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Telecommunications is today the world's most dynamic and exciting industry. Ours is an industry undergoing a revolutionary transformation from a century-long tradition of voice services to a limitless future where all forms of information will be available literally anywhere, anytime thanks to the magic of the Internet, wireless and optical technologies.
Your company, BCE, is uniquely positioned to succeed in this unfolding world of opportunity owing to the unequalled scope of our telecommunications capabilities. Our strategy is to exploit our scope to give customers the integrated communications services and solutions that will define the leading edge of the industry and by so doing, to be a leader in creating value for shareholders. In 1998 we invested heavily in new initiatives whose impact on our financial results is already being felt. These investments, and the strategies underlying them, are detailed in the pages that follow. We will continue to invest strategically in high-growth opportunities in the coming year in order to further strengthen our competitive position.
Reviewing the year just completed, BCE's 1998 baseline earnings grew by 25 per cent over 1997, from $1.3 billion to $1.6 billion. Revenues, excluding Nortel Networks which is no longer consolidated in BCE, increased by six per cent during the past year to $13.8 billion. A detailed review of BCE's financial results can be found in the Management's Discussion and Analysis section.
Group Results
Bell Canada continues to reshape its business operations in the face of heated competition on all fronts. While the company made significant progress in 1998, revenues and earnings remained virtually unchanged from the previous year when adjusted for the accounting changes made in 1997. Significant advances, however, were made in other areas. For example, aggressive savings plans for residence and business customers enabled Bell Canada to stem the erosion of market share in the long distance telephone market for the first year since the introduction of competition. Revenues generated from data services, a high growth area of our industry, grew by 19 per cent.
Nortel Networks finished the year with record results, underscoring the wisdom of its decision in 1998 to acquire Bay Networks. Nortel Networks' revenues for the year grew by 22 per cent over 1997, from $21.5 billion to $26.3 billion. Continuing growth is indicated by order input — essentially the dollar value of orders that have been placed for future delivery. In this respect, the year ended on a particularly strong note for Nortel Networks with order input for 1998 of $28 billion, an increase of 24 per cent over 1997.
Bell Mobility's year was highlighted by the introduction of digital wireless service (PCS). Reflecting competition and anticipated costs associated with the introduction of PCS, the company's earnings declined from $71 million in 1997 to essentially zero for the past year. Meanwhile overall subscriber growth continued to be very strong, up 19 per cent over 1997, to end the year at two million. But intense competition kept downward pressure on prices. As a result, revenues for 1998 increased by only three per cent to $1.29 billion.
Bell Canada International (BCI) recorded a year of robust growth in 1998. Revenues grew by 85 per cent from $418 million in 1997 to $772 million in 1998. The companies in which BCI has an interest now provide service to approximately three million customers — a five-fold increase over year-end 1997.
Executive Changes
In May 1998, L.R. Wilson, then Chairman and Chief Executive Officer was succeeded as Chief Executive Officer by Jean C. Monty, while Mr. Wilson continued as Chairman and an officer of the corporation.
In January 1999, the Board asked Mr. Wilson to continue as non-executive Chairman, and to assume the chairmanship of the recently formed Corporate Governance Committee. Consistent with these extended non-executive Board governance responsibilities, Mr. Wilson retired as an officer and employee of the corporation. A discussion of changes to our board of directors and other governance issues can be found in the Management's report.
As always we would like to thank our many thousands of employees in Canada and abroad who move our company forward on a daily basis and on whose skill and dedication we rely.
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