EBITDA growth at Bell Canada was driven by con- tinued improvement in wireless, Internet access and video services. EBITDA erosion in our legacy services was offset by a continued focus on productivity as well as EBITDA contributions from IP-based connectivity service, and VAS and VCIO revenue gains in our Business segment. 

The other BCE segment also contributed to the overall EBITDA growth. Bell Globemedia’s EBITDA improvement reflects a higher level of television adver- tising revenue and benefits from cost savings. CGI reflects the benefit of the AMS acquisition. 

Our EBITDA margin for the year was 39.4%, down 0.1 percentage points from 2003, reflecting a lower EBITDA margin at CGI and higher corporate expenses, which more than offset the margin improvement at Bell Canada. 

Bell Canada’s EBITDA margin of 42.4% in 2004 reflected a 0.3 percentage point improvement over last year. Wireless EBITDA margin reflected a 5.2 percent- age point improvement despite the adverse impacts of the implementation of the new billing system. 

We achieved EBITDA margin improvement by bet- ter management of COA per gross activation, particu- larly in the wireless business, and by placing a greater emphasis on more profitable contracts within the Enter- prise and Wholesale markets. The negative impact of the Aliant employee strike and the cost of the billing system migration partly offset the improvement at Bell Canada. 

Wireless COA of $411 per gross activation in 2004 improved by $15 compared to 2003, driven primarily from more targeted and cost-effective campaigns. COA for video services of $571 per gross activation increased $39 due to more customers taking a second receiver as a result of our 2TV bundle and aggressive retail pricing by competitors. 

In 2005, we are targeting stable EBITDA margins, as cost savings expected to be achieved through the benefits of our Galileo initiatives, combined with antic- ipated revenue increases from our growth services, are expected to mitigate declines in our legacy business. 

We are targeting to achieve significant cost savings from our Galileo initiatives. We expect close to half of these savings will be derived from the Consumer segment, driven by the impact of this year’s employee reduction programs, the migration to a single bill, higher sales through our Bell.ca website, efficiencies in call centre operations, and our efforts to provide simpler provisioning and product offers. The rest of the 

cost savings are expected to be achieved in the Business segment as we eliminate network elements and stan- dardize core operating processes, as well as from labour savings driven by this year’s workforce reductions. 

## Amortization Expense 

Amortization expense increased 0.3% or $8 million to $3,108 million in 2004, compared to 2003. This was a result of an increase in our capital asset base from cap- ital spending that continues to be higher than asset retirements. This was partly offset by an increase from three to four years in the useful life of Bell Canada’s internal use software. 

## Net Benefit Plans Cost 

The net benefit plans cost increased by 46% or $81 mil- lion to $256 million in 2004, compared to 2003. The increase resulted mainly from a higher accrued benefit obligation based on our most recent actuarial valua- tion. This was partly offset by the positive fund per- formance in 2003, which resulted in an actuarial gain and increased the fair value of plan assets. 

In the next two years, net benefit plans cost is expected to increase, mainly as a result of poor fund performance experienced in 2001 and 2002. This will continue to negatively impact the accounting value of the plan assets used to determine the net benefit plans cost. In 2006, however, we expect this negative impact will have a smaller effect. Beyond 2006, net benefit plans cost is expected to stabilize. 

## Restructuring and Other Items 

We recorded $1,224 million in restructuring and other items in 2004, consisting of: 

• $985 million in the third quarter relating to an employee departure program at Bell Canada, where 5,052 employees chose to leave the company. By the end of the year 4,900 employees had left the company. We expect this to result in annual savings of approxi- mately $390 million. 

• a $110 million provision recorded in the second quarter for potential cost overruns on a contract with the Government of Alberta, which was increased by $18 million in the fourth quarter 

• $67 million in the fourth quarter relating to an employee departure program at Aliant under which 693 employees decided to leave the company. Of these 

## Amortization Expense 

The amount of our amor- tization expense in any year is affected by: 

• how much we invested in new capital assets in previous years 

• how many assets we retired during the year 

• changes in accounting rules and estimates. 

Each year, we review our estimate of the useful life of our capital assets. 

## Net Benefit Plans Cost 

The amount of the net benefit plans cost in a year mainly depends on: 

• the return on pension plan assets expected to be generated during the year – the lower the return, the higher the cost 

• the present value of future pension benefit payments to employees – the lower the present value, the lower the cost 

• actuarial gain (loss) – the difference between the actual funded status of our pension plans and the amount calculated using our accounting assumptions. We amortize this into earn- ings over time. 

## Restructuring and Other Items 

This category includes vari- ous income and expenses that are not directly related to the operating revenues generated during the year. Examples are costs related to streamlining initiatives, asset write-downs and other types of income or charges. 

