BCE Inc. (NYSE:BCE) Q4 2023 Earnings Call Transcript

BCE Inc. (NYSE:BCE) Q4 2023 Earnings Call Transcript February 8, 2024

BCE Inc. beats earnings expectations. Reported EPS is $0.76, expectations were $0.54. BCE Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen. Welcome to the BCE Q4 2023 Results and 2024 Guidance Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thane Fotopoulos: Thank you, Matthew, and good morning, everyone, and thank you for joining our call. With me here today are Mirko Bibic, BCE’s President and CEO, and our CFO, Curtis Millen. You can find all of our Q4 disclosure documents including our safe harbor notice concerning forward-looking statements for 2024 on the Investor Relations page of the bce.ca website, which we posted earlier this morning. We have a lot of material to get through on the call. However, before we begin, I want to draw your attention to our safe harbor statement on Slide 2, reminding you that today’s slide presentation and remarks made during the call will include forward-looking information, and therefore are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements except as required by law. Please refer to our publicly filed documents for more details on assumptions and risks. With that, Mirko, over to you.

Mirko Bibic: Thank you, Thane, and good morning, everyone. Our quarterly and full year financial performance demonstrate the stability of our business and our proven ability to execute under any circumstances. The Bell team takes pride in delivering what we promised, taking the necessary near-term actions, including driving costs out of the business and balancing growth with profitability to meet our commitments to our customers and to our investors, while at the same time, putting in place the technology, product, customer service and cultural foundation that we know will drive growth in the medium to long term. Our results for 2023 validate this fact as we achieved all our financial guidance targets and maintained a stable EBITDA margin even while facing significant media advertising headwinds, unsupportive government and regulatory decisions, and a macroeconomic environment, marked by higher interest rates and sustained inflation.

We also made tangible progress on our key strategic imperatives in 2023, showing that the investments we’ve been making across every part of our business since the onset of COVID are working, and these priorities remain the foundation for Bell’s future success. We met our broadband fibre buildout target, and we surpassed our mobile 5G and 5G+ coverage objectives. In fact, we now offer multi-gig symmetrical Internet speeds of 3 gigabits in 6.5 million locations. That’s a big competitive advantage that our cable competitors cannot match across their entire footprints. And our performance and quality gap over cable is reflected in our Internet subscriber metrics. We also secured new 5G+ spectrum licenses in the recently completed 3,800 megahertz auction.

We now have the most 5G+ spectrum in Canada, acquired at a total cost that was the lowest among national wireless carriers. In wireless, we delivered a great result in an increasingly competitive environment. We delivered a healthy step-up in sales, strong net adds focused on high-quality premium brand customer loadings, positive organic ARPU growth in Q4 and throughout the year, and importantly, we managed our promotional offers in a disciplined way to balance growth with profitability with a sizable improvement in product margin in Q4. Fueled by our fibre footprint, we also grew broadband Internet market share, contributing to strong residential Internet revenue growth of 7.1% in 2023. In particular, we stepped up share gains and our competitiveness in the province of Quebec given our fibre advantage and bundling capabilities.

Turning to media, digital revenue was up 19% and represented 35% of total media revenue versus 29% last year, and that’s a notable result given current challenging advertising market conditions. This is also notable given our strategic shift to digital and investments to sustain this strategy are continuing with long-term access to premier content from core partners, including Warner Bros. Discovery and the NFL, the recent introduction of ad-supported subscription tiers on Crave, and upcoming distribution on Amazon Prime Video, which we announced this week, as well as the launch of addressable advertising that will enable advertisers to target ads to specific households or devices. We’re well positioned to capture an even higher share of industry digital ad market revenue going forward.

On the customer experience front, our investments in building the best broadband networks, which are consistently recognized by third parties as being the fastest, together with online digital support tools and innovative apps, continue to deliver better customer experiences. These efforts are a big reason why we’ve increased our share of digital online service transactions through self-serve tools to nearly 70% of all digital transactions and why Bell customer satisfaction scores continue to improve as reflected in the latest report from the CCTS, which showed, as you know, a 6% drop in Bell’s share of overall complaints. Again, the best performance among national service providers for an eight consecutive year. Now, on Slide 5 of our presentation, it’s clear from all the data points I just provided that we made good progress against our strategic imperatives in 2023.

And we fully appreciate that our shareholders look to Bell for the safety and growth of our cash flows. However, we must address a number of factors in our operating environment, and that includes unsupportive federal government policies, higher interest rates and inflation, changing consumer preferences regarding service experience and delivery, and managing through a fundamental technology transformation. Competition and customer expectations are also putting downward pressure on ARPUs, requiring a more agile and scaled-down cost structure. Media companies are facing increasing competition from global tech players, an ongoing advertising recession and a declining legacy distribution business. And the Canadian regulatory environment is marked by policies on fibre resale that are negative, specifically target Bell, and a broadcasting framework that curiously still does very little to assist Canadian media companies.

Because of the CRTC’s targeted action, we are halting the elevated CapEx spending program that we’ve been operating under since 2021. As a result, we are notably slowing the pace of our fibre footprint expansion and we’re capping fibre speeds at 3-gigabits per second. This also led to $105 million less capital being invested than planned for in Q4 of 2023. And we intend to reduce CapEx by at least an additional $1 billion over the next two years, including a minimum $500 million year-over-year decrease in 2024 alone. Given the lack of government and regulatory support for the historic capital investments Bell has made since the onset of COVID in 2020 and an unwillingness or inability to level the playing field between domestic competitors and global tech giants, we’re also shifting our focus away from overly regulated parts of our business towards key growth areas where we plan to accelerate investment, such as cloud and security services, advanced advertising and digital transformation, just to name a few.

And consistent with this refocusing, we’re today announcing the sale of 45 radio stations and the closure of 107 Source stores. To succeed in a landscape that’s being reshaped, it’s more important than ever to continue to align our operating model and cost structure to customer expectations and the revenue profile of our business segments. And for these reasons, we’re undertaking a significant workforce restructuring initiative, our largest in nearly 30 years, that will eliminate approximately 4,800 positions, including 750 contractors or 9% of all BCE employees. This restructuring initiative will yield in-year cost savings in the range of $150 million to $200 million for 2024 or $250 million on an annualized basis. Now, restructuring the business is never an easy decision, but it’s what we need to do to simplify our organization and accelerate our transformation.

Where possible, we are leveraging vacant positions and natural attrition in order to minimize the impact on our team. We’ll remove overlaps and consolidate certain functions across different teams, reducing corporate functions by 20% and over-indexing reductions in non-customer facing roles. While we’re eliminating positions in areas where demand and revenue are declining, we are continuing to hire in growth areas. And this restructuring program is enabled in part by our accelerated investments in automation, digitization and AI, strategic acquisitions, new partnerships and service launches to improve our competitiveness and innovation agenda. Given the transformation investments we’ve made since 2020, we’re in a better position now to drive costs out of the business.

These transformation investments will continue in 2024 and beyond, and they’ll drive more OpEx savings in the medium to long term than those being realized as a result of today’s announcement. Now, moving to Slide 6, I want to provide some color for you on how we’re driving our operational transformation from a traditional telco to a tech services and digital media leader with a number of examples of investments, partnerships, and initiatives we’ve been undertaking. In wireless, as we’ve already announced, we’ve entered into a long-term strategic partnership with Best Buy Canada to rebrand, excuse me, 165 Source stores to Best Buy Express. Bell will remain responsible for store operations while Best Buy assumes responsibility for consumer electronics merchandising, procurement, marketing, inventory ownership and management, logistics and supply chain, as well as other support functions.

Importantly, Bell will continue to control all mobility and Internet sales. At Bell Business Markets, we’ve advanced our capabilities in cloud computing solutions and digital workflow automation with the acquisition of FX Innovation last year and our partnership with ServiceNow, the global leader in digital workflow solutions. Our collaboration with ServiceNow creates unique value for the Canadian business market and will elevate the end-to-end experience for our customers. And on the media side, it’s about reducing our dependence on overly-regulated businesses like radio and pushing even more aggressively into digital-targeted ad platforms through scaling ad-supported subscription tiers on Crave, expanding addressable advertising across more media properties and acquiring OUTFRONT Media’s Canadian out-of-home business.

And as I’ve mentioned, we’ll distribute Crave on Amazon Prime Video channels, which will enable even better Crave growth looking forward. Against the backdrop of accelerating investments in key growth areas, we’re also laser-focused on transforming our existing core business. And we’re looking at things like how to build better and more resilient networks, providing better service through enhanced distribution channels and sales coverage, speeding up innovation and time to market, modernizing and rationalizing our suite of products, and embracing digital solutions and automation. And a key piece of our product modernization program is leveraging our existing all fibre network to provide better service to customers, saving money on maintenance costs, and, of course, reducing our environmental footprints.

We’ve made progress migrating customers and equipment to our fibre network, as well as consolidating and removing copper cables and equipment no longer required in the field. We’ve launched fibre migration now to 105 central offices, transitioning 110,000 residential customers in 2023. And in 2024, copper customers in Manitoba and Atlantic Canada who need a repair will be transitioned over to fibre where we have fibre as we already do in Ontario and Quebec. We introduced a new next-generation Fibe TV service powered by Bell’s in-house software on an Android TV set-top box, and that importantly sets the stage for a move to a single IPTV platform and addressable TV capabilities at scale everywhere we operate. This new service is currently available to residential customers in Atlantic Canada, and that will be rolled out, as I said, to other regions across our footprint in the coming quarters.

We’re also consolidating real estate, reducing the number of vendors we deal with, and very importantly, simplifying our ordering and billing technology platforms by moving all core consumer products to a single billing architecture. This has now been launched at scale to 1.3 million customers in Ontario and Quebec, and we’ll continue to migrate more customers on the new billing platform as the year progresses. Each of these programs, and I’ve given you several examples, each of them will drive growth, better serve customers, and take costs out of the business. Importantly, they’ll support a stronger EBITDA growth trajectory, margin accretion and free cash flow expansion in the years ahead, and that’s going to help support our dividend growth objective.

And that brings me to Slide 7 and our dividend announcement for this morning. We’re increasing the BCE common share dividend by 3.1% for 2024. It’s our 16th year of uninterrupted growth, demonstrating our unwavering commitment to dividend growth. Dividend growth remains central to our value proposition and we’ll continue to prioritize it in our capital allocation. And it is apparent from our dividend yield that, at this time, BCE share price is not being rewarded for the higher 5% dividend growth profile. We appreciate that our shareholders want a stable and a growing dividend, and we’re delivering on that expectation. The 3.1% increase for this year, 2024, will allow us to better balance capital allocation priorities with the ultimate objective of getting our payout ratio below 100%, and that provides us additional financial flexibility at the same time, given the higher interest rate environment, significant workforce restructuring we’re undertaking and the acceleration of our Techco transformation that will serve as the future catalyst to growth and deliver the financial results that we continue to deliver for our investors and that you can continue to expect from us.

And on that, I’ll turn it over to Curtis.

Curtis Millen: Thank you, Mirko, and good morning, everyone. I’ll begin on Slide 9 with BCE’s consolidated financial results. We had a strong quarter to end the year with 5.3% higher adjusted EBITDA that drove a 1.9 point increase in margin to 39.7%, and 7% adjusted EPS growth. This EBITDA result was achieved despite ongoing media advertising headwinds and a step-up in consumer promotional offer intensity and moderated service revenue growth this quarter. Regarding CapEx, due to the deceleration of our fibre network buildout in the back half of the year, CapEx was down $609 million in full year 2023. As Mirko pointed out, we reduced planned capital investment by an additional $105 million in Q4 as a direct result of the CRTC’s fibre resale decision.

Our strong EBITDA growth, substantial CapEx reduction, lower cash taxes and the positive change in working capital, that we had signaled to the Street throughout the year, drove a $913 million year-over-year positive swing in Q4 free cash flow. Turning to Bell CTS on Slide 10, starting with a high-level summary of Q4 subscriber metrics. Overall, I would say that we’re doing a very good job in wireless, striking a healthy balance between volume growth, acquisition cost, and ARPU. We delivered a record quarter for postpaid mobile phone gross activations that drove 128,715 new net subscribers. This result, which comprises our second highest Q4 for consumer postpaid net adds after last year, was achieved even with a higher number of switchers, reflecting aggressive offers from our competitors that we chose to match selectively.

This disciplined approach was reflected in our promotional offers where handset subsidies were on average 32% lower than they were in ’22, driving a significant improvement in wireless product margin. Wireless ARPU was up 0.4% this quarter, driven by our focus on premium 5G subscriber loadings and further growth in outbound roaming, a great result in light of the more aggressive rate plan offers during the Black Friday and December holiday sales period, demonstrating our reliance on network quality and distribution strength rather than promotional discounting to drive profitable subscriber growth. Switching to our industry-leading broadband segment. Bell Internet added 55,591 total new net retail subscribers, our second-best Q4 result in nearly two decades.

And on the TV side of things, we added 23,537 net IPTV subs, which is approximately 17,000 lower versus Q4 of 2022. This was an expected result as our result last year benefited from a significant number of customer activations, driven by the World Cup. Moving to Bell CTS financials. This is a very good set of results to end the year. Top-line revenue grew a respectable 1.7% in Q4. This was achieved despite ongoing legacy declines, a tough year-over-year comp for business product sales, and a richer residential service bundle discounts, reflecting a more intense promotions market compared to last year. Total consumer wireless revenue increased 5.5%, profiting from a higher sales mix of premium mobile phones on the product side and positive ARPU growth on the service side.

Residential Internet revenue was up 5.4%. CTS revenue also benefited from higher sales of security and cloud-focused managed and professional service solutions to businesses, as well as the financial contribution from our acquisition of FX Innovation in June. The combined impact of continued consumer strength across our wireless residential home services, together with improved business wireline results, better wireless promotional offer discipline and lower weather-related cost pressures drove strong EBITDA growth of 4.8%. Clearly, this is a financial highlight for Q4. On to Slide 11. Bell Media continued its digital revenue growth, and in aggregate, performed better than we expected during the quarter. Digital revenues were up 27% over last year.

Underpinning this result was Crave, which grew direct streaming subscribers by 14% on the back of market-leading content, as well as continued strong growth of our SAM TV sales tool, which saw a 70% increase in sales in Q4. Despite strong digital ad growth in the quarter, total ad revenue was down 13.7%, as advertiser spending, particularly for TV, continued to be impacted by the economy and now resolved Hollywood strikes. Furthermore, revenue generated in Q4 2022 from the World Cup contributed to the year-over-year decline. Normalizing for the World Cup, ad revenue net of displacements was down 9%. That performance is better than our peers, which is a testament to Bell Media’s programming strength, diversified mix of assets and focused execution of our digital-first strategy.

Despite the unfavorable revenue backdrop, EBITDA increased 14.7% in Q4. This result was supported by the favorable impact of various restructuring initiatives undertaken in ’23 to help right-size our cost structure and asset portfolio, along with lower TV programming costs due to the Hollywood strikes and last year’s World Cup broadcasts. I’ll now turn to our 2024 financial outlook, starting with revenue and EBITDA on Slide 13. Based on the latest economic forecasts and industry outlooks, our revenue and adjusted EBITDA growth ranges for ’24 take into consideration potential recessionary risks, competitive pricing pressures and business product sales lumpiness. Additionally, our strategic distribution partnership with Best Buy Canada will see the elimination of approximately $300 million in largely consumer electronics revenue from our consolidated results in 2024.

The impact on EBITDA will not be material given relatively low margin for consumer electronics. As a result, we’re setting our guidance growth ranges for 2024 at 0% to 4% for total revenue and 1.5% to 4.5% for adjusted EBITDA. Given this outlook and benefiting from the cost savings we expect to realize from the transformation initiatives that Mirko outlined earlier, including a 9% reduction in our workforce, we predict BCE’s margin for 2024 to remain, at a minimum, stable year-over-year. And notably, if you exclude the financial impact of the Best Buy transaction, our target guided ranges are consistent with last year, showing the relative stability of our business and the confidence we have in our proven ability to execute under any circumstance.

Underpinning this steady growth is our continued focus on premium mobile phone subs with increased emphasis on market growth, as we capitalize on our wireless network leadership, ongoing 5G upgrade cycle and strong immigration efforts. We also plan to continue winning the home by leveraging our industry-leading symmetrical Internet speed advantage over cable, delivering the best customer experience with our products and driving greater cross-sell penetration of higher value mobility and Internet households. In our B2B sector, our objective is to build on our momentum from 2023 by accelerating growth in cloud, security and workflow automation solutions in the large enterprise space, while also expanding key channels and leveraging our fibre footprint in SMB.

At Bell Media, although the timing of an advertising recovery remains uncertain, we’ll continue to drive advanced advertising, digital products like Crave, as well as new distribution initiatives such as Crave’s partnership with Amazon to further grow our market share of digital ad spend. These digital opportunities, together with the financial contribution from our pending acquisition of OUTFRONT Media and restructuring cost savings, should drive improved Media financial performance in 2024. Moving to Slide 14, despite growth in EBITDA, we project adjusted EPS to be in the range of $2.98 to $3.13 per share in 2024, or 2% to 7% lower versus last year. This year-over-year decline can be attributed largely to an approximate $200 million step-up in interest expense due to higher rates and more debt outstanding from investments in our growth strategy, an estimated $100 million increase in depreciation and amortization expense, consistent with the growth in our broadband network capital asset base, higher pension financing cost and gains on the sale of real estate realized in 2023 related to our multiyear consolidation and conversion program that totaled $67 million or $0.05 per share.

Turning to Slide 15, we expect to generate $2.8 billion to $3.05 billion of free cash flow in 2024. This is 3% to 11% lower compared to 2023 and reflects around $400 million in one-time severance payments related to the 4,800 employee reductions that Mirko detailed. Normalizing for the severance payments associated with our announced workforce restructuring initiatives in 2023 and 2024, free cash flow growth is in the range of 0% to 7% this year, providing support for the 3.1% dividend increase we declared this morning. This underlying growth in free cash flow is the result of higher year-over-year EBITDA and a $500 million decrease in CapEx that will drive our capital intensity ratio of 16.5% or less in 2024. Although we have currently budgeted approximately $4.1 billion in CapEx spending for 2024, this amount can possibly be even lower depending on government policy decisions during the course of the year that may further disincentivize investment.

2024 free cash flow also reflects higher interest paid, stable to higher cash taxes, as the federal government’s accelerated CCA program is phasing out beginning this year, and lower projected cash from working capital. This working capital drag is attributable mainly to the significant improvements in AR and inventory levels realized in ’23, which normalize following substantial COVID and supply chain impacts in 2022, as well as potential recessionary impacts on customer collections that may materialize with a harder economic landing. Moving to Slide 16, as we begin the year, we are in a very strong financial position. We have access to $5.8 billion of liquidity and a balance sheet with a sizable pension solvency surplus totaling $3.6 billion, which provides good overall financial flexibility to execute on our business plan and strategic priorities for 2024.

Our net debt leverage ratio at just under 3.5 times adjusted EBITDA, due to several years of generational CapEx spending and critical spectrum investments, is projected to remain more or less stable this year. Our debt capital structure also remains very well structured with an average term to maturity of approximately 12 years, an after-tax cost of borrowing that is below prevailing interest rates at around 3%, and a floating interest rate exposure that is below our historical target range of 20% to 30%. At these levels, together with no material debt refinancing requirements until Q1 2025, interest rates that are expected to ease and access to lower-cost short-term financing options, we can be opportunistic in accessing the debt capital markets this year if market conditions are favorable to pre-fund upcoming maturities and mitigate interest rate pressures.

Lastly, I wanted to note that capital leases are expected to begin declining this year, having reached a peak in 2023, which will drive lower principal repayments beginning in 2025. To conclude on Slide 17, 2024 is an important transformation year for Bell. It’s a year where we look to maintain operational momentum while balancing growth with financial performance as we continue our transition to a tech services and digital media leader. Within that context, the guidance targets we’re providing today are appropriate given the current economic, competitive and regulatory backdrops, while also reflecting the impacts of our workforce restructuring and other transformation initiatives that will better position the company for future growth and financial success.

I will now turn the call back over to Thane and the operator to begin Q&A.

Thane Fotopoulos: Thanks, Curtis. So given the volume of information we presented this morning, I’m sensitive to the time we have left for Q&A, so I would please ask that you limit yourself to one question, so we can get to everybody in the queue. With that, Matthew, we’re ready to take our first question.

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Q&A Session

Operator: Thank you. The first question is from Maher Yaghi from Scotiabank. Please go ahead.

Maher Yaghi: Thank you for taking my question. Believe it or not, I won’t ask you about Q4 or 2024. I think we need to discuss the elephant in the room here. One can’t satisfy the regulatory environment when looking at pricing pressure hitting Canadian telcos on both wireless and wireline. I mean, we have seen similar issues in the Canadian broadcasting industry due to slow evolution on regulation. Mirko, I wanted to ask you, is your telecom service in Canada at risk of seeing similar long-term profitability issues if regulation continues to lag technological advancements? Underlying my question is this question, beyond 2024, should we expect future years to see additional material cost reductions to continue to stay ahead of these regulatory pressures? Thank you.

Mirko Bibic: Thanks, Maher. Thanks for that question. It’s a lot there. Let me start with, I want to reemphasize what I started with in my opening remarks. We continue to deliver strong results each quarter, and that’s because we’re always planning ahead. So, we were making investments in 2020, 2021 to get us in a position where we could deliver strong results in 2023. And we’re continuing to do that, always plan for the environment that’s around us now and where we expect it to go. And that’s kind of where your question is going. So, that could be technology, that could be kind of macroeconomic, customer expectations, obviously, matter a lot, competitive environment and significantly regulatory. So, I mean — okay, if you look at our free cash flow guide — sorry, our CapEx guidance for 2024, we say less — 16.5% capital intensity ratio or less.

And we say that we’re kind of reducing CapEx by at least $1 billion over the next two years and the — or less. And the at least is basically saying if it gets worse on the regulatory front in terms of some of these rules that we know very well, fibre access, in this particular case, we will do more, and that could be cutting investments in these areas without — and then redirecting monies to growth CapEx and transformation CapEx, and it could be more restructuring, for sure. Like, the 16.5% capital intensity ratio is about $4.1 billion of CapEx planned for this year. And unfortunately, I had actually thought that we’d be at $4.1 billion in 2026, not in 2024 or 2025, when we were kind of anticipating to build to 9 million fibre locations by the end of 2025.

So, we’ve pulled our spending in earlier than planned, specifically because of the regulatory rules and federal public policies. We got to call those out as well. And in the midterm, we can operate this company below that capital intensity, Maher, given the work we’re doing now on our growth and our transformation agenda. I won’t relist them. I went at length at them on — in my opening remarks. So, now let’s go back. On fibre, fundamentally, why — the question we have to ask ourselves is why continue to invest at the pace that we did in 2020, 2021, 2022 and 2023 if we’re going to make investments that are going to enrich the shareholders of our major incumbent telcos and cablecos. I mean, you got to ask yourself at some point, why don’t we just kind of ride on their networks, right?

But ultimately, that would be a terrible outcome for resiliency, network competition, price competition, et cetera. So, yeah, the long answer — short answer is there could be more to come, depending on where this goes. And you didn’t focus on media in your question too much, other than calling out kind of what’s been a slow evolution in the broadcasting environment on regulatory. But, I mean, think about it. We’ve been talking about the need for the same rules for all in broadcasting, domestic and international competitors for years and we’ve still gotten nowhere. We actually had the renewal of our TV licenses until 2026 without meaningful prior consultation, despite the fact that we’re mired in an ad recession and an existential media industry crisis.

We have the CBC that has greater flexibility on their news obligations than we do, despite the fact that we’ve made it very public that we lose $40 million a year on news. Like, we want to deliver news, but we want to find a way to make this work. So, the list can go on, but I’ll stop there.

Maher Yaghi: Thank you.

Operator: Thank you. The next question is from David Barden from Bank of America. Please go ahead.

David Barden: Hey, guys, thanks so much for taking the question. I guess, maybe, Curtis, I think the free cash flow guide was probably the biggest surprise. I just want to make sure I’m thinking about this correctly. If we do a free cash flow walk from 2023, starting at $3.14 billion and we add a $500 million CapEx reduction tailwind, we add a $300 million midpoint guidance EBITDA increase and we subtract the $400 million of severance, and then we subtract $300 million of higher interest expense, we get to about $3.25 billion. So that suggests that there’s at least a [$0.25 billion] (ph) more incremental stuff, I guess that would be taxes and working capital. Could you kind of address the gap there? And I apologize to Thane for asking a related question, which is if your free cash flow is $3 billion and your common dividend is $3.5 billion and your preferred dividends are $200 million, we’ve got a pretty huge gap there. When do we close it? Thanks.

Curtis Millen: Great. Thanks for the question, David. So ultimately, we continue to drive free cash flow growth while we’re funding generational investments in our network. There are growth initiatives that Mirko talked about that we’re funding, that’s cloud and security services and all the digital transformation projects. As Mirko said, we were looking to spend more than $4.1 billion, but $4.1 billion still remains a pretty significant level of investment. I’d say it’s not a surprise. 2024 is a transformational year given the scale of our workforce reduction. So that’s $400 million of severance. That’s an exceptional one-time drag on free cash flow. As you mentioned, I mean, there are a couple of one-time timing issues here in terms of working cap, driving some pressure in 2024.

One example is we’re building out broadband — fibre and broadband [sub-seg] (ph) regions. So, we incur those costs and then we get refunded by the government. But there is a timing gap there. Again, it’s just a matter of time, we do get the money back, but it causes a pressure in 2024. And then, again, as you noted, interest paid is quite a step-up this year, given interest rates and the bigger balance sheet. So, there are a handful of moving pieces. But ultimately, we’re pretty confident in our ability to drive free cash flow growth. And our dividend at this level is supported by the free cash flow growth we’re going to push forward this year.

David Barden: Thanks.

Operator: Thank you. The next question is from Stephanie Price from CIBC World Markets. Please go ahead.

Stephanie Price: Good morning. Thank you. Just following up on the last question, I was hoping you could talk a little bit about the longer-term outlook for dividend growth. Do you see 3% as the new normal here, or is it more of a near-term impact from the restructuring? How should we think about dividend growth going forward?

Mirko Bibic: We’ll assess that, Stephanie. Hi, it’s Mirko. We’ll assess that year by year, of course. Look, we’re always going to use funds available to us in a balanced manner in line with the priorities I outlined in my opening remarks. So, dividend growth remains number one this year. For this year, the 3% is absolutely appropriate, particularly given where our dividend yield sits at right now. And then, we’ll always balance that against the growth CapEx that I’ve talked about, the transformation CapEx I’ve talked about. There might be some smaller-scale M&A opportunities that come up. They often do. So that’ll be how we line up our priorities and we’ll reassess it again next year. But I’d say 3% is a solid bump in this environment and it’s still competitive with our peer group.

Stephanie Price: Thank you very much.

Operator: Thank you. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Drew McReynolds: Yeah. Thanks very much. Good morning. So, Mirko, with respect to some of the top-line uncertainty, whether it’s in your control, but a lot of it’s not in your control, including regulatory. Certainly from our perspective, lowering the cost to serve becomes a pretty big protector and driver of EBITDA and free cash flow growth. And I think you’ve alluded to that certainly in your opening comments. Can you just speak to how you’re lowering the cost to serve kind of programming — program beyond 2024, and in that, just where do you kind of stand on copper decommissioning for this year, and what should we expect over the next few years? Thank you.

Mirko Bibic: Yeah. Thank you for the question. So again, as we line up how we’re going to spell — spend our capital most efficiently, you got kind of dividends on one side, then, yeah, you got network expansion, which unfortunately is at a significantly reduced pace, but that’ll continue. And then, it’s a question of allocating the rest as between kind of, what I’ve been calling this morning, the growth CapEx and the transformation CapEx and the right mix there. And as we invest more in the transformation of Bell, we’re able to get more efficient with our CapEx dollars over time, and of course, drive costs out of the business and drive growth. So, some examples, and I’m repeating a little bit what I said in my opening remarks, but it’s important.