Bell Aliant reports fourth quarter 2011 results and announces 2012 guidance

• Strategy continues to produce desired results
• Fourth quarter 2011 results in line with expectations and reflect continued improved trends after adjusting for 2010 out-of-the-ordinary events
• Fibre-to-the-home (FTTH) premises passed reaches 458,000 at the end of 2011; target for end of 2012 now 650,000
• Year-over-year financial trends expected to continue to improve in 2012

This news release contains forward-looking statements. For a description of the related risk factors and assumptions please see the section entitled "Forward-looking Information" later in this release.

HALIFAX, Feb. 7, 2012 /CNW/ - Bell Aliant Inc. (TSX: BA) today reported financial results for the fourth quarter of 2011 for Bell Aliant Inc. (Bell Aliant) and Bell Aliant Regional Communications Inc. (Bell Aliant GP), and announced its 2012 financial guidance.

"2011 was a year of solid execution for us," said Karen Sheriff, president and chief executive officer, Bell Aliant. "We met or exceeded all of our financial targets while executing an aggressive construction program expanding our fibre-to-the-home coverage area. This expansion is improving our opportunities for revenue growth by giving more customers access to the best Internet and TV service bundle available in our markets.

"I am very pleased with our fourth quarter results. Our revenue and EBITDA trends in the fourth quarter of 2011 continued to show the improved trends we experienced throughout the earlier quarters of 2011, when normalized for several out-of-the-ordinary events that boosted our fourth quarter 2010 results.

"The success we have achieved over the past several years with our strategy has convinced us to stay the course - continuing to grow our broadband business, while resetting our cost structure and improving our customers' experience. We now plan to pass approximately 650,000 premises with FTTH by the end of 2012, up slightly from our previous target of more than 600,000. As a result of our accomplishments in managing costs, we expect to do this while maintaining strong free cash flow, similar to our 2011 results.

"I look forward to 2012 with optimism," continued Ms. Sheriff. "We have begun to see a change in our revenue trajectory in Atlantic Canada, and as we announced yesterday, we will be launching FibreOP^TM in Sudbury, Ontario later this year. By continuing to execute on our strategy, we expect to progressively return our overall revenue trajectory to a positive path. I also expect our 2012 financial results to show improved year-over-year trends from our 2011 experience."

Fourth quarter 2011 highlights¹

Bell Aliant Inc. reported net earnings of $80 million for the fourth quarter of 2011 with earnings per share and adjusted earnings per share in the quarter of $0.35 and $0.42, respectively.²

Fourth quarter and full-year 2011 financial highlights of Bell Aliant GP are summarized as follows:

(In millions of dollars) (unaudited)	Q4 2011	Q4 2010	Percentage Change	2011	2010	Percentage Change
Operating Revenue	$701	$715	(2.0%)	$2,775	$2,807	(1.2%)
EBITDA before pension current service costs	338	358	(5.7%)	1,387	1,429	(2.9%)
EBITDA	324	345	(6.0%)	1,327	1,376	(3.6%)
Capital Expenditures	137	162	(15.3%)	573	494	16.0%
Free Cash Flow*	168	150	12.0%	557	531	4.8%

* 2011 free cash flow results exclude lump sum contributions to defined benefit pension plans of $115 million made in Q4 2011, and $315 million for the full year 2011.

Operating revenues in the fourth quarter of 2011 were $701 million, down $14 million (2.0 per cent) compared to the same quarter of 2010. Fourth quarter 2010 revenues included out-of-the-ordinary favourable adjustments related to contribution revenues and pole attachment fees, and unusually strong product sales. Excluding these adjustments, fourth quarter 2011 revenues were flat compared to the fourth quarter of 2010, with growth in Internet and TV revenues offsetting declines in local and long distance revenues from lower network access services (NAS).

Operating expenses in the fourth quarter of 2011 increased $7 million (1.8 per cent) compared to the same quarter of 2010. Productivity gains helped to mitigate the expense effects of normal inflationary pressures, lower scientific research and experimental development (SR&ED) credits and revenue driven expense growth.

EBITDA declined $21 million (6.0 per cent) in the fourth quarter of 2011 from the same quarter a year ago. Excluding the effects of the out-of-the-ordinary revenue adjustments and SR&ED credits in the fourth quarter of 2010, year-over-year fourth quarter 2011 EBITDA results were similar to earlier quarters of 2011.

Capital expenditures in the fourth quarter of 2011 decreased $25 million (15.3 per cent) from the same quarter a year earlier, as 2010 included a $57 million purchase of telephone poles, which was somewhat offset by higher capital expenditures in 2011 associated with the FTTH expansion. In the fourth quarter of 2011, Bell Aliant passed an additional 60,000 homes and businesses with FTTH, bringing its total FTTH coverage to 458,000 premises at the end of December 2011.

Free cash flow excluding a $115 million lump sum contribution to defined benefit pension plans was $168 million in the fourth quarter of 2011, up $18 million (12.0 per cent) from the same quarter a year earlier. The increase was primarily a result of lower capital spending in the fourth quarter of 2011 compared to 2010, which was partially offset by lower EBITDA in 2011 compared to 2010. Free cash flow before lump sum contributions to defined benefit pension plans for the full year 2011 increased by $26 million (4.8 per cent) over 2010 as a result of improvements in working capital and lower regular pension funding.

Revenue Details

Local service and long distance revenues declined $22 million (6.6 per cent) and $5 million (5.3 per cent), respectively, in the fourth quarter of 2011 compared to the same quarter in 2010. In addition to the revenue effects of a 5.3 per cent decline in NAS from a year earlier, the local revenue decline included the year-over-year effects of a favourable adjustment related to contribution revenues in the fourth quarter of 2010. Net NAS declines were 44,000 in the fourth quarter of 2011, up slightly from 43,000 in the fourth quarter of 2010.

Internet revenue grew by $10 million (8.7 per cent) in the fourth quarter of 2011 compared to the same period in 2010. Residential high-speed average revenue per customer (ARPC) continued to grow, as customer demand for more bandwidth and premium services, along with the carry-over effects of pricing actions earlier in the year, pushed ARPC in the fourth quarter of 2011 up 8.2 percent from the same quarter a year earlier.

High-speed Internet customers were 862,000 at the end of December 2011, up 2.4 percent from a year earlier. Overall net high-speed Internet customer additions of 2,000 in the fourth quarter of 2011 were down from 5,000 in the fourth quarter of 2010, reflecting continued competitive activity and migration to FibreOP. Included in net high-speed Internet customer additions for the quarter was FibreOP Internet customer growth of 13,000 to bring total FibreOP Internet customers to 47,000 at the end of 2011. The majority of FibreOP Internet customer growth was related to customers migrating from traditional DSL and fibre-to-the-node networks, which did not contribute to overall high-speed customer growth, but is expected to increasingly contribute to growth in ARPC.

IPTV revenue was $14 million in the fourth quarter of 2011 with total IPTV customers of 77,000 at the end of 2011. Overall net IPTV customer additions were 9,000 in the fourth quarter of 2011. FibreOP TV customers grew by 11,000 in the quarter to reach 42,000 at the end of 2011, including migration from Bell Aliant's fibre-to-the-node TV service.

Other data revenue grew $2 million (1.9 per cent) in the fourth quarter of 2011 from the same quarter a year earlier, continuing the improved trends of previous quarters as a result of data demand growth in Atlantic Canada.

Other revenues decreased $7 million (12.1 per cent) in the fourth quarter of 2011 compared to the same quarter in 2010, largely driven by lower product sales, and the effects of a favourable adjustment related to pole attachment fees in the fourth quarter of 2010.

2012 Guidance

Bell Aliant's 2012 financial guidance is as follows:

	2011 Results	2012 Guidance
Operating Revenues	$2,775 million	$2,700 million to $2,780 million
EBITDA^(2) after pension expense	$1,327 million	$1,285 million to $1,325 million
Capital Expenditures	$573 million	$550 million to $600 million
Free Cash Flow^(2)	$557 million^(1)	$500 million to $560 million
Adjusted earnings per share^(2)	$1.70	$1.60 to $1.80

⁽¹⁾ Excludes $315 million lump sum contributions to defined benefit pension plans made in 2011
⁽²⁾ EBITDA, Free Cash Flow and Adjusted earnings per share are non-IFRS measures. Refer to the "Non-IFRS financial measures" section of Bell Aliant GP's Q4 2011 Management's Discussion and Analysis (MD&A) for details

Operating revenues in 2012 are expected to be between $2,700 million and $2,780 million compared to $2,775 million in 2011. Strong growth in Internet and TV revenues as a result of FibreOP expansion is expected to largely offset decreases in traditional voice revenues arising from competitive activity and technology substitution. Operating expenses are expected to be similar in 2012 to 2011 as savings from restructuring in 2011 and other productivity initiatives offset cost increases from normal inflationary pressures and FibreOP rollout costs.

As a result, EBITDA in 2012 is expected to be between $1,285 million and $1,325 million, compared to 2011 EBITDA of $1,327 million.

Capital expenditures in 2012 are expected to be between $550 million and $600 million, compared to $573 million in 2011. Increased capital expenditures arising from FTTH expansion to somewhat less densely populated markets, start-up costs for expansion outside Atlantic Canada, and stronger growth in new FibreOP customer connections in 2012 are expected to offset declines from lower FTTH footprint expansion in 2012 than in 2011.

Free cash flow is expected to be between $500 million and $560 million in 2012, compared to $557 million in 2011, excluding 2011 lump sum contributions to defined benefit pension plans. Adjusted earnings per share in 2012 is expected to be similar to 2011.

Declared Dividends

Bell Aliant's Board of Directors declared a quarterly dividend of $0.4750 per common share, payable on March 30, 2012 to shareholders of record at the close of business on March 15, 2012.

Bell Aliant Preferred Equity Inc. declared a dividend on its Series A Preferred Shares of $0.303125 per share to be paid on March 30, 2012 to shareholders of record at the close of business on March 15, 2012.

Bell Aliant Preferred Equity Inc. declared the first dividend on its Series C Preferred Shares of $0.3584 per share to be paid on March 30, 2012 to shareholders of record at the close of business on March 15, 2012.

Unless otherwise stated, dividends paid by Bell Aliant and Bell Aliant Preferred Equity Inc. to Canadian residents are "eligible dividends" as defined by the Canadian Income Tax Act and corresponding provincial legislation.

Additional Information

More information on Bell Aliant's and Bell Aliant GP's fourth quarter 2011 results and 2012 guidance can be found in Bell Aliant's fourth quarter 2011 supplementary information package and Bell Aliant GP's fourth quarter 2011 MD&A, available at www.bellaliant.ca/investors.

Analyst conference call

A conference call with the financial community is scheduled for February 7, 2012 at 12 p.m. (Eastern). The dial-in numbers are 866-226-1792 and 416-340-2216 for Toronto area participants. Media are invited to attend in listen-only mode. A replay of the session can be heard until March 6, 2012. To access the replay, dial 800-408-3053 or 905-694-9451 and enter the passcode 6872111#.

A live audio webcast of the conference call can be accessed on www.bellaliant.ca under the Investor Relations section. A replay of the conference call will be available on the website for one year.

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¹ See Notes section at the end of this release for definitions of the non-International Financial Reporting Standard (IFRS) financial metrics including EBITDA, free cash flow and adjusted earnings per share.

² Bell Aliant converted from an income trust structure to a corporate structure on January 1, 2011. Prior year net earnings and earnings per share metrics of the trust structure are not meaningful or comparable to 2011 results.

Notes

The information contained in this news release is unaudited.

(1)	Bell Aliant derives virtually all of its income from its ownership in Bell Aliant GP. Bell Aliant GP's results consolidate the results of Bell Aliant Regional Communications, Limited Partnership, Télébec, Limited Partnership, NorthernTel, Limited Partnership, and Bell Aliant Preferred Equity Inc.
(2)	Percentage changes quoted in this release related to dollar values are based on amounts rounded to the nearest hundred-thousand, consistent with disclosure in Bell Aliant's supplementary information package and Bell Aliant GP's MD&As for the fourth quarter of 2011. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated.
(3)	Definitions of non-IFRS measures:
	a.	EBITDA: Bell Aliant defines EBITDA as operating revenue less operating expenses (operating income) before interest, income taxes, depreciation and amortization expense, severance and other charges.
	b.	Free cash flow: Bell Aliant defines free cash flow as cash generated from operating activities less capital expenditures. Free cash flow includes the operations of Bell Aliant and Bell Aliant GP on a combined basis.
	c.	Adjusted earnings per share: Bell Aliant defines adjusted earnings per share as fully diluted earnings per share adjusted for the after-tax per share impact of amortizing purchase price allocations (PPA) amounts, which represent the adjustments to historical cost of tangible and intangible assets acquired in business combinations.

For a reconciliation of these non-IFRS measures to the most closely comparable IFRS measures, please refer to Bell Aliant GP's MD&A for the fourth quarter of 2011.

Forward-looking Information

This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, in particular statements concerning fibre-to-the-home expansion plans, 2012 financial guidance and dividend payments. Unless otherwise indicated, such forward-looking statements describe management's expectations at February 7, 2012. These statements are based on management's beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond management's control. These statements are not guarantees of future performance and are subject to assumptions which may prove to be inaccurate and numerous risks and uncertainties which are difficult to predict.

Key Assumptions

Several assumptions were made in the preparation of Bell Aliant's 2012 financial guidance and in making forward-looking statements in this news release. For 2012, Bell Aliant expects:

	Market Assumptions
a)	Competition in both business and consumer markets will continue to be intense with the cable telephony competitive footprint growing from its current level of 72 percent to reach a peak of 75 to 80 per cent over the next several years;
b)	Wireless substitution for voice services will increase in Bell Aliant territories but will continue to lag other regions of Canada;
	Operational Assumptions
c)	NAS declines will be similar to those experienced in 2011;
d)	High-speed Internet subscriber net additions will be similar to those experienced in 2011;
e)	IPTV subscribers net additions will grow from those experienced in 2011;
f)	Bell Aliant will continue to invest in FTTH technology to pass approximately 650,000 homes and businesses by the end of 2012, which should result in higher total residential ARPC and significant TV subscriber and revenue growth;
g)	Cost reductions will continue in 2012, offsetting cost increases associated with the rollout of FTTH and normal inflationary pressures;
	Financial Assumptions
h)	Net benefit plans cost included in EBITDA in 2012 is expected to be $55 million to $65 million based on a 2011 year-end discount rate of 5.2 per cent at year-end 2011, compared to $60 million in 2011 which used a blended discount rate of 5.3 per cent. The assumed rate of return on plan assets (for financing income) is 6.0 per cent consistent with 2011;
i)	Substantially all of the 2012 pension deficit funding requirements are expected to be met by drawing down voluntary lump sum contributions to defined benefit pension plans made in 2011 or through use of letters of credit; cash funding for deficit reduction in 2012 is expected to be in the range of nil to $15 million. Cash funding for current service costs and other net benefit plans in 2012 is expected to be in the range of $65 million to $75 million, compared to $66 million in 2011;
j)	Taxable income is expected to be subject to a blended federal and provincial corporate income tax rate of 28 per cent in 2012, with a 2012 income tax provision of approximately $125 million to $135 million. The utilization of accumulated tax-loss carry forwards will result in minimal cash taxes being paid in 2012;
k)	Productivity initiatives, largely arising from workforce restructuring programs announced in 2011, will result in a use of cash for severance, benefits and real estate rationalization costs of approximately $20 million to $25 million in 2012;
l)	Bell Aliant's depreciation and amortization expense for 2012 will be $635 million to $650 million, including approximately $85 million to $90 million of amortization of PPA adjustments which are excluded from adjusted earnings per share calculations.

Bell Aliant encourages investors to review the risk factors section below, and related disclosures, for a discussion of the various factors that could cause actual results to differ from what is currently expected.

Risk Factors
There are many factors that could cause results or events to differ materially from current expectations. The most significant factors that Bell Aliant has identified that may affect Bell Aliant's results or events in 2012 include but are not limited to: increasing competition; management's ability to achieve strategies and plans, including expansion of our fibre-to-the-home (FTTH) network and managing the cost structure; general economic conditions; pension valuation and investment risk; reliance on systems; changing technology; demand for our products and services; our business relationship with BCE Inc. (BCE) and Bell Canada; changing regulations; dependence on key suppliers; maintenance of credit ratings; leverage and restrictive covenants; BCE's governance rights; reliance on key personnel and labour relations, including the requirement for effective business continuity planning and the ability to attract and retain new employees; legal contingencies and changes in laws, including laws pertaining to privacy and security of customer information; and tax related risks. Some of these risk factors are largely beyond Bell Aliant's control. For additional information on material factors and assumptions used to develop forward-looking information and risk factors that could cause actual results to differ materially from forward-looking information, see also the "Risk management" section of Bell Aliant Regional Communications Income Fund's MD&A for the year ended December 31, 2010, and the "Assumptions made in the preparation of forward-looking information" and "Risks that could affect our business and results" sections of Bell Aliant Regional Communications Holdings, Limited Partnership's MD&A for the year ended December 31, 2010, as updated by their 2011 quarterly MD&As, as well as the "Risk Factors" sections of Bell Aliant Inc.'s and Bell Aliant Regional Communication Inc.'s 2010 Annual Information Forms. These documents are available at www.bellaliant.ca and www.sedar.com.

Should any risk factor affect Bell Aliant in an unexpected manner, or should assumptions underlying the forward-looking statements prove incorrect, the actual results or events may differ materially from the results or events predicted. Unless otherwise indicated, forward-looking information does not take into account the effect that transactions, or non-recurring or other special items, announced or occurring after this information is provided may have on the business. All of the forward-looking information reflected in this press release and the documents referred to within it are qualified by these cautionary statements. There can be no assurance that the results or developments anticipated by Bell Aliant will be realized or, even if substantially realized, that they will have the expected consequences for Bell Aliant.

Except as may be required by Canadian securities laws, Bell Aliant disclaims any intention and assumes no obligation to update or revise any forward-looking information, even if new information becomes available, as a result of future events or for any other reason. Readers should not place undue reliance on any forward-looking information. Forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to fiscal 2012 or other future periods. Readers are cautioned that such information may not be appropriate for other purposes.

About Bell Aliant
Bell Aliant (TSX: BA) is one of North America's largest regional communications providers and the first company in Canada to cover an entire city with fibre-to-the-home (FTTH) technology with its FibreOP services. Through its operating entities it serves customers in six Canadian provinces with innovative information, communication and technology services including voice, data, Internet, video and value-added business solutions. Bell Aliant's employees deliver the highest quality of customer service, choice and convenience. 

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