Yeah, okay. No, it's okay. Curtis.
Well, we're off to a great start.
Thank you, Curtis, for coming. We have BCE following through with the telecom part of the discussion today. Maybe to start, can you tell us about the big contract you signed this morning and you announced with the federal government? What's, you know, what's the extent of that contract? What does it entail? What would be the long-term objective that the federal government would like to pursue with that?
Yeah, I mean, look, details are sparse to share at this point. I do think in general, look, the federal government clearly has a mandate. If we can help them pursue their mandate, it's good for the economy, it's good for Canada, frankly, it would be good for us. If we can be supportive, we're gonna be supportive. You know, we have certain capabilities, build capabilities and resources that we can lend to bear.
I think it's just an overall positive for us and how far it goes and how big it be, I think TBD at this point, ultimately a point in the right direction. You know, we've seen the federal government have very positive commentary in and around building Canada. Again, we're supportive of that. Bit by bit they're now executing their plan. All I can say is, like, we're happy that they're actually executing on the plan and happy to be a part of it and hope to continue building Canada infrastructure.
What how should we think about it in terms of, you know, a service level commitment versus AI-specific deployment, and how does it fit in that AI endeavor that you know, you've put a lot of organizationa resources behind?
Yeah. Well, look, if I take a step back, our AI-powered solutions is more than just the AI fabric. We can build data centers and its AI fabric. We also wrap the Bell Cyber around it. Connectivity also is something that we bring to bear. Our Ateko professional service, again, as governments and as we as an operator in Canada and other Canadian businesses, we need to actually leverage the relationships with hyperscalers. Whether it's the Salesforce, ServiceNow kind of workflow management, we need help to actually maximize the value of all the spend we're gonna have. We call it kind of the Full-Stack AI. We're just trying to make it easy for governments and customers to hit the easy button. We're not gonna provide every leg, like every kind of tranche of that.
We're not a large language model, right? We have a partnership with Cohere, a fantastic Canadian company. You know, we have partnerships and relationships with the hyperscalers of the world. That's not where we're gonna play. We play at a very different side of the risk reward. There's clearly growth in this industry, and we have a role to play.
Okay. Maybe just one last question. I mean, these contracts, I used to be part of a IT service company in my past. Do they fall within a multi-company, multi-organizational allocation, or you're basically holding the whole contract and now you'll be subdividing it into multiple contractors?
It's a bit all of the above. I mean, what we can do by ourselves, we do by ourselves. Again, we're under no illusion that we need to be the e-expert in taking the risk on absolutely everything. Some we'll do ourselves, and if it's more valuable to outsource, then we'll do it. I mean, we have to be flexible.
Okay. Is there a CapEx budget that we need to worry about as investors seeing this contract come in? Does it change your capital investment project, you know, expectations?
No, I wouldn't say there's a change in CapEx. Obviously we're focused on our 3.5x leverage. Ultimately for us, everything funnels into capital allocation decisions, but lead us within the 3.5x net leverage that we committed to by the end of 2027. Like we'll manage our way through, but get to that leverage target.
Okay. let's go back to our.
It's up to you.
... programming, on wireless, regular programming. You know, we had Rogers and Telus present to us earlier. You know, the discussion is trying to figure out how much more normalization the Canadian environment for wireless subscriber growth is going to continue to, how long it's gonna take before we reach that support level.
Sure.
Any indication you can give us how Q1 has been going for you so far versus expectations? Where do you see the year progress?
Yeah, a few things. Look, it's obviously a hot topic. If I just backed up the lens of time just a little bit, if you go back to, a few kind of data points. One, it's a competitive industry. We do compete in the market every day. There are a few moments in time across the year that are more competitive. Think back to school, think Black Friday, think Boxing Week. If we go back a few months, the competitive intensity of back to school and Black Friday was a decrease year-over-year. Then I'd say Boxing Week, was in line competitively with previous years, just off a higher base.
The contracts that we were signing in Q3 and Q4 were sequentially higher at, well, Q3 to Q4, but also year-over-year. Improvements in the contracts we were signing. I think it was a little bit of a disappointment on a relative basis going from back to school and Black Friday to Boxing Week, still, it was actually just normal level of competition. You're in January. February, I'd say, you know, localized skirmishes and generally okay. I'd always want for us, we're competing on our overall product, our bundled service. I think fiber becomes increasingly important in terms of decision-making in the household on a relative basis versus wireless. Clearly, that's where we have the advantage. For us, you see more of the same: sell our internet fiber, bundle wireless in on the Bell brand, and sell direct-to-consumer content.
Ultimately, those are the subscribers that drive longer-term value and lower churn for us. You know, we can always drive another 5,000+ gross adds, but it's not the right thing to do in terms of maximizing value. Like, net adds are helpful, but it's not the metric that actually drives value. Free cash flow growth is.
Okay. In terms of the pricing outlook for 2026, I know you don't have a crystal ball, but should we expect the level of decline in ARPU that we've seen is continuing to improve? Can we return to at least a flat percentage by the end of the year, or it's too early to make that forecast?
I wouldn't push back too hard on your comment. It might be a little bit early. I think we still see contracts that we sign, are gonna be at a higher recurring charge, like monthly recurring revenue than we saw last year. It's a matter of, you know, how much more? Is it CAD 2 better, CAD 3, CAD 5 better in terms of when does ARPU actually turn around? Previously, we had said by end of year. Now we're thinking probably early in 2027 for ARPU growth.
Okay. In terms of wireless KPI disclosure, I asked the question to Glenn, and Glenn in view was, you know, essentially, if you change the KPI, it doesn't change the company and the, you know, the effort to load customers is not gonna change if you change the reporting on the KPIs. What's your view about how important it is to always come in? I have this discussion with you guys all the time.
Sure,
...before reporting, you know, who has the highest subscriber loading. The focus is always, "I don't wanna be, you know, far behind." That whole discussion, isn't it detrimental to the good you know, good financial loading that a company should be focused on?
I'll give you an answer that agrees and disagrees. I agree that it shouldn't have much theoretical impact because it's not how we manage our day-to-day business. You know, net adds is a metric, but ultimately for us, what are our Bell loadings? How are we continuing to improve customer experience so that our churn continues to improve? Where are our product placements? Like, what is our product capabilities and advantages versus our competitors? We tend to think about our strategic advantages and leveraging our assets to drive more free cash flow. It shouldn't change theoretically how we run our business, 'cause we already run our business in terms of product intensity and households. Practically, there probably is some impact because we're having this conversation.
You know, greater than zero, but shouldn't have much of an impact because it's not the most important metric as we run our business. Again, net adds are helpful. They were more helpful in a world where net adds were more highly correlated with driving free cash flow. Driving free cash flow is the actual KPI that we care about, right? I mean, If you look at management compensation, it's free cash flow growth and de-leveraging. Manage our balance sheet, drive EBITDA growth, drive free cash flow growth.
Internet, you know, has been, I would say, a struggle a little bit for BCE to increase penetration on your fiber footprint that you built in the East compared to maybe what you're seeing at Ziply, for example. Why do you think it's harder to get those penetration levels in Ontario and Quebec as high as you have them in Atlantic Canada, for example?
I might rephrase the question a little bit.
Okay.
'cause I don't really see that much trouble in terms of driving penetration. If you look in the East, we're north of 50%. If you look at where we built out fiber in Ontario, our percentage is basically 50% break even in markets where we have fiber. In all of our markets, in Ziply as well, like we all track new fiber and what penetration is, and it's a Look, it's a very steep curve, and it winds up being fairly consistent. Where you have fiber, you win the net adds and, you know, 43,000 net adds on fiber last quarter. Where we have fiber, we take share from cable, and if you look back over the last handful of years, basically all the nets have gone to fiber.
That happens in Ontario, that happens in Quebec, it happens in the East, and it happens in the U.S. as well, not just with Ziply, but others. Like, the, the timeline to ramp up penetration is all fairly consistent. Where you have fiber, you load the fiber network. The faster you have fiber, the faster you beat cable. The more fiber you have, the more you beat cable. We haven't really seen different challenges building out fiber, 'cause fiber is just kind of acknowledged as the better product. I think what you see is our pricing behavior has an impact on it and, you know, how the tactics to drive the most free cash flow are dependent on your penetration. Where you have 30% penetration, you know, you'll look at tactics differently than where you have 55% penetration.
Okay.
Ultimately, and over the long run, even where you have 55% penetration, like, you're still winning net adds in the market. Ultimately, long way of saying fiber still just beats cable, and we've seen that in every jurisdiction we've built fiber.
Okay. you know, same question to Ziply, you know, what are your priorities for 2026, in terms of deploying fiber, new fiber versus increasing penetration of existing fiber?
Yeah, I would say those are one and two whichever order you want it.
Some metrics that we, you know, we should be looking for.
Yeah, it's a build year. It's a build year. You know, the parameters around Ziply Fiber management are a little bit different under our ownership, and frankly, with our partnership with PSP. The ability to get permits and ramp up the build, 2026 is a big build year for them. I mean, the ability for them to actually expand into different states, continue building in the Pacific Northwest, they need to ramp up. Like, this is a year where they are ramping up their build capabilities, and we're starting to see fiber network hosts start to fund some of that fiber build. It's not quite at run rate yet, as the financing and the permits kinda take a little bit of time to be at fiber network co, but, you know, by the end of the year, it's gonna be rolling.
Have you received any indication that the cost to build fiber has increased? We've seen fiber strands, prices go up close to 70% since the beginning of the year because of the AI buildup that is taking place. I'm sure you have long-term purchase agreements. You know, can you just give us some comfort that we won't see CapEx increase as a result maybe?
Yeah, I don't think you're gonna see CapEx increase. I mean, $3.7 billion for us is in the budget. That's our ceiling right at this point. We haven't seen it. Obviously, we've seen all the same reports. Clearly, more demand for fiber in the U.S., and as data center get built out, the supply chain seems to be holding on. We haven't seen that. Could there be a little bit of pressure? Yes. I mean, ultimately, you know, it's interesting, we still bring enough scale as a fiber builder to help Ziply, but Ziply is still not building a lot relative to some of the other kinda telcos in the U.S. and hyperscalers in the U.S.
You know, so far, we've been able to kind of have the scaled relationships, but not need to buy that much, that it's had much of an impact. Again, over the course of the year, we'll see. There might be a little bit of pressure, but we haven't seen it to date.
Okay. In terms of pricing environment in the Northwest? H ow would you qualify it? You know, we've seen Charter and Comcast become more aggressive in the marketplace in general. You know, some offers out there is quite aggressive, recently. Anything that you had to change your pricing tactic as a result?
We haven't seen that yet. Again, Well, two things. Comcast and Charter I think are pricing against AT&T and Verizon, not Ziply's near 1.5 million fiber locations in the Pacific Northwest. That's a good news and a bad news story, but that's kind of just a fact. We haven't seen much of that. Ziply pricing, even though it's a superior product, given, they were starting new in market, their pricing had been at a discount to cable anyway. Haven't seen that. There may be an impact, as you start looking at your kind of terminal penetration levels where fewer cable subs would now be willing to move over to fiber, 'cause they like the contract they signed or were locked into.
Keeping an eye on kinda impact to more mature markets and ability to continue to ramp up penetration. No impact to date. Again, you would expect that there'd be some, but we haven't really seen much of an impact to date. Again, we're building fiber, first fiber, so ultimately, there's pent-up demand for the superior broadband technology as we build fiber in a new market and folks are moving over from cable to fiber at kinda similar rates that what we've seen in the past.
Okay. It hasn't been long that you put out the multiyear project to build, more fiber inside the JV that you did with PSP and, out the footprint. Has anything changed when it comes to satellite competition, FWA, cable pricing becoming more aggressive that would potentially affect, the potential, long-term fiber deployment that you have?
No, it's a simple story. I mean, we're gonna build fiber, and we're gonna load the fiber network. The good news is we're not building fiber in deep urban markets. We're kind of the next couple of rings from there. Where, you know, the Starlink of the world and the LEOs of the world are competing are probably the next rings out. We really haven't seen that. I'd say the markets where Ziply is competing, they already had fixed wireless in the market, so there's no change. All of the kind of penetration curves that we underwrote and that the management has been able to deliver over time already included fixed wireless in the market. It's kind of status quo, frankly, in terms of competitive environment, that was already factored into our assumptions.
Okay. Good. In terms of leverage, you ended the year at 3.8x. Can you give us some guidelines, where we should end in 2026, 2027?
Well, 2027's an easier answer. That's 3x- 5x.
You did give the two point 2027, but, asset dispositions that you need to undertake to get there, implied inside the, those guidelines.
Sure. It's not meant to be flip, but yes, 3.5x leverage by the end of 2027. Continued de-leveraging thereafter. We had announced CAD 7 billion of asset sales, so there's kind of CAD 1 billion and change left relative to that target. We do have a couple files on the go. I mean, as soon as they happen, we'll announce them. Ultimately, we're living in a world where we want to de-lever, and we have real funding opportunities. We've taken a much harder look at our overall capital allocation. It's not just CapEx for the year, but are we the best owner of this asset? Frankly, even if we are a good owner of this asset, are we better served? Can we drive more free cash flow, more value for shareholders if we owned a different asset?
Whether that's more fiber in Canada, more fiber in the U.S., whether it's funding, AI fabric, which is still a very strong opportunity, or even just continuing to fund our digital transformation, where, you know, in my role, I can, I can see the efficiencies and see the improvements in customer experience. There's, there's no real shortage of really good investment ideas, which makes us take a harder look at what assets do you have that are maybe a little bit more of an adjacency and, not as good a return on value as investing in some of these other areas we've identified.
In terms of your satellite business, you do have a satellite business and it's profitable. How, you know. What is the end game with that business? Could there be a transition period? We've seen, I think, Starlink do a transaction with Hughes, where they pay for two months' worth of subscriber payments and take the customer away. I mean, could there be something to be done with that business, either a sale or a transition to reduce the cost of running a satellite business?
I think there are a few different options there that, you know, we'll continue to think about. Ultimately, they're providing a service where we don't have, you know, fiber likely. It's a service to more rural communities, more rural customers. That is their best alternative at this point. I mean, if you squint forward into the future, are there other alternatives? Do we migrate customers onto different technology?
Look, at the end of the day, we wanna provide services to our customers, and if there's a better service that we can provide that moves away from satellite, then, you know, that's in our standard product roadmap. As you manage legacy businesses, of course, you're looking to manage your cost. Fundamentally, can we deliver a service that's compelling to our customers, and how do we do so on a more cost-efficient basis? That's what we do every day, so we'll continue to do that.
You're still deploying CapEx in Canada and you know, building new fiber. Can you help us understand the long-term business model, financials that we, you know, we could expect to see from BCE when you finish deploying fiber? You're never gonna be done, but, you know, most of it done, in terms of capital intensity and also margins. When you have a network that is brand new, it's all fiberized, you can stop legacy services and just drive operational leverage.
I think that's right. Ultimately, I agree with everything you said. There are handful of step function benefits along the way as you shut down legacy services and as you move over to kind of newer technology. You still capture benefits along the way. Even, like, if you're just comparing a fiber subscriber to a copper internet subscriber, you know, ARPU is better, churn is better, call propensity is lower. There's already a lower cost to serve, and the churn is much lower, so overall long-term value is much better by basically every single variable. You know, we build out fiber. We'll continue to build out fiber. We built out, you know, 3 million homes over the last five years in Canada. That's not a terminal penetration.
There's continued growth in Canada of our kind of fiber base, which just continues the shift from legacy services to kind of newer technology. It's goodness all throughout the subscriber revenue churn. Just cost to maintain and cost to kind of service customers. I mean, fewer calls in the call center, fewer repairs. It means you need fewer trucks, less fuel, fewer technicians.
Like, it's just a more efficient, higher margin business all the way along. Yeah, look, we will continue to keep building fiber in Canada, right? Not what we did when we accelerated fiber during the COVID period, where we were really ramping up to get to 8 million. You know, we have 12 million ILEC footprint. We'll continue to build out fiber. You know, new starts obviously will build out. If it's within our footprint, we'll build out more fiber and again, capture all the benefits of having the superior technology in the marketplace.
Is there a way to break up how much of your cost is legacy versus? You know, it's kind of give us a forward-looking view about how BCE could look like when you pull the plug.
When I pull the plug. That's great. Threw me off there. Wasn't expecting that phrasing. Yes. Look, we're managing internally and clearly legacy costs and, you know, it's wrapped up in a few other opportunities 'cause it tends to be, you know, copper decommissioning and selling of the actual copper and ripping up and selling the real estate. You know, that's clearly the path, but that's not one giant step function.
That's central office by central office. Same thing, legacy product, conversion into kind of digital-based, fiber-based products. It's customer by customer over time, and then migration. 100%, that's already what we do. We need to keep doing more of it and, you know, I take note more disclosure would be helpful on that front. We shared growth versus legacy at Investor Day. We'll continue to share that information. It's just not at the point where we can report it officially on a quarterly basis.
Okay. That's fair. We talked about AI in the beginning of the discussion, but, you know, you've set some pretty, interesting guidelines about what you expect to achieve in that, segment. I get a lot of questions about CapEx and, I know you're running the business so that it, you know, the CapEx is contained. You know, could there be a moment where you say, "If I don't build it right now, I'm gonna lose out on a certain contract," and that could jeopardize or add CapEx that was not planned?
A few things to unpack there. I mean, it's a general question. I'd throw out a few data points. In our projection model, like our three-year targets, we talked about 73 MW of gross power that is baked into our plan. We don't build the data centers until we actually have the contracted revenue. We're de-risking the profile. It's north of 20% returns, but on a much different risk profile than what you see folks are building out in the U.S. where it's a bit more spec. That there's such demand out there that you build it on spec in the U.S. and they're filling the data centers and actually monetizing. We're a little bit more conservative in terms of security of having the revenue before we actually put shovels in the ground.
There's a bit of a, kind of an arbitrage of, like, return we can generate with the risk we're actually taking. I'd say, you know, we are not an LLM model. We are not a hyperscaler. We are building the digital infrastructure that supports AI. Again, we're a digital infrastructure company. That's what we've done for nearly 150 years. We provide end-to-end solutions for our customers, whether they be the government or whether they be enterprises. We do not need to own or take the risk or control or develop or fund every single kind of tranche of that end-to-end service. Build data centers, compute power, lease space and power, sell it to hyperscaler, sell it to chip manufacturer. They take the entirety of the space and power that we build.
It's very different than it was kind of in the old Q9 days where you're selling off racks at a time. We wrap up Ateko, professional services, Bell Cyber, connectivity, and we provide the end-to-end solution. I think we play in different pieces of that value chain. I think we have a right to play in certain of those. Again, fairly risk-averse in that market. Even though there's a ton of demand, we're holding off on building and spending CapEx till we have construction, and we're holding off on any more than the 73 MW than we put into our model, even though, look, there's very strong demand out there. It's lumpy demand, but I'd say there's been nothing but more comfort towards hitting our targets.
Okay. Are you feeling better or breathing better?
Feel great.
Now that Netflix is not buying HBO?
I was sleeping well at night even with anything that happened there. I mean, look, it's the benefit of having a long-term relationship and long-term contracts. Frankly, our Crave product, like, we've had a long-term relationship with HBO. It's gone very well. We do have other content, and we produce some of our own content. You probably heard of some of the shows we've produced and launched recently that seem to be fairly successful. No, we're very confident in that.
The content strategy, wrapped around wireless and wireline that you discussed at your Analyst Day that is behind the 2027 guidance that you provided is still.
Absolutely.
Solid and.
Yeah. Crave is a great product. It's a great product, in the current ownership of HBO, whether Netflix owned it or Paramount owns it. It's great content, and it kind of feeds into other great content that we have and, frankly, a pretty good Canadian solution to streaming service. No, I'm very happy with it.
Great. We're out of time. I'm sure we have a lot more.
I was gonna say that went by pretty quickly.
Thank you very much, Glen.
Great.
Curtis.
Thank you.
Thank you.
Enjoy the rest of the day.
We have Cineplex.