Management’s Discussion and Analysis promotional activities and reduced levels of fieldwork activity during the labour disruption. Strong growth in wireless and Internet services was more than offset by declines in other areas due to the labour disruption, the ongoing impact of competition, and the regulatory restrictions, including those on bundling, customer win-back activities, and rates charged for price-regu- lated services. Aliant’s wireless revenue grew 15.4% in 2004. This was driven by: • an increase of 9.6% in Aliant’s wireless customer base, including a 26% increase in digital customers, reflecting a positive response to the extensive dealer- supported network, attractive pricing offers and the expansion of digital cellular service into new areas • an increase of $3 in ARPU, reflecting the impact of a higher percentage of customers subscribing to digital service, higher usage and increased customer adoption of features. Intense long distance competition, the difficulty in maintaining win-back efforts during the labour dis- ruption and substitution of long distance calling with Internet and wireless options by customers resulted in long distance revenue declines in  2004, compared to last year. Consumer minute volumes were down due to customer losses to competition and the capping of minutes on certain long distance plans in late 2003. Business long distance pricing declines continued to reflect the impact of competitive pressures, as did long distance volume declines, in addition to a reduction of contact centre activity. Data revenues declined slightly in 2004 as higher Internet revenues were more than offset by other data revenue declines from the scale-back of marketing  and sales efforts during the labour disruption and the continued rationalization of circuit networks by cus- tomers. The continued increase in Internet revenues stemmed from the increased popularity of enhanced services and year-over-year subscriber growth of  6%, reflecting 21% growth in Aliant’s high-speed Internet customer base. The higher subscriber base resulted from the expansion of high-speed Internet service into new areas, attractive introductory offers, an emphasis on bundling with other products and services as well as dealer and online sales channel initiatives. These increases were partly offset by lower operating costs stemming from the xwave restructuring in 2003 and the sale of non-core operations in the second and third quarters. With the labour disruption and its impact on 2004 behind us, for 2005 we expect revenue growth in Aliant’s wireless and Internet services to offset contin- ued erosion in local and access and long distance. We also anticipate operating income growth in 2005 The remaining decrease of $12 million is a result of higher operating expenses from: Aliant’s operating income declined 35% or $147 mil- lion to $268 million in 2004, compared to 2003. This was largely due to: • the labour disruption, which had an estimated nega- tive impact of $68 million in 2004. Incremental costs were incurred during the labour disruption to enable operations to continue with relatively few interrup- tions, ensure the safety of employees, perform property repairs, provide training and equipment to employees and maintain basic customer service. • a restructuring charge of $67 million relating to an employee departure program. See  Restructuring and Other Items for more details. Terminal sales and other revenues declined in 2004 as a result of slower product sales during the labour disruption and the divestiture of non-core operations in the second and third quarters, which resulted in a reduction in IT service revenue. • growth in wireless and Internet services • an increase in net benefit plans cost • normal wage and annual salary adjustments • higher amortization expense resulting from a higher proportion of capital spending in recent years on broadband and wireless assets, which have shorter depreciable lives. 03 04 268 415 0 20.2% 13.2% Operating income Operating income margin ALIANT OPERATING INCOME 54 Bell Canada Enterprises  2004 Annual Report