##### 



Exhibit 99.1
 2005
  BELL CANADA




---



##### 








---



##### 



p. 2       MANAGEMENTS DISCUSSION AND ANALYSIS
 MD&A at a GlanceAbout Forward-Looking Statements
    
    
    2Non-GAAP Financial Measures
    
    
    2About Our Business
    
    
    4The Year at a Glance
    
    
    11Selected Annual and Quarterly Information
    
    
    15Financial Results Analysis
    
    
    16Financial and Capital Management
    
    
    29Evaluation of Disclosure Controls and Procedures
    
    
    36Assumptions Made in the Preparation of Forward-Looking Statements and Risks
That Could Affect Our Business and Results
    
    
    36Our Accounting Policies
    
    
    47
 www.bce.ca, www.sedar.com www.sec.gov
 we us our
  
 ABOUT FORWARD-LOOKING STATEMENTS
 anticipate, assumption, believe,
could, expect, goal, guidance, intend, may,
objective, outlook, plan, seek, should,
strive, target will
  United States Private
Securities Litigation Reform Act of 1995 Securities Act of
Ontario
  unless otherwise indicated,
forward-looking statements in Bell Canadas
2005 financial information, including in
this MD&A, describe our expectations at
March 1, 2006
 
 
 
 Assumptions Made in the Preparation of
Forward-Looking Statements and Risks That
Could Affect Our Business and Results.
 
  EBITDA




---



##### 



p. 3
    2005
    
    
    2004Operating income
    
    
    3,755
    
    
    
    2,695Amortization expense
    
    
    2,989
    
    
    
    2,962Net benefit plans cost
    
    
    389
    
    
    
    235Restructuring and other items
    
    
    54
    
    
    
    1,219EBITDA
    
    
    7,187
    
    
    
    7,111
     2005
    
    
    2004Operating income
    
    
    3,755
    
    
    
    2,695Restructuring and other items
    
    
    54
    
    
    
    1,219Operating income
before restructuring
and other items
    
    
    3,809
    
    
    
    3,914
     2005
    
    
    2004Net earnings applicable
to common shares
    
    
    2,098
    
    
    
    1,527Restructuring and other items
    
    
    36
    
    
    
    770Net gains on investments
    
    
    
    
    
    
    (179
    )Net earnings before restructuring
and other items and net gains
on investments
    
    
    2,134
    
    
    
    2,118
     Non-GAAP Financial Measures
  EBITDA
  Free Cash Flow




---



##### 



p. 4 MANAGEMENTS DISCUSSION AND ANALYSIS
   2005
    
    
    2004Cash from operating activities
    
    
    5,508
    
    
    
    5,333Capital expenditures
    
    
    (3,122
    )
    
    
    (3,026
    )Total dividends paid
    
    
    (1,747
    )
    
    
    (1,736
    )Other investing activities
    
    
    5
    
    
    
    (15
    )Free cash flow
    
    
    644
    
    
    
    556
 
 ABOUT OUR BUSINESS
 Residential, Business, Aliant Other Bell
Canada




---



##### 



p. 5
               
    
    local and access services
    
    long distance services
    
    wireless services
    
    data services
    
    video services
    
    terminal sales and other.




---



##### 



p. 6       MANAGEMENTS DISCUSSION AND ANALYSIS
   
 
 
 
          
 
 




---



##### 



p. 7
       direct-to-home (DTH) satellite 
  very high bit rate DSL (VDSL) 
  hybrid fibre co-axial cable
     
 
 
 




---



##### 



p. 8       MANAGEMENTS DISCUSSION AND ANALYSIS
 Transactions
with Related
Parties
    
 
 
  
 
 
 
 
 
        Service
 Customer retention
 Growth
 Cost
  1.
    
 




---



##### 



p. 9
   
 
 
 
      
 
 
 
 2.
     3.




---



##### 



p. 10       MANAGEMENTS DISCUSSION AND ANALYSIS
  
 
 
 
 
   
  
 
  
 
 
       
 
 
 




---



##### 



p. 11
    
 
 
 
 THE YEAR AT A GLANCE
        The Year at a Glance




---



##### 



p. 12       MANAGEMENTS DISCUSSION AND ANALYSIS
  2005
    
    
    DECEMBER 31,NET
    
    
    2005(in thousands)
    
    ACTIVATIONS
    
    
    CONNECTIONSNAS
    
    
    (324
    )
    
    
    12,581Digital equivalent access lines
    
    
    699
    
    
    
    5,034High-speed Internet
    
    
    387
    
    
    
    2,195Dial-up Internet
    
    
    (157
    )
    
    
    586Wireless
    
    
    516
    
    
    
    5,441Paging
    
    
    (80
    )
    
    
    347Video
    
    
    224
    
    
    
    1,727Total
    
    
    1,265
    
    
    
    27,911




---



##### 



p. 13
 
   
 
 
 
 
   
 
 
 
  Net Earnings
  
  Operating income and EBITDA
 EBITDA margin
 Capital Expenditures
 Capital intensity




---



##### 



p. 14      MANAGEMENTS DISCUSSION AND ANALYSIS
  
 
 
 
 
   
 
  
 
 
 
  
 
 
    
 
 




---



##### 



p. 15
 
 Selected Annual
and Quarterly
Information
 SELECTED ANNUAL AND QUARTERLY INFORMATION
   2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Operational DataOperating revenues
    
    
    17,250
    
    
    
    16,787
    
    
    
    16,614
    
    
    
    14,638
    
    
    
    14,488Earnings from continuing operations
    
    
    2,153
    
    
    
    1,518
    
    
    
    2,268
    
    
    
    1,468
    
    
    
    1,559Discontinued operations
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    Net earnings
    
    
    2,153
    
    
    
    1,587
    
    
    
    2,327
    
    
    
    1,468
    
    
    
    1,489Net earnings applicable to common shares
    
    
    2,098
    
    
    
    1,527
    
    
    
    2,244
    
    
    
    1,352
    
    
    
    1,354Included in net earnings:Net gains on investments
Continuing operations
    
    
    
    
    
    
    179
    
    
    
    92
    
    
    
    984
    
    
    
    399Discontinued operations
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    Restructuring and other items
    
    
    (36
    )
    
    
    (770
    )
    
    
    (3
    )
    
    
    (425
    )
    
    
    (542
    )Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (55
    )Balance sheet dataTotal assets
    
    
    28,841
    
    
    
    27,644
    
    
    
    28,220
    
    
    
    29,039
    
    
    
    24,426Long-term debt (including current portion)
    
    
    10,867
    
    
    
    10,317
    
    
    
    11,157
    
    
    
    11,839
    
    
    
    10,237Preferred shares
    
    
    1,100
    
    
    
    1,100
    
    
    
    1,100
    
    
    
    1,100
    
    
    
    1,100Common shareholders equity
    
    
    9,035
    
    
    
    8,570
    
    
    
    8,412
    
    
    
    5,187
    
    
    
    5,569Capital expenditures
    
    
    (3,122
    )
    
    
    (3,026
    )
    
    
    (2,892
    )
    
    
    (2,927
    )
    
    
    (4,099
    )Other dataDividends declared on common shares
    
    
    1,643
    
    
    
    1,472
    
    
    
    2,022
    
    
    
    1,769
    
    
    
    1,157Dividends declared on preferred shares
    
    
    55
    
    
    
    60
    
    
    
    58
    
    
    
    63
    
    
    
    55Number of employees (thousands)(1)
    
    
    55
    
    
    
    50
    
    
    
    51
    
    
    
    54
    
    
    
    44
 (1)
    
    The number of employees for 2004 excludes virtually all employees who left under the voluntary
departure program of 2004.
   2005
    
    
    2004YEAR
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    YEAR
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Operating revenues
    
    
    17,250
    
    
    
    4,457
    
    
    
    4,326
    
    
    
    4,258
    
    
    
    4,209
    
    
    
    16,787
    
    
    
    4,303
    
    
    
    4,206
    
    
    
    4,172
    
    
    
    4,106EBITDA
    
    
    7,187
    
    
    
    1,729
    
    
    
    1,804
    
    
    
    1,839
    
    
    
    1,815
    
    
    
    7,111
    
    
    
    1,679
    
    
    
    1,856
    
    
    
    1,821
    
    
    
    1,755Amortization expense
    
    
    (2,989
    )
    
    
    (755
    )
    
    
    (756
    )
    
    
    (746
    )
    
    
    (732
    )
    
    
    (2,962
    )
    
    
    (763
    )
    
    
    (734
    )
    
    
    (733
    )
    
    
    (732
    )Net benefit plans cost
    
    
    (389
    )
    
    
    (66
    )
    
    
    (110
    )
    
    
    (107
    )
    
    
    (106
    )
    
    
    (235
    )
    
    
    (62
    )
    
    
    (55
    )
    
    
    (58
    )
    
    
    (60
    )Restructuring and other items
    
    
    (54
    )
    
    
    (24
    )
    
    
    (30
    )
    
    
    (5
    )
    
    
    5
    
    
    
    (1,219
    )
    
    
    (123
    )
    
    
    (1,080
    )
    
    
    (13
    )
    
    
    (3
    )Operating income
    
    
    3,755
    
    
    
    884
    
    
    
    908
    
    
    
    981
    
    
    
    982
    
    
    
    2,695
    
    
    
    731
    
    
    
    (13
    )
    
    
    1,017
    
    
    
    960Net earnings before
extraordinary gain
    
    
    2,153
    
    
    
    516
    
    
    
    502
    
    
    
    593
    
    
    
    542
    
    
    
    1,518
    
    
    
    407
    
    
    
    (37
    )
    
    
    584
    
    
    
    564Extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    Net earnings
    
    
    2,153
    
    
    
    516
    
    
    
    502
    
    
    
    593
    
    
    
    542
    
    
    
    1,587
    
    
    
    476
    
    
    
    (37
    )
    
    
    584
    
    
    
    564Net earnings applicable to
common shares
    
    
    2,098
    
    
    
    502
    
    
    
    488
    
    
    
    580
    
    
    
    528
    
    
    
    1,527
    
    
    
    465
    
    
    
    (53
    )
    
    
    567
    
    
    
    548Included in net earnings:Net gains on investments
Continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    71
    
    
    
    108
    
    
    
    
    
    
    
    Restructuring and
other items
    
    
    (36
    )
    
    
    (16
    )
    
    
    (20
    )
    
    
    (3
    )
    
    
    3
    
    
    
    (770
    )
    
    
    (61
    )
    
    
    (724
    )
    
    
    16
    
    
    
    (1
    )




---



##### 



p. 16 MANAGEMENTS DISCUSSION AND ANALYSIS
 Financial Results Analysis
 FINANCIAL RESULTS ANALYSIS
  2005
    
    2004
    
    % CHANGEOperating revenues
    
    
    17,250
    
    
    
    16,787
    
    
    
    2.8
    %Operating expenses
    
    
    (10,063
    )
    
    
    (9,676
    )
    
    
    (4.0
    %)EBITDA
    
    
    7,187
    
    
    
    7,111
    
    
    
    1.1
    %Amortization expense
    
    
    (2,989
    )
    
    
    (2,962
    )
    
    
    (0.9
    %)Net benefit plans cost
    
    
    (389
    )
    
    
    (235
    )
    
    
    (65.5
    %)Restructuring and other items
    
    
    (54
    )
    
    
    (1,219
    )
    
    
    95.6
    %Operating income
    
    
    3,755
    
    
    
    2,695
    
    
    
    39.3
    %Other income
    
    
    39
    
    
    
    183
    
    
    
    (78.7
    %)Interest expense
    
    
    (827
    )
    
    
    (863
    )
    
    
    4.2
    %Pre-tax earnings
    
    
    2,967
    
    
    
    2,015
    
    
    
    47.2
    %Income taxes
    
    
    (743
    )
    
    
    (506
    )
    
    
    (46.8
    %)Non-controlling interest
    
    
    (71
    )
    
    
    9
    
    
    
    N.M.Net earnings before extraordinary gain
    
    
    2,153
    
    
    
    1,518
    
    
    
    41.8
    %Extraordinary gain
    
    
    
    
    
    
    69
    
    
    
    N.M.Net earnings
    
    
    2,153
    
    
    
    1,587
    
    
    
    35.7
    %Dividends on preferred shares
    
    
    (55
    )
    
    
    (60
    )
    
    
    8.3
    %Net earnings applicable to common shares
    
    
    2,098
    
    
    
    1,527
    
    
    
    37.4
    %
 N.M.: Not meaningful
     Segmented Analysis Product Line Analysis




---



##### 



p.
17
 Amortization Expense
  
 
 
  
 
 
 
 
 Segmented Analysis
         Amortization expense




---



##### 



p. 18 MANAGEMENTS DISCUSSION AND ANALYSIS
  Net benefit plans cost
  
 
 
 
   Restructuring and other items
  
 
   
 
 
 
    Net Benefit Plans Cost
  
 
 
 Restructuring and Other Items




---



##### 



p.
19
  
 2005
    
    2004
    
    % CHANGEOperating revenuesResidential
    
    
    7,599
    
    
    
    7,502
    
    
    
    1.3
    %Business
    
    
    6,120
    
    
    
    5,851
    
    
    
    4.6
    %Aliant
    
    
    2,097
    
    
    
    2,033
    
    
    
    3.1
    %Other Bell Canada
    
    
    1,958
    
    
    
    1,939
    
    
    
    1.0
    %Inter-segment eliminations
    
    
    (524
    )
    
    
    (538
    )
    
    
    2.6
    %Total operating revenues
    
    
    17,250
    
    
    
    16,787
    
    
    
    2.8
    %Operating incomeResidential
    
    
    2,001
    
    
    
    2,119
    
    
    
    (5.6
    %)Business
    
    
    910
    
    
    
    896
    
    
    
    1.6
    %Aliant
    
    
    396
    
    
    
    268
    
    
    
    47.8
    %Other Bell Canada
    
    
    448
    
    
    
    (588
    )
    
    
    N.M.Total operating income
    
    
    3,755
    
    
    
    2,695
    
    
    
    39.3
    %
 N.M.: Not meaningful
  
  Wireline
   Local and
access Long distance Product
Line Analysis




---



##### 



p. 20      MANAGEMENTS DISCUSSION AND ANALYSIS
 Wireless
  Wireless Product Line Analysis
 Data
   Data Product
Line Analysis
 Video




---



##### 



p.
21
    
    
  Enterprise




---



##### 



p. 22      MANAGEMENTS DISCUSSION AND ANALYSIS
   
 
 
 
  
 
 
 
 SMB
  Bell West




---



##### 



p.
23
   
      Aliant




---



##### 



p. 24 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### 



p. 25
  
   
  2005
    
    2004
    
    % CHANGELocal and access
    
    
    5,446
    
    
    
    5,572
    
    
    
    (2.3
    %)Long distance
    
    
    2,044
    
    
    
    2,327
    
    
    
    (12.2
    %)Wireless
    
    
    3,097
    
    
    
    2,818
    
    
    
    9.9
    %Data
    
    
    4,015
    
    
    
    3,640
    
    
    
    10.3
    %Video
    
    
    976
    
    
    
    850
    
    
    
    14.8
    %Terminal sales and other
    
    
    1,672
    
    
    
    1,580
    
    
    
    5.8
    %Total Bell Canada
    
    
    17,250
    
    
    
    16,787
    
    
    
    2.8
    %
 Local and Access




---



##### 



p. 26      MANAGEMENTS DISCUSSION AND ANALYSIS
  Long Distance
 
   Wireless




---



##### 



p.
27
     Data




---



##### 



p. 28 MANAGEMENTS DISCUSSION AND ANALYSIS
 Other Income
  
 
 
 
 
 Non-Controlling Interest
   Video
 Residential segment
 Terminal Sales and Other
 
   Other Income
  
 
 Interest Expense
  Income Taxes
  
 
  
  Related
Party Transactions
  Non-Controlling Interest
   
 




---



##### 



p.
29
 Financial and
Capital Management
  Capital Structure
  Net debt to capitalization ratio
 Extraordinary Gain
  
 
 
 FINANCIAL AND CAPITAL MANAGEMENT
  AT DECEMBER 31
    
    2005
    
    2004Debt due within one year
    
    
    836
    
    
    
    1,352Long-term debt
    
    
    10,177
    
    
    
    9,166Less: Cash and cash equivalents
    
    
    (233
    )
    
    
    (32
    )Total net debt
    
    
    10,780
    
    
    
    10,486Non-controlling interest
    
    
    1,212
    
    
    
    1,229Total shareholders equity
    
    
    10,135
    
    
    
    9,670Total capitalization
    
    
    22,127
    
    
    
    21,385Net debt to capitalization ratio
    
    
    48.7
    %
    
    
    49.0
    %
 
   
 
 




---



##### 



p. 30       MANAGEMENTS DISCUSSION AND ANALYSIS
  2005
    
    
    2004Cash flows from operating activities
    
    
    5,508
    
    
    
    5,333Capital expenditures
    
    
    (3,122
    )
    
    
    (3,026
    )Other investing activities
    
    
    5
    
    
    
    (15
    )Cash dividends paid on common shares
    
    
    (1,579
    )
    
    
    (1,559
    )Cash dividends paid on preferred shares
    
    
    (56
    )
    
    
    (60
    )Cash dividends paid by subsidiaries to non-controlling interest
    
    
    (112
    )
    
    
    (117
    )Free cash flow
    
    
    644
    
    
    
    556Business acquisitions
    
    
    (223
    )
    
    
    (1,138
    )Business dispositions
    
    
    
    
    
    
    2Increase in investments
    
    
    (134
    )
    
    
    (2
    )Decrease in investments
    
    
    
    
    
    
    128Decrease in advances made to an affiliated company under common control
    
    
    
    
    
    
    450Contribution of capital
    
    
    
    
    
    
    433Net repayment of debt instruments
    
    
    (63
    )
    
    
    (686
    )Financing activities of subsidiaries with third parties
    
    
    34
    
    
    
    15Other financing activities
    
    
    (57
    )
    
    
    (124
    )Net increase (decrease) in cash and cash equivalents
    
    
    201
    
    
    
    (366
    )
 Cash from Operating Activities
  
 
 
 
  
 
 
 Free Cash Flow
   Capital Expenditures
   
 
 
 
 




---



##### 



p.
31
 Debt instruments
  Our
Strategic Priorities
 Business Acquisitions
  
 
 
  
 
 
 Increase in Investments
  Decrease in Investments
   Debt Instruments
  
 
 
 
  
 
  
 




---



##### 



p. 32      MANAGEMENTS DISCUSSION AND ANALYSIS
 Credit Ratings
   S&P (1)
    
    DBRS (2)
    
    MOODYS (3)
    
    FITCH (4)Commercial paper
    
    A-1 (low)
    
    R-1 (low) / stable
    
    P-2
    
    Extendable commercial notes
    
    
    
    R-1 (low) / stable
    
    
    
    Long-term debt
    
    A - / negative
    
    A / stable
    
    A3 / negative
    
    BBB+ / stableSubordinated long-term debt
    
    BBB+ / negative
    
    BBB (high) / stable
    
    Baa1 / negative
    
    BBB / stablePreferred shares
    
    P-2
    
    Pfd-2 / stable
    
    
    
    
 
 (1)
    
    Standard & Poors, a division of The McGraw-Hill Companies, Inc.; maintains
a negative outlook on our corporate rating(2)
    
    Dominion Bond Rating Service Limited(3)
    
    Moodys Investors Service, Inc.; on February 1, 2006 ratings placed
under review for possible downgrade(4)
    
    Fitch Ratings Ltd.    Cash Requirements
  Capital Expenditures
  Pension Funding
  Contractual Obligations
  2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    THEREAFTER
    
    TOTALLong-term debt
(excluding capital leases)
    
    
    528
    
    
    
    613
    
    
    
    908
    
    
    
    967
    
    
    
    1,007
    
    
    
    5,599
    
    
    
    9,622Notes payable and
bank advances
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146Capital leases
    
    
    162
    
    
    
    151
    
    
    
    108
    
    
    
    99
    
    
    
    103
    
    
    
    622
    
    
    
    1,245Operating leases
    
    
    218
    
    
    
    200
    
    
    
    180
    
    
    
    163
    
    
    
    130
    
    
    
    689
    
    
    
    1,580Commitments for
capital expenditures
    
    
    96
    
    
    
    42
    
    
    
    7
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    147Purchase obligations
    
    
    1,392
    
    
    
    974
    
    
    
    689
    
    
    
    244
    
    
    
    143
    
    
    
    475
    
    
    
    3,917Other long-term liabilities
(including current
portion)
    
    
    55
    
    
    
    64
    
    
    
    61
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    254Total
    
    
    2,597
    
    
    
    2,044
    
    
    
    1,953
    
    
    
    1,548
    
    
    
    1,384
    
    
    
    7,385
    
    
    
    16,911




---



##### 



p.
33
        
 
  Other Cash Requirements
  Off-Balance Sheet Arrangements
 Guarantees
   Securitization of accounts receivable
     Commitment under the CRTC
Deferral Mechanism




---



##### 



p. 34 MANAGEMENTS DISCUSSION AND ANALYSIS
   
 
 
   Derivative Instruments
   Litigation
   Sources of Liquidity
    NON-COM-COMMITTED
    
    
    MITTED
    
    
    TOTALCommercial paper
credit lines (1)
    
    
    1,229
    
    
    
    900
    
    
    
    2,129Other credit facilities (2)
    
    
    390
    
    
    
    322
    
    
    
    712Total
    
    
    1,619
    
    
    
    1,222
    
    
    
    2,841Drawn (2)
    
    
    339
    
    
    
    
    
    
    
    339Undrawn
    
    
    1,280
    
    
    
    1,222
    
    
    
    2,502
 (1)
    
    Current commercial paper credit lines expire during
August 2008(2)
    
    Includes $311 million in letters of
credit




---



##### 



p. 35
   Loss Monetization Transactions
  BCE Inc., 4257111 Canada Inc. and Bell Mobility Inc. (Bell Mobility) loss monetization transaction
    Bell Canada International Inc. (BCI) loss monetization transaction
     BCE Inc., 3787842 Canada Inc. and Bell Canada loss monetization transaction




---



##### 



p. 36 MANAGEMENTS DISCUSSION AND ANALYSIS
 Assumptions Made in the Preparation of Forward-Looking Statements and Risks That Could Affect
Our Business and Results
    BCH, 4047974 Canada Inc. and Bell Canada loss monetization transaction
     
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  
 ASSUMPTIONS MADE IN THE PREPARATION OF FORWARD-LOOKING STATEMENTS AND RISKS THAT COULD AFFECT
OUR BUSINESS AND RESULTS
 Assumptions Made in the Preparation of Forward-Looking Statements
  Assumptions about the Canadian Economy
 
 
 
 Market Assumptions
 
 




---



##### 



p. 37
 
 
 
 
 Operational and Financial Assumptions
  
 
  
 
 
 
 
 Assumptions about Transactions
 
  Strategies and Plans
  Our
Strategic Priorities Our
Strategic Priorities
  
 
  Economic and Market Conditions




---



##### 



p. 38 MANAGEMENTS DISCUSSION AND ANALYSIS
 Increasing Competition
 Increasing Competition
   Wireline and Long Distance
      Internet Access




---



##### 



p. 39
 Anticipating Technological Change and Investing in New Technologies, Products and Services
 Wireless
  Video
  Transforming Our Cost Structure and Containing Capital Intensity
     Anticipating Technological Change and Investing in New Technologies, Products and Services




---



##### 



p. 40 MANAGEMENTS DISCUSSION AND ANALYSIS
 Liquidity
   Litigation, Regulatory Matters and Changes in Laws Legal Proceedings We Are Involved In
 The
Regulatory Environment We Operate In
  Liquidity
  
 
 
 
       
 
 
  Acquisitions and Dispositions
    Litigation, Regulatory Matters and Changes in Laws
  Securities
Act of Ontario




---



##### 



p. 41
  Funding and Control of Subsidiaries
    Pension Fund Contributions
   
    
    actual returns on pension plan assets
    
    long-term interest rates.
  Renegotiating Labour Agreements
   Events Affecting our Networks
   Software and System Upgrades
  Funding and Control
of Subsidiaries
  Renegotiating Labour
Agreements




---



##### 



p. 42 MANAGEMENTS DISCUSSION AND ANALYSIS
  Decisions of Regulatory Agencies
 The Regulatory Environment We
Operate In
 Regional Telecommunications Service Provider
  
 
 
 
 
 
 
 
    
 
 
 
 
  Changes to wireline regulation
 Decisions of Regulatory Agencies
      
 




---



##### 



p. 43
 Competitor Digital
Network Service
      
 
   force majeure




---



##### 



p. 44 MANAGEMENTS DISCUSSION AND ANALYSIS
 Application to Change
Bundling Rules
   
 
 
 
 
            
 




---



##### 



p. 45
 Access to Bell Canada Loops for
Competitor Local Exchange
Carriers Customers Served
Via Remotes
  Wireless
Number Portability
  Licences and Changes to
Wireless Regulation
 Radiocommunication
Act.
         Regulatory issues
related to the implementation of wireless number portability
 Licences and Changes to Wireless Regulation




---



##### 



p. 46 MANAGEMENTS DISCUSSION AND ANALYSIS
 Bell
ExpressVu
 Revenue from Major Customers
  Competition Bureaus Investigation Concerning
System Access Fees
 Competition Act Competition Act
  Competition Act
 Potential Legislation Restricting In-Vehicle
Use of Cellphones
  Health Concerns About Radio
Frequency Emissions
  Bell ExpressVu




---



##### 



p. 47
  R. v. DArgy and Theriault (DArgy Case) Radiocommunication Act Charter. DArgy Case Radiocommunication Act DArgy Case
 
 OUR ACCOUNTING POLICIES
      Employee Benefit Plans
     Discount Rate
  Our Accounting Policies
   Employee Benefit Plans
  Discount Rate




---



##### 



p. 48 MANAGEMENTS DISCUSSION AND ANALYSIS
 Goodwill Impairment
 IMPACT ON NET
    
    
    IMPACT ON ACCRUEDBENEFIT PLANS
    
    
    BENEFIT ASSET ATCOST FOR 2006
    
    
    DECEMBER 31, 2006Discount rate
increased to 5.7%Residential
    
    
    (33
    )
    
    
    33Business
    
    
    (33
    )
    
    
    33Aliant
    
    
    (24
    )
    
    
    24Other Bell Canada
    
    
    (10
    )
    
    
    10Total
    
    
    (100
    )
    
    
    100Discount rate
decreased to 4.7%Residential
    
    
    33
    
    
    
    (33
    )Business
    
    
    33
    
    
    
    (33
    )Aliant
    
    
    24
    
    
    
    (24
    )Other Bell Canada
    
    
    10
    
    
    
    (10
    )Total
    
    
    100
    
    
    
    (100
    )
  Expected Long-Term Rate of Return
   IMPACT ON NET
    
    
    IMPACT ON ACCRUEDBENEFIT PLANS
    
    
    BENEFIT ASSET ATCOST FOR 2006
    
    
    DECEMBER 31, 2006Expected rate of return
increased to 8.0%Residential
    
    
    (22
    )
    
    
    22Business
    
    
    (21
    )
    
    
    21Aliant
    
    
    (16
    )
    
    
    16Other Bell Canada
    
    
    (6
    )
    
    
    6Total
    
    
    (65
    )
    
    
    65Expected rate of return
decreased to 7.0%Residential
    
    
    22
    
    
    
    (22
    )Business
    
    
    21
    
    
    
    (21
    )Aliant
    
    
    16
    
    
    
    (16
    )Other Bell Canada
    
    
    6
    
    
    
    (6
    )Total
    
    
    65
    
    
    
    (65
    )
  Goodwill Impairment




---



##### 



p. 49
 Contingencies
   Contingencies
  Accounts payable and
accrued liabilities Other long-term liabilities Cash
from operating activities
  Income Taxes
     Financial Instruments 
Disclosure and Presentation
   Comprehensive Income
 Comprehensive Income
  
 
 Surplus Equity Comprehensive Income
  
 




---



##### 



p. 50 MANAGEMENTS DISCUSSION AND ANALYSIS
 Financial
Instruments  
Recognition and Measurement
 Financial Instruments  Recognition and
Measurement
  
 
 
 Financial Instruments
 Disclosure and Presentation
  Hedges
   
 
 
   Non-Monetary Transactions
 Non-Monetary Transactions




---



##### 



CONSOLIDATED FINANCIAL STATEMENTS
    
    p. 51
 Financial Statements at a GlanceManagements Report
    
    
    51Auditors Report
    
    
    51Consolidated Statements of Operations
    
    
    52Consolidated Statements of Retained Earnings
    
    
    52Consolidated Balance Sheets
    
    
    53Consolidated Statements of Cash Flow
    
    
    54Notes to Consolidated Financial Statements
    
    
    55
    we, us our
 
       
 Chief Executive Officer
 
 Chief Financial Officer
 
 Vice-President and Controller
  
      
 Chartered Accountants




---



##### 



p. 52 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE YEAR ENDED DECEMBER 31 (in $ millions, except share amounts)
    
    NOTE
    
    
    2005
    
    
    2004Operating revenues
    
    
    
    
    
    
    17,250
    
    
    
    16,787Operating expenses
    
    
    
    
    
    
    (10,063
    )
    
    
    (9,676
    )Amortization expense
    
    
    
    
    
    
    (2,989
    )
    
    
    (2,962
    )Net benefit plans cost
    
    
    22
    
    
    
    (389
    )
    
    
    (235
    )Restructuring and other items
    
    
    4
    
    
    
    (54
    )
    
    
    (1,219
    )Total operating expenses
    
    
    
    
    
    
    (13,495
    )
    
    
    (14,092
    )Operating income
    
    
    
    
    
    
    3,755
    
    
    
    2,695Other income
    
    
    5
    
    
    
    39
    
    
    
    183Interest expense
    
    
    6
    
    
    
    (827
    )
    
    
    (863
    )Pre-tax earnings
    
    
    
    
    
    
    2,967
    
    
    
    2,015Income taxes
    
    
    7
    
    
    
    (743
    )
    
    
    (506
    )Non-controlling interest
    
    
    
    
    
    
    (71
    )
    
    
    9Net earnings before extraordinary gain
    
    
    
    
    
    
    2,153
    
    
    
    1,518Extraordinary gain
    
    
    3
    
    
    
    
    
    
    
    69Net earnings
    
    
    
    
    
    
    2,153
    
    
    
    1,587Dividends on preferred shares
    
    
    
    
    
    
    (55
    )
    
    
    (60
    )Net earnings applicable to common shares
    
    
    
    
    
    
    2,098
    
    
    
    1,527
 
 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
 FOR THE YEAR ENDED DECEMBER 31 (in $ millions)
    
    NOTE
    
    
    2005
    
    
    2004Balance at beginning of year, as previously reported
    
    
    
    
    
    
    361
    
    
    
    306Accounting policy change
    
    
    1
    
    
    
    (8
    )
    
    
    (8
    )Balance at beginning of year, as restated
    
    
    
    
    
    
    353
    
    
    
    298Net earnings
    
    
    
    
    
    
    2,153
    
    
    
    1,587Dividends declared on preferred shares
    
    
    
    
    
    
    (55
    )
    
    
    (60
    )Dividends declared on common shares
    
    
    
    
    
    
    (1,643
    )
    
    
    (1,472
    )Balance at end of year
    
    
    
    
    
    
    808
    
    
    
    353




---



##### 



CONSOLIDATED BALANCE SHEETS
    
    p. 53
 AT DECEMBER 31 (in $ millions)
    
    NOTE
    
    
    2005
    
    
    2004ASSETSCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    233
    
    
    
    32Accounts receivable
    
    
    8
    
    
    
    1,353
    
    
    
    1,584Other current assets
    
    
    9
    
    
    
    920
    
    
    
    965Total current assets
    
    
    
    
    
    
    2,506
    
    
    
    2,581Capital assets
    
    
    10
    
    
    
    20,284
    
    
    
    19,501Other long-term assets
    
    
    11
    
    
    
    2,840
    
    
    
    2,592Indefinite-life intangible assets
    
    
    12
    
    
    
    913
    
    
    
    796Goodwill
    
    
    13
    
    
    
    2,298
    
    
    
    2,174Total assets
    
    
    
    
    
    
    28,841
    
    
    
    27,644LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities
    
    
    14
    
    
    
    2,798
    
    
    
    2,940Interest payable
    
    
    
    
    
    
    146
    
    
    
    147Dividends payable
    
    
    
    
    
    
    468
    
    
    
    387Debt due within one year
    
    
    15
    
    
    
    836
    
    
    
    1,352Total current liabilities
    
    
    
    
    
    
    4,248
    
    
    
    4,826Long-term debt
    
    
    16
    
    
    
    10,177
    
    
    
    9,166Other long-term liabilities
    
    
    17
    
    
    
    3,069
    
    
    
    2,753Total liabilities
    
    
    
    
    
    
    17,494
    
    
    
    16,745Non-controlling interest
    
    
    18
    
    
    
    1,212
    
    
    
    1,229Commitments and contingencies
    
    
    24SHAREHOLDERS EQUITYPreferred shares
    
    
    20
    
    
    
    1,100
    
    
    
    1,100Common shareholders equityCommon shares
    
    
    20
    
    
    
    7,689
    
    
    
    7,689Contributed surplus
    
    
    20
    
    
    
    538
    
    
    
    528Retained earnings
    
    
    
    
    
    
    808
    
    
    
    353Total common shareholders equity
    
    
    
    
    
    
    9,035
    
    
    
    8,570Total shareholders equity
    
    
    
    
    
    
    10,135
    
    
    
    9,670Total liabilities and shareholders equity
    
    
    
    
    
    
    28,841
    
    
    
    27,644
  (SIGNATURE)
    
    (SIGNATURE)Director
    
    Director




---



##### 



p. 54 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEAR ENDED DECEMBER 31 (in $ millions)
    
    NOTE
    
    
    2005
    
    
    2004Cash flows from operating activitiesNet earnings before extraordinary gain
    
    
    
    
    
    
    2,153
    
    
    
    1,518Adjustments to reconcile net earnings to cash flows from operating activities:Amortization expense
    
    
    
    
    
    
    2,989
    
    
    
    2,962Net benefit plans cost
    
    
    22
    
    
    
    389
    
    
    
    235Restructuring and other items
    
    
    4
    
    
    
    54
    
    
    
    1,219Net (gains) losses on investments
    
    
    5
    
    
    
    1
    
    
    
    (117
    )Future income taxes
    
    
    7
    
    
    
    672
    
    
    
    (148
    )Non-controlling interest
    
    
    
    
    
    
    71
    
    
    
    (9
    )Contributions to employee pension plans
    
    
    22
    
    
    
    (199
    )
    
    
    (87
    )Other employee future benefit plan payments
    
    
    22
    
    
    
    (93
    )
    
    
    (81
    )Payments of restructuring and other items
    
    
    
    
    
    
    (170
    )
    
    
    (251
    )Operating assets and liabilities
    
    
    26
    
    
    
    (359
    )
    
    
    92Cash flows from operating activities
    
    
    
    
    
    
    5,508
    
    
    
    5,333Cash flows from investing activitiesCapital expenditures
    
    
    
    
    
    
    (3,122
    )
    
    
    (3,026
    )Business acquisitions
    
    
    3
    
    
    
    (223
    )
    
    
    (1,138
    )Business dispositions
    
    
    
    
    
    
    
    
    
    
    2Increase in investments
    
    
    
    
    
    
    (134
    )
    
    
    (2
    )Decrease in investments
    
    
    
    
    
    
    
    
    
    
    128Decrease in advances made to an affiliated company under common control
    
    
    
    
    
    
    
    
    
    
    450Other investing activities
    
    
    
    
    
    
    5
    
    
    
    (15
    )Cash flows used in investing activities
    
    
    
    
    
    
    (3,474
    )
    
    
    (3,601
    )Cash flows from financing activitiesIncrease (decrease) in notes payable and bank advances
    
    
    
    
    
    
    (54
    )
    
    
    167Issue of long-term debt
    
    
    
    
    
    
    1,095
    
    
    
    461Repayment of long-term debt
    
    
    
    
    
    
    (1,104
    )
    
    
    (1,314
    )Repayment of equity-settled notes
    
    
    
    
    
    
    
    
    
    
    Contribution of capital
    
    
    
    
    
    
    
    
    
    
    433Issue of equity securities/ partnership units and convertible debentures
by subsidiaries to non-controlling interest/ BCE Inc.
    
    
    
    
    
    
    112
    
    
    
    40Redemption of equity securities by subsidiaries from non-controlling interest
    
    
    
    
    
    
    (78
    )
    
    
    (25
    )Cash dividends paid on common shares
    
    
    
    
    
    
    (1,579
    )
    
    
    (1,559
    )Cash dividends paid on preferred shares
    
    
    
    
    
    
    (56
    )
    
    
    (60
    )Cash dividends/ distributions paid by subsidiaries to non-controlling interest
    
    
    
    
    
    
    (112
    )
    
    
    (117
    )Other financing activities
    
    
    
    
    
    
    (57
    )
    
    
    (124
    )Cash flows used in financing activities
    
    
    
    
    
    
    (1,833
    )
    
    
    (2,098
    )Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    201
    
    
    
    (366
    )Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    32
    
    
    
    398Cash and cash equivalents at end of year
    
    
    
    
    
    
    233
    
    
    
    32




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    p. 55
         Recent Changes to Accounting
Standards
   
 
 
    
 
 
 
  
 
 
 
 
 
  
 
 




---



##### 



p. 56       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  [contd]
    Accounts payable and accrued liabilities Other long-term liabilities
  Cash and cash equivalents Other current
assets
   Other income
  
 
     ESTIMATED USEFUL LIFETelecommunications assets
    
    
    10 to 25 yearsMachinery and equipment
    
    2 to 20 yearsBuildings
    
    
    10 to 40 yearsSatellites
    
    
    10 to 15 yearsFinite-life intangible assets:Software
    
    3 to 7 yearsCustomer relationships
    
    5 to 40 years




---



##### 



p. 57
 Equity Method
  Cost Method
  Goodwill
        
 
  Other long-term assets
  Other long-term assets Interest expense
     
 




---



##### 



p.58       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Translation of Foreign Currencies
  [contd]
  Self-Sustaining Foreign Operations
  
 
  Integrated Foreign Operations
  
 
 
 Other income
 Domestic Transactions and Balances in Foreign Currencies
  
 
 
 Other income
   
 
 
   
 
 
   
 
 
  
 




---



##### 



p.59
 Employee Benefit Plans
  Interest Rate Swap Agreements
 Accounts receivable Interest payable
  Foreign Currency Swap Agreements
 Other long-term assets Other long-term liabilities
 Forward Contracts
  
 
  Other long-term assets Other long-term liabilities
  (i) Defined Benefit Plans
    
 
   
 
 




---



##### 



p. 60       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  [contd]
       (ii) Defined Contribution Plans
       
 




---



##### 



p. 61
 Stock Options
  
 
  Restricted Share Units
  Stock Options
  Deferred Share Units
     Aliants directory business
  
 
 
 
 




---



##### 



p. 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  [contd]
 Financial Instruments
 Financial Instruments  Disclosure
and Presentation
  Comprehensive Income
 Comprehensive Income
  
 
 Surplus Equity Comprehensive Income
  
 
 Financial Instruments
 Financial Instruments  Recognition and
Measurement,
 
 
 
 Financial Instruments
 Disclosure and Presentation
  Hedges
 Hedges




---



##### 



p. 63
 Significant Accounting Policies
  
 
 
   Non-Monetary Transactions
 Non-Monetary Transactions
  Residential Consumer Business, Aliant Other Bell Canada
 Residential
 Business
 Aliant
 Other Bell Canada




---



##### 



p. 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
  INTER-SEGMENTOTHER
    
    
    ELIMINATIONSRESIDENTIAL
    
    
    BUSINESS
    
    
    ALIANT
    
    
    BELL CANADA
    
    
    BELL CANADA
    
    
    CONSOLIDATEDFor the year ended December 31, 2005Operating revenuesExternal customers
    
    
    7,530
    
    
    
    5,986
    
    
    
    1,959
    
    
    
    1,775
    
    
    
    
    
    
    
    17,250Inter-segment
    
    
    69
    
    
    
    134
    
    
    
    138
    
    
    
    183
    
    
    
    (524
    )
    
    
    Total operating revenues
    
    
    7,599
    
    
    
    6,120
    
    
    
    2,097
    
    
    
    1,958
    
    
    
    (524
    )
    
    
    17,250Operating income
    
    
    2,001
    
    
    
    910
    
    
    
    396
    
    
    
    448
    
    
    
    
    
    
    
    3,755Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (827
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (743
    )Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,153Segment assets
    
    
    11,602
    
    
    
    10,560
    
    
    
    3,154
    
    
    
    3,525
    
    
    
    
    
    
    
    28,841Investments at equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditures
    
    
    (1,519
    )
    
    
    (897
    )
    
    
    (363
    )
    
    
    (343
    )
    
    
    
    
    
    
    (3,122
    )For the year ended December 31, 2004Operating revenuesExternal customers
    
    
    7,446
    
    
    
    5,702
    
    
    
    1,895
    
    
    
    1,744
    
    
    
    
    
    
    
    16,787Inter-segment
    
    
    56
    
    
    
    149
    
    
    
    138
    
    
    
    195
    
    
    
    (538
    )
    
    
    Total operating revenues
    
    
    7,502
    
    
    
    5,851
    
    
    
    2,033
    
    
    
    1,939
    
    
    
    (538
    )
    
    
    16,787Operating income (loss)
    
    
    2,119
    
    
    
    896
    
    
    
    268
    
    
    
    (588
    )
    
    
    
    
    
    
    2,695Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (863
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (506
    )Non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Net earnings before
extraordinary gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,518Segment assets
    
    
    10,218
    
    
    
    10,014
    
    
    
    3,157
    
    
    
    4,255
    
    
    
    
    
    
    
    27,644Investments at equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Capital expenditures
    
    
    (1,371
    )
    
    
    (1,008
    )
    
    
    (295
    )
    
    
    (352
    )
    
    
    
    
    
    
    (3,026
    )




---



##### 



p. 65
 Infostream Technologies Inc.
  Charon Systems Inc.
  Elix Inc.
     NR Communications Ltd. (NR Communications)
  Nexxlink Technologies Inc. (Nexxlink)
  
 
   Canadian operations of 360networks Corporation (360networks)
    DownEast Mobility Limited (DownEast)
  Bell West
  Infostream Technologies Inc. (Infostream)
  Charon Systems Inc. (Charon)
  Elix Inc. (Elix)
  Accutel Conferencing Systems Inc. (Canada) and Accutel Conferencing Systems Corp. (U.S.)
(collectively Accutel)
  
 




---



##### 



p. 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 contd
  2005NR
    
    
    NEXXLINK
    
    
    ALL OTHERCOMMUNICATIONS
    
    
    TECHNOLOGIES
    
    
    BUSINESSLTD.
    
    
    INC.
    
    
    ACQUISITIONS
    
    
    TOTALConsideration received:Non-cash working capital
    
    
    (16
    )
    
    
    9
    
    
    
    (10
    )
    
    
    (17
    )Capital assets
    
    
    19
    
    
    
    24
    
    
    
    13
    
    
    
    56Other long-term assets
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Indefinite-life intangible assets
    
    
    57
    
    
    
    
    
    
    
    20
    
    
    
    77Goodwill
    
    
    
    
    
    
    47
    
    
    
    77
    
    
    
    124Long-term debt
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Other long-term liabilities
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )60
    
    
    
    74
    
    
    
    100
    
    
    
    234Cash and cash equivalents (bank
indebtedness) at acquisition
    
    
    10
    
    
    
    (3
    )
    
    
    13
    
    
    
    20Net assets acquired
    
    
    70
    
    
    
    71
    
    
    
    113
    
    
    
    254Consideration given:(1)Cash
    
    
    69
    
    
    
    67
    
    
    
    100
    
    
    
    236Acquisition costs
    
    
    1
    
    
    
    4
    
    
    
    2
    
    
    
    7Non-cash
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    1170
    
    
    
    71
    
    
    
    113
    
    
    
    254
 (1) This does not include contingent payments of $8 million that may be paid out if certain
conditions specified in the purchase agreements are met. If the payments are made, the
amounts will be allocated to goodwill.
 2004CANADIAN
    
    
    40%
    
    
    ALL OTHEROPERATIONS OF
    
    
    INTEREST IN
    
    
    BUSINESS360NETWORKS
    
    
    BELL WEST
    
    
    ACQUISITIONS
    
    
    TOTALConsideration received:Non-cash working capital
    
    
    (9
    )
    
    
    
    
    
    
    10
    
    
    
    1Capital assets
    
    
    
    
    
    
    (15
    )
    
    
    33
    
    
    
    18Other long-term assets
    
    
    429
    
    
    
    5
    
    
    
    13
    
    
    
    447Goodwill
    
    
    
    
    
    
    395
    
    
    
    193
    
    
    
    588Other long-term liabilities
    
    
    (58
    )
    
    
    
    
    
    
    (2
    )
    
    
    (60
    )Non-controlling interest
    
    
    
    
    
    
    261
    
    
    
    
    
    
    
    261362
    
    
    
    646
    
    
    
    247
    
    
    
    1,255Bank indebtedness at acquisition
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Net assets acquired
    
    
    362
    
    
    
    646
    
    
    
    243
    
    
    
    1,251Extraordinary gain
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Consideration given:Cash
    
    
    283
    
    
    
    645
    
    
    
    193
    
    
    
    1,121Acquisition costs
    
    
    10
    
    
    
    1
    
    
    
    2
    
    
    
    13Future cash payment
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Issuance of 582,081 Aliant common shares
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15Non-cash
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    29293
    
    
    
    646
    
    
    
    243
    
    
    
    1,182




---



##### 



p. 67
  2005
    
    
    2004Restructuring initiatives
    
    
    (54
    )
    
    
    (1,063
    )Loss on long-term contracts
    
    
    
    
    
    
    (128
    )Settlement with MTS
    
    
    
    
    
    
    75Other charges
    
    
    
    
    
    
    (103
    )Restructuring and other items
    
    
    (54
    )
    
    
    (1,219
    )
  BELL
    
    
    
    
    
    
    CONSOLI-CANADA
    
    
    ALIANT
    
    
    DATEDBalance in accounts payable and accrued liabilities at December 31, 2004
    
    
    120
    
    
    
    67
    
    
    
    1872005 restructuring initiatives
    
    
    50
    
    
    
    
    
    
    
    50Less:Cash payments
    
    
    (73
    )
    
    
    (54
    )
    
    
    (127
    )Reversal of excess provision
    
    
    (45
    )
    
    
    
    
    
    
    (45
    )Balance in accounts payable and accrued liabilities at December 31, 2005
    
    
    52
    
    
    
    13
    
    
    
    65
 Employee
Departure Program  Bell Canada
  
 
    
 
  Employee
Departure Program  Aliant
  Loss on Long-Term Contract




---



##### 



p. 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
 Settlement with MTS
   
 
  Share
Capital
 
    NOTE
    
    
    2005
    
    
    2004Net gains (losses) on investments
    
    
    
    
    
    
    (1
    )
    
    
    117Interest income
    
    
    
    
    
    
    41
    
    
    
    53Securitization losses
    
    
    8
    
    
    
    (34
    )
    
    
    (26
    )Income from cost and equity investments
    
    
    
    
    
    
    
    
    
    
    15Foreign currency losses
    
    
    
    
    
    
    (5
    )
    
    
    (2
    )Other
    
    
    
    
    
    
    38
    
    
    
    26Other income
    
    
    
    
    
    
    39
    
    
    
    183
     2005
    
    
    2004Interest expense on long-term debt
    
    
    (794
    )
    
    
    (830
    )Interest expense on other debt
    
    
    (33
    )
    
    
    (33
    )Total interest expense
    
    
    (827
    )
    
    
    (863
    )




---



##### 



p. 69
   2005
    
    
    2004Income taxes computed at statutory rates
    
    
    (1,020
    )
    
    
    (691
    )Savings from loss monetization transaction
    
    
    256
    
    
    
    179Net gains on investments
    
    
    
    
    
    
    40Large corporations tax
    
    
    (29
    )
    
    
    (31
    )Other
    
    
    50
    
    
    
    (3
    )Total income tax expense
    
    
    (743
    )
    
    
    (506
    )
  2005
    
    
    2004Current income taxes
    
    
    (71
    )
    
    
    (654
    )Future income taxesRecognition (monetization) of loss carryforwards
    
    
    (249
    )
    
    
    6Change in statutory rate
    
    
    2
    
    
    
    (2
    )Change in temporary differences and other
    
    
    (425
    )
    
    
    144Total income tax expense
    
    
    (743
    )
    
    
    (506
    )
  2005
    
    
    2004Non-capital loss carryforwards
    
    
    314
    
    
    
    563Capital loss carryforwards
    
    
    12
    
    
    
    13Capital assets
    
    
    (331
    )
    
    
    (152
    )Employee benefit plans
    
    
    (52
    )
    
    
    (54
    )Other
    
    
    (105
    )
    
    
    114Total future income taxes
    
    
    (162
    )
    
    
    484Future income taxes are comprised of:Future
income tax asset  current portion
    
    
    419
    
    
    
    456Future
income tax asset  long-term portion
    
    
    111
    
    
    
    311Future
income tax liability  current portion
    
    
    (5
    )
    
    
    (8
    )Future
income tax liability  long-term portion
    
    
    (687
    )
    
    
    (275
    )Total future income taxes
    
    
    (162
    )
    
    
    484
  
 




---



##### 



p. 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 contd
  
 
  2005
    
    
    2004Trade accounts receivable
    
    
    1,431
    
    
    
    1,755Allowance for doubtful accounts
    
    
    (119
    )
    
    
    (131
    )Allowance for revenue adjustments
    
    
    (118
    )
    
    
    (102
    )Income taxes receivable
    
    
    48
    
    
    
    1Other accounts receivable
    
    
    111
    
    
    
    611,353
    
    
    
    1,584
        RANGE

    
    2005
    
    
    2004Securitized interest in accounts receivable
    
    
    
    
    
    
    1,354
    
    
    
    1,125Retained interest
    
    
    
    
    
    
    172
    
    
    
    176Servicing liability
    
    
    
    
    
    
    1.8
    
    
    
    1.3Average accounts receivable managed
    
    
    
    
    
    
    1,972
    
    
    
    1,513Assumptions:Cost of funds
    
    
    2.54%2.86
    %
    
    
    2.86
    %
    
    
    2.58
    %Average delinquency ratio
    
    
    7.70%12.32
    %
    
    
    12.32
    %
    
    
    7.20
    %Average net credit loss ratio
    
    
    0.55%0.90
    %
    
    
    0.56
    %
    
    
    0.90
    %Weighted average life (days)
    
    
    3237
    
    
    
    37
    
    
    
    32Servicing fee liability
    
    
    2.00
    %
    
    
    2.00
    %
    
    
    2.00
    %




---



##### 



p. 71
  2005
    
    
    2004Collections reinvested in revolving sales
    
    
    17,724
    
    
    
    14,360Increase in sale proceeds
    
    
    229
    
    
    
    95
  NOTE
    
    
    2005
    
    
    2004Future income taxes
    
    
    7
    
    
    
    419
    
    
    
    456Inventory
    
    
    
    
    
    
    315
    
    
    
    288Prepaid expenses
    
    
    
    
    
    
    184
    
    
    
    220Other
    
    
    
    
    
    
    2
    
    
    
    1920
    
    
    
    965
  2005
    
    
    2004ACCUMULATED
    
    
    NET BOOK
    
    
    
    
    
    
    ACCUMULATED
    
    
    NET BOOKCOST
    
    
    AMORTIZATION
    
    
    VALUE
    
    
    COST
    
    
    AMORTIZATION
    
    
    VALUETelecommunications assets:Inside plant
    
    
    19,522
    
    
    
    13,595
    
    
    
    5,927
    
    
    
    18,011
    
    
    
    12,452
    
    
    
    5,559Outside plant
    
    
    14,376
    
    
    
    9,470
    
    
    
    4,906
    
    
    
    14,303
    
    
    
    9,107
    
    
    
    5,196Station equipment
    
    
    2,655
    
    
    
    1,311
    
    
    
    1,344
    
    
    
    3,167
    
    
    
    1,910
    
    
    
    1,257Machinery and equipment
    
    
    5,330
    
    
    
    3,083
    
    
    
    2,247
    
    
    
    4,919
    
    
    
    2,716
    
    
    
    2,203Buildings
    
    
    3,027
    
    
    
    1,289
    
    
    
    1,738
    
    
    
    2,542
    
    
    
    1,329
    
    
    
    1,213Plant under construction
    
    
    1,708
    
    
    
    
    
    
    
    1,708
    
    
    
    1,411
    
    
    
    
    
    
    
    1,411Satellites
    
    
    808
    
    
    
    305
    
    
    
    503
    
    
    
    764
    
    
    
    211
    
    
    
    553Land
    
    
    77
    
    
    
    
    
    
    
    77
    
    
    
    77
    
    
    
    
    
    
    
    77Other
    
    
    146
    
    
    
    31
    
    
    
    115
    
    
    
    173
    
    
    
    37
    
    
    
    136Total property, plant
and equipment
    
    
    47,649
    
    
    
    29,084
    
    
    
    18,565
    
    
    
    45,367
    
    
    
    27,762
    
    
    
    17,605Finite-life intangible assets:Software
    
    
    3,224
    
    
    
    1,533
    
    
    
    1,691
    
    
    
    3,149
    
    
    
    1,273
    
    
    
    1,876Other
    
    
    39
    
    
    
    11
    
    
    
    28
    
    
    
    25
    
    
    
    5
    
    
    
    20Total capital assets
    
    
    50,912
    
    
    
    30,628
    
    
    
    20,284
    
    
    
    48,541
    
    
    
    29,040
    
    
    
    19,501




---



##### 



p. 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
    
    
    2005
    
    
    2004Accrued benefit asset
    
    
    22
    
    
    
    1,487
    
    
    
    1,473Long-term notes and other receivable
    
    
    
    
    
    
    533
    
    
    
    571Investment tax credits receivable
    
    
    
    
    
    
    345
    
    
    
    Investments at cost
    
    
    
    
    
    
    183
    
    
    
    51Future income taxes
    
    
    7
    
    
    
    111
    
    
    
    311Deferred debt issuance costs
    
    
    
    
    
    
    58
    
    
    
    63Deferred development costs
    
    
    
    
    
    
    9
    
    
    
    8Investments at equity
    
    
    
    
    
    
    
    
    
    
    4Other
    
    
    
    
    
    
    114
    
    
    
    1112,840
    
    
    
    2,592
 
  2005
    
    
    2004Spectrum licences
    
    
    895
    
    
    
    778Cable licences
    
    
    18
    
    
    
    18913
    
    
    
    796
  OTHERNOTE
    
    
    RESIDENTIAL
    
    
    BUSINESS
    
    
    ALIANT
    
    
    BELL CANADA
    
    
    CONSOLIDATEDBalance  December
31, 2004
    
    
    
    
    
    
    591
    
    
    
    1,034
    
    
    
    382
    
    
    
    167
    
    
    
    2,174Additions
    
    
    3
    
    
    
    23
    
    
    
    90
    
    
    
    
    
    
    
    11
    
    
    
    124Balance  December
31, 2005
    
    
    
    
    
    
    614
    
    
    
    1,124
    
    
    
    382
    
    
    
    178
    
    
    
    2,298
  NOTE
    
    
    2005
    
    
    2004Trade accounts payable and accruals
    
    
    
    
    
    
    1,393
    
    
    
    1,480Compensation payables
    
    
    
    
    
    
    443
    
    
    
    409Deferred revenues
    
    
    
    
    
    
    413
    
    
    
    362Taxes payable
    
    
    
    
    
    
    235
    
    
    
    189Restructuring charges payable
    
    
    4
    
    
    
    65
    
    
    
    187Future income taxes
    
    
    7
    
    
    
    5
    
    
    
    8Other current liabilities
    
    
    
    
    
    
    244
    
    
    
    3052,798
    
    
    
    2,940




---



##### 



p. 73
  WEIGHTED
    
    
    WEIGHTEDAVERAGE
    
    
    AVERAGENOTE
    
    
    INTEREST RATE
    
    
    MATURITY
    
    
    2005
    
    
    2004Bank advances
    
    
    
    
    
    
    3.37
    %
    
    
    N/A
    
    
    
    11
    
    
    
    25Notes payable
    
    
    
    
    
    
    2.78
    %
    
    30 days
    
    
    135
    
    
    
    176Long-term debt due within one year
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    1,151836
    
    
    
    1,352
 N/A: Not applicable.
   
 
 
   WEIGHTEDAVERAGENOTE
    
    
    INTEREST RATE
    
    
    MATURITY
    
    
    2005
    
    
    2004Bell CanadaDebentures and notes (a)
    
    
    
    
    
    
    7.14
    %
    
    
    20062054
    
    
    
    8,380
    
    
    
    8,246Subordinated debentures
    
    
    
    
    
    
    8.21
    %
    
    
    20262031
    
    
    
    275
    
    
    
    275Capital leases (b)
    
    
    
    
    
    
    7.63
    %
    
    
    20062047
    
    
    
    1,234
    
    
    
    825Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    75Total  Bell Canada
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,963
    
    
    
    9,421AliantDebentures, notes and bonds (c)
    
    
    
    
    
    
    7.65
    %
    
    
    20072025
    
    
    
    885
    
    
    
    885Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    11Total  Aliant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    904
    
    
    
    896Total debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,867
    
    
    
    10,317Less: Amount due within one year
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    (690
    )
    
    
    (1,151
    )Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,177
    
    
    
    9,166
 (a) Bell Canada
  
 
 (b) Bell Canada




---



##### 



p. 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 contd
 (c) Aliant
     
   NOTE
    
    
    2005
    
    
    2004Future income taxes
    
    
    7
    
    
    
    687
    
    
    
    275Accrued benefit liability
    
    
    22
    
    
    
    1,526
    
    
    
    1,425Deferred revenue on long-term contracts
    
    
    
    
    
    
    113
    
    
    
    184Deferred contract payments
    
    
    
    
    
    
    199
    
    
    
    254Other
    
    
    
    
    
    
    544
    
    
    
    615Total other long-term liabilities
    
    
    
    
    
    
    3,069
    
    
    
    2,753
  2005
    
    
    2004Non-controlling interest in subsidiaries:Aliant
    
    
    585
    
    
    
    640ExpressVu
    
    
    295
    
    
    
    259Bell Nordiq
    
    
    150
    
    
    
    143Other
    
    
    10
    
    
    
    151,040
    
    
    
    1,057Preferred shares issued by subsidiaries:Aliant
    
    
    172
    
    
    
    1721,212
    
    
    
    1,229




---



##### 



p. 75
     
 
 
 
          
 




---



##### 



p. 76       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
  2005
    
    
    2004CARRYING
    
    
    
    
    
    
    CARRYINGVALUE
    
    
    FAIR VALUE
    
    
    VALUE
    
    
    FAIR VALUEInvestment in Nortel (1)
    
    
    24
    
    
    
    18
    
    
    
    24
    
    
    
    21Long-term debt due within one year
    
    
    690
    
    
    
    694
    
    
    
    1,151
    
    
    
    1,164Long-term debt
    
    
    10,177
    
    
    
    11,732
    
    
    
    9,166
    
    
    
    10,868Derivative financial instruments, net asset (liability) position:Forward contracts  BCE Inc. shares
    
    
    
    
    
    
    (1
    )
    
    
    (19
    )
    
    
    (21
    )Currency contracts (2)
    
    
    (83
    )
    
    
    (111
    )
    
    
    (65
    )
    
    
    (83
    )Interest rate swaps and swaptions
    
    
    (7
    )
    
    
    (17
    )
    
    
    (8
    )
    
    
    (28
    )
 (1) We have designated 2 million of our approximately 5 million Nortel common
shares to manage our exposure to outstanding rights to SCPs.
 (2) Currency contracts include cross-currency interest rate swaps and foreign
currency forward contracts. Some of the cross-currency interest rate swaps are
economic hedges that do not qualify for hedge accounting. We carry these at fair
value and all gains or losses are recorded in the statement of operations.
     STATEDNUMBER OF SHARES
    
    
    CAPITALANNUAL
    
    
    CONVER-
    
    
    
    
    
    
    
    
    
    
    REDEMP-
    
    
    
    
    
    
    ISSUED
    
    
    ATDIVIDEND
    
    
    TIBLE
    
    
    CONVERSION
    
    
    REDEMPTION
    
    
    TION
    
    
    
    
    
    
    AND OUT-
    
    
    DECEMBER 31SERIES
    
    RATE
    
    
    INTO
    
    
    DATE
    
    
    DATE
    
    
    PRICE
    
    
    AUTHORIZED
    
    
    STANDING
    
    
    2005
    
    
    200415
    
    floating
    
    
    Series 16
    
    February 1, 2010
    

    
    At any time
    
    
    $
    25.50
    
    
    
    24,000,000
    
    
    
    1,914,218
    
    
    
    48
    
    
    
    40016
    
    
    4.40
    %
    
    Series 15
    
    February 1, 2010
    

    
    February 1, 2010
    

    
    $
    25.00
    
    
    
    24,000,000
    
    
    
    14,085,782
    
    
    
    352
    
    
    
    17
    
    
    5.25
    %
    
    Series 18
    
    May 1, 2006
    
    
    May 1, 2006
    
    
    $
    25.00
    
    
    
    22,000,000
    
    
    
    14,000,000
    
    
    
    350
    
    
    
    35018
    
    floating
    

    
    Series 17
    
    May 1, 2011
    
    
    At any time
    
    
    $
    25.50
    
    
    
    22,000,000
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    5.55
    %
    
    Series 20
    

    August 1, 2006
    
    
    August 1, 2006
    

    
    $
    25.00
    
    
    
    22,000,000
    
    
    
    14,000,000
    
    
    
    350
    
    
    
    35020
    
    floating
    

    
    Series 19
    
    August 1, 2011
    
    
    At any time
    
    
    $
    25.50
    
    
    
    22,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,100
    
    
    
    1,100
 Voting Rights
  Entitlement to Dividends
    Conversion Features




---



##### 



p. 77
 Redemption Features
       2005
    
    
    2004NUMBER
    
    
    STATED
    
    
    NUMBER
    
    
    STATEDOF SHARES
    
    
    CAPITAL
    
    
    OF SHARES
    
    
    CAPITALOutstanding, beginning of year
    
    
    355,346,988
    
    
    
    7,689
    
    
    
    355,346,988
    
    
    
    7,602Shares purchased for cancellation (a)
    
    
    
    
    
    
    
    
    
    
    (355,346,988
    )
    
    
    (7,602
    )Shares issued (a)
    
    
    
    
    
    
    
    
    
    
    355,346,988
    
    
    
    7,256Transfer from contributed surplus (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433Outstanding, end of year
    
    
    355,346,988
    
    
    
    7,689
    
    
    
    355,346,988
    
    
    
    7,689
 (a) In August of 2004, Bell Canada transferred its investment in MTS to BCE Inc. as part of
a corporate reorganization which included the exchange by Bell Canada Holdings (BCH) of all
of the 355,346,988 common shares with a carrying value of $7,602 million for consideration
including 355,346,988 new common shares with a carrying value of $7,256 million. The net
result of the corporate reorganization was a decrease in other long-term assets of $327
million and common shares of $346 million, representing the carrying value of the investment
in MTS and an adjustment to retained earnings for the difference. These transactions were
carried out so BCE Inc. could use capital loss carryforwards to shelter the gain on the sale
of the MTS shares.
 (b) In December of 2004, BCE made a capital contribution of $433 million to BCH. BCH
invested the $433 million in Bell Canadas contributed surplus. Bell Canada subsequently
transferred this amount from contributed surplus to share capital.
  2005
    
    
    2004Balance, beginning of year
    
    
    528
    
    
    
    512Capital contribution by BCH
    
    
    
    
    
    
    433Transfer to common shares
    
    
    
    
    
    
    (433
    )Compensation cost for stock options
    
    
    10
    
    
    
    16Balance, end of year
    
    
    538
    
    
    
    528




---



##### 



p. 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
      
 
   2005
    
    
    2004WEIGHTED
    
    
    
    
    
    
    WEIGHTEDAVERAGE
    
    
    
    
    
    
    AVERAGENUMBER
    
    
    EXERCISE
    
    
    NUMBER
    
    
    EXERCISEOF SHARES
    
    
    PRICE ($)
    
    
    OF SHARES
    
    
    PRICE ($)Outstanding, January 1
    
    
    18,657,530
    
    
    $
    32
    
    
    
    15,769,753
    
    
    $
    32Granted
    
    
    1,367,700
    
    
    $
    28
    
    
    
    4,280,800
    
    
    $
    30Exercised
    
    
    (903,604
    )
    
    $
    22
    
    
    
    (668,398
    )
    
    $
    16Forfeited
    
    
    (1,029,167
    )
    
    $
    34
    
    
    
    (940,920
    )
    
    $
    33Transfers in/out
    
    
    (349,183
    )
    
    $
    31
    
    
    
    246,295
    
    
    $
    32Outstanding, December 31
    
    
    17,743,276
    
    
    $
    32
    
    
    
    18,687,530
    
    
    $
    32Exercisable, December 31
    
    
    9,876,283
    
    
    $
    35
    
    
    
    8,520,041
    
    
    $
    34
  STOCK OPTIONS OUTSTANDING
    
    
    STOCK OPTIONS EXERCISABLEWEIGHTED
    
    
    WEIGHTED
    
    
    
    
    
    
    WEIGHTEDAVERAGE
    
    
    AVERAGE
    
    
    
    
    
    
    AVERAGEREMAINING
    
    
    EXERCISE
    
    
    
    
    
    
    EXERCISERANGE OF EXERCISE PRICES
    
    NUMBER
    
    
    LIFE
    
    
    PRICE ($)
    
    
    NUMBER
    
    
    PRICE ($)Below $20
    
    
    311,132
    
    
    3.32 years
    
    $
    17
    
    
    
    311,132
    
    
    $
    17$20$29
    
    
    9,325,768
    
    
    5.71 years
    
    $
    29
    
    
    
    2,202,030
    
    
    $
    28$30$39
    
    
    4,537,146
    
    
    5.79 years
    
    $
    34
    
    
    
    3,793,891
    
    
    $
    34Over $40
    
    
    3,569,230
    
    
    4.77 years
    
    $
    41
    
    
    
    3,569,230
    
    
    $
    4117,743,276
    
    
    5.5 years
    
    $
    32
    
    
    
    9,876,283
    
    
    $
    35




---



##### 



p. 79
   2005
    
    
    2004Compensation expense ($ millions)
    
    
    11
    
    
    
    16Number of stock options granted
    
    
    1,367,700
    
    
    
    4,280,800Weighted average fair value per option granted ($)
    
    
    3
    
    
    
    4Weighted average assumptionsDividend yield
    
    
    4.4
    %
    
    
    4.0
    %Expected volatility
    
    
    19
    %
    
    
    27
    %Risk-free interest rate
    
    
    3.6
    %
    
    
    3.2
    %Expected life (years)
    
    
    3.5
    
    
    
    3.6
      NUMBER OF RSUs2005
    
    
    2004Outstanding, January 1
    
    
    1,506,528
    
    
    
    Granted
    
    
    397,439
    
    
    
    1,497,730Dividends credited
    
    
    75,670
    
    
    
    46,165Forfeited
    
    
    (80,825
    )
    
    
    (37,367
    )Outstanding, December 31
    
    
    1,898,812
    
    
    
    1,506,528




---



##### 



p. 80       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
  
    
    293,426 relating to BCE Inc. common shares
 
    
    21,370,578 relating to Nortel common shares.
       NUMBER OF DSUs2005
    
    
    2004Outstanding, January 1
    
    
    380,601
    
    
    
    263,781Granted
    
    
    91,550
    
    
    
    159,317Dividends credited
    
    
    17,801
    
    
    
    16,355Payments
    
    
    (94,246
    )
    
    
    (58,852
    )Outstanding, December 31
    
    
    395,706
    
    
    
    380,601
    2005
    
    
    2004Pension benefits:DB plans cost
    
    
    243
    
    
    
    66DC plans cost
    
    
    20
    
    
    
    9Other future benefits
    
    
    126
    
    
    
    160Net benefit plans cost
    
    
    389
    
    
    
    235




---



##### 



p. 81
   PENSION BENEFITS
    
    
    OTHER BENEFITS2005
    
    
    2004
    
    
    2005
    
    
    2004Current service cost
    
    
    202
    
    
    
    213
    
    
    
    35
    
    
    
    31Interest cost on accrued benefit obligation
    
    
    837
    
    
    
    770
    
    
    
    109
    
    
    
    103Actual return on plan assets
    
    
    (1,517
    )
    
    
    (1,017
    )
    
    
    (12
    )
    
    
    (4
    )Past service costs arising during period
    
    
    
    
    
    
    75
    
    
    
    (119
    )
    
    
    14Actuarial loss on accrued benefit obligation
    
    
    1,709
    
    
    
    748
    
    
    
    494
    
    
    
    103Elements of employee future benefit plans cost,
before recognizing its long-term nature
    
    
    1,231
    
    
    
    789
    
    
    
    507
    
    
    
    247Excess (deficiency) of actual return over expected return (1)
    
    
    618
    
    
    
    108
    
    
    
    2
    
    
    
    (6
    )Deferral of amounts arising during period:Past service costs
    
    
    
    
    
    
    (75
    )
    
    
    119
    
    
    
    (14
    )Actuarial loss on accrued benefit obligation
    
    
    (1,709
    )
    
    
    (748
    )
    
    
    (494
    )
    
    
    (103
    )Amortization of previously deferred amounts:Past service costs
    
    
    12
    
    
    
    9
    
    
    
    1
    
    
    
    Net actuarial losses
    
    
    85
    
    
    
    22
    
    
    
    
    
    
    
    Transitional (asset) obligation
    
    
    5
    
    
    
    (42
    )
    
    
    35
    
    
    
    36Curtailment gain (2)
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    Adjustments to recognize long-term nature of employee
future benefit plans credit
    
    
    (989
    )
    
    
    (726
    )
    
    
    (381
    )
    
    
    (87
    )Other
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    DB plans cost, recognized
    
    
    243
    
    
    
    66
    
    
    
    126
    
    
    
    160
 (1) The expected return on plan assets for a given year is calculated based on the
market-related value of plan assets at the beginning of that year. The market-related value
of pension plan assets was $12,290 million at January 1, 2005 and $12,435 million at
January 1, 2004.
 (2) 2005 includes a curtailment gain associated with the phase-out, over the next three years, of a
discretionary allowance program.




---



##### 



p. 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
   PENSION BENEFITS
    
    
    OTHER BENEFITS2005
    
    
    2004
    
    
    2005
    
    
    2004Accrued benefit obligation, beginning of year
    
    
    13,714
    
    
    
    11,936
    
    
    
    1,752
    
    
    
    1,596Current service cost
    
    
    202
    
    
    
    213
    
    
    
    35
    
    
    
    31Interest cost on accrued benefit obligation
    
    
    837
    
    
    
    770
    
    
    
    109
    
    
    
    103Actuarial losses
    
    
    1,709
    
    
    
    748
    
    
    
    494
    
    
    
    103Benefit payments
    
    
    (870
    )
    
    
    (703
    )
    
    
    (93
    )
    
    
    (81
    )Employee contributions
    
    
    6
    
    
    
    3
    
    
    
    
    
    
    
    Special termination costs (1)
    
    
    (17
    )
    
    
    660
    
    
    
    (21
    )
    
    
    (12
    )Plan amendment (2)
    
    
    
    
    
    
    75
    
    
    
    (119
    )
    
    
    14Transfers from DC pension plans
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    (2
    )Accrued benefit obligation, end of year
    
    
    15,802
    
    
    
    13,714
    
    
    
    2,157
    
    
    
    1,752Fair value of plan assets, beginning of year
    
    
    12,391
    
    
    
    11,990
    
    
    
    137
    
    
    
    133Actual return on plan assets
    
    
    1,517
    
    
    
    1,017
    
    
    
    12
    
    
    
    4Benefit payments
    
    
    (870
    )
    
    
    (703
    )
    
    
    (93
    )
    
    
    (81
    )Employer contributions
    
    
    193
    
    
    
    78
    
    
    
    93
    
    
    
    81Employee contributions
    
    
    6
    
    
    
    3
    
    
    
    
    
    
    
    Transfers from DC pension plans
    
    
    221Other
    
    
    (13
    )
    
    
    6
    
    
    
    
    
    
    
    Fair value of plan assets, end of year
    
    
    13,445
    
    
    
    12,391
    
    
    
    149
    
    
    
    137Plan deficit
    
    
    (2,357
    )
    
    
    (1,323
    )
    
    
    (2,008
    )
    
    
    (1,615
    )Unamortized net actuarial losses
    
    
    3,501
    
    
    
    2,516
    
    
    
    489
    
    
    
    48Unamortized past service costs
    
    
    126
    
    
    
    139
    
    
    
    (2
    )
    
    
    16Unamortized transitional (asset) obligation
    
    
    (17
    )
    
    
    (12
    )
    
    
    230
    
    
    
    279Accrued benefit asset (liability), end of year
    
    
    1,253
    
    
    
    1,320
    
    
    
    (1,291
    )
    
    
    (1,272
    )Accrued benefit asset included in other long-term assets
    
    
    1,487
    
    
    
    1,473
    
    
    
    
    
    
    
    Accrued benefit liability included in other long-term liabilities
    
    
    (235
    )
    
    
    (153
    )
    
    
    (1,291
    )
    
    
    (1,272
    )
 (1) Costs in 2004 relate to the employee departure programs announced at Bell Canada.
See Note 4, for more information.
 (2) 2005 includes a curtailment gain associated with the phase-out, over the next three years, of a
discretionary allowance program.Costs in 2004 mainly relate to DB pension plan amendments at
Aliant whereby certain bargaining unit employees and eligible management employees were awarded
past service benefits.
  
 
  
 




---



##### 



p. 83
   PENSION BENEFITS
    
    
    OTHER BENEFITS2005
    
    
    2004
    
    
    2005
    
    
    2004At December 31Accrued benefit obligation:Discount rate, end of year
    
    
    5.2
    %
    
    
    6.2
    %
    
    
    5.2
    %
    
    
    6.2
    %Rate of compensation increase, end of year
    
    
    3.0
    %
    
    
    3.5
    %
    
    
    3.0
    %
    
    
    3.5
    %For the year ended December 31Net benefit plans cost:Discount rate, end of preceding year
    
    
    6.2
    %
    
    
    6.5
    %
    
    
    6.2
    %
    
    
    6.5
    %Expected return on plan assets, end of preceding year
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %Rate of compensation increase, end of preceding year
    
    
    3.5
    %
    
    
    3.5
    %
    
    
    3.5
    %
    
    
    3.5
    %
  
 
  1%
    
    
    1%INCREASE
    
    
    DECREASEEffect on other benefits  total service and interest cost
    
    
    19
    
    
    
    (18
    )Effect on other benefits  accrued obligation
    
    
    230
    
    
    
    (216
    )
   WEIGHTEDWEIGHTED
    
    
    
    
    
    
    
    
    
    
    AVERAGEAVERAGE
    
    
    
    
    
    
    
    
    
    
    EXPECTEDTARGET
    
    
    PERCENTAGE OF PLAN ASSETS
    
    
    LONG-TERMALLOCATION
    
    
    AT DECEMBER 31
    
    
    RATE OF RETURNASSET CATEGORY
    
    2005
    
    
    2005
    
    
    2004
    
    
    2005Equity securities
    
    
    45%65
    %
    
    
    59
    %
    
    
    57
    %
    
    
    9.0
    %Debt securities
    
    
    35%55
    %
    
    
    41
    %
    
    
    43
    %
    
    
    5.5
    %Total/average
    
    
    
    
    
    
    100
    %
    
    
    100
    %
    
    
    7.5
    %




---



##### 



p. 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]
   PENSION
    
    
    OTHERBENEFITS
    
    
    BENEFITS2006
    
    
    883
    
    
    
    972007
    
    
    904
    
    
    
    1022008
    
    
    925
    
    
    
    1072009
    
    
    946
    
    
    
    1142010
    
    
    966
    
    
    
    12020112015
    
    
    5,112
    
    
    
    693Total estimated future benefit payments
    
    
    9,736
    
    
    
    1,233
     PENSION BENEFITS
    
    
    OTHER BENEFITS2005
    
    
    2004
    
    
    2005
    
    
    2004Aliant
    
    
    172
    
    
    
    67
    
    
    
    5
    
    
    
    4Bell Canada
    
    
    27
    
    
    
    20
    
    
    
    88
    
    
    
    77Total
    
    
    199
    
    
    
    87
    
    
    
    93
    
    
    
    81Comprised of:Contributions to DB plans
    
    
    193
    
    
    
    78
    
    
    
    93
    
    
    
    81Contributions to DC plans
    
    
    6
    
    
    
    9
    
    
    
    
    
    
    
    




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##### 



p. 85
  2005
    
    
    2004PURCHASE OF EQUIPMENT, SUPPLIES AND SERVICESCGI (a)
    
    
    556
    
    
    
    563Telesat (b)
    
    
    26
    
    
    
    64Bell Globemedia (c)
    
    
    43
    
    
    
    37Emergis (d)
    
    
    
    
    
    
    23Entourage Technology Solutions Inc. (Entourage) (e)
    
    
    36
    
    
    
    152BCE Corporate Services Inc. (BCECS) (f)
    
    
    13
    
    
    
    13Other
    
    
    5
    
    
    
    SALE OF EQUIPMENT AND SERVICESCGI (a)
    
    
    114
    
    
    
    103Bell Globemedia (c)
    
    
    25
    
    
    
    20Emergis (d)
    
    
    
    
    
    
    40Entourage (e)
    
    
    7
    
    
    
    32
 (a) As at December 31, 2005, BCE has accounted for CGI (previously a BCE joint venture)
as a discontinued operation and no longer proportionately consolidates its financial
results. The sale was finalized on January 12, 2006, as a result BCEs ownership in CGI
decreased from 29.8% to 8.6%.
 (b) Telesat is a wholly owned subsidiary of BCE.
 (c) Bell Globemedia is a subsidiary of BCE. BCE owns 68.5% of the company.
 (d) Before BCE sold Emergis, in June 2004, it was a subsidiary of BCE. BCE owned 63.9% of the
company.
 (e) Entourage (renamed Bell Technical Solutions Inc. on October 25, 2005) was previously
an equity investment of Bell Canada, in which we owned 33% of the company. As at May
2005, Entourage is a wholly-owned subsidiary of Bell Canada.
 (f) BCECS is a wholly-owned subsidiary of BCE.
  2005
    
    
    2004Accounts receivable
    
    
    16
    
    
    
    45Notes receivable from parent company
    
    
    498
    
    
    
    498Accounts payable
    
    
    23
    
    
    
    39Dividends payable to parent company
    
    
    438
    
    
    
    374Debt due within one year
    
    
    96
    
    
    
    77Long-term debt
    
    
    339
    
    
    
    387




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##### 



p. 86       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 [contd]




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##### 



p.87
     2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    THEREAFTER
    
    
    TOTALLong-term debt
(excluding capital leases)
    
    
    528
    
    
    
    613
    
    
    
    908
    
    
    
    967
    
    
    
    1,007
    
    
    
    5,599
    
    
    
    9,622Notes payable and bank
advances
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146Capital leases
    
    
    162
    
    
    
    151
    
    
    
    108
    
    
    
    99
    
    
    
    103
    
    
    
    622
    
    
    
    1,245Operating leases
    
    
    218
    
    
    
    200
    
    
    
    180
    
    
    
    163
    
    
    
    130
    
    
    
    689
    
    
    
    1,580Commitments for capital
expenditures
    
    
    96
    
    
    
    42
    
    
    
    7
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    147Purchase obligations
    
    
    1,392
    
    
    
    974
    
    
    
    689
    
    
    
    244
    
    
    
    143
    
    
    
    475
    
    
    
    3,917Other long-term liabilities
(including current portion)
    
    
    55
    
    
    
    64
    
    
    
    61
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    254Total
    
    
    2,597
    
    
    
    2,044
    
    
    
    1,953
    
    
    
    1,548
    
    
    
    1,384
    
    
    
    7,385
    
    
    
    16,911
        
 




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##### 



p.88
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 contd
         2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010 +
    
    
    INDEFINITE
    
    
    TOTALSale of assets and businesses
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    1,502
    
    
    
    134
    
    
    
    1,651Sale of services
    
    
    10
    
    
    
    15
    
    
    
    10
    
    
    
    91
    
    
    
    55
    
    
    
    
    
    
    
    181Purchase and development
of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    10
    
    
    
    11Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12Total Guarantees
    
    
    10
    
    
    
    30
    
    
    
    10
    
    
    
    92
    
    
    
    1,557
    
    
    
    156
    
    
    
    1,855




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##### 



p.89
              2005
    
    
    2004Interest paid
    
    
    986
    
    
    
    1,383Income taxes paid (net of refunds)
    
    
    192
    
    
    
    128Cash provided by (used in) non-cash operating assets and liabilities is as follows:Accounts receivable
    
    
    413
    
    
    
    (224
    )Other current assets
    
    
    (7
    )
    
    
    (106
    )Other long-term assets
    
    
    (82
    )
    
    
    (21
    )Accounts payable and accrued liabilities
    
    
    (591
    )
    
    
    417Other long-term liabilities
    
    
    (109
    )
    
    
    20Other
    
    
    17
    
    
    
    6(359
    )
    
    
    92




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##### 



p. 90
 BOARD OF DIRECTORS
  Toronto, Ontario
     Montréal, Québec
    Calgary, Alberta
    Toronto, Ontario
    Toronto, Ontario
    Montréal, Québec
    South Lancaster, Ontario
    Ottawa, Ontario
   Wayland, Massachusetts
    Don Mills, Ontario
    Vancouver, British Columbia
    Boston, Massachusetts
    Montréal, Québec
     Montréal, Québec
    St. Johns, Newfoundland and Labrador




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##### 



p. 91
 CORPORATE OFFICERS




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##### 



p. 92
 COMMITTEES OF THE BOARD, Members of Committees of the Board
 Audit Committee
 Chair
 Corporate Governance Committee
 Chair
 Management Resources and
Compensation Committee
 Chair
 Pension Fund Committee
 Chair
  The following is a list of all our
trademarks referred to and used as such in
Bell Canadas 2005 financial information.
Aliant is a trademark of Aliant Inc. BCE is
a trademark of BCE Inc. The Rings and Head
Design, 10-4 & Design, Bell Canada
Enterprises corporate logo, Bell, Bell
Canada, Bell Globemedia, Bell Making It
Simple, Bell Mobility, Bell Nordiq, Bell
West, Bell World, Emily, GoTrax, Group
Telecom, Kidsmania, Seek & Find, Sympatico,
VDN & Design are trademarks of Bell Canada.
ExpressVu is a trademark of Bell ExpressVu
Limited Partnership. Mobile Browser is a
trademark of Bell Mobility Inc. Expertech is
a trademark of Expertech Network
Installation Inc. Northwestel is a trademark
of Northwestel Inc. Infostream is a
trademark of Infostream Technologies Inc.
Solo and Solo Mobile are trademarks of Solo
Branding Inc. Télébec is a trademark of
Telebec Limited Partnership. Nimiq and
Telesat are trademarks of Telesat Canada.
Any other trademarks, or corporate, trade or
domain names used in this document are the
property of their owners. We believe that
our trademarks and domain names are very
important to our success. Our exclusive
trademark rights are perpetual provided that
their registrations are timely renewed and
that the trademarks are used in commerce by
us or our licensees. We take appropriate
measures to protect, renew and defend
our trademarks. We also spend considerable
time and resources overseeing, registering,
renewing, licensing and protecting our
trademarks and domain names and prosecuting
those who infringe on them. We take great
care not to infringe on the intellectual
property and trademarks of others.




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