U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 40-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
OR | ||
X | ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: | December 31, 2004 | Commission File Number: | 1-8481 |
BCE Inc.
(Exact name of Registrant as specified in its charter)
Canada
(Jurisdiction of incorporation or organization)
4813
(Primary Standard Industrial Classification Code Number (if applicable))
98-0134477
(I.R.S. Employer Identification Number (if applicable))
1000 rue de La Gauchetière Ouest, Bureau 3700, Montreal, Quebec, Canada H3B 4Y7, (514) 397-7000
(Address and telephone number of Registrant’s principal executive offices)
CT Corporation System, 111 Eighth Avenue, 13th Floor, New York, N.Y. 10011, (212) 894-8940
(Name, address (including zip code) and telephone number (including area code)
of agents for service in the United States)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Common shares | Name of each exchange on which registered New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this Form
X | Annual information form | X | Audited annual financial statements |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
At December 31, 2004, 925,935,682 common shares and 66,000,000 First Preferred Shares were issued and oustanding. |
Indicate by check mark whether the Registrant by filing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number assigned to the Registrant in connection with such Rule.
YES: | NO: | X |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:
YES: | X | NO: |
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PRIOR FILINGS MODIFIED AND SUPERSEDED
BCE Inc.’s annual report on Form 40-F for the year ended December 31, 2004, at the time of filing with the U.S. Securities and Exchange Commission (the “SEC” or “Commission”), modifies and supersedes all prior documents filed pursuant to Sections 13, 14 and 15(d) of the Exchange Act for purposes of any offers or sales of any securities after the date of such filing pursuant to any registration statement or prospectus filed pursuant to the Securities Act of 1933 which incorporates by reference such annual report on Form 40-F. Other than BCE Inc.’s Annual Information Form for the year ended December 31, 2004 (the “AIF”) included herein, and BCE Inc.’s annual audited consolidated financial statements for the year ended December 31, 2004 and related management’s discussion and analysis of financial condition and results of operations, incorporated by reference herein, no other information from the Exhibits attached hereto is to be incorporated by reference in a registration statement or prospectus filed pursuant to the Securities Act of 1933.
ANNUAL AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
MANAGEMENT’S DISCUSSION AND ANALYSIS
A. Annual Audited Consolidated Financial Statements
For BCE Inc.’s annual audited consolidated financial statements for the year ended December 31, 2004 (the “Financial Statements”), including the auditor’s report with respect thereto, see pages 82 to 121 and part of page 82, respectively, of the BCE Inc. 2004 Annual Report to shareholders attached hereto as Exhibit 99.1, which pages are incorporated herein by reference. See Note 27 of the Notes to the Financial Statements on pages 118 to 121 of the BCE Inc. 2004 Annual Report to shareholders, reconciling the significant differences between Canadian and United States generally accepted accounting principles.
The above referenced auditor’s report is expressed in accordance with standards of reporting generally accepted in Canada which do not require a reference to changes in accounting principles in the auditor’s report when the changes are properly accounted for and adequately disclosed in the financial statements. In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there are changes in accounting principles that have a material effect on the comparability of the financial statements, such as the changes described in Note 1 to the Financial Statements, or when there is a retroactive restatement such as described in Note 1 to the Financial Statements.
B. Management’s Discussion and Analysis
For management’s discussion and analysis of financial condition and results of operations, see pages 32 to 81 of the BCE Inc. 2004 Annual Report to shareholders attached hereto as Exhibit 99.1, which pages are incorporated herein by reference.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this annual report on Form 40-F, an evaluation was carried out by BCE Inc.’s management, under the supervision, and with the participation, of BCE Inc.’s President and Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of BCE Inc.’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the CEO and CFO concluded that such disclosure controls and procedures were adequate and effective and designed to ensure that material information relating to BCE Inc. and its consolidated subsidiaries would be made known to them by others within those entities.
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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the year ended December 31, 2004, there were no changes in BCE Inc.’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, BCE Inc.’s internal control over financial reporting.
AUDIT COMMITTEE FINANCIAL EXPERT
CODE OF ETHICS
All of BCE Inc.’s employees, directors and officers must follow BCE Inc.’s Code of Business Conduct (the “Bell Canada Enterprises Code”), which provides guidelines for ethical behaviour. The Bell Canada Enterprises Code includes additional guidelines for BCE Inc.’s President and Chief Executive Officer, Chief Financial Officer, Controller and Treasurer. The Bell Canada Enterprises Code is available in the Governance section of BCE Inc.’s website at www.bce.ca.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Auditor’s fees
The table below shows the fees that Deloitte & Touche LLP (“Deloitte & Touche”), BCE Inc.’s external auditor, billed to BCE Inc. and its subsidiaries for various services for each year in the past two fiscal years.
2004 | 20031 | |||
(Can. $ millions) | ||||
Audit fees | 11.4 | 13.3 | ||
Audit-related fees | 3.1 | 2.2 | ||
Tax fees | 1.9 | 2.6 | ||
Other fees | – | 1.1 | ||
Total | 16.4 | 19.2 | ||
1 Figures for 2003 have been restated to eliminate the fees paid by CGI Group Inc. in the calculation of our aggregate fees paid and reclassify translation services from Other fees to Audit fees so they can be compared to 2004 fees.
Audit fees
These fees include professional services provided by the external auditor for the review of the interim financial statements, statutory audits of the annual financial statements, the review of prospectuses, consulting on financial accounting and reporting standards, other regulatory audits and filings and translation services.
Audit-related fees
These fees relate to non-statutory audits,Sarbanes-Oxley Act of 2002initiatives, pension plan audits and consulting on prospective financial accounting and reporting standards.
Tax fees
These fees include professional services for administering our compliance with our conflict of interest policy, tax compliance, tax advice, tax planning and advisory services relating to the preparation of corporate tax, capital tax and commodity tax returns.
Since November 2004, we generally do not engage the external auditor to perform tax planning and consulting services.
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Other fees
These fees include professional services provided for the redesign of product introduction and new applications for account management, inventory programming, promotion and research processes. This work started in 2002 and was completed in early 2003.
In 2004, Deloitte & Touche has not been engaged to design any information system or provide implementation services (IS/IT) or other consulting services to BCE Inc. or its subsidiaries.
Auditor independence policy
BCE Inc.’s auditor independence policy is a comprehensive policy governing all aspects of BCE Inc.’s relationship with the external auditor, including:
• | establishing a process for determining whether various audit and other services provided by the external auditor affect its independence; | |
• | identifying the services that the external auditor may and may not provide to BCE Inc. and its subsidiaries; | |
• | pre-approving all services to be provided by the external auditor of BCE Inc. and its subsidiaries; and | |
• | establishing a process outlining procedures (as part of a separate policy) when hiring current or former personnel of the external auditor in a financial oversight role to ensure auditor independence is maintained. | |
In particular, the policy specifies that: | ||
• | the external auditor cannot be hired to provide any services falling within the prohibited services category, such as bookkeeping, financial information system design and implementation and legal services; | |
• | for all audit or non-audit services falling within the permitted services category (such as prospectus work, due diligence and non-statutory audits), a request for approval must be submitted to the audit committee by the Chief Financial Officer prior to engaging the auditors; | |
• | specific permitted services however are pre-approved quarterly by the audit committee and consequently only require approval by the Chief Financial Officer prior to engaging the external auditor; and | |
• | at each regularly scheduled audit committee meeting, a consolidated summary of all fees paid to the external auditor by service type is presented. This summary includes a breakout of fees incurred within the pre-approved amounts. |
In 2004, BCE Inc.’s audit committee did not approve any audit-related, tax or other services pursuant to paragraph (c) (7) (i) (C) of Rule 2-01 of Regulation S-X.
OFF-BALANCE SHEET ARRANGEMENTS
Please see the section entitled “Off-Balance Sheet Arrangements” of BCE Inc.’s management’s discussion and analysis of financial condition and results of operations (which is incorporated by reference in BCE Inc.’s AIF) and Notes 11 and 25, entitled “Accounts receivable” and “Guarantees”, respectively, of the Financial Statements, all contained in BCE Inc.’s 2004 Annual Report to shareholders attached hereto as Exhibit 99.1, for a discussion of offbalance sheet arrangements.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Please see the section entitled “Contractual Obligations” of BCE Inc.’s management’s discussion and analysis of financial condition and results of operations (which is incorporated by reference in BCE Inc.’s AIF), contained in BCE Inc.’s 2004 Annual Report to shareholders attached hereto as Exhibit 99.1, for a tabular disclosure and discussion of contractual obligations.
IDENTIFICATION OF THE AUDIT COMMITTEE
BCE Inc. has a separately designated standing audit committee established in accordance with section 3(a)(58) (A) of the Exchange Act. BCE Inc.'s audit committee is comprised of five independent members: Mr. T.C. O'Neill (Chair), Mr. A. Bérard, Mrs. J. Maxwell, Mr. R.C. Pozen and Mr. V.L. Young.
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UNDERTAKING
BCE Inc. undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities in relation to which the obligation to file this annual report on Form 40-F arises; or transactions in said securities.
WEB SITE INFORMATION
Notwithstanding any reference to BCE Inc.’s website on the World Wide Web in the AIF or in the documents attached as Exhibits hereto, the information contained in BCE Inc.’s website or any other site on the World Wide Web referred to in BCE Inc.’s website is not a part of this Form 40-F and, therefore, is not filed with the Commission.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
BCE Inc. has made in the documents filed as part of this annual report on Form 40-F, and from time to time may otherwise make, forward-looking statements and related assumptions concerning its operations, economic performance and financial matters. BCE Inc. is under no duty to update any of these forward-looking statements or related assumptions. Actual results or events could differ materially from those set forth in, or implied by, the forward-looking statements and the related assumptions due to a variety of factors. Reference is made to the section entitled “About forward-looking statements” on page 3 of the AIF and to the section entitled “Risks That Could Affect Our Business” on pages 32 to 41 of the AIF for a discussion of certain of such factors. Reference is also made to the various risk factors discussed throughout BCE Inc.’s management’s discussion and analysis of financial condition and results of operations (which is incorporated by reference in BCE Inc.’s AIF), contained in BCE Inc.’s 2004 Annual Report to shareholders attached hereto as Exhibit 99.1.
BCE Inc. For the year ended December 31, 2004
| 2004 |
1 2004 Annual information form BCE Inc.
ABOUT THIS ANNUAL INFORMATION FORM This Annual Information Form (AIF) contains important information that will help you make informed decisions about investing in BCE Inc. It describes the company and its operations, its prospects, risks and other factors that affect its business. |
In this AIF,we,us,ourandBCE mean BCE Inc., its subsidiaries and joint ventures. Bell Canada, Aliant Inc. (Aliant) and their subsidiaries are referred to as the Bell Canada companies. |
All dollar figures are in Canadian dollars, unless stated otherwise. The information in this AIF is as of March 2, 2005, unless stated otherwise, and except for information in documents incorporated by reference that have a different date. |
The document in the table below contains information that is incorporated by reference into this AIF. |
Document | Where it is incorporated in this AIF | |
BCE Inc. 2004 annual report —Management’s | Management’s discussion and analysis, page 41 | |
discussion and analysis, pages 32 to 80 | ||
The table below is a list of all our trademarks referred to and used as such in this AIF, and their owners. | |
Owner | Trademark |
BCE Inc. | BCE |
Bell Canada | Rings & head design |
Bell Canada Enterprises corporate logo | |
Bell | |
Bell World | |
Espace Bell | |
ProConnect | |
Sympatico | |
Sympatico.ca | |
Bell ExpressVu Limited Partnership | ExpressVu |
Bell Globemedia Publishing Inc. | Canada’s National Newspaper |
Globeandmail.com | |
The Globe and Mail | |
Bell Mobility Inc. | Mobile Browser |
CTV Inc. | CTV |
CTV Newsnet | |
CTV Travel | |
The Comedy Network | |
CTV Television Inc. | ROB TV |
Talk TV | |
Le Réseau des Sports (RDS) Inc. | RIS Info Sports |
Telesat Canada | Anik |
Nimiq | |
Telesat | |
The Sports Network Inc. | TSN |
RDS | |
Any other trademarks, or corporate, trade or domain names used in this AIF are the property of their owners. We believe that our trademarks and domain names are very important to our success. Our exclusive trademark rights are perpetual provided that their registrations are timely renewed and that the trademarks are used in commerce by us or our licensees. We take appropriate measures to protect, renew and defend our trademarks. We also spend considerable time and resources overseeing, registering, renewing, licensing and protecting our trademarks and prosecuting those who infringe on them. We take great care not to infringe on the intellectual property and trademarks of others. |
2 2004 Annual information form BCE Inc.
A statement we make is forward-looking when it uses what we know and expect today to make a statement about the future. Forward-looking statements may include words such asanticipate,believe,could,expect,goal,guidance,intend,may,objective,outlook,plan,seek, should,strive,targetandwill.
Risks that could cause our actual results to materially differ from our current expectations are discussed throughout this AIF and, in particular, inRisks that could affect our business. BCE is Canada’s largest communications company. Our primary focus is Bell Canada, which represents the largest component of our business. We report Bell Canada’s results of operations in four segments. Each reflects a distinct customer group: Consumer, Business, Aliant and Other Bell Canada. All of our other activities are reported in the Other BCE segment. Our reporting structure reflects how we manage our business and how we classify our operations for planning and measuring performance. |
Operating revenues(in $ millions) | |||
Consumer | $ | 7,502 | �� |
Business | $ | 5,851 | |
Aliant | $ | 2,033 | |
Other Bell Canada | $ | 1,939 | |
Inter-segment eliminations | $ | (538 | ) |
Bell Canada | $ | 16,787 | |
Other BCE | $ | 2,861 | |
Inter-segment eliminations | $ | (455 | ) |
Total operating revenues | $ | 19,193 | |
|
3 BCE Inc.2004 Annual information form
(Northwestel). Our Wholesale business provides local telephone, long distance, wireless, data and other services to competitors who resell these services. Télébec, NorthernTel and Northwestel provide telecommunications services to less populated areas of Québec, Ontario and Canada’s northern territories. The telecommunications industry continues to evolve rapidly as the industry moves from multiple service-specific networks to Internet Protocol (IP)-based integrated communications networks where text, video, sound and voice all travel on a single network. While IP-based communications is creating a new competitive landscape with reduced barriers to entry, it also unleashes new growth opportunities and the ability to achieve significant cost savings. 1. Deliver an enhanced customer experience with the objective of enabling a significantly lower cost structure at Bell Canada.
In our Business segment:
In 2005, we will continue to work on both of these areas.
|
4 2004 Annual information form BCE Inc.
In Business we will:
By the end of 2006, through our Galileo initiatives we are targeting to remove between $1 billion and $1.5 billion in annual costs from our current cost structure. 2. Deliver abundant bandwidth to enable all the services of the future with the reliability and security that customers require. 3.Create the next-generation services to drive future growth. In 2004, our Consumer segment provided next-generation services with:
For Enterprise customers, we launched our Managed IP Telephonyservice. By year end, Bell Canada had sold more than 145,000 IP-enabled lines on customer premises equipment (CPE). We also enhanced our portfolio of value-added services through the acquisitions of:
As part of our strategy to become the technology advisor of choice toSMB customers, we:
In 2005, we plan to introduce Internet telephony service for consumers. In the Enterprise unit, we are targeting to increase the proportion of our customers in the Enterprise market purchasing value-added solutions. In the SMB market, we intend to reinvent the way information technology and telecom are integrated with the objective of increasing the number of SMB customers that view Bell Canada as their virtual Chief Information Officer (VCIO). |
5 2004 Annual information form BCE Inc.
The table below shows our main subsidiaries, where they are incorporated or registered, and the percentage of voting and non-voting securities or partnership interest that we beneficially own or that we directly or indirectly exercise control or direction over. |
Percentage of voting | |||
securities or | |||
Where it is | partnership interest | ||
incorporated or | that BCE Inc. held at | ||
Subsidiary | registered | December 31, 2004(1) | |
Bell Canada (2) | Canada | 100% | |
Aliant | Canada | 53.2% | |
Bell Mobility (3) | Canada | 100% | |
Bell ExpressVu (3) | Ontario | 100% (4) | |
Bell Globemedia(3) | Ontario | 68.5% | |
(1) | We do not own any outstanding non-voting securities issued by these subsidiaries. |
(2) | All of the voting securities of Bell Canada are owned by Bell Canada Holdings Inc. (BCH), a wholly-owned subsidiary of BCE Inc. |
(3) | These subsidiaries represent 10% or less of our total consolidated assets and 10% or less of our total consolidated operating revenues. We have included them to provide a better understanding of our overall corporate structure. |
(4) | This subsidiary is indirectly wholly-owned by BCE Inc. 52% is indirectly held by Bell Canada. |
Our directors and officers At December 31, 2004, BCE Inc.’s directors and officers as a group beneficially owned, directly or indirectly, or exercised control or direction over:
Directors The table on the next page lists BCE Inc.’s directors, where they lived and their principal occupation on March 2, 2005. |
6 2004 Annual information form BCE Inc.
Directors | ||
Date elected or appointed to the board | ||
Name and municipality of residence | Current principal occupation | |
André Bérard,Montréal, Québec | January 2003 | Corporate director |
Ronald A. Brenneman,Calgary, Alberta | November 2003 | President and Chief Executive Officer and a director, Petro-Canada |
(petroleum company), since January 2000 | ||
Richard J. Currie,(1)Toronto, Ontario | May 1995 | Chair of the board, BCE Inc. and Bell Canada, since April 2002 |
Anthony S. Fell,(1) Toronto, Ontario | January 2002 | Chairman of the board, RBC Dominion Securities Limited (investment bank), sinceDecember 1999 |
Donna Soble Kaufman,Toronto, Ontario | June 1998 | Lawyer and corporate director |
Thomas E. Kierans,(1)Toronto, Ontario | April 1999 | Chair, CSI Global Education Inc. (financial educator), since October 2004 |
Brian M. Levitt,Montréal, Québec | May 1998 | Co-Chair, Osler, Hoskin & Harcourt LLP (law firm), since January 2001 |
The Honourable Edward C. Lumley,(2) | January 2003 | Vice-Chairman, BMO Nesbitt Burns Inc. (investment bank), since 1991 |
South Lancaster, Ontario | ||
Judith Maxwell,Ottawa, Ontario | January 2000 | President, Canadian Policy Research Networks Inc. (non-profit organization |
conducting research on work, family, health, social policy and public | ||
involvement), since 1995 | ||
John H. McArthur,Wayland, Massachusetts | May 1995 | Senior advisor to the President, The World Bank Group (development bank), |
since March 1996 | ||
Thomas C. O’Neill,Don Mills, Ontario | January 2003 | Chartered Accountant and corporate director |
James A. Pattison,(3)Vancouver, British Columbia | February 2005 | Chairman and Chief Executive Officer, The Jim Pattison Group, since 1961 |
Robert C. Pozen,Boston, Massachusetts | February 2002 | Chairman of the board, MFS Investment Management (global investment |
manager), since February 2004 | ||
Michael J. Sabia,(1) Montréal, Québec | October 2002 | President and Chief Executive Officer (since April 2002) and a director, BCE Inc., and Chief Executive Officer (since May 2002) and a director, Bell Canada |
Paul M. Tellier,Montréal, Québec | April 1999 | Corporate director |
Victor L. Young,St. John’s, Newfoundland and Labrador | May 1995 | Corporate director |
(1) | Was a director or executive officer of Teleglobe Inc. or certain of its affiliates on or during the year preceding May 15, 2002, the date when Teleglobe Inc. and certain of its affiliates filed for court protection under insolvency statutes in various countries, including Canada and the United States. |
(2) | Was a director or executive officer of Air Canada on or during the year preceding April 1, 2003, the date when Air Canada filed for court protection under insolvency statutes in Canada and the United States. |
(3) | Was a director or executive officer of Livent Inc. on or during the year preceding November 18 and 19, 1998, the dates when Livent Inc. and its United States subsidiaries filed for court protection under insolvency statutes in Canada and the United States, respectively. |
7 2004 Annual information form BCE Inc.
Past occupation Under BCE Inc.’s by-laws, each director holds office until the next annual shareholder meeting or until his or her successor is elected. All of BCE Inc.’s directors have held the positions listed in the table on the previous page or other executive positions with the same or associated firms or organizations during the past five years or more, except for the people listed in the table below. | ||
Past occupation | ||
Director | Past occupation | |
Mr. A. Bérard | • | Chairman of the board of National Bank of Canada (chartered bank) from March 2002 to March 2004 |
• | Chairman of the board and Chief Executive Officer of National Bank of Canada from 1990 to March 2002 and a director of National Bank of Canada from 1985 to March 2004 | |
Mr. R.A. Brenneman | • | Before January 2000, General Manager – Corporate Planning of Exxon Corporation (petroleum company) |
Mr. R.J. Currie | • | President of George Weston Limited (food distribution, retail and production) from 1996 to May 2002 and a director from 1975 to May 2002 |
• | President of Loblaw Companies Limited (grocery chain) from 1976 to January 2001 and a director from 1973 to May 2001 | |
Mr. T.E. Kierans | • | Chairman of the board of Canadian Institute for Advanced Research (conducts basic research programs in the social and natural sciences) from September 1999 to October 2004 |
• | Chairman of the board of Moore Corporation Limited (management and distribution of print and digital information) from 1977 to March 2001 | |
• | Chairman of the board of Petro-Canada from 1996 to January 2000 | |
Mr. B.M. Levitt | • | President and Chief Executive Officer of Imasco Limited (consumer products and services company) from 1995 to February 2000 |
Mr. T.C. O’Neill | • | Chief Executive Officer of PricewaterhouseCoopers Consulting (provider of management consulting and technology services) from January 2002 to May 2002 and then Chairman of the board from May 2002 to October 2002 |
• | Chief Operating Officer of PricewaterhouseCoopers LLP global organization (professional services firm in accounting, auditing, taxation and financial advisory) from July 2000 to January 2002 | |
• | Chief Executive Officer of PricewaterhouseCoopers LLP (accounting firm) in Canada from 1998 to July 2000 | |
Mr. R.C. Pozen | • | Vice-chairman of the board of Fidelity Investments from June 2000 to December 2001 |
• | President and a director of Fidelity Management and Research Company (provider of financial services and investment resources) from 1997 to June 2001 | |
Mr. P.M. Tellier | • | President and Chief Executive Officer and a director of Bombardier .Inc. (manufacturer of business jets, regional aircraft and rail transportation equipment) from January 2003 to December 2004 |
• | President, Chief Executive Officer and a Director of Canadian National Railway Company from 1992 to December 2002 | |
Mr. V.L. Young | • | Chairman of the board and Chief Executive Officer of Fishery Products International Limited (frozen seafood products company) from 1984 to May 2001 |
8 2004 Annual information form BCE Inc.
Committees of the board The table below lists the committees of our board of directors and their members. As a public company, we are required by law to have an audit committee. | ||
Committee | Members | |
Audit | T.C. O’Neill (Chair) A. Bérard J. Maxwell R.C. Pozen V.L. Young | |
Corporate governance | D. Soble Kaufman (Chair) A.S. Fell T.E. Kierans The Honourable E.C. Lumley J.H. McArthur | |
Management resources and compensation | R.J. Currie (Chair) R.A. Brenneman A.S. Fell J.H. McArthur V.L. Young | |
Pension fund | R.C. Pozen (Chair) T.E. Kierans B.M. Levitt P.M. Tellier | |
All of our officers have held their present positions or other executive positions with BCE Inc. or one or more of our subsidiaries or affiliated companies during the past five years or more, except for:
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Officers The table below lists BCE Inc.’s officers, where they lived and the office that they held at BCE Inc. on March 2, 2005. | ||
Officers | ||
Name | Municipality of residence | Office held at BCE Inc. |
Michael J. Sabia(1) | Montréal, Québec | President and Chief Executive Officer |
William D. Anderson(1) | Montréal, Québec | President, BCE Ventures Inc. |
Alain Bilodeau | Montréal, Québec | Senior Vice-President, BCE Inc. and President, BCE Corporate Services Inc. |
Michael T. Boychuk(1) | Montréal, Québec | Senior Vice-President and Treasurer |
Karyn A. Brooks | Montréal, Québec | Vice-President and Controller |
Mark R. Bruneau | Montréal, Québec | Executive Vice-President and Chief Strategy Officer |
Peter Daniel | Ottawa, Ontario | Executive Vice-President – Communications and Corporate Marketing |
Lib Gibson | Toronto, Ontario | Corporate Advisor |
Leo W. Houle | Montréal, Québec | Chief Talent Officer |
Lawson A.W. Hunter | Ottawa, Ontario | Executive Vice-President |
Patricia A. Olah | Montréal, Québec | Corporate Secretary |
Barry W. Pickford | Toronto, Ontario | Senior Vice-President – Taxation |
Stephen P. Skinner(1) | Montréal, Québec | Senior Vice-President – Finance – Bell Canada |
Martine Turcotte | Montréal, Québec | Chief Legal Officer |
Siim A. Vanaselja | Montréal, Québec | Chief Financial Officer |
Stephen G. Wetmore | Mississauga, Ontario | Executive Vice-President |
Mahes S. Wickramasinghe | Mississauga, Ontario | Senior Vice-President – Audit and Risk Management |
(1) | Was a director or executive officer of Teleglobe Inc. or certain of its affiliates on or during the year preceding May 15, 2002, the date when Teleglobe Inc. and certain of its affiliates filed for court protection under insolvency statutes in various countries, including Canada and the United States. |
9 2004 Annual information form BCE Inc.
Our employees The table below shows the number of employees in the BCE group of companies. | ||||||
Number of employees at December 31 | ||||||
2004 | 2003 | 2002 | ||||
Total | 61,739 | 64,054 | 66,266 | |||
Negotiations continue regarding the renewal of both collective agreements.
On January 21, 2005, the Communications Energy and Paper Workers Union of Canada (CEP) filed a common employer application between Bell Canada, Bell West, Smiston Communications (Smiston) and GT Group Telecom Services Corporation (Group Telecom) to represent the craft and services employees of Bell West, Smiston and Group Telecom. BCE Inc. Securities The BCE Inc. articles of amalgamation provide for an unlimited number of common shares, an unlimited number of first preferred shares issuable in series, an unlimited number of second preferred shares also issuable in series and unlimited number of Class B shares. In addition, BCE Inc. has issued debt securities in the form of notes. This section describes BCE Inc.’s securities, the ratings that certain rating agencies have attributed to such securities and the trading of such securities on the Toronto Stock Exchange (TSX). Debt securities BCE Inc. has issued long-term debt securities in the form of Series A, B and C Notes, as summarized in the table below. |
Weighted-average | ||||||
interest rate | Maturity | $million | ||||
Series A, B and C Notes | 6.86% | 2006-2009 | 2,000 | |||
Share capital Preferred shares |
10 2004 Annual information form BCE Inc.
The table below is a summary of the principal terms of BCE Inc.’s First Preferred Shares at December 31, 2004. There were no Second Preferred Shares issued and outstanding at December 31, 2004. BCE Inc.’s articles of amalgamation describe the terms and conditions of these shares in detail. | |||||||||||||||||||
First preferred shares | |||||||||||||||||||
Stated capital | |||||||||||||||||||
Number of shares | |||||||||||||||||||
Annual | |||||||||||||||||||
dividend | Convertible | Redemption | Issued and | ||||||||||||||||
Series | rate | into | Conversion date | Redemption date | price | Authorized | outstanding | 2004 | 2003 | ||||||||||
Q | floating | Series R | December 1, 2010 | At any time | $25.50 | 8,000,000 | – | – | – | ||||||||||
R | $1.5435 | Series Q | December 1, 2005 | December 1, 2005 | $25.00 | 8,000,000 | 8,000,000 | 200 | 200 | ||||||||||
S | floating | Series T | November 1, 2006 | At any time | $25.50 | 8,000,000 | 8,000,000 | 200 | 200 | ||||||||||
T | fixed | Series S | November 1, 2011 | November 1, 2011 | $25.00 | 8,000,000 | – | – | – | ||||||||||
Y | floating | Series Z | December 1, 2007 | At any time | $25.50 | 10,000,000 | 1,147,380 | 29 | 29 | ||||||||||
Z | $1.3298 | Series Y | December 1, 2007 | December 1, 2007 | $25.00 | 10,000,000 | 8,852,620 | 221 | 221 | ||||||||||
AA | $1.3625 | Series AB | September 1, 2007 | September 1, 2007 | $25.00 | 20,000,000 | 20,000,000 | 510 | 510 | ||||||||||
AB | floating | Series AA | September 1, 2012 | At any time | $25.50 | 20,000,000 | – | – | – | ||||||||||
AC | $1.3850 | Series AD | March 1, 2008 | March 1, 2008 | $25.00 | 20,000,000 | 20,000,000 | 510 | 510 | ||||||||||
AD | floating | Series AC | March 1, 2013 | At any time | $25.50 | 20,000,000 | – | – | – | ||||||||||
1,670 | 1,670 | ||||||||||||||||||
Voting rights All of the issued and outstanding preferred shares at December 31, 2004 were non-voting, except under special circumstances, for example if BCE Inc. failed to make dividend payments, when the holders are entitled to one vote per share. Entitlement to dividends Holders of Series R, Z, AA and AC shares are entitled to fixed cumulative quarterly dividends. The dividend rate on these shares is reset every five years, as set out in BCE Inc.’s articles of amalgamation. Conversion features All of the issued and outstanding BCE Inc. preferred shares at December 31, 2004 are convertible at the holder’s option into another associated series of preferred shares on a one-for-one basis as per the terms set out in BCE Inc.’s articles of amalgamation. Redemption features BCE Inc. may redeem Series R, Z, AA and AC shares on the redemption date and every five years after that date. Liquidation, dissolution or winding up The first preferred shares of all series rank on a parity with each other and in priority to all other shares of BCE Inc. with respect to payment of dividends and with respect to distribution of assets in the event of liquidation, dissolution or winding up of BCE Inc., whether voluntary or involuntary, or any other distribution of assets for the purpose of winding up its affairs. Common shares and Class B shares BCE Inc.’s articles of amalgamation provide for an unlimited number of voting common shares and non-voting Class B shares. Each common share entitles its holder to one vote at any meeting of shareholders. The common shares and the Class B shares rank equally in the payment of dividends and in the distribution of assets if BCE Inc. is liquidated, dissolved or wound up, after payments due to the holders of preferred shares. |
11 2004 Annual information form BCE Inc.
The table below provides details about the outstanding common shares of BCE Inc. at December 31, 2004. No Class B shares were outstanding at December 31, 2004 and 2003. | ||||||||
Common shares | ||||||||
2004 | 2003 | |||||||
Number of shares | Stated capital | Number of shares | Stated capital | |||||
(in $ millions) | (in $ millions) | |||||||
Outstanding, beginning of year | 923,988,818 | 16,749 | 915,867,928 | 16,520 | ||||
Shares issued: | ||||||||
under employee savings plans | – | – | 4,951,199 | 145 | ||||
under dividend reinvestment plan | – | – | 2,807,899 | 82 | ||||
under employee stock option plans | 1,946,864 | 32 | 552,681 | 9 | ||||
Shares purchased for cancellation | – | – | (190,889 | ) | (7 | ) | ||
Outstanding, end of year | 925,935,682 | 16,781 | 923,988,818 | 16,749 | ||||
Ratings for BCE Inc. securities Ratings generally address the ability of a company to repay principal and interest or dividends on securities.
These credit ratings are not recommendations to purchase, hold or sell any of the securities discussed above, or a comment on the market price or suitability for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn in the future by a rating agency. Commercial paper and extendible commercial notes The table below shows the range of credit ratings that each rating agency assigns to short-term debt instruments. |
Highest quality | Lowest quality | |||
of securities rated | of securities rated | |||
DBRS | R-1 (high) | D | ||
Moody’s | P-1 | P-3 | ||
S&P | A-1 (high) | D | ||
|
Short-term debt credit rating | ||
DBRS | R-1 (low) | |
Moody’s | P-2 | |
S&P | A-1 (mid) | |
The A-1 (mid) rating ranks second among the eight short-term credit ratings given by S&P and, according to S&P, indicates a strong capacity to meet its financial commitment on the short-term obligations. Obligations rated A-1(mid) on the commercial paper rating scale would qualify for a rating of A-1 on S&P’s global short-term rating scale. |
12 2004 Annual information form BCE Inc.
Long-term debt (Senior notes Series A, B and C) The table below shows the range of ratings that each rating agency assigns to long-term debt instruments. | ||||
Highest quality | Lowest quality | |||
of securities rated | of securities rated | |||
DBRS | AAA | D | ||
Moody’s | Aaa | C | ||
S&P | AAA | D | ||
Fitch | AAA | D | ||
Moody’s long-term obligation ratings are an assessment of the relative credit risk of fixed-income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honoured as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default. |
Long-term debt credit rating | ||
DBRS | A | |
Moody’s | Baa1 | |
S&P | A- | |
Fitch | A- | |
While A is a respectable rating, companies that fall into this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities. Preferred Shares The table below describes the range of ratings that each rating agency assigns to preferred share instruments. |
Highest quality | Lowest quality | |||
of securities rated | of securities rated | |||
DBRS | Pfd-1 (high) | D | ||
S&P | P-1 (high) | D | ||
|
Preferred share credit rating | ||
DBRS | Pfd-2 | |
S&P | P-2 (high) | |
13 2004 Annual information form BCE Inc.
The Pfd-2 rating for preferred shares ranks fifth among the 16 preferred share credit ratings given by DBRS. According to DBRS, a company with preferred shares rated Pfd-2 by DBRS:
The P-2 (high) rating ranks fourth among the 18 preferred share credit ratings given by S&P. A P-2 (high) rating on the Canadian scale is equivalent to a BBB+ rating on the global scale. According to S&P, an obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the company’s ability to meet its financial commitment on the obligation. Trading of our Securities Common and preferred shares of BCE Inc. are traded on the TSX. In addition, BCE Inc.’s common shares are listed on the New York Stock Exchange (NYSE) and the SWX Swiss Exchange. The tables below and on the next page show the range in share price per month and volume traded on the TSX for each class of BCE Inc. securities. |
BCE Inc. common shares | ||||||
2004 | High | Low | Volume traded | |||
December | $29.33 | $27.98 | 38,078,817 | |||
November | $29.22 | $27.15 | 39,003,863 | |||
October | $28.65 | $27.20 | 32,534,161 | |||
September | $28.64 | $27.20 | 40,438,523 | |||
August | $28.02 | $26.80 | 30,876,533 | |||
July | $28.00 | $25.72 | 43,927,935 | |||
June | $27.47 | $25.64 | 43,339,921 | |||
May | $28.30 | $26.39 | 43,029,353 | |||
April | $28.86 | $26.51 | 42,365,543 | |||
March | $29.39 | $27.34 | 58,954,468 | |||
February | $29.98 | $28.36 | 54,902,306 | |||
January | $30.28 | $28.49 | 71,498,934 | |||
BCE Inc. preferred shares – Series R | ||||||
2004 | High | Low | Volume traded | |||
December | $26.45 | $25.85 | 129,560 | |||
November | $26.35 | $25.50 | 160,734 | |||
October | $26.50 | $26.10 | 62,550 | |||
September | $26.24 | $26.05 | 123,314 | |||
August | $26.24 | $26.00 | 342,326 | |||
July | $26.35 | $25.76 | 675,660 | |||
June | $26.38 | $26.01 | 42,442 | |||
May | $27.00 | $26.00 | 442,086 | |||
April | $27.00 | $26.22 | 527,668 | |||
March | $27.00 | $26.55 | 86,810 | |||
February | $27.12 | $26.60 | 74,155 | |||
January | $27.11 | $26.25 | 542,102 | |||
BCE Inc. Preferred shares – Series S | ||||||
2004 | High | Low | Volume traded | |||
December | $25.53 | $24.80 | 171,504 | |||
November | $25.15 | $24.76 | 502,032 | |||
October | $25.00 | $24.75 | 222,724 | |||
September | $25.00 | $24.55 | 256,451 | |||
August | $25.00 | $24.55 | 119,881 | |||
July | $25.50 | $24.60 | 48,456 | |||
June | $25.20 | $24.71 | 96,518 | |||
May | $25.55 | $24.95 | 101,558 | |||
April | $25.48 | $24.80 | 78,291 | |||
March | $25.34 | $24.75 | 122,817 | |||
February | $25.45 | $25.01 | 150,295 | |||
January | $25.70 | $25.00 | 151,366 | |||
BCE Inc. Preferred shares – Series Y | ||||||
2004 | High | Low | Volume traded | |||
December | $25.25 | $24.85 | 1,405 | |||
November | $25.25 | $24.43 | 7,100 | |||
October | $25.00 | $24.27 | 23,260 | |||
September | $25.35 | $24.60 | 17,580 | |||
August | $26.00 | $24.65 | 4,250 | |||
July | $25.69 | $24.52 | 8,075 | |||
June | $25.50 | $24.76 | 55,850 | |||
May | $25.80 | $24.87 | 25,417 | |||
April | $25.50 | $25.00 | 7,200 | |||
March | $25.55 | $25.00 | 16,600 | |||
February | $26.00 | $25.20 | 60,760 | |||
January | $25.45 | $25.02 | 6,230 | |||
BCE Inc. Preferred shares – Series Z | ||||||
2004 | High | Low | Volume traded | |||
December | $27.15 | $26.45 | 597,730 | |||
November | $27.15 | $26.51 | 373,967 | |||
October | $27.19 | $26.65 | 34,139 | |||
September | $27.15 | $26.55 | 406,071 | |||
August | $26.85 | $26.50 | 663,166 | |||
July | $26.89 | $26.00 | 108,244 | |||
June | $26.64 | $26.00 | 150,334 | |||
May | $26.70 | $25.95 | 969,709 | |||
April | $27.30 | $26.00 | 177,069 | |||
March | $27.70 | $26.65 | 159,892 | |||
February | $27.75 | $27.00 | 42,244 | |||
January | $27.49 | $26.65 | 256,691 | |||
14 2004 Annual information form BCE Inc.
BCE Inc. Preferred shares – Series AA | ||||||
2004 | High | Low | Volume traded | |||
December | $27.25 | $26.75 | 136,094 | |||
November | $27.10 | $26.55 | 242,880 | |||
October | $27.00 | $26.65 | 83,330 | |||
September | $27.00 | $26.65 | 348,885 | |||
August | $26.80 | $26.45 | 492,111 | |||
July | $26.74 | $26.00 | 221,942 | |||
June | $27.58 | $25.65 | 137,176 | |||
May | $26.64 | $25.80 | 274,923 | |||
April | $27.40 | $26.40 | 576,896 | |||
March | $27.70 | $26.32 | 415,501 | |||
February | $27.15 | $26.60 | 204,475 | |||
January | $27.29 | $26.69 | 248,144 | |||
BCE Inc. Preferred shares – Series AC | ||||||
2004 | High | Low | Volume Traded | |||
December | $27.49 | $26.75 | 251,020 | |||
November | $27.45 | $26.65 | 246,365 | |||
October | $27.19 | $26.60 | 220,173 | |||
September | $27.40 | $26.60 | 127,510 | |||
August | $27.00 | $26.60 | 54,730 | |||
July | $26.80 | $26.17 | 44,114 | |||
June | $26.60 | $26.00 | 114,543 | |||
May | $26.55 | $26.00 | 83,340 | |||
April | $27.45 | $26.25 | 150,695 | |||
March | $27.99 | $27.00 | 404,875 | |||
February | $27.59 | $26.71 | 210,755 | |||
January | $27.40 | $26.60 | 142,042 | |||
On December 15, 2004, we announced a 10% or $0.12 per share increase in our annual dividend on BCE Inc. common shares. |
2004 | 2003 | 2002 | ||||||
Common | $1.20 | $1.20 | $1.20 | |||||
Preferred Shares | ||||||||
– | Series P | – | $1.40 | $1.40 | ||||
– | Series R | $1.5435 | $1.5435 | $1.5435 | ||||
– | Series S | $0.66022 | $1.02094 | $1.05137 | ||||
– | Series U | – | – | $1.385 | ||||
– | Series Y | $0.66267 | $0.94637 | $1.01625 | ||||
– | Series Z | $1.3298 | $1.3298 | $0.33245 | ||||
– | Series AA | $1.3625 | $1.3625 | $1.3625 | ||||
– | Series AC | $1.385 | $1.385 | – | ||||
We report Bell Canada’s results of operations in four segments. Each reflects a distinct customer group: Consumer, Business, Aliant, and Other Bell Canada. All of our other activities are reported in the Other BCE segment. This section describes our products and services and competitors for each of our businesses. Bell Canada is Canada’s leading provider of wireline and wireless communications services, Internet access, data services and video services to residential and business customers. Bell Canada’s major lines of business, which include our Consumer, Business, Aliant and Other Bell Canada segments, are described below. Products and services Local and access services Bell Canada operates an extensive local access network that provides local telephone services to:
|
15 2004 Annual information form BCE Inc.
The 12.9 million local telephone lines, or network access services (NAS), we provide for our customers are key in establishing customer relationships and are the foundation for the other products and services we offer.
Rates for local telephone and value-added services in our incumbent territories are regulated by the Canadian Radio-television and Telecommunications Commission (CRTC). Long distance services We supply long distance voice services to business and residential customers. We also receive settlement payments from other carriers for completing their customers’ long distance calls in our territory. Long distance services are provided through the same segments as local and access services. Wireless services We offer a full range of wireless communications services to business and residential customers, including cellular, personal communications services (PCS) and paging. Wireless services are provided through the same segments as local and access services. PCS customers can get wireless access to the Internet through our Mobile Browser service or send text messages. We also provide value-added services, such as call display and voicemail, and roaming services with other wireless service providers. Customers can choose to pay for their cellular and PCS services through a monthly rate plan (postpaid) or in advance (prepaid). At the end of 2004, we had more than 5.3 million cellular, PCS and paging customers.
In December 2004, we announced we were in trials for Canada’s first EVDO network, which will provide wireless broadband speeds up to six times faster than data speeds available today. We expect to deploy EVDO in major urban centres across Canada in 2005 and 2006. Data services High-speed Internet access service provided through digital subscriber line (DSL) technology for residential and SMB customers is a growth area for Bell Canada. Data services are provided through the same segments as local and access services, with the Consumer segment offering internet access to our residential customers. At the end of 2004, we had over 1.8 million high-speed Internet customers. Video services We are Canada’s largest digital television provider, broadcasting nationally more than 400 video and CD-quality audio channels, including up to 25 high definition channels and unique interactive television services. Video services are provided through our Consumer segment. At the end of 2004, we provided video services to more than 1.5 million customers. We currently distribute our video services to customers in one of two ways:
In the future, we plan to also provide an IPTV service terrestrially to urban households in the Québec City to Windsor corridor. In 2004, we received CRTC approval of our broadcast licence application to deliver |
16 2004 Annual information form BCE Inc.
video services terrestrially to SFUs. We plan to conduct trials of our IPTV service in 2005.
Terminal Sales and Other This category includes revenues from a number of other sources, including:
Terminal sales and other revenues are derived by the segments that form Bell Canada. Wholesale business The Wholesale business that forms part of our Other Bell Canada segment provides local telephone, long distance, wireless, data and other services to customers who in many cases are also Bell Canada’s competitors. These wholesale customers, who are located principally in Ontario and Québec and may also be in Western Canada and the United States, resell these services or use them in combination with their own network capabilities. Marketing and distribution channels The Consumer segment delivers its products and services through:
Customers can buy our full range of products through the call centres, retail stores, sales representatives and our web portals. Networks The telecommunications industry continues to evolve rapidly as the industry moves from multiple service-specific networks to IP-based integrated communications networks where text, video, sound and voice all travel on a single network. Bell Canada and Aliant are working with Nortel Networks Corporation (Nortel Networks), to establish a national multi-service IP-enabled network. SeeOur objectives and strategy for more information related to our IP strategy. SeeBusiness Highlights – 2003 |
17 2004 Annual information form BCE Inc.
Highlightsfor more information related to agreements with Nortel Networks and Cisco Systems Canada in relation with our IP networks.
The national voice and data network consists of more than 11,500 route miles of optical fibre, which is configured as multiple rings for redundancy and fault protection. It reaches all major metropolitan centres and many smaller ones in Canada, as well as New York, Chicago, Washington, Atlanta, Dallas, Los Angeles, San Francisco and Seattle in the United States, at a speed of 10 gigabits per second. Competition Since the local services market was opened to competition in 1998, almost all of the markets that Bell Canada operates in are competitive. We face intense competition from traditional competitors, as well as from new entrants to the markets in which we operate. We compete not only with other telecommunications and television service providers, but also with other businesses and industries. These include cable, software and Internet companies, a variety of companies that offer network services, such as providers of business information systems, system integrators, and other companies that deal with, or have access to, customers through various communications networks. Wireline Our main competitors in local and access services are:
|
18 2004 Annual information form BCE Inc.
Competition in the long distance services market has been based primarily on price, which has led to flat-rate pricing in the residential market. We experience significant competition in the provision of long distance service from dial-around providers, prepaid card providers, VoIP service providers and others, and from traditional competitors such as inter-exchange carriers and resellers. We also face increasing cross-platform competition as customers replace traditional services with new technologies. For example, our wireline business competes with VoIP, wireless and Internet services, including chat services, instant messaging and e-mail. We also expect to face competitive pressure from cable companies as they implement voice services over their networks and from other emerging competitors such as electrical utilities.
Wireless The Canadian wireless telecommunications industry is highly competitive. We compete directly with other wireless service providers that aggressively introduce, price and market their products and services, and with wireline service providers. We expect competition to intensify as new technologies, products and services are developed.
Competition for subscribers to wireless services is based on price, services and enhancements, technical quality of the cellular and PCS system, customer service, distribution, coverage and capacity. Data Bell Canada faces intense competitive pressure in the data services market. Cable companies and independent Internet service providers (ISPs) have increased competition in the broadband and Internet access services business. In particular, competition from cable companies has focused on increased bandwidth and discounted pricing on bundles. Competition has led to pricing for Internet access in Canada that is among the lowest in the world.
In the dial-up market, the Consumer segment competes with America Online, Inc., Primus and more than 900 ISPs. Video Competition for subscribers is based on the number and kinds of channels offered, quality of the signal, set top box features, availability of service in the region, price and customer service. Bell ExpressVu competes directly with Star Choice Television Network Inc., another DTH satellite television provider, and with cable companies across Canada. These cable companies have upgraded their networks, operational systems and services, which could improve their competitiveness.
Wholesale Our Wholesale business’ main competitors include traditional carriers and emerging carriers. Traditional, facilities-based competitors include Allstream, Telus and Call-Net who may wholesale some or all of the same products and services as Bell Canada. Emerging competitors include utility-based telecommunications providers, cable operators and US-based carriers for certain services. The Other BCE segment includes our other media, satellite and IT activities. This segment includes Bell Globemedia, Telesat and CGI. |
19 2004 Annual information form BCE Inc.
Revenues for the Other BCE segment tend to be highest in the fourth quarter and lowest in the third quarter because of seasonal patterns in advertising spending in the fall and summer respectively. Bell Globemedia Bell Globemedia provides information and entertainment services to Canadian customers and access to distinctive Canadian content. It includes CTV, Canada’s leading private broadcaster, and The Globe and Mail, Canada’s leading national newspaper. CTV CTV is Canada’s leader in conventional and specialty television. It operates the CTV Television Network, a private English-language national television network that reaches almost all English-speaking Canadians. The Globe and Mail Founded in 1844, The Globe and Mail is Canada’s National Newspaper. It circulates an English-language edition six days a week in every province and territory. Globeandmail.com provides around the clock news coverage. For the 12 months ended September 30, 2004, total circulation was 316,438 copies a day, Monday to Friday, and 394,260 copies on Saturday. This was 27% higher on weekdays and 46% higher on Saturdays than its main competitor, the National Post. Total readership can exceed one million people a day. Competition While CTV’s broadcast operations have a significant market share in their broadcast areas, they face substantial competition for viewers and advertising revenues from CanWest Global Communications Corp. (CanWest), CHUM Limited, Alliance Atlantis Communications Inc., Corus Entertainment Inc., Canadian Broadcasting Corporation and other companies, including owners of specialty channels. Telesat In 1972, Telesat launched the world’s first commercial domestic geo-stationary satellite system, established to provide satellite-based telecommunications services for Canada. Today, Telesat provides a wide variety of video and two-way data services as well as various consulting services dealing with all aspects of the satellite business. CGI Founded in 1976, CGI now ranks among the largest independent IT and business process services firms in North America. CGI has consistently achieved profitable growth through a balance of organic growth and acquisitions. CGI currently employs approximately 25,000 professionals and has offices in Canada, the United States, Europe and Asia Pacific, as well as centers of excellence in India, the US, Canada and Europe. CGI combines global scale and scope with a strong local presence in all of its geographic markets, enabling it to build strong client partnerships. At December 31, 2004, BCE Inc. owned 28.9% of CGI. Discontinued operations In the past two years, we have disposed of or approved formal plans for disposing of a number of our businesses. These include:
All of these business dispositions were treated as discontinued operations. |
20 2004 Annual information form BCE Inc.
In treating business dispositions as discontinued operations, we restated the financial results of all previous years to exclude the results of these businesses. On November 2, 2004, BCE Inc. adopted an environmental policy that affirms:
The policy contains principles that support our commitment, varying from exercising due diligence to meet or exceed the environmental legislation that applies to us, to preventing pollution and promoting cost-effective initiatives that minimize resources and waste.
One of its key tools is the corporate environmental action plan, which outlines the environmental activities of Bell Canada’s various business units. The plan identifies funding requirements, accountabilities and deliverables, and monitors Bell Canada’s progress in meeting its objectives. As of December 31, 2004, Bell Canada has integrated the following entities into its corporate environmental action plan: Bell Canada, Bell Mobility, Bell ExpressVu, Bell West, BCE Nexxia Corp., Expertech, Télébec, NorthernTel, Northwestel and Telesat.
Aliant has established environmental processes that are similar to Bell Canada’s. In 2005, it is anticipated that Bell Canada will be integrating Aliant into its Environmental Management and Review System. This section describes significant events in the past three years that have influenced our business. 2004 highlights Key acquisitions and dispositions Sale of interest in Yellow Pages Group On February 10, 2004, Bell Canada exchanged its 3.24% indirect interest in YPG LP and YPG General Partner Inc. (Yellow Pages Group) for units of the Yellow Pages Income Fund. On July 21, 2004, Bell Canada sold its remaining interest in the Yellow Pages Income Fund for net cash proceeds of $123 million. Virgin Mobile On March 30, 2004, Bell Canada and The Virgin Group announced plans to launch mobile voice and data services in Canada through a jointly-owned entity, Virgin Mobile Canada. Acquisition of American Management Systems Incorporated (AMS) by CGI On May 3, 2004, CGI completed the acquisition of AMS. AMS is a business and technology consulting firm to government and to the healthcare, financial services and telecommunications industries. CGI acquired AMS’ business with associated revenue of more than $900 million for a net cash consideration of $584 million. Our 28.9% proportionate share of the cash paid for CGI’s acquisition of AMS was $171 million. |
21 2004 Annual information form BCE Inc.
Sale of interest in Manitoba Telecom Services On May 20, 2004, Bell Canada filed a lawsuit against MTS after MTS announced it would purchase Allstream. Bell Canada sought damages and an injunction that would prevent MTS from breaching the terms and conditions of the commercial agreements it had with Bell Canada. On June 3, 2004, Bell Canada also filed a lawsuit against Allstream seeking damages related to the same announcement.
On August 1, 2004, the MTS shares held by Bell Canada were transferred to BCE Inc. In late September, BCE Inc. disposed of its 15.96% non-strategic interest in MTS. Total net cash proceeds from this transaction were $584 million. Acquisition of Infostream On May 21, 2004, Bell Canada acquired 100% of the outstanding shares of Infostream, a systems and storage technology firm. Purchase of Canadian operations of 360networks On May 26, 2004, Bell Canada announced an agreement to purchase the Canadian operations of Vancouver-based 360networks, a telecommunications service provider, for $293 million (including acquisition costs) in cash. The transaction was completed on November 19, 2004. The purchase included the shares of 360networks’ subsidiary, Group Telecom, and certain related interconnected U.S. network assets. Following the purchase, Bell Canada sold the retail customer operations in Central and Eastern Canada to Call-Net. For a share of the revenues, Bell Canada now provides to Call-Net network facilities and other operations and support services so Call-Net can service its new customer base. Acquisition of Emergis’ Security business In June 2004, Bell Canada acquired Emergis’ security business. This business provides organizations with the security infrastructure for their electronic service delivery needs to help ensure data is secure and viewed only by the appropriate individuals. Sale of Emergis interest On June 16, 2004, BCE Inc. completed the sale of its 63.9% interest in Emergis for net cash proceeds of $315 million. Acquisition of full ownership of Bell West On August 3, 2004, Bell Canada assumed 100% ownership of Bell West by purchasing the 40% interest held by MTS for $646 million. Acquisition of Nexxlink On December 9, 2004, Bell Canada announced that it intended to offer to acquire all of the outstanding shares of Nexxlink, a provider of integrated IT solutions, at a price of $6.05 per share. As of February 21, 2005, Bell Canada had bought 89% of all the outstanding shares of Nexxlink for $59 million in cash. Bell Canada intends to buy the remaining shares in a subsequent transaction by way of amalgamation, which is expected to be approved at a shareholders’ meeting on April 7, 2005. Acquisition of Entourage Solutions Technologiques Inc. (Entourage) On February 22, 2005, Bell Canada announced that it had reached an agreement to purchase 57% of Entourage and manage its front-line residential installation and repair services in Ontario and Québec. Bell Canada currently owns 33% of Entourage and intends to acquire the remaining 10% interest. Entourage would then become a wholly-owned subsidiary of Bell Canada. Alliance with Clearwire Corporation (Clearwire) On March 8, 2005, Bell Canada announced an alliance with Clearwire, a privately held company led by Mr. Craig O. McCaw, through which Bell Canada will become Clearwire’s exclusive strategic partner for VoIP and certain other value-added IP services and applications in the United States. Bell Canada will also become Clearwire’s preferred provider of these services and applications in markets beyond North America. Key Developments Premier National Partner for 2010 Vancouver Olympic Games On October 18, 2004, Bell Canada was selected by the Vancouver Organizing Committee as its Premier National Partner for the 2010 Olympic and Paralympic Winter Games. The partnership continues through to 2012, securing the Canadian Olympic Team sponsorship rights to Torino in 2006, Bejing in 2008, Vancouver in 2010, the 2012 Summer Games |
22 2004 Annual information form BCE Inc.
(in a city to be determined), and for two Pan-American Games. It provides Bell Canada with the opportunity to build its brand by associating with one of the world’s strongest and most recognized brands. Canadian broadcast media rights for Olympics On February 7, 2005, the International Olympic Committee (IOC) awarded the Canadian broadcast media rights for the Vancouver 2010 Winter Games and the 2012 Summer Games (in a city to be determined) to a consortium comprised of CTV and Rogers Media Inc. The total fees payable by the consortium to the IOC for such rights is US$153 million. Launch of Sympatico-MSN.ca On June 9, 2004, Bell Canada launched Sympatico-MSN.ca in partnership with Microsoft Corporation (Microsoft). Sympatico-MSN.ca is a single portal combining the best features and Internet tools of MSN Canada with the broadband content and innovative services of Sympatico.ca. At the same time, Bell Canada introduced Sympatico with MSN premium, a custom-built version of the software featuring tools that enable a safer online experience, including pop-up ad blocking, spam filtering and parental controls. This announcement is another example of the benefits of the partnership with Microsoft, an industry leader in software innovation. Other developments Labour agreements On August 16, 2004, Bell Canada reached a new four-year agreement with approximately 7,100 technicians represented by the CEP. This agreement will expire in November 2007. Employee departure program In June 2004, Bell Canada announced an employee departure program that consisted of two phases. The first phase was an early retirement plan and the second phase was a departure plan. Under the early retirement plan, eligible employees chose to receive a package that included a cash allowance, immediate pension benefits, an additional guaranteed pension payable up to 65 years of age, career transition services and post-employment benefits. Under the early departure plan, employees chose to receive a special cash allowance. 2003 highlights The following events influenced our business in 2003 or were referred to in our 2003 AIF.
Bell Mobility also made amendments to its IS/IT outsourcing agreement with CGI and extended the term to June 30, 2012.
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These include DTH satellite television, VDSL services and future IP television services. 2002 highlights The following events influenced our business in 2002 or were referred to in our 2002 AIF:
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relating to its legacy accounts receivable systems dating back to the early 1990s.
This section describes the legislation that governs our businesses, and provides highlights of government consultations and recent regulatory changes. Legislation that governs our business Bell Canada, Aliant Telecom and several of Bell Canada’s direct and indirect subsidiaries and associated companies, including Bell Mobility and Bell ExpressVu, as well as CTV and certain of its direct and indirect subsidiaries are regulated by the CRTC. Other aspects of the businesses of Bell Canada, Bell Mobility and MT&T Mobility Inc. (MT&T Mobility), a subsidiary of Aliant Telecom, are regulated in various ways by federal government departments, in particular Industry Canada. Bell Canada Act Under theBell Canada Act, the CRTC must approve any sale or other disposal of Bell Canada voting shares that are held by BCE Inc., unless the sale or disposal would result in BCE Inc. retaining at least 80% of all of the issued and outstanding voting shares of Bell Canada. Telecommunications Act TheTelecommunications Actgoverns telecommunications in Canada. It defines the broad objectives of Canada’s telecommunications policy and gives the government the power to give general direction to the CRTC on any of these objectives. It applies to several of the Bell Canada companies and partnerships, including Bell Canada, Bell Mobility, NorthernTel, Northwestel, Télébec and Aliant Telecom and its affiliates.
Broadcasting Act TheBroadcasting Actassigns the regulation and supervision of the broadcasting system to the CRTC. Key policy objectives of theBroadcasting Actare to:
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Most broadcasting activities require a broadcasting licence or broadcasting distribution licence from the CRTC. A corporation must meet the following ownership requirements to obtain a broadcasting or a broadcasting distribution licence:
If the parent corporation of a broadcasting licensee has fewer than 80% Canadian directors on its board of directors, a non-Canadian chief executive officer or less than 80% Canadian ownership, the parent corporation must demonstrate to the CRTC that it or its directors does not have control or influence over any of the broadcasting licensee’s programming decisions.
On November 18, 2004, the CRTC issued Broadcasting Decision CRTC 2004-496, which approved Bell Canada’s applications for licences to operate terrestrial broadcasting distribution undertakings, using its wireline facilities, to serve large cities in Southern Ontario and Québec. Bell Canada will be licensed under the same terms and conditions that apply to major cable operators without any delays or other conditions that would limit its ability to compete with them. The licences will be issued once Bell Canada informs the CRTC that it is ready to commence operations and will expire on August 31, 2011. Bell Canada is required to have the terrestrial broadcasting distribution undertakings operational no later than November18, 2006, unless an extension of time is approved by the CRTC. Radiocommunication Act Industry Canada regulates the use of radio spectrum by Bell Canada, Bell Mobility, Aliant Telecom, MT&T Mobility and other wireless service providers under theRadiocommunication Act. Under the Act, Industry Canada ensures that:
The Minister of Industry has the discretion to:
Under theRadiocommunication Regulations, companies that are eligible for radio licences, such as Bell Canada, Bell Mobility and Aliant Telecom, must meet the same ownership requirements that apply to corporations under theTelecommunications Act. This section describes key regulatory changes in past years that have influenced our business. Second Price Cap decision In May 2002, the CRTC issued decisions relating to new price cap rules that will govern incumbent telephone companies for a four-year period, starting in June 2002. These decisions:
The CRTC also established a deferral account and, on March 24, 2004, initiated a public proceeding inviting proposals on the disposition of the amounts accumulated in the accounts of the incumbent telephone companies during the first two years of the price cap period. |
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to use some of the funds in its deferral account to implement the following initiatives:
On January 28, 2005, Aliant filed its proposal for the disposition of any amounts in its deferral account. Its proposal included:
It is expected that this proceeding will close in the second half of 2005. Competitor Digital Network Service The CRTC released Decision 2005-6 on February 3, 2005, concerning Competitor Digital Network (CDN) services. This decision determined the rates, terms and conditions, for the provision of digital network services by Bell Canada and the other incumbent telephone companies to their competitors. Decision on incumbent affiliates On December 12, 2002, the CRTC released its decision on incumbent affiliates, which requires Bell Canada and its carrier affiliates to receive CRTC approval on contracts that bundle tariffed and non-tariffed products and services. This means that:
On September 23, 2003, the CRTC issued a decision that requires Bell Canada and its carrier affiliates to include a detailed description of the bundled services they provide to customers when they file tariffs with the CRTC. The customer’s name will be kept confidential, but the pricing and service arrangements it has with the Bell Canada companies will be available on the public record. Allstream and Call Net application concerning customer-specific arrangements On January 23, 2004, Allstream and Call-Net filed a joint application asking the CRTC to order Bell Canada to stop providing service under any customer-specific arrangements (CSAs) that are currently filed with the CRTC and are not yet approved. Public notice on changes to minimum prices On October 23, 2003, the CRTC issued a public notice asking for comments on its preliminary view that revised rules may be needed for:
The CRTC sought comments on proposed pricing restrictions on volume or term contracts for retail tariffed services. It issued an amended public notice on December 8, 2003. The record of this proceeding was completed with the filing of arguments on June 11, 2004 and reply arguments on June 25, 2004. Application seeking consistent regulation On November 6, 2003, Bell Canada filed an application requesting that the CRTC start a public hearing to review how similar services offered by cable companies and telephone companies are regulated. This would allow consistent rules to be developed that recognize and support the growing competition between these sectors. Bell Canada also requested |
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that this proceeding address any rules that might be needed to govern VoIP services provided by cable companies and others. On November 18, 2004, the CRTC issued Broadcasting Decision CRTC 2004-496, which approved Bell Canada’s applications for licences to operate terrestrial broadcasting distribution undertakings, using its wireline facilities, to serve large cities in Southern Ontario and Québec. Bell Canada will be licensed under the same terms and conditions that apply to major cable operators, without any delays or other conditions that would negatively affect its ability to compete with them. The licences will be issued once Bell Canada informs the CRTC that it is ready to commence operations and will expire on August 31, 2011. Bell Canada is required to have the terrestrial broadcasting distribution undertakings operational no later than November 18, 2006, unless an extension of time is approved by the CRTC. From time to time, Industry Canada initiates proceedings that allow members of the telecommunications industry to comment on technical and policy issues. This ensures that Industry Canada takes into consideration the opinions of the industry when it is making decisions that affect the industry. Foreign ownership review Industry Canada asked the House of Commons Standing Committee on Industry, Science and Technology to conduct a review to determine whether the current Canadian ownership requirements included in theTelecommunications Actand associated regulations should be changed. The Committee released its report in April 2003.
Industry Canada licensing and fees consultation The cellular and PCS licences of Bell Mobility and of Aliant Telecom and MT&T Mobility, which would have expired on March 31, 2006, will now expire in 2011, as a result of a decision by Industry Canada. The PCS licences that were awarded in the 2001 PCS auction will expire on November 29, 2011. As a result, these Bell Canada companies’ cellular and PCS licences are now classified as spectrum licences with a 10-year licence term.
In December 2003, Industry Canada issued its decision on changing the terms and the method of calculating the fees of cellular and PCS licences. The new fees are based on the amount of spectrum a carrier holds in a given geographic area. Fees were previously based on the degree of deployment and the number of radio sites in operation. The changes came into effect on April 1, 2004, and will be implemented over seven years. Industry Canada national towers consultation In October 2001, the Minister of Industry announced plans for a national review of Industry Canada’s procedures for approving and placing wireless and radio towers in Canada, including a review of the role of municipal authorities in the approval process. If the consultation process results in more municipal involvement in the approval process, it could slow the expansion of wireless networks in Canada. The final report from the National Antenna Tower Policy Review Committee was filed with Industry Canada in September 2004. Industry Canada is now reviewing the report and considering what next steps, if any, it will take, after which it may invite comments from interested parties, including the wireless carriers, on the report and its recommendations. It is not possible to predict at this time if or when any action might be taken on the findings of the report. |
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Lawful access consultation In August 2002, the federal government started a consultation to consider the access that law enforcement agencies have to information and communications, including wireless communications. The Government’s proposals, which were not precisely defined in the consultation, could require telecommunications service providers, including wireline and wireless carriers and ISPs, to invest significant capital and incur significant ongoing expenses to comply with the proposed requirements.
We become involved in various claims and litigation as part of our business. This section describes important legal proceedings that you should be aware of. While we cannot predict the final outcome of the claims and litigation described below or of any other pending claims and litigation at March 2, 2005, based on information currently available, management believes that the resolution of these claims and litigation will not have a material and negative effect on our consolidated financial position or results of operation. Based on information currently available, we believe that we have strong defences and we intend to vigorously defend our position. Lawsuits related to Bell Canada Purported Class Action Concerning Wireless Access Charges On August 9, 2004, a statement of claim was filed under theClass Actions Act(Saskatchewan) in the Court of Queen’s Bench, Judicial Centre of Regina, Saskatchewan against wireless communications service providers, including Bell Mobility and Aliant Telecom, by certain alleged customers or former customers of such wireless communications service providers. The lawsuit has not been certified as a class action and it is too early to determine whether it will qualify for certification. Purported Class Action Concerning Bell Mobility Billing System On October 28, 2004, a motion seeking certification to proceed as a class action against Bell Mobility was filed with the Québec Superior Court. The lawsuit has not been certified to proceed as a class action and it is too early to determine whether it will qualify for certification. Wage Practices investigation Complaints filed in1994 with the Canadian Human Rights Commission by the CTEA and CEP on behalf of unionized employees of Bell Canada alleging wage discrimination in negotiated wages were referred in1996 to the Canadian Human Rights Tribunal for inquiry. Bell Canada challenged the institutional independence of the Canadian Human Rights Tribunal by judicial review proceedings in the Federal Court of Canada. Lawsuits related to Teleglobe Teleglobe lending syndicate lawsuit On July 12, 2002, a statement of claim was issued against BCE Inc. in the Ontario Superior Court of Justice by ABN AMRO Bank N.V., Bank of Montréal, Bank of Tokyo-Mitsubishi (Canada), Bayerische Landesbank Girozentrale, BNP Paribas (Canada), La Caisse Centrale Desjardins du Québec, CIBC, CIBC, N.Y. Agency, Citibank, N.A., Credit Suisse First Boston Canada, Credit Suisse First Boston, Export Development Canada, |
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HSBC Bank Canada, JPMorgan Chase Bank, Laurentian Bank of Canada, Merrill Lynch Capital (Canada) Inc., Merrill Lynch Capital Corporation, National Bank of Canada, Royal Bank of Canada, Société Générale, The Bank of Nova Scotia, and The Toronto-Dominion Bank (plaintiffs).
On November 28 and 29, 2002, the Ontario Superior Court of Justice heard the following motions that BCE Inc. had previously filed:
On March 21, 2003, the court granted BCE Inc.’s motion to remove the plaintiffs’ legal counsel as the solicitors of record for the plaintiffs in the lawsuit. The plaintiffs have appointed new solicitors of record. BNP Paribas (Canada) lawsuit On December 23, 2004, BNP Paribas (Canada), one of the plaintiffs in the Teleglobe lending syndicate lawsuit action against BCE Inc., filed a statement of claim with the Ontario Superior Court of Justice. As of March 2, 2005, this statement of claim has not yet been served on any of the defendants. The action is against BCE Inc. and five former directors of Teleglobe Inc. The statement of claim alleges oppression against the former directors and breach of contract against BCE Inc. BNP Paribas (Canada) seeks US$50 million in damages. Teleglobe Inc. was at the relevant time a subsidiary of BCE Inc. Teleglobe unsecured creditors lawsuit A lawsuit was filed in the United States Bankruptcy Court for the District of Delaware against BCE Inc. and the former directors and officers of Teleglobe and certain of its subsidiaries on May 26, 2004. The plaintiffs are comprised of Teleglobe Communications Corporation, certain of its affiliated debtors and debtors in possession, and the Official Committee of Unsecured Creditors of these debtors. The lawsuit alleges breach of an alleged funding commitment of BCE Inc. towards the debtors, promissory estoppel, misrepresentation by BCE Inc., and breach and aiding and abetting breaches of fiduciary duty by the defendants. VarTec lawsuit On December 2, 2002, VarTec Telecom, Inc. and VarTec Holding Company (together referred to in this section as VarTec) filed a lawsuit against BCE Inc., BCE Ventures Inc. and the President of BCE Ventures Inc. in the United States District Court for the Northern District of Texas (Dallas division).
In the hearing held on September 26, 2003, the United States District Court for the Northern District of Texas indicated that if VarTec did not ask to transfer the action to the District of Columbia, it would enter an order dismissing the action for improper venue. On September 29, 2003, VarTec filed a motion to transfer the action to the United States District Court for the District of Columbia. This motion was granted on October 9, 2003. As a result, the United States District Court for the District of Columbia will decide the motion to dismiss the action and to strike Vartec’s jury demand. |
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Kroll Restructuring lawsuit On February 26, 2003, BCE Inc. was informed that Kroll Restructuring Ltd., in its capacity as interim receiver of Teleglobe, had filed a notice of action in the Ontario Superior Court of Justice against five former directors of Teleglobe. This lawsuit relates to Teleglobe’s redemption of its third series preferred shares in April 2001 and the retraction of its fifth series preferred shares in March 2001. Lawsuits related to BCI BCI common shareholders lawsuits On September 27, 2002, BCE Inc. announced that a common shareholder of BCI had filed a lawsuit in the Ontario Superior Court of Justice. The plaintiff sought the court’s approval to proceed by way of class action on behalf of all holders of BCI common shares on December 3, 2001.
On May 9, 2003, the court dismissed the action and the motion for certification as a class action. On June 27, 2003, the plaintiff filed an amended statement of claim, again intending to seek to have the action certified as a class action. 6.75% debentureholders lawsuit On April 29, 2002, BCI announced that certain former holders of its $250 million 6.75% convertible unsecured subordinated debentures had filed a lawsuit in the Ontario Superior Court of Justice. The plaintiffs were seeking the court’s approval to proceed by way of class action on behalf of all holders of these debentures on December 3, 2001. 6.50% debentureholders lawsuit On August 31, 2003, a lawsuit was filed in the Ontario Superior Court of Justice by a former holder of $110 million of BCI’s 6.50% convertible unsecured subordinated debentures. The plaintiff seeks damages from BCI and its directors and BCE Inc. of up to $110 million, plus interest and costs. The notice of action contains allegations substantially similar to those in the 6.75% debentureholders lawsuit. Bell Globemedia lawsuit On February 5, 2001, Bell Globemedia Publishing Inc., a subsidiary of Bell Globemedia, was added as a defendant to a class action lawsuit relating to copyright infringement. The claim is that The Globe and Mail newspaper and magazines do not have the right to archive and publish |
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certain freelanced and employee material from the newspaper or magazines in any format other than print.
This section describes general risks that could affect all BCE group companies and specific risks that could affect BCE Inc. and certain other BCE group companies. Risks that could affect all BCE Group companies Strategies and plans We plan to achieve our business objectives through various strategies and plans.
Our strategic direction involves significant changes in our processes, in how we approach our markets, and in how we develop and deliver products and services. This means we will need to be responsive in adapting to these changes. It also means that a shift in employee skills will be necessary. Economic and market conditions Our business is affected by general economic conditions, consumer confidence and spending, and the demand for, and prices of, our products and services. When there is a decline in economic growth and in retail and commercial activity, there tends to be a lower demand for our products and services. During these periods, customers may delay buying our products and services, or reduce or discontinue using them. Increasing competition We face intense competition from traditional competitors, as well as from new entrants to the markets in which we operate. We compete not only with other telecommunications, media, television, satellite and information technology service providers, but also with other businesses and industries. These include cable, software and Internet companies, a variety of companies that offer network services, such as providers of business information systems, systems integrators and other companies that deal with, or have access to, customers through various communications networks. |
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Many of our competitors have substantial financial, marketing, personnel and technological resources. Other competitors may emerge from restructurings in the future with reduced debt and a stronger financial position. This means that they could have more financial flexibility to price their products and services at competitive rates. Wireline and long distance We experience significant competition in the provision of long distance service from dial-around providers, prepaid card providers, VoIP service providers and others, and from traditional competitors such as inter-exchange carriers and resellers. We also face increasing cross-platform competition as customers replace traditional services with new technologies. For example, our wireline business competes with VoIP, wireless and Internet services, including chat services, instant messaging and e-mail. We also expect to face competitive pressure from cable companies as they implement voice services over their networks and from other emerging competitors such as electrical utilities. These alternative technologies, products and services are now making significant inroads in our legacy services, which typically represent our higher margin business. Internet access Cable companies and ISPs have increased competition in the broadband and Internet access services business. In particular, competition from cable companies has focused on increased bandwidth and discounted pricing on bundles. Competition has led to pricing for Internet access in Canada that is among the lowest in the world. Wireless The Canadian wireless telecommunications industry is also highly competitive. We compete directly with other wireless service providers that aggressively introduce, price and market their products and services and with wireline service providers. We expect competition to intensify as new technologies, products and services are developed. Video Bell ExpressVu competes directly with another DTH satellite television provider and with cable companies across Canada. These cable companies have upgraded their networks, operational systems and services, which could improve their competitiveness. This could materially and negatively affect the financial performance of Bell ExpressVu. Improving productivity and containing capital intensity We continue to implement several productivity improvements while containing our capital intensity. There will be a material and negative effect on our profitability if we do not continue to successfully implement these productivity improvements, reduce costs and manage capital intensity while maintaining the quality of our service. For example, each year between 2002 and 2004, we were required to reduce the price of certain services offered by the Bell Canada companies that are subject to regulatory price caps and may be required to do so again in 2005. In addition, we have reduced our prices in some business data services that are not regulated in order to remain competitive, and we may have to continue doing so in the future. The profits of the Bell Canada companies will decline if they cannot reduce their expenses at the same rate. There would also be a material and negative effect on our profitability if market factors or other regulatory actions result in lower revenues and we cannot reduce our expenses at the same rate. |
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Anticipating technological change We operate in markets that are experiencing constant technological change, evolving industry standards, changing client needs, frequent introductions of new products and services, and short product life cycles.
As part of this move, the Bell Canada companies also plan to discontinue certain services that are based on circuit-based infrastructure. This is a necessary component of improving capital and operating efficiencies. In some cases, this could be delayed or prevented by customers or regulatory actions. If the Bell Canada companies cannot discontinue these services as planned, they will not be able to achieve improvements as expected. Liquidity Our ability to generate cash and to maintain capacity to meet our financial obligations and provide for planned growth depends on our sources of liquidity.
Financing through equity offerings would dilute the holdings of existing equity investors. An increased level of debt financing could lower our credit ratings, increase our borrowing costs and give us less flexibility to take advantage of business opportunities.
Any of these possibilities could have a material and negative effect on our cash flow from operations and growth prospects. Making acquisitions Our growth strategy includes making strategic acquisitions and entering into joint ventures. There is no assurance that we will find suitable companies to acquire or to partner with, or that we will have the financial resources needed to complete any acquisition or to enter into any joint venture. There could also be difficulties in integrating the operations of acquired companies with our existing operations or in operating joint ventures. Litigation, regulatory matters and changes in laws Pending or future litigation, regulatory initiatives or regulatory proceedings could have a material and negative effect on our businesses, operating results and financial condition. Changes in laws or regulations or in how they are interpreted, and the adoption of new laws or regulations (including changes in, or the adoption of, new tax laws that result in higher tax rates or new taxes) could also materially and negatively affect us. |
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Bell Canada companies – Changes to wireline regulationin this section Risks that could affect our business for a detailed description of:
Funding and control of subsidiaries BCE Inc. and Bell Canada are currently funding, directly or indirectly, and may, in the future, continue to fund, the operating losses of some of their subsidiaries, but they are under no obligation to continue doing so. If BCE Inc. or Bell Canada decides to stop funding any of its subsidiaries and that subsidiary does not have other sources of funding, this would have a material and negative effect on the subsidiary’s results of operations and financial condition and on the value of its securities. Pension fund contributions Most of our pension plans had pension fund surpluses as of our most recent actuarial valuation. As a result, we have not had to make regular contributions to the pension funds in the past few years. Renegotiating labour agreements Approximately 41% of our employees are represented by unions and are covered by collective agreements.
Negotiations continue regarding the renewal of both collective agreements.
Renegotiating collective agreements could result in higher labour costs and work disruptions, including work stoppages or work slowdowns. Difficulties in renegotiations or other labour unrest could significantly hurt our businesses, operating results and financial condition. Bell Canada has established a program to implement a number of measures to help minimize disruptions and seek to ensure that customers continue to receive normal service during labour disruptions. There can be no assurance that a strike, if one occurs, would not disrupt service to Bell Canada’s customers. In addition, work disruptions at our service providers, including work slowdowns and work stoppages due to strikes, could significantly hurt our business, including our customer relationships and results of operations. Events affecting our networks Network failures could materially hurt our business, including our customer relationships and operating results. Our operations depend on how well we protect our networks, equipment, applications and the information stored in our data centres against damage from fire, natural disaster, power loss, hacking, computer viruses, disabling devices, acts of war or terrorism and other events. Our operations also depend on the timely replacement and maintenance of our networks and equipment. Any of these events could cause our operations to be shut down indefinitely. |
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affecting the networks of these other carriers, could also hurt our business, including our customer relationships and operating results. Software and system upgrades Many aspects of the BCE group companies’ businesses including, but not limited to, the provision of telecommunication services and customer billing, depend to a large extent on various IT systems and software, which must be improved and upgraded on a regular basis and replaced from time to time. The implementation of system and software upgrades and conversions is a very complex process, which may have several adverse consequences including billing errors and delays in customer service. Any of these events could significantly hurt our customer relationships and businesses and have a material and adverse effect on our results of operations. Risks that could affect BCE Inc. Holding company structure BCE Inc. is a holding company. That means it does not carry on any significant operations and has no major sources of income or assets of its own, other than the interests it has in its subsidiaries, joint ventures and significantly influenced companies. BCE Inc.’s cash flow and its ability to service its debt and to pay dividends on its shares all depend on dividends or other distributions it receives from its subsidiaries, joint ventures and significantly influenced companies and, in particular, from Bell Canada. BCE Inc.’s subsidiaries, joint ventures and significantly influenced companies are separate legal entities. They are not required to pay dividends or make any other distributions to BCE Inc. Stock market volatility The stock markets have experienced significant volatility over the past few years, which has affected the market price and trading volumes of the shares of many telecommunications companies in particular. Differences between BCE Inc.’s actual or anticipated financial results and the published expectations of financial analysts may also contribute to volatility in BCE Inc.’s common shares. A major decline in the capital markets in general, or an adjustment in the market price or trading volumes of BCE Inc.’s common shares or other securities, may materially and negatively affect our ability to raise capital, issue debt, retain employees, make strategic acquisitions or enter into joint ventures. Risks that could affect certain BCE Group companies Bell Canada companies Contract with the Government of Alberta In 2001, we entered into a contract with the Government of Alberta to build a next-generation network to bring high-speed Internet and broadband capabilities to rural communities in Alberta. Mechanical construction of the network was completed in December 2004. We identified cost overruns on the construction contract and recorded an additional provision of $128 million in 2004. Acceptance of the network by the Government of Alberta was initially due by January 24, 2005. Based on discussions with the Government of Alberta, Bell Canada has agreed to have the network completed and accepted by the Government of Alberta by the end of September 2005. There is a risk that we could incur higher than currently anticipated costs in completing the acceptance of the network by the Government of Alberta. Changes to wireline regulation Decisions of regulatory agencies The business of the Bell Canada companies is affected by decisions made by various regulatory agencies, including the CRTC. For example, many of the decisions of the CRTC try to balance requests from competitors for access to facilities, such as the telecommunications networks, switching and transmission facilities, and other network infrastructure of incumbent telephone companies, with the rights of the incumbent telephone companies to compete reasonably freely. There is a risk that such decisions of the CRTC, and in particular the decisions dealing with prices at which we must provide such access, may adversely affect our business and results of operations. Second Price Cap decision In May 2002, the CRTC issued decisions relating to new price cap rules that will govern incumbent telephone companies for a four-year period starting in June 2002. These decisions:
The CRTC also established a deferral account and, on March 24, 2004, initiated a public proceeding inviting proposals on the disposition of the amounts accumulated in the accounts of the incumbent telephone companies during the first two years of the price cap period.
On January 28, 2005, Aliant filed its proposal for the disposition of any amounts in its deferral account. Its proposal included:
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It is expected that this proceeding will close in the second half of 2005. Competitor Digital Network Service The CRTC released Decision 2005-6 on February 3, 2005, concerning CDN services. This decision determined the rates, terms and conditions for the provision of digital network services by Bell Canada and the other incumbent telephone companies to their competitors. Retail quality of service indicators As part of the second price cap decision, incumbent telephone companies are also subject to an interim penalty mechanism for retail quality of service. Under this mechanism, these companies could pay a penalty of up to 5% of their annual revenues from total local retail, business and residential services that are regulated. For Bell Canada, the potential penalty amount could be as much as approximately $262 million annually. Decision on incumbent affiliates On December 12, 2002, the CRTC released its decision on incumbent affiliates, which requires Bell Canada and its carrier affiliates to receive CRTC approval on contracts that bundle tariffed and non-tariffed products and services. This means that:
On September 23, 2003, the CRTC issued a decision that requires Bell Canada and its carrier affiliates to include a detailed description of the bundled services they provide to customers when they file tariffs with the CRTC. The customer’s name will be kept confidential, but the pricing and service arrangements it has with the Bell Canada companies will be available on the public record. Allstream and Call-Net application concerning customer-specific arrangements On January 23, 2004, Allstream and Call-Net filed a joint application asking the CRTC to order Bell Canada to stop providing service under any customer-specific arrangements that are currently filed with the CRTC and are not yet approved. Public notice on changes to minimum prices On October 23, 2003, the CRTC issued a public notice asking for comments on its preliminary view that revised rules may be needed for setting minimum prices for the regulated services of incumbent telephone companies and for how they price their services, service bundles and customer contracts. The CRTC sought comments on proposed pricing restrictions on volume or term contracts for retail tariffed services. It issued an amended public notice on December 8, 2003. The record of this proceeding was completed with the filing of arguments on June 11, 2004 and reply arguments on June 25, 2004. |
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Application seeking consistent regulation On November 6, 2003, Bell Canada filed an application requesting that the CRTC start a public hearing to review how similar services offered by cable companies and telephone companies are regulated. This would allow consistent rules to be developed that recognize and support the growing competition between these sectors. Bell Canada also requested that this proceeding address any rules that might be needed to govern VoIP services provided by cable companies and others. Licences for broadcasting On November 18, 2004, the CRTC issued Broadcasting Decision CRTC 2004-496, which approved Bell Canada’s applications for licences to operate terrestrial broadcasting distribution undertakings, using its wireline facilities, to serve large cities in Southern Ontario and Québec. Bell Canada will be licensed under the same terms and conditions that apply to major cable operators, without any delays or other conditions that would negatively affect its ability to compete with them. The licences will be issued once Bell Canada informs the CRTC that it is ready to commence operations and will expire on August 31, 2011. Bell Canada is required to have the terrestrial broadcasting distribution undertakings operational no later than November 18, 2006, unless an extension of time is approved by the CRTC. Licences and changes to wireless regulation Companies must have a spectrum licence to operate cellular, PCS and other radio-telecommunications systems in Canada. The Minister of Industry awards spectrum licences, through a variety of methods, at his or her discretion under theRadiocommunication Act. Revenue from major customers A significant amount of revenue earned by Bell Canada’s Enterprise unit comes from a small number of major customers. If we lose contracts with these major customers and cannot replace them, it could have a material and negative effect on our financial results. Voluntary departure programs In 2004, we announced an early retirement program and early departure program for Bell Canada employees. We estimate annual savings of approximately $390 million relating to these programs because of lower salaries, bonuses and non-pension benefits. There is a risk that the amount we expect to save each year from these programs will be lower than expected if, for example, we incur outsourcing, replacement and other costs. Competition Bureau’s investigation concerning system access fees On December 9, 2004, Bell Canada was notified by the Competition Bureau that the Commissioner of Competition had initiated an inquiry under the misleading advertising provisions of theCompetition Actconcerning Bell Mobility’s description or representation of system access fees (SAFs) and was served with a court order, under section 11 of theCompetition Act, compelling Bell Mobility to produce certain records |
38 2004 Annual information form BCE Inc.
and other information that would be relevant to the Competition Bureau’s investigation. Increased accidents from using cellphones Some studies suggest that using handheld cellphones while driving may result in more accidents. It is possible that this could lead to new regulations or legislation banning the use of handheld cellphones while driving, as it has in Newfoundland and Labrador and in several U.S. states. If this happens, cellphone use in vehicles could decline, which would negatively affect the business of the Bell Canada companies. Health concerns about radio frequency emissions It has been suggested that some radio frequency emissions from cellphones may be linked to certain medical conditions. In addition, some interest groups have requested investigations into claims that digital transmissions from handsets used with digital wireless technologies pose health concerns and cause interference with hearing aids and other medical devices. This could lead to additional government regulation, which could have a material and negative effect on the business of the Bell Canada companies. In addition, actual or perceived health risks of wireless communications devices could result in fewer new network subscribers, lower network usage per subscriber, higher churn rates, product liability lawsuits or less outside financing being available to the wireless communications industry. Any of these would have a negative effect on the business of the Bell Canada companies. Bell ExpressVu Bell ExpressVu currently uses three satellites, Nimiq 1, Nimiq 2 and Nimiq 3, for its video services. Telesat operates or directs the operation of these satellites. Bell Globemedia Dependence on advertising A large part of Bell Globemedia’s revenue from its television and print businesses comes from advertising revenues. Bell Globemedia’s advertising revenues are affected by competitive pressures, including its ability to attract and retain viewers and readers. In addition, the amount advertisers spend is directly related to economic growth. An economic downturn tends to make it more difficult for Bell Globemedia to maintain or increase revenues. Advertisers have historically been sensitive to general economic cycles and, as a result, Bell Globemedia’s business, financial condition and results of operations could be materially and negatively affected by a downturn in the economy. In addition, most of Bell Globemedia’s |
39 2004 Annual information form BCE Inc.
advertising contracts are short-term contracts that the advertiser can cancel on short notice. Increasing fragmentation in television markets Television advertising revenue largely depends on the number of viewers and the attractiveness of programming in a given market. The viewing market has become increasingly fragmented over the past decade and this trend is expected to continue as new services and technologies increase the choices available to consumers. As a result, there is no assurance that Bell Globemedia will be able to maintain or increase its advertising revenues or its ability to reach or retain viewers with attractive programming. Revenues from distributing television services A significant portion of revenues from CTV’s specialty television operations comes from contractual arrangements with distributors who are mainly cable and DTH operators. Competition has increased in the specialty television market. As a result, there is no assurance that contracts with distributors will be renewed on equally favourable terms. Increased competition for fewer print customers Print advertising revenue largely depends on circulation and readership. The existence of a competing national newspaper and commuter papers in Toronto has increased competition, while the total circulation and readership of Canadian newspapers have continued to decline. This has resulted in higher costs, more competition in advertising rates and lower profit margins at The Globe and Mail. Broadcast licences and CRTC decisions Each of CTV’s conventional and specialty services operates under licences issued by the CRTC for a fixed term of up to seven years. These licences are subject to the requirements of theBroadcasting Act, the policies and decisions of the CRTC, and the conditions of each licensing or renewal decision, all of which may change. While these are expected to be renewed at the appropriate times, there can be no assurance that any or all of CTV’s licences will be renewed. Any renewals, changes or amendments to licences and any decisions by the CRTC from time to time that affect the industry as a whole or CTV in particular may have a material and negative effect on Bell Globemedia. Telesat Satellite risks There is a risk that the delivery of Telesat’s satellites under construction could be delayed as a result of delays in the construction of the satellites, delays in the construction of the launch vehicle, the failure of a launch vehicle that is similar to the model which Telesat intends to use to launch a satellite, or the unavailability of a reliable launch opportunity. A delay in delivery could have an adverse effect on Telesat’s ability to provide service and could result in additional costs. Telesat seeks to mitigate the impact of such a delay through various contractual measures including late delivery charges and by planning for contingency measures as required.
In December 2004, Telesat ceased to insure its interest in the residual value of Nimiq 2 following the arrival in orbit of the leased satellite Nimiq 3 (formerly DirecTV3) a satellite that complements the capacity of Nimiq 1 and 2 and which, following operational changes, could be used to provide capacity and continuity of service in the event of a failure of either Nimiq 1 or Nimiq 2. |
40 2004 Annual information form BCE Inc.
will review, and if appropriate, commence the placement of launch and in-orbit insurance coverage for Anik F3. However, there is no assurance that Telesat will be able to obtain launch and in-orbit insurance coverage for the full value of Anik F3, nor is there any assurance that coverage will be obtained at a favourable premium rate. CGI Long sales cycle for major outsourcing contracts The average sales cycle for large outsourcing contracts typically ranges from six to 18 months, with some extending over 24 months. If current market conditions prevail or worsen, the average sales cycle could become even longer and affect CGI’s ability to meet its growth targets. Foreign currency risks CGI’s increased international business volume could expose CGI to greater foreign currency exchange risks, which could adversely impact its operating results. CGI has a hedging strategy in place to protect itself, to the extent possible, against foreign currency exposure. Early termination risk If CGI fails to deliver its services according to contractual agreements, some of its clients could elect to terminate their contracts before the agreed expiry date. This could have a material and negative effect on CGI’s results of operations and business.
The information that appears on pages 32 to 80 of the BCE 2004 Annual report underManagement’s discussion and analysisis incorporated herein by reference. Our annual report is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Documents you can request You can ask us for a copy of any of the following documents:
Please send your request to the Corporate Secretary of BCE, at 1000, rue de La Gauchetière Ouest, Suite 3700, Montréal, Québec H3B 4Y7. Other information about BCE The transfer agent and registrar for the common shares and preferred shares of BCE Inc. in Canada is Computershare Trust Company of Canada (Computershare) at its principal offices in Montréal and Toronto and in the United States is Computershare Trust Company, Inc. at its principal offices in Denver and New York.
|
Shareholder inquiries | 1-800-561-0934 |
Investor relations | 1-800-339-6353 |
41 2004 Annual information form BCE Inc.
SCHEDULE 1 – AUDIT COMMITTEE INFORMATION 1. The Audit Committee’s Charter The BCE Audit Committee charter is available in the governance section of BCE’s website at www.bce.ca and attached as Schedule 1A to this AIF 2. Composition of the Audit Committee | ||||
Name | Independent ? | Financially literate ? | ||
T.C. O’Neill – Chair | Yes | Yes | ||
A. Bérard | Yes | Yes | ||
J. Maxwell | Yes | Yes | ||
R.C. Pozen | Yes | Yes | ||
V.L. Young | Yes | Yes | ||
3. Relevant Education and Experience T.C. O’Neill – Chair A. Bérard J. Maxwell R.C. Pozen V.L. Young 4. Reliance on Certain Exemptions Nil 5. Reliance on the Exemption in Subsection 3.3(2) or Section 3.6 Nil 6. Reliance on Section 3.8 Nil 7. Audit Committee Oversight Nil 8. Pre-Approval Policies and Procedures BCE’s Auditor Independence Policy is a comprehensive policy governing all aspects of BCE’s relationship with the external auditor, including:
The complete Auditor Independence Policy is available in the governance section of BCE’s website at www.bce.ca. |
42 2004 Annual information form BCE Inc.
9. External Auditor Service Fees (By Category) The table below shows the fees that Deloitte & Touche LLP, BCE’s external auditor, billed to BCE and its subsidiaries for various services for each year in the past two fiscal years. |
(in $ millions) | 2004 | 2003 | (1) | ||
Audit fees | $ | 11.4 | $ | 13.3 | |
Audit-related fees | $ | 3.1 | $ | 2.2 | |
Tax fees | $ | 1.9 | $ | 2.6 | |
Other fees | – | $ | 1.1 | ||
Total | $ | 16.4 | $ | 19.2 | |
(1) | Figures for 2003 have been restated to eliminate the fees paid by CGI in the calculation of our aggregate fees paid and reclassify translation services from Other fees to Audit fees so they can be compared to 2004 fees. |
These fees include professional services provided by the external auditor for the review of the interim financial statements, statutory audits of the annual financial statements, the review of prospectuses, consulting on financial accounting and reporting standards, other regulatory audits and filing and translation services. Audit-related fees These fees relate to non-statutory audits, Sarbanes-Oxley Act of 2002 initiatives, pension plan audits and consulting on prospective financial accounting and reporting standards. Tax fees These fees include professional services for administering our compliance with our conflict of interest policy, tax compliance, tax advice, tax planning and advisory services relating to the preparation of corporate tax, capital tax and commodity tax returns. Other fees These fees include professional services provided for the redesign of product introduction and new applications for account management, inventory programming, promotion and research processes. This work started in 2002 and was completed in early 2003. |
43 2004 Annual information form BCE Inc.
SCHEDULE 1A – BCE INC. – AUDIT COMMITTEE CHARTER I. PurposeThe purpose of the Audit Committee is to assist the Board of Directors in its oversight of: |
A. | the integrity of the Corporation’s financial statements and related information; |
B. | the Corporation’s compliance with applicable legal and regulatory requirements; |
C. | the independence, qualifications and appointment of the shareholders’ auditor; |
D. | the performance of the Corporation’s internal auditor and shareholders’ auditor; and |
E. | management responsibility for reporting on internal control. |
The Audit Committee shall perform the functions customarily performed by audit committees and any other functions assigned by the Board of Directors. In particular, the Audit Committee shall have the following duties and responsibilities: A. Financial reporting and control |
1. | On a periodic basis, review and discuss with management and the shareholders’ auditor on the following: | |
a. | major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting principles, and major issues as to the adequacy of the Corporation’s internal controls and any special audit steps adopted in light of material control deficiencies; | |
b. | analyses prepared by management and/or the shareholders’ auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative generally accepted accounting principles methods on the financial statements when such alternatives have been selected in the current reporting period; | |
c. | the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation. | |
d. | the type and presentation of information to be included in earnings press releases (paying particular attention to any use of pro-forma or adjusted non-generally accepted accounting principles, information). | |
2. | Meet to review and discuss with management and the shareholders’ auditor, report and, where appropriate, provide recommendations to the Board of Directors on the following: | ||
a. | the annual and interim consolidated financial statements, the Corporation’s disclosure under “Management Discussion and Analysis”, Annual Information Form, earnings press releases, financial information and earnings guidance provided to analysts and rating agencies and the integrity of the financial reporting of the Corporation; | ||
– | In addition to the role of the Audit Committee to make recommendations to the Board of Directors, where the members of the Audit Committee consider that it is appropriate and in the best interest of the Corporation, the interim consolidated financial statements, the interim Corporation’s disclosure under “Management Discussion and Analysis” for interim period and interim earnings press releases and earnings guidance, may also be approved on behalf of the Board of Directors by the Audit Committee, provided that such approval is subsequently reported to the Board of Directors at its next meeting; | ||
b. | any audit problems or difficulties and management’s response, including any restrictions on the scope of the activities of the shareholders’ auditor or access to requested information and any significant disagreements with management. | ||
3. | Review and discuss reports from the shareholders’ auditor on: | ||
a. | all critical accounting policies and practices used by the Corporation; | ||
b. | all material alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, including the ramifications of the use of such alternate treatments and disclosures and the treatment preferred by the shareholders’ auditor; and | ||
c. | other material written communications between the shareholders’ auditor and management, and discuss such report with the shareholders’ auditor. |
B. Oversight of the shareholders’ auditor | |
1. | Be directly responsible for the appointment, compensation, retention and oversight of the work of the shareholders’ auditor and any other auditor preparing or issuing an audit report or performing other audit services or attest services for the Corporation or any consolidated subsidiary of the Corporation, where required and review, report and where appropriate, provide recommendations to the Board of Directors on the appointment, terms and review of engagement, removal, independence and proposed fees of the shareholders’ auditor. |
2. | Approve in advance all audit, review or attest engagement fees and terms for all audit, review or attest services to be provided by the |
44 2004 Annual information form BCE Inc.
shareholders’ auditor to the Corporation and any consolidated subsidiary and any other auditor preparing or issuing an audit report or performing other audit services or attest services for the Corporation or any consolidated subsidiary of the Corporation, where required. | ||
3. | Pre-approve all engagements for permitted non-audit services provided by the shareholders’ auditor to the Corporation and any consolidated subsidiary and to this effect may establish policies and procedures for the engagement of the shareholders’ auditor to provide to the Corporation and any consolidated subsidiary permitted non-audit services, which shall include approval in advance by the Audit Committee of all audit/review and permitted non-audit services to be provided by the shareholders’ auditor to the Corporation and any consolidated subsidiary. | |
4. | Delegate, if deemed appropriate, authority to one or more members of the Audit Committee to grant pre-approvals of audit/review/attest and permitted non-audit services, provided that any such approvals shall be presented to the Audit Committee at its next scheduled meeting. | |
5. | Establish policies for the hiring of employees and former employees of the shareholders’ auditor. | |
6. | At least annually, consider, assess, and report to the Board of Directors on: | |
a. | the independence of the shareholders’ auditor, including whether the shareholders’ auditor’s performance of permitted non-audit services is compatible with the shareholders’ auditor’s independence; | |
b. | obtain from the shareholders’ auditor a written statement (i) delineating all relationships between the shareholders’ auditor and the Corporation; (ii) assuring that lead audit partner rotation is carried out, as required by law; and (iii) delineating any other relationships that may adversely affect the independence of the shareholders’ auditor; and | |
c. | the evaluation of the lead audit partner, taking into account the opinions of management and the internal auditor. | |
7. | At least annually, obtain and review a report by the shareholders’ auditor describing: | |
a. | the shareholders’ auditor’s internal quality-control procedures; | |
b. | any material issues raised by the most recent internal quality-control review, or peer review of the shareholders’ auditor firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the shareholders’ auditor firm, and any steps taken to deal with any such issues. | |
8. | Resolve any disagreement between management and the shareholders’ auditor regarding financial reporting. | |
9. | Review audit process with the shareholders’ auditor. | |
10. | Review and discuss with the Chief Executive Officer and Chief Financial Officer of the Corporation the process for the certifications to be provided in the Corporation’s public disclosure documents. | |
11. | Meet periodically, with the shareholders’ auditor in the absence of management and the internal auditor. |
C. Oversight of the internal auditor | ||
1. | Review and discuss with the internal auditor, report and, where appropriate, provide recommendations to the Board of Directors on the following: | |
a. | the appointment and mandate of the internal auditor, including the responsibilities, budget and staffing of the Corporation’s internal auditor; | |
b. | discuss with the head of the Corporation’s internal auditor the scope and performance of the internal auditor, including a review of the annual internal audit plan, and whether there are any restrictions or limitations on the internal auditor; | |
c. | obtain periodic reports from the head of the internal auditor regarding internal audit findings, including with respect to the Corporation’s internal controls, and the Corporation’s progress in remedying any material control deficiencies. | |
2. | Meet periodically, with the internal auditor in the absence of management and the shareholders’ auditor. |
D. Oversight of the Corporation’s internal control system | ||
1. | Review and discuss with management, the shareholders’ auditor and internal auditor, report and, when appropriate, provide recommendations to the Board of Directors on the following: | |
a. | the Corporation’s internal control system; | |
b. | assess periodically compliance with the policies and practices of the Corporation relating to business ethics; and | |
c. | the relationship of the Audit Committee with other committees of the Board of Directors, management and the Corporation’s consolidated subsidiaries’ audit committees. | |
2. | Establish procedures, for the receipt, retention, and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, including procedures for confidential, anonymous submission by employees regarding questionable accounting or auditing matters. | |
3. | Meet periodically, with management in the absence of the shareholders’ auditor and the internal auditor. |
E. Oversight of the Corporation’s risk management | ||
1. | Review, report and, where appropriate, provide recommendations to the Board of Directors on the following: | |
a. | the Corporation’s processes for identifying, assessing and managing risk; and | |
b. | the Corporation’s major financial risk exposures and the steps the Corporation has taken to monitor and control such exposures. |
F. Oversight of the Corporation’s Environmental risks | |
1. | Review, report, and where appropriate, provide recommendations to the Board of Directors on the Corporation’s environmental policy and environmental management system. |
2. | When appropriate, ensure that the Corporation’s subsidiaries establish an environmental policy and environmental management system and review and report thereon to the Board of Directors of the Corporation. |
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G. Compliance with legal requirements | |
1. | Review and discuss with management, the shareholders’ auditor and internal auditor, report and, when appropriate provide recommendation to the Board of Directors on the adequacy of the Corporation’s process for complying with laws and regulations. |
2. | Receive, on a periodic basis, reports from the Corporation’s Chief Legal Officer, with respect to legal issues. |
III. | Evaluation of the Audit Committee and Report to Board of Directors |
A. | The Audit Committee shall evaluate and review with the Corporate Governance Committee of the Board of Directors, on an annual basis, the performance of the Audit Committee. |
B. | The Audit Committee shall review and discuss with the Corporate Governance Committee of the Board of Directors, on an annual basis, the adequacy of the Audit Committee mandate. |
C. | The Audit Committee shall report to the Board of Directors periodically on the Audit Committee’s activities. |
The Audit Committee shall have the authority to engage outside counsel and other outside advisors as it deems appropriate to assist the Audit Committee in the performance of its functions. The Corporation shall provide appropriate funding for such advisors as determined by the Audit Committee. V. Membership The Audit Committee shall consist of such number of directors, in no event to be less than three, as the Board of Directors may from time to time by resolution determine. The members of the Audit Committee shall meet the independence, experience and other membership requirements under applicable laws, rules and regulations as determined by the Board of Directors. The Chair of the Audit Committee shall be appointed by the Board of Directors. VI. Term The members of the Audit Committee shall be appointed by resolution of the Board of Directors to hold office from the time of their appointment until the next annual general meeting of the shareholders or until their successors are so appointed. VII. Procedures for meetings The Audit Committee shall fix its own procedure at meetings and for the calling of meetings. The Audit Committee shall meet separately in executive session, at each regularly scheduled meeting in the absence of management, the internal auditors and the shareholders’ auditor, at each regularly scheduled meeting. VIII. Quorum and voting Unless otherwise determined from time to time by resolution of the Board of Directors, two members of the Audit Committee shall constitute a quorum for the transaction of business at a meeting. For any meeting(s) at which the Audit Committee Chair is absent, the Chair of the meeting shall be the person present who shall be decided upon by all members present. At a meeting, any question shall be decided by a majority of the votes cast by members of the Audit Committee, except where only two members are present, in which case any question shall be decided unanimously. IX. Secretary Unless otherwise determined by resolution of the Board of Directors, the Corporate Secretary of the Corporation or his/her delegate shall be the Secretary of the Audit Committee. X. Vacancies Vacancies at any time occurring shall be filled by resolution of the Board of Directors. XI. Records The Audit Committee shall keep such records as it may deem necessary of its proceedings and shall report regularly its activities and recommendations to the Board of Directors as appropriate. |
46 2004 Annual information form BCE Inc.
SCHEDULE 2 – GLOSSARY OF TERMS | ||
3Gmeans third generation; | ICTmeans information and communications technology; | |
360networksmeans 360networks Corporation; | Infostreammeans Infostream Technologies Inc.; | |
AIFmeans this Annual Information Form; | IOCmeans International Olympic Committee; | |
Aliantmeans Aliant Inc.; | IPmeans Internet Protocol; | |
Aliant Telecommeans Aliant Telecom Inc.; | IP-MPLSmeans IP multi-protocol label switching; | |
AMSmeans American Management Systems Incorporated; | IPTVmeans video over Internet Protocol; | |
ATMmeans asynchronous transfer mode; | IS/ITmeans information systems / information technologies; | |
BCHmeans Bell Canada Holdings Inc.; | ISPsmeans Internet service providers; | |
BCImeans Bell Canada International Inc.; | ITmeans information technology; | |
BDUsmeans broadcasting distribution undertakings; | Mbpsmeans megabits per second; | |
Bell ExpressVumeans Bell ExpressVu Limited Partnership; | MDUmeans multiple-dwelling unit; | |
Bell Globemediameans Bell Globemedia Inc.; | Microsoftmeans Microsoft Corporation; | |
Bell Mobilitymeans Bell Mobility Inc.; | Moody’smeans Moody’s Investors Service, Inc.; | |
Bell Westmeans Bell West Inc.; | MSN Canadameans MSN Canada Co.; | |
BWAmeans Bell Wireless Alliance; | MT&T Mobilitymeans MT&T Mobility Inc.; | |
Call-Netmeans Call-Net Enterprises Inc.; | MTNsmeans medium term notes; | |
CanWestmeans CanWest Global Communications Corp.; | MTSmeans Manitoba Telecom Services Inc.; | |
CATUmeans the Council of Atlantic Telecommunication Unions; | NANPmeans North American Numbering Plan; | |
CDNmeans competitor digital network; | NASmeans network access services; | |
CEPmeans the Communications, Energy and Paper Workers Union of | Nexxlinkmeans Nexxlink Technologies Inc.; | |
Canada; | Nortel Networksmeans Nortel Networks Corporation; | |
CGImeans CGI Group Inc.; | NorthernTelmeans NothernTel Limited Partnership; | |
CIRBmeans the Canadian Industrial Relations Board; | Northwestelmeans Northwestel Inc.; | |
CLECmeans competitive local exchange carrier; | NYSEmeans the New York Stock Exchange; | |
Cogecomeans Cogeco Cable Inc.; | PCSmeans personal communications services; | |
Computersharemeans Computershare Trust Company of Canada; | Primusmeans Primus Telecommunications Canada Inc.; | |
CPEmeans customer-premises equipment; | PSTNmeans Public Switched Telephone Network; | |
CRTCmeans the Canadian Radio-television and Telecommunications | Rogersmeans Rogers Cable Inc.; | |
Commission; | S&Pmeans Standard & Poor’s, a division of The McGraw-Hill | |
CSAmeans customer-specific arrangements; | Companies, Inc.; | |
CTEAmeans the Canadian Telecommunications Employees’ | SAFsmeans system access fees; | |
Association; | SBCmeans SBC Communications Inc.; | |
CTVmeans CTV Inc.; | SFUmeans single family unit; | |
CTV Televisionmeans CTV Television Inc.; | SMBmeans small and medium businesses; | |
DBRSmeans Dominion Bond Rating Service Limited; | Smistonmeans Smiston Communications; | |
DSLmeans digital subscriber line; | Sprint PCSmeans Sprint Spectrum, L.P.; | |
DTHmeans direct-to-home; | Stratosmeans Stratos Global Corporation; | |
Eastlinkmeans Eastlink Communications; | Télébecmeans Télébec Limited Partnership; | |
Emergismeans BCE Emergis Inc.; | Teleglobemeans Teleglobe Inc.; | |
Enterprisemeans large enterprise; | Telesatmeans Telesat Canada; | |
Entouragemeans Entourage Solutions Technologiques Inc.; | Telusmeans Telus Corporation; | |
ERIPmeans Early Retirement Incentive Program; | TSXmeans the Toronto Stock Exchange; | |
EVDOmean Evolution, Data Optimized; | VASmeans value-added services; | |
Fitchmeans Fitch Ratings Inc.; | VCIOmeans virtual Chief Information Officer; | |
FTTNmeans fibre-to-the-node; | VDSLmeans very high-bit-rate DSL; | |
Futurewaymeans Futureway Communications Inc.; | Vidéotronmeans Le Groupe Vidéotron Ltée; | |
GeSImeans the Global e-Sustainability Initiative; | VoIPmeans voice over Internet protocol; | |
Group Telecommeans GT Group Telecom Services Corporation; | Yellow Pages Groupmeans YPG LP and YPG General Partner. |
47 2004 Annual information form BCE Inc.
www.bce.ca
PRINTED IN CANADA
6
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
BCE Inc. | ||
By: | (signed) Siim A. Vanaselja | |
Siim A. Vanaselja Chief Financial Officer | ||
Date: March 11, 2005 |
LIST OF EXHIBITS
TO FORM 40-F
BCE Inc. 2004 Annual Report | Exhibit 99.1 |
Consent of Independent Registered Chartered Acocuntants | Exhibit 99.2 |
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Differences | Exhibit 99.3 |
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | Exhibit 99.31 |
Certification of the Chief Executive Officer and the Chief Financial Officer | Exhibit 99.32 |