Leading the way in communications BCE INC. 2015 ANNUAL REPORT for 135 years BELL LEADERSHIP AND INNOVATION PAST, PRESENT AND FUTURE OUR GOAL For Bell to be recognized by customers as Canada’s leading communications company OUR STRATEGIC IMPERATIVES Invest in broadband networks and services 11 Accelerate wireless 12 Leverage wireline momentum 14 Expand media leadership 16 Improve customer service 18 Achieve a competitive cost structure 20 Bell is leading Canada’s broadband communications revolution, investing more than any other communications company in the fibre networks that carry advanced services, in the products and content that make the most of the power of those networks, and in the customer service that makes all of it accessible. Through the rigorous execution of our 6 Strategic Imperatives, we gained further ground in the marketplace and delivered financial results that enable us to continue to invest in growth services that now account for 81% of revenue. Financial and operational highlights 4 Letters to shareholders 6 Strategic imperatives 11 Community investment 22 Bell archives 24 Management’s discussion and analysis (MD&A) 28 Reports on internal control 112 Consolidated financial statements 116 Notes to consolidated financial statements 120 2 We have re-energized one of Canada’s most respected brands, transforming Bell into a competitive force in every communications segment. Achieving all our financial targets for 2015, we strengthened our financial position and continued to create value for shareholders. DELIVERING INCREASED SHAREHOLDER VALUE 2015 FINANCIAL PERFORMANCE Actual Target Result Total shareholder return Total shareholder return in 2015 (1) since the end of 2008 (1) (2) Revenue 2.2% 1%–3% growth Adjusted 3.0% 2%–4% % % EBITDA 5.3 208 growth (3) Capital 16.9% ~17% intensity Adjusted $3.36 $3.28–$3.38 EPS (3) Increase in dividend per common Increase in dividend per common share for 2016 share since the end of 2008 Free 9.3% ~8%–15% cash flow growth (3) % % COMPARATIVE TOTAL RETURN(1) 5.0 87 Since the end 2015 of 2008 BCE 5.3% 208% S&P/TSX Composite Index -8.3% 78% S&P/TSX Telecom Index 7.0% 138% (1) Assumes the reinvestment of dividends. (2) Total return since the end of 2008, the year Bell implemented its transformational strategy. (3) Adjusted EBITDA, adjusted EPS and free cash flow are non-GAAP financial measures and do not have any standardized meaning under International Financial Reporting Standards (IFRS). Therefore, they are unlikely to be comparable to similar measures presented by other issuers. For a full description of these measures, see section 10.2, Non-GAAP financial measures and key performance indicators (KPIs) on pp. 108 to 110 of the MD&A. 3 FINANCIAL AND OPERATIONAL HIGHLIGHTS Growth services fuelled by broadband innovation Bell’s success in 2015 and in the future lies in wireless, TV, Internet and media growth services. To deliver Canada’s best broadband, we invest more in state-of-the-art fibre and mobile networks and product R&D than any other communications company – and customers are responding. BCE SUBSCRIBERS* (MILLIONS) 2015 2014 Growth Wireless 8.2 8.1 +1.6% High-speed Internet 3.4 3.3 +3.5% Television 2.7 2.6 +3.6% Total growth services 14.4 14.1 +2.4% L ocal telephone services 6.7 7.1 -6.2% Ziya Tong, co-host of Daily Planet on Discovery, Canada’s #1 entertainment Total subscribers 21.1 21.2 -0.5% specialty channel. Total subscribers Increase in growth services in 2015 subscribers in 2015 21.1M 2.4 % * Rounding in numbers may affect total figures presented. 4 $ Total % 21.5B growth services 81 $ Total % 17.7B growth services 64 Bell transformed Wireless, TV, Internet and media growth services accounted for 81% of Media Wireless Wireline Wireless Wireline Wireline Wireline Broadband & TV Broadband & TV voice voice BCE revenue in 2015, up from just 64% 36% 25% 39% 19% 32% 12% 37 % in 2008. 2008 2015 % +2.2 +3.0% +0.4% $21.042 $21.514 $8.303 $8.551 $2.718 $2.730 2014 2015 2014 2015 2014 2015 BCE operating revenues BCE adjusted EBITDA BCE net earnings ($ billions) ($ billions) ($ billions) +0.5% +9.3% +2.3% $6.241 $6.274 $2.744 $2.999 $3.46 $3.54 2014 2015 2014 2015 2014 2015 Cash flows from operating activities Free cash flow Free cash flow per share ($ billions) ($ billions) ($) For more information, please refer to Section 7 of the MD&A – Selected annual and quarterly information, page 88. 5 LETTERS TO SHAREHOLDERS MESSAGE FROM THE CHAIR OF THE BOARD Innovation strategy plus strong execution equals outstanding returns BCE celebrated 135 years of communications leadership We also continued to prudently in 2015 with an incredible list of achievements. manage our pension obligations. We made a further voluntary Our team has re-energized one of the nation’s most contribution of $250 million to our defined benefit pension plan in enduring institutions, rebuilding Bell into a competitive December, and announced a leader in every segment of Canadian communications groundbreaking longevity insurance as we deliver increasing shareholder value. agreement with Sun Life, the first of its kind in North America. I have had the honour and privilege innovation to support our growth We enter 2016 with a strong financial to serve as your Chair over the last services and deliver sustainable position of approximately $2.5 billion 7 years as BCE has executed a bold shareholder returns. in available liquidity and expectations strategy to regain the top spot We maintain an investment-grade for continued substantial free cash in Canadian communications with balance sheet and credit ratings, flow generation, all supporting our a commitment to lead our nation’s while taking full advantage of capital investment and dividend broadband revolution. favourable market conditions to growth objectives. Our credit profile And lead we have. 2015 was yet advance our financial strategy. is favourable with investment-grade another year of strong progress as Capitalizing on opportunity ratings and stable outlooks. the Bell group of companies moved to BCE raised $863 million in common Our success in the marketplace the forefront of wireless, TV, Internet share equity capital in Q4 2015 to coupled with our healthy financial and media – the growth services of reduce debt and further strengthen position enabled us to announce modern broadband communications. our balance sheet. It was our first a 5% increase in the common share Dedicated to ongoing innovation, such public equity issuance since dividend in February 2016. It was efficient operation and a better 2002 and we were pleased to see the twelfth time in the last 7 years customer experience at every level, that strong market demand that we have raised the BCE common Bell has become an outstanding outstripped supply by some 15%. share dividend – a total increase operator that rivals the best telecoms of 87%. Since the end of 2008, total around the globe. Successfully accessing the debt markets in both March and October shareholder return has grown Bell’s growing success in the 2015, Bell Canada raised a total of a remarkable 208%. communications marketplace and $1.5 billion in gross proceeds from the strong financial performance, which issuance of 30-year and 7-year MTN saw us achieve all of our guidance debentures, the latter issuance targets in 2015, is backed by a carrying an annual interest rate of capital markets strategy focused 3%, the lowest fixed coupon ever on enabling investment in broadband achieved by Bell Canada on any MTN debenture issuance. 6 % Broadband value Our broadband strategy has delivered a total shareholder return of 208% since the end of 2008. (1) 208 (1) Assumes the reinvestment of dividends Changes to the Board Thank you I will be retiring from the BCE Board I would like to express my appreciation of Directors at the Annual General and thanks to all my fellow Board Shareholder Meeting, passing the members for their wisdom and support Chair to Gordon Nixon, the former through the years. Your Board is a President and CEO of Royal Bank skilled, distinguished and dedicated of Canada. We are also pleased to group of business leaders that always announce the nominations of 2 more upholds the highest standards of good eminent Canadian business figures governance in serving the interests of to our Board: Monique Leroux, Chair, BCE shareholders. President and CEO of Desjardins My thanks to George, his unparalleled Group, and Calin Rovinescu, President senior management group and the and CEO of Air Canada. entire BCE team in every province and Changes to the Board in 2015 included territory for their total commitment the departure of Carole Taylor, to moving Bell forward. who had joined us in August 2010 Finally, my gratitude to my fellow and served with distinction on the shareholders for continuing to believe Corporate Governance and Pension in Bell’s ability to compete and win. Fund committees. In August 2015, It has been my great pleasure to we welcomed Katherine Lee, former serve you during one of the most President and CEO of GE Capital transformative and successful eras Canada, who now serves on the Audit in Bell’s long and distinguished and Pension Fund committees. history. Thank you all for your An outstanding CEO confidence and support. Congratulations to George Cope for being named Outstanding CEO of the Year in 2015, alongside his investiture in the Order of Canada and Bell’s recognition as one of the Top Employers in Canada earlier Thomas C. O’Neill Chair of the Board in the year. These are well-deserved BCE Inc. honours for George’s leadership in the industry and the community, and for his ability to engage team members in making Bell better every day.