Bell Aliant reports second quarter 2010 results

- Operating expense reductions of $21 million from Q2 2009 mitigate revenue declines of $31 million - NAS declines improve 26 per cent over Q2 2009 - FibreOP(TM) expansion continues on plan with strong IPTV and Internet bundle performance

HALIFAX, July 28 2010 -- Bell Aliant Regional Communications Income Fund (Bell Aliant or the Fund) (TSX: BA.UN) today announced its second quarter 2010 financial results for the Fund and Bell Aliant Regional Communications Holdings, LP (Bell Aliant Holdings LP).

"We continue to accelerate our strategic objectives and our results are in line with our expectations, including the reduction in operating expenses of over $20 million from the second quarter of 2009 as we reset our cost structure," said Karen Sheriff, president and chief executive officer. "While competitive expansion in our territories continued to reduce our local service customer base, our NAS declines in the second quarter improved substantially from both the first quarter of this year and the same quarter a year ago."

"The rollout of our FibreOP services is proceeding well and I am very pleased with the results we are experiencing to date, particularly the take-up of our FibreOP Bundles which include TV, Internet and home phone," continued Sheriff.

"We are making progress on our key strategies and I'm looking forward to making further improvements as we tackle the challenges of our competitive environment."

Second quarter 2010 results

Highlights ----------

Operating revenues were down $31 million (4.0 per cent) in the second quarter of 2010 compared to the second quarter of 2009. The decline was driven by declines in local and long distance revenues associated with lower network access services (NAS), lower data revenues and lower information technology (IT) service revenues. These decreases were partially offset by increases in Internet revenues.

Operating expense reductions of $21 million (5.1 per cent) from labour-related cost reductions and other cost containment initiatives mitigated the effects on EBITDA of lower revenues in the second quarter of 2010 compared to the same quarter a year earlier.

EBITDA decreased by 2.8 per cent, or $10 million in the second quarter of 2010 compared to the same period in 2009. Excluding the effects of a one-time $3 million adjustment that reduced senior management long-term incentive plan expenses in the second quarter of 2009, EBITDA decreased 1.9 per cent in the second quarter of 2010 compared to the same period in 2009. Because of the improvement in operating expenses, EBITDA margin improved to 47.4 per cent in the second quarter of 2010, up from 46.8 percent in the same quarter of 2009.

Bell Aliant Holdings LP's second quarter financial highlights are as follows:

------------------------------------------------------------------------- (In millions of Q2 Q2 Percentage YTD YTD Percentage dollars) 2010 2009 Change 2010 2009 Change ------------------------------------------------------------------------- Operating Revenue $753 $784 (4.0%) $1,532 $1,603 (4.4%) ------------------------------------------------------------------------- EBITDA 357 367 (2.8%) 711 726 (2.1%) ------------------------------------------------------------------------- Capital Expenditures 125 122 2.7% 220 229 (4.1%) ------------------------------------------------------------------------- Distributable Cash 176 187 (5.6%) 377 383 (1.7%) ------------------------------------------------------------------------- Results -------

Local service revenue declined $16 million (4.7 per cent) in the second quarter of 2010 compared to the same quarter in 2009 as a result of NAS declines and a $6 million decrease in competitor contribution subsidies. Residential and business NAS were 6.1 per cent and 2.6 per cent lower, respectively, than a year earlier primarily as a result of increased competitive activity. Total NAS declines in the quarter improved by approximately 8,000 over the second quarter of 2009 and by 15,000 compared to those experienced in the first quarter of 2010.

Long distance revenue declined $7 million (6.9 per cent), in the second quarter of 2010 compared to the same quarter in 2009 as a result of NAS declines and migration to flat rate long distance plans.

Internet revenue grew by $7 million (7.0 per cent) in the second quarter of 2010 compared to the same period in 2009, with the number of high-speed Internet customers 6.0 per cent higher than a year ago and growth in Bell Aliant TV subscribers. Residential High Speed average revenue per customer (ARPC) reached its highest point to date, increasing 4.5 per cent over the same quarter in 2009 as a result of pricing action and customer migration to higher value services.

Other data revenues declined $8 million (7.4 per cent) compared to the same quarter in 2009 as a result of competitive pressure and migration to alternate technologies.

IT revenues declined $6 million (9.0 per cent) compared to the same quarter a year ago driven by softness in the IT services sector.

Other revenues declined $3 million (7.0 per cent) compared to the same quarter in 2009 mainly as a result of lower product sales and rentals.

Capital expenditures in the second quarter of 2010 were $125 million, up $3 million from the same quarter a year ago as fibre-to-the-home expansion in 2010 replaced 2009 expenditures for the Bell Mobility backhaul project.

Distributable cash decreased $10 million (5.6 per cent) in the second quarter of 2010 from the same period in 2009, largely driven by lower EBITDA.

Conversion and Distributions

On June 16, 2010, Bell Aliant's unitholders approved the proposed conversion from an income trust into a dividend paying public corporation to be named Bell Aliant Inc. The conversion transaction is expected to be effective January 1, 2011. Upon completion of the conversion, Fund unitholders will receive one common share of Bell Aliant Inc. for each Fund unit held.

Bell Aliant has announced that it intends to maintain its current distribution of $0.2417 per unit per month, or $2.90 annually, for the balance of 2010 and reported distributions to unitholders of $92 million or $0.725 per unit for the quarter ended June 30, 2010. Beginning in 2011, Bell Aliant expects the initial dividend under the corporate structure will be $0.475 per share paid quarterly, or $1.90 annually.

Update to 2010 Guidance

As part of Bell Aliant's strategy to reset its cost structure, Bell Aliant has announced that it does not intend to renew certain pole use agreements with the power utility serving Newfoundland and plans to purchase an interest in poles. Bell Aliant currently pays usage fees to the utility and the purchase transaction is expected to reduce Bell Aliant's overall annual cash outlays, improving EBITDA and free cash flow going forward. This one-time capital expenditure of approximately $55-$60 million is expected to occur in either late 2010 or early 2011, subject to regulatory and other approvals. Should the transaction be completed in 2010, Bell Aliant's capital intensity and distributable cash metrics will be affected as shown below:

------------------------------------------------------------------------- 2010 Guidance Without Pole Purchase With Pole Purchase ------------------------------------------------------------------------- Operating Revenues $3,050 million - $3,150 million Unchanged ------------------------------------------------------------------------- Capital Intensity 14% - 15% 16% - 17% ------------------------------------------------------------------------- Distributable Cash $750 million - $790 million $690 million - $730 million -------------------------------------------------------------------------

Other than this adjustment, there are no changes to Bell Aliant's previously announced 2010 Guidance.

Supplementary financial information

More information on the Fund's and Bell Aliant Holdings LP's second quarter 2010 results can be found in Bell Aliant's second quarter 2010 supplementary information package and the Fund's and Bell Aliant Holdings LP's second quarter 2010 financial statements and management's discussion and analysis ("MD&A"), available at

Analyst conference call

A conference call with the financial community is scheduled for Wednesday, July 28, 2010 at 3:00 p.m. (Eastern). The dial-in numbers are (866) 226-1792 or (416) 340-2216 for Toronto area participants. Media are invited to attend in a listen-only mode. The title of the call is "Bell Aliant Second Quarter 2010 Financial Results." A replay of the session can be heard until August 8, 2010. To access the replay, dial (800) 408-3053 or (416) 695-5800 and enter the passcode 4105257#.

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


The information contained in this news release is unaudited.

(1) Bell Aliant derives virtually all of its income from its indirect ownership in Bell Aliant Holdings LP. Bell Aliant Holdings LP's results combine the results of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP), Télébec, Limited Partnership (Télébec) and NorthernTel, Limited Partnership (NorthernTel).

(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 the Fund's supplementary information package and Bell Aliant Holdings LP's MD&A for the second quarter of 2010. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated.

(3) Bell Aliant Holdings LP defines EBITDA, a non-GAAP measure, as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, net benefit plans cost, and restructuring and other charges. For a reconciliation of EBITDA to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's MD&A for the second quarter of 2010.

(4) Bell Aliant defines EBITDA margin as EBITDA as a percentage of operating revenue.

(5) Bell Aliant defines capital intensity as capital expenditures as a percentage of operating revenue.

(6) Bell Aliant defines distributable cash, a non-GAAP measure, as cash from operating activities of continuing and discontinued operations of Bell Aliant Holdings LP and of the Fund, plus operating items funded through cash reserves or borrowings, such as working capital, pension deficit funding, restructuring and other charges and cash capital taxes in excess of normalized levels, plus amounts for current income tax provisions plus other elements of working capital changes that do not affect cash flow, less capital expenditures. For a reconciliation of distributable cash to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP's MD&A for the second quarter of 2010.

Forward-looking Information

This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, including, but not limited to statements concerning the anticipated conversion to a corporate structure, Bell Aliant's expected distributions for the remainder of 2010, the expected dividend policy at the time of conversion, and capital expenditures in late 2010 or early 2011 in connection with the purchase of an interest in utility poles in Newfoundland, all as more particularly described in the "Conversion and Distributions" and "Update to 2010 Guidance" sections of this news release. Unless otherwise indicated, such forward-looking statements describe management's expectations at July 28, 2010. 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. Therefore, actual results may differ materially from what is predicted.

Assumptions made and risk factors considered in preparing our forward-looking statements are discussed in detail in Bell Aliant's 2009 earnings results and 2010 guidance news release dated February 3, 2010, as well as in the Fund's and Bell Aliant Holdings LP's 2009 annual MD&As and annual information forms, and 2010 first and second quarter MD&As. Additional risk factors considered and assumptions made in connection with the anticipated conversion transaction, and expected dividend policy beginning in 2011 if the conversion is implemented, are set out in the Fund's Management Information Circular dated May 7, 2010 beginning on page F-9, and in Bell Aliant's 2010 first quarter earnings release dated May 4, 2010 under "Additional Assumptions and Risk Factors", respectively. These documents are available at or at

All forward-looking statements in this news release are qualified by these cautionary statements, and there can be no assurance that the results or events predicted will be realized. 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 statement 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 statements.

About Bell Aliant

Bell Aliant (TSX: BA.UN) 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. Through its xwave offices, Bell Aliant also provides IT professional services and advanced technology solutions. Bell Aliant's employees deliver the highest quality of customer service, choice and convenience.

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For further information: Media Relations: Alyson Queen, (866) 696-6700,; Investor Relations: Zeda Redden, (877) 487-5726,

SOURCE Bell Aliant