Bell Canada Enterprises 2004 Annual Report bce BCE Inc. 1000, rue de la Gauchetière Ouest Bureau 3700 Montréal (Québec) H3B 4Y7 www.bce.ca Bell Canada Enterprises 2004 Annual Report Every day Bell is becoming an organization that is more and more focused on our customers and their needs. Over the past two years, we have articulated an explicit vision of what we must do to transform Bell into a new model communications company. We will be: Clear; we have a clear strategy and are clear on the challenges ahead. Most importantly, we are clear on what we need to do to meet those challenges. Simple; in the services we offer, in how we relate to our customers and in our internal processes. First; we will be the fi rst choice of our customers to provide technology that they can count on. True; to our core values and legacy of service. Profi table; in our business. Proud; of our 125-year history and our role as a responsible corporate citizen. Communications e-mail [email protected] tel 1 888 932-6666 fax (514) 870-4385 Investor Relations e-mail [email protected] tel 1 800 339-6353 fax (514) 786-3970 page 2 clear page 10 simple page 14 fi rst page 18 true page 22 profi table page 26 proud Letters to Shareholders Dear Fellow Shareholders, Bell Canada was founded 125 years ago and for the past To be at the end of the beginning implies that we are also three of those years I have had the honour of serving as at the beginning of something entirely new. That something, its Chairman. In that time, I have witnessed a company of course, is a new kind of telecommunications company, reaffi rming its legacy. Bell “wired” Canada in the last built on the platform of Internet Protocol (IP). For consumers century. Today, Bell is the company that is leading Canada and businesses, this will mean access to the full capabilities into a new century of broadband connectivity. of Bell—wireline, wireless, Internet, and video—from a single Your Board of Directors fully recognizes that because of the source. As ever-more sophisticated technology arrives and Internet, the telecommunications industry is in dramatic data transfer speeds accelerate, the choices for consumers will transition and Bell must undergo a major transformation in increase. To package, organize and deliver these choices order to ensure its future growth. Your Board also recognizes in ways consumers can use and to do so while maintaining the fi nancial strength of BCE. It is now clear that the asset Bell’s historically superior level of service and reliability base of the company will be renewed and transformed and at materially lower cost will be the real challenge of this well within its operating cash fl ow. Our confi dence in the telecommunications transformation. continuing fi nancial strength and in the future of BCE To lower costs, Bell Canada launched the Galileo initiative, led us to declare a 10% increase in the annual dividend, to which introduced company-wide operational changes and $1.32 per share, the fi rst increase in 10 years. started to streamline all key processes in the company—a On behalf of the Board, I want to publicly endorse project that is expected to save in excess of a billion dollars and support the management of BCE for its visionary and by the end of 2006. On the revenue side, Bell is now improv- determined leadership. ing customer experience and satisfaction through the bundling Bell is now nearing the end of the beginning of that trans- of its multiple services. formation, having positioned itself with 27 million customer Proof that our business model for BCE is working can connections in 2004 and one of the highest measures of be found in the current trend in business acquisitions among customer loyalty in North America. other North American telecommunications companies. In 2 Bell Canada Enterprises 2004 Annual Report SBC’s proposed acquisition of AT&T, and in other U.S. trans- Canadian business leader, has graciously declined to stand actions by other companies, involving wireless and satellite for re-election to the Board in order to eliminate any mean- services, many are beginning to mirror and emulate Bell’s ingful degree of interlocking directorships. On behalf of the established model of comprehensive communications services. Board, I want to recognize and thank him for his standards BCE is committed to the concept of competition because as well as his service. real competition is everywhere and in every instance in the The newest member of the Board of Directors, Jim Pattison, best interests of the consumer. Competition challenges old brings his keen entrepreneurial spirit as well as his almost ways of thinking and spurs innovation. But for competition legendary business expertise to our Board. We all look forward to be real, it must take place on an even playing fi eld with to his involvement. providers that offer similar services being treated by regulators Finally, in these changing times for the industry and while in similar ways. Regulations that benefi t one competitor much about Bell Canada is changing, what will not change over another hurt the evolution of this vital industry. is our heritage of dedicated customer service, unmatched Bell Canada has evolved with a proud tradition of using reliability and steadfast commitment to keeping Canada a private money for public good. From this tradition, Bell world leader in communications. provided Canadians with worldwide telecommunications lead- ership, the proven result of real, facilities-based competition. BCE is also committed to sound corporate governance and that commitment was recently recognized again by the independent ratings agency GovernanceMetrics International which rated 3,220 companies worldwide in 2004. BCE was one of only 34 companies globally and one of only three in Richard J. Currie, O.C. Canada awarded a perfect score of 10. Consistent with these Chairman of the Board high governance standards, Tom Kierans, a distinguished BCE Inc. 3 be clear. Dear Fellow Shareholders, Early in February, I sat down for a thirty-minute meeting I wanted to know what the mood of the company was. To with a group of Bell Canada employees. Two and a half know where our people stand. How they think we are doing. hours later, we adjourned. But I could have stayed all day. The short answer they gave me: it’s tough, but we are on the These were exceptional people—the kind who are leading right track. the charge in building a new Bell. 2004 was a watershed year in the 125-year history of Drawn from across the company. From across divisions and Bell Canada. A challenging year, a year in which many of our locations. From across job titles and responsibilities. A wide achievements were internal, not external. And while we were cross-section of our nearly 40,000 people. generally satisfi ed with our performance, we recognize how To know a company, to really know a company, you have to much we have left to accomplish. know its people. So I seized the opportunity. And asked these For example, we added one million new subscribers for frontline people to tell me how they thought we were doing. our products and services last year—but we need to add more, I didn’t need to ask twice. They told me about the very real and we will. We negotiated an important labour agreement challenges they have faced as we change Bell, as we tighten with our Bell technicians, but we did experience the disrup- our focus on a strategy that will take us into the future. They tion of a work stoppage at Aliant. We reduced the number told me about their hard work. How their teams are striving of product lines, offers and service codes. But this too is just to meet the call for simplicity and service. How it isn’t easy one step in our ongoing effort to be simpler. to be on the front lines in a time of great change. Other achievements will have a lasting impact. In October, But they also told me how proud they are to work at Bell. for instance, we took a bold step forward in our national To represent Bell in their communities. They spoke of the strategy. The Vancouver Organizing Committee named Bell pride they feel as we embrace the technological promise of a Premier National Partner for the 2010 Olympic Winter Internet Protocol, IP television and next generation wireless. Games. We strengthened that relationship when CTV earned They talked about the competition, and how we are ready the exclusive Canadian broadcast rights to the Games. This to fi ght. To win. is an opportunity to showcase Bell’s technology, reliability 4 Bell Canada Enterprises 2004 Annual Report and service on the highest-profi le stage in the world. And we will cut unnecessary steps and redundant functions. We it reinforces our position as the one truly national player will reduce re-work. And generate signifi cant savings. Galileo in telecommunications. is expected to contribute an estimated $1 billion to $1.5 billion in cost savings by the end of 2006. Savings that will improve shareholder returns and buy us freedom to In 2004 we got serious about getting simple. invest in and grow new areas of our business. For Bell, “Making it Simple” is much more than a tag line. But reducing our costs is only the start. Galileo focuses It is our strategic direction, our rallying cry, and how we are everyone at Bell on our strategy.