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## Net Earnings 

ROE (return on common shareholders’ equity) is calculated as net earnings applicable to common shares as a percentage of average common shareholders’ equity. 

## Capital Expenditures 

Capital intensity is capital expenditures divided by operating revenues. It is a key financial measure that we use to assess our performance and that of our business units. 

EBITDA erosion in our legacy services was offset by a continued focus on productivity, as well as EBITDA contributions from IP connectivity, 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 advertising revenue and benefits from cost savings. CGI’s EBITDA improvement 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 margin improvement at Bell Canada. Bell Canada’s EBITDA margin of 42.4% re- flected a 0.3 percentage point improvement over last year. Wireless EBITDA grew significantly, driving a 5.2 percentage point margin improvement despite the adverse impacts of the implementation of a new billing system. We achieved EBITDA margin improve- ment by better managing acquisition costs per gross activation, particularly in the wireless business, and by placing a greater emphasis on more profitable con- tracts within the Enterprise and Wholesale markets. The negative impact of the Aliant employee strike and the cost of the billing system implementation partly offset the improvement at Bell Canada. 

## Net Earnings/Earnings per Share ( EPS) 

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Net earnings applicable to common shares for 2004 were $1,523 million, or $1.65 per common share. This compared to net earnings of $1,744 million, or $1.90 per common share in 2003. ROE was 12.5% in 2004, compared to 15.1% last year. Included in 2004 net earnings were net losses of $349 million after taxes and non-controlling interest, or $0.37 per common share, consisting primarily of: 

• restructuring and other items of $772 million or $0.83 per share, mainly relating to the employee depar- ture programs announced at Bell Canada ($647 mil- lion) and Aliant ($24 million), partly offset by: 

• net gains of $423 million from the sales of our investment in MTS, our remaining interest in YPG General Partner Inc. (YPG) and our interest in Emergis, and the gain on the purchase of 360networks, which reflected the excess of the fair value of the net assets acquired over the purchase price. 

This compared to net losses of $5 million included in 2003 net earnings due mainly to the loss on sale of Emergis’ US Health operations, which was partly offset by a gain on sale of an interest in YPG. 

Excluding the impact of these items, net earnings grew 7.0% to $1,872 million, or $2.02 per share, in 2004, an increase of $123 million, or $0.12 per share, yielding an ROE of 15.2%, which is similar to last year. This increase reflected the improvement in oper- ating income and lower interest expense. 

## Capital Expenditures 

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Capital expenditures increased 6.2% or $197 million to $3,364 million in 2004, compared to 2003. Capital spending as a percentage of revenues was 17.5% in 2004, compared to 16.9% in 2003. Capital intensity at Bell Canada also increased from 17.4% to 18.0%. Capital spending at Bell Canada in 2004 reflected a mix of higher investment in the growth areas of the business and reduced expenditures in legacy areas. 

Our key strategic investments this year included the migration to one national IP MPLS network, our VDSL deployment strategy, our DSL footprint expansion facilitated through the deployment of new high-density remotes, and productivity enhancement initiatives. Higher spending related to satellite builds at Telesat also contributed to the increase. 

