BCE Q1 2025: Dividend Halved, Targets 3M Fiber Passings by 2028
- Accelerated Fiber Growth: Management is driving an aggressive fiber deployment strategy in both the U.S. and Canada with Ziply Fiber, already passing 1.5 million homes at closing and targeting 3 million homes by 2028. This accelerated build, enabled by a strategic PSP partnership, positions BCE for significant long‐term revenue growth.
- Robust Free Cash Flow and Deleveraging: BCE’s plan includes $7 billion in asset sales and disciplined capital allocation—including hybrid debt issuance and bond repurchases—that is expected to lower the net debt leverage ratio to approximately 3.5x adjusted EBITDA by the end of 2027. This strengthens financial resilience and supports future growth investments.
- Dividend Policy for Long-Term Flexibility: The recent adjustment of the annual dividend to $1.75 per share is designed to optimize the balance sheet and free up cash, enhancing BCE’s financial flexibility and ability to fund its growth initiatives while still delivering an attractive yield.
- Dividend Reduction Concerns: The panelists discussed adjusting the dividend from $3.99 to $1.75 per share, which may signal a need to preserve cash, potentially unsettling investors about future earnings stability.
- Execution and Integration Risks in U.S. Fiber Expansion: The Q&A raised several complexities regarding the Ziply Fiber strategy and the strategic partnership with PSP, including uncertainties around integration, funding, and achieving deleveraging targets.
- Weakening Wireless Performance: Discussions on wireless highlighted declining net subscriber gains and the effects of pricing pressures in a competitive market, suggesting ongoing challenges in maintaining growth and margins in this segment.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Debt Leverage Ratio | FY 2025 | Projected to begin decreasing in 2025 | Approximately 3.5x adjusted EBITDA by end of 2027 | lowered |
Dividend Policy | FY 2025 | no prior guidance | Annualized dividend set at $1.75 per share (effective with the Q2 dividend) and a long-term target of 40–55% payout | no prior guidance |
Capital Expenditure | FY 2025 | Budgeted at approximately $3.4 billion, which is $500 million lower than 2024 | Plans to reduce capital investment by $500 million in 2025 | no change |
CapEx Intensity Ratio | FY 2025 | Standalone Bell: approximately 14% in 2025 and Pro Forma with Ziply Fiber: around 16.5% during peak spending | Beyond 2025, expected to be around 14.5% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Accelerated Fiber Growth and Expansion | Q4 2024: Discussed fiber passings targets, Ziply Fiber acquisition and regulatory challenges. Q2 2024: Emphasized fiber as a core growth engine with adjustments to the build pace. | Q1 2025: Focused on accelerating the fiber deployment timeline with a strategic partnership with PSP Investments to expand the fiber footprint and achieve cost efficiency. | Acceleration continues with enhanced strategic alliances and cost efficiency focus. |
Dividend Policy, Capital Allocation, and Deleveraging Strategy | Q4 2024: Addressed an elevated dividend payout ratio, reviews of dividend policy, CapEx reductions, and planned asset sales to strengthen the balance sheet. Q2 2024: Discussed non-discounted DRIP, investments in core business, and asset sale proceeds supporting deleveraging. | Q1 2025: Announced a significant dividend reduction, updated payout policy targeting 40%-55% free cash flow, ambitious deleveraging targets, and leveraging the PSP partnership for incremental cash flow. | There is a more aggressive focus on deleveraging and capital optimization with clearer targets and strategic asset partnering in the current period. |
Wireless Performance, Pricing Pressure, ARPU Dynamics | Q4 2024: Reported positive postpaid net additions under the Bell brand with noted pricing pressures and a 2.7% ARPU decline. Q2 2024: Highlighted strong subscriber growth with competitive pricing pressures and a 1.9% ARPU decline, with cautious outlook. | Q1 2025: Noted a slight net loss in mobile subscribers, persistent competitive pricing pressure with a 1.8% ARPU decline, though postpaid churn has stabilized. | Persistent pricing pressure and competitive challenges continue, with mixed subscriber growth dynamics; sentiment remains cautious despite minor improvements in churn stability. |
Regulatory and Integration Risks in Fiber Deployment | Q4 2024: Detailed concerns over the CRTC decision impacting fiber deployment and integration risks associated with the Ziply acquisition were highlighted. Q2 2024: Mentioned the need to adjust to regulatory pressures without specific risk details. | Q1 2025: No discussion on regulatory or integration risks in fiber deployment was provided [N/A]. | The topic is de‑emphasized in the current period, possibly indicating that earlier concerns have been addressed or are no longer a priority [N/A]. |
Operational Efficiency and AI/Automation Initiatives | Q4 2024: Focused on business transformation with a target of $1 billion in cost savings, emphasized digital interactions and automation initiatives. Q2 2024: Launched AI-driven solutions, including self-serve tools and ServiceNow integration, yielding significant labor cost savings. | Q1 2025: Highlighted continued operational transformation with $500 million in savings already achieved, expanded AI/automation initiatives including partnering with Ateko to target $1.5 billion in savings by 2028. | There is a consolidation and broadening of efficiency initiatives with increased focus and higher cost-saving targets in the current period. |
Effective Subscriber Segmentation | Q4 2024: Indirectly referenced through a focus on premium loadings and bundled strategies to drive ARPU improvements. Q2 2024: Explicitly discussed effective segmentation strategies focusing on premium wireless subscribers and bundling offers. | Q1 2025: No specific mention of effective subscriber segmentation was made [N/A]. | Reduced emphasis in the current period, suggesting the topic may have been integrated into broader strategic narratives or deprioritized [N/A]. |
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Leverage Target
Q: Include asset sales in leverage target?
A: Management confirmed their plan factors in $7 billion of asset sales—including MLSE and Northwestel—to support deleveraging toward a 3.5x leverage target, ensuring a stronger balance sheet. -
Guidance & Leverage
Q: Is 2025 guidance firm amid market uncertainty?
A: They reaffirmed their 2025 guidance, noting that hybrid debt issuance has aided deleveraging, even though post-Ziply adjustments will naturally rebalance leverage toward the 3.5x goal by end‑2027. -
Dividend & JV
Q: How do dividend and JV structure affect FCF?
A: Management clarified that repurchase gains aren’t embedded in free cash flow and explained that the Ziply joint venture—ensuring exclusive network participation—supports growth while maintaining a dividend of $1.75 per share for enhanced flexibility. -
PSP Timing
Q: What’s the timeline for 6M fiber passings?
A: They indicated the PSP partnership is long term, with approximately 1.5 million fiber passings operational at closing and a gradual build toward an additional 6 million over time. -
Capital Call & Dividend
Q: Is the $1.5B commitment a lump sum?
A: Management emphasized it is not a one-off capital call but an incremental, over‑time investment, with the board setting the dividend at $1.75 to optimize flexibility and balance sheet performance. -
US Fiber Build
Q: How will U.S. fiber expansion be executed?
A: They expressed comfort with U.S. fiber plans based on extensive due diligence and PSP’s telecom expertise, dismissing open access concerns and underpinning a robust build strategy. -
Fiber Acceleration
Q: How is fiber deployment being accelerated?
A: Management outlined that Ziply Fiber upgrades are expected to yield approximately 3 million homes by 2028 by combining legacy updates with new builds, improving free cash flow and growth prospects. -
Gov & Savings
Q: How will government policies and cost savings interact?
A: They conveyed a constructive approach to new government policies while driving $500 million additional cost savings through automation, AI, and operational streamlining initiatives. -
CapEx & Costs
Q: What’s the CapEx intensity and cost trend outlook?
A: Management projected CapEx intensity around 14.5% and indicated that while recent transformation costs were higher due to one-time expenses, ongoing costs are expected to decline as process improvements normalize.
Research analysts covering BCE.