Financial Results Analysis Financial Results Analysis Consolidated Analysis Management’s Discussion and Analysis Looking ahead for 2005, we expect to achieve  overall revenue growth as expected increases from  our growth services, including wireless, Internet and IP-based connectivity, video services and value-added services are expected to more than offset anticipated continued declines in our legacy wireline business. Beyond 2005, we expect growth services will become a greater component of our future revenue base.  In 2005, the anticipated revenue increases from  our growth services are expected to be driven by  solid increases in the number of subscribers and tar- geted increases in average revenue per subscriber across these services.  In local and access and long distance revenues, we expect the trends experienced over the past years to continue and the rate of decline of these services to increase somewhat as cable companies begin expected launches of VoIP offerings. We also expect continued legacy revenue declines from the Enterprise and Wholesale businesses due to continued competitive pricing pressures and the migration to IP.  See  Segmented Analysis for a discussion of operating revenues on a segmented basis, and  Product Line Analysis for a discussion of operating revenues on a product line basis. Operating income declined 28% or $1,145 million to $2,976 million in 2004, compared to 2003. This was mainly because of an increase in restructuring and other items and a higher net benefit plans cost. Excluding the impact of the restructuring and other items, operating income increased 1.6% or $65 million to $4,200 million in 2004. This increase stemmed from operating income growth in our Consumer and Busi- ness segments, as well as improvements in Bell Globemedia and Telesat in the Other BCE segment, driven by the underlying growth in these sectors.  See  Segmented Analysis for a discussion of operating income on a segmented basis. Operating revenues grew 2.4% or $456 million to $19,193 million in 2004, compared to 2003, a rate of growth which exceeded our 2003 performance. Bell Canada contributed most of the increase despite the trailing effects of the implementation of a new wireless billing system and a prolonged labour disruption at Aliant. Bell Canada’s revenue growth was a result of improved performance in the Consumer seg- ment stemming from stronger wireless, Internet access and video services revenues, along with higher IP- connectivity and VAS revenues in the Business segment. Our EBITDA grew 2.1% or $154 million to $7,564 mil- lion in 2004, compared to 2003. This represented a growth rate of 3.0%, excluding the estimated negative impact of $71 million from the Aliant labour dis- ruption, from improvements at Bell Canada and the Other BCE segment.  Revenue growth was enhanced further by higher revenues at CGI, resulting from the AMS acquisition, and at Bell Globemedia, resulting from higher television advertising revenues due to strong ratings performance. EBITDA Operating Income Operating Revenues This section provides detailed information  and analysis about our  performance over the past two years. It focuses on  our consolidated operating results and provides financial information for each of our operating segments. N/M: Not meaningful 2004 2003 % CHANGE Operating revenues 19,193  18,737 2.4% Operating expenses (11,629) (11,327) (2.7%) EBITDA 7,564  7,410 2.1% Amortization expense (3,108) (3,100) (0.3%) Net benefit plans cost (256) (175) (46.3%) Restructuring and other items (1,224) (14) N/M Operating income 2,976  4,121 (27.8%) Other income 411  175 134.9% Interest expense (1,005) (1,105) 9.0% Pre-tax earnings from  continuing operations 2,382  3,191 (25.4%) Income taxes (710) (1,119) 36.6% Non-controlling interest (174) (201) 13.4% Earnings from continuing  operations 1,498  1,871 (19.9%) Discontinued operations 26  (56) 146.4% Net earnings before  extraordinary gain 1,524  1,815 (16.0%) Extraordinary gain 69  – N/M Net earnings 1,593  1,815 (12.2%) Dividends on preferred shares (70) (64) (9.4%) Premium on redemption  of preferred shares –  (7) N/M Net earnings applicable  to common shares 1,523  1,744 (12.7%) EPS 1.65  1.90 (13.2%) 48 Bell Canada Enterprises  2004 Annual Report