Annual Information Form: Bceinc

BCE INC.
ANNUAL INFORMATION FORM

FOR THE YEAR ENDED DECEMBER 31, 2001
APRIL 15, 2002

2001
TA B L E O F CO N T E N T S
Annual Information Form

for the year ended December 31, 2001
April 15, 2002
Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 BCE Emergis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Trade-marks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Note to Reader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Item 1 • Corporate Structure of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Item 2 • General Development of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 BCE Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 BCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Telesat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Significant Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 CGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Item 3 • Businesses of BCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Bell Canada Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Subsidiaries and Associated Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Item 4 • Selected Financial Information (Consolidated) . . . . . . . . . . . . . . . . . . . .39
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Item 5 • Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Bell Globemedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Item 6 • Market for the Securities of BCE Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Item 7 • Directors and Officers of BCE Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
CTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Item 8 • Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Bell Globemedia Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Schedule – Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Bell Globemedia Interactive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Teleglobe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Global Network – GlobeSystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
NOTES:
(1) Unless the context indicates otherwise, “BCE” refers to BCE Inc. and its subsidiaries and associated companies.
(2) All dollar figures are in Canadian dollars, unless otherwise indicated.
2 0 01 B C E A n n u a l I n f o r m a t i o n F o r m 1
Documents incorporated by reference
Part of Annual Information Form in which
Documents incorporated by reference
1. Portions of the BCE Inc. 2001 Annual Report Items 2, 5 and 6
2. Portions of the BCE Inc. Management Proxy Circular Item 7
Trade-marks
Owner Trade-mark
BCE Inc. BCE

Bell ActiMedia Inc. Yellow Pages
Bell Canada Rings & Head Design (Bell Canada corporate logo)
Bell
Bell World
Espace Bell
Sympatico
Bell Globemedia Publishing Inc./ ROB TV
Publications Bell Globemedia Inc. The Globe and Mail
Bell Mobility Inc./Bell Mobilité inc. Mobile Browser
CTV Inc. CTV
CTV Newsnet
Talk TV
The Comedy Network
Inktomi Corporation Inktomi
Intelsat, Ltd. Intelsat
Manitoba Telecom Services Inc. First Rate
NetStar Communications Inc. NetStar
Stentor Resource Centre Inc./ Datapac
Centre de ressources Stentor Inc. Megalink
SmartTouch
Teleglobe Inc. GlobeSystem
Telesat Canada Anik
Nimiq
The Sports Network Inc. TSN
RDS
TSN MAX
AT&T Corp. AT&T
MCI Communications Corporation Hyperstream
OnStar Corporation Onstar
Yahoo! Inc. Yahoo!
Any other trade-marks, corporate, trade or domain names used in this Annual Information Form are properties of their respective owners.
2 2 0 01 B C E A n n u a l I n f o r m a t i o n F o r m
Note to Reader: owned or over which control or direction is exercised directly or ings Inc. (“BCH”) with Bell Canada and its subsidiaries
The information contained in this Annual Information Form is indirectly by BCE Inc. Certain subsidiaries, each of which (including Bell Mobility Inc. (“Bell Mobility”), BCE Nexxia Inc.
disclosed as at December 31, 2001, unless otherwise indicated. All of represents not more than 10 per cent of consolidated assets and (carrying on business in Canada under the name “Bell Nexxia”),
the information contained in this Annual Information Form is not more than 10 per cent of consolidated sales and operating Bell ActiMedia Inc. (“Bell ActiMedia”), Bell Distribution Inc.
qualified in its entirety by the announcements made by BCE Inc. and revenues of BCE Inc., and all of which, in the aggregate, repre- (“Bell Distribution”), Bell West Inc. (“Bell West”), Certen Inc.
Teleglobe Inc. on April 24, 2002, which are described in Item 2 – sent not more than 20 per cent of total consolidated assets and (“Certen”), Northern Telephone Limited (“Northern Tele-
“General Development of BCE – Recent Developments” as well as by total consolidated sales and operating revenues of BCE Inc. at phone”), Northwestel Inc. (“Northwestel”) and Télébec ltée
the ultimate outcome of the events described therein. In particular, the December 31, 2001, have been omitted. (“Télébec”)), and also its investments in significantly influenced
following portions of this Annual Information Form are qualified: companies (including Manitoba Telecom Services Inc. (“MTS”),
Item 2 – “General Development of BCE – Overview”; Item 3 – “Busi- ITEM 2 • GENERAL DEVELOPMENT OF BCE and others). BCE Inc. owns 80 per cent of BCH and the
nesses of BCE – Teleglobe” (in particular information regarding the remaining 20 per cent ownership interest is beneficially owned
The information contained in this Item 2 – “General Develop-
operations of Teleglobe, the principal markets in which Teleglobe by SBC Communications Inc. In addition, the Bell Canada
ment of BCE” is qualified in its entirety by the announcements
provides services, the completion of the GlobeSystem network and of segment includes the consolidation of Aliant Inc. (“Aliant”)
made by BCE Inc. and Teleglobe Inc. on April 24, 2002, which
various investments or expansion by Teleglobe in relation thereto, the (approximately 39 per cent held by Bell Canada and approxi-
are described hereinafter under “Recent Developments” as well
status of Teleglobe’s licenses, the ability of Teleglobe to comply with mately 14 per cent held by BCE Inc.) as well as BCE Inc.’s 100 per
as by the ultimate outcome of the events described therein.
the requirements of applicable legislation and regulation and to meet cent interest in Bell ExpressVu Limited Partnership (“Bell
its obligations under the agreements to which it is a party; and the Overview ExpressVu”). Bell ExpressVu, a licensed DTH satellite broad-
ability of Teleglobe to maintain sufficient financial resources in order caster, has been delivering, since 1997, digital audio and video
BCE Inc. is Canada’s largest communications company. BCE Inc.
to remain competitive); Item 3 – “Businesses of BCE – Legal Proceed- services directly to Canadian homes and businesses. Since 1999,
had, on a consolidated basis, operating revenues of
ings” (in particular the status of the class action lawsuits to which Bell ExpressVu has utilized the Telesat Canada (“Telesat”) Nimiq
$21.7 billion, net earnings of $0.5 billion and cash flows from
Teleglobe Inc. is a party); Item 3 – “Businesses of BCE – Forward- direct broadcast satellite. The Bell Canada segment had oper-
operating activities of $4.6 billion in 2001, and had total assets
Looking Statements – Risk Factors”; and Item 5 – “Management’s ating revenues of $17.3 billion in 2001.
of $54.3 billion at December 31, 2001. BCE had approximately
Discussion and Analysis”.
75,000 employees at December 31, 2001. B E L L G LO B E M E D I A
The information relating to the business, assets and operations
BCE Inc. has among the largest number of registered share- Bell Globemedia Inc. (“Bell Globemedia”) is a Canadian multi-
of Teleglobe as contained in this Annual Information Form has been
holders of any Canadian corporation. At December 31, 2001, media company in the fields of broadcasting, print and the
derived primarily from information prepared by Teleglobe Inc. in the
there were more than 181,000 registered holders of common Internet, created on January 9, 2001. Bell Globemedia provides
course of the drafting of Teleglobe Inc.’s own Annual Information
shares, of whom about 95 per cent were registered as resident in integrated information, communications and entertainment
Form. As a result of substantial Board of Directors and management
Canada and held approximately 89 per cent of the common services to Canadian customers and access to distinctive Cana-
changes at Teleglobe Inc. on April 23, 2002, Teleglobe Inc.’s Annual
shares outstanding. dian content. Through its various Internet media properties,
Information Form has not been finalized. BCE Inc. has no reason to
At December 31, 2001, BCE centered its activities around four Bell Globemedia also provides unique destinations for Internet
believe that any of the information herein so derived from the infor-
core operating segments, based on products and services, users. Bell Globemedia is comprised of the television operations
mation prepared by Teleglobe Inc. is inaccurate in any material
reflecting the way that management classified its operations of CTV Inc. (“CTV”), the print operations of Bell Globemedia
respects for purposes of BCE Inc.’s Annual Information Form.
for purposes of planning and performance management: Publishing Inc. (“Bell Globemedia Publishing”) carrying on
Bell Canada segment; Bell Globemedia; Teleglobe; and business under the name The Globe and Mail, and the interac-
I T E M 1 • C O R P O R AT E S T R U C T U R E O F B C E
BCE Emergis. All other businesses were grouped in the BCE tive operations of Bell Globemedia Interactive Inc. (“Bell Globe-
BCE Inc. was incorporated in 1970, continued under the Canada Ventures segment. media Interactive”), and other media interests. Bell
Business Corporations Act in 1979 and exists under a Restated Globemedia had operating revenues of $1.2 billion in 2001.
B E L L C A N A DA S E G M E N T
Certificate of Incorporation dated December 1, 2000. BCE Inc. BCE Inc. owns 70.1 per cent of Bell Globemedia, while 20 per
The Bell Canada segment provides connectivity to residential
has its principal and registered offices at 1000, rue de La cent is held by The Thomson Corporation (“Thomson”) and
and business customers through wired and wireless voice and
Gauchetière Ouest, Bureau 3700, Montréal, Québec H3B 4Y7. 9.9 per cent is held by The Woodbridge Company Limited
data communications, high-speed and wireless Internet access,
The Schedule hereto presents certain subsidiaries and asso- (“Woodbridge”).
direct-to-home (“DTH”) satellite entertainment services,
ciated companies of BCE Inc., their respective jurisdictions of
Internet Protocol (“IP”)/Broadband services, e-business solu- T E L E G LO B E
incorporation or continuance and the percentage of voting and
tions and local and long distance phone and directory services. The Teleglobe segment (“Teleglobe”) provides a range of inter-
non-voting securities or partnership interests beneficially
This segment represents the consolidation of Bell Canada Hold- national and domestic communication services including voice,
Internet connectivity, high-speed data transmission, hosting, customer service and fund other operations-related needs while Américas (the “Reorganization”), pursuant to which the parties
broadband, broadcast and other value-added services on a it reviews its options for the future, including possible business reorganized the assets of Telecom Américas through certain
wholesale and retail basis. Teleglobe had operating revenues of combinations, a debt restructuring, a wind-down of some or all asset transfers and arranged for certain funding commitments.
$2.1 billion in 2001. Teleglobe Inc. is 23 per cent held by Bell of its business or a court-supervised proceeding. Following the closing of the Reorganization, the operations of
Canada and 77 per cent held by BCE Inc. BCE Inc. also announced that the revised outlook provided Telecom Américas focused exclusively on the Brazilian mobile
by Teleglobe Inc.’s management no longer meets the objectives wireless market. The Reorganization addressed, in part, the
BCE EMERGIS
of break-even free cash flow by 2003 and the prospect for “value funding requirements of Telecom Américas’ operating compa-
BCE Emergis Inc. (“BCE Emergis”) is a premier e-commerce
recovery” of this investment, and the market prospects for data nies by reducing the aggregate level of debt and by extending
service provider, strategically focusing on market leadership in
are not expected to improve in the foreseeable future. BCE Inc. the average life of some of its existing debt. In conjunction with
the transaction-intensive e-Health and financial services sectors
provided $550 million (U.S.$350 million) of funding to Tele- the Reorganization, Telecom Américas secured capital contri-
through its three strategic business units, e-Health Solutions
globe Inc. since December 2001 and announced that, as previ- butions from its principal shareholders, América Móvil and BCI,
Group, BCE Emergis – Canada and BCE Emergis – U.S.A. BCE
ously indicated, it will now provide only short-term periodic in the amount of U.S.$240 million. Additional capital resources
Emergis had operating revenues of $656 million in 2001. BCE
funding on terms and conditions satisfactory to it. in the amount of U.S.$120 million were committed in the form
Inc. owns approximately 65 per cent of BCE Emergis, with the
On the same day, Teleglobe Inc. announced that in light of of a shareholder loan that is repayable in June 2004 in common
remaining common shares being publicly held.
the decision by BCE Inc. to cease long-term funding to Teleglobe shares of Telecom Américas.
BCE VENTURES Inc., Teleglobe Inc. was now pursuing a range of financial BCE Inc. has started accounting for BCI as a discontinued
BCE Ventures reflects BCE Inc.’s interests in Bell Canada Inter- restructuring alternatives, potential partnerships and business operation in the first quarter of 2002.
national Inc. (“BCI”), Telesat, CGI Group Inc. (“CGI”) and combinations. To reach a rapid resolution of its situation, On December 3, 2001, BCI announced a recapitalization
certain other BCE investments. BCI owns, develops and oper- Teleglobe Inc. announced that, in addition to the short-term plan intended to enable the company to meet its short-term
ates advanced communications companies in Latin America. periodic funding which, as previously indicated, BCE Inc. may funding commitments. On January 11, 2002, BCI closed its
Telesat delivers satellite business services primarily to North provide to Teleglobe Inc., it has taken the following steps: Tele- rights offering for total gross proceeds of $440 million, in
American companies. CGI provides end-to-end information globe Inc. has retained an investment banking firm to assist in connection with its recapitalization plan. The public share-
technology (“IT”) services and business solutions to customers the evaluation and pursuit of all viable options; Teleglobe Inc. holders exercised 42 per cent of the rights offered to them, with
in North America, Europe and Asia. BCE Ventures had operating has accepted the resignation of all of its directors who were also BCE Inc. funding the remaining balance of $392 million. Also
revenues of $1.7 billion in 2001. directors or officers of BCE Inc., and appointed Paul Farrar and included in the recapitalization plan was the settlement of
J. Bruce Terry, to join H. Arnold Steinberg as independent approximately $478 million in obligations through the issuance
Recent Developments
members of its Board of Directors; and Teleglobe Inc. intends to of common shares (excluding the settlement of a put option
On April 24, 2002, the Board of Directors of BCE Inc. announced retain Crossroads, LLC, an international consulting firm, to obligation). BCE Inc.’s percentage ownership in BCI after the
that it has accepted the resignation tendered by Mr. Jean C. advise it as it evaluates restructuring initiatives. John G. settlement date of February 15, 2002 was diluted to approxi-
Monty as Chairman and Chief Executive Officer of BCE Inc. Mr. McGregor, Principal, will be the lead consultant. Teleglobe Inc. mately 62 per cent, subject to further change upon settlement
Monty’s resignation is effective as of April 23, 2002. The Board of also indicated that it anticipates discussions with its banks and of the put obligation.
Directors further announced that it has appointed Mr. Michael bondholders to keep them apprised of the process. On August 26, 2001, Teleglobe Inc. and certain of its
J. Sabia as Chief Executive Officer and Mr. Richard J. Currie as subsidiaries entered into definitive agreements for the sale of
Significant Developments
non-executive Chairman of the Board of Directors. Excel Communications group’s (“Excel”) North American oper-
On April 24, 2002, BCE Inc. announced that it will cease On February 12, 2002, a private investor signed an agreement to ations to an affiliate of VarTec Telecom, Inc. (“VarTec”). The U.K.
further long-term funding to Teleglobe Inc. BCE Inc. indicated purchase U.S.$300 million of common shares in Telecom operations, which are not part of the transaction, were shut
that its decision is based on a number of factors, including: Tele- Américas Ltd. (“Telecom Américas”). This transaction is down during the year. Consequently, the results of Excel have
globe’s revised business plan and outlook with associated expected to reduce BCI’s interest in Telecom Américas from been reported as discontinued operations. The transaction was
funding requirements; a pragmatic assessment of Teleglobe’s approximately 42 per cent to approximately 39 per cent. The completed on April 5, 2002, and the final proceeds of approxi-
prospects; and a comprehensive analysis of the state of the proceeds of the investment will be used to retire debt. The trans- mately U.S.$227.5 million were paid in the form of unsecured
industry. Furthermore, BCE Inc. announced that it will provide action is expected to close in the second quarter of 2002 and is five-year interest-bearing promissory notes.
only short-term periodic funding to Teleglobe Inc. subject to a number of conditions. In March 2001, BCE Inc. recorded a gain of approximately
on terms and conditions satisfactory to BCE Inc. up to a On February 8, 2002, BCI with its partners, América Móvil $3.7 billion relating to the settlement of short-term forward
maximum aggregate amount of between U.S.$100 million and S.A. de C.V. (“América Móvil”) and SBC International Inc. (“SBC contracts on approximately 47.9 million Nortel Networks
U.S.$125 million so that Teleglobe Inc. can provide continuing International”), completed a reorganization of Telecom Corporation (“Nortel Networks”) common shares as well as the
sale of an equivalent number of Nortel Networks common • the acquisition by BCE Inc. of all of the outstanding ITEM 3 • BUSINESSES OF BCE
shares. These transactions resulted in total proceeds of approxi- common shares of CTV for a total purchase price of
The information contained in this Item 3 is qualified in its
mately $4.4 billion. BCE Inc. continues to hold approximately approximately $2.5 billion.
entirety by the announcements made by BCE Inc. and Teleglobe
13 million Nortel Networks’ common shares of which six
19 9 9 Inc. on April 24, 2002, which are described in Item 2 – “General
million have been reserved to hedge BCE Inc.’s exposure to
Development of BCE – Recent Developments” as well as by the
special compensation payments, relating to Nortel Networks • the acquisition by Ameritech Corporation, since
ultimate outcome of the events described therein.
common shares, which were granted to employees under Nortel purchased by SBC Communications Inc. (collectively,
Networks’ stock option plan prior to 2000. “SBC”), of a 20 per cent minority interest in BCH for Bell Canada Segment
On January 9, 2001, BCE Inc., Thomson and Woodbridge $5.1 billion.
GENERAL
closed the transaction which resulted in the creation of the • as part of the foregoing transaction, the acquisition by
Canadian multi-media company Bell Globemedia. BCE Inc. BCE Inc. at net book value of Bell Canada’s interest in Bell Canada’s revenues are reported along five lines of business:
owns 70.1 per cent of Bell Globemedia and its principal contri- CGI, BCE Emergis and Telesat, and the transfer to Bell local and access; long distance; wireless; data; and terminal sales,
butions were its wholly-owned interest in CTV and its indirect Canada, also at net book value, of BCE Inc.’s indirect directory advertising and other. The Bell Canada segment also
71 per cent interest in Sympatico-Lycos Inc. (“Sympatico- interest in Bell Mobility, Teleglobe Inc. and in several includes DTH revenues earned through Bell ExpressVu. The
Lycos”). Thomson owns 20 per cent of Bell Globemedia and provincial and regional telecommunications companies, revenue distribution by percentage of the Bell Canada segment
contributed all of the assets and undertakings of The Globe and namely Aliant, Northern Telephone, Northwestel and is shown in Table 3.1.
Mail and of Globe Interactive. Woodbridge owns 9.9 per cent of Télébec.
LO C A L A N D AC C E S S
Bell Globemedia and contributed $385 million. Bell Globe- • the privatization by Bell Canada of Bell Mobility for
Local and access revenues are earned principally by connecting
media’s initial capitalization was approximately $4 billion. $1.6 billion.
business and residential customers to the Bell Canada segment’s
During the course of 2000 and 1999, the following signifi- • the launch by Bell Canada of Bell Nexxia, an IP/Broad-
network and providing them with local area service. As at
cant events have influenced the general development of band services company operating a network with over
December 31, 2001, the Bell Canada segment provided about
BCE’s business: 100 points of presence throughout Canada and the
13.3 million network access services to its residential and busi-
United States.
2000 ness customers, which consist primarily of basic exchange
• the acquisition by Bell Canada of an approximate 20 per
services (residential and business individual lines), private
• the closing of a joint venture agreement between BCI, cent interest in MTS and the launch by Bell Canada and
branch exchange (“PBX”) trunk lines and centrex lines. Local
América Móvil and SBC International and the formation MTS of Bell Intrigna Inc. (“Bell Intrigna”), a provider of
and access revenues also include revenues from the provision of
of Telecom Américas, a facilities-based communications access facilities offering an extensive suite of telecommu-
SmartTouch services (for example, call waiting and call display)
company which serves as the partners’ principal vehicle nication services to business customers in Alberta and
to residential and business customers as well as consumer
for expansion in Latin America. At closing, BCI and British Columbia.
terminal sales, and operator and directory assistance charges.
América Móvil each held a 44.3 per cent interest in Additional details on the above and some of the other major
All of the above services are provided to customers primarily on
Telecom Américas while SBC International held an events that have influenced the businesses carried out over the
a monthly contract basis. Payments from competitors accessing
11.4 per cent interest. last three years are discussed in Item 3 – “Businesses of BCE”.
• the acquisition by BCE Inc. of all of the outstanding Reference is made to the discussion of such events for the
common shares of Teleglobe Inc. that it did not already purposes of this Item 2.
own, for an aggregate purchase price of $7.4 billion which
was comprised of $240 million in cash and $7.2 billion in
BCE Inc. common shares at $41.20 per BCE Inc. common
3.1 Bell Canada segment – Communications services (revenue distribution)
share. Revenue distribution as a % of operating revenues for the years ended December 31 2001 2000 1999
• the distribution by BCE Inc. of an approximate 35 per
Local and access 37 38 39
cent interest in Nortel Networks to BCE Inc. common Long distance 15 18 20
shareholders. BCE Inc. common shareholders received, Wireless 11 10 9
for each common share of BCE Inc. held, approximately Data 20 18 16
1.57 post-split common shares of Nortel Networks. DTH (Direct-to-home satellite service) 3 2 1
Terminal sales, directory advertising and other 14 14 15
100 100 100
the Bell Canada segment’s local network are also included in LO N G D I S TA N C E National long distance and network services were formerly
this revenue category. These payments include contribution Long distance revenues include long distance voice revenues, as managed on a nationwide basis by Stentor Canadian Network
payments intended to help offset the costs of providing local well as long distance settlement payments from other carriers. Management (“SCNM”), a working association of provincial
services and access charge payments associated with the inter- These services are provided through a variety of calling plans telephone companies, which was terminated in 1999. Effective
connection of long distance competitors to the Bell Canada including residential discount calling plans such as Bell January 1, 2000, Bell Canada began providing national network
segment’s network. A summary of local and access services Canada’s First Rate Savings Plans. Separate discount plans, management and operations support services to Telus Commu-
revenues, the number of network access services and estimated including toll and toll-free calling, are available to business nications Inc. and to Bell Canada’s partners Aliant, MTS and
local market share is shown in Table 3.2. customers through Bell Canada’s Business Savings Plans. Saskatchewan Telecommunications Holding Inc. (“Sasktel”). To
ensure a seamless transition to customers, most of SCNM’s
3.2 Bell Canada segment – Local and access employees and functions were transferred to Bell Canada and to
For the years ended December 31 2001 2000 1999 the other former SCNM members, with many of the operating
Local and access revenues (in $ millions) 6,360 6,019 5,714 functions carried out by the same people, in the same locations,
Network access services (in thousands of lines in service) using the same assets. Accordingly, SCNM was wound up on
Residential 8,633 8,642 8,570 December 31, 1999.
Business 4,706 4,719 4,548 Long distance revenues are derived from services originating
13,339 13,361 13,118 and terminating within the Bell Canada segment’s service terri-
Estimated local market share (1) (Bell Canada territory only (2)) 95.8% 97.1% 98.7% tory, and from services provided with other telecommunica-
(1) The loss of business market share reflects facilities-based competition only. tions companies. A summary of long distance revenues and
(2) Bell Canada operating territory in Québec and Ontario at December 31. other long distance statistics is shown in Table 3.3.
3.3 Bell Canada segment – Long distance WIRELESS

For the years ended December 31 2001 2000 1999 Wireless revenues are primarily derived from the provision of
Long distance revenues (in $ millions) 2,651 2,845 2,909 cellular, personal communications service (“PCS”), paging and
Conversation minutes (in millions) 18,200 17,898 16,406 wireless data communications services, as well as airline
Revenue per minute (in cents) 14 15 n.a. (1) passenger communications and wireless consulting services
Local market share (% based on revenues) (2) 63.6% 62.0% n.a. (1)
offered by the Bell Canada segment, namely Bell Mobility,
(1) Reporting of these statistics began in 2000 only.
Northern Telephone, Northwestel, Télébec and Aliant. Cellular
(2) Bell Canada operating territory in Québec and Ontario at December 31.
n.a.: not available. and PCS revenues are derived from subscription fees, air time
usage, prepaid services, long distance, data, wireless Internet
3.4 Bell Canada segment – Wireless access, roaming and a variety of value-added services, such as
For the years ended December 31 2001 2000 1999
voice mail and text messaging.
Wireless services revenues (in $ millions) 1,839 1,515 1,336 Bell Mobility also generates revenues through the provision
Cellular & PCS subscribers (in thousands, at December 31)
of service to other service providers under resale agreements.
Prepaid 964 717 518
This includes: the provision of analog cellular service to Micro-
Postpaid 2,496 2,053 1,657
cell Connexions Inc, a subsidiary of Microcell Telecommunica-
3,460 2,770 2,175
tions Inc. (“Microcell”); the provision of cellular and PCS service
Cellular & PCS net activations (in thousands)
to Telus Mobility, complementing the coverage provided by
Prepaid 247 199 n.a. (1)
Postpaid 443 396 n.a. (1) Telus Mobility on its own facilities; the provision of cellular and
PCS service to support General Motors’ “Onstar” in-car commu-
690 595 n.a. (1)
nications service; and the provision of digital cellular service to
Cellular & PCS average revenue per subscriber ($/month) 46 47 n.a. (1)
Prepaid 13 13 n.a. (1) Bell Canada to provide wireless local loop service as an alterna-
Postpaid 58 58 n.a. (1) tive to fixed lines in high cost areas.
Usage per subscriber (minutes/month) 182 161 n.a. (1) A summary of the Bell Canada segment’s wireless services
Postpaid churn rate (average per month) 1.5% 1.5% n.a. (1) revenues and other wireless services statistics is shown in Table 3.4.
(1) Reporting of these statistics began in 2000 only.
n.a.: not available.
DATA revenues. A summary of DTH revenues and the other DTH companies such as MTS and others. This segment also includes
Data revenues are generated from legacy data services and non- statistics is shown in Table 3.6. BCE Inc.’s 100 per cent interest in Bell ExpressVu.
legacy data services. Legacy data services include digital trans-
TERMINAL SALES, BELL NEXXIA
mission services such as Megalink, network access for integrated
DIRECTORY ADVER TISING AND OTHER Bell Nexxia, which began commercial operations in the first
services digital network and data as well as competitive network
Terminal sales, directory advertising and other revenues are quarter of 1999, is Canada’s largest IP/Broadband company,
services and the sale of inter-networking equipment. Non-legacy
primarily derived from the rental, sales and maintenance of delivering the full range of connectivity, content and commerce
data services include national and regional IP/Broadband data,
business terminal equipment and from directory advertising, as solutions offered by BCE. Dedicated to the large enterprise
e-commerce and Internet services. Services such as managed
well as network management. A summary of terminal sales, market, Bell Nexxia bundles products and services into fully
private line service and digital private line service provide
directory advertising and other revenues is shown in Table 3.7. managed, end-to-end, e-business solutions using a powerful
customers with a high volume digital network for the transmis-
IP/Broadband network. Bell Nexxia offers Internet services
sion of voice, video and data messages. The Bell Canada segment S U B S I D I A R I E S A N D A S S O C I AT E D C O M PA N I E S
including extranets, wide area networks (“WANs”), and
also provides access to public digital packet switched networks
The Bell Canada segment’s principal subsidiaries are: Bell managed networks packaged with traditional voice services. The
as well as private line data transmission services. A summary of
Nexxia, Bell Mobility, Bell ActiMedia, Aliant, Bell Distribution, national IP/Broadband network is directly and indirectly owned,
the Bell Canada segment’s data revenues and Internet
Bell West, Certen, Northern Telephone, Northwestel, Télébec controlled and operated by Bell Nexxia and has more than
subscribers is shown in Table 3.5.
and Expertech Network Installation Inc. (“Expertech”). The Bell 100 points of presence in key locations throughout Canada and
DTH Canada segment also has a cost investment in Teleglobe Inc. the United States. Effective February 12, 1999, Bell Nexxia
DTH revenues primarily reflect revenues generated from DTH and interests in Canadian telecommunications associated obtained from the United States Federal Communications
satellite service, including programming and pay-per-view Commission (“FCC”) section 214 authority to operate as a
common carrier in the United States offering switched and
3.5 Bell Canada segment – Data private line services between the United States and the rest of
For the years ended December 31 2001 2000 1999 the world.
Data revenues (in $ millions)
Legacy 2,176 2,007 1,827 BELL MOBILIT Y
Non-legacy 1,383 912 442 Bell Mobility offers a full range of wireless communications
3,559 2,919 2,269 services to approximately 3.6 million Canadians, including PCS,
Internet subscribers (in thousands, at December 31) (1) one- and two-way paging, data and airline passenger communi-
DSL high-speed 757 336 n.a. (2) cations services, and also specializes in the sale of private radio
Dial-up 1,019 847 n.a. (2) system equipment. Effective January 1, 2002, the four operating
1,776 1,183 n.a. (2) subsidiaries of Bell Mobility – Bell Mobility Cellular Inc., Bell
(1) High-speed Internet subscribers include consumer, business and wholesale subscribers. Dial-up subscribers include consumer and business subscribers. Mobility Paging Inc., Bell Mobility Radio Inc. and Skytel
(2) Reporting of these statistics began in 2000 only. Communications Corporation – amalgamated to continue as
n.a.: not available. Bell Mobility Inc. (referred to in this Annual Information Form
as “Bell Mobility”).
3.6 Bell Canada segment – DTH
The cellular services division of Bell Mobility (“BMC”) oper-
ates a cellular telecommunications system in Ontario and
DTH revenues (in $ millions) 474 305 133
DTH subscribers (in thousands, at December 31) 1,069 722 416 Québec and through resale arrangements in British Columbia
DTH net activations (in thousands) 347 306 237 and Alberta. BMC also operates a digital PCS service in major
Average revenue per subscriber ($) 45 47 44 urban areas within its service territory, including Toronto,
Churn rate (annual) 10.3% 11.0% n.a. (1) Ottawa, Montréal and Québec City. BMC also operates a
(1) Reporting of this statistic began in 2000 only. nationwide mobile data radio network. The coverage areas
n.a.: not available. served by BMC had an estimated population of 17.6 million at
December 31, 2001. BMC’s cellular and PCS customers
3.7 Bell Canada segment – Terminal sales, directory advertising and other
numbered approximately 2,932,000 at December 31, 2001,
reflecting a 25 per cent increase from the corresponding 2000
Terminal sales, directory advertising and other revenues (in $ millions) 2,371 2,197 2,143
figure of approximately 2,340,000.
In May 1999, Bell Mobility launched a new service called its service territory population in Ontario and Québec and In 2001, Bell ActiMedia reorganized its sales channels in
Mobile Browser, making it the first wireless PCS company in should soon reach 95 per cent. Traffic on Bell Mobility’s digital Ontario and Québec.
North America to combine an Internet browser feature with a PCS network currently accounts for approximately 77 per cent In June 2001, Bell ActiMedia entered into an agreement with
digital PCS handset. Users of Bell Mobility’s Mobile Browser of its total wireless network traffic. Amdocs for the implementation of a new back-office platform,
service are able to log on to the Internet directly from their PCS The paging services division of Bell Mobility (“BMP”) oper- which would replace legacy systems related to service orders,
handsets and view a number of Internet sites that are specially ates a one- and two-way paging system in Ontario and Québec products and services contracts. Starting 2002, the new platform
adapted for small display screens, including Sympatico.ca, and is Canada’s largest paging operator. BMP had approximately began delivering cost savings across all operating units and
Charles Schwab, i/money, TD Waterhouse, VeeV from Bank of 649,000 pagers in service at December 31, 2001, a decrease of providing enhanced systems capability related to bundling,
Montreal, canada.com, canoe.ca, Web 411, MSN Hotmail and five per cent from the approximately 685,000 pagers in service at Web interfaces and customer data.
others. On February 9, 2000, Bell Mobility announced it December 31, 2000. In the fall of 2001, Bell ActiMedia made a strategic decision to
was providing its customers with wireless access to more On May 23, 2001, Glenayre Technologies Inc. (“Glenayre”), focus on its core business in Canada and end its associations
Internet sites and new “com-ready” handsets through its Mobile the paging network infrastructure supplier for major carriers, with companies in Asia, the Middle East and the Caribbean. The
Browser service, including access to one of Canada’s most announced that it intended to exit the business in May 2002. decision to divest its international properties and investments
popular Internet sites, the Yahoo! Canada Web site. Over Bell Mobility uses Glenayre’s technology in its paging and prompted the sale of most of Bell ActiMedia’s international
80 wireless consumer and business applications were in place at ReFLEX 2-way messaging operations. As a result of this properties. The only sale pending as of April 15, 2002, is the sale
December 31, 2001. announcement, Bell Mobility had indicated that it was exam- of the Cayman Islands-based Caribbean Publishing Company
On October 17, 2001, Bell Canada announced that Bell ining options for network infrastructure support past May 2002. Limited, a wholly-owned subsidiary.
Mobility and Aliant Telecom Wireless (a business unit of Aliant) Since that time, Glenayre has indicated that it intends to In deciding to concentrate on its core business in Canada,
entered into an enhanced ten-year network reciprocity agree- continue to provide paging network support to carriers. In Bell ActiMedia analyzed all operations and streamlined activi-
ment with Telus Mobility (a business unit of Telus Corporation February 2002, Glenayre and Bell Mobility entered into a renew- ties according to the company’s new focus on technology-
(“Telus”)) which is expected to significantly expand access to able two-year maintenance contract for the supply of mainte- driven offerings. This resulted in the decision to discontinue
advanced digital voice and data services across Canada and to nance and support services to Bell Mobility’s paging network printing Yellow Pages directories in Western Canada and
bring competition to rural areas. This agreement extended the infrastructure. Accordingly, this should enable Bell Mobility to consolidate efforts around electronic delivery of directory
current roaming and resale agreements between Bell Mobility continue to provide paging services. services, through Sympatico-Lycos. However, Bell ActiMedia will
and Telus Mobility. It is anticipated that this agreement will The radio communications services division of Bell Mobility continue to provide customers in Alberta and British Columbia
enhance the reach of Bell Mobility’s digital PCS across rural provides private and shared radio communications services in with free listing services on yellowpages.ca as well as a wide
Alberta and British Columbia by providing access through the the transit, public security and utility markets. range of online marketing options.
Telus Mobility network in the two provinces. As a result of this The Skytel communications division of Bell Mobility Created in January 2001, Bell Zinc is Canada’s leading
agreement, Bell Mobility is expected to be able to avoid capital provides airline passenger communications services. provider of online services to small- and medium-sized enter-
expenditures of more than $500 million over the term of the prises. Bell Zinc serves over 250,000 registered users by offering
B E L L AC T I M E D I A
agreement. several business services including Unified Messaging Services,
Bell ActiMedia is the Canadian leader in Yellow Pages products
On September 17, 2001, Bell Mobility officially launched its an international Trade Directory and a Request for Proposal plat-
and provides Internet access as well as e-commerce solutions
Western expansion with its consumer marketing campaign in form, among others.
through Bell Zinc Corporation (“Bell Zinc”), a wholly-owned
Alberta and British Columbia. On February 22, 2002, Bell ActiMedia acquired the 12 per
subsidiary of Bell ActiMedia which owns and operates the
On February 12, 2002, Bell Mobility announced the launch cent interest in Bell Zinc previously owned by BigVine.com
business-to-business (“B2B”) Web portal bellzinc.ca. Bell
of its Code Division Multiple Access 1X wireless network, the (“BigVine”). BigVine LLC, a subsidiary of BigVine, carrying on
ActiMedia also owns a 12.9 per cent partnership interest in
fastest mobile data network in Canada, which is expected to be business under the name AllBusiness, continues to license
Aliant ActiMedia, which operates in Nova Scotia, Prince Edward
introduced across the majority of its national coverage area certain content to Bell Zinc.
Island, Newfoundland and Labrador, and New Brunswick.
throughout 2002. Confirming Bell Canada’s commitment to help Canadian
As at December 31, 2001, Bell ActiMedia and Aliant Acti-
Bell Mobility has played a major role in the development of small- and medium-sized enterprises harness the power of the
Media had more than 60 per cent of the Canadian directory
mobile cellular services in Canada. As of December 31, 2001, Bell Internet, Bell Zinc acquired Onvia.com Inc. – the Vancouver-
market with close to 300,000 business customers advertising in
Mobility had invested approximately $885 million in its digital based B2B e-marketplace – in July 2001, as well as a controlling
116 directories and 247 Yellow Pages sections; Bell Zinc had
PCS network, including $273 million for the year ended interest in Césart Création Inc. – a Montreal-based e-marketing
more than 250,000 registered members and 45 preferred part-
December 31, 2001. Bell Mobility has rapidly expanded its and Web development firm – in December 2001, to bring
ners throughout Canada.
digital coverage area which currently covers some 91 per cent of
enhanced e-business services to members and corporate software sales, the outright sales of investments, transaction that are operated corporately and by dealer and franchise
partners. revenues, joint developments and joint ventures. This group’s operators.
Bell Zinc also confirmed partnerships with some 45 leading primary operations are through Innovatia Inc. (“Innovatia”),
BELL WEST
organizations of Canada’s Internet economy including IBM Prexar LLC (“Prexar”) and AMI Offshore Inc. (“AMI”). Innovatia
On April 11, 2002, Bell Canada and MTS announced that they
Canada Limited, Sun Microsystems of Canada Inc., Canada Post is focused on the research and development of Internet-based
have completed a transaction to create Bell West, which is
and CIBC-Bizsmart. By integrating these best-of-breed players services for broadband networks. Innovatia designs, develops
owned 60 per cent by Bell Canada and 40 per cent by MTS. Bell
into the Bell Zinc business model, Bell ActiMedia has demon- and sells Internet-based applications to service providers world-
West is a combination of the interests of Bell Intrigna and Bell
strated its commitment to fostering the growth of the small- and wide. Aliant Horizons owns 96.4 per cent of Prexar, an Internet
Nexxia in Alberta and British Columbia. Bell West operates
medium-sized enterprises market in Canada. service provider based in Maine and servicing the Northern New
under the Bell brand and focuses on businesses in Alberta and
England State. AMI (57.4 per cent owned by Aliant Horizons)
ALIANT British Columbia, providing a suite of advanced fibre-based data
provides process and systems control technical services, logis-
Aliant, held approximately 39 per cent by Bell Canada and and IP services, as well as a complete portfolio of telecommuni-
tics and supply chain management and contract manufacturing
approximately 14 per cent by BCE Inc., provides integrated cations products and services, including local and long distance
solutions to the offshore oil and gas and other industries. The
communications and IT solutions through its subsidiaries. services and business Internet services on a fully managed basis.
emerging businesses segment also includes a number of port-
Aliant is comprised of four core lines of business: telecom- The terms of the agreement between Bell Canada and MTS also
folio and strategic investments in the Internet and e-commerce
munications, information technology, remote communications include certain put and call options with respect to MTS’ 40 per
area including minority interests in iMagicTV Inc., Exigen Ltd.
and emerging businesses. cent ownership of Bell West.
and Voice Mobility International Inc., among others.
The telecommunications line of business is carried on by Previously, Bell Intrigna was two-thirds owned by MTS
On October 4, 1999, Bell Canada announced its decision to
Aliant Telecom Inc. (“Aliant Telecom”). Effective January 1, and one-third owned by Bell Canada. Bell Nexxia’s operations
make a cash offer to purchase up to 15.8 million outstanding
2001, Aliant Telecom amalgamated with most of its wholly- in Alberta and British Columbia were 100 per cent owned by
common shares of Aliant at $27 per share for a total considera-
owned subsidiaries including Island Telecom Inc., Maritime Tel Bell Canada.
tion of up to $427 million. On December 20, 1999, the offer was
& Tel Limited, NBTel Inc. (“NBTel”), NewTel Communications
increased to $27.50 per share and was made by BCE Inc. rather CERTEN
Inc. and NewTel Mobility Limited. Aliant Telecom provides a full
than by Bell Canada. On January 27, 2000, BCE Inc. announced In January 2001, Bell Canada and Amdocs Limited (“Amdocs”)
range of voice and data communications services including
that 30,580,538 common shares of Aliant were validly tendered created Certen, which is 89.9 per cent held by Bell Canada and
local, long distance, data, Internet, interactive television and
under the offer and that it had taken up and accepted for 10.1 per cent held by Amdocs. Certen offers best-in-class
other wireline and wireless services. This line of business also
purchase its previously announced allotment of 15.8 million products and services using Amdocs’ world leading billing soft-
includes the results of 87 per cent owned Aliant ActiMedia, a
shares, representing a proration factor of 51.21 per cent. ware for Bell Canada (including Bell Mobility and Bell Nexxia),
telephone directory advertising business operating in Atlantic
Following this purchase, BCE Inc.’s direct ownership interest in and is expected to offer Bell Canada’s customers the con-
Canada.
Aliant was approximately 13 per cent. Certain put and call venience of an integrated billing platform for all of Bell Canada’s
The IT line of business is carried out through Xwave Solu-
options have been put in place which, if exercised, will transfer services, including local, long distance, wireless, broadband and
tions Inc. (“Xwave”). Xwave is an established Canadian IT
the shares acquired by BCE Inc. to Bell Canada on agreed upon Internet services.
services and fulfillment company with offices in the United
terms, thereby bringing Bell Canada’s ownership of the By virtue of a shareholders’ agreement, both Bell Canada and
States and Europe.
common shares of Aliant to approximately 53 per cent. Amdocs hold a series of put and call options on their ownership
Aliant’s investment in the remote communications business
of Certen.
is a 61 per cent ownership position in Stratos Global Corpora- BELL DISTRIBUTION
tion (“Stratos Global”). Stratos Global is a Canadian-based In 1999, Bell Canada and Bell Mobility established Bell Distri- NORTHERN TELEPHONE, NORTHWESTEL
public company offering mobile and fixed remote communica- bution to manage a new customer-focused chain of stores AND TÉLÉBEC
tions solutions to a global customer base through a combina- providing one-stop shopping for a full range of communications Bell Canada also provides a full range of telecommunications
tion of its own satellite and microwave telecommunications products and services for the home and office. Combining the services in Canada through wholly-owned regional companies,
facilities, shared infrastructure and distribution of services of retail operations of both companies, the new stores Bell World namely Northern Telephone (Northeastern Ontario), North-
other network operators. in Ontario and Espace Bell in Québec were the first retail westel (Northwest Territories, Nunavut, Yukon and Northern
The emerging businesses segment is a group of companies network in Canada to provide complete and integrated commu- British Columbia) and Télébec (Québec).
under the ownership of Aliant Horizons Inc. (“Aliant Hori- nications solutions including wireline, wireless and DTH On April 9, 2002, Bell Canada announced that a receipt for a
zons”). These companies recognize revenue through several satellite services. This new retail network is made up of stores final prospectus had been issued on behalf of all securities regu-
means: licensing of software, consulting services, one-time latory authorities throughout Canada for the sale of units of a
newly created income fund – Bell Nordiq Income Fund (the business. In any of such cases, Bell Canada would take all neces- high-powered direct broadcast satellite, to be called Nimiq 2.
“Fund”). The Fund will acquire from Bell Canada a 40 per cent sary steps to minimize or offset any disruption in its ability to Subsequently, the satellite was redesigned to incorporate an
interest in each of Télébec, Limited Partnership (“Télébec LP”) provide service to its customers. experimental Ka-band payload, in order to allow Bell ExpressVu
and Northern Telephone, Limited Partnership (“Northern to utilize the special authorization granted to it by Industry
OTHERS
Telephone LP”). As part of this transaction, Télébec and Canada to utilize Ka-band radio spectrum at the 91°WL orbital
Bell Canada also has interests in: Entourage Inc., a maintenance
Northern Telephone will transfer substantially all of their assets position. As a result, following a successful launch and insertion
and repair services provider for interior cables and exterior
and liabilities to Télébec LP and Northern Telephone LP, respec- of the Nimiq 2 satellite at the 91°WL orbital position, planned
networks; Nexxia Inc. (carrying on business as “Nexxia U.S.”),
tively. The name of Télébec will also be changed to Bell Nordiq for early 2003, the Nimiq 1 satellite will be relocated to the
a telecommunications services provider in the United States;
Group Inc. (“Bell Nordiq GP”). After completion of the fore- 82°WL orbital position. Bell ExpressVu’s additional capacity will
and Fibreco Inc. (carrying on business as “Fibreco U.S.”), which
going transaction, Bell Canada is to hold an indirect 60 per cent be utilized for service improvements, especially with respect to
holds a fibre optic cable network in the United States.
interest in each of Télébec LP and Northern Telephone LP, High Definition services, and to provide in-orbit back-up to the
through its indirect wholly-owned subsidiary, Bell Nordiq GP, BELL EXPRESSVU primary service satellite located at the 91°WL orbital position.
the general partner of each of Télébec LP and Northern Bell ExpressVu delivers more than 300 digital television and CD- The Commercial division of Bell ExpressVu gained signifi-
Telephone LP. The net proceeds from this transaction (approxi- quality audio channels to over a million customers in homes, cant momentum during the year in expanding the market into
mately $338 million assuming full exercise of the over-allotment apartment buildings and condominiums, and commercial multiple dwelling units (“MDU”). Bell ExpressVu finalized
option) will be used by Bell Canada to reduce debt. The transac- establishments such as restaurants and other public viewing agreements for access to a total of 105,000 units in approxi-
tion is subject to various closing conditions and approvals areas. As of December 31, 2001, Bell ExpressVu had acquired mately 2,000 MDUs across Canada. In the forthcoming year,
which are expected to be met and obtained by the end of 1,069,000 subscribers in the marketplace, an increase of 347,000 Bell ExpressVu will aggressively market to residents of buildings
April 2002. from the December 31, 2000 year-end total of 722,000. Approxi- with existing Bell ExpressVu infrastructure.
mately two thirds of all new subscribers attracted in 2001 were In September 2001, Bell ExpressVu launched a total of
EXPERTECH
from urban markets with existing broadcasting distribution 42 new digital specialty channels, as part of the largest new tele-
Expertech, 75 per cent owned by Bell Canada and 25 per cent
competitors. This number is significant because it means that vision channel launch in Canadian history. As the market leader
owned by SNC-Lavalin Group Inc., specializes in the installa-
satellite television continues to be an effective competitive alter- in terms of the number of digital subscribers, Bell ExpressVu
tion of telecommunications networks in North America,
native in cabled areas. played a key role in this launch. In conjunction with the launch,
whether they are optical, copper, coaxial or wireless.
Bell ExpressVu introduced the Model 5100 Personal Video Bell ExpressVu took the opportunity to revise its packaging and
MTS Recorder (“PVR”) in August 2001, which allows satellite televi- pricing in order to provide more choice to consumers.
MTS, held approximately 22 per cent by Bell Canada, is a full sion viewers to record, store, pause, rewind and fast-forward live In 2002, Bell ExpressVu plans to introduce the “Combo
service Manitoba telecommunications company providing programming. The PVR is integrated with a digital satellite Box”, a development of Bell Canada and EchoStar Communi-
local, long distance, wireless, directory and multimedia receiver in the Model 5100 to provide a seamless television cations Corporation. The “Combo Box” will expand the poten-
telecommunications services. viewing experience. tial market for Bell ExpressVu’s service by combining a DTH
The introduction of the Model 5100 PVR was accompanied receiver/decoder, a digital subscriber line (“DSL”) gateway and a
T E L E G LO B E
by the introduction of a new Model 3100 receiver, which storage device in a single portal appliance.
Bell Canada has a 23 per cent ownership interest in Teleglobe
replaced the Model 2700 as the entry level receiver model for
Inc., which is accounted for at cost (refer to “Teleglobe” in this R E G U L AT I O N
consumers. Both the Model 3100 and the Model 5100 have the
Item 3 for details). As previously discussed under Item 2 –
capability of offering interactive television services – technology Bell Canada, Aliant and several of Bell Canada’s direct and indi-
“General Development of BCE – Recent Developments”, BCE
that will allow viewers to learn, shop and customize program- rect subsidiaries and associated companies, including Bell
Inc. announced on April 24, 2002 that it will cease further long-
ming. Bell ExpressVu introduced both an improved interactive Mobility and its subsidiaries, are subject to the jurisdiction of
term funding to Teleglobe Inc. Such events have not yet had any
electronic programming guide and an interactive weather fore- the Canadian Radio-television and Telecommunications
impact on Bell Canada’s relationship with Teleglobe Inc. or its
casting application in 2001, and is planning to offer video game Commission (“CRTC”), an agency of the Government of
ability to provide service to Bell Canada’s customers. If Teleglobe
interactive television applications in 2002. Canada. Several laws of specific application also govern the
Inc. is not successful in negotiating a restructuring, business
Bell ExpressVu continues to offer High Definition Television businesses of Bell Canada and Bell Mobility.
combination or partnership, it may have to pursue alternative
services to consumers, in conjunction with its High Definition
courses of action. There is, accordingly, a risk that Teleglobe Inc. B E L L C A N A DA AC T
Television-capable receiver, the Model 6000.
may become the subject of a court-supervised proceeding or In addition to the Canada Business Corporations Act, Bell Canada
In May 2001, Bell ExpressVu finalized an agreement with
that it may have to conduct a wind-down of some or all of its is also subject to the provisions of the Bell Canada Act. The Bell
Telesat for the purchase of all 32 of the transponders on a new
Canada Act imposes on Bell Canada an obligation to provide Canadian carrier must be a Canadian-owned and controlled Canadian ownership of 80 per cent of all outstanding and issued
service which is limited by the Bell Canada Act to those territo- corporation, and must not otherwise be controlled by non- voting shares and 80 per cent of the votes.
ries within which a general telephone service is provided. This Canadians. Specifically, a Canadian carrier is required to meet Similarly, indirect ownership in a broadcasting licensee
legal obligation is further limited to premises which are located a minimum level of direct Canadian ownership of 80 per cent requires that the parent corporation of a broadcasting licensee
within a prescribed distance from Bell Canada’s existing and a minimum level of indirect Canadian ownership of has a minimum level of Canadian ownership of two thirds of all
network facilities. Bell Canada provides a general telephone 66 2/3 per cent. BCE Inc. indirectly owns 80 per cent of the outstanding and issued voting shares and two thirds of
service to specific areas or regions within the provinces of outstanding voting shares of Bell Canada. To the best of BCE the votes.
Ontario and Québec which encompasses the vast majority of Inc.’s knowledge, the level of non-Canadian ownership of BCE In addition to the foregoing ownership constraints, not less
telephone customers in the two provinces. Inc.’s common shares was approximately 10.4 per cent as at than 80 per cent of the board of directors as well as the chief
The Bell Canada Act also provides for prior approval of the March 30, 2002. executive officer of a broadcasting licensee must be Canadian.
CRTC of any sale or other disposal of Bell Canada voting shares In addition to the foregoing foreign ownership constraints, Parent corporations of broadcasting licensees which: have
held by BCE Inc., except if such sale or disposal would result in the Telecommunications Act provides that not less than less than 80 per cent Canadian directors on the board of direc-
BCE Inc. retaining not less than 80 per cent of all such Bell 80 per cent of the members of the board of directors of a Cana- tors; have a non-Canadian chief executive officer or have a
Canada shares issued and outstanding. dian carrier must be Canadian. minimum level of Canadian ownership of less than 80 per cent,
are required to demonstrate to the CRTC that neither such
T E L E CO M M U N I C AT I O N S AC T B R OA D C A S T I N G AC T
parent corporation nor its directors exercise control or influence
In 1993, the Government of Canada passed the Telecommunica- In 1991, the Government of Canada amended the Broadcasting
over any programming decisions of the broadcasting licensee.
tions Act which updated and revised previous legislation Act in recognition of the need to modernize and consolidate
governing telecommunications in Canada. The Telecommunica- existing legislation. Key policy objectives of the Broadcasting Act R A D I O CO M M U N I C AT I O N AC T
tions Act applies to several companies of the Bell Canada include the safeguarding and strengthening of the cultural, The use of radio spectrum by Bell Mobility and other wireless
segment, including Bell Canada, Bell Mobility, Bell Nexxia, political, social and economic fabric of Canada as well as service providers (“WSPs”) is subject to regulation and licensing
Northern Telephone, Northwestel, Télébec, Aliant and MTS. The encouraging the development of Canadian expression. The by Industry Canada pursuant to the Radiocommunication Act.
Telecommunications Act defines the broad objectives of the Cana- Broadcasting Act assigns the regulation and supervision of the The Minister of Industry has the discretion to issue radio
dian telecommunications policy and empowers the govern- broadcasting system to the CRTC. licenses, establish technical standards in relation to radio
ment to issue to the CRTC directions of general application with Most broadcasting activities, such as Bell ExpressVu’s (and equipment and plan the allocation and use of the radio spec-
respect to any of these objectives. Under the Telecommunications CTV’s, see additional disclosure under this Item 3 entitled “Bell trum. The Radiocommunication Act provides the legislative
Act, all telecommunications common carriers, including Bell Globemedia – Regulation”), require a broadcasting license. authority to perform a number of functions with a view to
Canada and Bell Mobility, are required to seek regulatory Licenses are awarded by the CRTC and typically extend for a ensuring the orderly development and efficient operation of
approval for all proposed tariffs for telecommunications period of seven years at which time an application for a license radiocommunication in Canada and the orderly establishment
services. The Telecommunications Act also requires that all rates renewal must be made to the CRTC. There are two principal and modification of radio stations.
be just and reasonable and prohibits a carrier from conferring types of broadcasting licenses, one is for broadcasting program- Pursuant to the Radiocommunication Regulations, persons
an undue preference or advantage on any person. However, ming and the other is for broadcasting distribution, which who are eligible to be issued radio licenses, such as Bell Canada
under the Telecommunications Act, the CRTC has the power to includes terrestrial wireline, terrestrial wireless and satellite DTH and Bell Mobility, must comply with the same foreign owner-
forbear from regulating, in whole or in part, particular services. distribution. Three subsidiaries or associated companies of Bell ship restrictions as are applicable to Canadian carriers under
The CRTC has in fact issued various forbearance orders which Canada – Aliant, Northwestel and Télébec – have broadcasting the Telecommunications Act.
have resulted in Bell Mobility being largely forborne from regu- distribution licenses that permit them to offer terrestrial wire-
WIRELINE FRAMEWORK
lation and Bell Canada partially forborne. The CRTC may also line, and to a lesser extent terrestrial wireless, broadcast distri-
All of Bell Canada’s services, including services which are subject
exempt an entire class of carriers from regulation under the bution services in defined areas within Nova Scotia, New
to price regulation under the Telecommunications Act, are
Telecommunications Act, where the CRTC finds that exemption Brunswick, Québec, Ontario, Northwest Territories and
provided in an open and competitive environment.
of the class of carriers is consistent with the objectives of Cana- Nunavut.
Bell Canada’s major utility segment services (comprised
dian telecommunications policy. The Broadcasting Act and its accompanying regulations
primarily of basic local services) are subject to price cap regula-
The Telecommunications Act and accompanying regulations require that for a corporation to obtain a broadcasting license, it
tion as set out in Telecom Decision 97-9.
also provide that, in order for a company such as Bell Canada or must be a Canadian-owned and controlled corporation, and
Telecom Decision 97-9, issued on May 1, 1997, outlined the
Bell Mobility to operate as a telecommunications common must not otherwise be controlled by non-Canadians. A broad-
regulatory framework for the price cap regime implemented on
carrier, it must be eligible to operate as a Canadian carrier. A casting licensee is required to meet a minimum level of direct
January 1, 1998, including the principles and components of
the price cap formula applicable to a basket of telephone compa- final decision allowing recovery of approximately $220 million cations competition and deployment of advanced services at
nies’ local services over a four-year period. During this period, of the estimated $250 million costs. affordable rates across Canada.
price changes for this single basket of capped utility services On May 17, 1999, the CRTC announced, after an in-depth On November 30, 2000, the CRTC issued Telecom Decision
were limited to the rate of inflation minus an adjustment for review, that it will not regulate new media services on the 2000-745, changing the contribution regime from a company
productivity gains of 4.5 per cent. These price changes may be Internet and more particularly that new media services within specific long-distance per minute charge to a nationally aver-
adjusted to account for the impact of any approved exogenous the purview of the Broadcasting Act will not require a broadcasting aged surcharge of 4.5 per cent on Canadian telecommunications
factors, i.e., events which are beyond the telephone companies’ license. The CRTC concluded that new media on the Internet are revenues. This change effective January 1, 2001, had a negative
control that are allowed to be reflected in the rates. The single achieving the goals of the Broadcasting Act and that any attempt impact on earnings before interest, taxes, depreciation and
basket of capped services is divided into three sub-baskets (basic to regulate new media might put the Canadian industry at a amortization (“EBITDA”) (1) of BCE Inc.’s consolidated results of
residential local services, single and multi-line local business competitive disadvantage in the global market place. approximately $70 million in 2001. This net impact reflects that
and residual capped services), each subject to additional pricing In a letter decision dated March 9, 2000, the CRTC approved Telecom Decision 2000-745 was EBITDA positive for both Aliant
constraints. The remaining utility segment services, including a proposal filed on December 13, 1999 by Bell Canada and other and Northwestel. Bell Canada and Bell Mobility applied to the
optional services, are not subject to price cap constraints but are Incumbent Local Exchange Carriers (“ILECs”), to reduce Direct CRTC to vary this decision from the prescribed 4.5 per cent to
tariffed. Essential services required by local and long distance Connect (switching and aggregation) rates paid by competitors 2.7 per cent for 2001. On March 15, 2001, the CRTC issued Order
competitors, while not included with capped services, are gener- to interconnect with the ILECs networks. However, the CRTC 2001-219 denying the application by Bell Canada and Bell
ally priced to recover incremental costs and make an appropriate denied the ILECs’ request to offset reduced Direct Connect Mobility to vary the terms of Telecom Decision 2000-745, as it
contribution to fixed and common costs. The CRTC reviewed revenues with an exogenous adjustment to the price cap index. affects 2001. The CRTC held that a variance of the terms of its
the current price cap regime in a proceeding which was On March 17, 2000, the ILECs appealed the CRTC decision decision, as requested by Bell Canada, would have caused
completed in 2001. The CRTC’s decision which is expected on asking that the CRTC review and vary that part of its decision substantial local rate increases in other parts of Canada. More-
or prior to May 31, 2002, will set the terms and conditions for that disallowed the exogenous factor adjustment. On May 16, over, the CRTC held that Bell Mobility’s request would have
the new price cap regime. The terms of the price cap regime will 2000, the CRTC issued a decision that reversed its previous posi- amounted to giving wireless services preferential treatment over
govern the pricing flexibility for local exchange and wholesale tion by allowing the ILECs to partially recover the Direct wireline services.
services that Bell Canada will have going forward. Bell Canada Connect rate reductions. On December 18, 2000, the CRTC, in Orders 2000-1148 and
believes that its proposals provide a proper balance between the On June 19, 2000, approval of Bell Canada’s third annual 1149, denied Bell Canada’s applications to increase the rates for
interests of consumers and the interests of competitors by estab- price cap filing was essentially completed with the CRTC various calling features. On December 22, 2000, Bell Canada
lishing the necessary foundation for the further evolution of approval of Tariff Notices (“TN”) 6465 and 6465a. TN 6465 and filed an application with the CRTC seeking to vary these Orders
local service competition and the achievement of the ultimate TN 6465a, which became effective June 19, 2000, allowed Bell as Bell Canada believed these decisions were inconsistent with
goal of full facilities-based competition in all telecommunica- Canada to increase prices for single-line residential telephone the parameters established for the current regulatory regime. On
tions markets. However, there is no assurance that the CRTC will service for most customers, representing the first such increase March 21, 2001, the CRTC issued Order 2001-253 reversing
accept Bell Canada’s proposals and Bell Canada cannot predict for residential customers in over two years. Also included as part Orders 2000-1148 and 1149 which denied Bell Canada’s appli-
the final impact of the CRTC’s decision on Bell Canada. of the price cap filings were price decreases, filed and approved cations to increase the rates for various calling features. The rates
In contrast to Bell Canada’s utility segment services, earlier in the year, for single-line and PBX services (used by originally proposed were approved effective March 21, 2001.
competitive segment services (comprised primarily of long businesses of all sizes), as well as digital data services (used The annual revenue impact of these increased rates is approxi-
distance, private line and data, and terminals) are largely primarily by larger businesses). mately $60 million.
forborne from regulation. On June 28, 2000, the Governor In Council (“GIC”) On January 25, 2001, the CRTC issued Telecom Decision
announced that it had dismissed appeals of Telecom Decisions 2001-23 regarding the terms and conditions of access by Cana-
Significant Regulatory Decisions
99-15: Unbundled Local Loop Service Order Charges (filed by dian carriers to municipal property, as well as the entitlement
On March 12, 1999, in Order 99-239, the CRTC established, on
Call-Net Enterprises Inc. (“Call-Net”)), 99-16: Telephone Service of municipalities to compensation for allowing Canadian
an interim basis, the manner in which Bell Canada can recover,
to High Cost Serving Areas (filed by the Governments of Mani- carriers to occupy municipal rights-of-way. While the decision
over a three-year period, costs associated with local competition
toba and Saskatchewan and other parties) and 99-20: Review of was limited to the city of Vancouver, it is of importance to all
start-up and local number portability. The portion to be recov-
Frozen Contribution Rate Policy (filed by AT&T Canada Corp. (1) The term “EBITDA” used in this Annual Information Form does not have a
ered from services subject to price cap regulation is to be
(“AT&T Canada”) and other parties). In addition to upholding standardized meaning prescribed by Canadian Generally Accepted
reflected as an exogenous factor in the price cap formula. On Accounting Principles (“GAAP”) and therefore may not be comparable to
the CRTC decisions, the GIC also required that the CRTC report
February 23, 2000, in Order 2000-145, the CRTC rendered its similar measures presented by other publicly-traded companies. Bell
annually over a five-year period on the status of telecommuni- Canada uses EBITDA, among other measures, to assess the operating per-
formance of its on-going businesses.
carriers requiring access to municipal rights-of-way. By limiting a reasonable opportunity to make representations. Such revo- As a result, the terms and conditions associated with Bell
municipalities to recovery of incremental costs, the CRTC has cation is rare and licenses are usually renewed upon expiration. Mobility’s cellular license are subject to the outcome of any such
significantly reduced the potential charges applicable to Bell At this time, Bell Mobility knows of no reason why its current consultation initiated by Industry Canada.
Canada and other carriers. The cities of Toronto, Ottawa, radio licenses will not be renewed as they expire.
PCS License
Halifax, Calgary, Vancouver and the Federation of Canadian Industry Canada typically assigns portions of the radio spec-
In December 1995, following a competitive licensing process,
Municipalities were granted leave to appeal the CRTC Decision trum on a first-come, first-served basis. However, in instances
the Minister of Industry granted Bell Mobility one of four
on May 14, 2001 and have since filed their appeal with the where the expressed demand for a given allocation of spectrum
licenses to provide PCS in the 1.9 gigahertz (“GHz”) band for its
Federal Court of Appeal. exceeds the amount available, a comparative selection process
operating territory. The terms and conditions applicable to such
On March 30, 2001, the CRTC, in Order 2001-278, approved has been used to identify which of the various proposed systems
PCS licenses include requirements related to Canadian owner-
monthly price increases ranging from approximately $0.25 to will be authorized, based on relative merit. Bell Mobility was
ship and control, the time frame for rolling out service across
$1.60 per residential customer per month, for local residential granted authority for its PCS network in December 1995,
Canada, a restriction on cellular-affiliated PCS licensees to
services. Local price increases were anticipated in Telecom Deci- following such a comparative selection process. According to
provide PCS service in the 1.9 GHz band in each of the 25 major
sion 2000-745, which introduced changes to the contribution criteria announced by Industry Canada in June 1995, the
metropolitan areas prior to the commencement of service by at
regime, and are designed to recover from local customers a successful applicants were to be judged according to, among
least one PCS provider that is not affiliated with a cellular
portion of Bell Canada’s national subsidy requirements for high other things, financial capability, service innovation, commit-
licensee, resale of PCS and cellular services and facilities to other
cost serving areas. ment to early and extensive deployment, technical, marketing
PCS licensees, and research and development expenditures. The
On April 27, 2001, the CRTC issued Telecom Decision and sales expertise and equipment availability.
current term of Bell Mobility’s PCS license will expire on
2001-238, revising the unbundled local loop rates that compet- In February 1996, Industry Canada announced the results of
March 31, 2006. As with the cellular license, Industry Canada
itive local exchange carriers (“CLECs”) pay for the use of such its review of the radio licensing process. Industry Canada
has noted its intention to engage in a public consultation that
loops. The loop prices paid to Bell Canada have been reduced on concluded that a more streamlined version of the current
will consider equating the (1995) PCS license conditions with
average by 28 per cent. This aspect of Telecom Decision comparative process should be retained. At the same time,
those of the recently auctioned PCS spectrum. As a result, the
2001-238 is not expected to have a material adverse effect on Industry Canada announced its intention to establish an alter-
terms and conditions associated with Bell Mobility’s (1995) PCS
Bell Canada’s financial results. This decision also addresses the native competitive selection process incorporating a bidding
license are subject to the outcome of those consultations.
costs to be used as the basis for establishing the subsidy require- procedure in instances where reliance on market forces is appro-
ment under the national subsidy mechanism that was approved priate. Industry Canada released its Auction Framework in Spectrum Cap
on November 30, 2000 in Telecom Decision 2000-745. On August 1998 but reiterated that auctions were only one of many In October 1998, Industry Canada issued Canada Gazette Notice
December 14, 2001, the CRTC issued Order 2001-876, which tools it might use to allocate spectrum. Since that time, Industry DGTP-015-98 soliciting public comment on whether to
established the revenue per cent charge for the national subsidy Canada has conducted several auctions subsequently awarding continue, modify or rescind the application of a limit on the
program, on an interim basis, at 1.4 per cent for 2002. This spectrum in several frequency bands. aggregate amount of spectrum that may be held by PCS
reduction, while significant, was expected at the time Telecom providers. At the time of the initial selection of PCS licensees in
Cellular License
Decision 2000-745 was issued, which set the charge at December 1995, Industry Canada adopted a Spectrum Cap
The current term of Bell Mobility’s cellular license will expire on
4.5 per cent for 2001. Policy (“Policy”) which was set at 40 megahertz (“MHz”) and
March 31, 2006. The material terms and conditions of its cellular
consisted of frequency assignments for PCS at 2 GHz, cellular
WIRELESS FRAMEWORK license include compliance with the Canadian ownership and
radiotelephony and similar public high mobility radiotelephony
control requirements established in the Radiocommunication Act
Licensing Requirements services. Prior to the start of such consultation, Bell Mobility
and associated regulations, notification of the Minister of
All of Bell Mobility’s wireless communications services depend had licenses for 25 MHz of cellular spectrum and 10 MHz of PCS
Industry prior to any material change in ownership or control
on the use of radio frequencies. Industry Canada plans and spectrum. The stated objective of the Policy was to provide a
in fact of Bell Mobility, and at least two per cent of adjusted gross
assigns the use of spectrum in Canada for various wireless greater opportunity for competition.
revenues (excluding intercarrier payments, bad debts and third
communications systems and, where licensing is required, In November 1999, Industry Canada released its decision in
party commissions) of Bell Mobility for the period from April 1,
considers applications from prospective public and private its Policy Review, and increased the spectrum cap from 40 MHz
2001 to March 31, 2006, must be invested in research and devel-
operators of such systems for licenses to operate those systems. to 55 MHz in any geographical area. In addition to the above
opment related to wireless telecommunications activities.
The Minister of Industry also has the authority to suspend or frequency assignments, the new aggregation limit also applies
Industry Canada has noted its intention to engage in a public
revoke radio spectrum licenses, if the license holder has contra- to any future spectrum that may be identified for PCS in subse-
consultation that will consider equating the cellular license
vened the Radiocommunication Act, regulations or terms and quent Industry Canada allocation proceedings. The same
conditions with those of the recently auctioned PCS spectrum.
conditions of its license and after giving the holder of the license proceeding announced the timing of the release of a remaining
40 MHz of PCS spectrum which was held in reserve at the time services provided in-house by NBTel and subsequently approved reduces Bell Mobility’s contribution payments for 2002 to
of the awarding of PCS licenses in 1995. The FCC in the United the provision of current and future mobile services by the feder- approximately $21 million.
States has recently announced its intention to sunset its spec- ally regulated members of the SCNM alliance.
Telephone Charges for 911 Ser vice
trum cap policy as of January 2003. This action may cause
Local Number Portability WSPs provide their customers with access to emergency 911
Industry Canada to further consider its spectrum cap policy in
In December 1998, Microcell applied to the CRTC to impose service using the facilities of the wireline telephone companies.
the future.
wireless local number portability on the industry. In September Customers of the wireline telephone companies currently pay a
PCS Auction 1999, the CRTC denied Microcell’s application. In the United per number monthly charge of $0.22 for access to municipally
On June 28, 2000, Industry Canada released its policy and States, the FCC is considering a number of conservation initia- provided 911 service. This charge includes the provision of
licensing procedures which governed the auction of the 40 MHz tives including some that may require the implementation of related features such as automatic location information to emer-
of PCS spectrum held in reserve. Industry Canada determined number portability capability. Given the highly integrated gency answering centres. In an October 1999 decision, the CRTC
that the spectrum would be subdivided into four blocks of nature of North American wireless networks, including the found that it would be appropriate for WSPs, because they do not
10 MHz to be authorized as regional licenses. The policy also requirement to support North America wide roaming, an FCC receive the same functionality as fixed location wireline
determined that, subject to meeting Canadian ownership and decision requiring U.S. wireless carriers to implement such customers, to only be charged 50 per cent of the wireline 911 rate,
control regulations and the provisions of the PCS spectrum cap, measures could prompt similar requirements in Canada. As i.e., a monthly charge of $0.11 per wireless telephone number.
any entity would be permitted to participate in the auction. some U.S. wireless carriers are opposing such measures, the
Enhanced Wireless 911 Ser vice
Existing competitors as well as new entrants participated in the timing of any such requirement is not clear.
Due to technological limitations in wireline, wireless and 911
auction which concluded on February 1, 2001. Bell Mobility,
Toll Contribution answering centre platforms, when wireless customers call 911
bidding on behalf of itself and its Bell Wireless Alliance (“BWA”)
On May 1, 1997, the CRTC issued Order 97-590 in which it service, they are only provided with a voice link to the emer-
partners, paid approximately $720 million to acquire 20 licenses
determined that all WSP interexchange switched mobile voice gency answering centre. This contrasts to wireline service where
across Canada, including Alberta and British Columbia. This
services that originate or terminate on the telephone compa- databases, resident in the telephone network, provide the emer-
resulted in a $1.40/pop/MHz of spectrum which compares to a
nies’ public network would be subject to the payment of a long gency answering centre with the subscriber’s telephone number
price of $6.28/pop/MHz in the recent U.S. auction. In the key
distance contribution effective January 1, 1998. Another result for call back purposes, as well as with automatic location infor-
Southern Ontario market, Bell Mobility acquired an additional
of this Order is that cellular providers are no longer restricted mation. In 1996 in the United States, the FCC mandated WSPs
20 MHz of PCS spectrum. The new licenses will expire on
from carrying on long distance between fixed landline stations. in that country to implement enhancements in wireless 911
November 29, 2011. Bell Mobility is now well positioned to
The new contribution regime introduced by Telecom Deci- service in two phases. Phase 1 would provide the call back
begin the deployment of its 3G wireless services.
sion 2000-745, which became effective January 1, 2001, applies number of the originating wireless telephone. Phase 2 would
Forbearance to all Canadian telecommunications services providers, provide locational information to a fairly precise degree. While
In December 1996, the CRTC confirmed an earlier decision that including WSPs, with revenues of over $10 million per year. Bell both phases would result in WSPs incurring costs, Phase 2 is esti-
it was appropriate to forbear from regulating the rates for inter- Mobility paid $1.6 million in long distance contributions for the mated to involve substantial costs to retrofit wireless networks
connected switched mobile voice services (i.e., cellular, PCS and year 2000, while revenue-based contribution for the year 2001 is to accommodate this requirement. Due to technical and related
Enhanced Specialized Mobile Radio (“ESMR”)), other than wire- approximately $56 million. Bell Mobility and Bell Canada regulatory difficulties, the proposed implementation dates have
less services provided in-house by the telephone companies. The applied to the CRTC for it to vary the terms of its decision so not been met, and have recently been extended.
CRTC determined, however, that all interconnected mobile that in 2001, WSPs would be subject to a 1.5 per cent tax. On In light of the FCC regulatory initiatives, Canadian emer-
service providers should remain subject to the statutory require- March 15, 2001, the CRTC issued Order 2001-219 denying the gency agencies have requested that the CRTC mandate similar
ment prohibiting them from discriminating unjustly between application by Bell Mobility and Bell Canada to vary the terms requirements on Canadian WSPs. In response, in 1997 the Cana-
customers. The CRTC also retained its jurisdiction to impose of Telecom Decision 2000-745, as it affects 2001. The CRTC held dian WSPs proposed the establishment of a joint WSP/emer-
conditions on the provision of any interconnected switched that a variance of the terms of its decision, as requested by Bell gency agencies/telephone companies working group to examine
mobile voice service. Other services (i.e., paging, data radio Canada, would have caused substantial local rate increases in the technical and regulatory considerations involved. The CRTC
network, airline passenger communications and private and other parts of Canada. Moreover, the CRTC held that Bell and Industry Canada participate in the working group as
shared radio services) are subject to unconditional forbearance Mobility’s request would have amounted to giving wireless observers. As a direct outcome of the working group’s activities,
from regulation. services preferential treatment over wireline services. On all WSPs, including Bell Mobility, are currently engaged in an
In October 1998, subsequent to an application from NBTel, December 14, 2001, the CRTC issued Order 2001-876, which enhanced wireless 911 trial in the York-Toronto area to provide
the CRTC forbore from the regulation of cellular and PCS established the revenue per cent charge for the national subsidy the wireless call back number and improved emergency call
program on an interim basis at 1.4 per cent for 2002. This
routing. The trial ended on February 28, 2002, and a final report pay-per-view business authorized in 2000. In addition, Bell merged company is called AT&T Canada. AT&T Canada is active
is expected by the end of April 2002. ExpressVu has obtained a Satellite Relay Distribution Under- in about 29 markets in Canada, including most urban areas such
In a related development, on October 31, 2001, the CRTC taking broadcasting license which allows it to distribute, via as Toronto, Montréal, Ottawa-Gatineau, London and Québec
issued Public Notice 2001-110 which, amongst other things, satellite, broadcasting programming services to terrestrial broad- City. Their foothold represents over 80 per cent of the address-
considers whether WSPs should be mandated to offer E911 casting distributors throughout Canada. able market for local business lines in Canada.
service to their clients in areas where E911 is commercially Sprint Canada, an approved CLEC, is owned by Call-Net.
COMPETITION
offered by ILECs. In the meantime, E911 access service tariffs Sprint Canada competes in various markets including local, long
have been approved, on an interim basis, in Telus’ and Bell WIRELINE distance, wireless products with interconnections to interna-
Canada’s operating territories. Bell Mobility has argued that Bell Canada’s wireline services can be broadly classified under tional markets, data and Internet. Sprint Canada began offering
mandates are not appropriate in the forborne and highly the following categories: local telephone service in Calgary, Vancouver, Toronto and
competitive wireless segment. Bell Mobility and other WSPs Montréal in 1999.
Basic Access Ser vices
have argued that the cooperative working group approach, Many regional companies have also received or registered for
Basic access services are those services that allow Bell Canada to
which includes the several stakeholders involved in the provi- CLEC status; however, due to the current economic climate,
connect its customers to the network, i.e., basic local service.
sion of wireless E911, is the more effective and prudent course. some of these companies are no longer in operation. Vidéotron,
Bell Canada’s main competitors in basic access services include:
Any decision to mandate WSP provision of wireless E911 service an approved CLEC, which operates its own facilities-based local
AT&T Canada; Telus; Le Groupe Vidéotron Ltée (“Vidéotron”);
could impose significant costs on Bell Mobility and other WSPs. service, was acquired by Quebecor Inc. (“Quebecor”) in 2000.
and Call-Net. As discussed above, Bell Canada’s prices for basic
A decision by the CRTC is pending. They offer service in the urban areas of Québec with offerings
access services are subject to price cap regulation. On May 1,
available in Montréal, Laval, Longueuil, Drummondville and
Bundling and Joint Marketing 1997, the CRTC issued Telecom Decision 97-8, which estab-
Granby.
As permitted by Telecom Decision 98-4, Bell Canada and Bell lished the framework for local competition. In Telecom Decision
Telus announced that it has completed a national fibre-optic
Mobility are allowed to bundle their products and services with 97-8, the CRTC determined that:
network to deliver high speed data and Internet services to busi-
other companies, including each other and subsidiaries and • facilities-based entry into the local telephone market
ness customers, including having a route immediately available
associated companies, such as Bell ExpressVu. However, if would be permitted;
through established agreements with 360Networks Inc. Telus is
tariffed services are included in the bundle, the service bundle • new entrants are carriers equal in status and the new
also in the process of constructing a metropolitan fibre-optic
must be tariffed and pass an imputation test to ensure that framework must allow for the transition from a single
infrastructure in Toronto, to be owned and operated by Telus.
services are not sold at prices below cost. network to one of inter-operable networks;
Wireless competitors (PCS and cellular license holders, such
The relationship between Bell Canada and Bell Mobility is • all services of existing carriers and new entrants are to be
as Telus Mobility, Microcell and Rogers Wireless Communica-
expected to accelerate the delivery of bundled services, offer made available to competitors for resale; however, whole-
tions Inc. (“Rogers”)/AT&T Wireless (U.S.)) have been posi-
customers a single point of contact for their communication sale rates at a mandated discount are not required;
tioning their services as alternatives to conventional wireline
needs and improve overall cost structures allowing both compa- • new entrants’ retail prices will not be regulated;
telephony in the local market. To this end, Telus acquired
nies to compete more effectively in the marketplace. • new entrants will have access to subsidies that ILECs
Clearnet Communications Inc. (“Clearnet”), a national digital
receive to provide service in higher cost areas; and
DTH wireless company, in 2000.
• new entrants must meet certain public interest require-
Bell ExpressVu was awarded a broadcasting distribution license
ments such as providing 911 and message relay service. Competitor Ser vices
for its DTH satellite TV service by the CRTC in December 1995
With terms and conditions for providing local telecommu- Competitor services are those services that Bell Canada provides
and began operation in September 1997. Bell ExpressVu’s license
nications services now established, new entrants are making to competitors that are used in the provision of competitive
and the CRTC’s Broadcasting Distribution Regulations mandate
their presence felt in this market. Many companies have been local and interexchange services. Many of the terms and
various requirements in terms of the service that can be
approved by the CRTC to operate as CLECs. conditions for local competition were determined in Telecom
provided and how those services can be packaged. Bell
On March 4, 1999, AT&T Canada and MetroNet Communi- Decision 97-15, which dealt with issues such as: co-location
ExpressVu’s license allows it to provide service in all parts of
cations Corp., a provider of data and voice services targeting access; requirements to obtain or resell co-location access; the
Canada. Unlike cable companies, the price Bell ExpressVu
medium and large business accounts in major Canadian urban type of equipment included in co-location and co-location sites.
charges for its basic service is not regulated by the CRTC.
areas, announced that they had entered into a definitive agree- In addition, in Telecom Decision 97-8, ILECs were required to
Bell ExpressVu has been granted a pay-per-view program-
ment to merge their respective companies in a transaction make local network components available to competitors on an
ming license by the CRTC and operates a DTH pay-per-view
valued at approximately $7 billion. The terms of the agreement unbundled basis, thus allowing competitors to provide service
business pursuant to the terms and conditions specified in the
were approved at a shareholders’ meeting in May 1999. The using a mix of their own facilities with those of the ILECs. Bell
license. Bell ExpressVu has not yet initiated the terrestrial
Canada’s rates for these services are generally determined by a carrier. On May 31, 1999, AT&T Canada and Primus announced Internet services including extranets, WANs and managed
cost plus markup formula. On November 30, 1998, the CRTC the consummation of a comprehensive strategic alliance in the networks packaged with traditional voice services.
issued Telecom Decision 98-22 in which the CRTC established residential long distance consumer market in Canada. The Nationally, AT&T Canada has been Bell Canada’s most
the rates that Bell Canada can charge CLECs to use its local agreement included the sale by AT&T Canada of its residential significant competitor in the data services market, offering
access loops to compete in the local telephone service market. long distance customer base and consumer assets to Primus. frame relay and asynchronous transfer mode (“ATM”) services
These rates were subsequently reduced in Telecom Deci- AT&T Canada retains a strong presence in the business market. to the business markets utilizing a Canada-wide ATM network.
sion 99-15 to reflect anticipated cost efficiencies. The CRTC In Telecom Decision 97-19 issued on December 18, 1997, the Moreover, AT&T Canada has created a network with national,
issued Telecom Decision 2001-694 and Order 2001-848 to CRTC concluded that the long distance and toll-free markets are high speed fibre-optic capabilities with bandwidth for delivery
further reduce the service order charge based on updated cost now sufficiently competitive to protect the interests of of local, long distance, data and Internet services.
information and to reclassify the band designations for certain customers, and that it would be appropriate to forbear from Sprint Canada strengthened its position in the data services
telephone wire center serving areas. regulation of those services. As a result, Bell Canada is no longer business with its 1998 acquisition of Fonorola Inc., a long
required to file and obtain CRTC approval of tariffs specifying distance services reseller which had become a facilities-based
Options and Features
rates for such services. However, Bell Canada is required to carrier and had been constructing a national fibre network. Its
Options and features are discretionary services offered by Bell
provide the CRTC, and to make publicly available, rate sched- service offerings include managed and unmanaged private line
Canada to its customers, such as call waiting, calling number
ules setting out the rates for North American basic long distance and virtual private networks (“VPNs”) over frame relay.
identification and call answer. These services currently provide
service, and to update them within 14 days of any change in Vidéotron is also focusing on residential High Speed Internet
a substantial contribution to Bell Canada’s revenue base and
such rates. In addition, the CRTC has placed a cap on these through its cable modem offering which is essentially available
profitability. While these services are not capped, it is expected
schedules such that the weighted-average rate for each schedule in all its territory.
that in the longer term, with facilities-based local competition,
will not be allowed to increase. These conditions were subject to Private line and data services had been competitive prior to
margins from these services will decline.
review during the price cap hearing in 2001. Competition in the 1979 on a non-interconnected basis and since 1979 for services
Local Pay Telephones long distance market in Canada has been price intensive, connected to the public switched telephone network. In 1996,
On June 30, 1998, the CRTC issued Telecom Decision 98-8, resulting from discount structures for term and volume the CRTC approved Bell Canada’s application for forbearance
opening the local pay telephone market to competition. New contracts in the large business markets as well as from flat rate from regulation of its Datapac and HyperStream services. In a
entrants into the market must meet certain requirements as set pricing in the residential and small business markets. Bell separate decision later in 1996, the CRTC also approved forbear-
out by the CRTC. Bell Canada filed proposed tariffs on Canada intends to continue to compete vigorously and is ance for electronic messaging and information services. In both
August 14, 1998 to allow competitors’ pay telephones access to committed to being competitively priced in all markets. decisions, the CRTC concluded that the market for those
its local network. Removal of the last remaining barrier to long distance services was highly competitive. On December 18, 1997, the
Rates charged by new entrants will not be regulated. competition took effect on October 1, 1998, when Teleglobe’s CRTC issued Telecom Decision 97-20 in which it noted that the
However, rates charged by Bell Canada and other former SCNM exclusive right to provide certain international telecommuni- interexchange analog and other voice grade service sector,
companies will continue to be monitored until, in the opinion cations services ended. The CRTC released Telecom Decision which it deemed to be distinct from the high capacity and
of the CRTC, competition is sustainable. 98-17 in October 1998, which established a new regulatory digital data systems (“DDS”) service segments, required
regime for international telecommunications services. The deci- continued regulation to protect the interests of customers. With
Long Distance Ser vices
sion required that overseas carriers, including resellers, obtain a respect to the high capacity and DDS services, the CRTC
Bell Canada’s major long distance competitors are all affiliated
license from the CRTC from January 1, 1999; to date, numerous acknowledged that the sources of competitive supply had
with U.S. carriers. No two countries in the world share as much
parties have acquired licenses to provide international services, increased significantly and that there was evidence of sufficient
cross-border traffic as Canada and the United States.
making for an intensely competitive market. The decision also competitive supply to warrant forbearance on 20 specific routes.
Sprint Canada has a considerable base of residential and
eliminated traffic routing restrictions which previously required The CRTC also found that there were likely other routes, which
business customers, and strong brand loyalty. Its market pre-
the use of Canadian facilities for overseas traffic. would qualify for forbearance, and proposed a process to address
sence in the United States, as well as in other parts of the world,
further forbearance on a route-by-route basis. On May 12, 1999,
is a key strength in the carriage of cross-border traffic, including Private Line and Data
the CRTC announced that forbearance on additional routes
traffic between Canada and the United States. The majority of In 1999, Bell Canada launched Bell Nexxia to provide IP/Broad-
would be granted based on the existence of competing facilities
this traffic originates and terminates in Bell Canada’s territory. band services to business customers. Bell Nexxia directly and
on a route (competitors must file semi-annual reports identi-
Other competitors include Primus Telecommunications Canada indirectly owns, controls and operates a national IP/Broadband
fying qualifying routes). In subsequent rulings, the CRTC
Inc. (“Primus”) and Telus. In March 1999, Primus acquired network with over 100 points of presence in key locations
substantially extended the number of forborne routes to cover
London Telecom Network Inc., an independent long distance throughout Canada and the United States. Bell Nexxia offers
most major routes in Bell Canada’s territory.
The key drivers in the data market include growth in Internet Industry Canada subsequently authorized the remaining PCS November 30, 2000, Rogers announced plans to overlay its
access and applications using IP such as e-mail, Web site spectrum in its January 2001 PCS auction. In its pre-auction TDMA network with a GSM network with integrated General
design/hosting and e-commerce; however, competition from consultation, Industry Canada considered, and subsequently Packet Radio Service packet data capability throughout its
cable companies is not as important on the business side as it is declined, to adopt a new entrant set aside as part of its PCS nationwide digital coverage area. Rogers stated that the tech-
on the residential side. Demand for faster and higher bandwidth auction policy. While eligible new entrants were permitted to nology change was to better position itself to evolve towards full
access technologies, DSL and fibre access systems, applications participate in the auction, only one, Wireless2Net Inc., 3G wireless capabilities. GSM is the technology platform widely
such as broadcast video, requirements for managed corporate succeeded in acquiring a limited amount of spectrum. Industry used throughout Europe and Asia. Rogers began its marketing
and campus networks (VPN and ATM) and alternatives to dedi- Canada has stated its intention to reconsider the issue of setting of GSM phones in November 2001, and in January 2002,
cated private line and circuit switched services are also aside spectrum for new entrants as part of the next licensing announced that its GSM service has been extended to reach
increasing rapidly. round which is not expected prior to 2004. Should Industry 85 per cent of the Canadian population.
Canada introduce such an approach for new entrants, further In October 1997, Clearnet launched its PCS service using
Terminals
competition in the wireless market may also be introduced in Code Division Multiple Access technology, which is the same
Bell Canada has experienced substantial competition from a
the future through the licensing of additional PCS and cellular PCS technology used by Bell Mobility. Clearnet has rolled out
large number of companies in the provision of business and resi-
operators. For additional information, see earlier disclosure its PCS network in major urban areas in British Columbia,
dential terminal equipment in its operating territories, following
under this Item 3 entitled “Regulation – Wireless Framework – Alberta, Ontario and Québec and has signed an agreement with
CRTC decisions in the early 1980’s allowing the connection of
PCS Auction”. In addition to competing with cellular and other Rogers to permit Clearnet customers to roam on the analog
customer-owned terminal equipment to its facilities.
existing wireless services, PCS is expected to eventually compete network of Rogers when outside of Clearnet’s own serving area.
Ser vice Outside ILECs Traditional Territory with local wireline access services. Clearnet is currently competing for customers and for distribu-
On August 31, 2001, the CRTC issued Telecom Decision In November 1996, Microcell launched its PCS service in tion channels directly against Bell Mobility’s cellular and PCS
2001-534, granting forbearance to ILECs for service provided Montréal using Global System for Mobile Communications networks. Clearnet is also a Specialized Mobile Radio (“SMR”)
outside of their traditional operating territory; however, it (“GSM”) digital technology. Microcell has rolled out its PCS operator that owns a national ESMR network in Canada offering
retained powers to ensure that the confidentiality of customer network in major urban areas in British Columbia, Alberta, cellular-like service. Services offered using ESMR may also
and competitor information is protected against undue prefer- Ontario, and Québec and has signed an agreement with compete with cellular service. ESMR refers to a low-powered
ence or unjust discrimination. Mobility Canada to permit Microcell’s customers to roam on the ‘cellular-like’ communications service supplied by converting
analog network of Mobility Canada when outside of Microcell’s analog trunk radio systems into an integrated digital transmis-
WIRELESS
own serving area. Microcell is currently competing for sion system. ESMR addresses certain of the technical limitations
In 1985, Industry Canada awarded two cellular licenses in each
customers and for distribution channels directly against Bell of existing SMR systems. In August 2000, Clearnet was acquired
service area in Canada, which resulted in a highly competitive
Mobility’s cellular and PCS networks. In Order 2000-831, issued by Telus. As a result of the acquisition of Clearnet, Telus Mobility
cellular industry in Canada. Increased competition from the
September 8, 2000, the CRTC approved on an interim basis was required by Industry Canada to return radio spectrum previ-
introduction of PCS and the development of new products and
Microcell’s proposed tariff, enabling it to operate as a wireless ously licensed to Telus Mobility and Clearnet in any regions
services has heightened market awareness and stimulated
CLEC. Microcell has subsequently received CRTC approval to where the merger resulted in the combined entity exceeding
overall demand for wireless telecommunications services.
operate as a CLEC in portions of Telus operating territory and Industry Canada’s spectrum cap.
In December 1995, Industry Canada awarded four licenses to
has indicated its intention to roll out its service across Canada. On May 11, 1999, Mobility Canada announced a major
provide PCS in the 1.9 GHz range to Rogers, to two new PCS
In addition, the CRTC is currently considering certain CLEC restructuring of its organization, creating two groups of wireless
entrants (Clearnet and Microcell) and to the shareholders of
related requirements identified in Order 2000-831, primarily carriers able to compete anywhere in Canada for the wireless
Mobility Personacom Canada Ltd. (“Mobility Canada”), a
those relating to wireless 911 and wireless equal provisions, that business of national customers. The agreement changes the
company comprising the wireless affiliates or divisions of
could influence the timing of Microcell’s deployment as a CLEC. wireless landscape in Canada by removing restrictions that kept
Canada’s major wireline telephone companies, including Bell
In November 1996, Rogers announced the launch of digital Mobility Canada members from competing in each other’s terri-
Mobility. Bell Mobility and Rogers each received a license for
PCS service on its 800 MHz network using its existing Time Divi- tories. The groups are each able to offer Canada-wide wireless
10 MHz of radio frequency spectrum, while subsidiaries of
sion Multiple Access (“TDMA”) technology. At the same time, service, either by selling network services to each other or
Clearnet and Microcell each received a license for 30 MHz of
Rogers and AT&T Canada entered into a long-term strategic through direct competition.
radio frequency spectrum. In its initial PCS licensing process,
alliance which included the licensing of the AT&T brand to The first group is BWA, which covers Canada from coast-to-
Industry Canada declined to award all of the available spectrum
Rogers for use in connection with the marketing of its mobile coast and includes Bell Mobility, Island Tel Mobility,
assigned to PCS, indicating at that time its intention to re-eval-
wireless services. Effective January 17, 2000, Rogers changed its MTT Mobility Inc., NBTel Mobility, NewTel Mobility Limited,
uate the need to allocate further PCS spectrum in two years.
brand name from Cantel AT&T to Rogers AT&T Wireless. On
MTS Mobility and Sasktel Mobility. The other group is repre- Nationally, Bell ExpressVu also faced increased competition ENVIRONMENT
sented by Telus Mobility. from the sale of equipment for the reception of pirated U.S. DTH
Bell Canada monitors its operations to ensure their compliance
Under the agreement, Mobility Canada may continue to services, such as DirecTV and Echostar. The sale of the illegal
with applicable environmental requirements and standards and
provide national wireless service for the duration of all existing equipment grew substantially during 2001.
implements preventative and remedial action as required. Bell
contracts with national customers. It may also continue its role Bell ExpressVu’s estimated market share compared with Star
Canada has put in place an environmental management and
as a provider of billing and settlement services for all member Choice grew to 60 per cent as at December 31, 2001, and 70 per
review system which identifies potential environmental prob-
companies. cent of new DTH activations during the month of December
lems or opportunities, establishes a course of action and ensures
Bell Mobility competes directly with Rogers, Telus Mobility 2001 were with Bell ExpressVu.
ongoing improvement through a feedback process.
and Microcell for cellular and PCS customers, dealers and retail Regionally, Bell ExpressVu competes with the existing cable
One of the key management and review system tools is the
distribution outlets. Competition for subscribers is primarily on Multiple System Operators, Rogers, Shaw, Vidéotron and
Corporate Environmental Plan which essentially details the
the basis of price, services and enhancements offered, the tech- Cogeco, as well as smaller local cable companies.
environmental activities undertaken by the various business
nical quality of the cellular and PCS system, customer service, In some regions of Canada, Bell ExpressVu competes with
units within Bell Canada. The plan identifies, over a three-year
distribution, coverage and capacity. digital wireless operators such as Look Communications Inc.’s
period, funding requirements, accountabilities and deliverables,
The combination of cellular and PCS licenses provides a Look TV in Southern Ontario and Québec (in which Teleglobe
and allows for the follow-up of Bell Canada’s progress in
competitive advantage and favourably positions Bell Mobility Inc. owns an interest), Craig Wireless International’s SkyCable
meeting its objectives supporting its policy.
in the marketplace to benefit from accelerating wireless market in Manitoba, and Skinner Group’s Image Wireless Communica-
For the year ended December 31, 2001, a total amount of
growth while maintaining its existing customer base. Bell tions in Saskatchewan. Each of these three companies has less
approximately $12 million (79 per cent which were expenses
Mobility intends to compete vigorously in the wireless markets than 100,000 subscribers each.
and 21 per cent which were capital expenditures) has been spent
of the future, using its proven capabilities in the deployment
C A P I TA L E X P E N D I T U R E S on environmental activities. For 2002, Bell Canada has budgeted
and operation of wireless networks and its marketing expertise.
a total amount of approximately $14 million (79 per cent which
It also intends to continue to enhance its existing wireless Bell Canada continues to make large capital expenditures to
are expenses and 21 per cent which are capital expenditures) to
services as technology evolves, to apply for new radio licenses meet the demand for telecommunications services and the
ensure the proper application of its environmental policy and
and to deploy new services to the benefit of its customers. improvement of such services.
the minimization of its various environmental risks.
Bell Canada’s consolidated capital expenditures for the past
DTH Bell Canada is one of the founding members of the North
three years are shown in Table 3.8.
Bell ExpressVu became the fourth largest broadcasting distribu- American Communications Environmental Excellence Initia-
During 2002, capital expenditures are expected to be reduced
tion undertaking in Canada during 2001, ahead of Cogeco tive which led, in 1999, to the finalization and signing of a
to approximately $3.4 billion. This reduction is mainly attri-
Cable Inc. (“Cogeco”) and behind Rogers, Shaw Communica- charter aimed at guiding the telecommunications industry in
buted to non-recurring expenditures that were incurred in 2001
tions Inc. (“Shaw”) and Vidéotron in terms of total number of the management of its environmental issues.
for the purchase of Bell Mobility’s PCS spectrum licenses. A
subscribers. Bell ExpressVu’s main competitors can be broadly A second important milestone of this initiative was reached
significant portion of 2002 expenditures will be related to the
divided into national and regional competitors. in 2001, when ten leading North American telecommunications
growth initiatives such as IP/Broadband, increased digitaliza-
Nationally, Bell ExpressVu competes against Star Choice Tele- companies, including Bell Canada, jointly produced an industry
tion of the wireless network, national expansion including, but
vision Network Inc. (“Star Choice”), a DTH operator owned by report which provided objective guidelines for measuring
not limited to, Western Canada, and continued deployment of
Shaw through Canadian Satellite Communications Inc. the industry’s effect on the environment. Bell Canada believes
high-speed access infrastructure. Capital spending is also
(“Cancom”). Star Choice launched its service in April 1997, that this is a significant step forward in determining how
expected to support, to a lesser degree, convergent billing and
several months prior to Bell ExpressVu. On January 24, 2002, telecommunications technologies can help contribute to the
productivity initiatives. The overall anticipated increase in
Shaw and Cancom announced their consolidated financial development of meaningful solutions to the many global
capital expenditures for wireless services is expected to be
results for the first quarter ending November 30, 2001. Star challenges.
mainly offset by reduced expenditures for traditional wireline
Choice ended the quarter at 674,000 subscribers, and ended the
services. Bell Globemedia
December 31, 2001 calendar year at 699,000 subscribers.
GENERAL
3.8 Bell Canada – Capital expenditures (1)

Bell Globemedia is a Canadian multi-media company in the
2001 2000 1999 fields of broadcasting, print and the Internet, created on
Capital expenditures (in $ millions) 4,099 2,852 2,499 January 9, 2001. Bell Globemedia provides integrated informa-
(1) Comprised of Bell Canada’s capital expenditures only. tion, communications and entertainment services to Canadian
customers and access to distinctive Canadian content. Through CT V Revenues from print are primarily advertising revenues
its various Internet media properties, Bell Globemedia also representing 78 per cent of total revenues. Circulation revenues
CTV’s principal business is the operation of conventional tele-
provides unique destinations for Internet users. Bell Globemedia represent 16 per cent of total revenues while the remaining
vision broadcasting stations. CTV operates the CTV Television
is comprised of: the television operations of CTV (which six per cent is generated from other sources.
Network, a private English-language national television
operates the CTV Television Network and several specialty The Globe and Mail’s advertising revenues decreased in 2001
network, through wholly-owned television stations across
channels); the print operations of Bell Globemedia Publishing due to the slowdown in global economic activity that began in
Canada and through affiliation agreements with non-owned
carrying on business under the name The Globe and Mail; the the second quarter. Maintaining growth is dependent on
television stations. CTV holds and operates licenses for televi-
interactive operations of Bell Globemedia Interactive; and other general economic conditions as well as the ability to maintain
sion broadcasting undertakings in Toronto, Ottawa, Sudbury,
media interests. market share. To date, The Globe and Mail’s market share of
Sault Ste. Marie, North Bay, Timmins and Kitchener, Ontario;
In 2001, Bell Globemedia completed the following signifi- advertising volume against its key competitors in the Toronto
Winnipeg, Manitoba; Saskatoon, Regina, Yorkton and Prince
cant transactions: marketplace remains constant at 31 per cent.
Albert, Saskatchewan; Calgary, Lethbridge and Edmonton,
• exchanged its investment in, and cash commitments The key cost drivers in the print division are the cost of edito-
Alberta; Vancouver, British Columbia; Montréal, Québec;
towards, Landscape Entertainment Corp. for a 20 per cent rial content and staff, the number of copies circulated and the
Halifax and Sydney, Nova Scotia; and Moncton and Saint John,
economic interest in Film Holdings Co., the parent size and complexity of the product. At current levels, printing
New Brunswick. In addition, CTV holds licenses for and oper-
company of Artisan Entertainment Inc.; represents approximately 28 per cent of total operating costs
ates rebroadcasting facilities in Ontario, Manitoba,
• purchased CF Television Inc. (“CFCF-TV”) and CKY-TV, while compensation and newsprint represent 28 per cent and
Saskatchewan, Alberta, Nova Scotia, New Brunswick and Prince
two CTV affiliated television stations in Montréal and 14 per cent, respectively. The price of newsprint has been
Edward Island which allow CTV to extend the reach of its broad-
Winnipeg, respectively, for a total aggregate cash consi- declining since May 2001.
casting operations in these areas. CTV’s principal source of
deration of approximately $183 million; All printing is performed on a contract basis with long-term
revenue is the sale of airtime for commercials aired on its televi-
• sold its 40 per cent interest in CTV Sports Net Inc. (“CTV agreements in place at all six printing locations. During 2001,
sion stations.
SportsNet”), a specialty channel, for a total cash consider- all contract printers upgraded their presses for The Globe and
CTV has ownership interests in and/or manages several
ation of approximately $138 million; Mail to allow 50 per cent of the newspaper to be printed in
specialty channels, including CTV Newsnet, The Comedy
• completed the acquisition of a 100 per cent ownership colour, in order to meet increased colour demands from its
Network, Outdoor Life Network, Talk TV, TSN, RDS and
interest in Report on Business Television (“ROB TV”) advertisers. Capital requirements are generally restricted to
Discovery Channel. These specialty channels derive revenues
from affiliates of Thomson, pursuant to a previous system improvements and are not required for printing plant
from advertising and from subscription payments set at a
agreement; expansion. The Globe and Mail expects to make continued
monthly rate per subscriber as determined by contracts with the
• acquired 29.9 per cent of The Comedy Network, a system improvements over the years.
distributors of the particular service. CTV is also involved in the
specialty channel in which it previously held a 65.1 per
production and distribution of television programs. CTV’s BELL GLOBEMEDIA INTERACTIVE
cent ownership interest, for a cash consideration of
production and distribution revenue is generated primarily
approximately $36 million; and Bell Globemedia Interactive was created in the second quarter
from the production of commercials for advertisers and the sale
• announced an agreement with Cogeco, whereby Bell of 2001, as a division of Bell Globemedia, and is responsible for
of programs and distribution rights.
Globemedia would contribute approximately $72 mil- operating, maintaining and commercializing Bell Globemedia’s
CTV’s television operations have grown primarily through
lion in cash for a 40 per cent interest in a newly created various Internet media properties. Bell Globemedia Interactive
acquisitions as well as by winning licenses through competitive
company that would hold a 99 per cent interest in the operates a number of popular Internet media properties in the
applications.
TQS network as well as other television stations. Bell Finance, Careers, News, Entertainment and Sports categories,
Globemedia closed the TQS transaction on February 15, BELL GLOBEMEDIA PUBLISHING which leverage extensively the well-known Bell Globemedia
2002. family brands and associated content and services. These media
The Globe and Mail is an English-language print and electronic
In January 2002, Bell Globemedia acquired the remaining properties include:
daily Canadian newspaper (Canada’s largest national news-
five per cent interest in The Comedy Network for a cash consid- • In the Finance category: The Globe financial network of
paper), founded in 1844, publishing one Toronto and one
eration of approximately $6 million, and sold its 12 per cent properties, including globeinvestor.com, globefund.com,
national edition each day, six days a week, from six locations.
interest in the History Channel for cash proceeds of approxi- globeadvisor.com and robtv.com, which provide compre-
Total circulation amounts to approximately 364,000 copies per
mately $20 million. hensive Canadian and global coverage of financial, busi-
day Monday to Friday and 437,000 copies on Saturday, and total
ness and investment news and services. These sites
readership can reach over one million persons per day.
generate revenues from the sale of advertising, sponsor-
ships and promotions, as well as from distribution and
content syndication arrangements. In addition, in • Canadian Internet Directories: The canada411.ca and the The CRTC requires that in application for a transfer of owner-
December 2001, Bell Globemedia Interactive launched a yellowpages.ca sites offer comprehensive English and ship or control of a television programming undertaking,
subscription-based premium financial information and French electronic residential and business listings, significant and unequivocal tangible benefits representing a
services website, globeinvestorgold.com, which generates allowing users to locate, sort and obtain relevant infor- financial contribution of 10 per cent of the value of the transac-
revenue from both advertising and recurring user fees. mation on persons and businesses throughout Canada. tion be included. The CRTC policy is based on the CRTC’s view
• In the Careers category: workopolis.com English (owned • Network of City Sites: This network consists of a that the absence of a competitive process for changes to the
in partnership with Torstar Corp. (“Torstar”)) and series of local Web sites, including vancouverplus.ca, ownership or control of television programming undertakings
workopolis.com French (owned in partnership with calgaryplus.ca, edmontonplus.ca, ottawaplus.ca, montreal- makes the benefits test an appropriate mechanism for ensuring
GESCA Ltée) represents the meeting place of job plus.ca, quebecplus.ca and toronto.com (owned in part- that the public interest is served.
recruiters and candidates generating revenues from distri- nership with Torstar), each providing an aggregation of On December 7, 2000, the CRTC approved the acquisition
bution arrangements, postings and e-solutions. local Web programming, including information on arts by BCE Inc. of CTV. As part of the transaction, a tangible bene-
• In the News, Entertainment and Sports category: Each of and entertainment, weather, news, community informa- fits package totalling $230 million over seven years was
globeandmail.com, globetechnology.com, ctvnews.com, tion and more. approved. As of December 31, 2001, the balance remaining on
tsn.ca, rds.ca, exn.ca, talktv.ca, comedynetwork.ca and the $230 million commitment was approximately $206 million.
BUSINESS AND MARKET
ctv.ca offers consumers an online wealth of information, CTV also has combined benefit commitments of approxi-
In 2001, advertising revenues represented approximately 57 per
tools and resources under well-known brands in Canada. mately $59 million for other CRTC approved acquisitions of
cent of Bell Globemedia Interactive’s total revenues. Licensing
These sites generate revenues from the placement of television programming undertakings including NetStar, ROB
and distribution generated approximately 10 per cent of total
advertising and promotions, as well as from distribution TV, CKY-TV and CFCF-TV. The balance remaining on these
revenues while the remaining 33 per cent was derived through
and content syndication arrangements. In addition, in commitments as of December 31, 2001, is approximately
subscription, transaction, e-solutions and consulting revenues.
December 2001, Bell Globemedia Interactive launched a $50 million, the majority of which will be payable over the next
According to Jupiter Media Metrix, the Bell Globemedia
subscription-based premium sports Web site, tsnmax.ca, five years.
Interactive collection of websites attracted over 9.8 million
which generates revenue from both advertising and Pursuant to the provisions of the Income Tax Act, the cost of
unique Canadian visitors during the month of December 2001,
recurring user fees. advertising in a newspaper is deductible for the advertiser’s tax
out of an estimated 15 million unique online users in Canada,
purposes if the newspaper qualifies as a Canadian newspaper. In
S Y M PAT I CO - LYCO S representing over 65 per cent of online reach in Canada.
order to qualify as a Canadian newspaper, The Globe and Mail
Bell Globemedia owns a 71 per cent interest in Sympatico-Lycos.
R E G U L AT I O N must generally be held by a corporation incorporated under the
Sympatico-Lycos was created in April 2000, as a joint venture
laws of Canada, of which the chairperson and at least three
with Lycos, Inc. of Boston (now Terra Networks, S.A., as a result CTV is subject to the provisions of the Broadcasting Act. For more
quarters of the directors are Canadian citizens and which is not
of the combination of Terra Networks, S.A. and Lycos, Inc. in information on the Broadcasting Act, see earlier disclosure under
controlled by non-Canadians. As at the date of this Annual
October 2000). this Item 3 entitled “Bell Canada Segment-Regulation-Broad-
Information Form, The Globe and Mail qualifies as a Canadian
Sympatico-Lycos provides an integrated collection of local, casting Act”.
newspaper.
national and global Internet content, products and services, On August 2, 2001, the CRTC renewed the licenses of all the
including Web search and directory services, Internet commu- television stations owned and controlled by CTV for a full seven- COMPETITION
nications and personalization features and various other year term. Furthermore, the CRTC imposed several conditions
The Internet is driving the convergence of new media (i.e.,
Internet-based products and services for the consumer and of license, including a requirement to adhere to a Statement of
graphical, audio and video digital media), and established
small office/home office market in Canada. The Sympatico- Principles and Practices to ensure editorial independence
media, including publishing and broadcasting. While conver-
Lycos offerings are made available through its network of between the broadcast and print media interests, and to estab-
gence remains at its early stages, industry participants have
leading Canadian Web properties, including: lish a monitoring committee to address complaints concerning
begun to position themselves for the new environment. This is
• National Portal: The sympatico.ca portal, offered in both CTV’s compliance with the Statement of Principles and Practices.
not a trend limited to Canada but is occurring around the world.
English and French, provides a one-stop destination for When CTV’s acquisition of NetStar Communications Inc.
Some competitors have chosen to proceed with strategies similar
online content, information and communications tools, (“NetStar”) was approved by the CRTC in March 2000, the
to that of BCE ensuring a presence in a broad cross-sector of
products and services, leveraging content and tools from CRTC directed CTV to divest its interest in CTV SportsNet. In
industry segments, while others have decided to focus more
within the BCE group of companies and other leading July 2001, CTV, through its trustee, announced the sale of its
narrowly on content development, for example. The creation of
global content and service providers. 40 per cent interest in CTV SportsNet. This transaction was
Bell Globemedia positions BCE to compete more effectively in
completed in November 2001.
the Internet age.
Each of Bell Globemedia’s component businesses faces competing with a greater number of Internet and media compa- with nearly every major international telecommunications
vigorous competition from well-financed, and in many cases, nies, including companies offering both wireline and wireless carrier in the world, including national PTTs (i.e., government
well-established competitors in their respective core markets. communications services and features as well as companies owned or controlled monopolies known as Post, Telegraph &
Based on industry rating surveys, CTV’s broadcast operations involved in the broadcast, distribution and communication of Telephone Companies which usually provide domestic and
enjoy a significant market position within their broadcast areas. content and related services. international services) and incumbent carriers, and also with
However, CTV encounters substantial competition for viewers emerging carriers recently established as a result of the deregu-
Teleglobe
and corresponding advertising revenues in markets it serves lation of telecommunications markets. Teleglobe maintains
from the Canadian Broadcasting Corporation (“CBC”) and The following information with respect to Teleglobe is qualified information systems designed to allow for network optimiza-
CanWest Global Communication Corp. (“CanWest”). CTV also in its entirety by the announcements made by BCE Inc. and tion, least cost routing and the centralization of processing func-
competes with CHUM Limited, which has a multi-regional pres- Teleglobe Inc. on April 24, 2002, which are described in Item 2 tions principally located at Teleglobe’s International Network
ence, a number of specialty channels, and other Canadian and – “General Development of BCE – Recent Developments”, by Operating Center in Montréal and at its Internet Operating
foreign conventional and specialty broadcasters. This competi- the ultimate outcome of the events described therein and by the Center in Reston, Virginia.
tion has intensified over recent years. Market fragmentation has risk factors described in this Item 3 under the heading “Forward-
P R I N C I PA L M A R K E T S
increased over the last decade as a result of the introduction of Looking Statements – Risk Factors – Risks Associated with
Teleglobe has structured its regional operations to be managed
additional television services, the expanded reach of existing April 24, 2002 Announcements”.
locally, with centralized financial, network, IT and product
signals and increased use of VCRs. The deployment of digital
GENERAL development. Teleglobe enters new markets primarily by hiring
capability further extends the choices available to Canadian
local professionals who are better positioned to understand the
viewers as new Canadian and foreign services are made available. Through operating subsidiaries of Teleglobe Inc., Teleglobe
relevant markets. Teleglobe markets its products and services
The Globe and Mail competes with a broad range of print provides global communications and e-business services
through its sales force located in over 110 countries as well as
media for subscriber and advertising revenues. Before 1998, The including voice, Internet connectivity, high-speed data trans-
through agents and resellers.
Globe and Mail was the only national newspaper in Canada. mission, hosting, broadband, broadcast and other value-added
Since the launch of the National Post in that year and the services on a wholesale and retail basis. Teleglobe serves over North America. Teleglobe has international and domestic oper-
launch of several transit papers in the key Toronto market, 1,000 customers, with approximately 50 per cent of such ating authorizations from the FCC in the United States and a
competition has intensified. The Globe and Mail also vies for customers being ISPs, application service providers, and content full facilities-based license from the CRTC as well as the
subscribers and advertisers with The Toronto Star owned by and broadband providers, approximately 40 per cent of such authority to provide services on a resale basis in Canada. These
Torstar, Quebecor’s Sun Media newspaper chain, CanWest’s customers being carriers and approximately 10 per cent of such licenses and authorizations authorize Teleglobe to offer its
numerous community newspapers across Canada in addition to customers being multinational corporations. services in the following market segments: carriers, resellers,
the National Post, and dozens of independent community Teleglobe’s network connects approximately 240 countries ISPs, content providers and broadcasters, businesses and
newspapers. and territories via terrestrial and submarine cables, satellite access consumers. Teleglobe provides communications and e-business
The market for Internet products and services, and for related and peering arrangements with other network providers. As of services, ranging from traditional voice, data and broadcast
Internet advertising and subscription services, is highly December 31, 2001, Teleglobe’s network had 133 points of pres- services to Internet, transmission, content and other value-
competitive. Bell Globemedia Interactive believes that the prin- ence and approximately 72,000 square feet of hosting facilities. added services. These global services are offered to most of the
cipal competitive factors in this market are brand recognition, Teleglobe has ownership or interests in Intelsat Ltd. major North American carriers by Teleglobe’s carrier services,
performance, ease of use, relevance of content, variety of value- (“Intelsat”) and New Skies Satellite N.V. (“New Skies”) and in through sales offices in the United States and Canada. Tele-
added services and products and quality of end user support. undersea cable systems and cable segments, including systems globe’s largest customers in North America are Bell Canada and
Several companies currently offer competitive online prod- such as TAT 9/12/13/14, Gemini, TPC-4/5, AC-1, China-U.S. and AT&T Canada which accounted for approximately 11.4 per cent
ucts and services to Bell Globemedia Interactive’s target market. FLAG-1. Teleglobe also owns or has access to cable landing of Teleglobe’s revenues for the year ended December 31, 2001.
These competitors currently include the network of websites stations on the Atlantic and Pacific coasts of North America as In 2001, Teleglobe generated approximately $320 million of
offered by Yahoo! Inc., Microsoft Corporation’s (“Microsoft”) well as satellite earth stations that provide access to the Intelsat, revenues from BCE affiliates (including Bell Canada), repre-
MSN and America Online, Inc. As well, a number of companies New Skies, Loral, Lockheed Martin INTERSPUTNIK, EUTELSAT, senting approximately 15 per cent of its total revenues.
have and will continue to offer localized Internet content and PanAmSat and Telesat international satellite networks and back-
Europe. In Europe, Teleglobe has sales offices and various
services. Bell Globemedia Interactive’s competitors in this local to-back connectivity to U.S. and Canadian domestic satellite
licenses and authorizations in 18 countries to operate as an
market include the network of websites offered by CanWest, networks. These operating facilities are connected by fiber-optic
international and domestic facilities-based carrier or service
CBC, Telus and Quebecor. As Bell Globemedia Interactive links to Teleglobe’s international switching centers and Internet
provider. Teleglobe’s principal markets in Europe include
expands its offering of Internet products and services, it will be gateways. Teleglobe has operating agreements and relationships
Denmark, France, Germany, Italy, Norway, Spain, Sweden and to allow any underlying technology to interconnect with the entertainment programmers, news agencies and sportscasters
the United Kingdom. Its customer base includes incumbent and system. The GlobeSystem network’s design is based on directly throughout the world.
emerging carriers, ISPs, resellers/distributors, large corporations fusing optical wavelengths to routers and ATM platforms as well In cooperation with Bell Canada, Teleglobe has launched an
and broadcasters. as intelligent network management systems that are expected uncompressed 270 Megabits digital video network service.
to enable customers to select service parameters on demand. Teleglobe also offers occasional use, full time and special event
Asia/Pacific. Teleglobe has sales offices in ten countries of the
Teleglobe is working with a number of technology suppliers, video services through its own Program Booking Center and a
Asia/Pacific region and licenses and authorizations in three
including Nortel Networks for Dense Wave Division Multi- combination of satellite and fiber-based facilities.
countries to operate as an international facilities-based carrier.
plexing (“DWDM”) and synchronous digital hierarchy/synchro-
In Hong Kong, Japan and Australia, Teleglobe’s principal Voice Network. Teleglobe’s switching facilities include three
nous optical network equipment. In addition, Teleglobe is
markets in Asia/Pacific, Teleglobe offers various data and voice backbone international switching centers (or gateways) in
working with Cisco Systems, Inc. (“Cisco”) to connect Gigabit
telecommunications services to incumbent and alternative Canada and one in each of the United Kingdom and the United
Switch Routers onto the wavelengths in Teleglobe’s European
carriers, resellers, ISPs and broadcasters, such as international States. At these gateways, traffic is routed through or received
and North American fiber networks. Teleglobe has also invested
virtual transit service, switched transit, international toll free, from Teleglobe’s submarine cables or satellite earth stations. The
in the Inktomi platform for caching and distributing content at
collect, global roaming, Internet, international private line and gateways use DMS-300, DMS-250/300, DMS-500 and DMS-100E
the edges of Teleglobe’s network.
broadcast services. digital telephone switches from Nortel Networks and other
Internet Network. Teleglobe operates an Internet backbone equipment necessary for handling international traffic. Tele-
Latin America. Teleglobe has sales offices in nine countries of
peered with the U.S. and European backbones and providing globe has added a larger backbone international switch in the
Latin America and authorizations in such countries to operate as
international connectivity in over 100 countries. Teleglobe’s IP United Kingdom as well as backbone international switches in
an international facilities-based carrier or service provider. Tele-
network is present at all major network access points and Los Angeles, Newark and Tokyo. Teleglobe also owns and oper-
globe provides Internet, data and corporate voice services
Internet business exchanges. In addition to its own points of ates regional switches located in Denmark, Germany, Spain,
mainly to large corporations and ISPs, with its principal markets
presence, Teleglobe has points of presence in 58 telehouses and Italy and France. The software in Teleglobe’s switches is designed
being Argentina, Brazil, Colombia and Mexico.
exchanges around the world. Telehouses are buildings that offer to provide feedback about inbound and outbound traffic to Tele-
Rest of the World. Teleglobe has sales offices in eight countries shared co-location facilities for telecommunications and tech- globe’s network management software and to its billing system.
of the rest of the world, a market division that includes Africa, nology companies. Teleglobe uses co-location facilities in loca- The reporting software is designed to provide vendor and
Eastern Europe, the Middle-East and the Indian Sub-Continent. tions where traffic volumes do not justify the cost of customer usage reports to allow Teleglobe to seek the most cost-
In India, the United Arab Emirates and Saudi Arabia, Teleglobe’s fully-dedicated facilities. Approximately 15 per cent of global effective routing of traffic and to target customers who might
principal markets in the rest of the world, Teleglobe provides routes are directly reachable through Teleglobe without the absorb increased levels of traffic. Multiple redundant routes are
mainly switched voice and Internet services to carriers, ISPs and need to transit other backbone networks. used to provide backup and decrease the risk of losing connec-
resellers. The network is supported by approximately 300 Cisco tivity in case of a network failure.
routers running up to optical carrier (“OC”)-48 levels of
GLOBAL NET WORK – GLOBESYSTEM Cable Facilities. Teleglobe’s cable facilities include cable stations
capacity. While most of Teleglobe’s Internet customer base is
as well as ownership interests and indefeasible rights of use
Teleglobe’s network currently connects approximately accessed via cable, past innovations have focused on improving
(“IRUs”) in terrestrial and undersea cables. Teleglobe’s cable
240 countries and territories via terrestrial and submarine satellite-based connectivity services. Teleglobe’s Internet access
stations at Pennant Point (Nova Scotia) and Port Alberni (British
cables, satellite access and peering arrangements with other service is satellite-based in a number of the countries where it
Columbia) serve as landing points for transatlantic and transpa-
network providers. The Teleglobe network’s capacity and service offers Internet connectivity with a large portion of such satel-
cific cable systems respectively. Teleglobe has ownership inter-
capability has been upgraded as a result of the building of the lite connectivity being provided with asymmetrical links
ests in cable systems in North America and Europe as well as in
GlobeSystem network. In addition, Teleglobe is one of the whereby information may be downloaded and uploaded. Tele-
the Atlantic, Indian and Pacific oceans and the Caribbean,
largest service providers in terms of satellite capacity connecting globe’s facilities are also composed of ATM switches that are
Mediterranean and North seas. As at December 31, 2001, Tele-
the Internet. The Teleglobe network is supported by monitoring located in several major cities in North America and Europe.
globe had ownership rights or IRUs in cable systems and cable
and other technical systems principally located at Teleglobe’s
Broadcasting. Teleglobe operates International Television Access segments with a total capacity in excess of 60 Gigabits (“Gbps”).
International Network Operating Center in Montréal and at its
Centers in London, Los Angeles, New York, Toronto and Wash-
Internet Operating Center in Reston, Virginia. Internet Data Centres. Teleglobe offers a hosting and content
ington which provide international video broadcast services.
distribution product line used by multinational companies to
Network Strategy. In 1998, Teleglobe Inc. developed the first With more than 30 years of experience, Teleglobe provides
facilitate eBusiness transactions using practices, systems and
plans for the GlobeSystem network, representing an upgrade of transport services for broadcast networks, content producers,
technologies that are supported by service level agreements.
network capacity and service capability. The system is designed
Satellite Facilities. Teleglobe’s satellite facilities include satellite Canada – Regulatory Framework & Licensing Regime. Until Canada – The Telecommunications Act. The Telecommunications
earth stations as well as Teleglobe’s investment in Intelsat and October 1, 1998, Teleglobe Canada Inc. (“Teleglobe Canada”), a Act, as amended in May 1998 to implement Canada’s commit-
New Skies. Teleglobe operates three satellite earth stations in predecessor of Teleglobe Inc., was the sole authorized Canadian ments under the World Trade Organization (“WTO”) Agree-
Canada and five in Latin America. These stations transmit and operator of facilities to provide Canada/overseas telecommuni- ment, applies to all defined Canadian telecommunications
receive messages via Intelsat, New Skies, Loral, Lockheed Martin cations services. On October 1, 1998, the CRTC issued Telecom common carriers, and to the provision of international services
INTERSPUTNIK, EUTELSAT, PanAmSat and Telesat satellites Decision CRTC 98-17 that changed the regulatory framework to other telecommunications service providers. The Telecommu-
over the Pacific and Atlantic oceans and also provide back-to- governing the provision of international services in Canada. nications Act defines the broad objectives of the Canadian
back connectivity to North American domestic satellites. With this decision, the CRTC introduced a licensing regime that telecommunications policy and empowers the Government of
Intelsat completed its privatization in July 2001 and now applies to all Canadian international service providers. The Canada to issue to the CRTC directions of general application
operates as “Intelsat Ltd.” in a framework similar to other non- CRTC decision also eliminated the rules prohibiting the routing with respect to any of these objectives. The Telecommunications
governmental satellite systems. By operation of U.S. law, Intelsat of Canada-Canada calls and Canada-overseas calls through the Act gives the CRTC discretion to establish a licensing regime for
must conduct an initial public offering by December 31, 2002. United States, thereby removing all traffic routing restrictions. telecommunications service providers of international telecom-
At the present time, Teleglobe Inc.’s shareholding interest in In September 1999 and September 2001, the CRTC issued orders munications services. The CRTC also has discretion to specify
Intelsat is approximately four per cent. An executive of Teleglobe which forbear from regulation all of Teleglobe Inc.’s services in classes of telecommunications service providers required to
Inc. was elected to Intelsat’s Board of Directors in July 2001. As a Canada. obtain a license before providing international telecommuni-
customer of Intelsat, Teleglobe Inc. has the right to use the The licensing regime defined in Telecom Decision CRTC 98-17, cations services as well as to specify a class of international
Intelsat satellite system and the obligation to pay certain charges effective January 1, 1999 and revised on December 17, 1999, telecommunications services which licensed telecommunica-
according to the governing contracts and tariffs. establishes two classes of international telecommunications tions service providers are permitted to provide. In addition, the
Teleglobe Inc. also holds an interest of approximately two per service providers: (a) Class A licensees are those who operate CRTC has the power to establish the form, manner and infor-
cent in New Skies, a limited liability company operating five telecommunications facilities, whether owned by them or mation required in an international license application and to
satellites. New Skies competes directly with Intelsat and other leased from a separate facilities provider, used in transporting set the fees which must accompany such license application.
satellite operators. New Skies has completed an initial public basic telecommunications service traffic between Canada and The Telecommunications Act provides that the term of an inter-
offering and Teleglobe Inc. could sell a portion or all of its another country; those who operate telecommunications national license may not exceed ten years on its issuance or
interest in New Skies in the future. equipment that converts basic international traffic from circuit- renewal and that a license is not transferable except with the
switched minutes originating in Canada to non-circuit switched consent of the CRTC. The Government of Canada has the power
Information Technology. Teleglobe has built an IT infrastructure
traffic, or from non-circuit switched traffic to circuit-switched to vary, rescind or refer back CRTC decisions. The CRTC may
to support its national and international operations. Teleglobe’s
minutes terminating in Canada, regardless of whether the itself review and rescind or vary any decision made by it. An
system is designed to allow its various operating entities to carry
licensee is responsible for the international transport; or those appeal of a CRTC decision on a question of law or jurisdiction
a high volume of traffic and to bill customers. Teleglobe main-
who perform both of the functions described above; and (b) may be brought with leave before the Federal Court of Appeal.
tains programming and management information personnel,
Class B licensees are those who neither operate telecommuni- The CRTC has the power to exempt any class of carriers from the
as well as contract programmers dedicated to the maintenance,
cations facilities owned by them or leased from a separate facil- application of the Telecommunications Act, and to refrain from
operation and continued development of Teleglobe’s manage-
ities provider used in transporting basic telecommunications regulating classes of services where this would be consistent
ment information systems, network management systems and
service traffic between Canada and another country; nor with the objectives of the Telecommunications Act. The latter
operational support systems. All IT activities in Teleglobe are
operate telecommunications equipment that converts basic concept is generally known as the power of forbearance.
centralized in one single IT department.
international traffic from circuit switched minutes originating The Telecommunications Act limits eligibility to operate as a
R E G U L AT I O N in Canada to non-circuit switched traffic, or from non-circuit- telecommunications common carrier (a “Canadian carrier”) to
The following summary of regulatory developments and legis- switched traffic to circuit-switched minutes terminating in corporations incorporated in Canada that are Canadian-owned
lation does not purport to describe all present and proposed Canada. Among other things, it prescribes, as conditions of and controlled. These ownership restrictions do not apply in
laws and regulations affecting the telecommunications industry. license, a basic prohibition for all licensees from engaging in respect of the ownership or operation of international subma-
Other existing laws and regulations are currently (or may anti-competitive conduct, and a requirement for Class A rine cables or earth stations that provide telecommunications
become) the subject of judicial proceedings, legislative hearings licensees to file certain information as to the basic international services by means of satellites. Resellers are exempted from the
and administrative proposals which could change, in varying traffic they carry and the agreements and arrangements they application of the Telecommunications Act, except for the provi-
degrees, the manner in which the telecommunications industry enter into with foreign service providers. Teleglobe holds a Class sion of international services.
operates. A license granted in 1998 for a term of five years which is renew-
able at certain conditions.
Canada – The Teleglobe Act. Teleglobe Canada was established conditions applicable to their services. Domestic interstate the types of service covered by the agreement, the division of
under the Teleglobe Act in 1987, as the successor corporation to common carriers are not required to obtain individual Section revenues between the carrier that bills for the call and the carrier
the rights and obligations of the Canadian Crown corporation 214 or other authority from the FCC for the provision of that terminates the call at the other end, the frequency of settle-
responsible for the provision of overseas telecommunications domestic interstate telecommunications services. ments (i.e., monthly or quarterly), the currency in which
services. The Teleglobe Act was amended in May 1998 in order to payments will be made, the formula for calculating traffic flows
United States – International Services. With respect to interna-
implement Canada’s commitments under the WTO Agreement between countries, technical standards, procedures for the
tional services, Teleglobe USA has obtained all necessary Section
and to repeal provisions that were inconsistent with the end of settlement of disputes, the effective date of the agreement and
214 authorizations from the FCC to acquire, own and operate
Teleglobe Canada’s exclusive mandate. As a result of these modi- the term of the agreement.
international transmission facilities, to resell the services of
fications, Teleglobe Inc. and its subsidiaries are generally subject The FCC issued an international accounting rate order aimed
other U.S. carriers for the provision of international switched
to rules similar to those applicable to other telecommunications at reducing accounting rates by adopting a three-tiered system
services and international private line services, and to use the
service providers under the Telecommunications Act. of benchmarks, which was upheld by the U.S. Court of Appeals
interconnection arrangements and network assets of Teleglobe
in January 1999. Under this policy, U.S. carriers negotiating with
Canada – CRTC. In its role as Canadian regulator, the CRTC in Canada, L.P. Teleglobe USA has filed international tariffs with
overseas correspondents to exchange traffic will be required to
the past approved tariffs for Teleglobe’s regulated telecommu- the FCC.
use the specified benchmarks as the target for the negotiated
nications services and periodically issued directives which Additionally, the FCC has established different levels of regu-
settlement rate between the two carriers. The order establishes a
affected the accounting treatment of specific items in Tele- lation for dominant and non-dominant carriers. Teleglobe USA
three-tiered system of benchmarks, with different rates to be
globe’s accounts. As a result of its decision to forbear from regu- is presently classified as a non-dominant carrier for both
applied based on each country’s level of development (calcu-
lating Teleglobe services, CRTC’s oversight of Teleglobe’s domestic and international services on all routes, including
lated from World Bank and International Telecommunication
activities is very limited, consistent with its treatment of other Canada. As a result of the acquisition by BCE Inc. of all of the
Union data). If successful, the effect of this order could signifi-
international operators in Canada. outstanding common shares of Teleglobe Inc. that it did not
cantly reduce Teleglobe USA’s costs. At the same time, these
already hold in 2000, Teleglobe USA and its common carrier
Canada – Cable and Earth Station – Licenses. The Telecommunica- accounting rates could strengthen the ability of Teleglobe USA’s
affiliates are now subject to the FCC’s dominant carrier regula-
tions Act and the Radiocommunication Act require that a carrier competitors to reduce their own costs and more effectively
tion with respect to U.S.-Canada traffic. The primary effect of
must have a license for each of its satellite earth station sites and compete with Teleglobe USA and other Teleglobe affiliates.
dominant carrier regulation is to impose additional FCC
international undersea cable landing sites in Canada in order to
reporting and tariffing obligations. The FCC mandated the United States – Federal Legislation. The 1996 Telecommunications
operate such facilities and to carry traffic between Canada and
withdrawal of most tariffs by U.S. carriers by the end of 2001, Act is intended to, among other things, establish competition
any foreign country, or between countries through Canada.
including those filed by dominant carriers. to ILECs as a national policy by expressly prohibiting any legal
Teleglobe holds such licenses as are required by its business. The
The FCC permits the resale of international switched services barriers to competition in intrastate or interstate communica-
radio transmission licenses are renewable annually. The
and the resale of private lines for the provision of services inter- tions services under state and local laws. The 1996 Telecommu-
undersea cable landing licenses are granted for periods of ten or
connected to the public switched telephone network, generally nications Act further empowers the FCC, after notice and an
20 years and expire at various dates between 2003 and 2008. The
referred to as ISR. U.S. carriers may provide ISR on routes as opportunity for comment, to preempt the enforcement of any
holding of such licenses is subject to certain terms and condi-
permitted by the FCC. statute, regulation or legal requirement that prohibits, or has the
tions, with which Teleglobe is in compliance.
With regard to some carriers, Teleglobe USA must conduct effect of prohibiting, the ability of any entity to provide any
United States – Overview. The FCC exercises authority over all its international business in compliance with the FCC’s inter- intrastate or interstate communications service. The 1996
interstate and international facilities-based and resale services national settlements policy. The FCC currently applies the inter- Telecommunications Act also establishes certain requirements,
offered by Teleglobe USA Inc. (“Teleglobe USA”) and its national settlements policy to contracts with dominant carriers including interconnection requirements, the offering of local
operating affiliates. Services that originate and terminate within in offshore markets, but does not apply the international settle- network elements on an unbundled basis and other ILEC obli-
the same state, also known as intrastate services, are regulated ments policy to contracts with most new and emerging offshore gations with respect to resale, number portability, dialing parity,
by state regulatory commissions. carriers. Where it does apply, the international settlements access to rights-of-way and reciprocal compensation.
policy establishes the permissible boundaries for U.S.-based Certain provisions of the 1996 Telecommunications Act could
United States – General Federal Requirements. Under the Commu-
carriers and their affected foreign correspondents to settle the materially affect the growth and operation of the telecommu-
nications Act of 1934, as amended (the “Communications Act”),
cost of terminating each other’s traffic over their respective nications industry and the services provided by Teleglobe USA.
and the FCC’s rules, all international carriers are required to
networks. The precise terms of settlement are established in a There are currently in process numerous proceedings under the
obtain authority under Section 214 of the Communications Act
correspondent agreement, also referred to as an operating agree- 1996 Telecommunications Act. Certain sections of the 1996
prior to initiating international common carrier services, and
ment. Among other terms, the operating agreement establishes Telecommunications Act and the FCC’s rules have been, and likely
must file and maintain tariffs containing the rates, terms, and
will continue to be, judicially challenged. Teleglobe USA is COMPETITION of facilities-based international carriers is not only seen in
unable to predict the outcome of such legislative action, rule- the liberalization leader countries but more recently, in
The global communications and e-business industry is highly
makings or litigation or the substantive effect (financial or Latin America, Asia/Pacific and additional Western European
competitive and subject to the introduction of new services
otherwise) of the new legislation and the rulemakings on the countries.
facilitated by rapid technological change and market liberaliza-
operations of Teleglobe USA. In Canada, the elimination of the routing restrictions on
tion. International telecommunications providers compete on
international simple resale and international switched hubbing
United States – Arrangements with U.S. Carriers. Teleglobe’s U.S. the basis of price and pricing plans, customer service, transmis-
and the implementation of a streamlined process for the
carrier affiliates are classified by the FCC as non-dominant and sion quality, reliability and availability, breadth of service offer-
licensing of international telecommunications service providers
they may freely contract with other U.S. carriers. On February ings and availability of value-added services. Many of
have subjected the Canadian international direct distance
3, 1998, Teleglobe USA received authority from the FCC to use Teleglobe’s competitors and potential competitors upon dereg-
dialing market to unprecedented and intensifying levels of
owned or leased facilities between the United States and Canada ulation or expansion have significantly greater financial, tech-
competition from Canadian and foreign international telecom-
to interconnect the switched networks of Teleglobe USA and nological and other resources than Teleglobe. In addition,
munications service providers with greater financial resources
Teleglobe Canada, L.P. Teleglobe is classified as a dominant certain of Teleglobe’s competitors have recently filed for bank-
and larger breadth of service offerings than those of Teleglobe.
carrier on the U.S.-Canada route in light of its affiliation with ruptcy or are restructuring their debt, which may result in their
Acknowledging this, the CRTC has fully forborne from regu-
Bell Canada. assets being purchased or otherwise operated by companies
lating Teleglobe’s services.
with a significantly less leveraged capital structure from that of
Rest of the World. Teleglobe is also subject to regulation in coun- Technological changes, tied with competitive forces, may
Teleglobe. Internationally, Teleglobe competes with incumbent
tries in which it operates in connection with Teleglobe’s carrier affect all aspects of telecommunications, including network
providers, some of which have special regulatory status or the
services and other telecommunications service activities. The selection and access. Recent advances in technology, such as
exclusive right to sell particular services and virtually all of
policies of the national governments and regulatory authorities DWDM, are expected to help accommodate bandwidth expan-
whom have historically dominated their markets and accord-
of these countries may have a positive or negative impact on sion requirements by significantly expanding, in a cost effective
ingly have existing customer relationships. In addition, Tele-
Teleglobe’s ability to conduct business in such locations. manner, capacity and size. In the United States, private compa-
globe may be dependent upon these incumbent providers to
Teleglobe currently expects that the European Union nies are building North American terrestrial transmission
obtain facilities.
Member States will continue to implement more liberal systems which employ DWDM technology for commercial sale
In certain circumstances, significant resources are required
telecommunications policies and to address market entry issues. to telecom carriers, ISPs and resellers. As is the case in subma-
to obtain the regulatory approvals necessary to operate in a
Important issues remain with respect to the rates and terms of rine systems, these terrestrial providers already have significant
particular country and to obtain access to, and interconnect
service for interconnection of emerging carrier networks with capacity and in the near future are expected to offer substantial
with, the incumbent’s network. Foreign competitors may also
those of incumbent operators and the availability of fully bandwidth at declining prices. High-capacity fibre-optic cables,
possess a better understanding of their local areas, and there can
unbundled local loops and other network elements necessary to mobile telecommunications, compression technologies and
be no assurance that, notwithstanding Teleglobe’s efforts to hire
deploy broadband capabilities to end users. satellites also allow greater flexibility for consumers in their
local employees in each market, Teleglobe can obtain similar
In Asia, Teleglobe has benefited from deregulation in Japan, selection of a telecommunications provider, without commit-
levels of local knowledge. However, such competitors are some-
Hong Kong, Singapore, Taiwan and other markets both with ting them to a particular network. As high-capacity fibre-optic
times each other’s customers for certain specific routes and for
respect to securing its own operating authority and creating network technology is developed, international carriers may
certain categories of products. Moreover, Teleglobe may face
environments conducive to the establishment of new carriers. promote new cable systems, which will compete with Tele-
additional competition from existing and future global alliances
Elsewhere in Asia, China’s accession to the WTO is expected globe’s bandwidth service offerings.
and mergers among the largest telecommunications carriers.
to establish opportunities for the establishment of new domestic
Teleglobe also faces competition from companies offering BCE Emergis
and international carriers as well as foreign telecommunications
resold international telecommunications services. Teleglobe
investment in China over the next several years. In connection GENERAL
expects that competition from such resellers will increase in the
with accession, China has agreed to liberalize its telecommuni-
future in tandem with increasing deregulation of telecommu- BCE Emergis is a premier e-commerce service provider, strategi-
cations markets and to permit varying levels of non-controlling
nications markets worldwide. Teleglobe’s ability to compete cally focusing on market leadership in the transaction-intensive,
foreign investment in facilities-based operators over time. Tele-
effectively will depend on its continued ability to maintain high e-Health and financial services sectors. Its focus is to offer tech-
globe has also benefited from liberalization in Latin America
quality, market-driven services at competitive prices. nologically advanced Internet-based e-commerce services that
and Eastern and Central Europe, and is subject to certain levels
Internationally, the continuing market liberalization of the enable business processes from orders through to payments. Its
of regulation in its operating territories.
telecommunications industry has had a direct impact on the services transform business processes, such as buying, selling,
number of players in the market. This increase in the number invoicing and payment, and provide insurance claims
processing and cost containment services in the health sector. premium statement derived from a current enrolment database. delivered the managed Public Key Infrastructure to the first
Customers include leading North American banks and insur- This solution allows the premium statement to reflect statutory client department of the Government of Canada.
ance companies. and other changes made by the customer to its members’ profile Also in June 2001, BCE Emergis acquired for U.S.$30 million
BCE Inc. owns approximately 65 per cent of BCE Emergis, coverage, as well as facilitate the electronic payment of the all of the outstanding shares of Associates for Health Care, Inc.,
with the remaining common shares being publicly held. BCE consolidated premium statement. Through a five-year, multi- a privately held company involved in health care cost manage-
Emergis generated approximately $205 million of revenues from million dollar transaction-based agreement, BCE Emergis will ment in the State of Wisconsin in the United States. BCE
BCE affiliates in 2001 ($123 million in 2000), representing provide the Group Life and Health business unit of The Emergis paid U.S.$10 million at closing. The remaining
approximately 31 per cent of its total revenues (26 per cent Principal with the Emergis e-Premiums service. U.S.$20 million will be paid in three equal cash or share instal-
in 2000). In 2001, 82 per cent of the revenues generated from In October 2001, BCE Emergis announced that it had signed ments over a three-year period on the closing anniversary dates.
BCE affiliates were of a recurring nature, compared to 99 per a five-year agreement with Bank of America that will enable the This acquisition builds on BCE Emergis’ strategy to expand the
cent in 2000. bank to offer BCE Emergis’ e-Invoicing solution to its divisions reach of its provider network into a new geographic area.
and business customers around the world, in multiple languages
RECENT DEVELOPMENTS COMPETITION
and multiple currencies. Concurrent to this agreement, BCE
On April 5, 2002, BCE Emergis announced a re-alignment of its Emergis acquired technology assets from the bank. The e-commerce and the health care claims industries are and
business and an increased focus on the major growth opportu- Also in October 2001, BCE Emergis signed a number of key will continue to be highly competitive and BCE Emergis faces
nities where it already had a solid foundation and track record. agreements with Bell Canada for the provision of advanced competition for each of its individual services from numerous
As a result, it will actively seek to increase penetration in three e-commerce services. Under these agreements, BCE Emergis competitors who have substantial marketing, personnel and
specific areas: bill presentment services, payment solutions and extended its three-year reseller agreement with Bell Canada for technological resources. Many firms offer competing services in
claims processing. Concurrent with its focus on these areas, BCE another three years and expanded this agreement to include, in electronic bill/invoice presentment, electronic payment, claims
Emergis developed a plan to streamline its service offerings and addition to certain business Internet products (“IP Products”), processing invoice and payment. In the e-Health sector, certain
reduce its operating cost structure. A service offering review has its electronic business network services which enable enterprises companies provide an array of services, some of which may be
identified services considered non-core and that BCE Emergis to connect with their partners and exchange data in a secure IP- competitive to BCE Emergis’ claims processing solutions or
plans to exit during the course of 2002. The plan also includes based environment. Committed revenue over the three-year managed care services. Furthermore, in some areas, BCE Emergis
an overall reduction in personnel of approximately 550 persons, term will amount to $315 million. BCE Emergis also extended may compete with internal groups of major organizations.
representing approximately 20 per cent of its work force. for an additional three years the three-year services agreement BCE Emergis expects that other competitors will develop
In December 2001, BCE Emergis announced a five-year with Bell Nexxia with respect to the IP Products. over time. Some of these will be companies that are not
agreement with the Workplace Safety and Insurance Board of In July 2001, BCE Emergis announced a five-year agreement currently in BCE Emergis’ markets, others will be new compa-
Ontario (“WSIB”) to provide a new Web-enabled health claims with Visa U.S.A. that expands its payment and invoicing solu- nies, and others could be ventures between current clients and
approval and payment system that will provide a faster, more tions in the United States. BCE Emergis will work closely to inte- competitors.
consistent process for the province’s 27,000 health and medical grate its products into Visa’s commercial payment solutions. BCE Emergis believes that the principal competitive factors
service providers. With Ontario having the largest industrial BCE Emergis will also provide VISA with other payment-related in its industry include:
base in Canada, receiving over 300,000 claims for workplace application tools to facilitate the implementation and adoption • pricing of services;
safety and insurance benefits from injured workers annually, the among its large commercial customer base. • leading-edge technology;
WSIB is the largest payer of work-related health claims in the In June 2001, Bell Nexxia, BCE Emergis and CGI were • scalability of services;
country, and among the largest in North America. By devel- awarded a multi-million dollar contract to build and manage an • quality of services;
oping an online system for health claim submission and adju- e-government infrastructure for the Government of Canada. • technical and strategic expertise;
dication as well as receipt of labour market re-entry plans, BCE The solution, called the “Secure Channel”, is designed to allow • speed of development and implementation of solutions;
Emergis and the WSIB are breaking new ground in e-Health Canadian citizens and businesses to access different government • return on investment compared to costs and up-front
services. services electronically. Key components of the solution include fees;
In October 2001, BCE Emergis announced a new electronic the IP network, security, authentication, directory services, • brand-recognition and size of the firm;
premium presentment and management solution for the health application integration services and portal interfaces. BCE • strategic alliances and commercial relationships; and
and life insurance industry and that it had signed The Principal Emergis will provide e-commerce services, including managed • ownership of technology and ability to continue to
Financial Group (“The Principal”) as its first customer. The new Public Key Infrastructure security and financial payment enhance and improve technology.
service, called Emergis e-Premiums, allows customers to processing services, to the Government of Canada through Bell
generate and present to their corporate customers an electronic Nexxia. As part of phase one of the project, BCE Emergis has
BCE Ventures • Telecom Américas will transfer its 60 per cent indirect AC Q U I S I T I O N S A N D D I S P O S I T I O N S
interest in Techtel-LMDS Comunicaciones Interactivas, In November 2001, Vésper S.A., Vésper São Paulo S.A. and Vento
BCE Ventures combines, for management purposes, all the non-
S.A. (“Techtel”) to América Móvil upon receipt of regula- Ltda.’s (collectively the “Vésper Companies”) various stake-
core assets of BCE.
tory approvals. holders completed a financial restructuring that resulted in a
BCI In conjunction with the Reorganization, Telecom Américas dilution of BCI’s interest in the Vésper Companies to 1.4 per
secured capital contributions from its principal shareholders, cent on a fully-diluted basis. Under the terms of the restruc-
BCI, through joint ventures and subsidiaries, owns, develops
América Móvil and BCI, in the amount of U.S.$240 million. turing, BCI agreed to guarantee approximately U.S.$32 million
and operates advanced communications companies outside of
Additional capital resources in the amount of U.S.$120 million of the principal amount of certain indebtedness of the Vésper
Canada, with a focus on Latin America. BCI currently holds the
were committed in the form of a shareholder loan that is Companies (25 per cent of the debt guaranteed is due in 2004
majority of its investments through Telecom Américas, which
repayable in June 2004 in common shares of Telecom Américas. and the remaining 75 per cent is due in 2005). The amount of
owns and operates four Brazilian B-Band cellular companies
A private investor also signed an agreement to purchase the guarantee will be reduced proportionately in the event there
serving more than 4.3 million subscribers in territories of Brazil
U.S.$300 million of common shares in Telecom Américas. is a reduction in the principal amount being guaranteed. BCI
with a population of approximately 60 million. Telecom
Taking into account such U.S.$300 million equity injection, does not expect to recover any value from its investment in the
Américas was formed as a joint venture on November 16, 2000
BCI’s interest in Telecom Américas would be approximately Vésper Companies, and wrote off as of September 30, 2001, as
by BCI, América Móvil and SBC International, as a vehicle to
39 per cent, as compared to 41.7 per cent, currently. part of discontinued operations, the entire carrying value of its
expand their collective presence within the Latin American
BCI’s mobile operations in Brazil cover a combined total of investment of $86 million.
telecommunications market. Upon the formation of the joint
60.2 million licensed POPs (i.e., a population equivalent where During the course of 2001 and in March of 2002, Telecom
venture, BCI and América Móvil each held a 44.3 per cent
one person equals one POP) and include the B-Band cellular Américas closed a portion of the agreements announced on
interest in Telecom Américas, while SBC International held an
operations of: March 13, 2001 entered into with a group of Brazilian pension
11.4 per cent interest. Early in the third quarter of 2001, BCI and
• ATL in the states of Rio de Janeiro and Espírito Santo; and investment funds and Telesystem International Wireless
América Móvil each tendered shares of Telecom Américas to
• Tess S.A. (“Tess”) in the state of São Paulo, other than the Inc. to acquire an approximate additional 65 per cent indirect
redeem U.S.$275 million and U.S.$141 million, respectively, of
city and metropolitan region of São Paulo; economic interest in each of Telet and Americel, for an aggre-
notes due to Telecom Américas. As a result, BCI’s ownership
• Telet S.A. (“Telet”) in the state of Rio Grande do Sul; and gate purchase price of approximately U.S.$580 million, as
interest in Telecom Américas declined from 44.3 per cent to
• Americel S.A. (“Americel”) in seven states in the central- follows: (i) on March 30, 2001, Telecom Américas acquired an
41.7 per cent, while América Móvil’s and SBC International’s
west region of Brazil. additional 16.3 per cent economic interest in each of Telet and
ownership interests increased to 45.5 per cent and 12.8 per cent,
The balance of BCI’s operations have been treated as discon- Americel for an aggregate purchase price of U.S.$153.3 million;
respectively.
tinued operations and consist of the following: (ii) on September 25, 2001, Telecom Américas acquired an addi-
In February 2002, BCI with its partners, América Móvil and
• BCI’s CLEC operations in Mexico including fixed tional 43.44 per cent and 42.71 per cent economic interest in
SBC International, completed the Reorganization which reor-
telephony and value-added services carried on by Axtel, each of Telet and Americel respectively for an aggregate
ganized Telecom Américas into a company focused on the
S.A. de C.V. (“Axtel”); purchase price of U.S.$376.65 million; (iii) on December 5,
Brazilian mobile wireless market, while distributing the other
• BCI’s broadband operations in Brazil carried on by 2001, Telecom Américas acquired an additional 1.47 per cent
Telecom Américas assets to its shareholders. The Reorganization
Canbras and consisting primarily of broadband cable and 1.31 per cent in Telet and Americel, respectively, for an
gave effect to the following asset transfers:
television services including pay television, high-speed aggregate purchase price of U.S.$14.6 million; and (iv) on March
• Telecom Américas transferred its 77.1 per cent indirect
Internet access, wholesale data transport services and the 6, 2002, Telecom Américas acquired an additional 0.91 per cent
interest in Comunicación Celular S.A.-Comcel S.A.
ISP market; and interest in Americel for an aggregate purchase price of
(“Comcel”) to América Móvil;
• BCI’s Spanish Américas broadband operations carried on U.S.$3.5 million. Telecom Américas currently holds an approx-
• América Móvil transferred U.S.$80 million in cash and its
by Genesis and Communicaciones 2163, C.A. in imate 78 per cent indirect economic interest in each of Telet and
41 per cent indirect interest in ATL – Algar Telecom Leste
Venezuela. Americel. The remaining economic interests continue to be held
S.A. (“ATL”) to Telecom Américas;
On a consolidated basis, for the year ended December 31, by the Brazilian development bank, BNDES Participações S.A. –
• Telecom Américas distributed its 75.6 per cent indirect
2001, BCI had revenues of $373.9 million, a net loss of
interest in Canbras Communications Corp. (“Canbras”)
$335.4 million, EBITDA(1) of $57.6 million, and as of December 31, (1) The term “EBITDA” used in this Annual Information Form does not have a
to BCI;
2001, total assets of $4.9 billion and long-term debt (including standardized meaning prescribed by Canadian Generally Accepted
• Telecom Américas distributed its 59.1 per cent interest in Accounting Principles (“GAAP”) and therefore may not be comparable to
the current portion) of $2.1 billion.
Genesis Telecom, C.A. (“Genesis”) equally to BCI and similar measures presented by other publicly-traded companies. BCI uses
América Móvil; and EBITDA, among other measures, to assess the operating performance of its
on-going businesses.
BNDESPAR, a wholly-owned subsidiary of Banco Nacional de 42 per cent of the rights offered to them ($49 million), Proceeds of the Rights Offering were used to pay the accrued
Desenvolvimento Econõmico e Social (with an 18 per cent while BCE exercised all of the rights issued to it as well as interest owed to holders of the 1999 Debentures in the amount
holding) and the group of Brazilian pension and investment all of the remaining rights not exercised by the public of $40 million and to reduce outstanding indebtedness under
funds (with a four per cent holding). Telecom Américas is ($392 million); BCI’s syndicated senior secured facility (the “Credit Facility”) in
contractually committed to purchase, for approximately • pursuant to the Rights Offering, BCI offered units, priced the amount of $170 million. Approximately $150 million have
U.S.$33 million, the remaining four per cent economic interests at $100 per unit, consisting of a deposit receipt, a prin- been used to fund BCI’s equity commitments to Telecom
in each of Telet and Americel held by the Brazilian pension and cipal warrant and an anti-dilutive secondary warrant. The Américas, which was in turn used to fund, among other things,
investment funds once regulatory approvals are obtained. secondary warrants, which are non-transferable (and the first payment under the Tess Notes due on April 9, 2002. The
On April 9, 2001, Telecom Américas closed the agreement to therefore do not trade along with any common shares remaining proceeds will be used for general corporate and
acquire a 100 per cent interest in Tess, one of two B-Band cellular issued in connection with the Rights Offering), will investment purposes.
operators in the Brazilian state of São Paulo (excluding the entitle the holder thereof to acquire a certain number of On March 8, 2002, BCI concluded the amendment and
metropolitan region of São Paulo), for a total consideration of additional BCI common shares, for no additional consid- restatement of its Credit Facility whereby (i) the maturity date
approximately U.S.$950 million. The consideration consisted eration, in the event that (i) BCI issues common shares to was extended to March 8, 2003; (ii) the principal was reduced
of U.S.$319 million in cash and U.S.$631 million in notes affiliates of American International Group, Inc. (“AIG”) from $400 million to $230 million; and (iii) BCI pledged its
payable (the “Tess Notes”), which had an estimated fair value of upon the exercise by AIG of a put option described below; shares in Canbras to secure the repayment of the Credit Facility.
U.S.$571 million, resulting in an effective purchase price of and (ii) the average market price used to determine the On September 17, 2001, BCI amended and restated the
approximately U.S.$890 million. Under the terms of the number of common shares to be issued to AIG is less than Credit Facility with a group of lenders under which it could
agreement, and in accordance with the regulations governing the average market price used to determine the exercise borrow up to $400 million. The Credit Facility was secured up
ownership of the B-Band licenses, a majority of the voting rights price of the principal warrants in the Rights Offering. The to a maximum of U.S.$250 million by a pledge by BCI of all of its
continue to be held by the vendors. issuance of common shares pursuant to the secondary shares in Telecom Américas. The Credit Facility contains a
On March 27, 2001, Telecom Américas invested warrants could result in significant dilution to BCI share- change of control clause relating to BCE Inc.’s ownership in BCI
U.S.$300 million in ATL, increasing Telecom Américas’ total holders; which, if breached, could result in the acceleration of amounts
economic ownership in ATL from 50 per cent to 59 per cent. As • the issuance of 1,457,938,474 common shares at $0.27436 drawn thereunder. Concurrently with the entering into of the
a result of this transaction, BCI indirectly invested $208 million per share in settlement of the principal amount owing Credit Facility, on September 17, 2001, BCE Inc. extended a
in ATL and increased its effective economic interest from under BCI’s existing 6.75 per cent convertible unsecured convertible subordinated loan (the “BCE Loan”), in a principal
22.1 per cent to 24.6 per cent. subordinated debentures due February 15, 2002 and amount of $75 million, to BCI, which was subsequently
On February 23, 2001, BCI concluded the sale of its 20 per 6.50 per cent convertible unsecured subordinated deben- converted into common shares as mentioned above.
cent minority interest in KG Telecommunications Co., Ltd., tures due February 15, 2002 (collectively, the “1999
T E L E S AT
generating gross proceeds to BCI of approximately $785 million. Debentures”) in accordance with the terms of the inden-
tures governing the 1999 Debentures; Telesat is a world leader in satellite communications and systems
F I N A N C I N G AC T I V I T I E S
• the payment in cash of approximately $40 million in management and a leading consultant in the establishment,
On February 15, 2002, BCI completed a series of transactions
accrued interest on the 1999 Debentures on February 15, operation and upgrading of satellite systems worldwide. Telesat
(the “Recapitalization Transactions”) undertaken to improve the
2002; provides broadcast distribution and telecommunication services
financial condition of BCI and more specifically to (i) address a
• the issuance of 271,365,570 common shares at $0.2888 to over 275 customers located in North and South America.
liquidity shortfall relating to the settlement of BCI’s short-term
per share pursuant to the conversion on February 15, Telesat owns a total of four satellites: Anik E1, Anik E2, Nimiq 1
financial obligations; (ii) ensure that certain indebtedness of BCI
2002 of the principal amount and accrued interest owing and Anik F1. Telesat currently has two satellites under construc-
is not accelerated; and (iii) better position BCI and its share-
under the BCE Loan (defined hereinafter) in accordance tion, Nimiq 2 and Anik F2, which are expected to launch in
holders to benefit in any future recovery in the values of Latin
with its terms; and 2002 and 2003, respectively. While Nimiq 2 will provide addi-
American telecommunications companies. The Recapitalization
• a provision for the settlement of a put right (the “Put tional capacity for Bell ExpressVu’s DTH service as well as allow
Transactions consisted of the following:
Option”) in favour of AIG by the issuance of common for back-up capability, Anik F2 will provide full North America
• the issuance of 2,988,986,201 common shares at
shares of BCI in accordance with a put option agreement coverage in the traditional C and Ku-band frequency ranges in
$0.147288 per share pursuant to a rights offering with
entered into between BCI and AIG on December 10, 1998; addition to a Ka-band multi-media payload. Telesat owns and
gross proceeds to BCI of $440,241,800 (the “Rights
the issuance of common shares in satisfaction of the Put operates five teleports in Canada in addition to 240 earth
Offering”). The Rights Offering was made to holders of
Option is expected to result in significant dilution to BCI stations of various sizes and capabilities.
BCI’s common shares with public shareholders exercising
shareholders.
BUSINESS SEGMENTS Until November 2001, Telesat also managed the mobile satel- On October 1, 2001, Fireman’s Fund Insurance Company
Telesat provides satellite-based services through four strategic lite service business of TMI Communications and Company, (“Fireman’s Fund”), a subsidiary of Allianz AG of Munich, and
business units: Limited Partnership (“TMI Communications”). BCE Inc. holds a CGI finalized a ten-year IT outsourcing agreement valued at
• Broadcast Services: Broadcast services, which provided 100 per cent equity interest in TMI Communications Inc., the U.S.$380 million. As part of the agreement, CGI will provide
54 per cent ($173.8 million) of Telesat’s 2001 revenues, general partner of TMI Communications. In November 2001, Fireman’s Fund with IT support services to some 80 locations
are comprised of point-to-point and point-to-multi-point TMI Communications and Motient Corporation closed a joint across the United States.
satellite broadcast distribution of television programs and venture transaction under which they joined with financial part- On July 27, 2001, CGI acquired all of the outstanding
video signals. Customers in this segment include major ners to create a new combined entity called Mobile Satellite common shares of IMRglobal Corp. (“IMRglobal”), for a total
Canadian broadcasters, cable television companies, video Ventures (“MSV”). TMI Communications transferred its oper- consideration of $553 million, on the basis of 1.5974 Class A
distribution/reseller companies, Star Choice and Bell ating assets and all of its employees to new entities controlled or subordinate shares of CGI for each IMRglobal common share.
ExpressVu. managed by Mobile Satellite Ventures, LP. TMI Communications On June 14, 2001, CGI began operating the IT system of
• Business Networks Services: Telesat provides satellite-based holds partnership interests in various MSV entities. Laurentian Bank of Canada (“Laurentian Bank”), as part of a
wireless data networks nationwide to a broad range of $300 million ten-year outsourcing contract with Laurentian
CGI
financial, retail, industrial and commercial companies Bank. The agreement covers areas such as project development,
and government organizations, which require applica- GENERAL applications maintenance and evolution, operations support
tions including point-of-sale, video conferencing, Since October 1, 2001, CGI has organized its business units and automated banking machine support.
distance education, Lan-to-Lan connectivity, Internet according to the following breakdown: Canada and Europe, On May 1, 2001, CGI signed a strategic ten-year alliance
and intranet requirements and private voice networks. United States and Asia Pacific, and Business Process Services worth an estimated value of $1.2 billion with leading Canadian
Telesat also provides third party maintenance services at (outsourcing of a client’s processing functions). CGI provides financial services group Desjardins. In the context of this agree-
approximately 12,000 customer-owned earth stations end-to-end IT services to six industry sectors, namely financial ment, CGI acquired the related assets, certain intellectual prop-
within North America. Revenue from this business unit services, telecommunications, manufacturing/distribution/ erty rights and assumed liabilities of Desjardins used in data and
was 27 per cent ($87.2 million) of Telesat’s total revenues retail, governments, utilities and services, and healthcare. micro-computing of Mouvement Desjardins’ operations. CGI
in 2001. However, outside of Europe, CGI serves primarily the telecom- also took over 450 Mouvement Desjardins’ employees and two
• Carrier Services: Telesat provides satellite voice and data munications and financial services industries. Montréal data centers, and will manage Mouvement Desjardins’
transmission services to individual telephone companies CGI provides a range of IT services including information data processing operations. CGI also agreed to join with Mouve-
to extend their services to remote areas of Canada. technology and business process outsourcing, systems integra- ment Desjardins to market the client’s banking solutions to
Revenue from this business unit was 9 per cent ($28.7 tion and consulting. CGI’s primary focus is large-scale systems financial institutions.
million) of Telesat’s total revenues in 2001. integration and outsourcing contracts. Outsourcing revenue On January 4, 2001, CGI signed an outsourcing agreement
• International Consulting Programs: Telesat has developed represented approximately 69 per cent of CGI’s 2001 total worth more than $119 million with UK-based financial services
a wide range of specialized services designed to assist revenues, while systems integration and consulting represented company Sun Life Financial (“Sun Life”). Under the terms of the
satellite operators, spacecraft manufacturers and companies 31 per cent. CGI generates a high proportion of its revenues agreement, extending over a seven-year period, CGI has taken
involved in the field of satellite communications around from higher value-added services such as IT planning, business over Sun Life’s Basingstoke (UK) data center and will run and
the world. This business unit provided 10 per cent process engineering, systems architecture, systems development support the client’s IT infrastructure and desktops.
($31.0 million) of Telesat’s total revenues in 2001. and maintenance.
OTHERS
Effective March 1, 2000, Telesat no longer has a monopoly
R E C E N T D E V E LO P M E N T S
on Fixed Satellite Service business in Canada. Telesat expects BCE Ventures also manages on behalf of BCE certain BCE
On December 20, 2001, CGI successfully closed its public
that competition may develop from the major U.S. satellite investments including Bimcor Inc. and BCE Capital Inc.
offering of 11,110,000 Class A subordinate shares at a price of
operators using satellites with North American coverage to sell
$11.25 per share, for gross proceeds of $125 million, to a syndi- Employees
services into Canada. Telesat believes, however, that it remains
cate of investment dealers. The net proceeds of the offering was
strongly positioned in the Canadian market, having entered Table 3.9 sets out the number of employees of BCE as of
used to repay indebtedness and the balance was added to CGI’s
into long-term contracts with its major Canadian customers. December 31, 2001.
general funds to finance its development activities, including
Telesat also actively competes with terrestrial competitors such A significant portion of the employees of BCE Inc.’s
the funding of large outsourcing contracts and acquisitions, and
as Canada’s telephone carriers and service resellers in virtually subsidiaries are unionized and have a collective agreement with
for other general corporate purposes.
all of its markets. Telesat focuses on market segments and niches their employer.
best suited to satellite technology.
The following are some of the existing collective agreements western Bell” and the logo “Bell-in-a-circle design” infringe Bell and on May 24, 2001, the Federal Court of Appeal allowed the
that are governing the employment relationships of certain BCE Canada’s exclusive rights to BELL trade-marks in Canada. In appeal. On August 20, 2001, Bell Canada filed for leave to appeal
Inc. subsidiaries with their respective employees and which will their Statements of Defence and Counterclaims, the Defendants the Federal Court of Appeal decision to the Supreme Court of
expire in 2002 (or which have already expired): allege that Bell Canada’s trade-marks are invalid and not distinc- Canada. Hearings before the Tribunal resumed in September
• the collective agreement between Bell Canada and its tive of Bell Canada’s products and services and are seeking 2001. On December 13, 2001, the Supreme Court of Canada
12,685 clerical and associated employees represented by damages in the aggregate amount of $135 million and punitive granted Bell Canada’s application for leave to appeal. Bell
the Canadian Telephone Employees’ Association damages of $500,000 from Bell Canada for allegedly interfering Canada intends to seek a stay of the proceedings before the
(“CTEA”), which will expire on May 31, 2002. Renegotia- with their businesses. On June 16, 2000, the Federal Court of Tribunal pending the appeal to the Supreme Court of Canada
tions have been underway since March 4, 2002; Canada permitted Sonigem to institute a third party claim which is expected to be heard towards the end of 2002.
• several collective agreements between certain companies against Qwest and Unical alleging that they had warranted
I R I D I U M L I T I G AT I O N
of the Bell Globemedia segment (including CTV and The Sonigem’s use of the “Northwestern Bell” trade-mark in Canada
Iridium LLC (“Iridium”) developed a global wireless system
Globe & Mail) and their respective employees, repre- by virtue of a Distribution Agreement and the statutory
designed to enable customers to send and receive telephone
senting approximately 877 employees; and warranty of lawful use provided for in the Trade-Marks Act.
calls virtually anywhere in the world. Iridium has initiated
• two collective agreements between Teleglobe and approx- Qwest and Unical have both filed a Defence to this third party
proceedings under the United States Chapter 11 Bankruptcy Code
imately 300 of its employees, one of which expired in claim. On February 4, 2002, a Licence and Settlement Agree-
which are ongoing. Iridium Canada Inc. (“Iridium Canada”), a
March 2000 (Teleglobe is in the process of renegotiating a ment was entered into between Bell Canada and Qwest pursuant
wholly-owned subsidiary of Bell Mobility, is a shareholder of
new collective agreement) and the other one will expire to which they settled Bell Canada’s action against Qwest and
Iridium. A group of banks and financial institutions led by the
on December 31, 2002. Qwest’s counterclaim against Bell Canada. Pursuant to this
Chase Manhattan Bank are creditors in the bankruptcy proceed-
Failure of the renegotiations could have a material adverse settlement, each party has paid its own costs of the action and
ings and have asserted claims in connection with a
impact on the business, results of operations and financial counterclaim. On April 8, 2002, Bell Canada, Unical and
U.S.$800 million syndicated loan to an Iridium subsidiary. In
condition of the affected companies and, ultimately, on those Sonigem entered into a Settlement Agreement under which the
June 2000, the Chase Manhattan Bank, on behalf of itself and
of BCE Inc. parties have agreed to discontinue their respective action
this group (the “Plaintiffs”), instituted an action in the United
without costs.
Legal Proceedings States District Court, District of Delaware, against 16 share-
WAG E P R AC T I C E S I N V E S T I G AT I O N holders of Iridium, including Iridium Canada, alleging failure
Q W E S T, U N I C A L A N D S O N I G E M L I T I G AT I O N
On November 2, 2000, the Federal Court of Canada allowed Bell to make capital contributions. The amount of the claim against
Bell Canada instituted an action for trade-mark infringement
Canada’s application for judicial review of the Canadian Human Iridium Canada was U.S.$10 million and Iridium Canada has
seeking a permanent injunction and damages against US West,
Rights Tribunal’s (the “Tribunal”) determination that it could filed an Answer to the claim. The Plaintiffs have amended their
Inc., which has since merged with Qwest Communications
proceed with an inquiry into the 1994 pay equity complaints action against a number of shareholders of Iridium, including
International Inc., (“Qwest”, the successor of the merged
filed by members of the Communications, Energy and Paper- Iridium Canada, alleging fraudulent and negligent misrepre-
companies), Unical Enterprises, Inc. (“Unical”) and Sonigem
workers’ Union of Canada and the CTEA. The Federal Court sentation and claiming that each are jointly and severally liable
Products Inc. (“Sonigem”) (collectively, the “Defendants”) on
found that the Tribunal lacked institutional independence and for U.S.$800 million. In January 2002, the Plaintiffs moved for
February 11, 2000, in the Federal Court of Canada. The action
prohibited further proceedings in the matter. Hearings before summary judgment of liability against all defendants on their
alleges that the Defendants’ sales in Canada of telephones and
the Tribunal into the merits of the case were suspended. The claim relating to failure to make capital contributions which
answering machines bearing, among others, the mark “North-
Canadian Human Rights Commission appealed this decision includes the U.S.$10 million claim against Iridium Canada. On
the same day, all defendants cross-moved for summary judg-
3.9 BCE – Employees ment against the Plaintiffs to have dismissed all of their claims.
As of December 31 2001 2000 1999 The Plaintiffs and the defendants have filed answering briefs in
Bell Canada segment 55,712 55,195 43,995 (1) opposition to the respective motions for summary judgment.
Teleglobe 1,861 2,097 n/a
Bell Globemedia 4,223 3,014 n/a B E L L D I S T R I B U T I O N L AW S U I T S
BCE Emergis 2,603 2,096 1,147 Bell Distribution is involved in the distribution and sale of Bell
Other operations 10,776 12,508 9,741 Canada, Bell Mobility, Bell ExpressVu and Sympatico wireless
75,175 74,910 54,883 and wireline communications products and services through its
(1) Excluding Aliant. Bell World/Espace Bell outlets owned by franchisees, inde-
n/a: not applicable. pendent dealers or Bell Distribution itself. On October 16, 2001,
15 of Bell Distribution’s Québec franchisees filed a court York against Teleglobe Inc. and certain of its former officers. The Pursuant to the Shareholders’ Agreement, at any time from
proceeding against Bell Distribution before the Québec Superior complaints generally allege that the defendants violated the U.S. July 1, 2002 until December 31, 2002, and at any time from
Court claiming damages of $25,135,000, the nullity of specific Securities and Exchange Commission Rule 10b-5 and defrauded July 1, 2004 until December 31, 2004, (i) SBC shall have the
clauses of their franchise agreement as well as injunctive relief. investors who purchased stock between February 10, 1999 and option to sell all of its shares in BCH (the “Shares”) to BCE Inc.;
On December 19, 2001, 44 of Bell Distribution’s Québec inde- July 29, 1999. These complaints were consolidated and lead and (ii) BCE Inc. shall have the right to purchase all of SBC’s
pendent dealers filed a court proceeding against Bell Distribu- plaintiffs appointed in the fourth quarter of 2000. On Shares, in each case, at the fair market value of the Shares multi-
tion before the Québec Superior Court claiming damages of $55 February 9, 2001, the lead plaintiffs filed a consolidated plied by 1.25. BCE Inc. has the right to issue as consideration, in
million, the nullity of specific clauses of their independent complaint, which did not contain specific claims for money full or in part, two year interest bearing notes. Interest on such
dealer agreement as well as injunctive relief. Bell Distribution’s damages. On April 10, 2001, Teleglobe Inc. filed a motion to notes is to be based on BCE Inc.’s cost of funds for a note of
Québec franchisees and independent dealers allege that Bell dismiss the complaints. On January 2, 2002, the United States similar maturity and amount, plus up to a maximum of
Distribution is in breach of the franchise agreement and inde- District Court dismissed the consolidated amended complaint 150 basis points. Other terms and conditions of the notes are to
pendent dealer agreement, respectively, in a number of respects in its entirety and granted the plaintiffs 20 days to replead. The be agreed upon by the parties.
including with respect to the direct and indirect competition aforesaid 20-day period has expired and the plaintiffs have not The Shareholders’ Agreement provides that in the event
created or allowed by Bell Distribution, the products supplying repled. On March 28, 2002, final judgment was entered and there is a change of control of SBC, BCE Inc. shall have the right
structure and the compensation structure. They also allege plaintiffs have until April 29, 2002 to file a notice of appeal. to purchase SBC’s Shares at a price equal to the fair market value
unfair competition by Bell Canada and its business units. Plaintiffs have not disclosed whether they intend to appeal the of the Shares. In the event there is a change of control of BCE
dismissal of their complaint. Inc., SBC shall have the right to sell its Shares to BCE Inc. at a
B E L L G LO B E M E D I A C L A S S AC T I O N L AW S U I T S
price equal to: (i) if the change of control occurs on or before the
On February 5, 2001, Bell Globemedia Publishing Inc., a GENERAL
fifth anniversary of the closing date, the higher of:
subsidiary of Bell Globemedia, was added as a defendant to a In addition to the legal proceedings disclosed herein, BCE Inc.
(A) $5.1 billion plus interest thereon at a rate of 15 per cent per
class action lawsuit in respect of copyright infringement. The and its subsidiaries and associated companies are involved in
year compounded annually less the amounts of all dividends
claim is that The Globe and Mail newspaper and magazines (as various other claims and legal proceedings. While the final
and reductions of stated capital received by SBC; (B) the fair
well as Bell Globemedia Interactive) do not have the right to outcome of the legal proceedings disclosed herein and of any
market value of the Shares multiplied by 1.25 and (C) the
archive and publish certain freelanced and employee material other pending claims or legal proceedings cannot be predicted
consideration paid for the Shares pursuant to the change of
from the newspaper or magazines in any format, other than with certainty, it is the opinion of management that their reso-
control transaction; and (ii) if the change of control occurs after
print, because allegedly only print rights were originally lution will not have a material adverse effect on BCE’s consoli-
the fifth anniversary of the closing date, the higher of: (X) the
obtained with respect to that material. The relief claimed dated financial position or results of operations. BCE intends to
fair market value of the Shares and (Y) the amount of consider-
includes damages of $100 million as well as injunctive relief. The vigorously defend itself against all such claims and in all such
ation payable or paid to BCE Inc. that is attributable to the
Ontario Superior Court of Justice rendered a decision on proceedings.
Shares.
October 3, 2001, rejecting the plaintiff’s motion for partial
Certain Contracts The resignation of Mr. Jean C. Monty as Chairman and Chief
summary judgment (including the rejection of a requested
Executive Officer of Bell Canada, when it becomes effective, will
injunction at this stage) on certain proposed common issues. S H A R E H O L D E R S ’ AG R E E M E N T W I T H S B C
not trigger any SBC right under the Shareholders’ Agreement.
The Ontario Superior Court of Justice declared that The Globe BCE Inc. and SBC have entered into a shareholders’ agreement
However, the Shareholders’ Agreement does provide SBC with
and Mail was legally entitled to publish the newspaper on with respect to their joint ownership of BCH (the “Shareholders’
consultation and other rights on the choice of Mr. Monty’s
microfilm, microfiche and in the Internet edition, but reserved Agreement”). Pursuant to the Shareholders’ Agreement, the
successor until March 24, 2004. Absent an agreement among
for trial the question of whether The Globe and Mail had, over Board of Directors of each of BCH, the company which holds all
BCE Inc. and SBC on the choice of such successor, and if Bell
the years, acquired implied rights from freelancers to archive of the outstanding voting shares of Bell Canada, and Bell
Canada decides nonetheless to proceed with such appointment
and make available the freelancer written contents of the news- Canada is comprised of ten directors, eight nominated by BCE
prior to December 31, 2002, SBC has the option to sell all of its
paper on electronic databases and CD-ROMS. Both the plaintiffs Inc. (four management nominees and four independent direc-
Shares to BCE Inc. at a price equal to the higher of (a) $5.1 billion
and the defendants have certain appeal rights in respect of this tors from among the members of the Board of Directors of BCE
plus interest thereon at a rate of 15 per cent per year
decision, which will commence once the judge’s decision is Inc.) and two nominated by SBC. SBC is entitled to appoint the
compounded annually less the amounts of all dividends and
formally entered, which is expected by the end of April 2002. Chief Financial Officer of Bell Canada and of Bell Mobility as
reductions of stated capital received by SBC (also taking into
well as a senior officer in charge of product management and
T E L E G LO B E I N C . C L A S S AC T I O N L AW S U I T S account a 15 per cent interest rate compounded yearly) and (b)
product development at Bell Canada. SBC is also entitled to
During 2000, several class action lawsuits were filed in the the fair market value of the Shares multiplied by 1.25. After
nominate one director to the Board of Directors of Bell Mobility.
United States District Court for the Southern District of New
December 31, 2002, the price in such circumstances would be forward-looking statements relate to the future financial the conditions in the broader market for communications and
the fair market value of the Shares multiplied by 1.25. condition, results of operations or business of the BCE Group the conditions in the domestic or global economy generally.
The Shareholders’ Agreement provides BCE Inc. and SBC companies. These statements may be based on current expecta- More specifically, the financial performance of the BCE Group
with customary rights, including rights of first refusal and rights tions and estimates about the markets in which the BCE Group companies is affected by the general economic conditions as
of first offer. companies operate and management’s beliefs and assumptions demand for services tends to decline when economic growth
regarding these markets. In some cases, forward-looking state- and retail and commercial activity decline. Recently, the slow-
AG R E E M E N T B E T W E E N B C E A N D C G I
ments may be identified by words such as “anticipate”, “could”, down in global economic activity, including in Canada and the
BCE Inc. entered into an agreement on July 1, 1998 with CGI’s
“expect”, “seek”, “may”, “intend”, “will”, and similar expres- United States, has made the overall global and Canadian
three largest individual shareholders (the “Shareholders”)
sions. These statements are subject to important risks and uncer- economic environment more uncertain and could, depending
providing for certain put and call options, as well as rights of
tainties which are difficult to predict and assumptions which on the duration and extent of such slowdown and on the pace
first refusal, on the shares of CGI held by the Shareholders. The
may prove to be inaccurate. The results or events predicted in of an eventual economic recovery, have an important adverse
agreement gives the Shareholders the right to gradually sell (put
the forward-looking statements contained in this Annual Infor- impact on the demand for products and services and on the
options) their shares to BCE Inc. through January 5, 2004 and,
mation Form and in such other written or oral statements which financial performance of the BCE Group companies. Such nega-
thereafter for a period of two years, the right to BCE Inc. to buy
may subsequently be made, may differ materially from actual tive trends in global market and economic conditions could
(call options) these shares to the extent not already acquired by
results or events. Some of the factors which could cause results have an adverse effect on purchasing patterns of subscribers and
BCE Inc. The price per share payable on any exercise of the put
or events to differ materially from current expectations are customers especially in the case of products and services
or call options will be, in all cases, 115 per cent of the market
discussed below under the heading “Risk Factors” and provided by the BCE Group companies that are more subject to
price for CGI shares on the exercise date payable in common
other cautionary factors are outlined elsewhere in this being affected by economic slowdowns. These negative trends
shares of BCE Inc. These options, if fully exercised, would
Annual Information Form. The risk factors discussed below could also adversely affect the financial condition and credit risk
increase BCE Inc.’s equity ownership and voting interest in CGI
relate to BCE Inc.’s five business segments in existence as of of subscribers and customers which would, in turn, increase
to approximately 41 per cent.
December 31, 2001: Bell Canada segment; Bell Globemedia; uncertainties regarding the BCE Group companies’ ability to
S H A R E D S E R V I C E S AG R E E M E N T Teleglobe; BCE Emergis and BCE Ventures. Readers should also collect receivables. However, it is not possible for the BCE Group
Effective June 22, 2001, Bell Canada entered into a ten-year consult, when filed, the Annual Information Forms for the year companies to accurately predict economic fluctuations and the
service contract with a special purpose entity. This service ended December 31, 2001, of the following companies: Bell impact of such fluctuations on their performance.
contract will allow Bell Canada to, over time, reduce systems Canada; Aliant; BCE Emergis; BCI; Telesat; and CGI. BCE Inc.
Increasing Competition
and administrative costs through the rationalization and disclaims any intention or obligation to update or revise any
The markets in which each of the BCE Group companies carries
enhancements of certain systems and the optimization of forward-looking statements, whether as a result of new infor-
on business are characterized by vigorous and intensifying
certain processes. Bell Canada’s commitments are approxi- mation, future events, or otherwise. In particular, forward-
competition. Each company is facing many competitors with
mately $150 million over the first three years of the agreement. looking statements do not reflect the potential impact of any
substantial financial, marketing, personnel and technological
In 2004, Bell Canada may either exercise an option to buy the mergers, acquisitions, other business combinations, divestitures
resources. In some cases, competition does not only result from
special purpose entity, or maintain the service contract and or other transactions that may be announced or completed after
competitors within the same market segment, but also from
therefore commit itself to an additional minimum of such statements are made.
other businesses and industries. In addition, while competitors
$420 million in service fees to the third party.
RISK FACTORS of certain of the BCE Group companies already include both
Forward-Looking Statements domestic and foreign entities, the number of foreign-based
G E N E R A L FAC T O R S A F F E C T I N G A L L
competitors with large resources may increase in the future.
Certain statements contained in this section and in other B C E G R O U P CO M PA N I E S
Some industries in which the BCE Group companies
sections of this Annual Information Form, including statements
Economic and Market Conditions compete are consolidating. Mergers and acquisitions, as well as
contained in BCE Inc.’s management’s discussion and analysis
The future operating results of the BCE Group companies may strategic alliances, restructurings, partnerships and joint
of financial condition and results of operations (“MD&A”)
be affected by various trends and factors that must be managed ventures are creating new and larger participants. Such trans-
incorporated by reference in this Annual Information Form,
in order to achieve favourable operating results. In addition, actions may result in stronger competitors with broad skills and
constitute forward-looking statements. In addition, other
there are trends and factors beyond the control of the BCE significant resources. Furthermore, new competitors of the BCE
written or oral statements which constitute forward-looking
Group companies that affect their operations. Such trends and Group companies may emerge from time to time through the
statements may be made from time to time by or on behalf of
factors include adverse changes in the conditions in the specific development of new technologies, products and services, and
one or more of BCE Inc. and its subsidiaries, joint ventures, and
markets for the BCE Group companies’ products and services, other factors.
associated companies (the “BCE Group companies”). These
Factors such as product pricing and customer service are rially harm the business and operating results of the relevant modified laws or regulations governing the Internet could
under continued pressure while the necessity to reduce costs, BCE Group company. decrease the demand for the BCE Group companies’ Internet
manage expenses and generate productivity savings is ongoing. services and increase the costs of selling such services.
Technological Development
Intensifying competition may impact the BCE Group compa-
The business markets in which the BCE Group companies Expenditures, Capital Requirements
nies’ ability to retain existing and attract new customers, as well
operate are characterized by rapid technological changes, and Demand for Ser vices
as affect revenues and network capacity. The BCE Group compa-
evolving industry standards, changing client needs, frequent The financial condition and results of operations of the BCE
nies must not only try to anticipate, but also respond promptly
new product and service introductions and short product life Group companies are materially affected by a number of factors
to continuous and rapid developments in their respective busi-
cycles. The future success of each of the BCE Group companies such as: the level of expenditures necessary to expand opera-
nesses and markets.
will depend in significant part on its ability to anticipate tions, increase the number of customers, introduce new prod-
Strategies, Acquisitions and Alliances industry standards, successfully introduce new technologies, ucts and services, update or build networks and maintain or
BCE Inc. adjusts its business strategies and priorities as required initiatives, products and services and upgrade current products improve the quality of products and services; the availability
to address changes to its external environment and internal and services, and to comply with emerging industry standards. and cost of capital required to fund such expenditures (espe-
goals and capabilities. However, there is no certainty that BCE Furthermore, as the BCE Group companies seek to deploy new cially in light of the current market conditions in the telecom-
Inc.’s strategies (including its convergence, bundling, billing and products, services and technologies and update their networks munications industry); the ability of the BCE Group companies
branding strategies) will yield the expected benefits, revenue to remain competitive, they may be exposed to incremental to dispose of or otherwise monetize certain of their assets; and
and earnings projections, synergies and growth prospects. financial risks associated with newer technologies that are the extent of demand for both traditional and emerging prod-
A key element of the BCE Group companies’ growth strategy subject to accelerated obsolescence, or may be required to inject ucts and services in the markets served by the BCE Group
has been and continues to be strategic acquisitions. There can more capital than anticipated. The proposed deployment of companies as well as their ability to develop a customer base
be no assurance that in the future, acquisition candidates will new technologies and initiatives may also be delayed due to with recurring service revenues. Demand levels for the BCE
be found on acceptable terms or that the relevant BCE Group factors beyond the BCE Group companies’ control. In addition, Group companies’ products and services are also affected by
company will have adequate resources to consummate any new technological innovations generally require a substantial factors such as technology development and innovation,
acquisition. Furthermore, acquisitions involve a number of financial investment before any assurance is available as to their sociodemographic trends, levels of business investment and
other special risks, including time and expenses associated with commercial viability. There can be no assurance that the BCE general macro economic conditions.
identifying and evaluating acquisitions, the diversion of Group companies will be successful in developing and The level of capital expenditures could materially increase as
management’s attention, the difficulty in integrating operations marketing new products and services or enhancements that will the BCE Group companies seek to expand the scope and scale
and realizing synergies and the potential loss of key employees respond to technological change and achieve market accept- of their businesses beyond traditional territories and service
and customers of the acquired company. In addition, customer ance. Furthermore, the introduction of new products or services offerings. To the extent that the BCE Group companies fail to
satisfaction or performance problems at a single acquired firm employing new or evolving technologies could render existing make expenditures on new and existing capital programs, they
could have a material adverse effect on the reputation of the products or services unmarketable, or cause prices of such prod- may cease to be competitive in the markets in which they
relevant BCE Group company as a whole. Acquisitions may also ucts or services to decrease. compete. However, if such capital expenditures are made, the
result in potential dilutive issuance of equity securities, the BCE Group companies may also risk incurring substantial
Uncertainties Related to the Internet
incurrence of debt, write-offs and integration costs and the expenditures to acquire assets with little commercial or
An increasingly important driver for network and infrastructure
impairment of goodwill and the amortization of other intan- economic value.
investments is the growth of Internet traffic. This traffic is driven
gible assets, all of which could have a material adverse effect on
by residential and business Internet usage and has overtaken the Defects in Software Products and Network Failures
the results of operations and financial condition of the involved
volume of voice telephony traffic on many routes. It is uncer- Defects in software products owned or licensed by the BCE
BCE Group company.
tain to what extent this traffic will continue to exhibit high Group companies, as well as failures or mistakes in the provision
One other business strategy of the BCE Group companies has
growth rates as high-speed access services are deployed and of services, could materially harm the business of any of the BCE
been and continues to be to enter into strategic or similar collab-
bandwidth intensive applications, such as video, are increas- Group companies, including customer relationships and oper-
orative relationships or alliances with third parties in order, for
ingly adopted by users. Significant upgrades to network capacity ating results. The operations of the BCE Group companies are
example, to access competencies to develop new products and
will be required to sustain service levels if Internet growth rates dependent upon their ability to protect their networks and
services or to reach a larger client base than would otherwise be
remain high as they are today. Alternatively, the BCE Group equipment and the information stored in their data centers
achievable. The failure of, or the inability to consummate, one
companies’ financial condition and results of operations could against damages that may be caused by fire, natural disaster,
or more of such strategic relationships or alliances could mate-
be materially adversely affected should future levels of Internet power loss, unauthorized intrusion, computer viruses, disabling
traffic be lower than currently anticipated. In addition, new or devices, acts of war or terrorism and other similar events. There
can be no assurance that such events would not result in a interest-bearing notes. The exercise by SBC of its option would Increasing Competition
prolonged outage of the operations of any of the BCE Group require BCE Inc. to refinance such notes within two years. With the advent of competition in the local service market in
companies. 1998, virtually all parts of the businesses of the Bell Canada
Stock Market Volatility
Group companies are facing substantial and intensifying compe-
Other General Factors The common shares of BCE Inc. have in the past experienced
tition. The Bell Canada Group companies’ competitors include
The success of the BCE Group companies is largely dependent price volatility generally due to certain announcements
major telecommunications companies, cable companies,
upon their ability to attract and retain highly skilled personnel affecting BCE Inc. and the BCE Group companies. Variations
Internet companies, WSPs, CLECs and a variety of other compa-
and the loss of the services of key persons could materially harm between BCE Inc.’s actual or anticipated financial results and
nies that offer network services, such as providers of business
their businesses and operating results. the published expectations of financial analysts may also
information systems and systems integrators, as well as an
Some of the BCE Group companies may have to renegotiate contribute to this volatility. These factors, as well as general
increasing number of other companies that deal with, or have
existing collective agreements with their unionized employees. economic and political conditions, may also have a material
access to, customers through various communications networks.
The failure of the renegotiations could have a material adverse adverse effect on the market price of BCE Inc.’s common shares.
Internet access services are especially competitive with large
effect on the businesses, operating results and financial condi-
B E L L C A N A DA cable television companies and a significant number of inde-
tion of the BCE Group companies.
pendent ISPs providing intense competition. Competitive pres-
All BCE Group companies are subject to risks related to Regulatory Environment
sure has led to Internet access pricing in Canada that is among
pending or future litigation or regulatory initiatives or proceed- Bell Canada, Aliant and their subsidiaries and significantly
the lowest in the world and largely independent of usage
ings. In addition, changes in laws or regulations, or the adop- influenced companies (the “Bell Canada Group companies”) are
patterns. Costs to Bell Canada, however, are driven by the
tion of new laws or regulations, could also have a material subject to evolving regulatory policies in the form of decisions
amount of network traffic a user generates and the location of
adverse effect on the BCE Group companies’ businesses, oper- by various regulatory agencies including the CRTC. Many of
the server that stores the Web site the user visits. Such costs are
ating results and financial condition. these decisions balance competitor requests for access to the
largely beyond Bell Canada’s control and cannot be accurately
Some of the BCE Group companies, such as Teleglobe Inc., ILECs’ (such as Bell Canada and Aliant) essential facilities and
predicted.
CGI, Telesat and BCI, carry on business internationally and, other network infrastructure with the rights of the ILECs to
The Canadian wireless telecommunications industry is also
accordingly, a substantial proportion of their revenues are compete on a reasonably unencumbered basis. Also, Canadian
highly competitive. Bell Mobility competes directly with other
derived, or a substantial portion of their capital expenditures are Telecommunications Carriers and Broadcast Distribution
WSPs with aggressive product and service introductions, pricing
made, in currencies other than Canadian dollars. Additionally, Undertakings seeking physical access to customers’ facilities on
and marketing. Bell Mobility expects competition to intensify
some have exposures to emerging market currencies which have reasonable terms have increasingly found themselves in
through the development of new technologies, products and
extreme currency volatility. As a result, some of these compa- disputes with property owners regarding access to private
services, and through consolidations in the Canadian telecom-
nies may be exposed to movements in foreign currency property or with municipalities with respect to access to public
munications industry.
exchange rates which may have an adverse impact on their rights-of-way. As previously discussed in Item 3 – “Regulatory
Bell Mobility and certain of its competitors have successfully
respective results of operations and financial condition. Decisions”, a CRTC decision regarding the conditions and price
bid for additional spectrum licenses in early 2001. Some of the
The risk factors discussed below apply more specifically to for access to municipal rights-of-way is currently under appeal.
awarded licenses will enable Bell Mobility to roll out wireless
BCE Inc.’s five business segments and complete those previously At this point in time, it is impossible to assess the financial
services in British Columbia and Alberta. This rollout will result
discussed under the heading “General Factors Affecting All BCE implications of any final judicial decision. In addition, and also
in substantial capital expenditures for the construction of a
Group Companies”. as previously discussed in Item 3 – “Regulatory Decisions”, the
network in these provinces. Furthermore, the expected level of
CRTC recently completed its review of the price cap regime
S P E C I F I C FAC T O R S A F F E C T I N G B C E I N C . expenditures associated with this network expansion could
which has been in force since January 1998 for the major
increase as Bell Mobility will seek to gain adequate network
SBC Put Option incumbent telephone companies. The CRTC decision on the
coverage and secure new customers. Some of Bell Mobility’s
As previously discussed under Item 3 – “Businesses of BCE – new price cap regime is expected on or prior to May 31, 2002.
competitors were awarded licenses in Bell Mobility’s current
Certain Contracts”, BCE Inc. and SBC entered into the Share- With the business of Bell Canada increasingly focusing on
operating regions thereby increasing the potential for competi-
holders’ Agreement which includes, among other terms, the content, e-commerce and connectivity, assessment of regula-
tion and market share losses in such areas. Although the new
option by SBC to sell all of its shares in BCH to BCE Inc. at tory risks must increasingly take into account regulatory deci-
licenses awarded to Bell Mobility provide it with the possibility
any time from July 1, 2002 until December 31, 2002, and at any sions in the areas of wireless spectrum auctions, programming
to launch new technologies, services and applications and to
time from July 1, 2004 until December 31, 2004, at the fair and carriage requirements under the Broadcasting Act, as well
geographically expand its operations, there can be no assurance
market value of the shares multiplied by 1.25. BCE Inc. has the as copyright and other content related issues particularly over
that such additional licenses will result in the successful deploy-
right to issue as consideration, in full or in part, two-year the Internet.
ment of such new technologies, services and applications, a
successful geographical expansion and, in general, in an new legislation or regulations may be adopted in order to Competition
improvement in Bell Mobility’s financial condition and results address these concerns. Any such legislation or regulations Bell ExpressVu’s competitors have pursued, and may continue
of operations. could adversely affect WSPs through reduced network usage by to pursue, aggressive marketing campaigns and pricing policies
subscribers in motor vehicles. targeting the existing customers of Bell ExpressVu. In addition,
Wireless Regulation
Bell ExpressVu has recently faced increased competition from
The operation of cellular, PCS and other radio-telecommunica- Radio Frequency Emission Concerns
unregulated U.S. DTH services sold illegally in Canada.
tions systems in Canada is subject to initial licensing require- Media reports have suggested that certain radio frequency
Although Bell ExpressVu has, to date, been successful in
ments and the oversight of Industry Canada. Operating licenses emissions from cellular telephones may be linked to certain
increasing market share in the face of such competition, there
are issued at the discretion of the Minister of Industry pursuant medical conditions such as cancer. In addition, certain interest
is no assurance that such success will continue nor that Bell
to the Radiocommunication Act. Bell Mobility’s current cellular groups have requested investigations into claims that digital
ExpressVu will be able to increase average revenue per
and PCS licenses will expire on March 31, 2006. The recently transmissions from handsets used in connection with digital
subscriber, increase its share of the pay-per-view market or main-
awarded PCS spectrum auction licenses will expire on wireless technologies pose health concerns and cause interfer-
tain or reduce subscriber acquisition costs.
November 29, 2011. Industry Canada has the authority at any ence with hearing aids and other medical devices. There can be
time to modify the license conditions applicable to the provi- no assurance that the findings of such studies will not have a Satellite Defects
sion of such services in Canada to the extent necessary to ensure material adverse effect on the business of WSPs or will not lead Bell ExpressVu’s DTH services are solely provided through the
the efficient and orderly development of radiocommunication to governmental regulation. The actual or perceived health Nimiq Direct Broadcast Satellite operated by Telesat. Satellites
facilities and services in Canada. Industry Canada can revoke a risks of wireless communications devices could adversely affect are subject to significant risks, including manufacturing defects,
license at any time for failure to comply with its terms. Industry WSPs through reduced subscriber growth, reduced network destruction or damage that may prevent proper commercial use,
Canada has indicated that, with respect to licenses other than usage per subscriber, threat of product liability lawsuits or or result in the loss of the satellite. Any such loss, manufacturing
those awarded through the spectrum auction process, it intends reduced availability of external financing to the wireless defects, damage or destruction of the satellite would have a
to engage in a public consultation process on appropriate license communications industry. material adverse impact on Bell ExpressVu’s results of operations
term conditions and fees within the coming year. It is antici- and financial condition.
BELL EXPRESSVU
pated that Industry Canada will, at the end of this consultation
B E L L G LO B E M E D I A
period, give effect to its conclusions by making suitable amend- Capital Requirements
Television broadcasting is comprised of a conventional televi-
ments to existing license conditions. To date, Bell ExpressVu has funded operating losses through
sion sector of free over-the-air television services and a sector of
capital injections from BCE Inc. Bell ExpressVu believes that it
Announcements Concerning Teleglobe specialty and pay television services delivered to subscribers by
will access sufficient sources of funding to achieve its business
As previously discussed under Item 2 – “General Development broadcast distribution undertakings, including cable and DTH
plan. However, such access is based on a business plan that is
of BCE – Recent Developments”, on April 24, 2002, BCE Inc. and operators. CTV operates in both the conventional and specialty
subject to various assumptions and estimates, including
Teleglobe Inc. announced that BCE Inc. will cease further long- sectors. Commercial advertising is the primary source of
subscriber base, average revenue per subscriber and costs for
term funding to Teleglobe Inc. It is expected that Teleglobe Inc. revenue for the conventional television sector while the
acquiring new subscribers. If the business plan is not achieved,
will enter into negotiations with its debt holders to restructure specialty sector derives revenue both from subscribers and
greater losses than planned would occur, requiring Bell
its debt and explore possibilities for business combinations and commercial advertising. Commercial advertising is a function
ExpressVu to seek additional financing. There is no assurance
potential partnerships. There can be no assurance that Teleglobe of the viewing share in a given market, and viewing share is in
that Bell ExpressVu will be successful in obtaining such
Inc. will be successful in its efforts to effect a financial restruc- turn dependent on program content and the number of choices
financing on favourable terms and conditions.
turing, partnership or business combination. Accordingly, there available. Market fragmentation has increased over the last
is a risk that Teleglobe Inc. may become subject to a court- DTH Market Risks decade as a result of the introduction of additional television
supervised proceeding or may have to wind-down some or all of The success of Bell ExpressVu’s DTH business strategy is subject services, the extended reach of existing signals and the increased
its business. Bell Canada cannot predict the form, terms and to factors that are beyond its control and impossible to predict use of VCRs. The deployment of digital capability will further
legal implications of any such events nor the impact on Bell due, in part, to the limited history of digital DTH services in extend the choices available. Furthermore, new Web-based
Canada, its subsidiaries or associated companies. Canada. Consequently, the size of the Canadian market for services available over the Internet are expected to provide alter-
digital DTH services, the rates of penetration of that market, the native niche services to consumers, continuing the fragmenta-
Use of Handsets in Vehicles
churn rate, the extent and nature of the competitive environ- tion of the viewing market. Accordingly, reach and
Media reports have suggested that the use of hand held cellular
ment and the ability of Bell ExpressVu to meet revenue and cost attractiveness of programming content are the two prominent
units by drivers in vehicles may, in certain circumstances, result
expectations are uncertain. There is no assurance that Bell variables in the ability to generate revenues. However, there can
in an increased rate of accidents on the road. It is possible that
ExpressVu will be profitable in delivering its DTH services. be no assurance that CTV will be able to maintain or increase its
current ability to reach viewers with programming content that U.S.$1.3 billion due in 2002, representing annual debt service Intellectual Property
is satisfactory to the public, nor that CTV will be able to main- payments of approximately U.S.$135 million at interest and BCE Emergis depends on its ability to develop and maintain the
tain or increase its current advertising revenues. exchange rates prevailing on December 31, 2001. Teleglobe proprietary aspects of its technology. BCE Emergis cannot be
Each of CTV’s conventional and specialty services operates Inc.’s U.S.$1.275 billion revolving credit facilities (which are certain that it will be able to enforce its rights or prevent other
under a license issued by the CRTC for a fixed term, up to seven currently fully drawn) mature on July 22, 2002. Teleglobe Inc. parties from developing similar technology, duplicating its intel-
years. These licenses are subject to the requirements of the does not have sufficient funds available from its cash flow to lectual property or designing around its intellectual property. It
Broadcasting Act, the regulations enacted thereunder, the poli- meet these obligations, to make necessary capital expenditures is also possible that in the future, third parties may claim that
cies and decisions of the CRTC, and the conditions and expec- and pay other operating expenses. BCE Emergis or its current or potential future intellectual prop-
tations established in each licensing or renewal decision. These On April 24, 2002, BCE Inc. and Teleglobe Inc. announced erty infringes on their intellectual property. Any such claims,
requirements may change or be amended from time to time. that BCE Inc. will cease further long-term funding to Teleglobe with or without merit, could materially harm BCE Emergis’ busi-
License renewals are typically granted by the CRTC, although Inc. BCE Inc. will provide only short-term periodic funding ness and operating results.
conditions of license and expectations are often varied or to Teleglobe Inc., on terms and conditions satisfactory to BCE
Adoption Rate of Solutions by Customers
amended at the time of renewal. Inc., up to a maximum aggregate amount of between
In order to build its recurring revenue base, the number of trans-
Advertising is related to economic growth and tends to U.S.$100 million and U.S.$125 million, so that Teleglobe Inc.
actions that BCE Emergis processes must increase. This increase
follow GDP (gross domestic product). Accordingly, any can provide continuing customer service and fund other opera-
will depend on the rate at which its solutions are adopted by its
economic downturn, such as the current one, will impact Bell tions-related needs while it reviews its options for the future.
customers and by its channel partners’ customers. It will also
Globemedia’s ability to generate revenue growth as approxi- It is expected that Teleglobe Inc. will explore possibilities for
depend on its ability to stimulate its channel partners in being
mately 73 per cent of Bell Globemedia’s current revenue base a business combination and will enter into negotiation with its
pro-active and successful in selling its solutions to their
from the television, print and interactive sectors is dependent debt holders to restructure its debt. There is uncertainty as to
customers.
on advertising revenues. whether Teleglobe Inc. will be successful in carrying out any
Within the television sector, competition for highly rated business combination or negotiating with its debt holders a debt Growth
programming maintains cost pressure on program acquisitions. restructuring and, accordingly, there is a risk that Teleglobe Inc. BCE Emergis has experienced rapid growth in its revenue. To
Recent decisions allowing CanWest to own two conventional may become the subject of a court-supervised proceeding or continue to grow:
stations in the markets of Ontario and Vancouver along with that it may have to conduct a wind-down of some or all of its • there must be continued adoption of e-commerce solu-
completion of their national network across Canada will further business. In addition, there are risks and costs associated with tions;
the competition for programming and increase CTV’s costs for Teleglobe Inc.’s negotiation of a business combination and a • large financial institutions and health insurance compa-
the acquisition of popular programming. comprehensive debt restructuring, including the potential risks nies must adopt its e-commerce solutions and be effective
In the print sector, competition from the launch of a new associated with the commencement of a court-supervised in reselling them to their customers;
national newspaper in Canada more than three years ago proceeding or a wind-down. • BCE Emergis must integrate acquisitions successfully;
continues to require substantial spending in distribution and • the operations of BCE Emergis must be scalable; and
BCE EMERGIS
marketing and impacts revenue growth through competitive • BCE Emergis must be able to enter into agreements that
pricing. This competition is expected to continue and intensify. Adoption of E-Commerce generate non-recurring revenue and form the basis for
Bell Globemedia also operates a number of Web-based activi- In order for BCE Emergis to be successful, e-commerce must generating new recurring revenue.
ties through Bell Globemedia Interactive. These businesses are, continue to be widely adopted in a timely manner. Because
Operating Results
by their nature, relatively new and accordingly subject to uncer- e- commerce, and transactions over the Internet in general, are
BCE Emergis has experienced losses in the past. Revenue in any
tain returns. Leveraging existing content and brands from print new and evolving, it is difficult to exactly predict the size of this
quarter is substantially dependent on the quantity of purchases
and television through these new distribution channels requires market and its sustainable growth rate. Adoption of e-commerce
of services requested in that quarter by customers. Furthermore,
continued investment in labour and technology while has not been as fast as originally anticipated.
its e-Health business unit derives a significant portion of
attempting to grow share of revenues in an emerging market.
Security and Privacy Breaches revenue from a small number of major payor clients. The loss of
T E L E G LO B E If BCE Emergis is unable to protect the security and privacy of a contract with a major payor client or the inability to replace
its electronic transactions, its business, including customer rela- any such client with new clients could have a significant effect
Risks Associated with April 24, 2002
tionships, could be materially adversely affected. on its operating results.
Announcements
Quarterly revenue, when inclusive of non-recurring revenue,
At December 31, 2001, Teleglobe Inc. had outstanding indebted-
is difficult to forecast since the market for e-commerce is rapidly
ness of approximately U.S.$2.7 billion, including approximately
evolving and its revenue in any period is significantly affected Integrity of the Public Key Cryptography Telesat
by the economic environment and its impact on sales cycles, its Technology
Risk of Launch and In-orbit Failure
ability to enter into new sales agreements, and by the BCE Emergis’ Internet security solutions depend on public key
Telesat currently has two satellites under construction. There is
announcements and product offerings of its competitors as well cryptography technology. Any significant advance in tech-
a risk that these or future satellites may not be launched success-
as alternative technologies. niques for attacking cryptographic systems could render some
fully. To protect against such events, Telesat purchases launch
Quarterly operating results of BCE Emergis have fluctuated or all of its existing Internet security solutions obsolete or
insurance. Once in-orbit, there is the possibility that Telesat’s
in the past and BCE Emergis expects them to continue to fluc- unmarketable, which could reduce revenues from its security
satellites may experience failure which prevents them from
tuate in the future. Volatility in quarterly results is mainly due solutions and could materially harm its business and operating
fulfilling their commercial mission as originally intended. To
to the level of non-recurring revenue. If its quarterly operating results.
protect itself against the risk of in-orbit failure, Telesat under-
results fail to meet analysts’ expectations, the trading price of its
Industry and Government Regulations takes a variety of measures including engineering satellites with
common shares could decline. In addition, significant fluctua-
Governmental policies adversely affecting the business of BCE spare components and on board redundancies, and, where
tions in its quarterly operating results may harm its business
Emergis could be implemented by legislation, executive order, appropriate, by purchasing in-orbit insurance. There is no assur-
operations by making it difficult to implement its business plan
administrative order or otherwise, particularly in the U.S. health ance that Telesat will be able to renew existing in-orbit insur-
and achieve its results.
care industry. In that industry, a number of proposals for health ance coverage in sufficient amounts at favourable terms.
Success of U.S. Operations care reform have been made at federal and state levels, including Although it has already secured part of the insurance coverage it
BCE Emergis is expanding its operations in the United States. proposals to provide greater government control of health requires for Anik F2 and entered into arrangements with the
BCE Emergis has limited experience in marketing, selling and care spending, to reduce fraud and abuse, to broaden access to manufacturer of Nimiq 2 to obtain equivalent insurance protec-
supporting its services in other countries, including the United health care services and to change the operating environment tion, there is no assurance that it will be able to complete these
States. BCE Emergis may not be able to successfully market, sell, for healthcare providers and payors. BCE Emergis cannot programs with sufficient coverage at favourable rates.
deliver and support its services in the United States. BCE Emergis predict what impact, if any, these activities (which include In August 2001, Boeing Satellite Systems, the manufacturer
will need to devote significant management and financial efforts to effect reform through legislation and changes in of the Anik F1 satellite, advised Telesat of a gradual decrease in
resources to its expansion in the United States. In particular, administration or interpretation of government health care available power on-board the satellite. Telesat believes the
BCE Emergis will have to attract and retain experienced manage- programs, laws, regulations or policies) might have on it. Any of anomaly, over time, will require that some of Anik F1’s
ment and other personnel. Competition for such personnel is these changes could have a significant impact on the business transponders be turned off and has advised its insurers of this
intense, particularly in the United States, and BCE Emergis may and operating results of BCE Emergis. fact. The power degradation on the satellite is limited such that
be unable to attract and retain qualified staff. If BCE Emergis is none of Telesat’s existing customers on Anik F1 are expected to
BCE VENTURES
unable to expand its international operations successfully and see any disruption in service over the life of the satellite. Telesat
in a timely manner, its business and operating results could be General has insurance in place to cover such an occurrence and manage-
materially harmed. Effective December 1, 2000, BCE Inc. implemented a structure ment believes that any claim it makes in connection with the
whereby various operations which are not part of its four prin- power anomaly will be resolved successfully.
Dependence on Contracting Medical Ser vice
cipal business units were grouped under the business segment
Providers Business Risks
designated BCE Ventures. This segment includes, without limi-
The business growth in BCE Emergis’ e-Health sector is Provision of services into the United States and Latin American
tation, BCE Inc.’s investments in Telesat, CGI and BCI. Specific
dependent on its ability to retain existing contracting providers, markets is subject to certain risks such as changes in foreign
risks relating to each of these companies are described below.
to attract additional contracting providers and to retain or government regulations and telecommunications standards,
BCE Ventures is mandated to enhance shareholder value by
improve the price concessions granted by contracting providers. licensing requirements, tariffs, taxes and other matters. Latin
maximizing the value of its investments by continuing their
The termination of a significant number of contracts with American operations are also subject to risks associated with
growth and operating success, or by expanding their scale or
contracting providers having a significant number of claims economic and social instability, regulatory and licensing restric-
scope through mergers and alliances, or by outright disposition.
with its payor clients, the inability to replace those contracts tions and exchange controls. In addition, Telesat will face
The level of the contribution of the BCE Ventures segment to
with similar contracting providers and/or renegotiation of significant competition from other satellite companies, already
BCE Inc.’s general financial condition and results of operations
contracts resulting in reduced price concessions could have a providing services in these markets, which may have the advan-
will significantly depend on the degree of success of BCE
significant effect on its operating results. Also, such contracts do tage of long-standing customer relationships and may have
Ventures in meeting its mandate.
not prohibit the contracting providers from entering into greater financial resources than Telesat. A significant delay in
discounted arrangements with others. the delivery of the Anik F2 satellite by the manufacturer, or of
the launch by the launch service provider, could adversely affect
Telesat’s ability to provide service. Such delay could result from it will be able to generate any significant cash from such oper- could be significantly diluted. Furthermore, there can be no
a delay in the construction of the satellite and/or launch ating companies in the near future. assurance that the other shareholders of Telecom Américas can
vehicle, launch failures of vehicles similar in heritage to those BCI’s financial obligations, together with any investment or will contribute the necessary funding to Telecom Américas or
preceding a Telesat satellite, unavailability of a reliable launch requirements for BCI’s operations, are expected to be settled that Telecom Américas will be successful in securing such
opportunity and possible delays in obtaining regulatory with the proceeds from the future sale of BCI’s discontinued funding from any external sources.
approvals among others. operations and other assets or through new financings in either
Change of Control
the public or private debt or equity capital markets.
Governmental Regulation Certain of BCI’s financial obligations contain change of control
The capital and equity markets in Latin America have been
Prior to March 1, 2000, the CRTC regulated Telesat’s RF Channel provisions relating to BCE Inc.’s ownership in BCI which, if
depressed and there can be no assurance as to whether or when
service rates under a form of rate of return regulation. Effective breached, could result in the acceleration of such financial obli-
a recovery will occur. Such conditions have negatively affected
after this date, the CRTC approved an alternative form of regu- gations. The financial obligations containing such provisions
the value of BCI’s telecommunications assets and restricted
lation for these service rates based on certain price ceilings. represent approximately $930 million in principal amount of
BCI’s ability to raise capital.
While the price ceiling levels were established based on indebtedness. In the event that these change of control provi-
Further, BCI’s ability to realize the required proceeds from
prevailing market conditions and are above current rates for sions are triggered, all of the indebtedness mentioned above
asset sales remains dependent on many other factors outside of
certain of Telesat’s existing satellite services, there can be no could be accelerated.
management’s control, such as the economic, political and
assurance that these ceilings will be appropriate for services A “Change of Control” will be deemed to have occurred if
monetary situations specific to each of the countries where
offered in Canada on any future satellites operated by Telesat. (i) a Rating Decline (as defined below) occurs and BCE Inc. shall
BCI’s investments are located, as well as the status of BCI’s rela-
In 1999, the U.S. State Department published amendments cease to be the ultimate beneficial owner of more than
tionship with its partners in these investments. In the event that
to the International Traffic in Arms Regulations (ITAR) which 50 per cent of the total voting power of BCI’s voting stock on a
BCI is unable to raise proceeds through asset sales, it will be
included satellites on the list of items requiring export permits. fully-diluted basis; (ii) BCE Inc. shall cease to be the ultimate
required to secure other sources of funds, and there can be no
These provisions have already had an adverse impact on beneficial owner of at least 35 per cent of the total voting power
guarantee that it will be able to secure such other financing.
Telesat’s international consulting business. of BCI’s voting stock on a fully-diluted basis; (iii) any person or
In the past and in particular in the context of the Recapital-
group acting in concert becomes the beneficial owner of voting
CGI ization Transactions, BCI was successful in securing financing
stock representing a greater percentage of the total voting power
Risk factors concerning CGI include, without limitation, those from its parent company, BCE Inc. BCE Inc. has publicly stated
of the voting stock than is then ultimately beneficially owned
previously referred to under the heading “General Factors that it no longer considers BCI as a core investment and has
by BCE Inc.; or (iv) individuals who, on the date the obligation
Affecting All BCE Group Companies”. stated its intent to monetize its interest in BCI. BCE Inc. has
was created, constituted BCI’s Board of Directors (together with
further stated its current intent to invest no additional funds in
BCI any new directors whose election by the Board of Directors or
BCI in the future.
whose nomination for election by BCI’s shareholders was
Liquidity – BCI Accordingly, there can be no assurance that BCI will be able
approved by a vote of at least a majority of the members of the
BCI believes that the Recapitalization Transactions, combined to meet its financial obligations through asset sales or new
Board of Directors then in office who either were members of
with BCI’s available cash and unused availability under the financings.
the Board of Directors on the date the obligation was created or
Credit Facility, should provide BCI with sufficient funds to meet
Liquidity and Dilution – Telecom Américas whose election or nomination for election was previously so
its financial obligations to March 2003.
Telecom Américas and its operating companies have significant approved) cease for any reason to constitute a majority of the
In March 2003, BCI expects to have the following principal
ongoing funding requirements. Excluding its discontinued members of the Board of Directors then in office.
financial obligations outstanding:
operations, Telecom Américas and its operating companies as at A “Rating Decline” will be deemed to have occurred if at any
(i) drawdowns under the Credit Facility due March 8, 2003;
December 31, 2001, had net debt of U.S.$2.4 billion, net of cash time within 90 days (which 90-day period shall be extended so
(ii) $160 million principal amount under its 11 per cent
balances, of which U.S.$1.2 billion is short term and long as the rating of the High Yield Notes is under publicly
senior unsecured notes due September 2004 (the “High
U.S.$1.6 billion is denominated in U.S. dollars. The operating announced consideration for possible downgrade by any of
Yield Notes”); and
companies of Telecom Américas are not currently free cash flow Moody’s Investor Services Inc. or Standard & Poor’s Rating
(iii) $465 million of contingent guarantees.
(cash from operations less capital expenditures) positive and rely Services) of the earlier of (a) the date of public notice of the
BCI’s assets consist almost entirely of its shareholdings in
on external sources of financing, including capital contribu- change of beneficial ownership referred to in clause (i) of the
operating companies owned through Telecom Américas which
tions from their shareholders. If Telecom Américas is unable to definition of “Change of Control” in the preceding paragraph;
have no obligation, contingent or otherwise, to pay any divi-
fund such obligations and if BCI is unable to fund its share of (b) the date of public notice of the intention of BCI or any
dends or make any distributions to BCI. BCI does not expect that
investment requirements, BCI’s interest in Telecom Américas person to effect such a change of beneficial ownership; and
(c) the occurrence of such change in beneficial ownership, the company through Telecom Américas or otherwise. Certain The information which appears under the heading
rating of the High Yield Notes is decreased by any of the rating other agreements generally require that prior to the payment of “Management’s Discussion and Analysis” on pages 8 to 23 of the
agencies mentioned above in this paragraph by one or more dividends, distributions or other transfers, no default or event BCE Inc. 2001 Annual Report is incorporated herein by
gradations. of default shall have occurred, and the operating company reference.
proposing to make the distribution must provide for the
History of Losses and Debt Covenants
payment of other current obligations, including operating ITEM 6 • MARKET FOR THE SECURITIES
BCI has experienced losses in the past and may incur additional
expenses, debt service and reserves. BCI or its operating compa- OF BCE INC.
losses in the foreseeable future.
nies are likely to continue to be subject to such restrictions and
There can be no assurance that BCI will be able to meet its The information which appears under the heading “Stock
prohibitions for the foreseeable future.
debt service obligations and covenants under any financing Exchange Listings” on page 48 of the BCE Inc. 2001 Annual
arrangements that it currently has, or may be able to secure. If Report is incorporated herein by reference.
ITEM 4 • SELECTED FINANCIAL
BCI is unable to comply with the various covenants in its
I N F O R M AT I O N ( C O N S O L I D AT E D )
indebtedness, it would be in default under the terms thereof, ITEM 7 • DIRECTORS AND OFFICERS
which would permit the holders of such indebtedness to accel- a) Three-Year Data OF BCE INC.
erate the maturity of the indebtedness and could cause defaults See Table 4.1.
As of March 31, 2002, directors and officers of BCE Inc. as a
under other indebtedness of BCI. BCI’s ability to meet its debt
group beneficially owned, directly or indirectly, or exercised
covenants will depend on its future performance, which will be b) Dividends
control or direction over approximately 183,396 common
subject to prevailing economic conditions and to financial, busi- Common share dividends, which are declared and paid quar-
shares of BCE Inc. (or 0.0228 per cent of the common shares),
ness and other factors, including factors beyond BCI’s control. terly, have been adjusted to reflect the distribution of BCE Inc.’s
8,775 common shares of BCE Emergis (or 0.0086 per cent of
35 per cent interest in Nortel Networks to BCE Inc. common
Substantial Leverage and Ability to Service Debt the common shares), 12,000 common shares of Aliant (or
shareholders in May 2000. The indicated annual dividend rate
Under certain terms of some of their indebtedness, Telecom 0.0087 per cent of the common shares) and 62,679 common
remains at $1.20. Dividends on the preferred shares are declared
Américas’ operating companies and BCI’s discontinued opera- shares of BCI (or 0.0013 per cent of the common shares).
and paid quarterly, with the exception of the Series S preferred
tions have breached covenants and are operating under tempo-
shares, which are declared and paid monthly. DIRECTORS
rary waivers from their creditors or are currently negotiating
The information with respect to directors which appears on
waivers with those creditors. There can be no assurance that
ITEM 5 • MAN AGEMENT’S DISCUSSION page 7 and on pages 9 to 11 of the BCE Inc. Management Proxy
waivers will be obtained for such breaches or that they will be
A N D A N A LY S I S Circular, under the headings “Election of directors” and “Nomi-
in compliance with the terms and conditions of these facilities
nees for election as directors and their beneficial ownership of
when their waivers expire or will succeed in obtaining new The information contained in this Item 5 is qualified in its
voting securities”, is incorporated herein by reference.
waivers. Any failure of Telecom Américas’ operating companies entirety by the announcements made by BCE Inc. and Teleglobe
All of the current directors have held their present positions
or any discontinued operation to be in compliance with the Inc. on April 24, 2002, which are described in Item 2 – “General
or other executive positions with the same or associated firms
terms and conditions of its indebtedness could trigger cross- Development of BCE – Recent Developments” as well as by the
or organizations during the past five years or more with the
defaults under the terms and conditions of other indebtedness ultimate outcome of the events described therein.
following exceptions: Mr. Fell was, prior to 1999, Deputy
of that company. BCI’s ability to sell its shares of Telecom
Américas or the discontinued operations, and the price it could
obtain if it succeeds in selling them, could be adversely affected
by the high level of indebtedness of Telecom Américas, the oper- 4.1 Three-year data
For the years ended December 31 (in $ millions) 2001 2000 1999
ating companies and BCI’s discontinued operations, and by any
failure of those companies to be in compliance with the terms Selected consolidated financial data
Total operating revenues 21,711 17,432 13,922
and conditions of their indebtedness.
Earnings from continuing operations 2,419 312 5,107
Certain debt agreements of BCI and its operating companies
Net earnings applicable to common shares 459 4,782 5,366
now or hereafter may in effect restrict their ability to pay divi- Total assets 54,335 51,383 36,960
dends, make distributions or otherwise transfer funds, which Long-term debt (including current portion) 16,537 14,615 9,862
could negatively impact BCI’s ability to make payments under Dividends paid on preferred shares 64 79 93
outstanding debt obligations. Certain financing agreements are Dividends paid on common shares 969 849 875
or may be secured by capital stock held by BCI in such operating – per common share $1.20 $1.24 $1.36
Chairman of Royal Bank of Canada and, prior to February 1999, OFFICERS (i) one copy of this Annual Information Form together
Vice-Chairman of Royal Bank of Canada; Mrs. Soble Kaufman On April 15, 2002, the officers of BCE Inc. were as shown in with one copy of any document, or the pertinent pages of
was, prior to July 1997, a partner with Stikeman Elliott, barris- Table 7.1. any document, incorporated by reference therein;
ters and solicitors; Mr. Kierans was, prior to October 1999, Presi- All of the officers of BCE Inc. have held their present posi- (ii) one copy of the comparative financial statements of
dent and Chief Executive Officer of the C.D. Howe Institute; tions or other executive positions with BCE Inc. or one or more BCE Inc. for its most recently completed financial year
Mr. Levitt was, prior to February 2000, President and Chief of BCE Inc.’s subsidiaries or associated companies during the together with the accompanying report of the auditors
Executive Officer of Imasco Limited; Mr. Newall was, prior to past five years or more, with the following exceptions: Mr. thereon and one copy of any interim financial statements
June 1998, Vice-Chairman and Chief Executive Officer of NOVA Bilodeau was, prior to April 2002, Senior Vice-President, of BCE Inc. that have been filed subsequent to the financial
Corporation Ltd.; Mr. Pozen was, prior to January 2002, Vice- Compensation Practice of AON Consulting; Mr. Boychuk was, statements for its most recently completed financial year;
Chairman of Fidelity Investments and, prior to June 2000, Presi- prior to September 1997, Co-Founder, Principal and Chief Oper- (iii) one copy of the BCE Inc. Notice of 2002 Annual and
dent of Fidelity Management and Research Corporation; and ating Officer of Manitex Capital Inc.; Mr. Houle was, prior to Special Meeting and Management Proxy Circular; and
Mr. Young was, prior to May 2001, Chairman and Chief Execu- June 2001, Senior Vice-President, Corporate Human Resources (iv) one copy of any other documents that are incorporated
tive Officer of Fishery Products International Limited. of Alcan Inc.; Mr. Monty was, prior to October 1997, Vice- by reference into the preliminary short form prospectus or
As required, BCE Inc.’s Board of Directors has an Audit Chairman and Chief Executive Officer of Nortel Networks; the short form prospectus and are not required to be
Committee. The members of the Audit Committee are Mr. Sabia was, prior to October 1999, Executive Vice-President provided under (i), (ii) or (iii) above; or
J.E. Newall (Chairman), A.S. Fell, T.E. Kierans, J. Maxwell, D. and Chief Financial Officer of Canadian National Railway (b) at any other time, one copy of any documents referred to in
Soble Kaufman and V.L. Young. BCE Inc. also has a Management Company; and Mr. Skinner was, prior to March 1999, a Senior (a)(i), (ii), (iii) and (iv) above, provided that BCE Inc. may require
Resources and Compensation Committee (“MRCC”). The Audit Manager of PricewaterhouseCoopers. the payment of a reasonable charge if the request is made by a
members of the MRCC are R.J. Currie (Chairman), B.M. Levitt, person or company who is not a security holder of BCE Inc.
J.H. McArthur, R.C. Pozen and P.M. Tellier. I T E M 8 • A D D I T I O N A L I N F O R M AT I O N Additional information including directors’ and officers’
remuneration and indebtedness, principal holders of BCE Inc.’s
BCE Inc. shall provide to any person or company, upon request
securities, options to purchase securities and interests of insiders
to the Corporate Secretary of BCE Inc., at 1000, rue de La
in material transactions, where applicable, is contained in the
Gauchetière Ouest, Bureau 3700, Montréal, Québec H3B 4Y7:
BCE Inc. Notice of 2002 Annual and Special Meeting and
(a) when the securities of BCE Inc. are in the course of a distri-
Management Proxy Circular. Additional financial information is
bution under a preliminary short form prospectus or a short
provided in BCE Inc.’s comparative financial statements for its
form prospectus:
most recently completed financial year.
Information concerning BCE Inc., in addition to the docu-
ments referred to in (a)(i) to (iv) above, is available upon request
from the Vice-President, Investor Relations of BCE Inc., at the
7.1 BCE Inc. officers
address indicated above or by e-mail at investor.relations@bce.ca.
Name Municipality of residence Offices of BCE Inc. presently held
This additional information includes Management’s Discussion
Jean C. Monty (1) Montréal, Québec Chairman and Chief Executive Officer
and Analysis of the First, Second and Third Quarter Results of
William D. Anderson Montréal, Québec President – BCE Ventures
Alain Bilodeau Montréal, Québec Senior Vice-President BCE Inc. and BCE Inc.’s quarterly investor briefings to its earn-
Pierre J. Blouin Montréal, Québec Executive Vice-President ings press releases. These documents, as well as BCE Inc.’s
Michael T. Boychuk Montréal, Québec Corporate Treasurer annual and quarterly reports and news releases, are also avail-
Léo W. Houle Montréal, Québec Chief Talent Officer able on BCE Inc.’s Web site on the World Wide Web
Peter J. M. Nicholson Montréal, Québec Chief Strategy Officer (www.bce.ca).
Barry W. Pickford Toronto, Ontario Vice-President, Taxation
BCE Inc. also has toll free numbers for registered shareholder
Marc J. Ryan Montréal, Québec Corporate Secretary
Michael J. Sabia (2) Montréal, Québec President and Chief Operating Officer enquiries (1-800-561-0934) and for investor relations
Stephen P. Skinner Montréal, Québec Vice-President and Corporate Controller (1-800-339-6353).
Martine Turcotte Montréal, Québec Chief Legal Officer
Siim A. Vanaselja Montréal, Québec Chief Financial Officer
(1) Resigned effective April 23, 2002.
(2) On April 24, 2002, BCE Inc. announced the appointment of Mr. Sabia as Chief Executive Officer.
S C H E D U L E – CO R P O R AT E S T R U C T U R E
Percentage of Percentage of
voting securities non-voting securities
or Partnership or Partnership
Interests Interests
held directly or held directly or
Jurisdiction indirectly by indirectly by
Subsidiary of Incorporation BCE BCE
Bell Canada Holdings Inc. (1) Canada 80 N/A

Aliant Inc. (2) Canada 53 N/A
Bell Globemedia Inc. Ontario 70 N/A
Teleglobe Inc. (3) Canada 100 100
BCE Emergis Inc. Canada 65 N/A
(1) Bell Canada Holdings Inc. holds 100 per cent of the voting securities of Bell Canada.
(2) Aliant Inc.’s voting securities are held 14 per cent by BCE Inc. and 39 per cent by Bell Canada.
(3) Teleglobe Inc. is held 77 per cent by BCE Inc. and 23 per cent by Bell Canada.
N/A = not applicable.
w w w. bce. ca
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BCE INC.

ANNUAL INFORMATION FORM

APRIL 15, 2002

Annual Information Form

Documents Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 BCE Emergis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

BCE Inc. BCE

3.3 Bell Canada segment – Long distance WIRELESS

3.8 Bell Canada – Capital expenditures (1)

Bell Canada Holdings Inc. (1) Canada 80 N/A

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