Good morning, ladies and gentlemen. Welcome to the BCE Q2 2020 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Louis, and good morning everyone. Thank you for joining this morning. Participants on the call today will be Mirko Bibic, BCE’s President and CEO and Glen LeBlanc, our CFO. Our second quarter results package and other disclosure documents, including today’s news release, slide presentation as well as other documents issued earlier are available on BCE’s Investor Relations webpage. However, before we get started, I want to draw your attention to Slide 2 our safe harbor statement. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking and therefore, subject to risks and uncertainties. These forward-looking statements represent our expectations as of today and accordingly are subject to change. We disclaim any obligation to update forward-looking statement except as required by law. Factors that may affect future results are contained in BCE’s filings with both the Canadian Securities Commissions and the SEC and are also available on our corporate website. With that, I’ll turn it over to Mirko.

Good morning everyone. Thanks Thane. We're still in the midst of what continues to be a long journey for all of us and the Bell team stepped up in Q2 by focusing on the operating principles that have guided our crisis response from the very start, keeping Canadians connected and informed, prioritizing the health and safety of the public, our customers and of course our team and supporting our customers and communities. I'm proud of the thousands of team members who have been serving our customers at Bell workplaces and in the field since the crisis began. Against this backdrop we delivered operating results for Q2 that underscore Bell's broadband network leadership, to reinforce the critical nature of our services and demonstrate our ability to execute effectively under very difficult circumstances. Despite ongoing heavy demand for all our services we have maintained internet speeds and reliability while continuing to operate our networks at a near perfect 99.99% overall availability. We enabled work from home for about 90% of our employees which included some 12,000 call center agents. By mid April service levels were back to what they were pre-COVID and our call centers resumed full hours of operation at the beginning of June. In short, in a matter of a few weeks we pivoted from full crisis mode to the stabilization phase and now with Q2 behind us we are focused on building momentum back into the business. As Canada gradually reopens our focus has been on ensuring customer access to our retail locations wherever possible and as of now 99% of our Bell the source and authorized dealer stores and kiosks are back in full operation. In Q2 we continue to grow broadband market share with more than 50,000 total net new wireless retail internet and IPTV customer additions.…

Thank you Mirko and good morning everyone. I hope everyone is keeping well and staying safe this summer. Let's turn to slide 7. The financial impact of COVID-19 obviously accelerated in Q2 reflecting a full quarter impact of widespread retail store closures and reduced consumer activity as Canadian sheltered at home. This drove a 9.1% year-over-year decline in consolidated revenues. Due to the flow-through impact of lower revenue adjusted EBITDA was down 9.4%. This result reflects approximately $85 million of costs incurred directly because of COVID including the relocation of call center agents, employee redeployment expenses, the purchase of personal protective equipment, increased sanitation and cleaning and incremental provision for bad debt exposure totaling $36 million as well as donation of masks to healthcare and other frontline workers throughout Canada. Net earnings were down 64% over last year as a result of lower year-over-year EBITDA, lower equity income from MLSE due to COVID and a $452 million non-cash impairment charge to Bell media TV to reflect the current market value of its TV and radio assets. Despite the steep earnings decline this quarter free cash flow grew 50% to 1.6 billion. One of the reasons for the increase was a slowdown in capital spending during the initial stages of COVID as our primary focus was on stabilizing the organization and ensuring continuity of critical services. Construction activity has now ramped up considerably. Lastly I want to bring to your attention and reporting change we made this quarter as Mirko mentioned as a result of our agreement to sell substantially all of Bell's data centers those operating results are now being classified as discontinued operations this quarter with prior periods restated for consistency. Let's move to slide 8 and discuss wireless financials. COVID-19 had a material impact on Bell wireless financial…

Hey thanks, Glen. So before we start the Q&A period to keep the call as efficient as possible I'd ask you to limit yourselves to one question and a brief follow-up so we can get to everybody in the queue with the time we have left. So with that Louise we're ready to take our first question.

Thank you. We will now take questions from the telephone lines. [Operator Instructions] Our first question is from Jeff Fan from Scotiabank. Please go ahead.

Thanks and good morning to everyone. First question is just on the wireless, Glen wondering if you can help quantify for us some of the roaming and overage and weight fees impact just so that we can start to make some assumptions about the ABPU service revenue or ABPU recovery as we go through the second half and into ‘21 as the economy starts to open up. And then a quick follow-up perhaps for Mirko on the customer experience, I recall that was clearly one of your strategic imperatives coming into your new role. It sounds like there was quite a bit of accelerated efforts related to that maybe things that would have been done later in the year or later on in your tenure perhaps pull them all into Q2. Wondering if you can just identify some of those and maybe even if you can quantify for us how much was pulled into this year or this quarter versus what could have been done later in later years? Thanks.

Good. Thanks Jeff. Glen, I will start first and then I'll hand it over to you to unpack the ABPU a bit for Jeff. Thanks for the question Jeff. So I'll start first on wireless. Your question on that I will just give you some high level comments on the ABPU or the service revenue impacts from COVID. So I break it down into three-four categories. So there was a roaming decline clearly with a halt in travel and you can kind of quantify that in the range of 60 million and then there were COVID related overage decline impacts as customers were staying at home and were offloading data usage to Wi-Fi. Then of course there was data overage declined due to the migration to unlimited plans but on that one I have to say the team I've said this every single quarter that I have been on these calls the team has continued to manage that migration really-really well and we've been doing that since the launch of unlimited plans last summer. And there has been the impact of customer accommodations that we offer to help our customers during the COVID crisis. So you put all those together Jeff and they are more than the overall service revenue decline. I will answer the customer experience question now and then Glen you can unpack ABPU a little bit more if you think necessary. So on customer experience you're right, I mean it has been a focus since I have come on board as CEO on January 6 and it's a journey on the improvements to our online platforms like it's clear that customers, our mission is going to be to serve customers the way they want to be served and the vast majority of transactions especially in wireless continue to be in traditional retail stores and as I mentioned my opening remarks as the economy reopens and we're 99% open on the stores that advantage swings back our way. So we will continue to be best in class on that but other customers want to be served in the call centers and we need to be best in class there and online as well and we're upping our game each and every day. It's a journey. It's things like allowing customers to change their TV programming online, make online payments, change their rate plans online, upgrading their smartphones online. It's those kinds of things Jeff that we continually work on the buy flows and I'm not going to quantify how much we pulled into Q2 but it will be a core category of CapEx spend this year and that's going to continue. Over to you Glen.

Thanks Mirko. And good morning Jeff. Yes, I will give you a little more color here on the ABPU decline as Mirko said and explained. The biggest bucket is roaming and data overage that accounts for 60% at the ABPU decline that you see. Customer accommodations that we put in place temporarily help those facing financial challenge that accounted for about 10% of that ABPU decline. The remaining 30% year-over-year decline was mainly due to the higher prepaid customer mix that is in our subscriber base. Hope that's helpful Jeff.

Okay. Thank you both.

Thank you. Our next question is from Richard Choe from JPMorgan. Please go ahead.

Just wanted to ask about broadband is doing well but video the IPTV was lower and just wanted to get a little more color on those trends there. What are you seeing in broadband? And why TV is lower?

Thanks Richard. So on TV, I will start there I think sales were clearly disrupted because of COVID and there was an impact on the commercial side obviously. So think small businesses, bars, hotels that kind of thing and we are seeing the effects of high penetration of TV in our current five markets. We're lapping strong all TV growth and certainly in Q2 anyway because of initially the impacts of COVID we did have slower new service footprint growth which I think will pick up in the back half of the year in terms of service footprint growth. Now on internet you're right. I mean performance was quite resilient during what we all know is a pretty difficult period of time and that speaks to the importance and the quality of our internet. We have the fastest download and the fastest upload. Upload is pretty important right now and we have the best Wi-Fi in the marketplace and that too is very important. So on that, I mean I think those would be the primary reasons why internet is so resilient. We've had the acceleration of footprint on wireless home internet. Of course as we enter a community particularly rural community that hasn't had high-speed broadband with wireless home internet we accelerated that footprint that just, is a boon for the community and of course leads to the subscriber growth and we expect the resilience in the internet to continue over the rest of the year.

Great. Thank you.

Thank you. Our next question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Good morning, thanks for taking my question. My question is on B2B. I believe it was Glen mentioned that Bell business markets have held up fairly well thus far considering the conditions. I wanted to get your sense Mirko and Glen in terms of what you're seeing in terms of feedback from the larger enterprise customers. Conceivably the pressure on that end would come later in the year as set up some of those contracts kind of come up for renewal and reprice. I wanted to get some color around that, do you expect incremental pressure as that plays out and then secondly as my follow-up with respect to free cash flow, I hear your point about a lot of the factors that help free cash flow in Q2 sort of reversing potentially later in the year but I was wondering if you can size up the potential saving, cash saving from the handset cost this year that should obviously help the full year free cash flow number. I'll leave it there. Thank you.

Okay thanks Aravinda. I will take the enterprise question. Glen why don't you take the free cash flow question. So on the business side the puts and takes are the following. So customer spending did slow down things like product revenues and service solutions. On the other hand there was traction in connectivity, remote collaboration, conferencing services those types of things it kind of intuitively makes sense given what we were going through in Q2. So those are the broad categories of puts and takes but I have to say I mean as I look forward to the rest of the year, I think it's still too early to predict how all that's going to shake out for the rest of the year on the enterprise side and a little bit the same answer on SMB small business again really too early to predict what's going to happen but on the SMB as it's a very small part of our overall business markets exposure. Glen?

Thanks Mirko. Yes. Free cash flow strength, I think you kind of unpacked it a little bit and touched on the caution that I was giving going forward. As I said in my opening remarks CapEx was lower certainly in the early months of March and in April and May as we focused on organization of stability and ensuring that we propped up or secured our critical services and now we're moving back to more construction and footprint expansion. So we will see capital increase in the second half of the year. The working capital I mentioned earlier will reverse. Now on a handsets, it's hard to say how this will shake out. I certainly -- I'm not going to try to predict second waves and third waves do we have potential store disruption again with slowdown in sales activity. Obviously it's going to be down because as Mirko mentioned in his opening remarks that we had, we're 100% EIP now. When I look at the quarter alone EIP plus the reduced sales activity, I mean handset costs were down 25%, $140 million. I certainly hope sales activity is stronger in the second half of the year. So I wouldn't think you can just extrapolate that but hard to see how it's going to shake out. Let's just keep our fingers crossed that we see sales activity remain strong in the second half.

Thank you.

Thank you. Our next question is from Vince Valentini from TD Securities. Please go ahead.

Yes. Thanks very much. First, a clarification if I can. The 39,000 and 45,000 subscriber provisions, can you just clarify if that would have been zero in the second quarter last year or is this something you always do but it just got elevated this quarter? The second one a bigger picture question, I see a huge arbitrage opportunity and strategic opportunity for BCE emerging here. I mean your cost of debt has never been lower. You're flush with cash. You've got another billion coming from the data center sale soon and we're looking at a media industry that's just imploding and stingrays revenues around 60%. Yesterday in radio, I think Corus radio was down 52%. I mean there's a big need here for the government to step in and allow some consolidation or regulatory relief and it seems to me that BCE should be the leading candidate here to arbitrage your incredibly strong scale and media and cost of capital to try to sort of save the industry and help yourself and your shareholders at the same time. So I'm just wondering if you have any comments on thoughts about strategic growth opportunities in media Mirko. Thanks.

Thanks Vince. Why don't you go first Glen on the first question on provisions.

Of course. Good morning, Vince. Look, the customer provisions and this is what transpired, in any normal quarter what would happen is when customers reach certain points of non-payment then we activate what we refer to as an involuntary churn or an involuntary disconnect. What we had agreed to do during this difficult time is we would not deactivate customers and we would ensure that they had their internet and their wireless connectivity that became so critical at this difficult time. That said we know that we have to one day return to normal and we are going to see an escalation or a requirement for involuntary disconnects. So what I did is ensured that the provision that we took from the customers 39,000 you alluded to in wireless 45,000, 46,000 on wireline, mirrors exactly what the historical experience would have been on disconnects. So as you see in aging into 30, 60, 90, 120 days, we ensured that the provision is, it mirrors historical performance. So the important thing to remember Vince is now if you take revenue credits, if you take bad debt -- increase in bad debt provisions, you have to ensure that your nets and your churn are all aligned and that's what a customer provision does, doesn't overstate one metric.

Okay thanks and Vince on the second question. So I'm always open to good ideas. Let me tell you that. I think we've shown a strong track record over the years at being opportunistic and very strategic on the M&A side. So we'll always keep looking. I'm not going to comment specifically on the precise example you put forward but always looking to be opportunistic. I mean whether or not it's in media or in telecom, I mean you do raise a point about scale and it's pretty obvious that we ought to be encouraging scale in the country look who you just take media which is the example you brought forward, just look who are we competing against. It's a rather silly notion to still think of the media industry as a domestic media industry with three players competing with each other and we're competing with global internet giants really at this stage in the game. And I'm happy with our asset mix right now. I think it positions us well strategically and always looking to be opportunistic and it's hard for me to comment on this call on the specific idea but it was a good question.

Fair enough. Thank you.

Thank you. Our next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Yes. Thanks. Thanks very much. A couple of housekeeping questions for Glen and then one bigger one for you Mirko. Glen on the pension exposure, doing a great job keeping the solvency fully funded essentially. Are there kind of any scenarios here where that changes kind of going forward maybe just remind us on sensitivities and on the bad debt expense can you break that down between wireless, wireline and media and then over to you Mirko just bigger picture satellite broadband services around the world are getting a lot of attention. Love to hear your thoughts on at least in Canada sizing up either that opportunity or threats for your broadband strategy over the longer term. Thank you.

Okay. I'll go first Glen on the second question. So Drew on the satellite broadband services and the competitive implications ,I'll put up our fiber internet network up against anything. I mean, the fastest speeds in North America and we got customers want; what do they want? They want download speeds. We can't be beat and certainly satellite can't beat that. Upload speeds that's what they want that's more and more important as I said in my opening remarks. Can't beat fiber and certainly satellite broadband cannot and the in-home Wi-Fi the services that we have, the time to market advantage weather and then on fiber generally as compared to satellite but if you think about our wireless home internet expansion 25 download, one mega up that's going to 50/10 soon that's going to be hard for satellite to beat. We've already got 400,000 homes that have the ability to purchase that product. So I think we're in a very good position. I think we're in a great position if you even compare us to your traditional cable competitors let alone satellite broadband that hasn't launched yet and like obviously it will be well be received, I think in some very-very deep rural areas at some point but I think that's kind of my reflection on that question Drew. Over you Glen.

Thanks Mirko. Good morning Drew. Pension exposure, great question. It's hard to believe that discount rates continue to drop at a time when we were looking at discount rates at the end of 2019 between our plans that were running around on average 2.8% and now at the end of the quarter we were bouncing around 2.23 to 2.37 between our multiple plans, so significant decrease in the discount rate but all of that said we remained at 99 we're bouncing 99 to 100 on any given day from a solvency ratio perspective which is just remarkable. And I am incredibly proud of what our team has done to put us in this position. We didn't get here by accident. We got here by following a very prescriptive glide path ensuring that over 70% of our assets are now invested in fixed income. So that gives us a natural hedge against this declining discount rate. So a remarkable job. On a sensitivity if you saw discount rate drop another 25 basis points and reach two or sub two it's around $125 million to $150 million and when you consider a pension plan of over ‘20, $5 billion in total that's pretty manageable. So I feel like we have positioned ourselves incredibly well to mitigate this risk and never in my wildest dreams that I think we'd be looking at discount rates at this and still have a fully funded plan. Over to bad debt exposure. As I mentioned in my remarks, I think there is, I will unpack this a little further. I took an extra provision at $36 million as a bad debt expense but I also took provision of $28 million through revenue. So a total of $64 million additional provision related to COVID. Through revenue a provision of revenue that's really accommodations we gave customers. Customer credits we gave waiving late paid charges and making arrangements for folks who were struggling during this difficult time. So in total if you look at the P&L impact of COVID, bad debt and revenue impacts it's about 464 million. If I broke that down by BU 45% wireless, 45% wireline, about 10% media.

Okay. That's perfect, Glen. Thank you both.

Thank you. Our next question is from Maher Yaghi from Desjardins. Please go ahead.

Yes. Thank you for taking.

Hey Maher, we can't hear you. Sorry. You cut out.

Hello can you pick up, oops he dropped off his line. So I just go to the next person. Simon Flannery from Morgan Stanley. Please go ahead.

Thanks a lot. Good morning. Mirko, I wonder if we could talk about 5G for a minute. You rolled out the service to some of the key cities here. Any early learnings, any early observations and where do you see the biggest opportunity for the company? Is it really around the B2B type used cases? What sort of conversations you are having there -- we should be thinking about for the future? Thanks.

Thanks, Simon. Yes, so we did launch on June 11. You know that. So the cities were Montreal, the GTA, Calgary, Edmonton, Vancouver and we will be expanding to about 28 additional markets in 2020. So all that's going according to plan. I'm really pleased that our competitive positioning here on 5G because our speeds are 1.7 gigabits per second which is fastest in the industry and we're going to be even faster next year when 3.5 gigahertz spectrum becomes available for mobile. I'm also quite pleased that we have a 3.5 gigahertz spectrum advantage going into the auction given our Inukshuk Holdings. And just generally on that network side with so many advantages including our network sharing arrangement with Telus as you know and the number of cell sites that we have which are fiberized which will be so important for the service attributes customers will be looking for 5G. So far look it's early days. I'm quite pleased with how well it's going in the context of having just launched, having launched kind of still with stores having not been completely fully opened at the time that we did. I'm really pleased with how well-positioned we're going to be to capture growth in 5G and to that question which is the last part that you asked me about Simon. I mean, I see growth potential in the consumer space just kind of like on the consumer side when we upgraded from 2G to 3G, 3G to 4G etc. there's always a spike in penetration, smartphone adoption especially usage and that drives revenue and you're right there are going to be a multitude of used cases on the enterprise side, and on the IoT side which will be in a great position to capitalize on especially when you think about our distribution advantage with BBM Bell business markets and our enterprise strength.

Great. Thank you.

Thank you. Next question is from Maher Yaghi from Desjardins. Please go ahead.

Thank you for taking my question and getting me back in the queue. I wanted to take Vince's question and flip it other side with CapEx expected to increase. I guess, with 5G you have spectrum auctions coming up next year. You also have increased volatility in the markets that you're operating in. Do you think you have other assets that could be divested off and I'm thinking here real estate, potentially and you always in the past talked about the importance of owning cell towers. In the world of 5G, do you think that dependency and importance is to the same extent or you could get capital out of the market, out of your assets from that portion of your asset mix and redeploy it somewhere else? Thank you.

Okay. Thanks Maher. Nice to hear you come back on the line. I am going to, in some respect, reiterate some of the things I said in response to Vince's question which is I'm quite happy with our asset mix but we will always be looking up to optimize that as things develop. On the specific question you asked in terms of divesting cell site or tower portfolio. I am of the view that that is a very competitively important asset and I think it's especially important in the world of 5G. So owning that infrastructure remains an important part of our core business and I don't see that changing in the near term that's for sure. And in terms of just more general, the point about cost savings with respect to real estate, if I take the real estate question a bit more broadly, clearly with what we've gone through in the last few months and what we are going to put a sharp focus on real estate optimization and particularly from an office space point of view and that's something that we're going to be looking at as others across the Canadian economy surely are.

Thank you very much.

Thank you. Our next question is from Batya Levi from UBS. Please go ahead.

Great. Thank you. Can you provide some color on how the $85 million COVID related expenses were allocated in each segment and how do you think about wireless margins in the second half with activity picking up and one follow-up in media, does adding HBO Max change your profitability over segments in any way? Thank you.

Why don't you go ahead Glen?

Okay. I will start on the first part on the $85 million. Look, I gave of that $85 million I said that operating expense of $36 million of that was bad debt and I gave you a breakdown of how that affected the BUs and I'm not going to unpack the rest of the details the $36 million represents the substantive portion of the $85 million. I gave you the color on what it was with PP&E and the donation, the increased sanitization cost, the donation of PP&E that we gave to our frontline workers, the cost we incurred trying to ensure that we were able to move our contact center employees home to work in a safe environment. As far as the split of that, the 45, 45, 10 is pretty accurate on the whole envelope and Mirko over to you.

Yes. Look on the media question the HBO Max content, I mean that that's over a longer term horizon over which we'll be monetizing that content. What it really does is it makes the crave that much more compelling in terms of a spot service to subscribe to and will allow us to scale the service even more and we saw some good progress in Q2 going from 2.7 million to 2.8 million subscribers and just making adding more compelling content just makes it that much more attractive which allows us to increase our sub base and basically leverage that contract over the longer term.

I think you had another question on margin, looking forward and frankly as Mirko said in his opening remarks, it is our belief that that Q2 was the low watermark and that we will continue to see consecutive quarter improvement Q3 over Q2 and let's hope Q4 over Q3 as we get control of this pandemic. It's difficult for me to predict margins because I can't predict how this pandemic is going to affect us. As I said earlier wave two is there additional waves beyond that, is there shut down of commercial activity and heaven forbid closure of stores, etc. So our focus right now is to serve the customers with the stores we have open now to ramp up our sales activity and fingers crossed that that continues well into the fall and we have this under control.

Look sales are growing week after week, month after month and while traffic is clearly down in our stores, we're seeing strong conversion from the traffic that is in stores. I mentioned this last time we were on a call like this together and we're seeing that trend continue. So it all points towards positive momentum half of Q2.

Got it. Thank you.

Thank you. Our next question is from David Barden from Bank of America. Please go ahead.

Hi, it's Matthew sitting in for David. Thanks for taking the question. I just had two and Mirko in your prepared remarks you mentioned, you expect sequential improvement in Q3. I was just wondering if you could elaborate on what you see as the main drivers of that expectation and just secondly if I could with the acceleration in the self-serve and online channel, is that leading to any change in how you see the physical distribution network whether its size or its reach and maybe some costumes that you could extract from there? Anything would be helpful.

Okay. Good questions. Thanks Matthew. So on Q3 kind of, I'll pull from different comments we've made over the last hour. So on wireless, I just previously mentioned what we're seeing in terms of continued strength week after week. So I won't repeat that but we will reiterate it, on internet as I mentioned earlier performance is quite resilient and we expect that to continue over the rest of the year. On home phone, no significant sales but really strong churn and I called out the results in my opening remarks and we've seen a material improvement in the pace of decline and we expect continued improvement in the pace of decline throughout 2020. TV, I called out a little bit earlier and the enterprise side and on media I had not talked about what we're seeing in media. We're seeing gradual improvement and momentum slowly building. Cancellations have stabilized. Some segments are advertising again and we're seeing bookings month over month accelerating. We're seeing strong demand for the fall season and I mentioned F1 just take F1 for example just to point out the pent-up demand for sports we're up over 20% over the first three races and we're on pace for new audience records for that property. UFC, Nascar very strong viewership year-over-year and I think the Raptors are going to be very strong in terms of viewership. In fact the U.S. versus U.S. team matchups that we've had on TSN since the NBA has come back have been triple our normal audiences for matchups featuring U.S. teams. So all that bodes towards progressively improving loadings or bookings on media And self-serve, look, like I said earlier, I still think that the predominant way Canadians are going to want to shop for telecom services particularly wireless over the near term is in store and so that natural advantage we have swings back our way. Yes, we're going to need to scale self-serve and you kind of see it in our results and when we direct activity online, it does lead to a lower COA which is a lot of goodness and then the footprint will be optimizing that as we go. And that's a function of consumer behavior, consumer patterns, our readiness on online and will continually be evolving that mix between online and traditional retail store footprint.

Right.

Thanks Mirko on that, unfortunately we have timed out. So I do thank you for your participation on the call this morning. I will be available for the balance of the day for any questions follow-up questions and clarification. So with that take care and stay safe.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.