What's Important
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BCE Inc. Bell Canada Enterprises Bell Canada Enterprises 1000, rue de La Gauchetière Ouest Bureau 3700 Montréal (Québec) H3B 4Y7 www.bce.ca 2002 Annual Report Communications email: [email protected] What’s important. tel: 1 888 932-6666 fax: (514) 870 4385 Investor Relations email: [email protected] tel: 1 800 339-6353 fax: (514) 786-3970 2002 Annual Report Printed in Canada ABOUT BCE BCE is Canada’s largest communications company. It has 25 million customer connections through the wireline, wireless, data/Internet and satellite television services it provides, largely under the Bell brand. BCE’s media interests are held by Bell Globemedia, including CTV and The Globe and Mail. As well, BCE has eBusiness capabil- ities provided under the BCE Emergis brand. BCE shares are listed in Canada, the United States and Europe. TABLE OF CONTENTS What’s Important . 1 Chairman’s Message . 10 Letter from the President and CEO. 11 Financial Highlights. 12 Operational Highlights . 16 2002: The Year in Review . 17 Corporate Social Responsibility . 26 Management’s Discussion and Analysis . 28 Consolidated Financial Statements . 54 Notes to Consolidated Financial Statements . 58 Board of Directors. 82 Committees of the Board. 84 Shareholder Information . Inside Back Cover In this annual report, we, us, our and BCE mean BCE Inc., its subsidiaries, its joint ventures and its investments in significantly influenced companies. See page 28 for more information. In 2002, we set a new course for BCE and began the process of simplifying our business. As we move into the future, certain principles will guide our decisions. Bell Canada Enterprises1 2002 Annual Report Simpler Bell Canada Enterprises2 2002 Annual Report is better. Customers want things to be as simple as possible. They want things to be easy to access, easy to understand and easy to use. In a world that is getting more complex by the day, our services must simplify people’s lives. It’s all perfo Performance matters. Results matter. Customers and shareholders expect them, and in these times, expectations are high. They want action, not words. And they want to see more than effort. They want to see progress — real, measurable progress. We know we must deliver. about rmance. Bell Canada Enterprises5 2002 Annual Report Good is good Bell Canada Enterprises6 2002 Annual Report never enough. Excellence is an unending journey, not a destination. Nothing but great will suffice, and great is a moving target. Improvement must be a continuous process of questioning the status quo and pushing to be better. There is always room to improve. The drives ev Nothing in business is sustainable without loyal, satisfied customers. You must gain the right insights on what the customer needs, wants and expects — and let those insights drive everything you do. Because real shareholder value doesn’t happen without customer value. customer erything. Bell Canada Enterprises9 2002 Annual Report Chairman’s Message It was a tumultuous year for your company. In April, your Board of Directors, recognizing that the primary job of the Board is to be accountable to shareholders — not to run the company — separated the positions of Chairman and CEO. As the year progressed, it became ever clearer that the responsibility of the Board is to operate in a transparent manner. To that end, the BCE Board is examining its structure and committee mandates. Under the present TSX and NYSE guidelines, your Board, with the exception of the CEO, is composed entirely of independent, unrelated directors. Whatever guidelines ultimately emerge, BCE will maintain the majority of its Board, all its committee chairs and the majority of members on each committee as independent, unrelated directors, with an audit committee entirely composed of financially skilled, independent, unrelated directors. Through another important Board initiative, the director stock option program has been eliminated. Furthermore, we have increased the minimum share ownership for your directors from 3,000 shares to 10,000 shares in order to better align the interests of your directors with those of the shareholders. Until a director has met such minimum share ownership guideline, directors’ fees are payable in deferred share units (DSUs). The DSUs cannot be sold while serving as a director. The minimum share ownership guideline and the DSUs are designed to make all directors major shareholders of BCE. Share options will be only for management, have performance criteria and be recorded as an expense on our financial statements. In becoming transparently accountable to shareholders, your Board of Directors will focus its efforts and its interaction with management in three areas — stewardship, strategy and succession. Stewardship involves concentration on the core competencies of the business. In terms of strategy, the Board must endorse the strategic direction for the company as developed by the senior management team. Succession requires timely and effective programs to ensure management development is continuously taking place. Jean C. Monty resigned in 2002 as Chairman and CEO of the company. On behalf of the Board of Directors of BCE Inc., I would like to recognize the many contributions he made during his almost 30 years with this organization. The breadth of expertise on your Board has been increased by the addition of three new directors: André Bérard, Chairman of the National Bank of Canada, The Honourable Edward C. Lumley, Vice-Chairman of BMO Nesbitt Burns, and Thomas C. O’Neill, former Chairman of PwC Consulting. Two of our directors — Ted Newall and Guy Saint-Pierre — have announced they will not stand for re-election in May. We are grateful for the experience and insights of these well-known business leaders over many years. We look to the future with enthusiasm and confidence, not, of course, just because of governance changes, but primarily because the real talent of Michael Sabia and his management team has been so capably demonstrated. Their quick recognition of issues, the precision of their action plans to resolve those issues and the quality of their results, achieved in such a short period of time, all attest to their standards and their skill. Yours is a great Canadian company — now fully in control of its future. Richard J. Currie, C.M. Chairman of the Board Bell Canada Enterprises10 2002 Annual Report From the President and CEO Dear Shareholders, What’s important? For us it’s simple: Putting the customer at the centre of all that we do. Meeting their needs quickly, simply, competitively. Executing on our business plans. Reaching our goals. Delivering on our promises. Being leaders. Our direction is clear. We’re focused. Bell Canada Enterprises11 2002 Annual Report Financial Highlights 2002 2001 2000 Revenues (in millions) 19,768 19,340 16,668 EBITDA* (in millions) 7,622 7,242 6,715 Net earnings per common share 2.74 0.56 7.32 Net earnings before non-recurring items per common share* 1.81 1.74 1.87 Revenues EBITDA* Net earnings per common share (in millions) (in millions) Net earnings before non-recurring items per common share* 8.25 7,622 19,768 19,340 7,242 7.32 6,715 7.03 16,668 5,790 5,354 13,407 12,182 2.74 1.87 1.81 1.74 1.70 1.43 0.56 98 99 00 01 02 98 99 00 01 02 98 99 00 01 02 *The terms “EBITDA” (Earnings before interest expense, income taxes, depreciation and amortization) and “net earnings before non-recurring items” do not have a standardized meaning prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and may not be comparable to similar measures presented by other publicly traded companies. Refer to page 32 of this Annual Report for a description of these terms. Bell Canada Enterprises12 2002 Annual Report 2002 was an important year. We accomplished a great deal in 2002. Early in the year, Perhaps that’s an understatement. It was a very important it became clear that the pace of change in the telecommuni- year. It was a year in which we put a tremendous amount cation markets demanded some fundamental changes of BCE, of uncertainty behind us and turned our eyes confidently so we did what we had to do. We are now what we always again to the future. That’s important. must be: a strong Canadian company in complete control of We severed our ties with its destiny.What lies ahead? Teleglobe in the context of That’s what I want to talk unprecedented turmoil in the about in this letter. global telecommunications industry. It was not an easy An increasingly competitive decision. But it was an essential marketplace decision. First of all, what lies ahead We regained full owner- is competition — more of ship of our most important it from a growing roster of asset, Bell Canada, successfully players eager to enter our financing the transaction in traditional businesses. It is one of the toughest financial no longer just BCE competing markets anyone can remember. with other telecom companies. In fact, according to industry We compete with cable com- Michael Sabia expert Cap Gemini, the equity President and panies, which in turn compete Chief Executive Officer component of the financing with satellite companies. was the only truly successful such offering in the entire global Wireless companies compete with other wireless companies telecom industry during 2002. and with traditional telephone service. The complexity in In the face of this, we delivered solid financial results, the marketplace is growing with global software companies, outperforming the North American telecom sector across system integrators, massive media conglomerates, all now most important measures, despite very difficult conditions in vying for the customer. most of our customer markets.You’ll see highlights of these The very nature of competition in our industry has results on the left, and more detail in the back section of this changed, but I am convinced BCE has what it takes to win.