**EXHIBIT
  99.1**

















**BCE
  INC.**

**2004
  ANNUAL REPORT**





















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Every day Bell is becoming an organization that is more 
and more focused on our customers and their needs. 
 Over the past two years, we have articulated an explicit 
 vision of what we must do to transform Bell into a new 
 model communications company.
     We will be:Clear;
we have a clear strategy and are clear 
 on the challenges ahead. Most importantly we are clear on what 
we need to do to meet those challenges.Simple;
in the services 
we offer, in how we relate to our customers and in our internal 
processes.First; we will be
the first choice of our customers 
to provide technology that they can count on.True;
to our 
core values and legacy of service.Profitable;
in our business.Proud; of our 125-year
history and our role as a responsible 
corporate citizen.









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Letters to Shareholders



Dear Fellow Shareholders,

Bell Canada was founded 125 years ago and for the past three of those years I have had the honour of serving as its Chairman. In that time, I have witnessed a company reaffirming its legacy. Bell 
wired Canada in the last century. Today, Bell is the company that is leading Canada into a new century of broadband connectivity.
     Your Board of Directors fully recognizes that because of the Internet, the telecommunications industry is in dramatic transition and Bell must undergo a major transformation in order to ensure its future
growth. Your Board also recognizes the financial strength of BCE. It is now clear that the asset base of the company will be renewed and transformed well within its operating cash flow. Our confidence in
the continuing financial strength and in the future of BCE led us to declare a 10% increase in the annual dividend, to
$1.32 per
share, the first increase in 10 years.
      On behalf of the Board, I want to publicly endorse and support the management of
BCE for its visionary and determined leadership.
     Bell is now nearing the end of the beginning of that transformation, having positioned itself with
27 million customer connections in 2004 and one of the highest measures of customer loyalty in North America.
      
      To be at the end
          of the beginning implies that we are also at the beginning of something
          entirely new. That something, of course, is a new kind of telecommunications
          company, built on the platform of Internet Protocol (IP). For consumers
          and businesses, this will mean access to the full capabilities of Bellwireline,
          wireless, Internet, and videofrom a single source. As ever-more
          sophisticated technology arrives and data transfer speeds accelerate,
          the choices for consumers will increase. To package, organize and deliver
          these choices in ways consumers can use and to do so while maintaining
          Bells historically superior level of service and reliability and
          at materially lower cost  will be the real challenge of this telecommunications
          transformation.To lower costs, Bell Canada launched the Galileo initiative, which introduced company-wide operational changes and started to streamline all key processes in the companya project that is expected to
save in excess of a billion dollars by the end of 2006. On the revenue side, Bell is now improving customer experience and satisfaction through the bundling of its multiple services.
     Proof that our business model for BCE is working can be found in the current trend in business acquisitions among other North American telecommunications companies.
In






2    Bell Canada Enterprises
2004 Annual Report

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|SBCs proposed acquisition of AT&T, and in other U.S. transactions by other companies, involving wireless and
satellite services, many are beginning to mirror and emulate Bells established model of comprehensive communications services.
     BCE is committed to the concept of competition because real competition is everywhere and in every instance in the best interests of the consumer. Competition challenges old ways of
thinking and spurs innovation. But for competition to be real, it must take place on an even playing field with providers that offer similar services being treated by regulators in similar ways. Regulations that benefit one competitor over another
hurt the evolution of this vital industry. Bell Canada has evolved with a proud tradition of using private money for public good. From this tradition, Bell provided Canadians with worldwide telecommunications leadership, the proven result of real,
facilities-based competition.
     BCE is also committed to sound corporate governance and that commitment was recently recognized again by the independent ratings agency
Governance Metrics International which rated 3,220 companies worldwide in 2004. BCE was one of only
34 companies globally and one of
only three in Canada awarded a perfect score of 10. Consistent with these high governance standards, Tom
Kierans, a distinguished |  | Canadian business leader, has graciously declined to stand for re-election to
the Board in order to eliminate any meaningful degree of interlocking directorships. On behalf of the Board, I want to recognize and thank him for his standards as well as his service.
     The newest member of the Board of Directors, Jim
Pattison, brings his keen entrepreneurial spirit as well as his almost legendary business expertise to our Board. We all look forward to his involvement.
     Finally, in these changing times for the industry and while much about Bell Canada is changing, what will
not change is our heritage of dedicated customer
service, unmatched reliability and steadfast commitment to keeping Canada a world leader in communications.
      Richard J. Currie, O.C.Chairman of the Board
        BCE Inc.
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be clear.



Dear Fellow Shareholders,

Early in February, I sat down for a thirty-minute meeting with a group of Bell Canada employees. Two and a half hours later, we adjourned. But I could have stayed all day.
     These were exceptional peoplethe kind who are leading the charge in building a new Bell.
     Drawn from across the company. From across divisions and locations. From across job titles and responsibilities. A wide cross-section of our nearly
40,000
people.
     To know a company, to really know a company, you have to know its people. So I seized the opportunity. And asked these front-line people to tell me how they thought we were doing.
     I didnt need to ask twice. They told me about the very real challenges they have faced as we change Bell, as we tighten our focus on a strategy that will take us into the future. They told me about
their hard work. How their teams are striving to meet the call for simplicity and service. How it isnt easy to be on the front lines in a time of great change.
     But they also told me how proud they are to work at Bell. To represent Bell in their communities. They spoke of the pride they feel as we embrace the technological promise of Internet Protocol,
IP television and next-generation wireless. They talked about the competition, and how we are ready to fight. To win.
      
      I wanted to know what the mood of the company was. To know where our people stand. How they think we are doing. 
     The short answer they gave me: its tough, but we are on the right
track.     2004 was a watershed year in the 125-year history of Bell Canada. A challenging year, a year in which many of our achievements were internal, not external. And while we were
generally satisfied with our performance, we recognize how much we have left to accomplish.
     For example, we added one million new subscribers for our products and services last yearbut we need to add more, and we will. We negotiated an important labour agreement with our Bell technicians,
but we did experience the disruption of a work stoppage at Aliant. We reduced the number of product lines, offers and service codes. But this too is just one step in our ongoing effort to be simpler.
     Other achievements will have a lasting impact. In October, for instance, we took a bold step forward in our national strategy. The Vancouver Organizing Committee named Bell a Premier National Partner for
the 2010 Olympic Winter Games. We strengthened that relationship when CTV earned the exclusive Canadian broadcast rights to the Games. This is an opportunity to showcase Bells technology, reliability






4    Bell Canada Enterprises
2004 Annual Report

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|and
service on the highest-profile stage in the world. And it reinforces our position as the one truly national player in telecommunications.

In 2004 we got serious about getting simple.

For Bell, Making it Simple is much more than a tag line. It is our strategic direction, our rallying cry, and how we are building a new Bell Canada.
     To support simplicity, in 2004, we launched a company-wide program called Galileoa coordinated effort to re-examine every facet of our business. The goal: make
operations, products and procedures radically simpler, both internally and externally and as a result lower our cost base.
     Galileo is based on a simple equation:
            Simplicity = Service = Savings = Growth.
     This requires some explanation. First because it is fundamentally important. And second because it may not be intuitive how savings can co-exist with higher levels of service. Or how simplicity can pave the
way for next-generation products.
     We will be able to deliver better, more sustainable levels of customer service as we make our internal operations simpler and our products easier to choose and use. Through simplicity, |  | we will cut
unnecessary steps and redundant functions. We will reduce re-work. And generate significant savings. Galileo is expected to contribute an estimated
$1 billion to $1.5
billion in cost savings by the end of 2006. Savings that will improve shareholder returns and buy us freedom to invest in and grow new areas of our business.
     But reducing our costs is only the start. Galileo focuses everyone at Bell on our strategy. It forces our disparate parts to move as one towards our common goals. Perhaps most importantly, it gives
employees the opportunity to innovateto change the way we do business.
Steady performance, increased confidence
With our financial performance in 2004, BCE has demonstrated that we can deliver steady progress even as we continue to build a more productive and more
responsive business model. Total revenue for 2004 was $19.2 billion, a 2.4 per cent increase over
2003. Our EBITDA increased by 2.1 per cent to $7.6 billion. Among our most positive results was return
on equity, which was 15.2 per cent. Earnings per share, excluding restructuring charges, were
$2.02 , an increase of more than 6 per cent.
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The most significant restructuring charge taken in
2004 was $985 million associated with our Voluntary Employee Departure
Program. We expect the voluntary departureswhich reduced our workforce by approximately 10 per centto produce annual savings of approximately
$390 million.
     We are successfully executing our plan to reshape Bell Canada. In
2004, we defined the path for the future and laid the foundations. In 2005, we will execute our strategy
and deliver improved operating results. By
2006, the company will be focused on service innovation, steady growth and increasing returns to shareholders.
     Because of our progress, I recommended that the Board increase the common annual share dividend by
10 per cent, or 12 cents a share. The Board did so in December. The dividend increase is important for two reasons. First, it increases our yield and provides our shareholders with a greater return on their investment. Second and
more importantly, it sends a strong signal to our shareholders, to our employees and to our customers that we are confident in our forward momentum; our plan has traction.
A clear strategic planOur confidence is based on the very real progress we made in
2004. While Galileo paves the way for better performance, we also developed a clear strategic framework for making the worlds first new telecom. Our plan rests on three strategic pillars. These foundations are not new. They are a clear expression of the strategy we set out two years ago. And against which we have already made significant progress. We will
accelerate our progress over the next year as all of us at Bell drive the implementation of this plan.
1. Customer Experience
Providing our customers superior product and service experiences that build loyalty and save time and expense. For them and for us.
     Our job is to take the power of the most advanced technology and make it simple for our customers to use. So they can be better informed and entertained. So their businesses
      
      can be more productive and
globally competitive. Our customers want our products and services to be easy to use, to work all the time. If theres a problem they want us there to support them. 
     Our response is an approach we call smart contact. This
means we will help our customers adapt and use the latest technology without adding to the complexity of their lives. We will face them as one company. Provide them with the level of service that is at the core of our brand.
     Easy to say, harder to do. Like all organizations, sometimes we fall short. And sometimes, as with our recent migration
to a new billing system for Bell Mobility, we do not execute as well as we should: we take a few steps back before moving forward. But we
will move forward. Superior customer service will
be the centrepiece of our competitive advantage in the marketplace. We will
succeed.
2. Reliable Bandwidth
Providing our customers with ever-more-capable broadband connectivity that they can count on.
     In last years letter, I wrote at length about the promise of Internet Protocol
(IP) connectivity and how it would usher in a new world of communications. A year
later, I can say: it has.
     Last year, we successfully moved 60 per cent of our core network traffic onto an
IP platform. We also completed IP migration plans for our entire Enterprise customer group  our
1,000 largest customers. For our small business and consumer customers, we began our pioneering rollout of
Fibre-to-the-Node (FTTN). This will eventually allow Bell to deliver all our servicesvoice, data, video over a single high-speed broadband network eight times faster than todays current
DSL connections. A network that will reach almost 85 per cent of all households in the Québec City to Windsor corridor.
     Put simply, we are committed to the IP revolution and its potential. Let me be absolutely clear:
IP is not about delivering
cut-rate voice connectivity over a DSL line or cable connection. IP is about delivering the promise of true, high-speed bandwidth over a reliable network that our
customers can trust.




6    Bell Canada Enterprises
2004 Annual Report

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|Across this network will flow voice, video, music, business data, interactive gaming, the Internet and anything else that can be put into digital form. This is an area where we must lead. And we will.
3. Next-Generation Services
Providing our customers with the information, entertainment, connection and productivity that are the true purpose of our network.
     The same new technology that represents such a promising future for Bell also hastens the decline of our legacy telephone business. Rather than resist this decline, we are embracing it.
     An example; in 2004, we introduced virtually unlimited long distance for
$5 to promote our consumer product bundle. It was a signal that we are prepared to lever our existing legacy business to attract new customers and drive new value-added growth.
     Some observers think this approach is too aggressive. Some would like us to play
defence. We disagree. We think being bold is the best defence.
     Our growth will come from new products delivered over our new
IP network. In 2004, fully 40 per cent of our revenue was generated by such growth services. In just two years, we expect this to increase to
55 per cent.
     A case in point: our IPTV partnership with Microsoft announced last year. Building on our
Sympatico-MSN relationship, we are
now working with Microsoft to begin trials of television over existing copper-wire telephone connectionsin
2005.
     These services, and many others like them, are the long-term growth story for the company. We are moving aggressively to bring new technologies and new services to marketin ways that our customers can
use and will value. Technology is not an end in itself. It is a means to build a high-value relationship with each and every customer.
A cultural transformationTo reach these ambitious goals, we will draw fully on the great talents of all of our people. My meeting in February |  | with employees was just one of many. In thousands of conversations I have had with people at Bell, one thing is clear:
all of us want and expect to deliver what our customers need and want great experiences, reliable bandwidth, next-generation services.
     We know that, too often, the very processes, procedures, and systems we have put in place in the past to run our business stand in the way. So now our challengeperhaps the toughest and most important
one we faceis to get out of the way of our people so they can do what they know they need to do. What they want to do.
     That means changing our culturenot just what we do, but
how we do it. How we work, how we do business.
Today, we are still too hierarchical. We tie up good ideas with red tape.Where we are headedBut every day we are working to get in step with the future. We are doing what it takes to instill a culture of confidence: an environment that promotes accountability, personal initiative and merit. A place that cultivates the
creativity and the leadership of our people.
     We have a clear long-term strategy. Our business results tell us its the right direction.
     But perhaps what matters most is what I heard from the employees I met with that February morning. In their words, in their stories, and in their dedication,
I see the clearest path to building a company
that inspires our people and that offers our shareholders a future of increasing returns.
      Michael J. SabiaPresident and Chief Executive Officer
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Our Strategic Pillars

Customer ExperienceWewillface
 customersas1Company
      
      We will face customers as one company, offering a single point of contact. One source for all of our customers communications at home, at work, on the go. Bell will deliver the new freedom of digital technology free of
frustrations. This is the Power of One.2004 Customer Experience Milestones
Retired more than 1,000 service codes
431,000 customers on bundles
30% reduction in SMB provisioning time
Began to implement Galileo initiatives, aimed at simplifying
processes, improving service and lowering costs
Migrated key billing system
48-hour installation for ExpressVu
80% one call resolution in 310-BELL
Improved in-store selling time by 30%
Stopped selling some major non-IP network products
Introduction of five dollar virtually unlimited long distance
      
      Customer Experience in 2005We will launch redesigned Bell.ca site to increase on-line sales
Serving customers more effectively should allow us to dispatch
fewer trucks as we strive to eliminate re-work
We will continue to aggressively market our traditional products
and services using innovative marketing techniques
Rollout of new simpler bill
We will increase adoption of self-serve services and
web-based interfaces by Enterprise customersReliable BandwidthUp to
26mbpsin2006
      
    In 2006, we will deliver up to
      26 megabits per second data speed (about 8 times todays DSL speeds) and, by
      2008 we will be able to offer it to approximately 4.3 million households in the Québec City to Windsor corridor.
With EVDO technology on the wireless side, we will deliver up to 2.4 megabits per second to mobile devices.2004 Bandwidth Milestones
      Pioneering
          Fibre-to-the-Node rollout
        60% of core network traffic on IP
        DSL footprint reaches 83% of customers
        Completed IP migration plan for major Enterprise customers
        VDSL to MDU progress (335 buildings signed)
      
    Reliable Bandwidth in 2005Enterprise expects to migrate 150 major customers to IP networks
        Begin EVDO deployment
        By end of 2005, deploy high density remotes to 2,500 neighbourhoods serving up to 1.1 million households
        We expect 10–15% subscriber growth for video servicesNext Generation ServicesMorethan
50%ofOur Revenue
      
    By 2006, more than 50% of our revenue is expected to come from next generation and new growth services. By the end of
2005, this will already be true in our business sectors. Our legacy businesses are slowing down. But customers are eager for new value delivered over the network. And we have laid the groundworkbundling existing products, developing new
communications products, and partnering to bring entirely new levels of value.2004 Next Generation Services Milestones
Launch of Sympatico-MSN.ca portal
Introduction of MSN premium
Launch of wireless phone-to-phone video messaging
145,000 Enterprise Voice over IP lines
60% of major Enterprise customers buy Value-Added Solutions
Data is 50%+ of Bells wireless ARPU growth in 2004
57% of Mobility customers regularly use data
Launch of leading-edge wireless location-based services
      
    Next Generation Services in 200570% of our major customers in the Enterprise market
will purchase Value-Added Solutions, increasingly viewing us as a supplier of ICT services
In the SMB space, we will reinvent the way IT and
telecom are integrated with the objective of increasing the number of SMB customers that view Bell as their technology
advisor or
Virtual CIO
We will start trials of IPTV, delivering video over
ordinary phone wires
We will exploit our IP capability to achieve
interoperability between wireline and wireless platforms
Introduce Internet Telephony for consumers


8    Bell Canada Enterprises 2004 Annual Report

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Financial and Operational HighlightsFinancial Highlights
	2004
	
	2003
	
	2002Revenue (in millions) (1)
	19,193
	
	18,737
	
	18,900EBITDA (in millions) (2)
	7,564
	
	7,410
	
	7,384Operating income (in millions)
	2,976
	
	4,121
	
	3,625Net earnings applicable to common shares
(in millions)
	1,523
	
	1,744
	
	2,342Net earnings per common share
	1.65
	
	1.90
	
	2.66Net debt (in millions)
	12,705
	
	13,315
	
	15,158Net debt to capitalization ratio
	42.8
	%
	44.0
	%
	48.4
	%Free cash flow (in millions) (2)
	898
	
	1,589
	
	(783
	)Cash from operating activities (in millions)
	5,519
	
	5,968
	
	4,424Capital expenditures (in millions)
	3,364
	
	3,167
	
	3,709Capital intensity
	17.5
	%
	16.9
	%
	19.6
	%Operational Highlights
	2004
	
	2003
	
	2002Customer connections (thousands)Local
 telephone
	12,905
	
	13,051
	
	13,154Cellular
and personal communications (PCS)
	4,925
	
	4,412
	
	3,898Paging
	427
	
	524
	
	639High-speed
 Internet access
	1,808
	
	1,458
	
	1,100Dial-up
 Internet access
	743
	
	869
	
	957Video
	1,503
	
	1,387
	
	1,304Digital
 equivalent access lines
	4,335
	
	3,867
	
	3,68326,646
	
	25,568
	
	24,735Net activations (thousands)Cellular
and personal communications (PCS)
	513
	
	514
	
	452High-speed
 Internet access
	350
	
	358
	
	343Video
	116
	
	83
	
	235(1) Our financial results in 2004 and 2003 exclude the financial results of the directories business, which we sold in
November 2002. Our financial results before that date, include those of that business. In
2002, the directories business contributed $501 million of revenues and $311 million of
EBITDA.
(2) The terms EBITDA (Earnings before interest, taxes, depreciation and amortization) and free cash flow do not have a standardized meaning
prescribed by Canadian generally accepted accounting principles (GAAP) and may not be comparable to similar measures presented by other
publicly traded companies. Refer to pages 32 to 34 of this Annual Report for a description of these terms.


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|be simple.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Galileo                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|At Bell, we believe that a complex solution solves nothing. We know our customersindividuals and businesses alikeare excited by the promise of new communications technology, but fear adding yet another level of complexity to
their lives and business. Which is why we strive to offer products and services that are easy and intuitive to use, and customer interactions as straightforward and hassle-free as possible.
     With 27 million customer connections across four different services (voice, video, data and wireless), three different customer groups (consumer, enterprise and
small-and-medium-business) and a service area stretching from the Atlantic to the Pacific to the Arctic Oceans, its not always simple to be simple. But delivering true simplicityin our products and in our servicesis central to our
business.
     Here are three examples of how, by being simpler, Bell is transforming itself. |  | When Melanie Singh was given the task of designing a new way to deliver
IP products, her first step was to throw out Bells standard operations manual. The result was the IP Garagenot just a tune up but a literal overhaul of how Bell goes about delivering services to its customers. As Bell Canadas private think tank, the Garage focused the talents of the companys top
25 IP specialists towards a single goal: to simplify the IP installation process.
     At the time of the Garages creation, Bell could provide a business customer with
IP service no sooner than 38 days after the order was placed. Six weeks later,
the Garage had produced a plan to cut IP-VPN (Virtual Private Network) service installation time by almost 80 per centto only eight days. Once tested, this breakthrough will allow Bell to deliver
IP systems and products to our customers, offering fast, convenient access to a vast array of broadband services.
     However, the IP Garage is just one of many success stories to come from Galileoa total re-evaluation of how we operate our business, on both a day-to-day and a
long-term basis. With a single goal in mindto simplifyBells Galileo teams across the company have accomplished a tremendous amount, including eliminating
1,000 duplicate service codes,
cutting the number of wireless consumer rate plans sold from
14 to 4, and reducing ExpressVu installation times from five days to only 48 hours. These operational improvements, among others, are
expected to save Bell between $1 billion and $1.5 billion by the end of 2006, making us a stronger, simpler, and more flexible
company.



12    Bell Canada Enterprises
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|One Bell                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | A New Network                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|Last May, Bell Canada customer Lisa Bratina had a problem. Three problems, actually: her daughter had been pestering her for a cellphone for weeks, her son complained of slow Internet speeds when he got home from school, and her husband
was always missing his favourite television programs. Lisa wanted to get these distractions behind her, but she also envisioned hours and hours of trying to order new services and sorting through confusing forms. She decided to call Bell first.
     During her conversation with Sunil Singh, a Bell customer service representative, she asked Sunil if he could give her the number to call about wireless service. Sunil responded that he could help her with
all of her problems and explained the Bell bundle that included all of the services she wanted, plus a special
$5 long distance plan that included 1,000 minutes of
calling across all of North America.
     To be frank, we know that this sort of experience doesnt happen to every single Bell customer. In fact, today it is not a common experience. But the point is, it must become common. We are working to
make it happen. We are rolling out intensive training to equip all Bell service representatives with expertise in Bells four systems: wireline, wireless, Internet and video. This will allow all Bell representatives to help customers with all
their communications needs from start to finish. |  | Everything over IP. One backbone, one network, across Canada. Sitting behind everything we do to offer customers smarter contact, reliable bandwidth and new services will be a new,
IP-based network.
     Today, Bell operates on seven networks. Built over the course of
30 years, each of these networks was designed to provide a particular type of servicefor
example voice in our circuit switched network. Now we are on course to collapse them into three, interrelated networks that will all run on the
IP platform. For Bell today, this means transforming our company
to run in a simpler and more cost-effective way. It means everything to our operations, from fewer truck rolls and less re-work to one integrated service order and delivery process.
     For our customers the new network will mean faster and higher levels of service, fewer and more streamlined connections, fewer bills and more on-line billing features, all of this providing greater flexibility. It also will bring new choices and new services, from desktop video conferencing to seamless communication between virtually any devicecomputer, cellphone, Blackberry, video game console, television.

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be first.

























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|be first.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Way Better TV                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|Our goal is to be our customers first choice for the broadband future. Being first to us is more than bringing new technologies to the market, or establishing leading competitive positions in the markets we serve. At Bell, we
use technology to develop and to deliver great products and services that have meaningful benefits to our customers, connecting, entertaining and informing them. Our goal is to package and integrate new technologies to help businesses be more
productive and more competitivelocally or globally. |  | Its harder than ever to be a couch potato. Thanks to the advent of new, interactive technology, watching television has never been less passive. A touch of a button allows viewers to pause and rewind live television, choose their
own camera angles, play interactive games and preview one program while watching another.
     Our ExpressVu satellite television service brings all of these features to more than one-and-a-half-million Canadians today. In the last year, ExpressVu subscriptions increased by
8.4 per cent. Were also bringing these capabilities to many large apartment buildings through our
VDSL service, which offers consumers a competitive alternative to cable
television.
     Through our recently announced partnership with Microsoft, we are testing a powerful new television distribution platform called
IPTV (Internet Protocol TV). It is on-demand televisionan integration of the navigation qualities of the Internet, your home computer and what we watch on
TV. And we will bring the power of IPTV into the home through your current home telephone connection.
     What does this mean to the customer? These capabilities together give people a level of choice theyve never had before. But its relevant choice. Choice over content. Choice over viewing
times.

16    Bell Canada Enterprises
2004 Annual Report

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|Next Generation Wireless                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Family Friendly Internet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|We built a wireless network for voice. Today we are building a wireless network for voice, data, video, games and more.
     In 1994, no one predicted that eBay would be one of the killer applications of the World Wide Web. Today, the truth is no one knows for sure what the
breakthrough applications for this new wireless network will be. But what we do know is that Bell will build the network on which the new applications will run.
     One real-world example of how our next generation wireless network works today is the Ontario Provincial Police forces unique wireless application for their vehicles. Connected by Bells wireless
network, frontline officers travel their beat in 300 police cruisers equipped to function as mobile offices. Using this new application, officers can access local and national databases to check
for outstanding warrants, past driving records and other information before they pull a driver over. They also use the system to automatically enter information from newly-issued citations directly into the court system, cutting down on the risk of
errors.
     This is just one example of how we are building a wireless network for something other than just voice. Once fully installed, this third generation wireless network will provide broadband speeds to your
cellphone equal to the broadband Internet service you have at home today. This network will provide the capability for true wireless video and, subsequently, a new host of wireless applications. |  | Studies of our customers Internet usage have shown us that, as children enter school, Internet usage climbs significantly. It also spikes when children leave home to go away to university, because of the use of e-mail to keep in
touch. It seems odd, then, that a service so vital to Canadian families should be so plagued with spam, computer viruses, spyware, and adware. In fact, one study concludes that over
90 per cent of computers
are unwitting hosts to some type of computer virus.
     As the provider of Sympatico, Canadas most popular Internet service, we took this problem seriously. Weve responded by introducing the industrys most advanced security solutions to our
Sympatico subscribers. Leading-edge security features such as e-mail anti-spam, e-mail anti-virus, anti-spyware and parental control features. Such efforts keep more than
2.4 billion spam messages from
reaching customer e-mail boxes each day. Weve also led an extensive campaign by supporting organizations such as WebAware and Cybertip.ca to combat the online victimization of children and ensure safe use of the Internet.

17

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be true.



























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|be true.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Service in the Field                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Service is the essence of Bell Canada. It is in our
DNA. It is our single, unifying thread. It is why we are here.
     Service also separates us from others. We have a long history with the Canadian customer, from the first telephone to the most recent connection. Our relationship with them goes beyond dollars and cents,
or even a dependable dial tone. We are committed to provide Canada with the best communications system and the most reliable service possible. This inspires and informs every aspect of our business, both behind the scenes and face-to-face with the
customer.
     We are today and always will be true to this commitment. As we introduce new products and services, as we work to change our culture, as we simplify our operations, this will never change. |  | In Sainte-Thérèse, Québec, at the top of a telephone pole, Bell Canada technician François Laporte has been splicing icy wires for hours. With several hours to go before his job is finished, François
is glad his helmet has a flashlight. François is exceptional. But at Bell, he is not unusual.
     François job is linked to those of hundreds of other behind-the-scenes Bell technicians and engineers. They share a goal: to create and maintain the best network possible and to move mountains
to restore service on those rare occasions when it goes down. Because of their tireless efforts, people take the dial tone for granted. And thats how it should be.
     We engineered reliability into our network. But first, we engineered that same reliability into our culture. If you stripped away Bells
125 years of
accomplishments, a single core value remains, the same value at work behind every metre of wire laid: service. As we work to create an entirely
IP-based network, Bells customers can look forward to a
system whose simplicity and reliability improves their lives and carries on our heritage of reliable service.



20    Bell Canada Enterprises
2004 Annual Report

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|A Culture of Confidence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Moments of Truth                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|When Stéphane Gemme, a call centre manager for Bell in Montréal, saw a competitor launch a voice product on the citys South Shore, he didnt wait for an order from the top before he took action. Stéphane
simply saw an opportunity to help his company. In fact, he felt a responsibility to do so.
     Calling an on-the-spot meeting with his call centre staff, Stéphane and his teamknown at the call centre as the Out Boundersdeveloped a plan. They identified and approached
existing Bell customers on the South Shore and offered them product bundlesBells special service packagesto thank them for their long-term relationship with Bell, and to extend the relationship for an additional two
years.
     The Out Bounders are special employees, but there are others at Bell. Every day, from all across the company, more and more people are taking action, making decisions and making a difference. We are
building a culture of confidence at Bell, a culture present at the founding of our company and that has sustained us over the course of our history. Our employees draw strength from being part of that proud tradition and look for opportunities and
then follow through. 40,000 minds, millions of ideas. Endless potential for Bell. |  | Every customer interaction is a moment of truth. Every call to customer service, every e-mail, every product installation, every time a bill arrives. Thousands of moments of truth for Bell, each and every day. If a customer has a
negative experience with Bell, we fail those moments of truthand we fail ourselves.
     We know that last year, in the eyes of many of our customers, we failed. The introduction of a new Bell Mobility billing system was a very difficult time for the company and it damaged very important
relationships built up with our customers over the years.
     But we resolved not to let that be the lasting impression. So we are fixing our billing mistakes, correcting our errors; weve apologized to the customers affected. We know that rebuilding those
relationships will take time and effort on our part; because that is how they were built the first time.
     We learn from our mistakes and move to take action so as not to repeat them. We realize that each and every customer interaction is a crucial moment for our company. Delivering reliable and responsive
customer service. These are our moments of truth.

21

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be profitable.





























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|be profitable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | The Broadband Home                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The first duty of any corporation is to provide an increasing rate of return to its shareholders. At Bell, we are making the decisions that will result in profitable growth.
     Our recent increase in the per-share dividend reflects our growing confidence that our strategy is working. This is in large part a result of the lower costs that will come from Galileo. By focusing on
simplifying our operations, we intend to lower costs while providing higher levels of customer service. This will unleash our ability to generate profitable growth in all three customer segments. |  | Millions of Bell consumers are already living in the broadband futurethey just dont know it. Millions more will be soon. Any house with Bell
DSL (Digital Subscriber Line) is connected
to the IP network that makes the broadband future a reality. When we complete our
Fibre-to-the-Node (FTTN) installation by the end of 2008, a high-speed broadband connection eight times faster than todays
DSL lines will come through the line into nearly every Bell customers house in the Québec
City to Windsor corridor. And because of that broadband connection, Bell will be able to offer a wider and more varied selection of services to our customers.
     The Broadband Home will provide consumers with an endless variety of entertainment, education and information options across a variety of digital platforms, including television, home computers and the
telephone. And we are making it easy for our customers to choose and use more Bell services. Our
2003 introduction of product bundles allows customers of two or more Bell services (long distance, wireless,
video or Internet) to receive special pricing on these product packages, including our revolutionary long distance bundle that allows our customers nearly unlimited long distance calling anywhere in North America for only
$5 a month. In 2004, we sold almost 370,000 multi-product bundles.

24    Bell Canada Enterprises
2004 Annual Report

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|Enterprise Moves to IP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Bringing IT Management to SMBs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Our 1,000 largest customers make up our Enterprise customer segment. These large organizations have unique telecommunications requirements, often extending into information technology and database
management.
     Anticipating these needs, in 2004 Bell developed plans to move all of our major Enterprise customers to
IP-based networks.
Among notable clients making the move to IP-based networks was life insurance giant Manulife Financial, which signed a
$140 million, seven-year agreement with us to move
approximately 9,000 Manulife employees onto a comprehensive IP network, including Voice over
IP. The conversion will deliver
greater cost efficiencies and service levels to Manulife, while also outsourcing the management of its call
centres, voice and data communications departments directly to Bell.
     These solutions are examples of the types of value-added services that Bell is bringing to the Enterprise market. Within that market, Bell has become a major source of integrated telecommunications and data
services, including data security, call centre solutions, network management and outsourcing and data storage networks. We are increasingly focused on value-added solutions that offer services beyond pure connectivity. These new services highlight
the advantages of our communications and technology integration capabilities, our
IP network and our experience in managing Canadas largest and most robust networks. |  | Everyone at the Ambassador Hotel in Kingston, Ontario has something to smile about. Thanks to a Bell Small-and-Medium-Business representative working with them to find the right wireless and wireline solutions. The hotel now features
wireless technology allowing guests to browse the Internet at their leisure from the comfort of their room or from anywhere within the resort and allowing staff to offer curb-side check in.
     But the wireless technology doesnt stop there. Hotel guests can now use the hotel key card as a debit card. At the vending machine. At the bar. At the pool. This means less time fumbling for cash,
less time worrying about which credit card to use, and more time simply enjoying the trip.
     For the facilities manager, this means less maintenance for the vending machines and change machines. For the general manager, a smoother-running operation with less cash on the premises, lowering the risk
of theft and vandalism. For the owners, reduced costs and enhanced productivity of their staff.
     This is just one example of how Bell is becoming the technology advisor or Virtual
CIO to more than 450,000 Bell SMB customers, providing integrated communications and
IT solutions that business customers can afford.

25

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be proud.































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|be proud.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Olympic Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|The employees and shareholders of Bell Canada have many reasons to be proud. Proud of what we have accomplished together, proud of the important role that the company plays in Canada, proud of what the future holds. For
125 years, Bell has formed an important part of the fabric of this country.
     With our sense of pride comes a sense of determination to continue our tradition of success and accomplishment. The road ahead will not be an easy one, and our successes will not be handed to us; we will
have to work for them. But there is no mistaking that we are on the right road. A road that will reaffirm and continue the important role we play for Canada. |  | We were honoured to be chosen by the Vancouver Organizing Committee to be the Premier National Partner for the
2010 Olympic and Paralympic Winter Games. These will be Canadas games and we
are excited about our opportunity to bring them to our country and bring Canada to the world. But of course, connecting Canadians to each other and to the rest of the world is what weve always done.
     Bell will provide the games with comprehensive communications services. In addition, our
CTV subsidiary was recently awarded Canadian broadcast rights for the games.
The Olympics will provide us with an opportunity to showcase Bell technology, reliability and service on the highest-profile stage in the world.
     In addition to Vancouver, Bell was awarded the Canadian Olympic Team sponsorship rights for the Torino
2006 Games, the Beijing 2008 Games and the 2012 Games.
     The Olympics will be a centrepiece of our marketing efforts for the next eight yearsreinforcing our position as a truly national provider of communications services. The partnership underscores our
commitment to strengthen the Bell brand in Western Canada and across the country.
     The Olympics are about excellence and achievement at the highest levels. They are about values: participation, fair play, international cooperation and being the best. These standards and values are
important at Bell. Our relationship with the Games is a constant reminder to us of what it takes to succeed.

28    Bell Canada Enterprises
2004 Annual Report

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|Corporate Responsibility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | 125th Anniversary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|For 125 years, we have demonstrated our dedication to responsible corporate citizenship. Of course, corporate citizenship starts with running a successful business. Producing the goods and
services that customers need. Creating meaningful jobs for Canadians. Generating a return for our shareholders so we can keep investing. But our commitment to corporate responsibility goes beyond the economic impact of our operations. We are proud
of our strong and internationally recognized governance principles and structure that guide our approach to business. We take seriously our duty to help safeguard the environment and have substantially reduced our environmental impact.
     The people of Bell have added to our heritage of service through their own actions. We see it every day, most recently in their response to the tragedy of the Asian tsunami. Within a month, Bell employees
had helped raise a million dollars for the relief effort.
     We have recently embarked on a new approach to social investment, called Connected to Communities. Our goal is to write a new chapter in our corporate citizenship by searching for opportunities
where the public need meets the expertise of Bell. We intend to build upon our existing corporate giving initiatives to focus on projects that encourage economic development and the strengthening of social foundations at the community level. The
program will concentrate on initiatives that benefit children and youth, the generation who will lead us in the
21st century. BCEs full report on corporate
responsibility is available May 2, 2005 at www.bce.ca. |  | We are the company that pioneered telecommunications in Canada. There arent many businesses that can say they helped connect a nation, but Bell Canada is one of them. There also arent many businesses that last
25 years, let alone 125 years, but Bell is one of those as well.
     Across farms and fields, lakes, rivers and mountaintops, from city to village to town, stretching from the Atlantic Ocean to the Pacific, we provide Canadians with their preferred method of calling home
on holidays, checking out the latest news online, watching the game on TV or just talking to a friend. At the same time, Canadian business and industry rely on our network and our expertise. They count on Bell 
to be thereno matter what. It is a proud legacy and for 125 years it has been uniquely the Bell Canada story.
     Our role in Canadas history provides a strong foundation as we face the challenges ahead. Those challenges are real, but so too are the rewards. As the dramatic communications revolution accelerates,
society will reap countless benefits from a faster, better-connected world. We confidently look forward to that future.

29

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|be there.Providing connections Canada can count on. This has defined Bell Canada for the last
125 years. Despite changes in connectivitywireline to wireless,
cable to satellite, the advent of the Internetour tireless desire to deliver those connections hasnt changed. And as we turn to the years ahead, we will add to these connections. The power of new generations of services delivered simply
and reliably. As this new century unfolds, we will continue to be there, for each and every one of our customers. |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 















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| |  | Report
      of Financials                     
| |  | -----------------------------------------------
| |  | Management
      Discussion & Analysis         
| |  |                                                
| |  | About
      Forward-Looking Statements         
| |  | Non-GAAP
      Financial Measures              
| |  | About
      Our Business                       
| |  | The
      Year at a Glance                     
| |  | Selected
      Annual and Quarterly Information
| |  | Financial
      Results Analysis               
| |  | Financial
      and Capital Management         
| |  | Risks
      that Could Affect Our Business     
| |  | Our
      Accounting Policies                  
| |  |                                                
| |  | Consolidated
      Financial Statements        
| |  |                                                
| |  | Managements
      Report                      
| |  | Auditors
      Report                         
| |  | Consolidated
      Statements of Operations    
| |  | Consolidated
      Statements of Deficit       
| |  | Consolidated
      Balance Sheets              
| |  | Consolidated
      Statements of Cash Flows    
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                
| |  |                                                

31    Bell Canada Enterprises
  2004 Annual Report

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|Please
        refer to the audited consolidated financial statements when reading this
        MD&A. You will find more information about BCE, including BCE Inc.s
        annual information form for the year ended December 31, 2004 (BCE
         2004 AIF) and recent financial reports, on BCE Inc.s
        website at www.bce.ca, on SEDAR at www.sedar.comand on
        EDGAR at www.sec.gov.
      In thisMD&A,we,us,ourandBCEmeanBCE 
        Inc., its subsidiaries and
        joint ventures.
      All amounts in thisMD&Aare in millions of Canadian
        dollars, except where otherwise noted.
      A statement we make is forward-looking
        when it uses what we know and expect today to make a statement about the
        future. Forward-looking statements may include words such asanticipate,believe,could,expect,goal,guidance,intend,may,objective,outlook,plan,seek,
        should,strive,targetandwill.
      Non-GAAPFinancial Measures
      This section describes the non-GAAPfinancial measures we used
        in theMD&Ato explain our financial results. It also provides reconciliations
        of the non-GAAPfinancial
        measures to the most comparable CanadianGAAPfinancial
        measures. |  | Managements
        Discussion and Analysis
      This managements discussion
        and analysis of financial condition and results of operations (MD&A)
        comments on BCEs operations, performance and financial condition
        for the years ended December 31, 2004 and 2003.
      About
        Forward-Looking Statements
      Securities laws encourage companies
        to disclose forward-looking information so that investors can get a better
        understanding of the companys future prospects and make informed
        investment decisions.BCEs
         2004 annual report, including this MD&A, contains forward-looking
        statements about BCEs objectives, strategies, financial condition,
        results of operations, cash flows and businesses. These statements are
        forward-looking because they are based on our current expectations, estimates
        and assumptions about the markets we operate in, the Canadian economic
        environment and our ability to attract and retain customers and to manage
        network assets and operating costs. It is important to know that:
      forward-looking statements
          in BCEs 2004 annual report, including this MD&A, describe
          our expectations at March 2, 2005
        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 and, accordingly, you are cautioned not to place undue
          reliance on these forward-looking statements.
        forward-looking statements do
          not take into account the effect that transactions or non-recurring
          or other special items announced or occurring after the statements are
          made may have on our business. For example, they do not include the
          effect of dispositions, sales of assets, monetizations, mergers, acquisitions,
          other business combinations or transactions, asset write-downs or other
          charges announced or occurring after forward-looking statements are
          made. The financial impact of such transactions and non-recurring and
          other special items can be complex and necessarily depends on the facts
          particular to each of them. Accordingly, the expected impact cannot
          be meaningfully described in the abstract or presented in the same manner
          as known risks affecting our business.
        we disclaim any intention and
          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.Risks that could cause our actual
        results to materially differ from our current expectations are discussed
        throughout this MD&A and, in particular, inRisks
        that Could Affect Our Business.
      Non-GAAP Financial
        Measures
      EBITDA
      The term EBITDA does not have
        any standardized meaning prescribed by Canadian generally accepted accounting
        principles (GAAP). It is therefore unlikely to be comparable to similar
        measures presented by other companies. EBITDA is presented on a consistent
        basis from period to period.We useEBITDA,
        among other measures, to assess the operating performance of our ongoing
        businesses without the effects of amortization expense, net benefit plans
        cost, and restructuring and other items. We exclude amortization expense
        and net benefit plans cost because they largely depend on the accounting
        methods and assumptions a company uses, as well as non-operating factors,
        such as the historical cost of capital assets and the fund performance
        of a companys pension plans. We exclude restructuring and other
        items because they are transitional in nature. EBITDAallows us to compare
        our operating performance on a consistent basis. We believe that certain
        investors and analysts use EBITDA to measure a companys ability
        to service debt and to meet other payment obligations, or as a common
        valuation measurement in the telecommunications industry.The most comparable
        CanadianGAAP financial
        measure is operating income. The tables on the next page are reconciliations
        of EBITDA to operating income on a consolidated basis for BCE and
        Bell  Canada.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 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32Bell 
  Canada Enterprises2004Annual
  Report

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|EBITDA
      We define EBITDA (earnings before
        interest, taxes, depreciation and amortization) as operating revenues
        less operating expenses, which means it represents operating income before
        amortization expense, net benefit plans cost, and restructuring and other
        items. |                                     | BCE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 2004   |        | 2003   |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------ | ------ | -
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                 | EBITDA                              | 7,564                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        | 7,410  |       
|                                                                                                                                                                                                                                                                                                                 | Amortization
      expense          | (3,108                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | )      | (3,100 | )     
|                                                                                                                                                                                                                                                                                                                 | Net benefit
      plans cost        | (256                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | )      | (175   | )     
|                                                                                                                                                                                                                                                                                                                 | Restructuring
      and other items | (1,224                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | )      | (14    | )     
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                 | Operating
      income              | 2,976                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        | 4,121  |       
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                 |                                    
|                                                                                                                                                                                                                                                                                                                 | BELL CANADA                         | 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        | 2003   |       
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       
|                                                                                                                                                                                                                                                                                                                 |                                     | EBITDA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 7,111  |        | 7,001  |  
|                                                                                                                                                                                                                                                                                                                 |                                     | Amortization
      expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | (2,962 | )      | (2,970 | )
|                                                                                                                                                                                                                                                                                                                 |                                     | Net benefit
      plans cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (235   | )      | (181   | )
|                                                                                                                                                                                                                                                                                                                 |                                     | Restructuring
      and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (1,219 | )      | (14    | )
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       
|                                                                                                                                                                                                                                                                                                                 |                                     | Operating
      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 2,695  |        | 3,836  |  
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       
|                                                                                                                                                                                                                                                                                                                 |                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       
|                                                                                                                                                                                                                                                                                                                 |                                     | Operating
        Income Before Restructuring and Other Items
      The term operating income before
        restructuring and other items does not have any standardized meaning prescribed
        by Canadian GAAP. It is therefore unlikely to be comparable to similar
        measures presented by other companies.We use operating
        income before restructuring and other items, among other measures, to
        assess the operating performance of our ongoing businesses without the
        effects of restructuring and other items. We exclude these items because
        they affect the comparability of our financial results and could potentially
        distort the analysis of trends in business performance. The exclusion
        of these items does not imply they are necessarily non-recurring.
             The most comparable
        CanadianGAAP financial
        measure is operating income. The table below is a reconciliation of operating
        income to operating income before restructuring and other items on a consolidated
        basis. |       

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 2004  |  | 2003 
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | -----
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Operating
      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2,976 |  | 4,121
| |  | Restructuring
      and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 1,224 |  | 14   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Operating
        income before restructuring
        and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 4,200 |  | 4,135
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Net
        Earnings Before Restructuring and Other Items and Net Gains on Investments
      The term net earnings before restructuring
        and other items and net gains on investments does not have any standardized
        meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable
        to similar measures presented by other companies.We use net
        earnings before restructuring and other items and net gains on investments,
        among other measures, to assess the operating performance of our ongoing
        business without the effects of after-tax restructuring and other items
        and net gains on investments. We exclude these items because they affect
        the comparability of our financial results and could potentially distort
        the analysis of trends in business performance. The exclusion of these
        items does not imply they are necessarily non-recurring.
             The most comparable
        CanadianGAAP financial
        measure is net earnings applicable to common shares. The table below is
        a reconciliation of net earnings applicable to common shares to net earnings
        before restructuring and other items and net gains on investments on a
        consolidated basis and per common share.

| |  |                                                         |       |   | 2004      |   |       |  | 2003     
| |  | ------------------------------------------------------- | ----- | - | --------- | - | ----- |  | ---------
| |  |                                                         |       |   |          
| |  |                                                         | TOTAL |   | PER SHARE |   | TOTAL |  | PER SHARE
| |  |                                                        
| |  | Net earnings
      applicable to common shares          | 1,523 |   | 1.65      |   | 1,744 |  | 1.90     
| |  | Restructuring
      and other items                     | 772   |   | 0.83      |   | 3     |  |         
| |  | Net gains on
      investments                          | (423  | ) | (0.46     | ) | 2     |  |         
| |  |                                                        
| |  | Net earnings
      before restructuring and other items |       |   |           |   |       |  |          
| |  | and
      net gains on investments                      | 1,872 |   | 2.02      |   | 1,749 |  | 1.90     
| |  |                                                        
| |  |                                                        

33Bell 
  Canada Enterprises2004Annual
  Report

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|Free
        Cash Flow
      We define free cash flow as cash
        from operating activities after capital expenditures, total dividends
        and other investing activities. |  | Managements
        Discussion and Analysis
      Free Cash Flow
      The term free cash flow does not
        have any standardized meaning prescribed by Canadian GAAP. It is therefore
        unlikely to be comparable to similar measures presented by other companies.
        Free cash flow is presented on a consistent basis from period to period.We consider
        free cash flow to be an important indicator of the financial strength
        and performance of our business because it shows how much cash is available
        to repay debt and to reinvest in our company. We believe that certain
        investors and analysts use free cash flow when valuing a business and
        its underlying assets.
             The most comparable
        CanadianGAAP financial
        measure is cash from operating activities. The table below is a reconciliation
        of free cash flow to cash from operating activities on a consolidated
        basis.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                    |  | Cash from
      operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                    |  | Capital expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                    |  | Total dividends
      paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                    |  | Other investing
      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                    |  | Free cash
      flow                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                    |  | Restructuring
      and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                    |  | Free
        cash flow before restructuring
        and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |  | About
        Our Business
      BCE is Canadas largest
        communications company. Our primary focus is Bell Canada, which is
        Canadas leading provider of wireline and wireless communications
        services, Internet access, data services and video services to residential
        and business customers, and represents the largest component of our business.
        We report Bell Canadas results of operations in four segments.
        Each reflects a distinct customer group: Consumer,Business,AliantandOther Bell Canada.
        All of our other activities are reported in theOther
        BCEsegment. Our reporting
        structure reflects how we manage our business and how we classify our
        operations for planning and measuring performance. We discuss our consolidated
        operating results in thisMD&A,
        as well as the operating results of each segment. See Note 2 to the consolidated
        financial statements for information about our segments. We also discuss
        our results by product line to give further insight into these results.The chart below
        shows the operating revenues that each segment contributed to total operating
        revenues for the year ended December31,
         2004. Some of these revenues vary slightly by season. For example,
        Business segment revenues tend to be higher in the fourth quarter because
        of higher levels of voice and data equipment sales. Revenues for the Other
        BCE segment tend to be highest in the fourth quarter and lowest in
        the third quarter because of seasonal patterns in advertising spending
        in the fall and summer respectively. Our operating income can also vary
        slightly by season. For example, Consumer segment operating income tends
        to be lower in the fourth quarter due to the higher acquisition costs
        related to higher subscriber gains in the holiday season.
      
      Consumer Segment
      The Consumer segment provides
        local telephone, long distance, wireless, Internet access, video and other
        services to Bell Canadas residential customers, mainly in Ontario
        and Québec. Wireless services are also offered in Western Canada
        and video services are provided nationwide.Local telephone
        and long distance services are sold under the Bell brand, wireless
        services through Bell Mobility, Internet access under the Sympatico
        brand and video services through Bell ExpressVu.
      Business Segment The
        Business segment provides local telephone, long distance, wireless, data
        (including Internet access) and other services to Bell Canadas
        small and medium-sized businesses (SMB) and large enterprise (Enterprise)
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34Bell 
  Canada Enterprises2004Annual
  Report

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| |  | customers in Ontario
        and Québec, as well as business customers in Western Canada.In2004,
        Bell Canada acquired several small specialized service companies,
        allowing us to quickly enhance our value-added services (VAS) product
        suite for both SMB and Enterprise customers.In the third
        quarter, we enhanced our competitive position in Western Canada by acquiring100% ownership of
        Bell West Inc. (Bell West), our competitive local exchange
        carrier (CLEC) in Alberta and British Columbia, by completing the purchase
        of Manitoba Telecom Services Inc.s (MTS) interest in Bell West.In the fourth
        quarter of2004, we
        further enhanced our competitive position in Western Canada by completing
        the acquisition of the Canadian operations of 360networks Corporation
        (360networks) as well as certain U.S. network assets. This acquisition
        increases our customer base and gives us an extensive fibre network across
        major cities in Western Canada.
      Aliant SegmentThe Aliant segment provides local
        telephone, long distance, wireless, data (including Internet access) and
        other services to residential and business customers in Atlantic Canada,
        and represents the operations of our subsidiary, Aliant Inc. (Aliant).At December31, 2004,
        Bell Canada owned 53% of Aliant. The remaining 47% was publicly held.
      Other Bell Canada Segment
      The Other Bell Canada segment
        includes Bell Canadas Wholesale business and the financial
        results of Télébec Limited Partnership (Télébec),
        NorthernTel Limited Partnership (NorthernTel) and Northwestel Inc.
        (Northwestel). Our Wholesale business provides local telephone, long distance,
        wireless, data and other services to competitors who resell these services.
        Télébec, NorthernTel and Northwestel provide telecommunications
        services to less populated areas of Québec, Ontario and Canadas
        northern territories.Following the
        purchase of360networks,
        Bell Canada sold 360networks retail customer operations in
        Central and Eastern Canada to Call-Net Enterprises Inc. (Call-Net).
        As part of the sale, Bell Canada will provide to Call-Net, for a
        share of the revenues, network facilities and other operations and support
        services.At December
        31, 2004, Bell Canada owned 100% of Northwestel and 63% of Télébec
        and NorthernTel. The Bell Nordiq Income Fund owned the remaining
        37%.
      Other BCE SegmentThe Other BCE segment includes
        the financial results of our media, satellite and information technology
        (IT) businesses as well as the costs incurred by our corporate office.
        This segment includes Bell Globemedia Inc. (Bell Globemedia),
        Telesat Canada (Telesat) and CGI Group Inc. (CGI).Bell Globemedia
        provides information and entertainment services to Canadian customers
        and access to distinctive Canadian content. It includesCTV Inc.
        (CTV), Canadas leading private broadcaster, andThe
        Globe and Mail, Canadas
        leading national newspaper.BCE 
        Inc. owns 68.5% of Bell Globemedia. The Woodbridge Company Limited
        and affiliates own the remaining 31.5%.Telesat is
        a pioneer in satellite communications and systems management and is an
        experienced consultant in establishing, operating and upgrading satellite
        systems worldwide.BCE Inc.
        owns 100% of Telesat.CGIis
        one of Canadas largest IT services companies. It provides a full
        range of IT services and business solutions including outsourcing, systems
        development and integration and consulting. CGI is publicly traded. BCE Inc.
        owns 29% of CGI.
      Bell Canada Products and
        Services
      Bell Canada is our primary
        focus and the largest component of our business. It has six major lines
        of business:
      local and access services
        long distance services
        wireless services
        data services
        video services
        terminal sales and other.Local and Access Services
      Bell Canada operates an extensive
        local access network that provides local telephone services to business
        and residential customers. The 12.9 million local telephone lines,
        or network access services (NAS), we provide for our customers are key
        in establishing customer relationships and are the foundation for the
        other products and services we offer.
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35Bell 
  Canada Enterprises2004Annual
  Report

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| |  | Managements
        Discussion and Analysis
      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 voicemail
        services provided to competitors
          accessing our local network
        connections to and from our
          local telephone service customers for competing long distance companies
        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 regulated by the
        Canadian Radio-television and Telecommunications Commission (CRTC).The local telephone
        services market became more competitive in2004
        when several companies launched voice over Internet protocol (VoIP) services.
        In 2004, we launched our own VoIP service for Enterprise customers
        and are currently conducting trials of a version for residential customers.
        Several major cable companies recently entered, or announced their intention
        to enter, the local telephone services market in 2005 with VoIP offerings
        of their own.
      Long Distance Services
      We supply long distance voice
        services to business and residential customers. We also receive settlement
        payments from other 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. In2004,
        the long distance services market became more competitive with the emergence
        of non-traditional suppliers (i.e., prepaid card, dial-around and VoIP
        providers).
      Wireless Services
      We offer a full range of wireless
        communications services to business and residential customers, including
        cellular, personal communications services (PCS) and paging. PCS customers
        can get wireless access to the Internet through our Mobile Browser service
        or send text messages. We also provide value-added services, such as call
        display and voicemail, and roaming services with other wireless service
        providers. Customers can choose to pay for their cellular and PCS services
        through a monthly rate plan (postpaid) or in advance (prepaid). At the
        end of 2004, we had more than 5.3 million cellular, PCS and
        paging customers.The wireless
        division of each of our incumbent telephone companies provides wireless
        communications in its home territory, except for Bell Mobility Inc.
        (Bell  Mobility), which provides these services in its home territory,
        as well as Alberta and British Columbia.
             Our wireless
        network provides voice services and data services at typical transmission
        speeds of approximately120
        Kbps. At the end of 2004, our wireless network covered:
      95% of the population in Ontario
          and Québec, which is equivalent to our analogue coverage in this
          region
        88% of the population in Atlantic
          Canada
        Calgary, Edmonton and Vancouver
          in Western Canada.In December 2004, we announced
        we were in trials for Canadas first Evolution, Data Optimized (EVDO)
        network, which will provide wireless broadband speeds up to six times
        faster than data speeds available today. We expect to deploy EVDO in major
        urban centres across Canada in 2005 and 2006.We also announced
        a joint venture with the Virgin Group to offer wireless services to the
        key youth market under the dynamic Virgin brand.
      Data Services
      High-speed Internet access service
        provided through digital subscriber line (DSL) technology for residential
        and SMB customers is a growth area for Bell Canada. At the end of
        2004, we had over 1.8 million high-speed Internet customers.We expanded
        ourDSL footprint
        in Ontario and Québec to 83% of homes and business lines passed
        at the end of 2004, compared to 80% at the end of 2003. This
        was partly due to the deployment of new high-speed remotes that began
        in April 2004. In Atlantic Canada, DSL was available to 72% of homes
        and 79% of businesses at the end of 2004, compared to 65% and 75%,
        respectively, at the end of 2003.During2004,
        we upgraded our Sympatico DSL services by increasing our High Speed Edition
        to up to 3 Mbps from 1.5 Mbps and our Ultra service from 3 Mbps to up
        to 4 Mbps.
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36Bell 
  Canada Enterprises2004Annual
  Report

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| |  | We
        offer a full range of data services to business customers, including Internet
        access, Internet protocol (IP)
        based services, VAS and equipment sales. While we still offer legacy data
        services such as frame relay and asynchronous transfer mode (ATM), we
        began the process of discontinuing legacy data services by announcing
        in 2004 that we would not sell several of these services to customers
        who do not use them currently.
      Video ServicesWe are Canadas largest digital
        television provider, broadcasting nationally more than 400 video and CD-quality
        audio channels, including up to 25 high definition channels and unique
        interactive television services. At the end of 2004, we provided
        video services to more than 1.5 million customers. We currently distribute
        our video services to customers in one of two ways:direct-to-home (DTH) satellite:
          we have been offering DTH video services nationally since 1997. We use
          three satellites, Nimiq 1, Nimiq 2, and Nimiq 3. We added
          Nimiq 3 in 2004 to improve signal strength and reliability while
          increasing capacity.
        very high bit rate DSL (VDSL):
          in 2003, we began expanding our reach to the Toronto multiple-dwelling
          unit (MDU) market through the use of VDSL. The MDU market represents
          approximately 40% of all households in Toronto. In 2004, we increased
          our penetration of the Toronto MDU market and also began deploying VDSL
          in the MDU markets in Montréal and Ottawa.In the future, we plan to provide
        an IPTV service (video over Internet protocol) terrestrially to urban
        households in the Québec City to Windsor corridor. In 2004,
        we received CRTC approval of our broadcast licence application to deliver
        video services terrestrially to single family units (SFUs). We plan to
        conduct trials of our IPTV service in 2005.Signal piracy
        is a major issue facing the Canadian broadcasting industry. In order to
        combatDTH signal
        piracy, in 2004 we began the deployment of a new conditional access
        system. All new customers are now supplied with the new system, and the
        replacement of old smart cards is expected to be completed in the second
        half of 2005. During the transition to the new system, we are continuing
        our electronic countermeasure program, which transmits electronic signals
        that disable set top boxes that use illegal cards to steal programming.
      Terminal Sales and Other
      This category includes revenues
        from a number of other sources, including:renting, selling and maintaining
          business terminal equipment
        wireless handset and video set
          top box sales
        network installation for thirdparties
        IT services provided by Aliant.Discontinued OperationsIn the past two years, we have
        disposed of or approved formal plans for disposing of a number of our
        businesses. These include:
      Aliants emerging business
          segment. Its assets were sold in 2003.
        Aliants remote communications
          segment, which consisted mainly of Aliants investment in Stratos
          Global Corporation (Stratos). Stratos was sold in December 2003.
        Emergis Inc.s (Emergis)
          US Health operations, which were sold in March 2004
        Emergis, which was sold in May 
          2004.All of these business dispositions
        were treated as discontinued operations.
             In treating business dispositions as discontinued
        operations, we restated the financial results of all previous years to
        exclude the results of these businesses. They are presented separately
        in the consolidated financial statements and are discussed separately
        in this MD&A.
      Our Strategic Priorities
      The telecommunications industry
        continues to evolve rapidly as the industry moves from multiple service-specific
        networks to IP-based integrated communications networks where text, video,
        sound and voice all travel on a single network. While IP-based communications
        is creating a new competitive landscape with reduced barriers to entry,
        it also unleashes new growth opportunities and the ability to achieve
        significant cost savings. 
             In 2004, we embarked on our strategy
        to deliver unrivalled integrated communications to customers across Canada
        with the overall objective of taking a leadership position in setting
        the standard in IP for the industry and for our customers. Leveraging
        the
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37Bell 
  Canada Enterprises2004Annual
  Report

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| |  | Managements
        Discussion and Analysis
      opportunities created by IP-based
        communications should allow us to deliver on the guiding principles of
        our strategy of customer simplification, innovation and efficiency. This
        strategy is founded on three priorities:
      1. Deliver an enhanced
        customer experience with the objective of enabling a significantly lower
        cost structure at Bell Canada.
      A year ago we announced a far-reaching,
        company-wide program called Galileo (Galileo) designed to simplify and
        enhance the customer experience. In the Consumer segment, Galileo aims
        to unify the customer experience across all product lines, and eliminate
        the costs of complexity associated with multiple systems and processes.
        In the Business segment, Galileo aims to deliver to customers a streamlined
        service offer based on IP, thereby eliminating the costs of multiple data
        networks and related processes. 
             In 2004, we made significant progress
        on our Galileo initiatives in both our Consumer and Business segments.
      In our Consumer segment:
      we gained 369,000 subscriptions
          to the Bell bundle (a combination of wireless, Internet and video
          services in one offer), bringing our total sales to 431,000 since it
          was launched in September of 2003. Over the year, 48% of new bundle
          activations, 49% of fourth quarter activations and 51% of December activations
          included the sale of at least one new service.
        the $5 Long Distance Bundle
          that we introduced in June 2004 was extremely successful, gaining
          approximately 229,000 customers by year end
        we completed a major overhaul
          of Bell ExpressVus service offerings to stimulate growth
          and invigorate the business. This included repackaging programs and
          simpler pricing.
        we completed the migration of
          all Bell Mobility postpaid customer accounts to a new billing platform
          that will enable us to consolidate all of a customers services
          onto a single bill
        we also made significant advancements
          in improving the customer experience in our corporate stores.In our Business segment:
      we made significant progress
          on our key objective of having 100% of our core traffic moved to a pervasive
          national IP multi-protocol label switching (IP MPLS) network by the
          end of 2006. At the end of 2004, 61% of the traffic on our core
          network was IP-based.
        we also began the process to
          discontinue several legacy data services by announcing in 2004
          that we would not sell these services to customers who do not use them
          currently. This list of legacy services includes Frame Relay, ATM, Megastream,
          Bell Electronic Business Network, some business long distance services
          from the VNet portfolio (virtual corporate network services for large
          companies) and some packet services from the Datapac portfolio.In 2005, we will continue
        to work on both of these areas.
      In Consumer, we will continue
        to deliver on our strategy to win the broadband home. In particular, we:
      aim to significantly increase
          the number of customers on the Bell bundle
        will launch a redesigned Bell.ca
          site with the objective of increasing online sales
        will rollout a new, simpler
          bill for our customers.In Business, we will:
      continue the process of discontinuing
          legacy data services by expanding the list of services that will no
          longer be sold to customers who do not currently use them and by beginning
          to stop selling these services to existing customers
        continue to actively encourage
          customers to adopt new IP-based services as well as to migrate from
          legacy services to new IP-based services
        increase the adoption of self-serve
          and web-based interfaces by Enterprise customers
        eliminate network elements and
          standardize core operating processes.By the end of 2006, through our
        Galileo initiatives, we are targeting to remove between $1 billion and
        $1.5 billion in annual costs from our current cost structure.
      2. Deliver abundant bandwidth
        to enable all the services of the future with the reliability and security
        that customers require.
      Over the next four years, we plan
        to make a significant investment to expand the reach and amount of bandwidth
        available to customers. We are aiming to be able to deliver by 2008 up
        to 26 Mbps to 85% of urban households in the Québec City to Windsor
        corridor, or
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38Bell 
  Canada Enterprises2004Annual
  Report

---



| |  | approximately
        4.3 million households. Four million of these households will
        be SFUs that will be served using a fibre-to-the-node (FTTN) architecture
        capable of delivering IPTV service. The remaining 300,000 households will
        be MDUs served using VDSL.In2004,
        we began our FTTN rollout by deploying new high-density remotes in 376
        neighbourhoods. Although not yet capable of providing video services,
        these remotes did enable the expansion of our high-speed Internet access
        footprint in Ontario and Québec to 83% of homes and business lines
        passed, compared to 80% at the end of 2003. We also made solid progress
        in the deployment of VDSL to MDUs. By the end of the year, we had signed
        access agreements with 335 buildings.In2005,
        we plan to continue our FTTN rollout and conduct trials of our IPTV service.
        By year end, we expect to have deployed new high-density remotes to 2,500
        neighbourhoods, representing a footprint of approximately 1.1 million
        households. We plan to also continue our VDSL expansion into the MDU markets
        of Toronto, Montréal and Ottawa.We were also
        the first in Canada to announce plans to deploy the third generation (3G)
        of wireless mobile communications. Through our investment in EVDO, we
        will offer wireless broadband speeds of up to 2.4 Mbps, six times faster
        than the speeds that exist today. We intend to deploy EVDO in major urban
        centres across Canada in 2005 and 2006.
      3. Create the next-generation
        services to drive future growth.
      We continue to leverage our network
        capabilities, customer base and market knowledge to deliver innovative
        next-generation services. We plan to develop applications together with
        our wide array of partners, integrate them into useful services and bring
        these services to market using our strong brand, customer reach and channels.In2004,
        our Consumer segment provided next-generation services with:the launch of Sympatico-MSN.ca,
          a single portal combining the best features and Internet tools of MSN
          Canada Co. with the broadband content and innovative services of Sympatico.ca
        the introduction of MSN Premium
        the launch of Sympatico Home
          Networking (an integrated wireless high-speed modem and router solution)
        the launch of leading-edge wireless
          location-based services
        the launch of wireless phone-to-phone
          video messaging service.For Enterprise customers, we launched
        our Managed IP Telephony service. By year end, Bell Canada had sold
        more than 145,000 IP-enabled lines on customer premises equipment (CPE).
        We also enhanced our portfolio of value-added services through the acquisitions
        of:
      Infostream Technologies Inc.
          (Infostream), a systems and storage technology firm, addressing customer
          needs for secure and reliable information storage and redundant backup
          capabilities
        approximately 76% of Elix Inc.
          (Elix), a provider of call routing and management systems, IT applications
          integration, and design and implementation of electronic voice-driven
          response systems
        the security business of Emergis.As part of our strategy to become
        the technology advisor of choice to SMB customers, we:
      launched Productivity Pak (a
          self-serve bundle of tools that enables SMB customers to more easily
          access and share information) and ProConnect (a fully-managed service
          enabling the sharing of information easily, securely and affordably
          across the most extensive private IP-based network in Canada)
        acquired IT solutions provider
          Charon Systems Inc. (Charon) and, by February 21, 2005,
          an 89% interest in IT solutions provider Nexxlink Technologies Inc.
          (Nexxlink)
        on December 14, 2004,
          announced an initiative with Microsoft Canada Co. whereby Bell Canada
          will combine telecommunications services and Microsoft software-based
          solutions to bring SMB customers reliable, secure, productivity-enhancing
          services at affordable prices.In 2005, we plan to introduce
        Internet telephony service for consumers. In the Enterprise unit, we are
        targeting to increase the proportion of our customers in the Enterprise
        market purchasing value-added solutions. In the SMB market, we intend
        to reinvent the way information technology and telecom are integrated
        with the objective of increasing the number of SMB customers that view
        Bell Canada as their virtual Chief Information Officer (VCIO).
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39Bell 
  Canada Enterprises 2004 Annual Report

---



|The Year at a Glance
      This section reviews the key measures
        we use to assess our performance and how our results in 2004 compare to
        our results in 2003. |  | Managements
        Discussion and Analysis
      
      We will exploit the IP capability
        to achieve interoperability between wireless and wireline platforms. For
        instance, in 2005 we are targeting to bring to market an integrated
        single-voice mailbox for both cellular and land lines to allow customer
        access to voicemail messages through a single voicemail system.
      The Year at
        a Glance
      The results for 2004 demonstrate
        steady progress on our strategic objectives. We set a solid foundation
        for future growth, simplification of our customers experience and
        the transformation of our cost structure. Overall, our 2004 revenue
        growth performance exceeded the rate of growth achieved last year. The
        decrease in operating income was driven mainly by the restructuring and
        other items mainly related to the employee departure programs announced
        by Bell Canada and Aliant. Before restructuring and other items,
        operating income grew compared to last year, despite the negative impact
        of Aliants labour disruption. This growth reflected better operating
        performance at Bell Canada.In the Consumer
        segment, we achieved solid revenue and operating income growth, while
        maintaining strong levels of customer acquisitions and loyalty. Bundle
        subscriptions, a key part of our strategy to win the broadband home, significantly
        exceeded our expectations for the year.
             In the Business
        segment, we grew our base ofIP-based
        services and VAS within our SMB and Enterprise markets and expanded our
        presence in Western Canada. Overall, Business revenues grew modestly,
        despite increased competitive pressures, significant impacts from our
        exit from the low-margin cabling business, the completion of the Hydro-Québec
        outsourcing contract and lower revenues from Bell Wests contract
        with the Government of Alberta for the construction of the SuperNet. The
        improved momentum in our IP-connectivity and VAS business, combined with
        strong cost containment, led to operating income growth.In the Aliant
        segment, a new collective labour agreement was signed on September16,
         2004. The labour disruption, which started on April 23, 2004
        and ended on September 20, 2004, negatively impacted revenues and
        operating income.In the Other
        Bell Canada segment, market challenges persisted throughout the year
        for our Wholesale business. While full year revenues declined, this was
        in part due to our decision in the fourth quarter of2003
        to exit certain low-margin contracts and promotional offers for international
        switched minutes. In the last three quarters of the year, the rate of
        decline stabilized.In the OtherBCE segment,
        Bell  Globemedia delivered strong revenue and operating performance
        compared to last year, largely driven by higher television advertising
        revenue. Higher advertising revenue resulted from CTVs programming
        line-up which included the majority of the top 20 programs in each season.
        The improvement in revenue, combined with cost savings, contributed to
        significantly higher operating performance compared to 2003. Telesats
        revenues improved in 2004 as an increase in telecommunications revenue
        more than offset declines in consulting fees. CGIs revenues also
        increased due to its acquisition of American Management Systems Incorporated
        (AMS) in May 2004.
      Customer Connections
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 2004     |   | CONNECTIONS
      AT   
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | - | -----------------------
| |  | (in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | NET ADDS |   | DECEMBER 31,
      2004
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | NAS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | (146     | ) | 12,905                 
| |  | Digital equivalent
      access lines                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 468      |   | 4,335                  
| |  | High-speed Internet                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 350      |   | 1,808                  
| |  | Dial-up Internet                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | (126     | ) | 743                    
| |  | Cellular and
      PCS                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 513      |   | 4,925                  
| |  | Paging                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (97      | ) | 427                    
| |  | Video                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 116      |   | 1,503                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 1,078    |   | 26,646                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | The total number of customer connections increased 4.2% or 1.1 million
        to 26.6 million at December 31, 2004, compared to December 31, 2003.
      WirelessOur total cellular and PCS subscriber
        base grew 11.6% or 513,000 in 2004 to reach 4,925,000 at December 31,
        2004. This reflects a similar level of net additions as in 2003.
        We also improved blended and postpaid churn by 0.1 and 0.2 percentage
        points, respectively, over 2003.

40Bell 
  Canada Enterprises2004Annual
  Report

---



|Operating
        Income/EBITDA
      EBITDAmargin
        isEBITDAdivided
        by operating revenues. |  | High-Speed
        Internet
      Our DSL high-speed Internet business
        added 350,000 customers in 2004, increasing our DSL customer base
        by 24% to reach 1,808,000 at December 31, 2004. The additions
        achieved in 2004 were slightly lower than the 358,000 subscribers
        added in 2003. We also more than doubled our subscriptions to Sympatico
        value-added solutions over December 31, 2003, to reach an end
        of period count of 624,000.
      Video
      We gained momentum in our video
        business in 2004, ending the year with over 1.5 million subscribers,
        growing by 8.4% over 2003. During the year, we had 116,000 net activations,
        an increase of 40% over 2003. Bell ExpressVu achieved its target
        in the deployment of VDSL to MDUs, signing access agreements for 335 buildings
        by year end.
      NAS
      Our NAS levels declined 1.1% or
        146,000 in 2004, similar to the rate of decline in 2003, reflecting
        the substitution of wireline with wireless services and a reduction in
        the number of second lines as a result of growth in high-speed Internet
        access.
      Operating Revenues
       Operating
        revenues increased 2.4% or $456 million to $19,193 million in 2004,
        compared to 2003. This reflects a rate of growth which exceeded our 2003
        performance. Bell Canada contributed most of the increase despite
        the trailing effects of the implementation of a new wireless billing system
        and a prolonged labour disruption at Aliant.Bell Canadas
        revenue growth reflects improved performance in the Consumer segment stemming
        from stronger wireless, Internet access and video services, along with
        higherIP-connectivity
        and VAS revenues in the Business segment.Revenue growth
        was enhanced further by higher revenues atCGI,
        resulting from the AMS acquisition, and at Bell Globemedia, resulting
        from higher television advertising revenues due to strong ratings performance.
      Operating Income/EBITDA
       Operating
        income for the year declined $1,145 million to $2,976 million
        in 2004, compared to 2003. This was mainly a result of restructuring
        and other items of $1,224 million recorded in 2004. The cost
        of the employee departure programs announced at Bell Canada in June of
        this year, encompassing a total of 5,052 employees, and at Aliant, announced
        in the fourth quarter this year encompassing a total of 693 employees,
        amounted to $1,063 million. In addition, the labour disruption at
        Aliant had an estimated negative impact of $68 million on operating
        income.Operating income
        before restructuring and other items increased1.6%
        or $65 million to $4,200 million in 2004, compared to 2003,
        despite the estimated negative impact of $68 million of the Aliant
        labour disruption. This increase reflects EBITDA growth, partially offset
        by higher net benefit plans cost.EBITDAgrew
        2.1% or $154 million to $7,564 million in 2004, compared
        to 2003, driven mainly by improvements at Bell Canada and the
        Other BCE segment. Growth was 3.0% excluding the estimated negative
        impact of $71 million from the Aliant labour disruption. EBITDA growth
        at Bell Canada was driven by continued improvement in wireless, Internet
        access and video services.
|--------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

41Bell 
  Canada Enterprises 2004 Annual Report

---



|Net Earnings
      ROE(return
        on common shareholders equity) is calculated as net earnings applicable
        to common shares as a percentage of average common shareholders
        equity.
      Capital Expenditures
      Capital intensityis
        capital expenditures divided by operating revenues. It is a key financial
        measure that we use to assess our performance and that of our business
        units. |  | Managements
        Discussion and Analysis
      
      EBITDAerosion in our legacy
        services was offset by a continued focus on productivity, as well as EBITDA
        contributions from IP connectivity, VAS and VCIO revenue gains in our
        Business segment.The OtherBCE 
        segment also contributed to the overall EBITDA growth. Bell Globemedias
        EBITDA improvement reflects a higher level of television advertising revenue
        and benefits from cost savings. CGIs EBITDA improvement reflects
        the benefit of the AMS acquisition.OurEBITDA
        margin for the year was 39.4%, down 0.1 percentage points from 2003,
        reflecting a lower EBITDA margin at CGI and higher corporate expenses,
        which more than offset margin improvement at Bell Canada. Bell Canadas
        EBITDA margin of 42.4% reflected a 0.3 percentage point improvement over
        last year. Wireless EBITDA grew significantly, driving a 5.2 percentage
        point margin improvement despite the adverse impacts of the implementation
        of a new billing system. We achieved EBITDA margin improvement by better
        managing acquisition costs per gross activation, particularly in the wireless
        business, and by placing a greater emphasis on more profitable contracts
        within the Enterprise and Wholesale markets. The negative impact of the
        Aliant employee strike and the cost of the billing system implementation
        partly offset the improvement at Bell Canada.
      Net Earnings/Earnings per Share
        (EPS)
       Net
        earnings applicable to common shares for 2004 were $1,523 million,
        or $1.65 per common share. This compared to net earnings of $1,744 million,
        or $1.90 per common share in 2003. ROE was 12.5% in 2004, compared
        to 15.1% last year. Included in 2004 net earnings were net losses
        of $349 million after taxes and non-controlling interest, or $0.37
        per common share, consisting primarily of:
      restructuring and other items
          of $772 million or $0.83 per share, mainly relating to the employee
          departure programs announced at Bell Canada ($647 million)
          and Aliant ($24 million), partly offset by:
        net gains of $423 million
          from the sales of our investment in MTS, our remaining interest in YPG
          General Partner Inc. (YPG) and our interest in Emergis, and the
          gain on the purchase of 360networks, which reflected the excess of the
          fair value of the net assets acquired over the purchase price.This compared to net losses of
        $5 million included in 2003 net earnings due mainly to the loss
        on sale of Emergis US Health operations, which was partly offset
        by a gain on sale of an interest in YPG.Excluding the
        impact of these items, net earnings grew7.0%
        to $1,872 million, or $2.02 per share, in 2004, an increase
        of $123 million, or $0.12 per share, yielding an ROE of 15.2%, which is
        similar to last year. This increase reflected the improvement in operating
        income and lower interest expense.
      Capital ExpendituresCapital expenditures increased
        6.2% or $197 million to $3,364 million in 2004, compared
        to 2003. Capital spending as a percentage of revenues was 17.5% in 2004,
        compared to 16.9% in 2003. Capital intensity at Bell Canada
        also increased from 17.4% to 18.0%. Capital spending at Bell Canada
        in 2004 reflected a mix of higher investment in the growth areas
        of the business and reduced expenditures in legacy areas.Our key strategic
        investments this year included the migration to one nationalIP
        MPLS network, our VDSL deployment strategy, our DSL footprint expansion
        facilitated through the deployment of new high-density remotes, and productivity
        enhancement initiatives. Higher spending related to satellite builds at
        Telesat also contributed to the increase.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---



|Cash
        Flows
      Net debt to capitalization ratiois a key measure we use
        to assess our financial condition. It shows how much net debt (debt due
        within one year and long-term debt, net of cash) we have in relation to
        our capitalization (total net debt, non-controlling interest and shareholders
        equity). |  | Cash
        Flows
      
      Cash from operating activities
        decreased 7.5% or $449 million to $5,519 million in 2004,
        compared to 2003. The decline resulted mainly from cash tax refunds of
        $440 million received in 2003 that did not recur this year, higher
        cash payments related to the employee departure programs and higher working
        capital requirements, partly offset by the receipt of $75 million
        from the settlement of lawsuits against MTS and Allstream Inc. (Allstream).We generated
        free cash flow for the year totalling$898
        million or $1,092 million before restructuring and other items. Compared
        to 2003, free cash flow was down $691 million, mainly reflecting
        the $449 million decline in cash from operating activities and higher
        capital expenditures of $197 million.Our net debt
        to total capitalization ratio improved to42.8%
        at December 31, 2004, from 44.0% at December 31, 2003.
        The improvement reflects a reduction in net debt of $610 million,
        which was driven by $898 million of free cash flow, net cash proceeds
        of approximately $1 billion on our sales of MTS, YPG and Emergis, less
        $1.3 billion of business acquisitions, including Bell West and 360networks.
        This was complemented by an increase in shareholders equity, which
        reflects the excess of net earnings over dividends of approximately $400 million.
      New Labour Agreements
      During the year, Bell Canada
        reached a new four-year agreement with approximately 7,100 technicians
        represented by the Communications, Energy and Paperworkers Union of Canada
        (CEP). This agreement will expire in November 2007.Aliant reached
        an agreement with approximately4,300
        unionized employees represented by the Council of Atlantic Telecommunication
        Unions (CATU), ending a lengthy labour disruption. This agreement will
        expire in December 2007.
      Rewarding Shareholders
      On December 15, 2004,
        having achieved a solid capital structure and traction on our strategic
        initiatives, we announced, subject to being declared by the board of directors,
        a 10%, or $0.12 per share, increase in our annual dividend on BCE Inc.
        common shares.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

43Bell 
  Canada Enterprises2004Annual
  Report

---



|Selected Annual andQuarterly Information
      This section shows selected financial
        and operational data.
      EBITDA to interest ratiois
        EBITDA divided by interest expense.
      Operating marginis
        operating income divided by operating revenues.
      Net debt to EBITDAis
        net debt divided by EBITDA.
      Total debt to total assetsis
        total long-term debt (including debt due within one year) divided by total
        assets.
      Long-term debt to equityis
        long-term debt (including portion due within one year) divided by shareholders
        equity.
      Cash flow per shareis
        calculated by dividing cash from operating activities less capital expenditures
        by the average number of common shares outstanding.
      Cash flow yieldis
        cash from operating activities less capital expenditures, other investing
        activities, dividends on preferred shares and dividends paid by subsidiaries
        to non-controlling interest, divided by the number of common shares outstanding
        at the end of the year and multiplied by the share price at the end of
        the year. |                                                     | Managements
        Discussion and Analysis
      Selected
        Annual and Quarterly Information
      Annual Financial InformationThe tables below show selected
        consolidated financial data for each year from 2000 to 2004. We discuss
        the factors that have caused our results to vary over the past two years
        throughout this MD&A.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | 2004                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Operations                                          |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Operating
        revenues                          | 19,193                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Operating
        expenses                          | (11,629                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | EBITDA                                              | 7,564                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Amortization
        expense                        | (3,108                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Net
        benefit plans (cost) credit             | (256                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Restructuring
        and other items               | (1,224                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Operating
        income                            | 2,976                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Other
        income                                | 411                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Impairment
        charge                           |                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Interest
        expense                            | (1,005                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Pre-tax
        earnings from continuing operations | 2,382                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Income
        taxes                                | (710                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Non-controlling
        interest                    | (174                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Earnings
        from continuing operations         | 1,498                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Discontinued
        operations                     | 26                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Net
        earnings before extraordinary gain      | 1,524                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Extraordinary
        gain                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        earnings                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Dividends
        on preferred shares                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Premium
        on redemption of preferred shares                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        earnings applicable to common shares                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Included
        in net earnings:                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        gains on investments                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Continuing
        operations                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Discontinued
        operations                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Restructuring
        and other items                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Impairment
        charge                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Goodwill
        amortization                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Other                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        earnings per common share:                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Continuing
        operations  basic                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Continuing
        operations  diluted                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        earnings  basic                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Net
        earnings  diluted                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Ratios                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | EBITDA
        margin (%)                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | EBITDA
        to interest ratio (times)                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | Operating
        margin (%)                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     | ROE
        (%)                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                     |                                                                                                                                                                                                                                                                                                                                                                     

44Bell 
  Canada Enterprises 2004 Annual Report

---



|Market
        capitalizationis BCE Inc.s
        share price at the end of the year multiplied by the number of common
        shares outstanding.
      Book value per shareis
        common shareholders equity divided by number of common shares outstanding.
      Common dividend yieldis
        dividends paid on common shares divided by BCE Inc.s share
        price at the end of the year multiplied by the number of common shares
        outstanding.
      Common dividend payout ratiois dividends paid on common
        shares divided by net earnings applicable to common shares.
      Price to earnings ratiois
        BCE Inc.s share price at the end of the year divided by earnings
        per share.
      Price to book ratiois
        BCE Inc.s share price divided by the book value per share.
      Price to cash flow ratiois
        BCE Inc.s share price at the end of the year divided by cash
        flow per share. |                                                                 |                                                                         | 2004   |        | 2003   |        | 2002   |        | 2001   |        | 2000   |   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | --
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Balance
        Sheet                                           |                                                                         |        |        |        |        |        |        |        |        |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Total
        assets                                            | 39,143                                                                  |        | 39,420 |        | 39,142 |        | 53,687 |        | 50,909 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Long-term
        debt (including current portion)              | 12,930                                                                  |        | 13,872 |        | 14,684 |        | 11,812 |        | 10,370 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Net
        debt                                                | 12,705                                                                  |        | 13,315 |        | 15,158 |        | 12,872 |        | 14,014 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Total
        capitalization                                    | 29,651                                                                  |        | 30,291 |        | 31,350 |        | 35,053 |        | 34,759 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Preferred
        shares                                        | 1,670                                                                   |        | 1,670  |        | 1,510  |        | 1,300  |        | 1,300  |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Common
        shareholders equity                             | 12,362                                                                  |        | 11,903 |        | 11,098 |        | 15,274 |        | 15,832 |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Ratios                                                          |                                                                         |        |        |        |        |        |        |        |        |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Net
        debt to total capitalization (%)                    | 42.8                                                                    | %      | 44.0   | %      | 48.4   | %      | 36.7   | %      | 40.3   | %     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Net
        debt to EBITDA (times)                              | 1.68                                                                    |        | 1.80   |        | 2.05   |        | 1.87   |        | 2.16   |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Total
        debt to total assets (times)                      | 0.33                                                                    |        | 0.35   |        | 0.39   |        | 0.24   |        | 0.27   |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Long-term
        debt to equity (times)                        | 0.92                                                                    |        | 1.02   |        | 1.16   |        | 0.71   |        | 0.61   |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Cash
        Flows                                              |                                                                         |        |        |        |        |        |        |        |        |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Cash
        flows from operating activities                    | 5,519                                                                   |        | 5,968  |        | 4,424  |        | 4,116  |        | 2,177  |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Cash
        flows from investing activities                    | (3,864                                                                  | )      | (3,002 | )      | (7,032 | )      | (731   | )      | (6,551 | )     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Capital
        expenditures                                    | (3,364                                                                  | )      | (3,167 | )      | (3,709 | )      | (4,894 | )      | (3,581 | )     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Business
        acquisitions                                   | (1,299                                                                  | )      | (115   | )      | (6,471 | )      | (327   | )      | (3,521 | )     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Business
        dispositions                                   | 20                                                                      |        | 55     |        | 3,190  |        | 248    |        | 654    |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Other
        investing activities                              | 124                                                                     |        | 62     |        | 12     |        | (83    | )      | (103   | )     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Cash
        flows from financing activities                    | (2,190                                                                  | )      | (2,905 | )      | 3,362  |        | (1,951 | )      | 3,112  |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Net
        issuance (repayment) of equity instruments          | 32                                                                      |        | 172    |        | 2,819  |        | (120   | )      | (348   | )     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Net
        issuance (repayment) of debt instruments            | (740                                                                    | )      | (1,781 | )      | 2,005  |        | (1,520 | )      | 4,357  |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Financing activities of subsidiaries
        with third parties | (50                                                                     | )      | 24     |        | 92     |        | 1,010  |        | 181    |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash
        dividends paid on common shares                            | (1,108 | )      | (1,029 | )      | (999   | )      | (969   | )      | (849   | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash
        dividends paid on preferred shares                         | (85    | )      | (61    | )      | (43    | )      | (64    | )      | (79    | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash dividends paid by subsidiaries
        to non-controlling interest | (188   | )      | (184   | )      | (468   | )      | (357   | )      | (240   | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash
        provided by (used in) discontinued operations              | 193    |        | 355    |        | (1,017 | )      | (1,125 | )      | (873   | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Ratios                                                                  |        |        |        |        |        |        |        |        |        |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Free
        cash flow                                                  | 898    |        | 1,589  |        | (783   | )      | (2,251 | )      | (2,675 | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Capital
        intensity (%)                                           | 17.5   | %      | 16.9   | %      | 19.6   | %      | 26.5   | %      | 22.1   | % 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash
        flow per share (dollars)                                   | 2.33   |        | 3.04   |        | 0.84   |        | (0.96  | )      | (2.10  | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Cash
        flow yield (%)                                             | 7.5    | %      | 9.8    | %      | 0.8    | %      | (4.4   | %)     | (5.2   | %)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Share
        Information                                               |        |        |        |        |        |        |        |        |        |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Average
        number of common shares (millions)                      | 924.6  |        | 920.3  |        | 847.9  |        | 807.9  |        | 670.0  |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Common
        shares outstanding at end of year (millions)             | 925.9  |        | 924.0  |        | 915.9  |        | 808.5  |        | 809.9  |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Market
        capitalization                                           | 26,777 |        | 26,704 |        | 26,103 |        | 29,114 |        | 35,069 |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Dividends
        declared per common share (dollars)                   | 1.20   |        | 1.20   |        | 1.20   |        | 1.20   |        | 1.24   |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Book
        value per share (dollars)                                  | 13.35  |        | 12.88  |        | 12.12  |        | 18.89  |        | 19.55  |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Total
        dividends declared on common shares                       | (1,110 | )      | (1,105 | )      | (1,031 | )      | (969   | )      | (849   | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Total
        dividends declared on preferred shares                    | (70    | )      | (64    | )      | (59    | )      | (64    | )      | (79    | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Market
        price per common share (dollars)                         |        |        |        |        |        |        |        |        |        |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | High                                                                    | 30.00  |        | 32.35  |        | 36.87  |        | 43.50  |        | 199.75 |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Low                                                                     | 25.75  |        | 26.60  |        | 23.00  |        | 32.75  |        | 31.75  |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Close                                                                   | 28.92  |        | 28.90  |        | 28.50  |        | 36.01  |        | 43.30  |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Ratios                                                                  |        |        |        |        |        |        |        |        |        |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Common
        dividend yield (%)                                       | 4.1    | %      | 3.9    | %      | 3.8    | %      | 3.3    | %      | 2.4    | % 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Common
        dividend payout ratio (%)                                | 72.8   | %      | 59.0   | %      | 42.7   | %      | 260.5  | %      | 18.4   | % 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Price
        to earnings ratio (times)                                 | 17.53  |        | 15.21  |        | 10.71  |        | 78.28  |        | 6.01   |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Price
        to book ratio (times)                                     | 2.17   |        | 2.24   |        | 2.35   |        | 1.91   |        | 2.22   |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Price
        to cash flow ratio (times)                                | 12.41  |        | 9.51   |        | 33.93  |        | (37.51 | )      | (20.62 | ) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Other
        Data                                                      |        |        |        |        |        |        |        |        |        |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 | Number
        of employees (thousands)  unaudited                     | 62     |        | 64     |        | 64     |        | 73     |        | 73     |   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                 |                                                                         |       

45Bell 
  Canada Enterprises2004Annual
  Report

---



|Digital equivalent accesslinesare derived by converting
        low capacity data lines (DS-3 and lower) to the equivalent number of voice-grade
        access lines.
      ARPU (average revenue per unit)
        and ARPS (average revenue per subscriber)represent
        a measurement of the average revenue generated by each unit or subscriber,
        expressed as a rate per month for the year.
      Churnis
        the rate at which existing subscribers cancel their services. Churn is
        calculated as the number of subscribers disconnected divided by the average
        subscriber base.
      Costs of acquisition (COA)are
        also referred to as subscriber acquisition costs. This measure is expressed
        per gross activation. It includes costs associated with acquiring a customer
        such as hardware subsidies, marketing and distribution costs. |                                                          | Managements
        Discussion and Analysis
      
      Annual Operational Information
      The table below shows selected
        data on our operations from 2002 to 2004.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | 2004                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Wireline                                                 |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Local
        network access services (thousands)        | 12,905                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Long
        distance conversation minutes (millions)    | 18,070                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Long
        distance average revenue per minute (cents) | 11.7                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Data                                                     |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Digital
        equivalent access lines (thousands)      | 4,335                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | High-speed
        Internet net activations (thousands)  | 350                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | High-speed
        Internet subscribers (thousands)      | 1,808                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Dial-up
        Internet subscribers (thousands)         | 743                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Wireless                                                 |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Cellular
        and PCS net activations (thousands)     | 513                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Cellular
        and PCS subscribers (thousands)         | 4,925                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Average
        revenue per unit ($/month)               | 49                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Churn
        (%) (average per month)                    | 1.3                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Cost
        of acquisition ($/subscriber)               | 411                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Paging
        subscribers (thousands)                   | 427                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Video                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Video
        net activations (thousands)                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Video
        subscribers (thousands)                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Average
        revenue per subscriber ($/month)                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Churn
        (%) (average per month)                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          | Cost
        of acquisition ($/subscriber)                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                          |                                                                                                                                                                                

46Bell 
  Canada Enterprises 2004 Annual Report

---



| |  | Quarterly Financial Information
      The table below shows selected
        consolidated financial data by quarter for 2004 and 2003. This
        quarterly information is unaudited but has been prepared on the same basis
        as the annual consolidated financial statements. The factors that have
        caused our results to vary over the past eight quarters are discussed
        throughout this MD&A.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Operating
        revenues                                                                                                                                                                                                                                                                                                                                                                                               
| |  | EBITDA                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Amortization
        expense                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Net
        benefit plans cost                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Restructuring
        and other items                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Operating
        income                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Earnings
        from continuing operations                                                                                                                                                                                                                                                                                                                                                                              
| |  | Discontinued
        operations                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Extraordinary
        gain                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Net
        earnings                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Net
        earnings applicable to common shares                                                                                                                                                                                                                                                                                                                                                                         
| |  | Included in
      net earnings:                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Net
        gains on investments                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Continuing
        operations                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Discontinued
        operations                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Restructuring
        and other items                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Net
        earnings per common share                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Continuing
        operations  basic                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Continuing
        operations  diluted                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Net earnings  basic                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Net earnings  diluted                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Average
        number of common shares outstanding (millions)                                                                                                                                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                          

47Bell 
  Canada Enterprises2004Annual
  Report

---



|Financial
        Results Analysis
      This section provides detailed information
        and analysis about our performance over the past two years. It focuses
        on our consolidated operating results and provides financial information
        for each of our operating segments. |                                                     | Management’s
        Discussion and Analysis
      
      Financial Results Analysis
      Consolidated Analysis
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                |                                                     | 2004                                                                                                            
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                | Operating
      revenues                            | 19,193                                                                                                          
|                                                                                                                                                                                                                                                                                                | Operating
      expenses                            | (11,629)                                                                                                        
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                | EBITDA                                              | 7,564                                                                                                           
|                                                                                                                                                                                                                                                                                                | Amortization
      expense                          | (3,108                                                                                                          
|                                                                                                                                                                                                                                                                                                | Net benefit
      plans cost                        | (256                                                                                                            
|                                                                                                                                                                                                                                                                                                | Restructuring
      and other items                 | (1,224                                                                                                          
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                | Operating
      income                              | 2,976                                                                                                           
|                                                                                                                                                                                                                                                                                                | Other income                                        | 411                                                                                                             
|                                                                                                                                                                                                                                                                                                | Interest expense                                    | (1,005                                                                                                          
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                | Pre-tax
        earnings from continuing operations | 2,382                                                                                                           
|                                                                                                                                                                                                                                                                                                | Income taxes                                        | (710                                                                                                            
|                                                                                                                                                                                                                                                                                                | Non-controlling
      interest                      | (174                                                                                                            
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | Earnings
        from continuing operations                                                                     
|                                                                                                                                                                                                                                                                                                |                                                     | Discontinued
      operations                                                                                   
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | Net
        earnings before extraordinary gain                                                                  
|                                                                                                                                                                                                                                                                                                |                                                     | Extraordinary
      gain                                                                                        
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | Net earnings                                                                                                    
|                                                                                                                                                                                                                                                                                                |                                                     | Dividends
      on preferred shares                                                                             
|                                                                                                                                                                                                                                                                                                |                                                     | Premium on
      redemption of preferred shares                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | Net earnings applicable to common shares                                                                        
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | EPS                                                                                                             
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     |                                                                                                                 
|                                                                                                                                                                                                                                                                                                |                                                     | N/M: Not meaningful                                                                                             

| |  | Operating Revenues
      Operating revenues grew 2.4% or
        $456 million to $19,193 million in 2004, compared to 2003,
        a rate of growth which exceeded our 2003 performance.Bell Canada
        contributed most of the increase despite the trailing effects of the implementation
        of a new wireless billing system and a prolonged labour disruption at
        Aliant. Bell Canada’s revenue growth was a result of improved
        performance in the Consumer segment stemming from stronger wireless, Internet
        access and video services revenues, along with higherIP-connectivity
        and VAS revenues in the Business segment.Revenue growth
        was enhanced further by higher revenues atCGI,
        resulting from the AMS acquisition, and at Bell Globemedia, resulting
        from higher television advertising revenues due to strong ratings performance.Looking ahead
        for2005, we expect
        to achieve overall revenue growth as expected increases from our growth
        services, including wireless, Internet and IP-based connectivity, video
        services and value-added services are expected to more than offset anticipated
        continued declines in our legacy wireline business. Beyond 2005,
        we expect growth services will become a greater component of our future
        revenue base.In2005,
        the anticipated revenue increases from our growth services are expected
        to be driven by solid increases in the number of subscribers and targeted
        increases in average revenue per subscriber across these services.In local and
        access and long distance revenues, we expect the trends experienced over
        the past years to continue and the rate of decline of these services to
        increase somewhat as cable companies begin expected launches ofVoIP
        offerings. We also expect continued legacy revenue declines from the Enterprise
        and Wholesale businesses due to continued competitive pricing pressures
        and the migration to IP.SeeSegmented
        Analysisfor a discussion of operating
        revenues on a segmented basis, andProduct
        Line Analysisfor a discussion
        of operating revenues on a product line basis.
      Operating Income
      Operating income declined 28%
        or $1,145 million to $2,976 million in 2004, compared to 2003.
        This was mainly because of an increase in restructuring and other items
        and a higher net benefit plans cost. Excluding the impact of the restructuring
        and other items, operating income increased 1.6% or $65 million to
        $4,200  million in 2004. This increase stemmed from operating
        income growth in our Consumer and Business segments, as well as improvements
        in Bell Globemedia and Telesat in the Other BCE segment, driven
        by the underlying growth in these sectors.SeeSegmented
        Analysisfor a discussion of operating
        income on a segmented basis.
      EBITDA
      Our EBITDA grew 2.1% or $154 million
        to $7,564 million in 2004, compared to 2003. This represented
        a growth rate of 3.0%, excluding the estimated negative impact of $71 million
        from the Aliant labour disruption, from improvements at Bell Canada
        and the Other BCE segment.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

48    Bell  Canada
  Enterprises 2004 Annual Report

---



|Amortization
        Expense
      The amount of our amortization expense
        in any year is affected by: how
        much we invested in new capital assets in previous yearshow
        many assets we retired during the yearchanges in accounting
        rules and estimates.
      Each year, we review our estimate
        of the useful life of our capital assets.
      Net Benefit Plans Cost
      The amount of the net benefit plans
        cost in a year mainly depends on:the return on pension
        plan assets expected to be generated during the year  the lower
        the return, the higher the costthe present value of
        future pension benefit payments to employees  the lower the present
        value, the lower the costactuarial gain (loss)
         the difference between the actual funded status of our pension
        plans and the amount calculated using our accounting assumptions. We amortize
        this into earnings over time.
      Restructuring and Other Items
      This category includes various income
        and expenses that are not directly related to the operating revenues generated
        during the year. Examples are costs related to streamlining initiatives,
        asset write-downs and other types of income or charges. |  | EBITDA
        growth at Bell Canada was driven by continued improvement in wireless,
        Internet access and video services. EBITDA erosion in our legacy services
        was offset by a continued focus on productivity as well as EBITDA contributions
        from IP-based connectivity service, and VAS and VCIO revenue gains in
        our Business segment.
             The otherBCE 
        segment also contributed to the overall EBITDA growth. Bell Globemedias
        EBITDA improvement reflects a higher level of television advertising revenue
        and benefits from cost savings. CGI reflects the benefit of the AMS acquisition.OurEBITDA
        margin for the year was 39.4% , down 0.1 percentage points from 2003,
        reflecting a lower EBITDA margin at CGI and higher corporate expenses,
        which more than offset the margin improvement at Bell Canada.Bell CanadasEBITDA margin of 42.4%
        in 2004 reflected a 0.3 percentage point improvement over last year.
        Wireless EBITDA margin reflected a 5.2 percentage point improvement despite
        the adverse impacts of the implementation of the new billing system.We
        achieved EBITDA margin improvement by better management of COA per gross
        activation, particularly in the wireless business, and by placing a greater
        emphasis on more profitable contracts within the Enterprise and Wholesale
        markets. The negative impact of the Aliant employee strike and the cost
        of the billing system migration partly offset the improvement at Bell 
        Canada. WirelessCOA of $411 per gross
        activation in 2004 improved by $15 compared to 2003, driven
        primarily from more targeted and cost-effective campaigns. COA for video
        services of $571 per gross activation increased $39 due to more customers
        taking a second receiver as a result of our 2TV bundle and aggressive
        retail pricing by competitors. In2005,
        we are targeting stable EBITDA margins, as cost savings expected to be
        achieved through the benefits of our Galileo initiatives, combined with
        anticipated revenue increases from our growth services, are expected to
        mitigate declines in our legacy business. 
             We are targeting to achieve significant
        cost savings from our Galileo initiatives. We expect close to half of
        these savings will be derived from the Consumer segment, driven by the
        impact of this years employee reduction programs, the migration
        to a single bill, higher sales through our Bell.ca website, efficiencies
        in call centre operations, and our efforts to provide simpler provisioning
        and product offers. The rest of the cost savings are expected to be achieved
        in the Business segment as we eliminate network elements and standardize
        core operating processes, as well as from labour savings driven by this
        years workforce reductions.
      Amortization Expense
      Amortization expense increased
        0.3% or $8 million to $3,108 million in 2004, compared
        to 2003. This was a result of an increase in our capital asset base
        from capital spending that continues to be higher than asset retirements.
        This was partly offset by an increase from three to four years in the
        useful life of Bell Canadas internal use software.
      Net Benefit Plans Cost
      The net benefit plans cost increased
        by 46% or $81 million to $256 million in 2004, compared
        to 2003. The increase resulted mainly from a higher accrued benefit
        obligation based on our most recent actuarial valuation. This was partly
        offset by the positive fund performance in 2003, which resulted in
        an actuarial gain and increased the fair value of plan assets.
        In the next
        two years, net benefit plans cost is expected to increase, mainly as a
        result of poor fund performance experienced in2001
        and 2002. This will continue to negatively impact the accounting
        value of the plan assets used to determine the net benefit plans cost.
        In 2006, however, we expect this negative impact will have a smaller effect.
        Beyond 2006, net benefit plans cost is expected to stabilize.
      Restructuring and Other Items
      We recorded $1,224 million
        in restructuring and other items in 2004, consisting of:
      $985 million in the third
          quarter relating to an employee departure program at Bell Canada,
          where 5,052 employees chose to leave the company. By the end of the
          year 4,900 employees had left the company. We expect this to result
          in annual savings of approximately $390 million.
        a $110 million provision
          recorded in the second quarter for potential cost overruns on a contract
          with the Government of Alberta, which was increased by $18 million
          in the fourth quarter
        $67 million in the fourth
          quarter relating to an employee departure program at Aliant under which
          693 employees decided to leave the company. Of these
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49    Bell  Canada
  Enterprises 2004 Annual Report

---



| |  | Managements
        Discussion and Analysis
      employees, about 400 had left the
        company by January 1, 2005. We expect annual savings of approximately
        $48 million as a result of these departures.
        other charges totalling $119
           million. These consisted of future lease costs for facilities
          that were no longer needed, asset write-downs and other provisions.These charges were partly offset
        by income of $75 million recorded in the second quarter relating
        to an agreement reached between BCE Inc. and MTS to settle lawsuits.
        The terms of the settlement included:the unwinding of various commercial
          agreements
        the removal of contractual competitive
          restrictions effective June 30, 2004
        the orderly disposition of our
          interest in MTS, which was done in September 2004
        a premium payment to us by MTS
          if there is a change in control of MTS before 2006 and if there is an
          appreciation in MTS share price from the time of our divestiture
          to the time of any takeover transaction.We recorded $14 million in
        restructuring and other items in 2003, which included a charge of
        $15 million relating to a restructuring at Aliants subsidiary,
        Xwave Solutions Inc. (xwave). In2003,
        Bell Canada recorded charges of $65 million relating to various
        asset write-downs and other provisions. These charges were offset by a
        credit of $66 million relating to the reversal of restructuring charges
        recorded in 2002, which were no longer necessary because fewer employees
        were terminated than expected due to an increase in the number of employees
        being transferred to other positions within Bell Canada. See Note4
        to the consolidated financial statements for more information on the restructuring
        and other items.
      Net Earnings/Earnings
        per Share (EPS)
      EPS of $1.65 in 2004 was
        negatively impacted by net losses resulting from the after-tax restructuring
        and other items of $0.83 per share relating mainly to the employee departure
        programs at Bell Canada and Aliant. These were partly offset by:
      net gains of $0.39 per share
          relating mainly to the sales of our 15.96% interest in MTS, our remaining
          3.24% interest in YPG, and our 63.9% interest in Emergis.
        an extraordinary gain of $0.07
          per share relating to the acquisition of the Canadian operations of
          360networks.Similar items in 2003 had
        no net impact on the reported EPS of $1.90 .Excluding the
        impact of these items,EPS
        was $2.02 in 2004, up 6.3% or $0.12 from 2003. The increase
        was a result of the improvement in EBITDA and lower interest expense.
        These were partly offset by a higher net benefit plans cost.
      Segmented Analysis
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

50Bell 
  Canada Enterprises 2004 Annual Report

---



| |  |                                    | 2004   |   | 2003   |   | % CHANGE |   
| |  | ---------------------------------- | ------ | - | ------ | - | -------- | --
| |  |                                   
| |  |                                    |       
| |  | Operating revenues                 |        |   |        |   |          |   
| |  | Consumer                           | 7,502  |   | 7,203  |   | 4.2      | % 
| |  | Business                           | 5,851  |   | 5,827  |   | 0.4      | % 
| |  | Aliant                             | 2,033  |   | 2,059  |   | (1.3     | %)
| |  | Other
        Bell Canada          | 1,939  |   | 2,015  |   | (3.8     | %)
| |  | Inter-segment
        eliminations | (538   | ) | (490   | ) | (9.8     | %)
| |  |                                    |       
| |  | Bell Canada                        | 16,787 |   | 16,614 |   | 1.0      | % 
| |  | Other
        BCE                  | 2,861  |   | 2,597  |   | 10.2     | % 
| |  | Inter-segment
        eliminations | (455   | ) | (474   | ) | 4.0      | % 
| |  |                                    |       
| |  | Total operating revenues           | 19,193 |   | 18,737 |   | 2.4      | % 
| |  |                                    |       
| |  |                                    |       
| |  |                                   
| |  | Operating income                   |        |   |        |   |          |   
| |  | Consumer                           | 2,119  |   | 2,019  |   | 5.0      | % 
| |  | Business                           | 896    |   | 781    |   | 14.7     | % 
| |  | Aliant                             | 268    |   | 415    |   | (35.4    | %)
| |  | Other
        Bell Canada          | (588   | ) | 621    |   | (194.7   | %)
| |  |                                    |       
| |  | Bell Canada                        | 2,695  |   | 3,836  |   | (29.7    | %)
| |  | Other
        BCE                  | 281    |   | 285    |   | (1.4     | %)
| |  |                                    |       
| |  | Total operating income             | 2,976  |   | 4,121  |   | (27.8    | %)
| |  |                                    |       
| |  |                                    |       

| |  | Consumer
      Consumer
        segment revenues grew 4.2% or $299 million to $7,502 million
        in 2004, compared to 2003. The increase was the result of continued
        strength in our wireless, Internet access and video businesses from strong
        gains in the number of subscribers to these services. This was partly
        offset by steady rates of decline in local and access and long distance
        revenues.
      Wireless
      Consumer wireless revenues grew
        15.2% in 2004, compared to 2003. The increase was achieved through
        strong subscriber growth, particularly as a result of the sales programs
        initiated during the first four months of the year. Although revenue performance
        was solid, we believe that our call centres focus on handling billing
        inquiries following the implementation of our new billing platform somewhat
        diminished our ability to sell more services to our customers and delayed
        the implementation of planned price increases.
      Video
      Video revenues grew 12.0% in 2004,
        compared to 2003. This was driven by the growth in our subscriber
        base and average revenue per unit (ARPU). Our total video customer base
        reached 1,503,000 at December 31, 2004, an increase of 8.4% compared
        to last year. Video net activations
        of116,000 in 2004
        were significantly higher than the 83,000 achieved in 2003. This
        growth was stimulated by the continued success of the Bell bundle
        and the major overhaul of the Bell ExpressVu service to stimulate
        growth and invigorate the business, which included program repackaging
        and simpler pricing principles. Initiatives focused on churn containment,
        which in the fourth quarter resulted in the lowest churn level since 2001,
        also contributed to the growth. One of these initiatives is Bell ExpressVus
        move to provide services to new DTH customers strictly on a contract basis.
        As of August  1, 2004, all new DTH customers must opt for a
        one or two-year contract. Churn for the year was 1.0% per month, a 0.1
        percentage point improvement compared to 2003. ARPUper
        month of $49 for video services reflects a $3 increase in 2004, compared
        to 2003. The increase in ARPU for the year was positively impacted
        by the $2 to $3 rate increase for specific programming packages introduced
        on February 1, 2003, the introduction of the $2.99 system access
        charge for all customers effective April 28, 2003 and more customers
        paying for a second receiver.In2005,
        growth in video revenues is expected to continue, driven by ongoing growth
        in our subscriber base and increases in ARPU, resulting in part from our
        $3 programming price increase effective March 1, 2005 for customers
        who are not on contracts and are not taking the new program packages introduced
        in September 2004. Our increased rollout of VDSL will help contribute
        to subscriber growth as our penetration in MDUs increases.
      Data
      Consumer data revenues grew 21%
        in 2004, compared to 2003. This was driven by growth of 22%
        in our high-speed Internet subscriber base and a 49% increase in revenues
        from our Sympatico-MSN.ca web portal.Bell Sympatico
        value-added services such asMSN
        Premium, Security Services and Home Networking added 337,000 subscriptions
        in 2004. Our MSN Premium
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51    Bell  Canada
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| |  | Managements
        Discussion and Analysis
      
      subscriptions in the fourth quarter
        of 2004 increased 118% over the previous quarter.
      Wireline
      Local and access revenues declined
        slightly in 2004, compared to 2003, mainly due to lower NAS
        and related SmartTouch feature revenues, partly offset by higher revenues
        from wireline insurance and maintenance plans.Long distance
        revenues declined in2004,
        compared to 2003, mainly as a result of volume declines in domestic,
        overseas and US minutes, reflecting competition from non-traditional long
        distance providers, partially offset by strong sales of prepaid cards.
        The reduction in higher priced overseas minutes and the impact of the
        $5 Long Distance Bundle also led to a lower average wireline revenue per
        minute in 2004.
       Consumer
        operating income increased 5.0% or $100 million to $2,119 million
        in 2004, compared to 2003. The improvement related mainly to
        the increase in revenues, lower COA in wireless, and productivity savings.
        These were partly offset by increased operating expenses related to salaries,
        cost of goods sold and higher net benefit plans cost.In addition,
        higher costs were driven by an increase in the number of contact centre
        agents to support the increased customer handling time associated with
        the Bell bundle and increased call volumes resulting from the implementation
        of the new billing platform at Bell Mobility.
             For2005,
        we expect the Consumer segment to continue to grow its revenue, driven
        by the strength of our wireless, Internet access and video businesses.
        However, erosion is expected to continue in our local and access and in
        long distance services, driven by increasing competition as cable companies
        enter the market with VoIP telephony services.
      Business
       Business
        segment revenues grew slightly by $24 million to $5,851 million
        in 2004, compared to 2003.The increase
        was the result of revenue growth in theSMB
        business, which was largely offset by revenue declines in our Enterprise
        and Bell West businesses. On November 19, 2004, we completed
        the acquisition of the Canadian operations of 360networks. The Business
        segment includes the financial results of the retail portion of this acquisition
        from that date.From a product
        line perspective, increases in wireless and terminal sales and other revenues
        were partly offset by declines in local and access, long distance and
        data revenues.
       Business
        segment operating income grew 14.7% or $115 million to $896 million
        in 2004, compared to 2003. This demonstrates that our strategy
        of driving the shift to IP along with improved profitability achieved
        through ongoing productivity has traction and is delivering.In2005,
        we expect Business segment revenues will grow, driven by organic growth
        in IP-based connectivity service and VAS revenues, as well as the full-year
        impact of the business acquisitions made in 2004. However, declines
        from our legacy services and from the completion of the SuperNet contract
        with the Government of Alberta in 2004 will partly offset this expected
        growth in revenues.
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52    Bell  Canada
  Enterprises 2004 Annual Report

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| |  | Enterprise
      Enterprise revenues declined in
         2004, compared to 2003, as a result of lower local and access,
        long distance and data revenues. These declines were partly offset by
        increases in wireless and terminal sales and other revenues.The decline
        in data revenues relates mainly to the completion of the Hydro-Québec
        outsourcing contract in the fourth quarter of2003.
        Despite this decline, our IP-based connectivity and VAS revenues continued
        to grow significantly. IP-based connectivity and VAS service revenues
        grew from 22% of enterprise data revenues in 2003 to 43% in 2004.
        By December  31, 2004, more than 65% of our Enterprise customers
        used some element of our VAS portfolio.In December,2004, we announced
        the signing of a seven-year, $140 million exclusive outsourcing agreement
        with Manulife Financial for the provisioning and management of its IP-based
        voice and data services. The outsourcing arrangement will lever our VAS
        capabilities by having BCE Connexim, Bell Canadas outsourcing
        and professional services unit, provide an end-to-end solution that reduces
        and simplifies Manulife Financials transition to IP. Our out-sourcing
        capabilities play a key role in our strategy of securing the connectivity
        business of our Enterprise customers and preventing possible disintermediation
        by systems integrators. We also had a number of other significant contract
        wins during the year, including Fédération des Caisses Desjardins
        du Québec, La Senza Inc., Government of Québec, Hydro
        One Networks Inc., Department of Foreign Affairs and International
        Trade of the Government of Canada, and Enterprise Rent-a-Car.Significant
        growth in Enterprise operating income was the result of our focus on more
        profitable contracts and productivity savings, which led to reductions
        in cost of goods sold. This was partly offset by the completion of the
        Hydro-Québec contract in2003
        and higher operating expenses related to businesses acquired during the
        year (Infostream and Elix).
      SMB
      SMB revenues increased in 2004,
        compared to 2003, as a result of higher data, wireless and terminal
        sales and other revenues. These gains were partly offset by revenue declines
        in local and access and long distance revenues.Business acquisitions
        in2004, such as Accutel
        Conferencing Systems Inc. (Accutel) and Charon, contributed to the
        revenue growth, as did our continued growth in DSL high-speed Internet
        access services and VAS services. At December 31, 2004, we had
        83,000 VAS subscriptions.The decline
        in long distance revenues resulted from competitive pricing pressures
        and lower usage in our payphone business. Local and access revenues were
        also lower in our payphone business.
             SMBoperating
        income growth was driven by revenue growth and productivity savings, partly
        offset by higher operating expenses of businesses acquired during the
        year.
      Bell West
      Bell West continued to grow
        its customer base leading to increases in local and access and long distance
        revenues in 2004, compared to 2003. In 2001, we were awarded
        a contract by the Government of Alberta to build a next-generation network
        (SuperNet) to bring high-speed Internet and broadband capabilities to
        rural communities in Alberta. Mechanical construction of the network was
        completed in December 2004. The decline in data revenues in 2004
        reflects a decrease of approximately $43 million as this contract
        was nearing completion.The improvement
        in operating income performance at Bell West was driven by the increase
        in local and access and long distance revenues and lower operating costs
        related to the contract with the Government of Alberta, partly offset
        by higher salary costs due to the growing workforce.
      Aliant
       Aliant
        segment revenues declined 1.3% or $26 million to $2,033 million
        in 2004, compared to 2003. The labour disruption that started
        on April 23, 2004 and ended on September 20, 2004 negatively
        impacted revenues by an estimated $40 million. This represents fewer
        new customers, reduced product sales, additional
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53    Bell  Canada
  Enterprises 2004 Annual Report

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| |  | Managements
        Discussion and Analysis
      
      promotional activities and reduced
        levels of fieldwork activity during the labour disruption. Strong growth
        in wireless and Internet services was more than offset by declines in
        other areas due to the labour disruption, the ongoing impact of competition,
        and the regulatory restrictions, including those on bundling, customer
        win-back activities, and rates charged for price-regulated services.Aliants
        wireless revenue grew15.4%
        in 2004. This was driven by:an increase of 9.6% in Aliants
          wireless customer base, including a 26% increase in digital customers,
          reflecting a positive response to the extensive dealer-supported network,
          attractive pricing offers and the expansion of digital cellular service
          into new areas
        an increase of $3 in ARPU, reflecting
          the impact of a higher percentage of customers subscribing to digital
          service, higher usage and increased customer adoption of features.Intense long distance competition,
        the difficulty in maintaining win-back efforts during the labour disruption
        and substitution of long distance calling with Internet and wireless options
        by customers resulted in long distance revenue declines in 2004,
        compared to last year. Consumer minute volumes were down due to customer
        losses to competition and the capping of minutes on certain long distance
        plans in late 2003. Business long distance pricing declines continued
        to reflect the impact of competitive pressures, as did long distance volume
        declines, in addition to a reduction of contact centre activity.Data revenues
        declined slightly in2004
        as higher Internet revenues were more than offset by other data revenue
        declines from the scale-back of marketing and sales efforts during the
        labour disruption and the continued rationalization of circuit networks
        by customers. The continued increase in Internet revenues stemmed from
        the increased popularity of enhanced services and year-over-year subscriber
        growth of 6%, reflecting 21% growth in Aliants high-speed Internet
        customer base. The higher subscriber base resulted from the expansion
        of high-speed Internet service into new areas, attractive introductory
        offers, an emphasis on bundling with other products and services as well
        as dealer and online sales channel initiatives.Terminal sales
        and other revenues declined in2004
        as a result of slower product sales during the labour disruption and the
        divestiture of non-core operations in the second and third quarters, which
        resulted in a reduction in IT service revenue.
       Aliants
        operating income declined 35% or $147 million to $268 million
        in 2004, compared to 2003. This was largely due to:the labour disruption, which
          had an estimated negative impact of $68 million in 2004. Incremental
          costs were incurred during the labour disruption to enable operations
          to continue with relatively few interruptions, ensure the safety of
          employees, perform property repairs, provide training and equipment
          to employees and maintain basic customer service.
        a restructuring charge of $67
          million relating to an employee departure program. SeeRestructuring
          and Other Itemsfor more details.The remaining decrease of $12
         million is a result of higher operating expenses from:growth in wireless and Internet
          services
        an increase in net benefit plans
          cost
        normal wage and annual salary
          adjustments
        higher amortization expense
          resulting from a higher proportion of capital spending in recent years
          on broadband and wireless assets, which have shorter depreciable lives.These increases were partly offset
        by lower operating costs stemming from the xwave restructuring in 2003
        and the sale of non-core operations in the second and third quarters.With the labour
        disruption and its impact on2004
        behind us, for 2005 we expect revenue growth in Aliants wireless
        and Internet services to offset continued erosion in local and access
        and long distance. We also anticipate operating income growth in 2005
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54Bell 
  Canada Enterprises2004Annual
  Report

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| |  | driven
        by revenue growth and productivity improvements, as well as the absence
        of the restructuring charge and costs associated with the labour disruption.
        These positive impacts are expected to be partially offset by increased
        costs associated with Aliants growth services and higher net benefit
        plans cost.
      Other Bell Canada
       The
        Other Bell Canada segment revenues declined 3.8% or $76 million
        to $1,939 million in 2004, compared to 2003. This was due
        to:a decline in our Wholesale
          business stemming from lower long distance and data revenues from price
          competition and customers migrating services to their own network facilities
        our decision last year to exit
          certain contracts and promotional offers for international switched
          minutes that had low margins. The
        Other Bell Canada segment had an operating loss of $588 million
        in 2004, a $1,209 million decrease when compared to operating
        income of $621 million in 2003.This was mainly
        due to the charge for restructuring and other items of$1,147
         million in 2004, mostly for the voluntary employee departure
        program at Bell Canada. SeeRestructuring
        and Other Itemsfor more details.
             Excluding restructuring
        and other items, operating income decreased9.7%
        , or $60 million, in 2004. The decrease relates to costs associated
        with increased volumes of cross-border carrier exchange traffic and the
        repricing of long distance and data services in our Wholesale business.
      Other BCE
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 2004  |   | 2003  |   | %
        CHANGE |   
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | - | ----- | - | ---------------- | --
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  | Operating
      revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |   |       |   |                  |   
| |  | Bell Globemedia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1,420 |   | 1,363 |   | 4.2              | % 
| |  | Telesat                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 362   |   | 345   |   | 4.9              | % 
| |  | CGI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 1,019 |   | 838   |   | 21.6             | % 
| |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 60    |   | 51    |   | 17.6             | % 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  | Total
      operating revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 2,861 |   | 2,597 |   | 10.2             | % 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Operating
      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |       |   |       |   |                  |   
| |  | Bell Globemedia                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 240   |   | 167   |   | 43.7             | % 
| |  | Telesat                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 141   |   | 124   |   | 13.7             | % 
| |  | CGI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 94    |   | 91    |   | 3.3              | % 
| |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (194  | ) | (97   | ) | (100.0           | %)
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  | Total
      operating income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 281   |   | 285   |   | (1.4             | %)
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      
| |  | The Other BCE segment revenues
        grew 10.2% or $264 million to $2,861 million in 2004, compared
        to 2003. This growth was driven by revenue growth at Bell Globemedia,
        Telesat and CGI.
       The
        Other BCE segment operating income declined 1.4% or $4 million
        to $281 million in 2004, compared to  2003. This decline
        was due to higher corporate expenses, which more than offset higher operating
        income at Bell Globemedia, Telesat and CGI. The increase in corporate
        expenses is a result of higher net benefit plans cost and an increased
        level of corporate activities.
      Bell Globemedia
      Bell Globemedias revenues
        grew 4.2% or $57 million to $1,420 million in 2004, compared
        to 2003. This was the result of:advertising revenue growth
          of 6.4% , reflecting the strength of CTVs schedule, which included
          the majority

55    Bell  Canada
  Enterprises 2004 Annual Report

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| |  | Managements
        Discussion and Analysis
      
      of the top 20 programs in each season,
        and higher advertising line rates atThe
        Globe and Mail
        subscriber revenue growth of
          2.4%, reflecting specialty channel subscription growth, and online subscription
          growth and cover price increases atThe
          Globe and Mail.This increase was partly offset
        by a decline in production and other revenues of 13.8% or $13 million
        in 2004 as a result of the sale of a 50% interest in Dome Productions
         Inc. in January 2004.Bell Globemedias
        operating income grew44%
        or $73 million to $240 million in 2004, compared to 2003,
        as a result of the increase in revenues, which was complemented by cost
        savings.
      Telesat
      Telesats revenues grew 4.9%
        or $17 million to $362 million in 2004, compared to 2003.
        This increase was the result of higher telecommunications revenues, which
        more than offset lower consulting fees.On October1, 2004, Telesats
        Anik F2 satellite began commercial service and became the worlds
        first satellite to commercialize the Ka frequency band, enabling two-way,
        high-speed Internet access services to consumers and businesses in Canada
        and the United States.Telesats
        operating income grew13.7%
        or $17 million to $141 million in 2004, compared to 2003.
        This increase was the direct result of the increase in revenues.
      CGI
      Our share of CGIs revenues
        grew 22% or $181 million to $1,019 million in 2004, compared
        to 2003. Our share of CGIs operating income grew 3.3% or $3 million
        to $94 million in 2004, compared to 2003. In each case, the
        increase was driven mainly by CGIs acquisition of AMS in May 2004.
      Product Line Analysis
      In addition to discussing our
        financial results by business segment, we believe that a separate discussion
        of Bell Canadas consolidated revenues by product line provides
        further insight into managements view of our financial results.
        The table to the right shows Bell Canadas consolidated revenues
        by product line.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                            | 2004   |  | 2003   |  | % CHANGE |   
| |  | ------------------------------------------------------------------------------------------------------------------------------------------ | ------ |  | ------ |  | -------- | --
| |  |                                                                                                                                            |       
| |  | Local and access                                                                                                                           | 5,572  |  | 5,601  |  | (0.5     | %)
| |  | Long distance                                                                                                                              | 2,327  |  | 2,544  |  | (8.5     | %)
| |  | Wireless                                                                                                                                   | 2,818  |  | 2,461  |  | 14.5     | % 
| |  | Data                                                                                                                                       | 3,640  |  | 3,717  |  | (2.1     | %)
| |  | Video                                                                                                                                      | 850    |  | 759    |  | 12.0     | % 
| |  | Terminal sales
      and other                                                                                                             | 1,580  |  | 1,532  |  | 3.1      | % 
| |  |                                                                                                                                            |       
| |  |                                                                                                                                            | 16,787 |  | 16,614 |  | 1.0      | % 
| |  |                                                                                                                                            |       
| |  |                                                                                                                                            |       
| |  | Local
      and Access Local and access revenues declined
        0.5% or $29 million to $5,572 million in 2004, compared
        to 2003.

56Bell 
  Canada Enterprises2004Annual
  Report

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| |  | This
        decline was a result of:
      lower NAS
        lower SmartTouch feature revenues,
          mainly linked to NAS losses.The decline was partly offset
        by gains from wireline insurance and maintenance plans.NASin
        service declined 1.1% or 146,000 in 2004, compared to 2003.
        This was a result of:continued growth in high-speed
          Internet access, which reduces the need for second telephone lines
        losses resulting from competition
        customers substituting wireline
          with wireless telephone service.In 2005, we expect continued
        erosion of our NAS in service due to these trends, as well as the launches
        of VoIP telephony by cable providers.
      Long Distance 
       Long
        distance revenues declined 8.5% or $217 million to $2,327 million
        in 2004, compared to 2003. This decline stemmed from:lower volumes of conversation
          minutes, lower domestic rates and the pricing impact of increased subscriptions
          to the $5 Long Distance Bundle in our Consumer market
        lower volume and lower prices
          resulting from competitive pressures in our Business market.Overall, the volume of conversation
        minutes declined 5.6% in 2004. This was accompanied by a 5.6%, or
        $0.007 , decrease in average revenue per minute (ARPM) to $0.117 .We are anticipating
        continued pressure on long distance revenues in2005,
        as well as increased take rates to our $5 Long Distance Bundle and competition
        from cable companies that are offering VoIP residential telephone service
        in 2005.
      Wireless
       In 2004,
        our wireless business continued to demonstrate strong growth. 
             Wireless service revenues grew 14.5% or
        $357 million to $2,818 million in 2004, compared to 2003.
        This reflected subscriber growth of 11.6% and an increase in ARPU of $1
        per month.Our total cellular
        andPCS subscriber
        base reached 4,925,000 at the end of 2004, reflecting solid net additions
        and our success in managing churn to very low levels. Including paging
        subscribers, our total wireless customer base totalled 5,352,000.We gained513,000
        new customers in 2004, matching the gains achieved in 2003.
        In 2004, 75% of gross activations came from postpaid rate plans,
        compared to 80% in  2003. The decrease was primarily due to the success
        of our prepaid offers, particularly in the last quarter. At December 31, 2004,
        76% of our total cellular and PCS customer base were postpaid subscribers,
        unchanged from last year.BlendedARPU
        of $49 in 2004 was up from $48 in 2003. This was driven by an
        increase in revenues from:value-added services, such
          as Message Center and Call Display
        long distance and data services
        higher usage.During the year, we accomplished
        a key operational initiative: to migrate our postpaid wireless customers
        to a new billing platform. The new platform will enable the consolidation
        of wireless into a single bill, which will provide simplified information
        to our customers, lower costs to Bell Canada, and enhance our ability
        to bundle our products and services.In2004,
        revenue growth was impacted by our call centres focus on handling
        the high volume of billing inquiries after the migration to the new billing
        platform, diminishing our ability to sell more services to our customers
        and to implement planned price increases. Despite adding more than 600
        call centre
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57    Bell  Canada
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|Other Income
      Other income includes income that
        we receive from activities that are not part of our business operations,
        such as:net gains on investments,
        including gains or losses when we dispose of, write down or reduce our
        ownership in investmentsforeign
        currency gains (losses)interest
        income on cash and cash equivalentsequity
        in net earnings (losses) from significantly influenced companiesother
        miscellaneous income or expense. |  | Managements
        Discussion and Analysis
      
      representatives, the high volume
        of calls meant customers experienced slower response times during the
        second half of the year.Our blended
        churn of1.3% per
        month and postpaid churn of 1.1% per month reflect improvements of 0.1
        and 0.2 percentage points over 2003. This was achieved despite the
        migration to the new billing platform and increased competitive pressures.We continue
        to see ongoing growth prospects in the wireless market for2005,
        given that Canadian wireless penetration still lags behind levels achieved
        in other countries, such as the United States. We expect our wireless
        revenues will increase due to expected continued subscriber and ARPU growth.
        We anticipate that our recently announced price increases for some of
        our value-added services and increased usage of wireless data services
        such as text and picture messaging, as well as web browsing, will stimulate
        ARPU growth.
      Data
       Data
        revenues decreased 2.1% or $77 million to $3,640 million in 2004,
        compared to 2003, in spite of the growth in high-speed Internet services
        and revenues related to business acquisitions. This was because of:declines from competitive pricing
          and volume pressures, including wholesale customers migrating traffic
          onto their own networks
        lower revenues related to the
          completion of the mechanical construction of the Government of Alberta
          SuperNet
        our exit from the low-margin
          cabling business
        the completion of the Hydro-Québec
          outsourcing contract.The number of high-speed Internet
        subscribers increased by 350,000 in 2004, resulting in 1,808,000
        subscribers at December 31, 2004. The subscriber growth achieved
        this year was similar to that of last year, even as competition increased.
        At the end of 2004, we had a total of 743,000 dial-up customers compared
        to 869,000 last year.In2005,
        we expect revenue erosion in our legacy data services as customers migrate
        to IP, offset by continued growth in high-speed Internet services, value-added
        solutions and acquisitions.
      Video
       SeeSegmented Analysis
         Consumerfor a discussion
        of revenues from our video services.
      Terminal Sales and Other Terminal sales and other revenues
        increased 3.1% or $48 million to $1,580 million in 2004,
        compared to 2003. This increase reflected:higher sales of wireless handsets,
          satellite dishes and receivers
        higher revenues related to business
          acquisitions.Other Items
      Other Income
      Other income increased 135% or
        $236 million to $411 million in 2004, compared to 2003.
        The increase was a result of higher net gains on investments and other
        miscellaneous income. These were partly offset by lower foreign currency
        gains and lower interest income.Net gains on
        investments of$319
         million in 2004 included:a gain of $108 million
          from the sale of our remaining 3.24% interest in YPG in the third quarter,
          for net cash proceeds of $123 million
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58    Bell  Canada
  Enterprises 2004 Annual Report

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|Non-Controlling
        Interest
      The non-controlling interest in
        the statements of operations reflects the percentage of a subsidiary that
        we do not own multiplied by the amount of the subsidiarys after-tax
        earnings. |  | a gain of $217 million
          from the sale of our 15.96% interest in MTS in the third quarter, for
          net cash proceeds of $584 million
        partly offset by net losses
          on other investments of $6 million.Capital loss carryforwards fully
        sheltered the taxes on these gains.Net gains on
        investments of$76
         million in 2003 included:a $120 million gain from
          the sale of a 3.66% interest in YPG in the fourth quarter, for net cash
          proceeds of $135 million
        a $44 million loss from
          the write-down of a number of our cost-accounted investments.In April 2003, we entered
        into forward contracts to hedge US$200 million of long-term debt
        at Bell Canada that previously had not been hedged. This removed
        the foreign currency risk on the principal amount of that debt.Lower interest
        income in2004 was
        a result of lower average cash balances.
      Interest ExpenseInterest expense declined 9% or
        $100 million to $1,005 million in 2004, compared to 2003.
        This was a result of a lower average debt level of approximately $1,370 million
        in 2004, mainly from the positive free cash flows achieved in the
        last two years. The average interest rate on our debt in 2004 and 2003
        was 7.1% .
      Income Taxes
      Income taxes declined 37% or $409
         million to $710 million in 2004, compared to 2003.
        The decline was mainly due to:lower pre-tax earnings
        no tax on the $325 million
          of gains on the sale of MTS and YPG due to the availability of capital
          loss carryforwards partly offset by $45 million of restructuring
          charges that were not tax-effected
        the reduction in the statutory
          income tax rate to 34.3% in 2004 from 35.4% in 2003.As a result of these items, the
        effective tax rate was 29.8% in 2004, compared to 35.1% in 2003.
      Non-Controlling Interest Non-controlling interest
        decreased 13.4% or $27 million to $174 million in 2004,
        compared to 2003. The decrease was a result of:a higher net loss at Bell West,
          mainly due to the loss on the Government of Alberta contract
        lower net earnings at Aliant
          because of the labour disruption and the restructuring charge.The decrease was partly offset
        by higher net earnings at Bell Globemedia.
      Discontinued Operations
      The net gain from discontinued
        operations of $26 million in 2004 consisted of:a gain of $58 million on
          the sale of our 63.9% interest in Emergis in the second quarter
        our share of Emergis operating
          losses of $44 million.The net loss from discontinued
        operations of $56 million in 2003 consisted of a loss of $160 million
        relating to Emergis sale of its US Health operations in the fourth
        quarter.The
        loss was partly offset by:
      net gains of $56 million
          on our share of Aliants sales of its emerging business and remote
          communication segments
        net gains of $39 million
          from the use of available capital loss carryforwards that were applied
          against taxes payable on Bell Canadas sale of its 3.66% interest
          in YPG and Aliants sale of its investment in Stratos
        our share of operating gains
          from the discontinued businesses of $9 million.Extraordinary Gain
      We purchased the Canadian operations
        of 360networks in the fourth quarter of 2004 for $293 million
        in cash. The fair value of the net assets acquired exceeded the purchase
        price by approximately $227 million. For accounting purposes, the
        excess was eliminated by:reducing the amounts assigned
          to the acquired non-monetary assets (e.g., capital and intangible assets)
          to zero
        recognizing the balance of $69
          million as an extraordinary gain.
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59Bell 
  Canada Enterprises2004Annual
  Report

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|Financial and CapitalManagement This section tells you
        how we manage our cash and capital resources to carry out our strategy
        and deliver financial results. It provides an analysis of our financial
        condition, cash flows and liquidity on a consolidated basis.
      Capital Structure Our capital structure
        shows how much of our net assets are financed by debt and equity. |                                         | Managements
        Discussion and Analysis
      Financial and Capital Management
      Capital Structure
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------- | -----------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                   | AT
        DECEMBER 31                  | 2004                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Debt
        due within one year        | 1,276                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Long-term
        debt                  | 11,809                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Less:
        cash and cash equivalents | (380                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Total net debt                          | 12,705                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Non-controlling interest                | 2,914                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Total shareholders equity              | 14,032                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   | Total capitalization                    | 29,651                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         | Net debt to capitalization                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         | Outstanding share data(in millions)                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         | Common
        shares                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         | Stock
        options                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                   |                                         |                                                                                                            

| |  | Net Debt to Capitalization Ratio
       Our net debt to capitalization
        ratio was 42.8% at the end of 2004, an improvement from 44.0% at
        the end of 2003. This was a result of improvements in net debt and
        total shareholders equity, which was partly offset by lower non-controlling
        interest.Net debt improved
        by$610 million
        to $12,705 million in 2004. This was mainly from:$898 million of free cash
          flow in 2004
        approximately $1 billion of
          net cash proceeds from the disposition of our 15.96% interest in MTS
          ($584 million), our 63.9% interest in Emergis ($315 million)
          and our remaining 3.24% interest in YPG ($123 million).These were partly offset by the
        $1.3 billion invested in business acquisitions in 2004.Non-controlling
        interest declined$489
         million in 2004 due to Bell Canadas purchase of
        MTS 40% interest in Bell West and the sale of our investment
        in Emergis.Total shareholders
        equity increased$459
         million to $14,032 million in 2004. This was mainly due
        to the $413 million of net earnings remaining after the dividends we declared
        on common and preferred shares in 2004.
      Outstanding Share Data
      We had 925.9 million common
        shares outstanding at the end of 2004, an increase of 1.9 million
        over 2003. The increase was entirely from the exercise of stock options
        in 2004.The number
        of stock options outstanding at the end of2004
        was 28.5 million, an increase of 2.7 million over 2003.
        The weighted average exercise price of the stock options outstanding at
        December 31, 2004 was $32. Of the total outstanding stock options
        at December 31, 2004, 14.6  million were exercisable at
        a weighted average exercise price of $34. In 2004:
      5.9 million stock options
          were granted
        2 million of previously
          granted options were exercised
        1.2 million of previously
          granted options expired or were forfeited.Starting in 2004, most of
        the stock options granted contain specific performance targets that must
        be met before the option can be exercised.
      Cash Flows
      We generated free cash flow for
        the year totalling $898 million or $1,092 million before restructuring
        and other items. Compared to 2003, free cash flow was down $691 million,
        mainly reflecting the $449 million decline in cash from operating
        activities and higher capital expenditures of $197 million.We are targeting
        positive free cash flow generation in2005,
        mainly from recurring sources. Beyond 2005, we anticipate generating
        higher sustainable free cash flow as we anticipate realizing the full
        benefit from our expected cost savings and reducing capital spending levels.
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60    Bell Canada Enterprises
  2004 Annual Report

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| |  | The
        table below is a summary of the flow of cash into and out of BCE in 2004
        and 2003.
| |  | ------------------------------------------------------------------------------------------------------
| |  |                                                                                                       
| |  |                                                                                                       
| |  | Cash
        from operating activities                                                                
| |  | Capital
        expenditures                                                                          
| |  | Other
        investing activities                                                                    
| |  | Cash
        dividends paid on common shares                                                          
| |  | Cash
        dividends paid on preferred shares                                                       
| |  | Cash
        dividends paid by subsidiaries to non-controlling interest                               
| |  |                                                                                                       
| |  | Free cash flow                                                                                        
| |  |                                                                                                       
| |  | Business
        acquisitions                                                                         
| |  | Business
        dispositions                                                                         
| |  | Change
        in investments accounted for under the cost and equity methods                         
| |  | Net
        issuance of equity instruments                                                            
| |  | Net
        repayment of debt instruments                                                             
| |  | Financing
        activities of subsidiaries with third parties                                       
| |  | Cash
        provided by discontinued operations                                                      
| |  | Other
        financing activities                                                                    
| |  |                                                                                                       
| |  | Net increase (decrease) in cash and cash equivalents                                                  
| |  |                                                                                                       
| |  |                                                                                                       

| |  | Cash from Operating Activities
      Cash from operating activities
        decreased 7.5% or $449 million to $5,519 million in 2004,
        compared to  2003. This was mainly a result of less favourable changes
        in working capital that were mostly due to:one-time cash tax refunds of
          $440 million that were received in 2003
        an increase of $129 million
          in restructuring payments in 2004 relating to the employee departure
          program at Bell Canada.These were partly offset by:
      improved operating performance
          in 2004 as a result of higher EBITDA and lower interest costs
        a $75 million settlement
          payment received from MTS in the third quarter of 2004.Capital Expenditures
      We continue to make investments
        to expand and update our networks and to meet customer demand for new
        services. Capital expenditures were $3,364 million in 2004,
        or 17.5% of revenues. This was 6.2% or $197 million higher than capital
        expenditures of $3,167 million, or 16.9% of revenues, in 2003.
        The increase reflects a mix of:
      higher spending in the growth
          areas of the business, such as the migration to one national IP-MPLS
          network, our VDSL deployment and DSL footprint expansion strategies,
          and productivity enhancement initiatives
        higher spending for construction
          of Telesats new satellites
        lower spending in the legacy
          areas.Bell Canadas capital
        expenditures accounted for 90% of our consolidated capital expenditures
        in 2004. Bell  Canadas consolidated capital intensity
        ratio increased to 18.0% in 2004, compared to 17.4% in 2003.In2005,
        we are targeting a slightly higher capital intensity ratio at Bell Canada
        to support our continued investments in our key strategic priorities of
        enhancing the customer experience, reliable bandwidth and next-generation
        services. SeeOur
        Strategic Priorities.
      Other Investing Activities
      Cash from other investing activities
        totalled $124 million in 2004. This included $179 million
        of insurance proceeds that Telesat received for a progressive power failure
        on the Anik F1 satellite.Cash from other
        investing activities of$62
         million in 2003 included:$83 million of proceeds
          from the settlement of dividend rate swaps. These swaps hedged dividend
          payments on some of BCE Inc.s preferred shares.
        $68 million of insurance
          proceeds that Telesat and Bell ExpressVu received for a malfunction
          on the Nimiq  2 satellite.Other items relate to changes
        in long-term notes receivable and payments by Bell Globemedia relating
        to CRTC benefits owing on previous business combinations.
      Cash Dividends Paid on Common
        Shares
      We paid a dividend of $1.20 per
        common share in 2004, which is the same as the dividend we paid in
        2003.We realized
        a cash benefit of$73
        million in 2003 because we issued shares from treasury to fund BCE Inc.s
        dividend reinvestment plan instead of buying shares on the open market.
        Effective the first quarter of 2004, we started buying all of the
        shares needed for the dividend reinvestment plan on the open market to
        avoid dilution. This removed the possibility of any further cash benefits
        through issuing shares from treasury.
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61Bell
  Canada Enterprises2004Annual
  Report

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|Debt Instruments We use a combination of
        short-term and long-term debt to finance our operations. Our short-term
        debt consists mostly of bank facilities and notes payable under commercial
        paper programs. We usually pay fixed rates of interest on our long-term
        debt and floating rates on our short-term debt. |  | Managements
        Discussion and Analysis
      
      Total
        dividends paid on common shares increased7.7%
        or $79 million to $1,108 million in 2004, compared to 2003.
      Business Acquisitions
      We invested $1,299 million
        in business acquisitions in 2004. This consisted of:
      Bell Canadas acquisition
          of MTS 40% interest in Bell West in the third quarter for
          $646  million
        Bell Canadas acquisition
          of the Canadian operations of 360networks in the fourth quarter for
          $293 million
        our 28.9% proportionate share
          of the cash paid for CGIs acquisition of AMS in the second quarter
          for $171 million
        other business acquisitions
          at Bell Canada, Aliant and CGI, totalling $189 million.We invested $115 million
        in business acquisitions in 2003. This consisted mainly of:our proportionate share of the
          cash paid for CGIs acquisition of Cognicase Inc. in the first
          quarter
        Bell Canadas purchase
          of an additional 30% interest in Connexim, Limited Partnership in the
          fourth quarter, which increased its total interest to 100%.Business Dispositions
      We did not have any significant
        business dispositions in 2004.We received$55 million for
        business dispositions in 2003. This related to Bell Canadas
        sale of its 89.9% ownership interest in Certen Inc. in the third
        quarter. Bell Canada received $89 million in cash, which was
        reduced by $34 million Certen had in cash and cash equivalents at
        the time of sale.
      Change in Investments Accounted
        for under the Cost and Equity Methods
      In the third quarter of 2004,
        we sold our remaining 3.24% interest in YPG for net cash proceeds of $123
         million and our 15.96% interest in MTS for net cash proceeds of
        $584 million.In the fourth
        quarter of2003, we
        sold a 3.66% interest in YPG for net cash proceeds of $135 million
        and Bell Globemedia sold its 14.5% interest in Artisan Entertainment Inc.
        for net cash proceeds of $24 million.
      Equity Instruments
      We did not have any significant
        issues or redemptions of equity instruments in 2004.In the first
        quarter of2003, BCE 
         Inc. issued 20 million Series AC preferred shares for
        $510 million and redeemed 14 million Series U preferred shares
        for $357 million, which included a $7 million premium on redemption.
      Debt Instruments
      We made $740 million in debt
        repayments (net of issues) in 2004:
      Bell Canada repaid $952 million
          in debentures
        Aliant repaid $100 million
          in medium-term notes
        BCE Inc. redeemed all of
          its outstanding Series P retractable preferred shares for $351 million.Most of the issues were at Bell Canada,
        which issued $450 million in debentures, and Bell Globemedia,
        which issued $300 million of senior notes.We made$1.8
        billion in debt repayments (net of issues) in 2003:
      Bell Canada repaid $1.4
          billion in debentures
        Bell Canada Holdings Inc.
          repaid $314 million of equity-settled notes
        Bell Globemedia repaid
          $240  million of its credit facilities.We also repaid $295 million
        of notes payable and bank advances. The issues were mainly at Bell Canada,
        which issued $600 million in debentures, and Bell Globemedia,
        which issued $300 million of senior notes.
             The combined debt of BCE Inc., Bell Canada
        and Aliant makes up 93% of our total debt portfolio. The average annual
        interest rate on our total debt was approximately 7.1% in 2004 and
        2003.
             On February  11, 2005, Bell Canada
        issued $700 million in Series M-18 Medium Term Note Debentures
        having a maturity date of February 15, 2017 and a fixed interest
        rate of 5.00% . Following the issuance, Bell Canada swapped the fixed
        interest rate to a floating rate. The net proceeds from the issuance of
        the debentures will be used to repay maturing short-term debt and for
        general corporate purposes.
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62Bell
  Canada Enterprises2004Annual
  Report

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|Credit
        Ratings The interest rates we
        pay are partly based on the quality of our credit ratings, which were
        all investment grade at March 2, 2005. Investment grade ratings
        usually mean that when we borrow money, we qualify for lower interest
        rates than companies that have ratings lower than investment grade. |  | Cash
        Relating to Discontinued Operations
      Cash from discontinued operations
        was $193 million in 2004. This consisted mainly of net cash
        proceeds of $315 million from the sale of our investment in Emergis,
        which were partly offset by the deconsolidation of Emergis cash
        on hand of $137 million at December 31, 2003.Cash from discontinued
        operations was$355
         million in 2003. This consisted mainly of net cash proceeds
        of $320 million on Aliants sale of its 53.2% interest in Stratos.
      Credit Ratings
      The table below lists our key
        credit ratings at March 2, 2005.
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|                                                                                                                                                                                                                                                                                                                                                             |  | Commercial
      paper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|                                                                                                                                                                                                                                                                                                                                                             |  | Extendable
      commercial notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|                                                                                                                                                                                                                                                                                                                                                             |  | Long-term
      debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|                                                                                                                                                                                                                                                                                                                                                             |  | Preferred
      shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                             |  | (1)
      Standard & Poors, a division
      of The McGraw-Hill Companies, Inc. (S&P) (2) Dominion
      Bond Rating Services Limited (DBRS)
      (3) Moodys Investors Service,  Inc. (Moodys)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |  | LiquidityOur plan is to generate enough
        cash from our operating activities to pay for capital expenditures and
        dividends. In other words, we are targeting to have positive free cash
        flow in the short term and in the long term.We expect to
        repay contractual obligations maturing in2005
        and in the long term from cash on hand, from cash generated from our operations
        or by issuing new debt. Contractual obligations include long-term debt.
      Cash Requirements
      In 2005, we will need cash
        mainly for capital expenditures, dividend payments, the payment of contractual
        obligations and other cash requirements.
      Capital Expenditures
      We spent $3.4 billion on capital
        expenditures in 2004, representing 17.5% of our revenues for the
        year. Our target is for Bell Canadas capital expenditures to
        be in the range of 18% to 19% of its total revenues in 2005.
      Dividends
      In December 2004, the board
        of directors of BCE Inc. approved an increase of 10% or $0.12 per
        common share in the annual dividend on BCE Inc.s common shares.
        As a result, starting with the quarterly dividend to be paid on April 15, 2005,
        subject to being declared by the board of directors, we expect to pay
        quarterly dividends on BCE Inc.s common shares of approximately
        $305 million, based on the revised dividend policy. This assumes that
        there are no significant changes to the number of outstanding common shares.
        These quarterly dividends equal $0.33 per common share, based on approximately
        925 million common shares outstanding at December 31, 2004.
      Contractual Obligations
      The table on the next page is
        a summary of our contractual obligations at December 31, 2004
        that are due in each of the next five years and after 2009.
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63Bell
  Canada Enterprises2004Annual
  Report

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| |  | Managements
      Discussion and Analysis                     
| |  | ---------------------------------------------------------------
| |  |                                                                
| |  |                                                                
| |  |                                                                
| |  | Long-term
        debt (excluding capital leases)              
| |  | Notes
        payable and bank advances                        
| |  | Capital
        leases                                         
| |  | Operating
        leases                                       
| |  | Commitments
        for capital expenditures                   
| |  | Other
        purchase obligations                             
| |  | Other
        long-term liabilities (including current portion)
| |  |                                                                
| |  | Total                                                          
| |  |                                                                

| |  | Long-term debt and notes payable and bank advances include $123 million
        drawn under our committed credit facilities. They do not include $414 million
        of letters of credit. The total amount available under these committed
        credit facilities and under our commercial paper programs, including the
        amount currently drawn, is $2,461 million.The imputed
        interest to be paid on capital leases is$106
         million. 
             Rental expense relating to operating leases
        was $406 million in 2004, $368 million in 2003 and
        $356 million in 2002.Our commitments
        for capital expenditures include investments to expand and update our
        networks and to meet customer demand. Other purchase obligations consist
        mainly of contractual obligations under service contracts.
             Other long-term
        liabilities included in the table relate to:
      Bell Canadas future
          payments over the remaining life of its contract with Certen for the
          development of Bell Canadas billing system. The total amount
          was $301 million at December 31, 2004.
        Bell Globemedias
          obligations relating to CRTC benefits owing on previous business combinations.
          These and other long-term liabilities were $130 million at December 31,
          2004.At December 31, 2004,
        we had other long-term liabilities that are not included in the table.
        They consisted of an accrued employee benefit liability, future income
        tax liabilities, deferred revenue and gains on assets and various other
        long-term liabilities.We did not
        include the accrued employee benefit liability and future income tax liabilities
        because we cannot accurately determine the timing and amount of cash needed
        for them. This is because:
      future contributions to the
          pension plans depend largely on the results of actuarial valuations
          that are performed periodically and on the investment performance of
          the pension fund assets
        future payments of income taxes
          depend on the amount of taxable earnings and on whether there are tax
          loss carryforwards available to reduce income tax liabilities.We did not include deferred revenue
        and gains on assets because they do not represent future cash payments.
      Other Cash Requirements
      Our cash requirements may also
        be affected by the liquidity risks related to our contingencies, off-balance
        sheet arrangements and derivative instruments. We may not be able to quantify
        all of these risks.
      Off-Balance Sheet Arrangements
      Guarantees
        As a regular part of our business, we enter into agreements that provide
        for indemnification and guarantees to counterparties in transactions involving
        business dispositions, sales of assets, sales of services, purchases and
        development of assets, securitization agreements and operating leases.
             We cannot reasonably
        estimate the maximum amount we might be required to pay counterparties
        because of the nature of almost all of these indemnifications. As a result,
        we cannot determine how they could affect our future liquidity, capital
        resources or credit risk profile. We have not made any significant payments
        under these indemnifications in the past. See Note25
        to the consolidated financial statements for more information.
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64Bell
  Canada Enterprises2004Annual
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| |  | Securitization
        of accounts receivable
        Bell  Canada and Aliant have agreements in place to provide us with
        a less expensive form of financing than debt financing.Under the agreements,
        Bell Canada and Aliant sold interests in pools of accounts receivable
        to securitization trusts for a total of$1,125
         million.The total accounts
        receivable that were sold must meet minimum performance targets. These
        are based on specific delinquency, default and receivable turnover ratio
        calculations, as well as minimum credit ratings. If these accounts receivable
        go into default, the full purchase price will have to be returned to the
        buyers.
             These agreements
        are an important part of our capital structure and liquidity. If we did
        not have them, we would have had to finance approximately$1,125
         million by issuing debt or equity. See Note 11 to the consolidated
        financial statements for more information.
      Derivative Instruments
      We use derivative instruments
        to manage our exposure to interest rate risk, foreign currency risk and
        changes in the price of BCE Inc. common shares. We do not use derivative
        instruments for speculative purposes. Since we do not trade actively in
        derivative instruments, we are not exposed to any significant liquidity
        risks relating to them.The carrying
        value of the outstanding derivative instruments was a net liability of$121 million
        at December  31, 2004. Their fair values amounted to a net liability
        of $167 million. See Note 20 to the consolidated financial statements
        for more information.
      Litigation
      We become involved in various
        claims and litigation as a part of our business. While we cannot predict
        the final outcome of claims and litigation that were pending at December 
        31, 2004, based on information currently available, management believes
        that these claims and litigation will not have a material and negative
        effect on our consolidated financial position or results of operation.You will find
        a more detailed description of the material claims and litigation pending
        at December31,
        2004 in the BCE 2004 AIF, and in Note 24 to the consolidated financial
        statements.
      Commitment under the Deferral
        Account
      The deferral account is a mechanism
        resulting from the CRTCs second price cap decision of May 2002,
        which requires us to fund initiatives such as service improvements, reduced
        customer rates and/or customer rebates. We estimate our commitment under
        the deferral account to be approximately $202 million at December 31,
         2004. We expect to clear most of this amount in 2005 by implementing
        various initiatives.
      Provision for Contract Loss
      In 2001, we entered into
        a contract with the Government of Alberta to build a next-generation network
        to bring high-speed Internet and broadband capabilities to rural communities
        in Alberta. Mechanical construction of the network was completed in December 
         2004. We identified cost overruns on the construction contract and
        recorded an additional provision of $128 million in 2004. Acceptance
        of the network by the Government of Alberta was initially due by January 24, 2005.
        Based on discussions with the Government of Alberta, Bell Canada
        has agreed to have the network completed and accepted by the Government
        of Alberta by the end of September 2005. There is a risk that we
        could incur higher than currently anticipated costs in completing the
        acceptance of the network by the Government of Alberta.
      Sources of Liquidity
      While we do not expect a cash
        shortfall in the foreseeable future, we expect to cover any shortfall
        through the financing facilities we currently have in place.These financing
        facilities, along with our strengthening balance sheet, give us flexibility
        in carrying out our plans for future growth. If necessary, we can supplement
        our liquidity sources by issuing additional debt or equity, or by selling
        non-core assets. We might do this to help finance business acquisitions
        or for contingencies.
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65    Bell Canada Enterprises 2004
  Annual Report

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|Risks that Could Affect 
        Our Business This section describes
        general risks that could affect all BCE group companies and specific
        risks that could affect BCE Inc. and certain other BCE group
        companies.
      A risk is the possibility that an
        event might happen in the future that could have a negative effect on
        the financial condition, results of operations or business of one or more
        BCE group companies. Part of managing our business is to understand
        what these potential risks could be and to minimize them where we can.
             Because
        no one can predict whether an event will happen or what its consequences
        may be, the actual effect of any event 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
        of which we are currently not aware. |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Managements
        Discussion and Analysis
      
      The
        table below is a summary of our outstanding lines of credit, bank facilities
        and commercial paper programs at December31,
         2004.
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | COMMITTED                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Commercial
        paper credit lines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 1,290                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Other credit
      facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 1,171                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2,461                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Drawn                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 537                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Undrawn                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 1,924                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | BCE Inc.,
      Bell Canada and Aliant may issue notes under their commercial paper
      programs up to the amount of their supporting committed lines of credit.
      The total amount of these supporting committed lines of credit available
      (net of letters of credit) was $1.3 billion at December 31, 2004.BCE Inc.,
      Bell Canada and Aliant had $135 million in commercial paper outstanding
      at December 31, 2004.BCE Inc.
      and Bell Canada can issue Class E notes under their commercial paper
      programs. These notes are not supported by committed lines of credit and
      may be extended in certain circumstances. BCE Inc. may issue up to
      $360 million of Class E notes and Bell Canada may issue up to $400 million.
      BCE Inc. and Bell Canada had no Class E notes outstanding at December 31,
      2004.The drawn portion
      of our total credit facilities includes$414
       million in letters of credit under our committed facilities.
      Risks that Could
        Affect Our Business
      Bell Canada is our most important
        subsidiary, which means our financial performance depends in large part
        on how well Bell Canada performs financially. The risks that could
        affect Bell Canada and its subsidiaries are more likely to have a
        significant impact on our financial condition, results of operations and
        business than the risks that could affect other BCE group companies.
      Risks that Could Affect All BCE 
        Group Companies
      Strategies and Plans
      We plan to achieve our business
        objectives through various strategies and plans.In2004,
        we embarked on our strategy to deliver unrivalled integrated communications
        to customers across Canada, with an overall objective to take a leadership
        position in setting the standard in IP for the industry and for our customers.
        Leveraging the opportunities created by IP-based communications should
        allow us to deliver on the guiding principles of our strategy of customer
        simplification, innovation and efficiency. This strategy is founded on
        three priorities:deliver an enhanced customer
          experience with the objective of enabling a significantly lower cost
          structure at Bell Canada
        deliver abundant bandwidth to
          enable all the services of the future with the reliability and security
          that customers require
        create the next-generation services
          to drive future growth.Our strategic direction involves
        significant changes in our processes, in how we approach our markets,
        and in how we develop and deliver products and services. This means we
        will need to be responsive in adapting to these changes. It also means
        that a shift in employee skills will be necessary.We will need
        to spend capital to implement our strategies and to carry out our plans.
        However, the actual amounts of capital required and the returns from these
        investments could differ materially from our current expectations.
             If we are unable
        to achieve our business objectives, our financial performance, including
        our growth prospects, could be hurt. This could have a material and negative
        effect on our results of operations.
      Economic and Market Conditions
      Our business is affected by general
        economic conditions, consumer confidence and spending, and the demand
        for, and prices of, our products and services. When there is a decline
        in economic growth and in retail and commercial activity, there tends
        to be a lower demand for our products and services. During these periods,
        customers may delay buying our products and services, or reduce or discontinue
        using them.

66Bell
  Canada Enterprises2004Annual
  Report

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|Competition Competition affects our
        pricing strategies and reduces our revenues and profitability. It could
        also affect our ability to retain existing customers and attract new ones.
        Competition puts us under constant pressure to keep our prices competitive.
        It forces us to continue to reduce costs, manage expenses and increase
        productivity. This means that we need to be able to anticipate and respond
        quickly to the constant changes in our businesses and markets. |  | Weak
        economic conditions may negatively affect our profitability and cash flows
        from operations. They could also negatively affect the financial condition
        and credit risk of our customers, which could increase uncertainty about
        our ability to collect receivables and potentially increase our bad debt
        expenses.
      Increasing Competition
      We face intense competition from
        traditional competitors, as well as from new entrants to the markets in
        which we operate. We compete not only with other telecommunications, media,
        television, satellite and information technology service providers, but
        also with other businesses and industries. These include cable, software
        and Internet companies, a variety of companies that offer network services,
        such as providers of business information systems, systems integrators
        and other companies that deal with, or have access to, customers through
        various communications networks.Many of our
        competitors have substantial financial, marketing, personnel and technological
        resources. Other competitors may emerge from restructurings in the future
        with reduced debt and a stronger financial position. This means that they
        could have more financial flexibility to price their products and services
        at competitive rates.
             We already
        have several domestic and foreign competitors, but the number of well
        resourced foreign competitors with a presence in Canada could increase
        in the future. Over the past two years, the Government of Canada has reviewed
        the foreign ownership restrictions that apply to telecommunications carriers
        and to broadcasting distribution undertakings (BDUs).
        Removing or easing the limits on foreign ownership could result in foreign
        companies entering the Canadian market by making acquisitions or investments.
        This could result in greater access to capital for our competitors or
        the arrival of new competitors with global scale, which would increase
        competitive pressure. It is impossible to predict the outcome of the governments
        review or to assess how any change in foreign ownership restrictions may
        affect us because the government has not completed its review of these
        matters.
      Wireline and Long Distance
      We experience significant competition
        in the provision of long distance service from dial-around providers,
        prepaid card providers, VoIP service providers and others, and from traditional
        competitors such as inter-exchange carriers and resellers. We also face
        increasing cross-platform competition as customers replace traditional
        services with new technologies. For example, our wireline business competes
        with VoIP, wireless and Internet services, including chat services, instant
        messaging and e-mail. We also expect to face competitive pressure from
        cable companies as they implement voice services over their networks and
        from other emerging competitors such as electrical utilities. These alternative
        technologies, products and services are now making significant inroads
        in our legacy services, which typically represent our higher margin business.Technology
        substitution, andVoIP
        in particular, has reduced barriers to entry in the industry. This has
        allowed competitors with far lower investments in financial, marketing,
        personnel and technological resources to rapidly launch new products and
        services and gain market share. This trend is expected to accelerate in
        the future, which could materially and negatively affect our financial
        performance.Contracts for
        long distance services to large business customers are very competitive.
        Customers may choose to switch to competitors that offer lower prices
        to gain market share and that are less concerned about the quality of
        service or impact on their earnings.
             These competitive
        factors suggest that our wireline accesses and long distance volumes will
        continue to decline in the future. Continued decline will lead to reduced
        economies of scale in those businesses and, in turn, lower margins. Our
        strategy is to mitigate these declines by building the business for newer
        growth services, but the margins on newer services will likely be less
        than the margins on legacy services. If the legacy services decline faster
        than the rate of growth of our newer services, our financial performance
        will be negatively and materially affected.
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67Bell
  Canada Enterprises2004Annual
  Report

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|Anticipating
        Technological Change We operate in markets
        that are experiencing constant technological change, evolving industry
        standards, changing client needs, frequent introductions of new products
        and services, 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 client needs, and how quickly and
        efficiently we can introduce new products, services and technologies and
        upgrade existing ones. |  | Managements
        Discussion and Analysis
      
      Internet Access
      Cable companies and independent
        Internet service providers (ISPs) have increased competition in the broadband
        and Internet access services business. In particular, competition from
        cable companies has focused on increased bandwidth and discounted pricing
        on bundles. Competition has led to pricing for Internet access in Canada
        that is among the lowest in the world.In addition,
        service providers that are funded by regional electrical utilities may
        continue to develop and market services that compete directly with Bell 
        Canadas Internet access and broadband services. Developments in
        wireless broadband services may also result in increased competition in
        certain geographic areas. This could materially and negatively affect
        the financial performance of our Internet access services business.
      Wireless
      The Canadian wireless telecommunications
        industry is also highly competitive. We compete directly with other wireless
        service providers that aggressively introduce, price and market their
        products and services, and with wireline service providers. We expect
        competition to intensify as new technologies, products and services are
        developed.
      Video
      Bell ExpressVu competes directly
        with another DTH satellite television provider and with cable companies
        across Canada. These cable companies have upgraded their networks, operational
        systems and services, which could improve their competitiveness. This
        could materially and negatively affect the financial performance of Bell 
        ExpressVu.
      Improving Productivity and
        Containing Capital Intensity
      We continue to implement several
        productivity improvements while containing our capital intensity. There
        will be a material and negative effect on our profitability if we do not
        continue to successfully implement these productivity improvements, reduce
        costs and manage capital intensity while maintaining the quality of our
        service. For example, each year between 2002 and 2004, we were
        required to reduce the price of certain services offered by the Bell Canada
        companies that are subject to regulatory price caps, and may be required
        to do so again in 2005. In addition, we have reduced our prices in
        some business data services that are not regulated in order to remain
        competitive, and we may have to continue doing so in the future. The profits
        of the Bell  Canada companies will decline if they cannot reduce
        their expenses at the same rate. There would also be a material and negative
        effect on our profitability if market factors or other regulatory actions
        result in lower revenues and we cannot reduce our expenses at the same
        rate.Many productivity
        improvements require capital expenditures to implement systems that automate
        or assist in our operations. There is no assurance that these investments
        will be effective in delivering the planned productivity improvements.
      Anticipating Technological
        Change
      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. There is also a significant risk that current regulation could
        be expanded to apply to newer technologies. A regulatory change could
        delay our launch of new services and restrict our ability to market these
        services if, for example, new pricing rules or marketing or bundling restrictions
        were introduced or existing ones extended.The Bell Canada
        companies are in the process of moving their core circuit-based infrastructure
        toIP technology.
        As part of this move, the Bell Canada companies also plan to discontinue
        certain services that are based on circuit-based infrastructure. In some
        cases, this could be delayed or prevented by customers or regulatory actions.
        If the Bell Canada companies cannot discontinue these services as
        planned, they will not be able to achieve improvements as expected.
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68Bell
  Canada Enterprises2004Annual
  Report

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|Liquidity Our ability to generate
        cash and to maintain capacity to meet our financial obligations and provide
        for planned growth depends on our sources of liquidity.
             Our
        cash requirements may be affected by the risks associated with our contingencies,
        off-balance sheet arrangements, derivative instruments and assumptions
        built in our business plan.
      Litigation, Regulatory Matters
        and Changes in Laws
      Please see theBCE 
         2004 AIFfor a detailed
        description of:
      the principal legal proceedings involvingBCE
        certain
            regulatory initiatives and proceedings affecting the Bell Canada
            companies.Please also seeRisks
        that Could Affect CertainBCEGroup Companies 
        Bell Canada Companies  Changes to Wireline Regulationin
        thisMD&Afor
        a description of certain regulatory initiatives and proceedings that could
        affect the Bell Canada companies. |  | There
        is no assurance that we will be successful in developing, implementing
        and marketing new technologies, products, services or enhancements in
        a reasonable time, or that they will have a market. There is also no assurance
        that efficiencies will increase as expected. New products or services
        that use new or evolving technologies could make our existing ones unmarketable
        or cause their prices to fall.
      Liquidity
      In general, we finance our capital
        needs in four ways:from cash generated by our operations
          or investments
        by borrowing from commercial
          banks
        through debt and equity offerings
          in the capital markets
        by selling or otherwise disposing
          of assets.Financing through equity offerings
        would dilute the holdings of existing equity investors. An increased level
        of debt financing could lower our credit ratings, increase our borrowing
        costs and give us less flexibility to take advantage of business opportunities.Our ability
        to raise financing depends on our ability to access the capital markets
        and the syndicated commercial loan market. The cost of funding depends
        largely on market conditions, and the outlook for our business and credit
        ratings at the time capital is raised. If our credit ratings are downgraded,
        our cost of funding could significantly increase. In addition, participants
        in the capital and syndicated commercial loan markets have internal policies
        limiting their ability to invest in, or extend credit to, any single borrower
        or group of borrowers or to a particular industry.
             BCE Inc.
        and some of its subsidiaries have entered into renewable credit facilities
        with various financial institutions. They include facilities serving as
        backup facilities for issuing commercial paper. There is no assurance
        that these facilities will be renewed on favourable terms.We need significant
        amounts of cash to implement our business plan. This includes cash for
        capital expenditures to provide our services, dividend payments and payment
        of our contractual obligations, including repayment of our outstanding
        debt.
             Our plan in2005 is to generate
        enough cash from our operating activities to pay for capital expenditures
        and dividends. We expect to pay contractual obligations maturing in 2005
        from cash on hand, from cash generated from our operations or by issuing
        debt. If actual results are different from our business plan or if the
        assumptions in our business plan change, we may have to raise more funds
        than expected by issuing debt or equity, borrowing from banks or selling
        or otherwise disposing of assets.If we cannot
        raise the capital we need upon acceptable terms, we may have to:limit our ongoing capital expenditures
        limit our investment in new
          businesses
        try to raise additional capital
          by selling or otherwise disposing of assets.Any of these possibilities could
        have a material and negative effect on our cash flow from operations and
        growth prospects.
      Making Acquisitions
      Our growth strategy includes making
        strategic acquisitions and entering into joint ventures. There is no assurance
        that we will find suitable companies to acquire or to partner with, or
        that we will have the financial resources needed to complete any acquisition
        or to enter into any joint venture. There could also be difficulties in
        integrating the operations of acquired companies with our existing operations
        or in operating joint ventures.
      Litigation, Regulatory Matters
        and Changes in Laws
      Pending or future litigation,
        regulatory initiatives or regulatory proceedings could have a material
        and negative effect on our businesses, operating results and financial
        condition. Changes in laws or regulations or in how they are interpreted,
        and the adoption of new laws or regulations (including changes in, or
        the adoption of, new tax laws that result in higher tax rates or new taxes)
        could also materially and negatively affect us.
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69Bell
  Canada Enterprises2004Annual
  Report

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|Funding and Control 
        of Subsidiaries BCE Inc.
        and Bell Canada are currently funding, directly or indirectly, and
        may in the future continue to fund, the operating losses of some of their
        subsidiaries, but they are under no obligation to continue doing so.
      Renegotiating Labour Agreements Approximately41%of our employees are represented
        by unions and are covered by collective agreements. |  | Managements
        Discussion and Analysis
      
      Funding and Control of Subsidiaries
      If BCE Inc. or Bell Canada
        decides to stop funding any of its subsidiaries and that subsidiary does
        not have other sources of funding, this would have a material and negative
        effect on the subsidiarys results of operations and financial condition
        and on the value of its securities.In addition,BCE Inc. and
        Bell Canada do not have to remain the majority holder of, or maintain
        their current level or nature of ownership in, any subsidiary, unless
        they have agreed otherwise. The announcement of a decision by BCE Inc.
        or Bell Canada to change the nature of its investment in a subsidiary,
        to dispose of some or all of its interest in a subsidiary or any other
        similar decision could have a material and negative effect on the subsidiarys
        results of operations and financial condition and on the value of its
        securities.IfBCE Inc.
        or Bell Canada stops funding a subsidiary, changes the nature of
        its investment or disposes of all or part of its interest in a subsidiary,
        stakeholders or creditors of the subsidiary might decide to take legal
        action against BCE Inc. or Bell Canada, respectively. For example,
        certain members of the lending syndicate of Teleglobe, a former subsidiary
        of BCE Inc., and other creditors of Teleglobe have launched lawsuits
        against BCE Inc. following its decision to stop funding Teleglobe.
        SeeLegal proceedings
        we are involved inin theBCE 2004
        AIF for a description of these lawsuits. While we believe that these kinds
        of claims have no legal foundation, they could negatively affect the market
        price of BCE Inc.s or Bell Canadas securities. BCE Inc.
        and Bell Canada could also have to devote considerable management
        time and resources in responding to any such claim.
      Pension Fund Contributions
      Most of our pension plans had
        pension fund surpluses as of our most recent actuarial valuation. As a
        result, we have not had to make regular contributions to the pension funds
        in the past few years.The decline
        in the capital markets in2001
        and 2002, combined with historically low interest rates and early
        retirement programs recently offered to employees, have significantly
        reduced the pension fund surpluses. This has negatively affected our net
        earnings.If
        returns on pension plan assets decline in the future or if interest rates
        decline further, the surpluses will also continue to decline. This could
        have a material and negative effect on our results of operations.
             We expect to
        contribute approximately$200
         million to our defined benefit pension plans in 2005, subject
        to the completion of actuarial valuations. Following the completion of
        such actuarial valuations, we might have to make contributions to our
        defined benefit pension plans in 2005 in excess of the expected amount
        of approximately $200 million, which could have a negative effect on BCE Inc.s
        liquidity.
      Renegotiating Labour Agreements
      The following important collective
        agreements have expired:the collective agreements between
          CTV Television Inc. and its employees in Calgary and Edmonton,
          representing approximately 150 employees, which expired on September
          30, 2004
        the collective agreement between
          CTV Television Inc. and its employees in Ottawa, representing approximately
          65 employees, which expired on December 31, 2004.Negotiations continue regarding
        the renewal of both collective agreements.The following
        important collective agreements expire on or before December31,
         2005:the collective agreement between
          the Canadian Telecommunications Employees Association (CTEA) and
          Bell Canada representing approximately 10,000 clerical and associated
          employees, which expires on May 31, 2005. Negotiations began
          in March 2005.
        certain collective agreements,
          representing approximately 170 CTV Television Inc. employees, which
          expire as follows:
           Sault Ste. Marie on April 8, 2005
           RDS Montréal on April 15, 2005
           Cape Breton, New Brunswick, North Bay and Saskatoon on August 
          31, 2005
        the collective agreement representing
          approximately 395 employees atThe Globe and Mail,which
          expires on July1,
           2005.
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|Holding
        Company Structure BCE Inc.
        is a holding company. That means it does not carry on any significant
        operations and has no major sources of income or assets of its own, other
        than the interests it has in its subsidiaries, joint ventures and significantly
        influenced companies.
      Stock Market Volatility The stock markets have
        experienced significant volatility over the past few years, which has
        affected the market price and trading volumes of the shares of many telecommunications
        companies, in particular. |  | Renegotiating
        collective agreements could result in higher labour costs and work disruptions,
        including work stoppages or work slowdowns. Difficulties in renegotiations
        or other labour unrest could significantly hurt our businesses, operating
        results and financial condition. Bell Canada has established a program
        to implement a number of measures to help minimize disruptions and seek
        to ensure that customers continue to receive normal service during labour
        disruptions. There can be no assurance that a strike, if one occurs, would
        not disrupt service to Bell Canadas customers. In addition,
        work disruptions at our service providers, including work slowdowns and
        work stoppages due to strikes, could significantly hurt our business,
        including our customer relationships and results of operations.
      Events Affecting 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, equipment,
        applications 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. Our operations also
        depend on the timely replacement and maintenance of our networks and equipment.
        Any of these events could cause our operations to be shut down indefinitely.Our networks
        are connected with the networks of other telecommunications carriers,
        and we rely on them to deliver some of our services. Any of the events
        mentioned in the previous paragraph, as well as strikes or other work
        disruptions, bankruptcies, technical difficulties or other events affecting
        the networks of these other carriers, could also hurt our business, including
        our customer relationships and operating results.
      Software and System Upgrades
      Many aspects of the BCE group
        companies businesses including, but not limited to, the provision
        of telecommunication services and customer billing, depend to a large
        extent on various IT systems and software, which must be improved and
        upgraded on a regular basis and replaced from time to time. The implementation
        of system and software upgrades and conversions is a very complex process,
        which may have several adverse consequences including billing errors and
        delays in customer service. Any of these events could significantly hurt
        our customer relationships and businesses and have a material and adverse
        effect on our results of operations.
      Risks that Could Affect BCE Inc.
      Holding Company Structure
      BCE Inc.s cash flow
        and its ability to service its debt and to pay dividends on its shares
        all depend on dividends or other distributions it receives from its subsidiaries,
        joint ventures and significantly influenced companies and, in particular,
        from Bell Canada. BCE Inc.s subsidiaries, joint ventures
        and significantly influenced companies are separate legal entities. They
        are not required to pay dividends or make any other distributions to BCE Inc.
      Stock Market VolatilityDifferences between BCE Inc.s
        actual or anticipated financial results and the published expectations
        of financial analysts may also contribute to volatility in BCE Inc.s
        common shares. A major decline in the capital markets in general, or an
        adjustment in the market price or trading volumes of BCE Inc.s
        common shares or other securities, may materially and negatively affect
        our ability to raise capital, issue debt, retain employees, make strategic
        acquisitions or enter into joint ventures.
      Risks that Could Affect Certain
        BCE Group CompaniesBell Canada Companies
      Contract with the Government of
        Alberta
      In 2001, we entered into
        a contract with the Government of Alberta to build a next-generation network
        to bring high-speed Internet and broadband capabilities to rural communities
        in Alberta. Mechanical construction of the network was completed in December 2004.
        We identified cost overruns on the construction contract and recorded
        an additional provision of $128 million in 2004. Acceptance
        of the network by the Government of Alberta was initially due by January 24, 2005.
        Based on discussions with the
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|Decisions of Regulatory Agencies The business of the Bell Canada
        companies is affected by decisions made by various regulatory agencies,
        including theCRTC.
        For example, many of the decisions of theCRTCtry to balance requests from
        competitors for access to 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. There is a risk that such decisions
        of theCRTC, and in
        particular the decisions dealing with prices at which we must provide
        such access, may adversely affect our business and results of operations.
      Competitor Digital Network Service TheCRTCreleased Decision2005-6on February3,2005,
        regarding Competitor Digital Network (CDN) services. This decision determined the rates, terms and
        conditions for the provision of digital network services by Bell Canada
        and the other incumbent telephone companies to their competitors. |  | Managements
        Discussion and Analysis
      
      Government of Alberta, Bell Canada
        has agreed to have the network completed and accepted by the Government
        of Alberta by the end of September 2005. There is a risk that we
        could incur higher than currently anticipated costs in completing the
        acceptance of the network by the Government of Alberta.
      Changes to Wireline Regulation
      Second Price Cap Decision
      In May 2002, the CRTC issued
        decisions relating to new price cap rules that will govern incumbent telephone
        companies for a four-year period starting in June 2002. These decisions:set a 3.5% productivity factor
          on many capped services, which may require the Bell Canada companies
          to reduce prices for these services
        extended price cap regulation
          to more services
        reduced the prices that incumbent
          telephone companies can charge competitors for services
        set procedures for enforcing
          standards of service quality
        effectively froze rates for
          residential services.The CRTC also established a deferral
        account and, on March 24, 2004, initiated a public proceeding
        inviting proposals on the disposition of the amounts accumulated in the
        accounts of the incumbent telephone companies during the first two years
        of the price cap period.The total balance
        in Bell Canadas and Aliants deferral accounts at December31, 2004
        was estimated to be approximately $202 million.On May19,
         2004, Bell Canada filed its proposal, as part of the public
        proceeding initiated by the CRTC on March 24, 2004, asking for
        approval to use some of the funds in its deferral account to implement
        the following initiatives:expand its broadband services
          to certain areas that are not economically viable to serve under its
          commercial broadband programreduce rates for some of its
          optional local servicesimplement network upgrades required
          to support Bell Canadas High Probability of Call Completion
          feature. This feature would give designated calls on the Bell Canada
          network a higher probability of completion under normal network loads
          and when the Public Switched Telephone Network (PSTN) is busy and experiencing
          call blocking conditions.On January 28, 2005,
        Aliant filed its proposal for the disposition of any amounts in its deferral
        account. Its proposal included:funding of rate reductions in
          response to competitive pressuresrecovery of funds used to deploy
          telecommunications devices for the deaf for payphones pursuant to a
          CRTC directivefunding E9-1-1 enhancements
          in Atlantic Canadarecovery of costs and lost revenue
          resulting from a number of events that were beyond its control.It is expected that this proceeding
        will close in the second half of 2005.If theCRTC
        does not approve these proposals, there is a risk that the funds in Bell Canadas
        and Aliants deferral accounts could be used in a way that could
        have a negative financial effect on them.
      Competitor Digital Network
        Service
      The CRTCs decision concerning
        CDN services includes many changes that will affect both Bell Canada
        and Aliant as providers of CDN services in their respective operating
        territories and as buyers of those services elsewhere in Canada. The CRTC
        has determined that the scope of CDN services should be broadened from
        access elements only to also include intra-exchange facilities, inter-exchange
        facilities in certain metropolitan areas, channelization and co-location
        links (expanded CDN services). However, other than for the access and
        link components, the CRTC determined that these expanded CDN services
        should not be priced as essential facilities but will be priced to include
        appropriate mark-ups so as to encourage competitors to construct
        their own facilities.There are two
        important financial aspects to note in this decision. First, the reduced
        prices for the expandedCDN
        services are to be applied on a going-forward basis only, and Bell Canada
        will be compensated for the resulting revenue losses from the deferral
        account. Secondly, Bell Canada will also be compensated, through
        the deferral account, for both the retroactive and the future application
        of reduced rates for the CDN services currently tariffed. The incumbent
        telephone companies are required to file the estimated drawdown from the
        deferral account with the CRTC within 30 days of this decision.
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| |  | Retail
        Quality of Service Indicators
      As part of the second price cap
        decision, incumbent telephone companies are also subject to an interim
        penalty mechanism for retail quality of service. Under this mechanism,
        these companies could pay a penalty of up to 5% of their annual revenues
        from total local retail, business and residential services that are regulated.
        For Bell Canada, the potential penalty amount could be as much as
        approximately $262 million annually.The interim
        penalty mechanism covers13
        retail quality-of-service indicators. If a company does not meet the CRTCs
        average annual standard for any of these indicators, the penalty could
        range from $5 million to $20 million for each indicator that
        is not met on an annual average basis. The amount of penalty payable would
        be based on how much the actual results for each indicator deviated from
        the CRTC standard.This mechanism
        is currently under review in the proceeding initiated by Public Notice2003-3,Retail
        quality of service rate adjustment plan and related issues,and
        a decision has not yet been made. Based on actual results year-to-date,
        we do not expect Bell Canada to face any penalties for the penalty
        period of July1, 2004
        to June 30, 2005.
      Decision on Incumbent Affiliates
      On December 12, 2002,
        the CRTC released its decision on incumbent affiliates, which requires
        Bell Canada and its carrier affiliates to receive CRTC approval on
        contracts that bundle tariffed and non-tariffed products and services.
        This means that:
      all existing contracts that
          bundle tariffed and non-tariffed products and services must be filed
          with the CRTC for approval
        all new contracts that bundle
          tariffed and non-tariffed products and services must receive CRTC approval
          before they are carried out
        carrier affiliates must meet
          the same approval requirements as Bell Canada on products and services
          they offer in Bell Canadas operating territory.On September 23, 2003, the
        CRTC issued a decision that requires Bell Canada and its carrier
        affiliates to include a detailed description of the bundled services they
        provide to customers when they file tariffs with the CRTC. The customers
        name will be kept confidential, but the pricing and service arrangements
        it has with the Bell Canada companies will be available on the public
        record.This decision
        increased the regulatory burden for Bell Canada and its carrier affiliates
        at both the wholesale and retail levels. It could also cause some of their
        large customers to choose another preferred supplier, which could have
        a material and negative effect on their results of operations. Bell Canadas
        appeal of this decision to the Federal Court of Canada was dismissed on
        September14, 2004.
        As a result, Bell Canada has submitted tariffs for CRTC approval
        for those contracts with bundles that have not yet expired in order to
        provide more detailed descriptions of the bundled services.
      Allstream and Call-Net Application
        Concerning Customer-Specific Arrangements
      On January 23, 2004,
        Allstream Corp. (Allstream) and Call-Net Enterprises Inc. (Call-Net)
        filed a joint application asking the CRTC to order Bell Canada to
        stop providing service under any customer-specific arrangements that are
        currently filed with the CRTC and are not yet approved.Allstream and
        Call-Net have proposed that Bell Canada should only provide services
        to these customers under its general tariff.
             Bell Canada
        provided its comments opposing all aspects of this application. If theCRTC grants it, Bell Canada
        will be required to cancel contracts with many of its enterprise customers
        and, in some cases, to reprice services. This could have a material and
        negative effect on Bell Canadas ability to offer new services
        to the large business customer market on competitive terms and conditions.
      Public Notice on Changes to
        Minimum Prices
      On October 23, 2003,
        the CRTC issued a public notice asking for comments on its preliminary
        view that revised rules may be needed for setting minimum prices for the
        regulated services of incumbent telephone companies and for how they price
        their services,
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|Licences and Changes to Wireless
        Regulation Companies must have a
        spectrum licence to operate cellular,PCSand other radio-telecommunications
        systems in Canada. The Minister of Industry awards spectrum licences,
        through a variety of methods, at his or her discretion under theRadiocommunication
        Act. |  | Managements
        Discussion and Analysis
      
      service bundles and customer contracts.
        The CRTC sought comments on proposed pricing restrictions on volume or
        term contracts for retail tariffed services. It issued an amended public
        notice on December 8, 2003. The record of this proceeding was
        completed with the filing of arguments on June 11, 2004 and
        reply arguments on June  25, 2004.If theCRTC
        determines the proposals are to be implemented as proposed, the Bell Canada
        companies will be required to increase the minimum prices they charge
        for regulated services. This would negatively limit their ability to compete.
      Application Seeking Consistent
        Regulation
      On November 6, 2003,
        Bell Canada filed an application requesting that the CRTC start a
        public hearing to review how similar services offered by cable companies
        and telephone companies are regulated. This would allow consistent rules
        to be developed that recognize and support the growing competition between
        these sectors. Bell  Canada also requested that this proceeding address
        any rules that might be needed to govern VoIP services provided by cable
        companies and others.On April7,
         2004, the CRTC invited comments on its preliminary views on the
        regulation of VoIP services and invited interested parties to participate
        in a public consultation on the regulatory framework for VoIP. The CRTCs
        preliminary view is that VoIP services using telephone numbers that conform
        to the North American Numbering Plan (NANP) and allow subscribers to make
        or receive calls from any telephone with access to the PSTN are functionally
        the same as switched telecommunications services. The CRTCs preliminary
        conclusion is that when incumbent telephone companies provide VoIP services
        in their incumbent territories, they should be required to respect their
        existing tariffs or to file proposed tariffs where required, in order
        to conform with the regulatory rules that apply. The CRTC also provided
        preliminary views on 9-1-1 services, message relay service and privacy
        safeguards provided by local VoIP service providers. Bell Canada
        provided its comments to the CRTC on June 18, 2004. The CRTC
        held the public consultation on the regulatory framework for VoIP from
        September 21 to 23, 2004. Bell  Canada filed reply comments
        on October 13, 2004.A decision
        is expected in the second quarter of2005.
        There is a risk that the CRTC might decide to regulate VoIP services provided
        by the Bell Canada companies and other incumbent telephone companies
        but not the VoIP services provided by certain other competitors, cable
        companies in particular. These proceedings could determine the rules for
        competition with other service providers and limit the ability of Bell Canada
        companies to compete in the future.TheCRTC
        has included a Proceeding on Regulatory Symmetry in its 20052006
        Work Plan. If cable companies and the incumbent telephone companies are
        subject to different regulations for similar services, and specifically
        for similar bundles of services, the incumbent telephone companies would
        be at a competitive disadvantage which could have a material and negative
        effect on their revenues and profitability.
      Licences for Broadcasting
      On November 18, 2004,
        the CRTC issued Broadcasting Decision CRTC 2004-496, which approved
        Bell Canadas applications for licences to operate terrestrial
        broadcasting distribution undertakings, using its wireline facilities,
        to serve large cities in Southern Ontario and Québec. Bell Canada
        will be licensed under the same terms and conditions that apply to major
        cable operators, without any delays or other conditions that would negatively
        affect its ability to compete with them. The licences will be issued once
        Bell Canada informs the CRTC that it is ready to commence operations
        and will expire on August  31, 2011. Bell Canada is required
        to have the terrestrial broadcasting distribution undertakings operational
        no later than November 18, 2006, unless an extension of time is approved
        by the CRTC.
      Licences and Changes to Wireless
        Regulation
      As a result of an Industry Canada
        decision, the cellular and PCS licences of Bell Mobility and of Aliant
        Telecom Inc. and MT&T Mobility Inc. (two subsidiaries of
        Aliant), which would have expired on March 31, 2006, will now expire
        in 2011. The PCS licences that were awarded in the 2001 PCS auction
        will expire on November 29, 2011. As a result, these Bell Canada
        companies cellular and PCS licences are now classified as spectrum
        licences with a 10-year licence term. While we expect that they will be
        renewed at term,
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| |  | there
        is no assurance that this will happen. Industry Canada can revoke a companys
        licence at any time if the company does not comply with the licences
        conditions. While we believe that we comply with the conditions of our
        licences, there is no assurance that Industry Canada will agree. Should
        there be a disagreement, this could have a material and negative effect
        on the Bell Canada companies.In October2001,
        the Minister of Industry announced plans for a national review of Industry
        Canadas procedures for approving and placing wireless and radio
        towers in Canada, including a review of the role of municipal authorities
        in the approval process. If the consultation process results in more municipal
        involvement in the approval process, there is a risk that it could significantly
        slow the expansion of wireless networks in Canada. This could have a material
        and negative effect on the operations of the Bell Canada companies.
        The final report from the National Antenna Tower Policy Review Committee
        was filed with Industry Canada in September 2004. Industry Canada
        is now reviewing the report and considering what next steps, if any, it
        will take, after which it may invite comments from interested parties,
        including the wireless carriers, on the report and its recommendations.
        It is not possible to predict at this time if or when any action might
        be taken on the findings of the report.
      Revenue from Major Customers
      A significant amount of revenue
        earned by Bell Canadas Enterprise unit comes from a small number
        of major customers. If we lose contracts with these major customers and
        cannot replace them, it could have a material and negative effect on our
        financial results.
      Voluntary Departure Programs
      In 2004, we announced an
        early retirement program and early departure program for Bell Canada
        employees. We estimate annual savings of approximately $390 million
        relating to these programs because of lower salaries, bonuses and non-pension
        benefits. There is a risk that the amount we expect to save each year
        from these programs will be lower than expected if, for example, we incur
        outsourcing, replacement and other costs.
      Competition Bureaus Investigation
        Concerning System Access Fees
      On December 9, 2004,
        Bell Canada was notified by the Competition Bureau that the Commissioner
        of Competition had initiated an inquiry under the misleading advertising
        provisions of theCompetition
        Actconcerning Bell Mobilitys
        description or representation of system access fees (SAFs)
        and was served with a court order, under section 11 of theCompetition
        Act, compelling Bell Mobility
        to produce certain records and other information that would be relevant
        to the Competition Bureaus investigation.
             SAFs
        are charged on a monthly basis to Bell Mobility cellular subscribers
        to assist Bell Mobility to recover certain costs associated with
        its mobile communications network. These costs include maintenance costs,
        the installation of new equipment, retrofitting of new technologies and
        fees for spectrum licences. These costs also include the recovery of the
        contribution tax charged by the CRTC to support telephone services in
        rural and remote areas of Canada.Bell Mobility
        may be subject to financial penalties by way of fines, administrative
        monetary penalties and/or demands for restitution of a portion of theSAFs charged to cellular
        subscribers if it is found to have contravened the misleading advertising
        provisions of theCompetition
        Act.
      Increased Accidents from Using
        Cellphones
      Some studies suggest that using
        handheld cellphones while driving may result in more accidents. It is
        possible that this could lead to new regulations or legislation banning
        the use of handheld cellphones while driving, as it has in Newfoundland
        and Labrador and in several U.S. states. If this happens, cellphone use
        in vehicles could decline, which would negatively affect the business
        of the Bell Canada companies.
      Health Concerns about Radio Frequency
        Emissions
      It has been suggested that some
        radio frequency emissions from cellphones may be linked to certain medical
        conditions. In addition, some interest groups have requested investigations
        into claims that digital transmissions from handsets used with digital
        wireless
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|Bell ExpressVu Bell ExpressVu currently
        uses three satellites, Nimiq 1, Nimiq 2 and Nimiq 3, for
        its video services. Telesat operates or directs the operation of these
        satellites. |  | Managements
        Discussion and Analysis
      
      technologies pose health concerns
        and cause interference with hearing aids and other medical devices. This
        could lead to additional government regulation, which could have a material
        and negative effect on the business of the Bell Canada companies.
        In addition, 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 being available to the wireless communications industry.
        Any of these would have a negative effect on the business of the Bell Canada
        companies.
      Bell ExpressVu
      In order to restore the backup
        capacity for Bell ExpressVu, which was diminished by the partial
        failure of Nimiq 2, Telesat reached an agreement with DirecTV for
        an existing spare in-orbit satellite (Nimiq 3). Telesat received
        approval from Industry Canada to relocate this satellite to the orbital
        slots currently occupied by Nimiq 1 or Nimiq 2. In July 2004,
        the CRTC granted final approval to the agreement between Bell ExpressVu
        and Telesat to lease the full capacity of Nimiq 3.Satellites
        are subject to significant risks. Any loss, failure, manufacturing defects,
        damage or destruction of these satellites, of Bell ExpressVus
        terrestrial broadcasting infrastructure or of Telesats tracking,
        telemetry and control facilities that operate the satellites could have
        a material and negative effect on Bell ExpressVus results of
        operations and financial condition. Please see Risks
        that Could Affect Certain BCE Group Companies  Telesatfor
        more information on the risks relating to Telesats satellites.
             Bell ExpressVu
        is subject to programming and carriage requirements underCRTC
        regulations. Changes to the regulations that govern broadcasting could
        negatively affect Bell ExpressVus competitive position or the
        cost of providing its services. Bell ExpressVus DTH satellite
        television distribution undertaking licence was renewed in March 2004
        and expires on August 31, 2010.Bell ExpressVu
        continues to face competition from unregulatedU.S.
        DTH satellite television services that are illegally sold in Canada. In
        response, it is participating in legal actions that are challenging the
        sale of U.S. DTH satellite television 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
        faces a loss of revenue resulting from the theft of its services. It is
        taking numerous actions to reduce these losses, including legal action,
        investigations, implementing electronic countermeasures targeted at illegal
        devices, leading information campaigns and developing new technology.
        Bell ExpressVu introduced a smart card swap for its authorized digital
        receivers beginning in2004,
        that is designed to block unauthorized reception of Bell ExpressVu
        signals. The smart card swap is being introduced in phases and is expected
        to be completed in the second half of 2005. As with any technology-based
        security system, it is not possible to eliminate with absolute certainty
        the possibility that security may be compromised at some point in the
        future.On
        October 28, 2004, the Court of Québec ruled in
        R. v. DArgy and Theriaultthat the provisions in the
        Radiocommunication Act(Canada) making it a criminal
        offence to manufacture, offer for sale or sell any device used to decode
        an encrypted subscription signal relating to the unauthorized reception
        of satellite signals violate the freedom of expression rights enshrined
        in the Canadian
        Charter of Rights and Freedoms.
        The Canadian Department of Justice has launched an appeal of this decision
        to the Superior Court of Québec. It remains a criminal offence
        throughout Canada to manufacture, offer for sale or sell any device used
        to engage in the unauthorized reception of satellite signals. If this
        decision is ultimately upheld by the courts and Parliament does not enact
        new provisions criminalizing the unauthorized reception of satellite signals,
        Bell ExpressVu may face increasing loss of revenue from the unauthorized
        reception of satellite signals.
      Bell Globemedia
      Dependence on Advertising
      A large part of Bell Globemedias
        revenue from its television and print businesses comes from advertising
        revenues. Bell Globemedias advertising revenues are affected
        by competitive pressures, including its ability to attract and retain
        viewers and readers. In addition,
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| |  | the
        amount advertisers spend is directly related to economic growth. An economic
        downturn tends to make it more difficult for Bell Globemedia to maintain
        or increase revenues. Advertisers have historically been sensitive to
        general economic cycles and, as a result, Bell Globemedias
        business, financial condition and results of operations could be materially
        and negatively affected by a downturn in the economy. In addition, most
        of Bell Globemedias advertising contracts are short-term contracts
        that the advertiser can cancel on short notice.
      Increasing Fragmentation in Television
        Markets
      Television advertising revenue
        largely depends on the number of viewers and the attractiveness of programming
        in a given market. The viewing market has become increasingly fragmented
        over the past decade and this trend is expected to continue as new services
        and technologies increase the choices available to consumers. As a result,
        there is no assurance that Bell Globemedia will be able to maintain
        or increase its advertising revenues or its ability to reach or retain
        viewers with attractive programming.
      Revenues from Distributing Television
        Services
      A significant portion of revenues
        from CTVs specialty television operations comes from contractual
        arrangements with distributors who are mainly cable and DTH operators.
        Competition has increased in the specialty television market. As a result,
        there is no assurance that contracts with distributors will be renewed
        on equally favourable terms.
      Increased Competition for Fewer
        Print Customers
      Print advertising revenue largely
        depends on circulation and readership. The existence of a competing national
        newspaper and commuter papers in Toronto has increased competition, while
        the total circulation and readership of Canadian newspapers have continued
        to decline. This has resulted in higher costs, more competition in advertising
        rates and lower profit margins atThe Globe and Mail.
      Broadcast Licences and CRTC Decisions
      Each of CTVs conventional
        and specialty services operates under licences issued by the CRTC for
        a fixed term of up to seven years. These licences are subject to the requirements
        of theBroadcasting
        Act, the policies and decisions
        of theCRTC and the
        conditions of each licensing or renewal decision, all of which may change.
        While these are expected to be renewed at the appropriate times, there
        can be no assurance that any or all of CTVs licences will be renewed.
        Any renewals, changes or amendments to licences and any decisions by the
        CRTC from time to time that affect the industry as a whole or CTV in particular
        may have a material and negative effect on Bell Globemedia.
      Telesat
      Satellite Risks
      There is a risk that the delivery
        of Telesats satellites under construction could be delayed as a
        result of delays in the construction of the satellites, delays in the
        construction of the launch vehicle, the failure of a launch vehicle that
        is similar to the model which Telesat intends to use to launch a satellite,
        or the unavailability of a reliable launch opportunity. A delay in delivery
        could have an adverse effect on Telesats ability to provide service
        and could result in additional costs. Telesat seeks to mitigate the impact
        of such a delay through various contractual measures including late delivery
        charges and by planning for contingency measures as required.There is a
        risk that Telesats satellites currently under construction, or satellites
        built in the future, may not be successfully launched and deployed. Once
        Telesats satellites are in orbit, there is a risk that a failure
        could prevent them from completing their commercial mission of providing
        uninterrupted service to customers. Telesat has a number of measures in
        place that seek to protect itself against continuity of service risk.
        These measures include engineering satellites with onboard redundancies,
        including spare equipment on the satellite, standard testing programs
        that provide high confidence of performance levels, or retaining and obtaining
        redundant capacity on either the same or another in-orbit satellite, and
        the purchase of insurance.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

77Bell
  Canada Enterprises2004Annual
  Report

---



|Our Accounting Policies 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 the key changes in accounting standards and our
        accounting policies, and how they affect our financial statements.
             We have
        prepared our consolidated financial statements according to Canadian GAAP.
        See Note 1 to the consolidated financial statements for more information
        about the accounting principles we used to prepare our financial statements.
      Employee Benefit Plans We maintain defined benefit
        plans that provide pension, other retirement and post-employment benefits
        for some of our employees. The amounts reported in the financial statements
        relating to these benefits are determined using actuarial calculations
        that are based on several assumptions. |  | Managements
        Discussion and Analysis
      
      Where
        insurance coverage is available on commercially reasonable terms and conditions,
        Telesat seeks to protect itself against some of the consequences of launch
        and in-orbit failures by purchasing satellite insurance. However, there
        is no assurance that Telesat will be able to obtain or renew launch and
        in-orbit insurance coverage for its satellites for the full satellite
        value, nor is there any assurance that coverage will be obtained at a
        favourable premium rate.
             Telesat currently
        maintains insurance on in-orbit satellites as follows:
      Nimiq 1  insured
          until the second quarter of 2005 for approximately its book value;
        Anik F2  insured
          until the third quarter of 2007 for approximately two thirds of its
          book value. In the event of a total failure of the Anik F2 satellite,
          the after-tax accounting loss is estimated at $110 million to $115 million.In December 2004, Telesat
        ceased to insure its interest in the residual value of Nimiq 2 following
        the arrival in orbit of the leased satellite Nimiq 3 (formerly DirecTV3)
        a satellite that complements the capacity of Nimiq 1 and 2 and which,
        following operational changes, could be used to provide capacity and continuity
        of service in the event of a failure of either Nimiq 1 or Nimiq 2.In August2001,
        the manufacturer of the Anik F1 satellite advised Telesat of a gradual
        decline in power on the satellite. Telesat believes some of the satellites
        core services will be affected by mid-to-late 2005. Anik F1R
        is expected to replace Anik F1 in time to ensure that service to
        Anik F1s customers will not be interrupted. Telesat had insurance
        in place to cover the power loss on Anik F1 and filed a claim with
        its insurers in December 2002. In March 2004, Telesat and its
        insurers reached a final settlement agreement. The settlement calls for
        an initial payment to Telesat in 2004 of US$136.2  million,
        which has already been received, and an additional payment of US$49.1 million
        in 2007 if the power level on Anik F1 degrades as predicted by the
        manufacturer. In the event that the power level on Anik F1 is better
        than predicted, the amount of the payment(s) will be adjusted by applying
        a formula which is included in the settlement documentation and could
        result in either a pro-rated payment to Telesat of the additional US$49.1
         million or a pro-rated repayment of up to a maximum of US$36.1 million
        to be made by Telesat to the insurers. Currently, power levels are continuing
        to degrade as predicted.In December2004, Telesat received
        commitments for launch and in-orbit insurance coverage, covering the launch
        and first year of in-orbit life, for the approximate book value of Anik 
        F1R, subject to the completion of documentation.Telesat has
        signed a contract withEADS
        Astrium, SAS, a European satellite manufacturer, for construction of the
        Anik F3 satellite. Anik F3 is expected to be available for service
        in the second half of 2006. During 2005, subject to insurance availability
        and market conditions, Telesat will review and, if appropriate, commence
        the placement of launch and in-orbit insurance coverage for Anik F3.
        However, there is no assurance that Telesat will be able to obtain launch
        and in-orbit insurance coverage for the full value of Anik F3, nor
        is there any assurance that coverage will be obtained at a favourable
        premium rate.
      Our Accounting
        Policies
      Critical Accounting Estimates
      Under Canadian GAAP, we are required
        to make estimates when we account for and report assets, liabilities,
        revenues and expenses, and to disclose contingent assets and liabilities
        in our financial statements. We are also required to continually evaluate
        the estimates that we use.We base our
        estimates on past experience and on 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 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 highly uncertain.
             Our senior
        management has discussed the development and selection of the critical
        accounting estimates described in this section with the audit committee
        of the board of directors. The audit committee has reviewed these critical
        accounting estimates.
      Employee Benefit Plans
      We perform a valuation at least
        every three years to determine the actuarial present value of the accrued
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 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-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

78Bell
  Canada Enterprises 2004 Annual Report

---



|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 based on the yield on long-term high-quality corporate fixed income
        investments, with maturities matching the estimated cash flows from the
        plan. |  | 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, health-care cost trend and expected average
        remaining years of service of employees.While we believe
        that these assumptions are reasonable, differences in actual results or
        changes in assumptions could materially affect employee benefit obligations
        and future net benefit plans costs.
             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
        cost are the discount rate and the expected long-term rate of return on
        plan assets. Each of our operating segments is affected by these assumptions.
      Discount Rate
      We determine the appropriate discount
        rate at the end of every year. Our discount rate was 6.2% at December 31, 2004,
        a decrease from 6.5% at December 31, 2003. The table below shows
        the impact on the net benefit plans cost for 2005 and the accrued
        benefit asset at December 31, 2005 of a 0.5% increase and a
        0.5% decrease in the discount rate.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Discount rate increased to 6.7%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Aliant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Other
        Bell Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Other
        BCE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Discount rate decreased to 5.7%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Aliant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Other
        Bell Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Other
        BCE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  | Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |  | Although there is no immediate impact on our balance sheet, a lower discount
        rate results in a higher accrued benefit obligation and a lower pension
        surplus. This means that we may have to increase any cash contributions
        to the plan.
      Expected Long-Term Rate of Return
      The expected long-term rate of
        return is a weighted average rate of our forward-looking view of long-term
        returns on each of the major plan asset categories in our funds.We determine
        the appropriate expected long-term rate of return at the end of every
        year. We assumed an expected long-term rate of return on plan assets of7.5% in 2004,
        which is the same as it was in 2003. The table below shows the impact
        on the net benefit plans cost for 2005 and the accrued benefit asset
        at December 31, 2005 of a 0.5% increase and a 0.5% decrease
        in the expected rate of return on plan assets.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | .                                                                                                                                                                                                                                                   |             |   | IMPACT ON    |  
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | - | ------------ | -
| |  |                                                                                                                                                                                                                                                     |             |   | ACCRUED      |  
| |  |                                                                                                                                                                                                                                                     | IMPACT ON   |   | BENEFIT      |  
| |  |                                                                                                                                                                                                                                                     | NET BENEFIT |   | ASSET AT     |  
| |  |                                                                                                                                                                                                                                                     | PLANS COST  |   | DECEMBER 31, |  
| |  |                                                                                                                                                                                                                                                     | FOR 2005    |   | 2005         |  
| |  |                                                                                                                                                                                                                                                     |            
| |  | Expected
      rate of return increased to 8.0%                                                                                                                                                                                                     |             |   |              |  
| |  | Consumer                                                                                                                                                                                                                                            | (24         | ) | 24           |  
| |  | Business                                                                                                                                                                                                                                            | (21         | ) | 21           |  
| |  | Aliant                                                                                                                                                                                                                                              | (5          | ) | 5            |  
| |  | Other
        Bell Canada                                                                                                                                                                                                                           | (10         | ) | 10           |  
| |  | Other
        BCE                                                                                                                                                                                                                                   | (5          | ) | 5            |  
| |  |                                                                                                                                                                                                                                                     |            
| |  | Total                                                                                                                                                                                                                                               | (65         | ) | 65           |  
| |  |                                                                                                                                                                                                                                                     |            
| |  |                                                                                                                                                                                                                                                     |            
| |  |                                                                                                                                                                                                                                                    
| |  | Expected
      rate of return decreased to 7.0%                                                                                                                                                                                                     |             |   |              |  
| |  | Consumer                                                                                                                                                                                                                                            | 24          |   | (24          | )
| |  | Business                                                                                                                                                                                                                                            | 21          |   | (21          | )
| |  | Aliant                                                                                                                                                                                                                                              | 5           |   | (5           | )
| |  | Other
        Bell Canada                                                                                                                                                                                                                           | 10          |   | (10          | )
| |  | Other
        BCE                                                                                                                                                                                                                                   | 5           |   | (5           | )
| |  |                                                                                                                                                                                                                                                     |            
| |  | Total                                                                                                                                                                                                                                               | 65          |   | (65          | )
| |  |                                                                                                                                                                                                                                                     |            
| |  |                                                                                                                                                                                                                                                     |            
| |  | Although there is no immediate impact on our balance sheet, poor fund performance
      results in a lower fair value of plan assets and a lower pension surplus.
      This means that we may have to increase any cash contributions to the plan.

79Bell
  Canada Enterprises2004Annual
  Report

---



|Goodwill Impairment We assess the value of
        goodwill of all reporting units within each of our operating segments
        every year and when events or changes in circumstances indicate that it
        might be impaired.
      Contingencies We become involved in
        various litigation and regulatory matters as a part of our business. Each
        of our operating segments may be affected. Pending litigation, regulatory
        initiatives or regulatory proceedings represent potential financial loss
        to our business. |  | Managements
        Discussion and Analysis
      
      Goodwill Impairment
      We generally measure for impairment
        using a projected discounted cash flow method and confirm our assessment
        using other valuation methods. If the assets carrying value is more
        than its fair value, we record the difference as a reduction in the amount
        of goodwill on the balance sheet and an impairment charge in the statement
        of operations.We make a number
        of significant estimates when calculating fair value using a projected
        discounted cash flow method. These estimates include the assumed growth
        rates for future cash flows, the numbers of years used in the cash flow
        model, the discount rate and many others.
             We believe
        that all of our estimates are reasonable. They are consistent with our
        internal planning and reflect our best estimates, but they have inherent
        uncertainties that management may not be able to control.
             Any changes
        in each of the estimates used could have a material impact on the calculation
        of the fair value and resulting impairment charge. As a result, we are
        unable to reasonably quantify the changes in our overall financial performance
        if we had used different assumptions.
             We cannot predict
        whether an event that triggers impairment will occur, when it will occur
        or how it will affect the asset values we have reported.
             There were
        no impairment charges recorded in2004
        or 2003.
      Contingencies
      We accrue a potential loss if
        we believe the loss is probable and it can be reasonably estimated. We
        base our decision on information that is available at the time. We estimate
        the amount of the loss by consulting with the outside legal counsel that
        is handling our defence. This involves analyzing potential outcomes and
        assuming various litigation and settlement strategies.If the final
        resolution of a legal or regulatory matter results in a judgment against
        us or requires us to pay a large settlement, it could have a material
        and negative effect on our results of operations, cash flows and financial
        position in the period that the judgment or settlement occurs. Any accrual
        would be charged to operating income and included inAccounts
        payable and accrued liabilitiesorOther long-term liabilities.
        Any cash settlement would be included in cash from operating activities.
             None of our
        operating segments had any significant provisions relating to pending
        litigation, regulatory initiatives or regulatory proceedings at December31, 2004. We
        have not made any significant changes to our estimates in the past two
        years.
      Income Taxes
      Management believes that it has
        adequately provided for income taxes based on all of the information that
        is currently available. The calculation of income taxes in many cases,
        however, requires significant judgment in interpreting tax rules and regulations,
        which are constantly changing. Each of our operating segments may be affected.Our tax filings
        are also subject to audits, which could materially change the amount of
        current and future income tax assets and liabilities. Any change would
        be recorded as a charge or a credit to income tax expense. Any cash payment
        or receipt would be included in cash from operating activities.
             There were
        no significant changes to the estimates we made in the past two years.
      Recent Changes to Accounting Standards
      Please see Note 1 to the consolidated
        financial statements for more information about the accounting policies
        we adopted in 2004. These are the result of new accounting standards
        for:impairment of long-lived assets
        asset retirement obligations
        hedging relationships.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

80Bell
  Canada Enterprises2004Annual
  Report

---



| |  | Future
        Changes to Accounting Standards
      Financial Instruments
      The CICA issued revisions to section
        3860 of the CICA Handbook,Financial
        Instruments  Disclosure and Presentation.
        The revisions change the accounting for certain financial instruments
        that have liability and equity characteristics. It requires instruments
        that meet specific criteria to be classified as liabilities on the balance
        sheet. Some of these financial instruments were previously classified
        as equities.
             These revisions
        come into effect on January1,
         2005. Because we do not have any instruments with these characteristics,
        adopting this section on January 1, 2005 will not affect our
        consolidated financial statements.
      Comprehensive Income
      The CICA issued section 1530 of
        the CICA Handbook,Comprehensive
        Income. The section is effective
        for fiscal years beginning on or after October1,
        2006. It describes how to report and disclose comprehensive income and
        its components.Comprehensive
        income is the change in a companys net assets that results from
        transactions, events and circumstances from sources other than the companys
        shareholders. It includes items that would not normally be included in
        net earnings, such as:changes in the currency translation
          adjustment relating to self-sustaining foreign operations
        unrealized gains or losses on
          available-for-sale investments.The CICA also made changes to
        section 3250 of the CICA Handbook,Surplus,
        and reissued it as section3251,Equity.
        The section is also effective for fiscal years beginning on or after October1, 2006. The changes
        in how to report and disclose equity and changes in equity are consistent
        with the new requirements of section 1530,Comprehensive
        Income.
             Adopting these
        sections on January1,
        2007 will require us to start reporting the following items in the consolidated
        financial statements:comprehensive income and its
          components
        accumulated other comprehensive
          income and its components.Financial Instruments 
        Recognition and Measurement
      The CICA issued section 3855 of
        the CICA Handbook, Financial
        Instruments  Recognition and Measurement.
        The section is effective for fiscal years beginning on or after October1, 2006. It describes
        the standards for recognizing and measuring financial assets, financial
        liabilities and non-financial derivatives.This section
        requires that:
      all financial assets be measured
          at fair value, with some exceptions like loans and investments that
          are classified as held-to-maturity
        all financial liabilities be
          measured at fair value if they are derivatives or classified as held
          for trading purposes. Other financial liabilities are measured at their
          carrying value.
        all derivative financial instruments
          be measured at fair value, even when they are part of a hedging relationship.We are currently evaluating the
        impact on our consolidated financial statements of adopting this section
        on January 1, 2007.
      Hedges
      The CICA recently issued section
        3865 of the CICA Handbook,Hedges.
        The section is effective for fiscal years beginning on or after October1,
        2006, and describes when and how hedge accounting can be used.Hedging is
        an activity used by a company to change an exposure to one or more risks
        by creating an offset between:changes in the fair value of
          a hedged item and a hedging item
        changes in the cash flows attributable
          to a hedged item and a hedging item, or
        changes resulting from a risk
          exposure relating to a hedged item and a hedging item.Hedge accounting makes sure that
        all gains, losses, revenues and expenses from the derivative and the item
        it hedges are recorded in the statement of operations in the same period.We are currently
        evaluating the impact on our consolidated financial statements of adopting
        this section on January1,
        2007.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

81Bell
  Canada Enterprises2004Annual
  Report

---

This section of our annual report
          contains the audited consolidated financial statements of BCE and
          detailed notes with explanations and additional information.
        The financial statements contain
          our results and financial history for the past three years. The notes
          are an important part of understanding our financial results. They explain
          how we arrived at the numbers in the financial statements, describe
          significant events or changes that affect the numbers, and explain certain
          items in the financial statements. They also include details about our
          results that do not appear in the financial statements.
        BCE consists of many businesses,
          including subsidiaries and joint ventures. We present the financial
          information for all of our holdings as one consolidated company.
        Except in the auditors report,we,us,ourandBCEmean
          BCE Inc., its subsidiaries and joint ventures.
      
      Consolidated
        Financial Statements Managements
          ReportThese financial statements form
          the basis for all of the financial information that appears in this
          annual report.
               The financial statements and all of the
          information in this annual report are the responsibility of the management
          of BCE Inc. and have been reviewed and approved by the board of
          directors. The board of directors is responsible for ensuring that management
          fulfills its financial reporting responsibilities. Deloitte & Touche
          LLP, the shareholders auditors, have audited the financial statements.
               Management has prepared the financial
          statements according to Canadian generally accepted accounting principles.
          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 BCEs consolidated
          financial position, results of operations and cash flows.
               Management has a system of internal controls
          designed to provide reasonable assurance that the financial statements
          are accurate and complete in all material respects. This is supported
          by an internal audit group that reports to the audit committee, and
          includes communication with 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, which is made up of unrelated and independent directors.
          The audit committees responsibilities include reviewing the financial
          statements and other information in this annual report, and recommending
          them to the board of directors for approval. You will find a description
          of the audit committees other responsibilities on page 123 of
          this annual report. The internal auditors and the shareholders
          auditors have free and independent access to the audit committee.
        Michael J. SabiaPresident and Chief Executive Officer Siim A. VanaseljaChief Financial OfficerKaryn A. BrooksVice-President and Controller
        March 2, 2005Auditors
        Report To the Shareholders
          of BCE Inc.:
        We have audited the consolidated
          balance sheets of BCE Inc. as at December 31, 2004 and 2003,
          and the consolidated statements of operations, deficit and cash flows
          for each of the years in the three-year period ended December 31,
          2004. These consolidated financial statements are the responsibility
          of BCE Inc.s management. Our responsibility is to express
          an opinion on these consolidated 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
          whether the 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 financial
          statement presentation.
               In our opinion, these consolidated financial
          statements present fairly, in all material respects, the financial position
          of BCE Inc. as at December 31, 2004 and 2003 and the results
          of its operations and its cash flows for each of the years in the three-year
          period ended December  31, 2004, in accordance with Canadian generally
          accepted accounting principles.
        Deloitte & Touche LLPChartered Accountants Montréal,
          Canada
          March 2, 2005


82    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Consolidated
      Statements of Operations                                
| |  | ---------------------------------------------------------------------------
| |  | FOR THE YEAR ENDED DECEMBER 31(in
        $ millions, except share amounts)
| |  |                                                                            
| |  | Operating revenues                                                         
| |  |                                                                            
| |  | Operating expenses                                                         
| |  | Amortization expense                                                       
| |  | Net benefit plans (cost) credit                                            
| |  | Restructuring and other items                                              
| |  |                                                                            
| |  | Total operating expenses                                                   
| |  |                                                                            
| |  | Operating income                                                           
| |  | Other income                                                               
| |  | Impairment charge                                                          
| |  | Interest expense                                                           
| |  |                                                                            
| |  | Pre-tax earnings from continuing operations                                
| |  | Income taxes                                                               
| |  | Non-controlling interest                                                   
| |  |                                                                            
| |  | Earnings from continuing operations                                        
| |  | Discontinued operations                                                    
| |  |                                                                            
| |  | Net earnings before extraordinary gain                                     
| |  | Extraordinary gain                                                         
| |  |                                                                            
| |  | Net earnings                                                               
| |  | Dividends on preferred shares                                              
| |  | Premium on redemption of preferred shares                                  
| |  |                                                                            
| |  | Net earnings applicable to common shares                                   
| |  |                                                                            
| |  | Net earnings (loss) per common share  basic                               
| |  | Continuing operations                                                      
| |  | Discontinued operations                                                    
| |  | Extraordinary gain                                                         
| |  |                                                                            
| |  | Net earnings                                                               
| |  | Net earnings (loss) per common share  diluted                             
| |  | Continuing operations                                                      
| |  | Discontinued operations                                                    
| |  | Extraordinary gain                                                         
| |  |                                                                            
| |  | Net earnings                                                               
| |  | Dividends per common share                                                 
| |  | Average number of common shares outstanding  basic
        (millions)     
| |  |                                                                            

| |  | Consolidated
      Statements of Deficit                                            
| |  | ------------------------------------------------------------------------------------
| |  | FOR THE YEAR ENDED DECEMBER 31(in
        $ millions)                               
| |  |                                                                                     
| |  | Balance at beginning of year, as previously reported                                
| |  | Accounting policy change for asset retirement obligations                           
| |  |                                                                                     
| |  | Balance at beginning of year, as restated                                           
| |  | Consolidation of variable interest entity                                           
| |  | Net earnings                                                                        
| |  | Dividends declared on common shares                                                 
| |  | Dividends declared on preferred shares                                              
| |  | Costs relating to the issuance of common shares, net of $22 million
        of taxes
| |  | Premium on redemption of preferred shares                                           
| |  | Other                                                                               
| |  |                                                                                     
| |  | Balance at end of year                                                              
| |  |                                                                                     

83Bell Canada
  Enterprises2004Annual
  Report

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| |  | Consolidated
      Balance Sheets                 
| |  | --------------------------------------------------
| |  | AT DECEMBER31(in
      $ millions)                
| |  |                                                   
| |  | Assets                                            
| |  |                                                   
| |  | Current assets                                    
| |  | Cash and cash equivalents                         
| |  | Accounts receivable                               
| |  | Other current assets                              
| |  | Current assets of discontinued operations         
| |  |                                                   
| |  | Total current assets                              
| |  | Capital assets                                    
| |  | Other long-term assets                            
| |  | Indefinite-life intangible assets                 
| |  | Goodwill                                          
| |  | Non-current assets of discontinued operations     
| |  |                                                   
| |  | Total assets                                      
| |  |                                                   
| |  | Liabilities                                       
| |  |                                                   
| |  | Current liabilities                               
| |  | Accounts payable and accrued liabilities          
| |  | Interest payable                                  
| |  | Dividends payable                                 
| |  | Debt due within one year                          
| |  | Current liabilities of discontinued operations    
| |  |                                                   
| |  | Total current liabilities                         
| |  | Long-term debt                                    
| |  | Other long-term liabilities                       
| |  | Non-current liabilities of discontinued operations
| |  |                                                   
| |  | Total liabilities                                 
| |  |                                                   
| |  | Non-controlling interest                          
| |  |                                                   
| |  | Commitments and contingencies                     
| |  |                                                   
| |  | Shareholders Equity                              
| |  |                                                   
| |  | Preferred shares                                  
| |  |                                                   
| |  | Common shareholders equity                       
| |  | Common shares                                     
| |  | Contributed surplus                               
| |  | Deficit                                           
| |  | Currency translation adjustment                   
| |  |                                                   
| |  | Total common shareholders equity                 
| |  |                                                   
| |  | Total shareholders equity                        
| |  |                                                   
| |  | Total liabilities and shareholders equity        
| |  |                                                   

| |  | On
        behalf of the board of directors:
       Director | Director
| |  | ------------------------------------------------------------ | --------

84    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Consolidated
      Statements of Cash Flows                                                                  
| |  | -------------------------------------------------------------------------------------------------------------
| |  | FOR THE
      YEAR ENDED DECEMBER 31(in
      $ millions)                                                    
| |  |                                                                                                              
| |  | Cash flows from operating activities                                                                         
| |  | Earnings from continuing operations                                                                          
| |  | Adjustments to reconcile earnings from continuing operations to
        cash flows from operating activities:
| |  | Amortization
        expense                                                                                 
| |  | Net
        benefit plans cost (credit)                                                                      
| |  | Restructuring
        and other items                                                                        
| |  | Impairment
        charge                                                                                    
| |  | Net
        gains on investments                                                                             
| |  | Future
        income taxes                                                                                  
| |  | Non-controlling
        interest                                                                             
| |  | Contributions
        to employee pension plans                                                              
| |  | Other employee future benefit plan payments                                                                  
| |  | Payments
        of restructuring and other items                                                            
| |  | Operating
        assets and liabilities                                                                     
| |  |                                                                                                              
| |  | Cash flows from operating activities                                                                         
| |  |                                                                                                              
| |  | Cash flows from investing activities                                                                         
| |  | Capital expenditures                                                                                         
| |  | Business acquisitions                                                                                        
| |  | Business dispositions                                                                                        
| |  | Change in investments accounted for under
        the cost and equity methods                                
| |  | Other                                                                                                        
| |  |                                                                                                              
| |  | Cash used in investing activities                                                                            
| |  |                                                                                                              
| |  | Cash flows from financing activities                                                                         
| |  | Increase (decrease) in notes payable and bank advances                                                       
| |  | Issue of long-term debt                                                                                      
| |  | Repayment of long-term debt                                                                                  
| |  | Issue of common shares                                                                                       
| |  | Costs relating to the issuance of common shares                                                              
| |  | Issue of preferred shares                                                                                    
| |  | Redemption of preferred shares                                                                               
| |  | Issue of equity securities by subsidiaries to
        non-controlling interest                               
| |  | Redemption
        of equity securities by subsidiaries from
        non-controlling interest                
| |  | Cash dividends paid on common shares                                                                         
| |  | Cash dividends paid on preferred shares                                                                      
| |  | Cash dividends paid by subsidiaries to non-controlling interest                                              
| |  | Other                                                                                                        
| |  |                                                                                                              
| |  | Cash provided by (used in) financing activities                                                              
| |  |                                                                                                              
| |  | Cash provided by (used in) continuing operations                                                             
| |  | Cash provided by (used in) discontinued operations                                                           
| |  |                                                                                                              
| |  | Net increase (decrease) in cash and cash equivalents                                                         
| |  | Cash and cash equivalents at beginning of year                                                               
| |  |                                                                                                              
| |  | Cash and cash equivalents at end of year                                                                     
| |  |                                                                                                              
| |  | Consists
        of:                                                                                         
| |  | Cash and cash equivalents of continuing operations                                                           
| |  | Cash and cash equivalents of discontinued operations                                                         
| |  |                                                                                                              
| |  | Total                                                                                                        
| |  |                                                                                                              

85    Bell Canada
  Enterprises 2004 Annual Report

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|All
        amounts are in millions of Canadian dollars, except where noted.
      See Note 27, Reconciliation
        of Canadian GAAP to United States GAAP, for a description and reconciliation
        of the significant differences between Canadian GAAP and United States
        GAAP that affect our financial statements. |  | Notes
        to Consolidated Financial Statements
      Note 1:
        Significant Accounting Policies
      Basis of Presentation We
        have prepared the consolidated financial statements according to Canadian
        generally accepted accounting principles (GAAP).      We
        consolidate the financial statements of all of the companies we control.
        We proportionately consolidate our share of the financial statements of
        our joint venture interests. All transactions and balances between these
        companies have been eliminated on consolidation.
      Comparative Figures We have reclassified some
        of the figures for the comparative periods in the consolidated financial
        statements to make them consistent with the presentation for the current
        period.      We
        have restated financial information for previous periods to reflect:
      the adoption of section3110of the Canadian Institute
          of Chartered Accountants (CICA)
          Handbook,Asset Retirement Obligations,
          effective January2004,
          as described underRecent Changes to Accounting Standards
        the change in classification of
          Emergis Inc. (Emergis) and other minor business dispositions to
          discontinued operations.Using EstimatesWhen
        preparing financial statements according toGAAP,
        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 RevenueWe recognize operating revenues when they are earned, specifically when: services are provided or products
          are delivered to customers
        there is clear proof that an
          arrangement exists
        amounts are fixed or can be determined
        our ability to collect is reasonably
          assured.In particular, we recognize:
      fees for long distance and wireless
          services, and other fees,
          such as network access fees, licence fees, hosting 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 aired, or printed
          and distributed
        revenue from the sale of equipment
          when the equipment is delivered to customers and accepted
        revenue on long-term contracts
          as services are provided, equipment is delivered and accepted, or contract milestones
          are met.When a transaction involves more than
      one product or service, we allocate revenue to each based on its relative
      fair value. 
           We may enter into arrangements with subcontractors
      who provide services to our customers. When we act as the principal in these
      arrangements, we recognize revenue based on the amounts billed to customers.
      Otherwise, we recognize the net amount that we keep as revenue.
           We accrue an
      estimated amount for sales returns, based on our past experience, when revenue
      is recognized.      We
      record payments we receive in advance as deferred revenues until we provide
      the service or deliver the product to customers. Deferred revenues are presented
      inAccounts payable and accrued
      liabilitiesor in
      Other long-term liabilitieson
      the balance sheet.Cash
        and Cash Equivalents
      We generally classify highly liquid
        investments with a short-term maturity of three months or less asCash
        and cash equivalents.
      Securitization of Accounts Receivable
      We consider a transfer of accounts
        receivable to be a sale when we give up control of them in exchange for
        proceeds from a trust (other than our retained beneficial interest in
        the accounts receivable).      We
        determine the fair value of the accounts receivable transferred based
        on the present value of future expected cash flows, which we project using
        managements best estimates of discount rates, weighted average life
        of accounts receivable, credit loss ratios
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

86Bell Canada
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|Equity
        MethodAn 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 our net earnings. The amount of our
        investment is reduced by the amount of dividends received or receivable
        from the investment.
      Cost MethodThe investment is recorded at cost. Dividends received or receivable
        from the investment are included in our net earnings. |  | and
        other key assumptions. We recognize a loss on this kind of transaction,
        which is included inOther
        income. The loss partly
        depends on the carrying amount of the accounts receivable that are transferred.
        We allocate this amount to accounts receivable sold, or to our retained
        interest, according to its relative fair value on the day the transfer
        is made.      Accounts
        receivable are transferred on a fully-serviced basis. As a result, we:
      recognize a servicing liability
          on the day accounts receivable are transferred to the trust
        amortize this liability to earnings
          over the expected life of the transferred accounts receivable.Capital AssetsWe
        carry capital assets at cost, less accumulated amortization. Most of our
        telecommunications assets are amortized using the group depreciation method.
        When we retire assets in the ordinary course of business, we charge their
        original cost to accumulated amortization. In general, we amortize capital
        assets on a straight-line basis over the estimated useful lives of the
        assets. We review the estimates of the useful lives of the assets every
        year and adjust them if needed.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Goodwill Goodwill is created when we acquire a business. It is calculated by
      deducting the fair value of the net assets acquired from the consideration
      given and represents the value of factors that contribute to greater earning
      power, such as a good reputation, customer loyalty or intellectual capital. |                                     |                      | ESTIMATED
      USEFUL LIFE
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------------- | ---------------------------
|                                                                                                                                                                                                                                                                                                                                   |                                    
|                                                                                                                                                                                                                                                                                                                                   | Telecommunications
      assets     | 10
      to 25 years
|                                                                                                                                                                                                                                                                                                                                   | Machinery
      and equipment       | 2
      to 20 years 
|                                                                                                                                                                                                                                                                                                                                   | Buildings                           | 10
      to 40 years
|                                                                                                                                                                                                                                                                                                                                   | Satellites                          | 10
      to 15 years
|                                                                                                                                                                                                                                                                                                                                   | Finite-life
      intangible assets |                     
|                                                                                                                                                                                                                                                                                                                                   | Software                            | 3
      to 7 years  
|                                                                                                                                                                                                                                                                                                                                   | Customer relationships              | 5
      to 40 years 
|                                                                                                                                                                                                                                                                                                                                   |                                    

| |  | We capitalize
      construction costs, labour and overhead (including interest) related to
      assets we build or develop.      We
      capitalize some of the costs of developing or buying software for internal
      use. We expense software maintenance and training costs when they are incurred.
      The expense is included inOperating
      expensesin the statement
      of operations.      We
      assess capital assets for impairment when events or changes in circumstances
      indicate that we may not be able to recover their carrying value. We calculate
      impairment by deducting the assets fair value, based on discounted
      cash flows expected from its use and disposition, from its carrying value.
      Any excess is deducted from earnings. Accounting
        for Investments
      We use the following methods to
        account for investments that are not consolidated or proportionately consolidated
        in our financial statements:
      the equity method for our investments in companies where
          we have a significant influence on their operating, investing and financing
          activities
        the cost method for our investments
          in all other companies.We include
        investments inOther long-term
        assetson the balance sheet.
        Earnings from investments are included inOther incomein
        the statement of operations.      We
        expense declines in the fair values of our investments when management
        considers them to be longer term. The expense is included inOther
        incomein the statement
        of operations.
      Costs of Issuing Debt and Equity
      The costs of issuing debt are capitalized
        inOther long-term assets.
        They are amortized on a straight-line basis over the term of the related
        debt and are included inInterest
        expensein the statement
        of operations. The costs of issuing equity are reflected in the statement
        of deficit.
      Indefinite-Life Intangible Assets
      Our indefinite-life intangible assets
        consist mainly of the Bell brand name, spectrum licences and television
        licences. We assess these assets for impairment in the fourth quarter
        of every year and when events or changes in circumstances indicate that
        an asset might be impaired. We calculate the impairment by deducting the
        assets fair value, based on estimates of discounted future cash
        flows or other valuation methods, from its carrying value. Any excess
        is deducted from earnings.
      Goodwill We
        assess goodwill of individual reporting units for impairment in the fourth
        quarter of every year and when events or changes in circumstances indicate
        that goodwill might be impaired. We assess goodwill for impairment in
        two steps:
      we identify a potential impairment
          by comparing the fair value of a reporting unit to its carrying value.
          Fair value is based on estimates of discounted future
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

87Bell Canada
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|Translation of Foreign
        Currencies The way we account for
        a foreign operation depends on whether it is self-sustaining or integrated.
        A self-sustaining foreign operation is largely independent of the parent
        company. An integrated foreign operation depends on the parent company
        to finance or run its operations. |  | Notes to
      Consolidated Financial Statements 
      cash flows or other valuation methods.
        When the fair value of the reporting unit is less than its carrying value,
        we allocate the fair value to all of its assets and liabilities, based
        on their fair values. The amount that the fair value of the reporting
        unit exceeds the total of the amounts assigned to its assets and liabilities
        is the fair value of goodwill.
      we determine if there is an impairment
          by comparing the carrying value of goodwill to its fair value. Any excess
          is deducted from earnings.Translation of Foreign Currencies
      Self-Sustaining Foreign Operations
      For self-sustaining foreign operations,
        we use:
      the exchange rates 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 a 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, such as cash,
          accounts receivable and payable, and long-term debt
        the historical exchange rates
          for non-monetary assets and liabilities, such as capital assets
        the average exchange rates during the year for revenues
          and expenses.Translation exchange gains and losses
        are included inOther incomein the statement of operations.
      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 historical exchange rates
          for non-monetary assets and liabilities
        the average exchange rates during the year for revenues
          and expenses.Translation exchange gains and losses
        are included inOther incomein the statement of operations.
      Derivative Financial Instruments
      We use various derivative financial
        instruments to hedge against:
      interest rate risk
        foreign exchange rate risk
        changes in the price ofBCE Inc.
          common shares relating to special compensation payments(SCPs).We do not use derivative financial
        instruments for speculative or trading purposes.      We
        document all relationships between derivatives and the items they hedge,
        and our risk management objective and strategy for using various hedges.
        This process includes linking every derivative to:
      a specific asset or liability
          on the balance sheet, or
        a specific net investment in
          self-sustaining foreign operations, or
        a specific firm commitment, or
        an anticipated transaction.We assess how effective derivatives
        are in managing risk when the hedge is put in place, and on an ongoing
        basis. If a hedge becomes ineffective, we stop using hedge accounting.      We
        follow these policies when accounting for derivatives:
      foreign exchange translation gains
          or losses on the net investment in foreign subsidiaries are recorded
          as a currency translation adjustment. Any realized or unrealized gains
          or losses on instruments covering the net investment are also recognized
          as a currency translation adjustment.
        deferred gains or losses relating
          to derivatives that qualify for hedge accounting are recognized in earnings
          when the hedged item is sold or when the anticipated transaction is
          ended early
        gains and losses related to hedges
          of anticipated transactions are recognized in earnings or are recorded
          as adjustments of carrying values when the transaction takes place
        derivatives that are economic
          hedges, but do not qualify for hedge accounting, are recognized at fair
          value. We record the change in fair value in earnings.
        any premiums paid for financial
          instruments are deferred and expensed to earnings over the term of the
          contract
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

88Bell Canada
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| |  | any forward premiums or discounts
          on forward foreign exchange contracts that are used to hedge long-term
          debt denominated in foreign currencies are amortized as an adjustment
          to interest expense over the term of the forward contract.The following describes our policies
        for specific kinds 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 interest 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 inOther long-term assets or liabilities.
      Foreign Currency Swap Agreements
      We use foreign currency swap agreements
        to manage the foreign 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/or 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. Unrealized gains
        or losses are included in Other
        long-term assets or liabilities.
      Forward Contracts We
        use forward contracts to manage:
      designated in foreign currencies.
          We designate these agreements as hedges of firm commitments to pay the
          principal in the foreign currency.
        the exposure to anticipated forecasted
          transactions denominated in foreign currencies. We designate these agreements
          as hedges of future cash flows.
        changes in the price ofBCE Inc.
          common shares relating toSCPs.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 inOther
        long-term assets or liabilities.
      Employee Benefit Plans (i)
        Defined Benefit Plans
      We maintain defined benefit (DB)
        plans that provide pension benefits for some of our employees. Benefits
        are based on the employees length of service and average rate of
        pay during his or her last five years of service. Most employees are not
        required to contribute to the plans. The plans provide increasing pension
        benefits to help protect a portion of the income of retired employees
        against inflation.      We
        are responsible for adequately funding ourDBpension plans. We make contributions
        to them based on various actuarial cost methods that are permitted by
        pension regulatory bodies. Contributions reflect actuarial assumptions
        about future investment returns, salary projections and future service
        benefits.      We
        also provide other future benefits to some of our employees, including:
      health-care and life insurance
          benefits during retirement
        other post-employment benefits,
          including 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 do not fund the other employee
        future benefit plans.      We
        accrue our obligations and related costs under employee benefit plans,
        net of the fair value of plan assets. Pension and other retirement benefit
        costs are determined using:
      the projected benefit method,
          prorated on years of service, which takes into account future pay levels
        a discount rate based on market interest rates of
          high-quality bonds with maturities that match the timing and benefits
          expected to be paid by the plans
        managements best estimate of the plans expected
          investment performance, pay increases, retirement ages of employees
          and expected health-care costs.We value pension plan assets at
        fair value, which is determined using current market values. We use a
        market-related value to calculate the expected return on plan assets.
        This value is based on a four-year weighted average of the fair value
        of the pension plan assets.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

89Bell Canada
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|CurtailmentA curtailment is a significant reduction in plan benefits that can
        result when a DB pension plan is amended or restructured. Types of curtailments
        include:
      a
            reduction in 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.SettlementA 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. |  | Notes to
      Consolidated Financial Statements 
      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 day of the amendment. This represents the period that we expect
        to realize economic benefits from the amendments.      Transitional
        assets and obligations that arose upon implementation of new accounting
        standards for employee future benefits are amortized on a straight-line
        basis over the average remaining service period of employees expected
        to receive benefits under the plans.      We
        use the corridor approach to recognize actuarial gains and losses into
        earnings. First we deduct10%of the benefit obligation or
        the market-related value of plan assets, whichever is greater, from the
        unamortized net actuarial gains or losses based on a market-related value
        basis. Then we amortize the excess over the average remaining service
        period of active employees. At the end of2004,
        this ranges from approximately10to17years, with
        a weighted average period of14years.      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.      December31is the measurement date for
        most of our employee benefit plans. Our actuaries perform a valuation
        at least every three years to determine the actuarial present value of
        the accrued pension and other retirement benefits. The last actuarial
        valuation of most of our pension plans was performed on January1,2003.
      (ii) Defined Contribution Plans
      Some of our subsidiaries offer defined
        contribution (DC)
        plans that provide certain employees with pension benefits.      In
        January2005,BCE Inc.
        and Bell  Canada introduced aDCpension plan for its employees.
        Current employees had the option of retaining theirDBcoverage or switching to the newDCcoverage.      Going
        forward, most new employees will participate in theDCpension arrangements.      We
        recognize a pension cost forDCplans when the employee provides
        service to the company, essentially coinciding with the cash contributions
        to the plan.
      Income TaxesCurrent income tax expense is the estimated income taxes payable for the
      current year before any refunds or the use of losses incurred in previous
      years. We use the asset and liability method to account for future income
      taxes. 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, on an after-tax basis
        the benefit of losses and non-refundable
          tax credits that will more likely than not be realized and carried forward
          to future years to reduce income taxes.We calculate future income taxes
        using the rates enacted by tax law and those substantively enacted. A
        tax law is substantively enacted when it has been tabled in the legislature
        but may not have been passed into law. The effect of a change in tax rates
        on future income tax assets and liabilities is included in earnings in
        the period when the change is substantively enacted.
      Subscriber Acquisition Costs
      We expense all subscriber acquisition
        costs when services are activated.
      Stock-Based Compensation Plans
      BCE Inc.s
        stock-based compensation plans include employee savings plans (ESPs),
        restricted share units (RSUs)
        and long-term incentive plans. Before2000,
        the long-term incentive plans often includedSCPs.      Starting
        in2004,
        we made a number of prospective changes to the key features in our stock-based
        compensation plans, including:
      the value of the long-term incentive
          plans where stock options are granted was reduced to account for the
          introduction of a new mid-term incentive plan that usesRSUs
        setting specific performance targets
          that must be met before the option can be exercised.We credit to share capital any amount
        employees pay when they exercise their stock options or buy shares. We
        recognize the contributionsBCE Inc. makes under ESPs as compensation expense. We also recognize
        compensation expense or recovery relating toSCPs.
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90    Bell Canada
  Enterprises2004Annual
  Report

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|Black-Scholes
        Option Pricing Model
      The Black-Scholes option pricing
        model is a financial model we use to calculate the weighted average fair
        value of a stock option granted using four key assumptions: stock dividend
        yield, expected stock volatility, risk-free interest rate and expected
        life of the stock option. |  | RSUsFor eachRSUgranted we record a compensation
      expense that equals the market value of aBCE 
      Inc. common share at the date
      of grant prorated over the vesting period. The compensation expense is adjusted
      for future changes in the market value ofBCE Inc. common shares until the vesting date. The cumulative
      effect of the change in value is recognized in the period of the change.
      VestedRSUs
      will be paid inBCE Inc.
      common shares purchased on the open market or in cash, as the holder chooses,
      as long as minimum share ownership requirements are met. Stock
        OptionsEffective January2003,
        we use the fair-value based method to account for employee stock options
        and the Black-Scholes option pricing model to measure the compensation
        expense of options. This method is used for options granted on or after
        January1,2002. For options that contain specific performance-based targets,
        this is reflected in the calculation of the weighted average fair value
        per option granted.Recent Changes to Accounting Standards
      Asset Retirement ObligationsEffective January1,2004,
      we retroactively adopted section3110of theCICA
      Handbook,Asset
      Retirement Obligations. This
      section describes how to recognize and measure liabilities related to the
      legal obligations of retiring property, plant and equipment.      These
      obligations are initially measured at fair value and are adjusted for any
      changes resulting from age, and any changes to the timing or the amount
      of the original estimate of undiscounted cash flows. The asset retirement
      cost is capitalized as part of the related assets and is amortized into
      earnings over time.      The
      impact on our consolidated statements of operations for the year ended December31,2004and the
      comparative periods was negligible. At December31,2003and2002,
      this resulted in: an increase of$6million in capital assets
        an increase of$17million in other long-term
          liabilities
        a decrease of$4million in future income
          tax liabilities
        an increase of$7million in the deficit.Impairment of Long-Lived Assets
      Effective January1,2004,
        we adopted section3063of theCICA Handbook,Impairment of Long-Lived
        Assets. Adopting this section affects how we recognize,
        measure and disclose the impairment of long-lived assets.      An
        impairment loss is recognized on a long-lived asset to be held and used
        when its carrying value exceeds the total undiscounted cash flows expected
        from its use and disposition.      Before
        January1,2004,
        the amount of the loss was determined by deducting the assets net
        recoverable amount (based on undiscounted cash flows expected from its
        use and disposition) from its carrying value.      After
        January1,2004,
        the amount of the loss is determined by deducting the assets fair
        value (based on discounted cash flows expected from its use and disposition)
        from its carrying value.
      Hedging RelationshipsEffective January1,2004,
      we adopted Accounting Guideline13,Hedging Relationships.
      The guideline specifies when hedge accounting can be used, and includes
      requirements for documenting and designating hedge relationships. It also
      requires companies to regularly and frequently assess the effectiveness
      of these hedging relationships. The guideline does not change the method
      of accounting for derivative instruments in hedging relationships.      Adopting
      this guideline did not affect our consolidated financial statements. All
      outstanding hedges that previously qualified for hedge accounting continue
      to qualify for hedge accounting under this guideline. Consolidation
        of Variable Interest Entities Effective July1,2003,
        we adopted Accounting Guideline15,Consolidation of Variable
        Interest Entities, on a
        retroactive basis without a restatement of previous periods. This resulted
        in an increase of$25million
        in the deficit at July1,2003.
        At December31,2004we had no interest in these types of entities.
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91Bell Canada
  Enterprises2004Annual
  Report

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| |  | Notes to
      Consolidated Financial Statements 
      Future Changes to Accounting Standards
      Financial InstrumentsThe CICA issued revisions to section 3860 of the CICA Handbook, Financial
      Instruments  Disclosure and Presentation. The revisions change
      the accounting for certain financial instruments that have liability and
      equity characteristics. It requires instruments that meet specific criteria
      to be classified as liabilities on the balance sheet. Some of these financial
      instruments were previously classified as equities.
           These revisions come into effect on January 1,
      2005. Because we do not have any instruments with these characteristics,
      adopting this section on January 1, 2005 will not affect our consolidated
      financial statements. Comprehensive
        IncomeThe CICA issued section 1530 of
        the CICA Handbook, Comprehensive Income. The section is effective
        for fiscal years beginning on or after October  1, 2006. It describes
        how to report and disclose comprehensive income and its components.
             Comprehensive income is the change in a
        companys net assets that results from transactions, events and circumstances
        from sources other than the companys shareholders. It includes items
        that would not normally be included in net earnings, such as:changes in the currency translation
          adjustment relating to self-sustaining foreign operations
        unrealized gains or losses on
          available-for-sale investments.The CICA also made changes to
        section 3250 of the CICA Handbook, Surplus, and reissued it as
        section 3251, Equity. The section is also effective for fiscal
        years beginning on or after October 1, 2006. The changes in how to
        report and disclose equity and changes in equity are consistent with the
        new requirements of section 1530, Comprehensive Income.
             Adopting these sections on January 1,
        2007 will require us to start reporting the following items in the consolidated
        financial statements:
      comprehensive income and its
          components
        accumulated other comprehensive
          income and its components.Financial Instruments  Recognition and Measurement
      The CICA issued section 3855 of
        the CICA Handbook, Financial Instruments  Recognition and Measurement.
        The section is effective for fiscal years beginning on or after October 1,
        2006. It describes the standards for recognizing and measuring financial
        assets, financial liabilities and non-financial derivatives.
      This section requires that:
      all financial assets be measured
          at fair value, with some exceptions like loans and investments that
          are classified as held-to-maturity
        all financial liabilities be measured
          at fair value if they are derivatives or classified as held for trading
          purposes. Other financial liabilities are measured at their carrying
          value.
        all derivative financial instruments
          be measured at fair value, even when they are part of a hedging relationship.We are currently evaluating the
        impact on our consolidated financial statements of adopting this section
        on January 1, 2007.
      Hedges
      The CICA recently issued section 3865 of the CICA Handbook, Hedges.
      The section is effective for fiscal years beginning on or after October 1,
      2006, and describes when and how hedge accounting can be used.
           Hedging is an activity used by a company to
      change an exposure to one or more risks by creating an offset between:
      changes in the fair value of a hedged item and a hedging
          item
        changes in the cash flows attributable
          to a hedged item and a hedging item, or
        changes resulting from a risk
          exposure relating to a hedged item and a hedging item.Hedge accounting makes sure that
        all gains, losses, revenues and expenses from the derivative and the item
        it hedges are recorded in the statement of operations in the same period.
             We are currently evaluating the impact on
        our consolidated financial statements of adopting this section on January 1,
        2007.
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92Bell Canada
  Enterprises 2004 Annual Report

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| |  | Note 2:
        Segmented Information
      In the first quarter of 2004,
        we changed our internal organizational structure and started reporting
        our results of operations under five segments: Consumer, Business,
        Aliant, Other Bell Canadaand Other BCE. Our
        reporting structure reflects how we manage our business and how we classify
        our operations for planning and measuring performance.
             The Consumer segment provides local telephone,
        long distance, wireless, Internet access, video and other services to
        Bell Canadas residential customers, mainly in Ontario and Québec.
        Wireless services are also offered in Western Canada and video services
        are provided nationwide.
             The Business segment provides local telephone,
        long distance, wireless, data (including Internet access) and other services
        to Bell Canadas small and medium-sized businesses and large
        enterprise customers in Ontario and Québec, as well as business
        customers in Western Canada.
             The Aliant segment provides local telephone,
        long distance, wireless, data (including Internet access) and other services
        to residential and business customers in Atlantic Canada, and represents
        the operations of our subsidiary, Aliant Inc. (Aliant). At December 31,
        2004, Bell  Canada owned 53% of Aliant. The remaining 47% was publicly
        held.
             The Other Bell Canada segment includes
        Bell Canadas Wholesale business, and the financial results
        of Télébec Limited Partnership (Télébec),
        NorthernTel Limited Partnership (NorthernTel) and Northwestel Inc.
        (Northwestel). Our Wholesale business provides local telephone, long distance,
        wireless, data and other services to competitors who resell these services.
        Télébec, NorthernTel and Northwestel provide telecommunications
        services to less populated areas of Québec, Ontario and Canadas
        northern territories. At December 31, 2004, Bell Canada owned
        100% of Northwestel and 63% of Télébec and NorthernTel.
        The Bell Nordiq Income Fund owned the remaining 37%.
             The Other BCE segment includes the
        financial results of our media, satellite and information technology (IT)
        businesses as well as the costs incurred by our corporate office. This
        segment includes Bell Globemedia Inc. (Bell Globemedia),
        Telesat Canada (Telesat) and CGI Group Inc. (CGI).
             Bell Globemedia provides information
        and entertainment services to Canadian customers and access to distinctive
        Canadian content. It includes CTV Inc. (CTV), Canadas leading private
        broadcaster, and The Globe and Mail, Canadas leading national
        newspaper. BCE Inc. owns 68.5% of Bell  Globemedia. The Woodbridge
        Company Limited and affiliates own the remaining 31.5%.
             Telesat provides satellite communications
        and systems management and is a consultant in establishing, operating
        and upgrading satellite systems worldwide. BCE Inc. owns 100% of
        Telesat.
             CGI provides a full range of IT services
        and business solutions including outsourcing, systems development and
        integration and consulting. CGI is publicly traded. BCE Inc. owns
        29% of CGI.
             In classifying our operations for planning
        and measuring performance, all restructuring and other items at Bell Canada
        and its subsidiaries except for Aliant are included in the Other Bell
        Canada segment and not allocated to the Consumer or Business segments.
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93Bell Canada
  Enterprises 2004 Annual Report

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|The accounting policies used
        by the segments are the same as those we describe in Note 1, Significant
        Accounting Policies. Segments negotiate sales with each other as if
        they were unrelated parties.
             We measure the profitability of each segment
        based on its operating income.
             Our operations, including most of our revenues,
        capital assets and goodwill, are located in Canada. |                                     | Notes
      to Consolidated Financial Statements 
      The table below is a summary of
        financial information by segment. We have not presented comparative figures
        for2002because
        information is not available.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | CONSUMER                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | For the year endedDecember 31, 2004 |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Operating
      revenues            |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | External
        customers          | 7,440                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Inter-segment                       | 62                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Total
        operating revenues    | 7,502                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Operating
        income (loss)     | 2,119                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Other
        income                |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Interest
        expense            |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Income
        taxes                |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Non-controlling
        interest    |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Earnings
        from continuing operations                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Segment
        assets                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Investments
        at equity                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Capital
        expenditures                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | For the year endedDecember 31, 2003                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Operating
        revenues                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | External
        customers                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Inter-segment                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Total
        operating revenues                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Operating
        income                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Other
        income                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Interest
        expense                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Income
        taxes                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Non-controlling
        interest                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Earnings
        from continuing operations                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Segment
        assets                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Investments
        at equity                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     | Capital
        expenditures                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                     |                                                                                                                                                                                                                                         

94Bell Canada
  Enterprises 2004 Annual Report

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|AGTI
        provides business and IT consulting, project and change management, and
        productivity improvement services.
      Infostream is a systems and storage
        technology firm that provides networking solutions for voice over Internet
        protocol (VoIP), storage area networks and network management.
      Charon is a full-service IT solutions
        provider that specializes in server-based computing, systems integration,
        IT security, software development and IT consulting.
      AMS is a business and technology
        consulting firm to government and to the health-care, financial services
        and telecommunications industries.
      Elix offers technology consulting,
        integration and implementation of call routing and management systems,
        IT application integration, and design and implementation of electronic
        voice-driven response systems.
      Cognicase provides technology
        services, including implementing e-business solutions. |  | Note 3:
        Business Acquisitions and Dispositions
      The consolidated statements of operations
        include the results of acquired businesses from the date they were purchased.
      Business AcquisitionsWe made a number of business acquisitions in 2004, including: Canadian operations
          of 360networks Corporation (360networks)–
          In November 2004, Bell Canada acquired the Canadian operations
          of 360networks, a telecommunications service provider. The purchase
          included the shares of 360networks’ subsidiary GT Group Telecom
          Services Corporation and certain related interconnected U.S. network
          assets. Following the purchase, Bell Canada sold the retail customer
          operations in Central and Eastern Canada to Call-Net Enterprises Inc.
          (Call-Net). For a share of the revenues, Bell Canada now provides
          to Call-Net network facilities and other operations and support services
          so Call-Net can service its new customer base. The fair value of the
          net assets acquired exceeded the purchase price. For accounting purposes,
          the excess was eliminated by: 
          – reducing the amounts assigned to the acquired non-monetary assets
          to nil
          – recognizing the balance of $69 million as an extraordinary gain
          in our consolidated statement of operations.
        Our 29% proportionate
          share of CGI’s acquisition of AGTI Consulting Services Inc.
          (AGTI) – In November 2004, CGI
          acquired 51% of AGTI. CGI now owns 100% of AGTI. Prior to the acquisition,
          CGI proportionately consolidated AGTI.
        DownEast Mobility Limited
          (DownEast)– In October 2004,
          Aliant acquired 100% of the outstanding shares of DownEast, a communication
          solutions retailer.
        Bell West– In August 2004, Bell Canada acquired
          Manitoba Telecom Services Inc.’s (MTS) 40% interest in Bell West.
          Bell Canada now owns 100% of Bell West.
        Infostream Technologies Inc.
          (Infostream)– In May 2004, Bell Canada
          acquired 100% of the outstanding shares of Infostream.
        Charon Systems Inc.
          (Charon) – In May 2004, Bell Canada
          acquired 100% of the assets of Charon.
        Our 29% proportionate
          share of CGI’s acquisition of American Management Systems Incorporated
          (AMS)– In May 2004, CGI acquired
          100% of the outstanding common shares of AMS.
        Elix Inc. (Elix)– In March 2004, Bell Canada
          acquired 75.8% of the outstanding shares of Elix.Accutel Conferencing
          Systems Inc. (Canada) and Accutel Conferencing Systems Corp. (U.S.)
          (collectively Accutel)– In February 2004,
          Bell Canada acquired 100% of the outstanding shares of Accutel,
          which provides teleconferencing services.During 2003, CGI acquired 100%
        of the outstanding common shares of Cognicase Inc. (Cognicase). It
        issued Class A subordinate shares to pay part of the purchase price, which
        reduced BCEs equity interest in CGI to 29.9% from 31.5% . BCE recognized
        a dilution gain of $5 million.
             Of the goodwill acquired in 2004, $18 million
        was deductible for tax purposes. In 2003, none of the goodwill acquired
        was deductible for tax purposes.
             The table on the next page provides a summary
        of all business acquisitions made in 2004 and 2003. The purchase price
        allocation for all 2004 acquisitions is based on estimates. The final
        purchase price allocation for each business acquisition is expected to
        be completed within 12 months of the acquisition date.
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95Bell Canada
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| |  | Notes
      to Consolidated Financial Statements                                                                                                                                                                                                                                 
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  | Consideration
        received:                                                                                                                                                                                                                                                  
| |  | Non-cash
        working capital                                                                                                                                                                                                                                                 
| |  | Capital
        assets                                                                                                                                                                                                                                                           
| |  | Other
        long-term assets                                                                                                                                                                                                                                                   
| |  | Goodwill                                                                                                                                                                                                                                                                         
| |  | Long-term
        debt                                                                                                                                                                                                                                                           
| |  | Other
        long-term liabilities                                                                                                                                                                                                                                              
| |  | Non-controlling
        interest                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  | Cash and cash equivalents(bank
        indebtedness) at acquisition                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                  
| |  | Net
        assets acquired                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                  
| |  | Extraordinary
        gain                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                  
| |  | Consideration
        given:                                                                                                                                                                                                                                                     
| |  | Cash                                                                                                                                                                                                                                                                             
| |  | Acquisition
        costs                                                                                                                                                                                                                                                        
| |  | Future
        cash payment                                                                                                                                                                                                                                                      
| |  | Issuance
        of 582,081 Aliant common shares                                                                                                                                                                                                                                 
| |  | Issuance
        of 19,850,245 CGI                                                                                                                                                                                                                                               
| |  | Class
        A subordinate shares (1)                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                  
| |  | (1) The
      value of the CGI shares that were issued as payment was calculated using
      the weighted average closing share price on the Toronto Stock Exchange for
      the 10 trading days before the day the terms of the acquisition were agreed
      on and announced.

| |  | Business Disposition Sale
        of Certen Inc. (Certen)
      On July 2, 2003, Bell Canada
        sold its 89.9% ownership interest in Certen to a subsidiary of Amdocs
        Limited for $89 million in cash.
             The carrying value of Certen’s net
        assets was $159 million at the time of the sale. Certen had total assets
        of $450 million, including $34 million in cash and cash equivalents, and
        total liabilities of $291 million.
             At the time of the sale, Bell Canada
        extended the remaining term of its contract with Certen and Amdocs Limited
        from four years to seven years for the out-sourcing of billing operations
        and the development of customer care and billing solutions.
             Bell Canada received a perpetual right to
        use and modify the intellectual property relating to the billing system.
        It recorded the perpetual right as an intangible asset of $494 million
        that will be amortized against earnings over the remaining life of the
        contract.
             Bell Canada recorded a liability of $392
        million. This represented its future payments to Certen over the remaining
        life of the contract for the development of Bell Canada’s billing
        system. This liability will be reduced as Bell Canada makes payments
        to Certen.
             The future income tax liability relating
        to the intangible asset and long-term liability was $32 million. The transaction
        did not result in any gain or loss for Bell Canada. Before the sale,
        Certen’s results of operations were presented in the Other Bell Canada
        segment.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

96Bell
  Canada Enterprises 2004 Annual Report

---



| |  | Note 4:
      Restructuring and Other Items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Employee departure programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Provision for contract loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Settlement with MTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Write-down of Bell Canada’s accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Write-off of deferred costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Pay equity settlement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Other charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Restructuring and other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | 2004Employee Departure Program 
        Bell Canada
      In2004,
        we recorded a pre-tax charge of$985million related to the employee
        departure program that Bell Canada announced in June2004.
        The cost was included in the Other Bell Canada segment. The program
        consisted of two phases:
      an early retirement plan;3,965employees chose to receive
          a package that included a cash allowance, immediate pension benefits,
          an additional guaranteed pension payable up to65years of age, career transition
          services and post-employment benefits
        a departure plan;1,087employees chose to receive
          a special cash allowance.Almost all of the employees who
        chose to take advantage of the program left Bell Canada in2004.
        The rest will leave during2005.     We
        also recorded a pre-tax charge of$11million for relocating employees
        and closing real estate facilities that are no longer needed because of
        the employee departure program. We expect to spend approximately$65million in the future for similar
        costs that will be expensed as incurred.
      Employee Departure Program –
        Aliant
      Aliant recorded a pre-tax charge
        of$67million.
        Under the plan,693employees chose to receive a cash allowance. The program
        is expected to be completed by the end of2005.
      The table below provides a summary
        of the costs recognized in2004,
        as well as the corresponding liability at December31,2004.

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | BELL   |   |        |  | CONSOLI- |  
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------ | - | ------ |  | -------- | -
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | CANADA |   | ALIANT |  | DATED    |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       
| |  | Employee departure program
      costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 985    |   | 67     |  | 1,052    |  
| |  | Less:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |        |  |          |  
| |  | Cash
        payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (194   | ) | –      |  | (194     | )
| |  | Pension
        and other post- retirement benefits applied to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   |        |  |          |  
| |  | Other
        long-term assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (660   | ) | –      |  | (660     | )
| |  | Other
        long-term liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (11    | ) | –      |  | (11      | )
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       
| |  | Balance
        in accounts payable and accrued liabilities at December 31,
        2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 120    |   | 67     |  | 187      |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       
| |  | Provision
        for Contract LossIn2001,
        we entered into a contract with the Government of Alberta to build a next-generation
        network to bring high-speed Internet and broadband capabilities to rural
        communities in Alberta. Mechanical construction of the network was completed
        in December2004.
        We identified cost overruns on the construction contract and recorded
        an additional provision of$128million in2004.
      Settlement with MTSOn May 20, 2004, Bell Canada
        filed a lawsuit against MTS after MTS announced it would purchase Allstream Inc.
        (Allstream). Bell Canada sought damages and an injunction that would
        prevent MTS from breaching the terms and conditions of the commercial
        agreements it had with Bell Canada. On June 3, 2004, Bell Canada
        also filed a lawsuit against Allstream seeking damages related to the
        same announcement.
             On June 30, 2004, BCE Inc. reached
        an agreement with MTS to settle the lawsuits. The terms of the settlement
        included:
      a payment of $75 million by MTS
          to Bell Canada for unwinding various commercial agreements. This
          settlement was recorded in the second quarter of 2004 and received on
          August 3, 2004.
        the removal of contractual competitive
          restrictions to allow Bell Canada and MTS to compete freely with
          each other, effective June 30, 2004
        the orderly disposition of our
          interest in MTS. Our voting rights in MTS were waived after receiving
          the |       

97Bell
  Canada Enterprises 2004 Annual Report

---



| |  | Notes to
      Consolidated Financial Statements 
      $75 million payment.
        We sold our interest in MTS in September 2004. See Note 5,Other
        Income, for more information.
      a premium payment to us
          by MTS in the event there is a change in control of MTS before 2006.
          The payment will equal the appreciation in MTSs share price from
          the time of our divestiture to the time of any takeover transaction.Other ChargesDuring 2004, we recorded other pre-tax charges totalling $108 million.
      These costs consisted mostly of future lease costs for facilities that were
      no longer needed, asset write-downs and other provisions, net of a reversal
      of previously recorded restructuring charges that were no longer necessary
      because of the introduction of a new employee departure program.
      2003Restructuring of Xwave Solutions
        Inc.
      Aliant recorded a pre-tax
        restructuring charge of $15 million in 2003. This was a result of
        a restructuring plan at its subsidiary Xwave Solutions Inc. Costs
        associated with the restructuring include severance and related benefits,
        technology lease cancellation penalties and real estate rationalization
        costs. The restructuring was completed in 2004.
      Bell Canada Charges In 2003, Bell Canada
        recorded other charges of $65 million that related to various asset
        write-downs and other provisions. These charges were offset by a credit
        of $66 million relating to the reversal of the restructuring charges
        recorded in 2002, which were no longer necessary because fewer employees
        were terminated than expected. This was because of an increase in the
        number of employees being transferred to other positions within Bell Canada.
      2002Restructuring
        and Other Charges at Bell Canada
      Bell Canada recorded a pre-tax
        charge of $302 million in 2002. This included restructuring charges
        of $232 million and other charges of $70 million.
             The restructuring charges were mainly from
        streamlining Bell Canadas management, line and other support
        functions. They included severance for approximately 1,700 employees,
        enhanced pension benefits and other employee costs. The restructuring
        was largely completed in 2003. 
             Other charges consisted mainly of various accounts
        receivable write-downs relating to billing adjustments and unreconciled
        balances from previous years that were identified in 2002.
      Write-off of Deferred Costs BCE Inc. recorded a
        pre-tax charge of $93 million in 2002. This represented a write-off
        of deferred costs relating to various convergence initiatives after it
        was determined that these costs would not be recovered.
      Pay Equity Settlement On September 25, 2002,
        the members of the Canadian Telecommunications Employees Association
        (CTEA) ratified a settlement reached between the CTEA and Bell Canada
        relating to the 1994 pay equity complaints that the CTEA had filed on
        behalf of its members before the Canadian Human Rights Commission. The
        settlement included a cash payout of $128 million and related pension
        benefits of approximately $50 million.As
        a result of the settlement, Bell Canada recorded a charge of $79 million
        in the third quarter of 2002. The charge is equal to the $128 million
        cash payout, less a previously recorded provision. We are deferring and
        amortizing the related pension benefits into earnings over the estimated
        average remaining service life of active employees and the estimated average
        remaining life of retired employees.
      Write-down of Bell Canadas
        Accounts Receivable
      At the same time it was developing
        its new billing system, Bell Canada adopted a new and more precise
        method for analyzing receivables by customer and by product. This method
        allows us to more accurately determine the validity of amounts that customers
        owe to Bell Canada. The analysis indicated that a write-down of accounts
        receivable of $272 million was appropriate.Since
        these amounts came from legacy billing systems and processes, Bell Canada
        carried out a detailed review of billings and adjustments for the period
        from 1997
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

98Bell Canada
  Enterprises 2004 Annual Report

---



| |  | to 2002.
      It determined that these amounts were the cumulative result of a series of
      individually immaterial events and transactions relating to its legacy accounts
      receivable systems dating back to the early 1990s.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Note 5:
      Other Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Net gains
      on investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Foreign currency
      gains                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Other income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | In 2004, net gains on investments of $319 million included:
      a gain of $108 million from
          the sale of Bell Canadas remaining 3.24% interest in YPG
          General Partner Inc. for net cash proceeds of $123 million
        a gain of $217 million realized
          from the sale of BCE Inc.s 15.96% interest in MTS for net
          cash proceeds of $584 million. On August 1, 2004, the MTS
          shares were transferred from Bell Canada to BCE Inc. as part
          of a corporate reorganization. The purpose of this reorganization was
          to ensure that capital loss carryforwards at BCE Inc. would be
          available to be utilized against the gain on the sale of the MTS shares.
        other net losses on investments
          of $6 million.Net gains on investments of $76 million
        in 2003 were mainly from:
      a $120 million gain from
          the sale of a 3.66% interest in YPG General Partner Inc. for net
          proceeds of $135 million in cash
        a $44 million loss from
          the write-down of a number of our cost-accounted investments.Net gains on investments of $2,401
        million in 2002 were mainly from:
      selling the directories business
          ($2.3 billion)
        selling a 37% interest in each
          of Télébec andNorthernTel when the Bell Nordiq Income Fund was created ($222
          million)
        writing down our cost-accounted
          investment in Nortel Networks Corporation (Nortel) ($98 million).Note 6:
        Impairment Charge
      In 2002, we completed our annual
        impairment test for goodwill for all of our reporting units. As a result,
        we recognized a charge of $765 million to pre-tax earnings relating
        to impaired goodwill of reporting units in Bell Globemedia ($715
        million) and Aliant ($50 million). In each case, the goodwill was
        written down to its estimated fair value, which was determined based on
        estimates of discounted future cash flows and confirmed by market-related
        values.The
        main factor contributing to the impairment at Bell Globemedia was
        a revised estimate of future cash flows, which reflected managements
        decision to scale back its trials in convergence products and other non-core
        businesses. Market conditions for the media business also contributed
        to the impairment.
             The write-down at Aliant was a result of
        poor market conditions in the information technology business.

| |  | Note 7:
      Interest Expense          
| |  | ----------------------------------------
| |  |                                         
| |  |                                         
| |  | Interest expense
      on long-term debt
| |  | Interest expense
      on other debt    
| |  |                                         
| |  | Total interest
      expense            
| |  |                                         

| |  | Note 8:
        Income Taxes
      The table below is a reconciliation
        of income tax expense at Canadian statutory rates of 34.3% in 2004,
        35.4% in 2003 and 37.4% in 2002, and the amount of reported
        income tax expense in the statements of operations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                   
| |  | Income taxes
      computed at statutory rates                                                                                                                                                                                                                                    
| |  | Net gains
      on investments                                                                                                                                                                                                                                                    
| |  | Large corporations
      tax                                                                                                                                                                                                                                                      
| |  | Goodwill impairment                                                                                                                                                                                                                                                               
| |  | Other                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                   
| |  | Total income
      tax expense                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                   

99Bell Canada
  Enterprises 2004 Annual Report

---



|Emergis provides e-business solutions
        to the financial services industry in North America and the health-care
        industry in Canada. It automates transactions between companies and allows
        them to interact and transact electronically. Before Emergis sold its
        Security business it also provided organizations with the related security
        services. Before Emergis sold its US Health operations, it also operated
        cost containment networks that process medical claims for health-care
        payers, including insurance companies and self-insured entities. |                                                                                                                                                                                                                                                     | Notes
      to Consolidated Financial Statements 
      The table below shows the significant
        components of income tax expense relating to earnings from continuing
        operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                     | 2004                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                     |                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Current income
      taxes                                                                                                                                                                                                                          | 744                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Future income
      taxes                                                                                                                                                                                                                           |                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Utilization
        (recognition) of loss carryforwards                                                                                                                                                                                             | 38                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Change
        in statutory rate                                                                                                                                                                                                                    | 2                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Change
        in temporary differences and other                                                                                                                                                                                                   | (74                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                     |                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Total income
      tax expense                                                                                                                                                                                                                      | 710                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                     |                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 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, as well as tax loss carryforwards.

| |  |                                                         | 2004   |   | 2003   |  
| |  | ------------------------------------------------------- | ------ | - | ------ | -
| |  |                                                         |       
| |  | Non-capital
      loss carryforwards                    | 826    |   | 467    |  
| |  | Capital loss
      carryforwards                        | 23     |   | 22     |  
| |  | Capital assets                                          | (348   | ) | (176   | )
| |  | Indefinite-life
      intangible assets                 | (339   | ) | (363   | )
| |  | Employee benefit
      plans                            | 91     |   | (148   | )
| |  | Investment
      tax credits carryforwards              | 126    |   |       |  
| |  | Investments                                             | 49     |   | 46     |  
| |  | Other                                                   | (878   | ) | (754   | )
| |  |                                                         |       
| |  | Total future
      income taxes                         | (450   | ) | (906   | )
| |  |                                                         |       
| |  |                                                         |        |   |        |  
| |  | Future income
      taxes are comprised of:             |        |   |        |  
| |  | Future
        income tax asset  current portion       | 489    |   | 197    |  
| |  | Future
        income tax asset  long-term portion     | 772    |   | 704    |  
| |  | Future
        income tax liability  current portion   | (16    | ) | (13    | )
| |  | Future
        income tax liability  long-term portion | (1,695 | ) | (1,794 | )
| |  |                                                         |       
| |  | Total
      future income taxes                         | (450   | ) | (906   | )
| |  |                                                         |       

| |  | At December 31, 2004, BCE had $3,029 million in non-capital
        loss carryforwards. We:
      recognized a future tax asset
          of $826 million for financial reporting purposes for approximately
          $2,425  million of the non-capital loss carryforwards. Of the total,
          $2,319 million expires in varying annual amounts until the end
          of 2011. The balance expires in varying annual amounts from 2012 to
          2024.
        did not recognize a future tax
          asset for financial reporting purposes for approximately $604 million
          of the non-capital loss carryforwards. Of the total, $599  million
          expires in varying annual amounts until the end of 2011. The balance
          expires in varying annual amounts from 2012 to 2024.At December 31, 2004,
        BCE had $4,225 million in capital loss carryforwards, which
        can be carried forward indefinitely. We:
      recognized a future tax asset
          of $23 million for financial reporting purposes for approximately
          $102 million of the capital loss carryforwards
        did not recognize a future tax
          asset for financial reporting purposes on the balance.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Note 9:
      Discontinued Operations       
| |  | --------------------------------------------
| |  |                                             
| |  |                                             
| |  | Emergis                                     
| |  | Teleglobe Inc.
      (Teleglobe)            
| |  | Bell Canada
      International Inc. (BCI)  
| |  | Aliants
      emerging                     
| |  | business
      segment                      
| |  | Aliants
      remote                       
| |  | communications
      segment                
| |  | Other                                       
| |  |                                             
| |  | Net gain (loss) from discontinued operations
| |  |                                             

| |  | The table below is a summarized statement of operations for the discontinued
      operations.                                                                                                                   
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                  
| |  | Revenue                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                  
| |  | Operating
        gain (loss) from discontinued operations, before tax                                                                                                                                           
| |  | Gain
        (loss) from discontinued operations, before tax                                                                                                                                                     
| |  | Income
        tax recovery (expense) on operating loss (gain)                                                                                                                                                   
| |  | Income
        tax recovery (expense) on loss (gain)                                                                                                                                                             
| |  | Non-controlling
        interest                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                  
| |  | Net gain
      (loss) from                                                                                                                                                                                       
| |  | discontinued
      operations                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                  
| |  | EmergisIn May 2004, our board of directors approved the sale of our 63.9%
      interest in Emergis. In June 2004, BCE completed the sale of its
      interest in Emergis by way of a secondary public offering.



100Bell Canada
  Enterprises 2004 Annual Report

---



|Teleglobe
        provided international voice and data telecommunications services. It
        also provided retail telecommunications services through its investment
        in the Excel Communications group until the second quarter of 2002. These
        services included long distance, paging and Internet services to residential
        and business customers in North America.
      BCI developed and operated communications
        companies in markets outside Canada. Its main focus was on Latin America
        until July 2002, when it sold its interest in Telecom Américas
        Ltd. BCI held most of its investments through Telecom Américas
        Ltd.
      Aliants emerging business
        segment consisted mainly of Aliants investments in iMagicTV Inc.,
        Prexar LLC and AMI Offshore Inc. iMagicTV Inc. is a software
        development company that provides broadband TV software and solutions
        to service providers around the world. Prexar LLC is an Internet services
        provider. AMI Offshore Inc. provides process and systems control
        technical services, and contracts manufacturing solutions to offshore
        oil and gas and other industries.
      Aliants remote communications
        segment consisted of Aliants 53.2% investment in Stratos. Stratos
        offers Internet Protocol (IP), data and voice access services through
        a range of newly emerging and established technologies, including satellite
        and microwave, to customers in remote locations. |  | In
        June 2004, Bell Canada paid $49 million to Emergis for:
      the purchase of Emergis
          Security business
        the early termination of the
          Bell Legacy Contract on June 30, 2004 rather than December 31,
          2004
        the transfer of related intellectual
          property to Bell Canada.These transactions were
        recorded on a net basis. The net proceeds from the sale of Emergis were
        $285 million (net of $22 million of selling costs and a $49 million consideration
        given to Emergis). The gain on the transaction was $58 million.
             The operating loss includes a future income
        tax asset impairment charge of $56 million ($36 million after non-controlling
        interest), which Emergis recorded before the sale as a result of the unwinding
        of tax loss utilization strategies between Emergis, 4122780 Canada Inc.
        (a wholly-owned subsidiary of Emergis) and Bell Canada.
             Emergis completed the sale of its US Health
        operations in March 2004 for US$223 million in cash. The loss on
        the transaction was $87 million ($160 million after non-controlling interest
        and BCE Inc.s incremental goodwill), which was recorded in
        December 2003.
             Emergis was presented previously as a separate
        segment.
      TeleglobeEffective April 24, 2002, we started presenting the financial results
        of Teleglobe as discontinued operations. They were previously presented
        as a separate segment.
             The net gain of $39 million in 2003 relates
        mainly to the use of available loss carryforwards that were applied against
        the taxes payable relating to Bell Canadas sale of a 3.66%
        interest in the directories business and Aliants sale of Stratos
        Global Corporation (Stratos). The tax benefit associated with the remaining
        unused capital losses has not been reflected in the financial statements.
             We recorded a loss of $73 million in 2002
        for the write-down of our interest in Teleglobe to its net realizable
        value, which we determined to be zero. This loss was in addition to the
        transitional goodwill impairment charge to opening retained earnings of
        $7,516 million as of January 1, 2002, which was required by section
        3062 of the CICA Handbook.
             Effective May 15, 2002, we stopped
        consolidating Teleglobes financial results and started accounting
        for the investment at cost.
             On December 31, 2002, after obtaining
        court approval, we sold all of our common and preferred shares in Teleglobe
        to the court-appointed monitor for a nominal amount. The sale triggered
        approximately $10 billion of capital losses for tax purposes. We recorded
        a gain of $1,042 million, relating mainly to the tax benefit from:
      reinstating non-capital loss carryforwards
          that were previously used to offset gains incurred on the transactions
          related to the disposition of Nortel common shares in 2001
        applying a portion of the capital
          losses against the gain on the sale of the directories business in 2002.BCIEffective January 1, 2002, we started presenting the financial results
      of BCI as discontinued operations. They were previously presented in the
      BCE Ventures segment.
           Effective June 30, 2002, we stopped consolidating
      BCIs financial results and started accounting for our investment in
      BCI at cost. We recorded a charge of $316 million in 2002, which represented
      a writedown of the investment to our estimate of its net realizable value.
           BCI will be liquidated once all of its assets
      have been disposed of and all claims against it have been determined. A
      final distribution will be made to BCIs creditors and shareholders
      with the approval of the court. BCI is publicly traded. BCE Inc. owns
      a 62.2% interest in BCI. Aliants
        Emerging Business Segment
      Effective May 2003, we started
        presenting the financial results of Aliants emerging business segment
        as discontinued operations. They were previously presented in the Bell Canada
        segment.
             Almost all of the assets of Aliants
        emerging business segment were sold at December 31, 2003.
      Aliants Remote Communications
        Segment
      Effective December 2003,
        we started presenting the financial results of Aliants remote communications
        segment as discontinued operations. They were previously presented in
        the Bell Canada segment.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

101Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes
      to Consolidated Financial Statements 
      In
        December 2003, Aliant completed the sale of Stratos, after receiving
        the required regulatory approvals. Aliant received $340 million ($320 million
        net of selling costs) in cash for the sale. The transaction resulted in
        a gain on sale of $105 million ($48 million after taxes and
        non-controlling interest).
      Note 10:
        Earnings per Share
      The table below is a reconciliation
        of the numerator and the denominator used in the calculation of basic
        and diluted earnings per common share from continuing operations.                                                                                             
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Earnings
        from continuing operations (numerator)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Earnings
        from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Dividends
        on preferred shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Premium
        on redemption of preferred shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Earnings
        from continuing operations  basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Assumed
        exercise of put options by CGI shareholders (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Earnings
        from continuing operations  diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Weighted
        average number of common shares outstanding (denominator)(in millions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Weighted
        average number of common shares outstanding  basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Assumed
        exercise of stock options (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Assumed
        exercise of put options by CGI shareholders (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Weighted
        average number of common shares outstanding  diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | (1) 
      On July 24, 2003, BCE and CGI signed a new shareholder
      agreement. As a result, the put options were cancelled.
      (2) The calculation of the assumed exercise of stock options includes the
      effect of the average unrecognized future compensation cost of dilutive
      options. It does not include anti-dilutive options. These are options that
      would not be exercised because their exercise price is higher than the average
      market value of a BCE Inc. common share for each of the periods shown
      in the table. Including them would cause our diluted earnings per share
      to be overstated. The number of excluded options was 26,693,305 in 2004,
      22,176,302 in 2003 and 20,770,155 in 2002.

| |  | Note 11:
      Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Trade accounts
      receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Other accounts
      receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Allowance
      for doubtful accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Securitization of Accounts Receivable
      Bell Canada sold an interest
        in a pool of accounts receivable to a securitization trust for a total
        of $1 billion in cash at December 31, 2004 ($900 million
        at December 31, 2003), under a revolving sales agreement that
        came into effect on December 12, 2001. The agreement expires on December 12,
        2006. Bell Canada had a retained interest of $133 million in
        the pool of accounts receivable at December 31, 2004 ($128 million
        at December 31, 2003), which equals the amount of overcollateralization
        in the receivables it sold.
             Aliant sold an interest in a pool of accounts
        receivable to a securitization trust for a total of $125 million
        in cash at December 31, 2004 ($130 million at December 31, 2003),
        under a revolving sales agreement that came into effect on December 13,
        2001. The agreement expires on December 13, 2006. Aliant had a retained
        interest of $43 million in the pool at December 31, 2004
        ($29 million at December 31, 2003).
             Bell Canada and Aliant continue to
        service these accounts receivable. The buyers interest in the collection
        of these accounts receivable ranks ahead of the interests of Bell Canada
        and Aliant, which means that Bell Canada and Aliant are exposed to
        certain risks of default on the amount securitized. They have provided
        various credit enhancements in the form of overcollateralization and subordination
        of their 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 Bell Canadas and Aliants other assets
        if customers do not pay amounts owed on time.

102Bell Canada
  Enterprises 2004 Annual Report

---



| |  | In 2004, we recognized a pre-tax loss
        of $26 million on the revolving sale of accounts receivable for the
        combined securitizations, compared to a pre-tax loss of $33 million
        in 2003.
             The table below shows balances for the combined
        securitizations at December 31, 2004 and the assumptions that were
        used in the model on the date of transfer and at December 31, 2004.
        A 10% or 20% adverse change in each of these assumptions would have no
        significant effect on the current fair value of the retained interest.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Securitized
        interest in accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Retained
        interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Servicing
        liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Average
        accounts receivable managed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Assumptions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Cost
        of funds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Average delinquency
        ratio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Average
        net credit loss ratio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Weighted
        average life (days)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Servicing
        fee liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |  | The table below is a summary of certain cash flows received from and paid
        to the trusts during the year.
| |  | ----------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                 
| |  |                                                                                                                 
| |  | Collections
      reinvested in revolving sales                                                                 
| |  | Increase (decrease)
      in sale proceeds                                                                      
| |  |                                                                                                                 

| |  | Note 12: Other Current Assets
| |  | -----------------------------
| |  |                              
| |  |                              
| |  | Future income
      taxes    
| |  | Inventory                    
| |  | Prepaid expenses             
| |  | Other                        
| |  |                              
| |  |                              
| |  |                              

| |  | Note 13:
      Capital Assets      
| |  | -----------------------------------
| |  |                                    
| |  |                                    
| |  |                                    
| |  |                                    
| |  |                                    
| |  | Telecommunications
      assets    
| |  | Inside
        plant               
| |  | Outside
        plant              
| |  | Station
        equipment          
| |  | Machinery
      and equipment      
| |  | Buildings                          
| |  | Plant under
      construction     
| |  | Satellites                         
| |  | Land                               
| |  | Other                              
| |  |                                    
| |  | Total property, plant and equipment
| |  | Finite-life intangible assets      
| |  | Software                           
| |  | Customer relationships             
| |  | Other                              
| |  |                                    
| |  | Total
      capital assets         
| |  |                                    

103    Bell Canada
  Enterprises 2004 Annual Report

---

Notes
        to Consolidated Financial Statements 
        The cost of assets under capital
          leases was $850 million at December 31, 2004 and $842 million at
          December 31, 2003. The net book value of these assets was $531
          million at December 31, 2004, and $567 million at December 31,
          2003.
               Amortization of capital assets was $3,096
          million in 2004, $3,086 million in 2003, and $2,985 million in 2002.We
          capitalized total interest cost of $28 million in 2004, $23 million
          in 2003, and $25 million in 2002. Retirements charged to accumulated
          amortization were $1,583 million in 2004, $409 million in 2003, and
          $893 million in 2002.
        Note 14: Other Long-Term Assets


| |  |                                                                                                                                                                                                                                             | NOTES |  | 2004  |  | 2003 
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | ----- |  | -----
| |  |                                                                                                                                                                                                                                            
| |  | Accrued benefit asset                                                                                                                                                                                                                       | 23    |  | 1,128 |  | 1,728
| |  | Future income taxes                                                                                                                                                                                                                         | 8     |  | 772   |  | 704  
| |  | Investments at cost                                                                                                                                                                                                                         |       |  | 261   |  | 253  
| |  | Long-term notes and
        other receivables                                                                                                                                                                                               |       |  | 135   |  | 91   
| |  | Investments at equity                                                                                                                                                                                                                       |       |  | 110   |  | 496  
| |  | Deferred debt issuance costs                                                                                                                                                                                                                |       |  | 82    |  | 92   
| |  | Deferred development costs                                                                                                                                                                                                                  |       |  | 8     |  | 11   
| |  | Other                                                                                                                                                                                                                                       |       |  | 160   |  | 84   
| |  |                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                             |       |  | 2,656 |  | 3,459
| |  |                                                                                                                                                                                                                                            
| |  | Investments at equity include goodwill of $28 million at December 31, 2004,
      and $199 million at December 31, 2003. Amortization of deferred
      charges was $12 million in 2004, $14 million in 2003 and $39 million
      in 2002.

| |  | Note 15: Indefinite-Life Intangible Assets
| |  | ------------------------------------------
| |  |                                           
| |  |                                           
| |  | Brand
      name                          
| |  | Spectrum
      licences                   
| |  | Television
      licences                 
| |  | Cable
      licences                      
| |  |                                           
| |  | Total                                     
| |  |                                           

| |  | Note 16: Goodwill          
| |  | ---------------------------
| |  |                            
| |  |                            
| |  |                            
| |  |                            
| |  | Balance  December 31, 2003
| |  | Additions                  
| |  | Disposals                  
| |  | Foreign exchange and other 
| |  |                            
| |  | Balance  December 31, 2004
| |  |                            
| |  |                            

| |  | Note 17: Debt Due Within One Year                   
| |  | ----------------------------------------------------
| |  |                                                     
| |  |                                                     
| |  |                                                     
| |  |                                                     
| |  | Bank
      advances                                 
| |  | Notes
      payable                                 
| |  | BCE Inc.
      Series P retractable preferred shares
| |  | Long-term
      debt due within one year            
| |  |                                                     
| |  | Total
      debt due within one year                
| |  |                                                     
| |  | N/A:
      Not applicable.                          

104Bell Canada
  Enterprises2004Annual
  Report

---



| |  | Restrictions
      Some of the credit agreements:
      require us to meet specific financial
          ratios
        restrict our acquisition of capital
          assets
        restrict the payment of dividends.We are in compliance with all conditions
        and restrictions.
      Note 18: Long-Term Debt
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | BCE Inc.  Notes(a)                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Bell Canada                                                                                                                                                                                                                                                                                                           
| |  | Debentures and notes(b)                                                                                                                                                                                                                                                                                               
| |  | Subordinated debentures                                                                                                                                                                                                                                                                                               
| |  | Capital leases(c)                                                                                                                                                                                                                                                                                                     
| |  | Other                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Total  Bell Canada                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Aliant                                                                                                                                                                                                                                                                                                                
| |  | Debentures, notes and bonds(d)                                                                                                                                                                                                                                                                                        
| |  | Other                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Total  Aliant                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Bell Globemedia                                                                                                                                                                                                                                                                                                       
| |  | Revolving reducing term credit agreements(e)                                                                                                                                                                                                                                                                          
| |  | Notes                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Total  Bell Globemedia                                                                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Telesat  Notes and other                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Other                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Total debt                                                                                                                                                                                                                                                                                                            
| |  | Unamortized premium(f)                                                                                                                                                                                                                                                                                                
| |  | Less: Amount due within one year                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                       
| |  | Long-term debt                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                       

| |  | (a) BCE Inc.All notes are unsecured. BCE Inc. has the option to redeem $1.7 billion
      in notes at any time. (b)
        Bell CanadaAll debentures and notes are unsecured. They include US$200 million
        maturing in 2006 and US$200 million maturing in 2010, which have
        both been swapped into Canadian dollars; $125 million of long-term
        debt includes call options that allow for early repayment of the principal
        amounts when certain premiums are paid.(c) Bell CanadaIncludes capital leases of $84 million in 2004 and $75 million
        in 2003, net of loans receivable of $284 million in 2004
        and $300 million in 2003. These obligations were from agreements
        that Bell Canada entered into in 1999 and 2001 to sell and lease
        back telecommunications equipment for a total of $399 million. Some
        of the proceeds were invested in interest-bearing loans receivable. The
        capital lease obligations, net of loans receivable, were originally issued
        for US$39 million and have been swapped into Canadian dollar obligations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

105    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes
      to Consolidated Financial Statements 
      (d) AliantAll debentures and notes are unsecured. The
        bonds ($185 million in 2004 and 2003) are secured by deeds of
        trust and mortgage, and by supplemental deeds. These instruments contain
        a first fixed and specific mortgage, a pledge and charge upon all real
        and tangible property and equipment, which includes inventory and all
        capital investments except software, and all rights and licences related
        to that property of Aliant Telecom Inc. The bonds also provide, based
        on province of issue, a floating charge on all future real and tangible
        property of Aliant Telecom Inc. and all revenues and proceeds derived
        from that property. Aliant has a floating interest rate through a swap
        agreement of $100 million of debt.
      (e) Bell GlobemediaAssets of CTV and one of its subsidiaries, CTV Specialty Television Inc.
        (CTV Specialty), are collateral for these agreements. $95 million of the
        short-term advances were repaid to BCE Inc. in January 2005
        ($450 million were repaid to Bell Canada in January 2004). These
        were replaced with long-term debt under existing long-term facilities.
        CTV and CTV Specialty have fixed interest rates through swap agreements
        on $95 million of bank debt.(f) Unamortized PremiumRepresents the unamortized purchase price allocated to long-term debt
        resulting from BCEs repurchase of SBC Communications Inc.s
        20% interest in Bell Canada Holdings Inc.Restrictions Some of the debt agreements:require us to meet specific financial
          ratios
        impose covenants, maintenance
          tests and new issue tests
        restrict the payment of dividends
        restrict how we can dispose of
          Bell Canada voting shares.We are in compliance with all conditions
        and restrictions.
      Note 19: Other Long-Term Liabilities
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                            | NOTES |  | 2004  |  | 2003 
| |  | ------------------------------------------ | ----- |  | ----- |  | -----
| |  |                                           
| |  | Future
      income taxes                  | 8     |  | 1,695 |  | 1,794
| |  | Accrued
      benefit liability            | 23    |  | 1,519 |  | 1,383
| |  | Deferred
      revenue and gains on assets |       |  | 535   |  | 357  
| |  | Deferred
      contract payments           | 24    |  | 254   |  | 301  
| |  | CRTC
      benefits packages               |       |  | 80    |  | 130  
| |  | Other                                      |       |  | 849   |  | 740  
| |  |                                           
| |  | Total
      other long-term liabilities    |       |  | 4,932 |  | 4,705
| |  |                                           

| |  | Note 20: Financial Instruments
      Using Derivatives We use derivative instruments to manage our
        exposure to interest rate risk, foreign currency risk and changes in the
        price of BCE Inc. common shares. We do not use derivative instruments
        for speculative purposes. Since we do not trade actively in derivative
        instruments, we are not exposed to any significant liquidity risks relating
        to them.      The
        following derivative instruments were outstanding at December 31, 2004:
      cross-currency swaps and forward
          contracts that hedge foreign currency risk on a portion of our long-term
          debt
        interest rate swaps that hedge
          interest rate risk on a portion of our long-term debt
        forward contracts that hedge foreign
          currency risk on anticipated transactions
        foreign debt designated to hedge
          a net investment in a foreign subsidiary
        forward contracts on BCE Inc.
          common shares that hedge the fair value exposure related to SCPs.Credit Risk We
        are exposed to credit risk if counterparties to our derivative instruments
        are unable to meet their obligations. We expect that they will be able
        to meet their obligations because we deal with institutions that have
        strong credit ratings and we regularly monitor our credit risk and credit
        exposure.There
        was no credit risk relating to derivative instruments at December 31, 2004.
        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.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

106Bell Canada
  Enterprises2004Annual
  Report

---



| |  | Currency
        Exposures
      We use cross-currency swaps and
        forward contracts to hedge debt that is denominated in foreign currencies.
        We also use forward contracts to hedge foreign currency risk on anticipated
        transactions. Derivatives that qualify for hedge accounting, and the underlying
        hedged items, are marked to current rates.The
        principal amount to be received under currency contracts was US$675 million
        at December 31, 2004. The principal amount to be paid under
        these contracts was $902 million at December 31, 2004.      During 2004,
        we designated US$57 million of debt as a hedge of part of our net
        investment in self-sustaining foreign subsidiaries.
      Interest Rate Exposures We use interest rate swaps to manage
        the mix of fixed and floating interest rates on our debt. We have entered
        into interest rate swaps with a notional amount of $195 million,
        maturing in 2006 and 2011, as follows:
      on $100 million of swaps
          we pay interest at a rate equal to a three-month bankers acceptance
          floating interest rate plus 2.1%. We receive interest on these swaps
          at a rate of 6.8%.
        on $75 million of swaps
          we pay interest at a rate of 3.2%. We receive interest on these swaps
          at a rate equal to the three-month bankers acceptance floating
          rate.
        on $20 million of swaps
          we pay interest at a rate of 4.7% . We receive interest on these swaps
          at a rate equal to the three-month bankers acceptance floating
          rate.We have also issued swaptions for
        the right to enter into interest rate swap transactions for a notional
        amount of $90 million. If exercised, these swaptions will involve
        the payment of fixed interest rates of 10.5% and 11.1% in exchange for
        the receipt of the three-month bankers acceptance floating rate
        from 2006 until maturity in 2013.
      Fair Value Fair value is the amount that willing
        parties would accept to exchange a financial instrument based on the current
        market for instruments with the same risk, principal and remaining maturity.
        We base fair values on estimates using present value and other valuation
        methods.These
        estimates are affected significantly by our assumptions for the amount
        and timing of estimated future cash flows and discount rates, which all
        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 if these instruments
        were actually settled.      The
        carrying value of all financial instruments approximates fair value, except
        for those noted in the table below.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2004     |   | 2003   |  
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | - | ------ | -
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |          |   |        |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | CARRYING |   | FAIR   |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | VALUE    |   | VALUE  |  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |         
| |  | Investment in Nortel(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 54       |   | 59     |  
| |  | Long-term debt due within one year                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 1,121    |   | 1,134  |  
| |  | Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 11,809   |   | 13,747 |  
| |  | Derivative
        financial instruments, net asset (liability) position:                                                                                                                                                                                                                                                                                                                                                                                                                                   |          |   |        |  
| |  | Forward contracts  BCE Inc. shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (37      | ) | (41    | )
| |  | Currency
        contracts(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | (74      | ) | (97    | )
| |  | Interest
        rate swaps                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (10      | ) | (29    | )
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |         
| |  | (1)
      We have designated four million of our approximately 14 million
      Nortel common shares to manage our exposure to outstanding rights to SCPs.
      (2) Currency contracts include cross-currency interest rate swaps and foreign
      currency forward contracts. Some of the cross-currency interest rate swaps
      are economic hedges that do not qualify for hedge accounting. We carry these
      at fair value and all gains or losses are recorded in the statement of operations.

107    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes to
      Consolidated Financial Statements 
      Note 21:
        Share Capital
      Preferred Shares BCE Inc.s articles of amalgamation
        provide for an unlimited number of First Preferred Shares and Second Preferred
        Shares. The terms set out in the articles authorize BCE Inc.s
        directors to issue the shares in one or
        more Series and to set the number of shares and conditions for each
        series.The
        table below is a summary of the principal terms of BCE Inc.s
        First Preferred Shares. There were no Second Preferred Shares issued and
        outstanding at December 31, 2004. BCE Inc.s articles
        of amalgamation describe the terms and conditions of these shares in detail.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |      |                         |      |                         |  |                           |  |                  |  |                                         |  |              
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ |  | -------------------------- | ---- | ----------------------- | ---- | ----------------------- |  | ------------------------- |  | ---------------- |  | --------------------------------------- |  | -------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |      |                         |      |                         |  |                           |  | NUMBER OF SHARES |  | STATEDCAPITAL                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |      |                         |      |                         |  |                           |  |                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |      |                         |      |                         |  |                           |  |                  |  |                                        
| |  | SERIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | ANNUALDIVIDENDRATE |  | CONVERT- IBLE
        INTO |      | CONVERSION DATE         |      | REDEMPTIONDATE          |  | REDEMP-TION
        PRICE |  | AUTHORIZED       |  | ISSUED
        AND OUT
        STANDING |  | ATDECEMBER 31
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |     
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            | 2004 |                         | 2003
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Q                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | floating           |  | Series R                   |      | December 1,
      2010  |      | At
      any time       |  | $25.50                    |  | 8,000,000        |  |                                        |  |             
| |  | R                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $1.5435            |  | Series Q                   |      | December 1, 2005        |      | December 1, 2005        |  | $25.00                    |  | 8,000,000        |  | 8,000,000                               |  | 200          
| |  | S                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | floating           |  | Series T                   |      | November 1,
      2006  |      | At
      any time       |  | $25.50                    |  | 8,000,000        |  | 8,000,000                               |  | 200          
| |  | T                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | fixed              |  | Series S                   |      | November 1,
      2011  |      | November 1,
      2011  |  | $25.00                    |  | 8,000,000        |  |                                        |  |             
| |  | Y                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | floating           |  | Series Z                   |      | December 1,
      2007  |      | At
      any time       |  | $25.50                    |  | 10,000,000       |  | 1,147,380                               |  | 29           
| |  | Z                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $1.3298            |  | Series Y                   |      | December 1,
      2007  |      | December 1,
      2007  |  | $25.00                    |  | 10,000,000       |  | 8,852,620                               |  | 221          
| |  | AA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $1.3625            |  | Series AB                  |      | September 1,
      2007 |      | September 1,
      2007 |  | $25.00                    |  | 20,000,000       |  | 20,000,000                              |  | 510          
| |  | AB                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | floating           |  | Series AA                  |      | September 1,
      2012 |      | At
      any time       |  | $25.50                    |  | 20,000,000       |  |                                        |  |             
| |  | AC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $1.3850            |  | Series AD                  |      | March 1,
      2008     |      | March 1,
      2008     |  | $25.00                    |  | 20,000,000       |  | 20,000,000                              |  | 510          
| |  | AD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | floating           |  | Series AC                  |      | March 1,
      2013     |      | At
      any time       |  | $25.50                    |  | 20,000,000       |  |                                        |  |             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                    |  |                            |      |                         |      |                         |  |                           |  |                  |  |                                         |  | 1,670        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Voting Rights All
        of the issued and outstanding preferred shares at December 31, 2004
        were non-voting, except under special circumstances when the holders are
        entitled to one vote per share.
      Entitlement to Dividends
      Holders of Series R,
        Z, AA and AC shares are entitled to fixed cumulative quarterly dividends.
        The dividend rate on these shares is reset every five years, as set out
        in BCE Inc.s articles of amalgamation.      Holders
        of Series S and Y shares are entitled to floating adjustable cumulative
        monthly dividends.      If
        Series Q, AB and AD shares are issued, their holders will be entitled
        to floating adjustable cumulative monthly dividends.      If
        Series T shares are issued, their holders will be entitled to fixed
        cumulative quarterly dividends.
      Conversion Features All of the issued and outstanding
        preferred shares at December 31, 2004 are convertible at the holders
        option into another associated Series of preferred shares on a one-for-one
        basis as per the terms set out in BCE Inc.s articles of amalgamation.
      Redemption Features BCE Inc. may redeem
        Series R, Z, AA and AC shares on the redemption date and every five
        years after that date.      If
        Series T shares are issued, BCE Inc. may redeem them on the
        redemption date and every five years after that date.      BCE Inc.
        may redeem Series S and Y shares at any time at $25.50 per share (being
        a 2% premium to the issue price). If Series Q, AB and AD shares are
        issued, BCE Inc. may redeem them at any time.
      Common Shares and Class B Shares
      BCE Inc.s articles
        of amalgamation provide for an unlimited number of voting common shares
        and non-voting Class B shares. The common shares and the Class B shares
        rank equally in the payment of dividends and in the distribution of assets
        if BCE Inc. is liquidated, dissolved or wound up, after payments
        due to the holders of preferred shares.

108    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | The
      table below provides details about the outstanding common shares of BCE Inc.
      No Class B shares were outstanding at December 31, 2004 and 2003.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                               
| |  |                                                                                                                                                               
| |  |                                                                                                                                                               
| |  |                                                                                                                                                               
| |  |                                                                                                                                                               
| |  | Outstanding, beginning of year                                                                                                                                
| |  | Shares issued:                                                                                                                                                
| |  | under employee savings plans                                                                                                                                  
| |  | under dividend reinvestment plan                                                                                                                              
| |  | under employee stock option plans                                                                                                                             
| |  | Shares purchased for cancellation                                                                                                                             
| |  |                                                                                                                                                               
| |  | Outstanding, end of year                                                                                                                                      
| |  |                                                                                                                                                               

| |  | Dividend Reinvestment Plan The
        dividend reinvestment plan allows eligible common shareholders to use
        their dividends to buy additional common shares. A trustee buys BCE Inc.
        common shares for the participants on the open market, by private purchase
        or from BCE Inc. (where the shares are issued from treasury). BCE Inc.
        chooses the method the trustee uses to buy the shares.      A
        total of 3,198,015 common shares were bought in the open market under
        this plan for $89 million in 2004. A total of 2,807,899 common shares
        were bought from treasury for $82 million in 2003.
      Note 22: Stock-Based Compensation Plans
      Employee Savings Plans (ESPs)
      ESPs are designed to encourage
        employees of BCE Inc. and its participating subsidiaries to own shares
        of BCE Inc. Each year, employees who participate in the plans can
        choose to have up to a certain percentage of their annual earnings withheld
        through regular payroll deductions to buy BCE Inc. common shares.
        In some cases, the employer may also contribute up to a maximum percentage
        of the employees annual earnings to the plan.      Each
        participating company decides on its maximum percentages. For Bell Canada,
        employees can contribute up to 12% of their annual earnings. Bell Canada
        contributes up to 2%.      The
        trustee of the ESPs buys BCE Inc. common shares for the participants
        on the open market, by private purchase or from BCE Inc. (where the
        shares are issued from treasury). BCE Inc. chooses the method the
        trustee uses to buy the shares.      There
        were 37,843 employees participating in the plans at December 31, 2004.
        The total number of common shares bought for employees was 6,818,079 in
        2004 and 6,352,654 in 2003. Compensation expense related to ESPs
        was $38 million in 2004, $38 million in 2003 and $43 million
        in 2002. At December 31, 2004, 13,513,812 common shares
        were reserved for issue under the ESPs.
      Stock Options Under BCE Inc.s long-term incentive
        programs, BCE Inc. may grant options to key employees to buy BCE Inc.
        common shares. The subscription price is usually equal to the market value
        of the shares on the last trading day before the grant comes into effect.
        At December 31, 2004, 25,777,551 common shares were authorized
        for issue under these programs.      For
        options granted before January 1, 2004, the right to exercise options
        generally vests or accrues by 25% a year for four years of continuous
        employment from the day of grant, unless a special vesting period applies.
        Options become exercisable when they vest and can be exercised for a period
        of up to 10 years from the date of grant.      For
        most options granted after January 1, 2004, the right to exercise
        options vests after two to three years of continuous employment from the
        day of grant, if specific performance targets are met. Options become
        exercisable when they vest and can be exercised for a period of up to
        six years from the date of grant. Subject to achieving specific performance
        targets, 50% of the options will vest after two years and 100% after three
        years.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

109    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes
      to Consolidated Financial Statements 
      Special
        vesting provisions may apply if:
      there is a change of control
          of BCE Inc. and the option holders employment ends under
          certain circumstances
        the option holder is employed
          by a designated subsidiary of BCE Inc., and BCE Inc.s
          ownership interest in that subsidiary falls below the percentage set
          out in the program.When the Nortel common
        shares were distributed in May 2000, each outstanding BCE Inc.
        stock option was cancelled and replaced by two new stock options. The
        first option gives the holder the right to buy one BCE Inc. common
        share. The second option gives the holder the right to buy approximately
        1.57 post-split common shares of Nortel (Nortel option) at exercise prices
        that maintain the holders economic position.      We
        ensured that exercising the Nortel options would not dilute Nortel shares
        by:
      calculating how many BCE Inc.
          common shares could be issued under options granted under stock option
          programs immediately before the day of the distribution
        factoring this number into the
          calculation that determined how many Nortel common shares were distributed
          for each BCE Inc. common share held.BCE Inc. may exercise all Nortel
        options that expire unexercised or are forfeited. The exercise price paid
        to Nortel is given back to BCE  Inc. We credit an amount to retained
        earnings that is equal to the market share price of Nortel.
      The table below is a summary
        of the status of BCE Inc.s stock option programs.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                | 2004       |   | 2003     |   | 2002      
| |  | ------------------------------ | ---------- | - | -------- | - | ----------
| |  |                                |            |   |          |   |           
| |  |                                |            |   | WEIGHTED |   |           
| |  |                                |            |   | AVERAGE  |   |           
| |  |                                | NUMBER     |   | EXERCISE |   | NUMBER    
| |  |                                | OF SHARES  |   | PRICE ($ | ) | OF SHARES 
| |  |                               
| |  | Outstanding,
      January 1   | 25,750,720 |   | $32      |   | 24,737,423
| |  | Granted                        | 5,911,576  |   | $30      |   | 6,008,051 
| |  | Exercised                      | (1,946,864 | ) | $16      |   | (552,681  
| |  | Expired/forfeited              | (1,233,753 | ) | $34      |   | (4,442,073
| |  |                               
| |  | Outstanding,
      December 31 | 28,481,679 |   | $32      |   | 25,750,720
| |  |                               
| |  | Exercisable,
      December 31 | 14,633,433 |   | $34      |   | 10,722,294
| |  |                               

| |  | The table below shows you more about BCE Inc.s stock option programs
      at December 31, 2004.
| |  | -------------------------------------------------------------------------------------------------
| |  |                                                                                                  
| |  |                                                                                                  
| |  |                                                                                                  
| |  |                                                                                                  
| |  | RANGE OF                                                                                         
| |  | EXERCISE
        PRICES                                                                          
| |  |                                                                                                  
| |  | Below $20                                                                                        
| |  | $20$30                                                                                          
| |  | $30$40                                                                                          
| |  | Over $40                                                                                         
| |  |                                                                                                  
| |  |                                                                                                  
| |  |                                                                                                  

110    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Assumptions
      Used in Stock Option Pricing Model The table below shows the assumptions used to determine stock-based compensation
        expense, using the Black-Scholes option pricing model.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Compensation expense ($ millions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Number of stock options granted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Weighted average fair value per option granted ($)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Weighted average assumptions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Dividend
        yield                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Expected
        volatility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Risk-free
        interest rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Expected
        life (years)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Starting in 2004, most of the stock options granted contain specific
        performance targets that must be met before the option can be exercised.
        This is reflected in the calculation of the weighted average fair value
        per option granted.
      Restricted Share Units (RSUs)
      In 2004, BCE Inc. granted
        RSUs to executives and other key employees. The value of an RSU is always
        equal to the value of one BCE Inc. common share. Dividends in the
        form of additional RSUs are credited to the participants account
        on each dividend payment date and are equivalent in value to the dividend
        paid on BCE Inc. common shares. Each executive is granted a specific
        number of RSUs for a given performance period, based on his or her position
        and level of contribution. At the end of each given performance period,
        RSUs will vest if performance objectives are met or will be forfeited. 
             Vested RSUs will be paid in BCE  Inc. common
        shares purchased on the open market, in cash or through a combination
        of both, as the holder chooses, as long as individual share ownership
        requirements are met.
      The table below is a summary of
        the status of RSUs.

| |  |                                      | NUMBER OF RSUS |  
| |  | ------------------------------------ | -------------- | -
| |  |                                      |               
| |  | Outstanding,
      January 1, 2004   |               |  
| |  | Granted                              | 1,986,513      |  
| |  | Dividends
      credited             | 61,086         |  
| |  | Expired/forfeited                    | (51,077        | )
| |  |                                      |               
| |  | Outstanding,
      December 31, 2004 | 1,996,522      |  
| |  |                                      |               
| |  | Vested,
      December 31, 2004      |               |  
| |  |                                      |               

| |  | For the year ended December 31, 2004, we recorded compensation expense
        for RSUs of $25 million.
      Special Compensation Payments
        (SCPs)
      Before 2000, when BCE Inc.
        granted options to officers, vice-presidents and other key employees,
        related rights to SCPs were also often granted. SCPs are cash payments
        representing the amount that the market value of the shares on the date
        of exercise of the related options exceeds the exercise price of these
        options.When
        the distribution of Nortel common shares was made in 2000, the outstanding
        options were cancelled and replaced with options to buy BCE Inc.
        common shares and options to buy Nortel 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 Inc. and Nortel common shares.      The
        number of SCPs outstanding at December 31, 2004 was:
      1,078,394 relating to BCE Inc.
          common shares
        2,443,798 relating to Nortel
          common shares.All of the outstanding SCPs cover
        the same number of shares as the options to which they relate. It is the
        employers responsibility to make the payments under the SCPs. There
        was income related to SCPs of $14 million in 2004, income of $29 million
        in 2003 and an expense of $1 million in 2002. The amounts
        include a recovery of SCP expense previously established at $14 million
        for 2004, $50 million for 2003, and $59 million for 2002,
        relating to forfeitures of SCPs.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

111    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes
      to Consolidated Financial Statements 
      Note 23:
        Employee Benefit Plans
      We provide pension, other retirement
        and post-employment benefits for almost all of our employees. These include
        DB pension plans, plans that provide other employee future benefits and
        DC pension plans.
      Components of Accrued Benefit
        Asset (Liability)
      The table below shows the change
        in benefit obligations, change in fair value of plan assets and the funded
        status of the DB plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Accrued benefit obligation, beginning of
        year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Current
        service cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Interest
        cost on accrued benefit obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Actuarial
        (gains) losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Benefit
        payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Employee
        contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Special
        termination costs (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Plan
        amendment(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Divestitures
        and other(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Accrued
      benefit obligation, end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Fair value of plan assets, beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Actual
        return on plan assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Benefit
        payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Employer
        contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Employee
        contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Divestitures
        and other(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Fair value of plan assets, end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Plan surplus (deficit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Unamortized net actuarial (gains) losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Unamortized past service costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Unamortized transitional (asset) obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Valuation allowance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Accrued benefit asset (liability), end
        of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Accrued benefit asset included in other long-term
        assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Accrued benefit liability included in other
        long-term liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | (1)
        Costs in 2004 relate to the employee departure programs announced
        at Bell Canada. See Note 4,Restructuring and Other Items,
        for more information.
        (2) Costs in 2004 mainly relate to DB pension plan amendments at
        Aliant whereby certain bargaining unit employees and eligible management
        employees were awarded past service benefits.
        (3) Costs in 2003 mainly relate to Bell Canadas sale of
        its 89.9% ownership interest in Certen.
      For DB pension plans with an accrued benefit obligation that was more
        than plan assets:
      the accrued benefit obligation
          was $14,087  million at December 31, 2004, and $2,732 million
          at December 31, 2003
        the fair value of plan assets
          was $12,630  million at December 31, 2004, and $2,005 million
          at December 31, 2003.For DB pension plans with an accrued
        benefit obligation that was less than plan assets:
      the accrued benefit obligation
          was $261 million at December 31, 2004, and $9,773 million
          at December 31, 2003
        the fair value of plan assets
          was $400 million at December 31, 2004, and $10,564 million
          at December 31, 2003.

112    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Components
      of Net Benefit Plans Cost (Credit) The
        table below shows the net benefit plans cost (credit) before and after
        recognizing its long-term nature. The recognized net benefit plan cost
        (credit) reflects the amount reported in our statement of operations and
        is calculated according to our accounting policy.    
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | .                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | FOR THE YEAR ENDED DECEMBER 31                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Current service cost                                                                                                                                                                                                                                                                                                                                                
| |  | Interest cost on accrued benefit obligation                                                                                                                                                                                                                                                                                                                         
| |  | Actual (return) loss on plan assets                                                                                                                                                                                                                                                                                                                                 
| |  | Past service costs arising during period                                                                                                                                                                                                                                                                                                                            
| |  | Actuarial loss (gain) on accrued benefit
        obligation                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Elements of employee future benefit plans
        cost (credit), before
        recognizing its long-term nature                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Excess (deficiency) of actual return over
        expected return(1)                                                                                                                                                                                                                                                                                                
| |  | Deferral of amounts arising during period:                                                                                                                                                                                                                                                                                                                          
| |  | Past
        service costs                                                                                                                                                                                                                                                                                                                                          
| |  | Actuarial (loss) gain on accrued benefit
        obligation                                                                                                                                                                                                                                                                                                         
| |  | Amortization of previously deferred amounts:                                                                                                                                                                                                                                                                                                                        
| |  | Past
        service costs                                                                                                                                                                                                                                                                                                                                          
| |  | Net
        actuarial losses                                                                                                                                                                                                                                                                                                                                        
| |  | Transitional
        (asset) obligation                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Adjustments to recognize long-term nature
        of employee future
        benefit plans cost (credit)                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Increase (decrease) in valuation allowance                                                                                                                                                                                                                                                                                                                          
| |  | Other                                                                                                                                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Net benefit plans cost (credit), recognized                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | Comprised of:                                                                                                                                                                                                                                                                                                                                                       
| |  | Defined
        benefit plans cost                                                                                                                                                                                                                                                                                                                                  
| |  | Defined
        contribution plans cost                                                                                                                                                                                                                                                                                                                             
| |  |                                                                                                                                                                                                                                                                                                                                                                     
| |  | (1)
        The expected return on plan assets for a given year is calculated based
        on the market-related value of plan assets as at the beginning of that
        year. The market-related value of pension plan assets was $13,044 million
        at January 1, 2004, $12,542 million at January 1, 2003,
        and $13,922 million at January 1, 2002.

| |  | Significant Assumptions
      We used the following key assumptions
        to measure the accrued benefit obligation and the net benefit plans cost
        (credit) for the DB pension plans and plans that provide other employee
        future benefits. These assumptions are long-term, which is consistent
        with the nature of employee benefit plans.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                      
| |  | At
        December 31                                                                                                                                                                                                                                                                                                                                               
| |  | Accrued benefit obligation:                                                                                                                                                                                                                                                                                                                                          
| |  | Discount
        rate, end of year                                                                                                                                                                                                                                                                                                                                   
| |  | Rate
        of compensation increase, end of year                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                      
| |  | For
        the year ended December 31                                                                                                                                                                                                                                                                                                                               
| |  | Net benefit plans cost (credit):                                                                                                                                                                                                                                                                                                                                     
| |  | Discount
        rate, end of preceding year                                                                                                                                                                                                                                                                                                                         
| |  | Expected
        return on plan assets, end of preceding year                                                                                                                                                                                                                                                                                                        
| |  | Rate
        of compensation increase, end of preceding year                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                      

113    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes to Consolidated
      Financial Statements 
      We assumed the following trend
        rates in health-care costs:
      a 4.5% annual rate of increase
          in the cost per person of covered health-care benefits for  2004
          and the foreseeable future
        a 10.5% annual rate of increase
          in the cost of medication for  2004 with a gradual decline to 4.5%
          over six years.Assumed trend rates in health-care
        costs have a significant effect on the amounts reported for the health-care
        plans. The table below, for example, shows the effect of a 1% change in
        the assumed trend rates in health-care costs.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1%
      INCREASE |  | 1% DECREASE |  
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- |  | ----------- | -
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                  
| |  | Effect on other benefits  total
        service and interest cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 16                |  | (13         | )
| |  | Effect
        on other benefits  accrued
        obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 156               |  | (137        | )
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                  
| |  | Pension
      Plan Assets The investment
        strategy for the major benefit plans is to maintain a diversified portfolio
        of assets, invested in a prudent manner to maintain the security of funds
        while maximizing returns within our guidelines.      The
        expected rate of return assumption is based on our target asset allocation
        policy and the expected future rates of return on these assets.      The
        table below shows the allocation of our pension plan assets at December31,2004and2003,
        target allocation for2004and the expected long-term rate of return by asset class.

| |  |                         |            |   |                   |   |                |   | WEIGHTED  |  
| |  | ----------------------- | ---------- | - | ----------------- | - | -------------- | - | --------- | -
| |  |                         | WEIGHTED   |   | PERCENTAGE        |   | AVERAGE        |  
| |  |                         | AVERAGE    |   |                   |   | OF PLAN        |   | EXPECTED  |  
| |  |                         | TARGET     |   |                   |   | ASSETS AT      |   | LONG-TERM |  
| |  |                         | ALLOCATION |   | DECEMBER
      31 |   | RATE OF RETURN |  
| |  |                         |            |   |                   |   |                |  
| |  | ASSET
      CATEGORY    | 2004       |   | 2004              |   | 2003           |   | 2004      |  
| |  |                         |           
| |  | Equity
      securities | 45%65     | % | 57                | % | 56             | % | 9.0       | %
| |  | Debt
      securities   | 35%55     | % | 43                | % | 44             | % | 5.5       | %
| |  |                         |           
| |  | Total/Average           |            |   | 100               | % | 100            | % | 7.5       | %
| |  |                         |           

| |  | Equity securities included approximately $95 million of BCE Inc.
      common shares or 0.7% of total plan assets at December 31, 2004,
      and approximately $111 million of BCE Inc. common shares or 0.9%
      of total plan assets at December 31, 2003.Debt
      securities included approximately $8 million of BCE Inc. and affiliates
      debentures or 0.1% of total plan assets at December 31, 2004, and $108 million
      or 0.9% of total plan assets at December 31, 2003. Projected Cash Flows
      We are responsible for adequately
        funding our DB pension plans. We make contributions to them based on various
        actuarial cost methods that are permitted by pension regulatory bodies.
        Contributions reflect actuarial assumptions about future investment returns,
        salary projections and future service benefits.We
        contribute to the DC pension plans as employees provide service.
      The table below shows the amounts
        we contributed to the DB and DC pension plans and the payments made to
        beneficiaries under other employee benefit plans.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                           | PENSION
        BENEFITS |  | OTHER
        BENEFITS
| |  | ------------------------- | ------------------------ |  | ----------------------
| |  |                           |                          |  |                       
| |  |                           | 2004                     |  | 2003                  
| |  |                           |                          | 
| |  | Aliant                    | 67                       |  | 125                   
| |  | Bell Canada               | 20                       |  | 17                    
| |  | Bell Globemedia           | 17                       |  | 11                    
| |  | BCE Inc.                  | 8                        |  | 7                     
| |  |                          
| |  | Total                     | 112                      |  | 160                   
| |  |                          
| |  |                           |                          |  |                       
| |  | Comprised of:             |                          |  |                       
| |  | Contributions to DB plans | 97                       |  | 155                   
| |  | Contributions to DC plans | 15                       |  | 5                     
| |  |                          

114    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | We
        expect to contribute approximately $200 million to the DB pension plans
        in 2005, subject to actuarial valuations being completed. We expect
        to pay $93 million to beneficiaries under other employee benefit
        plans in 2005.
      We expect to contribute $24 million
        to the DC pension plans in 2005.
      Estimated Future Benefit Payments
      The table below shows the estimated
        future benefit payments for the next 10 years as at December 31, 2004.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | 20102014                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Total estimated future benefit payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | Note 24:
      Commitments and Contingencies Contractual
        Obligations
      The table below is a summary of
        our contractual obligations at December31,2004that are due in each of the next five years and after2009.                                                                                                                                                                                                                                                                               

| |  |                                                                 |       |  |       |  |       |  |       |  |       |  | AFTER |  |       
| |  | --------------------------------------------------------------- | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ------
| |  |                                                                 | 2005  |  | 2006  |  | 2007  |  | 2008  |  | 2009  |  | 2009  |  | TOTAL 
| |  |                                                                
| |  | Long-term debt (excluding capital leases)                       | 1,018 |  | 989   |  | 1,726 |  | 1,091 |  | 1,701 |  | 6,000 |  | 12,525
| |  | Notes payable and bank advances                                 | 155   |  |      |  |      |  |      |  |      |  |      |  | 155   
| |  | Capital leases                                                  | 103   |  | 70    |  | 59    |  | 47    |  | 31    |  | 95    |  | 405   
| |  | Operating leases                                                | 399   |  | 296   |  | 258   |  | 232   |  | 209   |  | 1,459 |  | 2,853 
| |  | Commitments for capital expenditures                            | 210   |  | 121   |  | 45    |  | 2     |  | 2     |  | 28    |  | 408   
| |  | Other purchase obligations                                      | 576   |  | 375   |  | 231   |  | 184   |  | 175   |  | 401   |  | 1,942 
| |  | Other long-term liabilities (including current
        portion) | 97    |  | 86    |  | 91    |  | 79    |  | 78    |  |      |  | 431   
| |  |                                                                
| |  | Total                                                           | 2,558 |  | 1,937 |  | 2,410 |  | 1,635 |  | 2,196 |  | 7,983 |  | 18,719
| |  |                                                                

| |  | Long-term debt and notes payable and bank advances include $123 million
        drawn under our committed-credit facilities. They do not include $414
        million of letters of credit. The total amount available under these committed
        credit facilities and under our commercial paper programs, including the
        amount currently drawn, is $2,461 million.      The
        imputed interest to be paid on capital leases is $106 million. Rental
        expense relating to operating leases was $406 million in 2004,
        $368 million in 2003 and $356 million in 2002.      Our
        commitments for capital expenditures include investments to expand and
        update our networks and to meet customer demand. Other purchase obligations
        consist mainly of contractual obligations under service contracts.      Other
        long-term liabilities included in the table relate to:
      Bell Canadas future
          payments over the remaining life of its contract with Certen for the
          development of Bell Canadas billing system. The total amount
          was $301 million at December 31, 2004.
        Bell Globemedias obligations
          relating to CRTC benefits owing on previous business combinations. These
          and other long-term liabilities were $130 million at December 31, 2004.At December 31, 2004,
        we had other long-term liabilities that are not included in the table.
        They consisted of an accrued employee benefit liability, future income
        tax liabilities, deferred revenue and gains on assets, and various other
        long-term liabilities.      We
        did not include the accrued employee benefit liability and future income
        tax liabilities because we cannot accurately determine the timing and
        amount of cash needed for them. This is because:
      future contributions to the pension
          plans depend largely on the results of actuarial valuations that are
          performed periodically and on the investment performance of the pension
          fund assets.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

115    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Notes
      to Consolidated Financial Statements 
      future payments of income taxes
          depend on the amount of taxable earnings and on whether there are tax
          loss carryforwards available to reduce income tax liabilities.We did not include deferred revenue
        and gains on assets because they do not represent future cash payments.
      Commitment under the Deferral
        Account
      The deferral account is a mechanism resulting
        from the CRTCs second price cap decision of May 2002, which requires
        us to fund initiatives such as service improvements, reduced customer
        rates and/or customer rebates. We estimate our commitment under the deferral
        account to be approximately $202 million at December 31, 2004.
        We expect to clear most of this amount in 2005 by implementing various
        initiatives.
      Litigation Teleglobe Lending Syndicate
        Lawsuit
      On July 12, 2002,
        some members of the Teleglobe and Teleglobe Holdings (U.S.) Corporation
        lending syndicate (the plaintiffs) filed a lawsuit against BCE Inc.
        in the Ontario Superior Court of Justice. The claim makes several allegations,
        including that BCE Inc. and its management, in effect, made a legal
        commitment to repay the advances the plaintiffs made as members of the
        lending syndicate, and that the court should disregard Teleglobe as a
        corporate entity and hold BCE Inc. responsible to repay the advances
        as Teleglobes alter ego. On November 2, 2004, Canadian
        Imperial Bank of Commerce and Canadian Imperial Bank of Commerce, N.Y.
        Agency withdrew from the lawsuit.      The
        plaintiffs claim damages of US$1.09 billion, plus interest and costs,
        which they allege is equal to the amount they advanced. This represents
        approximately 87% of the total US$1.25 billion that the lending syndicate
        advanced.      While
        we cannot predict the outcome of any legal proceeding, based on information
        currently available, BCE Inc. believes that it has strong defences,
        and it intends to vigorously defend its position.
      Kroll Restructuring Lawsuit In February 2003,
        a lawsuit was filed in the Ontario Superior Court of Justice by Kroll
        Restructuring Ltd., in its capacity as interim receiver of Teleglobe,
        against five former directors of Teleglobe. This lawsuit was filed in
        connection with Teleglobes redemption of its third series preferred
        shares in April 2001 and the retraction of its fifth series preferred
        shares in March 2001.      The
        plaintiff is seeking a declaration that such redemption and retraction
        were prohibited under the Canada
        Business Corporations Actand
        that the five former directors should be held jointly and severally liable
        to restore to Teleglobe all amounts paid or distributed on such redemption
        and retraction, being an aggregate of approximately $661 million,
        plus interest.      While
        BCE Inc. is not a defendant in this lawsuit, Teleglobe was at the
        relevant time a subsidiary of BCE Inc. Pursuant to standard policies
        and subject to applicable law, the five former Teleglobe directors are
        entitled to seek indemnification from BCE Inc. in connection with
        this lawsuit.      While
        we cannot predict the outcome of any legal proceeding, based on information
        currently available, BCE Inc. believes that the defendants have strong
        defences and that the claims of the plaintiffs will be vigorously defended
        against.
      Teleglobe Unsecured Creditors
        Lawsuit
      On May 26, 2004,
        a lawsuit was filed in the United States Bankruptcy Court for the District
        of Delaware. The United States District Court for the District of Delaware
        subsequently withdrew the reference from the Bankruptcy Court and the
        matter is now pending in the District Court for the District of Delaware.
        The lawsuit is against BCE Inc. and 10 former directors and officers
        of Teleglobe and certain of its subsidiaries. The plaintiffs are comprised
        of Teleglobe Communications Corporation, certain of its affiliated debtors
        and debtors in possession, and the Official Committee of Unsecured Creditors
        of these debtors. The lawsuit alleges breach of an alleged funding commitment
        of BCE Inc. towards the debtors, promissory estoppel, misrepresentation
        by BCE Inc. and breach and aiding and abetting breaches of fiduciary
        duty by the defendants. The plaintiffs seek an unspecified amount of damages
        against the defendants.      While
        no one can predict the outcome of any legal proceeding, based on information
        currently available, BCE Inc. believes that it has strong defences,
        and it intends to vigorously defend its position.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

116 Bell Canada Enterprises 2004
  Annual Report

---



| |  | Other
        Litigation
      We become involved in various other
        claims and litigation as a part of our business.
      While we cannot predict the final
        outcome of claims and litigation that were pending at December 31, 2004,
        based on information currently available, 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.
      Note 25: Guarantees As a regular part of our
        business, we enter into agreements that provide for indemnifications and
        guarantees to counterparties that may require us to pay for costs and
        losses incurred in various types of transactions. We cannot reasonably
        estimate the maximum potential amount we could be required to pay counterparties.
        While some of the agreements specify a maximum potential exposure, many
        do not specify a maximum amount or limited period. The amount also depends
        on the outcome of future events and conditions, which cannot be predicted.
        Historically, we have not made any significant payments under these indemnifications
        or guarantees.
      Sales of Assets and Businesses
      In transactions involving business
        dispositions and sales of assets, we may be required to pay counterparties
        for costs and losses incurred as a result of various events. These could
        include:
      breaches of representations and
          warranties
        intellectual property rights
          infringement
        loss or damages to property
        environmental liabilities
        changes in, or in the interpretation
          of, laws and regulations (including tax legislation)
        valuation differences
        litigation against the counterparties
        earn-out guarantees if the disposed
          business does not meet specific targets
        contingent liabilities of a disposed
          business, or
        reassessments of previous tax
          filings of the corporation that carries on the business.Some of the agreements specify a
        maximum potential exposure of $2 billion, but many do not specify a maximum
        amount or limited period. A total of $18 million has been accrued
        in the consolidated balance sheet relating to this type of indemnification
        or guarantee at December 31, 2004.
      Sales of Services In
        transactions involving sales of services, we may be required to pay counterparties
        for costs and losses incurred as a result of:
      breaches of representations and
          warranties
        changes in, or in the interpretation
          of, laws and regulations (including tax legislation), or
        litigation against the counterparties. Some of the agreements specify
      a maximum potential exposure of $305 million, but many do not specify
      a maximum amount or limited period. No amount has been accrued in the consolidated
      balance sheet relating to this type of indemnification or guarantee at December 31, 2004.
      Purchases and Development of AssetsIn transactions involving purchases
        and development of assets, we may be required to pay counterparties for
        costs and losses incurred as a result of breaches of:
      representations and warranties
        loss or damages to property
        changes in, or in the interpretation
          of, laws and regulations (including tax legislation), or
        litigation against the counterparties. Some of the agreements specify
      a maximum potential exposure of $1.5 billion, but many do not specify a
      maximum amount or limited period. No amount has been accrued in the consolidated
      balance sheet relating to this type of indemnification or guarantee at December
      31, 2004. Other TransactionsAs part of other transactions, such
        as securitization agreements and operating leases, we may be required
        to pay counterparties for costs and losses incurred as a result of:
      breaches of representations and
          warranties
        loss or damages to property
        changes in, or in the interpretation
          of, laws and regulations (including tax legislation), or
        litigation against the counterparties.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

117    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Notes
      to Consolidated Financial Statements 
      Some of the agreements specify
        a maximum potential exposure of $26 million, but many do not specify
        a maximum amount or limited period. No amount has been accrued in the
        consolidated balance sheet relating to this type of indemnification or
        guarantee at December 31, 2004.
      Note 26: Supplemental Disclosure for Statements
        of Cash Flows
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Interest
      paid on long-term debt                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Income
      taxes paid (net of refunds)                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |  | Note 27: Reconciliation of Canadian GAAP
        to United States GAAP
      We have prepared these consolidated
        financial statements according to Canadian GAAP. The tables below are
        a reconciliation of significant differences relating to the statement
        of operations and total shareholders equity reported according to
        Canadian GAAP and United States GAAP.
      Reconciliation of Net Earnings (Loss)
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Canadian GAAP  Earnings from continuing
        operations                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Deferred
        costs(a)                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Employee
        future benefits(b)                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Derivative
        instruments(j)                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | United States GAAP  Earnings from
        continuing operations                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Discontinued
        operations  United States GAAP(g)                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Cumulative
        effect of change in accounting policy(k)                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | United States GAAP  Net earnings
        (loss) before extraordinary gain                                                                                                                                                                                                                                                                                                                                                                       
| |  | Extraordinary
        gain                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | United States GAAP  Net earnings
        (loss)                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Dividends
        on preferred shares(j)                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Premium
        on redemption of preferred shares                                                                                                                                                                                                                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | United States GAAP  Net earnings
        (loss) applicable to common shares                                                                                                                                                                                                                                                                                                                                                                     
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Other comprehensive earnings (loss) items                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | Change
        in currency translation adjustment                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Change
        in unrealized gain (loss) on investments(h)                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Additional
        minimum liability for pension obligation(b)                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Comprehensive earnings (loss)                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Net earnings (loss) per common share 
        basic                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Continuing
        operations                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | Discontinued
        operations and change in accounting policy                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Extraordinary
        gain                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Net
        earnings (loss)                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | Net earnings (loss) per common share 
        diluted                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Discontinued operations
        and change in accounting policy                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Extraordinary gain                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Net earnings (loss)                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Dividends per common share                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | Average number of common shares outstanding
        (millions)                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  

118    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Statements
      of Accumulated Other Comprehensive Loss
| |  | --------------------------------------------------------
| |  |                                                         
| |  |                                                         
| |  | Currency
      translation adjustment                   
| |  | Unrealized
      gain (loss) on investments(h)          
| |  | Additional
      minimum liability for pensions(b)      
| |  |                                                         
| |  | Accumulated
        other comprehensive
        loss    
| |  |                                                         

| |  | Reconciliation
      of Total Shareholders Equity                                                              
| |  | ----------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                 
| |  |                                                                                                                 
| |  | Canadian
      GAAP                                                                                             
| |  | Adjustments                                                                                                     
| |  | Deferred
        costs(a)                                                                                       
| |  | Employee
        future benefits(b)                                                                             
| |  | Gain
        on disposal of investments
        and on reduction of ownership in
        subsidiary companies(c)
| |  | Other                                                                                                           
| |  | Tax
        effect of the above adjustments(e)                                                                  
| |  | Non-controlling
        interest effect of the above adjustments(f)                                             
| |  | Discontinued
        operations(g)                                                                              
| |  | Unrealized
        gain (loss) on investments(h)                                                                
| |  |                                                                                                                 
| |  | United
      States GAAP                                                                                        
| |  |                                                                                                                 

| |  | Description of United States GAAP Adjustments
      (a) Deferred Costs
      Under Canadian GAAP, certain expenses
        can be deferred and amortized if they meet certain criteria. Under United
        States GAAP, these costs are expensed as incurred.
      (b) Employee Future Benefits
      The accounting for future benefits
        for employees under Canadian GAAP and United States GAAP is essentially
        the same, except for the recognition of certain unrealized gains and losses.Canadian
        GAAP requires companies to recognize a pension valuation allowance for
        any excess of the accrued benefit asset over the expected future benefit.
        Changes in the pension valuation allowance are recognized in the consolidated
        statement of operations. United States GAAP does not specifically address
        pension valuation allowances.
        United States regulators have interpreted this to be a difference between
        Canadian and United States GAAP. Under United States GAAP, an additional
        minimum liability is recorded for the excess of the unfunded accumulated
        benefit obligation over the recorded pension benefit liability. An offsetting
        intangible asset equal to the unrecognized prior service costs is recorded.
        Any difference is recorded as a reduction in accumulated other comprehensive
        income. The accumulated benefit obligation at December 31, 2004 was
        $13.1 billion.
      (c) Gains or Losses on Investments
      Under Canadian GAAP and United States
        GAAP, gains or losses on investments are calculated in a similar manner.
        Differences in Canadian GAAP and United States GAAP, however, may cause
        the underlying carrying value of the investment to be different. This
        will cause the resulting gain or loss to be different.
      (d) Equity Income
      Under Canadian GAAP, we account
        for our joint venture investment in CGI using the proportionate consolidation
        method. Effective July 2003, as a result of the new agreement with
        CGI, we present CGI as an equity investment under United States GAAP.
        There is no impact on net earnings.Our
        proportionate share of CGIs operating results for the 12 months
        ended December 31, 2004 and six months ended December 31, 2003
        were:
      operating revenues of $1,019 million
          and $422  million for the periods in 2004 and 2003, which
          includes $164 million and $74  million with subsidiaries of BCE Inc.
        operating expenses of $873 million
          and $356 million for the periods in 2004 and 2003, which includes
          $30 million and $14 million for subsidiaries of BCE Inc.
        amortization expense of $52 million
          and $21 million for the periods in 2004 and 2003
        interest expense of $6 million
          and $3 million for the periods in 2004 and 2003
        other income of $4 million
          and other expense of $1 million for the periods in 2004 and 2003
        income tax expense of $33 million
          and $17 million for the periods in 2004 and 2003
        discontinued operations of $3 million
          and nil for the periods in 2004 and 2003.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

119    Bell Canada
  Enterprises 2004 Annual Report

---



| |  | Notes
      to Consolidated Financial Statements 
      (e) Income Taxes
      The income tax adjustment represents
        the impact the United States GAAP adjustments that we describe above have
        on income taxes. The accounting for income taxes under Canadian GAAP and
        United States GAAP is essentially the same, except that:
      income tax rates of enacted or
          substantively enacted tax law are used to calculate future income tax
          assets and liabilities under Canadian GAAP
        only enacted income tax rates
          are used under United States GAAP.(f) Non-Controlling Interest
      The non-controlling interest adjustment
        represents the impact the United States GAAP adjustments that we describe
        above have on non-controlling interest.
      (g) Discontinued Operations
      Differences between Canadian GAAP
        and United States GAAP will cause the historical carrying values of the
        net assets of discontinued operations to be different.
      (h) Change in Unrealized Gain
        (Loss) on Investments
      Our portfolio investments are recorded
        at cost under Canadian GAAP. They would be classified as available-for-sale
        under United States GAAP and would be carried at fair value, with any
        unrealized gains or losses included in other comprehensive loss, net of
        tax.
      (i) Accounting for Stock-Based
        Compensation
      In December 2002,
        the Financial Accounting Standards Board (FASB) issued Statement of Financial
        Accounting Standards (SFAS) No. 148,Accounting for Stock-Based Compensation  Transition
        and Disclosure. It applies
        to fiscal years ending after December 15, 2002. It amends the transitional
        provisions of SFAS No. 123 for companies that choose to recognize stock-based
        compensation under the fair value-based method of SFAS No. 123, instead
        of choosing to continue following the intrinsic value method of Accounting
        Principles Board (APB) Opinion No. 25.      We
        adopted the fair value-based method of accounting on a prospective basis,
        effective January 1, 2002.      Under
        SFAS No. 123, however, we are required to make pro forma disclosures of
        net earnings, and basic and diluted earnings per share, assuming that
        the fair value-based method of accounting had been applied from the date
        that SFAS No. 123 was adopted.      The
        table below shows stock-based compensation expense and pro forma net earnings
        using the Black-Scholes pricing model.
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| |  | Net earnings (loss), as reported                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | Compensation cost included                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | in net earnings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Total compensation cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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| |  | Pro forma net earnings (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Pro forma net earnings (loss) per
        common share (basic)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | Pro
        forma net earnings (loss) per
        common share (diluted)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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| |  | (j)
      Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133)
      On January 1, 2001,
        we adopted SFAS 133,Accounting
        for Derivative Instruments and Hedging Activities,
        as amended by SFAS 138. Under this standard, all derivatives must be recorded
        on the balance sheet at fair value under United States GAAP. In addition,
        certain economic hedging strategies, such as using dividend rate swaps
        to hedge preferred share dividends and hedging SCPs, no longer qualify
        for hedge accounting under United States GAAP.      The
        change in the fair value of derivative contracts that no longer qualify
        for hedge accounting under United States GAAP is reported in net earnings.      We
        elected to settle the dividend rate swaps used to hedge $510 million
        of BCE Inc. Series AA preferred shares and $510 million
        of BCE Inc. Series AC preferred shares in the third quarter of 2003.
        These dividend rate swaps in effect converted the fixed-rate dividends
        on these preferred shares to floating-rate dividends. They were to mature
        in 2007. As a result of the early settlement, we received total proceeds
        of $83 million in cash. Since the settlement, all of our derivative
        contracts qualify for hedge accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

120    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Under
        Canadian GAAP, the proceeds are being deferred and amortized against the
        dividends on these preferred shares over the remaining original terms
        of the swaps. Under United States GAAP, these dividend rate swaps did
        not qualify for hedge accounting and were recorded on the balance sheet
        at fair value. As a result, the amortization of the deferred gain under
        Canadian GAAP is reversed for purposes of United States GAAP.
      (k) Impact of Adopting Recent
        Changes to Accounting Standards
      Goodwill and Other Intangible
        Assets
      Effective January 1, 2002,
        we followed the requirements of SFAS No. 142,Goodwill
        and Other Intangible Assets.
        This standard required us to stop amortizing goodwill and indefinite-life
        intangible assets to earnings and to assess them for impairment each year.
        It includes a transitional impairment test.
      Effective June 30, 2002,
        we:
      allocated our existing goodwill
          and indefinite-life intangible assets to our reporting units
        completed the assessment of the
          quantitative impact of the transitional impairment test measured at
          January 1, 2002 on our financial statements.In performing the transitional impairment
        test, we:
      estimated the fair value of our
          reporting units based on discounted future cash flows
        compared the fair values to those
          implied by public company trading multiples.We determined a transitional impairment
        loss of $7,268 million net of tax in the second quarter of 2002.
        We recorded it as a cumulative effect of a change in accounting policy
        as of January 1, 2002, as required by the transitional provisions
        of SFAS No. 142. Under Canadian GAAP, the transitional impairment loss
        is recorded as an adjustment to opening retained earnings. The impairment
        loss related to impaired goodwill of reporting units in Teleglobe ($6,604 million),
        Bell Globemedia ($545 million) and Emergis ($119 million).
      Consolidation of Variable Interest
        Entities
      Effective July 1, 2003,
        we adopted FASB Interpretation (FIN) No. 46,Consolidation
        of Variable Interest Entities,
        on a prospective basis. This interpretation clarifies how to apply ARB
        No. 51,Consolidated Financial Statements,
        to variable interest entities when equity investors are not considered
        to have a controlling financial interest or they have not invested enough
        equity to allow the entity to finance its activities without additional
        subordinated financial support from other parties.      We
        determined a transitional loss of $25 million net of tax in the third
        quarter of 2003. We recorded it as a cumulative effect of a change
        in accounting policy as of July 1, 2003, as required by the transitional
        provisions of FIN No. 46. Under Canadian GAAP, the transitional loss is
        recorded as an adjustment to retained earnings. See Note 1,Significant
        Accounting Policies, for
        a summary of how this affected our consolidated financial statements.
      Note 28: Subsequent Events
      Acquisition of Nexxlink Technologies
        Inc. (Nexxlink)
      As of February 21, 2005, Bell Canada
        had bought 89% of all the outstanding shares of Nexxlink, a provider of
        integrated IT solutions, for $59 million in cash. Bell Canada
        intends to buy the remaining shares in a subsequent transaction by way
        of amalgamation, which is expected to be approved at a shareholders
        meeting on April 7, 2005.The
        net assets acquired are approximately $11 million. The excess purchase
        price over the net assets acquired has been allocated to goodwill until
        we complete the purchase price allocation, which is expected within 12
        months of the acquisition date.
      Issuance of Series M-18 Debentures
      On February 11, 2005,
        Bell Canada issued $700 million in Series M-18 Medium Term Note Debentures
        having a maturity date of February 15, 2017 and a fixed interest
        rate of 5.00% . Following the issuance, Bell Canada swapped the fixed
        interest rate to a floating rate. The net proceeds from the issuance of
        the debentures will be used to repay maturing short-term debt and for
        general corporate purposes.
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121    Bell Canada
  Enterprises 2004 Annual Report

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| |  | Board
      of DirectorsAs at March 2, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | André
        Bérard, O.C.Montréal, QuébecCorporate DirectorDirector since 
        January 2003
      Ronald A. BrennemanCalgary, AlbertaPresident and Chief ExecutiveOfficer
        and a director,Petro-CanadaDirector since November 2003
      Richard J. Currie, O.C.Toronto, OntarioChairman of the Board,BCE Inc. and Bell CanadaDirector since May 1995
      Anthony S. Fell, O.C.Toronto, OntarioChairman of the Board,RBC Dominion Securities Ltd.Director since January
        2002
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Committees
        of the Board Members of Committees of the BoardAudit
      
      Corporate
        Governance
      
      Management
        Resources
      
      Pension
        FundT.C. O’Neill
        – Chair
      
      D. Soble
        Kaufman – Chair
      
      and Compensation
      
      R.C. Pozen
        – ChairA. Bérard
      
      A.S. Fell
      
      R.J. Currie
        – Chair
      
      T.E. KieransJ. Maxwell
      
      T.E. Kierans
      
      R.A. Brenneman
      
      B.M. LevittR.C. Pozen
      
      The Honourable
        E.C. Lumley
      
      A.S. Fell
      
      P.M. TellierV.L. Young
      
      J.H. McArthur
      
      J.H. McArthurV.L. YoungThe
          committees of the board of directors, and their purpose, are identified
          below.
        The Audit CommitteeThe audit committee assists the board in the oversight of:
        the integrity of BCE’s
            financial statements and related information
          BCE’s compliance with
            applicable legal and regulatory requirements
          the independence, qualifications
            and appointment of the external auditor
          the performance of the internal
            and external auditors
          management responsibility
            for reporting on internal control.The Corporate Governance CommitteeThe CGC assists the board in:
        developing and implementing
            our corporate governance guidelines
          identifying individuals qualified
            to become directors
          determining the composition
            of the board and its committees
          determining the directors’
            remuneration for board and committee service
          monitoring the process to
            assess board and committee effectiveness.
      
      The
          Management Resources and Compensation CommitteeThe MRCC assists the board in the oversight of the:
        compensation
          nomination
          evaluation
          succession of officers and
            other management personnel.The MRCC also assists the board
          in the oversight of BCE’s health and safety policies and practices.
        The Pension Fund CommitteeThe PFC assists the board in the oversight of:
        the administration, funding
            and investment of our pension plans and fund
          the unitized pooled fund sponsored
            by BCE for the collective investment of the fund and the master fund
            in which certain of BCE’s subsidiaries’ pension funds
            invest.




122    Bell Canada
  Enterprises 2004 Annual Report

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| |  | ExecutivesAs at March 2, 2005                                                                                                                                                                                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Michael
        J. Sabia President and
        Chief Executive Officer
      William D. AndersonPresident  BCE Ventures
      Pierre J. Blouin Group President  Consumer
        Markets, Bell Canada
      Laurier (Larry) J. BoisvertPresident and Chief Executive
        Officer  Telesat Canada
      Mark R. Bruneau Executive Vice-President and
        Chief Strategy Officer
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123    Bell Canada
  Enterprises 2004 Annual Report

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| |  | 2005
        Shareholder Meeting
      The shareholder meeting will take
        place at 9:30 a.m. (Eastern time), Wednesday, May 25, 2005, at the
        Metro Toronto Convention Centre, 222 Bremner Blvd., Toronto, Ontario.    The meeting
        will also be webcast live on our website, www.bce.ca.    We offer
        various ways to vote your shares. For more details, consult your proxy
        circular or visit our website.
      2005 Quarterly Earnings Release
        Dates
      First quarter         
        May 4, 2005 
        Second quarter    August 3, 2005 
        Third quarter       November 2, 2005
        Fourth quarter     February 1, 2006
      Quarterly and annual reports as
        well as other corporate documents can be found on our website. If you
        wish to be notified electronically when documents are posted, register
        online at www.bce.cafor our service News Alerts. Corporate
        documents can also be requested from the Investor Relations group.
      Share Facts
      Symbol BCE
      ListingsToronto (TSX), New York
        (NYSE) and Zurich (SWX) stock exchanges
      Common Shares Outstanding925,935,682 as at December
        31, 2004
      Stock SplitsThree-for-one on April
        26, 1979 and two-for-one on May 15, 1997
      Quarterly Dividend*$0.33 per common share
      2005 Dividend Schedule*Record Date            
        Payment DateMarch 15, 2005        
        April 15, 2005
        June 15, 2005          
        July 15, 2005
        September 15, 2005  October 15, 2005
        December 15, 2005 January 15, 2006                                                                                      |  | Tax
        Information
      Dividends and Capital Gains on Your
        BCE Shares
      BCE common shareholders are required
        to pay tax on dividends as well as any capital gains they realize when
        they sell their shares or are deemed to have sold them. If you received
        Nortel Networks common shares in May 2000, you should contact the Investor
        Relations group to learn more on the tax implications of the BCE/Nortel
        Plan of Arrangement or visit www.bce.ca.
      Foreign Investors
      Dividends on BCE shares paid or
        credited to nonresidents of Canada are subject to a 25% withholding tax
        unless reduced by treaty. Under current tax treaties, U.S. and U.K. residents
        are subject to a 15% withholding tax.
      U.S. Investors
      BCE is required to solicit taxpayer
        identi-fication numbers (TIN) and Internal Revenue Service (IRS) Form
        W-9 certifications of residency from certain U.S. investors. Where these
        have not been received, BCE may be required to deduct the IRS specified
        backup withholding tax. The backup withholding rate on dividends is currently
        28%. Shareholders who did not provide their TIN and W-9 certification
        of residency and had the backup withholding tax applied on their dividends
        can obtain a refund or credit against their U.S. federal income tax through
        the filing of their income tax return the following year.    Under
        the Jobs and Growth Tax Reconciliation Actof 2003, dividends paid
        to U.S. individuals by most U.S. public companies and qualifying foreign
        corporations, including public Canadian companies such as BCE whose shares
        are readily tradable on a U.S. stock exchange (e.g., the New York Stock
        Exchange), will be subject to U.S. federal income tax at a maximum rate
        of 15% (or 5% for those in the lowest tax brackets), so long as certain
        conditions are met.
      For additional information, please
        contact your tax advisor. |  | Shareholder
        Services
      Dividend Reinvestment and Stock
        Purchase Plan
      This plan provides a convenient
        method for eligible holders of BCE common shares to reinvest their dividends
        and make optional cash contributions to purchase additional common shares
        without brokerage costs.
      Dividend Direct Deposit Service
      Avoid postal delays and trips to
        the bank by joining the dividend direct deposit service.
      E-delivery Service
      Enrol in our e-delivery service
        to receive the proxy material, the annual report and/or quarterly documents
        by e-mail.
      Duplicate Mailings
      Help us control costs and eliminate
        duplicate mailings by consolidating your accounts. For more details on any
        of these services, registered shareholders (holders of share certificates)
        must contact the transfer agent. Non-registered shareholders must contact
        their brokers.
      Contact Information
      Transfer Agent and Registrar
      For information on shareholder services
        or any other inquiries regarding your account (including stock transfer,
        address change, lost certificates and tax forms), contact:
      Computershare Trust Company of Canada
        9th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1
      e-mailbce@computershare.comtel      (514) 982-7555 or
                  1 800 561-0934
                  (toll free
        in Canada and the U.S.)
        fax    (416) 263-9394 or 
                  1 888 453-0330
        
                   (toll
        free in Canada and the U.S.)or
        visit their website at
                   www.computershare.com
      BCE Inc. 
        Investor Relations
        1000, rue de La Gauchetière Ouest, Bureau 3700 
        Montréal (Québec) H3B 4Y7
      e-mail investor.relations@bce.ca
        tel       1 800 339-6353 fax      (514) 786-3970 
                or visit the Investors
        section
                  on our website
        at www.bce.ca
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | *Subject to approval by the Board of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | Trademarks: The following is a list of all our trademarks referred
        to and used as such in this annual report. BCE is a trademark of BCE Inc.
        The rings and head design, Bell Canada Enterprises corporate logo,
        Bell, Sympatico, Sympatico.ca, Bell Mobility, ProConnect are trademarks
        of Bell Canada.The Globe and Mail is a trademark of Bell Globemedia
        Publishing Inc. Mobile Browser is a trademark of Bell Mobility. CTV
        is a trademark of CTV Inc. Nimiq, Anik and Telesat are trademarks of Telesat
        Canada. ExpressVu is a trademark of Bell ExpressVu L.P. Any other
        trademarks, or corporate, trade or domain names used in this report are
        the property of their owners. We believe that our trademarks and domain
        names are very important to our success. Our exclusive trademark rights
        are perpetual provided that their registrations are timely renewed and
        that the trademarks are used in commerce by us or our licensees. We take
        appropriate measures to protect, renew and defend our trademarks. We also
        spend considerable time and resources overseeing, registering, renewing,
        licensing and protecting our trademarks and prosecuting those who infringe
        on them. We take great care not to infringe on the intellectual property
        and trademarks of others.
      Cette publication
        est disponible en français. BCEs Annual Report is printed
        with vegetable-based ink and is recyclable
      Printed in Canada
      Design:VSA
        Inc. Partners, Principal photography: Robert François Printing: Press Blanchette Financial typesetting: Moveable Inc.

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|Communications           | emailbcecomms@bce.ca
      Tel 1 888 932-6666 Fax (514) 870-4385          
|------------------------ | --------------------------------------------------------------------------
|Investor
      Relations | emailinvestor.relations@bce.ca
      Tel 1 800 339-6353 Fax (514) 786-3970



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