Good morning, everyone. Thanks for joining us. I'm Lauren Bonham. I cover Canadian and U.S Telco, along with Kanan. Next up, we're very pleased to have Curtis Millen, CFO of BCE, with us. We'll get to some questions at the end. You should be able to submit them through the chat box on your screen, or feel free to email me as well. Thanks for joining us, Curtis.
Great. Hi, Lauren. Thanks for having us. Appreciate that.
Just to start-
It's now a virtual event. Appreciate the team having to pivot.
Yep, yep, and thank you for accommodating, and for everyone who's joined as well. It's been a hectic couple of days. Just to start broadly, going into the new year, what looks different or similar from a competitive or organizational standpoint, and how have your priorities changed compared to last year, if at all?
Yeah. Hi, Lauren. I'd say the priorities remain the same. We outlined them at our Investor Day, so it's balanced capital allocation, strengthen the balance sheet, de-lever, while we fund strategic growth opportunities. You know, that's putting the customer first, so it's continued digital transformation, leveraging AI, basically improving customer experience. Funding our networks. Again, we are an infrastructure company, so funding our best networks. They're world-class on the wireline side and on the wireless side. Continue to drive AI-powered solutions, so that's AI Fabric, it's Bell Cyber, and it's the kind of MSPs layer to services also, and then continue to drive digital media. The strategy remains the same. Obviously, there's an overlay of just drive efficiencies in the business, so strategy remains the same.
This is a year of continue to execute and continue to drive progress on our three-year financial targets.
1Q is typically a quiet period for wireless loading. There's been a bit more promotional activity in January and February than maybe we would have expected. Could you talk a little about any changes in the wireless landscape in the past few weeks since earnings? I know it hasn't been very long, but what you're seeing so far in 2026, any change in strategy on how you respond to that?
No, no change in the strategy. Again, it's a competitive marketplace, you know, since the history of the wireless industry and our industry, you know, prices become more competitive in certain periods of time. As you said, Q1 is generally a lower volume. It is a lower volume, so if you had to be a little bit more competitive on price, it's better to be more competitive in a world where you don't have that much volume. I think we saw some pretty good market behavior last year, right? I mean, back to school was pretty muted in a way, still competitive, but muted in terms of pricing actions, and then end of the year got a little bit more competitive and a couple of weeks here in January.
Again, we tend to focus on long-term value of customers, so both acquisition and maintaining the longer-term value, higher value subs. Subs that are on our Bell brand, subs that are taking our fiber product, right? Fiber loads continue to be very strong. Then, of course, in a bundled world where we continue to reduce churn, bundled subs are important for us going forward also. No, no real change. There are gonna be blips in terms of competitive intensity, but as long as we continue to execute our plan and think about driving the best value for customers, we're gonna be just fine.
Thank you. Bell seemed to outperform on churn improvement in 4Q. What is driving improved retention, and how much of that is coming from higher hardware upgrades versus other initiatives?
Yeah, hardware upgrades were actually down year-over-year in Q4, our churn improved 17 basis points. I'd say that's the third quarter in a row of churn improvement. It's many, many things, but fundamentally, it's providing great network, great service, and just improving the customer experience, right? All the way along the customer experience, we have to be very good. It's not enough to deliver, you know, a high-quality network and a high-quality product. The entire end-to-end experience has to be good. We spent a lot of time and energy over the last three, four, five years fixing our IT systems, updating our IT systems, so that, you know, how we present ourselves to the customer is much more digital focused. Even more importantly, we meet customers where they want to interact with us.
Whether it's self-serve, whether it's digital, whether it's call center, leveraging AI capabilities, however they want to interact with us, we have capabilities kind of on an omnichannel basis now, and that'll continue to improve. I think you're seeing that bear fruit, even in a world where hardware upgrades weren't the driving force. We're quite pleased with that. Again, without customers, the machine here doesn't work, so, you know, we're focused on driving customer experience.
Going a bit, bigger picture, we've seen some big changes in the industry the past few years. Structurally, where do you expect the industry growth to settle once all of the near-term noise with respect to immigration, the economy, travel, and so on, settles down? Are we now in an environment where longer-term core telecom growth is more in the low single-digit range, for the industry as a whole?
Yeah, you're probably right. I don't see anything to disapprove that, but I do think you're seeing a few tailwinds, ultimately, as you look beyond just the day-to-day, week to week. Penetration increase, I mean, we're for frankly unknown reasons, we tend to be trailing the US in terms of overall penetration of wireless handsets. So we'll continue to see an uptick in penetration. Immigration and new to category is still a net positive. Not the same, obviously, size of net tailwind that we've had a few years ago, but that'll continue to be a net positive. Then ultimately, as we get through our ARPU reprice, there's probably a little bit of ARPU benefit here as we look out two, three, four years.
As we don't focus on day-to-day, week to week, there's growth from all three of those. I continue to say, I think we have, you know, an endemic ability to actually improve our churn, which is, you know, a relative benefit for us versus our competitors. I think there's more room-
Mm
-for us to continue to drive churn, which again, will help our net going forward. The other thing I'd say, Lauren, you know, Canada is a little bit more converged than the U.S., but I do think fiber becomes more and more the first purchasing decision. You know, we have so much fiber north of eight million fiber locations, and when we sell a new internet, fiber internet, it pulls along 40%, or it pulls along mobility 40% of the time. I think we're in a pretty good structural position here to drive some outside growth over, again, two, three, four-year period.
Yeah, sort of sticking with that, I guess switching to broadband. In Canada, you've sold your fiber build and now seeing a lot more competition from TPIA, fixed wireless, but your fiber footprint is still the largest in Canada. How much more room is there for you to drive penetration within the fiber footprint? What are the key drivers of that fiber take rate?
Yeah, I'd say there are a few drivers of growth. One, we are continuing to build fiber in Canada, so, you know, it's a couple hundred thousand a year. whether that's new builds, new construction starts, obviously, we're going to build fiber if it's within our footprint. There's some subsidy builds, there's some edge apps. We'll continue to build fiber in Canada. Then I'd say, on the penetration point that you made directly, you know, we built threwight million fiber locations over the last five years. Those are not, definitely not at a run rate penetration. Like, where we have more tenured fiber footprint, we're 50%, even north of 50%. There's still some kind of inherent growth left in that newer footprint. Again, you know, as we continue.
Mm
... to prove out fiber is just superior product to cable, it'll just continue to grow. I mean, there's no reason in my mind where 50% is the actual equilibrium. It's, you know, not just Canada. I'm not just drinking the blue Kool-Aid. Fiber beats cable in just about every jurisdiction. I think there are, there are a few tailwinds for us there.
Fixed wireless scaled pretty quickly in the U.S. It's been much smaller in Canada.
Mm-hmm.
There are some differences in network capacity, but your copper footprint, areas where you don't have fiber, it seems some churn due to fixed wireless coming in there. Can you talk about how Bell uses fixed wireless, and is there room for a bigger push in those areas to capture copper churn?
Yeah, I'd say it's a different landscape. We actually built out 1 to 1 million fixed wireless homes before the U.S. really made their push into fixed wireless. Because we've built out over 8 million fiber locations, it's more of a niche product because it's not really competitive relative to fiber. I think what you've seen in the U.S., you know, the future fiber builders have built out fixed wireless, kind of to gain a little bit of market share and gain some customers, then overbuild with fiber. Ultimately, they were taking share from cable. They weren't taking share if there happened to be a fiber overbuilder. You know, it has a place for us, but it's certainly not competitive with fiber. I'd say again, in rural where we have it, useful.
You know, it's useful where you have copper only, but it's really not going to hunt in markets where you have fiber.
We're slowly, hopefully, emerging from a, you know, a tough couple of years of wireless pricing. On TPIA, we're still waiting for final wholesale rates, but assuming they remain as is, what prevents a similar sort of bout of pricing competition in wireline, given the higher competition nationwide and a bigger focus on convergence and bundling?
It's a fair question. It's a bit of a different story, though. I mean, ultimately, we've built out fiber, historically, the government has supported facilities-based operators. They want. Look, they're in a tough spot. They want to promote competition, promote access to solid internet. We've built out fiber, there is a lot of access to world-class broadband, and they want to make sure that there's an incentive to continue to build. I appreciate they're in a tough spot, but ultimately, we have the owner economics, and we have the ability to bundle with other services. You start looking at a world where we have fiber, excuse me, we'll sell wireless, we'll sell, Crave, TSN RDS direct to consumer.
I do think there's a world for us to continue to drive growth and leverage our footprint.
Yeah. Thanks. Sort of sticking on that theme, with the new administration, have you seen anything that would indicate sort of a change in course on Canada's approach to wholesale regulations, maybe moving back to how it was, you know, prior to the past couple of years? If that was something that was possible, what would it take for Bell to sort of recalibrate its domestic build plan back to its prior, like, CAD 9 million target, and how could that fit into the capital allocation framework, given leverage targets and U.S. build?
I think the last thing you said is very important. Obviously, we have a capital intensity envelope, and we have a leverage target. Those are very important to us. We're not going to deviate from those. For us, it's ultimately capital allocation, and on the highest level, you know, we're deleveraging, strengthening the balance sheet, paying out a dividend, and funding growth is our kind of second priority. Between that, it's just a matter of what drives the best return, what drives the best free cash flow growth, because ultimately, free cash flow growth is what allows us to continue to delever and fund dividends. It really comes down to what is the best opportunity and whether that's fiber in Canada, fiber in the U.S, continued digital transformation or Bell AI Fabric. All of those are very attractive returns.
It's a nice problem to have, to have more opportunity than you can actually fund. You know, if that's our biggest problem, it's pretty good news for us.
shifting to Ziply then, why does investing in the U.S. make sense? you know, the U.S. is still in the early stages of convergence compared to Canada, and arguably, convergence hasn't necessarily been helpful in Canada for the industry as a whole.
Yeah, it's a different marketplace. You know, we have a certain level of expertise building out fiber and marketing fiber. And again, I'm not being cavalier about our expertise. Fiber actually is just a superior product. You've seen in the U.S. market, whether it's Ziply, who has a great management team, but you also have a lot of, you know, startups recently, not as much recently, but five, six, seven years ago, who built fiber and were taking 30%, 35%, 40% share from the cable competitor. It is a first-to-fiber business model, and you're bringing competition to a market that basically has copper and/or cable, and whether it's Tier 1, Tier 2, or Tier 3 cable, you're now bringing a superior product to market, and you're picking up market share. Again, fiber really is the star in that world.
You know, Harold and team at Ziply have done a great job of driving penetration where they built fiber, and we're now in a world where we can expand, kind of their build plans. They haven't shown any change in ability to continue to drive penetration and capture market share where they do have fiber. It's very interesting for us. Then if you get into, you know, mobility convergence...
Yeah
... you know, that's upside for us ultimately. We haven't seen an ability, a need to do that just yet in terms of there's been no slowdown in their ability to drive subs and penetration. If it does become more important in the market, obviously we have the ability. That wasn't part of our investment case. It's all upside for us.
sort of on the Ziply build-out plan, I think the current expectations include a pretty significant ramp in the pace of fiber
Yeah
... build in the back half of the year, and then even more so in 2027, 2028. Part of that, you know, you've talked about the deliberate pullback after the deal closed. What kind of obstacles are you facing in the U.S. footprint that are impacting the pace of build, and what makes you confident that you can ramp quick enough to hit that three million target?
Yeah, they have a strong build engine. Ultimately, it's just permitting, right? I mean, it's time to get permits so that you can get shovels in the ground. You know, as we look at it, we took a half beat of a pause to make sure under different constraints, different parameters, excuse me, management was able to identify the best places to go, not just limited to their copper footprint and not just limited to kind of ABS funding and what that could grow. You know, much more flexible constraints and parameters. The goal isn't, "Hey, let's build where we have copper." It's, "Let's build in the locations where we're gonna drive the most value to shareholders." That took us half a beat, and now we get to run faster.
I think all in all, it's a good news story. As you said, we'd just keep ramping up that build engine by the second half of this year and going forward, so we march along to get our three million homes by 2028.
Sort of a little follow-up on that. On the Ziply build, what sort of KPIs determine where you're looking to build? I know you just talked about a little bit, but I guess, how, what would be the most material or how you even rank them, competition, deployment costs, ARPU potential?
All of the above, right? We tend to look at it as what's the best place to drive IRR, right? I mean, we're looking for return. Whether that's ARPU, whether that's cable competitor, whether that's proximity. I mean, generally, everything is close to Ziply's core fiber network because they have a lot of core fiber network. Cost to build, efficiency of marketing, all of those things go into the equation, all the assumptions that you would think of go into the equation, and it's really just what is the most efficient place to build and continue to scale the business.
Maybe switching gears a bit to the, the balance sheet. The path to reach 3.5 leverage by next year includes non-core asset sales. Can you talk more about any asset sales that are in the pipeline? Maybe give me a sense of what we can expect in 2026. Could this include tower monetization?
Yeah, look, our deleveraging plan includes a bit of everything.
Yeah.
We are continuing to drive a lot of free cash flow. We're driving EBITDA growth, and we've talked about in the past, you know, continued asset sales. We've sold off some assets, obviously, MLSE, our legacy home monitoring business. We have a couple files on the go. Again, nothing core to our business. Tower sales is obviously a file that has kicked around for the last decade and even longer than that in telco world. There's clearly a lot of value in our infrastructure, so it's something we'll consider, but ultimately, everything is viewed within the same lens. Does it accelerate our ability to drive free cash flow growth and value for our shareholders? If it does, then we have to consider it.
I guess in the same vein, what triggers would prompt you to revisit the dividend level again? Is it primarily just tracking to leverage goals?
Yeah, it's, again, you know, we do revisit the policy, and the board obviously makes that decision. I'd say over the three-year horizon here, where we're getting to 3.5 and then sub 3.5 leverage, and we're funding our growth initiatives, there's no expectation-
Mm-hmm
that our dividend would increase. Again, if we just blow the doors off of our free cash flow and we have to revisit it, then that's a good news story. In our base case, you know, we are focused on deleveraging and funding.
Mm-hmm
... the significant growth opportunities over the next two, three years.
... and on those growth opportunities, AI-powered solutions, major focus, growth driver the next couple years. Can you talk about sort of the different business models between the different segments, Cyber, Ateko, and AI Fabric, and anything to flag in the pipeline for AI Fabric that you can talk about?
They all work together, you know, Bell Cyber is, obviously, a security business. It's a recurring business model, but it ties in well with Ateko. Ateko is managed service, professional service. It's workflow management, it's cloud migration, it's helping companies actually leverage their spend and drive results. Whether that's companies like ours, I mean, they're doing work for us as well, 'cause we're all, we're all gonna spend money on platforms, whether it's Salesforce, ServiceNow, we're all migrating to the cloud or somewhere on the journey. We're all looking to maximize value out of AI spend. The economy and all these companies are spending money. Ateko helps them actually drive value for the spend. It's one thing to spend money and move to the platforms, but you actually have to capture the value and capture the efficiencies.
Atek o is helping us do that and helping kind of its customers in across North America do that. Very complementary, especially when you look at our fiber footprint. When you look at AI Fabric, it's AI Fabric, and if you're running inference or you're running data models, testing models, obviously it needs to be secure. That's where Bell Cyber comes in. It needs to run on the best network. That's where fiber comes into play. Again, you need to figure out how to actually capture value out of the tests you're running and the kind of technology spend. That's where Ateko comes into play. You know, separate lines of business, separate business models, but they all really work well together. Then in terms of AI Fabric, the question you asked, you know, you know, it...
There's a lot of demand, but it is lumpy, as we've said. When we're actually signing contracts, because again, we're not putting money into the ground before we sign contracts, we're able to actually generate strong north of 20% returns, but the risk profile is actually underweighted, because we wait until we have contracts before we start putting shovels into the ground. It'll be lumpy.
Yeah
... the demand is strong, and ultimately, we'll keep everyone abreast here when we sign contracts.
Just one more from me, and then we'll can go to some questions coming in.
Okay.
If you haven't already, feel free to submit questions in the chat box, or you can email me directly. Before we move on to that last one, just on guidance, thinking about the high and the low-end guidance ranges, how much of that swing is based on more macro factors, like economic slowdown, versus core industry drivers, like improvement in promotional activity, wireless pricing?
Ultimately, it's all of the above. I mean, some of these are macro items, some of them are within our control. If we can outperform our continued churn improvement, that's upside for us, right? I mean, if ARPU and competitive marketplace and, in your words, winds up being a little bit more helpful on the ARPU side and turns around a little faster, that's goodness relative to the plan. Our base plan really hasn't assumed, you know, a spike up in the macro environment.
Mm-hmm
... we're living in this backdrop and competing in this backdrop. If it improves, if immigration improves, if ARPU improves, those are all upsides for us. Again, for us, it's continue to do the blocking and tackling of delivering for customers, lowering churn, selling our fiber footprint, continuing to sell our digital platform, like Crave, 1 million-plus subs last year, continuing to drive Crave subs. For us, we're just blocking and tackling with the strong assets we have.
Thanks, Curtis. A couple minutes left, we're just gonna get to some questions. Oh, this is on Ziply. How is managing things like inflationary cost pressure, supply chain constraints, and build costs different in the U.S. compared to Canada?
Yeah, you know, in terms of supply chain constraints, there really aren't any supply chain constraints at this point. I'd say it's the same. I mean, we have access to materials. In a world, it's kind of a unique world where the Canadian asset actually brings scale to the US asset. In terms of procurement and economies of scale, we actually bring that benefit to Ziply. They haven't seen any issue actually procuring or sourcing information, sourcing equipment and goods, and it's probably improved a little bit as they leverage kind of either their contracts or our contracts. Ultimately, they're just executing, right?
The real timeline is the many different jurisdictions where they're looking to build, and, you know, fiber build is a community by community, municipality by municipality kind of effort. It's really just getting permits to build out. It's not an equipment shortage, it's-
Mm-hmm
just the timeline of identifying where you want to build and getting it done.
One on the cost-cutting initiative. You know, you have your CAD 1.5 billion of cost efficiencies. How do you think about the most material efficiency initiatives? Is it AI and customer care, network automation, something else?
It's really all of the above. Those are two very good examples, but it's really all of the above. If I had an umbrella comment, it's leveraging technology to eliminate manual work and eliminate friction in the system. Whether it's friction with customers, where they have to call back three times, right? I mean, just get it right the first time. Give them the right offer the first time, and call if you say you're going to call them back, call them back right away. It's eliminating friction along kind of the relationship and the experience, and that's internal as well, right? If you're going from one group to the other, or external customer internally, reduce the number of steps and automate where you can.
It just simplifies, and the fewer steps in a process, the less likely you are to make mistakes, and the more you can automate, again, the less likely you are to make mistakes and have to kind of spend money that you don't need to. It's not just cost savings. It's cost efficiency. It's kind of a unique spot where you can provide better service to customers and actually have it cost you less money. It's a nice win-win for us. When, you know, the investments we've made over the last few years are already capturing results.
One on enterprise. I think you've already touched on this a bit. I think enterprise is one of the areas that's expecting, you know, a growth turnaround 'cause some of these AI solutions.
Mm-hmm.
The question is, how concentrated is the enterprise revenue base, and how much could customer renewals or timing around renewals swing results?
Enterprise revenues and contract renewals tend to be a little bit lumpy, but.
Yeah
Its such a big business for us that it smooths out naturally. On a contract by contract, yes, it's lumpy, but overall, the business, other than Bell AI Fabric, is not as lumpy. Ultimately, we've done a pretty good job managing the legacy side of the business, and we're growing the growth side of the business. It's a pretty good combination of both when you look at our enterprise business relative to our competitors. Starting in Q1, we'll start breaking out a bit more information so that analysts and investors can track enterprise revenue separate and apart from consumer. Realize the wireline data number is a big number.
Ultimately, it's continued focus on the growth areas and continued focus on managing the legacy and ultimately, you know, pretty good performance on a, on a relative basis, I'd say even stronger relative.
We have one more in the queue. If anyone else has a question, feel free to submit. This is on hardware upgrades. How do you think about managing device financing economics and handset margins? How has that approach changed?
I can say, you know, ultimately, it is one of the levers we have to manage churn, but overall, manage the customer experience. We're not in a subsidy world. That business model went away in Canada a handful of years ago, start of COVID. It's there's a little bit of a working capital carry, but it's not what it was five, six years ago. Ultimately for us, and we leverage AI here, too, but ultimately for us, this is just managing the customer's journey over the long term, right? Happy customers equals higher long-term value, less churn. It's one of the levers we have. It is what customers are looking for in certain instances. Again, if it drives long-term value and it keeps customers happy, then it's something that we'll put on the table.
Again, it drives long-term value for us as well.
Thanks, Curtis. No more questions. I think we're right about time.
Great
... thank you so much for joining us, Curtis. Really appreciate having you here.
Appreciate the session. Good luck today.
Thanks.