BCE - Q4 2022

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the BCE Q4 2022 Second Results and 2023 Guidance Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, sir.

Thane Fotopoulos (VP of Investor Relations)

Thank you, Mode. Good morning, everybody, thank you for joining our call at this unusually but unavoidable early start time. With me here today are Mirko Bibic, BCE's President and CEO, and our CFO, Glen LeBlanc. You can find all our Q4 disclosure documents, including our safe harbor notice concerning forward-looking statements for 2023 on the Investor Relations page on the BCE.ca website, which we posted earlier this morning. We have a lot of material to get through this this morning on this call. Before we begin, I wanna draw your attention to our safe harbor statement on slide 2 of the presentation. With that out of the way, I'll turn the call over to Mirko.

Mirko Bibic (President and CEO)

Thank you, Thane. Good morning, everyone. Our 2022 accomplishments are anchored to the operational priorities we set back in 2020 and the Bell team's unwavering commitment to all our stakeholders. These priorities remain the foundation for Bell's future success. With a strategic roadmap, including a historic multi-year transformational Accelerated CapEx program that is well advanced and already paying off with subscriber loadings, an improved end-to-end customer experience, leading self-serve apps, and consistently strong execution, the Bell team delivered great results across all operating segments this past year. In terms of overall financial performance for 2022, we essentially achieved the midpoint of guidance for both revenue and EBITDA growth, despite unprecedented cost pressures from inflation and record storms, an expensive and highly competitive Black Friday, and media advertising softness.

Normalizing for CAD 87 million in largely unplanned inflation and storm-related costs this year, EBITDA growth was actually 4%. We're making massive investments to build the highest quality networks. They're consistently being recognized by third parties such as PCMag, Ookla, and Opensignal as being the fastest. Our customer value proposition is to offer the best networks at affordable prices. We're loading these networks profitably while maintaining margins stable in a highly competitive marketplace. It's a notable achievement. Since 2020, we've accelerated CapEx, investing more than CAD 14 billion, the highest ever over a three-year period by a Canadian communications company. We're doing it to forge ahead aggressively on constructing the broadest fiber footprint in North America, opening up Wireless Home Internet to 1 million rural homes in rural communities, and building our mobile 5G networks faster.

In the past three years alone, we have delivered over 2.6 million new customer-ready broadband internet locations, including a record 854,000 direct fiber connections in 2022. We've expanded mobile 5G coverage to 82% of Canadians, and we've secured CAD 2.1 billion worth of critical 3.5 GHz mid-band spectrum with which we deployed a standalone 5G+ network. In our wireless segment, we continued growing our base of high-value mobile phone subscribers, increasing our cross-sell penetration of wireless and internet households and managing customer churn. Total mobile phone net adds in 2022 were up 66% to 490,000, driving both service revenue and EBITDA growth of more than 7%.

With only 41% of postpaid customers currently on 5G-capable devices, as well as accelerating immigration levels and a sharp focus on bundling wireless and consumer Internet service, we see good runway for continued growth. On the wireline front, fueled by our biggest annual fiber build-out ever, we added 201,762 new net retail Internet customers in 2022. That was up 33% over 2021 and our best result in 16 years. That drove strong residential Internet revenue growth of 8%. In fact, we capped off 2022 with our best annual residential RGU performance and our first year of positive net adds since 2005. These results are a testament to the power of fiber-based Internet service that provides the fastest dedicated symmetrical speeds that cable just can't match.

By the end of this month, multi-gig symmetrical internet speeds of 3 gigs per second or higher will be available in 5 million locations, 1 million of these will have access to 8 Gb per second. Our acquisitions of EBOX and Distributel also further strengthen our competitive position and support our internet growth strategy with more service options for value-conscious residential and SMB customers. Despite a challenging macroeconomic backdrop for advertising, our Bell Media segment performed better than expected, driven by continued strong digital revenue growth, which is up 54% in 2022 and now comprises 29% of total Bell Media revenue compared to 20% in 2021.

Underpinning this performance was Crave, which grew direct streaming subscribers by 26% in 2022 on the back of market-leading content as well as rapid growth of our SAM TV sales tool, which nearly tripled sales revenue for a second consecutive year. We're also developing a strong customer-first culture. Investments in our people and in the tools they need to support our customers, as well as investments in digital functionality, AI, and machine learning capabilities, together with the unmatched quality and reliability of our networks, as I've mentioned, all of that is leading to higher NPS scores, lower customer churn, and meaningful CCTS performance improvement. On the ESG front, the Bell for Better initiative, which highlights our leadership in mental health, environmental sustainability, and workplace engagement, also made notable progress in 2022.

We were named by Corporate Knights the top telecom company and number four in Canada overall on the Best 50 Corporate Citizens list, as well as the inaugural Greenhouse Gas Reductions Champion by Clean50, a national sustainability organization. Reflecting our ongoing efforts to engage and invest in our people, Bell was named one of Canada's top 100 employers for the eighth consecutive year by Mediacorp. This latest recognition reflects our success in key areas, including employee benefits, training and skills development, and community involvement. Just last week, we proudly launched a new era of Bell Let's Talk in response to the growing need for mental health services in Canada. We're committing an additional CAD 10 million towards our goal of CAD 155 million in funding for Canadian mental health programs, replacing the CAD 0.05 per interaction donations made in previous years.

Exceeding any previous Bell Let's Talk Day donation, this funding will help support vitally important mental health projects all year round. It will allow us to put more emphasis on the practical ways we can all make positive change on Bell Let's Talk Day and throughout the year. Let me turn now to slide 6. Starting with Bell Wireless, I'll give an overview of some key operating segments. We're very pleased with our post-paid wireless loadings. We had a record quarter of gross activations that drove 155,000 new net subscribers. That's up 41% over 2021 and 148% higher than Q4 2019. This strong result was achieved even with a higher number of switchers, reflecting aggressive offers from our competitors that we chose to match selectively.

For the first time since 2019, Q4 retail foot traffic and shopping activity was unrestricted and back to pre-pandemic levels of competition, particularly during Black Friday, that whole Black Friday period, actually, which was very promotional intense in 2022 of Q4 of 2022. That said, all the work we do on cost and the strength of our balance sheet and liquidity position prepared us financially to load the subscribers that we did, despite a level of promotional activity that was higher than any of us would have desired. ARPU is up 0.5%, which is our seventh consecutive quarter of growth. This was supported by higher roaming revenue that was at 112% of pre-COVID levels and our continued focus on higher-value subscriber loadings, even as higher transaction intensity moderated ARPU growth due to the financial impact of the shift to installment plans.

For mobile-connected devices, net adds increased an impressive 168% over last year to 104,000, driven by continued strong demand for all Bell IoT solutions. Let's turn to wireline. Another strong RGU quarter. In fact, we've now delivered positive retail residential net customer adds, including satellite TV and local phone, in four of the last six quarters, and I've already mentioned our performance for the full year of 2022. Bell Internet added 63,466 new net retail subscribers, and that's 33% higher than 2021, driven by strong growth in every region. This was our best Q4 performance in 18 years. Notably, 70% of consumer fiber activations in Q4 were on gigabit or higher speeds, bringing our base of gigabit or higher customers to approximately 1 million, or 43% of total fiber subscribers at the end of 2022.

It was another great quarter for Bell IPTV, with our best quarterly result in almost seven years as we leveraged our multi-brand customer segmentation approach to drive 40,209 net adds, up 38% versus 2021. At Bell Media, as I said, advertising sales were better than we feared going into the quarter. Q4 ad revenue was up 3.8% over the previous year, buoyed by strong demand for the FIFA World Cup, demonstrating the massive popularity and the value that advertisers place on premium sporting events. This helped TSN and RDS assume their ranking as the top English and French language sports channels in Q4, and they're also off to a good, strong start in 2023 thanks to the World Juniors and the NFL playoffs. Crave also continued to deliver with total subs up 6% over last year, surpassing 3.1 million.

This, together with the increased adoption of our advanced advertising platforms and expanded AVOD offerings, contributed to a robust 46% growth in digital revenues in Q4. Our Québec media strategy continues to hunt as we led all competitors in Q4 in the French language specialty market, and that includes news and sports. Let me turn now to slide 7. Our 2023 business plan is anchored to our strategic framework to build, to execute, and to transform. It's a prudent plan designed to mitigate the effects of a potential recession, to maintain the generational investments in our networks and in our services, and to support our dividend growth model. Although we can't accurately predict the severity and magnitude of an economic downturn, we know our business is resilient and that our financial position is rock solid to weather potential impacts.

As a result, we remain optimistic about our business outlook as you see reflected in our financial guidance targets for 2023. As I said last February 2022, in line with our accelerated capital investment program, CapEx will begin to decrease in 2023 from what we clearly stated would be a peak spend year, 2022. We plan to invest around CAD 4.8 billion in 2023, that's to support the expansion of our pure fiber footprint to another 650,000 homes and businesses. Approximately 85% of our planned broadband build-out program will be done. That comprises approximately 10 million total combined fiber and Wireless Home Internet locations. By the end of the year, we will have 4 million homes that will be able to access symmetrical internet speeds of 8 Gb per second.

We'll also grow our 5G wireless footprint in 2023 to cover 85% of the national population and will enable low latency, stand-alone 5G+ service for 46% of Canadians or 71% of the addressable population. We plan to continue to win the home by leveraging our symmetrical internet speed advantage over cable, delivering the best Wi-Fi with Wi-Fi 6E and our Giga Hub modem, and will drive greater cross-sell penetration of higher value, lower churn wireless and internet households. In wireless now, we plan to grow mobile phone net adds by capitalizing on our network leadership and accelerating 5G upgrade cycle and higher immigration levels.

Building on our retail distribution leadership, you will have seen that earlier this week, we announced an exclusive multi-year distribution agreement with Staples Canada to sell Bell consumer and small and medium business services in more than 300 of their stores across the country. In our B2B sector, our objective is to build on our improved results from last year. In fact, 2022 represented our best SMB financial performance in over 15 years, we expect to maintain this momentum in 2023 by expanding in key channels and leveraging our fiber footprint. In the large enterprise space, we'll continue to put in place the foundation for our advanced products and services portfolio that will drive growth in the medium to long term.

At the same time, we're carefully managing our legacy portfolio through a combination of cost discipline and a focus on key legacy products. At Bell Media, we'll continue to drive advanced advertising and digital products like Crave and the CTV and Noovo apps to help offset some of the recessionary pressures we're seeing in advertising, particularly expected in the first half of 2023. Lastly, with respect to our work to, you know, with respect, pardon me, to our transform work stream, we'll continue to focus on end-to-end customer experience improvements that make it easier for customers to do business in Bell, and we'll do this by investing in digital self-serve and high-touch interaction.

We also intend to drive operational efficiencies through enterprise architecture and agile development, automation tools, product and process simplification, integration of central billing systems, and an ongoing attention to our cost structure in order to maintain a stable margin, even in the face of a potential recession. Let me turn to my last slide, which is slide 8, and our dividend announcement from this morning. The financial pillars of our 2023 plan enable us to execute on BCE's dividend growth objective, which is a top capital markets priority, as you all know. We're increasing the BCE common share dividend by 5.2% for 2023. It's our fifteenth uninterrupted year of a 5% or higher increase, and my fourth as CEO.

Although CapEx will be lower in 2023, it will remain elevated compared to pre-2020 baseline spending. This is why our dividend payout ratio will remain above our historical free cash flow target range of 65%-75%. We're delivering on the strategic initiatives that we transparently laid out for you three years ago. I'm so pleased with how far we've come in such a short period of time to future-proof this great company competitively in a changing world. This will position us for continued success. Our unmatched collection of assets, including the best networks and the most innovative products, our digital transformation journey, and our customer-first approach, will serve as a springboard to deliver the operating metrics and the financial results that all of you and all of our shareholders have come to expect from us. On that, let me turn it over to Glen.

Glen LeBlanc (CFO)

Thank you, Mirko, good morning, everyone. Q4 marked another quarter of consistent and focused execution with a 3.7% increase in consolidated revenues that was driven by year-over-year growth at all Bell operating segments, despite economic conditions that continued to pressure media advertising and our B2B sector. I am quite pleased that we delivered positive EBITDA growth this quarter, even while absorbing CAD 26 million in incremental storm recovery and inflationary cost pressures, higher media programming costs, and a very expensive and highly competitive Black Friday period. I take a wider lens view of 2022, the accelerated CapEx investments we are making are paying off with some of the highest wireless internet and TV subscriber loadings we have enjoyed in over a decade.

That said, all of the work we do on cost and the strength of our balance sheet prepared us financially to be able to afford the subscribers that we acquired. Despite a step-up in competitive intensity, exceptional cost pressures, and other economic challenges impacting our business, we still landed 2022 with a stable margin. Why? No one is better at managing costs. That core competency will continue to serve us well as we go forward. Net earnings and statutory EPS in Q4 were down year-over-year due to non-cash asset impairment charges, mainly for Bell Media's French language TV properties to reflect market conditions and economic-related pressures on current advertising. Although adjusted EPS was up 5% the full year, it was down this quarter, decreasing 6.6% to CAD 0.71, due mainly to increased interest expense because of higher rates.

Despite a historically year for CapEx, with total spending in excess of CAD 5.1 billion, free cash flow was up 2.9%. Notably, our reported CapEx number includes cash amounts received upfront from the Québec provincial government as a subsidy for the build-out of high-speed fiber in rural communities, which, as per IFRS rules, must be accounted for as a non-cash increase in capital expenditures. Let's turn now to wireless on slide 11. Overall, a very good set of financial results this quarter. Total revenue up 7.7%, fueled by robust postpaid subscriber growth and a higher proportion of customers on higher value 5G unlimited plans, strong demand for Bell IoT services, continued roaming improvements, and higher year-over-year mobile phone sales transactions that drove an 11.7% increase in product revenues.

Mirko has already pointed out it was an expensive quarter for postpaid subscriber acquisition. This had a direct impact on EBITDA growth, which increased a solid 4.1% in the quarter. Let's turn to slide 12 on wireline. A second consecutive quarter of positive top-line growth, with total revenue up 0.5%. This was led by continued strong residential internet revenue growth of around 9%, higher year-over-year SMB revenue, and 17.2% increase in product revenue. A good result given the ongoing legacy declines, global data equipment shortages, and richer promotional residential bundle offers. Further to this last point, given our industry-leading wireline margins, broad geographic scale, and fiber's superior cost structure, we have room to compete on price as multi-product bundling helps drive lower churn and greater customer lifetime value.

Notwithstanding higher revenue, wireline EBITDA was down 0.6% due to CAD 23 million in storm recovery costs and inflationary pressures absorbed in this quarter. Normalized for these costs, underlying EBITDA growth was quite respectable this quarter, increasing 1.1%. Slide 13 on Bell Media. Against a backdrop of challenging economic conditions, contrary to our North American media peers, Bell Media delivered revenue growth of 4.7% in the quarter. Despite soft overall TV and radio advertiser demand, total advertising revenue was still up 3.8%, this was driven by record sales for the 2022 FIFA World Cup and continued strong out-of-home and digital growth. Subscriber revenue grew 5.4% on the back of strong Crave and TSN direct-to-consumer streaming growth.

These results are a testament to our programming strength, diversified mix of media assets, and focused execution of our digital-first strategy. Similar to previous quarter, EBITDA was down 15.7%. This result was anticipated given the broadcast rights cost of the FIFA World Cup and the ongoing normalization of entertainment TV content deliveries. That does it for the quarterly results. I wanna move on and talk about the new reporting segment structure. I wanna bring your attention to an important change that we're making to our segment reporting structures starting this year. As highlighted on slide 15, beginning with Q1 2023 results, our previous wireless and wireline operating segments are being combined into a single segment called Communications and Technology Services or CTS. Bell Media remains a distinct operating segment. Consolidated BCE financial results are unaffected.

The reason for this modification is to align with organizational changes we made in calendar 2022 and to reflect the increasing strategic focus on multi-product sales and our digital transformation. Wireless and wireline service and product revenues will continue to be reported separately, and there will be no change to subscriber-related operating metrics disclosure. However, Adjusted EBITDA will now only be reported for the combined Bell CTS operating segment, with no split for wireless and wireline. For comparative purposes, we have provided you with our quarterly 2022 segmented results on the new basis of reporting. Slide 16 provides some perspective on our revenue and Adjusted EBITDA outlooks for 2023. Guidance ranges are the same as in 2022, with consolidated revenue growth of 1.5%, Adjusted EBITDA growth of 2.5%.

Given this outlook, we project BCE's margins to remain stable in the coming year. Based on latest economic forecasts, we must plan for potential recession. While we can't accurately predict the timing and the pace of an economic downturn, the fact that we are maintaining the same target guidance ranges as last year shows the confidence we have in our business outlook and the strength of our franchise to execute under any circumstances. Underpinning this steady growth is a strong financial contribution from Bell CTS, reflecting continued wireless subscriber momentum driven by 5G acceleration, fast immigration growth, and a sharp focus on the multiproduct cross-sell.

Further, but more moderate, year-over-year roaming revenue growth and a continued consumer wireline performance as we leverage our Fibe and our product leadership in the home, as well as our recent acquisitions of EBOX and Distributel to drive a high market share of internet and TV net additions and revenue. We also expect an improving performance trajectory of our Bell Business Markets predicated on higher product sales and a resumption of project spending by large enterprise customers as supply constraints ease. Against that backdrop, we will be maintaining a close eye on costs to mitigate the financial impact of ongoing legacy erosion, which continues to slow and of course, macroeconomic pressures.

At Bell Media, although we continue to experience soft TV and radio advertising demand in the early stages of 2023 as the economy impacts advertising budgets, we do expect a recovery as the year progresses. We also expect to benefit from the continued growth in Crave and out-of-home advertising, while also leveraging Bell Media's advanced advertising platforms and digital capabilities to grow our market share of digital ad spend. Taking all of this into account, we expect to generate positive revenue growth in 2023 despite the non-recurrence of FIFA World Cup advertising revenue and the one-time retroactive adjustment to subscriber revenue that we recorded in Q1 of 2022. Despite a resetting of the cost structure in 2022 that brought TV and programming and production costs closer to pre-COVID levels, we will be absorbing even higher spending in 2023.

This is due to higher costs for sports rights and other premium content, as well as further program volume normalization, which will weigh on Bell Media's EBITDA growth this year. Let's turn to slide 17. The funded status of BCE's defined benefit pension plan remains strong with a weighted average solvency ratio of 117% at the end of 2022. Our pension plan was in a solvency surplus position when interest rates were at historical lows. Now that rates have increased, it has further strengthened that valuation position. With every DB pension plan now above the required 105% threshold, we'll be able to monetize a full contribution holiday in 2023, resulting in cash savings of approximately CAD 230 million versus the CAD 145 million we enjoyed in 2022.

This level of annual cash funding reduction is expected to continue well into the foreseeable future as we project the solvency ratio to remain above 105%. In fact, with the substantial solvency surplus of $3.3 billion that has a very low sensitivity to interest rate changes, there is little risk that our pension plan ever goes back into a deficit position. Moving to our tax outlook on slide 18, the statutory tax rate for 2023 will remain unchanged at 26.8%. Our effective tax rate for accounting purposes is also projected to be essentially around that level, reflecting no tax adjustments this year compared to $0.10 per share in 2022. We expect a step-up in cash taxes for 2023, increasing to a range of $800 million-$900 million, up from $749 million this year.

This is due mainly to higher taxable income projected for the year. Slide 19. Despite positive EBITDA growth and lower pension financing costs, we project adjusted EPS to be between $3.10 and $3.25 per share for calendar 2023 or 3%-7% lower compared to 2022. The year-over-year decline is a direct result of the $0.10 per share year-over-year decrease in tax adjustments that I just referred to. An approximate $200 million increase in depreciation and amortization expense and a further step up in interest expense due to higher rates and the higher level of debt outstanding. Over to slide 20. Slide 20 summarizes our free cash flow look, which we project will grow again by 2%-10% in 2023.

Similar to last year's growth range and reflects the strong flow through of our higher EBITDA, lower year-over-year pension funding, and an approximate CAD 300 million decrease in CapEx that will drive a lower capital intensity ratio of 19%-20%. BCE's free cash flow generation is strong, reliable, and well protected from macroeconomic uncertainty due to the recession-resistant nature of the majority of our revenue streams, providing strong support for the 5.2% dividend increase we have announced this morning. Let's turn to our balance sheet. I'll make a few brief comments on slide 21. We have access to CAD 3.5 billion of liquidity as we begin the year, and a balance sheet that provides good overall financial flexibility to execute on the business plan and the strategic priorities of 2023.

Our net debt leverage ratio, while elevated at 3x Adjusted EBITDA due to several years of generational CapEx spending and critical spectrum investments, is manageable and projected to remain relatively unchanged this year. Our debt capital structure remains very well structured, with an average term to maturity of around 13 years, a low after-tax cost of debt of just 2.9%, and a relatively high proportion of fixed rate debts. We have no material refinancing requirements this year, as $1.1 billion of the 2023 maturities was pre-financed and early redeemed in 2022. This permits us to be opportunistic in accessing the debt markets this year to further strengthen our liquidity position and extend durations and maturities ahead of the anticipated C-band spectrum auction.

Finally, to conclude, BCE fundamentals and competitive position are as strong as ever, as evidenced by our 2022 operating results and consistent financial guidance targets for 2023. In 2023, we intend to build on that operating momentum underpinned by our proven ability to execute under any competitive or economic conditions and our set of industry-leading assets that will continue growth for years to come. On that, I will turn the call back over to Thane and the Operator for questions.

Thane Fotopoulos (VP of Investor Relations)

Thanks, Glen. Given the volume of information we presented this morning, I'm sensitive to the time we have left for Q&A. Unusually this quarter, one of our peers is hosting a call at 8:00 A.M., respecting all of your time and that of our competitors, I want you to please limit yourselves to one question so we can get to as many people in the queue as possible. With that Mode, we are ready to take our first question.

Operator (participant)

Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Maher Yaghi from Scotiabank. Please go ahead.

Maher Yaghi (Managing Director and Telecom, Cable, and Media Analyst)

Yes, good morning. I know it's early, so we appreciate the help that you guys are doing to have both companies' calls run on different times. I wanted to maybe start by asking you, Mirko, about the guidance that you provided for 2023. 1%-5% on revenue, 2%-5% on EBITDA, exactly the same as you had in 2022, which is quite impressive given all the macroeconomic changes that we're seeing right now.

I wanted to ask you what's underpinning that guidance when it comes to macroeconomic view as well as competitiveness in the marketplace in case, you know, we see a large transaction close during 2023, which a lot of people, investors are wondering what it can or can't do to the competitive intensity in the market. Maybe if I can just to follow up on the regulatory side. We've seen a new change at the CRTC level. What's your take in terms of what we should expect from a regulatory body that is looking more and more on improving prices for Canadians, as discussed in the media recently? Could that change the environment for you and participants in the industry? Thank you.

Thane Fotopoulos (VP of Investor Relations)

Thanks, Maher. Good morning and good question. What I'll do, Glen, maybe you can unpack the guidance. I might have a few things to add on the guidance question, and then I'll continue with the regulatory question.

Glen LeBlanc (CFO)

Absolutely. Good morning, Maher. As I said in my opening remarks, I mean, our guidance speaks volumes to the confidence we have in our business and the resiliency of our business. You know, when absolutely we expect there to be a recession, albeit I personally believe it will be short and shallow. The guidance we've provided here takes into consideration that recession.

We haven't seen any changes at this time to consumer demand. The market remains active and healthy, the proof points are in our results. Record postpaid mobile phone, gross activations, best internet ads in 16 years, strong wireless service and residential internet revenue growth. In fact, consumers are upgrading to higher service tiers rather than downgrading. On a B2B front, there's been no indications of pause in new orders or customers looking to cut spend. I think, you know, when we look at the health of our business and some of the challenges we faced in calendar in 2022, Mirko mentioned CAD 87 million, CAD 44 million in inflationary pressures that we experienced this year and CAD 43 million storm costs.

You know, a typical year, a good year, maybe CAD 5 million in storm costs. With changing weather patterns, that's probably been closer to CAD 10 million in recent history. CAD 43 million is extraordinary and, you know, knock on wood, something we don't repeat. Although I don't think we're out of the woods completely on inflation, of the CAD 44 million, about CAD 21 million of that's labor, CAD 16 million fuel, and about CAD 7 million utilities. The labor started really in the back half, so I would suspect that that type of pressure continues into 2022 as we have another half year before we start lapping that. I don't anticipate the same pressure on fuel or utilities. All in all, I think, you know, the 2022 results were pretty strong considering we had that. With those headwinds behind us, I am very confident in the guidance we provide. Thanks, Maher. Mirko, you were going to make some comments.

Mirko Bibic (President and CEO)

Yeah, just, I'm not going to repeat any of that because that was very good. I'll just add the following. At the highest level, Maher, I think the investors, you know, our investors should have confidence. Like, we have a clear strategy. We've articulated that strategy, and we're funding it and executing against it. We have the diversified revenue streams, and, you know, our Fibe strategy is working. We have good wireless momentum. While the media industry is pressured right now, we are taking share because our digital strategy has traction. You alluded to. That's mid, bit of a summation of what Glen said. You alluded to price competition as well, and we kind of see some of that. We saw some of that during the Black Friday period.

You foreshadow potentially more of that for 2023. On that, I'll say the following: We have the room to compete on price if anyone wants to take us there. We have the room because we're really good at managing cost and because of the scale of our fiber network, which and then the bundling strategy, and all that's delivering lower churn, lower cost structure, higher lifetime value of our subscribers. Look, we've invested billions and billions to build North American leading networks. We are going to load those networks, and we can compete on price if we're taken there. Then that kind of segues into the regulatory question that you asked me. Look, it's a bit early. Like, we are looking forward to sharing our thoughts with the new CRTC leadership on how competitive our industry is.

You know, we shared those thoughts on these calls, obviously, quarter after quarter. There's new CRTC leadership, so we're looking forward to those conversations. In particular, really looking forward to highlight and reiterate the importance of the massive investments that need to be made in communications networks to drive the country forward. A couple of other things just on that. Prices are declining. It's actually undeniable. You know, communications networks are pretty central to everything we want to accomplish as a country in terms of economic growth and productivity. Maybe I'll leave it with this last point. Does everyone in the country want better networks? Yes. Do we want more coverage? Yes. Do we, you know, want prices that keep declining? Of course. Does local TV content matter? Yes, it does. Do we want better customer experience? Yes, we do. Do we want more innovation, more jobs? Yes, yes, and yes. There's one common element that underpins all of those, and it's investment. We can't lose sight of that. I'll leave it there.

Thane Fotopoulos (VP of Investor Relations)

Next question, please.

Operator (participant)

Thank you. The following question is from Stephanie Price from CIBC. Please go ahead.

Stephanie Price (Equity Research Analyst of Software and Services)

Hi, good morning. For 2023, Fibe homes decreased from 900,000 to a plan of 650,000, but CapEx stayed relatively elevated at CAD 4.8 billion. Just curious about the other buckets of investment besides the mid-band and Fibe that you're looking at. Maybe related, how do you think about a longer-term view, and what a more normalized run rate could look like for CapEx as you ramp down Fibe initiatives?

Mirko Bibic (President and CEO)

On that, we've been, you know, I've tried to consistently articulate where we were going with this, right? Starting in February 2021, we said we were going to start elevating CapEx to accelerate fiber and 5G build, and we're doing that. We said 2022 was going to be the peak year, and you can see that, you know, CAD 5.1 billion spent in 2022 is CAD 300 million higher than the guidance we're giving you for 2023. We did say that each year after 2022, CapEx would start to glide down for, you know, 2023 lower than 2022, 2024 lower than 2023, et cetera, until we get to the end of 2025.

You should expect CapEx to get closer to what you were used to seeing from us in terms of capital intensity ratio prior to COVID. You know, 650,000, the reason we dropped CapEx by CAD 300 million from 2023 to 2022 is because we dropped from 854,000 locations passed on fiber to 650,000. That's the bulk of the reason for the decline.

Stephanie Price (Equity Research Analyst of Software and Services)

Okay, thank you very much.

Operator (participant)

Thank you. Thank you. Following question is from Jérôme Dubreuil from Desjardins. Please go ahead.

Jérôme Dubreuil (Director and Research Analyst of Telecommunications, Media and Technology)

Hi. Thanks, thanks for taking my question. Hey, can you talk a bit about 5G+? You know, we have in mind that maybe this could mean a bit of dilution for the 5G brand overall, but at the same time, I understand you want to maintain a differentiation. The second one, I think it's fair to say that you've been using promotions in a different way than in the past recently. Would you say that it's a new way of doing business overall, or this is more something that is done to rapidly ramp up your market share on newly deployed fiber? Thank you.

Mirko Bibic (President and CEO)

Look, I'll take the fiber question first. We actually on the fiber. Look, what we're doing here is like I said, we're spending billions of dollars to build the best networks, and we have an undeniable structural product superiority advantage. The Telco network traditionally was structurally disadvantaged from a technology point of view with copper in years past. Now, the telco advantage is structurally, there's a structural telco advantage with fiber. You have a structural technology advantage, you have product superiority and differentiation, and you spend billions of dollars to get that. The next step is to load the network, and we are taking share. Frankly, we're resetting the benchmark for what consumers believe broadband should be. That's a key thing.

It's a competitive differentiator that's gonna last for a few years, in my view, resetting the benchmark for what consumers believe broadband should be. If you look at our sales in Q4, 70% of our internet activations on fiber were on speeds at a gig or above. And 38% of our fiber internet base is now on speeds of a gig and above. We're loading the network, and we're shielding our customer base by resetting that broadband benchmark. It's a potent combination, right? You have fiber with symmetrical upload and download speeds that competitors can't match, a gigabit modem with Wi-Fi 6E, and we have a new Android-powered TV service, basically the new evolution of 5G, which is pretty powerful. On wireless and on 5G.

On wireless and on 5G, Well, I'm really pleased that industry-wide actually, the 5G pricing structure has remained intact, where we're, you know, we've delineated, there's clear demarcation between 5G and 5G+ and 4G and other services with the pricing that comes with it. So far frankly, that's held. As I mentioned in my opening remarks, 41% of our subscriber base is on 5G devices. 5G customers continue to use more and spend more, and there's room for growth there. I might add on both our wireless loadings and our market share gains on fiber, we're doing that despite some promotional intensity. We're doing that while maintaining margin stable, which is quite an accomplishment. The reason we're able to do that, one of the big reasons is with the Fibe scale, our cost structure comes down. Thank you. Next question.

Operator (participant)

Thank you. Our following question is from Tim Casey from BMO Capital Markets. Please go ahead.

Tim Casey (Analyst)

Thanks, Mirko. Could we follow up on that discussion on your Fibe leadership and talk about what you're seeing in the marketplace? You've mentioned that you're, you have the ability to match costs. I'm just wondering how that plays out in the wireline market and with respect to your, as you say, your, the competitive advantage you have with product. Could you just talk a little bit about the dynamics you're seeing in the marketplace there? Thanks.

Mirko Bibic (President and CEO)

Yeah. I mean, essentially, the short story, Tim, is, you see. I mean, you see our loadings are quite strong, right? And we're at best TV results in seven years on overall wireline, our consumer RGUs, best results in 2005, and best internet nets in 18 years. I think again, those. I mean, we talk about the fiber advantage, but they're just not idle words 'cause you're seeing the results follow what we're saying, right? And just to give you another data point. We had 63,500 internet nets or thereabouts, but we had 78,000 internet nets in fiber territory. I mean, I've been pretty transparent about this, too. We do lose internet customers where we don't have fiber.

We're gaining big share where we do have Fibe, I think that's the key thing. You know, 80% of our target broadband build is done. We'll be at 85% done. I shared in my opening remarks, the vast footprint that we will have that has 3 Gb or 8 Gb speeds. Like, those are phenomenal speeds. As we reset what the benchmark is for acceptable broadband, and we reset the bar to 1 gig or above, that becomes a powerful competitive proposition.

Glen LeBlanc (CFO)

Tim, as you've heard us say time and time again, the gift that keeps on giving is fiber. Not only does it allow us to deliver a superior product to our customers, a superior product over our competitors, but it's a network that allows, it is cheaper to operate, and it's reducing, you know, our cost of operating, which you see in our margins. Despite the challenges I spoke about earlier, we're maintaining stable margins, a big part of that is the cost advantage that fiber gives us.

Tim Casey (Analyst)

Thank you.

Mirko Bibic (President and CEO)

Thanks, Tim.

Operator (participant)

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

Batya Levi (Managing Director and Communications, Media and Infrastructure Analyst)

Great. Thank you. As you look at your new reporting structure, do you anticipate more cost rationalization, when you combine the wireline and wireless expense buckets, or has that already been aligned last year, and from here on, it will be more business as usual cost efficiencies? You did mention some incremental spending this year. Is there a way to quantify them or the timing on when they will show up? Thank you.

Glen LeBlanc (CFO)

I'll attack the first part of your question. I'm not sure what your last part was referring to. Look, we combined our internal structure for wireless and wireline this year. We did enjoy cost efficiencies in doing so. As I said in my opening remarks, it's become, you know, a core competency of Bell. We're always attacking costs and looking for more effective and efficient ways to deliver service, and that's not gonna change. Again, to the opening remarks that Mirko made about how are we able to deliver stable guidance over 2022, and that's part of it. It's focusing on our costs, finding efficiencies, leveraging the ability that fiber gives us for taking costs out. On the second part of your question, I'm not sure at all.

Batya Levi (Managing Director and Communications, Media and Infrastructure Analyst)

I think you mentioned that you'd like to make some internal investments this year to digitize some capabilities, and some efficiency. I was wondering if there is sort of a quantification or the pacing of that, or is it also more, sort of business as usual investments?

Glen LeBlanc (CFO)

It's. Yeah. We won't unpack that specifically. Since 2020, particularly since, you know, we got completely shut down in 2020 during COVID, we've made a concerted effort to improve our digital capabilities, both those that are customer-facing and continue to automate some of the processes in the operations of our business. That's continuing because it's important and it's driving better customer experience and lower cost structure. We're gonna keep doing that, and that's within the CapEx, the guidance that you see.

Batya Levi (Managing Director and Communications, Media and Infrastructure Analyst)

Okay. Thank you.

Glen LeBlanc (CFO)

Thank you.

Operator (participant)

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

Vince Valentini (Managing Director)

Thanks very much. Just a comment first. Look, I'm just not happy about getting rid of the segmented EBITDA. It makes our lives very difficult. I'm sure you have internal ideas as to what wireline versus wireless is, and you're not gonna change based on what I say, but I want to get that on record that it's not helpful to us. My question is on the guidance. The range is reasonably wide at 2%-5% on EBITDA, Glen. As you've articulated, competition seems to be escalating. You seem to be willing to lean in and load up your new networks and fight on price if you have to. I'm just wondering how the high end of the range is possible.

What kind of factors would you need to see some sort of big, you know, economic improvement or some sort of improvement in the competitive environment versus the current pacing? Maybe you can talk a bit about the pros and cons or the gives and takes at the high end versus low end of that guidance.

Glen LeBlanc (CFO)

Well, first of all, Vince, how wide the range is, it's the same range as in 2022. We're now approaching a CAD 25 billion revenue company and north of CAD 10 billion in EBITDA. I don't feel that range is all that wide when you consider the size of our organization. Yeah, we provide a range because there are all kinds of uncertainties that can happen in our business. We talked a number of times on this call about recession. I think that, although I personally believe will be short and shallow, I certainly could be wrong, and many people on this call probably have a different opinion than I.

Barring substantive recessionary impacts, continued momentum we have in our Fibe and our 5G strategy, recovery in our Bell Media business, those are the type of things that I think drive us towards the, you know, the higher end or past the midpoint of our guidance range. I mean, for me to be able to give you insights on what drives to the high end, you know it as well as I do. Low promotion activity, continuing to load the network, avoiding a recession, recovery of advertising, advancement of our digital-first strategy in Bell Media. Those are the things that we're focused on. I believe the guidance range is prudent. I think it takes into consideration the potential challenges plus the upside, and it is not inconsistent to what you've seen from us before. Thanks for your question, Vince. Duly noted on segment reporting.

Vince Valentini (Managing Director)

Thanks.

Operator (participant)

Thank you. Following question is from Simon Flannery from Morgan Stanley. Please go ahead.

Simon Flannery (Managing Director)

Great. Thank you very much. Good morning. Glen, I wonder if we could talk about roaming revenue. You've obviously had a very nice recovery during 2022, but you're pointing to a further recovery in 2023. Perhaps just help us understand where we are in the recovery cycle and what sort of benefit are you anticipating in your guidance next year on a year-over-year basis versus this year, and when do we get to sort of a new run rate?

Glen LeBlanc (CFO)

Certainly, Simon, Mirko mentioned that we're at 112% of what pre-pandemic roaming revenue is. To unpack that for you about on a volume basis, we're pretty much flat. We're back to pre-pandemic. The additional 12% is all related to price, so, you know, your P versus Q. I said in our opening remarks, one of us said that we don't anticipate the same tailwind on roaming that we enjoyed this year. Naturally, this was a year of true recovery as I think Canadians and we're starting to gain confidence to move again post the challenge of this pandemic.

I would say, you know, some of the price increases that we implemented in calendar 2022 were done through the year, we get to enjoy you know, the half year of those, coupled with, I think you're starting to see Canadian confidence continue on moving around again and enjoying the ability to travel. I think the short answer is the improvement from 2021 to 2022 will not repeat itself, but there's still a bit of a tailwind there for 2022 to 2023.

Simon Flannery (Managing Director)

All right. Thank you.

Thane Fotopoulos (VP of Investor Relations)

You're welcome, Simon. Okay. Mode, any more questions?

Operator (participant)

We have no further questions registered at this time. Back to you, Mr. Fotopoulos.

Thane Fotopoulos (VP of Investor Relations)

Great. Thank you very much. As usual, I'll be available throughout the day to take your follow-up questions and for any clarification. You have a few minutes to get ready for your next call. Have a great day, everybody.

Operator (participant)

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