
at market rates and interest revenue is accreted over the contractual
repayment period.
Wireline segment revenues
Our Wireline segment principally generates revenue from providing
data, including Internet access and Internet protocol television (IPTV),
local telephone, long distance, satellite TV service and connectivity,
as well as other communications services and products to residential
and business customers. Our Wireline segment also includes revenues
from our wholesale business, which buys and sells local telephone, long
distance, data and other services from or to resellers and other carriers.
We recognize product revenues from the sale of wireline equipment
when a customer takes possession of the product. We recognize service
revenues over time, as the services are provided. Revenues on certain
long-term contracts are recognized using output methods based on
products delivered, performance completed to date, time elapsed or
milestones met. For bundled arrangements, stand-alone selling prices
are determined using observable prices adjusted for market conditions
and other factors, as appropriate, or the expected cost plus margin
approach for customized business arrangements.
For wireline customers, products are usually paid in full at the point of
sale. Services are paid for on a monthly basis except where a billing
schedule has been established with certain business customers under
long-term contracts that can generally extend up to seven years.
Media segment revenues
Our Media segment principally generates revenue from conventional
TV, specialty TV, digital media, radio broadcasting and OOH advertising
and subscriber fees from specialty TV, pay TV and streaming services.
We recognize advertising revenue when advertisements are aired on
the radio or TV, posted on our websites or appear on our advertising
panels and street furniture. Revenues relating to subscriber fees are
recorded on a monthly basis as the services are provided. Customer
payments are due monthly as the services are provided.
D) Share-based payments
Our share-based payment arrangements include an employee savings
plan (ESP), restricted share units (RSUs) and performance share units
(PSUs), deferred share units (DSUs) and stock options.
ESP
We recognize our ESP contributions as compensation expense in
Operating costs in the consolidated income statements (income
statements). The value of an ESP at the grant date is equal to the value
of one BCE common share. We credit contributed surplus for the
ESP expense recognized over the two-year vesting period, based on
management’s estimate of the accrued employer contributions that
are expected to vest. Upon settlement of shares under the ESP, any
difference between the cost of shares purchased on the open market
and the amount credited to contributed surplus is reflected in the deficit.
RSUs/PSUs
For each RSU/PSU granted, we recognize compensation expense in
Operating costs in the income statements based on the number of
RSUs/PSUs expected to vest over the term of the vesting period, with
a corresponding credit to contributed surplus. The value of a RSU at the
grant date is equal to the value of one BCE common share. The value of
a PSU at the grant date is equal to the value of one BCE common share
or the value estimated using a Monte Carlo simulation for PSUs that
include relative total shareholder return as a performance condition.
Additional RSUs/PSUs are issued to reflect dividends declared on the
common shares.
Compensation expense is adjusted for subsequent changes in
management’s estimate of the number of RSUs/PSUs that are expected
to vest. The effect of these changes is recognized in the period of the
change. Upon settlement of the RSUs/PSUs, any difference between the
cost of shares purchased on the open market and the amount credited
to contributed surplus is reflected in the deficit. Vested RSUs/PSUs are
settled in BCE common shares, DSUs, or a combination thereof.
DSUs
If compensation is elected to be taken in DSUs, we issue DSUs equal
to the fair value of the services received. Additional DSUs are issued
to reflect dividends declared on the common shares. DSUs are settled
in BCE common shares purchased on the open market following the
cessation of employment or when a director leaves the board. We
credit contributed surplus for the fair value of DSUs at the issue date.
Upon settlement of the DSUs, any difference between the cost of shares
purchased on the open market and the amount credited to contributed
surplus is reflected in the deficit.
25
Notes to consolidated fi nancial statements Stock options
We use a fair value-based method to measure the cost of our employee
stock options. The fair value of options granted is determined using a
variation of a binomial option pricing model that takes into account
factors specific to the stock option plan. We recognize compensation
expense in Operating costs in the income statements, based on the
number of stock options that are expected to vest. Compensation
expense is adjusted for subsequent changes in management’s estimate
of the number of stock options that are expected to vest.
We credit contributed surplus for stock option expense recognized over
the vesting period. When stock options are exercised, we credit share
capital for the amount received and the amounts previously credited
to contributed surplus.
E) Income and other taxes
Current and deferred income tax expense is recognized in the income
statements, except to the extent that the expense relates to items
recognized in Other comprehensive income or directly in equity.
A current or non-current tax asset (liability) is the estimated tax
receivable (payable) on taxable earnings (loss) for the current or
past periods.
We use the liability method to account for deferred tax assets and
liabilities, which arise from:
• temporary differences between the carrying amount of assets and
liabilities recognized in the statements of financial position and their
corresponding tax bases
• the carryforward of unused tax losses and credits, to the extent they
can be used in the future
Deferred tax assets and liabilities are calculated at the tax rates that
are expected to apply when the asset or liability is recovered or settled.
Both our current and deferred tax assets and liabilities are calculated
using tax rates that have been enacted or substantively enacted at
the reporting date.
Deferred taxes are provided on temporary differences arising from
investments in subsidiaries, joint arrangements and associates, except
where we control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the
foreseeable future.
Tax liabilities are, where permitted, offset against tax assets within the
same taxable entity and tax jurisdiction.
Investment tax credits (ITCs), other tax credits
and government grants
We recognize ITCs, other tax credits and government grants given on
eligible expenditures when it is reasonably assured that they will be
realized. They are presented as part of Trade and other receivables and
Other current assets in the statements of financial position when they
are expected to be utilized in the next year. We use the cost reduction
method to account for ITCs and government grants, under which the
credits are applied against the expense or asset to which the ITC or
government grant relates.
F) Cash equivalents
Cash equivalents are comprised of highly liquid investments with original maturities of three months or less from the date of purchase and are
measured at amortized cost.
G) Securitization of receivables
Proceeds on the securitization of receivables are recognized as a collateralized borrowing as we do not transfer control and substantially all
the risks and rewards of ownership to another entity.
H) Inventory
We measure inventory at the lower of cost and net realizable value. Inventory includes all costs to purchase, convert and bring the inventories
to their present location and condition. We determine cost using specific identification for major equipment held for resale and the weighted
average cost formula for all other inventory. We maintain inventory valuation reserves for inventory that is slow-moving or potentially obsolete,
calculated using an inventory aging analysis.
I) Property, plant and equipment
We record property, plant and equipment at historical cost. Historical
cost includes expenditures that are attributable directly to the acquisition
or construction of the asset, including the purchase cost, and labour.
Borrowing costs are capitalized for qualifying assets, if the time to
build or develop is in excess of one year, at a rate that is based on our
weighted average interest rate on outstanding long-term debt. Gains
or losses on the sale or retirement of property, plant and equipment
are recorded in Other (expense) income in the income statements.
Leases
We enter into leases for network infrastructure and equipment, land
and buildings in the normal course of business. Lease contracts are
typically made for fixed periods but may include purchase, renewal or
termination options. Leases are negotiated on an individual basis and
contain a wide range of different terms and conditions.
We adopted IFRS 16 – Leases as of January 1, 2019. Certain finance leases
entered into prior to 2019 were initially measured under IAS 17 – Leases,
as permitted by the transition provisions of IFRS 16.
26
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements IfrS 6
We assess whether a contract contains a lease at inception of the
contract. A lease contract conveys the right to control the use of an
identified asset for a period in exchange for consideration. We recognize
lease liabilities with corresponding right-of-use assets for all lease
agreements, except for short-term leases and leases of low value
assets, which are expensed on a straight-line basis over the lease
term. Consideration in a contract is allocated to lease and non-lease
components on a relative stand-alone value basis. We generally account
for lease components and any associated non-lease components as
a single lease component.
Lease liabilities are initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted
using our incremental borrowing rate, unless the rate implicit in the
lease is readily determinable. We apply a single incremental borrowing
rate to a portfolio of leases with similar characteristics. Lease payments
included in the measurement of the lease liability comprise:
• fixed (and in-substance fixed) lease payments, less any lease incentives
• variable lease payments that depend on an index or rate
• payments expected under residual value guarantees and payments
relating to purchase options and renewal option periods that are
reasonably certain to be exercised (or periods subject to termination
options that are not reasonably certain to be exercised)
Lease liabilities are subsequently measured at amortized cost using
the effective interest method. Lease liabilities are remeasured, with a
corresponding adjustment to the related right-of-use assets, when
there is a change in variable lease payments arising from a change
in an index or rate, or when we change our assessment of whether
purchase, renewal or termination options will be exercised.
Right-of-use assets are measured at cost, and are comprised of the
initial measurement of the corresponding lease liabilities, lease payments
made at or before the commencement date and any initial direct costs.
They are subsequently depreciated on a straight-line basis and reduced
by impairment losses, if any. Right-of-use assets may also be adjusted
to reflect the remeasurement of related lease liabilities. If we obtain
ownership of the leased asset by the end of the lease term or the cost
of the right-of-use asset reflects the exercise of a purchase option,
we depreciate the right-of-use asset from the lease commencement
date to the end of the useful life of the underlying asset. Otherwise,
we depreciate the right-of-use asset from the commencement date
to the earlier of the end of the useful life of the underlying asset or the
end of the lease term.
Variable lease payments that do not depend on an index or rate are not
included in the measurement of lease liabilities and right-of-use assets.
The related payments are expensed in Operating costs in the period
in which the event or condition that triggers those payments occurs.
IAS 7
Under IAS 17, leases of property, plant and equipment are recognized as
finance leases when we obtain substantially all the risks and rewards
of ownership of the underlying assets. At the inception of the lease, we
record an asset together with a corresponding long-term lease liability,
at the lower of the fair value of the leased asset or the present value of
the minimum future lease payments, excluding non-lease components.
Asset retirement obligations (AROs)
We initially measure and record AROs at management’s best estimate
using a present value methodology, adjusted subsequently for any
changes in the timing or amount of cash flows and changes in discount
rates. We capitalize asset retirement costs as part of the related assets
and amortize them into earnings over time. We also increase the ARO
and record a corresponding amount in interest expense to reflect the
passage of time.
J) Intangible assets
Finite-life intangible assets
Finite-life intangible assets are recorded at cost less accumulated
amortization and accumulated impairment losses, if any.
Software
We record internal-use software at historical cost. Cost includes
expenditures that are attributable directly to the acquisition or
development of the software, including the purchase cost and labour.
Software development costs are capitalized when all the following
conditions are met:
• technical feasibility can be demonstrated
• management has the intent and the ability to complete the asset for
use or sale
• it is probable that economic benefits will be generated
• costs attributable to the asset can be measured reliably
Customer relationships
Customer relationship assets are acquired through business
combinations and are recorded at fair value at the date of acquisition.
program and feature film rights
We account for program and feature film rights as intangible assets
when these assets are acquired for the purpose of distribution through
broadcasting, digital media and streaming services. Program and feature
film rights, which include producer advances and licence fees paid in
advance of receipt of the program or film, are stated at acquisition cost
less accumulated amortization and accumulated impairment losses, if
any. Programs and feature films under licence agreements are recorded
as assets for rights acquired and liabilities for obligations incurred when:
• we receive a broadcast master and the cost is known or reasonably
determinable for new program and feature film licences; or
• the licence term commences for licence period extensions or
syndicated programs
Related liabilities of programs and feature films are classified as
current or non-current, based on the payment terms. Amortization of
program and feature film rights is recorded in Operating costs in the
income statements.
27
Notes to consolidated fi nancial statements Indefinite-life intangible assets
Brand assets, mainly comprised of the Bell, Bell Media and Bell MTS
brands, and broadcast licences are acquired through business
combinations and are recorded at fair value at the date of acquisition,
less accumulated impairment losses, if any. Wireless spectrum licences
are recorded at acquisition cost, including borrowing costs when the
time to build or develop the related network is in excess of one year.
Borrowing costs are calculated at a rate that is based on our weighted
average interest rate on outstanding long-term debt.
Currently, there are no legal, regulatory, competitive or other factors
that limit the useful lives of our indefinite-life intangible assets.
K) Depreciation and amortization
We depreciate property, plant and equipment and amortize finite-life
intangible assets on a straight-line basis over their estimated useful lives.
We review our estimates of useful lives on an annual basis and adjust
depreciation and amortization on a prospective basis, as required. Land
and assets under construction or development are not depreciated.
Property, plant and equipment
Network infrastructure and equipment
Buildings
Finite-life intangible assets
Software
Customer relationships
Program and feature film rights
Estimated useful life
2 to 50 years
5 to 50 years
2 to 12 years
2 to 26 years
Up to 5 years
L) Investments in associates and joint arrangements
Our financial statements incorporate our share of the results of our
associates and joint ventures using the equity method of accounting,
except when the investment is classified as held for sale. Equity income
from investments is recorded in Other (expense) income in the income
statements.
Investments are reviewed for impairment at each reporting period and
we compare their recoverable amount to their carrying amount when
there is an indication of impairment.
We recognize our share of the assets, liabilities, revenues and expenses of
joint operations in accordance with the related contractual agreements.
Investments in associates and joint ventures are recognized initially at
cost and adjusted thereafter to include the company’s share of income
or loss and comprehensive income or loss on an after-tax basis.
M) Business combinations and goodwill
Business combinations are accounted for using the acquisition method.
The consideration transferred in a business combination is measured
at fair value at the date of acquisition. Acquisition-related transaction
costs are expensed as incurred and recorded in Severance, acquisition
and other costs in the income statements.
Identifiable assets and liabilities, including intangible assets, of
acquired businesses are recorded at their fair values at the date of
acquisition. When we acquire control of a business, any previously-held
equity interest is remeasured to fair value and any gain or loss
N) Impairment of non-financial assets
Goodwill and indefinite-life intangible assets are tested for impairment
annually or when there is an indication that the asset may be impaired.
Property, plant and equipment and finite-life intangible assets are tested
for impairment if events or changes in circumstances, assessed at
each reporting period, indicate that their carrying amount may not be
recoverable. For the purpose of impairment testing, assets other than
goodwill are grouped at the lowest level for which there are separately
identifiable cash inflows.
Impairment losses are recognized and measured as the excess of the
carrying value of the assets over their recoverable amount. An asset’s
recoverable amount is the higher of its fair value less costs of disposal
and its value in use. Previously recognized impairment losses, other than
those attributable to goodwill, are reviewed for possible reversal at each
reporting date and, if the asset’s recoverable amount has increased,
all or a portion of the impairment is reversed.
26
BCE InC. AnnuAl fInAnCIAl rEport 2022
on remeasurement is recognized in Other (expense) income in the
income statements. The excess of the purchase consideration and any
previously-held equity interest over the fair value of identifiable net
assets acquired is recorded as Goodwill in the statements of financial
position. If the fair value of identifiable net assets acquired exceeds
the purchase consideration and any previously-held equity interest,
the difference is recognized in Other (expense) income in the income
statements immediately as a bargain purchase gain.
Goodwill impairment testing
We perform an annual test for goodwill impairment in the fourth quarter
for each of our cash-generating units (CGUs) or groups of CGUs to
which goodwill is allocated, and whenever there is an indication that
goodwill might be impaired.
A CGU is the smallest identifiable group of assets that generates cash
inflows that are independent of the cash inflows from other assets or
groups of assets.
We identify any potential impairment by comparing the carrying value
of a CGU or group of CGUs to its recoverable amount. The recoverable
amount of a CGU or group of CGUs is the higher of its fair value less costs
of disposal and its value in use. Both fair value less costs of disposal and
value in use are based on estimates of discounted future cash flows
or other valuation methods. Cash flows are projected based on past
experience, actual operating results and business plans, including any
Notes to consolidated fi nancial statements impact from rising interest rates and inflation. When the recoverable
amount of a CGU or group of CGUs is less than its carrying value, the
recoverable amount is determined for its identifiable assets and liabilities.
The excess of the recoverable amount of the CGU or group of CGUs
over the total of the amounts assigned to its assets and liabilities is the
recoverable amount of goodwill.
An impairment charge is recognized in the income statements for any
excess of the carrying value of goodwill over its recoverable amount.
For purposes of impairment testing of goodwill, our CGUs or groups
of CGUs correspond to our reporting segments as disclosed in Note 3,
Segmented information.
O) Financial instruments and contract assets
We measure trade and other receivables, including wireless device
financing plan receivables, at amortized cost using the effective interest
method, net of any allowance for doubtful accounts.
Our portfolio investments in equity securities are classified as fair
value through other comprehensive income and are presented in our
statements of financial position as Other non-current assets. These
securities are recorded at fair value on the date of acquisition, including
related transaction costs, and are adjusted to fair value at each reporting
date. The corresponding unrealized gains and losses are recorded
in Other comprehensive income in the consolidated statements of
comprehensive income (statements of comprehensive income) and are
reclassified from Accumulated other comprehensive (loss) income to
the deficit in the statements of financial position when realized.
P) Derivative financial instruments
We use derivative financial instruments to manage risks related to
changes in interest rates, foreign currency rates, commodity prices
and cash flow exposures related to share-based payment plans, capital
expenditures, long-term debt instruments and operating revenues and
expenses. We do not use derivative financial instruments for speculative
or trading purposes.
Derivatives that mature within one year are included in Other current
assets or Trade payables and other liabilities in the statements of
financial position, whereas derivatives that have a maturity of more
than one year are included in Other non-current assets or Other
non-current liabilities.
Hedge accounting
To qualify for hedge accounting, we document the relationship between
the derivative and the related identified risk exposure, and our risk
management objective and strategy. This includes associating each
derivative to a specific asset or liability, commitment, or anticipated
transaction.
We assess the effectiveness of a derivative in managing an identified
risk exposure when hedge accounting is initially applied, and on an
ongoing basis thereafter. If a hedging relationship ceases to meet the
qualifying criteria, we discontinue hedge accounting prospectively.
Other financial liabilities, which include trade payables and accruals,
compensation payable, obligations imposed by the Canadian Radio-
television and Telecommunications Commission (CRTC), interest payable
and long-term debt, are recorded at amortized cost using the effective
interest method.
We measure the allowance for doubtful accounts and impairment of
contract assets based on an expected credit loss (ECL) model, which
takes into account current economic conditions, historical information,
and forward-looking information, including higher interest rates and
inflation. We use the simplified approach for measuring losses based
on the lifetime ECL for trade and other receivables and contract assets.
Amounts considered uncollectible are written off and recognized in
Operating costs in the income statements.
The cost of issuing debt is included as part of long-term debt and is
accounted for at amortized cost using the effective interest method.
The cost of issuing equity is reflected in the consolidated statements
of changes in equity as a charge to the deficit.
fair value hedges
We use cross currency interest rate swaps to manage foreign currency
and interest rate risk on certain U.S. dollar long-term debt. We use
interest rate swaps to manage the interest rate risk on certain Canadian
dollar long-term debt. Changes in the fair value of these derivatives
and the related debt are recognized in Other (expense) income in the
income statements and offset each other, except for any ineffective
portion of the hedging relationship.
Cash flow hedges
We use foreign currency forward contracts and options to manage
foreign currency risk relating to anticipated purchases denominated
in foreign currencies. Changes in the fair value of these derivatives
are recognized in our statements of comprehensive income, except for
any ineffective portion of the hedging relationship, which is recognized
in Other (expense) income in the income statements. Realized gains
and losses in Accumulated other comprehensive (loss) income are
reclassified to the income statements or to the initial cost of the
non-financial asset in the same periods as the corresponding hedged
transactions are recognized.
We use foreign currency forward contracts to manage foreign currency
risk relating to our U.S. dollar debt under our commercial paper program,
securitization of receivables and committed credit facilities. Changes
in the fair value of these derivatives are recognized in Other (expense)
income in the income statements and offset the foreign currency
translation adjustment on the related debt, except for any portion of
the hedging relationship which is ineffective.
27
Notes to consolidated fi nancial statements We use cross currency interest rate swaps to manage foreign currency
and interest rate risk related to certain U.S. dollar long-term debt.
Changes in the fair value of these derivatives are recognized in our
statements of comprehensive income, except for amounts recorded in
Other (expense) income in the income statements to offset the foreign
currency translation adjustment on the related debt and any portion
of the hedging relationship which is ineffective.
We use forward starting interest rate swaps to manage interest rate
risk related to certain future debt issuances. Changes in the fair value
of these derivatives are recognized in our statements of comprehensive
income, except for any ineffective portion of the hedging relationship,
which is recognized in Other (expense) income in the income statements.
Realized gains and losses in Accumulated other comprehensive (loss)
income are reclassified to Interest expense in the income statements
over the term of the related debt.
Derivatives used as economic hedges
We use derivatives to manage cash flow exposures related to equity
settled share-based payment plans and anticipated purchases in
foreign currencies, interest rate risk related to preferred share dividend
rate resets, interest rate risk related to anticipated debt issuances and
commodity price risk related to the purchase cost of fuel. As these
derivatives do not qualify for hedge accounting, the changes in their fair
value are recorded in the income statements in Other (expense) income.
Q) Post-employment benefit plans
Defined benefit (DB) and other post-employment
benefit (OPEB) plans
We maintain DB pension plans that provide pension benefits for certain
employees and retirees. Benefits are based on the employee’s length
of service and average rate of pay during the highest paid consecutive
five years of service. Most employees are not required to contribute
to the plans. Certain plans provide cost of living adjustments to help
protect the income of retired employees against inflation.
We are responsible for adequately funding our DB pension plans. We
make contributions to them based on various actuarial cost methods
permitted by pension regulatory bodies. Contributions reflect actuarial
assumptions about future investment returns, salary projections, future
service and life expectancy.
We provide OPEBs to some of our employees, including:
• health care and life insurance benefits during retirement, which have
been phased out for new retirees since December 31, 2016. Most of
these OPEB plans are unfunded and benefits are paid when incurred.
• other benefits, including workers’ compensation and medical benefits
to former or inactive employees, their beneficiaries and dependants,
from the time their employment ends until their retirement starts,
under certain circumstances
We accrue our obligations and related costs under post-employment
benefit plans, net of the fair value of the benefit plan assets. Pension
and OPEB costs are determined using:
• the projected unit credit method, prorated on years of service, which
takes into account future pay levels
• a discount rate based on market interest rates of high-quality corporate
fixed income investments with maturities that match the timing of
benefits expected to be paid under the plans
• management’s best estimate of pay increases, retirement ages of
employees, expected healthcare costs and life expectancy
R) Provisions
Provisions are recognized when all the following conditions are met:
• the company has a present legal or constructive obligation based
on past events
• it is probable that an outflow of economic resources will be required
to settle the obligation
• the amount can be reasonably estimated
We value post-employment benefit plan assets at fair value using
current market values.
Post-employment benefit plans current service cost is included in
Operating costs in the income statements. Interest on our post-
employment benefit plan assets and obligations is recognized in
Finance costs in the income statements and represents the accretion
of interest on the assets and obligations under our post-employment
benefit plans. The interest rate is based on market conditions that
existed at the beginning of the year. Actuarial gains and losses for all
post-employment benefit plans are recorded in Other comprehensive
income in the statements of comprehensive income in the period in
which they occur and are recognized immediately in the deficit.
December 31 is the measurement date for our significant post-
employment benefit plans. Our actuaries perform a valuation based
on management’s assumptions at least every three years to determine
the actuarial present value of the accrued DB pension plans and OPEB
obligations. The most recent actuarial valuation of our significant pension
plans was as at December 31, 2021.
Defined contribution (DC) pension plans
We maintain DC pension plans that provide certain employees with
benefits. Under these plans, we are responsible for contributing a
predetermined amount to an employee’s retirement savings, based
on a percentage of the employee’s salary.
We recognize a post-employment benefit plans service cost for DC
pension plans when the employee provides service to the company,
essentially coinciding with our cash contributions.
When eligible, new employees can only participate in the DC pension
plans.
Provisions are measured at the present value of the estimated
expenditures expected to settle the obligation, if the effect of the time
value of money is material. The present value is determined using
current market assessments of the discount rate and risks specific to
the obligation. The obligation increases as a result of the passage of
time, resulting in interest expense which is recognized in Finance costs
in the income statements.
23
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements S) Estimates and key judgments
When preparing the financial statements, management makes estimates
and judgments relating to:
• reported amounts of revenues and expenses
• reported amounts of assets and liabilities
• disclosure of contingent assets and liabilities
We base our estimates on a number of factors, including but not
limited to historical experience, current events such as the effects of
the COVID-19 pandemic, economic and financial market conditions
such as higher interest rates and inflation, supply chain disruptions
and the increasing risk of recession, and actions that the company
may undertake in the future, as well as other assumptions that we
believe are reasonable under the circumstances. A change in these
assumptions may have an impact on our financial statements including
but not limited to impairment testing, fair value determination, expected
credit losses and discount rates used for the present value of cash
flows. By their nature, these estimates and judgments are subject to
measurement uncertainty and actual results could differ. Our more
significant estimates and judgments are described below.
Estimates
useful lives of property, plant and equipment
and finite-life intangible assets
Property, plant and equipment represent a significant proportion of
our total assets. Changes in technology or our intended use of these
assets, climate change and our environmental, social and corporate
governance initiatives as well as changes in business prospects or
economic and industry factors, may cause the estimated useful lives
of these assets to change.
post-employment benefit plans
The amounts reported in the financial statements relating to DB pension
plans and OPEBs are determined using actuarial calculations that are
based on several assumptions.
The actuarial valuation uses management’s assumptions for, among
other things, the discount rate, life expectancy, the rate of compensation
increase, cost of living indexation rate, trends in healthcare costs and
expected average remaining years of service of employees.
The most significant assumptions used to calculate the net post-
employment benefit plans cost are the discount rate and life expectancy.
The discount rate is based on the yield on long-term, high-quality
corporate fixed income investments, with maturities matching the
estimated cash flows of the post-employment benefit plans. Life
expectancy is based on publicly available Canadian mortality tables
and is adjusted for the company’s specific experience.
revenue from contracts with customers
We are required to make estimates that affect the amount of revenue
from contracts with customers, including estimating the stand-alone
selling prices of products and services.
Impairment of non-financial assets
We make a number of estimates when calculating recoverable amounts
using discounted future cash flows or other valuation methods to test
for impairment. These estimates include the assumed growth rates for
future cash flows, the number of years used in the cash flow model
and the discount rate.
Deferred taxes
The amounts of deferred tax assets and liabilities are estimated with
consideration given to the timing, sources and amounts of future
taxable income.
leases
The application of IFRS 16 requires us to make estimates that affect the
measurement of right-of-use assets and liabilities, including determining
the appropriate discount rate used to measure lease liabilities. Lease
liabilities are initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using our
incremental borrowing rate, unless the rate implicit in the lease is
readily determinable. Our incremental borrowing rate is derived from
publicly available risk-free interest rates, adjusted for applicable credit
spreads and lease terms. We apply a single incremental borrowing rate
to a portfolio of leases with similar characteristics.
fair value of financial instruments
Certain financial instruments, such as investments in equity securities,
derivative financial instruments and certain elements of borrowings, are
carried in the statements of financial position at fair value, with changes
in fair value reflected in the income statements and the statements
of comprehensive income. Fair values are estimated by reference to
published price quotations or by using other valuation techniques that
may include inputs that are not based on observable market data, such
as discounted cash flows and earnings multiples.
Contingencies
In the ordinary course of business, we become involved in various
claims and legal proceedings seeking monetary damages and other
relief. Pending claims and legal proceedings represent a potential cost
to our business. We estimate the amount of a loss by analyzing potential
outcomes and assuming various litigation and settlement strategies,
based on information that is available at the time.
onerous contracts
A provision for onerous contracts is recognized when the unavoidable
costs of meeting our obligations under a contract exceed the expected
benefits to be received under the contract. The provision is measured
at the present value of the lower of the expected cost of terminating
the contract and the expected net cost of completing the contract.
Judgments
post-employment benefit plans
The determination of the discount rate used to value our post-
employment benefit obligations requires judgment. The rate is set by
reference to market yields of long-term, high-quality corporate fixed
income investments at the beginning of each fiscal year. Significant
judgment is required when setting the criteria for fixed income
investments to be included in the population from which the yield curve
is derived. The most significant criteria considered for the selection of
investments include the size of the issue and credit quality, along with
the identification of outliers, which are excluded.
24
Notes to consolidated fi nancial statements Income taxes
The calculation of income taxes requires judgment in interpreting tax
rules and regulations. There are transactions and calculations for
which the ultimate tax determination is uncertain. Our tax filings are
also subject to audits, the outcome of which could change the amount
of current and deferred tax assets and liabilities.
those options. To assess if we are reasonably certain to exercise an
option, we consider all facts and circumstances that create an economic
incentive to exercise renewal options (or not exercise termination
options). Economic incentives include the costs related to the termination
of the lease, the significance of any leasehold improvements and the
importance of the underlying assets to our operations.
Management judgment is used to determine the amounts of deferred tax
assets and liabilities to be recognized. In particular, judgment is required
when assessing the timing of the reversal of temporary differences to
which future income tax rates are applied.
leases
The application of IFRS 16 requires us to make judgments that affect
the measurement of right-of-use assets and liabilities. A lease contract
conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. At inception of the contract, we
assess whether the contract contains an identified asset, whether we
have the right to obtain substantially all of the economic benefits from
use of the asset and whether we have the right to direct how and for
what purpose the asset is used. In determining the lease term, we
include periods covered by renewal options when we are reasonably
certain to exercise those options. Similarly, we include periods covered
by termination options when we are reasonably certain not to exercise
revenue from contracts with customers
The identification of performance obligations within a contract and
the timing of satisfaction of performance obligations under long-term
contracts requires judgment. Additionally, the determination of costs
to obtain a contract, including the identification of incremental costs,
also requires judgment.
CGus
The determination of CGUs or groups of CGUs for the purpose of
impairment testing requires judgment.
Contingencies
The determination of whether a loss is probable from claims and legal
proceedings and whether an outflow of resources is likely requires
judgment.
T) Adoption of amended accounting standards
As required, we adopted the following amendments and clarifications to accounting standards issued by the IASB.
Standard
Description
Impact
Onerous Contracts –
Cost of Fulfilling a
Contract, Amendments
to IAS 37 – Provisions,
Contingent Liabilities
and Contingent Assets
IFRIC Agenda Decision
on Demand Deposits
with Restrictions on
Use arising from a
Contract with a Third
Party (IAS 7 – Statement
of Cash Flows)
These amendments clarify which costs should
be included in determining the cost of fulfilling
a contract when assessing whether a contract
is onerous.
In April 2022, the International Financial Reporting
Interpretations Committee (IFRIC) issued an agenda
decision clarifying that an entity should present
a demand deposit with restrictions on use arising
from a contract with a third party as cash and
cash equivalents in the statements of financial
position and cash flows, unless those restrictions
change the nature of the deposit such that it no
longer meets the definition of cash in IAS 7.
These amendments were adopted effective January 1, 2022 and did not have
a significant impact on our financial statements.
In 2022, we applied this agenda decision retrospectively to each prior period
presented, the impact of which was limited to the classification of funding
of $97 million received in Q1 2021 under a subsidy agreement with the
Government of Québec. The application of this agenda decision resulted in
the following:
• an increase in Cash of $82 million with a corresponding decrease in Other
current assets in the statement of financial position as at December 31, 2021
• an increase in Capital expenditures and Other financing activities of ($15)
million and $97 million, respectively, for the year ended December 31, 2021
in the statement of cash flows
• no impact in the statement of financial position as at January 1, 2021 as the
funding was received in Q1 2021.
U) Future changes to accounting standards
The following amendments to standards issued by the IASB have an effective date after December 31, 2022 and have not yet been adopted by BCE.
Standard
Description
Impact
Effective date
Disclosure of Accounting
Policies – Amendments
to IAS 1 – Presentation
of Financial Statements
These amendments require that entities disclose
material accounting policies, as defined, instead of
significant accounting policies.
We are currently assessing the
impact of these amendments on the
disclosure of our accounting policies.
Effective for annual reporting periods
beginning on or after January 1, 2023.
Early application is permitted.
50
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 5 Segmented information
The accounting policies used in our segment reporting are the same
as those we describe in Note 2, Significant accounting policies. Our
segments reflect how we manage our business and how we classify
our operations for planning and measuring performance. Accordingly,
we operate and manage our segments as strategic business units
organized by products and services. Segments negotiate sales with
each other as if they were unrelated parties.
We measure the performance of each segment based on adjusted
EBITDA, which is equal to operating revenues less operating costs for
the segment. Substantially all of our severance, acquisition and other
costs, depreciation and amortization, finance costs and other (expense)
income are managed on a corporate basis and, accordingly, are not
reflected in segment results.
Substantially all of our operations and assets are located in Canada.
Our results are reported in three segments: Bell Wireless, Bell Wireline
and Bell Media.
Bell Wireless includes wireless service revenues and product sales as
well as the results of operations of our national consumer electronics
retailer, The Source (Bell) Electronics Inc. (The Source). Wireless services
are provided to our residential, small and medium-sized business and
large enterprise customers across Canada.
Bell Wireline includes data revenues (including Internet, IPTV, cloud-
based services and business solutions), voice and other communication
services revenues, and wireline product sales. These services are
provided to our residential, small and medium-sized business and
large enterprise customers primarily in Ontario, Québec, the Atlantic
provinces and Manitoba, while satellite TV service and connectivity to
business customers are available nationally across Canada. In addition,
this segment includes the results of our wholesale business, which buys
and sells local telephone, long distance, data and other services from
or to resellers and other carriers.
Bell Media provides conventional TV, specialty TV, pay TV, streaming
services, digital media services, radio broadcasting services and OOH
advertising services to customers nationally across Canada. Revenues
are derived primarily from advertising and subscriber fees.
Segmented information
for the year ended December 5 , 2022
note
Operating revenues
External service revenues
Inter-segment service revenues
Operating service revenues
External product revenues
Inter-segment product revenues
Operating product revenues
Total external revenues
Total inter-segment revenues
Total operating revenues
Operating costs
Adjusted EBITDA (1)
Severance, acquisition and other costs
Depreciation and amortization
Finance costs
Interest expense
Net return on post-employment benefit plans
Impairment of assets
Other expense
Income taxes
Net earnings
Goodwill
Indefinite-life intangible assets
Capital expenditures
7
6
7, 4
7
27
3
4
0
22
4
Bell
Wireless
6,821
44
6,865
2,714
9
2,723
9,535
53
9,588
(5,451)
4,137
Bell
Wireline
11,231
412
11,643
504
1
505
11,735
413
12,148
(6,831)
5,317
Bell
Media
Inter-segment
eliminations
2,904
350
3,254
–
–
–
2,904
350
3,254
(2,509)
745
–
(806)
(806)
–
(10)
(10)
–
(816)
(816)
816
–
3,046
6,192
1,084
4,914
1,788
3,887
2,946
1,846
162
–
–
–
(1) The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs.
BCE
20,956
–
20,956
3,218
–
3,218
24,174
–
24,174
(13,975)
10,199
(94)
(4,723)
(1,146)
51
(279)
(115)
(967)
2,926
10,906
9,826
5,133
5
Notes to consolidated fi nancial statements for the year ended December 5 , 202
note
Operating revenues
External service revenues
Inter-segment service revenues
Operating service revenues
External product revenues
Inter-segment product revenues
Operating product revenues
Total external revenues
Total inter-segment revenues
Total operating revenues
Operating costs
Adjusted EBITDA (1)
Severance, acquisition and other costs
Depreciation and amortization
Finance costs
Interest expense
Net interest on post-employment benefit plans
Impairment of assets
Other income
Income taxes
Net earnings
Goodwill
Indefinite-life intangible assets
Capital expenditures
7
6
7, 4
7
27
3
4
0
22
4
Bell
Wireless
6,355
45
6,400
2,593
6
2,599
8,948
51
8,999
(5,146)
3,853
Bell
Wireline
11,314
358
11,672
506
–
506
11,820
358
12,178
(6,863)
5,315
Bell
Media
Inter-segment
eliminations
2,681
355
3,036
–
–
–
2,681
355
3,036
(2,311)
725
–
(758)
(758)
–
(6)
(6)
–
(764)
(764)
764
–
3,046
6,148
1,120
4,580
1,692
3,612
2,946
1,935
120
–
–
–
(1) The chief operating decision maker uses primarily one measure of profit to make decisions and assess performance, being operating revenues less operating costs.
Revenues by services and products
The following table presents our revenues disaggregated by type of services and products.
BCE
20,350
–
20,350
3,099
–
3,099
23,449
–
23,449
(13,556)
9,893
(209)
(4,609)
(1,082)
(20)
(197)
160
(1,044)
2,892
10,572
9,775
4,852
202
6,355
7,871
3,154
2,681
289
2022
6,821
7,920
3,002
2,904
309
20,956
20,350
2,714
459
45
3,218
24,174
2,593
463
43
3,099
23,449
for the year ended December 5
Services (1)
Wireless
Wireline data
Wireline voice
Media
Other wireline services
Total services
Products (2)
Wireless
Wireline data
Wireline equipment and other
Total products
Total operating revenues
(1) Our service revenues are generally recognized over time.
(2) Our product revenues are generally recognized at a point in time.
52
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Segment reporting changes in 2023
In 2022, we began modifying our internal and external reporting
processes to align with organizational changes that were made
to reflect an increasing strategic focus on multiproduct sales, the
continually increasing technological convergence of our wireless and
wireline telecommunications infrastructure and operations driven by
the deployment of our Fifth Generation (5G) and fibre networks, and
our digital transformation. These factors have made it increasingly
difficult to distinguish between our wireless and wireline operations
and will result in changes in Q1 2023 to the financial information that is
regularly provided to our chief operating decision maker to measure
performance and allocate resources.
Effective with our Q1 2023 results, our previous Bell Wireless and Bell
Wireline operating segments are being combined to form a single
reporting segment called Bell Communication and Technology Services
(Bell CTS). Bell Media remains a distinct operating segment and is
unaffected. As a result of our reporting changes, prior periods are
being restated in 2023 for comparative purposes.
Our Bell CTS segment provides a wide range of communication products
and services to consumers, businesses and government customers
across Canada. Wireless products and services include mobile data and
voice plans and devices and are available nationally. Wireline products
and services comprise data (including Internet access, IPTV, cloud-based
services and business solutions), voice, and other communication
services and products, which are available to our residential, small and
medium-sized business and large enterprise customers primarily in
Ontario, Québec, the Atlantic provinces and Manitoba, while satellite TV
service and connectivity to business customers are available nationally
across Canada. In addition, this segment includes our wholesale business,
which buys and sells local telephone, long distance, data and other
services from or to resellers and other carriers, as well as the results
of operations of our national consumer electronics retailer, The Source.
Our Bell Media segment provides conventional TV, specialty TV, pay TV,
streaming services, digital media services, radio broadcasting services
and OOH and advanced advertising services to customers nationally
across Canada.
For purposes of impairment testing of goodwill in 2023, our CGUs or
groups of CGUs will correspond to our new reporting segments, notably
Bell CTS and Bell Media.
notE 6 Business acquisitions and disposition
Acquisition of Distributel Communications Limited (Distributel)
On December 1, 2022, Bell acquired Distributel, a national independent
communications provider offering a wide range of consumer, business
and wholesale communications services for cash consideration of
$303 million ($282 million net of cash acquired) and $39 million of
estimated additional cash consideration contingent on the achievement
of certain performance objectives. This contingent consideration
is expected to be settled by 2026 and the maximum contingent
consideration payable is $65 million. The acquisition of Distributel is
expected to support Bell’s strategy to grow residential and business
customers. The results of Distributel are included in our Bell Wireline
segment.
The allocation of the purchase price includes provisional estimates, in
particular for indefinite and finite-life intangibles. The following table
summarizes the fair value of the consideration paid and the fair value
assigned to each major class of assets and liabilities.
Cash consideration
Contingent consideration
Total cost to be allocated
Other non-cash working capital
Property, plant and equipment
Indefinite-life intangible assets (1)
Finite-life intangibles (2)
Deferred tax assets
Other long-term assets
Trade payables and other liabilities
Contract liabilities
Deferred tax liabilities
Other long-term liabilities
Cash and cash equivalents
Fair value of net assets acquired
Goodwill (3)
(1) Consists mainly of brand and digital assets.
(2) Consists mainly of customer relationships.
Total
303
39
342
14
29
84
52
8
4
(28)
(3)
(39)
(6)
115
21
136
206
(3) Goodwill arises principally from expected synergies and future growth and is not deductible for tax purposes. Goodwill was allocated to our Bell Wireline group of cash-generating
units (CGUs).
55
Notes to consolidated fi nancial statements Operating revenues of $14 million from Distributel are included in the
income statements from the date of acquisition. BCE’s consolidated
operating revenues for the year ended December 31, 2022 would
have been $24,309 million had the acquisition of Distributel occurred
on January 1, 2022. This proforma amount reflects the elimination of
intercompany transactions and the purchase price allocation. The
transaction did not have a significant impact on our net earnings for 2022.
Acquisition of EBOX and other related companies
In February 2022, Bell acquired EBOX and other related companies,
which provide Internet, telephone and TV services to consumers and
businesses in Québec and parts of Ontario, for cash consideration of
$153 million ($139 million net of cash acquired). The acquisition of EBOX
and other related companies is expected to accelerate growth in Bell’s
residential and small business customers. The results of EBOX and other
related companies are included in our Bell Wireline segment.
The following table summarizes the fair value of the consideration paid
and the fair value assigned to each major class of assets and liabilities.
Cash consideration
Total cost to be allocated
Other non-cash working capital
Property, plant and equipment
Indefinite-life intangible assets (1)
Finite-life intangible and other assets (2)
Trade payables and other liabilities
Contract liabilities
Deferred tax liabilities
Cash and cash equivalents
Fair value of net assets acquired
Goodwill (3)
(1) Consists of brand and digital assets.
(2) Consists mainly of customer relationships.
Total
153
153
5
5
17
15
(17)
(5)
(9)
11
14
25
128
(3) Goodwill arises principally from expected synergies and future growth and is not deductible for tax purposes. Goodwill was allocated to our Bell Wireline group of cash-generating
units (CGUs).
Operating revenues of $41 million from EBOX and other related parties are included in the income statements from the date of acquisition. The
transaction did not have a significant impact on net earnings for 2022.
Disposition of production studios
In December 2022, we entered into an agreement to sell our 63%
ownership in certain production studios and production studios currently
under construction, which are included in our Bell Media segment. The
transaction is expected to close in the first half of 2023 once we achieve
substantial completion of the construction of the production studios
and subject to customary closing conditions. As at December 31, 2022,
construction of the production studios was ongoing and there remain
significant construction activities which must be completed. We estimate
we will receive cash proceeds of approximately $220 million from the
sale transaction, which amount may vary primarily based on the actual
cost incurred to complete the construction of the production studios.
56
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 7 Operating costs
for the year ended December 5
Labour costs
Wages, salaries and related taxes and benefits (1)
Post-employment benefit plans service cost (net of capitalized amounts)
27
Other labour costs (1) (2)
Less:
Capitalized labour
Total labour costs
Cost of revenues (1) (3)
Other operating costs (1) (4)
Total operating costs
note
2022
202
(4,250)
(249)
(1,054)
1,136
(4,417)
(7,641)
(1,917)
(4,233)
(266)
(1,016)
1,068
(4,447)
(7,284)
(1,825)
(13,975)
(13,556)
(1) We have reclassified amounts from the previous period to make them consistent with the presentation for the current period.
(2) Other labour costs include contractor and outsourcing costs.
(3) Cost of revenues includes costs of wireless devices and other equipment sold, network and content costs, and payments to other carriers.
(4) Other operating costs include marketing, advertising and sales commission costs, bad debt expense, taxes other than income taxes, information technology costs, professional service
fees and rent.
Research and development expenses of $57 million are included in operating costs for 2022 and 2021.
notE 6 Severance, acquisition and other costs
for the year ended December 5
Severance
Acquisition and other
Total severance, acquisition and other costs
2022
(83)
(11)
(94)
202
(171)
(38)
(209)
Severance costs
Severance costs consist of charges related to involuntary and voluntary employee terminations.
Acquisition and other costs
Acquisition and other costs consist of transaction costs, such as legal and financial advisory fees, related to completed or potential acquisitions,
employee severance costs related to the purchase of a business, the costs to integrate acquired companies into our operations, costs relating
to litigation and regulatory decisions, when they are significant, and other costs.
notE 7
Interest expense
for the year ended December 5
Interest expense on long-term debt
Interest expense on other debt
Capitalized interest
Total interest expense
2022
(1,148)
(126)
128
(1,146)
202
(1,088)
(57)
63
(1,082)
Included in interest expense on long-term debt is interest on lease
liabilities of $165 million and $177 million for 2022 and 2021, respectively.
Capitalized interest was calculated using an average rate of 3.83%
for 2022 and 2021, which represents the weighted average interest
rate on our outstanding long-term debt.
57
Notes to consolidated fi nancial statements notE 3
Impairment of assets
2022
During the fourth quarter of 2022, we recognized $147 million of
impairment charges for French TV channels within our Bell Media
segment. The impairment charges were the result of a reduction in
advertising demand in the industry resulting from global economic
uncertainties and unfavourable impacts to assumptions for discount
rates. These charges included $94 million allocated to indefinite-life
intangible assets for broadcast licences, and $53 million to finite-life
intangible assets for program and feature film rights. The impairment
was determined by comparing the carrying value of the CGUs to their
fair value less cost of disposal. We estimated the fair value of the CGUs
using the discounted cash flow valuation models, which include five-year
cash flow projections derived from business plans reviewed by senior
management for the period of October 1, 2022 to December 31, 2027,
using a discount rate of 10.3% and a perpetuity growth rate of 0.5%. After
2021
During the second quarter of 2021, we identified indicators of impairment
for our Bell Media radio markets, notably a decline in advertising revenue
and an increase in the discount rate resulting from the impact of the
ongoing COVID-19 pandemic. Accordingly, impairment testing was
required for our group of radio CGUs.
During Q2 2021, we recognized $163 million of impairment charges for
various radio markets within our Bell Media segment. These charges
included $150 million allocated to indefinite-life intangible assets for
broadcast licences, and $13 million to property, plant and equipment
mainly for buildings and network infrastructure and equipment. They
were determined by comparing the carrying value of the CGUs to their
impairments, the carrying value of our impacted CGUs was $109 million.
In previous years’ impairment analysis, the company’s French Pay and
French TV channels were tested for recoverability as one French CGU.
In 2022, the French Pay channels are now grouped with English Pay
channels to form one CGU as a result of Bell Media launching a single
bilingual premium pay product.
There was no impairment of Bell Media goodwill. See Note 22, Goodwill,
for further details.
Additionally in 2022, we recorded impairment charges of $132 million
related mainly to right-of-use assets for certain office spaces we
ceased using as part of our real estate optimization strategy as a result
of our hybrid work policy.
fair value less cost of disposal. We estimated the fair value of the CGUs
using both discounted cash flows and market-based valuation models,
which include five-year cash flow projections derived from business
plans reviewed by senior management for the period of July 1, 2021
to December 31, 2026, using a discount rate of 8.5% and a perpetuity
growth rate of (2.0%), as well as market multiple data from public
companies and market transactions. After impairments, the carrying
value of our group of radio CGUs was $235 million.
There was no impairment of Bell Media goodwill. See Note 22, Goodwill,
for further details.
notE 4 Other (expense) income
for the year ended December 5
note
2022
Net mark-to-market (losses) gains on derivatives used to economically hedge equity settled
share-based compensation plans
Equity losses from investments in associates and joint ventures
Loss on investment
Operations
Losses on retirements and disposals of property, plant and equipment and intangible assets
Gains (losses) on investments
Early debt redemption costs
Other
Total other (expense) income
20
6
27
(53)
(42)
(19)
(27)
24
(18)
20
(115)
202
278
(49)
(46)
(24)
(6)
(53)
60
160
Equity losses from investments in associates and joint ventures
We recorded a loss on investment of $42 million and $49 million in 2022 and 2021, respectively, related to equity losses on our share of an
obligation to repurchase at fair value the minority interest in one of BCE’s joint ventures. The obligation is marked to market each reporting
period and the gain or loss on investment is recorded as equity gains or losses from investments in associates and joint ventures.
56
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Gains (losses) on investments
In 2022, we completed the previously announced sale of our wholly-owned subsidiary 6362222 Canada Inc. (Createch) and recorded a gain
on sale of $39 million. See Note 16, Assets held for sale, for additional details.
Additionally, in 2022, we recorded a loss on investment of $13 million related to an obligation to repurchase at fair value the minority interest
in one of our subsidiaries.
notE 0 Income taxes
The following table shows the significant components of income taxes deducted from net earnings.
for the year ended December 5
Current taxes
Current taxes
Uncertain tax positions
Change in estimate relating to prior periods
Deferred taxes
Deferred taxes relating to the origination and reversal of temporary differences
Change in estimate relating to prior periods
Recognition and utilization of loss carryforwards
Previously unrecognized tax benefits
Uncertain tax positions
Total income taxes
2022
(878)
91
8
(176)
(8)
(4)
–
–
202
(872)
12
42
(184)
(40)
(21)
15
4
(967)
(1,044)
The following table reconciles the amount of reported income taxes in the income statements with income taxes calculated at a statutory income
tax rate of 26.8% for 2022 and 2021.
for the year ended December 5
Net earnings
Add back income taxes
Earnings before income taxes
Applicable statutory tax rate
Income taxes computed at applicable statutory rates
Non-taxable portion of gains (losses) on investments
Uncertain tax positions
Change in estimate relating to prior periods
Non-taxable portion of equity losses
Previously unrecognized tax benefits
Other
Total income taxes
Average effective tax rate
2022
2,926
967
3,893
26.8%
(1,043)
4
91
–
(18)
–
(1)
(967)
24.8%
The following table shows aggregate current and deferred taxes relating to items recognized outside the income statements.
for the year ended December 5
Current taxes
Deferred taxes
Total income taxes (expense) recovery
2022
Other
comprehensive
income
–
(73)
(73)
202
other
comprehensive
income
–
(677)
(677)
Deficit
3
(7)
(4)
202
2,892
1,044
3,936
26.8%
(1,055)
(1)
16
2
(26)
15
5
(1,044)
26.5%
Deficit
1
30
31
57
Notes to consolidated fi nancial statements The following table shows deferred taxes resulting from temporary differences between the carrying amounts of assets and liabilities recognized
in the statements of financial position and their corresponding tax basis, as well as tax loss carryforwards.
net deferred tax liability
January 1, 2021
Income statement
Business acquisitions
Other comprehensive income
Deficit
Reclassified to liabilities held for sale
6
Other
December 31, 2021
Income statement
Business acquisitions
Other comprehensive (income) loss
Deficit
Other
December 31, 2022
non-capital
loss carry-
forwards
note
post-
employment
benefit
plans
Indefinite-
life
intangible
assets
property,
plant and
equipment
and finite-life
intangible
assets
69
(10)
4
–
–
–
–
63
(4)
1
–
–
–
185
(1,717)
(2,175)
2
–
(653)
–
–
–
16
(253)
–
–
–
–
–
(9)
–
16
4
–
other
total
(66)
19
1
(24)
14
1
2
(3,704)
(226)
(4)
(677)
30
5
2
(466)
(1,701)
(2,417)
(53)
(4,574)
15
–
(151)
–
–
(40)
(26)
–
–
–
(307)
(21)
–
–
–
148
(188)
3
78
(7)
16
(43)
(73)
(7)
16
60
(602)
(1,767)
(2,745)
185
(4,869)
At December 31, 2022, BCE had $251 million of non-capital loss
carryforwards. We:
• recognized a deferred tax asset of $60 million for $231 million of the
non-capital loss carryforwards. These non-capital loss carryforwards
expire in varying annual amounts from 2025 to 2042.
At December 31, 2021, BCE had $266 million of non-capital loss
carryforwards. We:
• recognized a deferred tax asset of $63 million for $249 million of the
non-capital loss carryforwards. These non-capital loss carryforwards
expire in varying annual amounts from 2024 to 2041.
• did not recognize a deferred tax asset for $20 million of non-capital
loss carryforwards. This balance expires in varying annual amounts
from 2023 to 2042.
• did not recognize a deferred tax asset for $17 million of non-capital
loss carryforwards. This balance expires in varying annual amounts
from 2023 to 2041.
At December 31, 2022, BCE had $67 million of unrecognized capital loss
carryforwards, which can be carried forward indefinitely.
At December 31, 2021, BCE had $69 million of unrecognized capital loss
carryforwards, which can be carried forward indefinitely.
notE Earnings per share
The following table shows the components used in the calculation of basic and diluted net earnings per common share for earnings attributable
to common shareholders.
for the year ended December 5
Net earnings attributable to common shareholders – basic
Dividends declared per common share (in dollars)
Weighted average number of common shares outstanding (in millions)
Weighted average number of common shares outstanding – basic
Assumed exercise of stock options (1)
Weighted average number of common shares outstanding – diluted (in millions)
2022
2,716
3.68
911.5
0.5
912.0
202
2,709
3.50
906.3
0.4
906.7
(1) The calculation of the assumed exercise of stock options includes the effect of the average unrecognized future compensation cost of dilutive options. It excludes options for which the
exercise price is higher than the average market value of a BCE common share. The number of excluded options was nil in 2022 and 3,302,850 in 2021.
53
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 2 Trade and other receivables
for the year ended December 5
Trade receivables (1)
Allowance for revenue adjustments
Allowance for doubtful accounts
Current tax receivable
Commodity taxes receivable
Other accounts receivable
Total trade and other receivables
note
24
2022
4,102
(160)
(129)
48
11
266
4,138
202
3,843
(169)
(136)
121
102
188
3,949
(1) The details of securitized receivables are set out in Note 24, Debt due within one year.
Wireless device financing plan receivables
Wireless device financing plan receivables represent amounts owed to us under financing agreements that have not yet been billed. The current
portion of these balances is included in Trade receivables within the Trade and other receivables line item on our statements of financial position
and the long-term portion is included within the Other non-current assets line item on our statements of financial position.
The following table summarizes our wireless device financing plan receivables.
for the year ended December 5
Current
Non-current
Total wireless device financing plan receivables (1)
note
2
2022
1,021
386
1,407
202
1,040
387
1,427
(1) Excludes allowance for doubtful accounts and allowance for revenue adjustments on the current portion of $46 million and $44 million at December 31, 2022 and December 31, 2021,
respectively, and allowance for doubtful accounts and allowance for revenue adjustments on the non-current portion of $15 million at December 31, 2022 and December 31, 2021.
notE 5 Inventory
for the year ended December 5
Wireless devices and accessories
Merchandise and other
Total inventory
2022
238
418
656
202
189
293
482
The total amount of inventory subsequently recognized as an expense in cost of revenues was $3,184 million and $3,080 million for 2022 and
2021, respectively.
54
Notes to consolidated fi nancial statements notE 6 Contract assets and liabilities
The table below provides a reconciliation of the significant changes in the contract assets and the contract liabilities balances.
Contract assets (1)
Contract liabilities
for the year ended December 5
Opening balance, January 1
Revenue recognized included in contract liabilities at the beginning
of the year
Revenue recognized from contract liabilities included in contract assets
at the beginning of the year
Increase in contract liabilities during the year
Increase in contract liabilities included in contract assets during the year
Increase in contract assets from revenue recognized during the year
Contract assets transferred to trade receivables
Acquisitions
Contract terminations transferred to trade receivables
Reclassified to liabilities held for sale
Other
Ending balance, December 31
note
6
6
2022
665
–
89
(83)
728
(586)
–
(50)
–
(39)
724
202
943
–
141
–
(115)
664
(859)
–
(89)
–
(20)
665
2022
1,045
(736)
–
794
–
–
14
8
(1)
–
(39)
202
959
(678)
–
752
–
–
50
13
4
(7)
(48)
1,085
1,045
(1) Net of allowance for doubtful accounts of $19 million and $20 million at December 31, 2022 and December 31, 2021, respectively. See Note 29, Financial and capital management, for
additional details.
notE 7 Contract costs
The table below provides a reconciliation of the contract costs balance.
for the year ended December 5
Opening balance, January 1
Incremental costs of obtaining a contract and contract fulfillment costs
Amortization included in operating costs
Acquisitions
Reclassified to assets held for sale
Ending balance, December 31
Contract costs are amortized over periods ranging from 12 to 84 months.
note
6
2022
894
807
(558)
–
–
1,143
202
764
635
(504)
3
(4)
894
notE 6 Assets held for sale
On March 1, 2022, we completed the previously announced sale of
our wholly-owned subsidiary Createch, a consulting business that
specializes in the optimization of business processes and implementation
of technological solutions, which was included in our Bell Wireline
segment. We recorded cash proceeds of $54 million and a gain on sale of
$39 million (before tax expense of $2 million) in Other (expense) income.
Our results for the years ended December 31, 2022 and 2021 included
Createch revenue of $10 million and $64 million and net earnings of
nil and $5 million, respectively.
The assets and liabilities of Createch were presented as held for sale
in our statement of financial position at December 31, 2021, measured
at their carrying amount, which is lower than the estimated fair value
less costs to sell. Property, plant and equipment and intangible assets
included in assets held for sale were no longer depreciated or amortized
effective December 2021.
60
BCE InC. AnnuAl fInAnCIAl rEport 2022
The following table summarizes the carrying value of the assets and
liabilities that are classified as held for sale at December 31, 2021.
Trade and other receivables
Contract costs
Prepaid expenses
Property, plant and equipment
Intangible assets
Other non-current assets
Goodwill
Total assets held for sale
Trade payables and other liabilities
Contract liabilities
Deferred tax liabilities
Other non-current liabilities
Total liabilities held for sale
Net assets held for sale
202
29
4
1
2
1
7
6
50
18
7
5
5
35
15
Notes to consolidated fi nancial statements notE 7 Property, plant and equipment
note
Network
infrastructure
and equipment (1)
Land and
buildings (1)
Assets under
construction
Impairment losses recognized in earnings
3
for the year ended December 5 , 2022
Cost
January 1, 2022
Additions
Business combinations/(business disposition)
Transfers
Retirements and disposals
December 31, 2022
Accumulated depreciation
January 1, 2022
Depreciation
Business disposition
Retirements and disposals
Transfers
Other
December 31, 2022
Net carrying amount
January 1, 2022
December 31, 2022
(1) Includes right-of-use assets. See Note 18, Leases, for additional details.
for the year ended December 5 , 202
Cost
January 1, 2021
Additions
Business combinations
Transfers
Retirements and disposals
Impairment losses recognized in earnings
Reclassified to assets held for sale
December 31, 2021
Accumulated depreciation
January 1, 2021
Depreciation
Retirements and disposals
Transfers
Reclassified to assets held for sale
Other
December 31, 2021
Net carrying amount
January 1, 2021
December 31, 2021
(1) Includes right-of-use assets. See Note 18, Leases, for additional details.
Total
82,053
5,893
(14)
(1,087)
(3,101)
(132)
83,612
53,818
3,660
(21)
(3,053)
–
(48)
54,356
28,235
29,256
total
79,198
5,484
14
(1,034)
(1,587)
(19)
(3)
70,923
2,824
11
1,180
(3,063)
–
71,875
49,122
3,195
(14)
(3,025)
2
(44)
8,889
394
(28)
51
(35)
(132)
9,139
4,696
465
(7)
(28)
(2)
(4)
49,236
5,120
2,241
2,675
3
(2,318)
(3)
–
2,598
–
–
–
–
–
–
–
21,801
22,639
4,193
4,019
2,241
2,598
network
infrastructure
and equipment (1)
note
land and
buildings (1)
Assets under
construction
69,477
2,643
2
358
(1,550)
(4)
(3)
7,832
326
12
771
(37)
(15)
–
1,889
2,515
–
(2,163)
–
–
–
3
6
6
70,923
8,889
2,241
82,053
47,563
3,220
(1,515)
(95)
(1)
(50)
4,122
407
(27)
191
–
3
49,122
4,696
–
–
–
–
–
–
–
21,914
21,801
3,710
4,193
1,889
2,241
51,685
3,627
(1,542)
96
(1)
(47)
53,818
27,513
28,235
6
Notes to consolidated fi nancial statements notE 3 Leases
Right-of-use assets
BCE’s significant right-of-use assets under leases are satellites, office premises, land, cellular tower sites, retail outlets and OOH advertising
spaces. Right-of-use assets are presented in Property, plant and equipment in the statements of financial position.
note
Network
infrastructure
and equipment
Land and
buildings
3
3,240
681
(195)
2
(35)
–
3,693
1,554
374
(112)
–
(12)
1,804
1,686
1,889
3,931
336
(6)
(11)
(7)
(124)
4,119
1,538
335
(5)
(7)
(3)
1,858
2,393
2,261
network
infrastructure
and equipment
note
land and
buildings
Total
7,171
1,017
(201)
(9)
(42)
(124)
7,812
3,092
709
(117)
(7)
(15)
3,662
4,079
4,150
total
6,685
788
(255)
12
(53)
(6)
3,690
574
(977)
–
(47)
–
2,995
214
722
12
(6)
(6)
3,240
3,931
7,171
1,473
419
(310)
(28)
1,554
2,217
1,686
1,086
275
177
–
1,538
1,909
2,393
2,559
694
(133)
(28)
3,092
4,126
4,079
for the year ended December 5 , 2022
Cost
January 1, 2022
Additions
Transfers
Business combinations/(business disposition)
Lease terminations
Impairment losses recognized in earnings
December 31, 2022
Accumulated depreciation
January 1, 2022
Depreciation
Transfers
Business disposition
Lease terminations
December 31, 2022
Net carrying amount
January 1, 2022
December 31, 2022
for the year ended December 5 , 202
Cost
January 1, 2021
Additions
Transfers
Business combinations
Lease terminations
Impairment losses recognized in earnings
3
December 31, 2021
Accumulated depreciation
January 1, 2021
Depreciation
Transfers
Lease terminations
December 31, 2021
Net carrying amount
January 1, 2021
December 31, 2021
62
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Leases in net earnings
The following table provides the expenses related to leases recognized in net earnings.
for the year ended December 5
Interest expense on lease liabilities
Variable lease payment expenses not included in the measurement of lease liabilities
Expenses for leases of low value assets
Expenses for short-term leases
2022
165
133
60
27
202
177
122
60
31
Leases in the statements of cash flows
Total cash outflow related to leases was $1,272 million and $1,202 million for the period ended December 31, 2022 and December 31, 2021, respectively.
Additional disclosures
See Note 24, Debt due within one year, and Note 25, Long-term debt, for
lease liabilities balances included in the statements of financial position.
See Note 29, Financial and capital management, for a maturity analysis
of lease liabilities.
notE 4 Intangible assets
See Note 34, Commitments and contingencies, for leases committed
but not yet commenced as at December 31, 2022.
for the year ended
December 5 , 2022
Cost
January 1, 2022
Additions
Acquired through business
combinations
Transfers
Retirements and disposals
Impairment losses
recognized in earnings
3
Amortization included in
operating costs
note
Software
Finite-life
Customer
relation-
ships
Program
and feature
film rights
Other
Total
Brands
Indefinite-life
Spectrum
and other
licences
Broadcast
licences
404
12,336
2,409
5,786
1,580
9,565
484
6
1,087
(599)
–
–
1,736
1
65
–
–
–
–
631
1,208
–
–
–
(53)
(1,183)
7
3
–
(7)
–
–
1,700
74
1,087
(606)
(53)
(1,183)
–
26
–
–
–
–
44
75
–
–
–
–
Total
intangible
assets
22,111
1,744
175
1,087
(606)
Total
9,775
44
101
–
–
–
–
–
–
(94)
(94)
(147)
–
–
(1,183)
December 31, 2022
10,543
1,802
603
407
13,355
2,435
5,905
1,486
9,826
23,181
Accumulated amortization
January 1, 2022
Amortization
Retirements and disposals
5,407
926
(599)
969
91
–
December 31, 2022
5,734
1,060
–
–
–
–
165
46
(7)
6,541
1,063
(606)
204
6,998
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,541
1,063
(606)
6,998
Net carrying amount
January 1, 2022
December 31, 2022
4,158
4,809
767
742
631
603
239
203
5,795
6,357
2,409
2,435
5,786
5,905
1,580
1,486
9,775
9,826
15,570
16,183
65
Notes to consolidated fi nancial statements finite-life
Customer
relation-
ships
program
and feature
film rights
note
Software
Indefinite-life
Spectrum
and other
licences (1)
Broadcast
licences
recognized in earnings
3
(28)
for the year ended
December 5 , 202
Cost
January 1, 2021
Additions
Acquired through business
combinations
Transfers
Retirements and disposals
Impairment losses
Amortization included in
operating costs
Reclassified to assets
held for sale
December 31, 2021
Accumulated amortization
January 1, 2021
Amortization
Retirements and disposals
Transfers
Reclassified to assets
held for sale
6
6
9,169
361
–
1,154
(1,089)
–
(2)
1,736
–
–
–
–
–
–
–
9,565
1,736
5,644
851
(1,087)
–
(1)
878
91
–
–
–
645
1,034
–
–
–
–
(1,048)
–
631
–
–
–
–
–
–
other
total
Brands
469
19
52
(125)
(11)
–
–
–
12,019
1,414
52
1,029
(1,100)
(28)
(1,048)
(2)
2,409
–
–
–
–
–
–
–
3,701
2,085
–
–
–
–
–
–
total
intangible
assets
19,859
3,499
52
1,029
(1,100)
total
7,840
2,085
–
–
–
1,730
–
–
–
–
(150)
(150)
(178)
–
–
–
–
(1,048)
(2)
404
12,336
2,409
5,786
1,580
9,775
22,111
235
40
(11)
(99)
6,757
982
(1,098)
(99)
–
(1)
165
6,541
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,757
982
(1,098)
(99)
(1)
6,541
December 31, 2021
5,407
969
Net carrying amount
January 1, 2021
December 31, 2021
3,525
4,158
858
767
645
631
234
239
5,262
5,795
2,409
2,409
3,701
5,786
1,730
1,580
7,840
9,775
13,102
15,570
(1) On December 17, 2021, Bell Mobility Inc. (Bell Mobility) acquired 271 licences in a number of urban and rural markets for 678 million megahertz per population (MHz-Pop) of 3500 MHz
spectrum for $2.07 billion
notE 20 Investments in associates and joint ventures
The following tables provide summarized financial information with respect to BCE’s associates and joint ventures. For more details on our
associates and joint ventures, see Note 35, Related party transactions.
Statements of financial position
for the year ended December 5
Assets
Liabilities
Total net assets
BCE’s share of net assets
Income statements
for the year ended December 5
Revenues
Expenses
Total net losses
BCE’s share of net losses
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
2022
3,857
(2,641)
1,216
608
2022
2,335
(2,456)
(121)
(61)
202
3,852
(2,523)
1,329
668
202
1,855
(2,047)
(192)
(95)
note
4
Notes to consolidated fi nancial statements notE 2 Other non-current assets
for the year ended December 5
Long-term wireless device financing plan receivables
Long-term receivables
Derivative assets
Publicly-traded and privately-held investments
Investments (1)
Other
Total other non-current assets
note
2
24
24
24
2022
386
255
233
215
184
82
202
387
221
274
183
185
56
1,355
1,306
(1) These amounts have been pledged as security related to obligations for certain employee benefits and are not available for general use.
notE 22 Goodwill
The following table provides details about the changes in the carrying amounts of goodwill for the years ended December 31, 2022 and 2021.
BCE’s groups of CGUs for purposes of goodwill impairment testing correspond to our reporting segments.
Balance at January 1, 2021
Acquisitions and other
Reclassified to assets held for sale
Balance at December 31, 2021
Acquisitions and other
Balance at December 31, 2022
note
6
6
Bell
Wireless
3,046
–
–
3,046
–
3,046
Bell
Wireline
4,612
(26)
(6)
4,580
334
4,914
Bell
Media
2,946
–
–
2,946
–
2,946
BCE
10,604
(26)
(6)
10,572
334
10,906
Impairment testing
As described in Note 2, Significant accounting policies, goodwill is tested
annually for impairment or when there is an indication that goodwill
may be impaired, by comparing the carrying value of a CGU or group
of CGUs to the recoverable amount, where the recoverable amount is
the higher of fair value less costs of disposal or value in use.
Recoverable amount
The recoverable amount for each of the Bell Wireless and Bell Wireline
group of CGUs is its value in use. The recoverable amount for the Bell
Media group of CGUs is its fair value less costs of disposal.
The recoverable amount for our groups of CGUs is determined by
discounting five-year cash flow projections derived from business plans
reviewed by senior management. The projections reflect management’s
expectations of revenue, adjusted EBITDA, capital expenditures, working
capital and operating cash flows, based on past experience and future
expectations of operating performance, including any impact from
rising interest rates and inflation. Revenue and cost projections for the
Bell Media group of CGUs also reflect market participant assumptions.
Cash flows beyond the five-year period are extrapolated using
perpetuity growth rates. None of the perpetuity growth rates exceeds the
long-term historical growth rates for the markets in which we operate.
The discount rates are applied to the cash flow projections and are
derived from the weighted average cost of capital for each CGU or
group of CGUs, including any impact from rising interest rates.
The following table shows the key assumptions used to estimate the
recoverable amounts of our groups of CGUs.
Groups of CGus
Bell Wireless
Bell Wireline
Bell Media
Assumptions used
perpetuity
growth rate
Discount
rate
0.8%
1.0%
0.9%
9.1%
6.0%
9.6%
The recoverable amounts determined in a prior year for the Bell Wireless
and Bell Wireline groups of CGUs exceed their corresponding current
carrying values by a substantial margin and have been carried forward
and used in the impairment test for the current year. We believe that
any reasonable possible change in the key assumptions on which the
estimates of recoverable amounts of the Bell Wireless and Bell Wireline
groups of CGUs are based would not cause their carrying amounts to
exceed their recoverable amounts.
For the Bell Media group of CGUs, a decrease of (0.9%) in the perpetuity
growth rate or an increase of 0.6% in the discount rate would have
resulted in its recoverable amount being equal to its carrying value.
67
Notes to consolidated fi nancial statements notE 25 Trade payables and other liabilities
for the year ended December 5
Trade payables and accruals
Compensation payable
Maple Leaf Sports and Entertainment Ltd. (MLSE) financial liability (1)
Commodity taxes payable
Derivative liabilities
Provisions
Other current liabilities (2)
note
24
24
26
2022
3,602
607
149
108
106
74
575
202
2,931
622
149
31
40
81
601
Total trade payables and other liabilities
5,221
4,455
(1) Represents BCE’s obligation to repurchase the BCE Master Trust Fund’s (Master Trust Fund) 9% interest in MLSE at a price not less than an agreed minimum price should the Master Trust
Fund exercise its put option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recorded in Other (expense) income in the income statements.
Subsequent to year end, BCE repurchased the Master Trust Fund’s interest for a cash consideration of $149 million.
(2) Includes a $28 million and $82 million liability as at December 31, 2022 and December 31, 2021, respectively, related to committed funding from the Government of Québec.
notE 26 Debt due within one year
for the year ended December 5
Notes payable (1)
Loans secured by receivables (2)
Long-term debt due within one year (3)
Total debt due within one year
Weighted average
interest rate at
December 5 , 2022
4.27%
5.19%
4.79%
note
24
24
27
2022
869
1,588
1,680
4,137
202
735
900
990
2,625
(1) Includes commercial paper of $627 million in U.S. dollars ($849 million in Canadian dollars) and $561 million in U.S. dollars ($711 million in Canadian dollars) as at December 31, 2022 and
December 31, 2021, respectively, which were issued under our U.S. commercial paper program and have been hedged for foreign currency fluctuations through forward currency contracts.
See Note 29, Financial and capital management, for additional details.
(2) At December 31, 2022, loans secured by receivables totaled $1,173 million in U.S. dollars ($1,588 million in Canadian dollars) and have been hedged for foreign currency fluctuations through
foreign currency forward contracts. At December 31, 2021, loans secured by receivables totaled $900 million in Canadian dollars. See Note 29, Financial and capital management, for
additional details.
(3) Included in long-term debt due within one year is the current portion of lease liabilities of $930 million and $864 million as at December 31, 2022 and December 31, 2021, respectively.
Securitized receivables
In 2022, we entered into a new securitization program which replaced
our previous securitized trade receivables program and now includes
wireless device financing plan receivables. As a result, the maximum
amount available under our securitization program increased from
$1.3 billion at December 31, 2021 to $2.3 billion at December 31, 2022.
The following table provides further details on our securitized receivables
programs during 2022 and 2021.
for the year ended December 5
Average interest rate
throughout the year
Securitized receivables
2022
3.15%
3,353
202
1.07%
1,701
Similar to the previous program, the securitization program is recorded
as a floating rate revolving loan secured by certain receivables. We
continue to service trade receivables and wireless device financing plan
receivables under the securitization program, which matures in July 2025
unless previously terminated. The lenders’ interest in the collection of
these receivables ranks ahead of our interests, which means that we
are exposed to certain risks of default on the amounts securitized.
We have provided various credit enhancements in the form of
overcollateralization and subordination of our retained interests.
The lenders have no further claim on our other assets if customers do
not pay the amounts owed.
In 2021, we terminated our other securitized trade receivables program
and repaid the $150 million balance outstanding under the program.
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Credit facilities
Bell Canada may issue notes under its Canadian and U.S. commercial paper programs up to the maximum aggregate principal amount of
$3 billion in either Canadian or U.S. currency provided that at no time shall such maximum amount of notes exceed $3.5 billion in Canadian
currency, which equals the aggregate amount available under Bell Canada’s committed supporting revolving and expansion credit facilities
as at December 31, 2022. The total amount of the net available committed revolving and expansion credit facilities may be drawn at any time.
The table below is a summary of our total bank credit facilities at December 31, 2022.
Committed credit facilities
Unsecured revolving and expansion credit facilities (1) (2)
Unsecured non-revolving credit facilities (3)
Other
Total committed credit facilities
Total non-committed credit facilities
Total committed and non-committed credit facilities
Total
available
Drawn
Letters of
credit
Commercial
paper
outstanding
Net
available
3,500
647
106
4,253
1,939
6,192
–
–
–
–
–
–
–
–
96
96
808
904
849
–
–
849
–
849
2,651
647
10
3,308
1,131
4,439
(1) Bell Canada’s $2.5 billion committed revolving credit facility expires in August 2027 and its $1 billion committed expansion credit facility expires in August 2025. In 2022, Bell Canada converted
its committed credit facilities into a sustainability-linked loan. The amendment introduces a borrowing cost that varies based on Bell’s performance of certain sustainability performance
targets.
(2) As of December 31, 2022, Bell Canada’s outstanding commercial paper included $627 million in U.S. dollars ($849 million in Canadian dollars). All of Bell Canada’s commercial paper outstanding
is included in Debt due within one year.
(3) In 2022, Bell Canada entered into two 30-year senior unsecured non-revolving credit facilities in the aggregate principal amount of up to $647 million to partly fund the expansion of its
broadband networks as part of government subsidy programs.
Restrictions
Some of our credit agreements:
• require us to meet specific financial ratios
• require us to offer to repay and cancel the credit agreement upon a change of control of BCE or Bell Canada
We are in compliance with all conditions and restrictions under such credit agreements.
notE 27 Long-term debt
for the year ended December 5
Debt securities
1997 trust indenture (1)
1976 trust indenture
2011 trust indenture
2016 U.S. trust indenture (2)
1996 trust indenture (subordinated)
Lease liabilities
Other
Total debt
Net unamortized discount
Unamortized debt issuance costs
Less:
Weighted average
interest rate at
December 5 , 2022
note
Maturity
2022
202
3.82%
9.38%
4.00%
3.32%
8.21%
4.53%
2023–2051
2027–2054
2024
2024–2052
2026–2031
2023–2068
16,747
975
225
6,525
275
4,402
449
29,598
(34)
(101)
(1,680)
27,783
16,750
975
225
5,188
275
4,309
438
28,160
(26)
(96)
(990)
27,048
Amount due within one year
26
Total long-term debt
(1) At December 31, 2022, $500 million has been swapped from fixed to floating using interest rate swaps. See Note 29, Financial and capital management for additional details.
(2) At December 31, 2022 and 2021, notes issued under the 2016 U.S. trust indenture totaled $4,850 million and $4,100 million in U.S. dollars, respectively, and have been hedged for foreign
currency fluctuations through cross currency interest rate swaps, including $600 million in U.S. dollars which has been swapped from fixed to floating. See Note 29, Financial and capital
management, for additional details.
Bell Canada’s debt securities have been issued in Canadian dollars with the exception of debt securities issued under the 2016 U.S. trust indenture,
which have been issued in U.S. dollars. All debt securities were issued at a fixed interest rate. We have entered into interest rate swaps and cross
currency interest rate swaps as disclosed above.
67
Notes to consolidated fi nancial statements Restrictions
Some of our debt agreements:
• impose covenants and new issue tests
• require us to make an offer to repurchase certain series of debt securities upon the occurrence of a change of control event as defined in the
relevant debt agreements
We are in compliance with all conditions and restrictions under such debt agreements.
In Q4 2021, Bell Canada successfully completed a proxy solicitation and obtained the necessary approval from debenture holders to make
certain amendments under its 1976 trust indenture, including the deletion of covenants that required Bell Canada to meet certain financial ratio
tests when issuing long-term debt.
All outstanding debt securities have been issued under trust indentures, are unsecured and have been guaranteed by BCE. All debt securities
have been issued in series and certain series are redeemable at Bell Canada’s option prior to maturity at the prices, times and conditions
specified for each series.
2022
On November 10, 2022, Bell Canada issued, under its 1997 trust indenture,
5.85% Series M-57 medium-term note (MTN) Debentures, with a principal
amount of $1 billion, which mature on November 10, 2032.
On March 16, 2022, Bell Canada redeemed, prior to maturity, its 3.35%
Series M-26 MTN debentures, having an outstanding principal amount
of $1 billion, which were due on March 22, 2023. As a result, for the
year ended December 31, 2022, we recognized early debt redemption
charges of $18 million, which were recorded in Other (expense) income
in the income statement.
2021
On August 12, 2021, Bell Canada issued, under its 2016 trust indenture,
2.15% Series US-5 Notes, with a principal amount of $600 million
in U.S. dollars ($755 million in Canadian dollars), which mature on
February 15, 2032, and 3.20% Series US-6 Notes, with a principal amount
of $650 million in U.S. dollars ($818 million in Canadian dollars), which
mature on February 15, 2052.
On May 28, 2021, Bell Canada issued, under its 1997 trust indenture, 2.20%
Series M-56 MTN debentures, with a principal amount of $500 million,
which mature on May 29, 2028. This issue constitutes Bell Canada’s
first sustainability bond offering.
On April 19, 2021, Bell Canada redeemed, prior to maturity, its 3.00%
Series M-40 MTN debentures, having an outstanding principal amount
of $1.7 billion, which were due on October 3, 2022.
On February 11, 2022, Bell Canada issued, under its 2016 trust indenture,
3.65% Series US-7 Notes, with a principal amount of $750 million in U.S.
dollars ($954 million in Canadian dollars), which mature on August 15,
2052. The Series US-7 Notes have been hedged for foreign currency
fluctuations through cross currency interest rate swaps. See Note 29,
Financial and capital management, for additional details.
Subsequent to year end, on February 9, 2023, Bell Canada issued, under
its 1997 trust indenture, 4.55% Series M-58 MTN debentures, with a
principal amount of $1,050 million, which mature on February 9, 2030.
Additionally, on the same date, Bell Canada issued, under its 1997 trust
indenture, 5.15% Series M-59 MTN Debentures, with a principal amount
of $450 million, which mature on February 9, 2053.
On March 17, 2021, Bell Canada issued, under its 1997 trust indenture,
3.00% Series M-54 MTN debentures, with a principal amount of $1 billion,
which mature on March 17, 2031, and 4.05% Series M-55 MTN debentures,
with a principal amount of $550 million, which mature on March 17, 2051.
Additionally, on March 17, 2021, Bell Canada issued, under its 2016
trust indenture, 0.75% Series US-3 Notes, with a principal amount of
$600 million in U.S. dollars ($747 million in Canadian dollars), which
mature on March 17, 2024, and 3.65% Series US-4 Notes, with a principal
amount of $500 million in U.S. dollars ($623 million in Canadian dollars),
which mature on March 17, 2051.
The Series US-3, Series US-4, Series US-5 and Series US-6 Notes
(collectively, the Notes) have been hedged for foreign currency
fluctuations through cross currency interest rate swaps. See Note 29,
Financial and capital management, for additional details.
For the year ended December 31, 2021, we recognized early debt
redemption costs of $53 million, which were recorded in Other (expense)
income in the income statement.
63
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 26 Provisions
for the year ended December 5
January 1, 2022
Additions
Usage
Reversals
December 31, 2022
Current
Non-current
December 31, 2022
note
25
23
AROs
182
12
(4)
(25)
165
28
137
165
Other (1)
226
38
(38)
(29)
197
46
151
197
Total
408
50
(42)
(54)
362
74
288
362
(1) Other includes environmental, legal, vacant space and other provisions.
AROs reflect management’s best estimates of expected future costs to restore current leased premises to their original condition prior to lease
inception. Cash outflows associated with our ARO liabilities are generally expected to occur at the restoration dates of the assets to which
they relate, which are long-term in nature. The timing and extent of restoration work that will be ultimately required for these sites is uncertain.
notE 27 Post-employment benefit plans
Post-employment benefit plans cost
We provide pension and other benefits for most of our employees. These
include DB pension plans, DC pension plans and OPEBs.
options offered to plan participants, lies with the Risk and Pension Fund
Committee, a committee of our board of directors.
We operate our DB and DC pension plans under applicable Canadian
and provincial pension legislation, which prescribes minimum and
maximum DB funding requirements. Plan assets are held in trust, and
the oversight of governance of the plans, including investment decisions,
contributions to DB plans and the selection of the DC plans investment
The interest rate risk is managed using a liability matching approach,
which reduces the exposure of the DB plans to a mismatch between
investment growth and obligation growth.
The longevity risk is managed using a longevity swap, which reduces
the exposure of the DB plans to an increase in life expectancy.
Components of post-employment benefit plans service cost
for the year ended December 5
DB pension
DC pension
OPEBs
Less:
Capitalized benefit plans cost
Total post-employment benefit plans service cost
Components of post-employment benefit plans financing income (cost)
for the year ended December 5
DB pension
OPEBs
Total net return (interest) on post-employment benefit plans
The statements of comprehensive income include the following amounts before income taxes.
Cumulative gains (losses) recognized directly in equity, January 1
Actuarial gains in other comprehensive income (1)
Increase in the effect of the asset limit in other comprehensive income (2)
Cumulative gains recognized directly in equity, December 31
(1) The cumulative actuarial gains recognized in the statement of comprehensive income are $1,699 million at December 31, 2022.
(2) The cumulative increase in the effect of the asset limit recognized in the statement of comprehensive income is $714 million at December 31, 2022.
2022
(193)
(118)
(2)
64
(249)
2022
84
(33)
51
2022
419
894
(328)
985
202
(223)
(113)
(2)
72
(266)
202
11
(31)
(20)
202
(2,014)
3,020
(587)
419
64
Notes to consolidated fi nancial statements Components of post-employment benefit assets (obligations)
The following table shows the change in post-employment benefit obligations and the fair value of plan assets.
Post-employment benefit obligations, January 1
Current service cost
Interest on obligations
Actuarial gains (1)
Benefit payments
Employee contributions
Other
DB pension plans
opEB plans
total
2022
202
(24,544)
(27,149)
2022
(1,457)
202
(1,600)
2022
202
(26,001)
(28,749)
(193)
(770)
4,856
1,366
(9)
(1)
(223)
(697)
2,137
1,396
(9)
1
(2)
(44)
294
70
–
1
(2)
(39)
113
71
–
–
(195)
(814)
5,150
1,436
(9)
–
(225)
(736)
2,250
1,467
(9)
1
Post-employment benefit obligations, December 31
(19,295)
(24,544)
(1,138)
(1,457)
(20,433)
(26,001)
Fair value of plan assets, January 1
Expected return on plan assets (2)
Actuarial (losses) gains (1)
Benefit payments
Employer contributions
Employee contributions
Transfers to DC plans
Other
28,040
875
(4,227)
(1,366)
81
9
(57)
–
27,785
708
766
(1,396)
168
9
–
–
Fair value of plan assets, December 31
23,355
28,040
Plan asset (deficit)
Effect of asset limit
Interest on effect of asset limit
Post-employment benefit asset (liability), December 31
Post-employment benefit assets
Post-employment benefit obligations
4,060
(980)
(21)
3,059
3,559
(500)
3,496
(652)
–
2,844
3,472
(628)
(1) Actuarial (losses) gains include experience losses of ($4,729) million in 2022 and gains of $907 million in 2021.
(2) The actual (loss) return on plan assets was ($3,370) million or (11.6%) in 2022 and $1,486 million or 5.7% in 2021.
Funded status of post-employment benefit plans
The following table shows the funded status of our post-employment benefit obligations.
351
11
(29)
(70)
64
–
–
–
327
(811)
–
–
(811)
–
(811)
344
8
4
(71)
65
–
–
1
28,391
886
(4,256)
(1,436)
145
9
(57)
–
28,129
716
770
(1,467)
233
9
–
1
351
23,682
28,391
(1,106)
–
–
(1,106)
–
(1,106)
3,249
(980)
(21)
2,248
3,559
(1,311)
2,390
(652)
–
1,738
3,472
(1,734)
for the year ended December 5
Present value of post-employment
benefit obligations
Fair value of plan assets
Plan surplus (deficit)
Effect of asset limit
Post-employment benefit asset (liability)
funded
partially funded (1)
unfunded (2)
total
2022
202
2022
202
2022
202
2022
202
(18,741)
23,291
4,550
(1,001)
3,549
(23,872)
27,979
4,107
(652)
3,455
(1,461)
391
(1,070)
–
(1,070)
(1,840)
412
(1,428)
–
(1,428)
(231)
–
(231)
–
(231)
(289)
–
(289)
–
(289)
(20,433)
23,682
3,249
(1,001)
2,248
(26,001)
28,391
2,390
(652)
1,738
(1) The partially funded plans consist of supplementary executive retirement plans (SERPs) for eligible employees and certain OPEBs. The company partially funds the SERPs through letters
of credit and a retirement compensation arrangement account with Canada Revenue Agency. Certain pa
(2) Our unfunded plans consist of certain OPEBs, which are paid as claims are incurred.
70
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Significant assumptions
We used the following key assumptions to measure the post-employment benefit obligations and the net benefit plans cost for the DB pension
plans and OPEB plans. These assumptions are long-term, which is consistent with the nature of post-employment benefit plans.
for the year ended December 5
Post-employment benefit obligations
Discount rate
Rate of compensation increase
Cost of living indexation rate (1)
Life expectancy at age 65 (years)
(1) Cost of living indexation rate is only applicable to DB pension plans.
for the year ended December 5
Net post-employment benefit plans cost
Discount rate
Rate of compensation increase
Cost of living indexation rate (1)
Life expectancy at age 65 (years)
(1) Cost of living indexation rate is only applicable to DB pension plans.
DB pension plans and opEB plans
2022
5.3%
2.25%
1.6%
23.3
202
3.2%
2.25%
1.6%
23.3
DB pension plans and opEB plans
2022
3.4%
2.25%
1.6%
23.3
202
2.9%
2.25%
1.6%
23.2
The weighted average duration of the post-employment benefit
obligation is 11 years.
Assumed trend rates in healthcare costs have a significant effect on
the amounts reported for the healthcare plans.
We assumed the following trend rates in healthcare costs:
• an annual increase in the cost of medication of 6.5% for 2022
The following table shows the effect of a 1% change in the assumed
trend rates in healthcare costs.
decreasing to 4.0% over 20 years
• an annual increase in the cost of covered dental benefits of 4%
• an annual increase in the cost of covered hospital benefits of 3.7%
• an annual increase in the cost of other covered healthcare benefits
of 4%
Effect on post-employment benefits –
increase/(decrease)
Total service and interest cost
Post-employment benefit obligations
% increase
% decrease
3
75
(3)
(65)
Sensitivity analysis
The following table shows a sensitivity analysis of key assumptions used to measure the net post-employment benefit obligations and the net
post-employment benefit plans cost for our DB pension plans and OPEB plans.
Discount rate
Cost of living indexation rate
Life expectancy at age 65
Impact on net post-employment
benefit plans cost for 2022 –
increase/(decrease)
Impact on post-employment benefit
obligations at December 5 , 2022 –
increase/(decrease)
Change in
assumption
Increase in
assumption
Decrease in
assumption
Increase in
assumption
Decrease in
assumption
0.5%
0.5%
1 year
(83)
46
29
72
(38)
(31)
(1,022)
907
612
1,123
(752)
(634)
Post-employment benefit plan assets
The investment strategy for the post-employment benefit plan assets is to maintain a diversified portfolio of assets invested in a prudent manner
to maintain the security of benefits.
The following table shows the target allocations for 2022 and the allocation of our post-employment benefit plan assets at December 31, 2022
and 2021.
Asset category
Equity securities
Debt securities (1)
Alternative investments (1)
Total
Weighted average
target allocation
total plan assets fair value
2022
December 31, 2022
December 5 , 202
0%–40%
50%–100%
0%–50%
15%
52%
33%
100%
16%
61%
23%
100%
(1) We have reclassified amounts from the previous period to make them consistent with the presentation for the current period.
7
Notes to consolidated fi nancial statements The following table shows the fair value of the DB pension plan assets for each category.
for the year ended December 5
Observable markets data
Equity securities
Canadian
Foreign
Debt securities
Canadian
Foreign (1)
Money market
Non-observable markets inputs
Alternative investments
Private equities (1)
Hedge funds
Real estate and infrastructure (1)
Private debt (1)
Other
Total
2022
202
824
2,555
9,904
1,537
739
1,017
1,374
4,297
1,048
60
23,355
952
3,436
13,643
2,033
1,466
976
1,208
3,576
695
55
28,040
(1) We have reclassified amounts from the previous period to make them consistent with the presentation for the current period.
Equity securities included approximately $11 million of BCE common
shares, or 0.05% of total plan assets, at December 31, 2022 and
$3 million of BCE common shares, or 0.01% of total plan assets, at
December 31, 2021.
Debt securities included approximately $85 million of Bell Canada
debentures, or 0.40% of total plan assets, at December 31, 2022 and
approximately $85 million of Bell Canada debentures, or 0.30% of total
plan assets, at December 31, 2021.
Alternative investments included an investment in MLSE of $149 million,
or 0.64% of total plan assets, at December 31, 2022 and $149 million,
or 0.53% of total plan assets, at December 31, 2021. Subsequent to
year end, BCE repurchased the Master Trust Fund’s interest for a cash
consideration of $149 million.
The Bell Canada pension plan has an investment arrangement which
hedges part of its exposure to potential increases in longevity, which
covers approximately $4 billion of post-employment benefit obligations.
The fair value of the arrangement is included within other alternative
investments.
Cash flows
We are responsible for adequately funding our DB pension plans. We
make contributions to them based on various actuarial cost methods
that are permitted by pension regulatory authorities. Contributions
reflect actuarial assumptions about future investment returns, salary
projections and future service benefits. Changes in these factors could
cause actual future contributions to differ from our current estimates
and could require us to increase contributions to our post-employment
benefit plans in the future, which could have a negative effect on our
liquidity and financial performance.
We contribute to the DC pension plans as employees provide service.
The following table shows the amounts we contributed to the DB and DC pension plans and the payments made to beneficiaries under OPEB plans.
for the year ended December 5
Contributions/payments
DB plans
2022
(81)
202
(168)
DC plans
2022
(59)
202
(114)
opEB plans
2022
(64)
202
(65)
We expect to contribute approximately $50 million to our DB pension plans in 2023, subject to actuarial valuations being completed. We expect
to contribute approximately $10 million to the DC pension plans and to pay approximately $75 million to beneficiaries under OPEB plans in 2023.
notE 23 Other non-current liabilities
for the year ended December 5
Provisions
Long-term disability benefits obligation
Derivative liabilities
Other
Total other non-current liabilities
note
26
24
2022
288
260
191
331
1,070
202
327
327
43
306
1,003
72
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 24 Financial and capital management
Financial management
Management’s objectives are to protect BCE and its subsidiaries on a
consolidated basis against material economic exposures and variability
of results from various financial risks, including credit risk, liquidity
risk, foreign currency risk, interest rate risk, commodity price risk and
equity price risk.
Derivatives
We use derivative instruments to manage our exposure to foreign
currency risk, interest rate risk, commodity price risk and changes in
the price of BCE common shares.
Fair value
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date.
Certain fair value estimates are affected by assumptions we make about
the amount and timing of future cash flows and discount rates, all of
which reflect varying degrees of risk. Income taxes and other expenses
that may be incurred on disposition of financial instruments are not
reflected in the fair values. As a result, the fair values may not be the
net amounts that would be realized if these instruments were settled.
The carrying values of our cash and cash equivalents, trade and
other receivables, dividends payable, trade payables and accruals,
compensation payable, interest payable, notes payable and loans
secured by receivables approximate fair value as they are short-term.
The carrying value of wireless device financing plan receivables
approximates fair value given that their average remaining duration is
short and the carrying value is reduced by an allowance for doubtful
accounts and an allowance for revenue adjustments.
The following table provides the fair value details of other financial instruments measured at amortized cost in the statements of financial position.
Debt securities
and other debt
Classification
fair value methodology
Debt due within one year
and long-term debt
Quoted market price
of debt
December 31, 2022
December 5 , 202
Carrying
value
Fair
value
Carrying
value
fair
value
25,061
23,026
23,729
26,354
note
26, 27
The following table provides the fair value details of financial instruments measured at fair value in the statements of financial position.
Classification
note
Carrying value of
asset (liability)
fair value
Quoted prices in
active markets for
identical assets
(level )
observable
market data
(level 2) (1)
non-observable
market inputs
(level 5) (2)
December 31, 2022
Publicly-traded and
privately-held investments (3)
Derivative financial instruments
Other non-current assets
2
Other current assets, trade
payables and other liabilities, other
non-current assets and liabilities
MLSE financial liability (4)
Trade payables and other liabilities
25
Other
Other non-current assets
and liabilities
December 31, 2021
Publicly-traded and
privately-held investments (3)
Derivative financial instruments
Other non-current assets
2
Other current assets, trade
payables and other liabilities, other
non-current assets and liabilities
MLSE financial liability (4)
Trade payables and other liabilities
25
Other
Other non-current assets
and liabilities
215
72
(149)
108
183
279
(149)
122
9
–
–
–
24
–
–
–
–
72
–
184
–
279
–
185
206
–
(149)
(76)
159
–
(149)
(63)
(1) Observable market data such as equity prices, interest rates, swap rate curves and foreign currency exchange rates.
(2) Non-observable market inputs such as discounted cash flows and earnings multiples. A reasonable change in our assumptions would not result in a significant increase (decrease) to our
level 3 financial instruments.
(3) Unrealized gains and losses are recorded in Other comprehensive income in the statements of comprehensive income and are reclassified from Accumulated other comprehensive (loss)
income to the deficit in the statements of financial position when realized.
(4) Represents BCE’s obligation to repurchase the Master Trust Fund’s 9% interest in MLSE at a price not less than an agreed minimum price, should the Master Trust Fund exercise its put
option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other (expense) income in the income statements. Subsequent to year
end, BCE repurchased the Master Trust Fund’s interest for a cash consideration of $149 million.
75
Notes to consolidated fi nancial statements Credit risk
We are exposed to credit risk from operating activities and certain
financing activities, the maximum exposure of which is represented by
the carrying amounts reported in the statements of financial position.
We are exposed to credit risk if counterparties to our trade receivables,
including wireless device financing plan receivables, and derivative
instruments are unable to meet their obligations. The concentration of
credit risk from our customers is minimized because we have a large
and diverse customer base. There was minimal credit risk relating to
derivative instruments at December 31, 2022 and 2021. We deal with
institutions that have investment-grade credit ratings and we expect
that they will be able to meet their obligations. We regularly monitor
our credit risk and credit exposure, and consider, among other factors,
the effects of rising interest rates and inflation.
The following table provides the change in allowance for doubtful accounts for trade receivables, including the current portion of wireless
device financing plan receivables.
Balance, January 1
Additions
Usage and reversals
Balance, December 31
note
2
2022
(136)
(109)
116
(129)
202
(149)
(83)
96
(136)
In many instances, trade receivables are written off directly to bad debt expense if the account has not been collected after a predetermined
period of time.
The following table provides further details on trade receivables, net of allowance for doubtful accounts.
At December 5
Trade receivables not past due
Trade receivables past due
Under 60 days
60 to 120 days
Over 120 days
Trade receivables, net of allowance for doubtful accounts
The following table provides the change in allowance for doubtful accounts for contract assets.
Balance, January 1
Additions
Usage and reversals
Balance, December 31
Current
Non-current
Balance, December 31
2022
3,215
434
253
71
3,973
note
2022
(20)
(20)
21
(19)
(7)
(12)
(19)
6
202
2,958
420
284
45
3,707
202
(59)
(9)
48
(20)
(6)
(14)
(20)
76
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Liquidity risk
Our cash and cash equivalents, cash flows from operations and possible capital markets financing are expected to be sufficient to fund our
operations and fulfill our obligations as they become due. Should our cash requirements exceed the above sources of cash, we would expect
to cover such a shortfall by drawing on existing committed bank facilities and new ones, to the extent available.
The following table is a maturity analysis for recognized financial liabilities at December 31, 2022 for each of the next five years and thereafter.
At December 5 , 2022
Long-term debt
Notes payable
Lease liabilities (1)
Loan secured by receivables
Interest payable on long-term debt, notes payable
and loan secured by receivables
Net payments (receipts) on cross currency
interest rate swaps
MLSE financial liability (2)
Total
(1) Includes imputed interest of $960 million.
note
27
26
27
26
25
2025
750
869
1,111
1,588
1,100
36
149
2026
2,103
2027
2,174
2026
1,582
2027
thereafter
total
1,724
16,863
25,196
–
923
–
931
(45)
–
–
561
–
877
5
–
–
515
–
825
4
–
–
320
–
787
4
–
–
1,932
–
869
5,362
1,588
9,833
14,353
(141)
–
(137)
149
5,603
3,912
3,617
2,926
2,835
28,487
47,380
(2) Represents BCE’s obligation to repurchase the Master Trust Fund’s 9% interest in MLSE at a price not less than an agreed minimum price, should the Master Trust Fund exercise its put
option. The obligation to repurchase is marked to market each reporting period and the gain or loss is recognized in Other (expense) income in the income statements. Subsequent to year
end, BCE repurchased the Master Trust Fund’s interest for a cash consideration of $149 million.
We are also exposed to liquidity risk for financial liabilities due within one year as shown in the statements of financial position.
Market risk
Currency exposures
We use forward contracts, options and cross currency interest rate
swaps to manage foreign currency risk related to anticipated purchases
and certain foreign currency debt.
In 2022, we entered into cross currency interest rate swaps with a total
notional amount of $750 million in U.S. dollars ($954 million in Canadian
dollars) to hedge the U.S. currency exposure of our US-7 Notes maturing
in 2052. In connection with these swaps, we settled the forward starting
interest rate swaps and cross currency basis rate swaps entered into in
2021, each of which had a notional amount of $127 million. See Note 25,
Long-term debt, for additional details.
At December 31, 2021, we had entered into cross currency interest rate
swaps with a total notional amount of $3,500 million in U.S. dollars
($4,511 million in Canadian dollars) to hedge the U.S. currency exposure
of our U.S. Notes maturing from 2032 to 2052. See Note 25, Long-term
debt, for additional details.
A 10% depreciation (appreciation) in the value of the Canadian dollar
relative to the U.S. dollar would result in a loss of $10 million (loss of
$17 million) recognized in net earnings at December 31, 2022 and a gain
of $114 million (loss of $105 million) recognized in Other comprehensive
income at December 31, 2022, with all other variables held constant.
A 10% depreciation (appreciation) in the value of the Canadian dollar
relative to the Philippine peso would result in a gain (loss) of $4 million
recognized in Other comprehensive income at December 31, 2022, with
all other variables held constant.
The following table provides further details on our outstanding foreign currency forward contracts and options as at December 31, 2022.
type of hedge
Cash flow (1)
Cash flow
Cash flow
Cash flow
Cash flow
Economic
Economic – call options
Economic – put options
Economic – call options
Economic – put options
Economic – options (2)
Buy currency
Amount to receive
Sell currency
Amount to pay
Maturity
USD
USD
USD
PHP
USD
USD
CAD
USD
CAD
USD
USD
1,178
632
796
2,147
643
156
225
156
225
156
120
CAD
CAD
CAD
CAD
CAD
CAD
USD
CAD
USD
CAD
CAD
1,607
852
989
50
810
196
156
196
156
195
153
2023
2023
2023
2023
2024
2023
2023
2023
2024
2024
2024
Hedged item
Loans
Commercial paper
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
Anticipated purchases
(1) Forward contracts to hedge loans secured by receivables under our securitization program. See Note 24, Debt due within one year, for additional information.
(2) Foreign currency options with a leverage provision and a profit cap limitation.
77
Notes to consolidated fi nancial statements Interest rate exposures
In 2022, we sold interest rate swaptions with a notional amount of
$1,000 million for $9 million to hedge economically the fair value of
our Series M-53 MTN debentures. Swaptions of a notional amount of
$500 million were exercised at a loss of $7 million and the remaining
swaptions matured unexercised. The resulting interest rate swaps
of a notional amount of $500 million mature in 2027 and have been
designated to hedge the fair value of our Series M-53 MTN debentures.
The fair value of these interest rate swaps at December 31, 2022 is a
liability of $14 million recognized in Trade payables and other liabilities
and Other non-current liabilities in the statements of financial position.
In 2022, we entered into cross currency basis rate swaps maturing
in 2023 with a notional amount of $638 million to hedge economically
the basis rate exposure on future debt issuances. The fair value of these
cross currency basis rate swaps at December 31, 2022 is a liability of
$33 million recognized in Trade payables and other liabilities in the
statements of financial position.
In 2021, we entered into cross currency interest rate swaps with a
notional amount of $600 million in U.S. dollars ($748 million in Canadian
dollars) to hedge the interest exposure of our U.S. Notes maturing in
2024. See Note 25, Long-term debt, for additional details.
We use leveraged interest rate options to hedge economically the
dividend rate resets on $582 million of our preferred shares which
had varying reset dates in 2021 for the periods ending in 2026. The fair
value of these leveraged interest rate options at December 31, 2022 and
December 31, 2021 was a liability of $1 million and $2 million, respectively,
recognized in Trade payables and other liabilities and Other non-current
liabilities in the statements of financial position. A gain of $1 million and
$15 million for the year ended December 31, 2022 and December 31,
2021, respectively, relating to these leveraged interest rate options is
recognized in Other (expense) income in the income statements.
A 1% increase (decrease) in interest rates would result in a loss of
$24 million (gain of $23 million) recognized in net earnings at December 31,
2022, with all other variables held constant.
A 0.1% increase (decrease) in cross currency basis swap rates would
result in a gain (loss) of $9 million recognized in net earnings at
December 31, 2022, with all other variables held constant.
Equity price exposures
We use equity forward contracts on BCE’s common shares to hedge
economically the cash flow exposure related to the settlement of equity
settled share-based compensation plans. See Note 31, Share-based
payments, for details on our share-based payment arrangements.
The fair value of our equity forward contracts at December 31, 2022
and December 31, 2021 was a net liability of $48 million and a net
asset of $130 million, respectively, recognized in Other current assets,
Trade payables and other liabilities, Other non-current assets and
Other non-current liabilities in the statements of financial position.
A loss of $53 million and a gain of $278 million for the year ended
December 31, 2022 and 2021, respectively, relating to these equity
forward contracts is recognized in Other (expense) income in the
income statements.
A 5% increase (decrease) in the market price of BCE’s common shares
would result in a gain (loss) of $33 million recognized in net earnings at
December 31, 2022, with all other variables held constant.
Capital management
We have various capital policies, procedures and processes which are
utilized to achieve our objectives for capital management. These include
optimizing our cost of capital and maximizing shareholder return while
balancing the interests of our stakeholders.
Our definition of capital includes equity attributable to BCE shareholders,
debt, and cash and cash equivalents.
The key ratios that we use to monitor and manage our capital structure
are a net debt leverage ratio (1) and an adjusted EBITDA to adjusted net
interest expense ratio (2). In 2022 and 2021, our net debt leverage ratio
target range was 2.0 to 2.5 times adjusted EBITDA and our adjusted
EBITDA to adjusted net interest expense ratio target was greater than
7.5 times. At December 31, 2022, we had exceeded the limit of our internal
net debt leverage ratio target range by 0.80.
We use, and believe that certain investors and analysts use, our net debt
leverage ratio and adjusted EBITDA to adjusted net interest expense
ratio as measures of financial leverage and health of the company.
The following table provides a summary of our key ratios.
At December 5
Net debt leverage ratio
Adjusted EBITDA to adjusted net
interest expense ratio
2022
3.30
8.50
202
3.17
8.77
On February 1, 2023, the board of directors of BCE approved an increase
of 5.2% in the annual dividend on BCE’s common shares, from $3.68 to
$3.87 per common share.
On February 2, 2022, the board of directors of BCE approved an increase
of 5.1% in the annual dividend on BCE’s common shares, from $3.50 to
$3.68 per common share.
In Q4 2022, BCE renewed its normal course issuer bid program (NCIB)
with respect to its First Preferred Shares. See Note 30, Share capital,
for additional details.
(1) Our net debt leverage ratio represents net debt divided by adjusted EBITDA. We define net debt as debt due within one year plus long-term debt and 50% of preferred shares, less cash
and cash equivalents, as shown in our statements of financial position. For the purposes of calculating our net debt leverage ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA.
(2) Our adjusted EBITDA to adjusted net interest expense ratio represents adjusted EBITDA divided by adjusted net interest expense. We define adjusted net interest expense as twelve-month
trailing net interest expense as shown in our statements of cash flows plus 50% of twelve-month trailing net earnings attributable to preferred shareholders as shown in our income
statements. For the purposes of calculating our adjusted EBITDA to adjusted net interest expense ratio, adjusted EBITDA is twelve-month trailing adjusted EBITDA.
76
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements notE 50 Share capital
Preferred shares
BCE’s articles of amalgamation, as amended, provide for an unlimited number of First Preferred Shares and Second Preferred Shares, all without
par value. The terms set out in the articles authorize BCE’s directors to issue the shares in one or more series and to set the number of shares
and the conditions for each series.
The following table provides a summary of the principal terms of BCE’s First Preferred Shares as at December 31, 2022. There were no Second
Preferred Shares issued and outstanding at December 31, 2022. BCE’s articles of amalgamation, as amended, describe the terms and conditions
of these shares in detail.
redemption
price
number of shares
issued and
outstanding
Stated capital
December 31, 2022
December 5 , 202
Series
Q
R (1)
S
T (1)
Y
Z (1)
AA (1)
AB
AC (1)
AD
AE
AF (1)
AG (1)
AH
AI (1)
AJ
AK (1)
AL (2)
AM (1)
AN (2)
AO (3)
AP (3)
AQ (1)
AR (4)
Annual
dividend
rate
floating
3.018%
floating
4.99%
floating
5.346%
Convertible
into
Series R
Series Q
Series T
Series S
Series Z
Series Y
Conversion date
redemption date
December 1, 2030
December 1, 2025
December 1, 2025
November 1, 2026
At any time
November 1, 2026
November 1, 2026
December 1, 2027
At any time
December 1, 2027
December 1, 2027
4.94%
Series AB
September 1, 2027
September 1, 2027
floating
Series AA
September 1, 2027
4.38%
Series AD
floating
Series AC
March 1, 2023
March 1, 2023
floating
Series AF
February 1, 2025
At any time
March 1, 2023
At any time
At any time
3.865%
Series AE
February 1, 2025
February 1, 2025
3.37%
Series AH
floating
Series AG
3.39%
Series AJ
floating
Series AI
May 1, 2026
May 1, 2026
August 1, 2026
August 1, 2026
May 1, 2026
At any time
August 1, 2026
At any time
3.306%
Series AL
December 31, 2026
December 31, 2026
floating
Series AK
December 31, 2026
At any time
$25.50
$25.00
$25.50
$25.00
$25.50
$25.00
$25.00
$25.50
$25.00
$25.50
$25.50
$25.00
$25.00
$25.50
$25.00
$25.50
$25.00
–
7,992,000
2,125,067
5,820,633
7,009,252
2,973,348
12,254,761
7,664,939
10,007,791
9,951,109
6,460,913
9,472,387
8,921,530
4,987,870
9,477,640
4,454,760
23,119,512
1,797,188
2.939%
Series AN
March 31, 2026
March 31, 2026
$25.00
10,422,778
floating
Series AM
March 31, 2026
At any time
1,052,822
fixed
Series AP
floating
Series AO
–
–
4.812%
Series AR
September 30, 2023
September 30, 2023
$25.00
9,108,800
floating
Series AQ
September 30, 2028
–
–
200
53
146
175
74
312
195
255
254
162
237
223
125
237
111
578
45
239
24
–
–
225
–
–
200
53
147
202
48
291
219
256
254
163
237
224
125
238
112
580
45
239
24
118
–
228
–
3,870
4,003
(1) BCE may redeem each of these series of First Preferred Shares on the applicable redemption date and every five years thereafter.
(2) BCE may redeem Series AL and AN First Preferred Shares at $25.00 per share on December 31, 2026 and March 31, 2026, respectively, and every five years thereafter (each, a Series
conversion date). Alternatively, BCE may redeem Series AL or AN First Preferred Shares at $25.50 per share on any date which is not a Series conversion date for the applicable series of
First Preferred Shares.
(3) On March 31, 2022, BCE redeemed its 4,600,000 issued and outstanding Series AO First Preferred Shares with a stated capital of $118 million for a total cost of $115 million. The remaining
$3 million was recorded to contributed surplus.
(4) If Series AR First Preferred Shares are issued on September 30, 2023, BCE may redeem such shares at $25.00 per share on September 30, 2028, and every five years thereafter (each,
a Series conversion date). Alternatively, BCE may redeem Series AR First Preferred Shares at $25.50 per share on any date which is not a Series conversion date for such series of First
Preferred Shares.
Normal course issuer bid for BCE
First Preferred Shares
On November 3, 2022, BCE announced the renewal of its NCIB to
purchase for cancellation up to 10% of the public float of each series of
BCE’s outstanding First Preferred Shares that are listed on the Toronto
Stock Exchange. The NCIB will extend up to November 8, 2023, or an
earlier date should BCE complete its purchases under the NCIB.
In 2022, BCE repurchased and canceled 584,300 First Preferred Shares
with a stated capital of $15 million for a total cost of $10 million. The
remaining $5 million was recorded to contributed surplus.
Subsequent to year end, BCE repurchased and canceled 1,090,400 First
Preferred Shares with a stated capital of $27 million for a total cost of
$20 million. The remaining $7 million was recorded to contributed surplus.
Voting rights
All of the issued and outstanding First Preferred Shares at
December 31, 2022 are non-voting, except under special circumstances
when the holders are entitled to one vote per share.
77
Notes to consolidated fi nancial statements Priority and entitlement to dividends
The First Preferred Shares of all series rank at parity with each other
and in priority to all other shares of BCE with respect to payment of
dividends and with respect to distribution of assets in the event of
liquidation, dissolution or winding up of BCE.
Holders of Series R, T, Z, AA, AC, AF, AG, AI, AK, AM and AQ First Preferred
Shares are entitled to fixed cumulative quarterly dividends. The dividend
rate on these shares is reset every five years, as set out in BCE’s articles
of amalgamation, as amended.
Holders of Series S, Y, AB, AD, AE, AH and AJ First Preferred Shares
are entitled to floating adjustable cumulative monthly dividends. The
floating dividend rate on these shares is calculated every month, as
set out in BCE’s articles of amalgamation, as amended.
Holders of Series AL and AN First Preferred Shares are entitled to
floating cumulative quarterly dividends. The floating dividend rate on
these shares is calculated every quarter, as set out in BCE’s articles of
amalgamation, as amended.
Dividends on all series of First Preferred Shares are paid as and when
declared by the board of directors of BCE.
Conversion features
All of the issued and outstanding First Preferred Shares at
December 31, 2022 are convertible at the holder’s option into another
associated series of First Preferred Shares on a one-for-one basis
according to the terms set out in BCE’s articles of amalgamation, as
amended.
Conversion and dividend rate reset
of First Preferred Shares
Subsequent to year end, on March 1, 2023, 3,635,351 of BCE’s fixed
rate Cumulative Redeemable First Preferred Shares, Series AC
(Series AC Preferred Shares) were converted, on a one-for-one basis,
into floating-rate Cumulative Redeemable First Preferred Shares,
Series AD (Series AD Preferred Shares). In addition, on March 1, 2023,
351,634 of BCE’s Series AD Preferred Shares were converted, on a
one-for-one basis, into Series AC Preferred Shares.
The annual fixed dividend rate on BCE’s Series AC Preferred Shares
was reset for the next five years, effective March 1, 2023, at 5.08%. The
Series AD Preferred Shares will continue to pay a monthly cash dividend.
Common shares and Class B shares
BCE’s articles of amalgamation provide for an unlimited number of voting common shares and non-voting Class B shares, all without par value.
The common shares and the Class B shares rank equally in the payment of dividends and in the distribution of assets if BCE is liquidated, dissolved
or wound up, after payments due to the holders of preferred shares. No Class B shares were outstanding at December 31, 2022 and 2021.
The following table provides details about the outstanding common shares of BCE.
Outstanding, January 1
Shares issued under deferred share plan
Shares issued under employee stock option plan
2022
202
note
5
Number of
shares
909,018,871
11,003
2,952,992
Stated
capital
20,662
1
177
number of
shares
904,415,010
–
4,603,861
Stated
capital
20,390
–
272
Outstanding, December 31
911,982,866
20,840
909,018,871
20,662
Contributed surplus
Contributed surplus in 2022 and 2021 includes premiums in excess of par value upon the issuance of BCE common shares and share-based
compensation expense net of settlements.
notE 5 Share-based payments
The following share-based payment amounts are included in the income statements as operating costs.
for the year ended December 5
ESP
RSUs/PSUs
Other (1)
Total share-based payments
(1) Includes DSUs and stock options.
73
BCE InC. AnnuAl fInAnCIAl rEport 2022
2022
(28)
(69)
(4)
(101)
202
(30)
(59)
(6)
(95)
Notes to consolidated fi nancial statements Description of the plans
ESP
The ESP is designed to encourage employees of BCE and its participating
subsidiaries to own shares of BCE. Employees can choose to have up to
12% of their eligible annual earnings withheld through regular payroll
deductions for the purchase of BCE common shares. In some cases,
the employer also contributes up to 2% of the employee’s eligible
annual earnings to the plan. Dividends are credited to the participant’s
account on each dividend payment date and are equivalent in value to
the dividends paid on BCE common shares. Employer contributions to
the ESP and related dividends are subject to employees holding their
shares for a two-year vesting period.
The trustee of the ESP buys BCE common shares for the participants on
the open market, by private purchase or from treasury. BCE determines
the method the trustee uses to buy the shares.
At December 31, 2022, 4,360,087 common shares were authorized for
issuance from treasury under the ESP. At December 31, 2022 and 2021,
there were 1,028,161 and 1,108,211 unvested employer ESP contributions,
respectively.
RSUs/PSUs
RSUs/PSUs are granted to executives and other eligible employees.
Dividends in the form of additional RSUs/PSUs are credited to the
participant’s account on each dividend payment date and are equivalent
in value to the dividends paid on BCE common shares. Executives and
other eligible employees are granted a specific number of RSUs/PSUs
for a given performance period based mainly on their level and position.
RSUs/PSUs vest fully after three years of continuous employment from
the date of grant and if performance objectives are met for certain
PSUs, as determined by the board of directors.
The following table summarizes RSUs/PSUs outstanding at December 31, 2022 and 2021.
number of rSus/pSus
Outstanding, January 1
Granted (1)
Dividends credited
Settled
Forfeited
Outstanding, December 31
Vested, December 31 (2)
2022
3,085,667
1,016,211
173,100
(1,061,392)
(89,399)
3,124,187
887,158
202
2,973,393
1,178,794
175,516
(1,135,128)
(106,908)
3,085,667
1,000,394
(1) The weighted average fair value of the RSUs/PSUs granted was $66 in 2022 and $60 in 2021.
(2) The RSUs/PSUs vested on December 31, 2022 were fully settled in February 2023 with BCE common shares and/or DSUs.
DSUs
Eligible bonuses and RSUs/PSUs may be paid in the form of DSUs
when executives or other eligible employees elect or are required to
participate in the plan. The value of a DSU at the issuance date is equal
to the value of one BCE common share. For non-management directors,
compensation is paid in DSUs until the minimum share ownership
requirement is met; thereafter, at least 50% of their compensation
is paid in DSUs. There are no vesting requirements relating to DSUs.
Dividends in the form of additional DSUs are credited to the participant’s
account on each dividend payment date and are equivalent in value
to the dividends paid on BCE common shares. DSUs are settled when
the holder leaves the company.
At December 31, 2022 and 2021, there were 3,321,167 and 3,365,433 DSUs
outstanding, respectively.
Stock options
Under BCE’s long-term incentive plans, BCE may grant options to
executives to buy BCE common shares. The subscription price of a
grant is based on the higher of:
• the volume-weighted average of the trading price on the trading day
immediately prior to the effective date of the gran
• the volume-weighted average of the trading price for the last five
consecutive trading days ending on the trading day immediately
pri
At December 31, 2022, in addition to the stock options outstanding,
4,484,643 common shares were authorized for issuance under these
plans. Options vest fully after three years of continuous employment
from the date of grant. All options become exercisable when they vest
and can be exercised for a period of seven years from the date of grant
for options granted prior to 2019 and ten years from the date of grant
for options granted since 2019.
The following table summarizes stock options outstanding at December 31, 2022 and 2021.
Outstanding, January 1
Exercised (1)
Forfeited or expired
Outstanding, December 31
Exercisable, December 31
note
50
2022
Number
of options
Weighted average
exercise price
($)
10,778,724
(2,952,992)
(23,624)
7,802,108
4,539,188
60
58
65
61
58
202
number
of options
15,650,234
(4,603,861)
(267,649)
10,778,724
4,316,424
Weighted average
exercise price
($)
59
57
60
60
58
(1) The weighted average market share price for options exercised was $69 in 2022 and $64 in 2021.
74
Notes to consolidated fi nancial statements The following table provides additional information about BCE’s stock option plans at December 31, 2022 and 2021.
range of exercise prices
$50–$59
$60 & above
Stock options outstanding
2022
Weighted average
remaining life
(years)
Weighted average
exercise price
($)
4
7
5
58
65
61
Number
4,510,298
3,291,810
7,802,108
202
Weighted average
remaining life
(years)
Weighted average
exercise price
($)
4
8
6
58
65
60
number
7,442,442
3,336,282
10,778,724
notE 52 Additional cash flow information
The following table provides a reconciliation of changes in liabilities arising from financing activities.
January 1, 2022
Cash flows from (used in) financing activities
Increase in notes payable
Issue of long-term debt
Repayment of long-term debt
Cash dividends paid on common and preferred shares
Cash dividends paid by subsidiaries to non-controlling interests
56
Increase in securitized receivables
Other financing activities
Total cash flows from (used in) financing activities excluding equity
Non-cash changes arising from
Increase in lease liabilities
Dividends declared on common and preferred shares
Dividends declared by subsidiaries to non-controlling interests
Effect of changes in foreign exchange rates
Business acquisition
Business disposition
Other
Total non-cash changes
December 31, 2022
note
Debt due
within one
year and
long-term
debt
29,673
Dividends
payable
Other
liabilities
Total
811
82
30,645
Derivative
to hedge
foreign
currency
on debt (1)
79
69
–
–
–
–
–
–
–
–
–
(3,448)
(39)
–
–
69
(3,487)
–
–
–
(437)
–
–
(18)
(455)
(307)
–
3,508
39
–
–
–
(4)
3,543
867
42
1,951
(2,023)
–
–
700
(13)
657
1,008
–
–
437
8
(14)
151
1,590
31,920
–
–
–
–
–
–
(18)
(18)
–
–
–
–
–
–
(36)
(36)
28
111
1,951
(2,023)
(3,448)
(39)
700
(31)
(2,779)
1,008
3,508
39
–
8
(14)
93
4,642
32,508
(1) Included in Other current assets, Trade payables and other liabilities and Other non-current liabilities in the statement of financial position.
60
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements January 1, 2021
Cash flows from (used in) financing activities
Increase (decrease) in notes payable
Issue of long-term debt
Repayment of long-term debt
Cash dividends paid on common and preferred shares
Cash dividends paid by subsidiaries to non-controlling interests
56
Decrease in securitized trade receivables
Other financing activities
Total cash flows from (used in) financing activities excluding equity
Non-cash changes arising from
Increase in lease liabilities
Dividends declared on common and preferred shares
Dividends declared by subsidiaries to non-controlling interests
Effect of changes in foreign exchange rates
Business acquisitions
Other
Total non-cash changes
December 31, 2021
Debt due
within one
year and
long-term
debt
26,323
note
Derivative
to hedge
foreign
currency
on debt (1)
Dividends
payable
other
liabilities
66
766
(27)
–
–
–
–
–
13
(14)
–
–
–
23
–
4
27
79
–
–
–
(3,257)
(86)
–
–
(3,343)
–
3,306
87
–
–
(5)
3,388
811
–
–
–
–
–
–
–
42
42
–
–
–
–
–
40
40
82
total
27,155
351
4,985
(2,751)
(3,257)
(86)
(150)
19
(889)
787
3,306
87
–
12
187
4,379
30,645
378
4,985
(2,751)
–
–
(150)
(36)
2,426
787
–
–
(23)
12
148
924
29,673
(1) Included in Other current assets, Other non-current assets and Trade payables and other liabilities in the statement of financial position.
notE 55 Remaining performance obligations
The following table shows revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially
unsatisfied) as at December 31, 2022.
Wireline
Wireless
Total
2025
1,343
1,482
2026
1,090
647
2,825
1,737
2027
739
40
779
2026
461
1
462
2027
thereafter
181
–
181
472
–
472
total
4,286
2,170
6,456
When estimating minimum transaction prices allocated to the remaining unfulfilled, or partially unfulfilled, performance obligations, BCE applied
the practical expedient to not disclose information about remaining performance obligations that have an original expected duration of one
year or less and for those contracts where we bill the same value as that which is transferred to the customer.
notE 56 Commitments and contingencies
Commitments
The following table is a summary of our contractual obligations at December 31, 2022 that are due in each of the next five years and thereafter.
2025
2026
2027
2026
2027
thereafter
total
Commitments for property, plant and
equipment and intangible assets
Purchase obligations
Leases committed not yet commenced
2,015
1,392
1,052
602
14
458
21
443
16
516
560
16
Total
2,631
1,871
1,511
1,092
216
276
17
509
949
955
96
6,140
3,294
180
2,000
9,614
Our commitments for property, plant and equipment and intangible
assets include program and feature film rights and investments to
expand and update our networks to meet customer demand.
Purchase obligations consist of contractual obligations under service
and product contracts for operating expenditures and other purchase
obligations.
Our commitments for leases not yet commenced include real estate,
OOH advertising spaces and fibre use. These leases are non-cancellable.
6
Notes to consolidated fi nancial statements Contingencies
As part of its ongoing review of wholesale Internet rates, on October 6,
2016, the CRTC significantly reduced, on an interim basis, some of the
wholesale rates that Bell Canada and other major providers charge
for access by third-party Internet resellers to fibre-to-the-node (FTTN)
or cable networks, as applicable. On August 15, 2019, the CRTC further
reduced the wholesale rates that Internet resellers pay to access network
infrastructure built by facilities-based providers like Bell Canada, with
retroactive effect back to March 2016.
The August 2019 decision was stayed, first by the Federal Court of
Appeal and then by the CRTC, with the result that it never came into
effect. In response to review and vary applications filed by each of Bell
Canada, five major cable carriers (Cogeco Communications Inc., Bragg
Communications Inc. (Eastlink), Rogers Communications Canada Inc.,
Shaw Communications Inc. and Videotron Ltée) and Telus
Communications Inc., the CRTC issued Decision 2021-182 on May 27,
2021, which mostly reinstated the rates prevailing prior to August 2019
with some reductions to the Bell Canada rates with retroactive effect to
March 2016. As a result, in Q2 2021, we recorded a reduction in revenue
of $44 million in our income statement.
While there remains a requirement to refund monies to third-party
Internet resellers, the establishment of final wholesale rates that are
similar to those prevailing since 2019 reduces the impact of the CRTC’s
notE 57 Related party transactions
long-running review of wholesale Internet rates and ensures a better
climate for much-needed investment in advanced networks. The
largest reseller, TekSavvy Solutions Inc. (TekSavvy), obtained leave to
appeal the CRTC’s decision of May 27, 2021 before the Federal Court
of Appeal. The decision was also challenged in three petitions brought
by TekSavvy, the Canadian Network Operators Consortium Inc. and
National Capital Freenet before Cabinet, but on May 26, 2022, Cabinet
announced it would not alter the decision.
In the ordinary course of business, we become involved in various claims
and legal proceedings seeking monetary damages and other relief. In
particular, because of the nature of our consumer-facing business, we
are exposed to class actions pursuant to which substantial monetary
damages may be claimed. Due to the inherent risks and uncertainties
of the litigation process, we cannot predict the final outcome or timing
of claims and legal proceedings. Subject to the foregoing, and based on
information currently available and management’s assessment of the
merits of the claims and legal proceedings pending at March 2, 2023,
management believes that the ultimate resolution of these claims and
legal proceedings is unlikely to have a material and negative effect on
our financial statements. We believe that we have strong defences and
we intend to vigorously defend our positions.
Subsidiaries
The following table shows BCE’s significant subsidiaries at December 31, 2022. BCE has other subsidiaries which have not been included in the
table as each represents less than 10% individually and less than 20% in aggregate of total consolidated revenues.
All of these significant subsidiaries are incorporated in Canada and provide services to each other in the normal course of operations. The value
of these transactions is eliminated on consolidation.
Subsidiary
Bell Canada
Bell Mobility Inc.
Bell Media Inc.
ownership percentage
2022
100%
100%
100%
202
100%
100%
100%
Transactions with joint arrangements and associates
During 2022 and 2021, BCE provided communication services and received programming content and other services in the normal course of
business on an arm’s length basis to and from its joint arrangements and associates. Our joint arrangements and associates include MLSE,
Glentel Inc. and Dome Productions Partnership. From time to time, BCE may be required to make capital contributions in its investments.
In 2022, BCE recognized revenues and incurred expenses with our joint arrangements and associates of $10 million (2021 – $10 million) and
$187 million (2021 – $178 million), respectively.
BCE Master Trust Fund
Bimcor Inc. (Bimcor), a wholly-owned subsidiary of Bell Canada, is the administrator of the Master Trust Fund. Bimcor recognized management
fees of $13 million from the Master Trust Fund for 2022 and 2021, respectively. The details of BCE’s post-employment benefit plans are set out
in Note 27, Post-employment benefit plans.
62
BCE InC. AnnuAl fInAnCIAl rEport 2022
Notes to consolidated fi nancial statements Compensation of key management personnel
The following table includes compensation of key management personnel for the years ended December 31, 2022 and 2021 included in our
income statements. Key management personnel have the authority and responsibility for overseeing, planning, directing and controlling our
business activities and consists of our Board of Directors and our Executive Leadership Team.
for the year ended December 5
Wages, salaries, fees and related taxes and benefits
Post-employment benefit plans and OPEBs cost
Share-based compensation (1)
Key management personnel compensation expense
(1) We have updated amounts for the prior year to make them consistent with the presentation for the current year.
notE 56 Significant partly-owned subsidiary
The following tables show summarized financial information for our subsidiary with significant NCI.
Summarized statements of financial position
for the year ended December 5
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity attributable to BCE shareholders
NCI
2022
(28)
(4)
(38)
(70)
CtV Specialty (1) (2)
2022
400
958
1,358
140
246
386
678
294
202
(23)
(3)
(31)
(57)
202
329
1,010
1,339
220
226
446
622
271
(1) At December 31, 2022 and 2021, the ownership interest held by NCI in CTV Specialty Television Inc. (CTV Specialty) was 29.9%. CTV Specialty was incorporated and operated in Canada as
at such dates.
(2) CTV Specialty’s net assets at December 31, 2022 and 2021 include $5 million, directly attributable to NCI.
Selected income and cash flow information
for the year ended December 5
Operating revenues
Net earnings
Net earnings attributable to NCI
Total comprehensive income
Total comprehensive income attributable to NCI
Cash dividends paid to NCI
CtV Specialty (1)
2022
986
180
57
198
63
39
202
879
158
51
164
53
86
(1) CTV Specialty’s net earnings and total comprehensive income include $4 million and $5 million directly attributable to NCI for 2022 and 2021, respectively.
notE 57 COVID-19
While the unfavourable effects of the COVID-19 pandemic on our financial
and operating performance moderated in 2022, it is difficult to estimate
the impacts that the COVID-19 pandemic could have in the future on
our business and financial results due to uncertainties relating to the
severity and duration of the COVID-19 pandemic and possible further
resurgences in the number of COVID-19 cases, including as a result
of the potential emergence of other variants, and various potential
outcomes. Our business and financial results could again, in future
periods, become more significantly and negatively impacted by the
COVID-19 pandemic, including, among others, as a result of associated
global supply chain challenges adversely affecting our wireless and
wireline product revenues.
65
Notes to consolidated fi nancial statements Board of directors
As of March 2, 2023
Gordon M. nixon
ONTARIO, CANADA
Corporate Director
Chair of the Board,
BCE Inc. and Bell Canada
Director since November 2014
Mirko Bibic
ONTARIO, CANADA
President and
Chief Executive Officer,
BCE Inc. and Bell Canada
Director since January 2020
David f. Denison,
FCPA, FCA
ONTARIO, CANADA
Corporate Director
Director since October 2012
robert p. Dexter
NOVA SCOTIA, CANADA
Chair and
Chief Executive Officer,
Maritime Travel Inc.
Director since November 2014
Katherine lee
ONTARIO, CANADA
Corporate Director
Director since August 2015
Monique f. leroux,
C.M., O.Q., FCPA, FCA
QUÉBEC, CANADA
Corporate Director
Director since April 2016
Committees of the Board
Audit
committee
l.p. pagnutti (Chair), K. lee,
M.f. leroux, J. tory, C. Wright
The audit committee assists
the Board in the oversight of:
• the integrity of BCE’s
financial statements and
related information
• BCE’s compliance with
applicable legal and
regulatory requirements
• the independence,
qualifications and appointment
of the external auditors
• the performance of both the
external and internal auditors
• management’s responsibility
for assessing and reporting
on the effectiveness of
internal controls
• BCE’s risks as they relate
to financial reporting.
Corporate governance
committee
M.f. leroux (Chair), D.f. Denison,
K. lee, K. Sheriff, r.C. Simmonds,
C. Wright
The CGC assists the Board to:
• develop and implement BCE’s
corporate governance policies
and guidelines
• identify individuals qualified to
become members of the Board
• determine the composition of
the Board and its committees
• determine the directors’
compensation for Board and
committee service
• develop and oversee a process
to assess the Board, committees
of the Board, the Chair of the
Board, Chairs of committees,
and individual directors
• review and recommend for
Board approval, BCE’s policies
concerning business conduct,
ethics, public disclosure of
material information and
other matters
• oversee BCE’s ESG strategy,
and its integration within BCE’s
overall business strategy,
and disclosure.
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
Sheila A. Murray
ONTARIO, CANADA
Corporate Director
Director since May 2020
louis p. pagnutti,
FCPA, FCA
ONTARIO, CANADA
Corporate Director
Director since November 2020
Calin rovinescu, C.M.
ONTARIO, CANADA
Corporate Director
Director since April 2016
Karen Sheriff
ONTARIO, CANADA
Corporate Director
Director since April 2017
robert C. Simmonds
ONTARIO, CANADA
Chair,
Lenbrook Corporation
Director since May 2011
Jennifer tory, C.M.
ONTARIO, CANADA
Corporate Director
Director since April 2021
louis Vachon,
C.M., O.Q.
QUÉBEC, CANADA
Operating Partner,
J.C. Flowers & Co.
Director since October 2022
Cornell Wright
ONTARIO, CANADA
President,
Wittington Investments, Limited
Director since April 2021
Management
resources and
compensation
committee
D.f. Denison (Chair), r.p. Dexter,
S.A. Murray, C. rovinescu,
J. tory, l. Vachon
The MRCC assists the Board in
the oversight of:
• compensation, nomination,
evaluation and succession of
officers and other management
personnel
• BCE’s workplace policies and
practices (including health
and safety policies, policies
ensuring a respectful workplace
free from harassment, and
policies ensuring a diverse
and inclusive workplace)
• BCE’s exposure to risk associated
with its executive compensation
and policies and identification of
practices and policies to mitigate
such risk.
Risk and pension fund
committee
C. rovinescu (Chair), r.p. Dexter,
S.A. Murray, l.p. pagnutti,
K. Sheriff, r.C. Simmonds,
l. Vachon
The RPFC assists the Board in
the oversight of:
• BCE’s enterprise risk governance
framework and the policies,
procedures and controls
management uses to evaluate
and manage key risks to which
BCE is exposed
• BCE’s exposure to key risks,
except for risks that remain the
primary responsibility of another
committee of the Board
• the administration, funding
and investment of BCE’s pension
plans and funds
• the unitized pooled funds
sponsored by BCE for
the collective investment
of the funds and the participant
subsidiaries’ pension funds.
Board of directors / Executives Executives
As of March 2, 2023
Mirko Bibic
President and Chief Executive Officer
BCE Inc. and Bell Canada
Claire Gillies
Executive Vice President Marketing and President, Consumer
Bell Canada
Stephen Howe
Chief Technology and Information Officer
Bell Canada
Blaik Kirby
Group President, Consumer and
Small & Medium Business (SMB)
Bell Canada
Glen leBlanc
Executive Vice President and Chief Financial Officer
BCE Inc. and Bell Canada
Devorah lithwick
Senior Vice President and Chief Brand Officer
Bell Canada
robert Malcolmson
Executive Vice President and
Chief Legal & Regulatory Officer
BCE Inc. and Bell Canada
nikki Moffat
Executive Vice President, Corporate Services and
Chief Human Resources Officer
BCE Inc. and Bell Canada
Karine Moses
Senior Vice President, Content Development &
News and Vice Chair, Québec
Bell Canada
Wade oosterman
President, Bell Media and Vice Chair
BCE Inc. and Bell Canada
John Watson
Group President, Business Markets,
Customer Experience and AI
Bell Canada
67
Board of directors / Executives Tax aspects
Shareholders are required to pay tax on dividends received as well as on capital
gains they realize, if any, when they sell their shares or are deemed to have
sold them.
The sale or disposition of your shares could
trigger a capital gain
IMPORTANT: If you received Nortel Networks common shares in May 2000
and/or Bell Aliant Regional Communications Income Fund units in July 2006,
you should contact the Investor Relations group to learn more about the tax
implications of these plans of arrangement and the impact on the calculation
of your cost, or visit BCE.ca.
Dividends
Since January 1, 2006 and unless stated otherwise, dividends paid by BCE Inc. to
Canadian residents are eligible dividends as per the Canadian Income Tax Act. Since
March 24, 2006 and unless stated otherwise, dividends paid by BCE Inc. to Québec
residents also qualify as eligible dividends.
non-residents of Canada
Dividends paid or credited to non-residents of Canada are subject to a 25% withholding
tax unless reduced by a tax treaty. Under current tax treaties, U.S. and U.K. residents
are subject to a 15% withholding tax.
Beginning in 2012, the Canada Revenue Agency introduced new rules requiring
residents of any country with which Canada has a tax treaty to certify that they
reside in that country and are eligible to have Canadian non-resident tax withheld
on the payment of their dividends at the tax treaty rate. Registered shareholders
should have completed the Declaration of Eligibility for Benefits under a Tax Treaty
for a Non-Resident Taxpayer and returned it to the transfer agent.
u.S. residents
In addition to the Declaration of Eligibility for Benefits under a Tax Treaty for a
Non-Resident Taxpayer mentioned above, we are required to solicit taxpayer
identification numbers and Internal Revenue Service (IRS) Form W-9 certifications
of residency from certain U.S. residents. If these have not been received, we may be
required to deduct the IRS’s specified backup withholding tax. For more information,
please contact the transfer agent or the Investor Relations group.
Investor information
Share facts
Symbol
BCE
Listings
tSX and nYSE stock exchanges
You will find a summary of the differences
between our governance practices and the
NYSE corporate governance rules in the
Governance section of our website at BCE.ca.
Common shares outstanding
December 31, 2022 – 911,982,866
Quarterly dividend*
$0.9675 per common share
2023 dividend schedule*
Record date
Payment date**
March 15, 2023
April 15, 2023
June 15, 2023
July 15, 2023
September 15, 2023
October 15, 2023
December 15, 2023
January 15, 2024
* Subject to dividends being declared by the board of directors
** When a dividend payment date falls on a date that is not a
business day, the payment is made on the following business day
2023 quarterly earnings
release dates
First quarter
May 4, 2023
Second quarter
August 3, 2023
Third quarter
November 2, 2023
Fourth quarter
February 8, 2024
Quarterly and annual reports as well as other
corporate documents can be found on our
website. Copies can be requested from the
Investor Relations group.
66
BCE InC. AnnuAl fInAnCIAl rEport 2022
Investor information Shareholder services
Dividend reinvestment and stock purchase plan
A convenient method for eligible shareholders to reinvest their dividends and
make optional cash contributions to purchase additional common shares without
brokerage costs.
Dividend direct deposit service
Avoid postal delays and trips to the bank by subscribing to the dividend direct
deposit service.
Direct registration (DRS)
Holding your shares electronically in lieu of share2certi0cates
Holdings are represented by a statement issued when establishing or subsequently
modifying your DRS balance. This option removes the risks of holding share
certificates, including their safekeeping, and, most importantly, eases the replacement
process. Note that there is a cost to replace lost or stolen certificates as well
as certificates mailed and never received by the shareholder (if claimed later
than one year after mailing). Generally, this cost is a percentage of the value of
the shares represented.
E-delivery service
Enrol in the e-delivery service to receive the proxy material, the annual financial report
and/or quarterly reports by e-mail. By doing so, you will receive your documents
faster and in an environmentally friendly manner while helping your company
reduce its costs.
Duplicate mailings
Eliminate duplicate mailings by consolidating your accounts.
Manage your shareholder account
Enrol in Investor Central at tsxtrust.com/issuer-investor-login and benefit from a
wide variety of self-service tools to help track and manage your shares.
For more details on any of these services, registered shareholders (shares are
registered under your name) must contact the transfer agent. Non-registered
shareholders must contact their brokers.
Contact information
Transfer agent and registrar
For information on shareholder services or any
other inquiries regarding your account (including
stock transfer, address change, lost certificates
and tax forms), contact:
TSX Trust Company
301 – 100 Adelaide St. West
Toronto, Ontario M5H 4H1
e-mail bce@tmx.com
tel
fax
416 682-3861 or 1 800 561-0934
(toll free in Canada and the U.S.)
514 985-8843 or 1 888 249-6189
(toll free in Canada and the U.S.)
website tsxtrust.com
Investor relations
For financial inquiries:
Building A, 8th Floor
1 Carrefour Alexander-Graham-Bell
Verdun, Québec H3E 3B3
e-mail
investor.relations@bce.ca
tel
fax
1 800 339-6353
514 786-3970
or visit the Investors section
of our website at BCE.ca
Integrated Annual Report
The BCE 2022 Integrated annual report is the first of its kind for a major communications company in North America, integrating both our
traditional Annual report and our Corporate responsibility report, in recognition that our Environmental, Social and Governance (ESG)
practices are a fundamental component to the daily operations of our business.
In line with our sustainability goals, the 2022 Integrated annual report is only available in digital format. You can find it on BCE.ca, alongside
other BCE reports.
We encourage shareholders not to request a paper copy of our reports, and instead visit our website and register to be notified by email
when our corporate documents, including annual reports, are available electronically.
To sign up, go to our website at BCE.ca and click on “Request Documents” at the bottom of the page.
Trademarks in this annual financial report which are owned or used under licence by BCE Inc., Bell Canada
or their subsidiaries include, without limitation, BCE, BELL Design, BELL MOBILITY and BELL MEDIA. This annual
financial report also includes trademarks of other parties. The trademarks referred to in this annual financial
report may be listed without the ® and ™ symbols.
© BCE Inc., 2023. All rights reserved.
BCE.CA
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