BCE Inc. (BCE) Earnings Call Transcript & Summary

Okay. I'm Ben Swinburne, Morgan Stanley's telecom and media analyst. Quick disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep. And we are excited, I think, to welcome to the conference, I believe, for the first time, Mirko Bibic, who has served as President and CEO of Bell and Bell Canada since January of 2020. Mirko, thanks for being here.

Thank you, Ben. Glad to be here.

So you had an Investor Day, as you know, back in October, laid out a long-term vision for the company, a 3-year strategic plan. Revenue growth of 2% to 4%, adjusted EBITDA of 2% to 3% through '28. Why don't we start, level set for the audience sort of the key pillars underpinning that growth outlook for the business?

Yes. So thanks for the question. Throughout the course of 2025 last year, we really set about kind of outlining with clarity a forward-looking capital markets and operational strategy. Obviously, they work hand in glove. And you've now got before you a BC and the Bell Canada, essentially a renewed energy, renewed vigor, a lot of optimism around the plan. And I think from an investor point of view, what I'd really highlight is, as a management team, we've declared ourselves, like we've outlined what we are going to do over the next 3 years. And so now we've got a management team that's focused entirely on execution, execution, execution against that plan. We're not managing to yesterday or to this quarter necessarily, we're managing to 2026, '27 and '28. And the plan is built around we call 4 plus 1, so the 4 strategic priorities, which are putting the customer first, delivering the best fiber and wireless networks, leading an enterprise with AI-powered solutions. And on the media side, it's about building a digital media and content powerhouse. So they all work together in a very tight integrated way. And it's all supported by the plus 1, which is a pretty aggressive cost reduction agenda. But importantly, it's about reducing costs while at the same time, improving customer experiences. So that's the plan.

Great. We'll dive into all those 4 plus 1 as we go through the conversation. Why don't we talk -- start with the consumer and SMB segment. So this is where you're targeting, I think, 4% to 5% compound growth in your sort of growth services over the next 3 years. It's still a very competitive environment in Canada. I don't need to tell you that on the telecom side. What are the things that you guys are doing specifically to help drive this accelerating growth from what we've been seeing over the last couple of years?

Right. So I'm glad you highlighted that on the consumer and SMB side, we've basically -- and we've done this for enterprise as well as we've outlined for investors -- we've shaped for them the profiling of saying, look, we are leaning into the growth vectors and those are going to grow. And in the case of consumer, you just mentioned there at 4% to 5%. And we've unpacked for investors the fact that we also -- we're a 145-year-old company that has a number of legacy businesses that are in structural decline. So we've separated the declining legacy businesses from the growth assets. But on the consumer side, fiber and wireless, the way we're going to do it is really 3 key pillars, and it's all about execution again, churn and retention, so continue to get churn down in wireless and fiber Internet, product intensity. We recognized a couple of years ago that we've got a ways to go to match our peers and the number of households in our footprint that buy more than one product from us. And there's no reason why we can't get that up because we have the best fiber networks and leading wireless networks. And the third thing we're going to do in order to get to those growth numbers is over-index our customer loadings on the premium Bell brand. So churn reduction, product intensity. So it's about mobility, Internet and content sales combined to as many households as possible, as many as possible on the premium Bell brand because that's where the highest value customers sit.

Great. We're going to unpack that more in a bit. I wanted to just stick with some of the big headlines from your Investor Day. So you guys put out a specific dollar number tied to AI, which is $1.5 billion of AI-powered solutions revenues over the next 3 years. So unpack that for us because I don't think too many people sort of think of Bell Canada as maybe a way to get exposure to AI.

It is -- we have -- there's a lot of momentum there behind the AI vector for us, and we're very optimistic about it. I think the punchline here is that you'll see that we are creating a significant amount of value in a short period of time. And the advantage we have is we essentially sit at the -- and we're comfortably sitting, I'd say, or confidently sitting at the intersection of secure networks trust because Bell is the most trusted communications brand in the country, distribution relationships and AI infrastructure. And you add to that, that we have access to a significant amount of power and time to compute is a significant advantage. So all those ingredients together are going to lead to us executing against that vision that I said about leading an enterprise with AI-powered solutions. And it's around, again, the AI infrastructure, which is Bell AI Fabric, AI-powered cybersecurity as a service, which is Bell Cyber, and then systems integration with a specialization in automation and AI, which Ateko. And put them all together, we're going to -- we're offering the full stack AI solutions to customers.

Great. I think the last sort of big piece of the growth outlook stems from your Ziply acquisition last year. You spent CAD 5 billion last August to acquire Ziply Fiber. We have a lot of your competitors at the conference on the U.S. side here. That really expanded your fiber footprint pretty meaningfully. How is the integration progressing? What are your expectations for Ziply's contribution to growth for Bell?

So those were the contribution -- Ziply's contributions to growth were outlined at Investor Day. But really, what I'd say is when you asked the question around integration of Ziply, and it's not an integration story in the classic M&A approach where you acquire a company and then you integrate it operationally and you drive synergies. So that's not what we're doing here. I view the integration question more as the approach is to build a durable high-growth fiber platform that's going to continue to contribute meaningfully to BCE's overall revenue and EBITDA growth. And again, fiber is the winning broadband technology. We are a fiber-first company, and we've turned ourselves into a fiber-first company in Canada, and it's really about securing growth in the United States through fiber, and it's about deploying capital to the highest value areas. So we want to continue to be in fiber. and we want to continue to allocate our fiber CapEx dollars to high-growth markets, and the U.S. is a significant growth market for BCE through Ziply.

Yes. In many ways, I'm sure you would agree last year, we saw the Canadian telecom market, while still competitive, begin to show some signs of stability, whereas in the U.S., sort of following Canada over the last couple of years, getting more intense, particularly on the cable side. I guess the question is, has the increased promotional intensity from the cable operators who are Ziply's primary competitors impacted at all, how you see that business performing in the near term?

We continue to see it growing at a fairly impressive clip. And the reason is there are 3 keys to that growth. One is having the superior network, which clearly fiber is, and that's what Ziply is a fiber company. Two is customer experience. You got to deliver what customers expect and Ziply is second to none in the U.S., frankly, on customer experience scores, you look at churn and particularly NPS. And then the third key thing is pricing. And Ziply actually has always been priced despite the superior network and superior experiences, priced below cable, and that remains the case. So those 3 ingredients are the winning ingredients, and they still are in Ziply's favor, the network, the experiences and the pricing.

Okay. All right. Why don't we turn to the Canadian market. Obviously, the bulk of the business. It's been intensely competitive, Quebecor being, in particular, a disruptive fourth challenger over the last several years. How would you describe the landscape today? And how do you see that evolving over the course of the year?

So I think the market -- on either the wireline -- both wireline and the wireless side, I think it has -- feels certainly more -- there's more stability there than there has been in the recent past in the last 2, 3 years. So that's a good sign. Black Friday in November of 2025 was particularly encouraging. I think the first half of December last year as well. I think there has been a lot of chatter about pricing in January and February, which I would view, I think, over the medium term -- over the course of a full year, I view January and February as more of a temporary thing. I think -- but that all being said, the most important thing from -- as people assess Bell is we now -- let's go back to the first -- my first answer to your first question. We have a plan. Everyone knows what the plan is. We're executing against the plan. We're not managing the business to January or February. We're managing it over the course of a full year, and we guided to a 3-year performance target. So that's what we are going to do. And in our case, again, I'm repeating myself, but it's fundamentally important. We've got a management team that's focused on reducing churn, increasing product intensity and going after the highest value customers on the premium Bell brand. So we are not about chasing headline, net add numbers. We are about discipline, returns and putting our efforts towards the highest value areas, and that's what we're going to continue to do. And I shared this stat a lot, Ben. I just -- again, just to put some data behind what my words. Last year, in Q1, Bell was fourth out of 4 players in wireless across almost all metrics. When you look at our performance in wireless over the course of 2025, we led the industry in gross wireless sales. In terms of the big 3, we're essentially tied in net adds, and we performed really well in terms of our churn reduction expectations and a number of other financial and key KPIs. And that's because we set out to manage our business across 12 months, 24 months, 36 months, and we're going to continue to do exactly that.

You mentioned January and February chatter. I mean these are relatively small months when it comes to the year. But is your expectation that, that's -- I don't know, just chatter and noise or that you think it moderates here in March? Or what do you think?

I do think it moderates over the course of the year. Q1 is structurally always a low volume quarter. And we have a lower growth environment generally, particularly because of the changes in immigration policy from 1.5 years ago. And again, back to our plan, we built our plan, which we unveiled in October of last year at Investor Day. We actually built our plan in a low-growth environment for a low-growth environment. So we're well -- kind of we're well positioned to operate in that framework. And as things stabilize and improve, it's all upside.

I was going to actually ask you about the immigration trends next. We have the same issue in the U.S. lately. Is there any line of sight to maybe some improvement in the immigration backdrop in Canada as you look out?

Well, in the very short term, I'd say no. I mean, the policy is what the policy is. However, in -- if you look out in the medium term, I think Canada is a country that thrives on immigration, and we need the growth. So I fully expect that to come back. In the meantime, though, you've got some newcomer growth, obviously, just not as high as it was 3 years ago. We're going to have penetration growth. Canada always lags -- has always lagged the U.S. in penetration. And as the U.S. as penetration improves, so does Canada, albeit just we're -- there's a lag there. So that's going to continue. And idiosyncratically for Bell, we've got our churn reduction agenda, and we've got our product intensity agenda, and we've got our market share ambitions on the premium Bell brand. And so we're going to continue to execute against those 3 things. So net-net, as things stabilize, I think we're going to be able to deliver on our 2026 objectives and our longer-term 2028 objectives.

When do you expect to return to positive wireless service revenue growth? What do you think needs to happen for that inflection to take place?

So I won't call a specific quarter on that. I think the focus ought to be on service revenues, frankly. It's how we're going to continue to grow the platform. So the things that we really need to see are price stabilization, which I think, by and large, I feel more comfortable about that than I did it certainly a year and 2 years ago. We need to see new win, new acquisition pricing improve vis-a-vis the same period of time a year ago. We definitely saw that in November of 2025 compared to November 2024. We saw that in the first half of December last year. It's kind of -- January, February has been up and down in terms of comparing new win pricing to a year ago. So that will be the second key thing that we need to look for. And the third thing is promotions. Promotions are a fact of a competitive environment. You just don't want promotions to be so constant that they become kind of a baseline feature rather than truly promotions at particular times of the year. So those are the key ingredients, but I won't call a specific quarter. I would say that our objective though is to continue to stabilize service revenue, which we're starting to see. And then once you get to stabilization improvement.

Maybe not as popular as the AI question this week, but we have had a lot of discussion on direct-to-sell, satellite connectivity. What is your view of the opportunity set for Bell or even maybe if that could be a competitive dynamic as you look out ahead at more and more satellite connectivity to wireless?

Yes. We're quite excited about the opportunity we're going to have in the direct-to-sell space. We have a partnership, a privileged partnership with ASTS, and we're tied to them certainly commercially and strategically. Our objective is to have a market trial by -- in the latter half of this year so that we can launch -- have a full market launch very early in 2027. And so the bundles, the plans, the pricing, the promotion, all of that is TBD in terms of how we're going to approach the market. But we believe that our offering through ASTS is going to be superior to what our competitors offer in the direct-to-sell space. And it will improve the customer experience and certainly will, as a result, improve our churn performance and I think will lead to, over time, a market share shift.

How do you think about the market opportunity? Is this something that a lot of your wireless customers will pay for, even if it's maybe as a backup or just peace of mind? What do you think the market opportunity is for direct-to-sell?

I mean we -- I won't go so far in the early days as to size the total market opportunity, but I do believe there's demand for the service. So I definitely see it being included in the highest value wireless plans, again, to generate higher service revenue and to lower churn. And if we make it easy to subscribe to, that's the key thing, right? Just make it easy for customers. I think there's going to be important demand there on a pay-per-use either on a pay-per-use basis or just subscription on demand. So if you're all of a sudden out of coverage, if we send you an alert, you're out of coverage, click here, 1 click, 2 clicks and you can have instant coverage. I think the key determinant to kind of the key driver to the market potential is going to be how easy we make it for customers to subscribe.

Okay. Let's talk a little bit about the enterprise space. What do you see -- when you look at cyber, Bell Cyber, Ateko, what differentiates these businesses in the marketplace and allows you to grow?

So it is -- we are extremely -- we're pretty proud and excited about what we're doing in the enterprise space compared to, frankly, most legacy telcos in this space. Our -- even before these growth vectors, our -- the way we were managing the core business in terms of very modest declines where in most countries, you see the legacy telco have significant enterprise declines. So just there in the core business, turning modest decline to stability and slight growth is a huge accomplishment. And now you add to that these high-growth verticals. And again, the secret here is combining -- finding growth verticals that are tightly tied to the core expertise. So that's a massive differentiator. Whether or not you're talking about Ateko or Cyber or Bell AI Fabric, they are very closely tied to the core business of communication and connectivity. So that's one important thing. Two is the Bell's strength in Canada in distribution is second to none. And we have a significant advantage compared to anyone else on distribution in the enterprise space and the trusted Bell brand. And you look at Bell AI Fabric, for example, it really is combining, secure high-performing networks, which are our core business with our distribution, the trusted Bell brand and now you add AI infrastructure to that. It's a powerful, very potent and powerful combination. And we're approaching this entire growth -- these growth verticals in a very disciplined way. And by that, I mean it's demand led. So once we have the demand, so a committed customer, we will build a data center -- AI data center for them. So that is a key thing. High growth, low risk from that perspective. We're not speculating on a data center build and hoping customers will come. And the second thing we do is we are not ourselves investing in GPUs. We partner with those who bring GPUs to the data centers. And in many cases, the GPU owners are actually the key committed tenants for our fabric -- AI fabric facilities, all of which to say is we don't take the technology obsolescence risk. And so high growth, disciplined way, high growth secured in a disciplined way. Lots of potential there.

Got it. Great. Let's make sure we touch on Bell Media. I can't leave that out right now. You guys are talking about driving digital revenue from 45% of revenue last year to 60% by 2028. I don't know how many people here know about Crave. They all know about Heated Rivalry though. So maybe you could talk a little bit about -- and congratulations, by the way, on that show. Talk a little bit about how you have positioned your streaming businesses in the marketplace relative to all the other options that consumers have today?

So we have -- we're also pretty excited and energized by the growth potential of Bell Media. And for those who don't know, we are the largest broadcaster in Canada and have either been a majority owner or an owner or 100% owner of what is now Bell Media since 2000. So I mean, I don't think it's appreciated that the media business is actually a core business of Bell's. And we're not immune to the worldwide forces that have impacted legacy media over decades. But we just haven't sat there and let it continue to decline. We took an approach 5 years ago that we were going to change this business back to growth by leaning exclusively into digital. So the strategy is premium entertainment, which is Crave streaming; premium sports, which is TSN and news, which is CTV News, all 3 of those, so entertainment, sports, news on digital platforms. That's the play. And so we've been aggressively pivoting the revenue mix towards digital since 2020. It's working really well. So let's go to Crave now as the proof point. We grew the Crave subscription base by over 1 million subscribers in 2025 year-over-year and across we've looked back to any one of our products on the media side, on the telco side, years and years, decades. And it actually was Crave in 2025 was the fastest-growing Bell product that we can remember. Of course, we have far more wireless sales than we do Crave sales, but on a net add basis, it was phenomenal. And it's on the strength of premium entertainment, including a lot of Canadian content, which is very popular in Canada, as you'd expect. on a digital platform that keeps improving. And it's pretty remarkable to think that probably the hottest show in the last 6 months globally is a Bell Media Crave content, Heated Rivalry. We're really proud of the show, but it's not the only one. We had Shoresy and Letterkenny. We have a lot of French language content on Crave that have sold globally. One of our shows, French language shows that was very popular in Quebec, ended up being #1 in France as well most recently. So it's got some momentum.

Is there a Heated Rivalry future film or a spin-off you want to announce?

That's probably leave that to the experts rather than me. There is a season 2, though.

Yes. Sure. Nice. Okay. I want to make sure we talk a little bit about the regulatory environment, TPIA. So let's start with that. The CRTC's decision on wholesale has been controversial, I don't need to tell you that. The final decision mandated that you will provide wholesale access to your facilities. I know that was upholding a prior decision. How is that impacting your capital allocation plans, if at all?

Oh, it is. So I'd say we react -- I'm going to keep back to a common theme, right? We just kind of go back to -- we anchor ourselves all the time to our plan. And our plan includes on the capital markets side, our capital market strategy, disciplined capital allocation, investment dollars find their own level. So we react to the signals around us. What we are going to continue to do is direct our investment dollars to the highest return opportunities in areas that are tightly connected or singularly connected, frankly, to our plan. So the -- an important signal was sent with that public policy change. And that is that there is going to be lower returns on future fiber build than there had been on previous fiber build. We're still going to build fiber in Canada, although at a significantly lower pace than we had before. Some of those fiber dollars got reallocated to the U.S. that are higher growth opportunities and still more capital investment got directed to more capital-light areas that are higher growth like AI fabric, some of the digital media areas. So it's kind of the decision highlights the importance of revenue diversification and geographic diversification. So it's kind of back to the same point. We've got geographic diversification in our core business with Ziply, and we've got revenue diversification, particularly with our push in the AI-powered solutions.

You guys, I believe, did announce plans to launch Internet service in British Columbia and Alberta through wholesale. So I'm sure you've thought about the competitive response and gamed it all out. Why is this an attractive opportunity for Bell shareholders?

Yes, we'll be very disciplined. So we do not intend to use TPIA in the West to become a mass market Internet provider. It's actually -- I'm repeating myself, but it's really kind of -- I hope I'm demonstrating the focus. It's the same plan out West, which is multiproduct bundling on the Bell brand. So we're only going to offer Bell branded services out West, and it's not about being a solo Internet provider. It's frankly using TPIA to improve lower churn, improve churn in the West for our high-value wireless base. What we want to do is we want to protect the high-value wireless base that we have, and we want to grow the high value -- our high-value wireless market share out West. And we're going to do that for those customers who want multiple products. We're going to use TPIA as one lever, and we're going to use our streaming content bundles as a third lever. Taking a step back, what are we trying to do, increase our -- protect our wireless base to increase our high-value wireless market share on the premium Bell brand through churn reduction and product intensity. It's actually the same plan as it is across the board in Canada for Bell, and it's a very disciplined approach. So we don't plan on aggressively pricing solo Internet to gain Internet market share in its own right. That's not the play.

Okay. Let me ask you another one, and then we'll see if anybody in the audience has a question for you. One of the things we've heard about over the course of the last year or so on the AI front is data sovereignty. And I wanted to ask you how you think the Canadian government and the Canadian marketplace thinks about that and whether that is a tailwind to what you're looking at achieving on the AI front at Bell?

Yes, it's a big opportunity for us. The kind of the the data sovereignty mindset that exists in Canada, but in other jurisdictions around the world. And if data sovereignty is important to you and in the public sector, it clearly is and for some critical industries in Canada that -- who's operators within other critical industries in Canada are big customers of ours. So if you're the public sector or an operator in another critical industry and data sovereignty becomes an important thing. Again, it comes back to security of networks, trusted brands. So we're in a good spot there given our high-performing networks and our trusted brand. So I think it's a potential further accelerant to our AI-powered solutions ambition. The growth projections that we have and that we outlined at Investor Day for AI-powered solutions, the $1.5 billion in revenue, none of that is necessarily dependent on data sovereignty as a critical enabler, but it is a big opportunity that would be a further accelerant to the growth plan.

Okay. That makes sense. Any questions? [indiscernible] just wait quickly for the microphones to the webcast can pick it up.

As you talk about the Ziply opportunity, how should we think about other M&A potential outside of Canada? And how big do you think the fiber opportunity in the U.S. could be?

So our fiber opportunity, we've outlined it on Investor Day. We aim to get over the longer term to 8 million fiber locations passed 3 million of those by the end of 2028, and we're roughly halfway there today. And so those -- that's the ambition. Again, we've declared ourselves. That's the ambition. The base case to get to those thresholds is to build. And so that's the base case. We're going to build our way to 3 million, and we're going to build our way to 8 million over time. If there are opportunities, again, over time that are opportunistic, the right value and that allow us to get to those targets quicker. We'll take a look at those opportunities. But again, I'll reiterate 2 things. base case is to build. And two, we wouldn't do anything in the short term that deviates us from our leverage targets. We plan on getting to 3.5 -- leverage ratio of 3.5 by the end of 2027. We're going to be below 3.5 by the end of 2028, and we're going to march our way towards 3.0 by 2030. So anything we do, whether or not it's in the U.S. or in any other of our businesses, we're not going to make investments that cause us to deviate from those leverage ratios.

That was going to be my next question, you sort of touched on it, how would, if at all, asset sales play into getting down to that 3x by 2030?

Yes. And again, it's a plan we outlined last year. In this case, in terms of asset sales, we outlined our objectives in February of '25, where we indicated that we plan to monetize up to, I guess, I think it was $7 billion of asset sales, $4.7 billion of which or $4.6 billion of which was MLSE, and then we had the Northwestel acquisition. Since then, we've smaller disposition -- Northwestel disposition. And since then, we've had a smaller disposition of Bell Smart Home. And we're not at the $7 billion in proceeds yet, but the plan remains exactly as it was outlined a year ago. And I think the target was to reach those proceeds of sale by the end of 2027. So we're not deviating from that plan. So all the things we said we were going to do last year, we're going to continue to execute towards.

Great. Well, we're running out of time, Mirko, anything you want to wrap up with before we close it out?

Again, it's -- I'm going to -- repetition. It's very important when you're the CEO, you got to keep saying the same things and just to reinforce the plan. It's execution, execution, execution. I think the significant value is going to be created through AI fabric. Bell Media will deliver annual revenue and EBITDA growth, and it's an asset that generates significant free cash flow. We will hit the leverage targets that we outlined. In fact, executive compensation depends on hitting those targets. So that's just -- I don't -- I share that with all of you just to say that it is a very serious target that we won't deviate from. And we are going to continue to operate in a disciplined manner to deliver the total shareholder return that we indicated we would deliver to everybody through to the end of 2028.

Great. Thank you very much. Thanks, everybody.

Thank you.