##### Table of Contents






Exhibit 99.1

Bell Canada

2002 Financial Information





---



##### Table of Contents



Bell Canada

Financial Information

2002





---



##### Table of Contents



(BELL LOGO)

Bell Canada is Canadas leading provider
of wireline and wireless communications
services, Internet access, data and other
communications services to residential and
business customers.

This document contains the Bell Canada
Managements Discussion and Analysis of
Financial Condition and Results of Operations
as well as its Financial Statements for 2002.

Please visit our website at www.bell.ca for information on our products and services.

Bell Canada is indirectly wholly-owned by BCE
Inc. To obtain a copy of BCE Inc.s Annual
Report, please visit BCEs website at
www.bce.ca, call 1 888 932-6666 or send a
written request to:

Bell Canada
Corporate Communications
1000, rue de La Gauchetière Ouest
Bureau 3700
Montréal (Québec)
H3B 4Y7
(Canada)





---

TABLE OF CONTENTS



|                                    |           |  |  |  |  |  |  | 
|----------------------------------- | --------- |  |  |  |  |  |  | 
|                                    | Exhibit A
|ABOUT OUR BUSINESS                 
|PERFORMANCE HIGHLIGHTS             
|FINANCIAL RESULTS ANALYSIS         
|FINANCIAL AND CAPITAL MANAGEMENT   
|RISK ASSESSMENT                    
|OUR ACCOUNTING POLICIES            
|Supplementary Financial Information
|EXHIBIT 99.1                       
|EXHIBIT 99.2                       



---



##### Table of Contents



Managements Discussion and Analysis

This Managements Discussion and Analysis of
Financial Condition and Results of Operations
(MD&A) comments on our operations, performance
and financial condition for the years ended
December 31, 2002 and 2001.

The MD&A is presented in seven sections:

About Our Businessdescribes our
businesses, objectives and strategies for
growth.

Performance Highlightsreviews the key
measures we use to assess our performance and
how our results in 2002 compare to our results
in 2001.

Financial Results Analysisprovides
detailed information and analysis about our
performance for the past two years.

Financial and Capital Management
describes how we manage our financial
condition and capital resources.

Risk Assessmentprovides an overview of
the key risks that could affect our business.

Our Accounting Policiesprovides a
discussion of the key estimates and
assumptions that management has made in
preparing the financial statements as well as
a discussion of changes to the accounting
standards.

Supplementary Financial Information
provides tables on selected consolidated
financial data and other useful information.

Please refer to the audited consolidated
financial statements starting on page 24 when
reading the MD&A.

MD&A at a glance

|                                    |  |  |    | 
|----------------------------------- |  |  | -- | 
|About Our Business                  |  |  | 2  | 
|Performance Highlights              |  |  | 5  | 
|Financial Results Analysis          |  |  | 6  | 
|Financial and Capital Management    |  |  | 11 | 
|Risk Assessment                     |  |  | 15 | 
|Our Accounting Policies             |  |  | 18 | 
|Supplementary Financial Information |  |  | 23 | 

About forward-looking statements

Securities laws encourage companies to
disclose forward-looking information so that
investors can better understand the companys
future prospects and make informed investment
decisions.

This document, including this MD&A and in
particular the outlook sections of this MD&A,
contains forward-looking statements about our
objectives, strategies, financial condition,
results of operations and businesses.

These statements are forward-looking
because they are based on our current
expectations about the markets we operate in
and on various estimates and assumptions.

It is important to know that:



| |  | forward-looking statements describe our
expectations on the day they are made. For
this MD&A, it is February 26, 2003                                                                                                                                                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our
actual results could be materially different
from what we expect if known or unknown risks
affect our business, or if our estimates or
assumptions turn out to be inaccurate. As a
result, we cannot guarantee that any
forward-looking statement will materialize                                                                                                                         
| 
| |  | forward-looking statements do not take into
account the effect that transactions or
non-recurring items announced or occurring
after the statements are made may have on our
business. For example, they do not include the
effect of sales of assets, monetizations,
mergers, acquisitions or other business
combinations or transactions, nor do they
include the effect of asset write-downs
| 
| |  | we
assume no obligation to update any
forward-looking statement even if new
information becomes available, as a result of
future events or for any other reason.                                                                                                                                                                                                                               

You will find a more detailed assessment
of the risks that could cause our actual
results to materially differ from our current
expectations in the Risk Assessmentsection of
this MD&A,starting on page 15. In particular,
all of our expectations contained in the
outlook sections of this MD&A are subject to
these risks.

In this MD&A, except as explained below, we, us and our mean Bell Canada, its
subsidiaries, joint ventures and investments in significantly influenced
companies.

Effective December 31, 2002, we consolidate the net assets of Aliant Inc.
(Aliant) and Bell ExpressVu Limited Partnership (Bell ExpressVu) in our
consolidated balance sheet. Accordingly, discussions in this MD&A on matters
reflecting our consolidated balance sheet include Aliant and Bell ExpressVu.
From a statement of operations perspective, we started consolidating the
results of operations of Aliant and Bell ExpressVu as of January 1, 2003.
Accordingly, given our 2002 results of operations exclude the consolidation of
these companies (except for our 39% equity earnings in Aliant) our MD&A
discussions on matters reflecting our results of operations exclude Aliant and
Bell ExpressVu unless otherwise specified.

Significantly influenced means that:



| |  | we have a 20% to 50% equity interest in a company that we do not control or
jointly control, and
|- |  | ------------------------------------------------------------------------------------------------
| 
| |  | we have a significant influence on its operating,
investing and financing activities.           

A statement we make is forward looking when it uses what we know today to make
a statement about the future.

Forward-looking statements may include words such as anticipate, believe,
could, expect, goal, intend, may, objective, outlook, seek, strive, targetand
will.

Bell Canada   2   2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis




ABOUT OUR BUSINESS

Who we are

We are Canadas leading provider of wireline
and wireless communications services, Internet
access, data and other communications services
to residential and business customers through
our 21 million customer connections.

KEY DEVELOPMENTS IN 2002

Effective December 31, 2002, BCE Inc. (BCE),
our ultimate parent company, transferred its
14% interest in Aliant to us in exchange for
common shares of Bell Canada. As a result, we
now own a 53% interest in Aliant and have
changed our accounting from the equity method
to consolidation. Aliant is a provider of
wireline and wireless communication services,
Internet access and data services to
residential and business customers in Atlantic
Canada.

Aliant, the incumbent telephone
company in Atlantic Canada, has:



| |  | 1.5 million local telephone service subscribers                     
|- |  | --------------------------------------------------------------------
| 
| |  | 551,000 cellular and personal communications service (PCS) customers
| 
| |  | 52,000 paging customers                                             
| 
| |  | 288,000 dial-up and high-speed Internet access subscribers          

These subscribers are not included in our
consolidated statistics and should not be
considered in our 2002 Financial Results
Analysis.

Aliant also has other revenues from
information technology, remote communications
and emerging businesses, which are not
considered in our 2002 Financial Results
Analysisas the operating revenues were not
consolidated with our own.

At the end of December 2002, BCE
transferred its 100% investment in Bell
ExpressVu, a provider of satellite television
services, to a partnership held 52% by
ourselves and 48% by BCE in exchange for units
in the partnership. Bell ExpressVu has 1.3
million DTH subscribers. These subscribers are
not considered in our 2002 Financial Results
Analysisas the operating revenues were not
consolidated with our own.

Effective December 31, 2002, we
consolidate the net assets of Aliant and Bell
ExpressVu in our consolidated balance sheet.
Accordingly, discussions in this MD&A on
matters reflecting our consolidated balance
sheet include Aliant and Bell ExpressVu. From
a statement of operations perspective, we
started consolidating the results of
operations of Aliant and Bell ExpressVu as of
January 1, 2003. Accordingly, given our 2002
results of operations exclude the
consolidation of these companies (except for
our 39% equity earnings in Aliant) our MD&A
discussions on matters reflecting our results
of operations exclude Aliant and Bell
ExpressVu unless otherwise specified.

On November 29, 2002, we completed the
sale of our directories business for
approximately $3 billion in cash and recorded
a $2.4 billion gain.

Prior to the closing of
the sale, we along with BCE, completed a
corporate reorganization, resulting in the
transfer of our directories business and BCEs
agreement to contribute its 100% investment
in Bell ExpressVu as well as certain debt
receivables and cash to a partnership. At the
end of December, BCE transferred its interest
in Bell ExpressVu. We own a 52% interest in
the partnership and BCE owns 48%.

Following the sale, the partnership
distributed the net proceeds to its partners.
A net distribution of $1.1 billion was made to
BCE which was partly used to help finance the
purchase of SBC Communications Inc.s (SBC)
remaining indirect interest in Bell Canada.
The balance of the proceeds were distributed
to us and will
be used to reduce debt and for general
corporate purposes. In addition, we acquired a
10% indirect interest in the post-sale
directories business for $91 million.

The
outlooks for 2003, including the outlook
sections in the Financial Results Analysis
section of this MD&A, take into account the
year-over-year impact of the consolidation of
Aliant and Bell ExpressVu and the sale of the
directories business by assuming that Aliants
and Bell ExpressVus results were consolidated
in 2002, and that the sale of the directories
business took place on January 1, 2002.

On April 11, 2002, Bell West Inc. (Bell
West) was created by Bell Canada and Manitoba
Telecom Services Inc. (MTS) to offer business
customers in Alberta and British Columbia a
range of local, long distance and data
services. Bell Canada owns 60% of Bell West,
and the balance is owned by MTS. We also own
approximately 22% of MTS.

In April 2002, we announced the initial
public offering of units of the Bell Nordiq
Income Fund. The Fund acquired an approximate
37% interest in each of Télébec Limited
Partnership and Northern Telephone Limited
Partnership from us. We retain management
control and hold an approximate 63% interest in
the partnerships. We received gross proceeds of
$324 million and recorded a pre-tax gain of
$222 million.

OUR BUSINESS

At December 31, 2002, we:



| |  | served 11.6 million local telephone
service subscribers                   
|- |  | --------------------------------------------------------------------------
| 
| |  | served 3.4
million cellular and PCS customers                             
| 
| |  | served 586,000 paging customers                                           
| 
| |  | provided dial-up and high-speed Internet
access to 1.8 million subscribers
| 
| |  | provided 3.7 million digital equivalent access
lines.(1)                  

The following chart shows our operating
revenues by line of business for the year
ended December 31, 2002.

There is some seasonality in certain of
our businesses. For example, our wireless and
DTH satellite television service revenues tend
to be higher in the fourth quarter due to
increased consumer spending during the holiday
season.

Operating revenues
by line of business(in millions)

(OPERATING REVENUES PIE CHART)

LOCAL AND ACCESS SERVICES

We operate an
extensive local access
network that provides
local telephone
services to business
and residential
customers. The 11.6
million local
telephone lines, or
network access
services (NAS), we
provide for our
subscribers are key in
establishing customer
relationships and are
the foundation for the
other products and
services we offer.



---

|(1) Derived by converting low capacity data lines to the equivalent number of
voice grade access lines.
|-------------------------------------------------------------------------------------------------------

Bell Canada   3   2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

We operate primarily as the incumbent telephone company in:



| |  | Ontario and Québec, through Bell Canada,
Télébec Limited Partnership and Northern
Telephone Limited Partnership  
|- |  | -----------------------------------------------------------------------------------------------------------------
| 
| |  | Canadas northern territories, through Northwestel Inc.                                                          
| 
| |  | We also operate as a competitive local
exchange carrier (CLEC) in Alberta and
British Columbia through Bell West.

Local telephone service is the main
source of local and access revenues. Other
sources of local and access revenues include:



| |  | value-added services such as call display,
call waiting and voice mail                    
|- |  | ------------------------------------------------------------------------------------------
| 
| |  | services
provided to competitors accessing our local
network                              
| 
| |  | subsidies from the National
Contribution Fund to support local service in
high-cost areas.

Rates for local telephone and value-added
services in our incumbent territories are
subject to price cap regulation by the
Canadian Radio-television and
Telecommunications Commission (CRTC).

LONG DISTANCE SERVICES

We supply long distance voice services to
business and residential customers. In
addition, we provide the originating and
terminating portion of long distance calls
from and to our local telephone service
customers for competing long distance
companies. We also receive settlement payments
from out-of-region carriers for completing
their customers long distance calls in our
territory.

Prices for long distance services have
been declining since this market was opened to
competition. The rate of decline, however, has
eased over the past several years. Price
decreases have generally led to increased
volume in conversation minutes.

WIRELESS SERVICES

We offer a full range of wireless
communication services to business and
residential customers, including cellular, PCS
and paging. PCS customers can access our
mobile browser service to gain wireless access
to the Internet. We also provide value-added
services such as call display and voicemail
and roaming services to other wireless service
providers.

Customers can choose to pay for their
cellular and PCS services through a monthly
rate plan (post-paid) or in advance (prepaid).

Wireless communication services are
provided in-territory by the wireless division
of each of our incumbent telephone companies
with the exception of Bell Mobility Inc. (Bell
Mobility), which offers wireless services in
Alberta and British Columbia, in addition to
its home territory of Ontario and Québec. In
2002, Bell Mobility completed the construction
of its network in Calgary, Edmonton and
Vancouver.

In 2002, we were the first company to
launch a high-speed wireless network, which
allows customers to transmit data at speeds of
up to
86 Kbps, five times faster than what was
previously available. By the end of 2002, our
high-speed network covered:



| |  | centers in
Ontario and Québec, representing 80% of the
population in those provinces
|- |  | ------------------------------------------------------------------------------------
| 
| |  | Calgary, Edmonton and Vancouver in Western Canada.                                  

DATA SERVICES

Data services are a growth area for us in both
the residential and business customer
segments. We provide high-speed and dial-up
Internet access to residential customers in
our incumbent territories primarily through
the Bell Sympatico brand. High-speed Internet
access is driving growth in the residential
portion of this business. In 2002, we expanded
our product line to offer customers a choice
of speeds and several value-added services.

We offer a full range of data services to
business customers, including local network
access, Internet access, frame relay, ATM,
Internet Protocol (IP)/broadband and
e-commerce services as well as sales of
equipment. In 2002, we launched Bell Managed
Network Solutions, a single source for the
delivery and management of end-to-end business
communication services.

Data services for business customers are
provided in-territory by our incumbent
telephone companies and by Bell West in
Western Canada.

DTH SATELLITE TELEVISION SERVICES

In 2003, when we consolidate Bell ExpressVu,
we will have direct-to-home (DTH) revenue.
DTH satellite television services have rapidly
become a major competitor to cable television.
Bell ExpressVu has been delivering digital
services on a national basis directly to
Canadian homes and businesses since 1997. It
is Canadas largest licensed DTH distributor
of digital programming offering more than
300 digital television and CD-quality audio
channels as well as more than 50 pay-per-view
channels.

Bell ExpressVu uses two satellites in
orbit owned by Telesat Canada (Telesat), a
subsidiary of BCE, Nimiq 1 and Nimiq 2. Nimiq
2 was successfully launched on December 29,
2002 although it has since experienced a
malfunction affecting its available power.
This malfunction is still being investigated.
Notwithstanding the malfunction, the
additional satellite capacity will allow Bell
ExpressVu to offer additional programming in
2003.

Signal piracy is a major issue facing all
segments of the Canadian broadcasting
industry. Bell ExpressVu has undertaken a
number of actions to combat signal piracy,
including taking legal action, implementing
electronic counter-measures targeted at
illegal devices, and leading public awareness
campaigns. Please see Risk assessment  Bell
ExpressVuon page 18 for more details.

OTHER PRODUCTS AND SERVICES

This category includes revenues from a number
of other sources including:



| |  | renting, selling
and maintaining business terminal equipment                                                                                      
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | print directories advertising (during the
year, we sold our directories business. In
2003, we will no longer be generating this type
of revenue).

OUR OBJECTIVES AND STRATEGY

Our governing objective is to achieve balanced
performance that will lead to profitable
growth, positive free cash flow & improving
returns.

The successful achievement of our
governing objective is dependent on achieving
three key strategic objectives:

Simplicity, Efficiency & Financial Discipline

Our customers want simplicity. Our research
demonstrates that they want products and
services that are easy to use and understand
and they want dealing with us to be easy. To
do this, we must continue to simplify our
processes, reduce bureaucracy and improve the
effectiveness of our sales and distribution
channels. In addition to simplicity, we need
to continue gaining better insight into the
needs of each of our customer segments. By
better understanding our customers needs, we
will be able to provide them with compelling
value propositions.

Bell Canada   4   2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

As part of our strategy, we are shifting
our focus to further position our key customer
segments at the center of our business. We
continue to develop a better understanding of
the needs of each of our customer segments:
consumers, small and medium enterprises, and
large enterprises.

Efficiency has become an integral part of
the way we do business. We generated
productivity gains of more than $950 million
over the past two years and are targeting more
than $600 million in further efficiency gains
in 2003. We have substantially reduced our
capital expenditures while growing our
customer connections. But increased efficiency
cannot come at the expense of service. Service
is the cornerstone of our brand, and we are
committed to improving customer service as we
continue to focus on efficiency.

Financial discipline demands decisive
action to ensure long-term financial success.
We will continue to manage our company with a
view to providing consistent, solid returns
while strengthening our balance sheet and
generating free cash flow.




PERFORMANCE HIGHLIGHTS

EBITDA(1) GREW 6.6% TO 6.5 BILLION IN 2002

Revenues(in millions)

|         |  |                                                                                                                                                                                                          
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Revenues |  | Revenues
increased by 1% to
$14.4 billion in 2002,
driven by subscriber
growth in wireless and
data services. We
expect these services
as well as DTH
services to drive
continued revenue
growth in 2003.

Productivity Improvements(in millions)

|                          |  |                                                                                                                                                                                                                                                                                                                                                                                         
|------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Productivity Improvements |  | We generated
productivity
improvements of $484
million in 2002 in
addition to the $470
million of productivity
improvements made in
2001. This contributed
to an improvement in
our EBITDA margin
(EBITDA as a percentage
of revenues) from 42.6%
in 2001 to 45.0% in
2002. For 2003, we are
targeting additional
productivity
improvements at similar
levels to those
achieved in 2002.

Net Debt to Total
Capitalization

|                                 |  |                                                                                                                                                                                       
|-------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net Debt to Total Capitalization |  | The net debt to total
capitalization ratio
decreased from 55% in
2001 to 53.7% in 2002.
Our objective in 2003
is for net debt to
total capitalization to
decrease as we pay down
debt.

Free Cash Flow(in millions)

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Free Cash Flow |  | Free cash flow
improved significantly
from negative $1.6
billion in 2001
(including the
one-time acquisition of
spectrum licenses) to
negative $350 million
in 2002, largely due
to lower levels of
capital spending and
improved cash flow
from operations offset
by higher dividends.
Our target is to
achieve a
modestly positive free
cash flow in 2003.
This includes positive
free cash flows from
Aliant and negative
free cash flows from
Bell ExpressVu.

Capital Expenditures(in millions)

|                     |  |                                                                                                                                                                                                                       
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Capital Expenditures |  | We reduced our capital
spending as a
percentage of revenue
from 28.7% in 2001 to
20.3% in 2002. In
2003, we expect to
further reduce our
capital expenditures
as a percentage of
revenues, known as
capital intensity.



---

|(1) |  | EBITDA does not have a standardized meaning under Canadian GAAP. Please
refer to the EBITDA discussion in the Financial Results Analysissection of
this MD&A for more information on EBITDA.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada  5  2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis




FINANCIAL RESULTS ANALYSIS

WE GENERATED MODEST REVENUE GROWTH OF 1% IN 2002

In 2002, we continued to focus on growth in
the wireless and data segments to offset
declines in the local and access and long
distance segments and to strive towards
outpacing industry growth. Our customer
connections grew to 21 million this year. Most
of the growth in these connections came from
wireless and data services.

In 2002, we increased our subscriber base
in these services as follows:



| |  | cellular and PCS subscribers grew 12.9% to reach 3.4 million                                                                                
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | high-speed Internet subscribers rose 46% to reach 1 million, capturing 42% of the
consumer high-speed Internet market in Ontario and Québec.

Recent CRTC decisions on price caps and
contribution combined with continued economic
and competitive pressures have resulted in a
3% decrease in local and access revenues in
2002. The price cap decision and competitive
pressures have also led to a 2.7% decline in
long distance revenues in 2002.

OUTLOOK FOR 2003

Revenues in 2003 will increase as a result of
the transfer of Aliant and Bell ExpressVu to
us. In 2002, Aliant and Bell ExpressVu had
combined revenues of approximately $3.1
billion net of intercompany transactions with
Bell Canada companies. This will be partially
offset by a decrease in revenues resulting
from the sale of our directories business,
which contributed approximately $500 million
to our total revenues in 2002.

After adjusting our 2002 revenues to
include Aliant and Bell ExpressVus revenues
and to exclude revenues from our directories
business, we are targeting modest growth in
total revenues for 2003. This reflects
continued regulatory impacts, competitive
pressures, and a continuation of the current
economic climate.

We expect our revenue growth will come
largely from increasing our total customer
connections, with a significant portion of the
growth coming from our wireless, data and DTH
businesses.

LOCAL AND ACCESS REVENUES DECLINED BY 3%

Local and access revenues fell to $5.5 billion
in 2002 compared to $5.7 billion in 2001. The
decline was primarily the result of recent
regulatory decisions and a reduction in the
number of NAS in service.

The price cap decision was issued on May 30, 2002. This
decision led to a reduction in some rates
charged for business services and services
provided to competitors and accordingly led to
lower revenues from June to December of 2002.
This decision also expanded the list of
services regulated under the price cap regime
to include value-added services, limiting our
ability to implement price increases for these services.

Also contributing to the decline were
lower subsidies that we received for servicing
high-cost areas. This was the result of a
change in the way companies must calculate the
subsidies that came into effect in 2002 under
the CRTCs Contribution Decision that was
issued on November 30, 2000.

NAS in service fell 1.2% because of:



| |  | growth in high-speed Internet access, which
reduced the need for second telephone lines
|- |  | ---------------------------------------------------------------------------------------
| 
| |  | losses resulting from competition and business
failures or downsizings                 
| 
| |  | customers substituting wireline telephone service with
wireless services.              

OUTLOOK FOR 2003

In 2003, we expect regulatory decisions and
NAS losses to negatively impact local and
access revenues. The CRTC price cap decision
will continue to reduce local and access
revenues in 2003 as we experience the
full-year impact of the price reductions for
business services and services provided to
competitors identified above.

NAS levels are expected to continue to be influenced by
economic and competitive pressures and
wireless and high-speed alternatives as
identified above.

In 2002, Aliant had local and access
revenues of approximately $623 million, net of
intercompany transactions with Bell Canada
companies.

LONG DISTANCE REVENUES DECLINED BY 3%

Long distance revenues fell by $62 million to
$2.3 billion in 2002 compared to 2001
reflecting the recent price cap decision and
competitive pressures. The price cap decision
led to a reduction in the rates charged to
competing long distance companies for carrying
originating and terminating long distance
traffic from and to our local telephone
service customers and accordingly led to lower
revenues from June to December 2002.

We continued to experience competitive
pressures on both residential and business
long distance prices, although at a more
moderate rate than previously experienced.

The average revenue per minute (ARPM)
stabilized in late 2002 at 13 cents which was
one cent lower than it was in 2001. The slight
decline in total ARPM was partly offset by a
5% increase in the volume of conversation
minutes. In 2002, long distance market share
in Ontario and Québec remained relatively
stable at 63%.

OUTLOOK FOR 2003

The recent industry trend of more moderate
pricing pressure is expected to continue in
2003. With lower pricing likely to drive
further increases in the volume of conversation
minutes, we are targeting relatively stable
long distance revenues from our business and
residential customers.

The CRTC price cap decision will continue to negatively impact
revenues in 2003 as we experience the full-year
impact of the price reductions for services
provided to long distance competitors
identified above.

In 2002, Aliant had long distance
revenues of approximately $313 million, net of
intercompany transactions with Bell Canada
companies.

Bell Canada  6  2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

WIRELESS REVENUES GREW BY 18%

Wireless Revenue Growth

|                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Wireless Revenue Growth |  | In 2002, our
cellular and PCS
customer base grew 13%
to 3.4 million. This
gain in subscribers
led to wireless
service revenues of
$1.9 billion, an
increase of 18%
compared to the
previous year.     
Virtually all of
the subscribers added
in 2002 were on
post-paid rate plans.
At December 31, 2002,
73% of our subscribers
were on post-paid
plans, up from 70% in
2001. This reflects
our continued focus on
acquiring and
retaining higher value
and more profitable
customers.     
The monthly
average revenue per
unit (ARPU) grew to
$47 in 2002 from $46
in 2001. The increase
reflects higher
post-paid subscribers as a percentage of the
total base, additional
revenues from
value-added services
and minor price
increases in system
access fees.

OUTLOOK FOR 2003

Our expectation is that the continued strength
of consumer spending in Canada combined with
relatively low wireless penetration, should
lead to further growth in both the number of
wireless subscribers and in wireless service
revenues.

As the industry focuses on profitability,
we expect slower subscriber and revenue growth
in 2003 than the growth experienced in 2002.
Our continued focus is to maintain or increase
our market share and to focus on high-value
postpaid customers and on customer service.
This should lead to relatively stable ARPU in
2003.

In 2002, Aliant had wireless revenues of
approximately $287 million, net of
intercompany transactions with Bell Canada
companies.

DATA REVENUE GREW BY 10%

Data revenue grew to $3.5 billion in 2002 from
$3.2 billion in 2001, reflecting growth in
high-speed Internet, IP broadband and
e-commerce services.

Data Revenue Growth(in millions)

|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Data Revenue Growth |  | In 2002, the
number of high-speed
Internet subscribers
increased 47% to reach
1 million, reflecting
customer preference
for higher speed
alternatives to
dial-up Internet
access. For the first
time, the number of
high-speed Internet
access subscribers
surpassed the number
of dial-up
subscribers. The
number of dial-up
subscribers declined
to 766,000 from
825,000 in 2001.     
Residential represents
the largest segment of
high-speed Internet
subscribers and
comprises 840,000
customers. During the
year, we implemented several initiatives to
increase revenues in
this segment,
including raising the
price of our main
service by $5 per
month and the
introduction of
bandwidth charges and
several value-added
services. Our
high-speed Internet
market share in
Ontario and Québec
grew to 42.2% at
year-end 2002, from
41.7% in 2001, despite
the price increase. At
year-end,
approximately 28% of
households
in Ontario and
Québec had high-speed
Internet access.

DSL High-speed Internet
Subscribers(in thousands)

|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|DSL High-speed Internet Subscribers |  | Revenue from
business and wholesale
customers grew
approximately 6% in
2002, a much slower
rate than in previous
years, reflecting a
general weakening in
demand. Competitive
pressures on prices
also played a role, but
by far, slower growth
in demand had the
greatest impact on
revenue. Demand from
business customers was
soft as customers in
the key sectors we
serve, mainly financial
services, technology
and governments, have
minimized their
investments, choosing
to use existing
capacity instead of
expanding. The wholesale market was also weak. Our market
share remains stable, and growth continues to
move at or above market rates, reflecting that
slower growth is a market phenomenon.

OUTLOOK FOR 2003

Based on our expectation of the same level of
economic growth in 2003 as in 2002, but with
slower growth in high-speed Internet
subscribers, we expect data revenue to grow
but at a lesser rate than experienced in 2002.

We expect large companies will continue
to be cautious in their investments given the
uncertainty in the economy. In addition, given
the financial state of many competitors, we
are not expecting significant increases in
wholesale demand. However, small and
medium-sized businesses are expected to
provide some stability.

Given current residential high-speed
Internet penetration levels, the rate of
growth in subscribers is expected to lessen as
our target market

Bell Canada  7  2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

shifts from early adopters to the mass market
where potential new subscribers are likely to
be more price-sensitive. Customer demand for
lower speed offerings may lead to lower
average revenue per subscriber (ARPS). We will
strive to differentiate our offerings in the
marketplace with value-added services, unique
bundles and superior customer service.

In 2002, Aliant had data revenues of
approximately $312 million, net of
intercompany transactions with Bell Canada
companies.

DTH SERVICES

As of January 1, 2003, we started
consolidating Bell ExpressVus results. Bell
ExpressVu had DTH revenues of approximately
$638 million in 2002, net of intercompany
transactions with Bell Canada companies. We
expect :



| |  | Consumer spending and the growth in
demand for digital TV services to
continue. However, as we focus on
improving profitability we expect more
modest, managed DTH subscriber growth.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | DTH revenue to grow at a slower rate
than in 2002 reflecting slower subscriber
growth, and a number of initiatives aimed
at improving revenues.                                      
| 
| |  | Revenue growth through the launch of new
programming and interactive services.                                                                                                       

EBITDA

The term EBITDA (earnings before interest,
taxes, depreciation and amortization) does not
have a standardized meaning under Canadian
GAAP. We define it as operating revenues less
operating expenses, which means it represents
operating income before amortization expense,
net benefit plans credit (expense) and
restructuring and other charges. The way we
define EBITDA may be different from the way
other publicly traded companies define it or
similar terms. EBITDA should not be confused
with net cash flows from operating activities.
We use EBITDA, amongst other measures, to
assess the operating performance of our
ongoing businesses. The most comparable
Canadian GAAP earnings measure is operating
income. Please refer to the Below  EBITDA
Income and Expensessection of this MD&A on
page 9 for a reconciliation of EBITDA to
operating income and to net earnings
applicable to common shares.

Our EBITDA grew 6.6% to $6.5 billion in
2002 from the $6.1 billion achieved in 2001
driven by productivity gains of $484 million.



| |  | Our focus on productivity resulted in:
|- |  | --------------------------------------



| |  productivity improvements of $484 million,
compared to $470 million in 2001
| | -----------------------------------------------------------------------------
|
| |  an improvement in the EBITDA margin from 42.6%
in 2001 to 45% in 2002.     



| |  | Our EBITDA margin improvement is
significant considering that our mix of
traditional and growth services is
transitioning to an increasing level of
growth services, which tend to have lower
margins than traditional services. For
2002, 42% of our revenue came from growth
services compared to 40% in 2001.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The productivity gains can be categorized as either:



| |  | reducing costs associated with serving
existing customers or
|- |  | ------------------------------------------------------------
| 
| |  | reducing costs
associated with customer acquisition         
| 
| |  | reducing back-office support costs.                       

Productivity gains

Productivity gains

Our productivity improvement program
included numerous projects reflecting both BCE
cross-enterprise initiatives and initiatives
at our level. However, the key elements of the
program included:



| |  | supply chain sourcing and
delivery process improvements that have
realized over $172 million in savings                                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | gaining operating efficiencies in key
functional areas such as call centers and
field services. Improvements in these areas
generated savings of $74 million and $30
million, respectively                                                  
| 
| |  | improving margins on newer services, such as consumer high-speed
Internet service and our broadband/IP
services, by improving the processes around
customer provisioning and customer servicing.
This area generated $50 million in savings.

The CRTC Contribution decision of
November 2000 had a modest positive effect on
EBITDA. This decision called for a change,
effective in 2002, in the way companies
calculate the subsidies they require to serve
high-cost areas, significantly lowering the
amount of those subsidies. It also reduced,
effective 2002, the amount companies had to
contribute to the National Contribution Fund,
reducing our expenses more than it reduced the
subsidy we receive.

OUTLOOK FOR 2003

In 2003, we expect to achieve productivity
improvements of approximately $600 million by
achieving further savings in many of the same
areas targeted in 2002. Productivity gains
will also reflect the reduction of
approximately 1,700 positions in our workforce
and the significant operating benefits that
are expected to result from the strategic
network alliance initiated by ourselves and
Aliant.

We are targeting modest revenue growth
in 2003. Combined with continued productivity
improvements, our objective is to achieve
modest EBITDA growth in 2003.

EBITDA in 2003, net of intercompany
transactions with Bell Canada companies, will
be:



| |  | negatively impacted by the sale of the
directories business, which contributed
approximately $310 million to EBITDA in 2002                                                                  
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | positively impacted by the consolidation of
Aliants and Bell ExpressVus results as of
January 1, 2003. Aliant and Bell
ExpressVu had combined EBITDA of
approximately $808 million in 2002.

Bell Canada  8  2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

BELOW-EBITDA INCOME AND EXPENSES

The table below shows a reconciliation of
EBITDA to operating income and to net earnings
applicable to common shares for each of the
past two years.

|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|---------------------------------------- |  | ---- | ----- | ---- |  | -------- | ----- | - |  |  | ----- | --
|($ millions)                             |  | 2002 |       | 2001 |  | % change
|                                         |  |      |       |      |  |         
|EBITDA                                   |  |      | 6,481 |      |  |          | 6,077 |   |  |  | 6.6   | % 
|Amortization expense                     |  |      | 2,401 |      |  |          | 2,391 |   |  |  | 0.4   | % 
|Net benefit plans credit                 |  |      | (50   | )    |  |          | (138  | ) |  |  | 63.8  | % 
|Restructuring and other
charges          |  |      | 675   |      |  |          | 864   |   |  |  | (21.9 | )%
|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|Operating income                         |  |      | 3,455 |      |  |          | 2,960 |   |  |  | 16.7  | % 
|Other income                             |  |      | 1,268 |      |  |          | 335   |   |  |  | 278.5 | % 
|Interest expense                         |  |      | 839   |      |  |          | 798   |   |  |  | 5.1   | % 
|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|Pre-tax earnings                         |  |      | 3,884 |      |  |          | 2,497 |   |  |  | 55.5  | % 
|Income taxes                             |  |      | 1,102 |      |  |          | 893   |   |  |  | 23.4  | % 
|Non-controlling interest                 |  |      | 1,278 |      |  |          | 14    |   |  |  | N/A   |   
|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|Net earnings before
extraordinary item   |  |      | 1,504 |      |  |          | 1,590 |   |  |  | (5.4  | )%
|Extraordinary item                       |  |      |      |      |  |          | (70   | ) |  |  | N/A   |   
|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|Net earnings                             |  |      | 1,504 |      |  |          | 1,520 |   |  |  | (1.1  | )%
|Dividends on preferred
shares            |  |      | (63   | )    |  |          | (55   | ) |  |  | (14.5 | )%
|Interest on equity-settled
notes         |  |      | (53   | )    |  |          | (80   | ) |  |  | 33.8  | % 
|                                         |  |      |       |      |  |          |       |   |  |  |       |   
|Net earnings applicable
to common shares |  |      | 1,388 |      |  |          | 1,385 |   |  |  | 0.2   | % 
|                                         |  |      |       |      |  |          |       |   |  |  |       |   

Amortization expense

The amount of our amortization expense in a
year is affected by:



| |  | how much we have invested in new capital assets in the past few years                                                 
|- |  | ----------------------------------------------------------------------------------------------------------------------
| 
| |  | how many assets we have retired during the current year                                                               
| 
| |  | changes in accounting rules and estimates. Each year, we review our
estimate of the useful life of our capital assets.

The table below shows our amortization
expense for each of the past two years.

|                           |                          |  |       |       |      |  |       |       | 
|-------------------------- | ------------------------ |  | ----- | ----- | ---- |  | ----- | ----- | 
|                           |                          |  | 2002  |       | 2001
|                           |                          |  |       |       |     
|Amortization of:           |                          |  |       |       |      |  |       |      
|                           | Capital and other assets |  |       | 2,401 |      |  |       | 2,352 | 
|                           | Goodwill                 |  |       |      |      |  |       | 39    | 
|                           |                          |  |       |       |      |  |       |       | 
|Total amortization expense |                          |  | 2,401 |       |      |  | 2,391 |      
|                           |                          |  |       |       |      |  |       |       | 

Our total amortization expense grew by
$10 million in 2002. This was largely a result
of higher levels of investments in capital
assets in the last several years offset by a
new accounting rule that required us to stop
amortizing goodwill, starting in 2002. Please
see Our accounting policies  Changes to accounting standardsin this MD&A for more information.

There were no notable changes in the
amortization method or estimates of the useful
life of our capital assets. The average useful
life of our capital assets is between 13 and
15 years.

OUTLOOK FOR 2003

We expect a modest increase in amortization
expense in 2003. We have made significant
investments in capital assets during the past
few years, but we plan to reduce our capital
spending levels in the future.

In 2002, Aliant and Bell ExpressVu had a
combined amortization expense of approximately
$534 million.

Net benefit plans credit

We maintain plans that provide two types of benefits:



| |  | pension benefits  we are responsible for
adequately funding these plans as entitlements
are earned. We make contributions based on
actuarial methods permitted by the pension
regulatory bodies.
Because our plans have had a surplus, we
have not had to make any contributions in
the past several years.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | other retirement and post-employment
benefits  we do not generally fund these
benefit plans in advance. We make
contributions every year as actual benefit
payments are made.                                                                                                                              

The amount of the net pension benefit
plans (credit) expense in a year primarily
depends on:



| |  | the return on pension plan
assets expected to be generated during the
year  the lower the return, the lower the
credit                                                             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the present value of future pension
benefit payments to employees the lower the
present value, the higher the credit                                                               
| 
| |  | the actuarial gain (loss)  the difference between
the actual net benefit asset and credit
calculated based on our accounting
assumptions. We amortize this into earnings
over time.

The table below is a summary of the net
benefit plans credit for each of the past two
years.

|                                                      |  |      |      |      |  |  |      |  
|----------------------------------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                                                      |  | 2002 |      | 2001
|                                                      |  |      |      |     
|Pension benefits credit                               |  |      | (191 | )    |  |  | (276 | )
|Other retirement and post-employment
benefits expense |  |      | 141  |      |  |  | 138  |  
|                                                      |  |      |      |      |  |  |      |  
|Total net benefit plans credit                        |  |      | (50  | )    |  |  | (138 | )
|                                                      |  |      |      |      |  |  |      |  

We had $12 billion of pension plan assets
at December 31, 2002. Our pension plan surplus
was close to $700 million, which is
significant in relation to plan assets.

Our total net benefit plans credit fell
by $88 million or 64% in 2002. About half of
the decrease was from weak fund performance in
2001. The rate of return was significantly
below our assumption of 8.8%, which created an
actuarial loss. As a result, the fair value of
plan assets at the beginning of the year,
which is used to calculate the pension credit,
was lower in 2002 than in 2001.

After a review of market trends and our
outlook, we reduced our assumption of expected
long-term return on plan assets to 8.3% in
2002. This also contributed to the decrease.

OUTLOOK FOR 2003

The fund performance in 2002 reflected the
negative returns in most markets. This
resulted in an actuarial loss in 2002 and a
reduction in the fair value of plan assets,
which we expect will contribute to a further
decrease in the pension benefit credit. Based
on a review of market trends and our
investment outlook, we have further reduced
our assumption of the long-term return on plan
assets to 7.5% for 2003.

As a result, our business plan, including
Aliant, reflects a net benefit plans expense
of $135 million to $155 million in 2003. We
expect that the lower return assumption will
contribute to about one-third of the decline
in the net benefit plans (credit) expense and
weak fund performance in 2002 will contribute
to the balance.

Bell Canada  9  2002 Financial Information





---



##### Table of Contents



Managements Discussion and Analysis

---

Restructuring and other charges

This includes various operating expenses that
are not directly related to the operating
revenues generated during the year, such as
costs related to streamlining initiatives,
asset write-downs and other types of charges.

2002

STREAMLINING AND OTHER CHARGES

In the fourth quarter of 2002, we recorded
pre-tax charges of $302 million ($190 million
after tax) representing restructuring charges
of $232 million and other charges of $70
million.

The restructuring charges were
primarily from streamlining our management,
line and other support functions and included
employee severance for approximately 1,700
employees, enhanced pension benefits and other
employee costs. This is expected to be
completed in 2003.

Other charges consisted primarily of
various accounts receivable write-downs
relating to billing adjustments and
unreconciled balances from prior years, which
were identified during the year. At December
31, 2002, $111 million of the restructuring
provision remained unpaid.

PAY EQUITY SETTLEMENT

On September 25, 2002, the members of the
Canadian Telecommunications Employees
Association (CTEA) ratified a settlement we
had reached relating to the 1994 pay equity
complaints that the CTEA filed on behalf of
its members before the Canadian Human Rights
Commission. The settlement includes a cash
payout of $128 million and related pension
benefits of approximately $50 million.

As a result of the settlement, we recorded a
one-time charge of $79 million ($45 million
after tax) in the third quarter of 2002. The
onetime charge is equal to the $128 million
cash payout, net of a previously recorded
provision. We are deferring and amortizing the
pension benefits into earnings over the
estimated average remaining service life of
active employees and the estimated average
remaining life of retired employees.

ACCOUNTS RECEIVABLE WRITE-DOWN

During the second quarter, coincident with the
development of a new billing platform, Bell
Canada adopted a new and more precise
methodology to analyze the amount of
receivables by customer as well as by service
line and that permits a more accurate
determination of the validity of customer
balances owed to Bell Canada.

This analysis indicated that a write-down of
accounts receivable amounting to $272 million
was appropriate. As these amounts arose from
legacy billing systems and processes, Bell
Canada has carried out a detailed review of
billings and adjustments for the period from
1997 to 2002. These amounts arose as the
cumulative result of a series of individually
immaterial events and transactions pertaining
to Bell Canadas legacy accounts receivable
systems dating back to the early 1990s.

2001

STREAMLINING AND OTHER CHARGES

We recorded pre-tax charges totalling $864
million ($542 million after tax) in the first
and fourth quarters of 2001. These charges
represented restructuring charges of $470
million and other charges of $394 million.

The restructuring charges were from our
streamlining initiatives and included employee
severance for approximately 3,900 employees,
enhanced pension benefits and other employee
costs. These restructuring programs were
completed in 2002.

Other charges mostly consisted of the
write-down of Bell Mobilitys wireless capital
assets, in particular, its analogue networks,
paging networks and PCS base stations.

Other income

This includes income we receive from
activities that are not part of our regular
business, such as:



| |  | net gains on investments, including gains or
losses when we dispose of, write-down or
reduce our ownership interest in investments                                      
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | other items, including interest income,
equity in net earnings (losses) in
significantly influenced companies, foreign
currency gains (losses) and miscellaneous
income.

The table below shows our sources of
other income for each of the past two years.

|                         |  |      |       |      |  |  |     |  
|------------------------ |  | ---- | ----- | ---- |  |  | --- | -
|                         |  | 2002 |       | 2001
|                         |  |      |       |     
|Net gains on investments |  |      | 1,282 |      |  |  | 406 |  
|Other                    |  |      | (14   | )    |  |  | (71 | )
|                         |  |      |       |      |  |  |     |  
|Total other income       |  |      | 1,268 |      |  |  | 335 |  
|                         |  |      |       |      |  |  |     |  

NET GAINS ON INVESTMENTS

In 2002, our net gains on investments
were primarily from:



| |  | selling the directories business
($2.424 billion)                                                                                                                                 
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | writing down our investment in
Teleglobe ($1.354 billion)                                                                                                                         
| 
| |  | selling an approximate 37% interest in each
of Télébec Limited Partnership and Northern
Telephone Limited Partnership when the Bell
Nordiq Income Fund was created ($222 million).

In 2001, our net gains on investments
were primarily from the sale of
Sympatico-Lycos ($373 million) and TDL ($37
million).

Interest expense

Our debt structure consists of a combination
of short-term and long-term debt. The interest
rate on our short-term debt is usually
variable, while the rate on our long-term debt
is usually fixed.

The table below shows the average
interest rate and average total debt for each
of the past two years.

|                             |  |      |        |      |  |  |        |  
|---------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                             |  | 2002 |        | 2001
|                             |  |      |        |     
|Average annual interest rate |  |      | 7.3    | %    |  |  | 7.5    | %
|Average total debt           |  |      | 11,413 |      |  |  | 10,603 |  
|                             |  |      |        |      |  |  |        |  
|Interest expense             |  |      | 839    |      |  |  | 798    |  
|                             |  |      |        |      |  |  |        |  

Total interest expense grew by 5%, due
primarily to increased debt levels.

Average total debt increased 8% in 2002
from 2001 because of debt financings to fund
capital expenditures and a $975 million
distribution of capital to BCH.

The average interest rate on our
short-term debt was slightly lower in 2002
than in 2001, which resulted in a small
decline in the average interest rate in 2002.

Bell Canada   10   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

OUTLOOK FOR 2003

We do not expect net debt to increase in 2003
if we achieve our objective of having a modest
positive free cash flow. In addition, notes
payable of $975 million due to BCH will be
repaid in 2003 using funds received from
capital injections from BCH. As well, the
proceeds from the loans from affiliated
companies will be used to reduce debt levels.

In 2002, Aliant and ExpressVu had a
combined interest expense of approximately
$152 million, net of intercompany transactions
with Bell Canada companies.

Income taxes

The federal and provincial governments set the
statutory rate of income tax. The table below
is a summary of income tax rates that applied
to us for the past two years, the impact of
items that are taxed at different rates and
the effective rate used to calculate our
income tax expense.

|                                                    |                                                     |  |       |      |      |  |       |      |   
|--------------------------------------------------- | --------------------------------------------------- |  | ----- | ---- | ---- |  | ----- | ---- | --
|                                                    |                                                     |  | 2002  |      | 2001
|                                                    |                                                     |  |       |      |     
|Canadian statutory income tax rate                  |                                                     |  | 37.4  | %    |      |  | 40.1  | %   
|Items reconciling statutory rate
to effective rate: |                                                     |  |       |      |      |  |       |     
|                                                    | Net gains on investments
(taxed at different rates) |  |       | (8.4 | )%   |  |       | (6.6 | )%
|                                                    | Various other items                                 |  |       | (0.6 | )%   |  |       | 2.3  | % 
|                                                    |                                                     |  |       |      |      |  |       |     
|Effective income tax rate                           |                                                     |  | 28.4  | %    |      |  | 35.8  | %   
|Earnings before income taxes                        |                                                     |  | 3,884 |      |      |  | 2,497 |     
|                                                    |                                                     |  |       |      |      |  |       |     
|Income tax expense                                  |                                                     |  | 1,102 |      |      |  | 893   |     
|                                                    |                                                     |  |       |      |      |  |       |     

The statutory income tax rate was reduced
to 37.4% in 2002 from 40.1% in 2001. This,
combined with an increase in net gains on
investments, led to a decrease in the
effective income tax rate.

The pre-tax earnings were $1.4 billion
higher in 2002 than in 2001. This, offset in
part by the lower effective income tax rate,
led to a 23% increase in our income tax
expense in 2002.

OUTLOOK FOR 2003

The Canadian statutory rate that applies to us
is currently set at 35.4% for 2003. The
decrease over 2002 results from federal
corporate tax rate reductions.

Non-controlling interest

A non-controlling interest is the portion of a
subsidiarys common shares that we do not own.
The non-controlling interest in the statements
of operations is affected by:



| |  | the percentage
of a subsidiary that we do not own 
|- |  | --------------------------------------------------
| 
| |  | the
amount of the subsidiarys after-tax earnings.

In 2002, the $1.3 billion increase in
non-controlling interest was primarily due to
the $2.4 billion gain on the sale of our
directories business recorded in the
partnership in which BCE has a 48%
non-controlling interest.




FINANCIAL AND CAPITAL MANAGEMENT

This section tells you how we manage our cash
and capital resources to carry out our
strategy and deliver financial results.

2002 Highlights and Outlook for 2003

We improved our fundamentals by:



| |  | reducing our capital intensity ratio to 20.3% in 2002 from 28.7% in 2001
|- |  | ------------------------------------------------------------------------
| 
| |  | improving free cash flow by 79% or $1.285 billion compared to 2001.     

We are targeting modestly positive free
cash flow in 2003 after payment of capital
expenditures and dividends.

Free Cash Flow(in millions)

|                           |  |                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(FREE CASH FLOW BAR CHART) |  | In the past several
years, we have had
significantly
negative free cash
flow, primarily from
high capital
spending, which we
describe below. We
funded this shortfall
through a combination
of increased debt and
cash generated from
various divestitures.     In
2002, we
improved our free
cash flow shortfall
position, mainly as a
result of
productivity
improvements and
reduced capital
expenditures.



---

|(1) |  | Free cash flows include capital expenditures of $715 million on PCS
Spectrum licences for wireless operations.
|--- |  | --------------------------------------------------------------------------------------------------------------

Free cash flow

Free cash flow is a key financial measure we use to assess our performance.
Free cash flow is derived directly from the statement of cash flows. Please see
the calculations in tabular form on the next page.

A positive free cash flow means that we generated more cash from our
operations than we needed to pay for capital expenditures, dividends and other
investing activities.

Bell Canada   11   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

We reduced our capital intensity ratio to 20.3%

(CAPITAL EXPENDITURES BAR CHART)

Our capital intensity ratio for 2002 was
20.3%, a significant improvement over the 2001
ratio of 28.7%.

We have made significant capital investments over the past few years, including:



| |  | acquiring and completing a national broadband IP network              
|- |  | ----------------------------------------------------------------------
| 
| |  | building a next-generation wireless network and expanding PCS coverage
| 
| |  | acquiring regional spectrum licences                                  
| 
| |  | expanding high-speed Internet coverage in our service territories     
| 
| |  | expanding into Western Canada                                         
| 
| |  | enhancing our billing system capabilities.                            

These investments have allowed us to
build a set of platforms that position us for
future growth, reduced capital intensity and
improved free cash flow.

BELL CANADAS CAPITAL STRUCTURE

|                                 |  |      |        |      |  |  |        |  
|-------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                 |  | 2002 |        | 2001
|                                 |  |      |        |     
|Cash                             |  |      | (1,049 | )    |  |  | 228    |  
|Note payable to BCH              |  |      | 975    |      |  |  |       |  
|Debt due within one year         |  |      | 1,906  |      |  |  | 1,669  |  
|Long-term debt                   |  |      | 10,501 |      |  |  | 9,041  |  
|                                 |  |      |        |      |  |  |        |  
|Total net debt                   |  |      | 12,333 |      |  |  | 10,938 |  
|Non-controlling interest         |  |      | 2,073  |      |  |  | 145    |  
|Total shareholders equity       |  |      | 8,556  |      |  |  | 8,815  |  
|                                 |  |      |        |      |  |  |        |  
|Total capitalization             |  |      | 22,962 |      |  |  | 19,898 |  
|                                 |  |      |        |      |  |  |        |  
|Net debt to total capitalization |  |      | 53.7   | %    |  |  | 55.0   | %
|                                 |  |      |        |      |  |  |        |  

Summary of cash flows

The following table is a summary of the flow
of cash into and out of our company for each
of the past two years.

|                                                             |  |      |        |      |  |  |        |  
|------------------------------------------------------------ |  | ---- | ------ | ---- |  |  | ------ | -
|                                                             |  | 2002 |        | 2001
|                                                             |  |      |        |     
|Cash from operating activities                               |  |      | 4,558  |      |  |  | 3,956  |  
|Capital expenditures                                         |  |      | (2,927 | )    |  |  | (4,099 | )
|Dividends/Distributions                                      |  |      | (1,799 | )    |  |  | (1,162 | )
|Interest on equity-settled notes                             |  |      | (84    | )    |  |  | (87    | )
|Investments                                                  |  |      | (90    | )    |  |  | (230   | )
|Other investing activities                                   |  |      | (8     | )    |  |  | (13    | )
|                                                             |  |      |        |      |  |  |        |  
|Free cash flow                                               |  |      | (350   | )    |  |  | (1,635 | )
|                                                             |  |      |        |      |  |  |        |  
|Divestitures                                                 |  |      | 3,056  |      |  |  | 510    |  
|Impact of consolidating previously
accounted for investments |  |      | 272    |      |  |  |       |  
|Loans to BCE affiliated companies                            |  |      | (270   | )    |  |  |       |  
|Distributions paid by subsidiary to BCE (1)                  |  |      | (1,396 | )    |  |  |       |  
|Contribution of capital (1)                                  |  |      | 296    |      |  |  |       |  
|Net issuance (repayment) of equity
instruments               |  |      | (882   | )    |  |  | (57    | )
|Net issuance (repayment) of debt
instruments                 |  |      | 530    |      |  |  | 1,080  |  
|Other                                                        |  |      | 21     |      |  |  | 80     |  
|                                                             |  |      |        |      |  |  |        |  
|Net increase (decrease) in cash                              |  |      | 1,277  |      |  |  | (22    | )
|                                                             |  |      |        |      |  |  |        |  



---

|(1) |  | The $1,396 million represents a
distribution made by the partnership (held 52%
by us and 48% by BCE) to BCE from the proceeds
of the directories business. BCE, through BCH,
subsequently made a capital contribution into
Bell Canada from those proceeds resulting in
an effective net cash distribution to BCE of
$1.1 billion relating to the proceeds of the
directories business.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capital intensity

Capital intensity is capital expenditures as a percentage of revenues. It is a
key financial measure that we use to assess our performance and that of our
units.

Improving capital intensity is key to improved free cash flow. A positive
trend over time means that we are becoming more efficient in using capital to
generate growth in revenue and cash flows.

Capital structure

Capital structure shows how much of our net assets are financed by debt and
equity.

Net debt to total capitalization ratio

The net debt to total capitalization ratio is a key measure that we use to
assess our financial condition. It tells you how much net debt (short-term and
long-term debt net of cash) we have in relation to our capital (total net debt,
non-controlling interest and shareholders equity).

Bell Canada   12   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

CASH FROM OPERATING ACTIVITIES

We generated a significant amount of
productivity improvements during the year
($484 million pre-tax, compared to $470
million in 2001). Please see our Financial
Results Analysisin this MD&A for more
details. These cost savings translated into
additional cash from our operations.

CAPITAL EXPENDITURES

We continue to make investments to expand our
networks to meet customer demand and for
replacement purposes.

Having much of the significant capital
expenditures relating to the build-out of our
growth infrastructures behind us, we were able
to reduce our capital expenditures by 29% in
2002 compared to 2001. This reduction in
capital spending lowered our capital intensity
ratio to 20.3% in 2002 from 28.7% in 2001.

DIVESTITURES

Our most significant divestiture in 2002 was
the sale of the print directories business for
approximately $3 billion in cash. Following
the sale, $1.1 billion of the net proceeds
were partly used by BCE to help finance the
repurchase of SBCs 20% interest in BCH. The
balance was used for repaying our debt and for
general corporate purposes.

Other divestitures in 2002 included the
sale of our 37% interest in each of Télébec
Limited Partnership and Northern Telephone
Limited Partnership for $324 million when the
Bell Nordiq Income Fund was created.

In 2001, our most significant divestiture
was the sale of Sympatico-Lycos and TDL for
net proceeds of $488 million.

EQUITY INSTRUMENTS

In 2002, we made a return of capital to BCH of
$975 million on our common shares.

DEBT INSTRUMENTS

We use a combination of long-term and
short-term debt to finance our operations. Our
short-term debt consists primarily of bank
facilities, commercial paper programs and
notes payable to related parties. We usually
pay fixed rates of interest on our long-term
debt and market rates on our short-term debt.

The average annual interest rate on our
total debt was approximately 7.3% and 7.5% in
2002 and 2001.

The interest rates we pay are mostly
based on the quality of our credit ratings.
The table that follows lists our credit
ratings, all of which are investment grade.
This usually means that we qualify for better
interest rates than average when we borrow
money. All of these ratings were confirmed in
February 2003.

|                            |  |            |  |              |  |            
|--------------------------- |  | ---------- |  | ------------ |  | -----------
|                            |  | S&P        |  | DBRS         |  | Moody's    
|                            |  |            |  |              |  |            
|Unsecured senior debentures |  | A          |  | A (high)     |  | A-3        
|Commercial paper            |  | A-1 (mid)  |  | R-1 (mid)    |  | P-2        
|Extendable commercial notes |  | A-1 (mid)  |  | R-1 (mid)    |  |           
|Subordinated debentures     |  | A-         |  | A (low)      |  | Baa-1 (neg)
|Preferred shares            |  | P-2 (high) |  | Pfd-2 (high) |  |           

CONTRACTUAL OBLIGATIONS

The table below is a summary of our
contractual obligations at December 31, 2002.

|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 
|----------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  |  | --- |  |  |  | ----- |  |  |  | ------ | 
|                                          |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Long-term debt
(excluding capital leases) |  |      | 1,582 |      |  |      | 953   |      |  |      | 1,178 |            |  |       | 542   |  |  |  | 611 |  |  |  | 6,647 |  |  |  | 11,513 | 
|Capital leases                            |  |      | 101   |      |  |      | 104   |      |  |      | 79    |            |  |       | 72    |  |  |  | 64  |  |  |  | 251   |  |  |  | 671    | 
|Notes payable and bank advances           |  |      | 1,198 |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |    |  |  |  |      |  |  |  | 1,198  | 
|Operating leases                          |  |      | 413   |      |  |      | 348   |      |  |      | 328   |            |  |       | 305   |  |  |  | 263 |  |  |  | 1,588 |  |  |  | 3,245  | 
|Purchase obligations                      |  |      | 545   |      |  |      | 227   |      |  |      | 120   |            |  |       | 112   |  |  |  | 48  |  |  |  | 173   |  |  |  | 1,225  | 
|Other contractual obligations             |  |      | 108   |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |    |  |  |  |      |  |  |  | 108    | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 
|Total                                     |  |      | 3,947 |      |  |      | 1,632 |      |  |      | 1,705 |            |  |       | 1,031 |  |  |  | 986 |  |  |  | 8,659 |  |  |  | 17,960 | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 

COMMERCIAL COMMITMENTS

We had the following commercial commitments at December 31, 2002:



| |  | $1,807 million in total credit and other
bank facilities, of which $72 million was
drawn
|- |  | ----------------------------------------------------------------------------------------
| 
| |  | $122 million in standby letters of credit.                                              

Of the $1,807 million in total credit and
other bank facilities, $950 million is used to
support our commercial paper program,
excluding extendable Class E notes. No amount
has been drawn on our commercial paper
program.

In addition, at December 31, 2002 there
were $50 million of Class E Notes outstanding.
The maximum principal amount that can be
issued is $400 million. Although these notes
are not supported by committed lines of
credit, we may extend them in certain
circumstances.

ACCESS TO CAPITAL

The primary uses of cash in 2003 will consist
of capital expenditures, dividend payments and
the refinancing of debt.

Our plan is built on the assumption that
we will be able to generate enough cash from
our operating activities to pay for capital
expenditures and dividends. Also, the debt
maturing in 2003 is expected to be refinanced
through the issuance of new debt, capital
contributions from BCH, or repaid from cash
generated from our operations in 2003.

Although our plan does not reflect any
cash shortfall in the short term, the lines of
credit and bank facilities are available for
contingency purposes.

USE OF FINANCIAL INSTRUMENTS

We periodically use derivative instruments to manage our exposure to:

Bell Canada   13   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis



| |  | interest rate
risk                                                                                                      
|- |  | ------------------------------------------------------------------------------------------------------------------------
| 
| |  | foreign exchange
risk                                                                                                   
| 
| |  | movements in BCE common share price and the
impact on equity price risk related to special
compensation payments (SCPs).

We do not use derivative instruments to
speculate. Because we do not actively trade in
derivative instruments, we are not exposed to
any significant liquidity risks.

The following derivative instruments were outstanding at December 31, 2002:



| |  | cross currency swaps and currency
forward contracts used to hedge foreign
currency risk on debt                                           
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | forward contracts on BCE common shares
to hedge the fair value exposures related to
stock compensation payments for Bell Canada
employees.

At December 31, 2002, the carrying value
of these derivative instruments was a net
liability of $2 million. Their fair value
amounted to a net asset of $1 million.

Please see Note 1 to the consolidated
financial statements for a description of the
significant accounting policies relating to
financial instruments.

USE OF OFF-BALANCE SHEET ARRANGEMENTS

This section describes outstanding
arrangements at December 31, 2002 and how they
could affect our results of operations and
financial condition.

SALE OF ACCOUNTS RECEIVABLE

Bell Canada sold accounts receivable to a
securitization trust for a total of $900
million in cash, under an agreement that came
into effect on December 12, 2001 and expires on
December 12, 2006. Bell Canada carried a
retained interest in the transferred accounts
receivable of $124 million at December 31,
2002, which equalled the amount of
over-collateralization in the receivables
transferred.

Aliant sold accounts receivable to a
securitization trust for a total of $135
million in cash, under an agreement that came
into effect on December 13, 2001 and expires
on December 13, 2006. Aliant carried a
retained interest in the transferred accounts
receivable of $30 million at December 31,
2002.

Bell Canada and Aliant continue to
service the accounts receivable. The buyers
interest in collections of these accounts
receivable ranks ahead of the interest of Bell
Canada and Aliant. Bell Canada and Aliant
remain exposed to certain risks of default on
the amount of receivables under securitization
and have provided various credit enhancements
in the form of overcollateralization and
subordination of its retained interests.

The buyers will reinvest the amounts
collected by buying additional interests in
the Bell Canada and Aliant accounts receivable
until the agreements expire. The buyers and
their investors have no claim on our and
Aliants other assets if customers fail to pay
amounts owed on time.

SHARED SERVICES AGREEMENT

Effective June 22, 2001, we entered into a
10-year service contract with a special
purpose entity. This contract will allow us to
reduce systems and administrative costs over
time by streamlining and enhancing our systems
and processes. We are committed to paying
approximately $150 million in service fees
over the first three years of the agreement.

In 2004, we may:

     exercise an option to buy the special purpose entity

     maintain the service contract and commit to
paying at least $420 million more in service
fees to the special purpose entity.

SALES LEASEBACK

In our long-term debt balance at December 31,
2002, we had capital leases of $71 million in
2002 and $66 million in 2001, which were
presented net of loans receivable of $319
million. These obligations were from
agreements that we entered into in 1999 and
2001 to sell and lease back telecommunication
equipment for total proceeds of $399 million.
Some of the proceeds were invested in
interest-bearing loans receivable.

CONTINGENCIES

AGREEMENT WITH MTS

The agreement between Bell Canada and MTS to
create Bell West includes put and call options
relating to MTS 40% ownership of Bell West.

Under the terms of the put option, MTS can
require us to buy its interest in Bell West:



| |  | in February 2004 at a guaranteed floor value of
$458 million plus ongoing incremental funding
invested by MTS. The put price includes an 8%
return on the incremental funding. The floor
value was $549 million at December 31, 2002
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | in January 2007 at fair market value less 12.5%                                                                                                                                                                                     
| 
| |  | at fair market value less 12.5%, under
certain circumstances.                                                                                                                                                                       

If MTS does not exercise its put option,
we can exercise our call option. Under the
terms of the call option, we have the option
to buy MTS interest:



| |  | in March 2004 at the
greater of the floor value described above and
fair market value                         
|- |  | --------------------------------------------------------------------------------------------------------------
| 
| |  | in February 2007 at fair
market value                                                                         
| 
| |  | at fair market value if there
is a change of control of MTS to a party other
than ourselves or our affiliates.

We have not received any formal notice
from MTS that it plans to exercise the put
option.

AGREEMENT WITH CGI

Effective July 1, 1998, under the terms of a
ten-year outsourcing agreement, a wholly-owned
subsidiary of CGI (which is a joint venture of
BCE) is the preferred provider of our
information systems and information technology
services.

About off-balance sheet arrangements

These are transactions that we enter into with third parties but do not appear
on our balance sheet. We do not generally enter into off-balance sheet
arrangements.

Bell Canada   14   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

Litigation

We become involved in various claims and
litigation as a regular part of our business.
While no one can predict the final outcome of
claims and litigation that were pending at
December 31, 2002, management believes that
the resolution of these claims and litigation
will not have a material and negative effect
on our consolidated financial position or
results of operations.




RISK ASSESSMENT

The following pages describe general risks
that could affect us. Because no one can
predict whether any risk will happen or its
consequences, the actual effect of any risk on
our business could be materially different
from what we currently anticipate. In
addition, this description of risks does not
include all possible risks and there may be
other risks that we are currently unaware of.

Economic and market conditions

Our business is affected by general economic
conditions, consumer confidence and spending
and the demand for, and the prices of, our
products and services. When there is a decline
in economic growth and retail and commercial
activity, there tends to be a lower demand for
our products and services.

The slowdown and
uncertainty in the global economy have reduced
demand for our products and services, which
negatively affected our financial performance
in 2002 and may also negatively affect it in
2003. In particular, weak economic conditions
have led to:



| |  | lower than expected growth in data revenue,
because of softer demand from enterprises and
wholesale customers
|- |  | -------------------------------------------------------------------------------------------------------------
| 
| |  | some reductions in the number of network
access lines due to business failures or
contractions.              

Weak economic conditions may also
negatively affect the financial condition and
credit risk of our subscribers. This could
increase uncertainty about our ability to
collect receivables.

Improving productivity and reducing capital intensity

In 2002, we have implemented several cost
reduction initiatives.

In 2003, we intend to
continue implementing more productivity
initiatives, including the streamlining of
approximately 1,700 positions in our workforce
and the continuation of the reduction of our
capital intensity.

There could be a material
and negative effect on our profitability if we
do not continue to successfully implement
productivity improvements and reduce capital
intensity, while maintaining the quality of our
service.

Increasing competition

With the advent of competition in the local
service market in 1998, virtually all the
businesses conducted by us face ongoing
competition. In addition, long distance rates
continue to be under pressure. We face intense
competition from traditional competitors, as
well as from new entrants to the markets we
operate in. We compete not only with other
telecommunications companies, but also with
other businesses and industries, such as
cable, Internet companies, wireless service
providers, competitive local exchange carriers
and a variety of companies that offer network
services, such as providers of business
information systems and systems integrators,
as well as other companies that deal with, or
have access to, customers through various
communications networks.

Cable companies and independent Internet
service providers have increased competition in
the Internet access services business.
Competition has led to Internet access pricing
in Canada that is amongst the lowest in the
world and largely independent of usage
patterns. Costs, however, are driven by the
amount of network traffic a user generates, and
the location of the server that stores the Web
site the user visits. Such costs are largely
beyond our control and cannot be accurately
predicted.

The Canadian wireless telecommunications
industry is also highly competitive. We compete
directly with other wireless service providers
with aggressive product and service
introductions, pricing and marketing. We expect
competition to intensify through the
development of new technologies, products and
services and through consolidations in the
industry.

Many of our competitors have substantial
financial, marketing, personnel and
technological resources. We already have
several domestic and foreign competitors, but
the number of foreign competitors having a
presence in Canada and large resources could
increase in the future. New competitors may
also appear as new technologies, products and
services are developed, and for other reasons.

Competition could affect our pricing
strategies and lower our revenues and net
income. It could also affect our ability to
retain existing customers and attract new
ones. Competition puts us under constant
pressure to improve customer service and be
price-competitive. It forces us to keep
reducing costs, managing expenses and
increasing productivity. This means that we
need to be able to anticipate and respond
quickly to the constant changes in our
businesses and markets.

Anticipating technological change

We operate in markets that are experiencing
constant technological change, evolving
industry standards, changing client needs,
frequent new product and service introductions,
and short product life cycles.

Our success will depend in large part on how
well we can anticipate and respond to changes
in industry standards and introduce new and
upgrade existing technologies, products and
services.

We may face additional financial risks as
we develop new products, services and
technologies and update our networks to stay
competitive. Newer technologies, for example,
may quickly become obsolete or may need more
capital than expected. Development could be
delayed for reasons beyond our control.
Substantial investments usually need to be
made before new technologies prove to be
commercially viable.

Risk is the possibility that an event might happen in the future that could
have a negative effect on our financial condition, results of operations or
business.

Part of managing our business is understanding what these potential risks could
be and working to minimize them where we can.

Bell Canada   15   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

There is no assurance that we will be
successful in developing, implementing and
marketing new technologies, products, services
or enhancements within a reasonable time, or
that they will have a market. New products or
services that use new or evolving technologies
could make our existing ones unmarketable or
cause their prices to fall.

Strategies and plans for revenue growth

We plan to increase our revenues through different strategies, including:



| |  | cross-selling additional services to our existing customers                     
|- |  | --------------------------------------------------------------------------------
| 
| |  | adding enhanced features and applications
that make our services more attractive
| 
| |  | expanding our geographical base in Western Canada.                              

If our plans are unsuccessful, our growth
prospects would be hurt. This could have a
material and negative effect on our results of
operations.

Financing our operations

We require substantial amounts of capital to
finance capital expenditures to provide our
services and to refinance our outstanding
debts.

We finance our capital needs in three
ways:



| |  | from cash generated by our operations                    
|- |  | ---------------------------------------------------------
| 
| |  | by borrowing from commercial banks                       
| 
| |  | through debt and equity offerings in the capital markets.

Increased debt financings could increase
our borrowing costs, lower our credit ratings
and give us less flexibility to take advantage
of business opportunities.

Our ability to finance operations and the
cost of funding depends on our ability to
access the capital markets and syndicated
commercial loan market and on market
conditions. In addition, participants in the
syndicated commercial loan market have
internal policies limiting their ability to
extend credit to any single borrower or group
of borrowers or to a particular industry. Less
capital has been available in the capital
markets in general and to the
telecommunications industry in particular, for
several reasons:



| |  | the September 11, 2001 terrorist attacks on the United States                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------
| 
| |  | accounting scandals relating to major North American companies                                                       
| 
| |  | bandwidth overcapacity                                                                                               
| 
| |  | a loss of investor confidence in the
capital markets in general and in the
telecommunications industry in particular.

If we cannot raise the capital we
need, we may have to:



| |  | limit our ongoing capital
expenditures                                               
|- |  | -------------------------------------------------------------------------------------
| 
| |  | limit our investment in new
businesses                                               
| 
| |  | try to raise additional capital by selling
assets or through monetizing transactions.

Any of these possibilities could have a
material and negative effect on our growth
prospects for the long term.

Litigation, regulatory proceedings and changes in laws

Pending or future litigation, regulatory
initiatives or regulatory proceedings could
have a material and negative effect on our
business. Changes in laws or regulations or in
their interpretation, or the adoption of new
laws or regulations could also have a material
and negative effect on our businesses,
operating results and financial condition.

In November 2002, Industry Canada
initiated a review of the current foreign
investment restrictions included in the
Telecommunications Act. A similar process has
been initiated by Canadian Heritage as it
relates to the Broadcasting Act. Since the
reviews by Industry Canada and Canadian
Heritage have not yet been completed and as it
is impossible to predict their outcome, we are
not currently in a position to assess the
impact, if any, these reviews may have on us.

Bell Canadas Annual Information Form for
the year ended December 31, 2002 contains a
detailed description of:



| |  | the principal legal proceedings against
us                  
|- |  | ------------------------------------------------------------
| 
| |  | certain regulatory initiatives and
proceedings affecting us.

Changing wireline regulations

Our business is affected by changes in
policies resulting from decisions made by
various regulatory agencies, including the
CRTC. Many of these decisions balance requests
from competitors for access to essential
facilities, such as the telecommunications
networks, switching and transmission
facilities, and other network infrastructure
of incumbent telephone companies with the
rights of the incumbent telephone companies to
compete reasonably freely.

CRTC PRICE CAP DECISION

The CRTC recently introduced new price cap
rules that reduce some rates that incumbent
telephone companies charge competitors for
services provided to them.

The new rules create certain risks for
us. For example, the CRTC has established a
deferral account, but has not yet determined
how the account will be used. There is a risk
that the account could be used in a way that
could have a negative financial effect on us.

AT&T Canada is the only party that has
petitioned the Governor in Council for changes
to the Price Cap Decision. The Governor in
Council must make a decision on AT&T Canadas
petition by May 30, 2003. If AT&Ts petition
and filings that other parties have made
relating to that petition were successful, it
could have a material and negative effect on
us.

CRTC DECISION ON INCUMBENT AFFILIATES

On December 12, 2002, the CRTC released its
decision on incumbent affiliates, which makes
several important changes to the regulatory
regime for us.

The decision ruled that contracts offered by
Bell Canada or its carrier affiliates that
bundle tariffed and non-tariffed products and
services must receive CRTC approval.

Monetizing

Monetizing means converting the value of a business or other asset into cash or
a cash equivalent.

Bell Canada   16   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

This means that:



| |  | all contracts that currently bundle products
and services must be filed with the CRTC for
regulatory approval                                        
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | all new contracts must receive CRTC approval before implementation.                                                                                  
| 
| |  | carrier affiliates must meet the same
requirements as Bell Canada for tariff
approval on products and services they offer
in our operating territory.

While the decision increases the
regulatory burden for us at both the wholesale
and retail levels in highly competitive
markets, it is not currently possible to
determine the financial effect of the decision
or to separate it from the normal risk of loss
of revenues resulting from competition.

Licences and changing wireless regulations

Companies must have a spectrum licence to
operate cellular, PCS and other
radio-telecommunications systems in Canada.
Bell Mobilitys cellular and PCS licences will
expire on March 31, 2006. The PCS licences
that were awarded in an auction in 2001 will
expire on November 29, 2011. Although we
expect that licences will be renewed when they
expire, there is no assurance that this will
happen. In addition, Industry Canada can
revoke a companys licence at any time if the
company does not comply with its terms.

In December 2002, Industry Canada
initiated a cellular and PCS licensing and
fees consultation. Industry Canada has
proposed a new cellular and PCS fee structure
that, while implemented over several years,
could significantly increase our licence fees
if it is implemented as proposed.

In October 2001, the Minister of Industry
announced his intention to initiate a national
review of Industry Canadas procedures
surrounding the approval and placement of
wireless and radio towers throughout Canada.
The review will include the role of municipal
authorities in the approval process. There is
a risk that if municipal involvement increases
in the process for approval of new towers, it
could significantly slow the expansion of
wireless networks in Canada. This could have a
material and negative effect on the operations
of all of Canadas wireless carriers,
including us.

Bankruptcy proceedings at Teleglobe

On September 19, 2002, Teleglobe, which had
previously started bankruptcy proceedings to
get protection from its creditors in Canada
and in other jurisdictions, announced an
agreement to sell its core telecommunications
business.

Under court orders, contracts between
Teleglobe and Bell Canada and some of its
subsidiaries will be assigned on substantially
the same terms to the buyers on the day the
sale closes. If the sale is not completed,
Teleglobes business could be shut down and
its remaining assets liquidated. If this
happens, we will have to transfer our traffic
to other carriers. While we will do our best
to protect our customers, they could
experience temporary service disruptions or a
lower quality of service if there are delays
in completing the transfer.

Attracting and retaining skilled people

Our success depends in large part on our
ability to attract and retain highly skilled
people. The loss of key people could
materially hurt our businesses and operating
results.

Protecting our networks

Network failures could materially hurt our
business, including our customer relationships
and operating results. Our operations depend
on how well we protect our networks, our
equipment and the information stored in our
data centres against damage from fire, natural
disaster, power loss, hacking, computer
viruses, disabling devices, acts of war or
terrorism and other events. Any of these
events could cause our operations to be shut
down indefinitely.

Renegotiating labour agreements

Many of our employees are represented by
unions and covered by collective bargaining
agreements.

Several of our collective bargaining
agreements expire in 2003 or have already
expired. These agreements, which cover
approximately 14,900 employees, are the
following:



| |  | the collective agreements between Bell
Canada and the Energy and Paperworkers Union
of Canada (CEP) representing approximately 400
operator services employees and approximately
7,000 craft and services employees which
expire at the end of November 2003
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the collective agreement between Bell Canada
and the CTEA representing approximately 1,100
communications sales employees which expires
on December 31, 2003                                                                                                
| 
| |  | several collective agreements between
certain other Bell Canada companies (including
Aliant, Expertech Network Installation Inc.
and Connexim L.P.) and their respective
employees, representing approximately 6,400
employees.                             

Renegotiating collective agreements could
result in higher labour costs or work
disruptions. Difficulties in renegotiations or
other labour unrest could hurt our businesses,
operating results and financial condition.

Increased accidents from using cell phones

Media reports have suggested that using
handheld cell phones while driving may result
in more accidents. It is possible that this
could lead to new regulations or legislation
banning the use of handheld cell phones while
driving, as it has in Newfoundland and
Labrador and several U.S. states. If this
happens, cell phone use in vehicles would
likely decline, which would negatively affect
us and other wireless service providers.

Spectrum licences

Spectrum licences allow companies to use specified frequencies to operate
wireless telephone equipment in Canada.

The Minister of Industry issues spectrum licences at his or her discretion
under the Radiocommunication Act. Licences can be awarded through competitive
bid, public auction or other ways.

Bell Canada   17   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

Health concerns about radio frequency emissions

Media reports have suggested that some radio
frequency emissions from cell phones may be
linked to medical conditions such as cancer. In
addition, some interest groups have requested
investigations into claims that digital
transmissions from handsets used with digital
wireless technologies pose health concerns and
cause interference with hearing aids and other
medical devices.

The findings of these kinds of studies could
lead to government regulation, which could have
a material and negative effect on our business.
Actual or perceived health risks of wireless
communications devices could result in fewer
new network subscribers, lower network usage
per subscriber, higher churn rates, product
liability lawsuits or less outside financing
available to the wireless communications
industry, all of which would have a negative
effect on us and other wireless service
providers.

Pension fund contributions

Most of our pension plans currently have
pension fund surpluses. As a result, we have
not had to make regular contributions to the
pension funds in the past years. It also means
that we have qualified for pension credits,
which have had a positive effect on our net
earnings.

The recent decline in the capital markets,
combined with historically low interest rates,
has significantly reduced the pension fund
surpluses and the pension credits. This has
negatively affected our net earnings.

If these conditions continue, the surpluses
could continue to decline and could eventually
be eliminated. If this happens, we might have
to recognize increased pension expenses and
also start contributing or increase our
contributions to the pension funds. This would
have a material and negative effect on our net
earnings. For more details, refer to the
discussion in this MD&A under Financial Results
Analysis  Below EBITDA Income and Expenses -
Net benefit plans credit.

Bell ExpressVu

Bell ExpressVu continues to face competition
from unregulated U.S. DTH services that are
illegally sold in Canada. In response, it has
initiated or is participating in several legal
actions that are challenging the sale of U.S.
DTH equipment in Canada. While Bell ExpressVu
has been successful in increasing its share of
the satellite television market despite this
competition, there is no assurance that it will
continue to do so.

Bell ExpressVu currently uses two satellites
for its DTH services, Nimiq 1 and Nimiq 2,
which are operated by Telesat. On February 20,
2003, Telesats Nimiq 2 satellite experienced a
malfunction affecting the available power on
the satellite. Telesat is working with the
Nimiq 2 satellite manufacturer, Lockheed
Martin, to understand the cause of the anomaly
and determine the next steps to be taken.

Satellites are subject to significant
risks. Any loss, manufacturing defects, damage
or destruction of the satellites used by Bell
ExpressVu could have a material and negative
effect on Bell ExpressVus results of
operations and financial condition.

Bell ExpressVu is subject to programming
and carriage requirements under its CRTC
licence. Changes to the regulations that
govern broadcasting or to its licence could
negatively affect Bell ExpressVus competitive
position or its costs of providing services.
Bell ExpressVus existing DTH Distribution
undertaking licence is scheduled for renewal
in August 2003. Although we expect that this
licence will be renewed when it expires,
there is no assurance that this will happen.

Finally, Bell ExpressVu faces a loss of
revenue resulting from the theft of its
services. Bell ExpressVu may reduce these
losses by taking numerous actions including
legal action, investigations, implementing
electronic counter-measures targeted at
illegal devices, leading information campaigns
and developing new technology. Implementing
these measures, however, could increase its
capital and operating expenses.




OUR ACCOUNTING POLICIES

We have prepared our consolidated financial
statements according to Canadian GAAP.

This section discusses key estimates and
assumptions that management has made under
these principles and how they affect the
amounts reported in the financial statements
and notes.

It also describes changes to accounting
standards that affect how we account for and
report certain items in our financial
statements.

Please see Note 1 to the consolidated
financial statements, Significant accounting
policies,for more information about the
accounting principles we use to prepare our
financial statements.

KEY ESTIMATES AND ASSUMPTIONS

Under Canadian GAAP, we are required to make
estimates and assumptions when we account for
and report assets, liabilities, revenue and
expenses and disclose contingent assets and
liabilities in our financial statements. We
are also required to constantly evaluate the
estimates and assumptions we use.

We base our estimates and assumptions on
past experience and other factors that we
believe are reasonable under the
circumstances. Because this involves varying
degrees of judgment and uncertainty, the
amounts currently reported in the financial
statements could, in the future, prove to be
inaccurate.

We consider the estimates and assumptions
described in this section to be an important
part of understanding our financial statements
because they rely heavily on managements
judgment and are based on factors that are
inherently uncertain.

Our senior management has discussed the
development and selection of these key
estimates and assumptions with the Audit
Committee of the Board of Directors. The Audit
Committee has reviewed the disclosures
described in this section.

Employee benefit plans

We maintain defined benefit plans that provide
pension, other retirement and post-employment
benefits for most of our employees.

The amounts reported in the financial
statements relating to pension, other
retirement and post-employment benefits are
determined using actuarial calculations that
are based on several assumptions.

We perform a valuation at least every
three years to determine the actuarial present
value of the accrued pension and other
retirement benefits. The valuation uses
managements assumptions for the discount
rate, expected long-term rate of return on
plan assets, rate of compensation increase,
healthcare cost trend and expected average
remaining years of service of employees.

Churn rate

The rate at which existing subscribers cancel their services is called churn.

Surplus

A pension fund has a surplus when the value of its assets is more than the
amount needed to pay accrued pension benefits to pensioners and active
employees.

Bell Canada   18   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

While we believe that these assumptions
are appropriate, differences in actual results
or changes in assumptions could affect
employee benefit obligations and future credit
or expense.

We account for differences between actual
and assumed results by recognizing differences
in benefit obligations and plan performance
over the working lives of the employees who
benefit from the plans.

The two most significant assumptions used
to calculate the net employee benefit plans
credit or expense are:



| |  | the discount rate                                    
|- |  | -----------------------------------------------------
| 
| |  | the expected long-term rate of return
on plan assets.

DISCOUNT RATE

The discount rate is the interest rate used to
determine the present value of the future cash
flows that we expect will be needed to settle
employee benefit obligations. It is usually
based on the yield on long-term high-quality
corporate fixed-income investments.

We determine the appropriate discount
rate at the end of every year. Our discount
rate was 6.5% at December 31, 2002, unchanged
from 2001. Changes in the discount rate do not
have a significant effect on our earnings.
They do, however, have a significant effect on
the projected benefit obligation. A lower
discount rate results in a higher obligation
which could, at some level, require us to make
contributions to the plan.

EXPECTED LONG-TERM RATE OF RETURN

In 2002, we assumed an expected long-term rate
of return on plan assets of 8.3%. The actual
rate of return has been substantially more
than 8.3% on average over the long term. In
the past two years, however, it has been
substantially less than 8.3%.

We have lowered our assumption to a rate
of return of 7.5% for 2003, because we expect
lower long-term rates of return in the
financial markets. We expect this to reduce
pre-tax earnings by about $80 million.

Allowances for doubtful accounts

We maintain allowances for losses that we
expect will result from customers who do not
make their required payments.

We estimate the allowances based on the
likelihood of recovering our accounts
receivable. This is based on past experience,
taking into account current and expected
collection trends.

If economic conditions or specific
industry trends become worse than we have
anticipated, we will increase our allowances
for doubtful accounts by recording an
additional expense.

Useful life of long-lived assets

The estimated useful life of long-lived assets
is used to determine amortization expense.

We estimate an assets estimated useful
life when we acquire the asset. We base our
estimate on past experience with similar
assets, taking into account expected
technological or other changes.

If technological changes happen more
quickly or in a different way than we have
anticipated, we might have to shorten the
assets useful life. This could result in:



| |  | a higher amortization expense in future
periods                      
|- |  | ---------------------------------------------------------------------
| 
| |  | an impairment charge to reflect the
write-down in value of the asset.

Impairment

We assess the impairment of long-lived assets
when events or changes in circumstances
indicate that we may not be able to recover
their carrying value.

We assess the impairment of goodwill and
intangible assets with indefinite lives each
year and when events or changes in
circumstances indicate that goodwill might be
impaired. We usually measure impairment using
a projected discounted cash flow method. If
the assets carrying value is more than its
fair value, we record the difference as an
impairment charge.

We believe that our estimates of future
cash flows and fair value are reasonable. The
assumptions we have used are consistent with
our internal planning and reflect our best
estimates, but they have inherent
uncertainties that management may not be able
to control. As a result, the amounts reported
for these items could be different if we used
different assumptions or if conditions change
in the future.

We cannot predict whether an event that
triggers an impairment will occur, when it
will occur or how it will affect the asset
values we have reported.

Legal contingencies

We become involved in various litigation and
regulatory matters as a regular part of our
business. Pending litigation, regulatory
initiatives or regulatory proceedings
represent potential financial loss to our
business.

We accrue a potential loss if we believe
the loss is probable and it can be reasonably
estimated. We base our decision on available
information.

We estimate the amount of the loss by
consulting with the outside legal counsel who
is handling our defence. This involves
analysing potential outcomes and assuming
various litigation and settlement strategies.

If the resolution of a legal or
regulatory matter results in a judgment
against Bell Canada or the payment of a large
settlement by Bell Canada, it could have a significant and adverse effect
on our results of operations, cash flows and
financial position in the period that the
judgment or settlement occurs.

Restructuring and other charges

We are required to develop formal plans for
exiting businesses and activities as part of
the restructuring initiatives we have been
carrying out for the past several years.

These plans require significant estimates
of the salvage value of assets that are made
redundant or obsolete. We are also required to
report estimated expenses for severance and
other employee costs, lease cancellation and
other exit costs.

Because exiting a business or activity is
a complex process that can take several months
to complete, it involves periodically
reassessing estimates that were made when the
original decision to exit the business or
activity was made. In addition, we constantly
evaluate whether the estimates of the
remaining liabilities under our restructuring
program are adequate.

As a result, we may have to change
previously reported estimates when the
payments are made or the activities are
completed. There may also be additional
charges for new restructuring initiatives.

Bell Canada   19   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

Alternative acceptable accounting policies

Generally accepted accounting principles
permit, in certain circumstances, alternative
acceptable accounting policies. Two areas
where we have made a choice are (1) the
accounting for customer acquisition costs in
our wireless and satellite television
businesses and (2) the accounting for
stock-based compensation cost.

Accounting for customer acquisition costs

We defer and amortize these costs over the
life of the customer contract in the case of
the wireless business and over three years in
the case of the satellite television business.
The alternative method would have been to
expense these costs as they are incurred. We
have selected to defer and amortize these
costs because we believe it provides for a
better matching of the costs with the future
revenue stream being generated by providing
monthly services to the customer.

Accounting for stock-based compensation cost

We account for employee stock options by using
the compensation costs of options (the amount
that the quoted market price at the date of
grant of BCEs common shares exceeds the
amount an employee must pay to buy the common
shares). The alternative method would have
been to use the fair value based method of
accounting using an option pricing model such
as Black-Scholes. While we acknowledge that
stock options represent a form of
compensation, we elected to use the
compensation costs of option method for 2002
to maintain comparability to other companies.
In response to demands from the financial
community and the fact that accounting
standard setters in Canada and the United
States are moving towards the adoption of
mandatory fair value accounting, effective
January 1, 2003, we have adopted the fair
value-based method of accounting.

CHANGES TO ACCOUNTING STANDARDS

This section tells you about changes to the
accounting standards and how they affect our
financial statements.

Business combinations

The CICA issued a new section in the CICA
Handbook, section 1581, Business Combinations,
which came into effect July 1, 2001. It
requires us to use the purchase method to
account for all business combinations.

Under the purchase method, the assets,
liabilities, earnings and cash flows from an
acquired business are recorded from the date
of acquisition.

Goodwill and other intangible assets

The CICA issued a new Handbook section in the
CICA Handbook, section 3062, Goodwill and
Other Intangible Assets,which came into
effect on January 1, 2002.

This section requires that goodwill and
intangible assets with an indefinite life:



| |  | no longer be amortized to earnings                                                                                                                                                                     
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | be assessed for impairment each year
according to the new standards. This included
a transitional test that required any
impairment to be charged to opening retained
earnings in the year of adoption.

As a result, we allocated our existing
goodwill to our reporting unit. We also
conducted a quantitative assessment of how the
transitional test would affect our financial
statements.

Under the transitional provisions, no
impairment charge was required as of January
1, 2002.

Foreign currency translation

Effective January 1, 2002, we adopted the
revised recommendations in section 1650 of the
CICA Handbook, Foreign Currency Translation.
These standards require us to include all
unrealized translation gains and losses on
assets and liabilities denominated in foreign
currencies in earnings for the year. This
includes gains and losses on long-term
monetary assets and liabilities, such as
long-term debt, which we previously deferred
and amortized on a straight-line basis over
the remaining lives of the related items.

We applied the recommendations
retroactively and restated prior periods. On
January 1, 2002, this resulted in:



| |  | a decrease of $131 million in other
long-term assets      
|- |  | ----------------------------------------------------------
| 
| |  | a decrease of $23 million in future
income tax liabilities
| 
| |  | a decrease of $108 million in retained
earnings.          

About the CICA

The Canadian Institute of Chartered Accountants (CICA) conducts research into
current business issues and sets accounting and assurance standards for
business, not-for-profit organizations and government.

It issues guidance on control and governance, publishes professional
literature, develops continuing education programs and represents the Canadian
accounting profession nationally and internationally.

Bell Canada   20   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

Stock-based compensation and other stock-based payments

Effective January 1, 2002, we adopted the new
recommendations in section 3870 of the CICA
Handbook, Stock-based compensation and other
stock-based payments.

This section sets standards for
recognizing, measuring and disclosing
stock-based compensation and other stock-based
payments made in exchange for goods and
services. The standards require us to use a
fair value-based method for:



| |  | all stock-based awards to non-employees                          
|- |  | -----------------------------------------------------------------
| 
| |  | direct awards of stock and stock
appreciation rights to employees
| 
| |  | awards to employees that are settled in
cash or other assets.    

The standards also encourage companies to
use a fair value-based method for all other
awards granted to employees.

Upon adoption, we elected to account for
employee stock options by measuring the
compensation cost of the options. This is the
amount that the quoted market price of BCE
common shares on the date of the grant exceeds
the amount an employee must pay to buy the
common shares.

In December 2002, we announced that
effective January 1, 2003, we will account for
employee stock options by measuring the
compensation cost for options granted on or
after January 1, 2002 under the fair
value-based method of accounting, using a
Black-Scholes option pricing model. As a
result of applying this new accounting policy,
we expect to record additional operating
expenses of approximately $17 million to $21
million in 2003.

Impairment of long-lived assets

The CICA recently issued a new section in the
CICA Handbook, section 3063, Impairment of
long-lived assets.It provides guidance on
recognizing, measuring and disclosing the
impairment of long-lived assets. It replaces
the write-down provisions in section 3061 of
the CICA Handbook, Property, plant and
equipment.

The new section requires us to recognize
an impairment loss for a long-lived asset to
be held and used when its carrying value
exceeds the total undiscounted cash flows
expected from its use and eventual
disposition. The impairment loss is the amount
that the carrying value of the asset exceeds
its fair value.

This section comes into effect in 2004
for Bell Canada, but the CICA encourages
companies to start using the new standards
before then. We do not expect that adopting
these standards will affect our consolidated
financial statements.

Disposal of long-lived assets and discontinued operations

The CICA recently issued a new section in its Handbook, section 3475,
Disposal of long-lived assets and discontinued
operations.It provides guidance on
recognizing, measuring, presenting and
disclosing long-lived assets to be disposed
of. It replaces the disposal provisions in
section 3061,
Property, plant and equipment,and section 3475, Discontinued operations.

The new section provides criteria for
classifying assets as held for sale. It
requires an asset classified as held for sale
to be measured at fair value less disposal
costs.

It also provides criteria for classifying
a disposal as a discontinued operation and
specifies the presentation of and disclosures
for discontinued operations and other
disposals of long-lived assets.

This section comes into effect for
disposal activities started on or after May 1,
2003, but the CICA encourages companies to
start using the new standard before then. We
do not expect that adopting these standard
will affect our consolidated financial
statements.

Disclosure of guarantees

In February 2003, the CICA issued Accounting
Guideline 14 (AcG-14), Disclosure of
guarantees. This guideline provides assistance
regarding the identification of guarantees and
requires a guarantor to disclose the
significant details of guarantees that have
been given regardless of whether it will have
to make payments under the guarantees. Although
the disclosure requirements of this guideline
have been mostly harmonized with similar
guidance in the United States, unlike the U.S.
standard, this guideline does not require the
fair value recognition of guarantees on the
balance sheet and does not extend to product
warranties. This guideline will come into
effect for our first quarter of 2003. Please
see Note 21, to the consolidated financial
statements for more information on guarantees.

Consolidation of special purpose entities

In August 2002, the CICA issued a draft
accounting guideline titled Consolidation of
special purpose entities. The final guideline
is expected to be consistent, in all material
respects, with the recently issued U.S.
standard, although the implementation date has
not yet been determined. We are currently
evaluating the impact of this draft guideline
on our consolidated financial statements.

Asset retirement obligations

The CICA recently approved the issuance of a
new section in the CICA Handbook, section
3310, Asset retirement obligations. This
standard focuses on the recognition and
measurement of liabilities related to legal
obligations associated with the retirement of
property, plant and equipment. Under this
standard, these obligations are initially
measured at fair value and subsequently
adjusted for the accretion of discount and any
changes in the underlying cash flows. The
asset retirement cost is to be capitalized to
the related asset and amortized into earnings
over time. This section comes into effect for
us in 2004. We are currently evaluating the
impact of this standard on our consolidated
financial statements.

Bell Canada   21   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis

OPERATIONAL HIGHLIGHTS

|                                                                                          |  |      |        |      |  |      |        |  |  |  |        |  | 
|----------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  | 
|December 31                                                                               |  | 2002 |        | 2001 |  | 2000
|                                                                                          |  |      |        |      |  |     
|Local and access                                                                          |  |      |        |      |  |      |        |  |  |  |        | 
|Network access services
(thousands of lines
in service)                                   |  |      | 11,633 |      |  |      | 11,769 |  |  |  | 11,791 | 
|                                                                                          |  |      |        |      |  |      |        |  |  |  |        | 
|Long Distance                                                                             |  |      |        |      |  |      |        |  |  |  |        | 
|Conversation minutes
(millions)                                                           |  |      | 15,368 |      |  |      | 14,704 |  |  |  | 14,601 | 
|Average revenue per minute
(cents)                                                        |  |      | 13     |      |  |      | 14     |  |  |  | 15     | 
|                                                                                          |  |      |        |      |  |      |        |  |  |  |        | 
|Wireless                                                                                  |  |      |        |      |  |      |        |  |  |  |        | 
|Cellular & PCS subscribers
(thousands)                                                    |  |      | 3,368  |      |  |      | 2,982  |  |  |  | 2,381  | 
|Cellular & PCS net
activations (thousands)                                                |  |      | 386    |      |  |      | 601    |  |  |  | 503    | 
|Average revenue per unit
($/month)                                                        |  |      | 47     |      |  |      | 46     |  |  |  | 46     | 
|                                                                                          |  |      |        |      |  |      |        |  |  |  |        | 
|Data                                                                                      |  |      |        |      |  |      |        |  |  |  |        | 
|Equivalent access lines -
Bell Canada only
(thousands)
Digital equivalent(1)
access lines |  |      | 3,683  |      |  |      | 3,713  |  |  |  | N/A    | 
|Broadband
equivalent(2)
access lines                                                      |  |      | 12,568 |      |  |      | 9,109  |  |  |  | N/A    | 
|DSL high-speed Internet
subscribers (thousands)                                           |  |      | 1,014  |      |  |      | 689    |  |  |  | 300    | 
|DSL high-speed Internet
net activations
(thousands)                                       |  |      | 325    |      |  |      | 389    |  |  |  | 249    | 
|                                                                                          |  |      |        |      |  |      |        |  |  |  |        | 



---

|(1) |  | Digital equivalent access lines are
derived by converting lower capacity data
lines (DS-3 and lower) to the equivalent
number of voice grade access lines.     
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Broadband equivalent access lines are
derived by converting higher capacity data
lines (higher than DS-3) to the equivalent
number of voice grade access lines.

Bell Canada   22   2002 Financial Information



---



##### Table of Contents



Managements Discussion and Analysis




SUPPLEMENTARY FINANCIAL INFORMATION

ANNUAL FINANCIAL INFORMATION

|                                           |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |        |  
|------------------------------------------ | ------------------------------------------------------------------ | ---- |  | ------- |  | ------- |  | ------- | - | ------- |  | ------- | - |  |  | ------ |  |  |  | ------ |  |  |  | ------ | -
|For the year ended December 31 (unaudited) |                                                                    | 2002 |  | 2001(1) |  | 2000(1) |  | 1999(1) |   | 1998(1) |  | 1997(1)
|                                           |                                                                    |      |  |         |  |         |  |         |   |         |  |        
|Statements of operations data ($ millions) |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |       
|                                           | Total operating revenues                                           |      |  | 14,403  |  |         |  | 14,265  |   |         |  | 13,230  |   |  |  | 12,583 |  |  |  | 12,405 |  |  |  | 12,309 |  
|                                           | EBITDA(i)                                                          |      |  | 6,481   |  |         |  | 6,077   |   |         |  | 5,775   |   |  |  | 5,399  |  |  |  | 5,424  |  |  |  | 5,352  |  
|                                           | Operating income                                                   |      |  | 3,455   |  |         |  | 2,960   |   |         |  | 3,546   |   |  |  | 2,896  |  |  |  | 2,498  |  |  |  | 2,677  |  
|                                           | Earnings from continuing operations                                |      |  | 1,504   |  |         |  | 1,590   |   |         |  | 1,544   |   |  |  | 1,362  |  |  |  | 1,069  |  |  |  | 901    |  
|                                           | Discontinued operations (net of tax)                               |      |  |        |  |         |  |        |   |         |  | (99     | ) |  |  |       |  |  |  |       |  |  |  |       |  
|                                           | Net earnings applicable to common shares
before extraordinary item |      |  | 1,388   |  |         |  | 1,455   |   |         |  | 1,306   |   |  |  | 1,295  |  |  |  | 1,036  |  |  |  | 865    |  
|                                           | Extraordinary item (net of tax)                                    |      |  |        |  |         |  | (70     | ) |         |  |        |   |  |  |       |  |  |  |       |  |  |  | (2,870 | )
|                                           | Net earnings (loss) applicable to common shares                    |      |  | 1,388   |  |         |  | 1,385   |   |         |  | 1,306   |   |  |  | 1,295  |  |  |  | 1,036  |  |  |  | (2,005 | )
|                                           | Dividends on common shares                                         |      |  | 1,769   |  |         |  | 1,157   |   |         |  | 1,085   |   |  |  | 868    |  |  |  | 765    |  |  |  | 764    |  
|                                           |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |        |  
|Balance sheets data ($ millions)           |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |       
|                                           | Total assets                                                       |      |  | 29,527  |  |         |  | 24,529  |   |         |  | 22,728  |   |  |  | 21,742 |  |  |  | 19,478 |  |  |  | 18,382 |  
|                                           | Long-term debt (including current portion)                         |      |  | 12,184  |  |         |  | 10,237  |   |         |  | 8,955   |   |  |  | 8,531  |  |  |  | 10,840 |  |  |  | 10,439 |  
|                                           | Retractable preferred shares                                       |      |  |        |  |         |  |        |   |         |  | 6       |   |  |  | 116    |  |  |  | 128    |  |  |  | 129    |  
|                                           | Preferred shares                                                   |      |  | 1,100   |  |         |  | 1,100   |   |         |  | 735     |   |  |  | 630    |  |  |  | 630    |  |  |  | 630    |  
|                                           | Equity-settled notes                                               |      |  | 2,068   |  |         |  | 2,068   |   |         |  | 2,493   |   |  |  | 2,493  |  |  |  | 923    |  |  |  | 832    |  
|                                           | Common shareholders equity                                        |      |  | 5,388   |  |         |  | 5,647   |   |         |  | 5,417   |   |  |  | 5,483  |  |  |  | 2,007  |  |  |  | 1,713  |  
|                                           | Capital expenditures                                               |      |  | 2,927   |  |         |  | 4,099   |   |         |  | 2,852   |   |  |  | 2,499  |  |  |  | 2,629  |  |  |  | 2,252  |  
|                                           |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |        |  
|Other data                                 |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |       
|                                           | Network access services (ii) (thousands)                           |      |  | 11,633  |  |         |  | 11,769  |   |         |  | 11,791  |   |  |  | 11,564 |  |  |  | 11,543 |  |  |  | 11,210 |  
|                                           | Conversation minutes (millions)                                    |      |  | 15,368  |  |         |  | 14,704  |   |         |  | 14,601  |   |  |  | 13,830 |  |  |  | 11,664 |  |  |  | 10,703 |  
|                                           | Number of employees (as at December 31)                            |      |  | 54,258  |  |         |  | 43,724  |   |         |  | 45,073  |   |  |  | 43,995 |  |  |  | 46,031 |  |  |  | 46,719 |  
|                                           | Salaries and wages (excl. workforce reduction costs)
($ millions)  |      |  | 2,460   |  |         |  | 2,478   |   |         |  | 2,390   |   |  |  | 2,391  |  |  |  | 2,459  |  |  |  | 2,555  |  
|                                           |                                                                    |      |  |         |  |         |  |         |   |         |  |         |   |  |  |        |  |  |  |        |  |  |  |        |  

QUARTERLY FINANCIAL INFORMATION

|                                                |  |             |       |             |  |             |       |             |  |      |       |         |  |      |       |         |  |  |        |   |  |  |       |  |  |  |       |  |  |  |       | 
|----------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | ----- | ----------- |  | ---- | ----- | ------- |  | ---- | ----- | ------- |  |  | ------ | - |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|unaudited                                       |  | 4th Quarter |       | 3rd Quarter |  | 2nd Quarter |       | 1st Quarter
|                                                |  |             |       |             |  |             |       |            
|($ millions)                                    |  | 2002        |       | 2001(1)     |  | 2002        |       | 2001(1)     |  | 2002 |       | 2001(1) |  | 2002 |       | 2001(1)
|                                                |  |             |       |             |  |             |       |             |  |      |       |         |  |      |       |        
|Total operating revenues                        |  |             | 3,748 |             |  |             | 3,798 |             |  |      | 3,551 |         |  |      | 3,620 |         |  |  | 3,587  |   |  |  | 3,487 |  |  |  | 3,517 |  |  |  | 3,360 | 
|Operating income                                |  |             | 689   |             |  |             | 328   |             |  |      | 1,046 |         |  |      | 1,036 |         |  |  | 722    |   |  |  | 917   |  |  |  | 998   |  |  |  | 679   | 
|Earnings (loss) before
extraordinary item       |  |             | 1,472 |             |  |             | 6     |             |  |      | 507   |         |  |      | 446   |         |  |  | (971   | ) |  |  | 500   |  |  |  | 496   |  |  |  | 638   | 
|Extraordinary item
(net of tax)                 |  |             |      |             |  |             | (70   | )           |  |      |      |         |  |      |      |         |  |  |       |   |  |  |      |  |  |  |      |  |  |  |      | 
|Net earnings (loss)                             |  |             | 1,472 |             |  |             | (64   | )           |  |      | 507   |         |  |      | 446   |         |  |  | (971   | ) |  |  | 500   |  |  |  | 496   |  |  |  | 638   | 
|Net earnings (loss) applicable
to common shares |  |             | 1,443 |             |  |             | (97   | )           |  |      | 478   |         |  |      | 410   |         |  |  | (1,000 | ) |  |  | 466   |  |  |  | 467   |  |  |  | 606   | 
|EBITDA(i)                                       |  |             | 1,584 |             |  |             | 1,506 |             |  |      | 1,701 |         |  |      | 1,605 |         |  |  | 1,629  |   |  |  | 1,501 |  |  |  | 1,567 |  |  |  | 1,465 | 
|                                                |  |             |       |             |  |             |       |             |  |      |       |         |  |      |       |         |  |  |        |   |  |  |       |  |  |  |       |  |  |  |       | 



---

|(1)  |  | Please see Note 1 to the consolidated financial statements, Significant
accounting policies, for the basis of presentation.                                                                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(i)  |  | Earnings before interest expense, income taxes, amortization and excluding
net benefit plans credit and restructuring and other charges. EBITDA does not
have a standardized meaning provided by Canadian GAAP and therefore may not be
comparable to similar measures presented by other issuers. Bell Canada uses
EBITDA to assess its operating performance.
|    
|(ii) |  | Network access services represents, at December 31, approximately the
number of lines in service.                                                                                                                                                                                                                                                              

Bell Canada   23   2002 Financial Information



---



##### Table of Contents



Managements report

This section of our financial information contains the consolidated financial
statements of Bell Canada. Bell Canada consists of many businesses, including
subsidiaries, joint ventures and investments in significantly influenced
companies. We present the financial information for all these holdings as one
consolidated company.

These financial statements form the basis of this financial information.

The financial statements, and all of the information in this financial
information, are the responsibility of the management of Bell Canada and have
been approved by the Board of Directors. Deloitte & Touche LLP, Chartered
Accountants, the shareholders auditors, have audited the financial statements.

Management has prepared the financial statements in accordance with Canadian
generally accepted accounting principles (GAAP). Under these principles,
management has made certain estimates and assumptions that are reflected in the
financial statements and notes. Management believes that these financial
statements fairly present Bell Canadas consolidated financial position,
results of operations and cash flows.

To ensure the accuracy and completeness of the financial statements, management
has a system of internal controls, which is supported by an internal audit
group that reports to the Audit Committee, and includes communication to
employees about policies for ethical business conduct. Management believes that
the internal controls provide reasonable assurance that our financial records
are reliable and form a proper basis for preparing the financial statements,
and that our assets are properly accounted for and safeguarded.

The Board of Directors has appointed an Audit Committee, made up of outside,
unrelated directors. The Audit Committees responsibilities include reviewing
the financial statements and other information in this financial information,
and recommending them to the Board of Directors for approval. The internal
auditors and the shareholders auditors have free and independent access to the
Audit Committee.

|                          |  |                          
|------------------------- |  | -------------------------
|-s- MICHAEL J. SABIA      |  | -s- PATRICK PICHETTE     
|(signed) Michael J. Sabia |  | (signed) Patrick Pichette
|Chief Executive Officer   |  | Chief Financial Officer  

February 26, 2003



Auditors report

To the shareholders of Bell Canada:

We have audited the consolidated balance sheets of Bell Canada as at December
31, 2002 and 2001, and the consolidated statements of operations, retained
earnings and cash flows for the years then ended. These consolidated financial
statements are the responsibility of Bell Canadas management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance that the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Bell Canada as at December 31,
2002 and 2001 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.

-s- DELOITTE & TOUCHE LLP
(signed) DELOITTE & TOUCHE LLP
Chartered Accountants

Montreal, Canada
February 26, 2003

Bell Canada   24   2002 Financial Information



---



##### Table of Contents



Consolidated financial statements  Bell Canada

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | ---- | ----- | ---- | ------ | - | --- | - | ------ | -
|For the year ended December 31 ($ millions)                                                                                                                                           |  | Notes    |  | 2002 |       | 2001
|                                                                                                                                                                                      |  |          |  |      |       |     
|Operating revenues                                                                                                                                                                    |  |          |  |      |       |      |        |   |     |   |        |  
|Local and access                                                                                                                                                                      |  |          |  |      |       |      | 5,532  |   |     |   | 5,731  |  
|Long distance                                                                                                                                                                         |  |          |  |      |       |      | 2,266  |   |     |   | 2,328  |  
|Wireless                                                                                                                                                                              |  |          |  |      |       |      | 1,880  |   |     |   | 1,589  |  
|Data                                                                                                                                                                                  |  |          |  |      |       |      | 3,494  |   |     |   | 3,182  |  
|Terminal sales, directory advertising and other                                                                                                                                       |  |          |  |      |       |      | 1,231  |   |     |   | 1,435  |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Total operating revenues                                                                                                                                                              |  |          |  |      |       |      | 14,403 |   |     |   | 14,265 |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Operating expenses                                                                                                                                                                    |  |          |  |      |       |      | 7,922  |   |     |   | 8,188  |  
|Amortization expense                                                                                                                                                                  |  |          |  |      |       |      | 2,401  |   |     |   | 2,391  |  
|Net benefit plans credit                                                                                                                                                              |  |          |  |      |       |      | (50    | ) |     |   | (138   | )
|Restructuring and other charges                                                                                                                                                       |  | (Note 4) |  |      | 675   |      |        |   | 864 |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Total operating expenses                                                                                                                                                              |  |          |  |      |       |      | 10,948 |   |     |   | 11,305 |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Operating income                                                                                                                                                                      |  |          |  |      |       |      | 3,455  |   |     |   | 2,960  |  
|Other income                                                                                                                                                                          |  | (Note 5) |  |      | 1,268 |      |        |   | 335 |  
|Interest expense                                                                                                                                                                      |  | (Note 6) |  |      | 839   |      |        |   | 798 |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Earnings before income taxes and non-controlling interest                                                                                                                             |  |          |  |      |       |      | 3,884  |   |     |   | 2,497  |  
|Income taxes                                                                                                                                                                          |  | (Note 7) |  |      | 1,102 |      |        |   | 893 |  
|Non-controlling interest                                                                                                                                                              |  |          |  |      |       |      | 1,278  |   |     |   | 14     |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Earnings before extraordinary item                                                                                                                                                    |  |          |  |      |       |      | 1,504  |   |     |   | 1,590  |  
|Extraordinary item                                                                                                                                                                    |  | (Note 8) |  |      |      |      |        |   | (70 | )
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Net earnings                                                                                                                                                                          |  |          |  |      |       |      | 1,504  |   |     |   | 1,520  |  
|Dividends on preferred shares                                                                                                                                                         |  |          |  |      |       |      | (63    | ) |     |   | (55    | )
|Interest on equity-settled notes                                                                                                                                                      |  |          |  |      |       |      | (53    | ) |     |   | (80    | )
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Net earnings applicable to common shares                                                                                                                                              |  |          |  |      |       |      | 1,388  |   |     |   | 1,385  |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|The following is a reconciliation of net earnings to reflect the comparative impact of no
longer amortizing goodwill and indefinite-life intangible assets effective January 1, 2002: |  | (Note 1) |  |      |       |      |        |   |     |  
|Adjusted net earnings                                                                                                                                                                 |  |          |  |      |       |      |        |   |     |   |        |  
|Net earnings, as reported                                                                                                                                                             |  |          |  |      |       |      | 1,504  |   |     |   | 1,520  |  
|Amortization expense on goodwill and indefinite-life intangible assets                                                                                                                |  |          |  |      |       |      |       |   |     |   | 39     |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  
|Net earnings, adjusted                                                                                                                                                                |  |          |  |      |       |      | 1,504  |   |     |   | 1,559  |  
|                                                                                                                                                                                      |  |          |  |      |       |      |        |   |     |  

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

|                                                     |                    |          |  |      |      |      |       |        |     |   |       |        |  
|---------------------------------------------------- | ------------------ | -------- |  | ---- | ---- | ---- | ----- | ------ | --- | - | ----- | ------ | -
|For the year ended December 31 ($ millions)          |                    | Notes    |  | 2002 |      | 2001
|                                                     |                    |          |  |      |      |     
|Balance at beginning of year, as previously reported |                    |          |  |      |      |      | 709   |        |     |   | 454   |       
|Adjustment for change in accounting policy           |                    | (Note 1) |  |      | (108 | )    |       |        | (78 | )
|                                                     |                    |          |  |      |      |      |       |        |     |  
|Balance at beginning of year, as restated            |                    |          |  |      |      |      | 601   |        |     |   | 376   |       
|Net earnings                                         |                    |          |  |      |      |      | 1,504 |        |     |   | 1,520 |       
|Dividends                                            |  Preferred shares |          |  |      |      |      |       | (63    | )   |   |       | (55    | )
|                                                     |  Common shares    |          |  |      |      |      |       | (1,769 | )   |   |       | (1,157 | )
|Interest on equity-settled notes                     |                    |          |  |      |      |      | (53   | )      |     |   | (80   | )     
|Other                                                |                    |          |  |      |      |      | (3    | )      |     |   | (3    | )     
|                                                     |                    |          |  |      |      |      |       |        |     |  
|Balance at end of year                               |                    |          |  |      |      |      | 217   |        |     |   | 601   |       
|                                                     |                    |          |  |      |      |      |       |        |     |  

Please read the notes starting on page 28. They are an important part of these
consolidated financial statements.

Bell Canada   25   2002 Financial Information



---



##### Table of Contents



Consolidated financial statements  Bell Canada

CONSOLIDATED BALANCE SHEETS

|                                                                                                                             |  |           |  |      |        |      |        |  |        |  |        | 
|---------------------------------------------------------------------------------------------------------------------------- |  | --------- |  | ---- | ------ | ---- | ------ |  | ------ |  | ------ | 
|At December 31 ($
millions)                                                                                                  |  | Notes     |  | 2002 |        | 2001
|                                                                                                                             |  |           |  |      |        |     
|ASSETS                                                                                                                       |  |           |  |      |        |      |        |  |        |  |        | 
|Current assets                                                                                                               |  |           |  |      |        |      |        |  |        |  |        | 
|Cash and cash equivalents                                                                                                    |  |           |  |      |        |      | 1,049  |  |        |  |       | 
|Notes receivable from related parties                                                                                        |  |           |  |      |        |      | 270    |  |        |  |       | 
|Accounts receivable (net of allowance for doubtful accounts of
$184 million and $89 million for 2002 and 2001, respectively) |  |           |  |      |        |      | 2,094  |  |        |  | 2,150  | 
|Other current assets                                                                                                         |  |           |  |      |        |      | 608    |  |        |  | 590    | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total current assets                                                                                                         |  |           |  |      |        |      | 4,021  |  |        |  | 2,740  | 
|Capital assets                                                                                                               |  | (Note 9)  |  |      | 18,892 |      |        |  | 14,847 | 
|Other long-term assets                                                                                                       |  | (Note 10) |  |      | 3,965  |      |        |  | 4,907  | 
|Indefinite-life intangible assets                                                                                            |  | (Note 11) |  |      | 772    |      |        |  | 756    | 
|Goodwill                                                                                                                     |  | (Note 12) |  |      | 1,877  |      |        |  | 1,279  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total assets                                                                                                                 |  |           |  |      |        |      | 29,527 |  |        |  | 24,529 | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|LIABILITIES                                                                                                                  |  |           |  |      |        |      |        |  |        |  |        | 
|Current liabilities                                                                                                          |  |           |  |      |        |      |        |  |        |  |        | 
|Bank indebtedness                                                                                                            |  |           |  |      |        |      |       |  |        |  | 228    | 
|Accounts payable and accrued liabilities                                                                                     |  |           |  |      |        |      | 3,269  |  |        |  | 2,773  | 
|Note payable to BCH                                                                                                          |  | (Note 13) |  |      | 975    |      |        |  |       | 
|Debt due within one year                                                                                                     |  | (Note 13) |  |      | 1,906  |      |        |  | 1,669  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total current liabilities                                                                                                    |  |           |  |      |        |      | 6,150  |  |        |  | 4,670  | 
|Long-term debt                                                                                                               |  | (Note 14) |  |      | 10,501 |      |        |  | 9,041  | 
|Other long-term liabilities                                                                                                  |  | (Note 15) |  |      | 2,247  |      |        |  | 1,858  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total liabilities                                                                                                            |  |           |  |      |        |      | 18,898 |  |        |  | 15,569 | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Non-controlling interest                                                                                                     |  |           |  |      |        |      | 2,073  |  |        |  | 145    | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Commitments and contingencies                                                                                                |  | (Note 21) |  |      |        |      |        |  |        | 
|                                                                                                                            
|SHAREHOLDERS EQUITY                                                                                                         |  |           |  |      |        |      |        |  |        |  |        | 
|Preferred shares                                                                                                             |  | (Note 17) |  |      | 1,100  |      |        |  | 1,100  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Equity-settled notes                                                                                                         |  | (Note 17) |  |      | 2,068  |      |        |  | 2,068  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Common
shareholders equity                                                                                                 
|Common shares                                                                                                                |  | (Note 17) |  |      | 4,264  |      |        |  | 4,673  | 
|Contributed surplus                                                                                                          |  | (Note 17) |  |      | 902    |      |        |  | 367    | 
|Retained earnings                                                                                                            |  |           |  |      |        |      | 217    |  |        |  | 601    | 
|Currency translation adjustment                                                                                              |  |           |  |      |        |      | 5      |  |        |  | 6      | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total common shareholders equity                                                                                            |  |           |  |      |        |      | 5,388  |  |        |  | 5,647  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total shareholders equity                                                                                                   |  |           |  |      |        |      | 8,556  |  |        |  | 8,815  | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 
|Total liabilities and shareholders equity                                                                                   |  |           |  |      |        |      | 29,527 |  |        |  | 24,529 | 
|                                                                                                                             |  |           |  |      |        |      |        |  |        | 

Please read the notes starting on page 28. They are an important part of these
consolidated financial statements.

On behalf of the Board of Directors:

|                            |  |                           
|--------------------------- |  | --------------------------
|-s- THOMAS E. KIERANS       |  | -s- J. EDWARD NEWALL      
|(signed)                    |  | (signed)                  
|Thomas E. Kierans, Director |  | J. Edward Newall, Director

Bell Canada   26   2002 Financial Information



---



##### Table of Contents



Consolidated financial statements  Bell Canada

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |       |  
|-------------------------------------------------------------------------------------- | ---------------------------------------------- | --------- |  | ---- | ----- | ---- | ------ | ------ | ---- | - | ------ | ----- | -
|For the year ended December 31 ($ millions)                                            |                                                | Notes     |  | 2002 |       | 2001
|                                                                                       |                                                |           |  |      |       |     
|Cash flows from operating activities                                                   |                                                |           |  |      |       |      |        |        |      |   |        |      
|Net earnings                                                                           |                                                |           |  |      |       |      | 1,504  |        |      |   | 1,520  |      
|Adjustments to reconcile earnings to cash flows from operating activities:             |                                                |           |  |      |       |      |        |        |      |   |        |      
|                                                                                       | Extraordinary item, net of tax                 |           |  |      |       |      |        |       |      |   |        | 70    |  
|                                                                                       | Amortization expense                           |           |  |      |       |      |        | 2,401  |      |   |        | 2,391 |  
|                                                                                       | Restructuring and other charges                |           |  |      |       |      |        | 613    |      |   |        | 804   |  
|                                                                                       | Net gains on investments                       |           |  |      |       |      |        | (1,282 | )    |   |        | (406  | )
|                                                                                       | Future income taxes                            |           |  |      |       |      |        | 305    |      |   |        | (73   | )
|                                                                                       | Non-controlling interest                       |           |  |      |       |      |        | 1,278  |      |   |        | 14    |  
|                                                                                       | Other items                                    |           |  |      |       |      |        | (93    | )    |   |        | (324  | )
|                                                                                       | Changes in non-cash working capital components |           |  |      |       |      |        | (168   | )    |   |        | (40   | )
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|                                                                                       |                                                |           |  |      |       |      | 4,558  |        |      |   | 3,956  |      
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|Cash flows from investing activities                                                   |                                                |           |  |      |       |      |        |        |      |   |        |      
|Capital expenditures                                                                   |                                                |           |  |      |       |      | (2,927 | )      |      |   | (4,099 | )    
|Investments                                                                            |                                                |           |  |      |       |      | (90    | )      |      |   | (230   | )    
|Divestitures                                                                           |                                                |           |  |      |       |      | 3,056  |        |      |   | 510    |      
|Impact of consolidating previously equity accounted investments                        |                                                |           |  |      |       |      | 272    |        |      |   |       |      
|Notes receivable from related parties                                                  |                                                |           |  |      |       |      | (270   | )      |      |   |       |      
|Other items                                                                            |                                                |           |  |      |       |      | (8     | )      |      |   | (13    | )    
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|                                                                                       |                                                |           |  |      |       |      | 33     |        |      |   | (3,832 | )    
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|Cash flows from financing activities                                                   |                                                |           |  |      |       |      |        |        |      |   |        |      
|Increase (decrease) in notes payable and bank advances                                 |                                                |           |  |      |       |      | 587    |        |      |   | (30    | )    
|Issue of long-term debt                                                                |                                                |           |  |      |       |      | 1,444  |        |      |   | 1,864  |      
|Repayment of long-term debt                                                            |                                                |           |  |      |       |      | (1,501 | )      |      |   | (754   | )    
|Contribution of capital                                                                |                                                |           |  |      |       |      | 296    |        |      |   |       |      
|Distribution of capital                                                                |                                                |           |  |      |       |      | (975   | )      |      |   |       |      
|Issue of preferred shares                                                              |                                                |           |  |      |       |      |       |        |      |   | 695    |      
|Redemption of preferred shares                                                         |                                                |           |  |      |       |      |       |        |      |   | (335   | )    
|Dividends paid on common and preferred shares                                          |                                                |           |  |      |       |      | (1,770 | )      |      |   | (1,162 | )    
|Issue of common shares/partnership units by subsidiary to non-controlling interest/BCE |                                                |           |  |      |       |      | 93     |        |      |   | 8      |      
|Distributions paid by subsidiary to BCE                                                |                                                |           |  |      |       |      | (1,396 | )      |      |   |       |      
|Dividends/distributions paid by subsidiaries to non-controlling interest               |                                                |           |  |      |       |      | (29    | )      |      |   |       |      
|Repayment of equity-settled note                                                       |                                                |           |  |      |       |      |       |        |      |   | (425   | )    
|Interest paid on equity-settled notes                                                  |                                                |           |  |      |       |      | (84    | )      |      |   | (87    | )    
|Other items                                                                            |                                                |           |  |      |       |      | 21     |        |      |   | 80     |      
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|                                                                                       |                                                |           |  |      |       |      | (3,314 | )      |      |   | (146   | )    
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|Net increase (decrease) in cash and cash equivalents                                   |                                                |           |  |      |       |      | 1,277  |        |      |   | (22    | )    
|Bank indebtedness at beginning of year                                                 |                                                |           |  |      |       |      | (228   | )      |      |   | (206   | )    
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      
|Cash and cash equivalents (bank indebtedness) at end of year                           |                                                | (Note 22) |  |      | 1,049 |      |        |        | (228 | )
|                                                                                       |                                                |           |  |      |       |      |        |        |      |   |        |      

Please read the notes starting on page 28. They are an important part of these
consolidated financial statements.

Bell Canada   27   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada

All amounts are in millions of Canadian dollars, except where noted.

1. SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING PRINCIPLES

We have prepared the consolidated financial
statements in accordance with Canadian
generally accepted accounting principles
(GAAP). We consolidate the financial
statements of all companies we control, and we
proportionately consolidate our share in joint
venture interests. All transactions and
balances between these companies have been
eliminated on consolidation.

We have reclassified some of the figures
for previous years in the consolidated
financial statements to make them consistent
with the presentation in the current year.

The principal companies that we control and consolidate are:



| |  | Bell Mobility Inc. (Bell Mobility)                                                                                                 
|- |  | -----------------------------------------------------------------------------------------------------------------------------------
| 
| |  | BCE Nexxia Inc. (carrying on business in
Canada under the name Bell Nexxia)                                                        
| 
| |  | Bell Distribution Inc.                                                                                                             
| 
| |  | Certen Inc.                                                                                                                        
| 
| |  | Bell Nordiq Group Inc. (Bell Nordiq)
(formerly Télébec Limited and Northern
Telephone Limited)                                     
| 
| |  | Bell West Inc. (Bell West)                                                                                                         
| 
| |  | Northwestel Inc.                                                                                                                   
| 
| |  | Connexim Inc.                                                                                                                      
| 
| |  | Expertech Network Installation Inc.                                                                                                
| 
| |  | Aliant Inc. (Aliant)  as of December
31, 2002  see Note 3, Business
acquisitions and dispositions                                
| 
| |  | Bell ExpressVu Limited Partnership (Bell
ExpressVu)  as of December 31, 2002 
see Note 3, Business acquisitions and
dispositions.

ACCOUNTING FOR INVESTMENTS

We use different methods to account for
investments that are neither consolidated nor
proportionately consolidated in our financial
statements:



| |  | the equity method for companies
that we can significantly influence
|- |  | -------------------------------------------------------------------
| 
| |  | the cost
method for our investments in other companies.            

The principal companies that we significantly influence are:



| |  | Manitoba Telecom Services Inc. (MTS)   
|- |  | ---------------------------------------
| 
| |  | Entourage Inc. (Entourage)             
| 
| |  | BCE Nexxia Corporation (Nexxia U.S.)   
| 
| |  | Fiberco Telecommunications Corporation.

We include investments in Other long-term
assetson the balance sheet. Earnings from
investments are included in Other incomein
the statements of operations.

We expense declines in the market values
of our investments when management considers
them to be other than temporary.

USING ESTIMATES

When preparing financial statements in
accordance with GAAP, management makes
estimates and assumptions relating to:



| |  | reported amounts of revenues and expenses       
|- |  | ------------------------------------------------
| 
| |  | reported amounts of assets and liabilities      
| 
| |  | disclosure of contingent assets and
liabilities.

Actual results could be different from these estimates.

RECOGNIZING REVENUE

We recognize operating revenues when they are
earned, specifically when:



| |  | services are provided                       
|- |  | --------------------------------------------
| 
| |  | products are delivered to customers         
| 
| |  | persuasive evidence of an arrangement exists
| 
| |  | amounts are fixed or determinable           
| 
| |  | collectibility is reasonably assured.       

In particular, we recognize:



| |  | fees for long distance and wireless services,
and other fees, such as network access fees,
licence fees, maintenance fees and standby
fees, when we provide the services or over the
term of the contract
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | subscriber revenue when customers receive the service                                                                                                                                                    
| 
| |  | advertising revenue when advertisements are printed and distributed                                                                                                                                      
| 
| |  | revenues from the sale of equipment when the
equipment is delivered to customers and
accepted.                                                                                                           

For transactions involving multiple
elements, revenue is allocated based on
relative fair values.

For arrangements in which subcontractors
perform services for customers, we recognize
revenue based on the amounts billed to the
customers when we act as the principal in the
arrangement. Otherwise, we record the net
amount that we keep.

Accruals for sales returns are recorded
when revenues are recognized and are based on
past experience.

We defer payments we receive in advance
until we provide the service or deliver the
product to customers.

CASH AND CASH EQUIVALENTS

We classify all highly liquid investments with
short-term maturities as cash and cash
equivalents.



Equity method

An investment is initially recorded at cost, and adjustments are made to
include our share of the investments net earnings or losses. These adjustments
are included in the calculation of our net earnings. The amount of our
investment is reduced by the amount of dividends we have received or have been
declared and are due to be received.

Cost method

The investment is recorded at cost. Dividends received or receivable from the
investment are included in the calculation of our net earnings.



Bell Canada   28   2002 Financial Information



---



##### Table of Contents



1. SIGNIFICANT ACCOUNTING POLICIES(continued)

SALES OF ACCOUNTS RECEIVABLE

Effective July 1, 2001, we adopted the
Canadian Institute of Chartered Accountants
(CICA) Accounting Guideline 12, Transfers of
Receivables. This guideline covers the
requirements for transferring and servicing
receivables. Please see Note 16, Financial
instruments, for more information.

We consider a transfer of accounts
receivable to be a sale when we give up control
over the accounts receivable in exchange for
proceeds from a trust (other than our
beneficial interest in such accounts
receivable).

We recognize gains or losses on this type
of transaction as Other incomeor expense. The
gains or losses partly depend on the previous
carrying amount of the accounts receivable
transferred. We allocate this amount to
accounts receivable sold or our retained
interest according to their relative fair
values on the day the transfer is made.

We determine fair value based on the
present value of future expected cash flows.
Cash flows are projected using managements
best estimates of key assumptions, such as
discount rates, weighted average life of
accounts receivable and credit loss ratios.

The accounts receivable are transferred on a
fully-serviced basis. As a result, we:



| |  | recognize a servicing liability on the
date the accounts receivable are transferred
to the trust  
|- |  | --------------------------------------------------------------------------------------------------
| 
| |  | amortize this liability to earnings
over the expected life of the transferred
accounts receivable.

CAPITAL ASSETS

We carry capital assets at cost less
accumulated amortization. In general, we use
the straight-line method to amortize capital
assets. Most of our capital assets are
amortized using composite group depreciation
methodology. When we retire a portion of these
assets in the ordinary course of business, we
charge their original cost to accumulated
amortization and no gain or loss is recognized
on their dispositions. We base the
amortization rates on the estimated useful
life of the asset:

|                              |  |                      
|----------------------------- |  | ---------------------
|                              |  | Estimated useful life
|                              |  |                      
|Telecommunications assets     |  | 10 to 25 years       
|Machinery and equipment       |  | 2 to 20 years        
|Buildings                     |  | 10 to 40 years       
|Finite-life intangible assets |  | 3 years              

Each year, we review the estimate of the
useful life of the assets. Software is our
only significant finite life intangible asset.

We assess the impairment of capital assets
when events or changes in circumstances
indicate that we may not be able to recover
their carrying value. We calculate the
impairment by deducting the net recoverable
amount of the assets (based on estimates of
undiscounted future cash flows) from their
carrying value. This
amount is deducted from earnings.

SUBSCRIBER ACQUISITION COSTS

The costs of acquiring subscribers are
classified in assets as short or long term, as
appropriate. We account for these costs as
follows:



| |  | we defer and amortize the costs of acquiring
Direct-to-Home (DTH) satellite service
subscribers into earnings over three years                         
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we defer and amortize the costs of acquiring
wireless subscribers into earnings over the
terms of the contracts. The terms are normally
up to 24 months
| 
| |  | we expense all other subscriber acquisition costs as they are incurred.                                                                                

The costs we defer and amortize consist mainly of hardware subsidies.

ISSUING DEBT

The costs of issuing debt are recorded as an
increase in other long-term assets and are
amortized on a straight-line basis over the
term of the related debt.

INDEFINITE LIFE INTANGIBLE ASSETS

Effective January 1, 2002, we no longer
amortize indefinite-life intangible assets.
Spectrum licences are our only significant
intangible assets with an indefinite useful
life.

We assess the impairment of these assets
each year and when events or changes in
circumstances indicate that assets might be
impaired. We calculate the impairment by
deducting the fair value of the asset (based
on estimates of discounted future cash flows)
from its carrying value. This amount is
deducted from earnings.

GOODWILL

Effective January 1, 2002, we no longer
amortize goodwill. Instead, we are required to
assess the impairment of goodwill of our
reporting unit each year and when events or
changes in circumstances indicate that
goodwill might be impaired. Please see Note 1,
Significant accounting policies  Recent
changes to accounting standards, for more
information.

We assess impairment of goodwill in two steps:



| |  | we identify a potential impairment by
comparing the fair value (based on estimates
of discounted future cash flows or other
valuation methods) of our reporting unit to
its carrying value. When the fair value of the
reporting unit is less than its carrying
value, we allocate the fair value of the
reporting unit to all of its assets and
liabilities, based on their fair values. The
amount by which the fair value of the
reporting unit exceeds the amounts assigned to
its assets and liabilities is the fair value
of goodwill.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we determine if there is an impairment by
comparing the fair value of goodwill to its
carrying value. Any excess is deducted from
earnings.                                                                                                                                                                                                                                                                                                                                                                                                 

Goodwill

Goodwill is created when we acquire businesses. It is calculated by deducting
the fair value of the net identifiable assets acquired from the cost of the
investment. Goodwill represents the value of factors that are expected to
contribute to a greater earnings power, such as a good reputation, customer
loyalty or intellectual capital.

Bell Canada   29   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

1. SIGNIFICANT ACCOUNTING POLICIES(continued)

TRANSLATION OF FOREIGN CURRENCIES

The way we account for a foreign operation
depends on whether the operation is
self-sustaining or integrated. Self-sustaining
foreign operations are largely independent of
the parent company. Integrated foreign
operations depend on the parent company to
finance or run their operations.

Self-sustaining foreign operations

For self-sustaining foreign operations, we use:

     the exchange rates in effect on the date of
the balance sheet for assets and liabilities

     the average exchange rates during the year for revenues and expenses.

Translation exchange gains and losses are
reflected as a currency translation adjustment
in shareholders equity. When we reduce our
net investment in a self-sustaining foreign
operation, we recognize an appropriate portion
of the currency translation adjustment in
earnings.

Integrated foreign operations

For integrated foreign operations, we use:



| |  | the exchange rates on the date of the
balance sheet for monetary assets and
liabilities (for example, cash, accounts
receivable and payable, and long-term debt)
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the historical exchange rates for
non-monetary assets and liabilities (for
example, capital assets)                                                             
| 
| |  | the average exchange rates during the year for revenues and expenses.                                                                                           

Translation exchange gains and losses are reflected in earnings.

Domestic transactions and balances in foreign currencies

For domestic transactions made in foreign currencies, we use:



| |  | the exchange rates on the date of the
balance sheet for monetary assets and
liabilities
|- |  | ---------------------------------------------------------------------------------------
| 
| |  | the average exchange rates during the year for revenues and expenses.                  

Translation exchange gains and losses are reflected in earnings.

DERIVATIVE FINANCIAL INSTRUMENTS

We use various derivative financial
instruments to hedge against:



| |  | interest rate
risk                                                                                                                 
|- |  | -----------------------------------------------------------------------------------------------------------------------------------
| 
| |  | foreign exchange rate risk                                                                                                         
| 
| |  | movements in BCE Inc. (BCE) common share
price and the impact on equity price risk
related to special compensation payments
(SCPs).

We expect that the derivatives we use
will generate sufficient cash flows, gains or
losses to offset these risks. We do not use
derivative financial instruments to speculate.

We describe the derivatives we use and
how we account for them below. Please see Note
16, Financial instruments,for more
information about derivatives. Please see Note
18, Stock-based compensation plans,for more
information about SCPs.

We formally document all relationships
between hedging instruments and hedged items,
and our risk management objective and strategy
for using various hedges. This process
includes linking all derivatives to:



| |  | specific assets and liabilities on the balance
sheet, or
|- |  | --------------------------------------------------------
| 
| |  | specific firm commitments, or                           
| 
| |  | forecasted transactions.                                

We formally assess how effective
derivatives are in managing risk when the
hedge is put in place and on an ongoing basis.

We follow these policies when accounting for derivatives:



| |  | deferred gains or losses relating to
derivatives that qualify for hedge accounting
are recognized in earnings when the hedged
item or anticipated transaction is ended early
or sold
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | gains and losses related to hedges of
anticipated transactions are recognized in
earnings or are recorded as adjustments of
carrying values when the hedged transaction
occurs      
| 
| |  | derivatives that are economic hedges, and do
not qualify for hedge accounting, are
recognized at fair value. We record the change
in fair value through earnings                    
| 
| |  | any premiums paid for financial instrument
contracts are deferred and expensed to
earnings over the period of the contract.                                                         

The following is a description of our
policies for specific types of derivatives.

Interest rate swap agreements

We use interest rate swap agreements to help
manage the fixed and floating interest rate
mix of our total debt portfolio.

These agreements often involve exchanging
payments without exchanging the notional
principal amount that the payments are based
on. We record the exchange of payments as an
adjustment of interest expense on the hedged
debt. We include the related amount payable or
receivable from counterparties as an adjustment
to accrued assets or liabilities.

Foreign currency swap agreements

We use foreign currency swap agreements to
manage the exchange rate exposure of some of
our debt that is denominated in foreign
currencies.

We designate these agreements as
hedges of firm commitments to pay interest and
principal on the foreign currency risk. We
recognize gains and losses on these contracts
the same way we recognize the gains and losses
on the hedged item.

Forward contracts

We use forward contracts to manage equity
price risk exposure related to SCPs. We
recognize gains and losses on these contracts
the same way we recognize the gains and losses
on the hedged item. Unrealized gains or losses
are included in other assets or liabilities.

Bell Canada   30   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

1. SIGNIFICANT ACCOUNTING POLICIES(continued)

EMPLOYEE BENEFIT PLANS

We maintain non-contributory defined benefit
plans. These plans provide for pensions for
almost all of our employees. The benefits are
based on the employees length of service and
rate of pay.

The plans also provide other
post-employment and retirement benefits,
including:



| |  | healthcare and life insurance benefits at retirement                                                                                                                                                                                     
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | various disability plans, workers
compensation and medical benefits to former or
inactive employees, their beneficiaries and
dependants, from the time their employment
ends until their retirement starts, under
certain circumstances.

We accrue our obligations under employee
benefit plans and related costs, net of the
fair value of plan assets. Actuaries determine
pension costs and other retirement benefits
using:



| |  | the projected benefit method, prorated on years of service                                                                                              
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | managements best estimate of the
plans expected investment performance, salary
escalation, retirement ages of employees and
expected healthcare costs.

We use a market-related value
approach to:



| |  | value pension plan assets at
fair value      
|- |  | ---------------------------------------------
| 
| |  | calculate the expected return
on plan assets.

We amortize past service costs from plan
amendments on a straight-line basis over the
average remaining service period of employees
who were active on the date of the amendment.
We deduct 10% of the benefit obligation or the
fair value of plan assets, whichever is
greater, from the net actuarial gain or loss,
and amortize the excess over the average
remaining service period of active employees.

When the restructuring of a benefit plan
results in both a curtailment and a settlement
of obligations, we account for the curtailment
before we account for the settlement.

Our actuaries perform a valuation at
least every three years to determine the
actuarial present value of the accrued pension
and other retirement benefits.

INCOME TAXES

We use the asset and liability method on all
transactions recorded in the consolidated
financial statements.

Future income taxes reflect the temporary
differences between the carrying amounts of
assets and liabilities for accounting purposes
and the amounts used for tax purposes. We
calculate future income taxes using the rates
and provisions in enacted and substantively
enacted tax law.

STOCK-BASED COMPENSATION PLANS

Bell Canadas stock-based compensation plans
primarily include employee savings plans
(ESPs) and long-term incentive programs.
Before 2000, these plans sometimes included
SCPs. Please see Note 18,
Stock-based compensation plans, for more information.

We recognize compensation expense for
Bell Canadas portion of the contributions
made under the ESP. We also recognize a
compensation expense relating to SCPs.

RECENT CHANGES TO ACCOUNTING STANDARDS

Business combinations, goodwill and other intangible assets

CICA Handbook section 1581, Business
Combinations, came into effect on July 1, 2001.
It requires us to use the purchase method to
account for all business combinations.

CICA
Handbook section 3062, Goodwill and Other
Intangible Assets, came into effect on January
1, 2002. It requires that goodwill and
indefinite-life intangible assets:



| |  | no longer be amortized to earnings                                                                                                                                                                     
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | be assessed for impairment each year
according to the new standards. This included a
transitional test that required any impairment
to be charged to opening retained earnings in
the year of adoption.

Under the transitional provisions, no
impairment charge was required as of January
1, 2002.

Foreign currency translation

Effective January 1, 2002, we adopted the
revised recommendations in section 1650 of the
CICA Handbook, Foreign Currency Translation.
These standards require us to include in
earnings for the year all unrealized
translation gains and losses on assets and
liabilities denominated in foreign currencies
in earnings for the year. This includes gains
and losses on long-term monetary assets and
liabilities, such as long-term debt, which we
previously deferred and amortized on a
straight-line basis over the remaining life of
the related items.

Curtailment

A curtailment is a significant reduction in plan benefits that can result when
a defined benefit pension plan is amended or restructured. Types of
curtailments include:



| |  | a reduction of the expected number of years of future service of active
employees                        
|- |  | ---------------------------------------------------------------------------------------------------------
| 
| |  | the elimination of the right to earn defined benefits for some or all of the
future service of employees.

Settlement

A company makes a settlement when it substantially settles all or part of an
accrued benefit obligation. An example is a lump-sum cash payment to employees
in exchange for their rights to receive future benefits.

Tax law

A tax law is substantively enacted when it has been tabled in Parliament but
has not necessarily been passed into law.

Bell Canada   31   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

1. SIGNIFICANT ACCOUNTING POLICIES(continued)

We applied these amendments retroactively
and restated prior periods. On January 1,
2002, this resulted in:



| |  | a decrease of $131 million in other
long-term assets      
|- |  | ----------------------------------------------------------
| 
| |  | a decrease of $23 million in future
income tax liabilities
| 
| |  | a decrease of $108 million in retained
earnings.          

Stock-based compensation and other stock-based payments

Effective January 1, 2002, we adopted the new
recommendations of section 3870 of the CICA
Handbook, Stock-based compensation and other
stock-based payments.This section sets
standards for recognizing, measuring and
disclosing stock-based compensation and other
stock-based payments made to employees and to
non-employees in exchange for goods and
services.

The standards require us to use a fair
value-based method for certain awards granted
on or after January 1, 2002. These include:



| |  | all stock-based awards to non-employees                          
|- |  | -----------------------------------------------------------------
| 
| |  | direct awards of stock and stock appreciation rights to employees
| 
| |  | awards to employees that are settled in cash or other assets.    

The standards also encourage companies to
use a fair value-based method for all other
awards granted to employees.

Upon adoption, we
elected to account for employee stock options
by measuring the compensation cost of options
at the date of grant(1). This is the amount
that the quoted market price of BCEs common
shares on the date of the grant exceeds the
amount an employee must pay to buy the common
shares.

FUTURE CHANGES TO ACCOUNTING STANDARDS

Impairment of long-lived assets

The CICA recently issued a new section in the
CICA Handbook, section 3063, Impairment of
long-lived assets. It provides guidance on
recognizing, measuring and disclosing the
impairment of long-lived assets. It replaces
the write-down provisions in section 3061,
Property, plant and equipment.

The new section requires us to recognize
an impairment loss for a long-lived asset to
be held and used when events or changes in
circumstances cause its carrying value to
exceed the total undiscounted cash flows
expected from its use and eventual
disposition. The impairment loss is calculated
by deducting the fair value of the asset from
its carrying value.

This section comes into effect for us in
2004, but the CICA encourages companies to
start using the new standard before then. We
do not expect that adopting this standard will
affect our consolidated financial statements.

Disposal of long-lived assets and discontinued operations

The CICA recently issued a new section in the
CICA Handbook, section 3475, Disposal of
long-lived assets and discontinued operations.
It provides guidance on recognizing,
measuring, presenting and disclosing
long-lived assets to be disposed of. It
replaces the disposal provisions in section
3061, Property, plant and equipment, and
section 3475, Discontinued operations.

The new section provides criteria for
classifying assets as held for sale. It
requires an asset classified as held for sale
to be measured at fair value less disposal
costs.

It also provides criteria for classifying
a disposal as a discontinued operation and
specifies the presentation of and disclosures
for discontinued operations and other
disposals of long-lived assets.

This section comes into effect for
disposal activities started on or after May 1,
2003, but the CICA encourages companies to
start using the new standard before then. We
do not expect that adopting this standard will
affect our consolidated financial statements.

Disclosure of guarantees

In February 2003, the CICA issued Accounting
Guideline 14 (AcG-14), Disclosure of
guarantees. This guideline provides assistance
regarding the identification of guarantees and
requires a guarantor to disclose the
significant details of guarantees that have
been given regardless of whether it will have
to make payments under the guarantees.
Although the disclosure requirements of this
guideline have been mostly harmonized with
similar guidance in the United States, unlike
the U.S. standard, this guideline does not
require the fair value recognition of
guarantees on the balance sheet and does not
extend to product warranties. This guideline
will come into effect for our first quarter of
2003. Please see Note 21, Contractual
obligations, commercial commitments and
contingencies,for more information on
guarantees.

Consolidation of special purpose entities

In August 2002, the CICA issued a draft
accounting guideline titled Consolidation of
special purpose entities. The final guideline
is expected to be consistent, in all material
respects, with the recently issued U.S.
guidance, although the implementation date has
not yet been determined. We are currently
evaluating the impact of this draft guideline
on our consolidated financial statements.

Asset retirement obligations

The CICA recently approved the issuance of a
new section in the CICA Handbook, section
3110, Asset retirement obligations. This
standard focuses on the recognition and
measurement of liabilities related to legal
obligations associated with the retirement of
property, plant and equipment. Under this
standard, these obligations are initially
measured at fair value and subsequently
adjusted for the accretion of discount and any
changes in the underlying cash flows. The
asset retirement cost is to be capitalized to
the related asset and amortized into earnings
over time. This section comes into effect for
us in 2004. We are currently evaluating the
impact of this standard on our consolidated
financial statements.



---

|(1) |  | In December 2002, we announced that effective January 1, 2003, we will
account for employee stock options by measuring compensation cost for options
granted on or after January 1, 2002 under the fair value-based method of
accounting using the Black-Scholes option pricing model.
We do not expect that this new accounting policy will have a significant
impact on our consolidated financial statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada   32   2002 Financial Information



---



##### Table of Contents



2. SEGMENTED INFORMATION

We manage our operations under one segment,
which is driven by our products and services,
in order to provide customers with integrated
communication services. This represents the
manner in which we are organized and managed
for assessing performance and making resource
allocation decisions. Our operations, including
substantially all revenues from customers,
capital assets and goodwill are concentrated in
Canada.

3. BUSINESS ACQUISITIONS AND DISPOSITIONS

All of the acquisitions described in this note
have been accounted for using the purchase
method of accounting. The consolidated
statements of operations include the results
of the acquired businesses from the date of
acquisition.

2002

Acquisition of Aliant

Effective December 31, 2002, BCE transferred,
at carrying value, its 14% interest in Aliant
to us in exchange for common shares of Bell
Canada. This gave rise to a reduction in
contributed surplus of $103 million. As a
result, we now own a 53% interest in Aliant
and have changed our accounting from the
equity method to consolidation.

The impact on our balance sheet is a reduction
in Other long term assetsof $574 million due
to the elimination of our 39% investment at
equity and the consolidation of Aliant which
increased our net assets as follows:

|                               |                |      |       |       | 
|------------------------------ | -------------- | ---- | ----- | ----- | 
|At December 31                 |                | 2002
|                               |                |     
|Current assets                 |                |      | 765   |      
|Non-current assets, including: |                |      | 3,252 |      
|                               | Capital assets |      |       | 2,345 | 
|                               | Goodwill       |      |       | 674   | 
|Current liabilities            |                |      | 423   |      
|Non-current liabilities        |                |      | 1,437 |      
|                               |                |     

In 2002, we recorded equity earnings of $66
million from Aliant. As of January 1, 2003, we
started consolidating Aliants results of
operations.

Acquisition of Bell ExpressVu Limited Partnership (Bell ExpressVu)

At the end of December 2002, BCE transferred,
at carrying value, its 100% investment in Bell
ExpressVu, a provider of digital home
entertainment and broadcasts, to a partnership
held 52% by ourselves and 48% by BCE in
exchange for units in the partnership. This
exchange gave rise to an increase in
contributed surplus of $342 million. The impact
of the consolidation of Bell ExpressVu on our
net assets is as follows:

|                               |                |      |     |     | 
|------------------------------ | -------------- | ---- | --- | --- | 
|At December 31                 |                | 2002
|                               |                |     
|Current assets                 |                |      | 73  |    
|Non-current assets, including: |                |      | 991 |    
|                               | Capital assets |      |     | 649 | 
|Current liabilities            |                |      | 315 |    
|Non-current liabilities        |                |      | 227 |    
|                               |                |     

As of January 1, 2003, we started
consolidating Bell ExpressVus results of
operations.

Sale of directories business

On November 29, 2002, we completed the sale of
our directories business for approximately $3
billion in cash and recorded a $2.4 billion
gain.

Prior to the closing of the sale, we
along with BCE, completed a corporate
reorganization, resulting in the transfer of
our directories business and BCEs agreement
to contribute Bell ExpressVu as well as
certain debt receivables and cash to a
partnership. At the end of December, BCE
transferred its interest in Bell ExpressVu. We
own a 52% interest in the partnership and BCE
owns 48%.

Following the sale, the partnership
distributed the net proceeds to its partners.
A net distribution of $1.1 billion was made to
BCE which was partly used to help finance the
repurchase of SBC Communications Inc.s (SBC)
remaining indirect interest in Bell Canada.
The balance of the proceeds were distributed
to us and will be used to reduce debt and for
general corporate purposes.

In addition, we acquired a 10% indirect
interest in the post-sale directories business
for $91 million, which is accounted for under
the cost method.

Creation of Bell West Inc.

In April 2002, we along with MTS created Bell
West by combining our interests in the
wireline assets of BCE Nexxia Inc. in Alberta
and British Columbia with our and MTSs
respective investments in Bell Intrigna Inc.
(Bell Intrigna). Bell West provides
telecommunications services in those two
provinces and operates under the Bell brand.

As a result of this transaction, we own 60% of
Bell West and MTS owns 40%. The terms of the
agreement between ourselves and MTS also
include certain put and call options relating
to MTS 40% ownership of Bell West. Please see
Note 21, Contractual obligations, commercial
commitments and contingencies,for details.

We
also own approximately 22% of MTS, a related
party.

Creation of the Bell Nordiq Income Fund

In April 2002, we announced the initial public
offering of units of the Bell Nordiq Income
Fund. The Fund acquired an approximate 37%
interest in each of Télébec Limited Partnership
and Northern Telephone Limited Partnership from
us. We retain management control and hold an
approximate 63% interest in the partnerships.
We received gross proceeds of $324 million and
recorded a pre-tax gain of $222 million on this
transaction.

2001

Sale of Sympatico-Lycos

In January 2001, we sold our 71% interest in
Sympatico-Lycos to BCE at fair market value
for proceeds of $425 million which resulted in
a gain of $373 million. The proceeds from this
transaction were used to repay a portion of
the equity-settled notes due to Bell Canada
Holdings (BCH), our parent company.

Sale of Telecom Directories Limited (TDL)

In March 2001, we sold our interest in TDL of
Hong Kong, China, for proceeds of $63 million
which resulted in a gain of $37 million.

Bell Canada   33   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

4. RESTRUCTURING AND OTHER CHARGES

2002

Streamlining and other charges

In the fourth quarter of 2002, we recorded
pre-tax charges of $302 million ($190 million
after-tax) representing restructuring charges
of $232 million and other charges of $70
million.

The restructuring charges were primarily
from streamlining our management, line and
other support functions, and included employee
severance for approximately 1,700 employees,
enhanced pension benefits and other employee
costs. This is expected to be completed in
2003. At December 31, 2002, the remaining
unpaid balance of this restructuring provision
was $111 million.

Other charges consisted primarily of
various accounts receivable write-downs
relating to billing adjustments and
unreconciled balances from prior years which
were identified during the year.

Pay equity settlement

On September 25, 2002, the members of the
Canadian Telecommunications Employees
Association (CTEA) ratified a settlement we
had reached relating to the 1994 pay equity
complaints that the CTEA filed on behalf of
its members before the Canadian Human Rights
Commission. The settlement includes a cash
payout of $128 million and related pension
benefits of approximately $50 million.

As a result of the settlement, we recorded a
one-time charge of $79 million ($45 million
after tax) in the third quarter of 2002. The
onetime charge is equal to the $128 million
cash payout, net of a previously recorded
provision. We are deferring and amortizing the
pension benefits into earnings over the
estimated average remaining service life of
active employees and the estimated average
remaining life of retired employees.

Accounts receivable write-down

During the second quarter, coincident with the
development of a new billing platform, Bell
Canada adopted a new and more precise
methodology to analyze the amount of
receivables by customer as well as by service
line and that permits a more accurate
determination of the validity of customer
balances owed to Bell Canada.

This analysis indicated that a write-down of
accounts receivable amounting to $272 million
was appropriate. As these amounts arose from
legacy billing systems and processes, Bell
Canada has carried out a detailed review of
billings and adjustments for the period from
1997 to 2002. These amounts arose as the
cumulative result of a series of individually
immaterial events and transactions pertaining
to Bell Canada legacy accounts receivable
systems dating back to the early 1990s.

2001

Streamlining and other charges

We recorded pre-tax charges of $864 million
($542 million after tax) in the first and
fourth quarters of 2001. These charges
represented restructuring charges of $470
million and other charges of $394 million.

The restructuring charges were from our
streamlining initiatives and included employee
severance for approximately 3,900 employees,
enhanced pension benefits and other employee
costs. The restructuring programs were
completed in 2002.

Other charges primarily consisted of the
write-down of Bell Mobilitys wireless capital
assets, in particular, its analog networks,
paging networks and PCS base stations.

5. OTHER INCOME

|                               |  |      |       |      |  |  |     |  
|------------------------------ |  | ---- | ----- | ---- |  |  | --- | -
|For the year ended
December 31 |  | 2002 |       | 2001
|                               |  |      |       |     
|Net gains on investments       |  |      | 1,282 |      |  |  | 406 |  
|Other                          |  |      | (14   | )    |  |  | (71 | )
|                               |  |      |       |      |  |  |     |  
|                               |  |      | 1,268 |      |  |  | 335 |  
|                               |  |      |       |      |  |  |     |  

2002



|                                              |  |                                                                                                                                                                                   
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Net gains on investments were
primarily from:
|                                             
|                                             |  | selling the directories
business ($2.424 billion)                                                                                                                                 
|                                             
|                                             |  | writing down our investment in Teleglobe ($1.354 billion) to nil                                                                                                                  
|                                             
|                                             |  | selling an approximate 37% interest in each
of Télébec Limited Partnership and Northern
Telephone Limited Partnership when the Bell
Nordiq Income Fund was created ($222 million).

Write-down of Teleglobe investment

On April 24, 2002, BCE announced that it would
stop providing long-term funding to Teleglobe.
In light of this decision, Teleglobe announced
that it would explore a range of financial
restructuring alternatives, potential
partnerships and business combinations. On May
15, 2002, Teleglobe and certain of its
subsidiaries filed for court protection under
insolvency statutes in Canada and the United
States. On September 19, 2002, Teleglobe
announced the execution of agreements for the
sale of its core telecommunications business.
On December 31, 2002, after obtaining court
approval, we sold all of our common shares in
Teleglobe to the court-appointed monitor for
nominal consideration.

During the second quarter, we completed our
assessment of the carrying value of our
investment in Teleglobe (accounted for on a
cost basis) and a write-down of $1.354 billion
was recorded, reducing the value of the
investment to nil. For tax purposes, the
capital loss from the sale of Teleglobe was
offset against the gain from the sale of the
directories business. Please see Note 3,
Business acquisitions and dispositions.

2001

Net gains on investments were primarily from
the sale of Sympatico-Lycos ($373 million) and
TDL ($37 million).

Bell Canada   34   2002 Financial Information



---



##### Table of Contents



6. INTEREST EXPENSE

|                                   |  |      |     |      |  |  |     | 
|---------------------------------- |  | ---- | --- | ---- |  |  | --- | 
|For the year ended December 31     |  | 2002 |     | 2001
|                                   |  |      |     |     
|Interest expense on long-term debt |  |      | 787 |      |  |  | 725 | 
|Interest expense on other debt     |  |      | 52  |      |  |  | 73  | 
|                                   |  |      |     |      |  |  |     | 
|                                   |  |      | 839 |      |  |  | 798 | 
|                                   |  |      |     |      |  |  |     | 

7. INCOME TAXES

The table below is a reconciliation of income
taxes at Canadian statutory rates of 37.4% in
2002 and 40.1% in 2001 and the amount of
reported income taxes.

|                                         |                                                              |      |       |      |   |  |       |      |  
|---------------------------------------- | ------------------------------------------------------------ | ---- | ----- | ---- | - |  | ----- | ---- | -
|For the year ended December 31           |                                                              | 2002 |       | 2001
|                                         |                                                              |      |       |     
|Income taxes computed at statutory rates |                                                              |      | 1,453 |      |   |  | 1,001 |     
|                                         | Net gains on disposal of investments                         |      |       | (328 | ) |  |       | (164 | )
|                                         | Equity in net earnings of significantly
influenced companies |      |       | (25  | ) |  |       | (9   | )
|                                         | Large corporations tax                                       |      |       | 19   |   |  |       | 21   |  
|                                         | Goodwill amortization                                        |      |       |     |   |  |       | 17   |  
|                                         | Other                                                        |      |       | (17  | ) |  |       | 27   |  
|                                         |                                                              |      |       |      |   |  |       |     
|Total income tax expense                 |                                                              |      | 1,102 |      |   |  | 893   |     
|                                         |                                                              |      |       |      |   |  |       |     

The table below shows the significant
components of the provision for income taxes
attributable to operations.

|                               |                                           |      |       |      |   |  |     |     |  
|------------------------------ | ----------------------------------------- | ---- | ----- | ---- | - |  | --- | --- | -
|For the year ended December 31 |                                           | 2002 |       | 2001
|                               |                                           |      |       |     
|Current income taxes           |                                           |      | 797   |      |   |  | 966 |    
|Future income taxes:           |                                           |      |       |      |   |  |     |    
|                               | Change in temporary differences
and other |      |       | 394  |   |  |     | (78 | )
|                               | Recognition of loss carryforwards         |      |       | (83  | ) |  |     | (5  | )
|                               | Tax rate changes                          |      |       | (6   | ) |  |     | 10  |  
|                               |                                           |      |       |      |   |  |     |    
|Total income tax expense       |                                           |      | 1,102 |      |   |  | 893 |    
|                               |                                           |      |       |      |   |  |     |    

The table below shows future income taxes
resulting from temporary differences between
the carrying amounts of assets and liabilities
for accounting purposes and the amounts used
for tax purposes.

|                                                       |                                                                                   |      |      |      |   |  |      |     |  
|------------------------------------------------------ | --------------------------------------------------------------------------------- | ---- | ---- | ---- | - |  | ---- | --- | -
|At December 31                                         |                                                                                   | 2002 |      | 2001
|                                                       |                                                                                   |      |      |     
|Non-capital loss carryforwards                         |                                                                                   |      | 295  |      |   |  | 199  |    
|Capital loss carryforwards                             |                                                                                   |      | 23   |      |   |  | 16   |    
|Capital assets                                         |                                                                                   |      | (113 | )    |   |  | 61   |    
|Difference in accounting and
tax basis for investments |                                                                                   |      |     |      |   |  | 60   |    
|Employee benefit plans                                 |                                                                                   |      | (255 | )    |   |  | (277 | )  
|Investment tax credits                                 |                                                                                   |      | (42  | )    |   |  | (63  | )  
|Other                                                  |                                                                                   |      | (12  | )    |   |  | 112  |    
|                                                       |                                                                                   |      |      |      |   |  |      |    
|Net future income taxes                                |                                                                                   |      | (104 | )    |   |  | 108  |    
|                                                       |                                                                                   |      |      |      |   |  |      |    
|Future income taxes are composed of:                   |                                                                                   |      |      |      |   |  |      |    
|                                                       | Future income tax asset
- current portion (included
in other current assets)      |      |      | 114  |   |  |      |    |  
|                                                       | Future income tax asset
- long-term portion (included
in other long-term assets)  |      |      | 151  |   |  |      | 191 |  
|                                                       | Future income tax liability
- long-term (included
in other long-term liabilities) |      |      | (369 | ) |  |      | (83 | )
|                                                       |                                                                                   |      |      |      |   |  |      |    
|Net future income taxes                                |                                                                                   |      | (104 | )    |   |  | 108  |    
|                                                       |                                                                                   |      |      |      |   |  |      |    

At December 31, 2002, we had non-capital
tax loss carryforwards of $819 million that
expire in varying annual amounts through 2009
and $40 million thereafter. For financial
reporting purposes, we recognized a future
income tax asset of $295 million on these loss
carryforwards.

We also had net capital losses of $369
million that can be carried forward
indefinitely. For financial reporting
purposes, we recognized a future tax asset of
$23 million on these loss carryforwards.

8. EXTRAORDINARY ITEM

Télébec Limited, now part of Bell Nordiq Group
Inc., determined that, as at December 31,
2001, it no longer met the criteria necessary
for the continued application of regulatory
accounting provisions of GAAP. As a result,
Télébec Limited recorded an extraordinary
non-cash pre-tax charge of $102 million ($70
million after tax). The operations of Télébec
Limited no longer met the criteria for
application of regulatory accounting
provisions due to significant changes in
regulation, including the implementation of
price cap regulation which replaced
rate-of-return regulation effective January 1,
2002, and the concurrent introduction of
competition in Télébec Limiteds local
exchange market. Accordingly, Télébec Limited
adjusted the carrying values of assets and
liabilities as at December 31, 2001 to reflect
values appropriate under GAAP for enterprises
no longer subject to rate-of-return
regulation.

Bell Canada   35   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

9. CAPITAL ASSETS

|                                    |  |      |        |       |  |          |        |       |  |  |        |          |  |  |        | 
|----------------------------------- |  | ---- | ------ | ----- |  | -------- | ------ | ----- |  |  | ------ | -------- |  |  | ------ | 
|At December 31                      |  |      |        |       |  | 2002     |        |       |  |  |        | 2001    
|                                    |  |      |        |       |  |          |        |       |  |  |        |         
|                                    |  |      |        |       |  | Net book |        |       |  |  |        | Net book
|                                    |  | Cost |        | value |  | Cost     |        | value
|                                    |  |      |        |       |  |          |        |      
|Property, plant and equipment       |  |      |        |       |  |          |        |       |  |  |        |          |  |  |        | 
|Telecommunications assets           |  |      | 33,963 |       |  |          | 12,653 |       |  |  | 27,468 |          |  |  | 9,936  | 
|Machinery and equipment             |  |      | 5,191  |       |  |          | 2,397  |       |  |  | 3,890  |          |  |  | 1,737  | 
|Buildings                           |  |      | 2,454  |       |  |          | 1,191  |       |  |  | 2,004  |          |  |  | 959    | 
|Plant under construction            |  |      | 1,011  |       |  |          | 1,011  |       |  |  | 919    |          |  |  | 919    | 
|Land                                |  |      | 80     |       |  |          | 80     |       |  |  | 65     |          |  |  | 65     | 
|Other                               |  |      | 131    |       |  |          | 100    |       |  |  | 119    |          |  |  | 72     | 
|                                    |  |      |        |       |  |          |        |       |  |  |        |          |  |  |        | 
|Total property, plant and equipment |  |      | 42,830 |       |  |          | 17,432 |       |  |  | 34,465 |          |  |  | 13,688 | 
|Finite life intangible assets       |  |      | 2,575  |       |  |          | 1,460  |       |  |  | 2,142  |          |  |  | 1,159  | 
|                                    |  |      |        |       |  |          |        |       |  |  |        |          |  |  |        | 
|Total capital assets                |  |      | 45,405 |       |  |          | 18,892 |       |  |  | 36,607 |          |  |  | 14,847 | 
|                                    |  |      |        |       |  |          |        |       |  |  |        |          |  |  |        | 

Included in capital assets, are assets under
capital leases amounting to $486 million ($347
million in 2001) and a related accumulated
amortization of $164 million ($65 million in
2001). Amortization of capital assets was
$2,396 million in 2002 and $2,339 million in
2001. Retirements charged to accumulated
amortization amounted to $879 million ($828
million in 2001).

10. OTHER LONG-TERM ASSETS

|                                  |  |      |       |      |  |  |       | 
|--------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31                    |  | 2002 |       | 2001
|                                  |  |      |       |     
|Investments at equity (a)         |  |      | 577   |      |  |  | 1,175 | 
|Investments at cost (b)           |  |      | 121   |      |  |  | 1,462 | 
|Accrued benefit asset (Note 19)   |  |      | 1,965 |      |  |  | 1,839 | 
|Long-term notes receivable (c)    |  |      | 542   |      |  |  |      | 
|Subscriber acquisition costs      |  |      | 370   |      |  |  | 42    | 
|Future income tax assets (Note 7) |  |      | 151   |      |  |  | 191   | 
|Other                             |  |      | 239   |      |  |  | 198   | 
|                                  |  |      |       |      |  |  |       | 
|Total other long-term assets      |  |      | 3,965 |      |  |  | 4,907 | 
|                                  |  |      |       |      |  |  |       | 



---

|(a) |  | This includes implicit goodwill of $178
million at December 31, 2002 and $178 million
in 2001.          
|--- |  | --------------------------------------------------------------------------------------------------------
|   
|(b) |  | The Teleglobe investment was written-down
in 2002. Please see Note 5, Other income,for
more information.
|   
|(c) |  | This includes a note receivable from a
related party of $498 million at December 31,
2002.              

11. INDEFINITE-LIFE INTANGIBLE ASSETS

|                                           |                          |      |     |      |  |  |     |     | 
|------------------------------------------ | ------------------------ | ---- | --- | ---- |  |  | --- | --- | 
|At December 31                             |                          | 2002 |     | 2001
|                                           |                          |      |     |     
|Intangible assets, January 1               |                          |      | 756 |      |  |  |    |    
|Intangible assets acquired during the year |                          |      |    |      |  |  | 733 |    
|Capitalized interest on spectrum licences  |                          |      | 16  |      |  |  | 23  |    
|                                           |                          |      |     |      |  |  |     |    
|Intangible assets, December 31             |                          |      | 772 |      |  |  | 756 |    
|                                           |                          |      |     |      |  |  |     |    
|Consisting of:                             |                          |      |     |      |  |  |     |    
|                                           | Spectrum licences        |      |     | 754  |  |  |     | 738 | 
|                                           | Cable licences and other |      |     | 18   |  |  |     | 18  | 
|                                           |                          |      |     |      |  |  |     |    
|Total                                      |                          |      | 772 |      |  |  | 756 |    
|                                           |                          |      |     |      |  |  |     |    

In the fourth quarter of 2002, we completed
our annual impairment test for indefinite-life
intangible assets, as required by the
provisions of CICA Handbook section 3062, and
determined that these assets were not
impaired.

12. GOODWILL

|                                      |  |      |       |      |  |  |       |  
|------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                                      |  | 2002 |       | 2001
|                                      |  |      |       |     
|Goodwill, January 1                   |  |      | 1,279 |      |  |  | 1,309 |  
|Goodwill acquired during the year (a) |  |      | 701   |      |  |  | 31    |  
|Goodwill disposed during the year (b) |  |      | (103  | )    |  |  | (18   | )
|Amortization expense                  |  |      |      |      |  |  | (39   | )
|Other                                 |  |      |      |      |  |  | (4    | )
|                                      |  |      |       |      |  |  |       |  
|Goodwill, December 31                 |  |      | 1,877 |      |  |  | 1,279 |  
|                                      |  |      |       |      |  |  |       |  



---

|(a) |  | The goodwill acquired during 2002 relates
primarily to the acquisition of BCEs 14%
interest in Aliant. Please see Note 3,
Business acquisitions and dispositions, for
more information.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The goodwill disposed of during the year
relates to the sale of the directories
business. Please see Note 3, Business
acquisitions and dispositions, for more
information.              

In the fourth quarter of 2002, we completed
our annual assessment of goodwill, as required
by the provisions of CICA Handbook section
3062, and determined that this asset was not
impaired.

Bell Canada   36   2002 Financial Information



---



##### Table of Contents



13. SHORT-TERM DEBT

|                                             |  |               |      |      |  |      |       |  |  |  |       | 
|-------------------------------------------- |  | ------------- | ---- | ---- |  | ---- | ----- |  |  |  | ----- | 
|At December 31                               |  | Interest rate |      | 2002 |  | 2001
|                                             |  |               |      |      |  |     
|Note payable to BCH(a)                       |  |               | 4.50 | %    |  |      | 975   |  |  |  |      | 
|                                             |  |               |      |      |  |      |       |  |  |  |       | 
|Notes payable and
bank advances              |  |               | 2.90 | %(1) |  |      | 223   |  |  |  | 473   | 
|Long-term debt due within
one year (Note 14) |  |               |      |      |  |      | 1,683 |  |  |  | 1,196 | 
|                                             |  |               |      |      |  |      |       |  |  |  |       | 
|Total debt due within one year               |  |               |      |      |  |      | 1,906 |  |  |  | 1,669 | 
|                                             |  |               |      |      |  |      |       |  |  |  |       | 



---

|(1) |  | Weighted average                                                                                                                                                                                                                                                                                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Represents a promissory note payable to
BCH of which $347 million has been repaid
subsequent to year-end using the proceeds of
the capital contribution made by BCH in
January 2003. We expect the remaining balance
to be repaid in 2003 using proceeds from
further capital contributions from BCH.

We expect to repay debt due within one
year with funds generated internally, or by
refinancing it with new debt.

At December 31, 2002, notes payable and
bank advances included notes due on demand of
$161 million and the weighted average days to
maturity for the remaining notes payable was
30 days.

The conditions of some of the credit
agreements require us to meet specific
financial ratios and to place restrictions on
acquiring capital assets.

14. LONG-TERM DEBT

|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |        |  
|------------------------------- | ------------------------------------------ | ------------- | ----- | -------- | ---- | ---- | --------- | ---- | --- |  | ------ | ------ | - |  | ------ | ------ | -
|At December 31                  |                                            | Interest rate |       | Maturity |      | 2002 |           | 2001
|                                |                                            |               |       |          |      |      |           |     
|Bell Canada                     |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Debentures and notes (a)        |                                            |               | 7.43% | (1)      |      |      | 2003-2054 |      |     |  | 9,609  |        |   |  | 9,057  |       
|Subordinated debentures         |                                            |               | 8.21% | (1)      |      |      | 2026-2031 |      |     |  | 275    |        |   |  | 275    |       
|Capital leases (b)              |                                            |               |       |          |      |      |           |      |     |  | 671    |        |   |  | 152    |       
|Due to related parties (c)      |                                            |               |       |          |      |      |           |      |     |  | 1      |        |   |  | 338    |       
|Other                           |                                            |               |       |          |      |      |           |      |     |  | 219    |        |   |  | 415    |       
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Total  Bell Canada             |                                            |               |       |          |      |      |           |      |     |  | 10,775 |        |   |  | 10,237 |       
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Aliant                          |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Debentures, notes and bonds (d) |                                            |               | 7.80% | (1)      |      |      | 2003-2025 |      |     |  | 1,058  |        |   |  |       |       
|Term debt (US$185 million) (e)  |                                            | LIBOR + 2.50% |       |          | 2005 |      |           |      | 292 |  |        |        |  | 
|Other                           |                                            |               |       |          |      |      |           |      |     |  | 59     |        |   |  |       |       
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Total  Aliant                  |                                            |               |       |          |      |      |           |      |     |  | 1,409  |        |   |  |       |       
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Total long-term debt            |                                            |               |       |          |      |      |           |      |     |  | 12,184 |        |   |  | 10,237 |       
|                                | Less: Amount due within one year (Note 13) |               |       |          |      |      |           |      |     |  |        | (1,683 | ) |  |        | (1,196 | )
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       
|Long-term portion               |                                            |               |       |          |      |      |           |      |     |  | 10,501 |        |   |  | 9,041  |       
|                                |                                            |               |       |          |      |      |           |      |     |  |        |        |   |  |        |       



---

|(1) |  | Weighted average interest rate
|--- |  | ------------------------------

Bell Canada   37   2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

14. LONG-TERM DEBT(continued)

Bell Canada



|(a) |  | All debentures and notes are unsecured and include:
|--- |  | ---------------------------------------------------



| |  |  | US$400 million maturing in 2006 and
2010. The US$200 million maturing in
2006 has been swapped into Canadian
dollars.
| | - |  | ---------------------------------------------------------------------------------------------------------------------
|
| |  |  | 300 million Swiss francs due in 2003
which have been effectively swapped or
converted into Canadian dollars.         



|    |  | In addition, $375 million of long-term debt
contains call options that allow for early
repayment of the principal amounts when
certain premiums are paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes capital leases of $71 million in
2002 and $66 million in 2001 that are net of
loans receivable of $319 million in 2002 and
$335 million in 2001. These obligations were
from agreements that we entered into in 1999
and 2001 to sell and lease back
telecommunication equipment for total proceeds
of $399 million. Some of the proceeds were
invested in interest-bearing loans receivable.
These capital leases, net of loans receivable,
were originally issued for US$39 million and
have been swapped into Canadian dollar
obligations. In addition, we had a capital
lease obligation of $245 million due to
Telesat Canada, a subsidiary of BCE.
|   
|(c) |  | In 2001, due to related parties
represented senior unsecured notes due to BCH
which were repaid during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Aliant



|(d) |  | All debentures and notes are unsecured.
The bonds are secured by deeds of trust and
mortgage, and by supplemental deeds. These
instruments consist of:
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a first fixed and specific mortgage                                                              
| | - |  | -------------------------------------------------------------------------------------------------
|
| |  |  | a pledge and charge on certain of Aliant
Telecom Inc.s real and immovable property and
equipment
|
| |  |  | a floating charge on all other present and
future property of Aliant Telecom Inc.                



|(e) |  | US$180 million of the term debt has fixed
interest rates through swap agreements.
|--- |  | ---------------------------------------------------------------------------------

Long-term debt maturities

Please see Note 21, Contractual obligations,
commercial commitments and contingencies, for
a schedule of maturities of long-term debt.

Restrictions

Certain debt agreements:



| |  |  | require us to meet specific financial ratios         
| | - |  | -----------------------------------------------------
|
| |  |  | impose covenants, maintenance and new issuance tests.

15. OTHER LONG-TERM LIABILITIES

|                                               |  |      |       |      |  |  |       | 
|---------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31                                 |  | 2002 |       | 2001
|                                               |  |      |       |     
|Deferred credits                               |  |      | 625   |      |  |  | 709   | 
|Pension obligation (Note 19)                   |  |      | 184   |      |  |  | 156   | 
|Post retirement benefits (Note 19)             |  |      | 1,082 |      |  |  | 863   | 
|Foreign currency contract payable (receivable) |  |      | (27   | )    |  |  | 31    | 
|Future income tax liabilities (Note 7)         |  |      | 369   |      |  |  | 83    | 
|Other                                          |  |      | 14    |      |  |  | 16    | 
|                                               |  |      |       |      |  |  |       | 
|Total other long-term liabilities              |  |      | 2,247 |      |  |  | 1,858 | 
|                                               |  |      |       |      |  |  |       | 

Bell Canada    38    2002 Financial Information



---



##### Table of Contents



16. FINANCIAL INSTRUMENTS

USING DERIVATIVES

We use various derivative instruments, such as
interest rate swaps, foreign currency swaps
and foreign exchange forward contracts,
primarily to manage foreign currency and
interest rate positions. The main derivative
financial instruments outstanding at December
31, 2002 were:



| |  |  | cross currency swaps and currency forward
contracts used to hedge foreign currency risk
on debt                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | forward contracts on BCE common shares to
hedge the fair value exposures related to
stock compensation payments for Bell Canada
employees.

Please see Note 1, Significant accounting
policies, for information about how we account
for derivative instruments.

Please see Note 21, Contractual
obligations, commercial commitments and
contingencies, for a description of the
significant put and call options that are
outstanding.

CREDIT RISK

We are exposed to credit risk if
counterparties to our derivative instruments
fail to meet their obligations. We expect that
our counterparties will meet their obligations
because we:



| |  |  | deal only with highly rated financial
institutions that have strong credit ratings
| | - |  | ----------------------------------------------------------------------------------
|
| |  |  | regularly monitor credit risk and credit
exposure.                                

As at December 31, 2002 credit risk
related to derivative financial instruments
amounted to $38 million.

We are also exposed to credit risk from
our customers, but the concentration of this
risk is minimized because we have a large and
diverse customer base.

CURRENCY EXPOSURES

At December 31, 2002, principal amounts to be
received under currency contracts are 300
million Swiss francs and US$464 million.
Principal amounts owed under cross currency
contracts are US$200 million and $731 million.

We use these derivatives mainly to hedge
foreign-denominated debt. Of our $12.2 billion
in total debt, $698 million is exposed to
fluctuations in foreign exchange rates after
hedging strategies.

INTEREST RATE EXPOSURES

Long-term debt is usually issued at fixed
interest rates. Commercial paper, included in
notes payable, is issued at market rates. At
December 31, 2002, our interest rate swaps had
a notional value of $334 million, maturing in
2003 and 2005.

Of our $12.2 billion in total debt, $570
million is exposed to fluctuations in interest
rates after hedging strategies. $162 million
of our $223 million notes payable and bank
advances is exposed to fluctuations in
interest rates after hedging strategies.

We have an equity-settled note (Junior
Note 2) issued for $1,570 million that is also
subject to fluctuations in interest rate.
Please see Note 17, Share capital, for more
details.

FAIR VALUE

Fair value is the amount at which a financial
instrument could be exchanged between willing
parties, based on current markets for
instruments with the same risk, principal and
remaining maturity. We base fair values on
estimates using present value calculations and
other valuation methods.

These estimates are significantly affected by
our assumptions for the amount and timing of
estimated future cash flows and discount
rates, all of which reflect varying degrees of
risk. Potential income taxes and other
expenses that would be incurred on disposition
of these financial instruments are not
reflected in the fair values. As a result, the
fair values are not necessarily the net
amounts that would be realized in the event of
an actual settlement of these instruments.

The carrying value of all financial instruments approximates fair value, except
for those noted in the table below.

|                                                       |  |          |        |       |  |          |        |       |  |  |        |      |  |  |        |  
|------------------------------------------------------ |  | -------- | ------ | ----- |  | -------- | ------ | ----- |  |  | ------ | ---- |  |  | ------ | -
|At December 31                                         |  |          |        |       |  | 2002     |        |       |  |  |        | 2001
|                                                       |  |          |        |       |  |          |        |      
|                                                       |  | Carrying |        | Fair  |  | Carrying |        | Fair 
|                                                       |  | value    |        | value |  | value    |        | value
|                                                       |  |          |        |       |  |          |        |      
|Investment in Nortel Networks (a)                      |  |          | 12     |       |  |          | 12     |       |  |  | 60     |      |  |  | 60     |  
|Long-term debt                                         |  |          | 12,184 |       |  |          | 13,459 |       |  |  | 10,237 |      |  |  | 11,104 |  
|                                                       |  |          |        |       |  |          |        |      
|Derivative
instruments, net asset (liability) position | 
|Forward contracts hedge of SCPs (Note 18)              |  |          | (32    | )     |  |          | (35    | )     |  |  | (17    | )    |  |  | (21    | )
|Currency contracts (b)                                 |  |          | 30     |       |  |          | 35     |       |  |  | (28    | )    |  |  | (22    | )
|Interest rate swaps                                    |  |          |       |       |  |          | 1      |       |  |  |       |      |  |  | 2      |  
|                                                       |  |          |        |       |  |          |        |       |  |  |        |      |  |  |        |  
|Total                                                  |  |          | (2     | )     |  |          | 1      |       |  |  | (45    | )    |  |  | (41    | )
|                                                       |  |          |        |       |  |          |        |       |  |  |        |      |  |  |        |  



---

|(a) |  | We have designated 3.5 million of our approximately 5 million Nortel
Networks common shares to hedge our exposure to outstanding rights to SCPs.
Please see Note 18, Stock-based compensation plans, for more information.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Currency contracts include cross currency swaps and foreign currency
forward contracts.                                                                                                                                   

Bell Canada    39    2002 Financial Information



---



##### Table of Contents



16. FINANCIAL INSTRUMENTS(continued)

SALE OF ACCOUNTS RECEIVABLE

On December 12, 2001, Bell Canada signed an
agreement to sell a co-ownership interest in a
pool of present and future eligible accounts
receivable to a trust. On December 13, 2001,
Aliant sold a direct interest in present and
future eligible accounts receivable to a
different trust. These types of transactions
are accounted for as sales because we give up
control over the transferred accounts
receivable when they receive proceeds from the
trusts.

Under the agreements, we continue to
service the accounts receivable. Our retained
interest in the accounts receivable that are
collected ranks below the trusts interests.
Both transactions represent revolving sales
whereby the trusts will reinvest the funds
they receive from collections by buying
additional interests in our accounts
receivable until the agreements expire or
until such time as we request a reduction in
the facility. The Bell Canada agreement
expires on December 12, 2006. The Aliant
agreement expires on December 13, 2006. The
trusts and their investors have no claim on
any of our other assets if customers fail to
pay amounts owed on time.

We estimate the fair value of retained
interests and calculate the loss on sale using
a present value of estimated cash flows model.
In 2002, we recognized a pre-tax loss of $27
million on the revolving sale of accounts
receivable for the combined securitizations.
The accounts receivable are transferred on a
fully-serviced basis. As a result, we
recognize a servicing liability on the date of
the transfer and amortize this liability to
income over the expected life of the
transferred accounts receivable.

The table below shows key balances for the
combined securitizations at December 31, 2002
and the assumptions that were used in the
model on both the date of transfer and at
December 31, 2002.

|                                            |  |      |       |      |  |  |       | 
|------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                            |  | 2002 |       | 2001
|                                            |  |      |       |     
|Securitized interest in accounts
receivable |  |      | 1,035 |      |  |  | 1,025 | 
|Retained interest                           |  |      | 154   |      |  |  | 102   | 
|Servicing liability                         |  |      | 1.5   |      |  |  | 1.5   | 
|Average accounts receivable managed         |  |      | 1,150 |      |  |  | 1,213 | 
|                                            |  |      |       |      |  |  |       | 

|                              |  |          |            |      |  |      |      |   |  |  |      |  
|----------------------------- |  | -------- | ---------- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                              |  | Range(a) |            | 2002 |  | 2001
|                              |  |          |            |      |  |     
|Cost of funds                 |  |          | 2.11%-3.12 | %    |  |      | 2.76 | % |  |  | 2.53 | %
|Average delinquency
ratio     |  |          | 3.54%-6.01 | %    |  |      | 6.01 | % |  |  | 3.46 | %
|Average net credit loss ratio |  |          | 0.61%-0.84 | %    |  |      | 0.84 | % |  |  | 0.58 | %
|Weighted average life
in days |  |          | 38-40      |      |  |      | 38   |   |  |  | 39   |  
|Servicing fee liability       |  |          | 2          | %    |  |      | 2    | % |  |  | 2    | %
|                              |  |          |            |      |  |      |      |   |  |  |      |  



---

|(a) |  | Securitizations during the year
|--- |  | -------------------------------

An immediate 10% and 20% adverse change in
each of the above assumptions would have no
significant effect on the current fair value
of the retained interest.

The table below is a summary of certain cash
flows received from and paid to the trusts
during the year.

|                                          |  |      |        |      |  |  |        | 
|----------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|                                          |  | 2002 |        | 2001
|                                          |  |      |        |     
|Collections reinvested in revolving sales |  |      | 12,651 |      |  |  | 11,847 | 
|Proceeds from additional sales            |  |      | 10     |      |  |  | 375    | 
|                                          |  |      |        |      |  |  |        | 

17. SHARE CAPITAL

(i) PREFERRED SHARES

Authorized

Bell Canadas articles of incorporation
provide for an unlimited number of Class A
Preferred Shares and Class B Preferred Shares.
The articles authorize Bell Canadas directors
to:



| |  |  | issue Class A preferred shares in one or
more series                     
| | - |  | -------------------------------------------------------------------------
|
| |  |  | set the number of Class A preferred shares
and conditions of each series.

Authorized and outstanding

The table on the following page is a summary of
the principal terms and conditions of Bell
Canadas authorized series of Class A Preferred
Shares. Bell Canadas articles of incorporation
show the details of the terms and conditions of
these shares.

All series outstanding at December 31, 2002:



| |  |  | were non-voting, except under special
circumstances when the holders were entitled
to one vote per share       
| | - |  | ---------------------------------------------------------------------------------------------------------------
|
| |  |  | were convertible at the holders option into
another series of Class A Preferred Shares on
a one-for-one basis.

At December 31, 2002 the Series 16, 18 and 20
Shares were authorized but not issued. Series
15, 17 and 19 Shares were authorized except
that only the following number of shares was
issued and outstanding:



| |  |  | 16,000,000 Series 15 Preferred Shares 
| | - |  | --------------------------------------
|
| |  |  | 14,000,000 Series 17 Preferred Shares 
|
| |  |  | 14,000,000 Series 19 Preferred Shares.

There were no Class B Preferred Shares outstanding at December 31, 2002.

Bell Canada    40    2002 Financial Information



---



##### Table of Contents



17. SHARE CAPITAL(continued)

|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |                |            |                |   |  |     |  |   |  |     |  |       |  |  |  |       | 
|------------------------------------ |  | ------------------- | ---- | --------------- |  | ---------------- |  | ---------------- |  | ---------------- | ----- | --------------- | ----- | ---------- | ---------- | -------------- | ---------- | -------------- | - |  | --- |  | - |  | --- |  | ----- |  |  |  | ----- | 
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |               
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |                |            | Stated Capital
|Convertible Class
A Preferred Shares |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       | Authorized |            | At
December 31
|                                     |  |                     |      |                
|Series                               |  | Annualdividend rate |      | Convertibleinto |  | Conversiondate   |  | Redemption date  |  | Redemptionprice  |       | Numberof shares |       | 2002       |            | 2001          
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |               
|15 (a)(c)                            |  |                     | 5.50 | %               |  | Series 16        |  | February 1, 2005 |  | February 1, 2005 |       | $               | 25.00 |            |            |                | 24,000,000 |                |   |  | 400 |  |   |  | 400 | 
|16 (b)(d)                            |  | fixed               |      | Series 15       |  | February 1, 2010 |  | February 1, 2010 |  | $                | 25.00 |                 |       |            | 24,000,000 |                |            |                |  |  |     |  |  | 
|17 (b)(d)                            |  |                     | 5.25 | %               |  | Series 18        |  | May 1, 2006      |  | May 1, 2006      |       | $               | 25.00 |            |            |                | 22,000,000 |                |   |  | 350 |  |   |  | 350 | 
|18 (d)                               |  | floating            |      | Series 17       |  | May 1, 2011      |  | at any time      |  | $                | 25.50 |                 |       |            | 22,000,000 |                |            |                |  |  |     |  |  | 
|19 (b) (d)                           |  |                     | 5.55 | %               |  | Series 20        |  | August 1, 2006   |  | August 1, 2006   |       | $               | 25.00 |            |            |                | 22,000,000 |                |   |  | 350 |  |   |  | 350 | 
|20 (d)                               |  | floating            |      | Series 19       |  | August 1, 2011   |  | at any time      |  | $                | 25.50 |                 |       |            | 22,000,000 |                |            |                |  |  |     |  |  | 
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |                |            |                |   |  |     |  |   |  |     |  |       |  |  |  |       | 
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |                |            |                |   |  |     |  |   |  |     |  | 1,100 |  |  |  | 1,100 | 
|                                     |  |                     |      |                 |  |                  |  |                  |  |                  |       |                 |       |            |            |                |            |                |   |  |     |  |   |  |     |  |       |  |  |  |       | 



|(a) |  | Series 15 shareholders are entitled to
fixed cumulative quarterly dividends. If not
redeemed, starting on the redemption date,
Series 15 Shares will entitle their holders to
floating adjustable cumulative monthly
dividends and their redemption price will be
$25.50 per share instead of $25.00.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The fixed dividend rate on these
shares is reset every five years pursuant to
their terms and conditions.                                                                                                                                                                                            
|   
|(c) |  | These Shares are redeemable on the
redemption date and at any time thereafter.                                                                                                                                                                                                                       
|   
|(d) |  | These Shares are redeemable on the
redemption date and every fifth year
thereafter.                                                                                                                                                                                                                  

(ii) Equity-settled notes

|                                                     |  |      |       |      |  |  |       | 
|---------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31                                       |  | 2002 |       | 2001
|                                                     |  |      |       |     
|Junior Note 1 unsecured obligation
due 2034 (a)      |  |      | 498   |      |  |  | 498   | 
|Junior Note 2 unsecured obligation
due on demand (b) |  |      | 1,570 |      |  |  | 1,570 | 
|                                                     |  |      |       |      |  |  |       | 
|Total equity-settled notes                           |  |      | 2,068 |      |  |  | 2,068 | 
|                                                     |  |      |       |      |  |  |       | 



|(a) |  | Junior Note 1 is payable to BCH and ranks
below all present and future debts of Bell
Canada and bears interest at 8.22%. Under
certain conditions, we have the option to
repay, at any time, all or part of the note in
cash before its maturity date, without giving
notice or paying a penalty. We may elect, at
any time, to repay the note by issuing to BCH
common shares with a total value equal to the
amount owing on the note on the repayment
date.                                                                                                                                                                                                                            
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Junior Note 2 is payable to BCH and ranks
below all present and future unsubordinated
debts of Bell Canada. The annual interest rate
on the note was 2.77% up to November 30, 2002,
when it was reset to 3.408%. The interest rate
will be reset every year on November 30 and is
equal to the Canadian one-year treasury
benchmark rate plus 0.40%. Under certain
conditions, we have the option to repay, at
any time, all or part of the note in cash
before its maturity date, without giving
notice or paying a penalty. We may elect, at
any time, to repay the note by issuing to BCH
common shares with a total value equal to the
amount owing on the note on the repayment
date.

(iii) Common shares

Authorized

An unlimited number of common shares are authorized by the articles of the
Corporation.

|                               |  |           |             |         |  |           |       |         |  |  |             |      |  |  |       | 
|------------------------------ |  | --------- | ----------- | ------- |  | --------- | ----- | ------- |  |  | ----------- | ---- |  |  | ----- | 
|                               |  |           |             |         |  | 2002      |       |         |  |  |             | 2001
|                               |  |           |             |         |  |           |       |         |  |  |             |     
|                               |  | Number of |             | Stated  |  | Number of |       | Stated 
|                               |  | shares    |             | capital |  | shares    |       | capital
|                               |  |           |             |         |  |           |       |        
|Outstanding, beginning of year |  |           | 348,316,829 |         |  |           | 4,673 |         |  |  | 348,316,829 |      |  |  | 4,673 | 
|Shares issued (a)              |  |           | 7,030,159   |         |  |           | 566   |         |  |  |             |      |  |  |       | 
|Capital distribution (b)       |  |           |            |         |  |           | (975  | )       |  |  |            |      |  |  |      | 
|                               |  |           |             |         |  |           |       |         |  |  |             |      |  |  |       | 
|Outstanding, end of year       |  |           | 355,346,988 |         |  |           | 4,264 |         |  |  | 348,316,829 |      |  |  | 4,673 | 
|                               |  |           |             |         |  |           |       |         |  |  |             |      |  |  |       | 



---

|(a) |  | During the year, 7,030,159 common shares were issued to BCE in exchange for
an additional 14% interest in Aliant. Refer to Note 3, Business acquisitions
and dispositions,for more information.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | During the year, Bell Canada made a return of capital of $975 million on
its common shares.                                                                                                    

Bell Canada    41    2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial
statements  Bell Canada (continued)


---

17. SHARE CAPITAL(continued)

(iv) Contributed surplus

|                               |  |      |     |      |  |  |     | 
|------------------------------ |  | ---- | --- | ---- |  |  | --- | 
|                               |  | 2002 |     | 2001
|                               |  |      |     |     
|Outstanding, beginning of year |  |      | 367 |      |  |  | 367 | 
|Capital contribution (a)       |  |      | 296 |      |  |  |    | 
|Related party transactions (b) |  |      | 239 |      |  |  |    | 
|                               |  |      |     |      |  |  |     | 
|Outstanding, end of year       |  |      | 902 |      |  |  | 367 | 
|                               |  |      |     |      |  |  |     | 



---

|(a) |  | In December 2002, BCH made a capital
contribution of $296 million.                                                                                                         
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The related party transactions adjustment
relates to the transfer of BCEs interests in
Aliant and Bell ExpressVu. Refer to Note 3,
Business acquisitions and dispositions.

18. STOCK-BASED COMPENSATION PLANS

EMPLOYEE SAVINGS PLANS (ESPs)

ESPs are designed to encourage employees of
Bell Canada and its participating subsidiaries
to own shares of BCE. Employees who
participate in the plans can buy BCE common
shares through regular payroll deductions. In
some cases, the employer may also contribute
to the plan. There were 34,771 employees
participating in the plans at December 31,
2002.

Each year, employees can choose to have
between 10% to 12% of their annual earnings
withheld to buy BCE common shares. Bell Canada
contributes up to 2% of the employees annual
earnings.

The trustee of the ESPs buys BCE
common shares for the participants on the open
market by private purchase or from BCE. BCE
chooses the method the trustee uses to buy the
shares.

Compensation expense related to ESPs
was $41 million in 2002 and $35 million in
2001.

STOCK OPTIONS

Under BCEs long-term incentive programs, BCE
may grant options to our officers,
vice-presidents and other key employees to buy
BCE common shares. The subscription price is
generally 100% of market value on the last
trading day before the grant comes into
effect.

The right to exercise options generally
accrues by 25% annual increments over a period
of four years of continuous employment from
the date of grant, except when a special
vesting period is provided for. Options
generally start to become exercisable 12
months after the date of the grant and for a
period of up to 10 years.

Special vesting provisions may apply when:



| |  |  | there is a change of control of BCE and the
option holders employment ends under certain
circumstances
| | - |  | -------------------------------------------------------------------------------------------------------
|
| |  |  | BCEs ownership interest in Bell Canada
falls below the percentage outlined in
the programs.           

When the Nortel Networks common shares
were distributed in May 2000, each outstanding
BCE stock option was cancelled and was
replaced by two new stock options. The first
option gives the right to buy one BCE common
share. The second option gives the right to
buy approximately 1.57 post-split common
shares of Nortel Networks (Nortel option) at
exercise prices that maintain the holders
economic position.

The table below is a summary of the
status of Bell Canadas portion of BCEs stock
option programs. We have adjusted the
weighted-average exercise price to
reflect the distribution of the Nortel
Networks common shares in May 2000.

|                               |  |           |            |           |  |          |    | 
|------------------------------ |  | --------- | ---------- | --------- |  | -------- | -- | 
|For the year ended
December 31 |  |           |            |           |  | 2002    
|                              
|                               |  |           |            |           |  | Weighted
|                               |  |           |            |           |  | average 
|                               |  | Number    |            | exercise 
|                               |  | of shares |            | price ($)
|                               |  |           |            |          
|Outstanding, beginning of year |  |           | 9,484,618  |           |  |          | 33 | 
|Granted                        |  |           | 4,504,589  |           |  |          | 31 | 
|Exercised                      |  |           | (265,331   | )         |  |          | 13 | 
|Expired/forfeited              |  |           | (1,173,655 | )         |  |          | 33 | 
|Outstanding, end of year       |  |           | 12,550,221 |           |  |          | 33 | 
|                               |  |           |            |           |  |          |    | 
|Exercisable, end of year       |  |           | 2,871,075  |           |  |          | 34 | 
|                               |  |           |            |           |  |          |    | 

The table below tells you more about the stock option programs at December 31,
2002.

|                        |  |         |            |                |  |                     |  |                     |    |           |    |  |           |         |           |          |    |  |    | 
|----------------------- |  | ------- | ---------- | -------------- |  | ------------------- |  | ------------------- | -- | --------- | -- |  | --------- | ------- | --------- | -------- | -- |  | -- | 
|                        |  |         |            |                |  | Options outstanding |  | Options exercisable
|                        |  |         |            |                |  |                     |  |                    
|                        |  |         |            |                |  |                     |  |                     |    | Weighted  |    |  |           |         |           | Weighted
|                        |  |         |            |                |  | Weighted            |  | average             |    |           |    |  |           | average
|Range of exercise price |  | average |            | exercise       |  |                     |  |                     |    | exercise 
|                        |  | Number  |            | remaining life |  | price ($)           |  | Number              |    | price ($)
|                        |  |         |            |                |  |                     |  |                     |    |          
|Below $20               |  |         | 1,823,875  |                |  | 6 years             |  |                     | 15 |           |    |  | 530,430   |         |           |          | 12 | 
|$20  $30               |  |         | 1,423,167  |                |  | 9 years             |  |                     | 27 |           |    |  |          |         |           |          | 0  | 
|$30  $40               |  |         | 4,800,277  |                |  | 9 years             |  |                     | 34 |           |    |  | 694,019   |         |           |          | 36 | 
|Over $40                |  |         | 4,502,902  |                |  | 8 years             |  |                     | 41 |           |    |  | 1,646,626 |         |           |          | 41 | 
|                        |  |         |            |                |  |                     |  |                     |    |           |    |  |           |         |           |          |    | 
|                        |  |         | 12,550,221 |                |  |                     |  |                     |    |           | 33 |  |           |         | 2,871,075 |          |    |  | 34 | 
|                        |  |         |            |                |  |                     |  |                     |    |           |    |  |           |         |           |          |    | 

Bell Canada    42    2002 Financial Information



---



##### Table of Contents



18. STOCK-BASED COMPENSATION PLANS(continued)

PRO-FORMA NET EARNINGS

We have elected to account for employee stock
options by using the compensation cost of
options. Compensation cost is the amount that
the quoted market price of BCEs common shares
on the date of grant exceeds the amount an
employee must pay to buy the shares.

The table
below shows the impact on net earnings and the
assumptions used if the compensation cost of
our portion of BCEs stock options granted on
or after January 1, 2002 was calculated using
the fair value-based method of accounting.

|                                                        |  |      |           |  
|------------------------------------------------------- |  | ---- | --------- | -
|For the period ended
December 31                        |  | 2002
|                                                        |  |     
|Net earnings, as reported ($ millions)                  |  |      | 1,504     |  
|Pro forma impact ($ millions)                           |  |      | (9        | )
|Pro forma net earnings ($ millions)                     |  |      | 1,495     |  
|Assumptions used in Black Scholes
option pricing model: |  |      |           |  
|Dividend yield                                          |  |      | 3.3       | %
|Expected volatility                                     |  |      | 30        | %
|Risk-free interest rate                                 |  |      | 4.5       | %
|Expected life (years)                                   |  |      | 4.4       |  
|Number of options granted                               |  |      | 4,504,589 |  
|Weighted average fair value of options granted ($)      |  |      | $7        |  
|                                                        |  |      |           |  

Please see Note 1, Significant accounting
policies  Recent changes to accounting
standards, for more information on the impact
of applying a new accounting policy for
stock-based compensation plans.

SPECIAL COMPENSATION PAYMENTS (SCPs)

Before 2000, when BCE granted options to our
officers and key employees to acquire BCE
common shares, related rights to SCPs were
also sometimes granted. SCPs are cash payments
representing the excess of the market value of
the shares on the date of exercise of the
related options over the exercise price of
such options.

When the distribution of Nortel Networks
common shares was made in 2000, the
outstanding options were divided into options
to buy BCE common shares and Nortel Networks
common shares. The related SCPs were adjusted
accordingly.

For each right to an SCP held before the
distribution, right holders now have rights
related to both BCE and Nortel Networks common
shares.

To manage the cost of SCPs, we have:



| |  |  | entered into forward contracts to hedge our
exposure to outstanding rights related to
options on BCE common shares                                                                   
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | designated approximately 3.5 million Nortel
Networks common shares to hedge Bell Canadas
exposure to outstanding rights related to the
options on the Nortel Networks common shares.

The number of SCPs outstanding at December 31, 2002 was:



| |  |  | 2,144,203 relating to BCE common shares             
| | - |  | ----------------------------------------------------
|
| |  |  | 2,088,562 relating to Nortel Networks common shares.

All of the outstanding SCPs covered the
same number of shares as the options they
relate to. It is the employers responsibility
to make the payments. The income related to
SCPs was $15 million in 2002 and an expense of
$48 million in 2001. The income of $15 million
includes a recovery of $59 million relating to
forfeitures of SCPs.

19. EMPLOYEE BENEFIT PLANS

We maintain defined benefit plans that provide
pension, other retirement and post-employment
benefits for most of our employees. These
benefits are based on the employees length of
service and rate of pay. We make contributions
to these pension plans based on various
actuarial cost methods that are permitted by
pension regulatory bodies.

We are responsible for adequately funding
the plans. Contributions reflect actuarial
assumptions about future investment returns,
salary projections and future service
benefits. Plan assets primarily include
Canadian and foreign equities, government and
corporate bonds, debentures and secured
mortgages.

The table below shows the change in
benefit obligations, change in the fair value
of plan assets and the funded status of the
plans.

A number of individual pension benefit
plans had projected pension benefit
obligations that exceeded the fair value of
their related plan assets at December 31,
2002. The aggregate projected benefit
obligation of these plans was $2,317 million,
and the aggregate fair value of plan assets
was $1,692 million. Similarly, a number of
individual pension benefit plans had plan
assets that exceeded projected benefit
obligations at December 31, 2002. The
aggregate projected benefit obligation of
these $8,998 million, and the fair value of
their related plan assets was $10,306 million.

Bell Canada    43    2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial
statementsBell Canada (continued)

19. EMPLOYEE BENEFIT PLANS(continued)

|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|----------------------------------------------- |  | ---------------- | ------ | -------------- |  | ---- | ------ | ---- |  |  | ------ | - |  |  | ------ | -
|                                                |  | Pension benefits |        | Other benefits
|                                                |  |                  |        |               
|                                                |  | 2002             |        | 2001           |  | 2002 |        | 2001
|                                                |  |                  |        |                |  |      |        |     
|Projected benefit obligation, beginning of year |  |                  | 9,832  |                |  |      | 8,678  |      |  |  | 1,452  |   |  |  | 1,490  |  
|Current service cost                            |  |                  | 184    |                |  |      | 168    |      |  |  | 31     |   |  |  | 27     |  
|Interest cost                                   |  |                  | 631    |                |  |      | 607    |      |  |  | 104    |   |  |  | 106    |  
|Actuarial (gains) losses                        |  |                  | (89    | )              |  |      | 686    |      |  |  | 162    |   |  |  | (96    | )
|Estimated benefits payments                     |  |                  | (560   | )              |  |      | (549   | )    |  |  | (73    | ) |  |  | (71    | )
|Employee contributions                          |  |                  | 2      |                |  |      | 2      |      |  |  |       |   |  |  |       |  
|Business combinations                           |  |                  | 1,405  |                |  |      |       |      |  |  | 160    |   |  |  |       |  
|Special termination costs                       |  |                  | 122    |                |  |      | 266    |      |  |  |       |   |  |  |       |  
|Plan amendment                                  |  |                  | 50     |                |  |      |       |      |  |  |       |   |  |  |       |  
|Divestitures and other                          |  |                  | (262   | )              |  |      | (26    | )    |  |  | (40    | ) |  |  | (4     | )
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|Projected benefit obligation, end of year       |  |                  | 11,315 |                |  |      | 9,832  |      |  |  | 1,796  |   |  |  | 1,452  |  
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|Fair value of plan assets, beginning of year    |  |                  | 11,941 |                |  |      | 12,061 |      |  |  | 385    |   |  |  | 361    |  
|Expected return on plan assets                  |  |                  | 966    |                |  |      | 1,011  |      |  |  | 32     |   |  |  | 28     |  
|Actuarial gains (losses)                        |  |                  | (1,117 | )              |  |      | (549   | )    |  |  | (110   | ) |  |  | (3     | )
|Estimated benefits payments                     |  |                  | (560   | )              |  |      | (549   | )    |  |  | (73    | ) |  |  | (71    | )
|Employer contribution                           |  |                  | 5      |                |  |      | 6      |      |  |  | 72     |   |  |  | 70     |  
|Employee contribution                           |  |                  | 2      |                |  |      | 2      |      |  |  |       |   |  |  |       |  
|Business combinations                           |  |                  | 1,107  |                |  |      |       |      |  |  |       |   |  |  |       |  
|Divestitures                                    |  |                  | (346   | )              |  |      | (41    | )    |  |  | (7     | ) |  |  |       |  
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|Fair value of plan assets, end of year          |  |                  | 11,998 |                |  |      | 11,941 |      |  |  | 299    |   |  |  | 385    |  
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|Funded status                                   |  |                  | 683    |                |  |      | 2,109  |      |  |  | (1,497 | ) |  |  | (1,067 | )
|Unamortized net actuarial (gains)/losses        |  |                  | 1,146  |                |  |      | (219   | )    |  |  | (5     | ) |  |  | (285   | )
|Unamortized past service costs                  |  |                  | 94     |                |  |      | 50     |      |  |  |       |   |  |  |       |  
|Unamortized transitional (asset) obligation     |  |                  | (97    | )              |  |      | (198   | )    |  |  | 367    |   |  |  | 430    |  
|Other                                           |  |                  |       |                |  |      |       |      |  |  | 8      |   |  |  |       |  
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  
|Accrued benefit asset (liability), end of year  |  |                  | 1,826  |                |  |      | 1,742  |      |  |  | (1,127 | ) |  |  | (922   | )
|                                                |  |                  |        |                |  |      |        |      |  |  |        |   |  |  |        |  

The table below shows the components of the accrued benefit asset for pension
and other benefits for financial reporting purposes:

|                          |  |      |       |      |  |  |       | 
|------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31            |  | 2002 |       | 2001
|                          |  |      |       |     
|Accrued benefit asset     |  |      | 1,965 |      |  |  | 1,839 | 
|Accrued benefit liability |  |      | 1,266 |      |  |  | 1,019 | 
|                          |  |      |       |      |  |  |       | 
|                          |  |      | 699   |      |  |  | 820   | 
|                          |  |      |       |      |  |  |       | 

The table below shows the significant
weighted-average assumptions we used to measure
Bell Canadas pension and other benefit
obligations.

Other assumptions we used were:



| |  |  | 4.5% annual rate of increase in the cost
per person of covered health-care
benefits for 2002, except for the cost of
medication              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 10.5% annual rate of increase in the
cost of medication for 2002 with a
gradual decline to 4.5% over 6 years,
where we assume it will remain.

|                                         |  |                  |     |                |  |      |     |      |  |  |     |   |  |  |     |  
|---------------------------------------- |  | ---------------- | --- | -------------- |  | ---- | --- | ---- |  |  | --- | - |  |  | --- | -
|At December 31                           |  | Pension benefits |     | Other benefits
|                                         |  |                  |     |               
|                                         |  | 2002             |     | 2001           |  | 2002 |     | 2001
|                                         |  |                  |     |                |  |      |     |     
|Discount rate                            |  |                  | 6.5 | %              |  |      | 6.5 | %    |  |  | 6.5 | % |  |  | 6.5 | %
|Expected long-term return on plan assets |  |                  | 8.3 | %              |  |      | 8.8 | %    |  |  | 8.3 | % |  |  | 8.8 | %
|Rate of compensation increase            |  |                  | 3.5 | %              |  |      | 3.5 | %    |  |  | 3.5 | % |  |  | 3.5 | %
|                                         |  |                  |     |                |  |      |     |      |  |  |     |   |  |  |     |  

Approximately 1% of the plan assets were held in BCE common shares at December
31, 2002.

Bell Canada    44    2002 Financial Information



---



##### Table of Contents



19. EMPLOYEE BENEFIT PLANS(continued)

The table below shows the components of the net benefit plans expense (credit)
for the years ended December 31, 2002 and 2001.

|                                                |  |                  |      |                |  |      |        |      |  |  |     |   |  |  |     |  
|----------------------------------------------- |  | ---------------- | ---- | -------------- |  | ---- | ------ | ---- |  |  | --- | - |  |  | --- | -
|For the year ended
December 31                  |  | Pension benefits |      | Other benefits
|                                                |  |                  |      |               
|                                                |  | 2002             |      | 2001           |  | 2002 |        | 2001
|                                                |  |                  |      |                |  |      |        |     
|Current service cost                            |  |                  | 184  |                |  |      | 168    |      |  |  | 31  |   |  |  | 27  |  
|Interest cost                                   |  |                  | 631  |                |  |      | 607    |      |  |  | 104 |   |  |  | 106 |  
|Expected return on plan assets                  |  |                  | (966 | )              |  |      | (1,011 | )    |  |  | (32 | ) |  |  | (28 | )
|Amortization of past service costs              |  |                  | 6    |                |  |      | 11     |      |  |  |    |   |  |  |    |  
|Amortization of net actuarial gain              |  |                  | 1    |                |  |      | (3     | )    |  |  |    |   |  |  | (5  | )
|Amortization of transitional (asset) obligation |  |                  | (47  | )              |  |      | (48    | )    |  |  | 38  |   |  |  | 38  |  
|                                                |  |                  |      |                |  |      |        |      |  |  |     |   |  |  |     |  
|Net benefit plans (credit) expenses             |  |                  | (191 | )              |  |      | (276   | )    |  |  | 141 |   |  |  | 138 |  
|                                                |  |                  |      |                |  |      |        |      |  |  |     |   |  |  |     |  

20. RELATED PARTY TRANSACTIONS AND ACCOUNTS

We concluded the following transactions at agreed upon amounts with related
parties in the normal course of business:

|                                             |  |      |     |      |  |  |     | 
|-------------------------------------------- |  | ---- | --- | ---- |  |  | --- | 
|For the years ended
December 31              |  | 2002 |     | 2001
|                                             |  |      |     |     
|Purchase of equipment, supplies and
services |  |      |     |      |  |  |     | 
|CGI Group Inc. (CGI) (a)                     |  |      | 416 |      |  |  | 463 | 
|BCE Emergis Inc. (BCE Emergis) (b)           |  |      | 140 |      |  |  | 223 | 
|Teleglobe (c)                                |  |      | 123 |      |  |  | 320 | 
|Entourage                                    |  |      | 156 |      |  |  | 152 | 
|Aliant (d)                                   |  |      | 83  |      |  |  | 103 | 
|Nexxia U.S.                                  |  |      | 132 |      |  |  | 65  | 
|                                             |  |      |     |      |  |  |     | 
|Sale of equipment and services               |  |      |     |      |  |  |     | 
|CGI (a)                                      |  |      | 42  |      |  |  | 214 | 
|BCE Emergis (b)                              |  |      | 141 |      |  |  | 156 | 
|Teleglobe (c)                                |  |      | 11  |      |  |  | 38  | 
|Aliant (d)                                   |  |      | 86  |      |  |  | 53  | 
|Bell ExpressVu (e)                           |  |      | 71  |      |  |  | 51  | 
|Other                                        |  |      | 16  |      |  |  | 7   | 
|                                             |  |      |     |      |  |  |     | 



---

|(a) |  | CGI is a joint venture of BCE                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | BCE Emergis is a subsidiary of BCE                                                                                                                                                      
|   
|(c) |  | As of May 15, 2002, Teleglobe is no longer a related party of Bell Canada                                                                                                               
|   
|(d) |  | During 2002, Aliant was held as an equity investment. As of December 31,
2002, Aliant became a subsidiary of Bell Canada. Refer to Note 3, Business
acquisitions and dispositions       
|   
|(e) |  | During 2002, Bell ExpressVu was wholly-owned by BCE. As of December 31,
2002, Bell ExpressVu became a subsidiary of Bell Canada. Refer to Note 3,
Business acquisitions and dispositions

Amounts owed to, or receivable from, related parties were as follows:

|                                         |  |      |     |      |  |  |     | 
|---------------------------------------- |  | ---- | --- | ---- |  |  | --- | 
|As at December 31                        |  | 2002 |     | 2001
|                                         |  |      |     |     
|Accounts Receivable from related parties |  |      | 116 |      |  |  | 181 | 
|Accounts Payable due to related parties  |  |      | 92  |      |  |  | 550 | 
|                                         |  |      |     |      |  |  |     | 

As well, there are $850 million of demand
promissory notes receivable from related
parties included in cash and cash equivalents.

During the year, we entered into the
following transactions with related parties as
part of our tax loss consolidation savings
strategy, which was subject to tax rulings.

BCH, 4047974 CANADA INC. AND BELL CANADA

In the second quarter of 2002, BCH advanced $5
billion in cash to us through a subordinated
demand loan at a rate of interest equal to the
rate at our leading bank. We used the proceeds
to acquire preferred shares from 4047974
Canada Inc. (4047974 Canada), a wholly-owned
subsidiary of BCH. The dividend rate on these
shares is essentially equal to the interest
rate on the loan we received from BCH. 4047974
Canada then advanced $5 billion to BCH through
an interest free subordinated demand loan.

We have the legal right to offset the demand loan
payable to BCH and the investment in preferred
shares of 4047974 Canada. As a result, these
items, as well as the related dividend income
and interest expense, have been presented on a
net basis.

BCE, 3787842 CANADA INC. AND BELL CANADA

On December 6, 2002, BCE advanced $12 billion
in cash to us through a subordinated demand
loan at a rate of interest equal to the rate
on five-year Government of Canada bonds. We
then used the proceeds to acquire preferred
shares from 3787842 Canada Inc. (3787842
Canada), a wholly-owned subsidiary of BCE. The
dividend rate is essentially equal to the
interest rate on the loan from BCE. 3787842
Canada then advanced $12 billion to BCE
through an interest free subordinated demand
loan.

We have the legal right to offset the
demand loan payable to BCE and the investment
in preferred shares of 3787842 Canada. As a
result, these items, as well as the related
dividend income and interest expense, have
been presented on a net basis.

Bell Canada    45    2002 Financial Information



---



##### Table of Contents



Notes to the consolidated financial statements  Bell Canada (continued)

21. CONTRACTUAL OBLIGATIONS, COMMERCIAL COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS

The table below shows our contractual obligations at December 31, 2002. Rental
expense relating to operating leases was $244 million in 2002 and $188 million
in 2001.

|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 
|----------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  |  | --- |  |  |  | ----- |  |  |  | ------ | 
|                                          |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Long-term debt
(excluding capital leases) |  |      | 1,582 |      |  |      | 953   |      |  |      | 1,178 |            |  |       | 542   |  |  |  | 611 |  |  |  | 6,647 |  |  |  | 11,513 | 
|Capital leases (a)                        |  |      | 101   |      |  |      | 104   |      |  |      | 79    |            |  |       | 72    |  |  |  | 64  |  |  |  | 251   |  |  |  | 671    | 
|Notes payable and bank advances           |  |      | 1,198 |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |    |  |  |  |      |  |  |  | 1,198  | 
|Operating leases                          |  |      | 413   |      |  |      | 348   |      |  |      | 328   |            |  |       | 305   |  |  |  | 263 |  |  |  | 1,588 |  |  |  | 3,245  | 
|Purchase obligations                      |  |      | 545   |      |  |      | 227   |      |  |      | 120   |            |  |       | 112   |  |  |  | 48  |  |  |  | 173   |  |  |  | 1,225  | 
|Other contractual obligations             |  |      | 108   |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |    |  |  |  |      |  |  |  | 108    | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 
|Total                                     |  |      | 3,947 |      |  |      | 1,632 |      |  |      | 1,705 |            |  |       | 1,031 |  |  |  | 986 |  |  |  | 8,659 |  |  |  | 17,960 | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |     |  |  |  |       |  |  |  |        | 



---

|(a) |  | The imputed interest to be paid in connection with the capital leases
amounts to $61 million.
|--- |  | ---------------------------------------------------------------------------------------------

COMMERCIAL COMMITMENTS

We had the following commercial commitments at
December 31, 2002:



| |  |  | $1,807 million in total
credit and other bank facilities, of which $72
million was drawn
| | - |  | ----------------------------------------------------------------------------------------
|
| |  |  | $122 million in standby
letters of credit.                                              

Of the $1,807 million in total credit and
other bank facilities, $950 million is used to
support our commercial paper programs,
excluding extendable Class E notes. No amount
has been drawn on our commercial paper
programs.

In addition, at December 31, 2002 there
were $50 million of Class E Notes outstanding.
The maximum principal amount that can be
issued is $400 million. Although these notes
are not supported by committed lines of
credit, we may extend them in certain
circumstances.

The remaining unused portion of the shelf
prospectus was $900 million as at December 31,
2002. After issuing Series M-16
debentures on February 12, 2003, the
amount decreased to $300 million.

CRTC Second Price Cap Decision 2002-34

On May 30, 2002, the CRTC released Decision
2002-34, Second Price Cap Decision. This
decision made a number of changes to the rules
governing local service in Canadas
telecommunications industry for the next four
years.

One of the changes is a new mechanism,
called the deferral account, which will be
used to fund initiatives such as service
improvement or reduced rates and/or rebates.
We estimate our commitment relating to this
decision to be $74 million at December 31,
2002.

Guarantees

In the normal course of our operations, we
execute agreements that provide for
indemnification and guarantees to
counterparties in transactions such as
business dispositions, the sale of assets, the
sale of services, securitization agreements
and operating leases.

These indemnification undertakings and
guarantees may require us to compensate the
counterparties for costs and losses incurred
as a result of various events, including
breaches of representations and warranties,
intellectual property right infringement, loss
of or damages to property, environmental
liabilities, changes in or in the
interpretation of laws and regulations
(including tax legislation), valuation
differences, claims that may arise while
providing services, or as a result of
litigation that may be suffered by the
counterparties. Also, in the context of the
sale of all or a part of a business, we may
from time to time agree to compensate the
purchaser for certain costs that may result
from certain future events such as the failure
of the disposed business to reach certain
operational thresholds (earn-out guarantees),
the resolution of contingent liabilities of
the disposed businesses, or the reassessment
of prior tax filings of the corporations
carrying on the business.

Certain indemnification undertakings can
extend for an unlimited period and generally
do not provide for any limit on the maximum
potential amount, although certain agreements
do contain specified maximum potential
exposure representing a cumulative amount of
approximately $3.5 billion. The nature of
substantially all of the indemnification
undertakings prevents us from making a
reasonable estimate of the maximum potential
amount we could be required to pay
counterparties as the agreements do not
specify a maximum amount and the amounts are
dependant upon the outcome of future
contingent events, the nature and likelihood
of which cannot be determined at this time.
Historically, we have not made any significant
payments under such indemnifications. As at
December 31, 2002, an aggregate amount of $42 million has been accrued in the consolidated
balance sheet with respect to these
indemnification undertakings, relating mainly
to environmental liabilities.

Bell West put and call options

The agreement between Bell Canada and MTS to
create Bell West includes put and call options
relating to MTS 40% ownership of Bell West.
Please see Note 3, Business acquisitions and
dispositions, for more information about Bell
West.

Under the terms of the put option, MTS
can require Bell Canada to buy its interest in
Bell West:



| |  |  | in February 2004 at a guaranteed
floor value of $458 million plus ongoing
incremental funding invested by MTS. The put
price includes an 8% return on the incremental
funding. The floor value was $549 million at
December 31, 2002
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in January 2007 at fair
market value less 12.5%                                                                                                                                                                                     
|
| |  |  | at fair market value
less 12.5%, under certain circumstances.                                                                                                                                                                       

Bell Canada    46    2002 Financial Information



---



##### Table of Contents



21. CONTRACTUAL OBLIGATIONS, COMMERCIAL COMMITMENTS AND CONTINGENCIES(continued)

If MTS does not exercise its put option,
we can exercise our call option. Under the
terms of the call option, we have the option
to buy MTS interest:



| |  |  | in March 2004 at the
greater of the floor value described above and
fair market value                         
| | - |  | --------------------------------------------------------------------------------------------------------------
|
| |  |  | in February 2007 at fair
market value                                                                         
|
| |  |  | at fair market value if there
is a change of control of MTS to a party other
than ourselves or our affiliates.

We have not received any formal notice
from MTS that it plans to exercise the put
option in February 2004.

Shared services agreement

Effective June 22, 2001, we entered into a
10-year service contract with a special
purpose entity. This contract will allow us to
reduce systems and administrative costs over
time by streamlining and enhancing our systems
and processes. We are committed to paying
approximately $150 million in service fees
over the first three years of the agreement.

In 2004, we may:



| |  |  | exercise an option to buy the special
purpose entity at fair market value, or                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | maintain the service contract and commit to
paying at least $420 million more in service
fees to the special purpose entity.

As at December 31, 2002, the special
purpose entity had $123 million of total
assets, of which $99 million are capital
assets, and $133 million of total liabilities,
of which $123 million is long-term debt.

Purchase commitment

Effective July 1, 1998, under the terms of a
ten-year outsourcing agreement, a wholly-owned
subsidiary of CGI is the preferred provider of
our required information systems and
information technology services.

Litigation

We become involved in various claims and
litigation as a regular part of our business.
While no one can predict the final outcome of
claims and litigation that were pending at
December 31, 2002, management believes that
the resolution of these claims and litigation
will not have a material and negative effect
on our consolidated financial position or
results of operations.

22. SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS

|                                |  |      |     |      |  |  |     | 
|------------------------------- |  | ---- | --- | ---- |  |  | --- | 
|For the year ended December 31  |  | 2002 |     | 2001
|                                |  |      |     |     
|Interest paid on long-term debt |  |      | 827 |      |  |  | 701 | 
|Income taxes paid               |  |      | 667 |      |  |  | 651 | 
|                                |  |      |     |      |  |  |     | 

Bell Canada    47    2002 Financial Information



---



##### Table of Contents



Board of DirectorsRichard J. Currie, C.M.Toronto, Ontario
     Chairman of the Board, BCE Inc.,
     Bell Canada and Telesat Canada.
     A director since May 2002 and
Chairman
     of the Pension Fund Committee.Michael J. SabiaMontréal, Québec
     President and Chief Executive Officer
and a director, BCE Inc.
     Chief Executive Officer, Bell Canada
     A director since July 2000. Chairman of
the Board of BCE Emergis
     Inc., BCE Nexxia Inc. and Bell
Globemedia Inc. A director of Bell
     ExpressVu Inc., Bell Mobility Holdings
Inc. and Telesat Canada.André Béard, O.C.Montréal, Québec
     Chairman of the Board, National Bank of
Canada
     A director since January 2003. A
director of BCE Inc.
     and Telesat Canada.Anthony S. Fell, O.C.Toronto, Ontario
     Chairman of the Board, RBC Dominion
Securities Limited.
     A director since January 2003 and a
member of the Audit Committee
     and the Pension Fund Committee. A
director of BCE Inc. and
     Telesat Canada.Donna Soble KaufmanToronto, Ontario
     Lawyer and Corporate Director.
     A director since January 2003 and a
member of the Corporate
     Governance Committee. A director of BCE
Inc., Bell Canada
     International Inc., Bell Globemedia
Inc. and Telesat Canada.Thomas E. Kierans, O.C.Toronto, Ontario
     Chairman of the Board, 
     Canadian Institute for Advanced
Research (CIAR). A director 
     since January 2003 and a member of the
Audit Committee. 
     A director of BCE Inc. and Telesat
Canada.Brian M. LevittMontréal, Québec
     Co-Chair, Osler, Hoskin & Harcourt LLP,
Business Lawyers. 
     A director since January 2003 and a
member of the Corporate 
     Governance Committee and the Management
Resources and 
     Compensation Committee. A director of
BCE Inc., Bell Globemedia
     Inc. and Telesat Canada.The Honourable Edward C. Lumley, P.C.South Lancaster, Ontario
     Vice-Chairman of the Board, BMO Nesbitt
Burns Inc. 
     A director since January 2003. A
director of BCE Inc. and 
     Telesat CanadaJudith Maxwell, C.M.Ottawa, Ontario
     President, Canadian Policy Research
Networks Inc. 
     A director since December 2000 and a
member of the Corporate 
     Governance Committee and the Pension
Fund Committee. 
     A director of BCE Inc. and Telesat
Canada.John H. McArthurWayland, Massachusetts
     Dean Emeritus, Harvard University
Graduate School of Business 
     Administration. A director since
January 2003 and a member of the 
     Management Resources and Compensation
Committee. 
     A director of BCE Inc., BCE Emergis
Inc. and Telesat Canada.J. Edward Newall, O.C.Calgary, Alberta
     Chairman of the Board, Newall and
Associates 
     A director since May 1998 and Chairman
of the Audit Committee 
     and a member of the Corporate
Governance Committee. 
     A director of BCE Inc. and Telesat
Canada.Thomas C. O'NeillDon Mills, Ontario
     Corporate Director. 
     A director since January 2003. A
director of BCE Inc. and 
     Telesat Canada.Guy Saint-Pierre, O.C.Montréal, Québec
     Chairman of the Board, Royal Bank of
Canada 
     A director since April 1999 and
Chairman of the Corporate Governance 
     Committee. A director of BCE Inc. and
Telesat CanadaPaul M. Tellier, P.C., C.C., Q.C.Montréal, Québec
     President and Chief Executive Officer
and a Director, Bombardier 
     Inc. A director since March 1996 and
Chairman of the Management 
     Resources and Compensation Committee. 
     A director of BCE Inc. and Telesat
Canada.Victor L. Young, O.C.St. John's, Newfoundland
     Corporate Director. 
     A director since January 2003 and a
member of the Audit Committee 
     and the Management Resources and
Compensation Committee. 
     A director of Aliant Inc., BCE Inc. and
Telesat Canada.Bell Canada    48    2002 Financial InformationTable of ContentsCorporate OfficersMichael J. Sabia
Chief Executive OfficerStephen G. Wetmore
Vice-Chairman  CorporateJohn W. Sheridan
President and Chief Operating OfficerJ. Trevor Anderson
Senior Vice-President  Network OperationsMichael T. Boychuk
Senior Vice-President and TreasurerCharlotte Burke
Senior Vice-President  Next Generation ServicesLinda Caty*
Corporate SecretaryBernard A. Courtois
Executive Counsel  Bell and BCEIsabelle Courville
President  Bell Nordiq GroupRenato J. Discenza
Senior Vice-President  Enterprise Services and Supply ChainBarry R. Dixon
Senior Vice-President  Strategic Business Development  Bell NexxiaRoch Dubé
Senior Vice-President  Bell QuébecT. Anthony Gaffney
President  Bell NexxiaHeather A. Gomes
Vice-President and Corporate ControllerJosée Goulet
Special AssignmentLeo W. Houle
Chief Talent OfficerSalvatore Iacono
Senior Vice-PresidentRichard J. Mannion
Chief Legal OfficerGuy Marier
President  Bell QuébecKelly L. McDougald
Senior Vice-President  Business SalesTimothy E. McGee
President  Bell ExpressVuRobert T. Mosey
President  Bell OntarioMichael A. Neuman
President  Bell MobilityPatrick Pichette
Chief Financial OfficerBarry W. Pickford
Senior Vice-President  TaxationRandall J. Reynolds
President  Bell WestEugene Roman
Chief Information and Technology OfficerSheridan E. Scott
Chief Regulatory OfficerPierre Shedleur
Senior Vice-President  Business Market, Québec* Effective March 31, 2003Bell Canada    49    2002 Financial InformationTable of ContentsCorporate OfficersKaren H. Sheriff
Chief Marketing OfficerDavid A. Southwell
President  Network OperationsJean Taillon
Senior Vice-President  OperationsIda Teoli
Chief Communications OfficerPamela A. Went
Senior Vice-President  Operations, Bell NexxiaGarry M. Wood
President  Bell DistributionCommittees of the BoardAUDIT COMMITTEE

|              |  |             
|------------- |  | ------------
|J.E. Newall  |  | A.S. Fell   
|Chairman      |  | T.E. Kierans
|              |  | V.L. Young  

CORPORATE GOVERNANCE COMMITTEE

|                  |  |                 
|----------------- |  | ----------------
|G. Saint Pierre  |  | D. Soble Kaufman
|Chairman          |  | B.M. Levitt     
|                  |  | J. Maxwell      
|                  |  | J.E. Newall     

MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE

|               |  |              
|-------------- |  | -------------
|P.M. Tellier  |  | B.M. Levitt  
|Chairman       |  | J.H. McArthur
|               |  | V.L. Young   

PENSION FUND COMMITTEE

|              |  |           
|------------- |  | ----------
|R.J. Currie  |  | A.S. Fell 
|Chairman      |  | J. Maxwell

Bell Canada    50    2002 Financial Information



---



##### Table of Contents



(LOGO OF BELL CANADA)

www.bell.ca

PRINTED IN CANADA