BCE (TSX:BCE) Q2 2026 Earnings Call

0:00 Good morning, ladies and gentlemen. Welcome to the BCE Q2 twenty twenty six Results Conference Call. I would now like to turn the meeting over to Chris Summers. Please go ahead, Mr. Summers. Thank you. 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 Millet. You can find all our Q2 disclosure documents on the Investor Relations page of the bce.ca website, which we posted earlier this morning. Before we begin, I'd like to draw your attention to our Safe Harbor statement on Slide two, 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.

0:46 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 out of the way, I'll turn the call over to Mirko. Thank you, Chris, and good morning to

1:02 all. Our Q2 results show continued execution against the strategy we laid out at Investor Day last year. Consolidated revenue increased 1.5%, adjusted EBITDA grew 1%, and we generated more than $1,000,000,000 of free cash flow in the quarter. We also reduced our net debt leverage ratio to approximately 3.7x, while continuing to invest in the growth platforms that will shape BCE's long term profile. The quarter also reflects progress across a number of key areas. Wireless trends improved with pricing better reflecting the value we offer customers, postpaid churn reaching its lowest quarterly level in three years and improved product margins. Fiber continued to drive Internet growth across Canada and The U. S.

1:48 Bell AI Fabric continued to build momentum, and Bell Media delivered a strong quarter supported by FIFA World Cup performance and continued growth at Crave. This is exactly how we said we would run the company: disciplined execution in the core business, focused investment in higher growth opportunities and a clear path to sustainable free cash flow growth. In fact, we've led the industry for the past couple of years in bringing down Canadian telecom capital spending in the face of unfavorable regulatory decisions, while at the same time redirecting that capital toward AI Fabric and U. S. Fiber. I'll start on Slide three with our progress against the four strategic priorities we outlined last year. Putting the customer first remains foundational. In Q2, the customer experience and retention initiatives we've executed over the past year and even before that continued to pay off.

2:40 Postpaid churn improved four basis points year over year to 1.02%, which is the lowest quarterly level in three years. And in a lower growth market, that matters. We also launched our always on Internet solutions, wireless Internet backup and power backup. These are practical solutions that help customers stay connected when Internet service is disrupted or the power goes out, and they reflect how Bell's network assets can work together to deliver a more resilient experience. That focus on reliability and performance is also being recognized externally. During the quarter, Bell received leading network recognition from OpenSignal, Rohde and Schwartz and Ookla, including Canada's most reliable Internet, Canada's fastest five gs plus network and a suite of 10 Ookla speed test awards.

3:30 Now turning to our second priority, delivering the best fiber and wireless networks. You see that fiber continued to drive growth in the quarter. In Canada, we added more than 45,000 residential FTTH Internet subscribers. Including Ziply Fiber, total residential FTTH net adds were nearly 55,000, which contributed to 14.2% Internet revenue growth. Where we have fiber, we continue to win. That's been consistent. It's consistent in Canada and now in The U. S. As well. At Zipply, the focus remains on build execution, as we mentioned as early as the beginning of this year and reiterated in May of this year. Permit submissions accelerated significantly through Q2, increasing more than fourfold from April to June.

4:19 Contractor capacity and fiber supply are in place to support this expected second half build ramp and penetration trends remain consistent with our investment case. In wireless, we delivered more than 41,000 postpaid mobile phone net adds, comprising significant loading on the main Bell brand, consumer share, which is in line with our peers, and we saw improved performance in the large enterprise segment. This reflects our focus on higher value customers, lower handset discounting and a healthier recurring revenue mix across all customer segments. Video also remains an important part of the household strategy, of course. Video net adds improved by roughly 24,000 year over year, driven by strong uptake of streaming bundles and a successful transition to hardware free TV. Again, these are things we said we were going to do at Investor Day last October.

5:15 And if you combine that with fiber growth and adoption of Bell's own streaming and content services, you see support and continued momentum in product intensity on the full service Bell brand. We also completed construction of our first sovereign direct to device satellite ground station in Quebec with additional ground stations underway as we build the infrastructure to extend wireless connectivity beyond the reach of traditional networks through our AST partnership. Turning to our next strategic priority, which is leading an enterprise with AI powered solutions. This remains one of the clearest examples of how we are repositioning Bell for growth. We're bringing together cloud, cybersecurity, AI adoption, data sovereignty, connectivity, and AI infrastructure for enterprise and government customers.

6:03 This is where Bell's enterprise relationships, national networks and AI capabilities come together. In Q2, demand for ATTCo and Bell Cyber remained strong with combined revenue up 29% year over year. Again, clear proof of underlying momentum in AI powered solutions. At the same time, Bell AI Fabric continues to move from announcement to execution. Saskatchewan remains on track with construction progressing at the 300 megawatt facility and first phase operations expected in the first half of twenty twenty seven. The facility in Winnipeg is on track to enter service in the second half of this year and Merit Phase two, which is supported by the Cohere, Buzz HPC and Hypertech partnership across AI models, GPU infrastructure and Canadian built hardware, that facility Phase two expected in early twenty twenty seven as well.

6:59 Turning to the last of our four strategic priorities, which is building a digital media and content powerhouse. The digital strategy, which we've been executing in Bell Media for several years now, continued to show strong momentum in Q2. Cray surpassed 5,000,000 subscribers, growing 23% year over year to 5,100,000, supported by 49 growth in direct to consumer streaming subs. That scale matters because it gives a strong owned and operated domestic platform for premium content, sports and streaming anchored in Canadian storytelling and our commitment to cultural sovereignty. FIFA World Cup twenty twenty six was a major highlight this quarter, of course.

7:44 Our live coverage reached 30,500,000 Canadians across TSN, RDS, CTV, Nouveau and Crave, with millions more through FIFA programming across our platforms. The tournament's final in July became the most watched World Cup match ever in Canada, with an average audience of 6,400,000 viewers. Matches also consistently ranked among the most watched content on Crave. More broadly, premium content becomes more valuable as we monetize it across the full Bell Media ecosystem and increasingly through global content distribution. In Q2, digital video advertising revenue grew 39% year over year and total digital revenues were up 6%.

8:31 That reinforces the monetization opportunity we continue to see from this strategy. Overall, Q2 reinforced the strategic role Bell Media plays inside BCE, premium content, growing streaming scale and stronger digital monetization, translating into 8.9% revenue growth and 3.8 adjusted EBITDA growth in the quarter. Now I'll move to Slide five because I want to come back to Bell AI Fabric and show the physical progress we're making on the ground. Saskatchewan is the anchor project. Since our Q1 call, piling has been completed and structural steel work is underway at our 300 megawatt facility. Key construction partners are in place and the first phase remains on track for operations in the first half of twenty twenty seven.

9:22 We now have approximately three thirty five megawatts of contracted capacity, real facilities, real construction milestones, real customer commitments, all supporting the long term AI powered solutions growth platform we're building. Turning now to Slide six. This is the scorecard we introduced at Investor Day to track whether the strategy is translating into deeper customer relationships, stronger monetization and sustainable growth. Q2 shows continued execution against that road map. We're focused on the operating drivers that support long term revenue, EBITDA and free cash flow growth. And before I close, I want to thank the Bell team.

10:07 The results we're sharing with everyone today reflect their focus on serving our customers, growing our business and executing against the transparent plan. Curtis will now take you through the financial and operating results in detail. So Curtis, over to you now. Great. Thank you, Mirko. Good morning, everyone. I'll begin on Slide eight with BCE's consolidated financial results. We're pleased with our results, which reflect continued execution against our plan, balancing measured investment with a clear focus on returns and free cash flow. Total revenue was up 1.5% year over year in Q2, driven by the contribution from Ziply Fiber and growth at Bell Media. Adjusted EBITDA increased 1% driven by Ziply Fiber with Bell Media also contributing positively.

10:57 Adjusted EBITDA margin was essentially stable at 43.8%. Adjusted EPS was up $02 to $0.65 supported by higher adjusted EBITDA and the absence of certain non cash mark to market losses on FX hedges and options recorded in Q2 of last year. CapEx was up $317,000,000 year over year, reflecting Zipply Fibers fiber buildout in The US and capital investments to support Bell AI Fabric. Putting aside the highly accretive AI Fabric investments, our Canadian telco CapEx declined year over year, consistent with the disciplined multi year reductions we've been executing.

11:40 As shown on the slide, the majority of expected 2026 Saskatchewan AI data centre CapEx of approximately $1,300,000,000 is to be incurred in the second half of the year. Consistent with the structure we outlined in March, we received our first tenant payment on the Saskatchewan facility in the quarter, part of the approximately $400,000,000 in setup fees and prepayments that partially offset the build cost of the facility.

12:08 Free cash flow was over $1,000,000,000 in the quarter. While down year over year due to higher CapEx, this was a strong result and is tracking consistent with our full year '26 guidance. Overall, in Q2, we delivered revenue and adjusted EBITDA growth, generated strong free cash flow and continued to fund targeted growth investments in Zipline Fiber and Bell AI Fabric.

12:36 Turning to Bell CCS Canada on Slide nine. Starting with a high level summary of Q2 sub metrics. We delivered 41,594 postpaid mobile phone net adds in the quarter. So it's modestly lower year over year, reflecting less active market and reduced promotional intensity compared to Q1.

12:59 Postpaid churn improved four basis points year over year to 1.02%, the lowest quarterly level since Q2 of twenty twenty three. The improvement reflected lower customer switching activity in the quarter, together with the continued benefit of our customer service and retention initiatives.

13:19 ARPU was relatively stable year over year, down approximately dot 2% without the impact of G7 summit related revenue in Q2 of last year. Importantly, the monthly recurring charges component of ARPU increased dot 7%, supported by higher quality loading and a healthier recurring revenue mix with improved transaction rates quarter over quarter and year over year.

13:45 In broadband, residential FTTH Internet net adds were 45,271, a strong result. Demand for fiber remains strong and fiber continues to be the anchor of our household strategy.

14:01 Video also continues to improve with 8,741 net adds compared to a net loss of 15,851 in Q2 of last year. The improvement was supported by strong uptake of streaming models and a successful transition to hardware free TV, reinforcing the product intensity strategy we outlined at our Investor Day.

14:25 Turning to the financial results for Bell CTS Canada. In Bell Business Markets, underlying revenue grew approximately 3.4% year over year, supported by continued momentum in AI powered solutions, including Ateco and Bell Cyber. On a reported basis, EBM was lower, reflecting two nonrecurring items in Q2 of last year. Revenue from the Mission Flats AI data center in Kamloops, BC, which was recognized upon delivery under finance lease accounting, as well as G7 Summit related revenue.

14:59 Wireless service revenue also affected by the G7 Summit in Q2 of last year. Without that impact, wireless service revenue was stable year over year. Wireless product revenue was down 6.6% year over year, reflecting our focus on healthier product margins, which drove fewer contracted mobile phone sales.

15:20 Lower product revenue also reflected a Q2 market shift towards BYOD activations and fewer device upgrades. We'll continue to maintain discipline on hardware discounting, given our focus on product margin improvement, ARPU growth and service revenue growth. To address affordability, we'll leverage device residual programs and trade in rather than hardware discounting.

15:45 Our adjusted EBITDA result was in line with plan. Notably, margin improved 40 basis points over last year to 46.1%. This reflects our continued focus on cost management with operating costs down 4.7% this quarter.

16:03 Turning to Bell CTS US on Slide 10. Zibily remains focused on build execution and fiber penetration. Build activity is expected to increase significantly in the second half of the year. Local permit submissions accelerated through Q2 and the broader readiness work is progressing across state approvals, engineering, contractor capacity and fiber supply.

16:27 For expansion markets, state level approvals have been obtained for approximately 75% of the twenty twenty seven location funnel. And high level engineering is complete for approximately 60% of those locations. On subscriber performance, Ziply delivered its highest quarterly residential net adds since BCE acquired the business at 99,600. Where Ziply has fiber, penetration continues to track the business case.

16:58 Revenue was broadly stable sequentially as fiber growth in consumer and small business was offset by ongoing legacy copper and voice declines and wholesale pressure. Adjusted EBITDA was $95,000,000 representing a 40.6% margin. The margin reflected higher subscriber acquisition activity associated with stronger internet net adds. We're comfortable making that investment given penetration trends.

17:23 Key point is that the fiber's thesis remains intact. Where Zipline has fiber, it is winning customers, and the work needed to support the second half build ramp has advanced. Over to Bell Media on Slide 11. Continued digital momentum and strong overall financial performance marked the quarter. Total revenue up 8.9% and adjusted EBITDA up 3.8% year over year.

17:49 Revenue growth was driven by strong FIFA World Cup performance and continued Crave growth, with additional contribution from the Formula One Canadian Grand Prix and higher program sales. Advertising revenue increased 5.3% supported by strong FIFA advertiser demand. Subscriber revenue was also up. It was up 6.7% driven by continued D2C streaming growth.

18:15 Crave subscribers grew 23% year over year to reach 5,100,000 subscribers, with direct to consumer streaming subs up 49%. Digital video advertising revenue also grew 39%, reinforcing the progress Bell Media is making in streaming scale and digital monetization.

18:38 Adjusted EBITDA growth reflected the flow through of higher revenue despite higher content and event related costs associated with FIFA, Formula One Canadian Grand Prix and other premium programming. In short, a strong quarter for Belle Mignon.

18:54 Turning to the balance sheet on Slide 12. We ended Q2 with $4,600,000,000 of total available liquidity, providing significant financial flexibility to fund our capital allocation priorities. Our reported net debt leverage ratio improved to approximately 3.7 times at quarter end, down about 0.1 times since Q4.

19:16 As part of our ongoing focus on balance optimization, we completed public debt offerings totaling $2,500,000,000 in June and repurchased debt securities trading below par value through tender offers. Together with growth in adjusted EBITDA, these actions contributed to the improvement in net debt leverage. Our defined benefit pension plans remain in very strong position, solvency surplus of approximately $4,900,000,000 and an aggregate solvency ratio of approximately 125%.

19:48 Looking ahead, the pending disposition of our land mobile radio network service business is expected to provide additional support for deleveraging. We remain on track to achieve our target net debt leverage ratio of 3.5 times by the end of twenty twenty seven.

20:07 Turning to Slide 13, we are reconfirming all of our 2026 financial guidance targets. We remain focused on executing the plan we laid out at Investor Day, delivering revenue and EBITDA growth, focused execution across our core telecom business, funding our key growth priorities in Bell AI Fabric and U. S. Fiber, generating meaningful free cash flow and progressing towards our 3.5 times leverage target by the end of twenty twenty seven. With that, I'll turn the call back over to Chris and the operator to begin Q and A. Thank you, Curtis. Before we start to keep the call as efficient as possible, please limit yourselves to just one question and a brief follow-up so that we can get to as many in the queue as possible.

20:57 With that, operator, we're ready to take our first question. Thank you. The

21:07 first question is from Mayor Yaghi from Scotiabank. Please go ahead. Great. Thank you for taking my question. Curtis, I wanted to ask you in terms of the spend on Saskatchewan,

21:23 you mentioned that to expect a ramp in the second half. Just wanted to ask you, on the last call, you mentioned that the ramp is going to be Q2, Q3 mostly. Now it's Q3, Q4. Can you maybe just help us understand why CapEx has been pushed out a little bit further down the year?

21:49 Is that timing on payments or timing on construction changes?

21:55 Yeah. Hi, Mehret. Thanks for the question. No change to construction timeline. This is a recording of CapEx when we actually spend the money. So we've ordered the vast majority of the equipment. I mean, the construction is pay as you go, but the the vast majority of equipment has been ordered, but the CapEx will be reported when the cash is actually being spent. That's less in Q2, more in Q3, Q4. So again, no change in timing.

22:25 Just about all the materials, all the equipment has been ordered with delivery schedules that are on time with our overall project, penalties for late delivery and in line with our budget. Okay. That's great to hear. Thanks for that clarification. So just turning to Ziply now.

22:48 My follow-up question is on the ramp in the second half. Now obviously, it looks like we should expect fiber deployment to ramp in the second half and going into next year. You have been adding quite a few subscribers since you started disclosing results.

23:10 I'm looking at 5% subscriber growth in fiber since Q4. But the revenue line is essentially flat. So the whole concept of Ziply is to provide you with revenue growth and EBITDA growth over time. But I want to focus just on the revenue growth angle here. So

23:36 do you expect the ramp in the second half to contribute to reaccelerating the revenue run rate of Zipline?

23:47 And when should we expect that growth to be visible? Because over the last three quarters, top line is essentially flat. So you got legacy decline offset by broadband growth. So I'm trying to focus on the top line, please. Yes. Hi, Mehran. Thanks again for that question. So ultimately, at Zipline, look, we're quite happy with the progress. The build is ramping up as you mentioned, you know, it's permits, it's it's hard hats, it's it's actually doing the building, and that continues to ramp up as you've seen in our CapEx spend. And as you said, that'll continue to wrap up ramp up back half of the year and then through into next year also. It's a continued ramp up. So, you know, what the team at Zipply Fiber has been really good at is where there is fiber, they are driving subscribers.

24:40 So penetration rates on new fiber exactly in line with historicals and with plans. So again, where they have fiber, they drive subs, subs drive revenue. So the goal and and frankly, the biggest driver of long term value for for our shareholders is continuing to drive that build and continuing to load fiber net adds. And in that part, quite successful. I'd say gross adds on fiber were up 25 quarter over quarter. So, you know, obviously, you have to spend the COA and it's a small base, but, you know, I'll take that temporary margin pressure for future revenue growth. I think that's a very good trade. And then, yeah, as you said, it's a small base. So if there's a you know, this quarter, there was a heavier wholesale contract renewal than than normal, and it has an impact on on overall growth rates because it's still such a small base of revenue and EBITDA. But again, for us, what we're really focused on is build the footprint, drive fiber penetration and the financials flow from there. So again, we're seeing ramp up and as we've kind of disclosed repeatedly, this continues to ramp up back half of the year.

25:56 Okay. Thank you. Thank you. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead. Yes, thanks very much. Good morning. On the wireless side, a pretty good set of results considering a low volume environment, at least from my perspective. Just wondering if there's any unusual kind of dynamics in the quarter just given all the sporting events. I'm assuming no. So the question really is, can you provide an update on just how the bundling strategy is working, the premium brand strategy is working and what should we expect for wireless ARPU network in the back half?

26:45 And then second question to the data center side in the deck, you alluded to line of sight on 800 megawatts. Obviously, we've known that for a while. Just wondering if there's any update on, that roadmap as we go from roughly 400 megawatts up to the 800? Thank you. So Drew. Good morning. So on the second one, still really, really kind of positive momentum across all the AR powered solutions businesses. But on AI Fabric, specifically, same goes. Funnel is very strong. So when we've got more to announce, we'll obviously do that, but well on track and remain quite confident in the ability to monetize in a reasonable period of time, well more than the three thirty five megawatts that you already know about.

27:38 On wireless, kind of wireless writ large, I say we're feeling that there's good industry momentum. And within that, we feel quite good about how we're executing, certainly in accordance with plan. So I'd say you've seen in the back half of Q2 strong quarter over quarter pricing improvements and strong year over year pricing improvements, which have continued into July for sure. And again, as I said in my opening remarks, that's a good thing because it's far more the pricing we're seeing now is more reflective of the significant value and the significant investments that the entire industry frankly is delivering to consumers.

28:33 So that's one thing. Within that, we are going to remain uber focused on profitability. And so what are the key drivers there that we need to look at? ARPU, in our case, very stable ARPU if you normalize for the impact of the G7 Summit last year. For sure, same thing with wireless service revenues. On product revenue, you're seeing kind of good numbers there in the sense that you can see it's pretty obvious that we're focusing we're being very disciplined on hardware discounting. And that's what, frankly, the industry has to get back to ARPU and service revenue growth. And that's what's going to allow us to continue to invest in the networks and in experiences that are going to drive value for consumers and, of course, correspondingly and importantly for our shareholders.

29:29 So that's where we're gonna remain focused on, Drew, and that goes with product margin improvements. An example on hardware discounting, rather than leaning leaning into hardware discounting to address affordability of devices for consumers, what we'll be doing is using trade in programs and device residual programs. And that that's how we're going to address, kind of the pro consumer agenda and enhancements all while remaining focused on profitability. So I hope that answers, the question that the the underlying numbers there are pretty strong. What you see in terms of the net adds, good consumer numbers in line with kind of industry trends, and we've had strong performance in Q2 in the enterprise segment. And I think you referred to kind of the onetime impacts of sporting events. I thought you might have said that. The numbers that you see aren't reflective of anything unusual as a result of sporting events.

30:32 That's great. Thank you. Thank you. Our next question is from Stephanie Price from CIBC World Markets. Please go ahead. Hi, there. It's Sam Schmidt on for Stephanie Price. I wanted to follow-up on the data center opportunity. A number of U. Data center peers announced significant increases in CapEx this earnings cycle given demand tailwinds. Can you talk a bit about Bell's pipeline here and your appetite to spend more heavily on CapEx if the demand for the data centers is there? Thank you. Yes. So our our folk thanks for the question. Our focus remains on, first of all, executing against the build of for the data centers we've already announced, and and the primary one there is Saskatchewan.

31:17 And as Curtis mentioned, we're on plan there across all metrics, including CapEx spend. And more broadly, in terms of strategically, we are deploying capital as a company where we have structural advantages. And in the case of data centers, it's power, network infrastructure, enterprise relationships, artificial intelligence, and that's how we're gonna drive greater shareholder value over the short, medium and long term. And again, no surprises. We do exactly as we say. We've been very, very transparent that we have line of sight to 800 megawatts of power, three thirty five megawatts already contracted. And as we contract more, we'll as we get from the three thirty five megawatts to the 800 megawatts, we'll be funding it.

32:10 And on that front, again, it's been very, very consistent messaging, and we'll continue to do as we say. And then just one follow-up on the wireline environment in Quebec. What are you seeing in terms of competition from traditional competitors and new entrants? And how are you thinking about potential growth drivers there? Thank you. Yes. Thank you. We're much like it's a little bit my answer on wireless is kind of similar to the answer I gave to Drew on wireless. So my answer on wireline is similar to the answer I gave to Drew on wireless. We're seeing kind of pricing across the board, Quebec or otherwise, that's more reflective of the tremendous value we're providing to consumers.

32:58 And then of course, within that as ourselves, we're quite satisfied and happy right now with how we're executing. And, the multiproduct focus on the premium Bell brand is working. And, for us, it's working because, you know, we do have the superior broadband network in fiber, so that certainly helps. We've made some tremendous improvements in our video offering with hardware free TV and the streaming apps and the bundling, which is very attractive to consumers based on the take up rates that we're seeing. You're seeing a lower churn as a result and our product intensity stats are continuing to improve as we signaled they would when we held our Investor Day.

33:47 So the key touch points are headed in the right direction. And I'll end my wireline answer exactly how I focus my wireless answer, which is our focus as a company is improving the profitability of the connections we get to the wireline business. That's helpful. Thank you. Thank you. Our next question is from Vince Valentini from TD Securities. Please go ahead. Hey, thanks very much. I'll focus on wireless. So a couple of questions about the outlook trends. I appreciate your comments on price discipline. But if you put together everything you're seeing in the market of the bad pricing, if I call it that, in Q1, the better pricing in Q2, and then the activation fees, to the extent that will have some impact in Q3, do you think wireless ARPU is still trending towards flattish?

34:51 Do you have any prediction as to roughly when that happens? And do you think Q3 could get a bit worse with the activation fees falling off? Or have you found a way to offset that? Secondly, on wireless, there's some chatter about a reasonably large government contract that they have shifted this quarter. Wondering if you can try to clarify that. What does that mean? Is that a material portion of your your postpaid ads this quarter? Yes. On the second one, it's that that's what I was alluding to, Vince, when I when I give the earlier answer to to Drew's question. So if you unpack our wireless net ads, in there is a reflection of enterprise contract one.

35:36 But even parsing that out, our net adds otherwise are very, very much in line with our peers. And in fact, if those were the only numbers we'd be reporting, you'd you know, we'd we'd be quite quite satisfied. So in line with our peers on wireless postpaid net adds, even excluding the government enterprise contract that you referred to. In terms of ARPU and service revenue and kind of predictions, I certainly appreciate the spirit of the question. And I think rather than start predicting when things, you know, or exact exact point in times when when we're gonna see this type of growth or that type of growth, I'd rather just focus on continued stability rather than getting into prediction game on timing.

36:37 The competitive environment seems to have normalized certainly for a number of weeks now. We expect that improving trend to resume certainly as we remain focused on profitability where the fundamentals are looking solid right now. And that's the case in the back half of that was the case in the back half of Q2 and certainly in the beginnings of Q3. So let's focus on the key drivers that will allow that to continue to improve rather than making predictions because if we do that, it will obviously show up in the reported results, I presume across the industry and that's a decidedly good thing. I just clarify also, Curtis, how much of the $400,000,000 of tenant prepayments was received in the second quarter? And I assume that's flowing through working capital?

37:32 Vince, call it in around a quarter of that $400,000,000 just below 100 And that that is showing up in free cash flow. In your free cash flow, is it in the working capital line or the CapEx line? Yes. The working capital. Thank you. Thank you. Our next question is from Tim Casey from BMO Capital Markets. Please go ahead. Thanks. Could you just flush out a little bit more this concept of the line of sight to 800 megawatts, no new announcements, but where do you where should we expect that to show up in terms of both timing and geography?

38:22 I mean, it sounds like as you said, your funnel is very attractive. But could you just give us a little more color on that environment and how those discussions are proceeding with potential partners? So in the so so 335 contracted already. The the long well, the the investor date horizon plan the the plan to 2028 assumes three seventy three megawatts will be contracted. So that would be that means that today, we're at 90% contracted for the plan. To the extent that we can pull more in, we will, but you have to reflect in that the fact that if we, let's say, enter into a new contract for additional megawatts in late twenty twenty seven or early twenty twenty eight, the ability to generate meaningful revenues within in year 2028 would be very difficult to do because there is a build timeline.

39:28 So for now, let's just stick to we've got three seventy three megawatts in the medium term plan, three thirty five already contracted and being built. And to the extent we can pull more in, we'll certainly try to do that. And geographically, it's kind of as we said or maybe the best way to answer that question, Tim, is to go back to May 2025 when we launched AI Fabric. And we said then that our vision and our plan was to build a national ecosystem of interconnected interconnected AI data centers. And that means that we have, you know, a vision where we would have data centers across multiple jurisdictions in the country. Of course, we've already got Manitoba, BC, Saskatchewan and there'll be more to come in other provinces.

40:20 Thank you. Thank you. Our next question is from Jerome Zubre from Desjardins Securities. Please go ahead. Hey, thanks. Good morning. First one I have is, can you share your views about whether long term foreign satellite operators have a shot at competing with key in wireless operators? If you can describe why it may or may not be possible in your view. Thank you, Jerome. I'll give you maybe a shortish answer on this. We view satellite as being complementary to our networks, and that's a structural conclusion. I'm giving you an answer that's grounded in physics. So in the markets that generate the vast majority of our revenue, as you know, and that's kind of where we have fiber and dense wireless, Those networks are in a completely different league of capacity, on speed, on economics. And, you know, satellite doesn't change that, and more satellites in the sky, we don't change that.

41:21 And, like, fiber has four times download advantage over satellite, 13 times upload advantage over satellite, five times better latency, and that's in rural, that's in urban. So where we have those networks, we have the distinct advantage. So that's that's the first part. Secondly, I'd say Canada is structurally different than some other countries. We have different spectrum availability, and our allocation policies are different here than in other jurisdictions. And the third thing I'd say is, you know, we're quite pleased and continue to be focused on our AST partnership, which we'll use to extend coverage where terrestrial networks, whether those are fiber networks or terrestrial wireless networks, don't provide the coverage that consumers need. Great. Thanks.

42:10 Second one is on Zipline. Maybe on the margins, wondering if there were some near term headwinds in the quarter on margins or is there an impact from the high competition we're seeing in The U. S? Thank you. Yeah. Hi, Jerome. Thanks for the question. In terms of the second part of your question, in terms of pricing, no, we're not really seeing either an impact sorry, you're kind of asking what cable pricing in marketing competitive intensity, and it's not changing our ability to drive penetration load subs on fiber. Those penetration rates are have been pretty consistent, and it's not changing our ARPU relative to our base either. So stable stable ARPU and stable ramps in penetration.

43:02 In terms of the margin, it's what I talked about earlier, Jerome. Right? So it's loading when gross adds are up 25% on a small base, the the COA expense increase has an impact on margins and and the flow through on on wholesale rerate. Alright, thanks. Thank you. Our next question is from Sebastiano Petti from JPMorgan. Please go ahead. Hi, thank you. Just kind of zipping there for a second. So the build activity is expected to increase in the second half here. You talked about permit submissions accelerating through the quarter. But maybe just back up and help us think, I mean, what has been the constraining factor in the build to date? Is it the submission of the permits?

43:51 Is it pushing the permits through the approval process? Because just trying to draw, you know, a conclusion from the acceleration of permits. Does that mean that approvals will also therefore accelerate? So just what's the constraint factor there? And then just back to the Bell AI fabric for a moment. Any update on, I guess, just sovereign workloads and, like, what are you hearing there particularly as it pertains to, you know, Saskatchewan, right, and implied upside to some of the financials you've laid out? And then in regards to the Merit Phase II, should we anticipate as that comes online, will be another finance lease, onetime payment? Thank you. No. Merit Phase II will be an operating lease and therefore not a onetime finance lease impact.

44:36 On Okay. On sovereign workloads, I think sovereign, you know, sovereign workloads are probably a kind of midterm upside to our plan, given kind of the the long lead times on on on some of that demand. But in the meantime, frankly, we're just focused on monetizing the megawatts and the capacity we have available. So the sovereign upside and the timing as to when that comes is an impediment at all to executing against the plan that we've been transparently sharing with you. And as far as Zip Li is concerned, I think the the the main point here that that I wanna reiterate again is, you know, back in February of this year when we reported q four twenty twenty five, we kind of transparently laid out that 2026 was gonna be a build reset. We reiterated that again in in May. So very, very transparent.

45:39 No surprises. Now we're sharing with you that there's momentum building on the kind of the the the the build plan. And I think the key thing here, Sebastiano, is what's fundamentally different. There are two things, but one of them that's fundamentally different is we're now in the growth phase, a different growth phase for Ziply where we're starting to build out of incumbent territory. So that that requires different sets of, you know, planning, and and we're well on our way on that. So we're talking about permit submissions being up four times from April to June. Our state level approvals have been obtained for 75% of the 2027 location funnel because you also need state approvals, then you need the more local permit approvals.

46:29 We've got high level engineering complete for 60% of the kind of 26 and twenty twenty seven funnel. We've got the contractor, contractor secured and the fiber supply secured for that funnel that we're getting approvals to build. So that's all work that takes time, and the gating item there was we're out of territory. And I shared on the on the previous call kinda how we we adjusted the method of building even in territory. We're taking a more portfolio approach to the build even in territory, which is the way BCE has been doing it in Canada in order to more efficiently build at scale. So we readjusted with the Ziply build team even in territory, the approach we're gonna take to build. So it was kind of a take a step to the side in order to speed up.

47:23 And no surprises here. I'm I'm really quite pleased with the momentum that we're starting to build. And for me, the focus is less on, you know, what happened in q two, and it's more is the funnel looking, you know, positive here so that we can start ramping at the back half of this year, gain even more momentum in 2027, and get to the 3,000,000 in 2028. And I'm feeling positive about that part of it. Thank you. Thank you. Our next question is from Aravinda Galappathige from Canaccord Genuity. Please go ahead. Good morning. Thanks for taking my question. I wanted to come back to sort of the balance sheet a little bit.

48:10 Obviously, you're waiting for you to close on the land mobile networks transaction. Michael and Curtis, maybe is there anything else that's out there in your portfolio that has sort of emerged? I mean, how should we think about sort of the prospects for additional divestitures? And then a quick follow-up on sort of the Canadian the Bell's CTS numbers. The with respect to the onetime items, the Mission Flats finance lease and the G7 item, how did that impact the EBITDA, which was down, I think, point 1%? Trying to get a sense of what would have been a more normalized number for that decline. Yes. I'll let Curtis answer the second one.

48:55 I'll answer the first one. I think that the most the the best answer is to give you a short one on the first one. You know, a a year and a half ago, we outlined that we plan to generate $7,000,000,000 in proceeds from dispositions, noncore asset dispositions. We're at 6,600,000,000, so well on track. And the second part of the answer is we're gonna we're focused hyper focused on the three dot five times leverage ratio by the end of twenty twenty seven, and we're gonna hit that. And so it's probably the most effective way to answer your question, Aravinda. Over to you, Curtis. Yeah. And clearly, just to pile on, in my role that, like, the three dot five leverage target is obviously something we're gonna hit. So we'll we'll we'll make our way there. And then in terms of Mission Flats, obviously, a year ago, there was onetime revenue is about a $100,000,000, pretty good flow through, and g seven was, you know, we didn't give specific numbers, but in the mid $30,000,000 of revenue.

49:59 So, you know, quite a quite a big impact sequentially. That's very helpful. Thank you. Thank you. Our next question is from Matthew Griffiths from Bank of America. Please go ahead. Good morning. Thanks for taking the question. Two, just on timing. With the Saskatchewan data center, the first half, one of the next year, one of the first phases we will get, I guess, start generating revenue. Sorry. What is the what pace should we expect for the following phases? Is it like a month between phases or is it more like a quarter that we should expect the subsequent phases to start being delivered?

50:52 And again, sort of on timing, I'm really looking for when the PSP partnership, the Network Co kind of partnership in The States might start to play more of a role with a view to when CapEx consolidated CapEx for Bell could potentially start to trend lower. What is the can you share any timing on when their participation in the build could ramp up and your in footprint participation in the build kind of starts to ramp down? That would be just helpful. Thanks. Yeah. Hi, Matthew. Thanks for the question. It's Curtis. So on the second question in and around network fiber co, so you're right. I mean, the the funding doubled in q two versus q one, but it's still $1,920,000,000 dollars of NFC. So what you're seeing happening is exactly right. We're we're we're spending and we're reporting CapEx at the Ziply level, which will ultimately be transferred into network fiber code and will reduce our our go forward equity contributions.

51:59 Again, the whoever has the permits and approvals has to do the building, and we didn't wanna slow down our access to the fiber footprint to drive our value for shareholders. So Ziply is doing more of the building as you pointed out that we would be doing that we will be doing going forward. So it's it's really just a steady ramp of time where more and more of the footprint being built was actually secured on permits and approvals by NFC. So just kinda naturally over time, more of that will be on on NFC paper. And on the first on the first question around the Saskatchewan data center build, I'd rather not get into specific kind of months. I I'd say there's four data halls that we're gonna build building, two data halls each. We have two tenants, two data halls for each tenant, and we'll sequentially be making those data halls available to our tenants.

53:04 So don't think of months apart. Maybe it's more kind of gaps by quarters. But by the end of twenty twenty seven, we'll be at full run rate on the revenue generation across the four halls. Okay, great. That's very helpful. Thank you. Thank you. The next question is from Batya Levi from UBS Financial. Please go ahead. Great. Thank you. A follow-up on Zipline. Could you put maybe some numbers around the fiber build, where you expect to end the year and how many homes do you expect to build next year? And the revenue growth question, you mentioned that pricing has been pretty firm.

53:49 There's a wholesale step down. All in, do you still expect U. S. Zipline revenues to grow double digits? Thank you. Hi, Bhatia. It's Curtis. So in terms of LPs, we're still on track to hit 3,000,000 by the end of twenty twenty eight. So we won't get into kind of quarterly or end of this year type LPs. Obviously, we'll disclose that going forward, but I don't want to speculate here and give away too much strategic information in terms of our our build plan. And then in terms of revenue, yeah, look, it all flows from building fiber, which is why we are kind of consistently focused on the the fiber build plan because, again, the team has demonstrated they can they can drive subscriber acquisition once they have fiber. So again, we're a bit of a broken record here, but building out the network is the most important thing for us to to focus on and and, you know, we're we're getting momentum, but we wanna continue to see more and more of it.

54:52 Got it. And I guess in The US, we're also seeing more go to market strategy with converged bundles. Has your view changed in terms of potentially adding an MVNO to drive and inflect growth? Or are you happy with the penetration targets you're seeing? Yes. On that, well, thank you, BCE. We it's the same kind of approach that we're going to take when we see that penetration gains are flat lining and perhaps, you know, a broader offering is needed to get to the next step up in penetration. We'll take a look at it. But as Curtis has shared this morning, our penetration where we have fiber continues to be, you know, exactly in line with historical and with with the business case when we entered into this. So, you know, it's it's looking good. And and we increased gross adds by 25%, which is the number that Curtis shared. So you can see that there's no slowdown in terms of sales in the areas where we have fiber. So that's a very good thing.

56:00 Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Chris Summers. Thank you again for your participation on the call this morning. Richard and I will be available throughout the day for follow-up questions or clarifications. So again, thank you, and have a great day. Thanks, everyone. Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.